Half-yearly Report

23rd Sep 2008 07:00

RAMBLER MEDIA LIMITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2008 Revenue up 152% year-on-year to US$51.7 million (H1 2007, US$20.5 million) with continued improvement in profitability Rambler Media Limited (RMG.LN), ("Rambler" or the "Group"), operator of one ofRussia's most popular internet brands, today announces its condensedconsolidated financial results in accordance with International FinancialReporting Standards (IFRS) for the six months ended 30 June 2008. The followinginformation has been reviewed and approved for release by the Group's auditors. FINANCIAL HIGHLIGHTS -- Consolidated revenue (including Begun's partner network) grew 152% year-on-year to US$51.7 million (H1 2007, US$20.5 million) - outpacing growth of internet display advertising market of 45% (source: Russian Association of Communication Agencies - AKAR). -- Like-for-like sales grew 73% year-on-year to US$35.4 million (H1 2007, US$20.5 million). -- Consolidated contextual revenue was US$23.2 million for the period (H1 2007, US$4.3 million). Paid search revenues on Rambler grew by 60% to US$6.9 million (H1 2007, US$4.3 million). Begun's partner network contributed US$16.3 million, after elimination of intercompany sales, to consolidated revenue. -- Display / banner advertising grew by 94% to US$21.7 million (H1 2007, US$11.2 million). -- Consolidated EBITDA continued to improve to US$8.9 million (H1 2007, US$0.6 million) including US$0.8 million foreign currency translation loss (H1 2007, US$0.7 million) with EBITDA margin of 17.3% (H1 2007, 3.0%). -- Consolidated net loss after interest and tax of US$0.5 million (H1 2007, US$6.7 million profit including net gain of US$7.1 million from disposal of TV operation). -- Operating loss of US$1.5 million after US$5.1 million impairment charge (H1.2007 US$0.8m). -- US$11.2 million cash generated from operations (H1 2007, US$0.6 million). -- CAPEX was US$2.7 million (H1 2007, US$1.7 million). -- Cash balance was US$26.1 million at 30 June 2008, excluding $10.9 million held within Begun which was classified as an asset held for sale (31 December 2007, US$31.5 million). Rambler expects to receive part of the cash held within Begun before completion of the announced sale of Begun to Google. Mark Opzoomer, Chief Executive Officer of Rambler Media, commented: "As indicated in our July trading update, our revenues for the first six monthsof 2008 were up over 150% year-on-year, demonstrating the resilience of theRussian advertising market and the improvements we have made to our salesorganisations. More importantly, our margins have continued to improve and cashgeneration has been good. I am proud of the progress our teams have made inbeginning to launch new and improved products. By continuing to be innovative,we will enhance the user experience and attract more users to our websites,making rambler.ru Russia's leading gateway to the Web. Our strategic agreementswith leading partners including ICQ in instant messaging, IMHO VI in displayadvertising and more recently, blinkx and Google in search, are aimed atcreating superior growth for Rambler, better monetisation and enhancing valuefor our shareholders." Key events -- On Friday July 18th 2008, Rambler announced that it has signed an agreement with Google to use Google's search and contextual advertising technology on www.rambler.ru. Under the agreement, search queries made on Rambler's homepage and through the Rambler search function will be enhanced by Google. Rambler will display Google advertisements alongside natural search results. This development allows Rambler to enhance user experience. Rambler will continue to operate its own brands, web properties and other advertising services. -- Alongside the agreement above, Rambler also announced the sale of Begun and related subsidiaries to Google, subject to certain approvals and conditions precedent, for a total cash consideration of US$140 million (of which US$69.9 million is attributable to Bannatyne for their 49.9% stake in Begun). The transaction is expected to be completed in the next couple of weeks. -- In July 2008, Rambler acquired the remaining 49% of Price Express LLC for a cash consideration of US$4.0 million to now own 100%. -- In July 2008, Rambler selected blinkx, one of the world's largest and most advanced video search engines, to power Rambler's new video search feature. -- In May 2008, Rambler signed a new partnership agreement with ICQ for instant messaging and in June 2008 launched free SMS text messaging from PC to mobile phones. -- In April 2008, Rambler was named title sponsor of the Rambler Russian Football Cup which includes unique content for Rambler. -- In April 2008, Rambler reinforced its relationship with Video International Group, the largest media advertising operator in Russia, through the sale of a controlling 51% stake in its online display advertising agency Index20 to IMHO VI, a subsidiary of Video International for US$145,000. Under this sale agreement, Index20 and IMHO VI will generate a minimum of US$40 million of cash advertising sales to Rambler from display advertising in 2008. -- In 1H 2008, the Company ceased to classify Damochka.ru as an asset held for sale due to the lack of potential buyers for the entity. Assumptions behind the original investment decision never materialised and the Group was unable to properly integrate Damochka in its product portfolio. In addition Damochka's business model of an early-stage social / dating network has come under increasing pressure from a number of competitors. As the business is continuously loss making the management decided at the moment of de-classification to impair in full the intangible assets recognised at the time of the purchase of the business in 2006 and recognised an impairment loss of US$5.1 million. Rambler User Statistics -- Unique number of visitors to Rambler.ru were up 30% year-on-year to 37.3 million per month on average in the period (H1 2007, 28.6 million). In June 2008, Rambler reached 34.5 million unique users vs. 25.8 million in June 2007, representing 34% growth. -- Peak traffic of 40.8 million unique users in May 2008, 35% higher than in May 2007 (30.2 million). -- 2.7 billion monthly page views on average in H1 2008, up 17% year-on-year (2.45 billion in June 2008 vs. 1.91 billion in June 2007 representing 28% increase). -- Total search queries amounted to 1.7 billion in H1 2008, up 21% year-on-year. Russian Internet / Advertising Market -- Russian internet penetration up 14% year-on-year in Spring 2008 to 32.7 million internet users in Russia compared to 28.7 million in the same period last year (source: The Public Opinion Foundation). -- Russian internet display advertising up 45% year-on-year in H1 2008 to US$112 million including VAT (H1 2007, US$77 million) (source: Russian Association of Communication Agencies - AKAR). -- Internet text and display advertising accounted for 2.8% of the total Russian advertising market in 2007 but the segment is growing faster than any other media and is forecast to attract 6-7% of total advertising by 2010 (source: Zenith Optimedia). FINANCIAL SUMMARY \* T(US$ '000s) Jan - Jun Jan - Jun Jan - Dec 2008 2007 2007Group Revenue 51,704 20,512 69,083 Rambler Media excl. Begun 35,409 20,512 54,162 Begun's partner network 16,295 - 14,921Investment income - 1,202 902 --------------------------------Total revenue and investment income 51,704 21,714 69,985EBITDA* 8,931 618 7,629EBITDA margin** 17.3% 3.0% 11.0%Operating (loss) / profit (1,497) (816) 940Net profit attributable to equity holders of the Group 756 6,439 6,080Net gain / (loss) from disposal of subsidiaries (included in net profit above) (241) 7,089 7,089Earnings / (loss) per share from continuing operations - basic (US$ per share) 0.049 (0.042) (0.066)Earnings / (loss) per share from continuing operations - diluted (US$ per share) 0.049 (0.042) (0.066)Earnings / (loss) per share from discontinued operations - basic (US$ per share) - 0.461 0.461Earnings / (loss) per share from discontinued operations - diluted (US$ per share) - 0.461 0.461------------------------------------------------------------------------------------------------------------------------ * Earnings before interest, tax, depreciation and amortisation ** Total EBITDA divided by total revenue.\* T Forward-looking statements Certain statements in this half-yearly report are forward-looking. Although theGroup believes that the expectations reflected in these forward-lookingstatements are reasonable, we can give no assurance that these expectations willprove to be correct. Because these statements involve risks and uncertainties,actual results may differ materially from those expressed or implied by theseforward-looking statements. The Group will not undertake any obligations to update any forward-lookingstatements whether as a result of new information, future events or otherwiseoccurring after the date of this announcement except as required by applicablelaw or by any applicable regulatory authority. OTHER INFORMATION The Group will host a conference call to present the results at 1 pm London Time(4 pm Moscow Time) today (23 September 2008). The results statement andpresentation are available on Rambler Media's website at www.ramblermedia.com. To participate in the conference call, please register online at: www.sharedvalue.net/ramblermedia/hy2008. The number for the conference call will be made available upon registration. For further information, please visit www.ramblermedia.com or contact: \* TRambler Media Shared Value LimitedMark Opzoomer / Arthur Akopyan Nicolas DuperrierTel. +7 495 500 3826 Tel. +44 (0) 20 7321 5010 [email protected] ING Wholesale BankingDaniel Friedman / William MarleTel. +44 (0) 20 7767 1000\* T ABOUT RAMBLER MEDIA Rambler Media is an internet media and services group which operates or hasinterests in leading Russian language internet brands including the Russianinternet homepage and search engine 'Rambler.ru', on-line newspaper 'Lenta.ru',product comparison website 'Price.ru', internet catalogue and navigation system'Top 100', instant messaging service 'Rambler-ICQ', digital advertising agency'Index20' and contextual advertising company 'Begun'. Rambler Media's shares aretraded on AIM, the junior market of the London Stock Exchange under the symbol'RMG'. For more information on Rambler Media, visit our corporate website atwww.ramblermedia.com. Certain statements within this announcement constitute forward-lookingstatements. Such forward-looking statements involve risks and other factorswhich may cause the actual results, achievements or performance of the Group tobe materially different from any future results, achievements or performanceexpressed or implied by such forward-looking statements. Such risks and otherfactors include, but are not limited to, general economic and businessconditions, changes in government regulations, and court interpretations of suchregulations, currency fluctuations (including the US$/Rbs rate), competition,and changes in development plans. There can be no assurance that the results andevents contemplated by the forward-looking statements contained in thisannouncement will, in fact, occur. Any forward-looking statements made in thisannouncement represent management's best judgment as to what may occur in thefuture and are correct only as at the date of this announcement. The Group willnot undertake any obligation to release publicly any revisions to theseforward-looking statements to reflect events or circumstances occurring afterthe date of this announcement except as required by applicable law or by anyapplicable regulatory authority. \* T Rambler Media Limited, Condensed consolidated half-yearly financial information, 30 June 2008 Contents PageInterim management report 6Balance sheet 16Income statement 17Statement of changes in equity 18Cash flow statement 19Notes to financial information 20Statement of directors' responsibilities 33Auditors' review report 34\* T Interim management report Rambler Media Limited (the "Group"), is a media and services group whichoperates or has interests in leading Russian language internet brands includingits original Russian internet homepage and search engine 'Rambler.ru', on-linenewspaper 'Lenta.ru', product comparison website 'Price.ru', internet catalogueand navigation system 'Rambler Top 100', instant messaging service'Rambler-ICQ', digital advertising agency 'Index20' and contextual advertisingcompany 'Begun'. Rambler Media's shares are traded on AIM, the junior market ofthe London Stock Exchange under the symbol 'RMG'. 