TABLE OF CONTENTSYANDEX N.V. INDEX TO CONSOLIDATED FINANCIAL STATEMENTSTable of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 20-F(Mark One) ☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934OR☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to OR☐SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company report Commission file number: 001-35173YANDEX 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 165Schiphol P7 1118 BG, The Netherlands(Address of principal executive offices)Arkady Volozh, Chief Executive OfficerSchiphol Boulevard 165Schiphol 1118 BG, The NetherlandsTelephone: +31 20-206-6970Facsimile: +31 20-446-6372Email: askIR@yandex-team.ru(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act.Title of each class Name of each exchange on which registeredClass A Ordinary Shares NASDAQ Global Select MarketSecurities registered or to be registered pursuant to Section 12(g) of the Act. NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act. Class A Ordinary SharesIndicate 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 outstandingClass A 286,848,365Class B 37,878,658 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 theregistrant 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 anynew or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐ † 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 AccountingStandards BoardOther ☐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 ☒(APPLICABLE ONLY TO ISSUERS INVOLVED INBANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under aplan confirmed by a court. Yes ☐ No ☐ In addition, we had 5,589,290 Class A shares held in treasury and nil Class C shares issued and fully paid as of December 31, 2018. Our Class C shares are issued from time to time solely for technical purposes, tofacilitate 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 areoutstanding, 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. (1) Table of ContentsTABLE OF CONTENTS PagePART I. Item 1.Identity of Directors, Senior Management and AdvisersN/AItem 2.Offer Statistics and Expected TimetableN/AItem 3. Key Information3Item 4. Information on the Company32Item 4A. Unresolved Staff Comments52Item 5. Operating and Financial Review and Prospects52Item 6. Directors, Senior Management and Employees76Item 7. Major Shareholders and Related Party Transactions82Item 8. Financial Information87Item 9. The Listing88Item 10. Additional Information88Item 11. Quantitative and Qualitative Disclosures About Market Risk98Item 12.Description of Securities other than Equity SecuritiesN/APART II. Item 13.Defaults, Dividend Arrearages and DelinquenciesN/AItem 14. Material Modifications to the Rights of Security Holders and Use of Proceeds98Item 15. Controls and Procedures98Item 16A. Audit Committee Financial Expert101Item 16B. Code of Ethics101Item 16C. Principal Accountant Fees and Services101Item 16D.Exemptions from the Listing Standards for Audit CommitteesN/AItem 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers102Item 16F. Change in Registrant’s Certifying Accountant102Item 16G. Corporate Governance102Item 16H.Mine Safety DisclosureN/APART III. Item 17. Financial Statements110Item 18. Financial Statements110Item 19. Exhibits111 In this Annual Report on Form 20‑F (this “Annual Report”), references to “Yandex,” the “company,” “we,” “us,” orsimilar 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 Russianrubles. 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 endedDecember 31 of the calendar year specified.This Annual Report includes market data reported by Yandex.Radar (March 2019), the Association of RussianCommunication Agencies (AKAR) (March 2019) and the Russian Federal State Statistics Service (Rosstat) (April 2019). 2 Table of ContentsForward‑Looking StatementsThis 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 otherwords that convey judgments about future events or outcomes indicate such forward‑looking statements. Forward‑lookingstatements in this Annual Report may include statements about:·the impact of macroeconomic and geopolitical developments in our markets;·the expected growth of the internet search and advertising markets and the number of internet and broadbandusers in the countries in which we operate;·competition in the internet search market in the countries in which we operate;·our anticipated growth and investment strategies;·our future business development, results of operations and financial condition;·expected changes in our margins and certain cost or expense items in absolute terms or as a percentage of ourrevenues;·our ability to attract and retain users, advertisers and partners; and·future advertising 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 aresult of a variety of factors, including those described under Part I, Item 3.B. “Risk Factors” and elsewhere in this AnnualReport.We operate in an evolving environment. New risks emerge from time to time, and it is not possible for ourmanagement to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, orcombination 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 updateor revise any forward‑looking statements, whether as a result of new information, future events or otherwise.PART I. Item 3. Key Information.A.Selected Consolidated Financial and Statistical DataThe selected consolidated statements of income data for the years ended December 31, 2016, 2017 and 2018 and theselected consolidated balance sheet data as of December 31, 2017 and 2018 are derived from our audited consolidatedfinancial statements appearing elsewhere in this Annual Report. The selected consolidated balance sheet data as ofDecember 31, 2014, 2015 and 2016 and consolidated statements of income data for the years ended December 31, 2014 and2015 are derived from our audited consolidated financial statements that are not included in this Annual Report, afteradjustment for the retrospective adoption of Accounting Standard Updates 2015‑03 and 2015‑17.Ruble amounts have been translated into U.S. dollars at a rate of RUB 69.4706 to $1.00, the official exchange ratequoted as of December 31, 2018 by the Central Bank of the Russian Federation. Such U.S. dollar amounts are not necessarilyindicative of the amounts of U.S. dollars that could actually have been purchased upon exchange of Russian rubles at thedates indicated, and have been provided solely for the convenience of the reader. See “Risk Factors—Emerging markets,such as Russia, are generally subject to greater financial, economic, legal and political risks than more developed markets.Such risks may have a material adverse effect on our business, financial condition and results of operations.”3 Table of ContentsThe following selected consolidated financial data should be read in conjunction with our “Operating and FinancialReview and Prospects” and our consolidated financial statements and the related notes appearing elsewhere in this AnnualReport. Our financial statements are prepared in accordance with U.S. GAAP. These historical financial results are notnecessarily indicative of the results to be expected in any future period. Year ended December 31, 2014 2015 2016 2017 2018 RUB RUB RUB RUB RUB $ (in millions, except share and per share data) Consolidated statements of income data: Revenues: 50,767 59,792 75,925 94,054 127,657 1,837.6 Operating costs and expenses: Cost of revenues(1) 14,336 16,810 19,754 23,937 35,890 516.6 Product development(1) 8,842 13,421 15,832 18,761 22,569 324.9 Sales, general and administrative(1) 7,782 11,601 17,885 27,081 36,200 521.1 Depreciation and amortization 4,484 7,791 9,607 11,239 12,137 174.7 Goodwill impairment — 576 — — — — Total operating costs and expenses 35,444 50,199 63,078 81,018 106,796 1,537.3 Income from operations 15,323 9,593 12,847 13,036 20,861 300.3 Interest income 1,947 3,037 2,863 2,909 3,382 48.7 Interest expense (1,091) (1,293) (1,208) (897) (945) (13.6) Effect of Yandex.Market deconsolidation — — — — 28,244 406.6 Other income/(loss), net(2) 6,296 2,259 (3,395) (1,466) 2,922 42.0 Income before income tax expense 22,475 13,596 11,107 13,582 54,464 784.0 Income tax expense 5,455 3,917 4,324 4,926 8,603 123.9 Net income 17,020 9,679 6,783 8,656 45,861 660.1 Net loss attributable to noncontrolling interests — — 15 120 1,726 24.9 Net income attributable to Yandex N.V. 17,020 9,679 6,798 8,776 47,587 685.0 Net income per Class A and Class B share: Basic 53.30 30.39 21.19 27.02 145.67 2.10 Diluted 52.27 29.90 20.84 26.49 141.98 2.04 Weighted average number of Class A andClass B shares outstanding: Basic 319,336,782 318,541,887 320,788,967 324,747,888 326,667,118 326,667,118 Diluted 325,610,277 323,713,437 326,136,949 331,243,961 335,162,062 335,162,062 (1)These amounts exclude depreciation and amortization expense, which is presented separately, and include share‑basedcompensation expense of: 2014 2015 2016 2017 2018 RUB RUB RUB RUB RUB $ Cost of revenues 101 168 193 178 180 2.6 Product development 780 1,860 2,238 2,477 4,450 64.1 Sales, general andadministrative 329 690 991 1,538 1,922 27.7 (2)A major component of other income/(loss), net is foreign exchange gains and losses generally resulting from changes inthe value of the U.S. dollar compared with the Russian ruble. Because the functional currency of our operatingsubsidiaries in Russia is the Russian ruble, changes in the ruble value of these subsidiaries’ monetary assets andliabilities that are denominated in other currencies (primarily U.S. dollar‑denominated cash, cash equivalents and termdeposits maintained in Russia) due to exchange rate fluctuations are recognized as foreign exchange gains or losses inour statement of income. For example, in 2018, other income, net includes RUB 3,155 million of foreign exchange gainsarising mainly from the depreciation of the Russian ruble compared to the U.S. dollar in that year. In 2017, other loss,net included a RUB 1,784 million loss arising mainly from the significant appreciation of the Russian ruble compared tothe U.S. dollar in that year. Although the U.S. dollar value of our U.S. dollar denominated cash, cash4 Table of Contentsequivalents and term deposits are not impacted by these currency fluctuations, they result in upward and downwardrevaluations of the ruble equivalent of these U.S. dollar denominated monetary assets. As of December 31, 2014 2015 2016 2017 2018 RUB RUB RUB RUB RUB $ (in millions) Consolidated balance sheet data(1): Cash and cash equivalents 17,645 24,238 28,232 42,662 68,798 990.3 Term deposits (current and non-current) 31,526 33,549 31,769 28,045 — — Total assets 94,594 111,818 114,108 130,544 241,698 3,479.1 Total current liabilities(2) 9,791 11,669 14,622 35,622 23,737 341.7 Total non-current liabilities(2) 29,067 30,052 20,894 2,275 2,141 30.8 Redeemable noncontrolling interests — — 1,506 9,821 13,035 187.6 Total shareholders’ equity 55,736 70,097 77,086 82,826 202,785 2,919.0 (1)Balances as of December 31, 2014 have been reclassified to reflect current period presentation. Balances related toconvertible debt issuance costs are reclassified for the retrospective adoption of Accounting Standard Update 2015‑03related to the presentation of deferred debt issuance costs. Balances related to deferred tax assets and liabilities arereclassified for the retrospective adoption of Accounting Standard Update 2015‑17 related to the presentation ofdeferred taxes as non‑current.(2)The total non‑current liabilities as of December 31, 2014, 2015, 2016 and the total current liabilities as of December 31,2017 mainly result from our convertible bond offering. Please refer to Note 11 to our consolidated financial statements.Exchange Rate InformationOur business is primarily conducted in Russia and almost all of our revenues are denominated in Russian rubles. Wehave presented our most recent annual results of operations in U.S. dollars for the convenience of the reader. Unless otherwisenoted, all conversions from RUB to U.S. dollars and from U.S. dollars to RUB in this Annual Report were made at a rate ofRUB 69.4706 to $1.00, the official exchange rate quoted by the Central Bank of the Russian Federation as of December 31,2018.See “Risk Factors—Emerging markets, such as Russia, are generally subject to greater financial, economic, legal andpolitical risks than more developed markets. Such risks may have a material adverse effect on our business, financialcondition and results of operations.” for a discussion of the foreign currency exchange rate risks and uncertainties ourbusiness faces.B.Risk FactorsInvesting in our Class A shares involves a high degree of risk. The risks and uncertainties described below and elsewherein this Annual Report, including in the section headed “Operating and Financial Review and Prospects”, couldmaterially adversely affect our business. These are not the only risks that we face; additional risks and uncertainties ofwhich we are unaware, or that we currently deem immaterial, may also become important factors that affect us. Any ofthese risks could adversely affect our business, financial condition and results of operations. In such case, the tradingprice of our Class A shares could decline.Risks Related to the Current Global Political, Regulatory and Economic EnvironmentThere has been increased scrutiny in recent periods of technology businesses across the globe. Should our operatingenvironment deteriorate because of a change in the regulation or perception of technology companies, our business,financial condition and results of operations may experience a material adverse effect.Around the world technology companies are operating in an increasingly uncertain environment, in part due toincreased scrutiny from policymakers, regulators and the general public. Such scrutiny has included concerns aboutbusiness practices, market presence and strategic direction. A number of our competitors, including Google and Facebook,have received scrutiny in different jurisdictions over business practices, including the application of targeted5 Table of Contentsadvertising. Our partner in Taxi business, Uber, has received scrutiny over labor practices and licensing in many of thejurisdictions in which it operates.Additionally, opposition to open markets in many jurisdictions, including the United States, has made doingbusiness more difficult for technology companies. For example, governments in a number of jurisdictions have takenaction to exclude Huawei from developing new 5G networks based on perceptions of the Chinese government's influenceover Huawei. Should our business practices, market presence or strategic direction receive adverse scrutiny or experienceincreased regulation in any material market in which we operate, we may experience a material adverse effect on ourbusiness, financial condition and result of operations. Emerging markets, such as Russia, are generally subject to greater financial, economic, legal and political risks thanmore developed markets. Such risks may have a material adverse effect on our business, financial condition and resultsof operations.Emerging markets, such as Russia, are subject to greater risks than more developed markets, including financial,economic, legal and political risks. Such risks or an increase in the perceived risks associated with investing in emergingeconomies could dampen foreign investment and adversely affect the economies of the countries in which we operate. Forexample, the current geopolitical situations in Ukraine and some other regions, as well as volatility in oil prices (to whichthe Russian economy is particularly sensitive), may continue to have deleterious macroeconomic and other effects on theregions in which we operate, including increased volatility in currency values and a weaker overall business environment.Since 2014, Russia has experienced economic volatility, including a sharp economic downturn in 2014-2015. In general,the Russian economy is influenced by macroeconomic and geopolitical factors, which have resulted in a degree ofvolatility in the local currency, created periods of high inflation rates and led to fluctuations in oil prices. Economicconditions continue to be unstable and future changes may have negative effects on our business. In addition,international sanctions have been imposed on certain parties and business sectors in Russia, in particular in connectionwith the geopolitical situation in Ukraine, as described below, which may adversely affect us or business conditions in ourmarkets. In connection with the current economic situation, in 2018 the Russian ruble depreciated against the U.S. dollarby 17%, after a significant appreciation during the course of 2016 and a slight appreciation in 2017. Although ourrevenues and expenses, including our personnel expenses, are both primarily denominated in Russian rubles, we may haveto increase our personnel expenses in order to better compete with other companies that denominate their personnelexpenses in currencies which appreciate in relation to the Russian ruble. Also, the majority of our rent expenses, includingthe lease for our Moscow headquarters, are denominated in U.S. dollars, and a major portion of our capital expenditures,primarily for servers and networking equipment, although payable in rubles, is for imported goods and therefore can bematerially affected by changes in the value of the ruble. In addition, our expenses related to the development of ourbusiness internationally, as well as for acquisitions, are often denominated in other currencies, including U.S. dollars andEuros. If the Russian ruble were to experience a prolonged and significant decline in value against foreign currencies, wecould face material foreign currency exchange exposure, which may materially adversely affect our business, financialcondition and results of operations. See “Operating and Financial Review and Prospects—Quantitative and QualitativeDisclosures About Market Risk”Should the Russian economy experience a contraction or slower growth in the future, it may adversely affect ourresults of operations in certain periods. In addition, these conditions may from time to time depress or encourage volatilityin our share price and in equity markets in general.The adoption and maintenance of international embargo, economic or other sanctions, in particular with respect to theconflict in Ukraine, may have a material adverse effect on our business, financial condition and results of operations.Significant uncertainty exists surrounding the current geopolitical situation in Ukraine. The United States, theEuropean Union and certain other countries have imposed economic sanctions on certain Russian government officials,private individuals and Russian companies, as well as “sectoral” sanctions affecting specified types of transactions withnamed participants in certain industries, including named Russian financial institutions, and sanctions that prohibit mostcommercial activities of U.S. and EU persons in Crimea and Sevastopol. In 2018, these sanctions were successivelyprolonged and extended. There is significant uncertainty regarding the extent or timing of any potential further economic6 Table of Contentsor trade sanctions, or the ultimate outcome of the Ukrainian conflict. Political and economic sanctions may affect theability or willingness of our international customers to operate in Russia, which could negatively impact our revenue andprofitability. Sanctions could also impede our ability to effectively manage our legal entities and operations in andoutside of Russia. We are domiciled in the Netherlands, while our wholly owned principal operating subsidiary isorganized under the laws of the Russian Federation, and several of our other subsidiaries are incorporated in othercountries that have imposed economic sanctions on the Russian Federation. Although neither our parent company nor ourprincipal operating subsidiary or other subsidiaries are targets of U.S. or EU sanctions, our business has been adverselyaffected from time to time by the impact of sanctions on the broader economy in Russia. In addition, Yandex.Money, ourjoint venture with Sberbank, in which we hold an approximately 25% minority stake, is subject to U.S. sectoral sanctions.Since May 2017, Yandex LLC and Yandex.Ukraine LLC, both subsidiaries of Yandex N.V., have been subject tosanctions in Ukraine, which have blocked Ukrainian users from accessing our services and websites. The applicablesanctions, which were extended in March 2019 for a further three years, ban all trade operations and require blocking of allassets, including bank accounts. The Ukrainian Security Service (SBU) also conducted searches at Yandex offices in Kievand Odessa. Such actions led to the shutdown of Yandex’s commercial operations in Ukraine. In January 2018, pursuant to the Countering America’s Adversaries through Sanctions Act of 2017, the U.S.administration presented the U.S. Congress with a report on senior Russian political figures, “oligarchs” and “parastatal”entities. Our founder, executive director and substantial shareholder, Arkady Volozh, is one of nearly 100 personsincluded in one part of the so called “Kremlin List”, on the basis of his reported net worth, and Herman Gref, a member ofour Board of Directors and the CEO and Chairman of Sberbank, the holder of our priority share, was included on the “Listof Senior Political Figures.” Although we are not aware of any intention on the part of the U.S. government to imposesanctions on Mr. Volozh or Mr. Gref, if Mr. Volozh or Mr. Gref were to become a target of sanctions, it could have materialadverse effect on our business. In 2018, we formed a joint venture with Sberbank in respect of our Yandex.Market business unit. AlthoughSberbank and a number of its subsidiaries are subject to “sectoral” sanctions, we believe that the joint venture, in whichSberbank holds an interest of less than 50%, is not within the scope of these prohibitions. However, we cannot guaranteethat, in the future, applicable sanctions would not impose limitations on our ability to provide additional financing to thisjoint venture. We could also be subject to a number of potential sanctions-related risks in the future. First, the sanctions rules,or the authoritative interpretation of current rules by the relevant authorities, could change at any time. In particular,OFAC (or other regulators) could:·add additional parties to the sectoral sanctions list;·designate parties with whom we have significant business relationships as “specially designatednationals”, meaning that all dealings with them by U.S. and/or EU persons would be prohibited; or ·expand current or new sanctions to cover entities that are less than 50% owned by a listed party, whichcould adversely affect our Yandex.Market joint venture. Any proposals in this regard would likely reflect the evolving geopolitical and U.S. domestic climate over time.In addition, the applicable sanctions requirements are interpreted broadly by the relevant authorities. As a consequence,many U.S. and EU parties typically take a very conservative view of compliance matters, given the ambiguities of some ofthese rules and the approach taken by the regulators. Some parties, in particular some U.S. and EU financial institutions,have adopted internal compliance policies that are more restrictive than are strictly required by the applicable rules andhave, for example, declined to engage in any dealings with parties on the sectoral sanctions list (including dealings thatare not prohibited by the rules applicable to such parties) or with entities closely affiliated with such entities (even if suchaffiliated entities are not themselves a target of sanctions). Although we act in strict compliance with applicable laws and regulations and adhere to the principles ofpolitical neutrality in all countries where we operate, further political, civil or military conflicts in the region may result ina general lack of confidence among international investors in the region’s economic and political stability and in7 Table of ContentsRussian investments generally. Along with potential official government sanctions on Russia, U.S. and foreign investorsmay be pressured to reduce or withdraw their investments in Russia. Such circumstances may result in trading volatility,reduced liquidity and significant declines in the price of listed securities of companies with significant operations inRussia, including our Class A shares.We rely on the continued availability, development and maintenance of the internet infrastructure in the countries in whichwe operate. Any errors, failures or disruption in the products and services provided by third-party providers of ourprincipal internet connections and the equipment critical to our internet properties and services, or any politicallymotivated limitations on the internet in Russia, could materially adversely affect our brand, business, financial conditionand results of operations.Our future success will depend on the continued availability, development and maintenance of the internetinfrastructure globally and particularly in the countries in which we operate. This includes maintenance of a reliable networkbackbone with the necessary speed, data capacity and security for providing reliable internet services. Any disruption in thenetwork access provided by third parties or any failure by them to handle current or higher future volumes of use maysignificantly harm our business. We have experienced and expect to continue to experience interruptions and delays inservice from time to time. Furthermore, we depend on hardware and software suppliers for prompt delivery, installation andservice of servers and other equipment to deliver our services. The internet infrastructure may also be unable to support thedemands placed on it by growing numbers of users and time spent online or increased bandwidth requirements. Governmentregulation may also limit our access to adequate and reliable internet infrastructure. Any outages or delays resulting frominadequate internet infrastructure or due to problems with our third-party providers or new