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YANDEX N.V. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

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Commission file number: 001-35173

YANDEX N.V.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name in English)

The Netherlands

(Jurisdiction of incorporation or organization)

Schiphol Boulevard 165

Schiphol P7 1118 BG, The Netherlands

(Address of principal executive offices)

Arkady Volozh, Chief Executive Officer

Schiphol Boulevard 165

Schiphol 1118 BG, The Netherlands

Telephone: +31 20-206-6970

Facsimile: +31 20-446-6372

Email: askIR@yandex-team.ru

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

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Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. Class A Ordinary Shares

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report.(1)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒  No ◻

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ◻ No ⌧

Note—checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepared the financial statements included in this filing:

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If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ◻ Item 18 ◻

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

⁽¹⁾ In addition, we had 795,801 Class A shares held in treasury and nil Class C shares issued and fully paid as of December 31, 2021. Our Class C shares are issued from time to time solely for technical purposes, to facilitate the conversion of our Class B shares into Class A shares. They are held by a Conversion Foundation managed by members of our Board of Directors. For the limited period of time during which any Class C shares are outstanding, they will be voted in the same proportion as votes cast by holders of our Class A and Class B shares, so as not to influence the outcome of any vote.

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In this Annual Report on Form 20-F (this “Annual Report”), references to “Yandex,” the “company,” “we,” “us,” or similar terms are to Yandex N.V. and, as the context requires, its consolidated subsidiaries.

Our consolidated financial statements are prepared in accordance with U.S. GAAP and are expressed in Russian rubles. In this Annual Report, references to “rubles” or “RUB” are to Russian rubles, and references to “U.S. dollars” or “$” are to United States dollars.

Our fiscal year ends on December 31 of each year. References to any specific fiscal year refer to the year ended December 31 of the calendar year specified.

This Annual Report includes market data reported by Yandex Radar (February 2022), the Association of Russian Communication Agencies (AKAR) (March 2022), the Russian Federal State Statistics Service (Rosstat) (February 2022), the Bank of Russia (February 2022) and Company’s Investor Presentation (February 15, 2022).

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Forward-Looking Statements

This Annual Report contains forward-looking statements that involve risks and uncertainties. Words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” “may” or other words that convey judgments about future events or outcomes indicate such forward-looking statements. Forward-looking statements in this Annual Report may include statements about:

The forward-looking statements included in this Annual Report are subject to risks, uncertainties and assumptions. Our actual results of operations may differ materially from those stated in or implied by such forward-looking statements as a result of a variety of factors, including those described under Part I, Item 3.D. “Risk Factors” and elsewhere in this Annual Report.

We operate in an evolving environment. New risks emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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INTRODUCTION AND EXPLANATORY NOTE

Current geopolitical tensions, their impact on the Russian and global economy, and the related stresses in the broader social and business environment, have created exceptional challenges for our business and our team.

Over the past 25 years, Yandex has built world-class technologies and services to meet the needs of millions of users in our core markets and, in recent years, globally. We are the leader in internet search and ride-hailing in our core market and have introduced a broad range of online and offline services both in Russia and abroad. As we have announced, we are currently exploring different strategic options, including divestment, for our news aggregation service and infotainment platform Zen. Going forward, we intend to focus on the continued development of our other technology-related businesses and products, including search, advertising, self-driving vehicles and cloud computing; and our transactional services, including ride-hailing, e-commerce, video/audio services and streaming.

None of Yandex or our group companies, nor any of our current directors or senior management, is a target of sanctions imposed by the United States, European Union or United Kingdom. Nevertheless, we are indirectly impacted by the designation of numerous parties in Russia and the restrictions that this places on international businesses in Russia. In addition, the US, EU and other governments have imposed strict controls on export of certain technology – including both hardware and software – to Russia or to certain Russian parties. A number of international businesses are taking a conservative approach and are restricting or eliminating their business with and supply to any parties in Russia at this time.

These developments have adversely impacted (and may in the future materially adversely impact) the macroeconomic climate in Russia, resulting in significant volatility of the ruble, currency controls, materially increased interest rates and inflation and a potential contraction in consumer spending, as well as the withdrawal of foreign businesses from the Russian market.

Our core businesses in Russia are market leaders and remain broadly stable, with significant potential over the longer term despite substantial challenges this year. In the near term, we expect our advertising business to be affected by the withdrawal of multinational advertisers from the market and tighter advertising budgets for domestic businesses. Our ride-hailing business remains stable, but we are unable to predict the impact of broader macroeconomic trends and changing competitive and supply and demand dynamics. In our e-commerce businesses, we anticipate a reduction of discretionary spending by consumers, although we currently have limited visibility in this regard. In addition, we understand that many suppliers have announced intentions to suspend the sale of consumer goods to Russia, and several major shipping companies have ceased shipments to Russia; such actions, if prolonged, would result in a reduction of the number and selection of goods we are able to offer. We have scaled back or paused many of our planned investments in our businesses both domestically and internationally. Any prolonged economic downturn in Russia as a result of sanctions, depreciation of the ruble or negative consumer sentiment could have a material adverse effect on our financial position and results of operations.

Our Class A shares remain subject to a suspension of trading on Nasdaq, and we are unable to say when or whether trading will resume on that market. Trading in our shares resumed on the Moscow Exchange on March 29, 2022. As a result of legal restrictions in Russia on sales by non-domestic holders, however, as well as actions taken in the international clearing systems, there is no flow of shares between the US and Russia, and therefore trading in our shares on the Moscow Exchange remains limited. Non-Russian investors are currently not permitted to trade our shares on that market.

As a result of the Nasdaq trading suspension, the holders of our $1.25 billion convertible notes due in 2025 currently have the right to require us to redeem their notes at par. As we have announced, we do not currently have the funds available to redeem the notes in full. We are engaged in active discussions with a committee of noteholders with a view to agreeing to a restructuring of these obligations, although we can give no assurance as to the likely success or timing of these discussions.

Recent events have also led to changes in our Board of Directors. Esther Dyson, Ilya Strebulaev and Tigran Khudaverdyan resigned from our Board in March. We expect to fill these vacancies in due course.

This Annual Report focusses on our performance in 2021. In the current circumstances, our visibility over the short- and medium-term is extremely limited. Our previous guidance for 2022 should no longer be relied upon and we

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are not able to provide any forward-looking comments at this stage.

We continue to provide services to our users and partners as usual. We are taking appropriate measures to conserve cash, consider our capital allocation and budget appropriately during this period of uncertainty. We are closely monitoring sanctions and export control developments and the macroeconomic climate in Russia and we are assessing contingency plans to address potential developments. Our Board and management are focused on the safety and wellbeing of our approximately 18,000 employees in Russia and abroad, while doing everything we can to safeguard the interests of our shareholders and other stakeholders.

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Risks Related to Our Governance and Ownership Structure

Risks Related to Our Business and Industry

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Additional Risks Related to Regulatory Matters

Risks Related to Tax Matters

Risks Related to Ownership of our Class A Shares

Risks for U.S. Holders

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Detailed Overview of Risk Factors

Risks Related to the Current Global Political, Regulatory and Economic Environment

Our business and operations have been materially adversely affected by the current geopolitical crisis.

Our principal operations are located in Russia, while we have smaller, early-stage businesses that operate internationally. The current geopolitical crisis, and the responses of governments and multinational businesses to these events, have created critical challenges for our business and operations, both in Russia and globally. These factors, including the specific risks outlined below, may materially adversely affect our financial condition, results of operations, trading price, ability to operate and solvency.

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Our core businesses may be materially adversely impacted by negative macroeconomic developments in Russia.

The current geopolitical crisis and international actions in response to it have materially and adversely impacted the macroeconomic climate in Russia, resulting in significant currency rate volatility, the imposition of currency controls, materially increased interest rates and inflation, and the withdrawal of a number of Western businesses from the Russian market or a reduction in their operations or services in the country, which may lead to a contraction in consumer spending. These factors are likely to adversely affect our results of operations in our core market.

We expect that our advertising revenues will be adversely affected in 2022 both by the loss of sales to multinational businesses that have suspended or reduced operations in Russia and by the anticipated reduction in advertising budgets of domestic businesses, although we may experience some benefit from the withdrawal of some of our competitors from the market. Our e-commerce businesses may be adversely affected by an anticipated reduction of discretionary spending by consumers, although we currently have limited visibility in this regard. In addition, we understand that many suppliers have announced intentions to suspend the sale of consumer goods to Russia, and several major shipping companies have ceased or suspended shipments to Russia; such actions, if prolonged, would result in a reduction of the number and selection of goods available through Yandex Market and a reduction in associated advertising. Our ride-hailing business currently remains stable but may likewise suffer from a weaker macroeconomic environment and adverse supply and demand dynamics. Price increases and a potential reduction in the availability of new cars and spare parts in Russia in the medium-term, as well as a significant increase of financial lease rates for new and existing lease contracts in the wake of key interest rate increases, may adversely affect the operations of our partners (including fleet management companies), which may negatively impact further growth of our ride-hailing business. We anticipate that consumer sentiment and spending patterns may result in reductions in revenue from our other business units, offset to some extent by decreased competition. Any prolonged economic downturn in Russia as a result of sanctions, depreciation of the ruble, negative consumer sentiment or other macro factors could have a material adverse effect on our results of operations in 2022 and potentially beyond.

International sanctions and export restrictions affecting businesses and individuals in Russia may have a material adverse impact on our business, financial condition and result of operations.

In response to the current geopolitical crisis, numerous governments, including those of the United States, European Union and United Kingdom, have imposed an extensive range of additional economic sanctions on certain Russian government officials, private individuals and Russian companies, as well as extensive controls on the export of technology to parties in Russia. In addition, many businesses are taking a cautious approach to sanctions and export compliance matters and have adopted internal policies more restrictive than are strictly required by the applicable rules.

Although neither Yandex N.V nor any of its group companies is a target of sanctions, these restrictions and policies significantly limit the ability of our core businesses to enter into agreements with international parties and may make it more difficult for us to enter into agreements with other counterparties, including our key providers who may refuse to work with us because of the geopolitical situation.

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Additional restrictive measures that could be implemented that could affect our business include the following:

If sanctions were to be imposed directly on Yandex N.V. or our operating subsidiaries, our business, operations may be materially adversely affected.

None of Yandex or our group companies is a target of sanctions in the United States, United Kingdom or European Union. Our former Executive Director and Deputy Chief Executive Officer, Tigran Khudaverdyan, was designated under EU and UK sanctions on March 14, 2022, and immediately resigned from his board and executive positions at Yandex N.V. and its Dutch subsidiaries.

If we were to become a target of sanctions, it may have a material adverse effect on our business and our ability to operate our business and satisfy our obligations to our stakeholders.

If we are unsuccessful in restructuring the terms of our outstanding convertible notes we may be unable to meet our obligations to our noteholders.

In March 2020, we issued $1.25 billion of our 0.75% convertible Notes due 2025. On February 28, 2022, Nasdaq and the New York Stock Exchange suspended the trading in securities of a number of companies with material operations in Russia, including Yandex N.V. Under the terms and conditions of our notes, in the event of a suspension of trading of our Class A shares on Nasdaq for a period of five dealing days or more, the holders of the notes have the right to require us to redeem their notes at par plus accrued interest. Trading in our Class A shares on Nasdaq remained suspended at the end of March 4, 2022. Therefore, the conditions for the holders of the notes to be able to require redemption of their notes have been satisfied.

We are engaged in discussions with advisors to an ad hoc committee of noteholders with a view to reaching a fair and sustainable solution for all parties involved. Despite these ongoing efforts, we can provide no assurance that we will be able to reach an acceptable result. In the event that are not able to reach such agreement and holders of a material portion of the notes were to exercise their right to require redemption of their notes, we would be unable to satisfy these obligations.

Our shareholders currently have limited or no liquidity in our shares.

On February 28, 2022, Nasdaq and the New York Stock Exchange suspended the trading in securities of a number of companies with material operations in Russia, including our Class A shares. Trading in our shares on Nasdaq remains suspended as at the date of this Annual Report. We have not received written notice from Nasdaq of any decision to formally delist our Class A shares and we continue to be in compliance with all applicable reporting obligations. However, we cannot guarantee that Nasdaq will not delist the shares of companies with sizeable businesses in Russia in the future.

In the event that we do receive such written notice from Nasdaq to formally delist our Class A shares, we may appeal against such action, although we cannot assure you that any such appeal would be successful. In such event, we may also seek a primary listing on another international stock exchange in due course, but we can provide no assurance that any such efforts would be successful in the near term or at all.

We have had a secondary listing for our Class A shares on the Moscow Exchange since 2014. Trading in our

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shares on the Moscow Exchange was suspended on February 28, 2022 and resumed on March 29, 2022. Under recently adopted legislation, however, non-Russian shareholders are not permitted to sell shares on the Moscow Exchange. Moreover, because the international settlement systems remain closed for trading in rubles and in any securities of Russian businesses, it is currently not possible for trades to settle between shareholders that acquired our shares on Nasdaq and investors on the Moscow Exchange, and the volume of our shares available for trading on the Moscow Exchange is limited. The trading value of our shares on the Moscow Exchange may therefore be different from the value at which they would trade if all of our Class A shares were available for trading. We can provide no assurance as to when or whether non-Russian shareholders will be permitted to effect trades on the Moscow exchange or when or whether the settlement systems will permit trading in all of our shares.

Laws or regulations may be adopted in our core market that may adversely affect our non-Russian shareholders and the value of the shares they hold in our company, including a requirement that Russia-based businesses re-domicile to Russia.

A number of measures have been adopted or proposed in our core market that could adversely affect non-Russian shareholders. For example, a law has been passed that would require Russian companies to delist their depositary receipts from stock exchanges outside Russia. Although this would not affect Yandex N.V., as a Netherlands registered company, other proposals under consideration would require that Russia-based businesses re-domicile to Russia. If such a requirement were to be adopted, we would have to take measures to change our corporate domicile, which would be complex and may have adverse tax consequences for our company and our shareholders. Moreover, the rights of shareholders in Russian companies differ from the rights of shareholders of Dutch public limited companies. In addition, many of our international shareholders may be unable to hold or, under current Russian law, trade in securities of a Russian entity.

Any such legislative requirements or other measures targeting non-Russian shareholders or offshore holding companies of Russian businesses would materially adversely affect the rights of our international shareholders.

Our brand may be harmed by public perceptions about some of our services.

We have always operated with a policy of strict political neutrality and have never exercised editorial control over the content we present in our news aggregation service or search results. We comply with the Russian laws applicable to news aggregators, which require that we only include news from registered mass media in Russia in our news feed. With respect to search, users can find anything they are looking for that is legally accessible in Russia.

Nevertheless, there has been extensive speculation in the media in recent weeks that Yandex News and Search have not presented a full and fair picture of current events. Although these criticisms are based on a mistaken understanding of the legal requirements to which all news aggregators in Russia, including Yandex, are subject, we may suffer from negative public perceptions of our role in the broader information ecosystem in Russia. There has also recently been speculation in the media based on a incorrect understanding of our data privacy policies, which are in line with those of our international peers. Such perceptions may adversely affect our reputation, our ability to enter into arrangements with global partners and the value of our business.

Our ability to expand internationally may be hindered by geopolitical tensions.

We currently have operations in 28 countries outside Russia across number of our business units as well as plans to expand in geographies globally. We anticipate that, in the near term, geopolitical tensions and public perceptions may make it difficult for us to expand, or even continue to operate, these businesses or to enter into new agreements with business partners or investors. For example, we are aware of calls by some governments and groups for our businesses to withdraw from certain markets, such as the Baltic countries, where the company’s operations are prohibited or significantly restricted, and for Yandex technologies to be removed from Android and Apple mobile application stores in certain countries.

We are continuing to maintain our international teams and to develop these businesses but have in some cases paused our plans to expand for the time being. As we resume these businesses, we may face enhanced competitive pressure from global companies that are not subject to these constraints.

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The current environment and related uncertainty may result in increased turnover of personnel and increased compensation expense.

A key part of our company’s success is our corporate culture and our ability to attract, maintain and motivate our key talent, management and executive staff. The current geopolitical circumstances have created additional challenges for our team, both in Russia and internationally. We have taken steps to retain and motivate our team, but there is a risk of increased personnel turnover which could have an adverse effect on our operations.

Historically, equity awards have formed a significant portion of the regular compensation of a large percentage of our team. The significant drop in the value of our Class A shares and current suspension of trading on Nasdaq has largely eliminated our ability to rely on equity awards for retention and motivation purposes. As a result, the cash component of our employee compensation may increase in the medium term, which would weigh on our operational expenses.

In the current environment, there may be a heightened risk of actions by the relevant authorities that may be perceived as reflecting political considerations.

The legal framework in which we operate in our core market is increasingly volatile in light of ongoing geopolitical tensions. This environment could increase the risk of new legislative or regulatory initiatives that could be seen as protecting the country’s national security and/or limiting foreign influence over the sectors in which we operate, including actions aimed at effecting changes of control of companies that are considered to be of strategic importance. The fact that we are a high-profile company may heighten these risks.

Foreign ownership limitations in Russia have been in place in many sectors for a number of years. Applicable laws restrict foreign (non-Russian) ownership or control of companies involved in certain strategically important activities in Russia, as well as companies that are classified as “mass media” businesses. Currently, technology, the internet and online advertising are not industries specifically covered by this legislation, but proposals have from time to time been considered by the authorities, which, if adopted, would impose foreign ownership or control restrictions on certain large technology or internet companies.

If existing limitations on foreign ownership were to be extended to our business, or if new limitations were put in place, such requirements could have a material adverse effect on our group and the value of our business.

In addition, we completed a corporate governance restructuring in late 2019, which included the formation of a Public Interest Foundation that holds a priority (“golden”) share in Yandex N.V. and a so-called “special voting interest” in our principal Russian operating subsidiary, Yandex LLC. Although these interests are designed to provide targeted and specific governance rights, some of these rights are not precisely defined. For instance, what may constitute a “Special Situation” is not defined, although it is our understanding, based on our discussions with the relevant authorities, that such “Special Situations”, if they ever arose, would relate to an action, failure to act or practice by Yandex that was deemed to be materially adverse to the national security interests of the Russian Federation. However, it is possible that the Public Interest Foundation may interpret matters relating to national security broadly and unpredictably, particularly in light of the ongoing crisis, or that matters of national security concern could arise in ways which we have not anticipated. Any such actions by the Public Interest Foundation could have a material adverse effect on our operations and the value of the Yandex group.

Risks Related to Our Governance and Ownership Structure

Although we implemented a restructuring of our corporate governance at the end of 2019, we may not be compliant with any legislation limiting foreign ownership or control that might ultimately be adopted. Any such non-compliance could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as on the trading price of our Class A Shares.

We cannot assure you that our business will not become subject to new legislation that might ultimately be adopted with the goal of limiting foreign ownership or control of businesses in our sector or of systemically important Russian businesses generally. If our business becomes subject to, and is found not to be compliant with, any such legislation, we cannot assure you that enforcement actions against Yandex or our business by the Russian authorities will not be imposed. The imposition of such enforcement actions could have a material adverse effect on our business,

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financial condition, results of operations and cash flows, as well as on the trading price of our Class A Shares. In addition, in the event that any such new restrictions are adopted, or if there is a perception that such restrictions might be forthcoming, our Board may determine that additional changes in our corporate governance structure are warranted in order to respond to such concerns and to protect the interests of our stakeholders. See also “Item 4. Information on the Company – Governance Structure”.

The Public Interest Foundation that was formed in connection with our corporate governance restructuring has important rights in our corporate governance structure. These rights could be exercised in a manner that is different from what we expect or that is not in the interests of our Class A shareholders.

The Public Interest Foundation has limited and targeted rights, through the powers associated with its holding of the Priority Share in Yandex N.V. and a so-called “Special Voting Interest” in Yandex LLC. The board of the Public Interest Foundation, as well as the designated directors on the Yandex N.V. board and any interim General Director of Yandex LLC appointed by the Foundation in the circumstances set out in the charter of Yandex LLC, may take actions, however, that are not in the interests of our stakeholders, including our Class A shareholders, or decline to approve actions that would be in the interests of our Class A shareholders. These actions could include exercising the veto right over the nomination of four members of our Board in such a way as to prevent the nomination of persons whom the other members of our Nominating Committee and Board believe would best serve the interests of our company and our shareholders. Moreover, these directors, together with the two designated directors, could act in a manner that results in Board deadlocks on material matters, such as budget approvals, that restrict our flexibility or ability to operate. Further, if the Public Interest Foundation exercised its right to use the Special Voting Interest in Yandex LLC in a manner that is inconsistent with our expectations, or if it did so repeatedly, it could disrupt our operations and adversely affect the public perception of our business. Any such actions could have an adverse effect on our business, financial condition and results of operations and cash flows. The impact and perception of such actions could also make it difficult or impossible for us to access the public capital markets going forward.

In addition, the Russian legislative framework under which the Public Interest Foundation was incorporated is relatively new and there has been very limited experience with such legal form in practice. We may therefore face novel issues in connection with the untested mechanics of the Foundation legislation and supporting regulations.

See also “Item 4. Information on the Company – Governance Structure”.

Risks Related to Our Business and Industry

We face risks related to the COVID-19 pandemic and other health epidemics or related crises.

The ongoing COVID-19 pandemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities globally, including in Russia. On the back of relaxed pandemic-related restrictions starting in the second half of 2020, our businesses and the broader economy strengthened in 2021. However, our businesses may continue to be affected by the economic impact of the coronavirus pandemic and potential further disruptions caused by the health crisis.

The extent to which the COVID-19 crisis impacts our results in any given period will depend on future developments, which are still uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and its variants, and the actions taken to contain the virus or treat its impact. These developments may also lead to changes in estimates and assumptions that affect the reported amounts of our assets and liabilities, and actual results could differ from those estimates. A prolonged or intensified disruption to normal economic activity or to our businesses could have a material adverse impact on our financial condition and results of operations.

We rely on the continued availability, development and maintenance of the internet infrastructure in the countries in which we operate. Any errors, failures or disruption in the products and services provided by third-party providers of our principal internet connections and the equipment critical to our internet properties and services, or any regulatory limitations on the internet in Russia, could materially adversely affect our brand, business, financial condition, and results of operations.

Our success depends on the continued availability, development and maintenance of the internet infrastructure globally and particularly in the countries in which we operate. This includes maintenance of a reliable network backbone

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with the necessary speed, data capacity and security for providing reliable internet services. Any disruption in the network access provided by third parties or any failure by them to handle current or higher future volumes of use may significantly harm our business. We have experienced and expect to continue to experience interruptions and delays in service from time to time. Furthermore, we depend on hardware and software suppliers for prompt delivery, installation and service of servers and other equipment to deliver our services. Public health concerns or epidemics, such as the recent coronavirus outbreak, may affect the production or delivery capabilities of our suppliers and resulting quarantines or closures could further disrupt our supply chain. The current geopolitical crisis is also adversely affecting our access to international suppliers.

The internet infrastructure may also be unable to support the demands placed on it by growing numbers of users and time spent online or increased bandwidth requirements. Government regulation may also limit our access to adequate and reliable internet infrastructure. Any outages or delays resulting from inadequate internet infrastructure or due to problems with our third-party providers or new regulatory requirements could reduce the level of internet usage as well as our ability to provide our services to users, advertisers and network partners, which could materially adversely affect our business, financial condition and results of operations.

A law that partly came into force in November 2019 introduced tighter regulation of traffic routing across the Russian internet. This regulation, among other things, may lead to a requirement that Russian internet traffic should be routed through Russian communication centers. This could reduce data transfer speed significantly and even result in interruptions and delays of the online services provided across the Russian internet.  

There has recently been increased scrutiny of technology businesses across the globe. Should our operating environment become more challenging because of a change in the regulation or perception of technology companies, our business, financial condition, and results of operations may be materially and adversely affected.

Around the world, technology companies are operating in an increasingly uncertain and challenging environment, in part due to increased scrutiny from policymakers, regulators and the general public. Such scrutiny has included concerns about business practices, market presence and strategic direction. A number of our competitors, including Google and Facebook, have received scrutiny in different jurisdictions over business practices, including the application of targeted advertising and data processing.

For example, the Russian Federal Antimonopoly Service (FAS) has recently started to apply more invasive remedies to technology companies, stipulating in its demands and orders exact changes that market participants should implement into their business processes in order to terminate an alleged violation (in contrast to more general requirements to eliminate the violation of the competition law). For instance, in February 2021 the FAS notified Yandex that it had found indications of an abuse of dominance in the way that Yandex displays enriched results in its search engine and required that Yandex undertake a number of measures to stop the alleged discrimination. In January 2022, Yandex reached a settlement with the FAS and the complainants which confirmed that Yandex has complied with all requirements of the FAS warning. One of the complainants is currently challenging the settlement in the Russian cassation court. See also “The competent authorities could determine that we hold a dominant position in one or more of our markets and could impose limitations on our operational flexibility that may adversely affect our business, financial condition and results of operations”.

Restrictive trade practices in many jurisdictions, including the United States, have also made doing business more difficult for technology companies. In particular, in the current geopolitical environment, access to international technology in Russia has been severely restricted.

Should our business practices, market presence or strategic direction receive adverse scrutiny or experience increased regulation in any material market in which we operate, we may experience a material adverse effect on our business, financial condition and result of operations. For instance, additional regulation applicable specifically to technological platforms and ecosystems is being currently discussed in a number of jurisdictions. Although there is no goal to limit the development of the IT business, any restrictive legislation in this sphere to be enacted in Russia or in other countries where we operate may limit our flexibility in providing our services and adversely impact our operations.