1. Highlights -- Consolidated revenue (including Begun's partner network) grew 152% year-on-year to US$51.7 million (H1 2007, US$20.5 million) - outpacing growth of internet display advertising market of 45% (source: Russian Association of Communication Agencies - AKAR). -- Like-for-like sales grew 73% year-on-year growth to US$35.4 million (H1 2007, US$20.5 million) -- Consolidated contextual revenue was US$23.2 million for the period (H1 2007, US$4.3 million). Paid search revenues on Rambler grew by 60% to US$6.9 million (H1 2007, US$4.3 million). Begun's partner network contributed US$16.3 million, after elimination of intercompany sales, to consolidated revenue. -- Display / banner advertising grew by 94% to US$21.7 million (H1 2007, US$11.2 million). -- Consolidated EBITDA continued to improve to US$8.9 million (H1 2007, US$0.6 million) including US$0.8 million foreign currency translation loss (H1 2007, US$0.7 million) with EBITDA margin of 17.3% (H1 2007, 3.0%). -- Consolidated net loss after interest and tax of US$0.5 million (H1 2007, US$6.7 million profit including net gain of US$7.1 million from disposal of TV operation). -- US$11.2 million cash generated from operations (H1 2007, US$0.6 million). -- Operating loss of US$1.5 million after US$5.1 million impairment charge (H1.2007 US$0.8m). -- CAPEX was US$2.7 million (H1 2007, US$1.7 million). -- Cash balance was US$26.1 million of cash at 30 June 2008, additional US$10.9 million of cash held by Begun at 30 June 2008 which was classified as an asset held for sale (31 December 2007, US$31.5 million). Rambler expects to receive part of the cash held within Begun before completion of the announced sale of Begun to Google. 2. Key Events and Statistics -- On Friday July 18th 2008, Rambler announced that it has signed an agreement with Google to use Google's search and contextual advertising technology on www.rambler.ru. Under the agreement, search queries made on Rambler's homepage and through the Rambler search function will be enhanced by Google. Rambler will display Google advertisements alongside natural search results. This development allows Rambler to enhance user experience. Rambler will continue to operate its own brands, web properties and other advertising services. -- Alongside the agreement above, Rambler also announced the sale of Begun and related subsidiaries to Google, subject to certain approvals and conditions precedent, for a total cash consideration of US$140 million (of which US$69.9 million is attributable to Bannatyne for their 49.9% stake in Begun). The transaction is expected to be completed in the next couple of weeks. -- In July 2008, Rambler acquired the remaining 49% of Price Express LLC for a cash consideration of US$4.0 million to now own 100%. -- In July 2008, Rambler selected blinkx, one of the world's largest and most advanced video search engines, to power Rambler's new video search feature. -- In May 2008, Rambler signed a new partnership agreement with ICQ for instant messaging and in June 2008 launched free SMS text messaging from PC to mobile phones. -- In April 2008, Rambler was named title sponsor of the Rambler Russian Football Cup which includes unique content for Rambler. -- In April 2008, Rambler reinforced its relationship with Video International Group, the largest media advertising operator in Russia, through the sale of a controlling 51% stake in its online display advertising agency Index20 to IMHO VI, a subsidiary of Video International for US$145,000. Under this sale agreement, Index20 and IMHO VI will generate a minimum of US$40 million of cash advertising sales to Rambler from display advertising in 2008. -- In 1H 2008, the Company ceased to classify Damochka.ru as an asset held for sale due to the lack of potential buyers for the entity. Assumptions behind the original investment decision never materialised and the Group was unable to properly integrate Damochka in its product portfolio. In addition Damochka's business model of an early-stage social / dating network has come under increasing pressure from a number of competitors. As the business is continuously loss making the management decided at the moment of de-classification to impair in full the intangible assets recognised at the time of the purchase of the business in 2006 and recognised an impairment loss of US$5.1 million. Rambler User Statistics -- Unique number of visitors to Rambler.ru were up 30% year-on-year to 37.3 million per month on average in the period (H1 2007, 28.6 million). In June 2008, Rambler reached 34.5 million unique users vs. 25.8 million in June 2007, representing 34% growth. -- Peak traffic of 40.8 million unique users in May 2008, 35% higher than in May 2007 (30.2 million). -- 2.70 billion monthly page views on average in H1 2008, up 17% year-on-year (2.45 billion in June 2008 vs. 1.91 billion in June 2007 representing 28% increase). -- Total search queries amounted to 1.70 billion in H1 2008, up 21% year-on-year. Russian Internet / Advertising Market -- Russian internet penetration up 14% year-on-year in Spring 2008 to 32.7 million internet users in Russia compared to 28.7 million in the same period last year (source: The Public Opinion Foundation). -- Russian internet display advertising up 45% year-on-year in H1 2008 to US$112 million including VAT (H1 2007, US$77 million) (source: Russian Association of Communication Agencies - AKAR). -- Internet text and display advertising accounted for 2.8% of the total Russian advertising market in 2007 but the segment is growing faster than any other media and is forecast to attract 6-7% of total advertising by 2010 (source: Zenith Optimedia). 3. Performance 3.1. Financial Summary \* T(US$ '000s) Jan - Jun Jan - Jun Jan - Dec 2008 2007 2007Group Revenue 51,704 20,512 69,083Rambler Media excl. Begun 35,409 20,512 54,162Begun's partner network 16,295 - 14,921Investment income - 1,202 902 -------------------------------Total revenue and investment income 51,704 21,714 69,985EBITDA* 8,931 618 7,629EBITDA margin** 17.3% 3.0% 11.0%Operating (loss) / profit (1,497) (816) 940Net profit attributable to equity holders of the Group 756 6,439 6,080Net gain / (loss) from disposal of subsidiaries (included in net profit above) (241) 7,089 7,089Earnings / (loss) per share from continuing operations - basic (US$ per share) 0.049 (0.042) (0.066)Earnings / (loss) per share from continuing operations - diluted (US$ per share) 0.049 (0.042) (0.066)Earnings / (loss) per share from discontinued operations - basic (US$ per share) - 0.461 0.461Earnings / (loss) per share from discontinued operations - diluted (US$ per share) - 0.461 0.461------------------------------------------------------------------------------------------------------------------------ * Earnings before interest, tax, depreciation and amortisation ** Total EBITDA divided by total revenue.\* T 3.2. The Group's financial review 3.2.1 Revenue Group revenue for the first six months of 2008 increased by 152% year-on-year toreach approximately US$51.7 million (H1 2007, US$20.5 million), includingUS$16.3 million from Begun's partner network. Begun partner network revenue ispart of consolidated contextual sales (US$ 23.3 million in H1.2008). ExcludingBegun's revenue contribution, Rambler's revenue grew by 73% year-on-year fromUS$20.5 million to US$35.4 million, once again ahead of the Russian displayadvertising market which was estimated to have grown by 45% in the first half of2008 (source: Russian Association of Communication Agencies - AKAR).Consolidated contextual revenue, generated through the sale of search-related ortext-based advertising on Rambler's sites, was US$23.2 million for the period(H1 2007, US$4.3 million), representing 45% of the Group's total revenue. Paidsearch revenues on Rambler went up by 60% year-on-year to US$6.9 million (H12007, US$4.3 million). Display / banner advertising revenue grew by 94% toUS$21.7 million (H1 2007, US$11.2 million), representing 42% of the Group'stotal revenue. Rambler had a share of approximately 20% of the Russian displayadvertising market in the first six months of 2008. Display advertising onRambler's pages is sold through Index20 and Video International Group's IMHO VI.Other revenues attributable mainly to listing fees (Price comparison) and mobilerevenues (SMS) amounted to US$6.8 million (H1 2007, US$5.0 million),representing 13% of the Group's total revenue. 3.2.2. EBITDA The Group reported consolidated EBITDA of US$8.9 million in H1 2008 (H1 2007,US$0.6 million). Actions taken since last year to further rationalise costs andaccelerate top-line revenue growth is improving the Group's profitability.Rambler's EBITDA margin in the first six months of 2008 was 17.3% (H1 2007, 3%). 3.2.3. Operating Expenses The Group's consolidated operating expenses (including depreciation,amortisation and tax related provision) reached US$47.8 million in H1 2008(including Begun's operating expenses), up 112% from US$22.5 million for thefirst half of last year (excluding Begun's operating expenses). Of thisincrease, Begun contributed US$16.0 million during the first half of 2008. Direct costs, including commissions, content, traffic acquisition costs, datacentre costs and mobile costs rose by 163% from US$6.8 million in H1 2007 toUS$17.9 million in H1 2008, mainly as a result of increased revenues andcommissions paid to partners of Begun's advertising network. Without the impactof Begun's commissions to its advertising network, the growth in direct costswould have been limited to 51% year-on-year. Commissions and partner fees alonerose by 191% from US$5.5 million in H1 2007 to US$16.0 million in H1 2008 as aresult of increased revenues. As indicated in the 2007 annual report, actions were taken to manage the Group'shuman resources more efficiently. These efforts continued in the first half of2008 and produced a reduction in labour costs as a proportion of total costs andas a proportion of total revenue. The Group's labour costs accounted for 32% oftotal operating expenses and 30% of total revenues in H1 2008, compared to 39%and 43% respectively in H1 2007. Labour costs rose by 74% to US$15.3 million (H12007, US$8.8 million). This increase was primarily driven by wage inflation inthe Russian internet and media market of approximately 30% and the impact ofconsolidating Begun. Closing headcount was 509 at 30 June 2008, excluding 191employees at Begun (31 December 2007: 529 and 147 respectively). Headcountexcludes Index20 employees as a result of