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Dori Media Group Ltd (DMG)

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Thursday 11 August, 2005

Dori Media Group Ltd

Interim Results

Dori Media Group Limited
11 August 2005



FOR IMMEDIATE RELEASE
August 11, 2005

INTERIM RESULTS
FOR THE 6 MONTHS ENDED 30 JUNE 2005

London, August 11, 2005. Nadav Palti, President and CEO of Dori Media Group Ltd.
('DMG'), the international media company active in the production, distribution,
broadcasting and merchandising of Telenovela, today announced the interim
results for the first half of 2005 following its successful admission to trading
on AIM in March 2005.

Financial Highlights:

   •Group Revenue of US$6,473,000 (US$6,094,000)
   •Gross Profit of US$2,965,000 (US$2,417,000)
   •Profit before taxes on income of US$476,000 (US$860,000)
   •Positive outlook for the second half of 2005 and beyond

Operating Highlights:

   •Entry into the German market with the sale of the first season of '
    Rebelde Way' to Viacom's MTV Networks with an option for the second season;
   •'Rebelde', the Mexican format of 'Rebelde Way', launched on TV channel
    Univision, the leading spanish language TV network in the USA, reaching 98%
    of the hispanic population in the country;
   •Lower than anticipated ticket sales for 'Floricienta' live concerts in
    Israel in April-May more than compensated by sales in other areas of the
    business;
   •US$2.0 million acquisition of new telenovela season rights including the
    second series of teen telenovela 'Floricienta' and the rights to two popular
    new series: 'Amor Mio' and 'Hombres De Honor';
   •Appointment of Dr. Conrad Heberling as CEO of Yair Dori International
    GmbH to develop production, distribution and merchandising opportunities for
    the group in Western Europe and other parts of the world.


Nadav Palti, President and CEO of Dori Media Group, commented: 'During the first
half of 2005, we have initiated the implementation of our international rollout
strategy. We have shown our ability to export the telenovela TV genre to various
markets and our objective is to continue to capitalise on the increasing
popularity of telenovelas worldwide. We aim to achieve our goal by establishing
a network of dedicated Telenovela TV channels in suitable markets around the
world.

The Group owns the rights to numerous TV series which have proven very
successful. We are well positioned to benefit from the different revenue streams
generated by the broadcasting, distribution, advertising and merchandising of
these TV programmes around the globe. The company is in advanced discussions
with regard to a number of new channel opportunities around the world for the
distribution of telenovelas and believes that the growth of telenovela outside
of Latin America is in its infancy and is a trend that will continue this year
and in subsequent years.

It is too early to predict with certainty the outcome for the full year but
activity in all areas of the group is very high and the company remains
confident on the outlook for the rest of the year and beyond'.

***

For further information on Dori Media Group, please visit our website on
www.dorimedia.com or contact:

Dori Media Group Ltd.
Nadav Palti, CEO & President
Tel: +972 3 7684000 / +972 54 4236828
Info@dorimedia.com

Shared Value Limited
Alex Dee/Nicolas Duperrier
Investor & Media relations
Tel. +44 (0) 20 7321 5010

Dori Media Group is an international entertainment group active in the
production, distribution and broadcasting of Telenovela. The group owns and
sells high-loyalty TV content and branded merchandise attracting a wide variety
of audiences in more than 40 countries. In Israel, Dori Media Group owns and
operates the 'Viva' dedicated TV channels and 'Darset Productions Ltd'
production company. Dori Media Group is controlled by Mapal Communications Ltd,
one of Israel's largest communications company. Dori Media Group is publicly
traded on the AIM Market of the London Stock Exchange. The Company's ticker
symbol is 'DMG'.


Copies of this interim statement are being sent to all shareholders and are
available, free of charge, from the company's registered office at 2 Raul
Wallenberg Street, Ramat - Hachayal, 69719 Tel Aviv, Israel for at least one
month from the date of publication.

Chief Executive's Review

Overview

DMG has continued to build upon its expertise in the production and distribution
of telenovela which has enabled the company to maintain a favourable position
and benefit from the growth of the telenovela genre around the world. Based on
these solid foundations as well as the quality of the programmes in DMG's
library, the company was able to conclude sales of telenovelas to new markets
including Germany, Spain, India and the US. A significant milestone was the
entry into the West European market through the sale of DMG's successful series
'Rebelde Way' in Germany and Spain.

This is a key period for Dori Media Group as the company has started the
international rollout phase of its strategy following its recent admission to
trading on AIM. The company will continue to increase its international presence
in the second half.

Operational update

Dori Media Group reported sales of US$6.47 million for the first half of 2005 up
6% from US$6.09 million for the same period last year and in line with
management's expectations. This result was achieved despite lower than
anticipated ticket sales for the 'Floricienta' live concerts in Israel in
April-May, although the TV series itself attracted significant audiences in
Israel, Argentina, Brazil and other territories worldwide and received positive
reviews by the Israeli ratings agency for the Jetix channel (formerly fox kids).

Sales outside of Israel contributed to a larger share of total group sales in H1
2005. International sales accounted for 33.2% of total sales in H1 2005 while
they represented 22.3% of total revenues in H1 2004.