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We face competition from major global and local companies, which could negatively affect our business, financial condition and results of operations.

Across our different business lines, we faced competition from both global (such as Google, Meta) and local (VK, Sber) players that provide internet services and content, including search, ride-hailing, food delivery, classifieds, media services, cloud services and e-commerce. Taking into account geopolitical events and, as a result, a change in the competitive environment and a reduction in the presence of global players in Russia (by their own decision or as a result of the actions of the regulator, for example, blocking Meta’s Facebook and Instagram), this year competition with local players is likely to come to the fore.

For many years we have considered Google to be our primary competitor. In addition to its search solutions, including voice search, Google offers online advertising, information and other search services similar to ours, including services similar to Yandex Direct. In March 2022, Google paused the sale of online advertising in Russia, including search, YouTube and outside publishing partners. Separately the Russian regulator Roskomnadzor blocked Meta services (Facebook and Instagram) in Russia.

We believe that social networking sites, video platforms and online marketplaces, are becoming significant competitors for online ad budgets. These sites derive a growing portion of their revenues from online advertising and are experimenting with innovative ways of monetizing user traffic. As a result of their very large audiences and the significant amount of proprietary information, they can access to analyze their users’ needs, interests and habits. Consequently, we believe that they may be able to offer highly targeted advertising which could result in increased competition for us. In 2021 these competitors included local players (such as VK, OK, Ozon, Wildberries) as well as international platforms (Facebook, Instagram, Twitter, TikTok and YouTube). We note that as a result of the current geopolitical situation, some of the international players have been blocked by the regulator (such as all Meta apps, including Facebook and Instagram and Twitter), while TikTok has decided to suspend their activity in Russia.

We also face competition in our non-advertising businesses, for example:

We operate in a market characterized by rapid commercial and technological change. If our competitors are able to develop their technologies more quickly than we are, we may need to increase R&D investments to defend our market shares.

We cannot guarantee you that we will be able to continue to compete effectively with current and future companies that may have greater ability to attract and retain users, greater brand recognition, more personnel and greater financial and other resources. If our competitors are successful in providing similar or better search results or other services compared with those we offer, we could experience a significant decline in user traffic or other business. Any such decline could negatively affect our business, financial condition and results of operations.

We generate a substantial part of our revenues from advertising, which is cyclical and seasonal in nature, and any reduction in spending by or loss of advertisers would materially adversely affect our business, financial condition, and results of operations.

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In the past several years, we continued to diversify our business, and as a result the share of our revenues generated from advertising has declined from 69% in 2019 to 47% in 2021. Nevertheless, advertising still remains the largest business for Yandex and the biggest contributor to our group revenue and adjusted EBITDA. Expenditures by advertisers tend to be cyclical, reflecting the overall economic conditions and budgeting and buying patterns, and can therefore fluctuate significantly. According to AKAR, the rate of growth in online advertising expenditures was 24% in 2021, compared to 4% in 2020 and 20% in 2019. Following the withdrawal of many multinational advertisers from the Russian market since February 2022, we anticipate a decline in advertising expenditures in 2022. Any decreases in online advertising spending due to economic or geopolitical conditions, or other reasons, could materially adversely impact our business, financial condition and results of operations.

Both advertising spending and user traffic also tend to be seasonal, with internet usage, advertising expenditures and traffic historically slowing down during the months when there are extended Russian public holidays and vacations, and increasing significantly in the fourth quarter of each year. For these reasons, comparing our results of operations on a period-to-period basis may not be meaningful, and past results should not be relied upon as an indication of future performance. Furthermore, as our business becomes more diversified, seasonal changes may have different effects on various lines of business.

We rely on partners for a material portion of our revenues and, in particular, for expanding our user base via distribution arrangements. Any failure to obtain or maintain such relationships on reasonable terms could have an adverse effect on our business, financial condition and results of operations.

We consider our ad partner network to be important for the continued growth of our business. Our agreements with our network partners are generally terminable at any time without cause. Our competitors could offer more favorable terms to our current or potential network partners, including guaranteed minimum revenues or other more advantageous revenue-sharing arrangements, in an effort to take market share away from us. If our network partners decide to use a competitor’s advertising services, our revenues would decline.

To expand our user base and increase traffic to our sites and mobile applications, we enter into arrangements with leading software companies and device manufacturers for the distribution of our services and technology. In particular, we have agreements, on a co-marketing basis, with certain internet browsers. As new methods for accessing the internet become available, including through new digital platforms and devices, we may need to enter into new or amended distribution agreements.

Our most significant distribution partners in 2021 were Samsung, Xiaomi, and Opera, which preinstall our applications on their devices in Russia and/or on their mobile and desktop browsers. Original equipment manufacturers (Samsung and Xiaomi) have become increasingly important partners due to mobile traffic growth over the last few years. Each of our other distribution partners constitutes less than 10% of our total distribution traffic acquisition costs. If we are unable to continue our arrangements with current key distribution partners, or enter into comparable arrangements with new distribution partners, particularly for the distribution of our search and other services on mobile devices, this would likely have a negative effect on our search market share over time. In the future, existing and potential distribution partners may not offer or renew distribution arrangements on reasonable terms for us, or at all, which could limit our ability to maintain and expand our user base, and could have a material adverse effect on our business, financial condition and results of operations.

Our business units face comparable risks. For example, if we are unable to attract or maintain a critical mass of Taxi partners, consumers, couriers, restaurants, grocery stores, whether as a result of competition or other factors, our ride-hailing and food delivery services could become less appealing to users, and our financial results could be adversely impacted.

Some of our businesses, in particular, Search and Portal and Media Services, depend on our ability to license, acquire or create compelling content at reasonable costs. Failure to offer compelling content would harm our ability to expand our base of users, advertisers and network partners.

We license much of our content from third parties, such as video content, music, news items, weather reports and TV program schedules. If we are unable to maintain and build relationships with third-party content providers, this would likely result in a loss of user traffic. Our ability to license content from international producers may also be limited in light of the current geopolitical crisis. In addition, we may be required to make substantial payments to third

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parties from whom we license or acquire such content. An increase in the prices charged to us by third-party content providers would adversely affect our business, financial condition and results of operations. In addition, many of our content licenses with third parties are non-exclusive. Accordingly, other websites and streaming platforms, as well as other media such as television, may be able to offer similar or identical content. If other companies make available competitive content, the number of users of our services may not grow as anticipated, or may decline. This increases the importance of our ability to aggregate compelling content in order to differentiate Yandex from other businesses.

Our business benefits from a strong brand. Failure to maintain and enhance our brand would materially adversely affect our business, financial condition and result of operations.

We believe that the brand identity that we have developed through the strength of our technology, our user focus, our independence from political considerations and, in particular, our ability to deliver relevant answers and recommendations, has significantly contributed to the success of our business. We also believe that maintaining and enhancing the Yandex brand is critical to expanding our base of users, advertisers, advertising network partners, and other business partners. We have also from time to time established joint ventures or other partnerships with respect to some of our business units. Although we have sought to implement appropriate controls and protections, depending on specific terms of joint venture or partnership arrangements we may have more limited ability to ensure that these businesses are operated in a manner that is consistent with the broader Yandex brand.

Maintaining and enhancing our brand, especially in relation to mobile services, will depend largely on our ability to continue to be a technology leader and a provider of high-quality, reliable services, which we may not continue to do successfully.

If we fail to manage effectively the growth and increasing complexity of our operations, our business, financial condition and results of operations could be adversely affected.

We have experienced, and continue to experience, growth in and diversification of our operations, which has placed, and will continue to place, significant demands on our management and our operational and financial infrastructure.

We operate certain of our services through separate business units in order to facilitate the growth of those services. Management of these separate business units, some of which now operate or have operated as joint ventures with third-party partners, requires additional administrative effort, which may put strain on our management and other resources. If we do not effectively manage our growth and the operation of our business units, the quality of our services could suffer, which could adversely affect our brand, business, financial condition and results of operations.

We will need to continue to increase our investment in technology, infrastructure, facilities and other areas of operations, in particular product development, sales and marketing. We will also need to continue to improve our operational and financial systems and managerial controls and procedures, and maintain close coordination among our technical, accounting, finance, marketing and sales personnel. If the improvements are not implemented successfully, our ability to manage our growth will be impaired and we may have to make significant additional expenditures, which could harm our business, financial condition and results of operations.

Expansion of our operations internationally may create increased risks that could adversely affect our business, financial condition and results of operations.

We have limited experience with operations outside Russia, and in 2021 derived only approximately 6.1% of our revenues from international markets. Our ability to manage our business and conduct our operations across a broader range of geographies requires considerable management attention and resources and is subject to a number of risks relating to international markets, including the following:

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In addition, compliance with complex and potentially conflicting foreign and Russian laws and regulations that apply to our international operations may increase our cost of doing business and may interfere with our ability to offer, or prevent us from offering, our services in one or more countries. These numerous laws and regulations include import and export requirements, content requirements, trade restrictions, tax laws, economic sanctions, internal and disclosure control rules, data protection, data retention, privacy and filtering requirements, labor relations laws, U.S. laws, such as the Foreign Corrupt Practices Act, and local laws prohibiting corrupt payments to governmental officials. Violations of these laws and regulations may result in fines; criminal sanctions against us, our officers, or our employees; prohibitions on the conduct of our business; and damage to our reputation. Although we have implemented policies and procedures designed to ensure compliance with these laws, we cannot assure you that our employees, contractors or agents will not violate our policies. Any such violations may result in prohibitions on our ability to offer our services in one or more countries, and may also materially adversely affect our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, financial condition and results of operations.

Our corporate culture has contributed to our success, and if we cannot maintain the focus on teamwork and innovation fostered by this environment, our business, financial condition and results of operations would be adversely affected.

We believe that a critical contributor to our success has been our corporate culture, which values and fosters teamwork and innovation. As our business matures and diversifies, and we are required to implement more complex organizational management structures, including those introduced in connection with our recently implemented corporate governance changes, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture. We operate a number of our services through separate business units, in order in part to maintain the “start-up spirit” and provide greater strategic and operational focus for these units. We also operate or have previously operated several of our business units as joint ventures with other parties and may establish new joint ventures in future. In such situations our efforts in maintaining our corporate culture may not be successful, which would adversely affect our business, financial condition and results of operations. In particular, the spin-off of certain business units or further establishment of joint ventures and partnerships may cause the loss of some of our clients or users, or disruption in the provision of the services that are being carved out, and may require additional attention from our management.

If our security measures are breached, malicious applications interfere with or exploit security flaws in our services,

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or our services are subject to attacks that degrade or deny the ability of users to access our products and services, our products and services may be perceived as not being secure, users and customers may curtail or stop using our products and services, and we may incur significant legal and financial exposure.

Third parties have in the past attempted, and may in the future attempt, to use malicious applications to interfere with our services and may disrupt our ability to connect with our users. Such interference often occurs without disclosure to or consent from users, resulting in a negative experience that users may associate with Yandex. Such an attack could also lead to the destruction or theft of information, potentially including confidential or proprietary information relating to Yandex’s intellectual property, content and users. For example, if a third party were to hack into our network, they could obtain access to our search code or to user data. Because the techniques used to obtain unauthorized access, disable or degrade services, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose users and customers.

We maintain substantial security measures staffed by a sizeable and well-trained information security team, undergo regular security audits and penetration testing procedures, both internal and external, and offer a generous bug bounty program for external security researchers, in order to provide a comprehensive security and privacy protection program attested by numerous internationally recognized certifications. Nevertheless, these measures may also be breached due to employee error, malfeasance, system errors or vulnerabilities, fraudulent actions of outside parties, or otherwise.

For example, in February 2021 we announced that a data breach had been discovered during routine screening by our security team, in which an employee had provided unauthorized access to users’ accounts for personal gain. Also, in March 2022, we announced that we discovered a data breach in respect of Yandex Eats customers’ records. Several claims for compensation for moral damage have been submitted to Russian courts to date.

Such security breaches may expose us to a risk of loss of company information or user data, litigation, remediation costs, increased costs for security measures, loss of revenue, damage to our reputation, and potential liability.

In addition, we offer applications and services that our users download to their devices or that they rely on to store information and transmit information to others over the internet. These services are subject to attack by viruses, worms and other malicious software programs, which could jeopardize the security of information stored in a user’s device or in our computer systems and networks. These applications may be difficult to remove or disable, may reinstall themselves and may circumvent other applications’ efforts to block or remove them. If our efforts to combat these malicious applications are unsuccessful, or if our services have actual or perceived vulnerabilities, our reputation may be harmed, our user traffic could decline, and our communications with certain users could be impaired, which could adversely affect our business, financial condition and results of operations.

Our business depends on the accuracy and reliability of our search results and dependability of our online and offline services. A systems failure, technical interference or human error could prevent us from providing accurate search results or ads or reliably delivering our other services, which could lead to a loss of users and advertisers and damage our reputation and materially adversely affect our business, financial condition and results of operations.

Our business depends on our ability to provide accurate and reliable search results and other user services, which may be disrupted. For example, because our search technology ranks a webpage’s relevance based in part on the importance of the websites that link to it, people have attempted to link groups of websites together to manipulate search results. If our efforts to combat these and other types of “index spamming” are unsuccessful, our reputation for delivering relevant results could be harmed. This could result in a decline in user traffic, which may adversely affect our business, financial condition and results of operations.

Although we maintain a robust network of security measures, our systems are potentially vulnerable to damage or interruption from terrorist attacks, denial-of-service attacks, computer viruses or other cyber-attacks or attempts to harm our system, power losses, telecommunications failures, floods, fires, extreme weather conditions, earthquakes and similar events. Our data centers are also potentially subject to break-ins, sabotage and intentional acts of vandalism, and to potential disruptions. At the same time, our data centers are located in different geographical areas. Most of Yandex’s

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services may function in the normal course even when one of the company's data centers is disconnected or lost. The occurrence of a natural disaster or other unanticipated problems at our data centers could result in lengthy interruptions in our service, or a pandemic or an outbreak of disease or similar public health concern, such as the recent coronavirus outbreak, or fear of such an event, could result in reduced customer traffic and consumer spending as well as a reduction of the equipment maintenance quality, partial or complete shutdown of equipment, labor shortages, delays in manufacturing and shipment of products, and possible interruptions in the provision of services.

Such events could reduce our revenues and profits, and our brand could be damaged if people believe our services are unreliable.

From time to time, we have experienced power outages that may have interrupted access to our services and impacted the functioning of our internal systems. Any unscheduled interruption in our services places a burden on our entire organization and would result in an immediate loss of revenue. If we experience frequent or persistent system failures on our websites, our reputation and brand could be permanently harmed. The steps we have taken to increase the reliability and redundancy of our systems are expensive, reduce our operating margin and may be insufficient to reduce the frequency or duration of unscheduled downtime.

Although we test software updates before implementation and there have been no significant downtime periods in recent years, errors made by our employees in maintaining or expanding our systems may damage our brand and may have a materially adverse effect on our business, financial condition and results of operations.

We may not be able to prevent others from unauthorized use of our intellectual property rights, which may adversely affect our competitive position, our business, financial condition and results of operations.

We rely on a combination of patents, trademarks, trade secrets and copyrights, as well as nondisclosure agreements, to protect our intellectual property rights. Our patent department is responsible for developing and implementing our group-wide patent protection strategy in selected jurisdictions, and to date we have filed more than 1,100 patent applications, of which more than 700 have resulted in issued patents. The protection and enforcement of intellectual property rights in Russia and other markets in which we operate, however, may not be as effective as that in the United States or Western Europe. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant infringement of our intellectual property rights could harm our business, our brand and/or our ability to compete, all of which could adversely affect our competitive position, our business, financial condition and results of operations.

We may be subject to intellectual property infringement claims, which are costly to defend, could result in significant damage awards, and could limit our ability to provide certain content or use certain technologies in the future.

A number of internet, technology, media and patent-holding companies own or are actively developing patents covering search, indexing, electronic commerce and other internet-related technologies, as well as a variety of online business models and methods. We believe that these parties will continue to take steps to protect these technologies, including, but not limited to, seeking patent protection in certain jurisdictions. As a result, disputes regarding the ownership of technologies and rights associated with online activities are likely to arise in the future. In addition, the use of open-source software is often subject to compliance with certain license terms, which we may inadvertently breach.

With respect to any intellectual property rights claim, we may have to pay damages or compensation and/or stop using technology found to be in violation of a third party’s rights. We may have to seek a license for the technology, which may not be available on commercially reasonable terms or at all, and may significantly increase our operating expenses. We may be required to develop an alternative non-infringing technology, which may require significant effort, expense and time to develop. If we cannot license or develop technology for any potentially infringing aspects of our business, we may be forced to limit our service offerings and may be unable to compete effectively. We may also incur substantial expenses in defending against third-party infringement claims regardless of the merit of such claims.

We may be subject to claims from our current or former employees as well as contractors for copyright, trade secret and patent-related matters, which are costly to defend, and which could adversely affect our business, financial condition and results of operation.

Unlike the video and other content that we license from third parties, the software, databases, algorithms,

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images, patentable intellectual property, trade secrets and know-how that we use for the operation of our services were generally developed, invented or created by our former or current employees or contractors during the course of their employment with us within the scope of their job functions or under the relevant contractor’s agreement, as the case may be. As a matter of Russian law, we are deemed to have acquired copyright and related rights as well as rights to file patent applications with respect to such products and have the intellectual property rights required for their further use and disposal subject to compliance with certain requirements set out in the Civil Code of Russia. We believe that we have appropriately followed such requirements, but they are defined in a broad and ambiguous manner and their precise application has never been definitively determined by the Russian courts. Therefore, former or current employees or contractors could either challenge the transfer of intellectual property rights over the products developed by them or with their contribution or claim the right to additional compensation for their works for hire and/or patentable results, in addition to their employment compensation. We may not prevail in any such action and any successful claim, although unlikely to be material, could adversely affect our business and results of operation.

We may be held liable for information or content displayed on, retrieved by or linked to our websites and mobile applications, or distributed by our users; or we may be required to block certain content or access to our websites could be restricted; any of which could harm our reputation, business, financial condition and results of operations.

The law and enforcement practice relating to the liability of providers of online services for the activities of their users is currently not settled in Russia and certain other countries in which we operate. Claims may be brought against us for defamation, libel, negligence, copyright, patent or trademark infringement, tort (including personal injury), fraud, other unlawful activity or other theories and claims based on the nature and content of information to which we link or that may be posted online via blogs and message boards, generated by our users or delivered or shared through our services, including if appropriate licenses and/or rights holder’s consents have not been obtained. For example, we have previously been involved in litigation regarding alleged copyright infringement in the United States. We are also regularly required to remove content uploaded by users on grounds of alleged copyright infringement, and from time to time we receive requests from individuals who do not want their names or websites to appear in our search results. In addition, under applicable laws companies and their officers may be held liable for the failure to delete or to stop distributing such information as is required by a court enforcement officer’s act. The liability may include penalties for companies and imprisonment for officers. 

Third parties may also seek to assert claims against us alleging unfair competition, data misappropriation, violations of privacy rights or failure to maintain the confidentiality of user data. Our defense of any such actions could be costly and involve significant time and attention of our management and other resources. If any of these complaints result in liability for us, the judgment or settlement could potentially be costly, encourage similar lawsuits, and harm our reputation and possibly our business.

Additional recent legislation in Russia has introduced a system of information and website blocking measures both to prevent and stop copyright and related rights infringements and to prevent dissemination of illegal information, such as child pornography, content encouraging suicides and drug use, information on minors hurt by illegal actions and extremist information. The regulations generally require a request from a governmental authority to take down the allegedly infringing or illegal information prior to blocking a particular website. However, in some cases, such as dissemination of extremist information, access to such information can be blocked without notification or prior judicial scrutiny. Moreover, under recent legislative amendments a website may be blocked if the information published contains disrespectful and indecent statements about the society, state, Constitution or governmental authorities. Additionally, the subjects who are accused of disseminating such statements can face administrative fines. If we fail to identify the above-mentioned types of information and delete them from our websites in timely manner, our websites might be blocked and our business may be materially adversely affected.

For example, Russian legislation allows for permanent blocking of websites for repeated violation of copyright and related rights. A number of large websites have been blocked pursuant to this legislation so far, including, for example, a major hosting provider. We may be subject to unpredictable blocking measures, injunctions or court decisions that may require us to block or remove content and may adversely affect our services and operations. In addition, to ensure compliance with such laws, we may be required to commit greater resources, or to limit functionality of our services, which may adversely affect the appeal of our services to our customers. Although we believe that we are in full compliance with applicable laws, the application of new norms by government authorities might be sometimes inconsistent or unpredictable.

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New legislation and regulations may impose additional requirements on us and our operations and lead to material legal liability, which can be difficult to foresee or limit. For instance, in December 2020 the European Commission proposed a draft of the Digital Services Act which is aimed at creating a common set of rules on obligations and accountability of online intermediaries providing services in the European Union. The document is now under consideration of the European Parliament and Member States and, if adopted, could impose new obligations on our services provided (or to be provided in the future) to users in the EU.

Also, legislation adopted in 2021 and coming into full effect in 2022 introduces a mandatory system for the measurement of the audience of internet services and content by a specially designated uniform measurements organization, which would provide Russian state authorities with measurement reports on the internet audience (similar to the mandatory measurement of the TV audience). Such legislation imposes obligations on popular internet resources in Russia (including those provided by Yandex) to either integrate required data collection and reporting instruments or to ensure independent collection of the data and information required for the measurement of the internet audience, and to transfer such data to the designated measurements organization. The regulations related to the foregoing legislation provide a significant list of information to be collected by or to be provided to the designated measurements organization, including data such as user ID, user device ID, and information on the content. Neither the legislation nor the regulations provide sufficient protection of our information and user data, including with respect to the competitive commercial interests of the appointed ‘measurements organization’. Mediascope, a leading Russian media research company, was appointed as the designated measurements organization in February 2022.

In addition, Russian legislation mandates the placement of “social advertising” (i.e., ads relating to the promotion of charities, socially useful activities and governmental functions) by all advertising platforms and distributors in their inventory free of charge, in an amount up to 5% of their commercial advertising inventory (calculated on the basis of the preceding year and nominated in currency or advertising impressions). The legislation also establishes a designated operator of social advertising on the internet, which is authorized to use the 5% free-of-charge quota to place social ads. The Institute for the Development of the Internet (IRI) was appointed as the social advertising operator in 2021. Although the legislation provides some degree of discretion for the advertising platforms and distributors regarding the interaction with the operator, the latter holds substantial authority to require any advertising platform or distributor to place social advertising on the terms determined by the operator. The regulations provide detailed provisions on reporting from the advertising platforms and distributors to the operator regarding their commercial advertising inventory, forecasting obligations related to the use of the 5% quota by the operator and some other provisions.

As the internet evolves, an increasing amount of online content may be held in closed social networks, mobile apps or proprietary document formats, which may limit the effectiveness of our search technology, which could adversely affect our brand, business, financial condition and results of operations.

Social networks are important players in the internet market and have a significant degree of control over the manner and extent to which information on their websites can be accessed through third-party search engines. Information can also be stored in other closed systems, such as mobile apps.

If social or other networks or software providers take steps to prevent their content or documents in their formats from being searchable, such content would not be included in our search results even if the content was directly relevant to a search request. These parties may also seek to require us to pay them royalties in exchange for giving us the ability to search content on their sites, in their networks or documents in their format and provide links thereto in our search results. If these parties also compete with us in the search business, they may give their search technology a preferential ability to search their content or documents in their proprietary format. Any of these outcomes could adversely affect our brand, business, financial condition and results of operations.

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We may have difficulty in continuing to scale and adapt our existing technology architecture to accommodate increased traffic and technology advances or new requirements of our users and advertisers, which could adversely affect our business, financial condition and results of operations.

With some of the most highly visited websites in Russia, we deliver a growing number of services, page views and video programs to an increasing number of users. In addition, the services we offer have expanded and changed significantly and are expected to continue to do so in the future to accommodate bandwidth-intensive technologies and means of content delivery, such as interactive multimedia and video. Our future success will depend on our ability to adapt to rapidly changing technologies, to adjust our services to evolving industry standards and to maintain the performance and reliability of our services. Rapid increases in the levels or types of use of our online services could result in delays or interruptions in our services.

As we expand our services, we will need to continue to invest in new technology infrastructure, including data centers. We may have difficulty in continuing to expand our infrastructure to meet increased demand for our services, including difficulties in obtaining suitable facilities or access to sufficient electricity supplies. Moreover, in the current geopolitical environment, we may be unable to acquire the required server capacity or upgrades. A failure to expand our infrastructure could materially and adversely affect our ability to maintain and increase our revenues and profitability and could adversely affect our business, financial condition and results of operations.

Certain technologies could block our ads, which may adversely affect our business, financial condition and results of operations.

Advertising displayed on our platforms may be interfered with by third parties, which may adversely affect our ability to attract advertisers. For example, third parties have in the past, and may in the future, employ technologies to block the display of ads on webpages. The wide and effective use of ad-blocking technologies can reduce the amount of revenue generated by the ads we serve and decrease the confidence of our advertisers and Yandex Advertising Network partners in our advertising technology, which may adversely affect our business, financial condition and results of operations.

