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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

OR

SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

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)

John Boynton, Chairman of the Board of Directors

Schiphol Boulevard 165

Schiphol 1118 BG, The Netherlands

Telephone: +31 20-206-6970

Facsimile: +31 20-446-6372

Email: askir@y-nv.com

(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.

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Ordinary Shares

YNDX

NASDAQ Global Select Market

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)

Title of each class

Number of shares outstanding

Class A

325,783,607

Class B

35,698,674

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.

Large accelerated filer

Accelerated filer

¨

Non-accelerated filer

¨

Emerging growth company

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.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). 

† 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:

U.S. GAAP

International Financial Reporting Standards 
as issued by the International Accounting
Standards Board

Other 

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 558,663 Class A shares held in treasury and nil Class C shares issued and fully paid as of December 31, 2023. 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.

TABLE OF CONTENTS

Page

Introduction and Explanatory Note

4

PART I.

Item 1.

Identity of Directors, Senior Management and Advisers

6

Item 2.

Offer Statistics and Expected Timetable

6

Item 3.

Key Information

6

Item 4.

Information on the Company

18

Item 4A.

Unresolved Staff Comments

32

Item 5.

Operating and Financial Review and Prospects

33

Item 6.

Directors, Senior Management and Employees

50

Item 7.

Major Shareholders and Related Party Transactions

55

Item 8.

Financial Information

57

Item 9.

The Listing

57

Item 10.

Additional Information

58

Item 11.

Quantitative and Qualitative Disclosures About Market Risk

67

Item 12.

Description of Securities other than Equity Securities

67

PART II.

Item 13.

Defaults, Dividend Arrearages and Delinquencies

67

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

67

Item 15.

Controls and Procedures

67

Item 16A.

Audit Committee Financial Expert

68

Item 16B.

Code of Ethics

68

Item 16C.

Principal Accountant Fees and Services

68

Item 16D.

Exemptions from the Listing Standards for Audit Committees

68

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

69

Item 16F.

Change in Registrant’s Certifying Accountant

69

Item 16G.

Corporate Governance

69

Item 16H.

Mine Safety Disclosure

69

Item 16J.

Insider trading policies

69

Item 16K.

Cybersecurity

69

PART III.

Item 17.

Financial Statements

112

Item 18.

Financial Statements

112

Item 19.

Exhibits

113

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 (December 2023), data.ai (January 2024), Growth from Knowledge (GfK) (January 2024), the Russian Federal State Statistics Service (Rosstat) (February 2024) and the Bank of Russia (March 2024).

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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 impact of macroeconomic developments and the current geopolitical crisis, including international sanctions and export controls, currency volatility, currency controls, increased interest and inflation rates and restrictions in the public trading of certain stocks;
the impact of the extensive changes to our group as part of our reorganization and the pending sale of all of the group’s business in Russia and certain international markets;
the expected dynamics of the business markets in the countries in which we currently operate;
competition in the internet search, ride-hailing and other markets in the countries in which we currently operate;
our anticipated growth, budgeting and investment strategies;
our future business development, results of operations and financial condition, including that of our retained businesses as well as those businesses to be divested as part of our sale transaction;
expected changes in our margins and certain cost or expense items in absolute terms or as a percentage of our revenues;
our ability to attract and retain users, advertisers and partners; and
future supply and demand dynamics.

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.

3

INTRODUCTION AND EXPLANATORY NOTE

The Yandex group is in the midst of the most fundamental changes since the founding of our business more than 25 years ago. Over the past two years, the war in Ukraine and the resulting geopolitical tensions have created exceptional challenges for our group and our team, and we are pleased that we are now implementing steps to address these circumstances.

On February 5, 2024, we announced our definitive agreement with a purchaser consortium to sell all of the group’s businesses in Russia and certain international markets (the “Target”). We were pleased that our shareholders, including our Class A shareholders, approved this proposal in early March. This transaction (the “Sale”) will be implemented in two closings.

We expect that the first closing will occur in the coming weeks. At this closing, Yandex N.V. will sell up to 68% of the Target for total consideration consisting of RUB 230 billion in cash, paid in Chinese Yuan outside Russia, and up to 68 million Class A shares of Yandex N.V. In addition, an amendment of our articles of association that was approved by our shareholders in March will become effective at the first closing. This amendment will significantly simplify our corporate governance and capital structure – in particular, by eliminating the “priority share” previously held by the Public Interest Foundation, as well as the related rights of that Foundation to appoint two members of our board. Further, four Russian members of our Board will resign with effect from that closing. Following the first closing, the members of our Board of Directors will be John Boynton (Chairman), Rogier Rijnja and Charles Ryan.

We expect the second and final closing to occur within seven weeks after the first closing, at which time we will sell our remaining interest in the Target. The consideration at the second closing will be paid in a combination of up to 108 million Class A shares of Yandex N.V., with the balance (if any) to be paid in up to RUB 135 billion in cash, to be paid in Chinese Yuan outside Russia. Following the second closing, Yandex N.V. will have no interest in the Russian businesses.

The number of Class A shares outstanding will be reduced by the number of shares that we receive as partial consideration in the Sale at each of the first and second closing. Following the first closing, we expect that the number of Class A shares outstanding will be approximately 294 million. The Class A shares received as consideration will be held in treasury, pending use under our equity incentive plans and for further financing purposes.

As we work towards the completion of this transaction, we are continuing our preparations for the future of the retained group. We expect to provide updates regarding the new senior management team and their strategy for the retained business in the coming months, and to nominate additional members of the Board in due course. We also expect to introduce a new brand for the retained group, and to ask shareholders to approve a change in the legal name of our company. The Yandex brand will continue to be used by the Target group being sold.

Trading in our Class A shares currently remains halted on Nasdaq. Although we can provide no assurance, we are hopeful that trading may resume following the successful completion of the divestment. We will apply to terminate the listing of our Class A shares on the Moscow Exchange in the coming weeks, which will become effective in connection with the second closing.

In this Annual Report we provide further detail on the Sale and the related risks. We also provide a full report on the year 2023, with respect to the group as a whole before giving effect to the Sale. We have presented separately the descriptions of our continuing operations and the Target businesses being sold. The Sale represents a material change to our company and our group. The Target accounted for more than 95% of the Yandex group’s consolidated revenues in 2023, and approximately 95% of the group’s consolidated assets and employees.

Following the Sale, the company will retain a portfolio of international businesses and other non-Russian assets. The core retained businesses are described in this Annual Report and include:

Nebius AI, an AI cloud platform that is one of the largest providers of GPU capacity in Europe;
Toloka AI, a data solutions partner for generative AI (“GenAI”) and Large Language Model (“LLM”) development;
Avride, one of the leading developers of self-driving technologies;

4

TripleTen, an EdTech service that equips people with in-demand tech skills;
a cutting-edge data center located in Finland; and
minority investments in other technology businesses.

The Sale is the result of an extensive strategic process designed to ensure our group’s sustainable development and the success of all of our businesses over the longer term. We look forward to providing updates to shareholders on the development of the retained group in the coming months.

5

Item 1.  Identity of Directors, Senior Management and Advisors.

Not applicable.

Item 2.  Offer Statistics and Expected Timetable.

Not applicable.

PART I.

Item 3. Key Information.

Exchange Rate Information

During 2023, the primary operations of Yandex N.V. group were conducted in Russia and the majority of the group’s revenues were denominated in Russian rubles. We have presented our most recent annual results of operations in U.S. dollars for the convenience of the reader. Unless otherwise noted, all conversions from RUB to U.S. dollars and from U.S. dollars to RUB in this Annual Report were made at a rate of RUB 89.6883 to $1.00, the official exchange rate quoted by the Central Bank of the Russian Federation as of December 31, 2023. No representation is made that the RUB amounts could have been, or could be, converted into U.S. dollars at such rate. Following completion of the Sale, we expect to report our results in U.S. dollars.

Risk Factors

Investing in our Class A shares involves a high degree of risk. The risks and uncertainties described below and elsewhere in this Annual Report, including in the section headed “Operating and Financial Review and Prospects”, could materially adversely affect our company, our continuing businesses and the operations to be divested. These are not the only risks that we face; additional risks and uncertainties of which we are unaware, or that we currently deem immaterial, may also become important factors that affect us. Any of these risks could adversely affect our business, financial condition and results of operations. In such case, the trading price of our Class A shares could decline.

Below we first describe the risks related to the divestment of our operations in Russia and certain international markets. As described above under “Introduction – Explanatory Note”, we expect that the first closing of this divestment will occur in the coming weeks. We then describe the risks related to our continuing operations following the divestment. Finally, we describe the risks related to the businesses we are divesting.

Summary of Risk Factors

Risks Relating to the Sale

We can provide no assurance that the Sale will be completed.
Even if the first closing occurs, we can provide no assurance that the second closing will occur.
The purchaser may be unable to satisfy its obligation to pay cash consideration at the first and/or second closing.
If we are not able to complete the proposed Sale, it is possible that steps could be taken pursuant to existing or new Russian legislation that could materially adversely affect our group and some or all of our shareholders.
If we are not able to complete the proposed Sale in a timely manner, the future prospects of our company and the retained businesses could be materially and adversely affected.
We will continue to be subject to general business uncertainties and contractual restrictions while the proposed Sale is pending completion, which could adversely affect our existing business and operations.
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.

Risks Related to Our Continuing Operations Following the Sale

The retained businesses, which have to date formed a part of the larger Yandex group, are at an early stage of development and have limited experience operating on a stand-alone basis.

6

The retained businesses will no longer have access to the intellectual property created by the group’s Russia-based businesses, and the retained businesses’ prospects and future success depend on their ability to develop new proprietary technology.
We have agreed to covenants in connection with the Sale that will impose restrictions on the retained businesses.
Our retained businesses may be adversely affected by the existing competition in the markets that we operate in, which could negatively impact on our business, financial condition and ability to develop internationally.
The retained businesses will continue to rely heavily on technological security measures to protect their services, software and products generally. If such security measures are breached or are insufficient, our businesses may suffer significant reputational damage as well as potential legal and financial exposure.
We may be subject to material claims under the share purchase agreement in connection with the Sale.
We may incur material tax liabilities in connection with the Sale, which would reduce the amount of net proceeds available for ultimate distribution to our shareholders.
The price of our Class A shares has been and may continue to be volatile.
The concentration of voting power with our principal shareholders limits the ability of our minority shareholders to influence corporate matters.
Anti-takeover provisions in our articles of association may prevent or delay change-of-control transactions.
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 the rights of our shareholders differ from the rights of a shareholder of a domestic U.S. issuer.
We do not comply with all of the provisions of the Dutch Corporate Governance Code. This may affect the rights of our shareholders.
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.
Any U.S. or other foreign judgments our shareholders may obtain against us may be difficult to enforce against us in 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.

Risks Related to the Businesses to be Divested

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

The businesses to be divested may be materially adversely impacted by negative macroeconomic and geopolitical developments including various restrictions in Russia and in other countries in which they operate.

Risks Related to the Business and Industry in which the Group to be Divested Operates

The businesses to be divested rely on the continued availability, development and maintenance of the internet infrastructure in the countries in which they operate.
The businesses to be divested face significant competition, which could negatively affect their business, financial condition and results of operations.
Our corporate culture has contributed to our success, and if the businesses to be divested cannot maintain the focus on teamwork and innovation fostered by this environment, their business, financial condition and results of operations would be adversely affected.
A systems failure, technical interference or human error could prevent the businesses to be divested from reliably delivering their services, which could lead to a loss of users and advertisers and damage their reputation and materially adversely affect their business, financial condition and results of operations.
The businesses to be divested may not be able to prevent others from unauthorized use of their intellectual property rights or become involved in intellectual property infringement claims, which may adversely affect their competitive position, business, financial condition and results of operations.

Additional Risks Related to Regulatory Matters

The businesses to be divested may be required to obtain additional licenses, permits or registrations or comply with other requirements, which may be costly or may limit their operational flexibility.

7

Regulations regarding the processing and retention of personal and other data may impose additional obligations on the businesses to be divested, limit their flexibility, or harm their reputation with users.
The competent authorities could determine that the businesses to be divested hold a dominant position in one or more markets and could impose limitations on their operational flexibility that may adversely affect their business, financial condition and results of operations.

Risks Related to Tax Matters

Changes in the tax systems in the countries in which we and the businesses to be divested operate, or unpredictable or unforeseen application of existing rules, may materially adversely affect our and their business, financial condition and results of operations.
Some of the counterparties of the businesses to be divested provide limited transparency in their operations, which could subject the businesses to be divested to greater scrutiny and potential claims from government authorities.

Detailed Overview of Risk Factors

Risks Relating to the Sale

We can provide no assurance that the Sale will be completed.

Although we have satisfied the conditions to the Sale, including receiving the required shareholder approvals, a number of mechanical steps must still be completed to move to the first closing, and then the second closing.

If any of these steps is not completed, we may be unable to consummate the Sale. In addition, several of the required regulatory approvals may entail political considerations unrelated to the commercial substance of the Sale. Further, we will need to obtain confirmation from our banks and the purchaser’s correspondent banks that they are able to receive and process the relevant cash consideration payments before the parties can proceed to closing. If these confirmations cannot be obtained, we would not be able to complete the Sale.

Our ability to complete the Sale will remain subject to the continuously evolving international and Russian political and regulatory environment. In particular, changes to Russian legislation or international sanctions could frustrate or block the consummation of the Sale on the agreed terms.

Even if the first closing occurs, we can provide no assurance that the second closing will occur.

Pursuant to the share purchase agreement in connection with the Sale, following the first closing, the purchaser will be obligated to acquire the remaining interest in the Target and to pay the remaining consideration at the second closing. Depending on the outcome of the offer for Class A shares by the purchaser, the purchaser will be obligated to pay some or all of the remaining consideration in cash.

Although we have negotiated contractual protections with a view to ensuring that the second closing occurs, we can provide no assurance in this regard. International or Russian legislative, regulatory or sanctions developments could prevent the parties from effecting the second closing. Moreover, in the event that the purchaser breaches its obligations to effect the second closing, we would have contractual rights to seek recourse but may be unable to obtain specific performance or other injunctive relief, and may not be able to obtain cash compensation in a sufficient amount or at all.

In the event that international sanctions are imposed on any parties involved in the Sale, including on our company, any of its subsidiaries, the purchaser, any of the underlying purchaser consortium members or any of their finance providers, or countermeasures are introduced in Russia that affect the Sale, we may be unable to proceed to second closing in a timely manner or at all. In addition, the second closing of the Sale will require the involvement of a number of international counterparties, including our banks. If any such parties are legally prohibited from acting in connection with the Sale, or decide for policy or other reasons not to act, we may be unable to make alternative arrangements, and the interests of our shareholders could be materially adversely affected.

8

The purchaser may be unable to satisfy its obligation to pay cash consideration at the first and/or second closing.

The members of the purchaser consortium are expected to fund the purchaser entity in advance of first and/or second closing with a combination of equity and debt financing in order to meet its cash consideration obligations. If one or more members of the purchaser consortium fails to provide its equity contribution to the purchaser, or if the purchaser’s lender fails to advance the anticipated debt financing, the purchaser may be unable to complete the Sale. We would have limited or no recourse in such circumstances.

If we are not able to complete the proposed Sale, it is possible that steps could be taken pursuant to existing or new Russian legislation that could materially adversely affect our group and some or all of our shareholders.

Actions have been taken in Russia with respect to the Russian operations of several multinational companies in the past two years, including Fortum, Uniper, Danone, Carlsberg and X5 Retail Group N.V. Given the significance of the Yandex operations in Russia and the increasing countermeasures by the Russian government against entities incorporated in “unfriendly” countries such as the Netherlands, it is possible that, in the event we are unable to complete the Sale, similar or other actions could be taken against the Yandex group. Any such actions could result in our loss of ownership or control over our businesses in Russia, which would materially adversely affect the interests of our Class A Shareholders (particularly those outside Russia).

If we are not able to complete the proposed Sale in a timely manner, the future prospects of our company and the retained businesses could be materially and adversely affected.

Our company and the retained businesses have historically been financed principally by the operating businesses in Russia. Due to regulatory restrictions, there are now significant limitations on the transfer of funds from Russia to parent companies incorporated in jurisdictions that are considered to be “unfriendly” by the Russian government. In the event that the Sale is not completed, it may be difficult or impossible to continue to finance the requirements of our company or the retained businesses from our broader group or to find alternative sources of financing, and there would be significant uncertainty regarding their ability to continue as a going concern.

In addition, if the Sale is not completed in a timely manner, we may face a number of other risks, including:

increasing constraints imposed by international sanctions;
potential loss of employees of the retained businesses;
challenges in attracting or retaining commercial partners;
further distraction of Board and management time, and additional expense, in seeking an alternative transaction; and
delisting of our Class A Shares from Nasdaq.

If the Sale is not completed, our Board will need to seek another opportunity or alternative transaction, however we can provide no assurance that we would be successful in doing so.

We will continue to be subject to general business uncertainties and contractual restrictions while the proposed Sale is pending completion, which could adversely affect our existing business and operations.