International growth

Dori Media Group has continued to demonstrate its ability to promote its TV
series in new markets, winning several new contracts with major broadcasters and
distribution companies.

In June, the company announced its successful first entry into the German
market, one of the most promising markets in Western Europe through the sale of
the first season of the original series of 'Rebelde Way' to MTV Networks GmbH &
Co. OHG, part of the global media group Viacom, for approximately US$0.35
million. MTV Networks will broadcast the TV series on one of the 4 TV channels
it operates in Germany (MTV, VIVA, VIVA Plus and Nickelodeon) and has the option
to purchase all 179 episodes of the second season for an additional US$0.72
million.

In March, Univision, the leading Spanish language TV network in the US reaching
98% of all US Hispanic television households, started broadcasting 'Rebelde',
the Mexican adaptation of DMG's 'Rebelde Way'. Management believe that entry
into the US market represents a significant opportunity for DMG, which owns with
its partners the TV ancillary business rights for the telenovela. The
broadcasting of the series on Univision is expected to generate attractive
merchandising revenues, particularly following the success of the series in
Mexico. In H1 2005, the success of 'Rebelde' in Mexico resulted in a 65%
increase in DMG's merchandising and music CDs sales to US$0.76 million.

In Asia, after the success of the local production of the first season of '
Rebelde Way', the Group signed a format agreement with Star One for the
production of the second season in India. The local production called 'Remix' is
broadcasted in India and in the US.

In order to accelerate the growth in international sales and develop production,
distribution and merchandising opportunities for the group, DMG also appointed
Dr. Conrad Heberling as CEO of Yair Dori International GmbH. Dr. Heberling has
been one of the top executives in RTL II serving as Marketing Director of RTL II
Television and of El Cartel Media GmbH, the station's advertising sales house
since 1998 and is a well-known figure in the media industry in Europe. He will
assume his new responsibilities at YDI on 15 August, 2005.

In June, the Group signed a format agreement with Televisa, the largest
Telenovela producer in Latin America, for the production of the local version of
'Rincon De Luz' in Mexico. Televisa has agreed to acquire the right to reproduce
all 199 episodes of the 'Rincon De Luz' for approximately US$0.4 million.
Televisa has the option to stop production after 100 episodes. Dori Media Group
is entitled to 57% of the revenue and its share of the deal for the 100 first
episodes has been recognised in accounts for the first half of 2005. Televisa
also signed an agreement to acquire the right to reproduce 'Floricienta' in
Mexico. Dori Media Group, through its subsidiary YDI, is entitled to 5% of the
income from Floricienta.

Strong Telenovela Programming

DMG's TV library has increased by approximately 600 TV hours in the period since
1 January 2005 and now exceeds 2,000 TV hours. DMG's telenovelas, such as
'Rebelde Way', have received positive reviews and often rank among the most
popular series in the markets were they are shown, attracting high ratings.

'Padre Coraje', one of DMG's successful Telenovelas, was the big winner at the
2004 'Martin Fierro' awards ceremony, held in Argentina in June. The telenovela
won several awards including 'Best Telenovela', 'Best actor', Best actress',
'Best supporting actors' and 'Best theme Song'. The TV series also received the
top honour of the ceremony, the 'Gold Martin Fierro Award', which is given to
the best programme of the year, among all TV genres nominated.

DMG invests in the stories and programmes which it believes will become
tomorrow's hits. In June, the company acquired the rights to two new TV series
'Amor Mio' and 'Hombres De Honor' and renewed its rights for the second season
of teen Telenovela 'Floricienta' for US$2.0 million. In addition, the rights
have been extended to cover all countries in the Middle East, the Persian Gulf,
Africa, Thailand and Singapore. For 'Hombres De Honor', the rights also include
China, Hong Kong, Taiwan, South Korea, Indonesia, Malaysia, Philippines and
India. DMG also has the rights for 5% of income from all the other territories
worldwide.

AIM Listing

In March, DMG successfully completed its initial public offering on the
Alternative Investment Market of the London Stock Exchange. 2,738,784 new
ordinary shares were allocated to institutional and other investors at a price
of 118 pence per share, raising approximately £3.23 million. Immediately after
Admission, the Company had 18,488,784 ordinary shares in issue and a market
capitalisation, at the placing price, of approximately £21.82 million. The IPO,
public profile and funds raised have increased DMG's credibility in the market,
providing the company with an appropriate platform from which to accelerate the
implementation of its international roll out strategy and prepare it for growth,
both organically and through selective acquisitions.

Outlook

Dori Media Group has shown that it is committed to play a leading role in the
promotion of the telenovela genre worldwide. The company's recent deals in
Germany, Spain, Mexico and the US lay the foundation for further international
growth. DMG's objective for the second half of the year and beyond is to
capitalise on the growth of the telenovela phenomenon by increasing the volume
of international productions, increasing sales of these productions and forming
dedicated channels in appropriate markets. The company also aims to explore
opportunities through strategic alliances with production companies and
third-party TV channels. Telenovelas are continuing to increase in popularity
around the world and the company's experience gives it a competitive advantage
to realise its goals.