If we fail to detect impressions and click fraud or other fraudulent activity or if our partners (including Yandex Advertising Network partners) disagree with our fraud detection techniques, we may face litigation and may lose the confidence of our advertisers or partners which may adversely affect our business, financial condition and results of operations.

We are exposed to the risk of fraudulent and invalid impressions and clicks on the ads we serve from a variety of potential sources. Invalid impressions and clicks are those that we have determined are not intended by the user to view or access the underlying content, including impressions and clicks resulting from fraud executed by automated scripts of computer programs. We monitor our own websites and those of our partners for click fraud and proactively seek to prevent such fraud and filter out fraudulent or other invalid impressions and clicks. To the extent that we are unsuccessful in doing so, we credit our advertisers for impressions or clicks that are later attributed to fraud. If we are unable to stop this activity, these credits to our advertisers or the amounts we pay to our partners for such invalid impressions and clicks may increase, and could exceed what they have actually earned. This could negatively affect our profitability, and these invalid impressions and clicks could result in legal claims or harm our brand.

We acquire complementary businesses, teams and technologies from time to time, and may fail to identify additional suitable targets, acquire them on acceptable terms or successfully integrate them, which may limit our ability to implement our growth strategy. Acquisitions of new businesses may also lead to increased legal risks and other negative consequences, which could have an adverse effect on our business, financial condition and results of operations.

We regularly acquire other businesses, technologies and teams. The acquisition and integration of new businesses, technologies and people pose significant risks to our existing operations, including:

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The integration of new businesses presents a number of challenges, including differing cultures or management styles, the complexities of operational or technical integration, poor financial records or internal controls on the part of the acquired companies, and an inability to establish control over cash flows. Furthermore, even if we are successful in integrating new businesses, expected cost and operating efficiencies may not materialize, the financial benefits from the acquisition may be less than anticipated, and we could be required to record impairment changes as a result of under-performing assets.

Failure to maintain effective customer service may result in customer complaints and negative publicity and may adversely affect our business, financial condition and results of operations.

Customer complaints or negative publicity about our services or those offered by us (including services offered by our business units) or one of our joint ventures, or breaches of customers’ privacy or of our security measures, could diminish consumer confidence in and use of our services. Measures we implement to combat risks of fraud and breaches of privacy and security may be viewed as onerous by our customers or those of our joint ventures and damage relations with them. Alternatively, should breaches of customers’ privacy or of security measures occur, we could be subject to investigations and claims from governmental bodies, as well as from our customers. These measures heighten the need for prompt and accurate customer service to resolve irregularities and disputes. Effective customer service requires significant personnel expense, and such expense, if not managed properly, may impact our profitability or that of one or more of our joint ventures. Any inability by us or our joint ventures to manage or train our or their customer service representatives properly could compromise our or their ability to handle customer complaints effectively. In the event we or one of our joint ventures fails to maintain effective customer service, our reputation may suffer, and we may lose our customers’ confidence, which may in turn adversely affect our business, financial condition and results of operations.

We have started the construction of our new headquarters, which involves significant risks, including those beyond our control. Construction delays may result in material expenses and distraction of management attention and may be exacerbated by restrictions and prohibitions on the supply of construction and finishing materials, engineering and other equipment into Russia.

In 2018 we acquired a property site for a new Moscow headquarters situated at 15 Kosygina Street. Even though we have managed to develop a design package for the site, obtain the required approvals for construction and engage a general contractor, we may face difficulties in managing or coordinating the construction process, which may be exacerbated by the current geopolitical and macroeconomic circumstances. If the construction is not finished by the time our current lease expires, we may need to negotiate a new lease for our current or future premises, and may be unable to secure favorable terms, or may be required to agree to rent denominated in, or linked to, U.S. dollars, which would subject us to foreign exchange risk, or incur other significant expenses associated with the continuation and completion of construction.

Additional Risks Related to Regulatory Matters

Because the range of the services we provide is increasing and the legal framework governing the operations in our markets is evolving, we may be required to obtain additional licenses, permits or registrations or comply with other requirements, which may be costly or may limit our flexibility to run our business.

As we increase the range of services we offer and diversify our business we may have to apply for additional licenses. Maintenance of granted licenses and obtaining new licenses may require us to spend additional resources.

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Licensing requirements may also limit our flexibility in running our business. Failure to maintain required licenses may significantly limit our ability to provide new services in respect of which these licenses are required.

As the legal framework in Russia continues to evolve, we may be required to take additional actions in order to comply with new legislation. Although we believe that we are in full compliance with applicable laws, ambiguities in legislation and the wide discretion granted to regulatory authorities may result in us being subject to additional regulatory requirements. Compliance with expanded or new regulatory requirements, or new interpretations or applications of existing requirements, may also require us to spend additional resources and limit our flexibility in providing our services.

We are subject to regulation regarding the processing and retention of personal and other data, which may impose additional obligations on us, limit our flexibility, or harm our reputation with users.

The collection and handling of user data by any entity or person in Russia (as in many other countries) may be subject to certain requirements and restrictions. If these requirements and restrictions are amended, interpreted or applied in a manner not consistent with current practice, we could face fines or orders requiring that we change our operating practices, which in turn could have a material adverse effect on our business, financial condition and results of operations.

Our companies are subject to routine inspections by the competent Russian authority (Roskomnadzor). If any inspections result in the determination that companies in our group fail to comply with the applicable data protection legislation, we could experience financial and reputational losses and could be restricted from providing certain types of services until we comply with the requirements.

Furthermore, we use cookies and other widespread technologies that assist us in improving the user experience and personalization of our products and services that ultimately benefit both our users and advertisers through behavioral targeting, which makes our advertising more relevant. There is no clarity as to whether our practices are compliant with the requirements of applicable data protection legislation in Russia and abroad, and such laws could be interpreted and applied in a manner that is not consistent with our current data protection practices.

Additionally, “organizers of information distribution” (subjects that ensure the operation of information systems or computer software which are intended or used to receive, transmit, deliver and/or process electronic messages of internet users) are required to notify the relevant Russian authority about the commencement of their operations and must retain a broad range of data relating to and generated by their users for a period of time, which must be provided to the authorities at their request. Our principal subsidiary operating in Russia has notified the relevant Russian authority that it acts as an organizer of information distribution with respect to some of the services it provides. Organizers of information distribution that use encryption when delivering or processing electronic messages are required to provide the security authorities with information necessary for decoding the delivered or processed messages. Compliance with these requirements may require significant expenditures by us, including additional data centers, servers and other infrastructure or software development. Data retention may also harm our reputation with users. If we fail to comply with the above requirements, the Russian authorities can block access to our services in Russia.

Companies are also required to store all personal data of Russian users in databases located inside Russia. Ongoing compliance with the requirements provided in this legislation may be practically difficult, require significant efforts and resources, could lead to legal liability in other jurisdictions and limit functionality of our services. Compliance with these requirements may also limit our ability to compete with other companies located in other jurisdictions that do not require mandatory local storage of personal data related to their users and that may elect not to comply with such requirements in Russia.

Amendments to the Law “On Information” are due to come into force on September 1, 2022. According to these amendments, significant organizational and technical requirements and restrictions apply to businesses that want to process biometric personal data in their information systems for identification and/or authentication purposes. Regulations implementing the law have not yet been adopted. This law could significantly affect Yandex's ability to use biometric data in the process of providing its services in the future, should such a need arise.

Due to the nature of the services we offer and the fact that we have a presence in a number of countries, we may also be subject to data protection laws in other jurisdictions, especially laws regulating the cross-border transfer of

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personal data, which may require significant compliance efforts and could result in liability for violations in other jurisdictions. For example, the General Data Protection Regulation (the GDPR) came into force in May 2018 in the European Union. Although we have only modest operations in the EU and therefore our exposure under the GDPR is generally limited, we believe that we are taking all necessary steps to comply with the GDPR. However, if we fail to interpret all the requirements of the GDPR in accordance with the official interpretation, we may be held liable for noncompliance. As our business grows, we may also encounter increased pressure from foreign state authorities with respect to the production of information related to users in circumvention of the international legal framework regulating the provision of such information. Any non-compliance with such requests may lead to liability and other adverse consequences. Further, current law imposes restrictions on the distribution of satellite images of certain areas in Russia and the other countries in which we operate and imposes requirements with respect to the information provided by the traffic monitoring service we offer. If we were found to be in violation of any such restrictions, we may be forced to suspend such services or may potentially be subject to fines or other penalties.

We may be subject to existing or new advertising legislation that could restrict the types and relevance of the ads we serve, which would result in a loss of advertisers and therefore a reduction in our revenues.

Russian law prohibits the sale and advertising of certain products and heavily regulates advertising with respect to certain products and services. Ads for certain products and services, such as financial services, as well as ads aimed at minors and some others, must comply with specific rules and must in certain cases contain required disclaimers.

Future amendments to legislation regulating advertising may impact our ability to provide some of our services or limit the type of advertising we may offer. The application of these laws to parties, such as Yandex, that merely serve or distribute ads and do not market or sell the product or service, however, can be unclear. Pursuant to our terms of service, we require that our advertisers have all required licenses or authorizations in order to comply with such legislation. If our advertisers do not comply with these requirements, and these laws were to be interpreted to apply to us, or if our ad-serving system failed to include necessary disclaimers (or otherwise ensure compliance of the ads with advertising legislation), we may be exposed to administrative fines or other sanctions, and we may have to limit the types of advertisers we serve.

The regulatory framework in Russia governing the use of behavioral targeting in online advertising is unclear. If new legislation were to be adopted, or current legislation were to be interpreted, to restrict the use of behavioral targeting in online advertising, our ability to enhance the targeting of our advertising could be significantly limited, which could result in a loss of advertisers or a reduction in the relevance of the ads we serve, which would reduce the number of clicks on the ads and therefore our revenues.

The competent authorities could determine that we hold a dominant position in one or more of our markets and could impose limitations on our operational flexibility that may adversely affect our business, financial condition and results of operations.

Applicable antimonopoly legislation imposes restrictions on companies that occupy a dominant position in a given market. The competent authorities might from time to time investigate the internet or online advertising industries, the ride-hailing business or other sectors in which we operate, and may conclude that, given our market share, we hold a dominant position in one or more of these markets. Additionally, from time to time we receive information requests from the Russian Federal Antimonopoly Service (FAS) related to certain of our services. If the FAS deems that we hold a dominant position in one or more of the markets in which we operate, this could result in limitations on our future acquisitions and a requirement that we pre-approve with the authorities any changes to our standard agreements with advertisers and Yandex Advertising Network partners, as well as any specially negotiated agreements with business partners. In addition, if we were to decline to conclude a contract with a third party or terminate an existing agreement without sufficient substantiation this could, in certain circumstances, be regarded as an abuse of a dominant market position.

Any abuse of a dominant market position could lead to administrative penalties and the imposition of fines of up to 15% of our prior year annual revenues in the relevant market. These limitations may reduce our operational and commercial flexibility and responsiveness, which may adversely affect our business, financial condition and results of operations.

See also "Risks Related to Our Business and Industry".

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Risks Related to Tax Matters

Some of our counterparties provide limited transparency in their operations, which could subject us to greater scrutiny and potential claims from government authorities.

We do business with a number of companies, especially small companies that may not always operate in a fully transparent manner and that may engage in unpredictable or otherwise questionable practices with respect to tax obligations or compliance with other legal requirements. We have been approached by government authorities from time to time regarding potential tax claims or other compliance matters in connection with such transactions. As we are a larger and more transparent company with greater resources than such counterparties, governmental authorities may seek to collect taxes and/or penalties from us in relation to such transactions on the basis that we could have had knowledge of or aided such practices even when we did not.

Changes in the tax systems in the countries in which we operate, or unpredictable or unforeseen application of existing rules, may materially adversely affect our business, financial condition and results of operations.

Russian tax, currency and customs laws and regulations are subject to varying interpretations and changes, which may be frequently revised and reviewed by the authorities. As a result, our interpretation of such tax legislation may be challenged by the relevant authorities. Russian tax legislation largely follows the OECD approach but may be implemented in a way which is not in line with international practice or our interpretation. Moreover, under the current conditions of weak economic growth and increased geopolitical risks, the authorities are taking a more assertive position in their interpretation of the tax legislation and, as a result, it is possible that transactions and activities that have not been challenged in the past may now be questioned by the authorities. High-profile companies such as ours can be particularly vulnerable to such assertive positions of the authorities.

Although we believe that our interpretation of relevant legislation is appropriate and is in accordance with existing court practice, if the authorities were successful in enforcing differing interpretations, our tax liability may be greater than the estimated amount that we have expensed to date and paid or accrued on our balance sheet. We believe our tax position is consistent with the tax laws in the jurisdictions in which we conduct our business, however, the determination of our worldwide provision for tax liabilities, including digital tax, requires significant judgment and there are many transactions and calculations where the ultimate tax determination is uncertain and we are subject to regular review and audit by both domestic and foreign tax authorities. Generally, Russian taxpayers are subject to inspection of their activities for a period of three calendar years immediately preceding the year in which an audit is carried out. Tax years 2019, 2020 and 2021 are currently open for tax audit of our principal Russian subsidiaries.

There have also been significant developments and proposed changes in recent periods to international tax laws that increase the complexity, burden and cost of tax compliance. Global Tax Reform plan (Pillar One and Pillar Two) was adopted in 2021 by 137 countries and now has to be implemented into the local legislation of Russia, the Netherlands and other countries in which we operate. Although we do not expect this reform to have a significant impact on our business, further developments and unexpected implementation mechanics could adversely affect our effective tax rate or result in higher cash tax liabilities.

We may be required to record a significant deferred tax liability if we are unable to reinvest our earnings in Russia.

Our principal Russian operating subsidiary has significant accumulated earnings that have not been distributed to our Dutch parent company. Our current policy is to retain all of our earnings at the level of our principal subsidiary for investment in Russia.

We currently deem any earnings to be permanently reinvested by our principal Russian operating subsidiary outside of the Netherlands and, accordingly, we have not recorded a deferred tax liability on these unremitted earnings. If circumstances change and we are unable to reinvest in that subsidiary’s current operations or acquire suitable businesses in Russia, U.S. GAAP would require us to record a deferred tax liability representing the dividend withholding taxes that we would be required to pay if this subsidiary were to pay these unremitted accumulated earnings to our Dutch parent company as a dividend, even if such dividends were not actually declared and paid. We expect the amount of unremitted earnings to grow as our principal Russian operating subsidiary continues to generate net income. If we were required to record a deferred tax liability on an amount subsequently made available for distribution it may have a material adverse effect on our results of operations and may require us to consider changes to the corporate structure of

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our group.

Risks Related to Ownership of our Class A Shares

The price of our Class A shares has been and may continue to be volatile.

On the back of geopolitical tensions and macroeconomic events in Russia at the end of February 2022, the value of traded securities of companies with significant operations in Russia have been adversely affected, including our Class A shares. Trading in our Class A shares is currently suspended on Nasdaq. Although trading in our shares resumed on the Moscow Exchange in late March 2022 following a suspension, only a limited number of our shares are available for trading on that market at this time, and non-Russian investors are not permitted to trade. The trading price of our shares on the Moscow Exchange may not reflect the price that would be recorded if all of our shares were trading.

Generally, the market for technology and other growth companies has generally experienced severe price and volume fluctuations that have often been disproportionate to the operating performance of those companies. These broad macroeconomic, geopolitical, market and industry factors may impact the market price of our Class A shares regardless of our actual operating performance.

If and when our Class A shares resume trading in the ordinary course, the trading price may to be volatile and subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include:

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In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

The concentration of voting power with our principal shareholders, including our founder, together with the Priority Share held by the Public Interest Foundation, limits your ability to influence corporate matters, while a loss of voting control by our principal shareholders could affect the direction of our company. 

Our Class B shares have ten votes per share and our Class A shares have one vote per share. As of February 15, 2022, our founder, directors, senior management (and their affiliates) and principal non-institutional shareholders together own 95.54% of our outstanding Class B shares and 2.85% of our outstanding Class A shares, representing in the aggregate 51.50% of the voting power of our outstanding shares. In particular, our founder, Mr. Volozh, directly or indirectly controls 86.24% of our outstanding Class B shares and 0.01% of our outstanding class A shares representing in the aggregate 45.27% of the voting power of our outstanding shares. Additionally, the Priority Share provides the Public Interest Foundation with certain rights, including an effective veto on acquisitions related to our Company or the sale of our material businesses.

In addition, as part of the restructuring that was approved in late 2019, the automatic conversion feature of the Class B Shares was amended to provide that, upon the death of a Class B holder, including Mr. Volozh, Class B Shares held by a family trust established by such holder will not automatically convert for a period of two years. During the two-year transition period following the death of Mr. Volozh, the trustee of the family trust will be bound to vote in favor of any proposal of the Board, and in accordance with the Board’s recommendation on any other matter.

These restrictions will fall away, and the shares will automatically convert into Class A Shares, after the end of that two-year period. On December 6, 2021, the company announced that Mr. Volozh has agreed to a further lock-up of his Class B shares till December 31, 2023 and confirmed that he has no current plans to sell his Class B shares.

As a result, Mr. Volozh and his family trust have significant influence over the management and affairs of our company and over all matters requiring shareholder approval, including the election of directors, the amendment of our articles of association and significant corporate transactions, such as a sale of our company or its assets. This concentrated control limits your ability to influence decisions on corporate matters. We may take actions that our public shareholders do not view as beneficial or as maximizing value for them. As a result, the market price of our Class A shares may be adversely affected.

Certain of our directors and shareholders and their affiliates may have interests that are different from, or in addition to, the interests of other Yandex shareholders.

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Some of our directors are affiliated with investment funds or financial institutions that have investments in other businesses or entities that currently or may in the future compete with us or with whom we may enter into transactions. Such affiliations may require the directors to recuse themselves from consideration of certain transactions or may otherwise create real, potential or perceived conflicts of interest.

Our Board of Directors and our priority shareholder have the right to approve accumulations of stakes in our company or the sale of our principal Russian operating subsidiary, which may prevent or delay change-of-control transactions.

Our Board of Directors has the right to approve the accumulation by a party, group of related parties or parties acting in concert of the legal or beneficial ownership of shares representing 10% or more, in number or voting power, of our outstanding Class A and Class B shares (taken together). If our board grants its approval of such share accumulation, the matter is then submitted to Public Interest Foundation, as holder of our priority share, which has a further right of approval of such accumulation of shares. In addition, any decision by our Board of Directors to transfer all or substantially all of our assets to one or more third parties, including the sale of our principal Russian operating subsidiary, is subject to the prior approval of Public Interest Foundation, as priority shareholder.

Any holding, transfer or acquisition by a party, group of related parties or parties acting in concert of the legal or beneficial ownership of Class B shares representing 10% or more, in number or by voting power, of our outstanding Class A and Class B shares (taken together), without the prior approval of our Board of Directors, first, and then the priority shareholder, will be null and void. The acquisition of shares in excess of the thresholds permitted by our articles of association will be subject to certain notification requirements set forth in our articles of association. Failure to comply with those terms would render the transfer of such shares null and void. In addition, the holders of such shares would not be entitled to the dividend or voting rights attached to their excess shares. The rights of our Board of Directors and our priority shareholder to approve accumulations of stakes in our company may prevent or delay change-of-control transactions.

Anti-takeover provisions in our articles of association may prevent or delay change-of-control transactions.

In addition to the rights of our board and of the priority shareholder to approve the accumulation of stakes of 10% or more, as described above, our multiple class share structure may discourage others from initiating any potential merger, takeover or other change-of-control transaction that our public shareholders may view as beneficial. Our articles of association also contain additional provisions that may have the effect of making a takeover of our company more difficult or less attractive, including:

The Dutch public offer rules, which impose substantive and procedural requirements in connection with the attempted takeover of a Dutch public company, only apply in the case of Dutch target companies that have shares listed on a regulated market within the European Union. We have not listed our shares, and do not expect to list our shares, on a regulated market within the European Union, and therefore these rules do not apply to any public offer for our Class A shares.

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We rely on NASDAQ Stock Market rules that permit us to comply with applicable Dutch corporate governance practices, rather than the corresponding domestic U.S. corporate governance practices, and therefore your rights as a shareholder differ from the rights you would have as a shareholder of a domestic U.S. issuer.

As a foreign private issuer whose shares are listed on the NASDAQ Global Select Market, we are permitted in certain cases to follow Dutch corporate governance practices instead of the corresponding requirements of the NASDAQ Marketplace Rules. We follow Dutch corporate governance practices with regard to the quorum requirements applicable to meetings of shareholders and the provision of proxy statements for general meetings of shareholders. In accordance with Dutch law and generally accepted business practices, our articles of association do not provide quorum requirements generally applicable to general meetings of shareholders. Although we do provide shareholders with an agenda and other relevant documents for the general meeting of shareholders, Dutch law does not have a regulatory regime for the solicitation of proxies and the solicitation of proxies is not a generally accepted business practice in the Netherlands. Accordingly, our shareholders may not be afforded the same protection as provided under NASDAQ’s corporate governance rules. Due to the current geopolitical situation, trading in our Class A shares on Nasdaq has been suspended. Depending on how the situation develops, the company's obligations to comply with corporate governance requirements may change.

We do not comply with all the provisions of the Dutch Corporate Governance Code. This may affect your rights as a shareholder.

As a Dutch company we are subject to the Dutch Corporate Governance Code, or DCGC. The DCGC contains both principles and best practice provisions for management boards, supervisory boards, shareholders and general meetings of shareholders, financial reporting, auditors, disclosure, compliance and enforcement standards. The DCGC applies to all Dutch companies listed on a government-recognized stock exchange, whether in the Netherlands or elsewhere, including the NASDAQ Global Select Market. The principles and best practice provisions apply to the board (in relation to role and composition, conflicts of interest and independence requirements, board committees and remuneration), shareholders and the general meeting of shareholders (for example, regarding anti-takeover protection and obligations of the company to provide information to its shareholders) and financial reporting (such as external auditor and internal audit requirements). The DCGC requires that companies either “comply or explain” any noncompliance and, in light of our compliance with NASDAQ requirements and as permitted by the DCGC, we have elected not to comply with all of the provisions of the DCGC. This may affect your rights as a shareholder and you may not have the same level of protection as a shareholder in a Dutch company that fully complies with the DCGC.

Risks for U.S. Holders

We cannot assure you that we will not be classified as a passive foreign investment company for any taxable year, which may result in adverse U.S. federal income tax consequence to U.S. holders.

Based on certain management estimates with respect to our gross income and the average value of our gross assets and on the nature of our business, we believe that we were not a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes for the 2021 tax year, and do not expect to be a PFIC in the foreseeable future. However, because our PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets in such year, and because this is a factual determination made annually after the end of each taxable year and there are uncertainties in the application of the rules, there can be no assurance that we will not be considered a PFIC for the current taxable year or any future taxable year. In particular, the value of our assets may be determined in large part by reference to the market price of our Class A shares, which has fluctuated, and may continue to fluctuate, significantly. If we were to be treated as a PFIC for any taxable year during which a U.S. holder held our Class A shares, certain adverse U.S. federal income tax consequences could apply to the U.S. holder. See “Taxation—Taxation in the United States—Passive foreign investment company considerations.”

Any U.S. or other foreign judgments you may obtain against us may be difficult to enforce against us in Russia or the Netherlands.

We have only very limited operations in the United States, most of our assets are located in Russia, our company is incorporated in the Netherlands, and most of our directors and senior management are located outside the United States. As a result, it may be difficult to serve process on us or persons within the United States. Although arbitration awards are generally enforceable in Russia and the Netherlands, and Russian courts may elect to enforce

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foreign court judgments as a matter of international reciprocity and judicial comity, you should note that judgments obtained in the United States or in other foreign courts, including those with respect to U.S. federal securities law claims, may not be enforceable in Russia or the Netherlands. There is no mutual recognition treaty between the United States and the Russian Federation or the Netherlands, and no Russian federal law or Dutch law provides for the recognition and enforcement of foreign court judgments. Therefore, it may be difficult to enforce any U.S. or other foreign court judgment obtained against our company, any of our operating subsidiaries or any of our directors in Russia or the Netherlands.

The rights and responsibilities of our shareholders are governed by Dutch law and differ in some important respects from the rights and responsibilities of shareholders under U.S. law.

Our corporate affairs are governed by our articles of association and by the laws governing companies incorporated in the Netherlands. The responsibilities of members of our Board of Directors under Dutch law are different than under the laws of some U.S. jurisdictions. In the performance of its duties, our Board of Directors is required by Dutch law to consider the interests of Yandex, its shareholders, its employees and other stakeholders and not only those of our shareholders. Also, as a Dutch company, we are not required to solicit proxies or prepare proxy statements for general meetings of shareholders.

In addition, the rights of our shareholders are governed by Dutch law and our articles of association and differ from the rights of shareholders under U.S. law. For example, Dutch law does not grant appraisal rights to a company’s shareholders who wish to challenge the consideration to be paid upon a merger or consolidation of the company.

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expanded into e-commerce, entertainment and cloud computing markets to address the needs of customers in Russia and number of international markets. We hold the number one market position in Russia in each of digital advertising, ride-hailing, on-demand video, auto classifieds, maps and navigation, and smart speakers. We also operate a market-leading subscription loyalty program, Yandex Plus, linking many of the services in our ecosystem. As of the end of December 2021 Yandex had over 30 offices in 9 countries, and operations in nearly 30 countries.

