According to the International ratings agency Moody’s, the Russian law on gambling business will not damage the business of Ritzio, regarding the possible changes in their ‘rating’. Moody's Investors Service comments on the potential implications for the Ritzio Entertainment Group ('itzioR') (B2 corporate family rating, A3.ru NSR, stable outlook) of the proposed 'Law on State Regulations of Gaming' which was recently approved by the State Duma and the President. According to Moody’s assessment, restrictions prescribed by the law with regards to the capitalization and gaming halls size will not lead to a reduction in the company’s cash generating assets.

Moody’s comments that in its current format the Law would have far-reaching implications for the gaming industry in Russia as a whole, including with regards to the size, capitalization, and number of slot machines and tables. From 1 July 2007 the minimum payout ratio will be increased from 75% to 90%. Moody’s notes that Ritzio is largely in compliance with this aspect of the Law, which will not lead to a reduction in the company’s cash generating assets in 2007. The company may be required to replace an insignificant share of its smaller-sized halls with larger ones, although the quantity of slot machines is not expected to diminish. In this respect Ritzio may be better positioned than some smaller rivals.

The second stage of the Law stipulates that the entire gambling industry should be confined to four designated regions in Russia, notably the Kaliningrad, Rostov/Krasnodar, Far East and Altai regions, which are distant from major cities, effectively transforming the industry into a highly localized business. However, the second stage of the Law is not due to be enacted until July 2009 and Moody's believes that in the interim its content could be significantly altered. The parameters of the designated zones remain to be finalised.

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