Mail.Ru Group Limited Preliminary Trading Update for Q3 2014

23 October 2014. Mail.Ru Group Limited (LSE: MAIL, hereinafter referred as "the Company" or "the Group"), one of the largest Internet companies in the high-growth Russian-speaking Internet markets, today provides an update on the preliminary unaudited segment revenues for Q3 2014.

Q3 2014 Performance Highlights

- Q3 2014 Group aggregate segment revenue grew 12.9% Y-o-Y to RUR 7,448 million (9 month 2014 Group aggregate segment revenue grew 18.6% Y-o-Y)

- Net debt position as of 30 September 2014 was RUR 19,053 million

- Monthly audience of Mail.Ru portal in September 2014 reached 57.8 million Russian users (TNS, all Russia, age 12-64, desktop)

Key Recent Developments

Products and user offering

-  myMail for iOS now supports Microsoft Exchange ActiveSync

- New mobile strategy game Iron Desert launched on iOS and Android (under the My.com brand)

- Mobile version of our popular MMO game Legend: Legacy of Dragons released on iOS and Android

- New ICQ for iOS featuring interface themes, new contact list, enhanced customization options, ability to send multiple photos and videos at once and edit chat history

- New ICQ for Android updated with friend recommendations, lots of customization capabilities (notifications for events, autoupload of files of different types, etc.), ability to send multiple photos and share ICQ profile on social networks

- Mail.Ru email service made SSL-encrypted connection mandatory for all email clients accessing Mail.Ru servers via POP3 and SMTP protocols

- Online document editor available in Mail.Ru email service and Cloud.Mail.Ru now allows editing spreadsheets (.xls/.xlsx) and presentations (.ppt/.pptx) (currently in beta)

- Afisha.Mail.Ru introduced new user-friendly interface with focus on movies and TV series and offers licensed content from major Russian online providers

- Answers.Mail.Ru released a mobile app for Android

- Mobile web version of Health.Mail.Ru optimized for smartphones and tablets (touch version)

- Odnoklassniki introduced audio and video messages

- Odnoklassniki app for iOS is back on the App Store; now features location sharing in posts (individual and group) and photo sharing in chat

- Target.Mail.Ru launched mobile ad network allowing advertisers to extend their campaigns to third-party mobile apps

- Target.Mail.Ru introduced conversion tracking and cross-device targeting

- Update of mobile game Evolution (Black Legion) introduced on Android

- Release of updates for Allods Online (Broken Chains) and ArcheAge (Ernard Library)

Corporate

- The acquisition of the remaining 48.01% stake in VK.Com Limited (VK, Vkontakte) in an all cash deal for a total consideration of $1.47bn bringing Mail.Ru Group to 100% ownership

- The Group sold 2.165m shares of Qiwi on September 12th, reducing its stake from 5.28% to 1.31%

- Appointment of Jan Buné as Chairman of the audit committee replacing Vasileios Sgourdos. Vasileios remains both a member of the board and the audit committee

- Mail.Ru Group hosted the final stage of Russian Code Cup 2014

- TechnoSphere, a joint educational project of the faculty of Computational Mathematics and Cybernetics of Lomonosov Moscow State University and Mail.Ru Group, opened machine learning laboratory

Vkontakte

- Q3 2014 VK revenue grew 6.7% Y-o-Y to RUR 968 million (9 month 2014 VK revenue grew 9.0% Y-o-Y to RUR 2,971 million)

- While the acquisition was closed on September 16th the business will be consolidated from September 30th and hence there is no revenue contribution from VK in the Group’s reported Q3 results

Commenting on the Q3 revenue update, Dmitry Grishin, Co-Founder and CEO of Mail.Ru Group, said:

“In Q3 2014, the Company achieved Y-o-Y revenue growth of 12.9% to RUR 7,448 million with 9 month 2014 Y-o-Y revenue growth of 18.6%. As in H1 MMO games and community IVAS revenues remained broadly on budget, but advertising revenues and our Headhunter business continued to face challenging conditions as a result of the ongoing economic and geo-political environment. As in H1 this continued to have a negative effect on our advertising revenues and in particular the display advertising revenues which saw similar declines to Q2. Our other revenue stream remains sensitive to the underlying economic environment and hence grew at 4.4% in Q3.

In Q3 we continued to execute on our MMO games strategy which proved successful over the last years. Warface remains our largest revenue generating game. In late Q3 the previously discussed issue with Archeage was largely rectified, and the initial signs are that monetization is improving. We have also released a number of other titles, most notably the mobile strategy game Iron Desert where initial user feedback has been positive. The pipeline remains strong over the next 9 months with World of Speed, Skyforge and Armored Warfare, amongst others, all scheduled for release. We will also continue to internationalize our most successful titles under the My.com brand. As such we expect the MMO games revenues to continue to show solid growth through the year.

We are also encouraged by the continued traction of myMail which was launched in November 2013 as part of the wider My.com launch. In Q3 this remained the most downloaded alternative mail client tool on both iOS and Android globally. The US is the largest market followed by UK, France, Germany and Brazil.

In late Q3 we acquired the remaining 48.01% of Vkontakte for $1.47bn taking Mail.Ru Group to 100% ownership. As we commented at the time of the acquisition, the first priority for us is the retention of the talented programmers and engineers, and the continued focus on the product and the user experience. While we will retain VK as a stand-alone brand, we will be looking to leverage the wider Mail.Ru Group experience, especially across IVAS and advertising, to the widest possible audience. Additionally we will be looking for non-personnel cost savings, particularly in the areas of server hosting and facilities.