Although we continue to derive a substantial part of our revenues from online advertising, this comprised only 47% of our revenues in 2021, compared with 58% in 2020. We enable advertisers to deliver targeted, cost effective ads, including performance-based, brand and video advertising formats across different platforms, that are relevant to our users’ needs, interests and locations. We serve ads on our own search results and other Yandex webpages, as well as on thousands of third party websites that make up our Yandex Advertising Network.

Our non-advertising revenue streams grew rapidly through 2021. The contribution of non-advertising businesses increased significantly in 2021. For the year 2021, the non-advertising segments accounted for 53% of our total group revenue compared with 42% in 2020 and 31% in 2019.

Our principal businesses are organized in the following segments:

For a detailed description of our operating segments for financial reporting purposes, see Item 5, “Operating and Financial Review and Prospects”.

Search and Portal

We offer a broad range of world-class, locally relevant search and information services that are free to our users and that enable them to find relevant information quickly and easily.

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Yandex Search

Our search engine offers almost instantaneous access to the vast range of information available online, subject only to local legal restrictions with respect to the blocking of specified websites entirely in Russia. We utilize linguistics, mathematics, machine learning and AI to develop proprietary algorithms that efficiently extract, compile, systematize and present relevant information to our users. Our organic search results are ranked by computer algorithms based exclusively on relevance, and we clearly segregate organic results from paid results to avoid confusing our users. We do not exercise editorial control over the content of our search results.

According to Yandex Radar, our total search share reached 59.8% of all search traffic in Russia in 2021, up from 57.0% in 2019 and 59.2% in 2020, which was driven by share growth on both desktop and mobile devices. In 2021, our search share on desktop and mobile reached 69.9% and 55.5%, respectively. We continued to gain share in mobile search, reaching 59.2% on Android and improving our share to 42.8% on iOS in 2021 (from 57.6% and 41.8% in 2020, respectively). In February 2022, our search share averaged 71.6% on desktop and 55.7% on mobile, with mobile search share of 59.4% on Android and 45.6% on iOS. Also, we further improved mobile monetization in 2021. The percentage of our total search traffic generated from mobile devices averaged approximately 64% in Q4 2021 compared with 60% in Q4 2020, while the percentage of our search revenues generated from mobile devices increased to approximately 57% in Q4 2021 from approximately 53% in Q4 2020.

In 2021, Yandex introduced Y1, a new version of search with more than 2,000 improvements, based on deep neural YaLM (Yet another Language Model) networks trained on massive volumes of data. YaLM now uses up to 13 billion parameters to understand natural language. This brought users new features and upgrades, including video timestamp responses to search queries, more detailed quick answers to a greater number of queries and improved object recognition in real time.

Yandex Search App

Enhanced with Alice, the first conversational voice assistant on the Russian market, Yandex Search App integrates Yandex’s must-have services into one app, including Search, Maps, News, Zen, Weather and many others. The Yandex Search App audience reached 66 million users on Android on a monthly basis in February 2022.

In 2021, Yandex added a smart camera feature in the Yandex App and Yandex Browser, which gives mobile users instant information about objects in real life (for example, price and availability for commercial items), instant translation, as well as scanning and editing.

Yandex Browser

Our Yandex Browser is the second most popular browser on desktops and the most popular non-native browser on mobile platforms in Russia. Yandex Browser is committed to delivering high-quality user experiences and to ensuring security for users online. Yandex Browser’s “Protect” technology offers comprehensive protection against the majority of online threats. For example, Yandex Browser checks all downloaded files for viruses, warns users about dangerous websites, encrypts users’ passwords with strong cryptography, and ensures safe payments. The Russian version has native ad blocking to enhance users’ browsing experience by filtering intrusive advertising. In 2021, we rolled out ‘Your Tracking Protection’ (YTP), a feature that lets each individual user control whether to block or unblock third-party cookies through a simple, intuitive dashboard built into the Yandex Browser. This is a further step we have implemented to make the browser experience safer for users and more secure.

Also, in 2021 Yandex introduced AI-generated voice-over translation into Russian. The feature is a combination of four different Yandex technologies: voice recognition, speech synthesis, machine translation and biometrics. It creates subtitles for videos or adopts subtitles that are already in place and automatically translates them, and then integrates the subtitles audibly into the video with an artificially synthesized voice that matches the original voice’s gender, tempo and other parameters. In addition, Yandex integrated image translation functionality natively in the browser on desktop and Android to give users the option to translate content into another language.

The combined share of our desktop and mobile visits processed through Yandex Browser in Russia reached 26.9% in February 2022, according to Yandex Radar.

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Geolocation Services

Our Geolocation Services integrate Yandex’s advanced technologies (including mapping, cartography, and navigation) to provide a broad range of services across Russia, other CIS countries and Turkey. We focus on the development of logistics and routing solutions for individual users and businesses, as well as advertising products for SMEs. Our Geolocation Services include Yandex Maps, Yandex Navigator, our contactless payment service at gas stations, Yandex Fuel, and RouteQ (formerly known as Yandex Routing), our cloud platform using traffic forecasts to optimize last mile delivery. We monetize our Geolocation Services through online advertising, licensing, and transaction services.

Yandex Maps provides high-quality, detailed maps of Russia, its neighboring countries, Turkey, and other countries where we operate our ride-hailing service. The monthly audience of the service reached 25 million monthly average users in the mobile app, 28 million on the website and 52 million in mobile browsers in 2021 across Russia. We offer our users panoramic views, navigation for all forms of transport including recently added scooters, public transportation routes, driving directions with voice controls and turn-by-turn navigation. We continue to develop Yandex Maps to integrate new features, such as in-app transactions for purchasing food and fuel, ratings and reviews of businesses. In 2021, we launched support for CarPlay and Android Auto. Drivers can build routes and search for places directly using the screens built into users’ cars. Our AI assistant Alice was also added to Yandex Maps in 2021.

We use our technology and licenses to create and edit maps from raw data, including satellite images, GPS coordinates and live user feedback. Yandex Maps is also available via application programming interfaces, or APIs, which allow developers to embed and use our interactive maps in third-party websites and applications, as well as to add extra layers of information; for example, to offer a map showing the location of a restaurant or a hotel. As of the end of 2021, there were 30 million people using Yandex Maps’ API daily on 600,000 websites.

We also offer Yandex Navigator, which integrates our AI assistant Alice. Yandex Navigator provides turn-by-turn navigation, incorporates a voice input function, speed limit warnings, parking information and information about accidents or road works. It is one of Yandex’s most popular mobile apps in terms of usage, with 30 million monthly average users including CIS and Turkey at the end of December 2021.

Our map-based apps allow offline businesses to place ads in native formats (adopted for different scenarios on the map), offering advanced targeting capabilities. We monetize Yandex Maps through contextual and location-based advertising, while Yandex Navigator is monetized through display advertising. Such advertising can help smaller businesses stand out among competitors, and large brands to stimulate sales in stores that might be experiencing lower sales. Also, we are developing a transactional model in Yandex Maps with services such as taxi orders and fuel payments available through the appropriate apps.

Yandex Fuel is a contactless payment service at gas stations built into Yandex Navigator, Yandex Maps, Yandex Pro, an app for Yandex Taxi drivers, Yandex Drive and a standalone Yandex Fuel app, and is also available to corporate clients. We monetize Yandex Fuel through a commission model.

As of December 2021, more than 8,000 fueling stations are connected to the service throughout Russia, including Rosneft, EKA, Neftmagistral, gas station Tatneft, Shell and others. In 2021, users of Yandex Fuel purchased more than 1.2 billion liters of fuel with a gross merchandise value of 54.1 billion rubles. In 2021, Yandex Fuel launched a new feature to tip staff at gas stations through Maps, Navigator or Fuel apps.

In December 2021, Yandex Fuel added the first electric chargers to the service. The stations were produced by a Yandex partner, the Russian company Rewatt. The service is designed such that drivers can leave the cars to charge while they go shopping.

RouteQ (formerly known as Yandex Routing) is a cloud platform for optimizing last mile logistics in retail, fast moving consumer goods, and courier services. It automatically forms optimized delivery routes and improves courier monitoring and communication. The platform powers up to one million deliveries (orders) daily in peak seasons and operates in the markets of the Middle East, Turkey, and Russia. RouteQ became an independent business unit in 2021.

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Yandex Business is a service for small and medium-sized businesses that bundles together ad tools, making ad placement more efficient and simpler. We already have a simple subscription service tailored to offline and online businesses so they can efficiently advertise within the Yandex ecosystem (Search, Zen, Maps, Yandex Ad Network) for a fixed monthly fee. The number of monthly average users of the subscription reached 55,000 in December 2021.

Voice assistant Alice

Alice was the first conversational intelligent assistant for the Russian market. Alice assists users with a broad range of inquiries, such as factoid questions, weather forecasts, directions and currency exchange rates, as well as helping users to manage daily tasks, such as setting an alarm, scheduling reminders for important events or hailing a taxi. Alice is not limited to predefined scenarios and includes a general “chit-chat” mode – a feature among intelligent assistants that has been embraced by millions of users. It also benefits from the near-human level of speech recognition accuracy (based on the Word Error Rate measurement) provided by the Yandex SpeechKit platform. We offer a developers’ skills platform, Yandex Dialogues, designed to make it easy for any third-party developer to create new skills for Alice. As of December 2021, there were about 3.4 monthly users of external voice applications with Alice.

Our smart home ecosystem powered by Alice currently can connect with air-conditioners, robot vacuum cleaners, light switches, power sockets, remote controllers and more. While initially only accessible through our search app, Alice is now accessible through Yandex Browser, Yandex Navigator, Yandex Station, Yandex Station Max, Yandex Station Mini, Yandex Auto and Yandex TV, as well as on third-party platforms and smart speakers.

Other Products and Services

Search and Portal segment includes number of other products and services, the key ones of which are the following:

Our Monetization and Advertiser Services

We offer a variety of ad formats to our advertisers, including performance-based, brand and video advertising formats.

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Performance-based ads are principally targeted to a particular user query on our search engine result pages, and on the search result pages of our partners, as well as to the content of a particular website or webpage being viewed, or to user behavior or characteristics. Such ads are clearly marked as paid advertising and are separate from our organic search results and non-advertising content.

Most of our revenues are generated from performance-based advertising, on a pay-per-action basis and a pay-per-click basis (in which the share of a cost-per-action (CPA) optimization is growing, where an action can be a purchase, a click, a call etc.). A growing portion of revenues is generated from brand advertising and video advertising, based on the number of impressions delivered. We actively monitor the ads we serve, both automatically and manually, to help ensure the relevance of the ads as well as compliance with applicable laws.

Yandex Direct

Yandex Direct is our auction-based advertising placement platform, which uses auction theory and relies on our distributed infrastructure to process millions of auctions every day. Yandex Direct lets advertisers cost-effectively deliver relevant ads targeted at particular search queries or content on Yandex websites or third-party websites in the Yandex Advertising Network. Advertisers may use our automated tools, often with little or no assistance from us, to create performance-based ads, bid on keywords that are likely to trigger the display of their ads, and set total spending budgets. Yandex Direct features an automated, online sign-up process that enables advertisers to create and quickly launch their advertising campaigns. Advertisers may also work with our sales staff to design and implement more specialized or sophisticated campaigns. We also offer a Yandex Direct mobile app to better facilitate advertisers’ access to our service to manage their advertising campaigns.

Performance-based ads on our desktop search engine results page (SERP) appear in one of two general categories: top of the page, appearing above the organic search results; and bottom of the page, which appears either below the organic search results or the right-hand block located to the right of the organic search results. Advertisers bid for the amount of traffic they want to purchase, instead of traditional bidding for a specific ad placement block. Yandex Direct continues using a Vickrey-Clarke-Groves (VCG) auction to serve ads on our SERP.

During 2021, our priorities included further development of automated strategies, improvement of advertising products for SME clients and development of advertising products for e-commerce players. We believe these initiatives helped us to maintain advertising revenue growth above the dynamic of the digital advertising market in Russia in 2021.

We launched our Fixed Cost Per Action (CPA) model in Yandex Direct in the second quarter of 2020, which allows any business, regardless of size or industry, to pay a specific price for targeted user actions, like placing an order on the website or filling out a request, and in which ad bidding is optimized for this specific targeted action. This model is aimed at better customization (providing more options for settings), simplification of the usage of advertising strategies and higher ad efficiency for our clients. This includes application of the neural network on graphic processor units (significantly improving the quality of targeting and conversion prediction) to improve the behavioral forecasting of clicks and the real time selection of ads. This has led to a 20-25% increase in efficiency of our conversion strategies and we are continuing to hone the neural network for these purposes. Other recent innovations include payment for conversions for multiple goals (e.g., a purchase and a phone call), the addition of a dynamic value for goals, and post-click activity analysis using machine learning technologies. These enhancements further improve the transparency and efficiency of CPA strategies, while positioning Yandex to expand its advertising client base and increase its share of wallet in the market. Share of conversion-oriented strategies grew throughout the year and reached 36% of total Search and Portal ad revenue and 51% of Yandex Advertising Network revenue in Q4 2021.

The SMB segment remained an important focus area and growth driver for Yandex’s ad business in 2021. We continued to develop special easy-to-use advertising products for small and medium-sized businesses, including our Yandex Business Subscription. This product allows clients to maximize efficiency from advertisements for a fixed amount of money with minimal engagement from their side, providing access not only to Yandex Direct, but also to partner properties to generate more effective leads. In 2021 we launched Campaign Wizard, a product for small and medium businesses and beginner advertisers.

As part of our strategy of advancing tools for SMBs we have announced an acquisition (pending FAS approval) of eLama’s technology platform and professional team to integrate it into Yandex and strengthen our position and expertise in collaborating with small businesses. eLama is the largest aggregating platform for small ad agencies and

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freelance ad campaign experts, which allows them to service SMB advertisers on the leading online ad platforms such as Yandex and VK.

In 2021, Yandex started to actively develop advertising formats for ecommerce players that enable advertisers to improve the presentation of their products on both search and network sites. In Q4 2021, we launched a product gallery (product cards with offers from several stores containing a picture of the product along with its name, price and other key information) that appears below the search bar. This advertising format enjoys better user perception and helps them to make shopping decisions faster, which proves to be more efficient for advertisers.

Yandex Advertising Network

Our Yandex Advertising Network partners include search websites and apps, for which we provide search capabilities, as well as contextual network partners, where we serve ads on websites and apps, based on user behavior or characteristics or website content.

We help third-party website owners monetize their content while extending the reach of our advertisers. Through the Yandex Advertising Network, our partners can deliver performance‑based, brand and video ads on their search results pages or websites. Our advertising algorithms use our proprietary CatBoost and neural network technologies, which optimize the click-through rate on our network through improved click prediction. We screen applicants for the Yandex Advertising Network and favor resources with high-quality content and stable audiences to offer advertisers high-quality traffic.

Yandex’s video advertising network allows users to place full-screen videos, video ads on pages of websites and ads within the video content available on a wide range of advertising resources, including desktop and mobile websites, mobile apps and Smart TV applications. Yandex’s technologies enable users to provide advertising to the targeted audience and offer analysis of its efficiency through different tools and instruments, such as Brand Lift or video roll analysis.

Programmatic advertising

We have developed a range of programmatic advertising products, which utilize real-time bidding, or RTB, technologies to provide effective solutions to our publisher and advertiser partners. Our RTB ad exchange connects our performance-based demand-side platform (DSP) Yandex Direct and third-party DSPs with multiple SSPs. Our RTB ad exchange leverages the wealth of targeting data generated by our own Data Management Platform, including Crypta, and search and browsing history. In addition, through ADFOX, an online ad management platform for media publishers, we provide a supply-side platform to our publisher partners. ADFOX is able to mediate in real-time between ads from Yandex Direct, ads from integrated third-party DSPs and the publisher’s own direct sales.

Mobile Advertising

We offer our advertisers the ability to display ads on mobile versions of Yandex services, including Search and our Advertising Network partner websites, as well as in mobile applications, including our Yandex Search App. Advertisers are able to set up their mobile bids as a coefficient of their desktop bids.

Turbo pages

Launched in mid-2017, Turbo pages is a format used to display content on mobile devices that loads several times faster than regular web pages and is optimized for smaller screens. Our Turbo pages are easier to implement compared to other similar products and offer monetization from Yandex out of the box. In 2021, our Turbo pages were being used by tens of thousands of internet websites.

Analytics tools

Yandex Metrica, our web analytics system, offers a comprehensive set of tools for ad analytics, helping businesses easily find traffic sources with the highest ROI. Yandex Metrica provides the Logs API to export all raw data in order to accomplish complex tasks. Yandex Metrica is available without any data caps, regardless of the traffic volume.

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App developers can also use AppMetrica, a mobile app analytics solution that helps mobile developers improve the in-app experience by identifying and fixing errors, optimizing advertising settings and building marketing strategies based on in-app user performance.

Yandex Radar is our analytics tool, which provides statistics on search market shares and browser usage, as well as traffic breakdown by operating system and device type.

MLU (Taxi)

Taxi group offers multi-mode services that seamlessly and efficiently satisfy the needs of users and businesses for ride-hailing, car-sharing and delivery (including both food and grocery deliveries, as well as last-mile delivery services). Our platform enables access to a wide range of personal mobility and delivery services through our Yandex Go super app, which we launched in August 2020. In December 2021 total MAU of the Yandex Go super app exceeded 35 million. In addition to the Yandex Go super app, users can also access Taxi group services through standalone apps and the Yandex Drive car-sharing app, as well as Yandex Eats and Yandex Lavka.

This group is operated through our joint venture with Uber, MLU B.V. (“MLU (Taxi)”). On December 21, 2021, we completed the restructuring of the ownership of MLU, following which Yandex owns 100% of each of the Yandex Eats, Yandex Lavka and Yandex Delivery businesses and approximately 71% of MLU (Taxi).

Ride-Hailing

We launched our ride-hailing service in Russia in 2011. In December 2021, our ride-hailing services were available in Russia and other 19 countries. Geographies outside of Russia generated 25% of our monthly rides in December 2021. The scale of our network coupled with our proprietary technology and marketplace efficiency enable us to accurately forecast demand and incentivize drivers to be available to accept rides, providing highly reliable ride-hailing services for individual users and businesses.

We have established one of the largest ride-hailing networks in Russia and in many CIS countries, enabling riders to complete over 2.4 billion rides across all our geographies in 2021. Our total number of rides grew 50% year-over-year in 2021 and by 33% on 2-year stack basis, as economies recovered from the pandemic-related slow-down. In December 2021, we had 1.2 million active drivers on the platform.

In addition to our primary B2C ride-hailing services, our B2B platform offers comprehensive solutions for corporate ride-hailing services, including business trips, airport transfers and staff logistics, as well as transportation budget management system. We operate our B2B platform in Russia, Kazakhstan, Armenia, Belarus and Israel.

Our app utilizes smartphone GPS to detect a rider’s location and efficiently connect a rider with an available driver. Our app also provides robust features and functionality for riders and drivers throughout a trip, including upfront pricing and efficient determination of pickup points, both of which allows for reduced estimated arrival and waiting times and an optimized fare per ride. Our proprietary map infrastructure allows our apps to more precisely locate cars, as well as offer a more accurate match with nearby drivers. At locations with more complicated logistics such as airports or stadiums, pickup points are predetermined in our app and are integrated with offline signage. Our app accepts a variety of payment methods, including credit cards, cash paid directly to the driver in certain markets and e-wallet payment solutions.

We currently build relationships with our drivers for our ride-hailing services both directly and through a wide partner network (Fleet Management Companies or FMCs). In Russia we also support the new simplified self-employment regime that has been introduced by the tax authorities in Russia, which allows us to engage more drivers directly.

We offer our FMC partners access to efficient fleet management software to manage their driver base and fleet, optimizing their administrative and technical workflows. In 2021, we also started to provide additional social benefits for drivers on the platform, including a dedicated health insurance program (wholly or partially compensated, depending on the partner’s (FMC’s) status) and sick leave compensation.

Safety is of the utmost importance, and we take a comprehensive approach to monitoring and improving the safety of all our platform users, before, during and after their rides. We offer insurance that covers passengers, drivers and third-party participants in the event of personal injuries sustained during a ride. We have also implemented service access controls, such as driver scoring and detailed driver identification methods. We also tailor certain safety features to

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particular users, such as providing child safety seats and additional training for drivers within our kids tariff. For drivers, we offer training and vehicle check-ups, both remotely and in person, and we continue piloting various technological tools to improve trip safety, such as telemetry monitoring to ensure that drivers remain alert. Our support service provides emergency support and a safety center within the app for both riders and drivers.

During the COVID-19 pandemic, we created a separate fleet of vehicles drawn from many thousands of cars available through the Yandex Taxi service and organized more than 160 locations for taxi cars to be disinfected throughout Russia, where drivers could also obtain personal protective equipment. We also established a Support Fund for our drivers and couriers who were infected with COVID-19, in order to support them and their families during the period they were not able to perform ride-hailing services. After the start of obligatory vaccination program in Russia, we launched a number of vaccination points for our partners and compensated days of leave in case of negative side-effects following vaccination.

FoodTech

Our FoodTech business consists of Yandex Eats, our ready-to-eat and grocery delivery services, and Yandex Lavka, a hyperlocal convenience store delivery service. Our FoodTech business relies on a wide partner network of couriers, who make deliveries using cars, bikes, scooters and on foot.

In December 2021, our Yandex Eats services were available in 186 cities in Russia, Kazakhstan and Belarus, with the majority of operations in Russia. Yandex Eats is one of the leading online food and grocery ordering and delivery marketplaces in Russia working with approximately 35,000 restaurants and 3,200 retail stores as of the end of December 2021. In December 2021, the share of grocery orders reached 21% of total Eats orders and the share of GMV totaled to 28%. Approximately 89% of our orders in 2021 were through a first-party delivery model.

Yandex Lavka offers on-demand delivery of groceries, ready-to-eat and other FMCG products within 10 to 30 minutes. The assortment includes over 2,500 SKUs with a focus on fresh and ready-to-eat categories. As of the end of December 2021, Yandex Lavka operated 404 “dark” stores (small warehouses) across Russia and Israel.

Delivery

Yandex Delivery is our last-mile express delivery solution for individual consumers and businesses, which we launched during the pandemic as a means to serve the increased demand for delivery services. The service leverages Yandex’s routing and marketplace efficiency platform to provide on-demand B2C and B2B delivery services.

Our last-mile logistics services are available to users in the Yandex Go super app, while for businesses we developed proprietary software, tailored for specific needs of SMBs and large enterprises. In 2021, the service grew rapidly and its annualized run-rate was 130 million deliveries in December 2021. The number of businesses actively using our Delivery services in December exceeded 30,000. We provide last-mile delivery services for internal Yandex businesses, such as Yandex Market, Yandex Eats and Yandex Lavka, as well as for third party companies, including retailers and pharmacies. The number of SMBs on the platform reached 500,000 as of December 2021.

Yandex Drive

Launched in 2018, our free-floating car-sharing service, Yandex Drive provides users with vehicles that can be reserved for varying periods of time through a standalone mobile app, as well as through Yandex Go. Users can then drop off the designated cars in any permitted parking place across the cities we serve, as well as at airports and shopping malls. Offering on-demand access to cars in Moscow, St. Petersburg, Kazan and Sochi, Yandex Drive operates one of the leading car-sharing platforms in Russia, managing more than 17,000 cars as of December 31, 2021.

Yandex Drive has been working with corporate clients since 2019. In 2020, Yandex Drive launched a car subscription service, which allows a user to rent a car by subscription for a period of one month to one-and-a-half years through the app, including maintenance and insurance.

Yandex Drive pricing is inclusive of fuel, parking, insurance and other costs associated with car ownership. Yandex provides dynamic pricing, which integrates traffic conditions, customer demand and other factors at the time of reservation. In addition, Yandex Drive became the first car-sharing service worldwide to launch fixed-price tariffs based on the final destination point, which allows us to improve the utilization rates of our fleet.

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Yandex Drive’s car fleet is equipped with our proprietary telematics system, which allows us to manage our fleet remotely. In 2021 Yandex Drive upgraded its driver’s behavior analysis technology. It differentiates between drivers, improves safety by reducing aggressive driving, and works to incentivize gentle driving behavior. As of 2021, 90% of Yandex Drive users had “gentle driver” status.

Yandex Auto is our voice-activated in-car infotainment system, which offers Yandex’s best-in-class mapping and navigation, music streaming, weather information and other services. We work with car manufacturers to equip cars with Yandex Auto, which is found in some models of Nissan, Renault, LADA and others on the Russian market. In this segment, we primarily generate revenues from the sale of Yandex Auto software licenses.

Yandex Market

Yandex Market is one of the most popular internet services in Russia, working as a multi-category marketplace. We offer millions of goods for millions of buyers, working in partnership with tens of thousands of merchants. The marketplace operates under both 1P and 3P (third-party) models, the latter being priced on cost per action (CPA) model and where we recognize only 3P commission revenue, while in the 1P model we recognize gross revenue, which is the value of all 1P goods sold.

Yandex Market was launched in 2000 as a price comparison service, while the transformation into an e-commerce platform began in 2018. Yandex Market allows us to benefit from significant synergies from the integration of Yandex Market with other services within our platform, including Yandex Plus subscription, Yandex Lavka and Yandex Delivery.