regulatory requirements couldreduce the level of internet usage as well as our ability to provide our services to users, advertisers and network partners,which could materially adversely affect our business, financial condition and results of operations.The recent draft law that has been already passed by the State Duma may lead to much tighter regulation of trafficrouting in the Russian internet. While it is not entirely clear yet how this regulation will be applied in practice, given thatsubordinate acts will have to be drawn up for its implementation, its enactment, among other things, may lead to arequirement that Russian internet traffic should be routed through Russian communication centers. This can reduce the datatransfer speed significantly and even result in interruptions and delays of the online services in the Russian internet segment.The draft law must now be approved by Russian parliament's upper house — the Federation Council.Businesses in countries where we operate have on occasion been subject to actions by public authorities that some havecharacterized as unpredictable or politically motivated.Many commercial laws and regulations in the markets where we operate are relatively new and have been subject tolimited interpretation. As a result, their application can be unpredictable. In addition, government authorities are entrustedwith a high degree of discretion and have at times exercised their discretion in ways that may be perceived as selective orunpredictable, and sometimes in a manner that is seen as being influenced by political or commercial considerations.Furthermore, significant uncertainty exists in the relevant markets in light of the broader geopolitical situation, which mayresult in the adoption or application of regulations based on political considerations.For instance, in May 2017 Ukraine sanctioned two Yandex subsidiaries and prohibited usage of our services andwebsites by Ukrainian users. Yandex offices in Kiev and Odessa were subject to searches by the Ukrainian Security Service inconnection with alleged breaches of law. Although we believe that these actions were groundless, they materially adverselyaffected our operations in Ukraine.Although we believe that our commitment to content neutrality principles lessens the risk of politically motivatedactions against us, we cannot guarantee that we will not be affected by politically motivated actions that could materiallyadversely affect our operations.The legal system in Russia and other countries in which we operate can create an uncertain environment for investmentand business activity that could have a material adverse effect on the value of our Class A shares, our business, financialcondition and results of operations.The legal framework in which we operate in Russia and other markets continues to evolve. The current8 Table of Contentsgeopolitical environment increases the risk of new legislative initiatives in Russia that would be seen as protecting thecountry’s national security and/or limiting foreign influence over the sector. In addition, as is common in markets where the legal framework is still developing, there can be contradictionsbetween different laws and regulations, and the enforcement of laws can be selective or unpredictable. At the same time, thereis sometimes a perceived lack of judicial and prosecutorial independence from political, social and commercial forces.These factors may result in our being subject to unpredictable fines or requirements, affect our ability to enforce ourrights under our contracts or to defend ourselves against claims by others, or result in our being subject to unpredictablerequirements, and could have a material adverse effect on our Class A shares and our business, financial condition and resultsof operations. The fact that we are a high-profile company may heighten these risks.If the Russian government were to apply existing limitations on foreign ownership to our business, or specifically imposelimitations on foreign ownership of internet businesses in Russia, it could materially adversely affect our group and thevalue of our Class A shares.Russian law restricts foreign ownership of companies involved in certain strategically important activities in Russiaas well as companies that are classified as "mass media" businesses. Currently, the internet and online advertising are notindustries specifically covered by this legislation, but in the past there have been amendments under consideration by theRussian State Duma, which, if adopted, would include certain large internet companies within the scope of this law. We believe that our Yandex.Money joint venture is subject to restrictions on foreign ownership because theYandex.Money business currently holds an encryption license covered by the strategic enterprises law. Since the completionof our joint venture in respect of Yandex.Money in July 2013 following the sale by Yandex to Sberbank of 75% (less oneruble) of the total participation interest in Yandex.Money, we believe that the applicable restrictions in respect of privatenon-Russian persons no longer apply to Yandex, but that the requirement to obtain prior approval from the RussianGovernment continues to be applicable to non-Russian state or international organizations or entities controlled by a non-Russian state or international organization that would seek to acquire shares of Yandex or enter into an agreement that wouldestablish direct or indirect control over Yandex and, therefore, trigger application of the law restricting foreign ownership.There is also a risk that some of the rights granted to Yandex N.V. under the relevant joint venture agreement with Sberbankcould be interpreted by Russian authorities as establishing control by Yandex over the Yandex.Money business, whichwould require the Russian Government’s preliminary consent for a broader number of transactions, including by private non-Russian persons. Moreover, because Yandex holds 25% (plus one ruble) in Yandex.Money, there is a risk that a change ofcontrol in respect of Yandex would require preliminary consent of the Central Bank of Russia.Other aspects of our business may be subject to restrictions on foreign ownership through the future interpretationof current legislation or through new legislation and we could be forced to take significant steps to modify our operating,corporate governance or ownership structure to comply with any such requirements, which could have a material adverseeffect on our operations or the value of our Class A shares. For example, in 2018 new draft legislation was introduced thatrestricts foreign ownership of news aggregators. The wording of the draft legislation is rather broad and this act, if adopted,might be applied to Yandex.News and other services. At this time, we cannot anticipate if the draft legislation will beadopted or, if it is adopted, whether such restrictions will be applied to us.As previously disclosed, our Board of Directors and its relevant committees periodically consider questions relatingto the optimal capital and governance structure of our company. The Board is committed to good corporate governance and,in the exercise of its fiduciary duties, evaluates any potential steps with a view to protecting the long-term interests of ourcompany and all of its shareholders and stakeholders.Risks Related to Our Business and IndustryWe face significant competition from major global and Russian companies, including Google and Mail.ru, which couldnegatively affect our business, financial condition and results of operations.We face strong competition in various aspects of our business from global and Russian companies that provide9 Table of Contentsinternet services and content, including search services. Currently, we consider our principal competitors in our corebusiness to be Google and Mail.ru. Out of the large global internet companies, we consider Google to be our principal competitor in the market fordesktop and mobile internet search, and for performance-based advertising, online advertising network revenues,advertising intermediary services, distribution arrangements and other services. According to Yandex Radar, Google’sshare of the Russian search market, based on search traffic generated, was 40.0% for the full year 2018 and 39.6% in 2017,compared with our market share of 56.3% in 2018 and 55.1% in 2017. Google conducts extensive online and offlineadvertising campaigns in Russia. In recent years, Google has actively marketed its products and services, including itsmobile and voice search, YouTube, as well as advertising products for businesses, leading to increased competition.With Android, its popular mobile platform, Google exerts significant influence over the increasingly importantmarket for mobile and location-based search and advertising. Pursuant to a settlement between FAS and Google reached inApril 2017, Google is prohibited from arrangements prohibiting pre-installation of rival applications and is required toprovide a choice to users in selecting their default search engine in Russia. As a result of this settlement we improved oursearch share on Android platform in 2018. Nevertheless, we expect that Google will continue to use its brand recognitionand global financial and engineering resources to compete aggressively with us and can provide no assurance that Googleis fully complying or will fully comply with the settlement. In addition to Google, we also face competition, albeit lessintense, from the Russian and international business of Microsoft.On the domestic side, our principal competitor is Mail.ru Group. Although we power paid search on Mail.ruGroup properties and monetize a number of Mail.ru Group properties through our Yandex Advertising Network, we alsocompete with Mail.ru Group for online advertising budgets, allocated between social networks and search, as well as infood delivery services (through Mail.ru Group’s Delivery Club service and our Yandex.EATS service). In addition,Mail.ru Group offers a wide range of internet services, the most popular Russian web mail service, and other services thatare comparable to ours. Mail.ru’s search market share was 3.4% and 2.2% in 2017 and 2018, respectively. We also view anumber of social networking sites as increasingly significant competitors. In light of their large audiences and thesignificant amount of information they can access and analyze regarding their users’ needs, interests and habits, we believethat they may be able to offer highly targeted advertising that could create increased competition for us. The popularity ofsuch sites may also reflect a growing shift in the way in which people find information, get answers and buy products,which may create additional competition to attract users.In addition, our business units, which include Taxi, Classifieds and E-commerce, face significant competition intheir respective business areas. Our Taxi business, a joint venture with Uber which we completed in February 2018, faces competition fromCitymobil, Gett and Vezet, as well as a variety of other taxi and ride-sharing operators and dispatch services. In addition,although Yandex.Taxi and Uber operate as a joint venture in Russia and neighboring countries, our Taxi business may alsocompete with Uber in jurisdictions outside the scope of our joint venture territory.Our Classifieds business faces competition from a range of online and offline classified services, including Avito(in real estate and automobile sales), CIAN (in real estate), and Drom.ru (in automobile sales); and Yandex.Market’s E-commerce business faces competition from online retailers and marketplaces, including AliExpress, Avito, Ozon andWildberries, as well as offline retailers.We cannot guarantee that we will be able to continue to compete effectively with current and future companies thatmay have greater ability to attract and retain users, greater name recognition, more personnel and greater financial and otherresources. If our competitors are successful in providing similar or better search results or other services compared with thosewe offer, we could experience a significant decline in user traffic or other business. Any such decline could negatively affectour business, financial condition and results of operations.We expect the rate of growth of our revenues to be lower in the future and we may experience downward pressure on ouroperating margin.We expect that our online advertising revenues growth rate will decline over time as a result of a number of10 Table of Contentsfactors, including continuing macroeconomic challenges in Russia, challenges in maintaining our growth rate as ourrevenues increase to higher levels, increasing competition, changes in the nature of queries, the evolution of the overallonline advertising market and the declining rate of growth in the number of internet users in Russia as overall internetpenetration increases. A decline in our online advertising revenue growth rate may negatively impact the rate of growth ofour revenues on a consolidated basis.Other factors which may cause our operating margin to fluctuate or decline include:·changes in the proportion of our advertising revenues that we derive from the Yandex ad networkcompared with our own websites. In periods in which our Yandex ad network revenues grow more rapidlythan those from our own sites, our operating margin generally declines because the operating margin werealize on revenues generated from partner websites is significantly lower than the operating margingenerated from our own websites, as a result of traffic acquisition costs (TAC) that we pay to our partnerwebsites. Over several past years our partner TAC was above 50% of our online advertising networkrevenues. The margin we earn on revenue generated from the Yandex ad network could also decrease inthe future if we are required to share with our partners a greater percentage of the advertising feesgenerated through their websites;·investments we make in our businesses, in particular our experimental businesses within Other Bets andExperiments, Taxi segment, which includes our food delivery business and self-driving solution, as wellas our initiatives related to the Internet of Things;·increased depreciation and amortization expense related to capital expenditures for many aspects of ourbusiness, particularly the expansion of our data centers to support growth in both our current and newmarkets;·relatively higher spending on advertising and marketing to further enhance our brand and promote ourservices in Russia, to build and expand brand awareness in other countries where we operate and torespond to competitive pressures, if these efforts do not drive revenue growth in the manner we anticipate;·expenses in connection with the launch of new products and related advertising and marketing efforts,which may not result in the anticipated increase in revenues or market share;·the possibility of higher fees or revenue sharing arrangements with our distribution partners that distributeour products or services or otherwise direct search queries to our website. We expect to continue to expandthe number of our distribution relationships in order to increase our user base and to make it easier for ourexisting users to access our services;·costs incurred in our international expansion efforts until we succeed in building the user base necessaryto begin generating sufficient revenues in these markets to earn accretive operating margins there; and·increased costs associated with the creation, support and maintenance of mobile products and services tomaintain and expand our offering and competitive market position, which may not result in anticipatedincreases in revenues or market share. As the Russian internet market matures, our future expansion will increasingly depend on our ability to generate revenuesfrom new businesses, from new business models or in other markets. If we do not continue to innovate and provide servicesthat are useful and attractive to our users, we may be unable to retain them and may become less attractive to ouradvertisers, which could adversely affect our business, financial condition and results of operations.As internet usage has spread in Russia, the rate of growth in the number of internet users has been declining. Oursuccess depends on providing search and other services that make using the internet a more useful and enjoyable11 Table of Contentsexperience for our users. As search technology continues to develop, our competitors may be able to offer search capabilitiesthat are, or that are seen to be, substantially similar to, or better than, ours. As our core market matures, we will need toprovide new services, further exploit non-core business models, such as our Taxi, E-commerce and Classifieds business units,or expand into new geographic markets in order to continue to grow our revenues at previously achieved levels. The cost weincur in these efforts, both in terms of product development expenses and advertising and marketing costs, could besignificant.If we are unable to continue to develop and provide our users with quality, up-to-date services, and to appropriatelytime the services with market opportunities, or if we are unable to maintain the quality of such services, our user base may notgrow, or may decline. Further, if we are unable to attract and retain a substantial share of internet traffic generated by mobileand other digital devices, or if we are slow to develop services and technologies that are compatible with such devices, ouruser base may not grow or may decline.If our users move to our competitors, we will also become less attractive to advertisers and therefore to Yandex adnetwork partners. This could adversely affect our business, financial condition and results of operations.The competition to capture market share on mobile devices is intense, and if we are not successful in achieving substantialreach among users and monetizing search and other services on mobile devices, our business, financial condition andresults of operations could be adversely affected. Users are increasingly accessing the internet through mobile and other devices rather than desktop and laptoppersonal computers, including through smartphones, wearable devices, and handheld computers such as tablets, as well asthrough video game consoles, smart TVs and television set-top devices. Such devices have different characteristics thandesktop and laptop personal computers (including screen size, operating system, user interface and use patterns). Tailoringour products and services to such devices requires particular expertise and the expenditure of significant resources. Theversions of our products and services developed for these devices, including the advertising solutions we offer, may be lessattractive to users, advertisers, manufacturers or distributors of devices than those offered by our competitors or than ourdesktop offerings. The percentage of our total search traffic that was generated from mobile devices increased fromapproximately 39% in the fourth quarter of 2017 to approximately 49% in the fourth quarter of 2018, while the percentage ofour search revenues generated from mobile devices increased from approximately 31% to approximately 41% between thoseperiods.Each manufacturer or distributor of mobile or other devices may establish unique technical standards for itsdevices, and as a result our products and services may not work or be viewable on these devices. Some manufacturers mayalso elect not to include our products on their devices, or may be prohibited from doing so pursuant to their agreements withother parties. Although Google is prohibited from arrangements restricting pre-installation of rival applications and isrequired to provide a choice to users in selecting their default search engine in Russia, it is difficult to anticipate the long-term effects of such changes on our market shares in its Chrome browser and Chrome widget. In addition, consumers areincreasingly accessing content directly via applications, or “apps”, tailored to particular mobile devices or in closed socialmedia platforms, which could affect our share of the search market over time. As new devices and platforms are continuallybeing released, it is difficult to predict the challenges we may encounter in adapting our products and services anddeveloping competitive new products and services. See also “—As the internet evolves, an increasing amount of onlinecontent may be held in closed social networks, mobile apps or proprietary document formats, which may limit theeffectiveness of our search technology, which could adversely affect our brand, business, financial condition and results ofoperations.”We expect to continue to devote significant resources to the creation, support and maintenance of mobile products andservices. If we are unable to attract and retain a substantial number of device manufacturers, distributors and users to ourproducts and services, or if we are slow to develop products and technologies that are more compatible with such devices andplatforms, we will fail to capture the opportunities available due to consumers’ and advertisers’ transition to a dynamic,multi-screen environment. Furthermore, given the importance of distribution and application pre-installation arrangementswith the most popular device manufacturers to the successful operation of our business, failure to reach such arrangementsmay adversely affect our business, financial condition and results of operations. We generate almost all of our revenues from advertising, which is cyclical and seasonal in nature, and any reduction inspending by or loss of advertisers would materially adversely affect our business, financial condition and results of12 Table of Contentsoperations.In the past three years, we generated on average 89% of our revenues from advertising. Expenditures by advertiserstend to be cyclical, reflecting the overall economic conditions and budgeting and buying patterns, and can thereforefluctuate significantly. According to AKAR, the rate of growth in online advertising expenditures was 22% in 2018,compared to the similar period of 2017, and 22% in 2017 compared to 2016, up from a growth rate of 21% in 2016 comparedwith 2015. Any decreases in online advertising spending due to economic conditions, or other reasons, could materiallyadversely impact our business, financial condition and results of operations.Advertising spending and user traffic also tend to be seasonal, with internet usage, advertising expenditures andtraffic historically slowing down during the months, when there are extended Russian public holidays and vacations, andincreasing significantly in the fourth quarter of each year. For these reasons, comparing our results of operations on a period-to-period basis may not be meaningful, and past results should not be relied upon as an indication of future performance.Furthermore, as our business becomes more diversified, seasonal changes may have different effects on various lines ofbusiness. Any decline in the internet as a significant advertising platform in the countries in which we operate could have a materialadverse effect on our business, financial condition and results of operations.We have significantly diversified our revenue streams in the recent years, however, the sale of online advertising inRussia still accounts for a sizeable portion of our overall revenue. Although the use of the internet as a marketing channel inRussia is already mature, the internet continues competing with traditional advertising media, such as television, print, radioand outdoor advertising. Although advertisers have become more familiar with online advertising in recent years, some ofour current and potential customers still have limited experience with online advertising and have not historically devoted asignificant portion of their marketing budgets to online marketing and promotion. As a result, they may be less inclined toconsider the internet effective in promoting their products and services compared with traditional media.Any decline in the appeal of the internet generally in Russia or the other countries in which we operate, whether asa result of increasing governmental regulation of the internet, the growth in popularity of other forms of media, a decline inthe attractiveness of the internet as an advertising medium or any other factor, could have a material adverse effect on ourbusiness, financial condition and results of operations.Several of our businesses operate through joint ventures with third parties, which involves risks that we do not face withrespect to our core business.Our Yandex.Taxi business now operates as a joint venture with Uber, while our Yandex.Money and Yandex.Marketbusinesses operate as joint ventures with Sberbank. We hold an approximately 61% interest in our Yandex.Taxi jointventure. We hold an approximately 25% interest in Yandex.Money and we and Sberbank each hold a 45% interest inYandex.Market. Sberbank is the holder of our priority share and Herman Gref, its chief executive officer and chairman, servesas one of our non-executive directors. Our joint venture partners have certain shareholder and contractual rights in respect ofthe management of these joint ventures, and therefore we do not have sole control over the management or operations of ourjoint ventures. The level of control exercisable by us depends on the size of our interest and the terms of the contractualagreements, in particular, the allocation of control among, and continued cooperation between, the participants.We may face financial, reputational and other exposure (including regulatory actions) in the event that any of ourpartners fail to meet their obligations under the arrangements, encounter financial difficulty, or fail to comply with local orinternational regulation and standards. A temporary or permanent disruption to these arrangements, such as throughsignificant deterioration in the reputation, financial position or other circumstances of the third party or material failure