Our governance approach

In our view, good governance is essential to company performance. It’s not just a question of compliance but also one of doing the right thing and building a sound basis of leadership, control and accountability to make sure our growth rests on firm foundations. We are committed to backing up our intentions through implementation of effective governance structures and processes.

During 2007, with a new board, a more settled management team and a clearer development strategy, we have had the opportunity to make good progress in strengthening our governance.

Board of Directors

The Board includes a Non-Executive Chairman, two Executive Directors and four Non-Executive Directors as set out below.

Robert Mott Brown III (Age 60)
Chairman of the Board

Mark Opzoomer (Age 49)
Chief Executive Officer

Nikita Serguienko (Age 38)
Chief Financial Officer

Sergey Tikhonov (Age 41)
Non-Executive Director

Nicholas Anthony Hynes (Age 46)
Non-Executive Director

Vladimir A. Pravdivy (Age 31)
Non-Executive Director

Ilya Oskolkov-Tsentsiper (Age 39)
Non-Executive Director

Executive Management

Mark Opzoomer
Chief Executive Officer

Nikita Serguienko
Chief Financial Officer

Vitaly Rudenko
Chief Operating Officer

Anna Znamenskaya
Chief Sales & Partnership Officer

Arkady Moreynis
Chief Product Officer

Zhanna Beletskaya
Chief Marketing Officer

Margarita Kuzina
Chief People Officer / Human Resources Director

Maxim Konovalov
Chief Technical Officer

A Board that meets our needs

One major step forward has been putting in place a board which has the right mix of people. As we reported last year, we were keen to bring to the board further experience of the internet market and internet company operations. In the middle of 2007 we appointed Nick Hynes as an independent non-executive director. Nick’s experience in the internet industry has brought invaluable insight, especially in the area of internet-related marketing, as well as access to an extensive network of industry players. His knowledge complements very well Mark Opzoomer’s industry experience. The Board’s market skill set is strengthened by Ilya Oskolkov-Tsentsiper who, as a non-executive director, brings his experience as a media professional to bear particularly on issues surrounding content and advertising. Ilya’s management experience is also extremely useful in giving the board insight into the people management issues of a Russian media company.

As well as having the necessary market experience, we also feel that the board now has the right mix in terms of management and control. In addition to the skills brought to the board by executive management, the non-executives bring extensive management experience. The Prof-Media representatives have brought with them a highly professional approach to performance management, financial analysis and internal control, which is actively shared with management as well as supporting active oversight by the board.

Providing an independent viewpoint

At this stage we feel there are no gaps in the mix of skills and experience of the board. We recognise, however, that we need to keep under review the question of the balance of independent and non independent non-executive directors. Currently the seven-member board has two independent non-executive directors, including the non-executive chairman who is now fully independent. In this respect we are in compliance with the Combined Code as is expected for smaller companies. The more important question, however, is whether we have sufficient independent presence on the board to ensure that management is properly challenged and that we have the benefit of an independent perspective. In our view we do. Ilya Oskolkov-Tsentsiper, although not fully independent due to links between his businesses and the controlling shareholder, is not connected to Prof-Media in a way that undermines his independence. The Prof-Media representatives themselves adopt a highly independent mindset in overseeing and challenging management and evaluating performance. The board is also satisfied that the interests of minority shareholders are considered and protected appropriately, with the Prof-Media representatives showing a good level of understanding of the need to take this into account.

The board recognises that there may be a case for including a further independent non-executive in future, in part to increase the independent director component of the audit committee membership. But we want to make sure that the board does not become too large at this stage, taking into account Rambler Media’s stage of development and the need for current governance approaches to bed down. We will keep the situation under review.