Our marketplace business model enables us to provide the full suite of e-commerce services to almost 24,000 partners, including access to consumers, fulfillment, logistics, advertising and marketing, payments, support and analytics. To meet different sellers’ needs we introduced different partnership models such as: FBY (fulfilment by Yandex), FBS (fulfillment by seller), DBS (delivery by seller) and fast delivery model Market Express.

During 2021, we materially expanded our third-party business (3P) from 66% of the marketplace’s gross merchandise value (GMV) in the fourth quarter of 2020 to 82% in the fourth quarter of 2021. More than half of our third-party GMV is fulfilled by Yandex Market.

Our combined e-commerce GMV, which includes Yandex Market marketplace GMV, the GMV of Yandex Lavka and GMV of deliveries from grocery stores on Yandex Eats grew almost threefold in 2021 and reached 160 billion rubles.

The assortment on Yandex Market marketplace expanded more than elevenfold during 2021 and reached 22.6 million SKUs by the end of the year (compared to 2 million SKUs at the end of 2020). The number of active buyers increased more than twofold and reached almost 10 million by the end of the year (an active buyer is a buyer who made at least 1 purchase in the last 12 months prior to the reporting date). The number of active sellers on the marketplace increased more than threefold in 2021 and reached around 24,000 (an active seller is a seller who made at least 1 sale in the last 1 month prior to the reporting date).

At the end of 2021, Yandex Market operated ten warehouses located in Moscow, Rostov-on-Don, St. Petersburg, Novosibirsk, Samara and Ekaterinburg with total area of 320,000 square meters. In addition, our logistics infrastructure included 10 sorting centers, around 7,000 pick-up points (including almost 2,000 of which were Yandex branded) and 2,900 branded lockers. The share of orders managed by our own delivery platform exceeded 95% (effectively leaving only remote regions to external services) from 33% at the end of Q4 2020. We continued to work on improving the quality of delivery, an important metric for customer satisfaction. The share of orders delivered on-time through our own platform exceeded 95%, with approximately 98% of orders shipped from our warehouses being on time.

As a part of our integration efforts, we launched an on-demand delivery option, capitalizing on the synergies between Yandex Market and the courier capabilities of Yandex Lavka. This service offers 15-30 minute “delivery to the door” and is now available to all users in 13 cities, including Moscow, St. Petersburg and Nizhny Novgorod. We have also expanded our loyalty program Yandex Plus to our marketplace, so users are now able to receive cashback as well as to pay for their purchases with Yandex Plus points. In February 2021, in addition to cashbacks, we added free delivery

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for orders over a certain amount for Yandex Plus subscribers. Overall, in 2021 every second purchase on Market was made by a Yandex Plus subscriber. GMV per Plus customer increased by 64% in 2021 compared to 2020 driven by year-on-year increase in frequency and higher average check compared to a non-Plus customer, resulting in Plus generating more than 50% of Yandex Market GMV. Also, Plus subscribers are 2.4 times more likely to return for additional purchases at Yandex Market than customers without a Plus subscription.

In March 2021, we launched Market Express, a fast (within two hours) delivery option straight from merchant warehouses powered by using Yandex Delivery (Logistics) and complemented by the involvement of Yandex Go drivers. This service is currently available in 57 Russian cities and offers the widest selection among competitors of over 1.4 million SKUs.

In November 2021, we launched a fashion category, improved the user interface by redesigning product cards and increasing product presentation requirements for easier size and color selection, allocated separate spaces in our fulfillment center to ensure proper storage of fashion inventory, and implemented quick refunds and partial purchase of fashion orders.

Also, we have launched a special app for Market merchants which is an important step towards developing a fully-fledged mobile platform for our partners. We have expanded the offer of fintech instruments (including our BNPL (buy now pay later) service Split as well as number of other financial products in partnership with third-party banks) and continue to leverage our advertising expertise across segments by enhancing advertising tools available for our merchants. Advertising revenue from our marketplace platform (excluding CPC ad revenue) reached 2.9% of GMV for Q4 2021 and amounted to RUB 2.8 billion for the full year 2021.

Media Services

Media Services include our subscription service Yandex Plus, our entertainment services (Yandex Music, Kinopoisk and Yandex Afisha), as well as our production center Yandex Studio. Based on Yandex’s recommendation technologies and professional content, Media Services offer its users various entertainment options. We monetize Media Services through subscription revenue, online advertising and transaction revenues, as well as event tickets sales. Our Media Services are available across different platforms, including Yandex Station and Yandex TV.

Yandex Plus

Yandex Plus is our subscription service to Yandex Music and Kinopoisk, and includes cashback loyalty points in the Yandex Go app, Yandex Market, Yandex Eats, Yandex Lavka, Yandex Drive, Yandex Afisha and various special offers from other Yandex services (the availability of content, special offers and cashback programs varies by country). Subscribers earn cashback loyalty points when they pay for our services and can use these rewards across the Yandex ecosystem. Yandex Plus is available in Russia, Kazakhstan, Belarus, Uzbekistan, Israel and several other countries. In 2021, we enhanced cash back loyalty points to other Yandex services, including Yandex Travel, Yandex Uslugi, Yandex Tips and others. We also developed partnerships with various companies such as telecom operators, retail, gaming, and other businesses.

The subscriber base grew from 6.7 million in December 2020 to 12 million in December 2021 and reached over 12.4 million in February 2022. The share of paying subscribers exceeded 80% as of the end of 2021.

We currently offer two types of Yandex Plus subscription: Plus (for individuals) and Plus Multi (for up to 4 members in one household). There are also other options available with additional content from partners: Plus with more.tv and Plus Multi with Amediateka, an exclusive distributor of HBO content in Russia.

We have seen improved conversion from trials to paid subscribers, better cross-service usage and higher average spend. On average Plus subscribers demonstrated around 45% higher frequency across key transactional services (for the full year 2021, Plus subscribers placed 2.4 times more orders on Yandex Market than non-Plus subscribers), which together with a higher average value purchase resulted in a 50%-85% higher GMV than that generated by non-Plus customers. The network effects generated by our diversified set of offerings and the user loyalty engendered through our subscription service enable us to increase our user base and user interactions and retention, which in turn generates revenues from an increasing number of online and offline services.

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Yandex Music

Yandex Music is a streaming platform that provides access to a catalog of 80 million music tracks and 260,000 podcast episodes. The service matches music for every taste using its recommendation system, creating unique personalized playlists and endless music streams for each user. Yandex Music is the largest subscription-based music streaming service in Russia. In 2021, Yandex Music launched new unique feature “My Vibe” – endless, highly adaptive stream of recommended music designed to push the discovery of new music with highest possible likability chance of new tracks.

Yandex Music also provides various audio content apart from music; audiobook streaming began in 2021. Also, Yandex Music has a dedicated section for children; it has its own special tab and includes the favorite kids’ titles, some of which have been distributed exclusively through Yandex.

In the meantime, the average time that a Yandex Plus subscriber spends in Yandex Music monthly reached 27 hours in the beginning of 2022 compared to around 25 hours in January 2021.

Kinopoisk

Kinopoisk is the leading subscription-based video streaming service in Russia and the largest Russian-language database of movies, TV-shows, celebrity content and entertainment news, providing users with movie ratings, critic and user reviews, personalized recommendations, local movie showtimes, ticketing, and many other services. Kinopoisk allows users to watch content on a subscription basis (through the Yandex Plus subscription) or purchase selected titles. The Kinopoisk library contains over 70,000 movies and TV shows, including exclusive content, both licensed and original content. The streaming service is available via Kinopoisk apps on smart TVs, smartphones, tablets, digital media players, video game consoles and via internet browser on computers. According to data.ai, Kinopoisk was the most downloaded mobile app among all streaming services in Russia in 2021.

In Q2 2021, Kinopoisk became the leader in the video on-demand market in Russia by both total as well as paying subscribers according to a GfK study. During the second half of the year, it further strengthened its number one position in the video-on-demand market and increased the gap with its competitors.

In January 2022, the number of monthly Yandex Plus subscribers who watch content on Kinopoisk doubled compared to January 2021 and reached 6 million, with 180 million hours viewed per month.

Yandex Afisha

Yandex Afisha (“playbill”), the leading event sales platform in Russia, allows users to buy tickets to cinemas, theaters, concerts, exhibitions, and sports events online. It incorporates personalized recommendations and operated in over 190 cities across Russia, as well as several cities in Kazakhstan as of year end 2021. In 2021, Yandex Afisha hosted several pre-sales of the top Russian and foreign artists shows exclusively for Yandex Plus subscribers. Yandex Afisha also manages the ticketing system Yandex Tickets, which is was used by more than 1,000 event organizers as of December 2021.

Yandex Studio

Yandex Studio is our own production center, which creates video and music content, co-invests in different projects with other production studios and provides marketing support to movie releases. We have participated in the co-production of several Russian movies and released eleven Kinopoisk original series throughout 2021 and early 2022, four of which have since been shown on the leading Russian TV channels. We believe our own content production is strategically important in a world where video consumption is rapidly shifting online and the importance of original content as a key differentiating factor is increasing.

Classifieds

Yandex’s Classifieds business unit includes Auto.ru, Yandex Realty and Yandex Rent.

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Auto.ru

Auto.ru is our classifieds platform for the sale of used and new cars, motorcycles, commercial vehicles and spare parts. We strive to make the used cars market as transparent as possible by providing comprehensive information about the cars advertised on our platform. Auto.ru puts significant effort into providing users with special tools such as vehicle history reports, which include information from dozens of sources (carmakers, service stations, distributors, official databases and so on). Our users can also apply for a car loan directly through the Auto.ru website. We partner with reputable financial organizations and do not issue the loans ourselves. In 2021, we continued to improve the platform and introduced features such as ‘secure transaction’ to buy or sale used cars completely online, as well as ‘finance’ to find best credit option.

Auto.ru holds a leading position in Moscow and St. Petersburg, and grew in the regions in 2021. Successful integration of CM.Expert, an online platform for managing used car sales, and eCredit, a platform for car dealers, also strengthened our businesses in 2021.

We monetize Auto.ru through vehicle history reports, loan commissions, value added services (VAS), listing fees and valid calls from clients for dealers, spare part sellers and certain individuals as well as through advertising.

Yandex Realty

Yandex Realty is our real estate classifieds platform for private individuals, developers and realtors. The service provides listings for both sales and rentals of apartments, houses, and commercial property. We also offer the opportunity to place listings for apartments in newly-built or under-construction apartment complexes across Russia. Yandex Realty helps users not only to find the right listing but also discover all relevant information about the building and its surroundings. Yandex Realty primarily generates revenues from listings of new apartments, charging realtors for verified calls from clients as well as through advertising.

Yandex Rent

Yandex Rent is a long-term apartment rental platform, officially launched in September 2021, which helps to manage pre-contract rental processes and subsequent administration of the payments. The service provides a 3D apartment tour, risk insurance of both parties to the transaction and supports clients on various issues even after signing a contract. By the end of January 2022, we had expanded the service to four regions in Russia and added approximately 4,000 apartments to the platform, 50% of which are signed online.

Other Business Units and Initiatives

Our Other Business Units and Initiatives segment includes new initiatives and smaller business that are being tested and developed.

Zen

Yandex Zen is a social infotainment platform that brings together content creators and users. In February 2022, we announced that we are exploring strategic alternatives, including divestment, for Zen. The service features an AI powered personalized content feed based on user interests. In March 2022, in order to achieve high-quality personalization, Zen has temporarily switched its feed to a subscription format, i.e., users receive content of those creators in the feed that they have chosen themselves. For content creators, the platform offers monetization opportunities as well as providing tools to produce high quality content in multiple formats and engage with the audience. The number of daily average users reached 22.3 million in December 2021 (up 10% from December 2020), who generally spent approximately 40 minutes per day on the platform. We have further increased our focus on the quality of content, which helped us to improve our net promoter score (NPS) throughout 2021.

Yandex Zen has been successfully developing its own content platform since 2017, when the service launched a partner program with content creators, monetizing through advertising placement in its feed and creators’ content, including articles and videos. The platform shares part of the advertising revenue with creators. As part of transforming the monetization of authors and media towards subscriptions, Zen pays for interaction with subscribers instead of displaying ads in content. This helps to increase the share of high-quality content available on the platform and became

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one of the key drivers of growing user engagement for Yandex Zen in 2021. As at the end of December 2021, 90% of the user’s time on Zen relates to our own platform and most of our content is unique and created exclusively for Yandex Zen.

While initially Yandex Zen was a text-based content platform, it now offers multiple formats, including short videos, live broadcasts, and posts. Some of these new formats, as well as a dedicated short video feed and Yandex Zen’s own video editor in the Yandex Search App, were launched in 2021. New video formats contributed to the rapid growth of video consumption on Yandex Zen. As of December 2021, 37% of user time is spent consuming video content. We continue to partner with content creators and have increased the amount of video content generated per day from 8,000 in January 2021 to 11,000 in January 2022.

Yandex Cloud

Yandex Cloud is a fully-fledged cloud platform that provides B2B customers (SMBs and enterprises) (which account for 94% of our revenue) and individual developers with scalable infrastructure, storage, machine learning and development tools to build and enhance cutting-edge digital services and applications.

The number of active users was 16,000 at the end of December 2021. As of February 2022, 50 of our services use Yandex Cloud, including services in the field of security, serverless computing and machine learning. The Yandex Cloud platform has become the first public cloud platform in Russia and through the CIS region that complies with both international standards such as ISO 27017 and ISO 27018, and Russian regulation for data storage and processing.

In 2021, Yandex Cloud became a corporate member of the Cloud Security Alliance and met the requirements of the Security, Trust, Assurance and Risk (STAR) program at Level 1. CSA is an international organization dedicated to developing and raising awareness of best practices in information security for cloud services. Cloud is also compliant with GDPR and PCI DSS (Payment Card Industry Data Security Standard).

In 2021, we also launched Yandex Cloud in Kazakhstan.

Self-Driving Group

In early 2017, we started working on our driverless technologies with the aim of creating a fully autonomous system that can operate various types of vehicles and be applied to various transportation scenarios (including, among others, ride-hailing, logistics, e-commerce, food and grocery delivery) in a wide range of conditions. In May 2017, we unveiled the first prototype of our Self-Driving Сar, which leverages Yandex’s world-class technologies, and launched public road testing by the end of that year.

In 2018, we received a license to operate our self-driving car in the state of Nevada and demonstrated the advanced capabilities of our autonomous vehicles at CES, Las Vegas in 2019 and again in 2020. Also, in 2018 we obtained the relevant permission from the Israeli Ministry of Transportation and Road Safety and began regular tests of our self-driving cars on public roads in Tel Aviv, Israel. Yandex is also operating Europe’s first autonomous ride-hailing service with no one behind the steering wheel in Innopolis, Russia. By the end of December 2021, the total number of robotaxi trips in Innopolis reached 25,000. On March 17, 2022, a law was passed in Russia that would allow Yandex to launch a commercial self-driving taxi service in Moscow, as well as start testing without a safety engineer in the car in Innopolis.

At the end of 2021, our self-driving fleet consisted of 170 cars, which have accumulated over 17 million autonomous miles on public roads in Russia, United States and Israel. Since March 2022, testing of our self-driving cars in the United States has been suspended.

Yandex signed a memorandum of understanding with Hyundai Mobis in 2019 to jointly develop autonomous vehicles and introduced the fourth generation of Yandex autonomous vehicles based on the Hyundai Sonata in 2020. Also, in the spring of 2019 we started developing our own proprietary LIDAR sensors and nine months later we began testing the first driverless vehicles equipped with our lidars on city streets. In 2021 we rolled out our lidars across the AV fleet.

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In November 2019, we introduced our autonomous Delivery Robot, which leverages our self-driving technology. In 2020, rovers started commercial operations in three locations in Russia: Moscow, Innopolis and Skolkovo. In 2021, we released the third generation of our delivery robots, which are larger and run on a replaceable battery which increases the utilization and productivity of each robot.

In July 2021, Yandex entered a multi-year partnership with Grubhub, the leading online and mobile food-ordering and delivery platform on US college campuses. The partnership involved the development of rover delivery on campuses of Universities colleges throughout the United States. Yandex delivery robots delivered food on the campuses of Ohio State University and the University of Arizona. In March 2022, Grubhub stopped cooperation with Yandex due to geopolitical tensions. In October 2021, together with the largest postal operator in Russia, Yandex launched the delivery of parcels from Russian Post offices in Moscow by our third generation delivery robots.

In September 2021, Yandex acquired the remainder of Uber’s interest in the self-driving vehicles business, Yandex SDG. As a result of the restructuring, Yandex SDG is now fully owned by Yandex (100%).

Devices

Yandex Station

In 2018 we launched Yandex Station, the first smart speaker designed for the Russian market and Yandex’s first hardware product, equipped with our AI voice assistant, Alice, to help users manage their daily tasks. Yandex Station provides a complete in-home multimedia entertainment experience. As the first smart speaker with both audio and video capabilities, it plays music and also streams films, videos and television through its HDMI port to any connected display. Currently, Yandex Station has access to our streaming services Yandex Music (audio) and Kinopoisk (video).

In 2019, we launched our second smart speaker: the compact and affordable Yandex Station Mini, which has all features of Yandex Station apart from video capabilities. In addition, it features gesture control.

In 2020, we presented a new addition to our family of smart speakers: the Yandex Station Max, which features advanced Dolby Audio technology for a perfect audio experience, 4K HDR for streaming films in crystal clear quality, and an interactive LED screen to visually augment Alice’s replies.

In 2021, we introduced the updated version of Yandex Station Mini and the flagship Yandex Station in the second-generation. In addition to all the basic functions, Yandex’s smart assistant can control smart home devices with simple voice commands.

The number of devices sold with voice assistant Alice reached 3 million by the end of 2021. At the same time, the number of Yandex smart home users increased 2.7 times from 0.3 million to 0.8 million in 2021.

Yandex TV

In 2020, we announced Yandex TV, our own smart TV multimedia platform that comes pre-installed in a variety of budget and mid-range TVs offered in Russia based on the AOSP (Android Open Source Project), and supports 7 platforms with 4K, Full HD and HD Ready. Yandex TV offers users seamless way to interact with different kinds of content on one screen, including Yandex’s own Kinopoisk content, blogger videos and TV channels. Yandex TV users can also stream videos from other streaming services such as ivi, Okko, Wink and others. In November 2020, voice assistant Alice was made available on all TVs with Yandex TV installed: it can help navigate through content via smart voice search, find specific movies, answer general questions, display weather data and much more.

In October 2021, we launched Yandex Module, our 4K streaming media player powered by AI-based virtual assistant Alice. Compatible with any TV via HDMI, Yandex Module provides customers with access to the Yandex TV platform with thousands of films, TV channels, programs and shows, video streaming services, recommended content and more. Once connected to a TV, Yandex Module can be operated via a remote control or using voice command after activating the smart assistant button.

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Our Technology

All of our products and services are built on a foundation of proprietary machine learning and other technologies that we have developed in-house over nearly 25 years and which we believe cannot readily be replicated. This robust technology base and our culture of innovation have enabled us to efficiently roll out new services to capture an increasingly diversified range of online and offline revenue streams, generally at attractive margins and/or a more efficient cost structure compared with our peers, and have driven a substantial expansion of our total addressable markets. As an example of the strength and wider applicability of our technologies, we spun-off our ClickHouse open-source database management system in 2021 into a stand-alone business, in which we currently hold a significant minority stake, that will seek to offer commercial products to customers globally, backed by leading international venture capital investors.

Advertisers

Our advertisers include individuals and small, medium, and large businesses throughout the countries in which we operate, as well as large multinationals. Small and medium size enterprises drive most of our advertising revenue. No single advertiser accounted for more than 0.6% of our total revenues in 2021.

On the back of the ongoing and developing geopolitical situation our international clients began to suspend or terminate their advertising and marketing activities in Russia in March 2022. Their contribution to our advertising revenues amounted to approximately 8% in 2021.

Sales and Advertiser Support

We have an extensive sales and support infrastructure, with sales offices in a number of cities in Russia, as well as Minsk, Belarus; Lucerne, Switzerland; Newburyport, Massachusetts, USA; Shanghai, China; Tel Aviv, Israel and Almaty, Kazakhstan. In Russia we have 16 regional sales offices.

The substantial majority of our advertisers use our automated Yandex Direct service to establish accounts, create ads and manage their advertising campaigns. Our largest advertising clients are served by a dedicated sales team. These advertisers have access to our strategic support services, including a dedicated accounts team, to help them set up and manage their campaigns. Our sales team specialists are able to help advertisers with tasks such as selecting relevant keywords, creating effective ads and audience targeting, and measuring and improving advertisers’ return on investment.

The Yandex Advertising Network follows a similar model. Most of the websites in the network submit their applications through Yandex Direct’s automated partner interface. Our direct sales force focuses on building relationships with our largest partners to help them get the most out of their relationship with us. We also have relationships with different advertising sales agencies placing online advertising.

Marketing

We engage in significant marketing efforts directed first and foremost at internet users, as well as advertising agencies, advertisers and webmasters. Our marketing efforts are focused above all on delivering an optimal user experience with every Yandex product and service. We believe that satisfied users are the best and most credible advocates for our services. To improve user satisfaction and loyalty and to continue to use our products and services as marketing tools, we constantly experiment with and improve the design, technology and interface of these products and services. Although we believe that word of mouth is the best advertising strategy, we also view advertising campaigns in online and traditional media as an important element of our efforts to promote our brand. We also invest into our separate business units, including Mobility, FoodTech, Yandex Market, Media Services, Classifieds, and Other Business Units and Initiatives including Zen, SDG and Cloud to grow customer awareness, increase our user base, and increase usage.

Competition

We operate in a market characterized by rapid commercial and technological change, and we face significant competition in many aspects of our business. We currently operate principally in Russia, Belarus, Kazakhstan, Uzbekistan and Israel.

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During 2021, we faced competition across our different business lines from both global (such as Google, Meta) and local players (VK, Sber). Taking into account geopolitical events and, as a result, a change in the competitive environment and a reduction in the presence of global players in Russia (by their own decision or as a result of the actions of the regulator, for example, blocking the Meta), this year competition with local players is likely to come to the fore.

For many years we have considered Google to be our primary competitor. In addition to its search solutions, including voice search, Google offers online advertising, information and other search services similar to ours, including services similar to Yandex Direct. In March 2022, Google paused the sale of online advertising in Russia, including search, YouTube and outside publishing partners. Separately the Russian regulator Roskomnadzor blocked Meta services (Facebook and Instagram) in Russia.

The following table presents a comparison of Russian search market share, according to Yandex Radar (a search traffic and browser usage analytics tool based on Yandex Metrica data), based on search traffic generated:

We believe that social networking sites, video platforms and online marketplaces, are becoming significant competitors for online ad budgets. These sites derive a growing portion of their revenues from online advertising and are experimenting with innovative ways of monetizing user traffic. In light of their very large audiences and the significant amount of proprietary information they can access to analyze their users’ needs, interests and habits, we believe that they may be able to offer highly targeted advertising which could create increased competition for us. In 2021 these competitors included both local players (such as VK, OK, Ozon, Wildberries) as well as international platforms (Facebook, Instagram, Twitter, TikTok and YouTube). We note that as a result of the current geopolitical situation, some of the international players have been blocked by the regulator (all Meta apps, including Facebook and Instagram and Twitter), while TikTok has decided to suspend their activity in Russia.

We also face competition across our non-advertising businesses.

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Science and Education

Yandex has been developing and implementing educational programs since 2007. The Company’s educational products have been used by millions of people of all ages – from first graders to graduate students, from young professionals to those who decided to change their career paths. Our team of specialists come from a variety of academic backgrounds, including mathematics, data analysis, programming and linguistics. In addition to working on Yandex products and technologies for learning, some of our experts teach, lecture and train students and young specialists across schools, colleges, universities and partner programs in Russia, Belarus, Armenia and Israel.

Our first educational project, the Yandex School of Data Analysis (YSDA), a free master’s-level program for undergraduates and graduate students, has been running since 2007. The school trains specialists in machine learning, data science, big data infrastructure, data analysis in five Russian cities as well as in Minsk, Belarus. The school’s graduates create a global alumni network advancing machine learning and distributed systems development in academia and the private IT sector. In October 2018, we launched Y-Data, a branch of Yandex School of Data Analysis in partnership with Tel Aviv University in Israel. It offers an advanced one-year master’s degree program in machine learning. 134 students have graduated from the Yandex School of Data Analysis in the 2020-2021 academic year, and the number of applicants averaged 20 students per available space.

Since 2014, Yandex and the Higher School of Economics (HSE), one of Russia’s top research institutions included in the QS World University Rankings, have been jointly running the Computer Science Faculty, with Yandex contributing with study curriculum. Also in 2014, we established the Ilya Segalovich Scholarship in memory of Yandex’s co-founder, which became a tribute to his commitment to driving positive change. The scholarship is awarded to HSE students demonstrating outstanding academic achievements and research work in the field of computer science and information technology. The scholarship committee includes the HSE faculty members and lead developers from Yandex. Over 90 students have received the Ilya Segalovich Scholarship since 2014.

Yandex educational partners include leading research centers and universities. More than 1,500 students enroll in our joint degree programs at various universities every year, with over 400 of them having graduated in 2021 alone.