Financial Performance

Revenue
DMG's revenues for the first half of 2005 illustrate the company's increased
focus on growth outside of South America and outside of Israel.

In the first six months of 2005, DMG's revenues reached US$6.47million compared
to US$6.09 million for the same period last year as the Company increased its
international sales from 22.3% in H1 2004 to 33.2% of total sales in the first
half of 2005. Israel now represents 66.8% of total sales compared to 77.7% in H1
2004. European sales activities increased from 5.3% in H1 2004 to 17.2% of total
sales in H1 2005. Sales in Central America increased from 8.4% in H1 2004 to
13.8% in H1 2005 while sales in South America represented 0.8% of total sales in
H1 2005 compared to 5.8% in H1 2004.

In Israel, the income from Telenovela sales increased from US$0.14 million in H1
2004 to US$1.09 million in H1 2005. This increase was largely due to DMG
obtaining joint control of Darset Productions Ltd. on 2 January 2005. Darset
Productions Ltd. is now proportionately consolidated into the financial
statements.

Broadcasting income from DMG's two television channels, Viva and Viva Platina in
Israel was US$2.04 million in H1 2005 compared to US$2.18 million in H1 2004.

Income from the group's ancillary business, including merchandising and music
CDs, increased by 65% from US$0.46 million in H1 2004 to US$0.76 million in H1
2005. This increase is mainly due to the growth in sales of 'Rebelde' in Mexico.

Income from concerts and live shows in Israel amounted to US$0.93 million in the
first half of 2005 compared to US$1.84 million for the same period last year. As
announced in May, ticket sales for the 'Floricienta' show were disappointingly
low despite positive reviews and high TV viewing ratings in Israel and
Argentina. In 2003 and 2004, the 'Rebelde Way' and 'Rincon De Luz' concerts were
particularly successful.

Gross Margins
Gross margins improved significantly at 45.8% in the first six months of 2005
from 39.6% in H1 2004, with gross profit for the first half of 2005 increasing
by 23% to US$3.0 million compared with US$2.42 million for the same period last
year.

The cost of goods sold in H1 2005 was US$3.51 million compared to US$3.68
million in the same period last year. The depreciation charge for the period was
reduced to US$0.42 million from US$1.18 million in H1 2004. A change in
depreciation method on 1 January 2005 from the
individual-film-forecast-computation method to the straight line method had an
immaterial impact on the charge for the period. Proportional consolidation of
Darset Productions Ltd increased the production costs by US$0.85 million.

Translation and adjustments decreased from US$0.35 million in H1 2004 to US$0.21
million in H1 2005 and live show expenses were down US$0.1 million to US$1.27
million (US$1.37 million).

Operating Expenses
Total operating expenses amounted to US$2.41 million (US$1.74 million). Selling
costs increased by 101% in H1 2005 to US$0.99 million largely due to agency
commissions from merchandising incomes and increasing commissions in line with
increased series sales. General and administrative expenses increased by 14% in
H1 2005 to US$1.42 million (US$1.25 million), principally because of higher
ongoing professional fees related to being a publicly listed company and the
adoption of IFRS2, 'Share-based Payment', which requires expensing of option
benefits attributable to directors and employees. This added a further US$0.07
million to costs for the period.

Operating Profit
The operating profit was US$0.55 million in H1 2005 as compared to US$0.68
million in H1 2004. This was in line with management's expectations despite the
lower than expected revenues from the 'Floricienta' concerts in Israel in
April-May. The operating margin for the first half of 2005 was 8.5% compared to
11.1% in H1 2004.

Other Income
In H1 2005, other income reached US$19,000 compared to US$375,000 reached last
year. In 2004, DMG's other income was mainly the result of capitalising loans of
shareholders in the subsidiary of the company.

Net Income
The net income for the first six months of 2005 was US$0.14 million compared to
US$0.66 million in the first six months of 2004 (US$0.56 million attributable to
equity holders of the parent and US$0.10 million attributable to minority
interests) mainly as a consequence of higher tax expenses, which amounted to
US$0.34 million for the period (US$0.20 million).
                                      ***

                   INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF 30 JUNE 2005

                                   UNAUDITED

CONSOLIDATED STATEMENTS OF INCOME

                                      Six months    Six months    Year ended 
                                    ended 30 Jun  ended 30 Jun        31 Dec
                                            2005          2004          2004
                                      US$ '000 *)   US$ '000 *)   US$ '000 *)
                                       Unaudited     Unaudited       Audited

Revenues                                   6,473         6,094    **) 10,412
Cost of revenues                           3,508         3,677         4,908
                                      ----------    ----------   -----------
Gross profit                               2,965         2,417         5,504
                                      ----------    ----------   -----------

Selling and marketing expenses, net          989           491           746
General and administrative expenses        1,424         1,249         2,632
                                      ----------    ----------   -----------
Total operating costs and expenses         2,413         1,740         3,378
                                      ----------    ----------   -----------

Operating profit                             552           677         2,126
Financial expenses, net                      (95)         (247)         (394)
Equity in earnings of associate                -            55            71
Other income, net                             19           375           396
                                      ----------    ----------   -----------
Profit before taxes on income                476           860         2,199
Taxes on income                              337           198           506
                                      ----------    ----------   -----------
Profit for the period                        139           662     **) 1,693
                                      ==========    ==========   ===========