In connection with the proposed Sale, it is possible that some of our customers, suppliers and other persons with whom we currently or might potentially have a business relationship may delay or defer certain business decisions or seek to terminate, change or renegotiate their relationships with us as a result of the proposed Sale, which could negatively impact our existing revenue streams in respect of the businesses soon to be divested and our retained businesses.

9

In addition, the share purchase agreement in connection with the Sale includes customary restrictions on the conduct of business of the Target group prior to the first closing, which may affect the ability of the Target group to execute certain of its business strategies in the near term.

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.

A number of measures have been adopted or proposed in our core market that could adversely affect non-Russian shareholders, including laws related to required redomiciliation of businesses to Russia and termination of “control” by foreign parent companies over businesses in Russia. If we are required to take measures to change our corporate domicile, this would be complex or even impossible 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. 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 could materially affect the rights of our shareholders.

Risks Related to Our Continuing Operations Following the Sale

The retained businesses, which have to date formed a part of the larger Yandex group, are at an early stage of development and have limited experience operating on a stand-alone basis.  

The various Yandex businesses historically operated as an integrated group and ecosystem globally. In preparation for the Sale, we have undertaken significant steps to ensure the complete legal, technical and operational separation of the retained businesses from the Russia-based businesses, with a view to ensuring their ability to function on a stand-alone basis and without any connection to the Russian operations. Given the scale and complexity of these restructuring steps, and the limited experience of our company and the retained businesses operating as part of a smaller group, we may be required to take additional steps to implement the infrastructure required to operate on a stand-alone basis.

In addition, the retained businesses have historically benefited from our larger, profitable businesses in Russia. We have limited experience in managing and financing only early-stage businesses. Although we intend to retain a portion of the net cash proceeds of the Sale to finance the development of the retained businesses, these businesses are in their early stages and are therefore capital intensive. Although we believe that they have a material opportunity for revenue generation and growth in the future, we may need to seek additional equity or debt financing in the near to medium term. We can provide no assurance that we will be able to obtain such financing on acceptable terms or at all.

The retained businesses will no longer have access to the intellectual property created by the group’s Russia-based businesses, and the retained businesses’ prospects and future success depend on their ability to develop new proprietary technology.

The retained businesses have historically benefitted from access to the intellectual property developed and owned by the group’s Russia-based businesses. This intellectual property will remain with the businesses to be divested as part of the Sale and we will not receive any long-term licenses to any such intellectual property. Although the retained businesses will benefit from certain transitional licenses from businesses being divested for various fixed periods in 2024, we may incur significant expense and personnel time in developing new proprietary technology independently. Failure to develop such new proprietary technology could materially adversely affect our prospects and future success.

We have agreed to covenants in connection with the Sale that will impose restrictions on the retained businesses.

We have agreed to certain non-compete obligations for a period of five years following the first closing. Our company and its affiliates will be permitted to operate the retained businesses, including any development or natural evolution of the retained businesses, globally (other than in Russia and Belarus) at any time. However, during the five

10

year non-compete period, we will not be permitted to engage in the principal businesses being divested in any territory worldwide. In addition, we have agreed that our company and the retained businesses will not solicit or hire employees of the Target group for a period of five years, subject to certain exceptions.

Although we do not anticipate that these obligations will impose any limits on the ability of the retained businesses to pursue their development plans as presently contemplated, it is possible that they may be required to forego potential opportunities that may arise in the future.

Our retained businesses may be adversely affected by the existing competition in the markets that we operate in, which could negatively impact on our business, financial condition and ability to develop internationally.

Our retained businesses operate in a highly competitive market which necessarily involves rapid commercial and technological advancements. If our competitors are able to develop their technologies more efficiently or faster than we are, we will need to increase our expenditure in order to fund further research, development and marketing, as necessary. We are not able to guarantee that our retained businesses will be able to compete with significant competition from new players and new technologies as well as the existing players in the international market. If we are not able to compete effectively with current and future players, our businesses’ ability to generate income and sustainably fund development will be negatively impacted.

The retained businesses will continue to rely heavily on technological security measures to protect their services, software and products generally. If such security measures are breached or are insufficient, our businesses may suffer significant reputational damage as well as potential legal and financial exposure.

Third parties have in the past attempted, and in the future may attempt, to interfere with our services. We rely on security measures to protect our customers’ and partners’ information, data and personal details as well as to safeguard the smooth operation of our services. If any targeted or random attacks successfully breach our security, interfere with or exploit any flaws in our services, or are able to restrict or prohibit our users from accessing our products and services, our partners and customers going forwards may lose confidence in our ability to safeguard their information or to provide reliable services. To the extent an actual or perceived attack on our services hinders our services and user experience, we may face significant reputational damage and we may be exposed to a risk that new businesses will not wish to partner with us, which in the early stages of our retained businesses’ lifecycles could be detrimental to their development.

Similarly, we cannot guarantee that our security measures will not be breached or left vulnerable due to employee error, malfeasance, system errors or other non-malicious circumstances. If we are not able to implement safeguards, training and sufficient protections against forms of cyber attacks or errors, we could be at risk of losing company information or private user data, exposing us to potential litigation, increased costs, potential liability and damage to reputation, ultimately negatively impacting our ability to generate revenues and develop internationally.

We may be subject to material claims under the share purchase agreement in connection with the Sale.

The share purchase agreement in connection with the Sale contains customary warranties, indemnities and covenants for a material divestment transaction. In the event that the purchaser were to bring successful claims under the share purchase agreement, we could incur significant liabilities. Such risk may be heightened given the limited visibility we have had in recent periods over the operations of businesses to be divested, as well as the geopolitical context in which the Sale is being consummated.

We may incur material tax liabilities in connection with the Sale, which would reduce the amount of net proceeds available for ultimate distribution to our shareholders.

A significant portion of the consideration for the Sale will be paid in the form of Yandex N.V. Class A shares to be delivered by the purchaser. The acquisition of such shares by our company in consideration for shares in the Target will be treated as a repurchase by our company of its own shares for Dutch tax purposes, which would be subject to withholding tax at a 15% rate. However, we anticipate that all or substantially all of the shares so acquired will qualify as “temporary investments”, given our intention and plan to use such shares for our employee equity incentive program and for further financing purposes. We can provide no assurance, however, that the Dutch tax authorities will ultimately

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agree with our assessment in this regard, in which case we may incur a significant Dutch withholding tax liability. We may also need to provide for a reserve in respect of such potential liability, which would reduce the amount of net proceeds available for ultimate distribution to our shareholders.

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 since the end of February 2022, the value of traded securities of companies with significant operations in Russia has been adversely affected, including our Class A shares. Trading in our Class A shares on Nasdaq has been subject to a trading halt since February 2022, and in March 2023 the Listing Qualifications Staff of Nasdaq notified us that it had determined that our securities would be delisted from the Nasdaq Stock Market as of March 24, 2023. We appealed such determination, and our appeal was granted, subject to conditions related to the Sale. The trading halt currently remains in place. Even if we successfully complete the Sale, there can be no guarantee if or when the trading halt may be lifted and trading might ultimately resume on Nasdaq or over-the-counter.

Although trading in our Class A 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 from “non-friendly” countries are not permitted to trade. We will apply to terminate the listing of our Class A shares on the Moscow Exchange in the coming weeks, which will become effective in connection with the second closing.

If and when (if at all) our Class A shares resume trading on Nasdaq in the ordinary course, or commence trading over-the-counter, the trading price may be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. We are unable to predict the impact of the Sale on our share price if and when trading results in the ordinary course. Moreover, we will provide updates on the strategy and business plans for the retained businesses, as well as the potential return of capital to shareholders, in due course. As a consequence of these material factors, it may take time for the trading price of our Class A shares to reflect the intrinsic value of our group, and such trading price may experience volatility.

The concentration of voting power with our principal shareholders limits the ability of our minority shareholders to influence corporate matters.

Our Class B shares have ten votes per share and our Class A shares have one vote per share. As of March 31, 2024, our directors, employees, pre-IPO shareholders and the family trust described below together hold Class A and Class B shares carrying approximately 51% of the voting power of our ordinary shares.

Our founder, Arkady Volozh, is the settlor of a trust for the benefit of his family, which holds Class B shares representing a 45.1% voting and an 8.5% economic interest in our company as of March 31, 2024. Mr. Volozh was designated under sanctions in the European Union and Switzerland in June 2022; such designations were removed in March 2024. At the time of his designation, Mr. Volozh irrevocably undertook not to instruct the trustee as to how to vote such shares and, pursuant to the terms of the trust, the trustee would vote such shares on all matters proposed to the shareholders in accordance with the recommendations of the independent members of the Board of Directors. We anticipate that, following the Sale, Mr. Volozh will again be able to provide voting instructions to the trustees in respect of such shares.

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

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 staggered terms, of up to four years, of our directors, as a result of which only a minority of our board is subject to election in any one year;
a provision that our directors may only be removed by a two-thirds majority of votes cast representing at least 50% of our outstanding share capital;

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requirements that certain matters, including an amendment of our articles of association, may only be brought to our shareholders for a vote upon a proposal by our Board of Directors;
minimum shareholding thresholds, based on par value, for shareholders to call general meetings of our shareholders or to add items to the agenda for those meetings, which will be very difficult for Class A shareholders to meet given our multiple class share structure; and
supermajority requirements for shareholder approval of certain significant corporate actions, including the legal merger or demerger of our company and the amendment of our articles of association.

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.

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 the rights of our shareholders differ from the rights of 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.

We do not comply with all of the provisions of the Dutch Corporate Governance Code. This may affect the rights of our shareholders.

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 non-compliance 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 the rights of our shareholders who may not have the same level of protection as shareholders in a Dutch company that fully complies with the DCGC.

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 2023 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

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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.

Any U.S. or other foreign judgments our shareholders may obtain against us may be difficult to enforce against us the Netherlands.

We have only very limited operations in the United States, most of our assets are located outside of the United States, our company is incorporated in the Netherlands, and some of our directors and most of our 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 the Netherlands, 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 the Netherlands. There is no mutual recognition treaty between the United States and the Netherlands, and no 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 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 the company and its group, 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.

Risks Related to the Business to be Divested

Once the first closing has taken place, we will continue to hold a minority interest in the Target and the Russian businesses before they are fully divested at the second closing. The Target accounted for more than 95% of the Yandex group’s consolidated revenues in 2023, and approximately 95% of the group’s consolidated assets and employees. Below we describe the risks that affect these businesses being divested.

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

The businesses to be divested may be materially adversely impacted by negative macroeconomic and geopolitical developments including various restrictions in Russia and in other countries in which they operate.

The current geopolitical crisis and international and Russian actions in response have materially and adversely impacted the macroeconomic climate in Russia, resulting in significant currency rate volatility, the imposition of currency controls, significant fluctuations in interest rates and increased inflation, which may lead to a continued contraction in consumer spending. These factors, as well as the impact of sanctions or responses to sanctions on operations, could adversely affect the results of operations of the businesses to be divested.

For instance, the advertising revenues of the businesses to be divested may be adversely affected by an inability to gain access to advertising inventory, and by the possible reduction in advertising budgets of domestic businesses, as well as by intensifying competition with local players (including marketplaces). The e-commerce businesses to be divested may be adversely affected by a possible reduction of discretionary spending by consumers and further supply restrictions which may adversely affect the number and selection of goods available through Yandex Market and a reduction in associated advertising. The ride-hailing business to be divested may likewise suffer from a weaker macroeconomic environment and adverse supply and demand dynamics. Price increases and a potential reduction in the

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availability of new cars and spare parts in Russia, 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 the partners of the businesses to be divested (including fleet management companies), which may negatively impact further growth of the ride-hailing business. Consumer sentiment and spending patterns may result in reductions in revenue from other business units, offset to some extent by decreased competition. Any prolonged economic downturn in Russia or the other countries in which the businesses to be divested operate, whether as a result of sanctions or the broader geopolitical or economic situation, depreciation of the ruble and other national currencies, negative consumer sentiment or other macro factors, could have a material adverse effect on the results of operations of these businesses.

Risks Related to the Business and Industry in which the Group to be Divested Operates

The businesses to be divested rely on the continued availability, development and maintenance of the internet infrastructure in the countries in which they operate.

The success of these businesses depends on the continued availability, development and maintenance of the internet infrastructure globally and particularly in the countries in which they operate. This includes maintenance of a reliable network backbone 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 these businesses. Furthermore, these businesses depend on hardware and software suppliers for prompt delivery, installation and service of servers and other equipment to deliver their services. The current geopolitical crisis and resulting export controls may materially adversely affect the access of these businesses to international software and hardware suppliers.

The businesses to be divested face significant competition, which could negatively affect their business, financial condition and results of operations.

These businesses operate in a market characterized by rapid commercial and technological change, and face significant competition, increasingly from local players. If competitors are able to develop their technologies more quickly than the group to be divested, these businesses may need to increase R&D investments in order to defend their market shares. These businesses may face increased competition from new players and new technologies. We cannot guarantee you that these businesses 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. A significant decline in user traffic or other business could negatively affect the group’s business, financial condition and results of operations.

Our corporate culture has contributed to our success, and if the businesses to be divested cannot maintain the focus on teamwork and innovation fostered by this environment, their 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. If the businesses to be divested are not able to maintain this corporate culture under new ownership, this may adversely affect their business, financial condition and results of operations.

A systems failure, technical interference or human error could prevent the businesses to be divested from reliably delivering their services, which could lead to a loss of users and advertisers and damage their reputation and materially adversely affect their business, financial condition and results of operations.

The businesses to be divested maintain a robust network of security measures, but their systems remain vulnerable to damage or interruption from terrorist attacks, denial-of-service attacks, computer viruses or other cyber-attacks, power losses, telecommunications failures, floods, fires, extreme weather conditions, earthquakes and similar events. Their data centers are also potentially subject to break-ins, sabotage and intentional acts of vandalism, and other potential disruptions. Such events could reduce revenues and profits, and the businesses brand could be damaged if people believe their services are unreliable.

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The businesses to be divested may not be able to prevent others from unauthorized use of their intellectual property rights or become involved in intellectual property infringement claims, which may adversely affect their competitive position, business, financial condition and results of operations.

The businesses to be divested rely on a combination of patents, trademarks, trade secrets and copyrights, as well as nondisclosure agreements, to protect their intellectual property rights. The protection and enforcement of intellectual property rights in Russia and other markets in which the businesses operate, however, may not be as effective as that in the United States or Western Europe. Also, the efforts the businesses have taken to protect their proprietary rights may not be sufficient or effective. Any significant infringement of their intellectual property rights could harm their business, brand and/or ability to compete, all of which could adversely affect their competitive position, business, financial condition and results of operations.

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. 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 could be inadvertently breached.

With respect to any intellectual property rights claim, the businesses to be divested may have to pay damages or compensation and/or stop using technology found to be in violation of a third party’s rights. They 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 operating expenses. They may be required to develop an alternative non-infringing technology, which may require significant effort, expense and time to develop. If they cannot license or develop technology for any potentially infringing aspects of these businesses, they may be forced to limit service offerings and may be unable to compete effectively. They may also incur substantial expenses in defending against third-party infringement claims regardless of the merit of such claims.

As a matter of Russian law, the businesses to be divested are deemed to have acquired copyright and related rights as well as rights to file patent applications with respect to products developed by their employees and contractors. The relevant requirements under the Russian Civil Code, however, 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. These businesses may not prevail in any such action and any successful claim, although unlikely to be material, could adversely affect their business and results of operations.

Additional Risks Related to Regulatory Matters

The businesses to be divested may be required to obtain additional licenses, permits or registrations or comply with other requirements, which may be costly or may limit their operational flexibility.

As the legal framework in Russia continues to evolve, the businesses to be divested may be required to take additional actions in order to comply with new legislation. Ambiguities in legislation and the wide discretion granted to regulatory authorities may also result in these businesses being subject to additional regulatory requirements. Compliance with expanded or new regulatory requirements, or new interpretations or applications of existing requirements, may also require the expenditure of additional resources and limit the businesses’ flexibility in providing services.

Regulations regarding the processing and retention of personal and other data may impose additional obligations on the businesses to be divested, limit their flexibility, or harm their 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, these businesses could face fines or orders requiring that they change operating practices, which in turn could have a material adverse effect on their business, financial condition and results of operations. If any inspections result in the determination that companies in the divested group fail to comply with the

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applicable data protection legislation, they could experience financial and reputational losses and could be restricted from providing certain types of services.

The competent authorities could determine that the businesses to be divested hold a dominant position in one or more markets and could impose limitations on their operational flexibility that may adversely affect their 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 in Russia or the other countries in which these businesses operate might from time to time investigate the internet or online advertising industries, the ride-hailing business or other sectors in which they operate, and may conclude that, given their market shares, these businesses hold a dominant position in one or more of these markets. If the Russian Federal Antimonopoly Service (FAS) determines that these businesses hold a dominant position in one or more markets, this could result in limitations on future acquisitions and a requirement that the businesses pre-approve with the authorities certain changes to their standard agreements with advertisers and Yandex Advertising Network partners, as well as any specially negotiated agreements with business partners. In addition, if these businesses 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.