incontrols, could adversely affect our results of operations.The formation and operation of joint ventures involve significant challenges and risks, including:·difficulties in integrating operations and managing the large and diverse number of personnel, products,services, technology, internal controls and financial reporting of constituent components of our jointventures, and any unanticipated expenses relating to business integration;13 Table of Contents·disruption of our ongoing business, distraction of our management and employees and increase of ourexpenses;·departure of skilled professionals as well as the loss of established client relationships of the businesses weinvest in or acquire;·unforeseen or hidden liabilities or additional operating losses, costs and expenses that may adverselyaffect us following the transactions;·potential impairment charges or write-offs due to changes in the fair value of our business units as a resultof market volatility or other reasons that we may not control which could have a material adverse effect onour financial results;·regulatory hurdles including in relation to the antimonopoly and competition laws;·the risk that any future proposed transaction fails to close, including as a result of political and regulatorychallenges and protectionist policies; and·challenges in maintaining or further growing our business units, or achieving the expected benefits ofsynergies and growth opportunities in connection with these transactions.Additionally, if we or one of our joint venture partners fail to maintain and enhance the Yandex brand, or if weincur excessive expenses in our efforts to do so, our business, financial condition and results of operations could bematerially adversely affected.We rely on third party partners for a material portion of our revenues and for expanding our user base via distributionarrangements. Any failure to obtain or maintain such relationships on reasonable terms could have an adverse effect onour business, financial condition and results of operations.Revenues from advertising on our ad network partner websites represented 23.4% of our online advertisingrevenues in 2018 compared with 25.5% in 2017. We consider our ad partner network to be important for the continuedgrowth of our business. Our agreements with our network partners, other than our agreement to power paid search results onMail.ru, are generally terminable at any time without cause. Our competitors could offer more favorable terms to our currentor potential network partners, including guaranteed minimum revenues or other more advantageous revenue-sharingarrangements, in an effort to take market share away from us. Additionally, some of our partners in the Yandex ad network,such as Mail.ru and Microsoft Bing, compete with us in one or more areas and may terminate their agreements with us inorder to develop their own businesses. If our network partners decide to use a competitor’s advertising services, our revenueswould decline.Many of our key network partners operate high-profile websites, and we derive tangible and intangible benefitsfrom this affiliation, such as increased numbers of users, extended brand awareness and greater audience reach for ouradvertisers. If our agreements with any of these partners are terminated or not renewed and we do not replace thoseagreements with comparable agreements, our business, financial condition and results of operations would be adverselyaffected.The number of paid clicks and amount of revenues that we derive from our partners in the Yandex ad networkdepends on, among other factors, the quality of their websites and their attractiveness to users and advertisers. Although wescreen new applicants, favor websites with high-quality content and stable audiences, and strive to monitor the quality of thenetwork partner websites on an ongoing basis, these websites are operated by independent third parties that we do notcontrol. If our network partners’ websites deteriorate in quality or otherwise fail to provide interesting and relevant contentand services to their users, this may result in reduced attractiveness to their users and our advertisers, which may adverselyimpact our business, financial condition and results of operations.To expand our user base and increase traffic to our sites and mobile applications, we enter into arrangements14 Table of Contentswith leading software companies and device manufacturers for the distribution of our services and technology. In particular,we have agreements, on a co-marketing basis, with certain internet browsers. As new methods for accessing the internetbecome available, including through new digital platforms and devices, we may need to enter into new or amendeddistribution agreements. See also “—The competition to capture market share on mobile devices is intense, and if we are notsuccessful in achieving substantial reach among users and monetizing search and other services on mobile devices, ourbusiness, financial condition and results of operations could be adversely affected.”Our most significant distribution partner in 2018 was Opera, which offers mobile and desktop browsers, and whereYandex is the default search in certain search entry points. Each of our other distribution partners constitutes less than 10%of our total distribution traffic acquisition costs. If we are unable to continue our arrangements with Opera, or maintainexisting or enter into comparable arrangements with new distribution partners, particularly for the distribution of our searchand other services on mobile devices, this would likely have a negative effect on our search market share over time. In thefuture, existing and potential distribution partners may not offer or renew distribution arrangements on reasonable terms forus, or at all, which could limit our ability to maintain and expand our user base, and could have a material adverse effect onour business, financial condition and results of operations.Our business depends on our ability to license, acquire or create compelling content at reasonable costs. Failure to offercompelling content would harm our ability to expand our base of users, advertisers and network partners.We license much of our content from third parties, such as music, news items, weather reports and TV programschedules. If we are unable to maintain and build relationships with third-party content providers, this would likely result ina loss of user traffic. In addition, we may be required to make substantial payments to third parties from whom we license oracquire such content. An increase in the prices charged to us by third-party content providers would adversely affect ourbusiness, financial condition and results of operations. In addition, many of our content licenses with third parties are non-exclusive. Accordingly, other websites and other media such as radio or television may be able to offer similar or identicalcontent. If other companies make available competitive content, the number of users of our services may not grow asanticipated, or may decline. This increases the importance of our ability to aggregate compelling content in order todifferentiate Yandex from other businesses.Our business benefits from a strong brand. Failure to maintain and enhance our brand would materially adversely affectour business, financial condition and result of operations.We believe that the brand identity that we have developed through the strength of our technology, our user focusand, in particular, our ability to deliver compelling content, has significantly contributed to the success of our business. Wealso believe that maintaining and enhancing the Yandex brand, including through continued significant marketing efforts, iscritical to expanding our base of users, advertisers, advertising network partners, and other business partners. As describedbelow, several of our business units operate as joint ventures. Although we have sought to implement appropriate controlsand protections, depending on specific terms of joint venture arrangements we may have more limited ability to ensure thatthese businesses are operated in a manner that is consistent with the broader Yandex brand.Maintaining and enhancing our brand, especially in relation to mobile services, will depend largely on our abilityto continue to be a technology leader and a provider of high-quality, reliable services, which we may not continue to dosuccessfully.If we fail to manage effectively the growth and increasing complexity of our operations, our business, financial conditionand results of operations could be adversely affected.We have experienced, and continue to experience, growth in our operations, which has placed, and will continue toplace, significant demands on our management and our operational and financial infrastructure.We have carved out certain of our services into separate business units in order to facilitate the growth of thoseservices. Management of these separate business units, some of which now operate as joint ventures with third-party partners,requires additional administrative effort, which may put strain on our management and other resources. If we do noteffectively manage our growth and the operation of our business units, the quality of our services could suffer, which couldadversely affect our brand, business, financial condition and results of operations.15 Table of ContentsAs our user and advertiser bases expand, we will need to continue to increase our investment in technology,infrastructure, facilities and other areas of operations, in particular product development, sales and marketing. As a result ofsuch growth, we will also need to continue to improve our operational and financial systems and managerial controls andprocedures. We will have to maintain close coordination among our technical, accounting, finance, marketing and salespersonnel. If the improvements are not implemented successfully, our ability to manage our growth will be impaired and wemay have to make significant additional expenditures, which could harm our business, financial condition and results ofoperations.Growth in our operations internationally may create increased risks that could adversely affect our business, financialcondition and results of operations.We have limited experience with operations outside Russia, and in 2018 derived only approximately 7.5% of ourrevenues from customers outside Russia. Part of our future growth strategy is to expand our operations geographically on anopportunistic basis. Our geographic expansion efforts generally require the expenditure of significant costs in the newgeography prior to achieving the market share necessary to support the commercialization of our services, which allows us tobegin generating revenues from our core services in the new geography. Our ability to manage our business and conduct ouroperations across a broader range of geographies will require considerable management attention and resources and is subjectto a number of risks relating to international markets, including the following:·challenges caused by distance, language and cultural differences;·managing our relationships with local partners should we choose to adopt a joint venture approach in ourinternational expansion efforts;·credit risk and higher levels of payment fraud in certain countries;·pressure on our operating margins as we invest to support our expansion;·currency exchange rate fluctuations and our ability to manage our currency exposure;·foreign exchange controls that might prevent us from repatriating cash earned in certain countries;·legal risks, including potential of claims for infringement of intellectual property and uncertaintyregarding liability for online services and content;·adoption of new legislation and regulations, which may adversely impact our operations or may beapplied in an unpredictable manner;·potentially adverse tax consequences;·deleterious changes in political environment;·unexpected changes in preferences and perceptions of our users and customers; and·higher costs and greater management time associated with doing business internationally.In addition, compliance with complex and potentially conflicting foreign and Russian laws and regulations thatapply to our international operations may increase our cost of doing business and may interfere with our ability to offer, orprevent us from offering, our services in one or more countries. These numerous laws and regulations include import andexport requirements, content requirements, trade restrictions, tax laws, economic sanctions, internal and disclosure controlrules, data protection, data retention, privacy and filtering requirements, labor relations laws, U.S. laws, such as the ForeignCorrupt Practices Act, and local laws prohibiting corrupt payments to governmental officials. Violations of these laws andregulations may result in fines; criminal sanctions against us, our officers, or our employees; prohibitions on the conduct ofour business; and damage to our reputation. Although we have implemented policies and procedures16 Table of Contentsdesigned to ensure compliance with these laws, we cannot assure you that our employees, contractors or agents will notviolate our policies. Any such violations may result in prohibitions on our ability to offer our services in one or morecountries, and may also materially adversely affect our reputation, our brand, our international expansion efforts, our abilityto attract and retain employees, and our business, financial condition and results of operations.Our corporate culture has contributed to our success, and if we cannot maintain the focus on teamwork and innovationfostered by this environment, our business, financial condition and results of operations would be adversely affected.We believe that a critical contributor to our success has been our corporate culture, which values and fostersteamwork and innovation. As our business matures, and we are required to implement more complex organizationalmanagement structures, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture. Wehave carved-out a number of our services into separate business units, in order in part to maintain the “start-up spirit” andprovide greater strategic and operational focus for these units. We operate several of our business units as joint ventures withother parties and may establish new joint ventures in future. In such situations our efforts in maintaining our corporateculture may not be successful, which would adversely affect our business, financial condition and results of operations. Inparticular, the spin‑off of certain business units or further establishing of joint ventures and partnerships may cause the loss ofsome of our clients, or disruption in the provision of the services that are being carved out, and may require additionalattention from our management.The loss of any of our key personnel, or a failure to attract, retain and motivate qualified personnel, may have a materialadverse effect on our business, financial condition and results of operations.Our success depends in large part upon the continued service of key members of our management team andtechnical personnel, as well as our continued ability to attract, retain and motivate other highly qualified engineering,programming, technical, sales, customer support, financial and managerial personnel.Although we attempt to structure employee compensation packages in a manner consistent with the evolvingstandards of the markets in which we operate and to provide incentives to remain with Yandex, including equity awardsunder our employee incentive plans, we cannot guarantee that we will be able to retain our key employees. Although wegrant additional equity awards to management personnel and other key employees from time to time, employees may bemore likely to leave us after their initial award fully vests. Decline of the market value of our shares could also make suchequity awards less effective in retaining our key employees, especially for options issued above the current trading price. Ifany member of our senior management team or other key personnel should leave our group, our ability to successfullyoperate our business and execute our business strategy could be impaired. We may also have to incur significant costs inidentifying, hiring, training and retaining replacements for departing employees.The competition for software engineers and qualified personnel who are familiar with the internet industry inRussia is intense. We may encounter difficulty in hiring and/or retaining highly talented software engineers to develop andmaintain our services. There is also significant competition for personnel who are knowledgeable about the accounting andlegal requirements related to a NASDAQ listing, and we may encounter difficulty in hiring and/or retaining appropriatefinancial staff needed to enable us to continue to comply with the internal control requirements under the Sarbanes-OxleyAct and related regulations.Any inability to successfully retain key employees and manage our personnel needs may have a material adverse effect onour business, financial condition and results of operations.If our security measures are breached, malicious applications interfere with or exploit security flaws in our services, or ourservices are subject to attacks that degrade or deny the ability of users to access our products and services, our productsand services may be perceived as not being secure, users and customers may curtail or stop using our products and services,and we may incur significant legal and financial exposure.Third parties have in the past attempted, and may in the future attempt, to use malicious applications to interferewith our services and may disrupt our ability to connect with our users. Such interference often occurs without disclosure toor consent from users, resulting in a negative experience that users may associate with Yandex. Such an attack could alsolead to the destruction or theft of information, potentially including confidential or proprietary information relating toYandex’s intellectual property, content and users. For example, if a third party were to hack into our network, they could17 Table of Contentsobtain access to our search code. Because the techniques used to obtain unauthorized access, disable or degrade service, orsabotage systems change frequently and often are not recognized until launched against a target, we may be unable toanticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our securityoccurs, the market perception of the effectiveness of our security measures could be harmed and we could lose users andcustomers.Although we maintain substantial security measures, such measures may also be breached due to employee error,malfeasance, system errors or vulnerabilities, fraudulent actions of outside parties, or otherwise. Such security breaches mayexpose us to a risk of loss of this information, litigation, remediation costs, increased costs for security measures, loss ofrevenue, damage to our reputation, and potential liability.In addition, we offer applications and services that our users download to their devices or that they rely on to storeinformation and transmit information to others over the internet. These services are subject to attack by viruses, worms andother malicious software programs, which could jeopardize the security of information stored in a user’s device or in ourcomputer systems and networks. These applications may be difficult to remove or disable, may reinstall themselves and maycircumvent other applications’ efforts to block or remove them. If our efforts to combat these malicious applications areunsuccessful, or if our services have actual or perceived vulnerabilities, our reputation may be harmed, our user traffic coulddecline, and our communications with certain users could be impaired, which could adversely affect our business, financialcondition and results of operations.Our business depends on the accuracy and reliability of our search results and dependability of our other services. Asystems failure, technical interference or human error could prevent us from providing accurate search results or ads orreliably deliver our other services, which could lead to a loss of users and advertisers and damage our reputation andmaterially adversely affect our business, financial condition and results of operations.Our business depends on our ability to provide accurate and reliable search results, which may be disrupted. Forexample, because our search technology ranks a webpage’s relevance based in part on the importance of the websites thatlink to it, people have attempted to link groups of websites together to manipulate search results. If our efforts to combatthese and other types of “index spamming” are unsuccessful, our reputation for delivering relevant results could be harmed.This could result in a decline in user traffic, which may adversely affect our business, financial condition and results ofoperations.Although we maintain robust network security measures, our systems are potentially vulnerable to damage orinterruption from terrorist attacks, denial-of-service attacks, computer viruses or other cyber-attacks or attempts to harm oursystem, power losses, telecommunications failures, floods, fires, extreme weather conditions, earthquakes and similar events.Our data centers, which we maintain ourselves, are also potentially subject to break-ins, sabotage and intentional acts ofvandalism, and to potential disruptions. The occurrence of a natural disaster or other unanticipated problems at our datacenters could result in lengthy interruptions in our service, which could reduce our revenues and profits, and our brand couldbe damaged if people believe our services are unreliable.From time to time, we have experienced power outages that have interrupted access to our services and impactedthe functioning of our internal systems. Although we maintain back-up generators, these may not operate properly through amajor sustained power outage or their fuel supply could be inadequate. Any unscheduled interruption in our services places aburden on our entire organization and would result in an immediate loss of revenue. If we experience frequent or persistentsystem failures on our websites, our reputation and brand could be permanently harmed. The steps we have taken to increasethe reliability and redundancy of our systems are expensive, reduce our operating margin and may be insufficient to reducethe frequency or duration of unscheduled downtime.Although we test updates before implementation and there were no significant downtime periods in recent years,errors made by our employees in maintaining or expanding our systems may damage our brand and may have a materiallyadverse effect on our business, financial condition and results of operations.We may not be able to prevent others from unauthorized use of our intellectual property rights, which may adversely affectour competitive position, our business, financial condition and results of operations.We rely on a combination of patents, trademarks, trade secrets and copyrights, as well as nondisclosure18 Table of Contentsagreements, to protect our intellectual property rights. Our patent department is responsible for developing andimplementing our group-wide patent protection strategy in selected jurisdictions, and to date we have filed more than 650patent applications, of which more than 250 have resulted in issued patents. The protection and enforcement of intellectualproperty rights in Russia and other markets in which we operate, however, may not be as effective as that in the United Statesor Western Europe. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Anysignificant infringement of our intellectual property rights could harm our business, our brand and/or our ability to compete,all of which could adversely affect our competitive position, our business, financial condition and results of operations.We may be subject to intellectual property infringement claims, which are costly to defend, could result in significantdamage awards, and could limit our ability to provide certain content or use certain technologies in the future.A number of internet, technology, media and patent-holding companies own or are actively developing patentscovering search, indexing, electronic commerce and other internet-related technologies, as well as a variety of onlinebusiness models and methods. We believe that these parties will continue to take steps to protect these technologies,including, but not limited to, seeking patent protection in certain jurisdictions. As a result, disputes regarding the ownershipof technologies and rights associated with online activities are likely to arise in the future. In addition, use of open-sourcesoftware is often subject to compliance with certain license terms, which we may inadvertently breach.With respect to any intellectual property rights claim, we may have to pay damages or compensation and/or stopusing technology found to be in violation of a third party’s rights. We may have to seek a license for the technology, whichmay not be available on commercially reasonable terms or at all, and may significantly increase our operating expenses. Wemay be required to develop an alternative non-infringing technology, which may require significant effort, expense and timeto develop. If we cannot license or develop technology for any potentially infringing aspects of our business, we may beforced to limit our service offerings and may be unable to compete effectively. We may also incur substantial expenses indefending against third-party infringement claims regardless of the merit of such claims.We may be subject to claims from our current or former employees as well as contractors for copyright, trade secret andpatent-related matters, which are costly to defend and which could adversely affect our business, financial condition andresults of operation.The software, databases, algorithms, images, patentable intellectual property, trade secrets and know-how that weuse for the operation of our services were generally developed, invented or created by our former or current employees orcontractors during the course of their employment with us within the scope of their job functions or under the relevantcontractor’s agreement, as the case may be. As a matter of Russian law, we are deemed to have acquired copyright and relatedrights as well as rights to file patent applications with respect to such products and have the intellectual property rightsrequired for their further use and disposal subject to compliance with certain requirements set out in the Civil Code of Russia.We believe that we have appropriately followed such requirements, but they are defined in a broad and ambiguous mannerand their precise application has never been definitively determined by the Russian courts. Therefore, former or currentemployees or contractors could either challenge the transfer of intellectual property rights over the products developed bythem or with their contribution or claim the right to additional compensation for their works for hire and/or patentableresults, in addition to their employment compensation. We may not prevail in any such action and any successful claim,although unlikely to be material, could adversely affect our business and results of operation.We may be held liable for information or content displayed on, retrieved by or linked to our by websites and mobileapplications, or distributed by our users; or we may be required to block certain content or access to our websites could berestricted; any of which could harm our reputation, business, financial condition and results of operetions.The law and enforcement practice relating to the liability of providers of online services for the activities of theirusers is currently not settled in Russia and certain other countries in which we operate. Claims may be brought against us fordefamation, libel, negligence, copyright, patent or trademark infringement, tort (including personal injury), fraud, otherunlawful activity or other theories and claims based on the nature and content of information to which we link or that may beposted online via blogs and message boards, generated by our users or delivered or shared through our services, including ifappropriate licenses and/or rights holder’s consents have not been obtained. For example, we have previously been involvedin litigation regarding alleged copyright infringement in the United States. We are also regularly required to remove contentuploaded by users on grounds of alleged copyright infringement, and from time to time we receive19 Table of Contentsrequests from individuals who do not want their names or websites to appear in our search results. Under amendments to theapplicable laws, introduced in 2018, any companies and their officers may be held liable for the failure to delete or to stopdistributing such information as is required by a court enforcement officer’s act. The liability may include penalties forcompanies and imprisonment for officers. Third parties may also seek to assert claims against us alleging unfair competition, data misappropriation,violations of privacy rights or failure to maintain the confidentiality of user data. Our defense of any such actions could becostly and involve significant time and attention of our management and other resources. If any of these complaints results inliability to us, the judgment or settlement could potentially be costly, encourage similar lawsuits, and harm our reputationand possibly our business.The governments of the countries in which we operate are increasingly developing legislation aimed at regulationof the internet, in many places expanding liability and creating new obligations for companies that operate in the internet. For example, under legislation adopted in 2017, we are required to delist search results linking to websites that have beenblocked in Russia for repeated copyright infringements. We had to subscribe to the registry of all blocked websitesmaintained by Roskomnadzor in order to delist search results linking to the websites identified in this registry. Newlegislation and regulations may impose additional new requirements on us and our operations and lead to material legalliability, which can be difficult to foresee or limit.Additional recent legislation in Russia has introduced a system of information and website blocking measures bothto prevent and stop copyright and related rights infringements and to prevent dissemination of illegal information, such aschild pornography, content encouraging suicides and drug use, information on minors hurt by illegal actions and extremistinformation. The regulations generally require a request from the governmental authority to take down the allegedlyinfringing or illegal information prior to blocking of a particular website. However, in some cases, such as dissemination ofextremist information, access to such information can be blocked without notification or prior judicial scrutiny. Ananalogous simplified blocking process has been proposed in a recent draft legislation with regard to violation of copyrightand related rights (e.g. to videos posted online). Moreover, under the recent amendments to the legislation the website might be blocked if the informationpublished there contains disrespectful and indecent statements about the society, state, Constitution, governmentalauthorities etc. Additionally, the subjects who are accused of disseminating such statements can face administrative fines.In addition, in 2018 we became party to an anti-piracy memorandum signed between the major Russian ITcompanies and copyright holders. This memorandum stipulates an out-of-court procedure that obligates search engines toremove URLs to infringing audio-visual content at the request of the rights holders. The memorandum will be valid untilSeptember 1, 2019. By that time a corresponding draft law should be elaborated on the basis of this memorandum. Apart fromthat, under a recent draft resolution of the Supreme Court of the Russian Federation, the liability may be imposed for the theprovision of access to materials that violate IP rights (including in a form of links). If this resolution is adopted, it might bepotentially applied to us.The categories of illegal information to which access can be restricted may be interpreted broadly or be expanded. Incertain cases, even removal of illegal information does not eliminate the risk of website blocking or reinstate access to theblocked website. For example, Russian legislation allows for permanent blocking of websites for repeated violation ofcopyright and related rights. A number of large websites have been blocked pursuant to this legislation so far, e.g. a majorhosting provider. We may be subject to unpredictable blocking measures, injunctions or court decisions that may require usto block or remove content and may adversely affect our services and operations. In addition, to ensure compliance with suchlaws, we may be required to commit greater resources, or to limit functionality of our services, which may adversely affect theappeal of our services to our customers. Although we believe that we are in full compliance with applicable laws, theapplication of new norms by government authorities might be sometimes inconsistent or unpredictable.As the internet evolves, an increasing amount of online content may be held in closed social networks, mobile apps orproprietary document formats, which may limit the effectiveness of our search technology, which could adversely affect ourbrand, business, financial condition and results of operations.Social networks are important players in the internet market and have a significant degree of control over themanner and extent to which information on their websites can be accessed through third-party search engines. Information20 Table of Contentscan also be stored in other closed systems, such as mobile apps.If social or other networks or software providers take steps to prevent their content or documents in their formatsfrom being searchable, such content would not be included in our search results even if the content was directly relevant to asearch request. These parties may also seek to require us to pay them royalties in exchange for giving us the ability to searchcontent on their sites, in their networks or documents in their format and provide links thereto in our search results. If theseparties also compete with us in the search business, they may give their search technology a preferential ability to searchtheir content or documents in their proprietary format. Any of these results could adversely affect our brand, business,financial condition and results of operations.We may have difficulty scaling and adapting our existing technology architecture to accommodate increased traffic andtechnology advances or new requirements of our users and advertisers, which could adversely affect our business, financialcondition and results of operations.With some of the most highly visited websites in Russia, we deliver a growing number of services and page viewsto an increasing number of users. In addition, the services we offer have expanded and changed significantly and areexpected to continue to do so in the future to accommodate bandwidth-intensive technologies and means of contentdelivery, such as interactive multimedia and video. Our future success will depend on our ability to adapt to rapidlychanging technologies, to adjust our services to evolving industry standards and to maintain the performance and reliabilityof our services. Rapid increases in the levels or types of use of our online services could result in delays or interruptions inour services.As we expand our services, we will need to continue to invest in new technology infrastructure, including datacenters. We may have difficulty in expanding our infrastructure to meet increased demand for our services, includingdifficulties in obtaining suitable facilities or access to sufficient electricity supplies. A failure to expand our infrastructurecould materially and adversely affect our ability to maintain and increase our revenues and profitability and could adverselyaffect our business, financial condition and results of operations.Certain technologies could block our ads, which may adversely affect our business, financial condition and results ofoperations.Advertising displayed on our platforms may be interfered with by third parties, which may adversely affect ourability to attract advertisers. For example, third parties have in the past, and may in the future, employ technologies to blockthe display of ads on webpages. Ad-blocking technology, if used widely and effectively, would reduce the amount ofrevenue generated by the ads we serve and decrease the confidence of our advertisers and Yandex ad network partners in ouradvertising technology, which may adversely affect our business, financial condition and results of operations.If we fail to detect click fraud or other invalid clicks, we may face litigation and may lose the confidence of our advertisers,which may adversely affect our business, financial condition and results of operations.We are exposed to the risk of fraudulent and invalid clicks on the ads we serve from a variety of potential sources.Invalid clicks are clicks that we have determined are not intended by the user to access the underlying content, includingclicks resulting from click fraud executed by automated scripts of computer programs. We monitor our own websites andthose of our partners for click fraud and proactively seek to prevent click fraud and filter out fraudulent or other invalidclicks. To the extent that we are unsuccessful in doing so, we credit our advertisers for clicks that are later attributed to clickfraud. If we are unable to stop these invalid clicks, these credits to our advertisers may increase. This could negatively affectour profitability, and these invalid clicks could result in legal claims or harm our brand.We acquire complementary businesses, teams and technologies from time to time, and may fail to identify additionalsuitable targets, acquire them on acceptable terms or successfully integrate them, which may limit our ability to implementour growth strategy. Acquisitions of new businesses may also lead to increased legal risks and other negativeconsequences, which could have an adverse effect on our business, financial condition and results of operations.We regularly acquire other businesses, technologies and teams. The acquisition and integration of new businesses,technologies and people pose significant risks to our existing operations, including:21 Table of Contents·additional demands placed on our management, who are also responsible for managing our existingoperations;·increased overall operating complexity of our business, requiring greater personnel and other resources;·difficulties in expanding beyond our core expertise;·significant initial cash expenditures or share dilution in connection with acquiring and integrating newbusinesses; and·legal risks (including potential claims of the counterparty or of third parties), which may result from ourlack of expertise in the field of the target’s business, incomplete or improper due diligence,misrepresentations by counterparties, and/or other causes.The integration of new businesses presents a number of challenges, including differing cultures or managementstyles, poor financial records or internal controls on the part of the acquired companies, and an inability to establish controlover cash flows. Furthermore, even if we are successful in integrating new businesses, expected cost and operatingefficiencies may not materialize, the financial benefits from the acquisition may be less than anticipated, and we could berequired to record impairment changes as a result of under-performing assets.Moreover, our growth may suffer if we fail to identify suitable acquisition targets or are outbid by competingbidders. As a NASDAQ-listed company, we are subject to securities laws and regulations that, in certain circumstances,require that we file with the SEC audited historical financial statements for businesses we acquire that exceed certainmateriality thresholds. Given financial reporting practices in Russia and other countries in which we operate, such financialstatements and documented systems of internal controls over financial reporting are often not readily available or notcapable of being audited to the standards required by U.S. securities regulations. As a result, we may be prevented from ordelayed in pursuing acquisition opportunities that our competitors and other financial and strategic investors are able topursue, which may limit our ability to implement our growth strategy.Failure to maintain effective customer service may result in customer complaints and negative publicity and may adverselyaffect our business, financial condition and results of operations.Customer complaints or negative publicity about our services or those offered by us (including services offered byour business units) or one of our joint ventures, or breaches of customers’ privacy or of our security measures, could diminishconsumer confidence in and use of our services. Measures we implement to combat risks of fraud and breaches of privacy andsecurity may be viewed as onerous by our customers or those of our joint ventures and damage relations with them.Alternately, should breaches of customers’ privacy or of security measures occur, we could be subject to investigations andclaims from governmental bodies, as well as from our customers. These measures heighten the need for prompt and accuratecustomer service to resolve irregularities and disputes. Effective customer service requires significant personnel expense, andsuch expense, if not managed properly, may impact our profitability or that of our one or more of our joint ventures. Anyinability by us or our joint ventures to manage or train our or their customer service representatives properly couldcompromise our or their ability to handle customer complaints effectively. In case of failure to maintain effective customerservice by us or by one of our joint ventures, our reputation may suffer and we may lose our customers’ confidence, whichmay adversely affect our business, financial condition and results of operations.The inherent limitations of the available data regarding internet usage and online advertising may make it difficult toassess our markets and our market position. We rely on and refer to information and statistics from various third-party sources, as well as our own internalestimates, regarding internet usage and penetration and the online advertising markets in the countries in which we operate.The information and statistics used in our industry are subject to inherent limitations reflecting the differing metrics andmeasurement methods utilized and applied by different sources; for example, data derived from computer usage contrasted tothat derived from user surveys. In addition, while we believe that the available data and research on the Russian market is ofcomparable quality to that available in most developed countries, the data for Kazakhstan and Belarus are generally lessconsistent and reliable due to more limited third-party measurements in those countries.22 Table of ContentsWe will need to make new arrangements for our Russian headquarters premises before our current lease expires in 2021,which may result in material expenses and distraction of management attention.Our Russian headquarters are currently located in approximately 88,000 square meters of rented property in centralMoscow, with leases expiring in 2021 on a portion of our properties under lease. In order to secure sufficient office space tosupport our expected future growth, in December 2018 we acquired a property site for a new Moscow headquarters situated at15 Kosygina Street. We may encounter challenges in developing our headquarters design proposal for the site and obtainingthe required approvals for the finalized project. In addition, we may face difficulties in managing or coordinating adevelopment process. If the development project is not finished by the time our current and future lease expires, we may needto negotiate a new lease for our current or future premises, and may be unable to secure favorable terms, or may be required toagree to rent denominated in, or linked to, U.S. dollars, which would subject us to foreign exchange risk.Additional risks Related to Doing Business and Investing in Russia and Other Countries in which We OperateBecause the range of the services we provide is increasing and the legal framework governing the operations in ourmarkets is evolving, we may be required to obtain additional licenses, permits or registrations or comply with otherrequirements, which may be costly or may limit our flexibility to run our business.As we increase the range of services and diversify our business we may have to apply for additional licenses.Maintenance of granted licenses and obtaining new licenses may require us to spend additional resources. Licensingrequirements may also limit our flexibility in running our business. Failure to maintain required licenses may significantlylimit our ability to provide new services in respect of which these licenses are required.Court interpretations and the applicability of Russian legislation and regulations in relation to our business can beambiguous or contradictory and it is possible that the authorities may determine that we are required to have additionallicenses, permits or registrations to provide our services. For example, we could fall within the regulations that require receiptof licenses/permits or compliance with certain mandatory procedures with respect to the provision of telecommunicationsservices, the delivery of “mass media” and the use of encryption technologies by businesses. Such licensing or complianceprocesses may be time consuming and expensive and we may not be successful in acquiring any newly required licenses.Additionally, if we fail to obtain and maintain required licenses, permits or registrations or comply with certain mandatoryprocedures, we may face fines, penalties or sanctions.As the legal framework in Russia continues to evolve, we may be required to take additional actions in order tocomply with new legislation. Although we believe that we are in full compliance with applicable laws, ambiguities inlegislation and the wide discretion granted to regulatory authorities may result in us being subject to additional regulatoryrequirements. Compliance with additional or new regulatory requirements, or new interpretations or applications of existingrequirements, may also require us to spend additional resources and limit our flexibility in providing our services.New legislation under discussion in the Russian government may potentially affect the services we provide. Inparticular, there have been proposals regarding the regulation of taxi services, including on-line taxi aggregators. Adoptionof new regulation in this area may result in new obligations and restrictions on our Taxi business.Since 2017 the Russian State Duma has also been considering whether to impose new requirements on the ownersof social networks. The owners of social networks could be obligated to delete certain types of information from theirwebsites at request of users. Although we believe that we would not be affected by such legislation, it could be interpreted insuch a way that it affects our business. If we fail to comply with applicable legal requirements, we may face fines, penalties orsanctions.Applicable legislation imposes restrictions and requirements on us with respect to the processing of certain types ofpersonal and other data and data retention which may impose additional obligations on us, limit our flexibility, or harmour reputation with users.The collection and handling of user data by any entity or person in Russia (as in many other countries) may besubject to certain requirements and restrictions. If these requirements and restrictions are amended, interpreted or applied in amanner not consistent with current practice, we could face fines or orders requiring that we change our operating23 Table of Contentspractices, which in turn could have a material adverse effect on our business, financial condition and results of operations.In Russia, in order to store an individual’s personal data, we must obtain his or her written consent (when requiredby the applicable legislation) and use encryption and other technical means to protect his or her personal data. We do notcollect or perform any operations on our users’ personal data, except when such collection or processing is in accordancewith our terms of services and privacy policies which are available on our websites. Subject to several exemptions, processors of personal data must notify the appropriate Russian authority. We do notbelieve that we are required to make this notification. However, due to the absence of established court practice and officialguidelines on the application of the exemptions to notification, we cannot assure you that the regulator may not take a viewthat we nevertheless have to file a notification or comply with other requirements applicable to processors of personal data. Ifwe are ultimately required to file such a notification or otherwise are determined to be subject to the rules regarding thecollection and handling of personal data, we may be required to use special technical facilities and equipment and to adoptextensive internal compliance rules for the protection of personal data, which may adversely affect our ability to flexiblymanage our business or make it costlier to do so. Furthermore, several companies in our group will undergo a plannedinspection by the competent Russian authority during 2019. If this authority comes to a conclusion that companies in ourgroup fail to comply with the applicable data protection legislation, we could experience financial and reputational lossesand could be restricted from providing certain types of services until we comply with the requirements.Furthermore, we use cookies and other widespread technologies that assist us in improving the user experience andpersonalization of our products and services that ultimately benefit both our users and advertisers through behavioraltargeting, which makes our advertising more relevant. There is no clarity as to whether our practices are compliant with therequirements of applicable data protection legislation in Russia and abroad, and such laws could be interpreted and appliedin a manner that is not consistent with our current data protection practices.Additionally, in Russia, “organizers of information distribution” are required to notify the relevant Russianauthority about the commencement of their operations, and must retain a broad range of data relating to and generated bytheir users for a period of time, which must be provided to the authorities at their request. Our principal subsidiary operatingin Russia has notified the relevant Russian authority that it acts as an organizer of information distribution with respect tosome of the services it provides. Organizers of information distribution that use encryption when delivering or processingelectronic messages are required to provide the security authorities with information necessary for decoding the delivered orprocessed messages. Compliance with these requirements may require significant expenditures by us, including additionaldata centers, servers and other infrastructure or software development. Data retention may also harm our reputation with users.If we fail to comply with the above requirements, the Russian authorities can block access to our services in Russia.Under Russian law, companies are also required to store all personal data of Russian users in databases locatedinside Russia. Compliance with the requirements provided in this legislation may be practically difficult, require significantefforts and resources, could