Attributable to:
Equity holders of the parent                 139           559     **) 1,486
Minority interest                              -           103           207
                                      ----------    ----------   -----------
                                             139           662     **) 1,693
                                      ==========    ==========   ===========
Basic earnings per share                    0.01          0.04          0.10
                                      ==========    ==========   ===========
Diluted earnings per share                  0.01          0.04          0.10
                                      ==========    ==========   ===========

Weighted average number of shares 
used for computing basic earnings
per share                             17,094,392    15,000,000    15,000,000
                                      ==========    ==========   ===========
Weighted average number of shares 
used for computing diluted
earnings per share                    17,851,960    15,000,000   15,771,707
                                      ==========    ==========   ===========

*) Except per share amounts.
**) Restated - see Note 5d.

The accompanying notes are an integral part of the consolidated financial
statements.

CONSOLIDATED BALANCE SHEETS

                                                        As of 30        As of 30             As of 31
                                                            June            June             December
                                                            2005            2004                 2004
                                                        US$ '000        US$ '000             US$ '000
ASSETS                                                          Unaudited                     Audited

CURRENT ASSETS:
Cash and cash equivalents                                  1,332             650                  364
Trade receivables                                          4,054           3,187             *) 2,903
Other accounts receivable                                    302             457                  281
Broadcasting rights                                          618             640                  764
Inventory of TV series rights for sale                        88             120                   77
                                                        --------        --------           ----------
                                                           6,394           5,054                4,389
                                                        --------        --------           ----------
NON-CURRENT ASSETS:
Investments in rights of TV series                         7,704           6,155                7,227
Investment properties, net                                 1,160           1,238                1,237
Intangible assets, net                                     3,200           1,551                1,454
Property and equipment, net                                  206             275                  202
Investment in associate                                        -              94                   87
Deferred tax assets                                        1,132           1,044                1,043
                                                        --------        --------           ----------
                                                          13,402          10,357               11,250
                                                        --------        --------           ----------
Total assets                                              19,796          15,411               15,639
                                                        ========        ========           ==========

LIABILITIES AND EQUITY

CURRENT LIABILITIES:
Credit from banks and current maturities of long-term 
loans                                                      4,543           5,824                6,128
Trade payables                                             1,208           1,058                  800
Other current liabilities                                  1,808           2,194                1,720
                                                        --------        --------           ----------
                                                           7,559           9,076                8,648
                                                        --------        --------           ----------
LONG-TERM LIABILITIES:
Bank loans                                                     -             139                    -
Other long-term liabilities                                    -             205                   51
Accrued severance pay, net                                   116             101                  118
                                                        --------        --------           ----------
                                                             116             445                  169
                                                        --------        --------           ----------
EQUITY:
Equity Attributable to Equity Holders of the Parent:

Issued capital                                               428               2                  348
Additional paid-in capital                                 9,434           4,058                3,656
Receipts on account of shares                                  -               -                  200
Foreign currency translation reserve                        (216)            (77)                (137)
Asset revaluation surplus                                    240             240                  240
Retained earnings                                          2,235           1,169             *) 2,096
                                                        --------        --------           ----------
                                                          12,121           5,392                6,403
Minority interest                                              -             498                  419
                                                        --------        --------           ----------
Total equity                                              12,121           5,890                6,822
                                                        --------        --------           ----------

Total liabilities and equity                              19,796          15,411               15,639
                                                        ========        ========           ==========
*) Restated - see Note 5d.

The accompanying notes are an integral part of the consolidated financial
statements.

STATEMENTS OF CHANGES IN EQUITY

                                  Attributable to equity holders of the parent
                       

                             Receipts   Foreign
                                   on  currency     Asset                                           Total recognised
                   Additional account    trans-       re-                                          income and expense
             Issued   paid-in      of    lation valuation  Retained            Minority      Total
            capital   capital  shares   reserve   surplus  earnings      Total interest     equity  Parent Minority
                US$       US$     US$       US$       US$       US$        US$      US$        US$     US$      US$     
               '000      '000    '000      '000      '000      '000       '000     '000       '000    '000     '000     
                ---     -----   -----     -----     -----     -----    -------    -----     ------    ----    -----
Six months
ended 30 June
2005
(Unaudited)

Balance at
beginning of
period          348     3,656     200      (137)      240     2,096      6,403      419      6,822       -        -
Issuance of
shares in
IPO,
net of           
expenses         63     4,536       -         -         -         -      4,599        -      4,599       -        -
Issuance of
shares            7       193    (200)        -         -         -          -        -          -       -        -

Issuance of
shares to
purchase
minority
interest in
subsidiary       10       984       -         -         -         -        994     (190)       804       -        -
Acquisitions
of shares of
a                 
subsidiary        -         -       -         -         -         -          -     (229)      (229)      -        -
Cost of
share-based
payments          -        65       -         -         -         -         65        -         65       -        -
Currency
translation
differences       -         -       -       (79)        -         -        (79)       -        (79)    (79)       -
Profit for
the               
period            -         -       -         -         -       139        139        -        139     139        -
                ---     -----   -----     -----     -----     -----    -------    -----     ------    ----    -----
Balance at
end           
of period       428     9,434       -      (216)      240     2,235     12,121        -     12,121      60        -
                ===     =====   =====     =====     =====     =====     ======    =====     ======    ====    =====