Risks Related to Tax Matters

Changes in the tax systems in the countries in which we and the businesses to be divested operate, or unpredictable or unforeseen application of existing rules, may materially adversely affect our and their 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, these businesses’ 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 the businesses to be divested can be particularly vulnerable to such assertive positions of the authorities. If the authorities were successful in enforcing interpretations different from those take by these businesses, their tax liability may be greater than the estimated amount expensed to date and paid or accrued on the balance sheet. The determination of 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 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 2021, 2022 and 2023 are currently open for tax audit of the principal businesses to be divested.

In light of the current macroeconomic environment and potential budget deficits, the Russian government may impose additional taxes and penalties in the future, as well as the potential elimination of applicable tax benefits, which could adversely affect the business, financial condition and results of operations of the businesses to be divested. International expansion of the business to be divested may also create new tax challenges in the changing tax environment.

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 and may lead to additional tax liabilities. The Global Tax Reform plan (Pillar One and Pillar Two) was adopted in 2021 by 137 countries. Among other provisions, the reform imposes a 15% global minimum tax on multinational corporate groups. A multinational corporate group must assess whether the effective tax rate for each country in which it operates is lower than 15%. If the effective tax rate in a country is lower than 15% a top-up tax may be levied. EU and other countries, including some of those in which we operate, have implemented, or have committed to implement the reform in 2024. The Netherlands have implemented 15% global minimum tax in its domestic tax legislation starting January 1, 2024. This reform may increase our effective tax rate and result in higher tax liabilities.

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Some of the counterparties of the businesses to be divested provide limited transparency in their operations, which could subject the businesses to be divested to greater scrutiny and potential claims from government authorities.

The businesses to be divested do business with a number of 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. As the businesses to be divested are larger and more transparent, with greater resources than such counterparties, governmental authorities may seek to collect taxes and/or penalties from these businesses in relation to such transactions.

Item 4. Information on the Company.

History and Development of the Company; Organizational Structure.

Yandex N.V. is a Dutch public company with limited liability, which became the parent company of Yandex group in 2007. Its registered office is at Schiphol Boulevard 165, 1118 BG, Schiphol, The Netherlands (tel: +31 (0) 20 206 6970).

Our founders began the development of our search technology in 1989 and launched the yandex website in 1997. In May 2011, the company's Class A shares were listed on the Nasdaq Global Select Market, under the ticker YNDX, and subsequently listed on the Moscow Exchange in June 2014. On February 28, 2022, Nasdaq and the New York Stock Exchange halted the trading in securities of a number of companies with material operations in Russia, including Yandex N.V. The trading halt currently remains in place.

For a discussion of our principal acquisitions in 2023, see “Operating and Financial Review and Prospects — Key Recent Acquisitions”.

Business Overview

As described below, we have entered into a definitive agreement with a purchaser consortium to sell all of the group’s businesses in Russia and certain international markets. The Sale will be completed in two closings; the first closing is expected to take place in the coming weeks. Following first closing, the company will hold a minority interest in the Target group, which will subsequently be sold at second closing, which is expected to occur within seven weeks following the first closing.

Below we describe the business of the combined group in 2023. We have presented separately the descriptions of our continuing operations and the Target businesses being sold.

Overview of Proposed Sale

As we announced on February 5, 2024, Yandex N.V. has entered into a definitive agreement to sell all of the Yandex group's businesses in Russia and certain international markets. Following completion of the Sale, Yandex N.V. will hold no interest in its businesses in Russia and will retain a portfolio of international businesses and other non-Russian assets, including the four early-stage technology businesses described below, a data center in Finland and minority investments in other technology businesses.

Yandex N.V. and its remaining international businesses will cease to use the Yandex brand, other than during a short transition period through the end of July 2024, and in due course we intend to propose to shareholders a change of our legal name. We anticipate that once the Sale transaction is completed, our retained businesses will develop their own branding going forward. The businesses being divested will continue to use the Yandex brand.

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Continuing Operations following the Sale

Nebius AI

Nebius AI is an AI-centric cloud platform that offers robust infrastructure and computing capacity for seamless AI deployment and machine-learning (“ML”) oriented solutions. Following completion of the Sale transaction, Nebius AI will seek to address the shortage of AI compute by being one of the largest providers of GPU capacity in Europe. We also see considerable opportunity to roll-out the Nebius product offering across the EMEA region. Nebius AI’s proprietary data center in Finland excels in energy efficiency, and houses Europe’s most powerful commercially available supercomputer that ranks as the 16th among the 500 most powerful globally (within the top 3%). Today, the Nebius team includes over 400 experts in hardware infrastructure, cloud software development and AI.

Toloka AI

Toloka AI offers data-for-GenAI solutions at every stage of the GenAI lifecycle, from data annotation and generation, model training and fine-tuning, to quality assessment of LLMs for accuracy and reliability. Toloka AI’s solutions leverage both AI-powered auto labeling and human expert input to ensure quality and optimized cost. Toloka AI features one of the most diverse crowds and expert networks covering 120 countries, speaking over 40 languages and over 20 knowledge domains. The platform meets the most rigorous information security and data privacy standards: it is GDPR-compliant and certified to ISO 27001, 27701 and HIPAA. Toloka AI supports research in AI, offering open-source projects, open datasets and collaborating with top academic institutions worldwide.

Avride

The Avride team develops autonomous driving solutions targeting ride-hailing, logistics, e-commerce, and food/grocery delivery as application domains, and focuses on two core products: autonomous vehicles and delivery robots. The team builds on over eight years of experience developing autonomous technologies from scratch in diverse regulatory, cultural and operational contexts, including road testing in comprehensive weather and road conditions. Self-driving vehicles and delivery robots developed by the Avride team have completed over 20 million autonomous kilometers driven on public roads, and over 200,000 successful deliveries from retail and dining establishments, respectively. As of December 2023, Avride holds testing, including driverless testing, and carries out commercial delivery projects across four geographies: the USA, Israel, UAE, and South Korea.

TripleTen

TripleTen is an EdTech service developed by a team with over 15 years of experience in IT education, dedicated to preparing specialists for STEM roles and equipping them with essential technology skills. As of the end of 2023, TripleTen has over 60 partner employers worldwide and offers four immersive study tracks: Software Engineering, Data Science, BI (Business Intelligence) Analytics, and Quality Assurance. These programs, accessible remotely, span North and South America and the Middle East. Across 2022 and 2023, over 5,000 people took advantage of the reskilling opportunities offered by TripleTen. In 2023, TripleTen maintained its position among the top-rated EdTechs in the US based on employment rate, median post-graduation salaries, and student feedback. According to TripleTen's 2023 Outcomes Report, 87% of graduates secured employment within six months of graduation.

For the full year 2023, the four businesses described above have generated 1.8 billion rubles of revenue and incurred an Adjusted EBITDA loss of 24.9 billion rubles. To date, these international businesses have been unable to obtain sufficient capital for their development as a result of significant limitations on the group’s ability to transfer funds from the group’s historically profitable businesses in Russia. In order to support the development of these businesses in the future, we expect to retain a portion of the cash consideration received pursuant to the Sale transaction, the amount of which is to be determined by our Board.

Businesses to be Divested

The businesses described below form the divestment perimeter and will not be a part of the Yandex group following the completion of the proposed Sale transaction.

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The businesses are organized in the following segments:

Search and Portal, which includes Search, Geo, Weather, and number of other services;
E-commerce, Mobility and Delivery includes transactional online-to-offline (O2O) businesses, which consist of (i) the mobility businesses, including ride-, Yandex Drive, a car-sharing business, and scooters; (ii) the E-commerce businesses, including Yandex Market, a multi-category e-commerce marketplace, Yandex Lavka, a hyperlocal convenience store delivery service, and the grocery delivery services of Yandex Eats and Delivery; and (iii) certain other O2O businesses, including Yandex Delivery, a middle and last-mile delivery service; Yandex Eats and Delivery, a ready-to-eat delivery from restaurants services; and Yandex Fuel, a contactless payment service at gas stations, as well as several smaller experiments;
Plus and Entertainment Services includes the Yandex subscription service Yandex Plus, Yandex Music, Kinopoisk, Bookmate, Yandex Afisha and the production center Plus Studio;
Classifieds, which includes Auto.ru, Yandex Realty, Yandex Rent and Yandex Travel; and
Other Business Units and Initiatives, which includes a self-driving vehicles business known as Yandex SDG, Yandex Cloud and Yandex 360, Yandex Education (consisting of Practicum and other education initiatives), Devices and Alice, FinTech (including Yandex Pay and Yandex ID) and number of other experiments as well as unallocated corporate expenses.

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

Search and Portal

The Search and Portal segment offers a broad range of world-class, locally relevant search and information services that are free to users and that enable them to find relevant information quickly and easily.

Yandex Search

The Yandex search engine offers almost instantaneous access to the vast range of information available online. It utilizes linguistics, mathematics, machine learning and AI to develop proprietary algorithms that efficiently extract, compile, systematize and present relevant information to the users. The organic search results are ranked by computer algorithms based exclusively on relevance, and organic results are clearly segregated from paid results to avoid confusing users. Yandex does not exercise editorial control over the content of the search results.

According to Yandex Radar, Yandex’s total search share reached 63.4% of all search traffic in Russia in 2023, up from 59.8% in 2021 and 61.9% in 2022, which was driven by share growth on both desktop and mobile devices. In 2023, search share on desktop and mobile reached 72.7% and 59.6%, respectively. The business continued to gain share in mobile search, reaching 63.0% on Android and improving the share to 49.9% on iOS in 2023 (from 61.4% and 47.6% in 2022, respectively).The percentage of total search traffic generated from mobile devices averaged approximately 70% in Q4 2023 compared with 68% in Q4 2022, while the percentage of search revenues generated from mobile devices increased to approximately 62% in Q4 2023 from approximately 60% in Q4 2022.

Yandex Search App

Enhanced with the Yandex virtual assistant Alice, the Yandex Search App integrates Yandex’s must-have services into one app, including Search, Weather and many others, available on Android and iOS platforms.

Yandex Browser

Yandex Browser is a browser for computers, TV, Android and iOS smartphones and tablets with built-in “Protect” technology, which checks all downloaded files for viruses, warns users about dangerous websites (whereby

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Yandex Browser prevented users from accessing suspicious websites approximately 110 million times throughout 2023), encrypts users’ passwords with strong cryptography, and ensures safe payments.

Geolocation Services

Geolocation Services integrate Yandex’s advanced technologies (including mapping, cartography, and navigation) to provide a broad range of services, including routing solutions and logistics.

Yandex Maps, a B2C product targeted at a wider audience, provides high-quality, detailed maps of countries where the Yandex ride-hailing service operates. In December 2023, the monthly audience of the service amounted to 39 million monthly average users in the mobile app, 25 million on the website and 52 million in mobile browsers across Russia. Yandex Maps offers users panoramic views, navigation for all forms of transport, driving directions with voice controls, among others.

The business also offers Yandex Navigator, which integrates a virtual assistant Alice and focuses mostly on the navigation scenarios for the B2C audience. In 2023, it was one of Yandex’s most popular mobile apps in terms of usage with 33 million monthly average users in December 2023.

For the B2B audience, the business offers application programming interfaces, or APIs, which allow developers to embed and use Yandex interactive maps in third-party websites and applications, as well as to add extra layers of information, utilizing the technology and licenses to create and edit maps from raw data, including satellite images, GPS coordinates and live user feedback.

Shedevrum

Shedevrum is a Yandex mobile application where users can create animations, images and text using Yandex’s generative neural networks. It is based on two core technologies: YandexART, which generates images and animations, and YandexGPT, which generates posts with a title and relevant illustration. After its launch in April 2023, Shedevrum reached the top of App Store and Google Play in Russia, and, as of Q4 2023, the app approached 10 million downloads.

Monetization and Advertiser Services

The business offers a variety of ad formats to advertisers, including performance-based, brand and video advertising formats. Most 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.); performance-based ads are principally targeted to a particular user query, as well as to the content of a particular website or mobile app being viewed, or to user behavior or characteristics. A further portion of revenues is generated from brand advertising and video advertising, based on the number of impressions delivered.

Yandex Direct

Yandex Direct is an auction-based advertising placement platform, which uses auction theory and relies on a 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 websites and mobile applications of Yandex or third parties in the Yandex Advertising Network.

During 2023, the business focused on the further development of automated strategies and automatic targeting algorithms, improvement of advertising products and increased efficiency for users, with a particular focus on SMB, and the development of advertising products for e-commerce players.

Yandex Advertising Network

The Yandex Advertising Network partners with search websites and apps, among others, for which Yandex provides search capabilities, as well as contextual network partners, where Yandex serves ads on websites and apps, based on user behavior or characteristics or website content.

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The Yandex Advertising Network helps third-party website and app owners monetize their content while extending the reach of advertisers. Through the Network, partners can deliver performance and brand ads on their search results pages, websites or apps. The advertising algorithms are based on the recent advances in AI including transformer-based architecture, which optimize the clickthrough and conversion rate on the ad network through improved click and conversion prediction.

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.

Mobile Advertising

The business offers advertisers the ability to display ads on mobile versions of Yandex services, including Search and Advertising Network partner websites, as well as in mobile applications, including the Yandex Search App. In 2023, the business significantly extended the advertising network on mobile platforms, including the expansion of advertising into new media channels, such as Telegram, to help advertisers widen their targeted audience as well as publishers’ revenue growth.

Analytics tools

Yandex Metrica is a web analytics tool used by hundreds of thousands of websites. Using a comprehensive set of tools, Metrica users can better understand their clients: from user acquisition to retention. Leveraging the recently open-sourced Metrica tag and proprietary Webvisor technology, businesses can objectively measure and improve the performance of their web assets. Metrica is integrated with Yandex Direct allowing for in-depth analytics of paid traffic.

AppMetrica offers a mobile SDK, an analytical dashboard, and a versatile data platform with streaming capabilities. This set of tools enables clients to obtain insights to improve user acquisition, optimize monetization, and even report crashes.

Yandex Radar is an open access internet analysis tool that provides general market information. This includes market shares of search engines and browsers, as well as more technical data such as the share of different operating systems and device types. The accuracy of Radar insights is enabled by anonymized data from Metrica, AppMetrica, and other Yandex data sources.

Advertisers

Yandex’s advertisers include individuals and small, medium, and large businesses, as well as large multinationals. Small and medium-sized enterprises drive most advertising revenue. No single advertiser accounted for more than 1% of total revenues in 2023.

E-commerce, Mobility and Delivery

The Yandex Mobility business includes a ride-hailing business, Yandex Drive, a car-sharing business for both B2C and B2B and Scooters.

The platform enables access to a wide range of personal mobility services through the Yandex Go super app, which launched in August 2020. In December 2023, total MAU of the Yandex Go super app exceeded 47 million.

Ride-Hailing

Yandex’s ride-hailing business offers a technological platform and delivers proprietary top-notch ride-hailing technologies to local communities ride-hailing services for individual users and businesses and to ensure sufficient driver availability to meet the growing demand.

The platform aggregated 1.75 million active drivers in December 2023, while earnings of the business’s partners totaled 974 billion rubles for the full 2023 year. The business currently builds relationships with drivers for the ride-hailing services both directly and through a wide partner network (Fleet Management Companies or FMCs).

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The business offers FMC partners access to efficient fleet management software to manage their driver base and fleet, optimizing their administrative and technical workflows.

Yandex Drive and Scooters

Alternative methods of transportation include Yandex Drive, a free-floating car-sharing service, launched in 2018, and Scooters, launched in 2022.

Yandex Drive offers on-demand access to cars for users to drive themselves in Moscow, St. Petersburg and Sochi, and provides users various options to reserve the vehicles for varying periods of time through a standalone mobile app, as well as through Yandex Go. As of the end of 2023, Yandex Drive operated approximately 16,500 vehicles.

Scooters is an electric scooter rental service. It provides access to more than 63,000 scooters as of the end of 2023.

Beyond the Mobility business, Yandex Fuel is a contactless payment service at gas stations built into Yandex Navigator, Yandex Maps, Yandex Pro, an app for drivers and couriers, Yandex Drive and a standalone Yandex Fuel app. Yandex Fuel is also available to corporate clients. As of December 2023, more than 11,000 fueling stations including charging stations were connected to the service throughout Russia.

E-commerce business

In 2023 the E-commerce segment included the following businesses: Yandex Market, a multi-category e-commerce marketplace, Yandex Lavka, the hyperlocal convenience store delivery service, and the grocery delivery services of Yandex Eats and Delivery.

Yandex Market

Yandex Market was launched in 2000 as a price comparison service and began its transformation into an e-commerce platform in late 2018. Today, it offers 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 marketplace business model enables the business to provide the full suite of e-commerce services to merchants, including access to consumers, fulfillment, logistics, advertising and marketing, payments, support and analytics.

Yandex Lavka

Yandex Lavka operated 502 dark stores (small warehouses) as of the end of 2023. Throughout 2023, the business continued to focus on improving operational efficiency and profitability.

FoodTech services Yandex Eats and Delivery

The Yandex Food and Grocery delivery services provide express delivery from restaurants and retail stores in 30 minutes. The Grocery vertical of Yandex Eats and Delivery is developed as a part of the E-commerce business. In 2023, the Food delivery from restaurants service operated as part of the other online-to-offline businesses (although in 2024, food delivery formed part of the E-commerce segment).