deconsolidation in Q2 2008. Lastyear's closing headcount at 30 June 2007 was 517 including 45 employees atIndex20. The Group's results include provisions for potential tax related charges. Theseprovisions relate to potential liabilities for taxes other than income tax,which arise from the legal structure of the Group and the jurisdictions in whichvarious income and expense items are recognised and assessed. For the first halfof 2008, the provision for potential tax-related charges amounted toapproximately US$1.6 million (H1 2007, US$0.5 million). If appropriate, theprovisions may be released at some point in the future. Legal and professional fees went down from US$1.6 million in H1 2007 to US$1.3million in H1 2008. The Group's amortisation expense went up by 244% from US$0.9 million in H1 2008to US$3.1 million due to amortisation of intangibles resulting from the Q3 2007acquisition of Begun. The Group's depreciation expense went up by 183% fromUS$0.6 million to US$1.7 million in line with the increase in the underlyingdepreciable fixed assets. The Group's consolidated net loss from continuing operations after interest andtax was US$0.5 million in H1 2008 (H1 2007, US$0.4 million loss). In addition tothe net loss in H1 2007, the disposal of the TV operation (classified asdiscontinued operations in H1 2007) generated a net gain on disposal of US$7.1million. The Group's basic earnings per share from continuing operations in H1 2008 wereUS$0.049 (H1 2007, loss US$0.042), and respective diluted - profit US$0.049 (H12007, loss US$0.042). In 1H 2008, the Company ceased to classify Damochka.ru as an asset held for saledue to the lack of potential buyers for the entity. Assumptions behind theoriginal investment decision never materialised and the Group was unable toproperly integrate Damochka in its product portfolio. In addition Damochka'sbusiness model of an early-stage social / dating network has come underincreasing pressure from a number of competitors. As the business iscontinuously loss making the management decided at the moment ofde-classification to impair in full the intangible assets recognised at the timeof the purchase of the business in 2006 and recognised an impairment loss ofUS$5.1 million which was partially offset by a reduction of deferred income taxliability by US$ 1.2 million and reduction of minority interest in net assets ofDamochka's subsidiary by US$1.9 million. Therefore impact of this impairmentcharge on net income is approximately US$ 3.2 million. 3.2.4. Operating loss The Group reported operating loss of US$1.5 million after US$5.1 millionimpairment charge in H1 2008 related to Damochka.ru (H1 2007 US$0.8m). 3.3. Operating review Rambler's vision is to become Russia's favourite homepage and an open,multi-branded gateway to the internet for millions of Russians every day. TheGroup's mission is to build the largest internet audience in Russia by providingthe best suite of search, communications, media and entertainment content in oneplace. 3.3.1 Products A very clear strategy is being implemented to launch new products and also tostrengthen Rambler's reputation for offering leading multibranded onlineservices and media content to the Russian speaking community. Search & Navigation In H1 2008, Rambler Search processed a total of approximately 1.7 billionqueries, 21% more than in H1 2007 - an average of 280 million search queries permonth. In H1 2008, an average of 38% of Rambler's audience used Rambler Searcheach month. Broad horizontal web search requires significant ongoing investment to stay atthe leading edge and generates high economics of scale. In line with the Group'svision to offer superior products to users and advertisers whilst generatinghigher profitability, Rambler announced in July 2008 an agreement with Google,the world's most popular search engine, to use Google's search and contextualadvertising technology on www.rambler.ru. Under the agreement, search queriesmade on Rambler's home page Rambler.ru and through the Rambler Search functionwill be enhanced by Google. Rambler will display Google ads alongside naturalsearch results. This agreement will allow Rambler to enhance user experience andto develop more relevant local and vertical content in the future. In July 2008, Rambler introduced a new 'Auto' search vertical category inRambler's hybrid search engine (http://beta.rambler.ru). The new verticalenables users to search for cars and filter results according to theirrelevancy. Users are able to refine their vehicle searches by model, price, yearof production, mileage and the date of advertisements placed on a wide range ofmarket places. Search results can also be prioritised by location and arefurther enhanced by the appearance of relevant car images. Since its launch inApril 2008, Rambler's beta hybrid search has attracted over 1.6 million monthlyunique visitors. Homepage Following several months of consultation with consumer focus groups throughoutRussia, Rambler is implementing significant changes to its homepage,www.rambler.ru, and is preparing to launch a new version. The new homepage willhave a much more simple and streamlined structure which will increase the site'sstickiness and provide users with a much more customised experience to makeRambler.ru Russian internet users' favourite homepage. The new site will becomean open gateway to the Internet, with a clear separation between Search,Communication features, Media & Entertainment channels, user generated contentand 'recommended best of the web'. 'Top100' will remain an integral part of thenavigation services, with a modernised look and feel. The Group intends toconsolidate its offering by investing in areas where there is high user interestthrough partnerships or other development programmes. Communications Improvements are also being made to Rambler.ru's communications tools so thatusers can more easily interact with each other. Rambler recently launched'Rambler Friends' (http://friends.rambler.ru/), which enables users topersonalise their page, watch popular videos and photos and congregate all theiraccounts from different sources in one place including leading email providersand social networks. This new product has been introduced to enable users toembrace all personal services and communications tools such as email, instantmessaging, blogs, video, audio and mobile communications, creating an opencommunications platform. Media and Entertainment In May 2008, Rambler launched 'Autorambler' (www.auto.rambler.ru), an exclusiveservice offering users comprehensive information on automobiles, a growingsegment of the Russian Internet market. 'Autorambler' allows users to makedetailed searches on all major auto sites, including key international sitessuch as Mobile.de, AutoScout24, Cars.com and Kurumaerabi.com. In addition to theregular information on cars being delivered to Russia, the service providesinformation on car performance, dealer locations and resale values. The'Autorambler' Internet magazine provides users with articles, test-drive reviewsfrom leading auto editions and the most recent auto news. Since its launch, thesite's audience has quickly reached close to 3 million unique monthly users. In June 2008, Rambler launched a free Short Message Service (SMS) text messagingfeature available for all users of Rambler-ICQ. In addition to its regularInstant Messaging service, users are now able to send free SMS text messages toany subscriber of the three leading mobile operators MTS, Beeline or MegaFonthrough Rambler-ICQ. SMS recipients can reply to the sender's ICQ by simplyusing the "reply" option at the mobile operator's rate. To commemorate the 30th anniversary of the Moscow International Film Festival,Rambler launched in June a unique website dedicated to the world of cinema andthe festival's history and key events. Rambler also launched a website for allfootball fans covering all key matches of the Euro2008 championship. In July 2008, Rambler launched 'Rambler Navigation' a travel service to informdrivers of traffic conditions and the most efficient routes in Moscow and itssurroundings. The new service, accessible from Rambler's homepage or directly athttp://nakarte.rambler.ru, allows users to search specific addresses in Moscowor find the quickest routes from start to finish whilst taking trafficconditions into account. 3.3.2. Sales & partnerships Display Advertising In April 2008, Rambler's display (banner) advertising capabilities werereinforced through the sale of 51% of the Group's advertising agency Index20 toVideo International's display agency IMHO VI. As a result, IMHO VI and Index20now jointly sell advertisements on Rambler's web pages to further optimiseRambler's advertising revenues. In contrast with the slowdown seen in global advertising markets since thebeginning of the year, the Russian advertising market continues to grow at afast rate. Rambler's partnership with IMHO VI has proven successful in the firsthalf of the year with leading brands allocating more of their budgets toadvertise on Rambler's pages. In the first six months of 2008, Rambler's top 20advertising clients comprised some of Russia's top internet advertisersincluding Ford Motors, Beeline, Nokia, Wrigley, Unilever and Nissan amongothers. In the first half of 2008, the Rambler homepage, mass media, Lenta.ru, RamblerMail and Rambler ICQ were the Group's most sought after pages for displayadvertising. The advertising rights on these pages are also sold in bundledpackages with more targeted pages and products. The vast majority of displayadvertising sold on Rambler is now priced on a dynamic basis, rather than on astatic basis as was previously the case in 2007. Contextual Advertising Contextual advertising consists of search-related or text-based adverts. In July2008, as part of its agreement to use Google's search and contextual advertisingtechnology on rambler.ru, Rambler announced that it would sell its stake inBegun to Google, the world's most popular search engine. Begun is one ofRussia's leading search and contextual text based advertising services withlocal expertise, efficient sales systems and over 40,000 advertisers. By workingwith Google and Begun, Rambler aims to improve its monetisation whilst enablingits users to see more relevant search results and adverts, helping them go wherethey want to go. In parallel, advertisers will have new ways to reach theirtarget customers online more efficiently. Other Partnerships In May 2008, Rambler and ICQ signed a new partnership agreement to extend theiroffer of joint Instant Messaging (IM) services in Russia. Rambler and ICQ firstentered into a partnership in 2005 by launching the co-branded Rambler-ICQ IMservice, which has since proven very successful with a growing number of Russianinternet users and increasing advertising revenues. Under the terms of the newagreement, Rambler and ICQ will continue offering a co-branded service and worktogether on a non-exclusive basis, which will give both brands greater marketflexibility and opportunity for further growth. In July 2008, Rambler also announced that it has entered into a partnership withblinkx, one of the world's largest and most advanced video search engines(www.blinkx.com) to power Rambler's new video search feature. The free servicewill provide Rambler users with easy and efficient access to a unique index ofRussian video content. 