In 2016, with the support of regional governments and public institutions, we launched the Lyceum of Yandex Academy, an initiative focusing on teaching the basics of computer programming to school students. The enrollment is now available in over 160 cities in Russia and Kazakhstan. Over 10,000 teenagers are currently learning Python at the Lyceum, with over 2,100 students having graduated from the program in 2021.

The YSDA and Lyceum are integral parts of Yandex Academy, an umbrella educational project that aims to provide free IT training to anyone wishing to pursue studies and careers in tech. As of February 2022, about 3,000 IT

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specialists pursuing careers in major tech companies or research institutions are Yandex Academy alumni.

We also invest in supporting educators in developing skills that are necessary to create productive learning environments. Launched in 2018, Yandex Textbook is now a major digital platform in Russia assisting students and educators with tackling school curriculum. It is currently used by over 100,000 teachers and 1.9 million Grade 1-7 students.

In 2021, Yandex launched the Ilya Segalovich Foundation, a successor to our earlier educational initiatives and a new umbrella body for all free educational projects. The Foundation announced an additional commitment to providing grant support to the most promising educational projects developed by any educational institution or organization. Additional educational projects include the following:

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Employees and Workplace Culture

We place a high value on technological innovation and compete aggressively for talent. We strive to hire the best computer scientists and engineers, as well as talented sales, marketing, financial and administrative staff. We seek to create a dynamic, fulfilling work environment with the best features of a “start-up” atmosphere, encouraging equal participation, creativity, the exchange of ideas and teamwork.

Our total headcount increased from 11,864 at December 31, 2020 to 18,004 at December 31, 2021, primarily driven by gradually accelerating pace of hiring in E-commerce (including Yandex Market, Yandex Lavka and Yandex Eats) and Search and Portal. As of December 31, 2021, we had 9,192 employees related to the product development cost category, 7,956 employees related to sales, general and administration, and 856 employees related to cost of revenues.

Intellectual Property

We rely principally on a combination of trademark, copyright, related rights, patent and trade secret laws in Russia and other jurisdictions as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We enter into confidentiality and patent assignment agreements with our employees and consultants and confidentiality agreements with other third parties, and we rigorously control access to our proprietary technology.

Our patent department is responsible for developing and implementing our group-wide IP protection strategy in selected jurisdictions. We have filed more than 1,100 patent applications to date, of which more than 700 have resulted in issued patents in Russia, the USA, China and Taiwan. We also have internal procedures for invention disclosures, patent filings, patent acquisitions, freedom-to-operate analyses and patentability searches.

In respect of the “Yandex” brand, we have three registered well known trademarks in Russia - “Яndex”, “Yandex”, and “Яндекс” for certain services (classes 35, 38 and 42 under the International Classification of Goods and Services) on the basis of intensive use. We also own a Russian well-known trademark “auto.ru” for class 38 under the International Classification of Goods and Services, protecting a key brand of our classifieds business. Under Russian

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law, the protection granted to well known trademarks is extended to non homogeneous goods and services if customers associate specific use of the designation by third parties with the rights holder and the rights holder’s legitimate interests are infringed. Yandex is also a registered trademark in the United States, the European Union, China and other countries under the Madrid Agreement and Protocol. We have other registered trademarks in Russia and abroad. We continue to file applications to register new trademarks and widen the country coverage of our existing trademarks. Most of the software used by our services or distributed by Yandex to our users is either developed by our employees or by independent contractors who transfer all rights to Yandex.

We enter into written license and use arrangements with providers of a significant portion of the content we offer. Our agreements with most of the news content providers in Russia are on “content-for-traffic” terms, pursuant to which we obtain access to news content for free in consideration of the user traffic that accesses the content providers’websites through our Yandex News services. We license or purchase other additional content. We do not knowingly include content on our websites that we do not have the legal right to include.

We do not own the content generated or posted by users on our websites. As with all websites that host user-generated content, we are potentially liable for any intellectual property infringement committed by the creator of that content. If we receive a complaint from a party that user-generated content on our websites infringes that party’s copyright or related rights, we examine the content in question. If the complaint is substantiated, we remove the content and notify the party that has posted the content (if their contact details are available). If the user evidences that the content does not violate third parties’ intellectual property rights, it is possible to recover the deleted content. In the event of any court decision in the matter, we comply with the decision.

Facilities

Our principal operating subsidiary currently leases a total of approximately 64,700 square meters in a single location in central Moscow that serves as our group’s headquarters. We also lease additional office space of about 108,000 square meters in business centers in Moscow, of which approximately 53,400 square meters relates to the contract for office space in Moscow City business center; 31,000 square meters relates to office space in Avrora business center; 18,600 square meters relates to office space in Lotte Plaza business center; and 5,000 square meters relates to office space in Amaltea Skolkovo business center. Together with our operating subsidiaries, we also lease or own office space in a number of other cities in Russia. We also lease offices in Schiphol, the Netherlands; Lucerne, Switzerland; Prague, Czech; Minsk, Belarus; Almaty, Kazakhstan; Tashkent, Uzbekistan; Tel Aviv, Israel; Shanghai, China, and other locations. We operate data centers in Moscow and other regions of Russia, as well as in Finland. We also have a presence in a number of other cities in Russia and elsewhere. We continuously evaluate the capacity and locations of our data centers to determine the most cost-effective manner of delivering reliable services to our users.

In December 2018, we acquired a property site at 15 Kosygina Street, Moscow, Russia for our new Moscow headquarters. The acquisition cost of the property site amounted to 9.7 billion rubles (around $145 million, based on the exchange rate as of the transaction date) exclusive of 18% VAT.

Governance Structure

Overview

In December 2019, our shareholders approved targeted changes to Yandex’s corporate governance structure, which we refer to as the restructuring. Our Board proposed this restructuring in response to the evolving legal and regulatory environment in Russia, and designed these changes to balance the concerns of public authorities in our core market with the interests of our shareholders, employees and users.

Pursuant to this restructuring, a number of changes were made, including the establishment of the Public Interest Foundation and new Board Committees. The Board of Directors was also expanded to appoint two “designated directors”. In 2021, we continued to work in this new corporate governance structure and to interact with its many complex elements.

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Public Interest Foundation

The Public Interest Foundation has certain limited and targeted governance rights in our group. The Public Interest Foundation was incorporated in the Oktyabrskiy special administrative region in Kaliningrad, in the Russian Federation, under a newly adopted legislative framework. The Public Interest Foundation has no shareholders, owners or beneficiaries, and is governed by the Foundation’s Board of Directors comprising 11 directors, including members appointed by five leading Russian universities and three non-governmental institutions, all of which have long histories of cooperation with Yandex. The Public Interest Foundation Board also includes three representatives of Yandex management. The statutory purpose of the Public Interest Foundation, as set out in its charter, is to preserve the continuity and promote the success of Yandex. The Public Interest Foundation is not permitted by its charter to engage in any commercial activities; its operating costs will be covered by Yandex.

Priority Share

The Public Interest Foundation holds our Priority Share, which gives the Public Interest Foundation the following rights:

Special Voting Interest in Yandex LLC

As an additional protection for the overall structure, the Public Interest Foundation holds a Special Voting Interest in Yandex LLC, which provides limited and defined powers that will be exercisable only in the case of what we describe as a Special Corporate Situation or a Special Situation related to a matter of national security.

Special Corporate Situations

A Special Corporate Situation is deemed to arise only in the following specific circumstances:

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If the Foundation Board decides (acting by a specified majority) that any of the above triggers for a Special Corporate Situation has occurred, it must send a notice to Yandex, providing details of such matter. Following receipt of such notice, we may cure such matter within a defined period. If we do not cure such matter, the Public Interest Foundation will have the ability (acting by specified majority) to replace the General Director of Yandex LLC without the vote of Yandex N.V. The Public Interest Foundation will appoint an interim General Director from a pre-approved list. As soon as the situation is resolved, Yandex N.V. will remove the interim General Director and appoint a permanent General Director.

Special Situations related to a matter of national security

A Special Situation is a matter constituting an extraordinary one-off event related to matters of the national security of the Russian Federation requiring quick remedy.

If the Foundation Board decides (acting by a specified supermajority) that a Special Situation has occurred, it must send a notice to Yandex providing the details of such matter. Following receipt of such notice, we may cure such matter within a defined period. If we do not cure such matter, the Public Interest Foundation will have the ability (acting by specified majority) to replace the General Director of Yandex LLC without the vote of Yandex N.V. An interim General Director appointed under these circumstances will hold office for a limited period of time, after which Yandex N.V. will again have the right to appoint a permanent General Director.

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Conversion Provisions of the Class B Shares

In addition, as part of the restructuring, the automatic conversion feature of the Class B Shares was amended. Previously, such shares would immediately convert into Class A Shares upon the death of the holder. To avoid this “cliff-edge” scenario, in which the voting control of our company could suddenly shift, following this amendment Class B Shares held by a family trust will not automatically convert for a period of two years after the death of the holder. Mr. Volozh has established such a trust. Mr. Volozh and his family trust have also agreed not to sell or transfer any Class B shares prior to December 31, 2023.

A description of other standing Board committees can be found below under the heading “Item 6. Directors, Senior Management and Employees — Corporate Governance”.

Public Interest Committee

The Public Interest Committee has a right of approval over certain specified matters and consists of three members: the Yandex CEO (currently Mr. Volozh) and both of the designated directors (Messrs. Yakovitsky and Komissarov). Decisions of the Public Interest Committee must be unanimous. The Public Interest Committee will not review ordinary business or commercial matters; its right of approval will be limited to a defined list of the following specific matters deemed to be of public interest:

Our Board cannot act in respect of any of these specified matters prior to receiving a recommendation from the Public Interest Committee. If the Public Interest Committee does not approve the matter referred to it, the Board will follow the decision of the Public Interest Committee, unless the Board rejects such decision by either a supermajority of

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eight votes (subject to adjustment for Board vacancies), which must include the affirmative votes of the two designated directors; or a supermajority of eight votes (subject to adjustment for Board vacancies) (not including the affirmative votes of the two designated directors), provided that the Public Interest Foundation Board has given its approval. The Public Interest Committee will act only as a check on our Board’s actions; it cannot proactively make any decisions on behalf of the Board or require the Board to take any action.

Government Regulation

We operate in a rapidly evolving environment of increasing regulatory complexity, reflecting a trend towards increasing scrutiny of large technology companies by policymakers, regulators and the general public in jurisdictions across the globe, including in Russia. As explained in more detail below, there are also a significant number of additional laws and regulations currently being debated and considered for adoption in Russia and other countries where we operate which, in the event of adoption, might require us to take significant steps to modify our operating, governance or ownership structure. Due to changing interpretations of laws and regulations, we could also be subject to laws and regulations to which we are not currently subject and which could materially affect our operations. In the current geopolitical environment, there could also be an increased risk of new legislative or regulatory initiatives that could be seen as protecting the country’s national security and/or limiting foreign influence over the sectors in which we operate, including actions aimed at effecting changes of control of companies that are considered to be of strategic importance. We have not summarized laws and regulations that we do not believe we are currently subject. See also “Risk Factors – In the current environment, there may be a heightened risk of actions by the relevant authorities that may be perceived as reflecting political considerations.”

Regulation of Sensitive Businesses in Russia

In recent years, the Russian government has adopted a series of laws aimed at regulating the technology and internet sectors generally, as described in detail below. In addition, a number of laws have been adopted that impose restrictions on foreign ownership and control of businesses in sensitive sectors of the Russian economy, including strategically important enterprises and mass media, and we are aware of various discussions about potentially imposing similar restrictions on businesses such as ours. Most significantly, legislation was proposed in the Russian State Duma in the summer of 2019 that would have limited non-Russian ownership of “significant” internet companies to no more than 20%. Another recent draft law proposed restrictions to audiovisual services limiting their non-Russian ownership to no more than 20%. In case such a proposal were to be admitted to law and would be applied to Yandex, we will be forced to reevaluate and consequently modify the corporate structure of the KinoPoisk service, which is a part of Yandex Media Services.

Advertising Regulation

The principal Russian law governing advertising, including online advertising, is the Federal Law No. 38-FZ “On Advertising,” dated March 13, 2006 (as amended) (known as the “Russian Advertising Law”). The Russian Advertising Law prohibits advertisements for certain regulated products and services without the required certification, licensing or approval. For example, advertisements for products such as pharmaceuticals and medical equipment, food supplements and infant food, financial instruments or securities and financial services as well as incentive sweepstakes and advertisements aimed at minors and some other products and services must comply with specific requirements and must in certain cases be accompanied by certain required disclaimers. Additionally, Russian law contains certain prohibitions regarding the advertising of alcohol, tobacco and medical services. In addition, the distribution of advertisements through email requires explicit actions (either consent or similar affirmative action) of recipients. In some cases, violation of these Russian laws can lead to civil action by third parties who suffer damages, or administrative penalties imposed by the FAS. Further amendments to legislation regulating advertising may impact our ability to provide some of our services or limit the type of advertising we may offer. For instance, there is a working group (within the Analytical Center of the Government of the Russian Federation) which hosted a discussion for the legislative proposal to set forth detailed grounds for the self-regulation of the advertising business in Russia. However, the proposal has ceased to be the priority in the development of the advertising legislation in Russia.

In 2021, there were adopted and came into force (fully or partially) two sets of amendments to the Russian Advertising Law: (a) new rules for mandatory placement of the “social advertising” (i.e., ads related to the promotion of charities, socially useful activities and governmental functions) by all advertising platforms and distributors in their inventory free of charge, in an amount up to 5% of their commercial advertising inventory (calculated on the basis of the

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preceding year and nominated in currency or advertising impressions); and (b) establishment of the system for the accounting and storage of the online advertising data (operated by Roskomnadzor) and marking of the online advertising in the Russia segment of the Internet. These sets of amendments were (and still are) widely debated as establishing more burdensome and complex regulation for the whole online advertising industry and resulting in increased cost of compliance with Russian Advertising Law. The legislation covering the system of accounting and storage for the online advertising data will come into full force in September 2022, while before that date the respective bylaws providing all the details of such system are to be developed and adopted by Roskomnadzor and the Russian Government. This legislation imposes obligation on all the participants of the online advertising placement chain (advertisers, advertising platforms, publishers) to provide the state accounting and storage system with all information related to each online advertising unit and to mark all the online advertising units with mandatory label “Advertising”. Respective information could be provided to the state accounting and control system either directly or through special entities “operators of the advertising data”. Although all the details are yet to be defined through the respective bylaws, the drafts introduced in November 2021 expose sufficient number of risks and costs that Yandex will face should the proposed bylaws be adopted without scrutiny and public discussion. Main potential risks and costs applicable to Yandex are undefined level of exposure of confidential information of Yandex and our clients/partners to state authorities; substantial monetary and organizational costs of both Yandex and all our clients/partners to comply with the new legislation, including increasing costs of data processing, restructuration of data and money flows, data storage costs; potential market disruption due to the inability of the some segments of the online advertising market (especially SMB-segment) to comply with the new legislation.

We seek to comply with all advertising laws and regulations. At the same time, the application of the advertising laws, in particular in relation to products or services requiring certification, licensing or approval, can be ambiguous and inconsistent. The application of these laws in an unanticipated manner, or the failure of our compliance efforts, may expose us to substantial liability as distributors of advertising and may restrict our ability to provide some of our services. Other laws or interpretations of laws, including those of foreign jurisdictions, may also restrict advertising and negatively impact our business. For example, some French courts have interpreted French trademark laws in ways that would limit the ability of competitors to advertise in connection with generic keywords. Adoption of similar interpretations by Russian or other national courts may adversely affect our business. Also, the Supreme Court of the Russian Federation has issued clarification which states that some cases of the use of trademarks as keywords could be treated as an unfair competition. In addition, Russian law does not specifically regulate behavioral targeting in relation to advertising, which is a standard tool widely used in online business. Any future interpretation of Russian law affecting the regulation of behavioral targeting could have a negative impact on our business.

Intellectual Property Regulation

In principle, the acquisition, protection and enforcement of intellectual property rights in Russia are addressed in line with international standards. In particular, literary, artistic and scientific works are subject to copyright protection without any registration and enjoy legal protection simply by virtue of being created in an objective form perceivable by third parties.

Mandatory registration with Rospatent is required for “hard IP” such as trademarks and patents (available in Russia for inventions, utility models and industrial designs) in order for the rights holder to acquire exclusive rights. Trademarks registered abroad under the Madrid Agreement and/or Madrid Protocol have the same legal protection in Russia as locally registered trademarks. 

Under Russian law, we have exclusive rights to trade secrets (know-how) only if we have complied with a legal requirement to introduce reasonable measures to maintain confidentiality of our trade secrets. Such measures may be burdensome and difficult to implement. As we rely extensively in our operations on the protection afforded to trade secrets, we have implemented a set of measures required by Russian law in order to protect these trade secrets (know-how). However, there is a risk that our measures will be deemed insufficient and, as a result, we will fail to acquire rights to these trade secrets under Russian law.

One of the known problems and risks in Russian business practice relates to acquiring exclusive rights to works for hire and patentable results from employees. As a rule, the exclusive rights to works for hire and patentable results are assigned to the employer if the intellectual property is made during the course of employment. However, there are often uncertainties and disputes around the scope of such assignments. In case of employment disputes, Russian courts are often inclined to follow an overly formalistic approach and may take a pro-employee position in the event of uncertainty

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in a dispute of this nature.

Nonetheless, under Russian law, subject to the risks outlined above, we are deemed to have acquired copyrights and rights to file patent applications with respect to works for hire and patentable results created by our employees during the course of their employment with us and within the scope of their job duties, and have the exclusive rights to their further use and disposal subject to compliance with the requirements of the Civil Code of Russia.

Liability of Online Service Providers

Laws relating to the liability of online service providers for the activities of their users and other third parties are still being developed in Russia and certain other countries in which we operate. Recent laws adopted in Russia, such as the law on the regulation of social networks; the law regulating the placement of publicly available personal data on the internet; the law on criminal liability for libel on the internet; the law introducing significant fines for non-deletion of information by an information resource; the law prohibiting censorship of information resources, as well as a number of other laws, may substantially affect business operations.

Russian law contains provisions aimed at establishing a framework for limitation of liability of online service providers for the information communicated by third parties over such providers’ networks. Substantial ambiguity remains in Russian law around the scope and protection of such limitation of liability. In particular, there is little clarity on the limitation of liability with respect to the types of online service providers other than providers transmitting information and hosting providers (such as those caching data or providing information location tools). Since the law has not been given detailed binding interpretation, our exposure to liability will depend significantly on the interpretation of these provisions by the courts and officials.

The Russian Civil Code also imposes strict liability for infringement of intellectual property rights if such infringement is committed in connection with business activities. It might be unclear how these provisions apply to online service providers.

Russian law establishes a system for the blocking of websites that make available specific categories of illegal information. Illegal content that can lead to the blocking of websites in Russia, includes the following:

The procedure for deleting such information is complex and strictly enforced and the failure to follow such procedures may lead to the blocking of the applicable website by all Russian internet service providers and telecommunication service operators. Yandex follows these laws, however, compliance with these regulations by western technology companies has been inconsistent or non-existent.

In many cases, only a subsequent post-blocking notification to the relevant website owner or hosting provider is required. The categories of illegal information to which access can be restricted may be interpreted broadly or be expanded by government authorities depending on circumstances. We may find ourselves subject to such blocking if government authorities interpret information provided by our services as violating these rules and we may be unable to prevent this blocking of our services.

This legislation, as well any similar additional regulations (in Russia or abroad), and the interpretation of such legislation and regulations, may impose new requirements on us and our operations and lead to material legal liability, which can be difficult to foresee or limit. For instance, in December 2020 the European Commission proposed the draft

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of the Digital Services Act which is aimed at creating a common set of rules on obligations and accountability of online intermediaries providing services in the European Union. The document is now under consideration of the European Parliament and Member States and, if adopted, could impose new obligations on our services provided (or to be provided in the future) to users in the EU. See “Risk Factors—We may be held liable for information or content displayed on, retrieved by or linked to our websites and mobile applications, or distributed by our users; or we may be required to block certain content or access to our websites could be restricted; any of which could harm our reputation, business, financial condition and results of operations”.

In February 2020, draft legislation aimed at regulating big data in Russia was introduced and remains under consideration. The wording of the legislation is very broad and ambiguous, but would create a basis for further regulation in this sphere. In particular, it states that the Government should implement control over big data processing. Currently big data processing is not specifically covered by Russian law. This legislation, if adopted, may have a far-reaching impact on our business, which is difficult to estimate at the present time.

In 2021 the Law “On the Activities of Foreign Persons on the Internet” was adopted. The purpose of the law is to oblige foreign companies to open a legal entity or representative office in the Russian Federation to ensure their compliance with Russian legislation. If foreign platforms (Facebook, Google, YouTube, Instagram) fail to comply with the Law, they may be subject to enforcement measures, including blocking of access, prohibition of placement of advertisement or being promoted through advertisement, ban on money transfers from users and etc. These measures could affect Yandex's activities as well, since these measures would prohibit Yandex from promoting and advertising its services on these foreign platforms or advertising these international platforms in Russia, including on Yandex platforms.

In 2021 and 2022, Russia adopted a number of laws applicable to internet governance, including tighter regulation of social networks, restrictions on the placement of publicly available personal data on the internet, prohibitions for information resources to practice censorship in the form of restrictions for distribution of socially significant information by the users of such information resources, a complex state-operated accounting and storage system for the online advertising, a mandatory system for the measurement of the audience of internet services and content by a specially designated uniform measurements organization and other matters. Significant amendments have been made to the provisions of the Criminal Code of the Russian Federation on users' liability for libel (defamation) on the internet and to the provisions of the Code of Administrative Offenses of the Russian Federation imposing liability for violating the procedure for the deletion of prohibited information from the internet. The law also establishes administrative fines up to 20% of a company's annual turnover for non-deletion of information by an information resource, if such deletion is required by law. This regulation may have a substantial impact on operation of our services.

Applicability of the Russian Law on Strategic Enterprises

Under Russian law, a variety of activities related to encryption require a special permit (license) granted by the Federal Security Service (the “FSS”) subject to the applicant’s continued compliance with a number of licensing requirements, including the requirement to use only certified encryption means and equipment and to ensure timely extension of such certification when its terms expire.

We have also obtained an encryption license for our Yandex Cloud service in order to expand this business. Therefore, the restrictions imposed by the strategic enterprises law have become applicable to Yandex as a whole. In particular, a third-party non-Russian investor would be required to obtain prior approval from the competent Russian authority in some cases if it seeks to acquire more than 25% of the voting power in Yandex or seeks to enter into an agreement that would establish direct or indirect control over Yandex. Such investors would also be required to notify the competent Russian authority if it acquires more than 5% of the voting power in Yandex (which would represent more than 33.3 million Class A shares). In addition, foreign states and international organizations, or entities controlled by them are prohibited from entering into agreements to establish direct or indirect control over Yandex.

See also “Risk Factors— In the current environment, there may be a heightened risk of actions by the relevant authorities that may be perceived as reflecting political considerations.”

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Mass Media Regulation

Russian law requires certain parties that disseminate news and similar mass communications and information to be registered with the appropriate Russian governmental body, Roskomnadzor, and to comply with restrictions regarding the distributed content. The law currently permits electronic network publications (including websites) to register as mass media. As registration under this amendment is voluntary, we elected not to register our online properties as mass media. See “Risk Factors — Because the range of the services we provide is increasing and the legal framework governing the operations in our markets is evolving, we may be required to obtain additional licenses, permits or registrations or comply with other requirements, which may be costly or may limit our flexibility to run our business.”

Since 2016, Russian law imposes a limit of no more than 20% on non-Russian ownership and control, direct or indirect, of Russian mass media. Accordingly, if our core business were to be required to register as a mass media, or if such law were otherwise amended to cover our business, it would have a material impact on the ownership structure of our business and could materially adversely affect the value of our Class A shares. See also “Risk Factors— In the current environment, there may be a heightened risk of actions by the relevant authorities that may be perceived as reflecting political considerations.”

In addition, in March 2019 a new law came into force that imposes liability for the dissemination of “fake news” in mass media or telecommunication networks if such news items are potentially of social importance. The liability includes fines up to 1.5 million rubles (depending mainly on the consequences of such violation). It is difficult to predict how these norms will be interpreted in practice. This regulation can be applied to some of our services and, therefore, we could be held liable for the information published by third parties.

More recently, the amendments to Russian legislation on mass media and information, which came into force in 2022, have introduced the mandatory system for the measurement of the audience of internet services and content by a specially designated uniform measurements organization, which would provide the state authorities with measurement reports on the internet audience (similar to the mandatory measurement of the TV audience). Such legislation imposes obligations on popular internet resources in Russia (including those provided by Yandex) to either integrate required data collection and reporting instruments or to ensure independent collection of the data and information required for the measurement of the internet audience, and to transfer such data to the designated measurements organization. Mediascope, a leading Russian media research company, was appointed as designated measurements organization in February 2022. We may be held liable for information or content displayed on, retrieved by or linked to our websites and mobile applications, or distributed by our users; or we may be required to block certain content or access to our websites could be restricted; any of which could harm our reputation, business, financial condition and results of operations”.

Internet Regulation

Certain laws that came into force in November 2019 introduced tighter regulation of traffic routing in the Russian internet. While it is not entirely clear yet how this regulation will be applied in practice, its implementation, among other things, may lead to a requirement that Russian internet traffic should be routed through Russian communication centers. This could significantly reduce data transfer speeds significantly and even result in interruptions and delays of online services in Russia.