Delivery

Yandex Delivery is a last and middle-mile delivery service, launched during the Covid-19 pandemic as a means to serve the increased demand for delivery services. In 2023, the Delivery business benefited from the growing penetration of E-commerce and Food delivery in Russia. The service leverages Yandex’s routing and marketplace efficiency platform to meet growing demand of delivery services in the circumstances of challenging courier supply, especially on the domestic market. Growing order density and batching share led to an increase in courier earnings.

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RouteQ 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 between all parties involved in the delivery process.

Plus and Entertainment Services

Plus and Entertainment Services include the subscription service Yandex Plus, entertainment services (Yandex Music, Kinopoisk, Bookmate and Yandex Afisha), and the production center Plus Studio. Plus and Entertainment Services are available across different platforms, including Yandex Station and Yandex TV.

Yandex Plus

Yandex Plus is a subscription service to Yandex Music and Kinopoisk, and includes cashback loyalty points in a number of other services and apps. Subscribers earn cashback loyalty points when they pay for services and can use these rewards across the Yandex platform.

The subscriber base grew from 19.3 million in December 2022 to 30.4 million in December 2023. The share of paying subscribers exceeded 82% and average revenue per paying subscriber in December 2023 increased by 15% year-on-year.

On average Plus subscribers demonstrate greater than 70% higher frequency compared to non-Plus users across Yandex’s key transactional services as well as higher spending and better retention as of the end of 2023. Plus subscribers continued to generate a substantial part of GMV for the E-commerce and Food Delivery services.

Yandex Music

Yandex Music is a streaming platform that provides access to a catalog of approximately 73 million music tracks and 1.6 million podcast and audiobook 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 continues to lead among music streaming services in terms of the number of subscribers (both total and paid subscribers), according to a GfK report for Q4 2023.

Kinopoisk

Kinopoisk is a subscription-based video streaming service offering access to an extensive 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 entertainment-related services. Kinopoisk allows users to watch content on a subscription basis (through the Yandex Plus subscription) or purchase selected titles. The Kinopoisk library contains more than 81,000 movies, TV and original series episodes, including 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 browsers on computers.

In 2023, Kinopoisk maintained its leading position on the video-on-demand market based on the total number of subscribers, as well as paid subscribers, according to a GfK study. The number of monthly Yandex Plus subscribers who watch content on Kinopoisk exceeded 11 million in 2023.

Yandex Afisha

Yandex Afisha (“playbill”), an event sales platform, allows users to buy tickets to cinemas, theaters, concerts, exhibitions, and sports events online, and incorporates personalized recommendations.

Plus Studio

Plus Studio is the Yandex production center, which creates video content, co-invests in different projects with other production studios and provides marketing support to movie releases. Throughout 2023, the business continued to

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focus on original content: in the fall of 2023, it announced 11 original projects in the 2023 and 2024 season as well as a musical adaptation.

Classifieds

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

Auto.ru

Auto.ru is a classifieds platform for the sale of used and new cars. The business develops and provides digital products for users, large car dealers, and medium and small sellers. Every month, more than 25 million people visit Auto.ru projects: the Auro.ru website, the related mobile app and the branded media outlet.

More than 495,000 car classifieds are available on the platform every month. All individuals can use free-to-use options of the platform for safe and effective transactions.

Yandex Realty

Yandex Realty is a 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.

Yandex Rent

Yandex Rent is a long-term apartment rental platform available in four regions in Russia, which helps to manage pre-contract rental processes and subsequent administration of the payments. By the end of January 2024, the number of apartments on the platform reached 20,000, with 95% of deals signed online. A mobile app for Yandex Rent was launched in January 2023.

Yandex Travel

Yandex Travel is a travel aggregator service, which allows users to book hotels, search for flight tickets and other transport services. Yandex Travel average MAUs grew from 11 million per month in 2022 to 13 million per month in 2023. In 2023, the GBV (Gross Booking Value) of the service increased by 1.5 times compared to 2022, and the fastest growing product was hotel reservations. Also, Yandex Travel became the leading hotel booking service in Russia following the results of the summer of 2023 (according to hotel industry automation company TravelLine).

Other Business Units and Initiatives

The Other Business Units and Initiatives category includes all other Yandex businesses, including smaller and newer initiatives that are being tested and developed.

Yandex Cloud

Yandex Cloud is a fully-fledged cloud platform that provides B2B customers (SMBs and enterprises) and individual developers with scalable infrastructure, storage, machine learning and development tools to build and enhance cutting-edge digital services and applications. The cloud platform is based on in-house technologies that Yandex uses throughout other Yandex services, such as Search, Maps, and Metrica. Yandex Cloud continues to develop and improve its cloud services, offering customers new efficient solutions, such as SpeechKit (a speech synthesis and recognition service), machine translation services, and computer vision services, among others.

As of the end of 2023, the number of active users exceeded 29,000, while the number of services offered by the Yandex Cloud platform reached over 60 services, including services in the field of data analytics, security, serverless computing, machine learning and many other services.

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Yandex 360

Yandex 360 combines various productivity tools (for both B2C and B2B), such as Yandex Mail, Yandex Disk, a cloud-based storage service, Yandex Telemost, a video conferencing service, Yandex Documents, an online documents editor, Yandex Calendar, Yandex Messenger and many other services.

Self-Driving Group

The Self-Driving Group started developing driverless technologies in early 2017, 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. During 2023, the business launched the public testing of a self-driving taxi service in Moscow and Sochi. By the end of December 2023, the total number of kilometers driven by vehicles in autonomous mode was more than 28 million.

At the end of 2023, the self-driving fleet consisted of over 130 cars with custom-built fleet management system and additional software developed internally.

In the autumn of 2019, Yandex introduced an autonomous Delivery Robot, which leverages a self-driving technology. As of December 2023, these autonomous delivery robots had conducted 310,000 commercial deliveries, including deliveries through Yandex Eats and Lavka services (more than 10,000 orders per month in 2023). As of the end of 2023, more than 200 stores and restaurant chains utilized Yandex delivery robots for their logistics.

Devices and Alice

Smart Speakers and Smart Home

Yandex Station is a Yandex smart speaker with an integrated virtual smart assistant, Alice. The current range of smart devices with Alice consists of Light Station, Mini Station, Midi Station, Station 2, Max Station, DuoMax Station and certain smart home devices. In 2023, 4.2 million Yandex Stations equipped with Alice were sold.

Smart TV and Video Streaming Devices

Since launching the first Yandex smart speaker in 2018, the business has been working on voice control applications for video content consumption. In 2022, Yandex released the Yandex Smart TV with Alice, the first Yandex-branded Smart TV with YaOS and voice control through paired smart speakers. In 2023, the business introduced TV Station and TV Station Pro, which represent a new category of TVs and combine the capabilities of a smart speaker with the virtual smart assistant Alice and smart TV in one device.

Virtual Smart Assistant Alice

Alice is the first virtual smart assistant launched in Russia and is currently the most popular and widely recognized one on that market. Alice helps its users manage daily tasks, such as setting an alarm and scheduling reminders for important events, ordering a taxi, using radio-nanny mode and controlling a user’s ‘smart’ home. It is also widely used for entertainment, such as turning on Yandex Music and radio stations, and composing generative tales together with children and others. In 2023, the business launched a new Alice feature which has the ability to accept orders through the hyperlocal convenience store delivery service Yandex Lavka.

As of December 2023, there were over 77.1 million monthly Alice users across Yandex platforms such as the Yandex Search app and Yandex Browser, smart speakers, smart TVs and navigational apps.

Fintech

In 2021, Yandex acquired a banking license and started to develop financial products. In 2023, Yandex provided multiple financial services including the convenient online and offline payment service Yandex Pay, Yandex Split (a service facilitating purchases made and paid for in instalments, which is now integrated in many other Yandex businesses), Yandex Saver (offering savings accounts with or without a deposit term), the Yandex Pay Debit card with

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cashback options (Yandex Plus points) for purchases made in Yandex services and outside, another debit card option Yandex Pro for drivers and saving and deposits accounts and loans for drivers. Most of these products are aggregated in the Yandex Pay app.

Practicum

In 2019, Yandex launched Practicum, an online EdTech platform offering IT and digital reskilling and upskilling programs for specialists who already have a profession and work experience. In 2023, Practicum announced new online Bachelor and Master programs with several universities. As of March 2024, over 70,000 people have graduated from Practicum.

Competition

Yandex operates in a market characterized by rapid commercial and technological change, and faces significant competition in many aspects of its business. In Search, Yandex competes with Google, VK and Rambler.

Social networking sites, video platforms, online marketplaces, new media channels, and classifieds 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, which could create increased competition.

In 2023, Yandex also faced competition across the non-advertising businesses:

The ride-hailing services (including Yandex Taxi) compete with ride-hailing operators such as Citymobil, Taksovichkof, InDrive, Maxim as well as with a number of other ride-hailing, on-demand transportation and traditional taxi companies that operate nationally or in specific cities or regions.
Yandex Market faces competition from a number of local players acting as both merchants and marketplaces, including Wildberries, Ozon, and others.
The Yandex Classifieds services compete with Avito in most areas as well as with a number of niche players such as CIAN, Domofond, Domclick in real estate and Drom and Cars.ru in automobile sales.
Kinopoisk competes with ivi, Okko, Wink and other online cinemas, while Yandex Music competes with VK Music and MTС Music.
Food delivery businesses Yandex Eats, Delivery Club and the hyperlocal grocery delivery service Yandex Lavka each compete with Samokat, retailers such as Vprok.ru (operated by X5 Retail Group), Vkusvill and others, Sbermarket, restaurants’ own delivery services (Dodo, Domino’s Pizza, Papa John’s), dark kitchens and others.
Yandex’s last mile logistics solution for individuals, SMBs and enterprises Yandex Delivery competes with SDEK, Russian Post and a number of local players across Russia.
Yandex Drive, the car-sharing service, competes with Delimobil, BelkaCar as well as a number of other players operating primarily in Moscow and St. Petersburg.
Yandex Cloud competes with a number of local players (Rostelecom, Sber, VK and others).
Yandex smart speakers with virtual assistant Alice compete with VK Сapsule and SberBoom.

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

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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 20,850 at December 31, 2022 to 26,361 at December 31, 2023.

The four international businesses, which will be retained by Yandex N.V. following the completion of the Sale transaction, currently employ approximately 1,300 people, with a significant portion based at our headquarters in Amsterdam and located internationally, including in Israel, Germany, Switzerland, Czech Republic, the US, Serbia, and the UAE.

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.

In connection with the Sale, we will receive transitional licenses to the intellectual property created by businesses within the divestment perimeter for various fixed periods in 2024 in order to facilitate the further development of the retained businesses going forwards.

The businesses being sold will retain the use of the Yandex brand. Our company and the retained businesses will cease to use the Yandex brand following a short transition period.

Facilities

Yandex currently leases a total of approximately 64,700 square meters in a single location in central Moscow that serves as group’s headquarters. Yandex also leases additional office space of about 92,980 square meters in business centers in Moscow. Together with operating subsidiaries, Yandex also lease or own office space in a number of other cities in Russia and internationally.

Governance Structure

Overview of current structure

In December 2019, our shareholders approved targeted changes to Yandex’s corporate governance structure, including the introduction of a priority share and the formation of a Public Interest Foundation. Pursuant to an amendment of our articles of association that was approved by our shareholders in March 2024 and that will become effective at the first closing of the Sale, these elements of our governance structure will be eliminated. Below we provide a brief description of these governance mechanisms as in place during 2023 and until first closing of the Sale.

Public Interest Foundation

The Public Interest Foundation has certain limited and targeted governance rights in our group, which will terminate at the first closing of the Sale. 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 are covered by Yandex.

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Priority Share

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

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 by voting power, of the outstanding Class A and Class B Shares (taken together), if our Board has otherwise approved such accumulation of shares;
to approve a decision of our Board to sell, transfer or otherwise dispose of, directly and indirectly, all or substantially all of our assets to one or more third parties in any transaction or series of related transactions, including the sale of Yandex LLC, one of the main operating businesses that forms part of the Sale divestment perimeter; and
to make binding nominations of two designated directors of our 12-person Board. Under Dutch law, a binding nomination will be adopted at a General Meeting of our shareholders, unless rejected by a two-thirds (2/3) majority of those voting.

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 certain specified situations.

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 vacant) and both of the designated directors.

The Public Interest Committee is not authorized to review ordinary business or commercial matters; its right of approval is limited to a defined list of the following specific matters deemed to be of public interest:

transactions or other transfers resulting in the granting of direct access to Russian users’ personal data owned by us and non-depersonalized big data owned by us to non-Russian persons;
the adoption, modification, amendment, and cancellation of the Yandex internal policies on protection of personal data and non-depersonalized big data of Russian users (including storage procedures, and sale/provision of such information to foreign persons);
entry by Yandex into any agreement which concerns Russia with a non-Russian state or an international intergovernmental organization (or its bodies and agencies); and
direct or indirect transfers or encumbrances of material intellectual property rights, including licensing such rights, if as a result of such license Yandex would lose the ability to use such rights in Russia.

Government Regulation

Both the continuing operations and the businesses to be divested 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. In this section, we focus on the current and proposed regulatory framework that is applicable to the businesses to be divested, which constitute a majority of the businesses of the combined group. In the current geopolitical environment, there could also be an increased risk of new legislative or regulatory initiatives that could be seen as protecting national security and/or limiting foreign influence over certain sectors, including actions aimed at effecting changes of control of companies that are considered to be of strategic importance. 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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In light of the ongoing geopolitical tension in our key markets, a number of new laws and regulations critical to a number of businesses and activities in Russia have been proposed or adopted that are designed to restrict foreign ownership and tighten state control over businesses in certain sensitive sectors of the Russian economy, including strategically important enterprises and mass media. New regulation and laws in Russia could have a significant impact on the businesses to be divested pursuant to our proposed Sale.

Regulation of Sensitive Businesses in Russia

Legislation proposed in the Russian State Duma in the summer of 2019 could limit non-Russian ownership of “significant” internet companies to no more than 20%. A more recent draft law proposed restrictions to audiovisual services limiting their non-Russian ownership to no more than 20%. Yet another recent law imposes restrictions to classifieds services limiting their non-Russian control up to 50%.

Advertising Regulation

The businesses to be divested 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 compliance efforts, may expose the businesses to be divested to substantial liability as distributors of advertising and may restrict their ability to provide some services. Other laws or interpretations of laws, including those of foreign jurisdictions, may also restrict advertising and negatively impact these businesses.

Intellectual Property Regulation

Under Russian law, the businesses to be divested have exclusive rights to trade secrets (know-how) only if they have complied with a legal requirement to introduce reasonable measures to maintain confidentiality of trade secrets. Such measures may be burdensome and difficult to implement. As these businesses rely extensively on the protection afforded to trade secrets, they 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 these measures will be deemed insufficient and, as a result, these businesses will fail to acquire rights to these trade secrets under Russian law.

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 in a dispute of this nature.

Nonetheless, under Russian law, subject to the risks outlined above, the businesses to be divested 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 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

In October 2023, legislative changes regulating the use of recommendation technologies have entered into force and now apply to a broad range of services offered by the businesses to be divested (including Search and Yandex Direct). Failure to comply with these requirements may result in the blocking of the information resource. Now the owner of an information resource is obliged:

not to allow the use of recommendation technologies that violate the rights and legitimate interests of users, or in order to provide information in violation of the law;
to inform users of the resource about the use of recommendation technologies; and
to place on the information resource the rules for the use of recommendation technologies.

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Internet Regulation

Certain laws that came into force in November 2019 continue to tightly regulate traffic routing in the Russian internet. There has been limited experience in the application of this regulation, and so its implementation or any uncertainty relating to it, 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 and even result in interruptions and delays of online services in Russia.

Additional regulation applicable specifically to technological platforms and ecosystems is 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 flexibility in providing services and adversely impact operations.

Privacy and Personal Data Protection Regulation

In 2022, amendments to the Russian law on personal data were adopted, introducing a procedure of notification of a personal data breach to the supervisory authority (Roskomnadzor). A bill is being prepared that would establish a turnover-based fine (up to 3% of annual revenue) for repeated leaks of personal data. If this version of the draft law is adopted, the possible amount of potential fines could be significant for Yandex. In March 2023, the procedure for prior notification of Roskomnadzor on the cross-border transfer of personal data was introduced. These amendments allow Roskomnadzor to impose a ban on the cross-border transfer of personal data to a specific foreign organization or the country as a whole.

Russian data protection laws provide that an individual must freely consent to the processing of their personal data. Such consent must be concrete, substantive, informed, definite 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.

The businesses to be divested seek this consent from 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 the collection, use, storage and processing of personal data. Furthermore, many of the services offered do not require the creation of an account prior to their use and only limited information is collected in these circumstances. In particular, the businesses place cookies and use other widespread technologies that assist in improving user experience and ultimately benefit both our users and advertisers through behavioral targeting of advertising. No clear legislative guidelines have been provided addressing whether these 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 the businesses’ current data protection practices. Complying with various regulations in this area may require additional costs or changes in business practices. Further, any failure to protect users’ privacy and data may result in a decrease of user confidence in the services offered, and may ultimately result in a loss of users, which would adversely affect these businesses.