3.3.3. Rambler User statistics Rambler.ru (www.rambler.ru) reached 37.3 million unique users on average in H12008, up 39% from 26.8 million in the same period in 2007. In May 2008, Ramblerreached a peak of 40.8 million unique users, 35% higher than in May 2007 when itreached 30.2 million users. Rambler users viewed an average of 2.7 billion pagesper month on Rambler's sites during the first half of 2008, up 17% from the sameperiod last year. During H1 2008, Rambler News' audience grew by approximately 18% to reach 4.9million users on average per month, representing 16% of Rambler's averagemonthly audience. Rambler News (www.rambler.ru/news) was enriched with video andaudio content, as well as new links enabling easier access to sports, finance,regional news, real estate and other sections. Rambler News also launchedsuccessful weekly online supplements for auto, style, home and personal finance.Lenta (www.lenta.ru), one of the Group's most frequented news sites and theleading online newspaper in Russia, continued to grow its readership with 3.9million unique visitors per month on average between January and June 2008. Rambler Sports (http://sport.rambler.ru/) continues to be one of Russia'sleading sports news sites. In the first half of 2008, Rambler launched a numberof successful projects. Its site dedicated to the UEFA's Euro 2008 Footballchampionship, which was held in June, attracted 2.9 million users, more than anyof the other Euro 2008 websites in Russia and was supported by strongadvertising campaigns. In addition, Rambler was named official title sponsor ofthe Rambler Russian Football Cup in April 2008 and launched its official websiteat http://rambler-football.ru at the end of August 2008. Another successfulproject was Rambler's site dedicated to the 2008 Beijing Olympics, whichattracted 2.4 million users, more than any of the other Russian websitescovering the event. Rambler Games (http://games.rambler.ru/) attracted an average of 2.1 millionplayers per month in the first half of 2008, compared to 1.5 million monthlyusers on average in the first half of last year. Rambler Audio (http://audio.rambler.ru/), which also sells MP3 songs, attracted1.9 million users per month on average between January and June 2008, 110% morethan in the same period last year. 4. Position The Group ended the period with cash balances of US$26.1 million excludingUS$10.9 million held in Begun which was classified as an asset held for sale (31December 2007, US$31.5 million). Rambler expects to receive part of the cashheld within Begun before completion of the sale of Begun to Google. The Group'soperations generated US$11.2 million cash in the first half of 2008 (H1 2007,US$0.6 million). Russia has rapidly become one of Europe's largest online communities, thirdafter Germany and the UK, with 32.7 million Russians online in the spring of2008, representing about 29% of the Russian adult population (source: The PublicOpinion Foundation). This percentage is forecast to more than double by 2010,according to the Russian Ministry of Communications, which could make Russia thelargest online market in Europe by number of users. The overall Russianadvertising market is growing very strongly, and internet advertising is thefastest growing segment. Online display advertising was estimated to haveincreased by 60% year-on-year for the full year 2007 to US$160 million includingVAT (2006, US$100 million) and for the half-year by 45% year-on-year to US$112million in H1 2008 (H1 2007, US$77 million) (source: Russian Association ofCommunication Agencies - AKAR). In addition, text-based advertising onRussian-language internet sites soared to US$225 million for the full year 2007from US$110 million in 2006. In 2007, revenue from Internet advertisingaccounted for 2.8% of the total advertising market but the segment is growingfaster than any other media and is forecast to attract 6-7% of total advertisingby 2010 (source: Zenith Optimedia). The Group is well-positioned to continue its rapid growth, in line with orfaster than that of the online advertising market, due to its established brand,large market share, and wide range of internet media and services. 5. Principal risks Russian taxation and currency control regulations A substantial part of the operations of the Group is conducted in Russia orinvolves transactions with Russian entities. As a result the Group hassignificant exposure to the Russian taxation and currency control regimes. Russian tax and customs legislation is subject to varying interpretations, andchanges, which can occur frequently. Management's interpretation of suchlegislation as applied to the transactions and activity of the Group may bechallenged by the relevant authorities. The Russian tax authorities may be taking a more assertive position in theirinterpretation of the legislation and assessments, and it is possible thattransactions and activities that have not been challenged in the past may bechallenged. The Supreme Arbitration Court issued guidance to lower courts onreviewing tax cases providing a systemic roadmap for anti-avoidance claims, andit is possible that this will significantly increase the level and frequency oftax authorities scrutiny. As a result, significant additional taxes, penalties and interest may beassessed. Fiscal periods remain open to review by the authorities in respect oftaxes for three calendar years preceding the year of review. Under certaincircumstances reviews may cover longer periods. Russian transfer pricing legislation introduced on 1 January 1999 provides thepossibility for tax authorities to make transfer pricing adjustments and imposeadditional tax liabilities in respect of all controllable transactions, providedthat the transaction price differs from the market price by more than 20%. Controllable transactions include transactions with interdependent parties, asdetermined under the Russian Tax Code, all cross-border transactions(irrespective whether performed between related or unrelated parties),transactions where the price applied by a taxpayer differs by more than 20% fromthe price applied in similar transactions by the same taxpayer within a shortperiod of time, and barter transactions. There is no formal guidance as to howthese rules should be applied in practice. In the past, the arbitration courtpractice with this respect has been contradictory. Tax liabilities arising from intercompany transactions are determined usingactual transaction prices. It is possible with the evolution of theinterpretation of the transfer pricing rules in the Russian Federation and thechanges in the approach of the Russian tax authorities, that such transferprices could potentially be challenged in the future. Given the brief nature ofthe current Russian transfer pricing rules, the impact of any such challengecannot be reliably estimated; however, it may be significant to the financialcondition and/or the overall operations of the entity. The Group includes companies incorporated outside of Russia. Russian tax laws donot provide detailed rules on taxation of foreign companies. It is possible thatwith the evolution of the interpretation of these rules and the changes in theapproach of the Russian tax authorities, the non-taxable status of some or allof the foreign companies of the Group in Russia may be challenged. Where theGroup believes that it is probable that its position could not be sustained, therelated tax and associated balances have been accrued. However, it is possiblethat additional challenges may occur and the impact of such challenges, if any,cannot be reliably estimated; however, it may be significant to the financialcondition and/or the overall operations of the entity. Russian tax legislation does not provide definitive guidance in certain areas.From time to time, the Group adopts interpretations of such uncertain areas thatreduce the overall tax rate of the Group. As noted above, such tax positions maycome under heightened scrutiny as a result of recent developments inadministrative and court practices; the impact of any challenge by the taxauthorities cannot be reliably estimated; however, it may be significant to thefinancial condition and/or the overall operations of the entity. Business risks The Group's business risk is difficult to evaluate because the Group has alimited operating history in an emerging and rapidly evolving market. The Groupderives nearly all of its net revenue from online advertising, which is arelatively new advertising medium. The Group's ability to succeed in this marketmay be restrained by limited resources, expenses, risks, and complicationsfrequently encountered by similar companies in emerging and changing markets. Toaddress these risks, the Group must, amongst other things: -- maintain and increase the size of its audience; -- maintain and increase its advertisers' base; -- implement and successfully execute its business and marketing strategy; -- continue to develop and upgrade its technology; -- continually update and improve its service offerings and features; -- find and integrate strategic transactions; -- respond to industry and competitive developments; and -- attract, retain, and motivate qualified personnel. The Group may not be successful in addressing these risks, particularly as someof them are largely beyond its control. If the Group is unable to do so, itsbusiness, financial condition, and results of operations would be materially andadversely affected. 6. Forward-looking statements Certain statements in this half-yearly report are forward-looking. Although theGroup believes that the expectations reflected in these forward-lookingstatements are reasonable, we can give no assurance that these expectations willprove to be correct. Because these statements involve risks and uncertainties,actual results may differ materially from those expressed or implied by theseforward-looking statements. The Group will not undertake any obligations to update any forward-lookingstatements whether as a result of new information, future events or otherwiseoccurring after the date of this announcement except as required by applicablelaw or by any applicable regulatory authority. \* T Rambler Media Limited Condensed Consolidated Interim Balance Sheet as at 30 June 2008 (expressed in US$'000s) Notes 30 June 2008 31 December 2007 ----- ------------ ----------------AssetsNon Current Assets Property, plant and equipment 5 7,346 7,865 Intangible assets 6 7,164 42,189 Investments in associates 7 517 - Deferred income tax asset 699 1,503 ------------ ---------------- 15,726 51,557Current Assets Trade debtors 9,371 11,628 Prepayments 1,921 2,143 VAT, net 399 559 Other receivables 947 842 Bank and cash balances 26,075 31,462 ------------ ---------------- 38,713 46,634 Non-current assets held for sale 18 48,176 5,231 ------------ ----------------Total assets 102,615 103,422 ============ ================ LiabilitiesCurrent Liabilities Trade and other creditors 8,706 11,613 Current income tax payable 2,836 8,193 VAT payable 1,622 1,813 Other provisions for liabilities and charges 10 6,892 10,887 Deferred income 1,810 5,242 ------------ ---------------- 21,866 37,748Long Term Liabilities Deferred taxation 1,439 6,149 ------------ ---------------- 1,439 6,149 Liabilities directly associated with assets held for sale 18 23,170 1,331 ------------ ----------------Total liabilities 46,475 45,228 Shareholders' equityIssued capital 8 173 165Share premium 67,026 64,053Options reserve 194 148Assets valuation reserve 1,011 966Accumulated losses (13,336) (13,315)Currency translation reserve (1,688) (446) ------------ ----------------Total shareholders' equity 53,380 51,571 Minority interest directly associated with assets held for sale 1,386 1,876Minority interest 