                                   Attributable to equity holders of the parent

                             Receipts   Foreign
                                   on  currency     Asset                                           Total recognised
                   Additional account    trans-       re-                                          income and expense
             Issued   paid-in      of    lation valuation  Retained            Minority      Total
            capital   capital  shares   reserve   surplus  earnings      Total interest     equity  Parent Minority
                US$       US$     US$       US$       US$       US$        US$      US$        US$     US$      US$     
               '000      '000    '000      '000      '000      '000       '000     '000       '000    '000     '000     
                ---     -----   -----     -----     -----     -----    -------    -----     ------    ----    -----
Six months
ended 30 June
2004
(Unaudited)

Balance at
beginning of
period            2     4,058       -       (90)      240       610      4,820      353      5,173       -        -
Issuance of
shares by a
subsidiary        -         -       -         -         -         -          -       34         34       -        -
Currency
translation
differences       -         -       -        13         -         -         13        8         21      13        8
Profit for the
period            -         -       -         -         -       559        559      103        662     559      103
                ---     -----   -----     -----     -----     -----    -------    -----     ------    ----    -----
Balance at end
of period         2     4,058       -       (77)      240     1,169      5,392      498      5,890     572      111
                ===     =====   =====     =====     =====     =====     ======    =====     ======    ====    =====

                                        Attributable to equity holders of the parent


                             Receipts   Foreign
                                   on  currency     Asset                                           Total recognised
                   Additional account    trans-       re-                                          income and expense
             Issued   paid-in      of    lation valuation  Retained            Minority      Total
            capital   capital  shares   reserve   surplus  earnings      Total interest     equity  Parent Minority
                US$       US$     US$       US$       US$       US$        US$      US$        US$     US$      US$     
               '000      '000    '000      '000      '000      '000       '000     '000       '000    '000     '000     
                ---     -----   -----     -----     -----     -----    -------    -----     ------    ----    -----


Year ended 31
December 2004
(Audited)

Balance at
beginning of
year              2     4,058       -      (90)       240       610      4,820      353      5,173       -        -
Issuance costs    -       (56)      -        -          -         -        (56)       -        (56)      -        -
Issuance of                                                    
bonus shares    346      (346)      -        -          -         -          -        -          -
Receipts on
account of
shares            -         -     200        -          -         -        200        -        200
Acquisitions
of shares of a
subsidiary        -         -       -        -          -         -          -     (178)      (178)

Issuance of
shares by a
subsidiary        -         -       -        -          -         -          -       34         34
Currency
translation
differences       -         -       -      (47)         -         -        (47)       3        (44)    (47)        3
Profit for the
year              -         -       -        -          -  **)1,486   **)1,486      207   **)1,693 **)1,486      207
                                                                              
                ---     -----   -----     -----     -----     -----    -------    -----     ------    ----     -----
Balance at end
of year         348     3,656     200     (137)       240     2,096      6,403      419      6,822   1,439       210
                ===     =====   =====     =====     =====     =====     ======    =====     ======    ====     =====


*) Less than US$ 1 thousand.
**) Restated - see Note 5d.

The accompanying notes are an integral part of the consolidated financial
statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                  Six months ended        Year ended
                                                                          30 June        31 December

                                                                2005             2004          2004
                                                            US$ '000         US$ '000      US$ '000
                                                           Unaudited                        Audited
  Cash flows from operating activities:


  Profit for the period                                          139              662       *) 1,693
  Adjustments to reconcile profit to net
  cash provided by (used in) operating
  activities                                                    (419)             494       *) (203)
                                                            --------         --------    ----------
  Net cash provided by (used in)
  operating activities                                          (280)           1,156         1,490
                                                            --------         --------    ----------

  Cash flows from investing activities:

  Acquisition of minority interest in
  subsidiary                                                  (1,041)               -             -
  Increase in cash for newly
  proportionately consolidated company
  (c)                                                             63                -             -
  Loans and investments in rights of TV
  series, net                                                 (1,011)          (1,420)       (2,871)
  Proceeds from sale of property and
  equipment                                                       47                -            55
  Purchase of property and equipment                             (98)             (39)          (46)
                                                            --------         --------    ----------
  Net cash used in investing activities                       (2,040)          (1,459)       (2,862)
                                                            --------         --------    ----------

  Cash flows from financing activities:

  Receipts on account of shares                                    -                -           200
  Proceeds from issuance of shares, net
  of issuance costs                                            4,599                -           944
  Acquisition of shares of a subsidiary                            -                -          (236)
  Repayment of loans from banks                                 (138)             (44)         (169)
  Repayment of loans from shareholder                              -                -           (50)
  Short-term bank credit, net                                 (1,127)             716           765
                                                            --------         --------    ----------
  Net cash provided by financing
  activities                                                   3,334              672         1,454
                                                            --------         --------    ----------
  Effect of exchange rate changes on cash
  and cash equivalents                                           (46)              (5)           (4)
                                                            --------         --------    ----------