Licenses for the Provision of Particular Services

The provision of banking operations, including those provided by Yandex Bank, is heavily regulated, which continually undergo significant changes. Compliance with these requirements is closely reviewed by the regulators.

Entities that provide certain telecommunication services for a fee are required under Russian law to obtain a “telematics” license from Roskomnadzor, which the businesses to be divested have obtained. It is possible that a Russian court or government agency may construe online advertising revenues as a fee and determine that these businesses are required to hold an additional telematics license for such services.

Antimonopoly Regulation

The businesses to be divested 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 they operate. We understand that the

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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.

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. Taxation in Kazakhstan and other markets outside Russia, where the Company operates, also has significant uncertainties.

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 services offered by the businesses to be divested and the failure to comply with such norms could lead to liability.

Also, the law “On unacceptable contract terms that infringe on the rights of consumers” adopted in 2022 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 law is vague and generalized, which can lead to legal uncertainty and could negatively affect services that interact with consumers (and may result in liability for violation of such law).

Regulations of Other Business Units; Other Jurisdictions

A number of the businesses to be divested, including in particular Ride-Hailing, operate in sectors that are subject to extensive governmental scrutiny and rapidly evolving regulatory requirements. The new Russian federal law “On taxi” was adopted in December 2022 and came into force in September 2023 in Russia. This law is a comprehensive regulation of the sphere of taxi transportation, it grants self-employed the right to provide transportation services, as well as clarifies the status of the taxi aggregator and establishes a limited list of cases of their liability.

In addition, because many Yandex 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.

Other Regulations

As mentioned above, in 2022, a number of decrees of the President of the Russian Federation were issued aimed at ensuring the financial stability of the country. Under these decrees, a number of transactions with persons from so called “unfriendly” states applying restrictive measures (including sanctions) to the Russian Federation, its legal entities and individuals, became possible only with the permission of the Government Commission for Foreign Investment Control, Bank of Russia, or the President of the Russian Federation.

Item 4A. Unresolved Staff Comments.

None.

32

Item 5. Operating and Financial Review and Prospects.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the “Selected Consolidated Financial Information” section of this Annual Report and our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion contains forward-looking statements based on our current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” and “Forward-Looking Statements” sections and elsewhere in this Annual Report. The historical results described below are not indicative of the results of the retained businesses or the group to be divested in the Sale in current or future periods.

Overview

Yandex is a technology company that builds intelligent products and services powered by proprietary machine learning and other technologies, with the goal of helping consumers and businesses better navigate the online and offline world. The ongoing geopolitical tensions, their impact on the Russian and global economy, and related pressures on the broader social and business environment, created unprecedented challenges for our business in 2023. Throughout the year we have been primarily focused on the stability of our operations and financial position, safeguarding the interests of our stakeholders and ensuring the well-being of our employees.

On February 5, 2024, the company announced that it had entered into a definitive agreement with a purchaser consortium to sell all of the group’s businesses in Russia and certain international markets (the “Sale”). The first closing pursuant to the Sale transaction is expected to take place in the coming weeks, with the second closing occurring within seven weeks following the first closing. Following the Sale, the company will have no interest in the businesses to be divested in Russia.

The Sale was approved by the Board in February 2024 and by the Company’s shareholders in March 2024. As of December 31, 2023, the Sale had not been approved and, accordingly, the result of operations of the businesses to be divested in the Sale are included consolidated financial results of the Company for the year ended December 31, 2023, and are not presented as discontinued operations or assets held for sale.

Over the last several years, the Yandex group expanded its operations beyond the core advertising and ride-hailing businesses into a number of other areas, including car-sharing, e-commerce, foodtech, video and audio streaming, delivery and logistics business, cloud technologies and fintech.

Yandex has continued to focus on improvements in the quality of Search, which is the largest Yandex service by audience and the basis of the group’s key cash generating business - advertising.

For the Search and Portal business, the principal constituencies are:

Users. Yandex provides users with advanced search capabilities and an extensive range of online services that enable them to find relevant, objective information quickly and easily, as well as communicate, connect, arrange transportation, access entertainment and shop over the internet.
Advertisers. The Yandex online advertising platform allows advertisers to reach a large audience of users in their markets and deliver cost-effective online advertising. With Yandex.Direct, an auction-based advertising platform, advertisers can promote their products and services through relevant ads targeted to a particular user query, the content of a website or the application or webpage being viewed, or user behavior or characteristics.
Yandex Advertising Network partners. The businesses to be divested have relationships with a large number of third-party websites, which we refer to as the Yandex Advertising Network. In addition to serving ads on the Yandex website and the application, ads can be served directly on network partners’ websites and Yandex shares the fees generated by these ads with its partners, providing an important revenue stream for them.

33

Search and Portal revenues increased by 49% in 2023 compared to 2022. This growth was mainly driven by the strong performance of the core search business and the Yandex Advertising Network underpinned by ongoing investments in the development and efficiency improvements to ad-products and technologies, as well as the expansion of advertising inventory.

The businesses to be divested benefit from a large and diverse base of advertisers. Advertisers include individuals and small, medium and large enterprises across Russia and the other countries in which the business operates, as well as large multinational corporations. No individual advertiser accounted for more than 1% of total revenues in 2021, 2022 or 2023.

In 2023, E-commerce, Mobility and Delivery segment revenues increased by 61% compared to 2022. The increase was mainly driven by E-commerce services (with Yandex Market being the largest contributor to the growth, followed by Yandex Lavka) and Mobility. Mobility revenues increased by 36%, which is lower than GMV growth due to increased investments in driver supply in Russia. E-commerce revenues increased by 77%, slightly surpassing the increase in GMV, reflecting an improvement of 3P take rates and a growing share of advertising revenue. Other O2O services revenues produced 93% growth where Food Delivery was the key contributor to the growth, followed by Yandex Delivery business.

The growth in GMV1 of Mobility reached 45% in 2023 compared to 2022 driven by an increase in the number of rides on the back of growth in the number of users, a growing share of non-economy tariffs due to the shift of new vehicles supply on the market towards upper-class models, and positive forex effect. The growth in GMV2 of E-commerce was 64%, supported by organic growth in the user base, assortment expansion and cross-service synergies with Fintech products (in particular Split and Yandex Pay) and Yandex Plus. GMV3 of other O2O services grew by 72%, with Yandex Delivery and Yandex Food Delivery services being the largest contributors.

Plus and Entertainment Services revenues grew by 110% in 2023 compared to 2022. The increase was primarily driven by the growth of subscription revenue on the back of an expanding base of paid subscribers, changes in tariff mix and options, as well as solid trends in other revenue streams (including advertising, licensing, ticketing and other revenue categories).

We believe the most significant factors that allowed these businesses to show relative stability despite the continually challenging external environment affecting the business throughout 2023 include the following:

expansion of the advertising inventory (mainly across mobile platforms), entry into new media channels and being able to offer new advertising formats;
the ability to effectively monetize the mobile search function, where the number of search queries is growing quicker than on desktops.
being able to effectively monetize traffic generated by Yandex websites and apps and those of the Yandex Advertising Network (with a specific focus on the e-commerce sector and SMB clients), while improving advertising products and technologies (including on the back of the integration of generative neural networks) and maintaining an attractive return on investments for the network’s advertisers;
the drive to provide clients with simple, high-quality and efficient advertising products and instruments as part of the E-commerce segment, which allow businesses to promote goods on the Yandex marketplace and beyond to a wider audience in addition to exploring opportunities across Yandex Ad Network and Search;
the quality of Yandex’s and partners’ services, including the relevance, objectivity and quality of the search results; the availability, accuracy, comfort and safety of the Mobility businesses; the assortment of goods offered on Yandex Market, the reliability of third-party sellers, delivery speed and convenience of the E-commerce and FoodTech businesses, and the quality of other services;

1 GMV (or gross merchandise value) of Mobility is defined as the total amount paid by customers for ride-hailing, car-sharing and scooters rent services booked through the Yandex platform, including VAT.

2 GMV of E-commerce is defined as the value of all merchandise sold through the Yandex Market marketplace and Yandex Lavka as well as the value of products sold through Yandex Eats and Delivery grocery service (delivered and paid for), including VAT.

3 GMV of other O2O (online-to-offline) services includes the total amount paid by customers and partner businesses for Yandex Delivery and Yandex Fuel services, the value of orders, delivered through the Yandex Eats and Delivery food delivery services, Lavka Israel, and several other smaller O2O experiments, including VAT.

34

focus on strong partner relationships supporting the growth across each of the businesses as well as the well-being of Yandex’s partners, providing them with efficient ways of monetization through various services;
the demand for Yandex Plus, which combines a wide range of services (including Kinopoisk, Yandex Music and Bookmate) and benefits for users, connected by one-account, together with an increased focus on original content both online and offline; and
development of other businesses and products in Yandex Сloud, Alice and Devices and FinTech, as well as an improvement in market share on the back of increasing demand for Yandex services.

Operating Segments

As described elsewhere in this Annual Report, Yandex N.V. has entered into a definitive agreement to sell all of the group’s businesses in Russia and certain international markets. The businesses described below form part of the transaction perimeter and will not continue as part of the Yandex group following the completion of the proposed Sale. Those Target businesses are managed and reported on as part of the following operating segments:

Search and Portal, which includes Search, Geo, Weather and a number of other services;
E-commerce, Mobility and Delivery, which includes transactional online-to-offline businesses, which consist of (i) the mobility businesses, including ride-hailing, Yandex Drive, a car-sharing business, and scooters; (ii) the E-commerce businesses, including Yandex Market, multi-category e-commerce marketplace, Yandex Lavka, a hyperlocal convenience store delivery service, and the grocery delivery services of Yandex Eats and Delivery (the services earlier known as Delivery Club); and (iii) other O2O businesses, including Yandex Delivery, a middle and last-mile delivery service; Yandex Eats and Delivery, a ready-to-eat delivery from restaurants services; and Yandex Fuel, a contactless payment service at gas stations, and several smaller experiments;
Plus and Entertainment Services, including subscription service Yandex Plus, Yandex Music, Kinopoisk, Yandex Afisha, Bookmate and the production center Yandex Studio;
Classifieds, which includes Auto.ru, Yandex Realty, Yandex Rent and Yandex Travel; and

Other Business Units and Initiatives, including a self-driving vehicles business referred to as Yandex SDG, Yandex Cloud and Yandex 360, Yandex Education (consisting of Practicum and other education initiatives), Devices and Alice, FinTech (including Yandex Pay and Yandex ID) and a number of other experiments as well as unallocated corporate expenses.

Certain changes have been made to the reporting segments, effective as of the start of 2024, including (i) the transfer of Edadeal from E-commerce, Mobility and Delivery to Search and Portal, and (ii) the transfer of Food Delivery from other O2O businesses to E-commerce businesses within E-commerce, Mobility and Delivery.

Key Trends Impacting Our Results of Operations

The key factors affecting the results of our operations reflect the current geopolitical and macroeconomic situation, including:

sanctions and export control restrictions introduced by a number of governments (including those of the United States, United Kingdom, Switzerland and European Union);
changes in the competitive landscape: including intensification of competition with local players (marketplaces, classifieds and others);
capital control measures adopted by the Russian authorities in response;
increases in inflation and interest rates;
currency exchange dynamics (see also “Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Risk”); and

35

trends in consumption and real disposable income (the future development of which is hard to predict at this time).

According to the Russian Federal State Statistics Service, Rosstat, the consumer price index in Russia increased to 8.4% in 2021 and to 11.9% in 2022 and normalized back to 7.4% in 2023. The Central Bank of Russia forecasts that inflation in 2024 could drop further to 4.0-4.5%. Inflation rates dynamics influence our operating expenses and capital expenditures.

Yandex carefully follows the export control restrictions introduced by several countries, including the United States, the United Kingdom, Switzerland and the European Union, and is working closely with its vendors. None of the Yandex group companies operates in the sectors that have been specifically targeted. In July 2023, “Yandex Pay” was designated in Canada; such designation does not apply to Yandex N.V. or its other group companies or operations. Yandex continues to closely monitor developments in this regard.

Given the high level of uncertainty around future geopolitical developments and the macro environment, our visibility over the short- and medium-term is limited and we remain unable to provide any forward-looking expectations at this stage.

In addition to the impact of the current geopolitical and macroeconomic environment, other key trends influencing the group’s results of operations in the ordinary course include the following:

In the Search and Portal business:
oongoing improvement in the efficiency of advertising products as well as development of new advertising solutions (with a particular focus on small businesses and e-commerce businesses);
ofurther integration of AI technologies into Yandex advertising solutions and products;
ogrowth of search share on iOS; and
oexpansion of advertising inventory across the mobile platforms.
For the Mobility businesses:
ocontinuous growth of demand for ride-hailing services;
oundersupply of drivers and cars;
oshifts in new vehicle supply on the market towards upper-class models;
orising purchase prices for new cars and higher maintenance costs for Yandex partners on the back of geopolitical and macroeconomic factors; and
ofurther improvements in marketplace efficiency and increase of driver incentives to support the well-being of Yandex partners).
For the E-commerce and Delivery businesses:
oincreased promotional pressure by the key players;
ogreater focus on improvements in operational efficiency of delivery amid courier undersupply;
orapid growth of advertising revenue on the back of development of new products and solutions for merchants;
odeeper cross-synergies between E-commerce and other services, including Plus and FinTech; and
oincreased focus on unit economics and improving operational efficiency of E-commerce.
For the Plus and Entertainment Services:
othe increase in the base of subscribers and their retention supported by benefits across multiple Yandex services offered by subscription services;
ochanges to the content mix amid reduced availability of the major content, as well as the growing popularity of original content and its importance for the growth and the competitiveness of streaming platforms; and

36

othe continuing growth of bundled subscriptions popularity, providing a wide range of services and benefits for users.

The businesses to be divested have diversified their 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, Plus and Entertainment Services and other new opportunities with different margin profiles and stages of investments) remains an important driver of consolidated operating margin. Search and Portal revenues have decreased from 45.5% of total revenues in 2021 to 43.3% in 2022 and to 42.2% in 2023.

In the ordinary course of business revenues were impacted by some seasonal factors, including seasonal fluctuations in internet usage, the influence of public holidays and vacations and general seasonal demand fluctuations. As the current geopolitical situation continues to worsen, the uncertainty of seasonal trends and how they will impact the businesses throughout 2024 remains particularly unclear.

Key Recent Acquisitions

Acquisition of Uber’s remaining interest in MLU B.V.

On April 21, 2023, we entered into an agreement (the “Agreement”) with Uber NL Holdings 1 B.V. (“Uber”), a subsidiary of Uber Technologies Inc., and on the same day acquired Uber’s entire remaining 29% interest in MLU B.V, a mobility joint venture, for consideration in cash of $702.5 million (RUB 57,337 million at the exchange rate as of the closing date). The Agreement superseded and was in lieu of the call option Uber granted to us under a Framework Agreement dated September 7, 2021. The call option was exercisable until September 7, 2023. The transaction was accounted for as an equity transaction.

A further description of the acquisitions and their accounting implications can be found in Note 3 – “Business combinations and investment transactions” of our consolidated financial statements included elsewhere in this Annual Report.

Results of Operations

The following table presents our historical consolidated results of operations as a percentage of revenues for the periods indicated:

Year ended December 31, 

 

    

2021

    

2022

    

2023

 

Revenues

100.0

100.0

100.0

%

Operating costs and expenses:

Cost of revenues

48.8

44.7

45.0

Product development

13.6

13.9

12.9

Sales, general and administrative

34.5

33.0

33.4

Depreciation and amortization

6.8

5.9

5.0

Goodwill impairment

0.1

Total operating costs and expenses

103.7

97.5

96.4

Income/(loss) from operations

(3.7)

2.5

3.6

Interest income

1.3

0.9

0.7

Interest expense

(1.0)

(0.7)

(1.4)

Gain on restructuring of convertible debt

1.8

Effect of the News and Zen deconsolidation

7.3

Income/(loss) from equity method investments

1.8

(0.2)

(0.2)

Other income/(loss), net

(0.3)

1.8

2.7

Income/(loss) before income tax expense

(2.0)

13.5

5.4

Provision for income taxes

2.1

4.4

2.7

Net income/(loss)

(4.1)

9.1

2.7

%

Our consolidated income/(loss) from operations as a percentage of total revenues increased to an income of 3.6% and 2.5% in 2023 and 2022, respectively from a loss of 3.7% in 2021. The growth of margin in 2023 was mainly

37

driven by solid performance across Search and Portal, Plus and Entertainment segments, as well as Devices and Alice segment, partly offset by the loss from operations associated with the impairment of intangible assets in 2023 and investments in the expansion of the group’s businesses and their future growth. The growth of margin in 2022 was mainly driven by the continuing improvement of the Search and Portal, E-commerce, Mobility and Delivery, and Devices and Alice segments’ profitability on the back of the increased operational efficiency and stricter cost control.