13 1,374 4,747 ------------ ----------------Liabilities and Shareholders' Equity: 102,615 103,422 ============ ================ \* T \* T The accompanying notes are an integral part of this condensed interim financial information.These condensed interim financial statements were approved by the Directors on 22 September 2008 Mark Opzoomer, CEO Arthur Akopyan, CFO\* T \* T Rambler Media Limited Condensed Consolidated Interim Income Statement for the 6 month period ended 30 June 2008 (expressed in US$'000s)------------------------------------------------------------------------------------------------------------------------ Notes 1 January 1 January 2008 to 30 2007 to 30 June 2008 June 2007 ----- ---------- ----------Continuing OperationsRevenue 11 51,704 20,512 Other income 11 - 1,202 Operating expenses 12 (47,815) (22,530) Loss on disposal of a subsidiary 16 (241) - Impairment expenses 18 (5,145) - ---------- ---------- Operating loss (1,497) (816) Share of profit of an associate 7 287 - Interest income 494 892 ---------- ----------(Loss) / profit before taxation (716) 76 Taxation 14 259 (473) ---------- ---------- Loss for the period from continuing operations (457) (397) Discontinued operationsGain on disposal of subsidiary 18 - 7,089 ---------- ---------- Net (loss) / profit (457) 6,692 Attributable to:- equity holders of the company 756 6,439- minority interest 13 (1,213) 253 ---------- ---------- (457) 6,692 ========== ========== Earnings/(loss) per share for profit/(loss) attributable to the equity holders of the company, expressed in cents per share Earnings/(loss) per share from continuing operations -- basic (in US$ per share) 0.049 (0.042) -- diluted (in US$ per share) 15 0.049 (0.042) Earnings per share from discontinued operations -- basic (in US$ per share) - 0.461 -- diluted (in US$ per share) 15 - 0.461\* T The accompanying notes are an integral part of this condensed interim financialinformation. \* T Rambler Media Limited Condensed Consolidated Interim Statement of Changes in Shareholders' Equity for the 6 month period ended 30 June 2008 (expressed in US$'000s)----------------------------------------------------------------------------------------------------------------------- Issued Assets Share Options Accumulated Translation Total Minority Minority Total capital valuation premium reserve Losses reserve interest interest equity reserve directly ass. with AHS ----------------------------------------------------------------------------------------------31 December 2006 153 - 57,208 601 (17,846) - 40,116 - 3,613 43,729 Share capital issued 1 - 2,503 - - - 2,504 - - 2,504Share option reserve transferred to share premium - - - (601) - - (601) - - (601)Cost of share option - - - 103 - - 103 - - 103Profit for the period - - - - 6,439 - 6,439 - 253 6,692Valuation of available- for-sale financial assets - 17,214 - - - - 17,214 - - 17,214Deferred tax thereon - (4,131) - - - - (4,131) - - (4,131)Translation reserve 3 - 1,167 6 (290) 9 895 - 76 971 ----------------------------------------------------------------------------------------------30 June 2007 157 13,083 60,878 109 (11,697) 9 62,539 - 3,942 66,481 Cost of share option - - - 32 - - 32 - - 32Valuation of available- for-sale financial assets - (16,277) - - - - (16,277) - - (16,277)Deferred tax thereon - 4,131 - - - - 4,131 - - 4,131Classified as assets held for sale - - - - - - - 1,876 (1,876) -Loss for the period - - - - (360) - (360) - (668) (1,028)Minority arising on acquisitions - - - - - - - - 3,395 3,395Dividends paid - - - - - - - - (334) (334)Translation reserve 8 29 3,175 7 (1,258) (455) 1,506 - 288 1,794 ----------------------------------------------------------------------------------------------31 December 2007 165 966 64,053 148 (13,315) (446) 51,571 1,876 4,747 58,194 Cost of share option - - - 39 - - 39 - - 39Classified as assets held for sale - - - - - - - (490) 490 -Profit/(loss) for the period - - - - 756 - 756 - (1,213) (457)Dividends paid - - - - - - - - (3,063) (3,063)Translation reserve 8 45 2,973 7 (777) (1,242) 1,014 - 413 1,427 ---------------------------------------------------------------------------------------------- 30 June 2008 173 1,011 67,026 194 (13,336) (1,688) 53,380 1,386 1,374 56,140 ==============================================================================================\* T \* T Rambler Media Limited Condensed Consolidated Interim Statement of Cash Flows for the 6 month period ended 30 June 2008 (expressed in US$'000s)------------------------------------------------------------------------------------------------------------------------ 1 January 2008 1 January 2007 to 30 June to 30 June 2008 2007 -------------- -------------- Cash flows from operating activitiesNet (loss) / profit (457) 6,692Adjusted for:Profit attributable to discontinued operations - (7,089)Interest receivable (494) (892)Share of profit of associates (287) -Dividends receivable - (1,202)Taxation charge (259) 473Impairment loss 5,145 -Cost of share options vested 39 - 103Foreign currency translation loss 753 678Depreciation and amortisation 4,755 1,437Increase in other provisions for liabilities and charges 1,646 533Overhead costs attributable to discontinued operations paid by continuing operations - 57 -------------- --------------Operating cash flows before working capital changes 10,841 790Decrease / (increase) in debtors and receivables 1,685 (4,856)(Increase) / decrease in prepayments (56) 419Increase in creditors and other payables 592 3,265(Decrease) / increase in deferred income (1,884) 949 -------------- --------------Cash generated from operations 11,178 567Income taxes paid (3,544) (234) -------------- --------------Net cash from operating activities 7,634 333 Cash flows from investing activitiesSale of subsidiary undertakings 110 -Purchase of property, plant and equipment (2,123) (1,324)Purchase of intangibles assets (585) (334)Dividends received - 903 -------------- --------------Net cash used in investing activities - continuing operations (2,598) (755)Net cash from investing activities - discontinued operations - 20,524 -------------- --------------Net cash (used in) / from investing activities (2,598) 19,769 Cash flows from financing activitiesProceeds of equity financing - 1,904Interest received 427 892 -------------- --------------Net cash from investing activities 427 2,796 Net increase in cash 5,463 22,898Cash at the beginning of the period - continuing operations 31,462 18,461Cash at the beginning of the year - assets held for sale 1 476 Cash at the end of the period - continuing operations 26,075 41,836Cash at the end of the year - asset held for sale 10,851 -Cash at the end of the period 36,926 41,836 ============== ==============\* T Notes to the condensed consolidated half-yearly interim financial information 1. General Information Rambler Media Limited ("the company") was incorporated in Jersey on 10 June 2004as a private limited company (now a public company - see below). The company hasits registered office at First Island House, Peter Street, St. Helier, JerseyJE2 4SP. The condensed consolidated financial information presented hereinincludes the condensed interim financial information of the company, its whollyowned subsidiaries and investees in which the parent company has control(together referred to as "the Group"). The Group's principal place of business is the Russian Federation and CIS. Rambler Media is a diversified Russian language media, entertainment, servicesand content delivery company which operates various internet propertiesincluding the leading Russian language internet portal and search engine"Rambler.ru", Top 100 rating system, free email service, on-line newspaper"Lenta.ru", price comparison website "Price.ru", data center operator "RamblerTelecom", contextual advertising company "Begun", and mobile content serviceprovider "Rambler Mobile". Rambler Media's shares are traded on the AIM market of the London Stock Exchangeunder the symbol "RMG" since the Initial Public Offering (IPO) which took placeon 15 June 2005. At 30 June 2008, the Rambler Group had 700 employees in continuing operations(31 December 2007: 687; 30 June 2007: 517). On 31 October 2006, Prof-Media, a Russian media holding, acquired 48.8% of theshares of Rambler Media Limited from funds managed by FM Asset ManagementLimited. In December 2006, following the anti-monopoly approval, Prof-Mediaobtained control of Rambler Media Limited. Subsequently, Prof-Media (the "PMGroup") increased its stake to 54.84%. The immediate controlling party of the PMGroup is KM Technologies (Overseas) Limited. The ultimate controlling parties ofthe PM Group in 2007 were Mr V. Potanin and Mr M. Prokhorov, in 2008 MrV.Potanin completed the acquisition of Mr M.Prokhorov's stake in the companycontrolling KM Techniligies (Overseas) Limited, and consequently became the soleultimate controlling party of the PM Group. 2. Basis of preparation This condensed consolidated interim financial information for the half-yearended 30 June 2008 has been prepared in accordance with IAS 34, "Interimfinancial reporting". The interim condensed financial report should be read inconjunction with the annual financial statements for the year ended 31 December2007. The accounting policies adopted are consistent with those of the annualconsolidated financial statements for the year ended 31 December 2007, asdescribed in the annual consolidated financial statements for the year ended 31December 2007 except for change in estimated useful lives for computers from 5to 3 years. 3. Accounting policies a) Basis of consolidation These condensed consolidated interim financial statements have been prepared inaccordance with International Financial Reporting Standards ("IFRS") under thehistorical cost convention. The principal accounting policies applied in thepreparation of these condensed consolidated interim financial statements are setout below. These policies have been consistently applied to all the periodspresented, unless otherwise stated (refer to Note 3 (e), New AccountingPronouncements). b) Functional currency Management exercised its judgement to determine that for the purposes of the2008 IFRS financial statements the Russian Rouble most fairly represents theeconomic effects of the underlying transactions, events and conditions. c) Presentation currency All amounts in these financial statements are presented in thousands of USdollars ("US$ thousands"), unless otherwise stated. It is a common practice forRussian companies operating in the media industry to use US$ as a presentationcurrency. The Russian Rouble is not a fully convertible currency outside the RussianFederation and, accordingly, any translation of RUR denominated assets andliabilities into US$ for the purpose of these condensed consolidated interimfinancial statements does not imply that Group could or will in the futurerealise or settle in US$ the translated values of these assets and liabilities. The results and financial position of each Group entity (functional currency ofnone of which is a currency of a hyperinflationary economy) are translated intothe presentation currency as follows: (i) assets and liabilities for each balance sheet presented are translated atthe closing rate at the date of that balance sheet; (ii) income and expenses for each income statement are translated at averageexchange rates (unless this average is not a reasonable approximation of thecumulative effect of the rates prevailing on the transaction dates, in whichcase income and expenses are translated at the dates