Additional regulation applicable specifically to technological platforms and ecosystems is being currently under consideration in a number of jurisdictions. Although there is no goal to limit the development of IT businesses, any restrictive legislation in this sphere to be enacted in Russia or in other countries where we operate may limit our flexibility in providing our services and adversely impact our operations.

Privacy and Personal Data Protection Regulation

We are subject to Russian and foreign laws regarding privacy and the protection of our users’ personal data. We publish on our websites our privacy policies and practices concerning the use, processing, storage and disclosure of user data. Any failure by us to comply with our privacy policies as well as Russian or other applicable laws and regulations relating to privacy and the protection of user data may result in proceedings against us by governmental authorities, individuals or other third parties, which may adversely impact our business.

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The adoption and interpretation of data protection laws, and their application to internet operations, are often unclear, difficult to predict and in a constant state of development. Although we believe that we comply with all current requirements, these laws could in the future be interpreted and applied in a manner that is inconsistent with current practice. For instance, in May 2014 the Court of Justice of the European Union established that an operator of a search engine can be obligated to remove from the list of search results links to webpages containing inaccurate or outdated information related to an individual. Russian personal data laws have been amended, granting a similar right to Russian citizens, who may apply for the removal of search results that link to inaccurate or irrelevant information about them. Beyond Russia, in May 2018, the General Data Protection Regulation, or GDPR, came into force in the European Union. We believe that we have taken all necessary steps to comply with the applicable requirements of the GDPR, although our exposure to users in the EU is relatively limited. Nevertheless, some provisions of the GDPR are formulated broadly and their interpretation by the competent authorities might be unpredictable. Therefore, we may fail to interpret all the requirements in accordance with the official interpretation and may be held liable for noncompliance.

Russian data protection laws provide that an individual must freely consent to the processing of their personal data. Such consent must be concrete, informed and conscious, and may be provided in any form evidencing the fact that consent has been provided, unless otherwise established by federal law, which requires that it be made in writing, signed by digital electronic signature or evidenced in a similar manner prescribed by laws and regulations.

We, like our peers, seek this consent from our users by asking them to click on a button or select a check-box in appropriate circumstances prior to commencement of the account registration process, indicating the user’s consent to our collection, use, storage and processing of personal data. Furthermore, many of our services do not require the creation of an account prior to their use and we collect only limited information in these circumstances. In particular, we place cookies and use other widespread technologies that assist us in improving user experience of our products and services and ultimately benefit both our users and advertisers through behavioral targeting of advertising. No clear legislative guidelines have been provided addressing whether our practices are compliant with the requirements of the data protection legislation in Russia and abroad. There is a risk that such laws may be interpreted and applied in a manner that is not consistent with our current data protection practices. Complying with various regulations in this area may cause us to incur additional costs or to change our business practices. Further, any failure by us to protect our users’ privacy and data may result in a decrease of user confidence in our services, and may ultimately result in a loss of users, which would adversely affect our business.

Once collected, all personal data of Russian users must be stored in databases located inside Russia. Although we have data centers located in Russia, this requirement could limit our flexibility in managing our operations globally. Failure to comply with applicable data protection legislation may lead to the restriction of access to our services.

Russian legislation also regulates “organizers of information distribution”. Organizers of information distribution, such as Yandex, must retain a broad range of data relating to and generated by users for a period of time and provide such data to security and investigation authorities at their request. Organizers of information distribution that use encryption when delivering or processing electronic messages have to provide the security authorities with information necessary for decoding the delivered or processed messages. If Yandex were to fail to comply with the above requirements, the Russian authorities can prescribe the blocking of access to the services of such organizer of information distribution.

Licenses for the Provision of Particular Services

Entities that provide certain telecommunication services for a fee are required under Russian law to obtain a “telematics” license from Roskomnadzor. In order to increase our range of services and diversify our business, we have obtained the required licenses (including telematic licenses) necessary for the provision of certain of our services in Russia. However, we generally do not charge a fee for the online services we provide to our users and therefore believe that we are not required to hold a telematics license for provision of these services. We do, however, generate revenue from ads directed to our users. As a result, it is possible that a Russian court or government agency may construe our online advertising revenues as a fee and determine that we are required to hold an additional telematics license for such services, which would require us to apply for and comply with the terms of any such license.

Additionally, we may in certain cases offer user services for a fee, which could require us to comply with the licensing requirements described above.

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Antimonopoly Regulation

Russian law grants to the Federal Antimonopoly Service, or the FAS, wide powers and authorities to maintain competition in the market, including approval or monitoring of mergers and acquisitions, establishment of rules of conduct for market players occupying dominant positions, prosecution of any abuse of a dominant position, and prevention of cartels and other anti-competitive agreements or practices. The regulator may impose significant administrative fines (up to 15% of the annual revenue derived in the market where the violation occurred) on market players that abuse their dominant position or otherwise restrict competition, and is entitled to challenge contracts, agreements or transactions that are in violation of the antimonopoly regulation. We could be considered to possess a substantial (and even dominant) market share in the online advertising market, ride-hailing market and/or other markets in which we operate. We understand that the regulator from time to time focuses on internet services and, for instance, could in the future recognize online advertising as a separate market, identify dominant players and impose conduct limitations and other restrictions.

In addition, the “fifth antimonopoly package” developed by the FAS is currently under consideration, which would introduce amendments to the existing antimonopoly legislation with regard to digital markets. The new legislation aims to facilitate the review of cases in this sphere. In particular, the document specifies new triggers for determining the dominant position of a digital transactional platform. Therefore, this legislation, if adopted, may have a far-reaching impact on our business, which is difficult to estimate at the present time.

Taxation Regulation

Taxation of legal entities and individuals in Russia is regulated primarily by the Tax Code of the Russian Federation. The scope and application of the Tax Code is elaborated by numerous regulations and clarifications from the Ministry of Finance of Russia and by the Federal Tax Service, which enforces the tax laws. Russian tax law and procedures are still not fully developed and local divisions of the Federal Tax Service have considerable autonomy in tax law interpretation and could potentially interpret tax rules inconsistently. Also, there is extensive court practice on the construction of the Code’s provisions, which can sometimes be unpredictable or even contradictory. Both the substantive provisions of the Russian tax law and the interpretation and application of those provisions by the Russian tax authorities and by Russian courts may be subject to rapid and unpredictable change. See “Risk Factors — Changes in the tax systems in the countries in which we operate, or unpredictable or unforeseen application of existing rules, may materially adversely affect our business, financial condition and results of operations.”

Consumer Protection Legislation

Recent amendments to Russian consumer protection legislation impose duties on aggregators of information about goods and services. These norms are applicable to some of our and Yandex Market’s services and the failure to comply with such norms could lead to liability.

In addition, amendments to the Russian law on protection of consumers set out requirements for pre-installation of local Russian applications on mobile devices, laptop and desktop computers, and smart TV sets applicable as of April 1, 2021. The list of apps for pre-installation includes search, browser, maps, social networks, cloud storage and some others. The requirement is set to be expanded, as of July 1, 2021, to include the possibility to choose default search in browsers. The exact implementation of the pre-installation requirements is still under discussion and may not have significant near-term impact on our operations.

Also, the draft law "On unacceptable contract terms that infringe on the rights of consumers" developed by Rospotrebnadzor and submitted to the State Duma in 2021 provides for a wide list of contract terms that are prohibited in contracts with consumers was well as with merchants, and also for aggregators of information about goods and services. There is civil and administrative liability in the event of non-compliance with the requirements. The wording used in the draft law is vague and generalized, which can lead to legal uncertainty and could negatively affect the company's services that interact with consumers (and may result in liability for violation of such law).

Securities Regulation

Our Class A ordinary shares are currently listed on the NASDAQ Global Select Market (although currently

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subject to suspension of trading) and have been admitted to trading on the Moscow Exchange since June 2014. We are required to comply with specific Russian regulation concerning information disclosure, insider trading and certain other requirements as may be applied to foreign issuers in Russia.

Regulation of Self-Driving cars

Our Self-Driving Group is subject to extensive and evolving regulation with respect to this new technology and operating model. In particular, current and emerging regulations govern the ability to test autonomous vehicles on public roads, which is an important stage in the introduction of autonomous technology to the transportation infrastructure and the development of driverless taxi services.

Autonomous vehicles are allowed on public roads in Russia in a test mode under Decree of the Government of the Russian Federation of November 26, 2018 No. 1415. Such testing is subject to the following restrictions: presence of a driver behind the wheel; limitations to certain territories, currently including Moscow, Saint-Petersburg and the Republic of Tatarstan; and a prohibition on the commercial testing of self-driving cars. Such restrictions complicate the development of autonomous driving systems which impacts our still-developing Self-Driving Group.

A law on experimental legal regimes in the field of digital innovations was recently enacted in the Russian Federation. This law aims to ease the legal regulation applicable to developers of digital innovations in seeking formal approval for innovative solution applications, including self-driving cars. There are also discussions underway regarding the bill of amendment to the current legal regulation which impedes such formal approval of digital innovations, which would formally introduce a regime for experimental technologies

Regulations of Other Business Units; Other Jurisdictions

A number of our business units, including in particular MLU (Taxi), operate in sectors that are subject to extensive governmental scrutiny and rapidly evolving regulatory requirements, both in Russia and in other jurisdictions in which we operate or may begin operating. We continuously monitor such regulatory developments and actively participate where appropriate in the development of the regulatory frameworks for these emerging businesses and operating models.  

In addition, because many of our services are accessible worldwide and are becoming increasingly available to other users globally, certain foreign jurisdictions, including those in which we have not established a local office, employees or infrastructure, may require us to comply with their local laws.

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world. Since 1997, we have delivered world-class, locally relevant search and information services. Additionally, we have developed market-leading on-demand transportation and delivery services, as well as navigation products, and have expanded into the e-commerce, online entertainment, and cloud computing markets in order to assist consumers in our core market and internationally.

We are one of the largest European internet companies and the leading search provider in Russia, the leading Russian ride-hailing business with branches in 19 other countries across CIS and EMEA, a media provider with a rapidly growing subscription base, and one of the top e-commerce and food tech businesses in Russia (Yandex Market, Yandex Eats, Yandex Lavka). We are also exploring growth opportunities for a number of our businesses internationally.

For the Search and portal business our principal constituencies are:

Online advertising revenues accounted for 69.4%, 57.9% and 46.8% of our total revenues in 2019, 2020 and 2021, respectively. Our online advertising revenues consist of fees charged to advertisers for serving online ads on our websites and apps and those of our partners in the Yandex Advertising Network. Although the majority of our revenues are generated by direct sales to our advertisers, a significant portion of our advertising is sold through media agencies.

We benefit from a large and diverse base of advertisers. Our advertisers include individuals and small, medium and large enterprises across Russia and the other countries in which we operate. No individual advertiser accounted for more than 1% of our total revenues in 2019, 2020 or 2021. On a geographical basis, based on the billing address of the customer, we generated more than 92% of our total revenues in each of 2019, 2020 and 2021 from customers in Russia.

In 2021, our mobility businesses, which consist of our Ride-hailing business, our car-sharing business Yandex Drive, our FoodTech businesses, and our last mile logistics solution Yandex Delivery, showed a 94% increase in revenue compared with 2020. The largest contributors to this growth were the increase in the number of rides, fast growth in GMV¹ in the Ride-hailing and Yandex Drive businesses and the opening of the new dark stores as part of the Yandex Lavka service, reaching a total of 404 stores as of the end of December 2021.

Yandex Market GMV² increased by 180% and revenues grew by 22% in 2021 compared with 2020. The growth was driven by a combination of factors, including the expansion of the customer and merchant base, as well as product improvement, the expansion of Market Express offer and order frequency. The slower-than-GMV revenue growth is explained by the changes in marketplace revenue mix, reflecting an increase in the share of marketplace revenues (from sales of goods (1P) and commission and other marketplace revenues (3P)) priced on CPA (cost per action) model versus the share of price comparison services priced on a CPC (cost-per-click) basis.

¹ GMV (or gross merchandise value) is the value of orders delivered (and settled by customers) recognized on the date of delivery at their final prices, including VAT.

² Yandex Market GMV is defined as the value of all merchandise sold through our Yandex Market marketplace including VAT.

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Media Services revenues grew 136% in 2021 compared with 2020. The increase was primarily driven by the growth of subscription revenue (including the rapid growth of the Yandex Plus program), licensing revenue (original content produced and exclusive content purchased), as well as devices revenue and ticket sales.

We believe the most significant factors that influence our businesses performance in the ordinary course include the following:

Operating Segments

We manage and report on our businesses in the following operating segments:

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guidance (provided in our Q4 2021 financial press release on February 15, 2022) should no longer be relied upon and we are not able to provide any forward-looking comments at this stage.

In addition to the impact of the current macroeconomic environment, there are several other key trends influence our results of operations in the ordinary course:

We have diversified our operations in recent years from a principally advertising-based business into a comprehensive digital platform for consumers and businesses. The change in revenue mix (towards higher share of Ride-Hailing, E-commerce, Media Services and other new opportunities with different margin profiles and stages of investments) remains an important driver of the group’s consolidated operating margin. The share of non-advertising revenue has increased from 30.6% in 2019 to 42.1% in 2020 and 53.2% in 2021.

Our revenues are also impacted by some seasonal factors:

In 2020 and 2021 we experienced less seasonality as a result of the COVID-19 pandemic and related restrictions. There is a high degree of uncertainty over the impact of the current geopolitical events on the seasonality in 2022.

Recent Acquisitions

Yandex Market (2020)

On June 23, 2020, we entered into a binding agreement to reorganize our joint ventures, Yandex Market and Yandex.Money. On July 23, 2020, we completed the acquisition of our partner’s interest in Yandex Market (approximately 50%) for RUB 42,000 million and sold to our partner a 25% plus RUB 1 interest in Yandex Money for approximately RUB 2,420 million. We paid net cash consideration of RUB 39,580 million. The acquisition is accounted for as a step-acquisition under business combination rules.

Other Acquisitions (2020)

During the year ended December 31, 2020, we completed other acquisitions for a total consideration of approximately RUB 529 million.

Acropol Bank (2021)

On July 16, 2021, we completed the acquisition of a 100% ownership interest in Commercial Bank ACROPOL, JSC (“Acropol”). As a result of the acquisition, we received all of Acropol’s licenses, including a universal banking license. Cash consideration transferred totaled RUB 986 million.

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Transaction with Uber (2021)

On August 30, 2021, we entered into a Framework Agreement with Uber Technologies, Inc., and certain of its affiliates (“Uber”), to restructure our joint ventures, MLU B.V. (“MLU”) and Yandex Self Driving Group B.V. (“SDG”). Pursuant to this agreement, for total consideration of $1,000 million in cash, we acquired from Uber its entire equity interest in SDG and an additional 4.5% interest in MLU, both of which were completed in September 2021, as well as Uber’s entire indirect interest in Yandex Eats, Yandex Lavka and Yandex Delivery, each of which was demerged from MLU and acquired in December 2021. The transaction provides us and our employees a total of approximately 71% ownership in the newly restructured MLU which will focus on mobility businesses, including ride-hailing and car-sharing services. The transaction was accounted for as an equity transaction.

Acquisition of Axelcroft Group (2021)

On February 2, 2021, we entered into a share purchase agreement with Fasten CY Limited and completed the acquisition of 100% of the shares of Axelcroft Limited and its subsidiaries (“Axelcroft Group”), representing certain components of the ride-hailing and cargo business of the Vezet Group for total cash consideration of RUB 12,916 million. The transaction was intended to strengthen our position and enhance customer care across Russian regions. The transaction was accounted for as a business combination.

Other Acquisitions (2021)

During the year ended December 31, 2021, we completed other acquisitions for total consideration of approximately RUB 1,575 million.

A further description of the acquisitions and their accounting implications can be found in Note 3 of our audited consolidated financial statements included elsewhere in this Annual Report.

Our consolidated income from operations as a percentage of total revenues decreased from 14.0% in 2019 to 7.2% in 2020, and to a loss of 3.7% in 2021. The lower margin was primarily due to increasing investments in new attractive opportunities (including investments in Yandex Market and development of Yandex Plus) as well as the changing mix of businesses (i.e., an increase as a percentage of our total revenues of costs related to segments with margins lower than those of our core advertising business).

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The table below presents information about the revenues of our reportable segments:

The table below presents information about the adjusted EBITDA our reportable segments:

Eliminations represent the elimination of transactions between the reportable segments, including advertising agreements, brand royalties, logistics services, sales of devices and others.

For the reconciliation between total adjusted EBITDA and net income/(loss) before income tax expense see Note 17 — “Information about segments, revenues & geographic areas” in the Notes to our consolidated financial statements included elsewhere in this Annual Report.

Our Ride-hailing, Yandex Drive, Logistics and FoodTech segments comprised MLU B.V. group before December 21, 2021 when we completed the restructuring of our joint ventures with Uber.

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Online advertising revenues. Online advertising revenues increased by RUB 40,168 million, or 31.8%, from 2020 to 2021 and by RUB 4,712 million, or 3.9%, from 2019 to 2020. Online advertising revenue growth over the periods under review resulted primarily from growth in sales of performance-based online ads, driven by an increase in the number of paid clicks. The rate of online advertising revenues growth in 2021 is higher than in 2020, reflecting the adverse impact of the COVID-19 pandemic in 2020 and the recovery in 2021. On a two-year stack basis online advertising revenues grew by 17%.

Revenues of MLU businesses, excluding sales of goods. Revenues related to MLU, excluding sales of goods mainly represent revenues from our Ride-hailing and Yandex Eats businesses as well as Yandex Drive and Logistics. Ride-hailing and Logistics revenues mainly represent commissions for providing ride-hailing and logistics services related to our Yandex Go and Uber mobile applications. For ride-hailing and logistics services provided to individual users, we are not a principal and report only commission fees as revenue. For services provided to corporate clients we act as the principal and revenue and related costs are recorded gross. FoodTech revenues, excluding sales of goods (i.e. Yandex Lavka), include revenues of Yandex Eats (where we act as an agent for restaurants and grocery stores) and other revenue streams. The increase of revenues related to MLU, excluding sales of goods in 2021 was driven by the growth in Ride-hailing (including our corporate Taxi business), followed by the strong performance of Logistics business, and our Yandex Eats businesses, driven by restaurants vertical and further development of our grocery business. The increase of revenues related to the MLU businesses, excluding sales of goods in 2020 was mainly attributed to the growth of ride-hailing businesses, our corporate Taxi business and to the growth of our FoodTech businesses, driven by the strong performance of Yandex Eats business, particularly as a result of the COVID-19 pandemic.

Revenues related to sales of goods. Revenues related to sales of goods principally represent our revenue from Yandex Market, revenues from our FoodTech businesses (specifically, Yandex Lavka, where we use a first-party (1P) business model and act as a direct retailer) and from our Devices business. Revenues related to sales of goods increased significantly by RUB 35,765 million from 2020 to 2021 and by RUB 18,000 million from 2019 to 2020. The growth was primarily due to our FoodTech businesses, driven by our hyperlocal grocery delivery service, Yandex Lavka, and consolidation of Yandex Market, as well as increasing sales of Devices. Revenues related to sales of goods on a like-for-like basis including revenues of Yandex Market for the full year 2020 and 2019 increased by 96% from 2020 to 2021 and increased by 121% from 2019 to 2020.

Other revenues. Other revenues principally represent our revenues from our Media Services subscription model, from third-party sales through the Yandex Market marketplace platform, from Search and Portal’s Yandex Disk and Travel Services, from Yandex Cloud and from Geolocation Services. Other revenues increased by RUB 18,008 million, or 126.5%, from 2020 to 2021 and by RUB 7,361 million, or 107.1%, from 2019 to 2020. Other revenues on a like-for-like basis including revenues of Yandex Market for the full year 2020 and 2019 increased by 109% from 2020 to 2021 and increased by 149% from 2019 to 2020.

Operating Costs and Expenses

Our operating costs and expenses consist of cost of revenues; product development expenses; sales, general and administrative expenses, depreciation and amortization expense and goodwill impairment.

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Cost of revenues. Cost of revenues consists primarily of traffic acquisition costs, the costs related to MLU businesses, excluding sales of goods, cost of devices and other goods sold and other cost of revenues.

Traffic acquisition costs (TAC) are the amounts paid to our partners in the Yandex Advertising Network for serving our online ads on their websites and to our partners who distribute our products or otherwise direct search queries to our websites. These amounts are primarily based on revenue-sharing arrangements. Some of our distribution partners are compensated on the basis of the number of installations of Yandex Browser or search apps.

We pay fees to our distribution partners on a non-refundable basis following the period in which the distribution fees are earned. We do not have a standard term or termination provision that applies to agreements with our distribution partners.

Cost of revenues related to MLU businesses, excluding sales of goods primarily consists of the cost of corporate taxi services paid to taxi partners for providing services to corporate clients and various outsourced services associated with direct operations (for example, dispatch control, call center services, testing of software security, and logistics costs for the food delivery business), as well as cost related to Yandex Drive (consisting of costs of leasing cars, gasoline costs and outsourced services such as insurance, maintenance and other services).

Cost of devices and other goods sold primarily consist of the costs of Yandex Market and our FoodTech service Yandex Lavka, as well as cost of devices sold.

Other costs of revenues include logistics costs related to e-commerce, content costs, the expenses associated with the operation of our data centers, including related personnel costs, share-based compensation expense, rent, utilities and telecommunications bandwidth costs.

The following table presents the primary components of our cost of revenues in absolute terms and as a percentage of revenues for the periods presented:

The majority of our traffic acquisition costs relate to the Yandex Advertising Network, with a smaller portion relating to distribution partners. Traffic acquisition costs relating to the Yandex Advertising Network represent our partners’ share in the amount of Yandex Advertising Network revenue for the period. These costs increased by RUB 4,311 million from 2020 to 2021 due to the recovery of advertisers’ activity in 2021 compared to 2020 and decreased by RUB 2,662 million from 2019 to 2020 primarily due to the adverse effect of COVID-19 on advertisers’ activity in the partner network, as well as the decrease of advertising inventory from some of our partners. In addition, the amounts paid to our distribution partners increased by RUB 1,412 million from 2020 to 2021 due to the adverse impact of the COVID-19 pandemic in 2020 on our distribution partners’ revenue and the recovery in 2021. The amounts paid to our distribution partners decreased by RUB 532 million from 2019 to 2020 due to optimization of distribution TAC rates. As a percentage of total revenues, traffic acquisition costs decreased from 13.2% in 2019 to 9.1% in 2020 and to 7.2% in 2021, as a result of growth of non-advertising revenue as a percentage of total revenue and the corresponding decline in online revenue related costs.

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Costs related to the MLU businesses, excluding cost of goods sold increased by RUB 23,931 million, or 82.5%, from 2020 to 2021, and by RUB 8,901 million, or 44.3%, from 2019 to 2020, primarily due to the expansion of our corporate ride-hailing and logistics businesses, where revenues and related costs are recorded on a gross basis, as well as increased costs of FoodTech logistics services.

Cost of devices and other goods sold increased by RUB 32,371 million, from 2020 to 2021 and by RUB 15,371 million, from 2019 to 2020, primarily driven by consolidation of Yandex Market and strong growth of Yandex Lavka and our Devices business.

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Other cost of revenues increased by RUB 26,194 million, or 136.5%, from 2020 to 2021, primarily driven by consolidation of Yandex Market as well as increased investments in content within Media Services and Zen. Other cost of revenues increased by RUB 8,868 million, or 85.9%, from 2019 to 2020, primarily driven by consolidation of Yandex Market in the amount of RUB 4,005 million. Cost of revenues excluding those related to Yandex Market increased by RUB 4,863 million from 2019 to 2020 as a result of our investments in content within Media Services and Search and Portal.

Product development. Product development expenses consist primarily of personnel costs incurred for the development, enhancement and maintenance of our search engine and other Yandex services and technology platforms (such as Yandex Cloud, Zen, self-driving vehicles business and others). We also include rent and utilities attributable to office space occupied by development staff in product development expenses. We expense product development costs as they are incurred.

The following table presents our product development expenses in absolute terms and as a percentage of revenues for the periods presented:

Product development expenses increased by RUB 12,122 million, or 33.4%, from 2020 to 2021, and by RUB 7,130 million, or 24.4%, from 2019 to 2020. These increases were primarily due to increases in headcount and salaries in 2021 and 2020, as well as increases in share-based compensation expense. Development personnel headcount increased from 5,784 as of December 31, 2019 to 6,459 as of December 31, 2020, and to 9,192 as of December 31, 2021. As a percentage of revenues, product development expenses remained flat from 2019 to 2020, and decreased by 3 percentage points from 2020 to 2021, reflecting faster revenue growth.

Sales, general and administrative. Sales, general and administrative expenses consist of compensation and office rent expenses for personnel engaged in customer service, sales, sales support, finance, human resources, facilities, information technology and legal functions; fees for professional services; and advertising and marketing expenditures.