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

    

2021

2022

2023

(in millions of RUB)

Search and Portal

162,176

226,022

337,514

E-commerce, Mobility and Delivery

 

166,714

261,246

420,753

Plus and Entertainment

18,408

31,782

66,899

Classifieds

 

9,217

12,287

24,174

Other Business Units and Initiatives

26,822

48,784

82,734

Total segment revenues

383,337

580,121

932,074

Eliminations

(27,166)

(58,422)

(131,949)

Total revenues

356,171

521,699

800,125

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

    

2021

2022

2023

(in millions of RUB)

Search and Portal

81,259

120,503

172,950

E-commerce, Mobility and Delivery

 

(30,392)

(19,644)

(23,611)

Plus and Entertainment

(6,464)

(7,849)

2,944

Classifieds

 

1,864

1,111

423

Other Business Units and Initiatives

(14,471)

(29,844)

(56,794)

Total segment adjusted EBITDA

31,796

64,277

95,912

Eliminations

347

(135)

1,058

Total adjusted EBITDA

32,143

64,142

96,970

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

For a reconciliation between total adjusted EBITDA and net income/(loss) before income tax expense see Note 16 — “Information about segments & geographic areas” of our consolidated financial statements included elsewhere in this Annual Report.

Revenues

The following table presents consolidated revenues, by source, in absolute terms and as a percentage of total revenues for the periods presented:

Year ended December 31, 

 

2021

2022

2023

 

    

RUB

    

% of Revenues

    

RUB

    

% of Revenues

    

RUB

    

% of Revenues

 

(in millions of RUB, except percentages)

 

Service revenues

 

300,261

84%

429,701

82%

658,065

82%

Revenues related to sales of goods

55,910

16%

91,998

18%

142,060

18%

Total revenues

 

356,171

100%

%

521,699

100%

%

800,125

100%

%

Service revenues. Service revenues consist of online advertising revenues, revenues from the ride-hailing and logistics services, food delivery services, Plus and Entertainment services, car-sharing services, third party sales through the Yandex Market marketplace platform and other services. Service revenues increased by RUB 228,364 million, or

38

53.1% in 2023 and by RUB 129,440 million or 43.1% in 2022, year over year. The growth was mainly attributable to the following:

in respect of online advertising revenue - the solid performance of the core search business and the Yandex Advertising Network on the back of investments into the expansion of advertising inventory, along with development and efficiency improvements of certain ad-products and technologies;
in respect of ride-hailing and logistics services - a solid increase in the number of rides and a growing share of non-economy tariffs in ride-hailing segment, as well as the solid performance of logistics business;
in respect of the Yandex Eats businesses - a solid performance of the restaurants vertical and further development of the grocery business;
in respect of the Plus and Entertainment services - the expanding base of paid subscribers and changes in tariff mix, as well as solid trends in other revenue streams.

Revenues related to sales of goods primarily represent revenues from goods sold through the marketplace platform, e-grocery revenue (specifically, Yandex Lavka, which uses a first-party (1P) business model and act as a direct retailer) and from the Devices and Alice business. Revenues related to sales of goods increased by RUB 50,062 million or 54.4% in 2023 and by RUB 36,090 million or 64.5% in 2022, year over year. The growth was primarily due to the FoodTech businesses, driven by hyperlocal grocery delivery service, Yandex Lavka, as well as increasing sales of devices and raising sales through the marketplace platform.

Operating Costs and Expenses

We classify operating costs and expenses as follows: cost of revenues, product development, sales, general and administrative expenses, depreciation and amortization.

Costs of revenues consists of cost of devices and other goods sold, traffic acquisition costs (TAC), cost of corporate ride-hailing and logistics services, logistics costs, content acquisition costs and outsource services, personnel expenses, content assets amortization and other cost of revenues.

TAC are the amounts paid to partners in the Yandex Advertising Network for serving Yandex online ads on their websites and to those partners who distribute Yandex products or otherwise direct search queries to Yandex websites. These amounts are primarily based on revenue-sharing arrangements. Some distribution partners are compensated on the basis of the number of installations of Yandex Browser or search apps. Yandex pays fees to its distribution partners on a non-refundable basis following the period in which the distribution fees are earned. Yandex does not have a standard term or termination provision that applies to agreements with distribution partners.

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

Year ended December 31, 

 

    

2021

    

2022

    

2023

 

(in millions of RUB,

 

except percentages)

 

Cost of service revenues

123,995

160,524

251,581

Cost of service revenues as a percentage of revenues

 

34.8

%

30.8

%

31.4

%

including Traffic acquisition costs

 

25,669

34,692

56,759

Traffic acquisition costs as a percentage of revenues

 

7.2

%

6.6

%

7.1

%

Cost of goods sold

 

49,957

72,695

108,452

as a percentage of revenues

14.0

%

13.9

%

13.6

%

Total cost of revenues

173,952

233,219

360,033

as a percentage of revenues

48.8

%

44.7

%

45.0

%

Traffic acquisition costs increased by RUB 22,067 million and by RUB 9,023 million in 2023 and 2022, respectively, compared to the prior years, as a result of solid growth in Yandex Advertising Network revenue for the period and costs related to distribution partners. As a percentage of total revenues, traffic acquisition costs increased to 7.1% in 2023 - primarily driven by the growing contribution of ad revenues related to the Yandex Advertising Network

39

and decreased to 6.6% in 2022 from 7.2% in 2021, as a result of growth of non-advertising revenue as a percentage of total revenue and the corresponding decline in the share of online revenue related costs.

Other cost of service revenues increased by RUB 68,990 million or 54.8% and by RUB 27,506 million or 28%, respectively, compared to the prior years. The increase was primarily due to the growth of the cost of corporate ride-hailing and logistics services, growth of content acquisition costs and outsource services, related to our Plus and Entertainment services (in line with the growth of subscription revenue) and Mobility business (including messaging services expenses and vehicles maintenance); and growth of logistics costs due to the expansion of Yandex Market, FoodTech and Yandex Delivery.

Cost of goods sold increased by RUB 35,757 million and by RUB 22,738 million in 2023 and 2022, respectively, year over year, in line with the growth of the corresponding revenue.

Product development. Product development expenses consist primarily of personnel costs incurred for the research and development of the Yandex search engine, YandexGPT, YandexART and other technology platforms (such as Yandex Go, marketplace platform, self-driving vehicles business, classifieds platform and others). We also include rent and utilities attributable to office space occupied by development staff in product development expenses.

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

Year ended December 31, 

 

    

2021

    

2022

    

2023

 

(in millions of RUB,

 

except percentages)

 

Product development expenses

 

48,461

72,278

102,991

as a percentage of revenues

 

13.7

%

13.9

%

12.9

%

Product development expenses increased by RUB 30,713 million or 42.5% and by RUB 23,817 million or 49.1% in 2023 and 2022, respectively, year over year. These increases were primarily due to increases in headcount and salaries in 2023 and 2022. Development personnel headcount increased from 9,192 as of December 31, 2021, to 10,708 as of December 31, 2022, and to 13,003 as of December 31, 2023.

Sales, general and administrative expenses include: expenses for personnel engaged in sales and promotion of products to the market, or performing general or administrative functions, including share-based compensation expenses; rental of office space and related utilities in proportion to the number of employees performing these functions; training and hiring expenses; advertising and marketing expenses, including the costs of organizing promotions; telecommunication services; travel expenses; legal and audit services; banking commission; and other expenses related to the group’s wider operating activities.

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

Year ended December 31, 

 

    

2021

    

2022

    

2023

 

(in millions of RUB,

 

except percentages)

 

Sales, general and administrative expenses

 

122,924

172,092

267,552

as a percentage of revenues

 

34.5

%

33.0

%

33.4

%

Sales, general and administrative expenses increased by RUB 95,460 million or 55.5% and by RUB 49,168 million or 40% in 2023 and 2022, respectively, year over year. The increases were primarily due to a growth of personnel expenses (including share-based compensation) of RUB 33,544 million and RUB 21,356 million in 2023 and 2022, respectively, which supported GMV growth in respect of Yandex Market and the revenue growth of Search and Portal, Mobility, FoodTech, Plus and Entertainment services and Yandex Delivery.

Additional factors contributing to the overall increase in 2023 compared to 2022 were increases in advertising and marketing expenses; bank and payment systems commissions, reflecting an increase in the number of orders made

40

through Yandex Market, FoodTech and in the number of rides in the Ride-hailing business; intangible assets impairment related to E-commerce, Mobility and Delivery segment; recruiting and training expenses; and other professional and outsourced services.

Additional factors contributing to the overall growth in 2022 compared to 2021 were increases in tax expenses other than income tax; bank and payment systems commissions, reflecting an increase in the number of orders made through Yandex Market, FoodTech and Yandex Delivery and in the number of rides in the Ride-hailing business; office rent and utilities expenses; and intangible assets impairment related to E-commerce, Mobility and Delivery segment.

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

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

Year ended December 31, 

 

    

2021

    

2022

    

2023

 

(in millions of RUB,

 

except percentages)

 

Depreciation and amortization expense

 

24,111

30,874

39,952

as a percentage of revenues

 

6.8

%  

5.9

%  

5.0

%

Depreciation and amortization expense increased by RUB 9,078 million or 29.4% and by RUB 6,763 million or 28.0% in 2023 and 2022, respectively, year over year. The growth was primarily due to: the increase of depreciation expense related to server and network equipment and infrastructure systems (primarily the result of investment in equipment); amortization expense related to technologies and licenses; depreciation expense related to finance; and acquisition-related intangible assets amortization expense.

Any depreciation of the Russian ruble may result in a material increase in capital expenditures and respective depreciation and amortization.

Share-based compensation. In the 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 the cost of revenues, product development expenses and sales, general and administrative expenses.

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

Year ended December 31, 

 

    

2021

    

2022

    

2023

 

(in millions of RUB,

 

except percentages)

 

Share‑based compensation expense

 

20,829

24,038

31,776

as a percentage of revenues

 

5.8

%  

4.6

%  

4.0

%

Share-based compensation expense increased by RUB 7,738 million or 32.2% in 2023 compared to the prior year. The increase was primarily related to the changes in the fair value of Synthetic Options and Business Unit Equity Awards (equity-linked awards in respect of the various business units), which are expected to be settled in cash, and the material appreciation of the U.S. dollar against the Russian ruble. In 2023, we recognized our obligation to settle the Synthetic Options and Business Units Equity Awards as a liability based on our past practice of settlements in cash.

Share-based compensation expense increased by RUB 3,209 million or 15.4% in 2022 compared to the prior year. The growth was primarily related to settlement of the group’s Synthetic Options and Business Units Equity Awards in cash, which led to additional cost recognized in 2022.

41

In light of the ongoing trading halt in our Class A shares on Nasdaq, during 2022 and 2023 participants received cash compensation based on the appreciation in value of the business unit equity from the grant date to the exercise date instead of settlement in our Class A shares. 

See Note 15 — “Share-based compensation” of the consolidated financial statements included elsewhere in this Annual Report.

Revenues and adjusted EBITDA by reportable segments

Revenues by reportable segment. Revenues attributable to the Search and Portal segment increased by RUB 111,492 million or 49.3% and by RUB 63,847 million or 39.4% in 2023 and 2022, respectively, year over year. This growth was mainly driven by the strong performance of the core search business and the Yandex Advertising Network underpinned by ongoing investment in the ad inventory expansion, as well as the development and efficiency improvement of ad-products and technologies. Search and Portal revenues accounted for approximately 42.2% of total revenues in 2023, compared with 43.3% in 2022 and 45.5% in 2021.

Revenues attributable to the E-commerce, Mobility and Delivery segment increased by RUB 159,507 million or 61.1% and by RUB 94,532 million or 56.7% in 2023 and 2022, respectively, year over year. The increase is primarily driven by E-commerce services (where Yandex Market was the largest contributor to growth, followed by Yandex Lavka) and Mobility. E-commerce, Mobility and Delivery revenues accounted for approximately 52.6% of total revenues in 2023, compared with 50.1% in 2022 and 46.8% in 2021.

E-commerce revenues (which represented 42.5% of the total segment revenues in 2023) increased by RUB 77,592 million or 76.7% and by RUB 40,667 million or 67.2% in 2023 and 2022, respectively, year over year. The increase was driven by the normalization of the 1P/3P revenue mix in Yandex Market and improvement of 3P take rates, as well as the growth of GMV on the back of the overall e-commerce market growth.

Mobility revenues increased by RUB 43,941 million or 36.0% and by RUB 36,566 million or 42.8% in 2023 and 2022, respectively, year over year. The increase was driven by the growing demand for the ride-hailing services in Russia, the larger share of non-economy tariffs, as well as the higher share of the corporate taxi business, which is recognized on a gross basis. For the purposes of assessing the business, “rides” are defined 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 the 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, 2021, 2022 and 2023 were 2.4 billion, 3.1 billion and 3.6 billion, respectively.

Other O2O services revenues attributable to the E-commerce, Mobility and Delivery segment increased by RUB 41,246 million in 2023 compared to 2022 which delivered 93% year-on-year growth and by RUB 20,816 million, or 88.5% in 2022 compared to 2021 primarily driven by the growth of Yandex Delivery and Yandex Food Delivery, as well as the acquisition of Delivery Club in September 2022.

Revenues attributable to the Plus and Entertainment services segment increased by RUB 35,117 million or 110.5% and by RUB 13,374 million or 72.7% in 2023 and 2022, respectively, year over year. The increase was primarily driven by the growth of subscription revenue (which increased by 67% year-on-year) on the back of an expanding base of paid subscribers, changes in tariff mix and options, as well as solid trends in other revenue streams (including advertising, licensing, ticketing and other revenue categories). Plus and Entertainment services revenues accounted for approximately 8.4% of total revenues in 2023, compared with 6.1% in 2022 and 5.2% in 2021.

Revenues attributable to the Classifieds segment increased by RUB 11,887 million or 96.7% and by RUB 3,070 million or 33.3% in 2023 and 2022, respectively, year over year. The increase of the revenue in 2023 compared to 2022 is primarily due to the recovery of the car market, dealer base expansion and new projects: C2B buy-out and CM Finance. Classifieds revenues accounted for approximately 3.0% of total revenues in 2023, compared with 2.4% in 2022 and 2.6% in 2021.

Revenues attributable to the Other Business Units and Initiatives category increased by RUB 33,950 million or 69.6% and by RUB 21,962 million or 81.9% in 2023 and 2022, respectively, year over year. The growth was primarily

42

driven by the Devices and Alice and Yandex Cloud revenues in 2023 and 2022. Other Business Units and Initiatives revenues increased to approximately 10.3% of total revenues in 2023, compared with 9.4% in 2022 and 7.5% in 2021.

Adjusted EBITDA by reportable segments. Adjusted EBITDA attributable to the Search and Portal segment increased by RUB 52,447 million, or 43.5%, from 2022 to 2023 and by RUB 39,244 million, or 48.3%, from 2021 to 2022. The increase in 2023 was mainly a result of the positive operating leverage effect driven by the strong performance of the core business and supported by positive impact of the segregation of corporate overheads. Adjusted EBITDA margin came to 51.2% in 2023 compared with 53.3% in 2022. The year-on-year margin dynamic mainly reflected investment into new products and technologies and related increases in personnel and marketing costs, as well as the low base effect in 2022 on the back of cost optimization.

Adjusted EBITDA losses attributable to the E-commerce, Mobility and Delivery segment expanded by RUB 3,967 million or 20.2% in 2023 compared to 2022 and narrowed by RUB 10,748 million or 35.4% in 2022 compared to 2021. The adjusted EBITDA loss in 2023 expanded primarily due to the growing scale of Yandex Market business and the higher investments into driver supply in Ride-Hailing, while adjusted EBITDA margin improved on the back of better operational efficiency in e-commerce generally and in the Food Delivery business. The improvement of adjusted EBITDA in 2022 was driven primarily by better operational efficiency across most of the key businesses included in the segment, as well as a group-wide focus on cash generation and stricter cost control, which included a hiring freeze, optimization of marketing expenses and other overheads.

Adjusted EBITDA/(loss) attributable to the Plus and Entertainment segment increased by RUB 10,793 million or 137.5% in 2023 compared to 2022 and decreased by RUB 1,385 million or 21.4% in 2022 compared to 2021. Adjusted EBITDA turned positive in 2023 due to the operating leverage effect on the back of the subscription revenue growth, which has more than offset investment into promotional activities on new products and regional launches and growing personnel expenses.

Adjusted EBITDA attributable to the Classifieds segment decreased by RUB 688 million or 61.8% and by RUB 753 million or 40.4% in 2023 and 2022, respectively, year over year. The primary reason for this in 2023 was the growth of advertising and marketing expenses, continuing investments in the long-term growth of businesses such as Yandex Travel and Yandex Realty, as well as personnel costs to support the development of those services. The primary factor contributing to the overall decrease of adjusted EBITDA in 2022 was the growth of advertising and marketing expenses, investments in Yandex Rent, as well as personnel costs to support the development of services.