of the transactions); and (iii) all resulting exchange differences are recognised as a separate componentof equity. At 30 June 2008, the principal rate of exchange used for translating foreigncurrency balances was US$ 1 = RR 23.46 (31 December 2007: US$ 1 = RR 24.55). d) Foreign currency translation Monetary assets and liabilities are translated into each entity's functionalcurrency at the official exchange rate of the Central Bank of the RussianFederation at the respective balance sheet dates. Foreign exchange gains andlosses resulting from the settlement of the transactions and from thetranslation of monetary assets and liabilities into each entity's functionalcurrency at year-end official exchange rates of the Central Bank of the RussianFederation are recognised in profit or loss. Translation at year-end rates doesnot apply to non-monetary items, including equity investments. Effects ofexchange rate changes on the fair value of equity securities are recorded aspart of the fair value gain or loss. e) New accounting pronouncements Certain new IFRSs became effective for the Group from 1 January 2008. Listedbelow are those new or amended standards or interpretations which are or in thefuture could be relevant to the Group's operations and the nature of theirimpact on the Group's accounting policies. All changes in accounting policieswere applied unless otherwise described below. The following new standards, amendments to standards or interpretations aremandatory for the first time for the financial year beginning 1 January 2008 butare not currently relevant for the group: IFRIC 11, 'IFRS 2 - Group and treasury share transactions'; IFRIC 12, 'Service concession arrangements'; IFRIC 14, 'IAS 19 - the limit on a defined benefit asset, minimum fundingrequirements and their interaction'. The following new standards, amendments to standards and interpretations havebeen issued but are not effective for the financial year beginning 1 January2008 and have not been early adopted: IFRS 8, Operating Segments (effective for annual periods beginning on or after 1January 2009). The standard applies to entities whose debt or equity instrumentsare traded in a public market or that file, or are in the process of filing,their financial statements with a regulatory organisation for the purpose ofissuing any class of instruments in a public market. IFRS 8 requires an entityto report financial and descriptive information about its operating segments andspecifies how an entity should report such information. The Group does notexpect IFRS 8 to affect the consolidated financial statements. Puttable financial instruments and obligations arising on liquidation--IAS 32and IAS 1 Amendment (effective from 1 January 2009). The amendment requiresclassification as equity of some financial instruments that meet the definitionof a financial liability. The Group does not expect the amendment to affect itsconsolidated financial statements. IAS 23, Borrowing Costs (revised March 2007; effective for annual periodsbeginning on or after 1 January 2009). The revised IAS 23 was issued in March2007. The main change to IAS 23 is the removal of the option of immediatelyrecognising as an expense borrowing costs that relate to assets that take asubstantial period of time to get ready for use or sale. An entity is,therefore, required to capitalise such borrowing costs as part of the cost ofthe asset. The revised standard applies prospectively to borrowing costsrelating to qualifying assets for which the commencement date for capitalisationis on or after 1 January 2009. The Group does not expect the revision to affectits consolidated financial statements. IAS 1, Presentation of Financial Statements (revised September 2007; effectivefor annual periods beginning on or after 1 January 2009). The main change in IAS1 is the replacement of the income statement by a statement of comprehensiveincome which will also include all non-owner changes in equity, such as therevaluation of available-for-sale financial assets. Alternatively, entities willbe allowed to present two statements: a separate income statement and astatement of comprehensive income. The revised IAS 1 also introduces arequirement to present a statement of financial position (balance sheet) at thebeginning of the earliest comparative period whenever the entity restatescomparatives due to reclassifications, changes in accounting policies, orcorrections of errors. The Group expects the revised IAS 1 to affect thepresentation of its financial statements but to have no impact on therecognition or measurement of specific transactions and balances. IAS 27, Consolidated and Separate Financial Statements (revised January 2008;effective for annual periods beginning on or after 1 July 2009). The revised IAS27 will require an entity to attribute total comprehensive income to the ownersof the parent and to the non-controlling interests (previously "minorityinterests") even if this results in the non-controlling interests having adeficit balance (the current standard requires the excess losses to be allocatedto the owners of the parent in most cases). The revised standard specifies thatchanges in a parent's ownership interest in a subsidiary that do not result inthe loss of control must be accounted for as equity transactions. It alsospecifies how an entity should measure any gain or loss arising on the loss ofcontrol of a subsidiary. At the date when control is lost, any investmentretained in the former subsidiary will have to be measured at its fair value.The Group is currently assessing the impact of the amended standard on itsconsolidated financial statements. IFRS 3, Business Combinations (revised January 2008; effective for businesscombinations for which the acquisition date is on or after the beginning of thefirst annual reporting period beginning on or after 1 July 2009). The revisedIFRS 3 will allow entities to choose to measure non-controlling interests usingthe existing IFRS 3 method (proportionate share of the acquiree's identifiablenet assets) or on the same basis as US GAAP (at fair value). The revised IFRS 3is more detailed in providing guidance on the application of the purchase methodto business combinations. The requirement to measure at fair value every assetand liability at each step in a step acquisition for the purposes of calculatinga portion of goodwill has been removed. Instead, goodwill will be measured asthe difference at acquisition date between the fair value of any investment inthe business held before the acquisition, the consideration transferred and thenet assets acquired. Acquisition-related costs will be accounted for separatelyfrom the business combination and therefore recognised as expenses rather thanincluded in goodwill. An acquirer will have to recognise at the acquisition datea liability for any contingent purchase consideration. Changes in the value ofthat liability after the acquisition date will be recognised in accordance withother applicable IFRSs, as appropriate, rather than by adjusting goodwill. Therevised IFRS 3 brings into its scope business combinations involving only mutualentities and business combinations achieved by contract alone. The Group iscurrently assessing the impact of the amended standard on its consolidatedfinancial statements. IFRS 2 (amendment) 'Share-based payment' (effective for annual periods beginningon or after 1 January 2009). Management is assessing the impact of changes tovesting conditions and cancellations on the Group's consolidated financialstatements. IFRIC 13, Customer Loyalty Programmes (issued in June 2007; effective for annualperiods beginning on or after 1 July 2008). IFRIC 13 clarifies that where goodsor services are sold together with a customer loyalty incentive (for example,loyalty points or free products), the arrangement is a multiple-elementarrangement and the consideration receivable from the customer is allocatedbetween the components of the arrangement using fair values. The Group iscurrently assessing the impact of the Interpretation on its consolidatedfinancial statements. Unless otherwise described above, the new standards and interpretations are notexpected to significantly affect the Group's consolidated financial statements. 4. Segmental Information Starting from 2H 2007 management determined that the Mobile segment no longerrepresents a distinguishable component of the group because this segment isclosely integrated with the internet operations. Management believes that risksand returns associated with internet and mobile operations are closely relatedgiven the similar nature of products and services, as well as the similar methodused to provide them, and the similar customer base. Additionally, both types ofoperations are managed together by the same management team. The internalreporting provided to chief operating decision-maker was set up in a way toreflect a single segment - namely, internet services. The segmental results for the six months ended 30 June 2007 were as follows: \* T Internet Services Mobile VAS Total ----------------- ---------- --------Total Revenue 18,408 2,104 20,512Operating expenses and overheads (20,383) (2,147) (22,530) ----------------- ---------- -------- Net loss before interest, tax and minority interest (1,975) (43) (2,018) ================= ========== ========\* T 5. Capital expenditure \* T Leasehold Office Total improvements equipment -------------------------------Cost31 December 2006 429 6,330 6,759 Additions 48 834 882Disposals - (11) (11)Currency translation 9 135 144 -------------------------------30 June 2007 486 7,288 7,774 Additions 144 3,537 3,681On acquisition of subsidiary - 683 683Disposals - (1) (1)Classified as non-current assets held for sale - (86) (86)Currency translation 24 279 303 -------------------------------31 December 2007 654 11,700 12,354 Additions 231 1,892 2,123Disposals - (12) (12)Deconsolidation as a result of a disposal of subsidiary (27) (227) (254)Classified as non-current assets held for sale (209) (1,233) (1,442)Currency translation 35 580 615 -------------------------------30 June 2008 684 12,700 13,384 ------------------------------- Accumulated Depreciation31 December 2006 338 2,690 3,028 Charge 25 539 564Disposals - (2) (2)Currency translation 7 60 67 -------------------------------30 June 2007 370 3,287 3,657 Charge 130 723 853Classified as non-current assets held for sale - (20) (20)Currency translation (1) (1) -------------------------------31 December 2007 500 3,989 4,489 Charge 59 1,608 1,667Disposals - (6) (6)Deconsolidation (14) (123) (137)Classified as non-current assets held for sale (3) (203) (206)Currency translation 24 207 231 -------------------------------30 June 2008 566 5,472 6,038 ------------------------------- Net book value 30 June 2008 118 7,228 7,346 =============================== 31 December 2007 154 7,711 7,865 ===============================\* T 6. Intangible Assets \* T Domain Software Goodwill Total and trade and other names intangibles ---------------------------------------Cost31 December 2006 10,402 1,943 2,170 14,515 Additions - 354 - 354Currency translation 194 102 43 339 ---------------------------------------30 June 2007 10,596 2,399 2,213 15,208 Additions - 62 - 62On acquisition of subsidiary 10,835 8,300 16,920 36,055Classified as non-current assets held for sale (5,757) - - (5,757)Impairment - - (1,521) (1,521)Currency translation 999 386 804 2,189 ---------------------------------------31 December 2007 16,673 11,147 18,416 46,236 Additions - 585 - 585Deconsolidation - (133) - (133)Declassified