The following table presents our sales, general and administrative expenses in absolute terms and as a percentage of revenues for the periods presented:

Sales, general and administrative expenses increased by RUB 60,011 million, or 95.4%, from 2020 to 2021 and by RUB 12,618 million, or 25.1% from 2029 to 2020. The increase in 2021 compared to 2020 was primarily due to an increase in advertising and marketing expenses of RUB 27,964 (including RUB 7,744 million due to the consolidation of Yandex Market) as well as in personnel expenses of RUB 14,295 million (including RUB 3,027 million due to the consolidation of Yandex Market), which supported GMV growth acceleration of Yandex Market and revenue growth of

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Search Portal, Ride-hailing, FoodTech, Media Services and Yandex Delivery. The dynamics in the second and third quarters of 2021 were also affected by the low operating costs base in prior year periods due to COVID-19-related cost optimization measures that were implemented in 2020.

Additional factors contributing to the overall increase from 2020 to 2021 were increases in bank and payment systems commissions of RUB 5,517 million, reflecting an increase in the number of rides in the Ride-hailing segment and in the number of orders in FoodTech and Yandex Delivery segments, as well the consolidation of Yandex Market; other professional and outsourced services of RUB 3,257 million; and in share-based compensation expense of RUB 2,783 million.

The increase in 2020 compared to 2019 was primarily due to an increase in personnel expenses of RUB 4,633 million in 2020 compared to 2019, as a result of a headcount and salary increases.

Additional factors contributing to the overall increase from 2019 to 2020 were increases in share-based compensation expense of RUB 2,795 million, in office rent and utilities expenses of RUB 1,608 million due to additional rent agreements, in bank and payment systems commissions of RUB 1,421 million mainly related to an increase in the number of rides in Ride-hailing segment and the number of orders in FoodTech segment, as well the consolidation of Yandex Market, and in advertising and marketing expenses of RUB 1,384 million mainly related to the consolidation of Yandex Market.

Depreciation and amortization. Depreciation and amortization expense relates to the depreciation of our property and equipment, mainly servers and networking equipment, leasehold improvements, data center equipment and office furniture, and the amortization of our intangible assets with definite lives.

The following table presents our depreciation and amortization expense in absolute terms and as a percentage of revenues for the periods presented:

Depreciation and amortization expense increased by RUB 6,424 million, or 36.3%, from 2020 to 2021 and by RUB 2,910 million, or 19.7%, from 2019 to 2020. The increases from 2020 to 2021 and from 2019 to 2020 were primarily due to: amortization expense related to technologies and licenses in the amount of RUB 710 million and RUB 467 million, respectively; amortization expense related to acquired software in the amount of RUB 987 million and RUB 448 million, respectively; depreciation expense related to server and network equipment and infrastructure systems in the amount of RUB 2,919 million (primarily the result of our investments in servers and data center equipment), and RUB 1,008 million, respectively; depreciation expense related to finance leases in the amount of RUB 474 million and RUB 503 million, respectively; and depreciation expense related to office furniture and equipment in the amount of RUB 442 million and RUB 224 million, respectively.

We have both operating and finance leases in Yandex Drive. In addition, we depreciate the cost of certain equipment that we install in carsharing cars, such as infotainment systems and telematics. Any depreciation of the Russian ruble may result in a material increase in our capital expenditures and respective depreciation and amortization.

Share-based compensation. In our consolidated statements of operations, share-based compensation expense is recorded in the same functional area as the expense for the recipient’s cash compensation. As a result, share-based compensation expense is allocated among our cost of revenues, product development expenses and sales, general and administrative expenses.

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The following table presents our aggregate share-based compensation expense in absolute terms and as a percentage of revenues for the periods presented:

Share-based compensation expense increased by RUB 5,101 million, or 32.4%, from 2020 to 2021. The growth was primarily related to new equity-based grants made in 2020-2021 (including restricted share units (“RSUs”) granted in respect of SDG, synthetic equity awards for certain business units and PSUs granted in November 2020 and February 2021) as well as the change in the share price of Yandex N.V. and appreciation of the U.S. dollar against the ruble which was offset by the high base effect (related to the replacement of cash bonuses by equity compensation for some senior employees in Q2 2020, in the course of our COVID-19 related cost optimization initiatives) and due to the exchange of Yandex Market and MLU equity awards for new Yandex N.V. RSUs in Q3 and Q4 2020.

Share-based compensation expense increased by RUB 5,873 million, or 59.6%, from 2019 to 2020. The growth was primarily related to the exchange of subsidiary-level equity awards previously granted by Yandex Market and MLU B.V. for new Yandex N.V. RSUs. We accounted for the exchange as a modification resulting in additional cost recognized in Q3 and Q4 2020. In addition, the increase reflected new equity-based grants made in 2019-2020, as well as material appreciation of the U.S. dollar against the ruble.

See Note 16 — “Share-based compensation” in the Notes to our consolidated financial statements included elsewhere in this Annual Report.

Goodwill impairment. The goodwill impairment recorded in 2019 in the amount of RUB 762 million relates to our acquisition of Food Party and was a result of our annual goodwill impairment test. The impairment is the full amount of goodwill recognized at the Food Party acquisition date and allocated to the FoodTech segment. The goodwill impairment was the result of the absence of expected synergies from the integration of the Food Party business model with the existing operations of our other businesses or technologies, resulting in a change of business model of Food Party. No goodwill impairment was recognized in 2020 and 2021.

Revenues and adjusted EBITDA by reportable segments

Revenues by reportable segment. Our revenues attributable to the Search and Portal segment increased by RUB 40,425 million, or 32.4%, from 2020 to 2021 and by RUB 1,997 million, or 1.6%, from 2019 to 2020. The growth in this segment’s revenues is in line with the growth in our overall online advertising revenues. The key driver for the Search and Portal revenue increase is the growth of Yandex’s share of Russian search market (by 0.8% up to 60.7%) driving search revenue growth. Search and Portal revenues accounted for approximately 46.4% of total revenues in 2021, compared with 57.2% in 2020 and 70.0% in 2019.

Our revenues attributable to the Ride-hailing segment increased by RUB 32,305 million, or 79.3%, from 2020 to 2021 and by RUB 6,259 million, or 18.2%, from 2019 to 2020. Ride-hailing revenues accounted for approximately 20.5% of total revenues in 2021, compared with 18.6% in 2020 and 19.6% in 2019. The increase is primarily driven by an increase in the number of rides and solid performance of our corporate Taxi business, which we recognize on a gross basis. We consider the number of rides to be a key performance indicator for our Ride-hailing segment. We define rides as the number of rides completed by the service users (riders) in a given period. Management uses this metric to assess the scale and frequency of usage of our platform and believes that it is the most useful metric for investors to measure the scale and usage of our platform. The number of rides for the years ended December 31, 2019, 2020 and 2021 were 1.4 billion, 1.6 billion and 2.4 billion, respectively.

Our revenues attributable to the Yandex Drive segment increased by RUB 3,842 million, or 45.1%, from 2020 to 2021 and by RUB 980 million, or 13.0%, from 2019 to 2020. Yandex Drive segment’s share of total revenues remained stable for 2021 and 2020. Yandex Drive revenues accounted for approximately 3.5% of total revenues in 2021, compared with 3.9% in 2020 and 4.3% in 2019. The increase of this segment’s revenues in 2021 and 2020 was primarily driven by significant increase in vehicle utilization boosted by rapid development of the B2B vertical on the back of

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improved economic recovery from COVID-19 pandemic.

Our revenues attributable to the Yandex Delivery (Logistics) segment increased by RUB 9,829 million, or 318.8%, from 2020 to 2021. Delivery revenues accounted for approximately 3.6% of total revenues in 2021, compared with 1.4% in 2020. The increase of this segment’s revenues in 2020 and 2021 was primarily driven by a significant increase in the number of deliveries.

Our revenues attributable to the FoodTech segment increased by RUB 20,989 million, or 126.0%, from 2020 to 2021 and by RUB 13,081 million, or 365.2%, from 2019 to 2020. FoodTech revenues accounted for approximately 10.6% of total revenues in 2021, compared with 7.6% in 2020 and 2.0% in 2019. The increase of this segment’s share of total revenues in 2020 and 2021 is primarily due to the growth of our e-grocery business Yandex Lavka driven by an increase in the number of orders and solid performance of our Eats vertical, an increase in the number of orders of our restaurants vertical, and by further development of our grocery delivery service.

Our revenues attributable to the Yandex Market segment amounted to RUB 35,288 million, RUB 13,867 and nil in 2021, 2020 and 2019, respectively, and accounted for approximately 9.9%, 6.4% and none of total revenues in 2021, 2020 and 2019, respectively. Revenues of standalone Yandex Market for the full years 2021, 2020 and 2019 amounted to RUB 35,288 million, RUB 28,831 million and RUB 19,370 million respectively. Revenues from sale of goods (1P) increased primarily due to the business growth, partially offset by a decrease in 1P as a share of GMV. Commission and other marketplace revenues (3P) increased primarily due to overall growth of 3P GMV, partially offset by the lower merchant commissions and a decrease of the 3P blended take-rates (on the back of the expansion of the DBS (Delivery by Seller) model and lower merchant commissions).

Our revenues attributable to the Classifieds segment increased by RUB 2,380 million, or 41.2%, from 2020 to 2021 and by RUB 388 million, or 7.2%, from 2019 to 2020. Classifieds revenues accounted for approximately 2.3% of total revenues in 2021, compared with 2.6% in 2020 and 3.1% in 2019. The decrease of this segment’s revenues in 2020 compared to 2019 is primarily due to the impact of COVID-19 (including the closure of auto dealerships on the back of the strict COVID-19 lockdown regime, and a slowdown in real estate demand as well as СOVID-related supply chain disruptions leading to stock shortages at car dealerships). The decrease of this segment’s revenues in 2021 compared to 2020 is explained by Yandex’s investment strategy (accelerated development of Yandex Market) partially offset by Classifieds' investments in new projects, such as Yandex Rent.

Our revenues attributable to the Media Services segment increased by RUB 10,601 million, or 135.8%, from 2020 to 2021 and by RUB 3,940 million, or 101.9%, from 2019 to 2020. Media Services revenues accounted for approximately 5.2% of total revenues in 2021, compared with 3.6% in 2020 and 2.2% in 2019. The increase was supported by the further expansion of the Yandex Plus subscriber base, an increasing share of paying subscribers, increases in original and exclusive content license revenue, as well as transactional revenue mainly through ticket sales due to market recovery following the easing of the pandemic-related restrictions.

Our revenues attributable to the Other Business Units and Initiatives segment increased by RUB 12,977 million, or 116.8%, from 2020 to 2021 and by RUB 5,062 million, or 83.8%, from 2019 to 2020. Other BUs and Initiatives revenues primarily related to Devices and Zen and increased to approximately 6.8% of total revenues in 2021, compared with 5.1% in 2020 and 3.4% in 2019. The growth in this segment’s revenue is explained by the increase of sales prices and the launch of new products.

Adjusted EBITDA by reportable segments. Our adjusted EBITDA attributable to the Search and Portal segment increased by RUB 18,860 million, or 31.1%, from 2020 to 2021 and by RUB 2,304 million, or 3.9%, from 2019 to 2020. The primary factor contributing to the overall increase in 2021 was revenue growth due to the solid growth of the core search business (supported by product development and improved search share) as well as strong trends in the Yandex Ad Network on the back of improved economic recovery from COVID-19 pandemic partly offset by our investments in increasing effectiveness of advertising products (including our conversion strategies and simplified solutions for SMB clients) and in product and performance marketing to support the growth of iOS market share. The increase in 2020 was adversely impacted by the COVID-19 pandemic and primarily related to the increase in revenue, mainly driven by search and Yandex websites revenues, as well as by improved profitability due to optimization of traffic acquisition costs and growing share of own properties in the total advertising revenues together with pandemic-related cost cutting measures implemented in 2020.

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Our adjusted EBITDA attributable to the Ride-hailing segment increased by RUB 12,374 million, or 125.1%, from 2020 to 2021 and by RUB 4,875 million, or 97.1%, from 2019 to 2020. The increases in 2020 and in 2021 were mainly due to significant revenue growth together with continuing improvement of our operational efficiency. Adjusted EBITDA for 2021 also includes approximately RUB 503 million from a one-off effect related to the reversal of non-income tax provision.

Our negative adjusted EBITDA attributable to the FoodTech segment increased by RUB 6,750 million, or 175.7%, from 2020 to 2021 and by RUB 1,076 million, or 39.0%, from 2019 to 2020. The increases in 2020 and in 2021 were mainly due to expansion of our grocery business and investments in Yandex Lavka, offset by improvement unit economics of the restaurants business.

Our negative adjusted EBITDA attributable to the Yandex Delivery segment remained relatively stable for 2020 to 2021 and was mainly due to the expansion of our service and investments in building a stand-alone supply of drivers and couriers.

Our adjusted EBITDA attributable to the Yandex Drive segment increased by RUB 2,976 million from 2020 to 2021 and by RUB 366 million from 2019 to 2020. On the back of improved economic recovery from COVID-19 pandemic this growth was mainly driven by solid growth in rides as well as significant increase in vehicle utilization boosted by the rapid development of our B2B vertical.

Our negative adjusted EBITDA attributable to the Yandex Market segment increased by RUB 36,338 million, or 883.5%, from 2020 to 2021 and decreased by RUB 4,113 million, or 100.0%, from 2019 to 2020. Negative adjusted EBITDA of standalone Yandex Market for the full years 2021, 2020 and 2019 amounted to RUB 40,451 million, RUB 8,293 million and RUB 8,263 million respectively. Negative adjusted EBITDA increased primarily due to higher operating expenses associated both with the materially increased volume of orders processed by fulfillment and logistics and targeted promotional campaigns, as well as fixed costs related to newly deployed operations infrastructure, partially offset by improving unit economics due to the optimization of delivery options, more efficient resources planning, and streamlining the key operational processes, including simplification of merchant acquisition and enrollment.

Our adjusted EBITDA attributable to the Classifieds segment increased by RUB 996 million, or 93.1%, from 2020 to 2021 and increased by RUB 760 million, or 245.2% from 2019 to 2020. The primary factor contributing to the overall increase of adjusted EBITDA in 2021 was the increase in revenues from auto dealers’ listings, partly offset by investments in the development and marketing of new products and services in order to expand our end-to-end value proposition for both customers and consumers, as well as overall enhancement of the Classifieds segment’s offering. The primary factor contributing to the overall increase of adjusted EBITDA in 2020 was revenue growth as well as the reduction in advertising and marketing expenses due to COVID-19, partly offset by the growth in personnel costs due to headcount increases.

Our negative adjusted EBITDA attributable to the Media Services segment increased by RUB 2,729 million, or 73.1%, from 2020 to 2021 and by RUB 1,533 million, or 69.6%, from 2019 to 2020. These increases are mainly due to our investments in content and marketing which translated into the growth of the Yandex Plus subscriber base as well as the growth of personnel expenses required to support the expansion of the business in both 2020 and 2021.

Our negative adjusted EBITDA attributable to the Other Business Units and Initiatives segment increased by RUB 6,580 million, or 79.3%, from 2020 to 2021, and increased by RUB 2,428 million, or 41.4%, from 2019 to 2020. The increases in 2021 were primarily due to our launch of new experiments, such as FinTech and Lavka Overseas as well as continued investments in Yandex SDG, Yandex Uslugi, Zen and other initiatives and experiments. The increases in 2020 were primarily due to continued investments in Yandex SDG, Education, Yandex Uslugi and other initiatives and experiments.

Interest Income

Interest income increased from RUB 3,869 million in 2020 to RUB 4,615 million in 2021 mainly due to the increase in interest rates. Interest income increased from RUB 3,315 million in 2019 to RUB 3,869 million in 2020 principally as a result of an increase of average amounts of our deposits during the year.

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Interest Expense

Interest expense increased from RUB 2,373 million in 2020 to RUB 3,711 million in 2021. The increase was primarily due to amortization of debt discount and interest expenses related to our convertible bonds in the amount of RUB 521 million and financial lease interest expenses in the amount of RUB 578 million due to the expansion of fulfillment capacity for Yandex Market as well as our fleet of cars for our car-sharing business. Interest expense increased from RUB 74 million in 2019 to RUB 2,373 million in 2020 mostly due to the increase of amortization of debt discount and interest expenses related to our convertible bonds issued in the first quarter of 2020.

Effect of Yandex Market consolidation

On July 23, 2020, we completed the acquisition of our partner’s interest in Yandex Market (approximately 50%) for RUB 42,000 million. The acquisition was accounted for as a step-acquisition under the business combination rules. Accordingly, we remeasured our previously held equity interest in Yandex Market to fair value, in the amount of RUB 41,838 million, and recorded a gain of RUB 19,230 million. As a result, we became the controlling shareholder in Yandex Market and its financial results have been consolidated in our consolidated financial statements from July 24, 2020.

Income/(loss) from equity method investments

Income from equity method investments in the amount of RUB 6,367 million in 2021 represented by the RUB 3,354 million gain on our share dilution of investment in ClickHouse Inc. and RUB 3,014 million in investments in venture capital funds as part of our strategic initiatives. Net loss from equity method investments in the amount of RUB 2,175 million and RUB 3,886 million in 2020 and 2019 respectively mainly related to an investment in Yandex Market B.V. See Note 4 — “Consolidated financial statements details” in the Notes to our consolidated financial statements included elsewhere in this Annual Report.

Because the functional currency of our operating subsidiaries in Russia is the Russian ruble, changes in the ruble value of these subsidiaries’ monetary assets and liabilities that are denominated in other currencies (primarily the U.S. dollar) due to exchange rate fluctuations are recognized as foreign exchange gains or losses in our consolidated statements of operations. There were no significant fluctuations in exchange rates in 2021, so we recognized an insignificant foreign exchange gain compared to previous period in the amount of RUB 235 million.

In 2020 we recognized foreign exchange gain in our Russian subsidiaries in the amount of RUB 4,856 million due to depreciation of the Russian ruble against the U.S. dollar. On the contrary, we recognized foreign exchange losses of RUB 2,104 million in our foreign companies where functional currency primarily is the U.S. Dollar, because they have monetary assets and liabilities denominated in the ruble.

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In 2019 because of the material appreciation of the ruble, we recognized foreign exchange losses of RUB 1,288 million in our Russian subsidiaries as other loss, net, arising from changes in the value of the U.S. dollar compared with the Russian ruble during that year.

The item labelled as “Contribution to a not-for-profit organization” in 2021 represents our RUB 1.5 billion contribution to the Russian Fund for the Development of Information Technologies to support Russian technology companies in promoting their products and services.

Our income tax expense decreased by RUB 5,763 million from 2020 to 2021 and increased by RUB 1,537 million from 2019 to 2020 primarily as a result of a decrease and increase in taxable income, respectively. Our effective tax rate decreased by 139.0 percentage points from 2020 to 2021 and decreased by 15.2 percentage points from 2019 to 2020. The effective tax rate differs from the statutory rate mainly as a result of the effects of deferred tax asset valuation allowances, share-based compensation expense, items not deductible for tax purposes, differences in foreign tax rates of certain our subsidiaries, contribution to a not-for-profit organization, withholding tax on distributed profits from subsidiaries, tax provisions recognized as well as gain on Yandex Market consolidation and loss on Yandex.Money disposal.

In 2021, we made adjustments to our policy of dividend distribution by Yandex LLC to Yandex N.V. reflecting our plans to re-invest a higher share of our profits into numerous attractive opportunities and businesses in Russia. As a result of these changes we recognized a tax gain in the amount of RUB 1,965 million.

See “Critical Accounting Policies, Estimates and Assumptions—Tax Provisions” for additional information about our income tax expense. A reconciliation of our statutory income tax rate to our effective tax rate is set forth in Note 10 of our audited consolidated financial statements included elsewhere in this Annual Report.

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As of December 31, 2021, we had a bank overdraft balance of RUB 2,940 million used for maintaining sufficient funds for operational payments during public holidays in the beginning of January 2022. This overdraft was fully repaid in January 2022. We also had RUB 3,101million liabilities under a reverse factoring program and had several confirmed credit facilities, consisting of credit lines in the amount of RUB 14,859 million, documentary credit lines in the amount of RUB 4,022 million, overdraft lines of RUB 12,989 million, a leasing facility of RUB 5,884 and a factoring limit in the amount of 6,797 that remained unused.

We need capital to finance our capital expenditures, working capital, acquisitions, repayments of debt and related interest payments, as well as general corporate activities. We expect to continue to finance these expenditures mainly through our operating cash flow, and to the extent required, to incur additional indebtedness through borrowings or additional capital raising activities. Additional financing may not be available on terms favorable to us or at all.

In the current geopolitical environment, capital controls and other restrictions have been imposed in Russia that limit our ability to upstream funds from our Russian operating subsidiaries. In addition, pursuant to long-standing Russian legislation, dividends must be limited to the cumulative net profits of our Russian operating subsidiaries, calculated in accordance with Russian accounting principles, which differs from the cumulative net profit calculated in accordance with U.S. GAAP; and dividends cannot result in negative net assets in our Russian subsidiaries or render them insolvent.

­­­­­­­­­­­ Cash flows provided by operating activities.

Net cash provided by operating activities consists of net income/(loss) adjusted to reconcile net income to net cash provided by operating activities, including depreciation of property and equipment, amortization of intangible assets, operating lease right-of-use assets amortization and the lease liability accretion, amortization of debt discount and issuance costs, share-based compensation expense, deferred income taxes, foreign exchange gains and losses, effect of consolidation of Yandex Market, goodwill impairment, amortization of content assets, income/(loss) from equity method investments, and the effect of changes in operating assets and liabilities excluding the effect of acquisitions.

Net cash provided by operating activities decreased by RUB 23,311 million from 2020 to 2021. The decrease was due to net income in 2020 which turned to net loss in 2021, adjusted to reconcile net income to net cash provided by operating activities of RUB 15,370 million and an increase of change of RUB 7,941 million in operating assets and liabilities excluding the effect of acquisitions. Changes in operating assets and liabilities excluding the effect of acquisitions were RUB 28,450 million in 2021 and increased between the periods primarily due to an increase in cash outflow related to changes in accounts receivable, net, inventory, content assets, prepaid expenses and other assets partly compensated by an increase in cash inflow from changes in accounts payable, accrued and other liabilities and non-income taxes payable, deferred revenue and content liabilities in 2021 compared to 2020.

Net cash provided by operating activities decreased by RUB 11,775 million from 2019 to 2020. This change was primarily due to increased changes of RUB 10,693 million in operating assets and liabilities excluding the effect of acquisitions with a slight decrease in net income, adjusted to reconcile net income to net cash provided by operating activities of RUB 1,082 million. Changes in operating assets and liabilities excluding the effect of acquisitions were RUB 20,509 million in 2020 and increased between the periods primarily due to an increase in cash outflow related to changes in accounts payable, accrued and other liabilities and non-income taxes payable , accounts receivable, net, and content assets, partly compensated by increased changes in deferred revenue in 2020 compared to 2019.

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Cash flows (used in)/provided by investing activities.

Net cash provided by investing activities in 2021 in the amount of RUB 21,994 million compared to net cash used in investing activities in 2020 in the amount of RUB 119,947 million was mainly a result of an increase in cash flows from maturities of term deposits (net of investment in term deposits) of RUB 142,931 million and a decrease in cash used for acquisitions of businesses, net of cash acquired of RUB 25,562 million. Cash used for acquisitions of businesses net of cash acquired in the amount of RUB 8,236 million in 2021 mainly related to the acquisition of Axelcroft Group in February 2021 (RUB 7,228 million), as well acquisition of Acropol Bank and other acquisitions (see Note 3 — “Business combinations and investment transactions” in the Notes to our consolidated financial statements included elsewhere in this Annual Report). Purchases of property and equipment and intangible assets increased by RUB 20,070 million. In addition, in 2021, we made several treasury investments in the amount of RUB 10,604 million.

Net cash used in investing activities in 2020 increased by RUB 70,811 million compared to 2019 as a result of an increase in cash used for acquisitions of business, net of cash acquired of RUB 33,451 million mainly related to the consolidation of Yandex Market less consideration received from the sale of Yandex.Money of RUB 39,580 million in July 2020 (net of the effect of consolidation of its cash and cash equivalents), increases in investments in term deposits (net of maturities of term deposits) of RUB 28,600 million and an increase in capital expenditure of RUB 4,008 million. There were no proceeds from sale of equity securities in 2020 compared to RUB 4,612 million in 2019.

Our total capital expenditures were RUB 44,621 million in 2021 and RUB 24,551 million in 2020. Our capital expenditures have historically consisted primarily of the purchases of servers and networking equipment for data centers. We also incurred significant capital expenditures in 2020 and 2021 related to the construction of our large data centers, fulfillments and sort centers, and to the construction of new office building for our headquarters.

Cash flows (used in)/provided by financing activities.

Net cash used in financing activities in 2021 was RUB 84,845, consisting mainly of cash outflows from payment under the transaction with Uber of RUB 73,077 million, repurchases of Class A ordinary shares of RUB 6,966 million, payment of contingent consideration and holdback amount of RUB 6,073 million slightly offset by the cash inflow related to proceeds from overdraft borrowings of RUB 2,941 million.

Net cash provided by financing activities in 2020 was RUB 139,676, consisting mainly of cash inflows from proceeds from issuance of convertible notes of RUB 82,046 million and proceeds from issuance of Class A ordinary shares of RUB 72,650 million, slightly offset by the cash outflow related to repurchases of Class A ordinary shares of RUB 10,165 million.

Off-Balance Sheet Items

We do not currently engage in off balance sheet financing arrangements, and do not have any material interest or obligation, including a contingent obligation, arising out of a variable interest, in entities referred to as variable interest entities, which include special purpose entities and other structured finance entities.