lead to legal liability in other jurisdictions and limit functionality of our services. Compliancewith these requirements may also limit our ability to compete with other companies located in other jurisdictions that do notrequire mandatory local storage of personal data related to their users and that may elect not to comply with suchrequirements in Russia. However, any non-compliance with this requirement could lead to legal liability and potentially torestriction of the availability of the service in Russia. For example, in 2016 a Russian court ordered the blocking of access toa popular social networking website for violation of data protection legislation.Due to the nature of the services we offer and the fact that we have a presence in a number of countries, we may alsobe subject to data protection laws of other jurisdictions, especially laws regulating the cross-border transfer of personal data,which may require significant compliance efforts and could result in liability for violations in other jurisdictions. Forexample, the General Data Protection Regulation (the GDPR) came into force in May 2018 in the EU. Although we have onlymodest operations in the EU and therefore our exposure under the GDPR should be limited, we believe that we are taking allnecessary steps to comply with the GDRP. However, if we fail to interpret all the requirements of the GDPR in accordancewith the official interpretation, we may be held liable for noncompliance. As our business grows, we may also encounterincreased pressure from foreign state authorities with respect to the production of information related to users incircumvention of the international legal framework regulating the provision of such information. Any non-compliance withsuch requests may lead to liability and other adverse consequences. Further, current law imposes restrictions on thedistribution of satellite images of certain areas in Russia and the other countries in which we operate and imposes24 Table of Contentsrequirements with respect to the information provided by the traffic monitoring service we offer. If we were found to be inviolation of any such restrictions, we may be forced to suspend such services or may potentially be subject to fines or otherpenalties.We may be subject to existing or new advertising legislation that could restrict the types and relevance of the ads we serve,which would result in a loss of advertisers and therefore a reduction in our revenues.Russian law prohibits the sale and advertising of certain products and heavily regulates advertising with respect tocertain products and services. Ads for certain products and services, such as financial services, as well as ads aimed at minorsand some others, must comply with specific rules and must in certain cases contain required disclaimers.Further amendments to legislation regulating advertising may impact our ability to provide some of our services orlimit the type of advertising we may offer. The application of these laws to parties, such as Yandex, that merely serve ordistribute ads and do not market or sell the product or service, however, can be unclear. Pursuant to our terms of service, werequire that our advertisers have all required licenses or authorizations. If our advertisers do not comply with theserequirements, and these laws were to be interpreted to apply to us, or if our ad-serving system failed to include necessarydisclaimers, we may be exposed to administrative fines or other sanctions, and may have to limit the types of advertisers weserve.The regulatory framework in Russia governing the use of behavioral targeting in online advertising is unclear. Ifnew legislation were to be adopted, or current legislation were to be interpreted, to restrict the use of behavioral targeting inonline advertising, our ability to enhance the targeting of our advertising could be significantly limited, which could resultin a loss of advertisers or a reduction in the relevance of the ads we serve, which would reduce the number of clicks on the adsand therefore our revenues.Our need to comply with applicable Russian laws and regulations could hamper our ability to offer services that competeeffectively with those of our foreign competitors and may adversely affect our business, financial condition and results ofoperations.Many of our global competitors, such as Google and Microsoft, have their principal operations outside of Russia,putting them generally outside of the jurisdiction of Russian courts and government agencies, even though some of themhave offices in Russia. Our systems and operations are located principally in Russia. Russian laws and regulations that areapplicable to us, but not to our foreign competitors, may impede our ability to develop and offer services that competeeffectively on a global scale as well as in Russia with those offered by our foreign-based competitors and generally availableworldwide over the internet. For instance, our foreign competitors might be not in compliance with the requirement of theRussian data protection legislation to store all personal data of Russian users in databases located inside Russia. In addition,our foreign competitors have not joined an anti-piracy memorandum signed between the major Russian IT companies andcopyright holders. This memorandum stipulates an out-of-court procedure that obligates search engines to remove URLs toinfringing audio-visual content at the request of the rights holders. Any inability on our part to offer services that arecompetitive with those offered by our foreign competitors may adversely affect our business, financial condition and resultsof operations.Any inability on our part to offer services that are competitive with those offered by our foreign competitors mayadversely affect our business, financial condition and results of operations.Russian authorities could determine that we hold a dominant position in one or more of our markets, and could imposelimitations on our operational flexibility that may adversely affect our business, financial condition and results ofoperations.Russian anti-monopoly legislation imposes restrictions on companies that occupy a dominant position in a givenmarket. Were the Russian authorities to investigate the internet or online advertising industries, it is possible that they mayconclude that, given our market share, we hold a dominant position in one or more of the markets in which we operate.Additionally, from time to time we receive information requests from Russian Federal Antimonopoly Service (FAS) related tocertain of our services. If FAS deems that we hold a dominant position in one or more of the markets in which we operate thiscould result in limitations on our future acquisitions and a requirement that we pre-approve with the authorities any changesto our standard agreements with advertisers and Yandex ad network partners, as well as any25 Table of Contentsspecially negotiated agreements with business partners. In addition, if we were to decline to conclude a contract with a thirdparty or terminate an existing agreement without sufficient substantiation this could, in certain circumstances, be regarded asabuse of a dominant market position.Any abuse of a dominant market position could lead to administrative penalties and the imposition of fines of up to15% of our prior year annual revenues in the relevant market. These limitations may reduce our operational and commercialflexibility and responsiveness, which may adversely affect our business, financial condition and results of operations.The Russian banking and financial systems remain less developed than those in some more developed markets, and abanking crisis could place liquidity constraints on our business and materially adversely affect our business, financialcondition and results of operations.Russia’s banking and other financial systems are less well-developed and regulated than those of some moredeveloped markets, and Russian legislation relating to banks and bank accounts is subject to varying interpretations andinconsistent application. Russian banks generally do not meet international banking standards, and the transparency of theRussian banking sector lags behind international norms. In addition, the United States and European Union have imposed“sectoral” and related sanctions on named Russian banks in connection with developments in Ukraine. See “—The adoptionand maintenance of international embargo, economic or other sanctions, in particular with respect to the conflict in Ukraine,may have a material adverse effect on our business, financial condition and results of operations”.As a result, the banking sector remains subject to periodic instability. Another banking crisis, or the bankruptcy orinsolvency of banks through which we receive or with which we hold funds, may result in the loss of our deposits oradversely affect our ability to complete banking transactions in Russia, which could have a material adverse effect on ourbusiness, financial condition and results of operations.Some of our counterparties provide limited transparency in their operations, which could subject us to greater scrutiny andpotential claims from government authorities.We do business with a number of companies, especially small companies that may not always operate in a fullytransparent manner and that may engage in unpredictable or otherwise questionable practices with respect to tax obligationsor compliance with other legal requirements. We have been approached by government authorities from time to timeregarding potential tax claims or other compliance matters in connection with such transactions. For example, in 2016 wereceived a claim from the Russian tax authority with respect to one of our distribution agreements with a Russian softwaredeveloper. We have paid the claim in full.As we are a larger and more transparent company with greater resources than such counterparties, governmentalauthorities may seek to collect taxes and/or penalties from us in relation to such transactions on the basis that we could havehad knowledge of or aided such practices even when we did not.Changes in the tax systems of Russia and other countries in which we operate, as well as unpredictable or unforeseenapplication of existing rules, may materially adversely affect our business, financial condition and results of operations.Russian tax, currency, and customs laws and regulations are subject to varying interpretations and changes, whichmay be frequently revised and reviewed by the authorities. As a result, our interpretation of such tax legislation may bechallenged by the relevant authorities. Russian tax legislation largely follows the OECD approach but may be implementedin a way which is not in line with international practice or our interpretation. Moreover, under the current conditions of weakeconomic growth and reduced tax revenue, the authorities are taking a more assertive position in their interpretation of thetax legislation and, as a result, it is possible that transactions and activities that have not been challenged in the past maynow be questioned by the authorities. High-profile companies such as ours can be particularly vulnerable to such assertivepositions of the authorities.Although we believe that our interpretation of relevant legislation is appropriate and is in accordance with existingcourt practice, if the authorities were successful in enforcing differing interpretations, our tax liability may be greater than theestimated amount that we have expensed to date and paid or accrued on our balance sheet. Generally, Russian taxpayers aresubject to inspection of their activities for a period of three calendar years immediately preceding26 Table of Contentsthe year in which an audit is carried out, with tax audits routinely undertaken at least every two years. A tax audit of ourprincipal Russian subsidiary covering 2015 and 2016 was completed in 2018 and the resulting tax claims were fully accruedin our 2018 financial statements.Taxes payable on dividends from our Russian operating subsidiaries to our parent company might not benefit from reliefunder the Netherlands‑Russia tax treaty.In 2018, our principal Russian operating subsidiary distributed dividends to our parent company (Yandex N.V.)and applied withholding tax at a 5% rate in reliance on the provisions of the Netherlands‑Russia tax treaty.Yandex is incorporated in the Netherlands and our principal operating subsidiaries are incorporated in Russia. Ourmanagement seeks to ensure that we conduct our affairs in such a manner that our parent company is regarded as thebeneficial owner of all its incomes and not regarded as tax resident in any jurisdiction other than the Netherlands and, inparticular, is not deemed to be a tax resident of, or to have a permanent establishment in, Russia. Thus, dividends paid fromour Russian operating subsidiaries to our parent company should generally be subject to Russian withholding tax at a 5%rate. If our parent company were not treated as a Dutch resident for tax purposes or if it were deemed to have a permanentestablishment in Russia, or if the Russian tax authorities were to determine that other conditions for the application of the 5%rate are not met because, for example, if Yandex N.V. is not deemed to be beneficial owner of the dividends received,dividends paid from our Russian operating subsidiaries to our parent company would be subject to Russian withholding taxat the rate of 15%.Russian tax rules are characterized by significant ambiguities and limited interpretive guidance and are subject tochange, and we can provide no assurance that dividend withholding tax relief may not be challenged by the Russian taxauthorities based on the grounds mentioned above. Furthermore, Russian tax rules regarding residency and beneficialownership which were recently introduced may change or their interpretation may evolve, thus triggering changes intaxation of dividends from our Russian subsidiaries to our parent company in the future.Based on the current state of the law and available interpretations, we believe that Yandex and our material foreignsubsidiaries should not be treated as controlled foreign corporations for Russian tax purposes. However, there are risks thatany of these rules may be interpreted or applied in a manner that may have an adverse effect on our results of operations.We may be required to record a significant deferred tax liability if we are unable to reinvest our earnings in Russia.Our principal Russian operating subsidiary has significant accumulated earnings that have not been distributed toour Dutch parent company. Our current policy is to retain substantially all our earnings at the level of our principalsubsidiary for investment in Russia.We did not provide for dividend withholding taxes on the unremitted earnings of our non‑Dutch subsidiaries for2012 or earlier years because we considered them to be permanently reinvested outside of the Netherlands. As ofDecember 31, 2018, we had an accrual of RUB 391 million ($5.6 million) for dividend withholding tax. If circumstanceschange and we are unable to reinvest in that subsidiary’s current operations or acquire suitable businesses in Russia,U.S. GAAP would require us to record a deferred tax liability representing the dividend withholding taxes that we would berequired to pay if this subsidiary were to pay these unremitted accumulated earnings to our Dutch parent company as adividend, even if such dividends were not actually declared and paid. As of December 31, 2018, the cumulative amount ofunremitted earnings in respect of which dividend withholding taxes have not been provided is RUB 71,752 million($1,032.8 million). The applicable withholding tax rate is 5% and the amount of the unrecognized deferred tax liabilityrelated to these unremitted earnings was RUB 3,588 million ($51.6 million) as of December 31, 2018. We expect the amountof unremitted earnings to grow as our principal Russian operating subsidiary continues to generate net income. If we wererequired to record a deferred tax liability on an amount subsequently made available for distribution it may have a materialadverse effect on our results of operations.Risks Related to Ownership of our Class A SharesThe price of our Class A shares has been and may continue to be volatile. Market fluctuations specific to Russia ordeveloping markets or to high‑growth technology companies generally may affect the performance of our Class A27 Table of Contentsshares and could expose us to potential securities litigation, which could result in substantial costs and a diversion of ourmanagement’s attention and resources.Macroeconomic and geopolitical events in Russia in recent periods have adversely affected the value of tradedsecurities of companies with significant operations in Russia, including our Class A shares. In addition, the market fortechnology and other growth companies has generally experienced severe price and volume fluctuations that have oftenbeen disproportionate to the operating performance of those companies. These broad macroeconomic, geopolitical, marketand industry factors may impact the market price of our Class A shares regardless of our actual operating performance.The trading price of our Class A shares has been and may continue to be volatile and subject to wide fluctuations inprice in response to various factors, some of which are beyond our control. These factors include:·macroeconomic and geopolitical developments, including those specific to the internet and onlineadvertising both in Russia and globally;·changes or proposed changes in the regulation of our services by the applicable government authorities,including with respect to operational requirements and governance;·market rumors (for example, rumors regarding potential changes to our capital structure in October 2018had an immediate negative impact on the price of our Class A shares);·quarterly variations in our results of operations or those of our competitors;·fluctuations in our share of the internet search market;·the proportion of our revenues generated on our websites relative to those generated through the Yandexad network or through distribution partners, as a result of the revenue sharing arrangements we enter intoand the overall volume of advertising we provide our partners;·announcements of technological innovations or new services and media properties by us or ourcompetitors;·the amount of advertising purchased or market prices for online advertising;·the emergence of new advertising channels in which we are unable to compete effectively;·the volume of searches conducted, the amounts bid by advertisers or the number of advertisers that bid inour advertising system;·changes in governmental regulations, in particular those applicable to regulation of online business inRussian and globally;·disruption to our operations or those of our partners;·our ability to develop and launch new and enhanced services on a timely basis;·commencement of, or our involvement in, litigation;·any major change in our directors or management;·changes in earnings estimates or recommendations by securities analysts;·our ability to compete effectively for users, advertisers, partner websites and content;28 Table of Contents·the operating and stock price performance of other companies that investors may deem comparable to us;·fluctuations in the exchange rate between currencies, including the Russian ruble and the U.S. dollar; or·general global or Russian economic conditions and slow or negative growth or forecast growth of relatedmarkets.Additionally, volatility or a lack of positive performance in the price of our Class A shares may adversely affect ourability to retain key employees, some of whom have been granted equity awards.This volatility may affect the price at which holders of Class A shares may sell such shares and the sale ofsubstantial amounts of our Class A shares could adversely affect our trading price.In the past, following periods of volatility in the overall market and the market price of a company’s securities,securities class action litigation has often been instituted against these companies. Such litigation, if instituted against us,could result in substantial costs and a diversion of our management’s attention and resources.The concentration of voting power with our principal shareholders, including our founders, directors and seniormanagement, limits your ability to influence corporate matters, while a loss of voting control by our principal shareholderscould affect the direction of our company. Our Class B shares have ten votes per share and our Class A shares have one vote per share. As of February 15,2019, our founder, directors, senior management (and their affiliates) and principal non‑institutional shareholders togetherown 93.8% of our outstanding Class B shares and 3.65% of our outstanding Class A shares, representing in the aggregate54.92% of the voting power of our outstanding shares. In particular, our founder, Mr. Volozh, directly or indirectly controls85.03% of our outstanding Class B shares and 0.12% of our outstanding class A shares representing in aggregate 48.41% ofthe voting power of our outstanding shares. As a result, our founder, directors, senior management and their affiliates havesignificant influence over the management and affairs of our company and over all matters requiring shareholder approval,including the election of directors, the amendment of our articles of association and significant corporate transactions, suchas a sale of our company or its assets.This concentrated control limits your ability to influence decisions on corporate matters. We may take actions thatour public shareholders do not view as beneficial or as maximizing value for them. As a result, the market price of our Class Ashares may be adversely affected.At the same time, if our principal shareholders cease to have absolute voting control over Yandex N.V., as a resultof conversions of Class B shares or the issuance of a substantial number of Class A shares, this may also present risks for ourcompany and business, including with respect to the regulatory environment in which we operate. Russia has previouslyenacted legislation restricting foreign ownership in sectors that the authorities deem to be of strategic importance, and whileto date no such actions have been taken with respect to internet companies, the loss or potential loss of voting control byinsiders of the Company may be viewed unfavorably by the authorities. These risks may also include it being more difficultfor us to obtain shareholder approval for matters that we believe are in the best interest of our business.Certain of our directors and shareholders and their affiliates may have interests that are different from, or in addition to,the interests of other Yandex shareholders.Some of our directors are affiliated with investment funds or financial institutions that have investments in otherbusinesses or entities that currently or may in the future compete with us or with whom we may enter into transactions. Forexample, one of our directors, Herman Gref, is CEO and Chairman of Sberbank, with which we have joint ventures withregards to Yandex.Market and Yandex.Money. These affiliations may require such directors to recuse themselves fromconsideration of certain transactions or may otherwise create real, potential or perceived conflicts of interest.Our Board of Directors and our priority shareholder have the right to approve accumulations of stakes in our company orthe sale of our principal Russian operating subsidiary, which may prevent or delay change‑of‑control transactions.29 Table of ContentsOur Board of Directors has the right, acting by simple majority, to approve the accumulation by a party, group ofrelated parties or parties acting in concert of the legal or beneficial ownership of shares representing 25% or more, in numberor voting power, of our outstanding Class A and Class B shares (taken together). If our board grants its approval of such shareaccumulation, the matter is then submitted to the holder of our priority share, which has a further right of approval of suchaccumulation of shares. In addition, any decision by our Board of Directors to transfer all or substantially all of our assets toone or more third parties, including the sale of our principal Russian operating subsidiary, is subject to the prior approval ofthe priority shareholder.Any holding, transfer or acquisition by a party, group of related parties or parties acting in concert of the legal orbeneficial ownership of Class B shares representing 25% or more, in number or by voting power, of our outstanding Class Aand Class B shares (taken together), without the prior approval of our Board of Directors, first, and then the priorityshareholder, will be null and void. The acquisition of shares in excess of the thresholds permitted by our articles ofassociation will be subject to certain notification requirements set forth in our articles of association. Failure to comply withthose terms would render the transfer of such shares null and void. In addition, the holders of such shares would not beentitled to the dividend or voting rights attached to their excess shares. The rights of our Board of Directors and our priorityshareholder to approve accumulations of stakes in our company may prevent or delay change‑of‑control transactions.Anti‑takeover provisions in our articles of association and the shareholders agreement among our principal shareholdersmay prevent or delay change‑of‑control transactions.In addition to the rights of our board and of the priority shareholder to approve the accumulation of stakes of 25%or more, as described above, our multiple class share structure may discourage others from initiating any potential merger,takeover or other change‑of‑control transaction that our public shareholders may view as beneficial. Our articles ofassociation also contain additional provisions that may have the effect of making a takeover of our company more difficultor less attractive, including:·the