from non-current assets held for sale 5,145 - - 5,145Classified as non-current assets held for sale (11,798) (9,039) (18,508) (39,345)Impairment (5,145) - - (5,145) ---------------------------------------Currency translation 774 529 855 2,157 ---------------------------------------30 June 2008 5,649 3,089 763 9,501 --------------------------------------- Accumulated Amortisation31 December 2006 273 501 - 774 Amortisation expense 753 120 - 873Currency translation 12 27 - 39 ---------------------------------------30 June 2007 1,038 648 - 1,686 Amortisation expense 1,321 1,560 - 2,881Accumulated amortization classified as non-current assets held for sale (620) - - (620)Currency translation 53 47 - 100 ---------------------------------------31 December 2007 1,792 2,255 - 4,047 Amortisation expense 1,370 1,718 - 3,088Accumulated amortisation classified as non-current assets held for sale (2,163) (2,872) - (5,035)Currency translation 97 139 - 236 ---------------------------------------30 June 2008 1,096 1,240 - 2,336 --------------------------------------- Net book value 30 June 2008 4,553 1,849 762 7,164 ======================================= 31 December 2007 14,881 8,892 18,416 42,189 =======================================\* T Goodwill is tested for impairment annually at year end (31 December) or wheneverthere is any indication of impairment. At 30 June 2008, there was no indicationof impairment of goodwill. Intangible assets that are subject to amortisation are reviewed for impairmentwhenever events or changes in circumstance indicate that the carrying amount maynot be recoverable. In 1H 2008, the Company ceased to classify Damochka.ru as an asset held for saledue to the lack of potential buyers for the entity. Assumptions behind theoriginal investment decision never materialised and the Group was unable toproperly integrate Damochka in its product portfolio. In addition Damochka'sbusiness model of an early-stage social / dating network has come underincreasing pressure from a number of competitors. As the business iscontinuously loss making the management decided at the moment ofde-classification to impair in full the intangible assets recognised at the timeof the purchase of the business in 2006 and recognised an impairment loss ofUS$5.1 million which was partially offset by a reduction of deferred income taxliability by US$1.2 million and reduction of minority interest in net assets ofDamochka's subsidiary by US$1.9 million. Therefore impact of this impairmentcharge on net income is approximately US$ 3.2 million. There was no indication of impairment of other intangible assets at 30 June2008. 7. Investments in associates On 1 April 2008, the Company sold a 51% stake in RGL Holding Limited which owns100% of ZAO Index20 to a subsidiary of Video International Group and recognisedan investment in an associate at cost (US$ 229 thousand). The carrying amount isincreased or decreased to recognise the Company's share of the profit or loss ofthe investee after the date of the transaction. Distributions received from theinvestee reduce the carrying amount of the investment. \* T 2008 -------------------------- Carrying amount at 1 January -Fair value of net assets of an associate at the date of sale of a controlling stake in Index20 229Share of profit of an associate 287Currency translation 1 --------------------------Carrying amount at 30 June 517 ==========================\* T 8. Share Capital The share capital of the Company at the balance sheet date expressed in US$ (notthousands) is comprised as follows: \* T 2008 2007 ------------ -------------\* T \* T 2008 2007 ------------ -------------Authorised ordinary shares of US$ 0.01 each (20 million shares) 200,000 200,000 ------------ ------------- Issued and fully paid share capital 15,397,649 ordinary shares of US$ 0.01 each 153,976 153,976 ------------ -------------\* T There were no employee share options exercised during the first half of 2008 (30June 2007: 125,545 shares with exercise proceeds of US$15.16 per share, US$1,904thousand in total). 9. Share based payments On 18 October 2004, at an Extraordinary General Meeting, the Shareholders of theCompany approved the grant of options pursuant to the Rambler Media LimitedShare Option Plan and the Rambler Media Limited Executive Share Option Plan (the"Share Option Plans"). Under the terms approved, directors of the Company maynot allot more than 1,300,000 shares to the Share Option Plans without furtherapproval by ordinary resolution of the Company in general meeting. \* T Number Weighted average Total proceeds exercise prices, received and USD receivable, USD'000-------------------------------------------------------------------------------------------- Balance at 31 December 2007 50,000 34.10 1,705New awards - - -Exercised - - ---------------------------------------------------------------------------------------------Balance at 30 June 2008 50,000 34.10 1,705--------------------------------------------------------------------------------------------\* T The estimated fair value of each share option granted was calculated by applyinga Black-Scholes option pricing model. The model inputs were the share price atgrant date and exercise price (disclosed in a table above), expected volatilityof 21% for options granted in 2007, no expected dividends and an averagerisk-free interest rate of 4%. To allow for the effects of early exercise, itwas assumed that the employees would immediately exercise the options aftervesting date. Share options agreements have an early exercise condition wherebythe employees have a right of early exercise in the event of management change. 10. Other provisions for liabilities and changes Movements in Other Provisions for Liabilities and Charges are as follows: \* T ------------------------------------------------------------------------------------------------------------------------ Carrying amount at 31 December 2007 10,887 Additions charged to profit or loss 1,646Classified as liabilities directly associated with assets held for sale (6,684)Currency translation 1,043 Carrying amount at 30 June 2008 6,892\* T All of the above provisions relate to potential liabilities for taxes other thanincome taxes, and associated balances arising from the legal structure of theGroup and the jurisdictions in which various income and expense items arerecorded and where they may be deemed to be assessed for tax purposes. Theseissues are also impacted by the absence of group relief between various entitiesin the Group structure. 11. Revenue and Other Income Revenue comprises: \* T 1 January 1 January 2008 to 30 2007 to 30 June 2008 June 2007 ---------- ---------- Paid Search / Contextual advertising 23,195 4,274Display / Banner advertising 21,702 11,197Mobile and Value Added Services 3,080 2,104Listing fees, other advertising 2,982 2,056Other Revenue 745 881 ---------- ---------- 51,704 20,512 ========== ==========\* T Other income comprises: \* T 1 January 1 January 2008 to 30 2007 to 30 June 2008 June 2007 ---------- ---------- Dividends from Begun - 1,202 ---------- ---------- - 1,202 ========== ==========\* T 12. Operating expenses Operating expenses comprise: \* T 1 January 1 January 2008 to 30 2007 to 30 June 2008 June 2007 ---------- ---------- Labour 15,279 8,778Traffic acquisition cost - contextual 7,571 756Commissions - banner sales 3,633 1,101Amortisation 3,088 873Marketing and advertising 2,908 1,157Traffic Acquisition Cost - banner and revenue 2,564 1,744Mobile costs 2,261 1,864General expenses 1,842 887Depreciation 1,667 562Provision for taxes other than income tax 1,646 533Data center costs 1,288 534Legal and professional 1,285 1,561Rent - min lease payments 1,167 543Foreign currency translation loss 753 678Content costs 587 754Other 237 102Share options 39 103 ---------- ---------- Total Operating expenses 47,815 22,530 ========== ==========\* T The Company incurs expenses throughout the year on maintaining existing productsand developing new products; staff members are involved in both activities. Itis therefore not practical to estimate with any accuracy the amount ofexpenditure incurred on development expenditure in any given period. 13. Minority interest \* T Begun Holmruk Paintium Business- Price Total Studio equity -------------------------------------------------As at 1 January 2008 3,250 8 - 51 1,438 4,747 Profit / (loss) for period 427 - (1,914) 4 270 (1,213)Dividends paid / declared (2,596) - - - (467) (3,063)Currency translation 305 - 38 - 70 413Minority directly associated with assets held for sale (1,386) - 1,876 - - 490 -------------------------------------------------As at 30 June 2008 - 8 - 55 1,311 1,374\* T 14. Income taxes The Rambler Group has operations in a number of jurisdictions and isconsequently exposed to the fiscal regimes of more than one country. Its mainexposure is to the fiscal regime of the Russian Federation. Income taxes have been provided for in the consolidated financial statements inaccordance with Russian legislation enacted or substantively enacted by thebalance sheet date. The income tax charge/benefit comprises current tax anddeferred tax and is recognised in the consolidated income statement unless itrelates to transactions that are recognised, in the same or a different period,directly in equity. Income tax comprised the following: \* T 1 January 1 January 2008 to 30 2007 to 30 June 2008 June 2007------------------------------------------------------------------------------------------------------------------------Current tax expense 2,217 563Deferred tax benefit (2,476) (90)Income tax (benefit) / expense for the period (259) 473------------------------------------------------------------------------------------------------------------------------\* T A reconciliation between the expected and the actual taxation charge is providedbelow: \* T 1 January 2008 1 January 2007 to 30 June to 30 June 2008 2007------------------------------------------------------------------------------------------------------------------------ Accounting (loss) / profit before taxation (716) 76------------------------------------------------------------------------------------------------------------------------ Theoretical tax (benefit) / charge at statutory rate of 24% (2007: 24%) (172) 18 Tax effect of items which are not deductible or assessable for taxation purposes: Non-deductible expenses 108 - Non-deductible provisions for taxes other than on income 395 128 Revenue generated in tax free jurisdictions (1,530) (1,251) Loss accumulated in tax free jurisdictions 1,353 1,303 Use of estimated annual effective tax rate (1,117) - Additional charges for income tax in connection with the group's structure 704 274 ------------------------------- (87) 455 Income tax (benefit) / expense for the period (259) 473------------------------------------------------------------------------------------------------------------------------\* T For the purpose of calculating income tax charge for 1H 2008 the management usedthe effective tax rate of 36.4% based on actual and budget data for the fullyear of 2008. 