Our engagement with users remains very strong, and user behavior remains unchanged. International initiatives under the My.com brand are going well and VK presents a number of opportunities to expand the reach of the mail experience over as many users as possible. However there is no change in the underlying environment from what we said with the H1 results and hence forecasting remains problematic. As such we do not anticipate any near or medium term improvement in the display revenues, or in the Headhunter business. Notwithstanding this, we retain the full year 2014 revenue guidance (ex-VK contribution in Q4) of between 14-18% growth and despite FX headwinds we continue to maintain tight cost control and hence continue to anticipate full year EBITDA margins at around 53%.”

Q3 2014 Trading Update*


(*) The numbers in this table and further in the document may not exactly foot or cross-foot due to rounding

(**) Including Other IVAS revenues

Note: Group aggregate segment revenue is calculated by aggregating the segment revenue of the Group's operating segments and eliminating intra-segment and inter-segment revenues. This measure differs in significant respects from IFRS consolidated net revenue. See "Presentation of Aggregate Segment Financial Information" below.

Liquidity

As of 30 September 2014, the Group had RUR 3,173 million of cash (including term deposits and cash at VK) and RUR 22,226 million of debt outstanding as a result of the acquisition of 48.01% of VK, therefore the Group's net debt position was RUR 19,053 million, or USD 484 million[1].

Conference call

The Mail.ru Group management team will host an analyst and investor conference call at 14.30 UK time (17.30 Moscow time, 9.30 U.S. Eastern Daylight Time), on Thursday 23rd October 2014, including a Question and Answer session.

To participate in this conference call, please use the following access details:

Confirmation Code: 2046692

Participant Toll Free Telephone Numbers:

From Russia 81080024082044

From the UK 08006945707

From the US 18662540808

Standard International Call +44 (0) 1452 541003

For Further Information Please Contact:

Investors

Matthew Hammond

Mail.Ru Group

E-mail: hammond@corp.mail.ru

Press

Ksenia Chabanenko

E-mail:ks@corp.mail.ru

Cautionary Statement regarding Forward Looking Statements

This press release contains statements of expectation and other forward-looking statements regarding future events or the future financial performance of the Group. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "forecast", "intend", "will", "could", "may" or "might", the negative of such terms or other similar expressions including "outlook" or "guidance". The forward-looking statements in this release are based upon various assumptions that are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and may be beyond the Group's control. Actual results could differ materially from those discussed in the forward looking statements herein. Many factors could cause actual results to differ materially from those discussed in the forward looking statements included herein, including competition in the marketplace, changes in consumer preferences, the degree of Internet penetration and online advertising in Russia, concerns about data security, claims of intellectual property infringement, adverse media speculation, changes in political, social, legal or economic conditions in Russia, exchange rate fluctuations, and the Group's success in identifying and responding to these and other risks involved in its business, including those referenced under "Risk Factors" in the Group's public filings. The forward-looking statements contained herein speak only as of the date they were made, and the Group does not intend to amend or update these statements except to the extent required by law to reflect events and circumstances occurring after the date hereof.

About Mail.Ru Group

Mail.Ru Group (LSE:MAIL, listed since November 5, 2010) is a leading Internet company in the high-growth Russian-speaking Internet markets (Russia is Europe's largest Internet market measured by the number of users, comScore). Mail.Ru Group's sites reach approximately 98% of Russian Internet users on a monthly basis (comScore, August 2014) and the Company is the sixth largest Internet businesses globally, based on the number of total pages viewed (comScore, August 2014).

In line with the ‘communitainment’ (communication plus entertainment) strategy, the Company is moving rapidly to build an integrated communications and entertainment platform. The Company owns Russia’s leading email service and one of Russia’s largest internet portals, Mail.Ru (TNS, all Russia, age 12-64, August 2014). The Company operates three largest Russian language social networks, Vkontakte (VK), Odnoklassniki (OK) and Moi Mir (My World), and Russia’s largest online game business. The Company’s portfolio also includes Mail.Ru Agent and ICQ – two instant messaging services popular in Russia and CIS.

The Company holds minority equity stake in Qiwi (1.31%) and a number of small venture capital investments in various Internet companies in Russia, Ukraine and Israel.

Presentation of Aggregate Segment Financial Information

The Group aggregate segment financial information is derived from the financial information used by management to manage the Group's business by aggregating the segment financial data of the Group's operating segments and eliminating intra-segment and inter-segment revenues and expenses. Group aggregate segment financial information differs significantly from the financial information presented on the face of the Group's consolidated financial statements in accordance with IFRS. In particular.

- The Group's segment financial information excludes certain IFRS adjustments which are not analysed by management in assessingthe core operating performance of the business. Such adjustments affect such major areas as revenue recognition, deferred tax on unremitted earnings of subsidiaries, share-based payment expense, impairment of investments, business combinations, fair value adjustments, amortisation and impairment thereof, net foreign exchange gains and losses, share in financial results of non-core associates, as well as irregular non-recurring items that occur from time to time and are evaluated for adjustment as and when they occur. The tax effect of these adjustments is also excluded from segment reporting.

- Segment revenues do not reflect certain other adjustments required when presenting consolidated revenues under IFRS. For example, segment revenue excludes barter revenues and adjustments to defer online gaming and social network revenues under IFRS.


[1]The USD number represents a convenience translation. The RUR amounts have been translated into USD using an exchange rate of RUR 39.3866 to USD 1.00, the official exchange rate quoted as of September 30, 2014 by the Central Bank of the Russian Federation