staggered three‑year terms of our directors, as a result of which only one‑third of our directors aresubject to election in any one year;·a provision that our directors may only be removed by a two‑thirds majority of votes cast representing atleast 50% of our outstanding share capital;·the authorization of a class of preference shares that may be issued by our Board of Directors in such amanner as to dilute the interest of any potential acquirer;·requirements that certain matters, including an amendment of our articles of association, may only bebrought 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 ourshareholders or to add items to the agenda for those meetings, which will be very difficult for Class Ashareholders to meet given our multiple class share structure; and·supermajority requirements for shareholder approval of certain significant corporate actions, including thelegal 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 theattempted takeover of a Dutch public company, only apply in the case of Dutch target companies that have shares listed on aregulated market within the European Union. We have not listed our shares, and do not expect to list our shares, on aregulated 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 your rights as a shareholderdiffer from the rights you would have as a shareholder of a domestic U.S. issuer.30 Table of ContentsAs a foreign private issuer whose shares are listed on the NASDAQ Global Select Market, we are permitted in certaincases to follow Dutch corporate governance practices instead of the corresponding requirements of the NASDAQMarketplace Rules. We follow Dutch corporate governance practices with regard to the quorum requirements applicable tomeetings of shareholders and the provision of proxy statements for general meetings of shareholders. In accordance withDutch law and generally accepted business practices, our articles of association do not provide quorum requirementsgenerally applicable to general meetings of shareholders. Although we do provide shareholders with an agenda and otherrelevant documents for the general meeting of shareholders, Dutch law does not have a regulatory regime for the solicitationof proxies and the solicitation of proxies is not a generally accepted business practice in the Netherlands. Accordingly, ourshareholders may not be afforded the same protection as provided under NASDAQ’s corporate governance rules.We do not comply with all the provisions of the Dutch Corporate Governance Code. This may affect your rights as ashareholder.As a Dutch company we are subject to the Dutch Corporate Governance Code, or DCGC. The DCGC contains bothprinciples and best practice provisions for management boards, supervisory boards, shareholders and general meetings ofshareholders, financial reporting, auditors, disclosure, compliance and enforcement standards. The DCGC applies to allDutch companies listed on a government‑recognized stock exchange, whether in the Netherlands or elsewhere, including theNASDAQ Global Select Market. The principles and best practice provisions apply to the board (in relation to role andcomposition, conflicts of interest and independence requirements, board committees and remuneration), shareholders and thegeneral meeting of shareholders (for example, regarding anti‑takeover protection and obligations of the company to provideinformation to its shareholders) and financial reporting (such as external auditor and internal audit requirements). The DCGCrequires that companies either “comply or explain” any noncompliance and, in light of our compliance with NASDAQrequirements and as permitted by the DCGC, we have elected not to comply with all of the provisions of the DCGC. This mayaffect your rights as a shareholder and you may not have the same level of protection as a shareholder in a Dutch companythat fully complies with the DCGC.Because of the secondary listing of our Class A shares on the Moscow Stock Exchange, we are subject to additionaldisclosure and compliance requirements that may conflict with those imposed by the SEC and NASDAQ, and we mayexperience trade fluctuations based on arbitrage activities.In June 2014, we established a secondary listing of our Class A shares on the Moscow Stock Exchange. Pursuant tothat listing, we and our insiders must comply with certain disclosure and other obligations that may differ in timing andsubstance from those applicable to our NASDAQ listing. In addition, many of the obligations imposed by the Moscow StockExchange are formalistic in nature, and that exchange has limited experience in the application of its requirements tocompanies incorporated outside Russia. As a result, we may not be able to comply with all formal obligations in a mannerthat is consistent with the requirements or interpretations of that exchange.In addition, this secondary listing may create opportunities for trading arbitrage, particularly in connection withcurrency fluctuations between the trading in U.S. dollars on NASDAQ and in rubles on the Moscow Stock Exchange, whichcould impact the trading price of our Class A shares.Risks for U.S. HoldersWe cannot assure you that we will not be classified as a passive foreign investment company for any taxable year, whichmay 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 assetsand 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 2018 tax year, and do not expect to be a PFIC in the foreseeable future. However, becauseour PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets insuch year, and because this is a factual determination made annually after the end of each taxable year and there areuncertainties in the application of the rules, there can be no assurance that we will not be considered a PFIC for the currenttaxable year or any future taxable year. In particular, the value of our assets may be determined in large part by reference tothe market price of our Class A shares, which has fluctuated, and may continue to fluctuate, significantly. If we were to betreated as a PFIC for any taxable year during which a U.S. holder held our Class A shares,31 Table of Contentscertain adverse U.S. federal income tax consequences could apply to the U.S. holder. See “Taxation—Taxation in the UnitedStates—Passive foreign investment company considerations.”Any U.S. or other foreign judgments you may obtain against us may be difficult to enforce against us in Russia or theNetherlands.We have only very limited operations in the United States, most of our assets are located in Russia, our company isincorporated in the Netherlands, and most of our directors and senior management are located outside the United States. As aresult, it may be difficult to serve process on us or these persons within the United States. Although arbitration awards aregenerally enforceable in Russia and the Netherlands, and Russian courts may elect to enforce foreign court judgments as amatter of international reciprocity and judicial comity, you should note that judgments obtained in the United States or inother foreign courts, including those with respect to U.S. federal securities law claims, may not be enforceable in Russia orthe Netherlands. There is no mutual recognition treaty between the United States and the Russian Federation or theNetherlands, and no Russian federal law or Dutch law provides for the recognition and enforcement of foreign courtjudgments. Therefore, it may be difficult to enforce any U.S. or other foreign court judgment obtained against our company,any of our operating subsidiaries or any of our directors in Russia or the Netherlands.The rights and responsibilities of our shareholders are governed by Dutch law and differ in some important respects fromthe 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 incorporatedin the Netherlands. The responsibilities of members of our Board of Directors under Dutch law are different than under thelaws of some U.S. jurisdictions. In the performance of its duties, our Board of Directors is required by Dutch law to considerthe interests of Yandex, its shareholders, its employees and other stakeholders and not only those of our shareholders. Also,as a Dutch company, we are not required to solicit proxies or prepare proxy statements for general meetings of shareholders.In addition, the rights of our shareholders are governed by Dutch law and our articles of association and differ fromthe rights of shareholders under U.S. law. For example, Dutch law does not grant appraisal rights to a company’s shareholderswho wish to challenge the consideration to be paid upon a merger or consolidation of the company. Item 4. Information on the Company.History and Development of the Company; Organizational Structure.Our founders began the development of our search technology in 1989, and launched the yandex.ru website in1997. Our principal Russian operating subsidiary, Yandex LLC, was formed in 2000, as a wholly owned subsidiary of ourformer Cypriot parent company. In 2007, we undertook a corporate restructuring, as a result of which Yandex N.V. becamethe parent company of our group. Yandex N.V. is a Dutch public company with limited liability. Its registered office is atSchiphol Boulevard 165, 1118 BG, Schiphol, the Netherlands (tel: +31‑20‑206‑6970). The executive offices of our principaloperating subsidiary are located at 16, Leo Tolstoy Street, Moscow 119021, Russian Federation (tel. +7‑495‑739‑7000).For a discussion of our principal acquisitions and joint venture formation in 2018, see “Operating and FinancialReview and Prospects—Recent Acquisitions and Formation of Yandex.Market joint venture in 2018”.Business OverviewOur BusinessYandex is one of the largest internet companies in Europe. Since 1997, Yandex has delivered world-class,geographically relevant search and locally tailored experiences on all digital platforms, based on its innovativetechnologies. Yandex operates Russia’s most popular search engine. We also provide a number of other services, includingmarket-leading on-demand transportation services, navigation products, classifieds and entertainment services in Russia andother regions, including CIS, Central Europe, the EU, Africa and the Middle East. Yandex’s goal is to help consumers andbusinesses better navigate the online and offline worlds.32 Table of ContentsYandex is a technology company that builds intelligent products and services powered by machine learning. Ourproducts and services are based on complex, unique technologies that are not easily replicated. Benefiting from Russia’slong‑standing educational focus on mathematics and engineering, we have drawn upon the considerable local talent pool tocreate a leading technology company.We derive a substantial part of our revenues from online advertising. We enable advertisers to deliver targeted,cost‑effective ads that are relevant to our users’ needs, interests and locations. We serve ads on our own search results andother Yandex webpages, as well as on thousands of third‑party websites that make up our Yandex Advertising Network.Through our ad network, we extend the audience reach of our advertisers and generate revenue for both our network partnersand us. We offer a variety of ad formats to our advertisers, including performance-based, brand and video advertising formatsacross different platforms. A few years ago, we embarked on a strategy to diversify our revenue streams and broaden theappeal of our ecosystem. Other revenue streams are growing rapidly and come from our ride-sharing service, classifieds andother initiatives, including music subscription and event tickets sales within our Media Services, as well as Other Bets andExperiments, particularly by our car-sharing business and personalized content feed.Our businesses are organized in the following operating segments:·Search and Portal, which includes all our services offered in Russia, Belarus and Kazakhstan (and, for periodsprior to the imposition of sanctions on Yandex by the government of Ukraine in May 2017, all our servicesoffered in Ukraine), other than those described below. Since Q1 2018, our Search and Portal segment alsoincludes Search and Portal in Turkey and Yandex Launcher, previously reported in Other Bets and Experiments,and Yandex.Travel, previously reported in Classifieds;·Taxi (including our ride-sharing business, which consists of Yandex.Taxi as well as Uber in Russia and othercountries, Food Delivery business, which includes Yandex.EATs, Uber.EATs and Food Party, a meal kitsubscription service, and our Self-Driving Cars division);·E‑commerce (including the Yandex.Market service for the period prior to April 27, 2018, the date of thecompletion of the Yandex.Market joint venture between Yandex and Sberbank);·Classifieds (including Auto.ru, Yandex.Realty and Yandex.Jobs);·Media Services (including KinoPoisk, Yandex.Music, Yandex.Afisha, Yandex.TV program, our productioncenter Yandex.Studio and our subscription service Yandex.Plus, which we launched in Q1 and Q2 2018respectively);·Other Bets and Experiments, including:·Zen, our proprietary algorithmic personalized content feed;·Yandex.Cloud (prior to Q1 2018 was a part of Search and Portal segment);·Yandex.Drive, our car-sharing service, launched in February 2018;·Geolocation Services;·Yandex.Health (prior to Q1 2018 was a part of Search and Portal segment);·Yandex Data Factory.Other Bets and Experiments aim to develop current successful business models and create new ones. Once anexperiment becomes sizable enough, represents a new business model, and has good prospects for future development, wemay decide to designate it a business unit and report it accordingly, while unsuccessful experiments may be shut down orreabsorbed by one of our other segments.33 Table of ContentsSearch and PortalWe offer a broad range of world-class, locally relevant search and information services that are free to our users andthat enable them to find relevant information quickly and easily.Yandex SearchOur search engine offers almost instantaneous access to the vast range of information available online. We utilizelinguistics, mathematics, machine learning and AI to develop proprietary algorithms that efficiently extract, compile,systematize and present relevant information to our users. Our organic search results are ranked by computer algorithmsbased exclusively on relevance, and we clearly segregate organic results from paid results to avoid confusing our users.Yandex also provides users with one of its major products, such as search, mail, weather, browser and other services,in Belarus, Kazakhstan, Turkey and Uzbekistan, offering local customers advertising services.Yandex Search generated 56.3% of all search traffic in Russia in 2018 and 56.9% in March 2019, according toYandex.Radar, a search traffic and browser usage analytics tool based on Yandex.Metrica data. In 2018 our search share ondesktop and mobile reached 67.1% and 46.5%, respectively. In March 2019, our search share averaged 68.5% on desktopand 49.0% on mobile, respectively, with mobile search share of 51.6% on Android and 40.1% on iOS. The percentage of ourtotal search traffic generated from mobile devices averaged approximately 49% in Q4 2018 compared with 39% in Q4 2017,while the percentage of our search revenues generated from mobile devices increased to approximately 41% in Q4 2018 fromapproximately 31% in Q4 2017.Personal ServicesYandex.Mail provides users with fast and easy access to their email.Yandex.Disk is our cloud‑based storage service that allows users to upload, store and share content online. In 2018,we started offering Disk Pro, a subscription-based option, which provides users with a wider range of features in Yandex.Disk.Yandex.NewsYandex.News is the most visited online news aggregation service in Russia, providing a comprehensive mediaoverview for our users. We aggregate and present local, national and international news. The selection of news is fullyautomated and editorial-free.Yandex.WeatherOur Yandex.Weather service offers hyperlocal, real-time weather information based on our proprietary weatherforecasting technology, Meteum. Powered by machine learning, it gives accurate forecasts at the level of individualneighborhoods across the world. In 2018, based on our AI, neural networks and satellite technologies, we empowered our up-to-the-minute weather forecast service by using satellite imagery as a new data source for precipitation maps to provide userswith highly advanced and accurate weather updates. Yandex.TravelYandex.Travel is our travel aggregator service, which allows users to search for flight tickets and hotels, as well asto compare prices. The service also offers users an opportunity to purchase train and intercity bus tickets. Yandex.Travel isintegrated into the services of Yandex’s ecosystem and, in addition to Yandex.Travel websites, provides services directlyfrom Yandex search results and Yandex.Maps.34 Table of ContentsAliceIn October 2017, we launched Alice, the first conversational intelligent assistant for the Russian market. Aliceassists users with a wide array of information needs, such as factoid questions, weather forecasts, directions and currencyexchange rates, and also helps users to manage daily tasks, such as ordering in from a restaurant or hailing a taxi. Alice is notlimited to predefined scenarios and includes a general “chit-chat” mode – a unique feature among intelligent assistants thathas been enthusiastically embraced by millions of users. It also benefits from the near-human level of speech recognitionaccuracy (based on the Word Error Rate measurement) provided by the Yandex SpeechKit platform. In May 2018, welaunched a developers skill platform, Yandex.Dialogues, designed to make it easy for any third-party developer to createnew skills for Alice. As of December 2018, Alice had expanded from its initial core functionalities to over 50,000 skills,which include both human operators and chat-bots. While initially only accessible through our search app, Alice is now alsoavailable in Yandex.Browser, Yandex.Navigator, Yandex Launcher, Yandex.Station, Yandex.Auto and Yandex.Phone, aswell as on third-party platforms, such as Sony Experia Ear Duo, Elari KidPhone 3G, and the smart speakers Irbis A, DexpSmartbox and Elari SmartBeat.Turbo pages Launched in mid-2017, Turbo pages is a new format of displaying content on mobile devices, which loads severaltimes faster than regular web pages and is optimized for smaller screens. Our Turbo pages are easier to implement comparedto other similar products and offer monetization from Yandex out of the box. Turbo pages are available on Search, Zen andNews. As of December 2018, Turbo pages appeared on 50% of search engine result pages on mobile.Yandex Search AppEnhanced with Alice, the first conversational voice assistant on the Russian market, Yandex Search App integratesYandex’s must-have services into one app, including Search, Maps, News, Zen, Weather and many others. In 2018, theYandex Search App audience reached 36 million users on a monthly basis in December 2018, doubling compared to the prioryear. As of the end of 2018, our Search App was installed on 48% of Android smartphones in Russia and generated 40% ofYandex’ search traffic on the Android platform.Yandex BrowserOur Yandex Browser is the second most popular browser on desktops and the most popular non-native browser onmobile platforms in Russia. Yandex Browser is committed to delivering high-quality user experiences and to ensure securityfor users online. Yandex.Browser’s built-in Antishock technology blocks malicious and fraudulent advertising and its“Protect” technology offers comprehensive protection against the majority of online threats. For example, Yandex.Browserchecks all downloaded files for viruses, warns users about dangerous websites, encrypts users’ passwords when using publicWi-Fi networks, and ensures safe payments. In 2018, we introduced native ad blocking in the Russian version of YandexBrowser to enhance users’ browsing experience by filtering intrusive advertising. Moreover, we started offering an energy-saving mode, making Yandex.Browser the most energy-efficient browser, according to the tests of ixbt.com, the Russianinformation and analytical website focused on IT technologies.The combined share of our desktop and mobile visits processed through Yandex Browser in Russia reached 20.5%in March 2019, according to Yandex.Radar.Yandex LauncherYandex Launcher is our free Android user interface, which integrates our voice-assistant Alice and Yandex’sservices, such as Yandex.Zen, Yandex.Weather and other, and allows users to adapt their Android phones to fit their style andfill it with interesting content from all over the internet.Hardware productsYandex.StationIn May 2018, we launched Yandex.Station, the first smart speaker designed for the Russian market and Yandex’sfirst hardware product, equipped with our AI assistant, Alice, to help users manage their daily tasks. Yandex.Station35 Table of Contentsprovides a complete in-home multimedia entertainment experience. As the first smart speaker with both audio and videocapabilities, it plays music and also streams films, videos and television through its HDMI port to any connected display.Currently, Yandex.Station has access to Yandex's video streaming service KinoPoisk, as well as a wide range of other contentincluding premium content provided by our partners.Yandex.PhoneIn December 2018, we unveiled our first smartphone, Yandex.Phone, which is fully powered by Yandex’sintelligent assistant, Alice. Our smartphone integrates a suite of our advanced mobile services from the Yandex ecosystem,which along with Alice offers a highly personalized mobile experience based on the users’ location, routine, and usagepattern. For example, our smartphone provides traffic updates for the daily commute with turn-by-turn navigation fromYandex.Maps, suggests a personalized Yandex.Music playlist, or sends forecast updates from Yandex.Weather, while ourvoice-controlled AI assistant helps with managing daily tasks, such as adding an event to the calendar.Our Monetization and Advertiser ServicesWe offer a variety of ad formats to our advertisers, including performance-based, brand and video advertisingformats.Performance‑based ads are principally targeted to a particular user query on our search engine result pages, and onthe search result pages of our partners, as well as to the content of a particular website or webpage being viewed, or to userbehavior or characteristics. Such ads are clearly marked as paid advertising and are separate from our organic search resultsand non-advertising content.Most of our revenues are generated from performance‑based advertising, on a pay‑per‑click basis, with a smaller, butgrowing portion of revenues generated from brand advertising and video advertising, based on the number of impressionsdelivered. We actively monitor the ads we serve, both automatically and manually, in order to help ensure the relevance ofthe ads as well as compliance with applicable laws.Yandex.DirectYandex.Direct is our auction‑based advertising placement platform, which uses auction theory and relies on ourdistributed infrastructure to process millions of auctions every day. Yandex.Direct lets advertisers cost‑effectively deliverrelevant ads targeted at particular search queries or content on Yandex websites or third‑party websites in the Yandex adnetwork. Advertisers may use our automated tools, often with little or no assistance from us, to create performance‑based ads,bid on keywords that are likely to trigger the display of their ads, and set total spending budgets. Yandex.Direct features anautomated, online sign‑up process that enables advertisers to create and quickly launch their advertising campaigns.Advertisers may also work with our sales staff to design and implement more specialized or sophisticated advertisingcampaigns. Recently we enhanced Yandex.Direct with an opportunity to place display ads right in the system. We also offera Yandex.Direct mobile app to better facilitate advertisers’ access to our service to manage their advertising campaigns.Performance‑based ads on our desktop search engine results page (SERP) appear in one of several generalcategories: top of the page, appearing above the organic search results and featuring up to four paid links on desktop and upto three paid links on mobile; and bottom of the page, which appears either below the organic search results or the right-handblock located to the right of the organic search results, featuring up to nine paid links in total on desktop and up to one paidlink on mobile. In late 2017 we started to test the concept of Templates – our new ad placement formats tailored to a searchquery of a particular user. Templates allow advertisers to dynamically enrich their ads with additional elements, such asquick links, contact information, working hours, merchants’ ratings, images and others. We are constantly rolling out newtemplates and testing new formats. In April 2018, we introduced the change in our search engine results page layout. Insteadof our typical ad placement blocks, paid links are mixed with organic search links, whereby our algorithms choose whichformat is more appropriate and efficient in each particular situation in order to provide a more personalized SERP.Advertisers bid for the amount of traffic they want to purchase, instead of traditional bidding for a specific ad placementblock. Yandex.Direct continues using a Vickrey‑Clarke‑Groves (VCG) auction to serve ads on our SERP.36 Table of ContentsYandex Advertising NetworkOur Yandex Advertising Network partners include search websites, for which we provide search capabilities, as wellas contextual network partners, where we serve ads on websites, digital panels and other, based on user behavior orcharacteristics or website content. Among our partners are some of the largest Russian websites, including Mail.ru, Rambler,Bing, Avito.ru, Gismeteo.ru and others.We help third‑party website owners monetize their content while extending the reach of our