  Increase in cash and cash equivalents                          968              364            78
  Cash and cash equivalents as of the
  beginning of the period                                        364              286           286
                                                            --------         --------    ----------
  Cash and cash equivalents as of the end
  of the period                                                1,332              650           364
                                                            ========         ========    ==========

*) Restated - see Note 5d.
The accompanying notes are an integral part of the consolidated financial
statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                             Six months ended                   Year ended
                                                             30 June                            31 December

                                                                    2005              2004                 2004
                                                                US$ '000          US$ '000             US$ '000
                                                               Unaudited                                Audited

  (a)   Adjustments to reconcile profit to net cash
        provided by (used in) operating activities:
        --------------------------------------------------

        Income and expenses not involving operating cash
        flows:

        Equity in earnings of associate, net of dividend                 -              (13)                  (2)
        received
        Depreciation and amortization                                  573            1,393                2,562
      
        Deferred income taxes                                          (88)             105                  104

        Gain on issuance of shares by a subsidiary                       -             (306)                (306)
        Cost of share-based payments                                    65                -                    -
        Other                                                          (17)              10                   16

        Changes in operating assets and liabilities:

        Increase in trade receivables                               (1,260)            (904)             *) (544)
        Decrease (increase) in other accounts receivable               (24)             869                 (856)
        Decrease (increase) in broadcasting rights                     106             (116)                  69
        Increase in inventory of TV series rights for                  (16)            (109)                 (51)
        sale
        Decrease in short-term investments in rights of TV              50                -                    -
        series
        Increase in trade payables                                     379              366                   90
        Decrease in other current liabilities                         (187)            (801)              (1,285)
                                                                  --------         --------           ----------
                                                                      (419)             494              *) (203)
                                                                  =========         ========          ==========
  (b)   Supplemental disclosure of cash flows:
        ----------------------------------------

        Cash paid during the period for:

        Interest                                                       269              148                  369
                                                                  ========         ========           ==========
        Income taxes                                                   323              588                1,067
                                                                  ========         ========           ==========

        Cash received during the period for:

        Dividend                                                         -               42                   69
                                                                  ========         ========           ==========


*) Restated - see Note 5d.
The accompanying notes are an integral part of the consolidated financial
statements.


CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       Six months ended                      Year ended
                                                       30 June                              31 December
                                                             2005             2004                 2004
                                                       US$ '000           US$ '000             US$ '000
                                                       Unaudited                                Audited
  (c)   Newly proportionately consolidated company:

        Assets and liabilities at the date of
        consolidation:

        Working capital deficiency (excluding cash               22               -                   -
        and cash equivalents)
        Property and equipment, net                              (4)              -                   -
        Investments in rights of TV series                      (46)              -                   -
        Long-term liabilities                                     7               -                   -
        Equity at date of consolidation (formerly -              84               -                   -
        associate)                                         --------        --------          ----------
                                                                 63               -                   -
                                                           ========        ========          ==========

  (d)   Significant non-cash transactions:

        Issuance of shares to purchase minority                 994               -                   -
        interest in subsidiary                             ========        ========          ==========

        Acquisition of rights in TV series on                     -             514                 360
        credit                                             ========        ========          ==========

        Acquisition of minority interest in                     390               -                   -
        subsidiary on credit                               ========        ========          ==========

        Conversion of loans into shares of                        -             340                 340
        subsidiary                                         ========        ========          ==========

*) Restated - see Note 5d.
The accompanying notes are an integral part of the consolidated financial
statements.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1:- GENERAL

a.                   These financial statements have been prepared in a
condensed format as of 30 June 2005 and for the six months then ended. These
financial statements should be read in conjunction with the Company's audited
annual financial statements and accompanying notes as of 31 December 2004 ('the
annual financial statements').

b.                  On 24 March 2005, the Company's shares were admitted to
trading on AIM, a market operated by the London Stock Exchange. Concurrently,
the Company also completed an initial public offering (IPO) of 2,738,784
Ordinary shares. The proceeds of the IPO were approximately US$ 6,049 thousand,
net of issuance expenses in the amount of US$ 1,450 thousand.

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

a. The interim consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS) in the
context of interim condensed financial standards. The significant accounting
policies and methods of computations applied in the preparation of the interim
financial statements are the same as those applied in the annual financial
statements as of 31 December, 2004, except as described in c. and d. below and
are the policies expected to be adopted in respect of the annual accounts for
the year ending 31 December 2005.

b. Following are data regarding the Israeli CPI and the exchange rate of the
U.S. dollar:

                                                                      Exchange
                                                                       rate of
As of                                    Israeli CPI           one U.S. dollar
                                            Points *)                      NIS

June 30, 2005                                  181.6                     4.574
June 30, 2004                                  181.1                     4.497
December 31, 2004                              180.7                     4.308

Change during the period                           %                         %
--------------------------                 ---------               -----------

June 2005 (six months)                           0.3                       6.2
June 2004 (six months)                           0.2                       4.4
December 2004 (12 months)                        1.2                      (1.6)

*) The index on an average basis of 1993 = 100.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

c. Adoption of new accounting standards:

On 1 January 2005, the Company adopted IFRS 2, 'Share-based Payment'. IFRS 2
requires an expense to be recognized where the Company buys goods or services in
exchange for shares or rights over shares ('equity-settled transactions'), or in
exchange for other assets equivalent in value to a given number of shares of
rights over shares ('cash-settled transactions'). The main impact of IFRS 2 on
the Company is the expensing of employees' and directors' share options
(equity-settled transactions) by using an option-pricing model.