15. Earnings/(loss) per share Earnings/(loss) per share has been calculated as follows: \* T 1 January 2008 1 January 2007 to 30 June to 30 June 2008 2007------------------------------------------------------------------------------------------------------------------------Profit/(loss) for the period from continuing operations attributable to equity holders 756 (650) Weighted average number of shares in issue (thousands) - basic 15,398 15,376Weighted average number of shares in issue (thousands) - diluted 15,398 15,376------------------------------------------------------------------------------------------------------------------------ Basic earnings/(loss) per share from continuing operations (expressed in US$ per share) 0.049 (0.042)Diluted earnings/(loss) per share from continuing operations (expressed in US$ per share) 0.049 (0.042)------------------------------------------------------------------------------------------------------------------------\* T Earnings/(loss) per share from discontinued operations is calculated as follows: \* T 1 January 2008 1 January 2007 to 30 June 2008 to 30 June 2007------------------------------------------------------------------------------------------------------------------------ Profit for the period from discontinued operations - 7,089 Weighted average number of shares in issue (thousands) - basic 15,398 15,376Weighted average number of shares in issue (thousands) - diluted 15,398 15,376------------------------------------------------------------------------------------------------------------------------ Basic earnings per share from discontinued operations (expressed in US$ per share) - 0.461Diluted earnings per share from discontinued operations (expressed in US$ per share) - 0.461------------------------------------------------------------------------------------------------------------------------\* T 16. Disposal of a subsidiary On 1 April 2008, the Group sold a 51% stake in RGL Holding Limited which owns100% of ZAO Index20 to a subsidiary of Video International Group for US$145thousand. The remaining 49% share in RGL Holding Limited is accounted for as aninvestment in associate from the date of sale. Details of the sale are as follows: \* TCash and cash equivalents 1,630Other net assets (1,161)Net assets of business (51%) 239------------------------------------------------------------------------------------------------------------------------Total purchase consideration 145------------------------------------------------------------------------------------------------------------------------less: cash of business (1,630)Outflow of cash on sale (1,485)less: direct costs associated with the sale (147)------------------------------------------------------------------------------------------------------------------------Loss on sale (241)------------------------------------------------------------------------------------------------------------------------\* T 17. Directors' Remuneration The directors' remuneration for 2008 and 2007 paid by Group companies are asfollows (not in thousands): \* T 1 January 2008 to 1 January 2007 to 30 June 2008 30 June 2007 ----------------- ----------------- Robert Mott Brown III 58,987 52,765 Mark Opzoomer 291,462 156,574 Arthur Akopyan 177,116 86,667 Irina Gofman - 177,565 James Mullins - 96,875 ----------------- ----------------- Total Short term employee benefits 527,565 570,446 ================= =================\* T 18. Non-current assets held for sale (or disposals groups) On 30 June 2008, the Company met the criteria of IFRS 5 to classify the Begunbusiness as an asset held for sale. A plan to sell the business was approved in2008 due to the necessity to establish a prosperous partnership with Google. Thesale is expected to be completed within the third quarter of 2008. Major classes of non-current assets classified as held for sale (or disposalgroups) are: \* T 30 June 2008 31 December 2007----------------------------------------------------------------------------------------------------------------------- Property, plant and equipment 1,302 66Intangible assets 15,831 5,137Goodwill 18,508 -Deferred tax asset 1,005 3Trade and other receivables 679 24Cash and cash equivalents 10,851 1 ----------------------------------------------------------------------------------------------------------------------- 48,176 5,231-----------------------------------------------------------------------------------------------------------------------\* T Major classes of liabilities directly associated with non-current assets (ordisposal groups) classified as held for sale are: \* T 30 June 2008 31 December 2007----------------------------------------------------------------------------------------------------------------------- Deferred income tax liability 3,840 1,234Other taxes payable 12,172 4Trade and other payable 7,158 93 ----------------------------------------------------------------------------------------------------------------------- 23,170 1,331-----------------------------------------------------------------------------------------------------------------------\* T In 1H 2008, the Company ceased to classify Damochka.ru as an asset held for saledue to continued absence of potential buyers for the entity. As the business iscontinuously loss making the management decided at the moment ofde-classification to impair in full the intangible assets recognised at businesscombination in 2006 and recognised an impairment loss in the amount of US$ 5,145thousand. 19. Contingent liabilities (a) Russian taxation and currency control regulations In addition to the possible attribution of additional tax to the Group'scompanies described in Note 10, management estimates that the Group has otherpossible obligations from exposure to other than remote tax risks of US$1,944thousand (31 December 2007: US$1,328 thousand). These exposures primarily relateto income tax. (b) Litigation In the course of its normal business the Rambler Group receives legal claimsfrom time to time. In the opinion of the directors none of the litigationcurrently in progress is likely to result in the crystallisation of a materialliability. (c) Commitment to pay for exclusive internet partnership An agreement was signed on 8 December 2004 by the Rambler Group that commits itto paying a minimum of US$ 200 thousand per annum for a minimum of 12 months inrespect of an exclusive internet partnership to promote a customised co-brandedinstant messaging product for Russian and other CIS countries. The Rambler Grouppaid a similar amount in December 2007, December 2006, December 2005. Starting from year 2008 a minimum of US$ 750 thousand per quarter is committedto be paid by Rambler Group (US$ 1,500 thousand paid during the 6 months periodended 30 June 2008). (d) Lease commitments The Group is committed to the following lease payments under the non-cancellableoperating leases: \* T 2008 2007-------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------Expiring within one year 2,669 2,025--------------------------------------------------------------------------------------\* T 20. Related-Party Transactions Transactions between Rambler Companies and its related parties, as well asrelated party balances are not material for the period ended 30 June 2008 exceptfor the following parties: \* T 2008------------------------------------------------------------------------------------------------------------------------FINAM Bank (related to Begun's minority shareholder)Cash at the beginning of the period - short term deposits 4,552Cash at the beginning of the period - bank account 496Interest income received 267Cash at the period end - short term deposits 8,867Cash at the period and - bank account 944 IMHO (majority shareholder of Index20 from 1 April 2008)Balance receivable at 1 April 2008 7,630Agent sales 7,184Agent commission charge (1,114)Cash inflows (net) during the period 13,145Balance receivable at the period end 555\* T 21. Post Balance Sheet Events Rambler Group has agreed to sell its contextual advertising company ZAO Begunand related subsidiaries to Google. Rambler currently holds 50.1% of Begun. Thetransaction will consist of Rambler buying the remaining 49.9% from a minorityshareholder, affiliated with the Finam Group of companies, immediately afterwhich Rambler will sell 100% of Begun to Google subject to certain approvals andcondition precedent for a total cash consideration of US$ 140 million, of whichUS$ 69.9 million is attributable to the minority shareholder, with customaryclosing adjustments. The transaction is expected to be completed in September2008. On 3 July 2008, Rambler acquired the remaining 49% stake in Price Express LLCfor a total cash consideration of US$4 million from a minority stakeholder, anemployee of the Rambler group. Rambler already held a 51% stake in thissubsidiary which it acquired in January 2006. 22. Seasonality The internet advertising volume of sales is subject to certain seasonalfluctuations, the second half of the year is typically higher than the firsthalf due to holiday seasons. For the six months ended 30 June 2008 sales volumewas affected by both seasonality and growth of the market and it represented 75%(six months ended 30 June 2007: 41%) of the annual sales in the year ended 31December 2007. The increase was also impacted significantly by the consolidationof Begun commencing in August 2007. Statements of directors' responsibility The directors' confirm that this condensed set of financial statements has beenprepared in accordance with IAS 34. The directors of Rambler Media Limited are listed in Rambler Media's AnnualReport for 31 December 2007. A list of current directors is maintained onRambler Media Limited's corporate website at www.ramblermedia.com. \* T ---------------------------------- ------------------------------------Mark Opzoomer Arthur AkopyanCEO CFO 22 September 2008\* T Independent review report to Rambler Media Limited Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2008 which comprises the consolidated interimbalance sheet as at 30 June 2008 and the related consolidated interim statementsof income, cash flows and changes in shareholders' equity for the six monthsthen ended and related notes. We have read the other information contained inthe interim report and considered whether it contains any apparent misstatementsor material inconsistencies with the financial information. The otherinformation comprises the Interim Management Report. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the AIM Rulesfor Companies which require that the financial information must be presented andprepared in a form consistent with that which will be adopted in the company'sannual financial statements. This interim report has been prepared in accordance with the InternationalAccounting Standard 34, 'Interim financial reporting'. Review work performed We conducted our review in accordance with International Standard on ReviewEngagements 2410, 'Review of Interim Financial Information Performed by theIndependent Auditor of the Entity' issued by the International Auditing andAssurance Standards Board. A review consists principally of making enquiries ofmanagement and applying analytical procedures to the financial information andunderlying financial data and, based thereon, assessing whether the disclosedaccounting policies have been applied. A review excludes audit procedures suchas tests of controls and verification of assets, liabilities and transactions.It is substantially less in scope than an audit and therefore provides a lowerlevel of assurance. Accordingly we do not express an audit opinion on thefinancial information. This report, including the conclusion, has been preparedfor and only for the company for the purpose of the AIM Rules for Companies andfor no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2008. \* TPricewaterhouseCoopers CI LLPChartered AccountantsJersey 22 September 2008\* T Copyright Business Wire 2008

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