Having the right focus

With a stable membership, a clearer sense of direction and full recognition of what is needed to move the company forward, the board was able during 2007 to bring greater focus to its discussions. We have made sure that all board members and senior management understand the board’s responsibilities as set out in the Reserved Matters (which are available on our website). Meetings are now scheduled well in advance, agendas are tightly structured and we are putting in place a forward agenda system to help make sure that we meet our responsibilities fully and get the balance right between strategic and operational issues. Board attendance has been good throughout the year with directors participating in the five scheduled board meetings held last year.

During 2007, particular areas of focus included the Begun acquisition and the development of a new remuneration system for the management team.

We also discussed IFRS reporting at the board on numerous occasions: while detailed work is delegated to the audit committee, the board feels it is important that all directors are familiar with the key reporting issues and risks. It has taken an active interest in the work and opinions of the newly-established internal audit function. We have also adopted a Code of Ethics, which we are now using as a basis for developing the culture that we wish to foster throughout the company. In general we are pleased that, in the wake of the inevitable changes resulting from the acquisition of a majority interest by Prof-Media, the board has taken a very structured approach to re-confirming Rambler Media’s strategic direction, identifying what needs to happen to achieve our goals, pushing for improvements in management processes, reporting and controls and in considering the implications for developing a strong management team and motivated employees.

Becoming more effective

We have made a lot of progress to becoming a more effective board. Last spring we asked Independent Audit to attend a board meeting to brief our new directors on their responsibilities under UK governance standards, and to inject new life into our plans for implementing a well-structured governance approach. During the second half of the year, we have introduced a more effective approach to organising meetings, adopted clear procedures and styles for minuting meetings, met regularly in person with high attendance levels, reviewed regularly the actions taken to implement the board’s decisions and applied a more disciplined approach to agenda setting and meeting management to ensure all topics get a good airing. The flow of information to the board has improved, with monthly income statements now available within a few weeks of month end. A three year budgeting and planning approach has also been introduced. The audit committee has been meeting regularly in person (see below) and the remuneration committee has started operating.

There is, of course, still room for improvement. To help us in this process of continuous improvement, we asked Independent Audit to undertake an effectiveness review, including observation of a board and audit committee meeting.

Their views were presented to the board in April this year and, taking into account their recommendations, we will take further steps to strengthen our governance during the rest of the year. For one, we need to continue to work on making sure that all board papers are available well in advance of meetings. We also need to establish a clearer and more effective reporting line between internal audit, the board and management. Our focus on risk needs to be strengthened and we need to undertake a more structured review of internal controls each year. And, although we have made big strides in developing our financial reporting, we need to introduce quarterly performance reports for the board which link the financial and non-financial outcomes more clearly to our performance drivers and strategic objectives. Later in the year we will check how we are doing with a self-assessment exercise.

Strengthening the committees

The remuneration committee has started operating and has reviewed its terms of reference. Its work for the rest of this year will be focused on getting in place an effective senior management reward system. It has appointed an independent advisor to help in this area, with a view to adopting a new system during 2008. The nomination committee met to approve the appointment of a new director; currently its responsibilities can be met by the board so there is no need for it to become more active at this stage.

The audit committee is now well established. It adopted new terms of reference in May. It met formally four times during the year (including one meeting by phone) and adopted a more structured approach to minuting and following through on decisions made. In addition to the formal meetings, there has been active informal contact between the committee members (Robert Brown as chairman, Sergey Tikhonov and Vladimir Pravidivy), management and the Head of Internal Audit. Meetings are usually attended by the CFO, the CEO , the Head of Internal Audit and the external auditors, PricewaterhouseCoopers (PwC). The committee also meets the external and internal auditors without the presence of management. It has been reporting informally to the full board on its activity and areas of concern. We intend to make committee reporting more structured through more formal reports and by automatically providing the full minutes of committee meetings to the full board.

An experienced auditor was appointed as Head of Internal Audit at the end of 2006, and he is now supported by another auditor. The function has played an active role in supporting the audit committee. It has direct access to the committee and presents its findings regularly, with the committee in turn monitoring Internal Audit’s work against plan and helping it prioritise.