The cost of equity settled transactions is measured by reference to the fair
value at the date at which they were granted. The weighted average fair value of
options granted by the Company in September 2004 in the amount of U.S.$ 205
thousand, was estimated based on the following data and assumptions:
share price - U.S.$ 0.7; exercise price - U.S.$ 0.66; expected volatility -
25.6%; risk-free interest rate 4.9%; expected dividends 0%, and expected average
life of options - 3.5 years.

The cost of equity-settled transactions is recognized, together with a
corresponding increase in equity, over the period in which the performance
conditions are fulfilled, ending on the date the options vest.

The effect of the adoption of IFRS 2 on the six months ended 30 June 2005, was
an increase in employee benefits expense and a decrease in profit in the amount
of US$ 65 thousand, with a corresponding increase in equity (additional paid-in
capital).

The effect of the initial adoption of IFRS 2 (retrospective application) on
periods prior to 1 January 2005 was immaterial.

d. Change in method of amortisation of investments in rights of TV series:

Commencing 1 January 2005, investments in rights of TV series are amortised
using the straight-line method over their useful economic life of 10 years,
based on management's revised evaluation of the expected pattern of consumption
of the economic benefits of these rights. Prior to this change, the cost of
investments in rights was amortised using the
individual-film-forecast-computation method. The change in the method of
amortisation is recognised prospectively as a change in accounting estimate.

For the six months ended 30 June 2005, amortisation of the rights amounted to
U.S.$ 411 thousand (six months ended 30 June 2004 - U.S.$ 1,176 thousand).

NOTE 3:- NEWLY PROPORTIONATELY CONSOLIDATED COMPANY

On 2 January 2005, the Company reached an agreement with the shareholder of
Darset Production Ltd. ('Darset'), pursuant to which the shareholder granted the
Company a proxy, at no consideration, to vote in the meetings of Darset's
shareholders by force of its shares that comprise 24.83% of Darset's equity.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3:- NEWLY PROPORTIONATELY CONSOLIDATED COMPANY (Cont.)
The proxy is in force for a period of eight years from the date of the signing
or until such date on which the shareholder will give notice to the Company of
the transfer of the shares, in whole or in part, to someone and/or any legal
entity whatsoever, except for a wholly-owned company of the shareholder,
whichever is earlier.

Subsequent to the signing of the agreement, the Group holds 50% of the voting
power and joint control in Darset. Therefore, commencing in 2005, the Group's
interest in Darset (25%) is accounted for by proportionate consolidation.

The Company's share of the assets, liabilities, revenues and expenses of Darset
which are included in the consolidated financial statements, are as follows:

                                                                 As of 30 June
                                        2005 and for the six months then ended

Balance sheet items:
----------------------

Assets                                                                     404
Liabilities                                                                267

Statement of income items:
----------------------------

Revenues                                                                   944
Profit for the period                                                       91

NOTE 4:- TAXES ON INCOME

On July 25, 2005, the Knesset (Israeli Parliament) passed the Law for the
Amendment of the Income Tax Ordinance (No. 147), 2005, which prescribes, among
others, a gradual decrease in the corporate tax rate in Israel to the following
tax rates: in 2006 - 31%, in 2007 - 29%, in 2008 - 27%, in 2009 - 26% and in
2010 and thereafter - 25%. Management estimates that the effect of the amendment
on the Company's balance of deferred taxes as of June 30, 2005, will be
immaterial.

NOTE 5:- ADDITIONAL INFORMATION

a.       On 12 January 2005, the Company issued 300,000 Ordinary shares to a
related party in consideration of US$ 200 thousand.
b.      YDI 2002 and Dori-Mapal: On 31 January 2005, the Company signed a
compromise agreement with a minority shareholder (5%) of YDI 2002 and Dori
Mapal. Pursuant to this agreement, the minority shareholder agreed to sell to
the Company his interest (5%) and all other rights in YDI 2002 and Dori-Mapal
for a total consideration of US$ 575 thousand. The consideration is payable in
three equal installments in February 2005, December 2005 and in December 2006.
In addition, the minority shareholder agreed to release the Company and all
members of the Group from any and all claims and demands. Goodwill on the
acquisition amounted to U.S.$ 358 thousand.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5:- ADDITIONAL INFORMATION (Cont.)

c.       Davka Content & Productions Ltd. ('Davka'):

On 11 February 2005, the Company signed an agreement with the minority
shareholder of Davka ('the seller') according to which, the Company acquired the
22% of Davka's shares held by the seller in exchange for 2.86% of the Company's
shares (post issuance) and a cash payment of US$ 844 thousand. After completion
of this agreement the Company holds 100% of Davka's issued share capital.
Goodwill on the acquisition amounted to U.S.$ 1,648 thousand.