Adjusted EBITDA loss attributable to the Other Business Units and Initiatives category increased by RUB 26,950 million or 90.3% and by RUB 15,372 million or 106.2% in 2023 and 2022, respectively, year over year. The loss increase in 2023 in absolute terms was mainly attributed to the unallocated corporate expenses from reportable segments recognized within the Other Business Units and Initiatives category (while these costs remain broadly unchanged as a percentage of total group’s revenue), investments into growth of the FinTech and Yandex SDG businesses, and development of other verticals, which was partially offset by a solid performance in Devices and Alice and Yandex Cloud in Russia and CIS. The loss increase in 2022 was primarily due to the segregation of unallocated corporate expenses from reportable segments’ adjusted EBITDA to Other Business Units and Initiatives category and higher investments in certain experimental growing businesses, such as Yandex SDG and FinTech, while the key businesses have demonstrated improvements in performance compared 2021: Devices and Alice and Yandex Cloud in Russia and CIS both became profitable in 2022.

Interest Income

Interest income is mainly generated from bank deposits and cash account balances. Interest income increased from RUB 4,723 million in 2022 to RUB 5,637 million in 2023 mainly due to the increase in applicable interest rates. Interest income remained relatively stable at RUB 4,723 million in 2022 and RUB 4,615 million in 2021.

Interest Expense

Interest expense is mainly generated from debt and financial lease liabilities. Interest expense increased to RUB 10,863 million in 2023 from RUB 3,396 million in 2022 mainly due to the conclusion of new debt facilities to finance operating activities as well as increases in interest rates.

43

Interest expense decreased to RUB 3,396 million in 2022 from RUB 3,711 million in 2021. This dynamic reflects a decrease in amortization of debt discount and interest expenses related to convertible debt and an increase in interest on the loan that was used to finance the convertible debt restructuring as well as increases in financial lease interest expenses.

Gain on restructuring of convertible debt

In June 2022, we completed the purchase of 93.2% in aggregate principal amount of our $1.25 billion 0.75% Convertible Notes due 2025. We have to date repurchased more than 99% in aggregate principal amount of our $1.25 billion 0.75% Convertible Notes due 2025 originally issued. As a result of the restructuring, a gain in the amount of RUB 9,305 million and a related income tax expense in the amount of RUB 751 million were recognized. See Note 13 — “Debt” of our consolidated financial statements included elsewhere in this Annual Report.

Effect of the News and Zen deconsolidation

In September 2022, we completed the sale of the group's news aggregation platform and Zen, an infotainment service, together with the acquisition of 100% of the food delivery service Delivery Club. The transaction marked a strategic decision to exit from media businesses (other than entertainment streaming). As a result of the News and Zen deconsolidation, a gain in the amount of RUB 38,051 million was recognized. See Note 3 – “Business combinations and investment transactions” of our consolidated financial statements included elsewhere in this Annual Report.

Income/(loss) from equity method investments

Loss from equity method investments in the amount of RUB 1,602 million and RUB 929 million in 2023 and 2022, respectively, was mainly a result of certain investments in venture capital funds. Income from equity method investments in the amount of RUB 6,367 million in 2021 was represented by the RUB 3,354 million gain on the revaluation of investment in ClickHouse Inc. and RUB 3,014 million income from investments in venture capital funds.

Other Income/(Loss), net

The following table presents the components of other income/(loss), net in absolute terms and as a percentage of revenues, for the periods presented:

Year ended December 31, 

 

    

2021

    

2022

    

2023

 

(in millions of RUB,

 

except percentages)

 

Other income/(loss), net

 

(1,217)

9,359

21,514

as a percentage of revenues

 

(0.3)

%

1.8

%

2.7

%

Other income/(loss), net includes foreign exchange gains in the amount of RUB 235 million, RUB 9,393 million and RUB million 22,853 in 2021, 2022 and 2023, respectively.

Foreign exchange gain dynamics reflect changes in the ruble value (currently, the group’s functional currency) of monetary assets and liabilities that are denominated in other currencies (primarily the U.S. dollar), as well as changes in the functional currencies of foreign subsidiaries' monetary assets and liabilities that are denominated in the Russian rubles.

Income Tax Expense

The following table presents income tax expense in absolute terms and effective tax rate for the periods presented:

Year ended December 31, 

 

    

2021

    

2022

    

2023

 

(in millions of RUB,

 

except percentages)

 

Income tax expense

 

7,430

22,734

21,372

Effective tax rate

 

(102.9)

%  

32.3

%  

49.5

%

44

Income tax expense decreased by RUB 1,362 million in 2023 and increased by RUB 15,304 million in 2022, year over year, primarily reflecting changes in taxable income. The effective tax rate increased by 17.2 and by 135.2 percentage points in 2023 and 2022, respectively, compared to the prior years. The effective tax rate differs from the statutory rate mainly as a result of the effects of differences in foreign tax rates of our subsidiaries (including reduced tax rates and effects of change in tax rates in certain subsidiaries), deferred tax asset valuation allowances, non-deductible stock-based compensation expenses, tax on dividends, statutory expenses not deductible for income tax purposes and tax provision recognized, as well as tax effects of the News and Zen deconsolidation in 2022.

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

Liquidity and Capital Resources

The group’s principal source of liquidity is cash flows from its operating activity as well as credit facilities.

As of December 31, 2023, RUB 96,519 million was recorded in cash and cash equivalents. Cash equivalents mainly consist of bank deposits with original maturities of three months or less.

As of December 31, 2023, RUB 141,484 million of debt consisting mainly of loan facilities of RUB 127,233 million were recorded (for more details see Note 13 - "Debt" of our consolidated financial statements included elsewhere in this Annual Report). As of December 31, 2023 the businesses to be divested also had available unused limits under the following facilities: loan facilities in the amount of RUB 118,408 million, leasing facilities of RUB 16,688 million and overdrafts of RUB 15,000 million.

The businesses due to be divested have in place a reverse factoring program with certain banks whereby a bank acts as a paying agent and pays suppliers and marketplace sellers on the date the payables are due. The conditions assume that the finance provider makes payments with the right for the relevant business to delay from 60 to 365 days depending on the contract. As of December 31, 2023, liabilities under the reverse factoring programs were RUB 33,486 million. The available unused limit under reverse factoring programs as of December 31, 2023 was RUB 20,833 million.

The group’s main cash owtflows are as follows: working capital, acquisitions, repayment of debt and related interest payment and other general corporate activities. The businesses to be divested expect to continue to finance those projects mainly through operating cash flow and, to the extent required, through borrowings. Certain of the businesses to be divested are temporarily restricted from remitting funds in the form of cash dividends or loans by a variety of regulations and local statutory requirements. The dividends from the principal businesses to be divested to our parent Yandex N.V. are limited to the cumulative net profits of the operating businesses, calculated in accordance with local accounting principles, which differs from the cumulative net profit calculated in accordance with U.S. GAAP. In addition, these dividends cannot result in negative net assets in the businesses to be divested or render them insolvent. Pursuant to applicable statutory rules, the amount that the principal operating businesses would be permitted to pay as a dividend to the company as of December 31, 2023 was approximately RUB 124,775 million.

Cash Flows

Set out below the summary of cash flows for the years ended December 31, 2021, 2022 and 2023:

Year ended December 31, 

    

2021

    

2022

    

2023

(in millions of RUB)

Net cash provided by operating activities

 

9,293

 

41,688

 

70,282

Net cash (used in)/provided by investing activities

 

21,994

 

(22,738)

 

(106,943)

Net cash (used in)/provided by financing activities

 

(84,845)

 

(5,519)

 

41,843

Effect of exchange rate changes on cash and cash equivalents, and restricted cash and cash equivalents

 

511

 

(8,390)

 

8,248

45

Cash flows provided by operating activities.

The main sources of cash provided by operating activities are generated by Search, Portal and Mobility services. Additionally, cash is generated through sales of devices and other services. Cash is primarily used for payments to employees, the purchase of goods and content assets, and making payments to Yandex Advertising Network’s and certain distribution partners. Other uses of cash from operating activities include payments to suppliers for professional services, tax authorities for income taxes, and other general corporate expenditures.

Net cash provided by operating activities increased by RUB 28,594 million in 2023 and by RUB 32,395 million from in 2022, respectively, year over year. The increase mainly resulted from positive operating leverage effect in Search and Portal driven by solid trends in advertising revenue supported by savings related to reduced advertising and marketing expenses. In addition there was increased inflow from Mobility services driven by (i) the growth in the number of rides due to the improvement in the rider base and order frequency in Russia and fast growth of new users in CIS; and (ii) operational efficiency improvement and optimization of marketing expenses. Changes in operating assets and liabilities resulted in an outflow of RUB 20,459 million in 2023 and RUB 22,817 million in 2022 primarily due to changes in inventory, sales financing receivables, accounts receivables and content assets.

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

Cash used in investing activities consists primarily of the acquisition of property and equipment (including the construction of new office building for a new headquarters for the businesses to be divested, purchasing networking equipment, and acquiring fulfillment and sort centers and scooters) and purchase of assets to be leased.

Net cash used in investing activities in 2023 amounted of RUB 106,943 million compared to net cash used in investing activities in 2022 of RUB 22,738 million. The change was mainly related to the increase in acquisitions of property, equipment and intangible assets by RUB 40,097 million, the purchase of assets to be leased by RUB 11,405 million, new loans granted by RUB 4,934 and a decrease in cash flows from maturities of term deposits (net of investment in term deposits) of RUB 23,455 million.

Net cash used in investing activities in 2022 amounted to RUB 22,738 million compared to net cash provided by investing activities in 2021 of RUB 21,994 million. The change was mainly related to maturities of term deposits and investments in term deposits in 2021 (in net amounts). Purchases of property and equipment and intangible assets increased by RUB 5,923 million in 2022 compared to 2021.

Cash used for acquisitions of businesses net of cash acquired in the amount of RUB 8,236 million in 2021 mainly related to the acquisitions: Axelcroft Group in February 2021 (RUB 7,228 million), Acropol Bank and other acquisitions (see Note 3 — “Business combinations and investment transactions” in the Notes to our consolidated financial statements included in this Annual Report).

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

Net cash provided by financing activities in 2023 was RUB 41,843 million, consisting mainly of cash inflow from proceeds from the issuance of debt in the amount of RUB 227,151 million, cash outflows from repayment of debt in the amount of RUB 137,755 million and purchase of non-redeemable noncontrolling interests related to the acquiring of Uber’s entire remaining 29% interest in MLU B.V. for consideration in cash of $702.5 million (RUB 57,337 million at the exchange rate as of the closing date) (for more details see Note 3 - "Business combinations and investment transaction" of our consolidated financial statements included elsewhere in this Annual Report).

Net cash used in financing activities in 2022 was RUB 5,519 million, consisting mainly of cash outflows from repayment of convertible debt of RUB 49,560 million and cash inflow from proceeds from issuance of debt in the amount of RUB 50,666 million to fund the cash component of the Notes. Repayment of debt primarily refers to the repurchase of our convertible debt (for more details see Note 13 - "Debt" in the Notes to our consolidated financial statements included in this Annual Report).

Net cash used in financing activities in 2021 was RUB 84,845 million, consisting mainly of cash outflows from payment under the transaction with Uber of RUB 73,077 million.

46

Effect of exchange rate changes on cash and cash equivalents, and restricted cash and cash equivalents consists of positive effect in 2023 in the amount of RUB 8,248 million due to the depreciation of the Russian ruble in 2023 against the U.S. dollar and negative effect in 2022 in the amount of RUB 8,390 million due to the strengthening of the Russian ruble against the U.S. dollar in 2022. This effect reflects changes of USD denominated monetary assets in the Russian businesses to be divested and RUB denominated monetary assets in our other foreign businesses.

Off-Balance Sheet Items

The Yandex group does not currently engage in material off balance sheet financing arrangements, and does 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.

Contractual Obligations

The following table sets forth contractual obligations as of December 31, 2023:

Payments due by period

Less than

One to three

Three to five

More than

Total

one year

years

years

five years

(in millions of RUB)

Debt

 

141,484

92,046

42,559

6,879

Operating lease obligations1

43,766

13,216

20,630

7,188

2,732

Finance lease obligations2

43,651

7,087

18,186

9,767

8,611

Non-cancelable streaming content related purchase obligations

 

7,194

5,623

1,120

451

Non-cancelable other purchase obligations3

26,745

12,196

12,231

1,492

826

Total contractual obligations

 

262,840

130,168

94,726

25,776

12,169

1 Includes lease obligations for corporate offices, warehouses, sorting centers, parking spots and cars.

2 Includes lease obligations for cars and warehouses

3 Obligations related to facility build-outs, utilities fees, agreements on the right to distribute the third-party content and other services.

For agreements denominated in U.S. dollars, the amounts shown in the table above are based on the U.S. dollar/Russian ruble exchange rate prevailing on December 31, 2023. All amounts are shown excluded value added tax, where applicable.

Critical Accounting Policies, Estimates and Assumptions

The accounting policies affecting our financial condition and results of operations are more fully described in our consolidated financial statements for the years ended December 31, 2021, 2022 and 2023, included elsewhere in this Annual Report. The preparation of these consolidated financial statements requires us to make judgments in selecting appropriate assumptions for calculating accounting estimates, which inherently contain some degree of uncertainty. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe our critical accounting policies that affect the more significant judgments and estimates used in the preparation of our consolidated financial statements are as follows:

Tax Provisions

Significant judgment is required in evaluating uncertain tax positions and determining the appropriate income tax expense. FASB authoritative guidance on accounting for uncertainty in income taxes requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained

47

on tax audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.

Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will impact the income tax expense in the period in which such determination is made. The income tax expense includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest. Our actual taxes may be in excess of the estimated amount expensed to date and accrued as of December 31, 2023, due to ambiguities in, and the evolution of, local tax legislation, varying approaches by regional and local tax inspectors, and inconsistent rulings on technical matters at the judicial level. See “Risk Factors—Risks Related to Tax Matters—Changes in the tax systems in which the businesses to be divested operate, or unpredictable or unforeseen application of existing rules, may materially adversely affect our business, financial condition and results of operations.”

In addition, significant management judgment is required in determining whether deferred tax assets will be realized. A valuation allowance is recognized to reduce deferred tax assets to amounts that are more likely than not to ultimately be utilized based on our ability to generate sufficient future taxable income. Establishing or reducing a tax valuation allowance requires us to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning strategies. If actual events differ from management’s estimates, or to the extent that these estimates are adjusted in the future, any changes in the valuation allowance could materially impact our consolidated financial statements.

Business Combinations

The FASB authoritative guidance requires an allocation of the fair value of purchase consideration to the assets of businesses acquired and respective liabilities assumed based on their fair values. Our estimates of the fair value of the identified intangible assets of businesses acquired are based on our expectations of the future results of operations of the businesses to be divested. The fair value assigned to identifiable intangible assets acquired is supported by valuations that involve the use of a large number of estimates and assumptions provided by management.

The purchase consideration that requires estimation of fair value is determined by valuation techniques which involve the use of significant estimates and assumptions determined by management.

Impairment of Goodwill

The carrying value of goodwill arising from business combinations is assessed on an annual basis, or more frequently if events or changes in circumstances indicate that such carrying value may not be recoverable. Other than our annual review, factors we consider important that could trigger an impairment review include under-performance of the reporting segments compared with internal budgets or changes in projected results, changes in the manner of utilization of the asset, and negative market conditions or economic trends. We determine whether impairment has occurred by assigning goodwill to the reporting segment identified in accordance with the authoritative guidance, and comparing the carrying amount of the reporting unit to the fair value of the reporting unit. We generally measure the fair value of the reporting unit by considering discounted estimated future cash flows using an appropriate discount rate. Therefore, our judgment as to the future prospects of the retained business as well as those to be divested has a significant impact on our results and financial condition. If these future prospects do not materialize as expected or there is a future adverse change in market conditions, we may be unable to recover the carrying amount of an asset, resulting in future impairment losses.

Fair Value of the Share Consideration Part of the Convertible Debt

We accounted for the modification of our 0.75% convertible notes due March 3, 2025 (the “Notes”) as a troubled debt restructuring and recognized as a gain the difference between the carrying value of all the Notes and the fair value of the purchase price paid and payable, including the cash component and share consideration. The fair value of the share consideration was determined based on the analysis of the most appropriate valuation technique in light of the trading halt in our Class A shares on NASDAQ.

48

Recent Accounting Pronouncements

See Note 1 — “Description of Business and Summary of Significant Accounting Policies” of our consolidated financial statements included elsewhere in this Annual Report.

Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

In our Russian operating subsidiaries to be divested, foreign exchange gains and losses arise primarily on monetary assets and liabilities denominated in U.S. dollar, and in our foreign companies - denominated in rubles. Therefore, the exchange rate fluctuations of rubles versus U.S. dollar may significantly affect our results of operations. For example, if the U.S. dollar had been stronger/weaker by 20% relative to the value of the Russian ruble as of December 31, 2023 we would have recognized additional foreign exchange losses/gains before tax of RUB 2,279 million.

Furthermore, the revenues and expenses of the Russian businesses to be divested are primarily denominated in Russian rubles. However, a substantial portion of capital expenditures, as well as a portion of expenses denominated in a currency other than the Russian ruble, can be materially affected by changes in the dollar-ruble and euro-ruble exchange rates. In the event of a material appreciation of the U.S. dollar against the ruble, such as occurred in 2015, 2020, 2022 and 2023 the ruble equivalents of these U.S. dollar-denominated expenditures increase and negatively impact net income and cash flows.