The audit committee is satisfied that enough time is allowed to sufficiently understand and discuss technical reporting matters. Vladimir Pravdivy, as a certified accountant, former auditor and expert in financial analysis and management, brings particular expertise to the financial reporting aspects of the committee’s work. The committee is satisfied that it has the knowledge to challenge both management and auditors on financial reporting issues and spends enough time doing this in practice. It has considered the independence of the external auditors, which it considers appropriate.

During 2007, as well as covering standard questions such as financial reporting, earnings releases and internal control issues, the committee’s activity has included discussions on acquisition accounting and due diligence, budgetary controls, tax treatments and risks, functional currency, intangibles and the adoption of a policy on information disclosure to the controlling shareholder.

It also discussed PwC’s management letter and responded formally to this. It has been pleased with management’s efforts to improve the flow of information to the committee, with considerable progress having been made during the year in improving the quality and timing of reports on financial and non-financial performance. In line with the board, the audit committee is looking for continuous improvement in how it works. It will be taking into account Independent Audit’s observations resulting from its effectiveness review. The committee recognises that there is still room for improvement in financial and non-financial reporting systems and will be pushing for this over the next year. It needs to increase its focus on risk management, and also wants to see further development of internal audit to help it maintain effective oversight of internal controls. The committee will continue to keep under review its chairmanship and management. The board believes that the members of the committee are effective and bring the right mix of skills. It recognises, however, that two of the three members are not fully independent. Furthermore, the chairman of the committee is also chairman of the board, which, as well as not being in compliance with the principles of the Combined Code, means that the time demands on the chairman are significant. The board feels that the Prof-Media representatives who sit on the audit committee bring an independent mindset and play a very useful role in actively challenging management to ensure sound financial reporting and controls. It does not believe that the question of the independence of the audit committee is detrimental to the committee’s effectiveness. However, the board continues to keep the chairmanship and membership questions under review and will decide on any changes over the next few months.

Compliance with the Combined Code

We aim to comply with the Code while recognising the flexibility it affords to smaller companies and the fact that it is based on a “comply or explain” approach. The directors are satisfied that Rambler Media has, to the extent relevant to a company of its size, complied with the Provisions of the UK Combined Code with the following relevant exceptions:

For part of 2007, board membership included only one independent director, the Chairman. This was a temporary situation as a new board was put in place. Since mid-2007 the board has included two independent non-executive directors (as expected by the Code in the case of smaller companies), including the chairman. In addition, it believes that Ilya Oskolkov-Tsentsiper, while connected to Prof-Media through joint ownership of a number of entities, is effectively independent. It also believes that, given the independent attitude adopted by the Prof-Media representatives, the board is able to exercise effective and objective oversight of management and actively takes into account the interests of minority shareholders. It does not, therefore, believe it is necessary to increase the size of the board at this stage solely in order to increase the number of formally independent directors.

The appointment of a Senior Independent Director is not considered necessary given our size. The audit committee has only one independent member. Also, the chairman of the board is chairman of the audit committee. We do not believe that this has a significant impact on the effectiveness of the committee but will keep the question under review, taking into account the proposed change to the Combined Code in this area. The members of the remuneration and nomination committees are not all fully independent but at this stage in the development of the board, and given the active role played by the whole board in issues normally falling to these committees, we do not believe that this is an issue at present.

With the nature of non-executive director appointments, recruitment consultants were not used for the appointments of the new non-executive directors. The effectiveness of the board and board committees was not assessed in 2007, although an external consultant did provide some observations on the extent of progress in implementing their earlier recommendations. A more formal review has recently been completed with a self-assessment exercise planned for later this year. Individual director performance was not assessed during 2007 but we expect to do this during 2008. The Chairman’s performance was not formally assessed; a formal review will be completed towards the end of this year. The board has not conducted a formal review of internal control during the year, although the audit committee has covered issues in this area and Internal Audit has covered many control issues. A more structured approach to board review of internal controls will to be adopted during this year.

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