On the same date, the Board of Directors of the Company resolved to grant 60,000
options under the Company's share option plan, to the owner of the minority
shareholder who is also a director of Davka, at an exercise price of NIS 3.00
each.

The acquisition and the grant of options were effective as of 1 January 2005.

d.      In the six months ended 30 June 2005, the Company restated its
consolidated financial statements for the year ended 31 December 2004 due to an
error in revenue recognition by a subsidiary.

The effect of the restatement was a decrease in trade receivables and a decrease
in revenues in the amount of U.S.$ 78 thousand, and a decrease in profit for the
period of U.S. $ 78 thousand.

NOTE 6:- BUSINESS SEGMENTS

a.       General:

The Group companies operate in three principal business segments: rights of TV
series, broadcasting of TV channels and sales of TV series rights.

b.      The following data is presented in accordance with IAS 14:

                         Six months ended 30 June 2005 (Unaudited)


             Rights   Broadcasting   Sales of   Adjustments          Total
                 of          of TV         TV                 consolidated
                 TV       channels     series
             series                    rights

            US$'000       US$ '000   US$ '000      US$ '000        US$ '000

Revenues:
Sales to
external
customers     4,334          2,036        103               -            6,473
Intersegment
sales             5              -        142            (147)
            -------       --------     ------        --------         --------

Segment
revenues      4,339          2,036        245            (147)           6,473
            =======       ========     ======        ========         ========

Result:
Segment         506            360        138               -            1,004
result      =======       ========     ======        ========

Unallocated
expenses                                                                  (452)
                                                                      --------

Operating
profit                                                                     552
                                                                      ========


NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6:- BUSINESS SEGMENTS (Cont.)

                         Six months ended 30 June 2004 (Unaudited)


              Rights  Broadcasting       Sales of     Adjustments          Total
                  of         of TV             TV                   consolidated
                  TV      channels         series
              series                       rights

           US$ '000       US$ '000       US$ '000       US$ '000        US$ '000
                    
Revenues:
Sales to
external
customers     3,771          2,182        141               -            6,094
Intersegment
sales            74              -        190            (264)               -
            -------       --------     ------        --------         --------

Segment
revenues      3,845          2,182        331            (264)           6,094
            =======       ========     ======        ========         ========

Result:
Segment         433            311        298               -            1,042
result      =======       ========     ======        ========

Unallocated
expenses                                                                  (365)
                                                                      --------

Operating
profit                                                                     677
                                                                      ========

                           Year ended 31 December 2004 (Audited)


              Rights  Broadcasting    Sales of    Adjustments         Total
                  of         of TV          TV                  consolidated
                  TV      channels      series
              series                    rights

             US$'000      US$ '000     US$'000       US$ '000      US$ '000
Revenues:
Sales to
external
customers   *)5,750          4,471        191               -     *) 10,412
             
Intersegment
sales           235              -        402            (637)            -
            -------       --------     ------        --------      --------
Segment
revenues   *) 5,985          4,471        593            (637)    *) 10,412
            =======       ========     ======        ========      ========
             

Result:
Segment    *) 1,601            781        491               -      *) 2,873
result                 
            =======       ========     ======        ========

Unallocated
expenses                                                               (747)
                                                                   --------
Operating
profit                                                             *) 2,126
                                                                   ========










*) Restated - see Note 5d.

ERNST & YOUNG   Kost Forer Gabbay & Kasierer         Phone: 972-3-6232525
                3 Aminadav St.                       Fax: 972-3-5622555
                Tel-Aviv 67067, Israel


The Board of Directors
Dori Media Group Ltd.

Re: Review of unaudited interim consolidated financial statements for the six
months ended 30 June 2005

At your request, we have reviewed the accompanying interim consolidated balance
sheet of Dori Media Group Ltd. as of 30 June 2005, and the related consolidated
statements of income, statements of changes in shareholders' equity and the
consolidated statements of cash flows for the six months periods then ended.
These interim consolidated financial statements are the responsibility of, and
has been approved by, the directors. Our responsibility is to issue a review
report on these interim consolidated financial statements based on our review.

We have been furnished with reports of other accountants in respect of the
review of the interim financial statements of a jointly controlled entity, whose
assets constitute approximately 2% of total consolidated assets as of 30 June
2005 and whose revenues constitute approximately 9% of total consolidated
revenues for the six months ended 30 June 2005.

We conducted our review in accordance with the International Standard on Review
Engagement 2400. This Standard requires that we plan and perform the review to
obtain moderate assurance as to whether the interim consolidated financial
statements are free of material misstatement. A review is limited primarily to
inquiries of Company personnel and analytical procedures applied to financial
data and thus provides less assurance than an audit. We have not performed an
audit and, accordingly, we do not express an audit opinion.

Based on our review and the review report of other accountants, nothing has come
to our attention that causes us to believe that the accompanying interim
consolidated financial statements are not presented fairly, in all material
respects, in accordance with International Financial Reporting Standards.



Tel-Aviv, Israel            KOST FORER GABBAY & KASIERER
10 August, 2005             A Member of Ernst & Young Global




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