The functional currency of our parent company, Yandex N.V., is the U.S. dollar. The functional currency of the group’s other businesses, including those businesses to be divested, which are incorporated in other countries is generally the respective local currency. The Russian ruble is currently the company’s reporting currency. The financial statements of the non-Russian entities are translated into rubles using the current rate method, where balance sheet items are translated into rubles at the period-end exchange rates and revenue and expenses are translated using a weighted average exchange rates for the relevant period. The resulting translation effects were recorded as part of accumulated other comprehensive income in the consolidated balance sheets and amounted to a loss of RUB 9,369 million, a gain of RUB 7,966 million and a loss of RUB 1,672 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Interest Rate Risk

The group is exposed to variability in cash flow primarily related to floating interest rate debt (for more details see Note 13 - "Debt" of our consolidated financial statements included elsewhere in this Annual Report). A part of the obligations bear floating interest rates based on the key rate of the Central Bank of Russia. Such businesses would have experienced an additional interest expense of approximately RUB 1,061 million on an annual basis as a result of a hypothetical increase in base rate by one percentage point over the current rate as of December 31, 2023. Since a linear dependence is applicable, a hypothetical increase in base rate by each additional percentage point would have caused the same additional interest expense of approximately RUB 1,061 million on an annual basis.

49

Item 6. Directors, Senior Management and Employees.

The following table sets forth certain information with respect to each of our non-executive directors and their respective age and position as of the date of this Annual Report:

Name

    

Age

    

Date of Expiration of Current Term of Office

    

Director or Executive Officer Since

    

Title

John Boynton

58

2025

2000

Non-Executive Chairman

Rogier Rijnja

61

2026

2013

Non-Executive Director

Charles Ryan

56

2026

2011

Non-Executive Director

Alexander Voloshin

68

2026

2010

Non-Executive Director

Alexey Yakovitsky

48

2027

2019

Non-Executive Director

Alexander Moldovan

73

2025

2021

Non-Executive Director

Andrey Betin

43

2027

2023

Non-Executive Director

With effect from the first closing of the proposed Sale transaction, Messrs. Betin, Moldovan, Voloshin and Yakovitsky will resign from the Board.

Mr. Boynton has been a non-executive director since 2000 and was appointed to serve as Chairman of the Board in 2016. He was a founding shareholder of Yandex and has served the Board in a number of capacities including Chairman of the Nominating and Governance Committee, Chairman of the Compensation Committee, and Member of the Audit Committee. He is a member of the National Association of Corporate Directors. He was co-founder of CompTek and InfiNet Wireless in Russia and has served as a founder, investor and/or board member in a variety of growth companies in technology, healthcare services, and real estate. He graduated with BA from Harvard College in 1988.

Mr. Rijnja has been a non-executive director of Yandex since 2013. Mr. Rijnja is a management consultant and executive coach. Previously he served as a Senior Vice President of Human Resources and a member of the executive committee at D.E Master Blenders, a Dutch public company listed on the Amsterdam stock exchange. Earlier, Mr. Rijnja served as head of the human resources departments at several international companies, including Maxeda (2008 to 2011), Numico N.V. (2004 to 2008) and Amazon.com (2002 to 2004). Prior to this, he was director of global management development at Reckitt Benckiser PLC from 1998 to 2002, and a human resources manager for Nike Europe from 1996 to 1998. Between 1989 and 1996, Mr. Rijnja held several positions at Apple in The Netherlands and the United States. Mr. Rijnja has a degree in law studies from Leiden University in The Netherlands.

Mr. Ryan became a non-executive director of Yandex at the time of its initial public offering in 2011. A finance professional with 29 years of experience internationally, Mr. Ryan co-founded United Financial Group (UFG) and became its Chairman and CEO in 1994. In 1998, Mr. Ryan initiated the New Technology Group within UFG Asset Management, which sponsored an early-stage technology investment in ru-Net Holdings whose investments include Yandex. In 2006, Deutsche Bank acquired 100% of UFG’s investment banking business, and Mr. Ryan was appointed chief country officer and CEO of Deutsche Bank Group in Russia and remained in that position until the end of 2008, when he became chairman of UFG Asset Management. From 2008 through the end of 2010, Mr. Ryan was a consultant for Deutsche Bank. Prior to founding UFG, Mr. Ryan worked as an associate and principal banker with the European Bank for Reconstruction and Development in London from 1991 to 1994 and as a financial analyst with CS First Boston from 1989 to 1991. Mr. Ryan is also a founder and the general partner of Almaz Capital Partners, an international VC firm, headquartered in Silicon Valley, which connects entrepreneurs and engineering talent in the USA and Eastern European /CIS countries and brings prominent startups to the global market. Mr. Ryan has a degree in Government from Harvard University. The Board of Directors has determined that Mr. Ryan meets the SEC criteria for an Audit Committee Financial Expert.

Mr. Voloshin has been a non-executive director of Yandex since August 2010 after serving as an advisor to the company for two years. As the leader of the Moscow International Financial Centre working group, Mr. Voloshin championed an overhaul to Russia’s corporate governance rules, helping to update guidance in line with global best practice. He served as Chairman of the Board of Directors of Uralkali from 2010 to 2014 and as Chairman of the Board and Independent Director at JSC Freight One from 2012 to 2023. Prior to joining our Board of Directors, Mr. Voloshin

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served as Chairman of the Board of MMC Norilsk Nickel from 2008 to 2010 and as Chairman of the Board of Directors of RAO "UES of Russia" from 1999 to 2008. From 1999 to 2003 Mr. Voloshin headed the Russian Presidential Administration. Prior to becoming Chief of Staff of the Russian President he worked as Deputy Chief of Staff from 1998 to 1999, and as Assistant to Chief of Staff from 1997 to 1998. Mr. Voloshin has been Chairman of the Board at Moscow Business School Skolkovo since 2016. Also in 2016 he was elected Member of the Board of Directors of Genotek. In July 2020 Mr. Voloshin was elected Member of the Board of Directors of Analytical Credit Rating Agency (ACRA).In April 2021 was elected a member of the Board of Directors of "Etalon Group PLC". Also in September 2022 became a member of the Board of Directors of "Etalon Group company".

Mr. Yakovitsky has been a non-executive director of Yandex since 2019. He started his career in equity research at United Financial Group (UFG). He joined VTB Capital in 2008 as co-head of equities and head of research and served as its Moscow CEO from 2009 until Q1 2022. Mr. Yakovitsky has degrees from Moscow Lomonosov State University, Department of History, as well as from the Nelson A. Rockefeller College of Public Affairs and Policy (Albany, US).

Dr. Moldovan joined the Board in June 2021. Dr. Moldovan is Chairman of the Academic Council of the Vinogradov Institute and a full member of the Russian Academy of Sciences. He is one of the foremost experts on the history and evolution of the Russian language. His collaborations with Yandex date back more than 20 years when he worked with Arkady Volozh and Ilya Segalovich to develop the first National Russian Language Corpus on top of our core search platform.

Mr. Betin joined the Board in May 2023. Mr. Betin is a businessperson and former public official. Since February 2023, Mr. Betin works as Deputy General Director of the Autonomous Non-Profit Organization "Russia – country of opportunities" – an open platform for participation in all-Russian projects, learning new skills and realizing talents. From 2002 to 2013, Mr. Betin held various positions in commercial companies. From 2016 to 2017, he worked as Deputy General Director of Transengineering LLC, a part of the Summa Group. In 2017, he worked as First Vice-Rector for innovation in cooperation with industrial partners of the Moscow State University of Technology "STANKIN". From 2018 to February 2023, Mr. Betin worked in the administration of the Nizhny Novgorod region in central Russia and held the position of Deputy Governor of Nizhny Novgorod region. Since February 2023, Mr. Betin has held no governmental position. Mr. Betin graduated from the State Institute of Physical Culture and the Russian University of Economics named after G.V. Plekhanov (MBA program).

To our knowledge, there are no family relationships among any of the members of our board or senior management.

Following the resignations of two executive directors in 2022, these positions remain vacant. In the absence of executive directors, as matter of Dutch law, our Board of Directors collectively exercises executive authority over our company. The Board grants powers of attorney from time to time to company representatives as required, and supervises and directs the other members of management.

Compensation and Share Ownership of Executive Officers and Directors

In light of the trading halt in our Class A shares on Nasdaq, our Board of Directors approved an amendment of our outstanding equity incentive awards: in 2023 our participants received cash compensation on the vesting dates of the relevant RSU equity awards, in an amount equal to the target value of each tranche of such awards. Accordingly, no awards have vested from February 28, 2022 through the end of 2023, and participants instead received cash compensation on the vesting dates of the relevant RSU equity awards, in an amount equal to the target value of each tranche of such awards.

The aggregate cash compensation paid or accrued in 2023 for members of our senior management, as a group, was RUB 1,607 million ($17.9 million), including cash compensation of RUB 989 million ($11.0 million), which was paid instead of the relevant vested equity awards. In addition, we granted an aggregate of 131,227 Synthetic Options and Business Unit Equity Awards during 2023 to the members of that senior management group. Synthetic Options and Business Unit Equity Awards will vest 25% after one year and the remaining part on a quarterly basis over three years. The Synthetic Options and Business Unit Equity Awards have ten-year terms.

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Corporate Governance

The principal standing committees of our board of directors are the audit, compensation, nominating, corporate governance, investment, and public interest committees. We have adopted a charter for each of these committees. Following the first closing of the Sale, the committee structure and composition will be changed.

Audit Committee

Our audit committee consists of Messrs. Ryan (chairperson), Boynton and Rijnja. Each member satisfies the “independence” requirements of the Nasdaq listing standards, and Mr. Ryan qualifies as an “audit committee financial expert,” as defined in Item 16A of Form 20-F and as determined by our Board. The audit committee oversees our accounting and financial reporting processes and the audits of our consolidated financial statements. The audit committee is responsible for, among other things:

making recommendations to our Board regarding the appointment by the shareholders of our independent auditors;
coordinating our Board’s oversight of the internal control over financial reporting, disclosure controls and procedures and code of conduct;
overseeing the work of the independent auditors, including resolving disagreements between management and the independent auditors relating to financial reporting;
pre-approving all audit and non-audit services permitted to be performed by the independent auditors;
reviewing the independence and quality control procedures of the independent auditors;
discussing material off-balance sheet transactions, arrangements and obligations with management and the independent auditors;
reviewing and approving all proposed related-party transactions;
discussing the annual audited consolidated and statutory financial statements with management;
periodically reviewing and reassessing the adequacy of our audit committee charter;
meeting separately with the independent auditors to discuss critical accounting policies, observations on internal controls, the auditor’s engagement letter and independence letter and other material written communications between the independent auditors and the management;
establishing procedures for an annual internal audit;
dealing with the internal audit matters and reviewing the findings of annual internal audits prepared by the internal auditors; and
attending to such other matters as are specifically delegated to our audit committee by our Board from time to time.

Compensation Committee

Our compensation committee currently consists of Messrs. Rijnja (chairperson) and Boynton, with one vacancy. Each member satisfies the “independence” requirements of the Nasdaq listing standards. The compensation committee assists the Board in reviewing and approving or recommending our compensation structure, including all forms of compensation relating to our directors and management. Members of our management may not be present at any committee meeting while the compensation of our chief executive officer is deliberated, although this position

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vacant at the time of this Annual Report. Subject to the terms of the remuneration policy approved by our general meeting of shareholders from time to time, as required by Dutch law, the compensation committee is responsible for, among other things:

reviewing and making recommendations to the Board with respect to compensation of our executive and non-executive directors;
reviewing and approving the compensation, including equity compensation, change-of-control benefits and severance arrangements, of our chief financial officer and such other members of our management as it deems appropriate;
overseeing the evaluation of our management;
reviewing periodically and making recommendations to our Board with respect to any incentive compensation and equity plans, programs or similar arrangements;
exercising the rights of our Board under any equity plans, except for the right to amend any such plans unless otherwise expressly authorized to do so; and
attending to such other matters as are specifically delegated to our compensation committee by the Board from time to time.

Nominating Committee

The nominating committee currently consists of five members: Messrs. Boynton (chairperson), Betin, Rijnja, Voloshin and Moldovan. Each member satisfies the “independence” requirements of the Nasdaq listing standards. The committee has formed two subcommittees:

Subcommittee I consists of one director with a Russian passport and residency (Mr. Moldovan), one designated director (Mr. Betin) and one other director (Mr. Boynton). Subcommittee I will recommend to our Board for nomination four directors (the “Class I Directors”), who will then be subject to the approval of our Board as a whole. The designated director will have the right to veto any candidates for such slots, provided that the exercise of such veto has first been approved by the Public Interest Foundation. The current Class I Directors on the Board are Charles Ryan and Alexander Moldovan, with two such seats currently vacant;
Subcommittee II consists of three directors (Messrs. Boynton, Rijnja and Voloshin) who are not Class I Directors and will, by simple majority, recommend to the Board for nomination six directors (the “Class II Directors”); the designated directors will have no right of veto over candidates for these seats. Our Board must adopt the recommendations of candidates recommended by Subcommittee II, unless our Board votes by a supermajority of ten directors (subject to adjustment for Board vacancies) to reject such recommendation.

Corporate Governance Committee

Our corporate governance committee currently consists of Messrs. Boynton (chairperson), Voloshin, and Rijnja. Each member satisfies the “independence” requirements of the Nasdaq listing standards. The corporate governance committee assists the Board in developing our corporate governance guidelines. The corporate governance committee is also responsible for making recommendations to the Board regarding the composition of certain committees of the Board and for overseeing the company’s policies and initiatives with respect to environmental, social and governance matters; and for overseeing the evaluation of the Board.

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Investment Committee

Our investment committee consists of Messrs. Ryan (chairperson), Boynton, and Rijnja. Each member satisfies the “independence” requirements of the Nasdaq listing standards. The investment committee is responsible for, among other things:

reviewing, and providing guidance to management and the Board with respect to, potential corporate transactions, including strategic investments, mergers, acquisitions and divestitures transactions (“Potential Transactions”), including the structure, timing or other terms or conditions of such transactions;
overseeing management’s and the Board’s due diligence process with respect to Potential Transactions;
overseeing the negotiation by management and the company’s financial, legal and other professional advisors of the definitive terms of any Potential Transaction;
monitoring and reporting to the Board regarding the implementation of any Potential Transaction and the integration of any completed transaction; and
reviewing and providing guidance to management and the Board regarding the organizational structure of the group.

Public Interest Committee

A description of the Public Interest Committee can be found above under the heading “Item 4. Information on the Company—Governance Structure”.

Employment Agreements

Substantially all of our employees are employed by our operating subsidiaries. Our employment agreements generally contain the minimum statutory notice periods required under local law. The employment agreements generally contain non-competition and non-solicitation provisions, although we understand that such provisions are generally unenforceable under local law in certain jurisdictions.

Employees

The following table indicates the composition of the group’s workforce as of December 31 in each year presented:

    

2021

    

2022

    

2023

Businesses to be divested

 

18,004

19,985

25,127

Continuing operations

 

865

1,234

Total

 

18,004

 

20,850

 

26,361

    

2021

    

2022

    

2023

Product development

 

9,192

 

10,708

 

13,003

Sales, general and administration

 

7,956

 

9,204

 

12,364

Cost of sales

 

856

 

938

 

994

Total

 

18,004

 

20,850

 

26,361

Yandex also typically employs several thousand contract workers on a part-time basis which are not reflected in the table above, and the numbers of such contract workers generally vary in line with the numbers of full-time staff.

Our employees are not represented by any collective bargaining agreements and we have never experienced a work stoppage. We believe our employee relations are good.

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Employee Plan

We grant equity awards in the form of restricted shares units (“RSUs”) under our 2016 Equity Incentive Plan (the “2016 Plan”) (“Company Awards”). Our 2016 Plan was approved at our 2016 annual general meeting of shareholders on May 27, 2016 and replaced our Forth Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”). However, there remain unexercised grants under our 2007 Plan. The total number of shares available for issuance under the 2016 Plan is equal to 20% of the aggregate number of Class A and Class B shares outstanding from time to time.

Additionally, the 2016 Plan provides employees of several business units the opportunity to receive synthetic option awards in respect of relevant business units (the “Synthetic Options and Business Unit Equity Awards”) and a linked RSU award.

Plan administration. Our Board or its compensation committee administers the 2016 Plan. Although the 2016 Plan sets forth certain terms and conditions of the equity awards, our Board or its compensation committee determines the provisions and terms and conditions of each grant. These include, among other things, the vesting schedule, repurchase provisions, forfeiture provisions, and form of payment upon exercise.

Eligibility. We may grant awards to employees and directors of and consultants to our company and its subsidiaries. With respect to Synthetic Options and Business Unit Equity Awards, we may grant awards to employees, officers, members of the Board, advisors and consultants of such business units.

Exercise price and term of equity awards. With respect to Synthetic Options and Business Unit Equity Awards, the exercise price of options shall be determined from time to time by the Board (following consultation with an independent valuation expert). RSU awards have no exercise or measurement price. Equity awards are generally exercisable up until the tenth anniversary of the grant date so long as the grantee’s relationship with Yandex has not terminated.