advertisers. Through theYandex Advertising Network, our partners can deliver performance‑based ads on their search results pages or websites. Ouradvertising algorithms use our proprietary MatrixNet technology, which optimizes the click‑through rate on our networkthrough improved click prediction. We screen applicants for the Yandex Advertising Network and favor websites withhigh‑quality content and stable audiences to offer advertisers high quality traffic.Yandex’s video advertising network allows users to place full-screen videos, video ads on pages of websites and adswithin the video content available on over 200 advertising platforms, including desktop and mobile websites, mobile andSmart TV applications. Yandex’s video ad network covers over 37 million users. Yandex’s technologies enable users toprovide advertising to the targeted audience and offers analyses of its efficiency through different tools and instruments, suchas Brand Lift or video roll analysis.In 2018, Yandex started offering auction-based digital outdoor advertising opportunities in partnership with leadingoutdoor advertising players in Russia, Gallery and RussOutdoor. Outdoor ads are sold on a thousand opportunity-to-see(OTS) basis. We allow advertisers to run ad campaigns during certain periods of time with a real-time managementopportunity and deep analysis of efficiency. Yandex’s technologies also make it possible to estimate the audience coverage,and to divide it into segments in accordance with received anonymized data on interests and social-demographiccharacteristics, which can be also used for Yandex.Direct retargeting.In 2018, we also launched indoor advertising based on facial recognition technology provided by Addreality, whichdevelops software for centralized customer management on various display devices. Yandex provides relevant advertising tothe targeted audience, defined by facial recognition technology based on gender and approximate age of viewers. When adsare shown to different types of viewers, we charge advertisers only for ads shown to the targeted audience. The system usesonly anonymized data and does not make video recordings.Programmatic advertisingWe have developed a range of programmatic advertising products, which utilize real‑time bidding, or RTB,technologies to provide effective solutions to our publisher and advertiser partners. Our RTB ad exchange connects ourperformance‑based demand‑side platform (DSP) Yandex.Direct, to our display‑based DSP (called AWAPS) as well as tointegrated third-party DSPs. Our RTB ad exchange leverages the wealth of targeting data generated by our own DataManagement Platform, including Crypta, search and browsing history, etc. The RTB ad exchange is connected to many ofour Yandex Advertising Network partners who have chosen to display ads from our RTB ad exchange as well as or in lieu ofour regular Yandex.Direct ads. In addition, through ADFOX, we provide a supply‑side platform to our publisher partners.ADFOX is able to mediate in real‑time between programmatic brand ads from AWAPS, performance‑based ads fromYandex.Direct, ads from integrated third-party DSPs and the publisher’s own direct sales.Mobile AdvertisingWe offer our advertisers the ability to display ads on mobile versions of Yandex services, including Search, Zen, ourAdvertising Network partner websites, and in mobile applications, including Yandex Search App. Advertisers are able to setup their mobile bid as a coefficient of their desktop bid.Analytics toolsOur web analytics system, Yandex.Metrica, has the largest coverage among web analytics platforms in Russia. It isalso one of the three most popular web analytics system tools in the world. Yandex.Metrica combines near real-time reportingtools with intuitive heat maps and session replay. It features online-to-offline and cross-device tracking, easy-to-useattribution models, intuitive dashboards and fully customizable reports and segments. Yandex.Metrica filters out referralspam and bot traffic and lets site owners monitor ad blocker usage – all out-of-the-box. Yandex.Metrica provides37 Table of Contentsthe Logs API to export all raw data in order to accomplish complex tasks. Yandex.Metrica is available without any data capsor sampling, regardless of the traffic volume.We also provide users with AppMetrica, a universal app analytics and marketing platform for install attribution thatcan be used for tracking various kinds of ad campaigns, as well as for product analytics, crash reports and push campaigns.Yandex.Radar is our market analytics tool, which provides advertisers, webmasters, analysts, and other internetmarketing professionals with accurate statistics on the internet technology trends in different countries. Yandex.Radar'stechnology reports are based on Yandex.Metrica aggregated data and provides statistics on search market shares and browserusage, as well as traffic breakdown by operating system and device type. In November 2018, we introduced Yandex.Radar's“Top internet resources”, which represents the first ranking featuring cross-device audience data for the top 10,000 sitespopular among visitors from Russia.TaxiTaxiYandex.Taxi is our ride-sharing service, established in 2011. The service benefits from our robust expertise inmachine learning and our world-class navigation and mapping technologies, allowing us to increase efficiency and improvefleet utilization.We continue developing our ride-sharing service to provide the best user experience. Our forward dispatchtechnology allows us to better utilize the fleet, our smart pick-up points allow users to more efficiently manage travel timeand reduce fares, and our upfront pricing, which provides fixed pricing for the trip, is appreciated by users.On February 7, 2018, Yandex.Taxi and Uber completed the combination of their ride-sharing businesses in Russiaand neighboring countries, including Kazakhstan, Azerbaijan, Armenia, Belarus, Georgia, Kyrgyzstan and Moldova. Uberinvested $225 million and Yandex invested $100 million in cash in the combined company, and the combined business hadmore than $400 million in cash on hand at closing. The combined company was held approximately 59.3% by Yandex,36.9% by Uber, and 3.8% by employees of the group on a fully diluted basis. Tigran Khudaverdyan, who previously ledYandex.Taxi, became the CEO of the combined business. The combined company supervisory board consists of fourdesignees of Yandex and three designees of Uber.Consumers are now able to use both Yandex.Taxi and Uber apps, while the driver-side apps have been integrated,leading to shorter passenger wait times, increased driver utilization rates, and higher service reliability.In 2018 Yandex.Taxi more than doubled the number of countries where it operates, launching in Latvia, Uzbekistan,Estonia, Serbia, Lithuania, as well as in Ivory Coast, Finland and Israel, where we started operating under the new brandYango. As of December 31, 2018, the combined company operated in 16 countries.Food DeliveryIn late December 2017, Yandex acquired FoodFox. In the first quarter of 2018, as part of the transaction betweenYandex.Taxi and Uber, UberEATs was also contributed to the combined company. In February 2018, FoodFox andUberEATs started operating under the Yandex.EATs brand.Yandex.EATs has been growing rapidly. The service expanded from Moscow to a dozen cities in Russia, havingincreased the number of restaurants from 2,000 in early 2018 to over 8,000 at the end of 2018. In December 2018, the servicedelivered over 1 million orders. To better control service quality, we utilize own delivery for approximately 85% of allorders. Leveraging Yandex’s advanced technologies to optimize the routing and logistics, Yandex.EATs’ average deliverytime was 32 minutes in December 2018.We are also seeking to further strengthen our position in Food Tech. In October 2018, we completed the acquisitionof a majority stake in Food Party, one of Russia's largest meal kit subscription service providers.38 Table of ContentsSelf-Driving CarsIn late 2016 we started working on our driverless technologies, creating a fully-fledged autopilot functionality,which is described as Level 5. In May 2017 we unveiled our first prototype of a self-driving car, which incorporates Yandex’sworld-class technologies, such as mapping, real-time navigation, AI, machine learning and cloud technologies, allowing aself-driving car to make decisions in complex environments.We have been actively testing our autonomous vehicle and rapidly advanced from tests on Moscow streets and the780 kilometer federal highway from Moscow to Kazan, to the first autonomous ride-sharing services, which we provide intwo Russian cities, Innopolis and Skolkovo, right through the Yandex.Taxi app.In November 2018, we received a license to operate our self-driving car in the state of Nevada and demonstrated theadvanced capabilities of our autonomous vehicle at CES, Las Vegas, which took place in January 2019. We have also startedtesting our self-driving car on public roads in Tel Aviv, Israel, after we obtained the relevant permission from the IsraeliMinistry of Transportation and Road Safety in December 2018.E‑commerceLaunched in 2000, Yandex.Market is one of the most popular internet services in Russia, providing productinformation, price comparisons and user generated reviews of products and online retailers. We aggregate price, product andavailability information from thousands of active online and “brick and mortar” retailers, and currently feature over160 million offerings in approximately 3,000 product categories from over 21,000 domestic and international merchants.Similar to Yandex.Direct, Yandex.Market is mainly priced on a cost‑per‑click (CPC) basis and recognizes revenue only whena user clicks on product offerings placed by merchants on Yandex.Market.In April 2018, Yandex and Sberbank of Russia completed the formation of a joint venture based on Yandex.Marketto further develop domestic and cross-border e-commerce marketplaces, in addition to comparison shopping. Sberbankinvested 30 billion rubles (approximately $500 million) into the new joint venture. At closing, the joint venture was valuedat 60 billion rubles (approximately $1.0 billion). The two partners own equal stakes in the joint venture. Ten percent of theJV’s shares are reserved for current and future equity awards for management and employees of Yandex.Market. MaximGrishakov, Chief Executive Officer of Yandex.Market, became the head the new joint venture and also joined the board ofdirectors, which also includes two representatives from Yandex, two representatives from Sberbank and two independentdirectors.Starting April 27, 2018, we deconsolidated Yandex.Market from Yandex’s consolidated financial results and werecord our share of Yandex.Market’s financial results under the equity method of accounting within the other (loss)/income,net line in the consolidated statements of income.In May 2018, Yandex.Market launched in beta the marketplace Beru, allowing users to make purchases frommultiple categories on a single platform and rely on smooth delivery and logistics. In October 2018, Beru came out of beta,featuring 15 shopping categories and 100,000 SKUs. In order to enhance the user shopping experience and provide full-fledged services, we introduced the first Beru-operated fulfillment center in Rostov-on-Don. In addition Beru leases facilitiesof third-party fulfilment centers. Beru is monetized on a commission basis (as a percentage of gross merchandise value, orGMV) as well as through direct product sales.In November 2018, Yandex.Market announced beta testing of Bringly, a cross-border marketplace that offers over 4million products from the world’s most popular brands from China, South Korea, Turkey, Germany and Great Britain. Bringlyuses third-party fulfillment centers for order processing. Bringly is monetized on a commission basis (as a percentage ofGMV).ClassifiedsYandex’s Classifieds business unit includes Auto.ru, Yandex.Realty and Yandex.Jobs.Auto.ru is our classifieds platform for used and new cars, commercial vehicles and spare parts. The quality of thecars advertised on our platform is in our key focus and we put great efforts into providing users with the means to find theexact car they are looking for. Auto.ru provides users with listings and vehicle history reports, which include39 Table of Contentsinformation from official databases as well as our internal and third-party data. Our auto classifieds platform also aggregates75,000 auto service centers available in Russia, allowing users to make an appointment at an appropriate service center. Inaddition, Auto.ru continues developing spare parts classifieds, which were launched in 2016.Auto.ru continues to hold a leading position in its established markets. According to a third-party advertisingagency, in December 2018, Auto.ru generated 76% of all calls from auto classifieds to dealers in Moscow and 66% in St.Petersburg. We also continue growing our market share in the regions. Successful integration of Hearst Shkulev Media, thelargest media company in the Urals with 30 auto classifieds domains in the regions, and the deal with 24auto.ru, the leadingauto classified in Krasnoyarsk region, have also strengthened our regional businesses.We monetize Auto.ru through advertising, vehicle history reports, value added services (VAS) and listing fees fordealers and certain individuals. In 2018, we also introduced alternative way of new car listings monetization, chargingdealers for a valid call from users.Yandex.Realty is our real estate classifieds platform for private individuals and realtors. The service provideslistings for both the sale and rental of apartments, rooms, houses and commercial property. We also offer the opportunity toplace listings for apartments in newly‑built or under‑construction apartment complexes in several cities, including Moscow,St. Petersburg and Ekaterinburg. Yandex.Realty monetizes listings for new apartments, charging realtors for valid calls fromclients.Yandex.Jobs is our service for job seekers, which is mainly focused on blue collar and service industry jobs. Theservice is available as a mobile app for Android and iOS and allows users to call the potential employer directly from the app.Yandex.Jobs aggregates vacancies from a number of partners.Media ServicesMedia Services include our entertainment services – Yandex.Music, KinoPoisk, Yandex.Afisha and Yandex.TVProgram – with a monthly audience of more than 50 million people, a subscription service (Yandex.Plus), and a productioncenter (Yandex.Studio). Based on Yandex’s recommendation technologies and professional content, Media Services offer itsusers various interesting entertainment options. We monetize Media Services through online advertising and transactionrevenues, including music and video content subscriptions as well as event tickets sales. Our Media Services are availableacross different platforms, including Yandex.Station, Yandex.Drive and Yandex.Auto.Media Services include the following:·Yandex.Music is our music streaming service, offering users millions of tracks and facilitating new musicdiscovery with its recommendation tools and Radio feature. The most popular feature of Yandex Music is thesmart playlist feed, which we launched in December 2017. Utilizing Yandex’s neural networks technologies, thesmart playlist feed is updated daily for each user according to their tastes and preferences. Yandex.Music has afree web version and a mobile app and is offered as both Yandex’s own service and as a white label product frommobile operators. In 2018, Yandex.Music also expanded to other countries, including Israel, Armenia,Uzbekistan and other CIS countries.·KinoPoisk is the largest Russian language source for information about movies, TV-shows, celebrity contentand entertainment news, providing users with critic and user reviews and ratings, personalizedrecommendations, local movie showtimes, ticketing, and many other services. In 2018 KinoPoisk also launchedits own video platform, allowing users to purchase and watch by subscription over 7,000 movies and TV- showsonline, including exclusive content, provided by leading international production companies. In addition tovideo offerings through the Yandex.Plus subscription service, KinoPoisk in partnership with Amediateka, anexclusive distributor of HBO content in Russia, offers a premium subscription for the video content available onthis platform. Further expansion of our licensed content library and distribution of video platform is one of ourstrategic focuses.·Yandex.Afisha (“playbill”) provides an opportunity to buy tickets to cinemas, theaters and concerts online. Itincorporates personalized recommendations and is currently active in over 190 cities across Russia, as well asseveral cities in Belarus and Kazakhstan.40 Table of Contents·Yandex.TV Program is a service providing users with an up to date schedule of broadcast, cable and digital TVchannels as well as an option to view certain TV channels online.·Yandex Plus is our subscription service, which we launched in May 2018. The service provides subscribers witha high value bundle of multiple Yandex services, including unlimited music streaming on Yandex.Music, ad-free movies and TV-shows on KinoPoisk, discounts for taxi and car-sharing rides, free delivery for Berucustomers as well as other benefits from the Yandex ecosystem We record Yandex.Plus’ revenues in MediaServices segment, while the service offers a bundle of various services across our universe. Incremental revenuesgenerated by Yandex’s services through Yandex.Plus are reported in the relevant segments.·Yandex.Studio is our own production center, which we launched in 2018 to create video and music content, co-invest in different projects with other production studios and provide marketing support to movies releases. Wehave already participated in co-production of several Russian movies. We believe the service is strategicallyimportant in a world where video consumption is rapidly shifting online and plan to expand our participation insuch projects.Other Bets and ExperimentsAside from our core business and our separate business units, we have a number of services and products, includingexperimental ones, that represent new business models and have good prospects for future development, or are experimentalin nature. We believe that some of them have a good chance of transforming into separate business units in the future.ZenYandex.Zen is a personal recommendation service. Analyzing what a particular user consumes on the internet, Zenselects news, videos, images, blog entries, and other internet content that may be relevant to the user. The service usesYandex's global search index and AI technology.Zen continues developing its publisher content platform, mainly focusing on tools for publishers, helping increaseuser engagement and the quality of content. In June 2018, Zen offered an opportunity to create short posts and videos, inaddition to articles and narratives (set of screens combining text, video, images and GIFs that can be swiped through), andallowed users to leave comments. In October 2018, the service launched the partner program, aimed at increasing share ofhigh quality content created on the Zen platform. In December 2018, Zen’s publisher content platform generated over 50% ofZen’s feed content.Yandex.Zen is available on Yandex Home Page, Yandex Search App, Yandex Browser, Yandex Launcher and as astandalone app on Android and iOS. In late December 2018, Zen also became available to users of the Opera desktop browserin Russia.Yandex.CloudIn September 2018, we introduced our public cloud platform, Yandex.Cloud, allowing companies to host anddevelop their apps and services, and store and manage their data by leveraging Yandex’s advanced technologies andinfrastructure. At launch, Yandex.Cloud was available on request and offered such services as scalable virtual infrastructurewith multiple management options, automated services for the labor-intensive management tasks of popular databasessystems and AI-based Yandex services (speech recognition and synthesis as well as machine translation). In December 2018,we rolled out the Yandex.Cloud platform for public use.As of February 2019, we had 6,000 businesses and individuals actively using our platform, including more than 500paying customers. We extended our platform with public preview versions of a network load balancer, Redis-based andMySQL-based managed services, Yandex Instance Groups and DataLens, our business intelligence tool. We continuedeveloping our cloud platform to provide users with full-fledged cloud offerings. All Yandex.Cloud services are available onthe servers located in Russia.41 Table of ContentsYandex.DriveIn February 2018, we launched our free-floating car-sharing service, Yandex.Drive, providing users with self-servicevehicles, which can be reserved by the minute, the hour or by the day through the mobile app and which are available in anypermitted parking places across the cities, in the airports and shopping malls. Offering on-demand access to 7,500 cars inMoscow and 850 cars in St. Petersburg (as of February 2019),Yandex.Drive operates the leading car-sharing network in theRussian market, the second largest in Europe and third largest in the world. Recently, we also introduced the cargo segmentof our car-sharing service. As of February 28, 2019, Yandex.Drive had completed approximately 12 million rides.We equip Yandex.Drive’s car fleet with Yandex.Auto, our in-car infotainment system. Yandex.Auto provides anumber of Yandex’s services, including Yandex.Navigator, Yandex.Music and other. Being powered by our voice-controlledassistant Alice, Yandex.Auto allows the user to personalize the service. It recognizes each user, greeting by name, loads theirusual routes, plays their favorite music and warns about traffic or weather conditions.Yandex.Drive usage is billed on a per minute, per hour and daily basis at rates that include fuel, parking, insuranceand other costs associated with car ownership. In addition, Yandex provides dynamic pricing, which integrates trafficconditions, customer demand and other factors at the time of reservation. Recently we became the first car-sharing service inour markets to offer a fixed-price tariff, based on final destination and real-time traffic.Geolocation ServicesIntegrating Yandex’s advanced technologies, including mapping, cartography, navigation, AI and machinelearning, our Geolocation Services provide broad range of services across Russia, CIS countries and Turkey with the keyfocus on the automotive market, development of logistics and routing solutions as well as advertising products for offline-businesses. Our Geolocation Services include Yandex.Maps, Yandex.Navigator, our infotainment system for connected cars,Yandex.Auto, as well as Yandex.Routing, our technological platform for businesses, which provide services and products intransportation and logistics industries. We monetize Geolocation Services through online advertising, licensing andtransaction services, as well as sales of our Yandex.Auto hardware device.Yandex.Maps provide high‑quality, detailed maps of Russia, its neighboring countries, Turkey and other countrieswhere we operate our ride-sharing service. We offer our users panoramic views, navigation across the cities enriched withaugmented reality, public transportation routes, driving directions with voice controls and turn-by-turn navigation. Wecontinue to develop Yandex.Maps to integrate new features, such as hotel bookings, food ordering, ratings and reviews ofrestaurants as well as their menus.We use our technology and licenses to create and edit maps from raw data, including satellite images, GPScoordinates and live user feedback. Yandex.Maps is also available via application programming interfaces, or APIs, whichallow developers to embed and use our interactive maps in third‑party websites and applications, as well as to add extralayers of information — for example, to offer a map showing the location of a restaurant or a hotel.We also offer Yandex.Navigator, our mobile application, empowered by our AI assistant Alice, that providesturn‑by‑turn navigation, incorporates a voice input function, speed limit warnings, parking information, natural guidancefeatures as reference points along a route and voice notifications for accidents or road works etc. It is one of Yandex’s mostpopular mobile apps in terms of usage. In December 2018, we also started offering transaction services throughYandex.Navigator, allowing users to pay for gas at gas stations directly from the app.Our map-based apps allow offline businesses to place ads in native formats (adopted for different scenarios on themap). These formats target potential clients of those businesses while they are using Yandex.Maps and/or Navigator.Yandex.Auto is our voice-activated in-car infotainment system, which offers Yandex’s best-in-class mapping andnavigation, music streaming, weather information and other services. We work with car manufacturers to equip cars withYandex.Auto. Yandex.Auto is already available in some models of Toyota, Nissan, Honda, Renault, Chery and others on theRussian market. We use mainly a license-based model to monetize Yandex.Auto. In late 2018, we also launched an on-boardtablet for connected cars, equipped with the Yandex.Auto infotainment system.42 Table of ContentsYandex.Routing is our B2B routing platform, aimed at providing businesses in the transportation and logisticssegments with routing-based solutions. Offering optimal and transparent routes for delivery and logistics, our service helpscompanies to minimize the time and fuel spent.Yandex.HealthYandex.Health is our service that allows users to receive 24/7 online consultations with doctors. Moreover, theYandex.Health web-site provides users with articles related to health and diseases as well as reference information onpharmaceutical products. Yandex.Health is available as a standalone website and mobile app.Yandex Data FactoryYandex Data Factory (YDF) is aimed at developing big data analytics solutions for companies in finance, retail,telecom, manufacturing, healthcare and other industries. Our YDF team consists of machine learning and data analyticsexperts who use data science to improve businesses’ operations, revenues and profitability. In 2018 Yandex Data factorybecame a part of Search and Portal.Our TechnologyYandex is a technology company that is a pioneer in machine learning, artificial intelligence and neural networks.We believe this expertise uniquely positions us in the global technology arena and allows us to innovate in our local marketsand continuously to improve our products and services based on complex, unique technologies that are not easily replicated.Yandex distributed infrastructureWe seek to ensure the speed and reliability of our services regardless of the user’s location by operating our ownContent Delivery Network (CDN) in points of presence in major cities throughout Russia and other countries in which weoperate. This network allows us to support reliable 24/7 operations, including server‑based computations, research anddevelopment work, and user and advertiser services. We use proprietary computer architecture to link these clusters ofservers, as well as proprietary computational software that operates across these distributed servers, including software thatenables us to deploy and monitor software across our systems. This allows us to use relatively inexpensive off‑the‑shelfservers as the foundation of our robust and effective systems for redundant, distributed data storage, retrieval and distributedcalculations. Geographic distribution of our servers decreases the cost of internet usage for our users, increases the accessspeed for our services and increases the stability and dependability of our service offerings. This structure provides redundantfail‑safe capacity such that the failure of a single facility would not cause our websites to stop functioning.AdvertisersOur advertisers include individuals and small, medium and large businesses throughout the countries in which weoperate, as well as large multinationals. Small and medium‑size enterprises purchase the bulk of our performance‑basedadvertising. No particular advertiser accounted for more than 1.1% of our total revenues in 2016, 2017 or 2018.Sales and Advertiser SupportWe have an extensive sales and support infrastructure, with sales offices in a number of cities in Russia, as well asLucerne, Switzerland; Newburyport, Massachusetts, USA; Istanbul, Turkey; Shanghai, China; and Almaty, Kazakhstan. In2018 we actively increased our presence across the Russian regions by opening 10 regional sales offices.The substantial majority of our advertisers use our automated Yandex.Direct service to establish accounts, createads, target users and launch and manage their advertising campaigns. Our largest advertising clients are served by a dedicatedsales team. These companies may request strategic support services, which include a dedicated accounts team, to help themset up and manage their campaigns. Our sales team specialists are able to help advertisers with tasks such as selectingrelevant keywords, creating effective ads and audience targeting, thus measuring and improving advertisers’ return oninvestment.43 Table of ContentsThe Yandex Advertising Network follows a similar model. Most of the websites in the network submit theirapplications through Yandex.Direct’s automated partner interface. Our direct sales force focuses on building relationshipswith our largest partners to help them get the most out of their relationship with us. We also have relationships with differentadvertising sales agencies placing online advertising.MarketingWe engage in significant marketing efforts directed first and foremost at internet users, as well as advertisingagencies, advertisers and webmasters. Our marketing efforts are focused above all on delivering an optimal user experiencewith every Yandex product and service. We believe that satisfied users are the best and most credible advocates for ourservices. In order to improve user satisfaction and loyalty and to continue to use our products and services as marketing tools,we constantly experiment with and improve the design, technology and interface of these products and services. Althoughwe believe that word of mouth is the best advertising strategy, we also view advertising campaigns in online and traditionalmedia as an important element of our efforts to promote our brand, as well as key services. We also invest heavily into ourseparate business units, including Taxi, Classifieds and Media Services, as well as Other Bets and Experiments to growcustomer awareness, increase user base, increase usage in our existing markets and penetrate into other geographies.CompetitionWe operate in a market characterized by rapid commercial and technological change, and we face significantcompetition in many aspects of our business, including search, ride-sharing, food delivery, classifieds, media services, cloudand other. We currently operate principally in Russia, Belarus, Kazakhstan, Uzbekistan and Turkey.We face competition from global players such as Google and local players such as Mail.ru Group, both of whichoffer proprietary search and other services.We consider Google to be our primary competitor. In addition to its search solutions, including voice search,Google offers online advertising, information and other search services similar to ours, including services similar toYandex.Direct. We expect that Google will continue to use its brand recognition, financial and engineering resources tocompete with us. In 2013 we entered into a partnership with Mail.ru Group pursuant to which Mail.ru Group uses theYandex.Direct advertising system to power paid search results on its properties. Mail.ru Group offers many communicationservices, including Russia’s most popular webmail, social networking and messenger services. We compete with Mail.ru foradvertising budgets that flow to Mail.ru’s social networks.The following table presents a comparison of Russian search market share, according to Yandex.Radar (a searchtraffic and browser usage analytics tool based on Yandex.Metrica data), based on search traffic generated: 2016 2017 2018 Yandex 56.0% 55.1% 56.3%Google 37.1% 39.6% 40.0%Mail.ru 4.1% 3.4% 2.2%We also face competition from the Russian and international websites of Microsoft and other established companiesand start‑ups that are developing search and online advertising technologies. We also compete with online advertisingnetworks, such as Google and MyTarget, which direct online advertising on a number of popular Russian websites.We believe that social networking sites, such as Facebook, Twitter, and Mail.ru Group’s Vkontakte, Odnoklassnikiand My World services, are becoming significant competitors for online ad budgets. These sites derive a growing portion oftheir revenues from online advertising, and are experimenting with innovative ways of monetizing user traffic. In light oftheir very large audiences and the significant amount of proprietary information they can access and analyze their users’needs, interests and habits, we believe that they may be able to offer highly targeted advertising which could create increasedcompetition for us. The popularity of such sites may also reflect a growing shift in the way in which people find information,get answers and buy products, which may result in increased competition for users.44 Table of ContentsIn certain vertical areas, in particular those in which our business units operate, we compete with niche services,including e‑commerce, video search, online news aggregators and dictionaries, real estate and automobile services, andspecialized search apps for mobile devices. Our Yandex.Taxi service competes with Vezet, Citymobil and Gett as well as anumber of regional offline players across Russia. In addition, although Yandex.Taxi and Uber operate as a joint venture inRussia and neighboring countries, our Taxi business may also compete with Uber in jurisdictions outside the scope of ourjoint venture territory. Our e‑commerce services face competition from a number of local players acting as both merchantsand marketplaces, including Avito, which acts as a marketplace for merchants and private individuals, Ozon, Wildberries anda number of international players popular with Russian users, especially those from China such as AliExpress. Our Classifiedsservices compete with Avito in most areas as well as a number of players present in specific industries such as CIAN in realestate and Drom.ru in automobile sales. On the Media Services front, our KinoPoisk service competes with ivi.ru, okko.ru andother online cinemas, while Yandex.Music competes with VK Music, Boom.ru and Apple Music. Our food delivery businessYandex.EATs competes with Delivery Club, owned by Mail.ru. Our car-sharing service competes with Delimobil, BelkaCaras well as a number of other players operating in Moscow and St. Petersburg. Our public cloud platform competes mainlywith international cloud services, such as Microsoft Azur and Amazon Web Services (AWS), as well as with other localplayers.We also face competition from other search and service providers in establishing relationships with devicemanufacturers, such as mobile and tablet computer makers, and access providers, such as internet service providers. Suchcompanies have a significant degree of control over the distribution of products and services, including by offering orestablishing exclusive arrangements for “default” search features or other services and bundling them with their offerings.Our users typically have direct relationships with these companies, and may be influenced by economic or other factors indeciding which search or other services to use.Science and EducationOur team of specialists represents many scientific disciplines, including mathematics, data analysis, programmingand linguistics. Besides working on products and technologies at Yandex, some of our experts teach, lecture and trainstudents and young specialists.We also run our own educational programs. The Yandex School of Data Analysis, offering free courses forundergraduates and graduate students, has been running since 2007. The school trains specialists in data processing, dataanalysis and fact extraction in 5 Russian cities and in Minsk, Belarus. The school’s graduates create a global alumni networkadvancing machine learning in academia and the private IT sector. Yandex also has schools for project managers, userinterface developers, designers and other specialists in IT. In October 2018 we launched Y-Data, a branch of Yandex Schoolof Data Analysis in partnership with Tel Aviv University, Israel. It offers an advanced one-year master’s degree program inmachine learning.In 2016 with the support of regional governments and ministries overseeing education and IT, we launched a projectto teach programming to school children called Yandex.Lyceum which is now offered in 54 cities in Russia and 4 cities inKazakhstan.We value education and are glad to open new educational opportunities supported with our technologies. InSeptember 2018, we launched Yandeх.Schoolbook, an online service for primary school teachers for Russian language andmathematics with individual educational plans for each student. As of February 2019, Yandeх.Schoolbook was used in14,000 classrooms across more than 300,000 students. The content of programs is based on curricula used in public schoolsand meets government requirements for primary general education.In October 2017, in partnership with the Higher School of Economics (HSE) we introduced a service calledYandex.Atlas, which provides students and their parents with information about the pass rates of Russian universities inprevious years. The project is aimed to help children and their parents with choosing an appropriate university in accordancewith their requirements and opportunities.In September 2018, we launched Yandex.Tutor, an online study tool for the Russian Unified State Exam (USE). Thetool allows USE students to study, view exam materials, solve practice problems and take practice tests. As of today,Yandex.Tutor has about 200,000 monthly active users.45 Table of ContentsYandex and HSE run the Faculty of Computer Science, for which we created an educational program. We alsopartner with other leading research centers and universities, including the Moscow Institute of Physics and Technology,Saint Petersburg State University and the Belarusian State University. We sponsor a number of school contests in computerprogramming, mathematics and linguistics, and run a programming competition, Yandex.Algorithm, on an annual basischallenging competitive coders and advancing the machine learning community across the world.In addition to educational services, Yandex and Coursera, the online education platform, launched severalSpecializations and Courses written by Yandex’s employees for people who are eager to expand their knowledge in a certainfield of IT. Since 2014, in partnership with top Russian universities, we have offered 30 online courses and increased theaudience to more than 300,000 students.To reward achievements in academics and research as well as to support undergraduate and postgraduate students incomputer science and information technology at HSE, in 2014 we established the Ilya Segalovich Scholarship, in memory ofone of our co-founders. The scholarship committee includes faculty staff members and lead developers from Yandex. Since2014, this scholarship has been awarded to over 60 students.Russia’s largest technology conference, Yet Another Conference, which is organized by Yandex every year, gathersindustry experts from all over the world. We also run scientific conferences on machine learning, as well as seminars, lectures,workshops and master classes for those who wish to make or have already made a career in the technology industry.Employees and Workplace CultureWe place a high value on technological innovation and compete aggressively for talent. We strive to hire the bestcomputer scientists and engineers, as well as talented sales, marketing, financial and administrative staff. We seek to create adynamic, 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 7,445 at December 31, 2017 to 8,767 at December 31, 2018. As of December 31,2018, we had 4,582 employees related to the product development cost category, 3,712 employees related to sales, generaland administration, and 473 employees related to cost of revenues. Intellectual PropertyWe rely principally on a combination of trademark, copyright, related rights, patent and trade secret laws in Russiaand other jurisdictions as well as confidentiality procedures and contractual provisions to protect our proprietary technologyand our brand. We enter into confidentiality and patent assignment agreements with our employees and consultants andconfidentiality agreements with other third parties, and we rigorously control access to our proprietary technology.Our patent department is responsible for developing and implementing our group‑wide IP protection strategy inselected jurisdictions. We have filed more than 650 patent applications to date, of which more than 250 have resulted inissued patents. We also have internal procedures for invention disclosures, patent filings, patent acquisitions,freedom‑to‑operate analyses and patentability searches.We have three registered well‑known trademarks in Russia for certain services (classes 35, 38 and 42 under theInternational Classification of Goods and Services) on the basis of intensive use. Under Russian law, the protection grantedto well‑known trademarks is extended to non‑homogeneous goods and services if customers associate specific use of thedesignation by third parties with the rights holder and the rights holder’s legitimate interests are infringed. Yandex is also aregistered trademark in Ukraine, the United States, the European Union and other countries under the Madrid Agreement andProtocol. We have other registered trademarks in Russia and abroad. We continue to file applications to register newtrademarks and widen the country coverage of our existing trademarks. Most of the software used by our services ordistributed by Yandex to our users is either developed by our employees or by independent contractors who transfer all rightsto Yandex.We enter into written license and use arrangements with providers of a significant portion of the content we offer.Our agreements with most of the news content providers in Russia are on “content‑for‑traffic” terms, pursuant to which46 Table of Contentswe obtain access to news content for free in consideration of the user traffic that accesses the content providers’ websitesthrough our search engine. We license or purchase other additional content. We do not knowingly include content on ourwebsites that we do not have the legal right to include.We do not own the content generated or posted by users on our websites. As with all websites that hostuser‑generated content, we are potentially liable for any intellectual property infringement committed by the creator of thatcontent. If we receive a complaint from a party that user‑generated content on our websites infringes that party’s copyright orrelated rights, we examine the content in question. If the complaint is substantiate, we remove the content and notify theparty that has posted the content (if their contact details are available). If the user evidences that the content does not violatethird parties’ intellectual property rights, it is possible to recover the deleted content. In the event of any court decision in thematter, we comply with the decision.FacilitiesOur principal operating subsidiary currently leases a total of approximately 61,000 square meters in a singlelocation in central Moscow that serves as our group’s headquarters. We also lease additional office space of approximately27,000 square meters in a business center in central Moscow, which houses some of our divisions. We or our operatingsubsidiaries also lease or own office space in a number of other cities in Russia. We also lease offices in Newburyport,Massachusetts, USA; Istanbul, Turkey; Lucerne, Switzerland; Minsk, Belarus; Berlin, Germany; Schiphol, The Netherlands;Shanghai, China; Almaty, Kazakhstan, and other locations. We operate data centers in Moscow and other regions of Russia,as well as in Finland. We have points of presence in a number of cities in Russia and elsewhere. Taking into account theprojected demand for our services, we continuously evaluate the capacity and locations of our data centers to determine themost cost‑effective manner of delivering reliable services to our users.In December 2018, we acquired a property site at 15 Kosygina Street, Moscow, Russia for our new Moscowheadquarters. The acquisition cost of the property site amounted to RUB 9.7 billion (around $145 million, based on theexchange rate as of the transaction date) exclusive of 18% VAT.Government RegulationWe are subject to an extensive and constantly evolving legal framework in Russia and other jurisdictions applicableto our businesses. As explained in more detail below, there are also a significant number of additional laws and regulationscurrently being debated and considered for adoption in Russia and other countries where we operate which, in the event ofadoption, might require us to take significant steps to modify our operating, governance or ownership structure. Due tochanging interpretations of laws and regulations, we could also be subject to laws and regulations to which we are notcurrently subject and which could materially affect our operations. We have not summarized laws and regulations to whichwe do not believe we are currently subject. See also “Risk Factors –If the Russian government were to expand limitations onforeign ownership to our business, it could materially adversely affect our group and the value of our Class A shares”.Advertising RegulationThe principal Russian law governing advertising, including online advertising, is the Federal Law No. 38-FZ “OnAdvertising,” dated March 13, 2006 (as amended) (the “Russian Advertising Law”). The Russian Advertising Law prohibitsadvertisements for certain regulated products and services without the required certification, licensing or approval. Forexample, advertisements for products such as pharmaceuticals and medical equipment, food supplements and infant food,financial instruments or securities and financial services as well as incentive sweepstakes and advertisements aimed at minorsand some other products and services must comply with specific requirements and must in certain cases be accompanied bycertain required disclaimers. Additionally, Russian law contains certain prohibitions regarding the advertising of alcohol,tobacco and medical services. In addition, the distribution of advertisements over the internet (for example, by email) mayrequire the prior express consent of recipients. In some cases, violation of these Russian laws can lead to civil action by thirdparties who suffer damages, or administrative penalties imposed by FAS. Further amendments to legislation regulatingadvertising may impact our ability to provide some of our services or limit the type of advertising we may offer.We seek to comply with all advertising laws and regulations. At the same time, the application of the advertisinglaws, in particular in relation to products or services requiring certification, licensing or approval, can be ambiguous and47 Table of Contentsinconsistent. The application of these laws in an unanticipated manner, or the failure of our compliance efforts, may exposeus to substantial liability as distributors of advertising and may restrict our ability to provide some of our services. Other lawsor interpretations of laws, including those of foreign jurisdictions, may also restrict advertising and negatively impact ourbusiness. For example, some French courts have interpreted French trademark laws in ways that would limit the ability ofcompetitors to advertise in connection with generic keywords. Adoption of similar interpretations by Russian or othernational courts may adversely affect our business. In addition, Russian law does not specifically regulate behavioraltargeting in relation to advertising, which is a standard tool widely used in the online business. Any future interpretation ofRussian law affecting the regulation of behavioral targeting could have a negative impact on our business.Recently, draft legislation has been discussed which, if adopted, would increase governmental control over theonline advertisement sector significantly. It would inter alia oblige owners of online advertisements systems to form self-regulatory organizations and to incur substantial expenses in storing all distributed advertising materials and submittingregular reports to the self-regulatory organizations. Adoption of this law could lead to competitive gains for other types ofadvertising distributors, e.g. TV channels, who may also distribute advertisements in the Internet but would not have tocomply with such requirements. If the proposed regulation is adopted, the failure to comply with it could lead to liability foradvertisement distributors and even to blocking the websites where the advertisements are distributed.Intellectual Property RegulationIn principle, the acquisition, protection and enforcement of intellectual property rights in Russia are addressed inline with international standards. In particular, literary, artistic and scientific works are subject to copyright protectionwithout any registration and enjoy legal protection simply by virtue of being created in an objective form perceivable bythird parties.Mandatory registration with Rospatent is required for “hard IP” such as trademarks and patents (available in Russiafor inventions, utility models and industrial designs) in order for the rights holder to acquire exclusive rights. Trademarksregistered abroad under the Madrid Agreement and/or Madrid Protocol have the same legal protection in Russia as locallyregistered trademarks. Under Russian law, we have exclusive rights to trade secrets (know-how) only if we have complied with a legalrequirement to introduce reasonable measures to maintain confidentiality of our trade secrets, which measures may beburdensome and formalistic to implement. As we rely extensively in our operations on the protection afforded to tradesecrets, we have implemented a set of measures required by Russian law in order to protect these trade secrets (know-how).However, there is a risk that our measures will be deemed insufficient and, as a result, we will fail to acquire rights to thesetrade secrets under Russian law.One of the known problems and risks in Russian business practice relates to acquiring exclusive rights to works forhire and patentable results from employees. As a rule, the exclusive rights to works for hire and patentable results areassigned to the employer if the intellectual property is made during the course of employment. However, there are oftenuncertainties and disputes around the scope of such assignments. In case of employment disputes, Russian courts are ofteninclined to follow an overly formalistic approach and may take a pro-employee position in the event of uncertainty in adispute of this nature.Nonetheless, under Russian law, subject to the risks outlined above, we are deemed to have acquired copyrightsand rights to file patent applications with respect to works for hire and patentable results created by our employees during thecourse of their employment with us and within the scope of their job duties, and have the exclusive rights to their further useand disposal subject to compliance with the requirements of the Civil Code of Russia.Liability of Online Service ProvidersLaws relating to the liability of online service providers for the activities of their users and other third parties arestill being developed in Russia and certain other countries in which we operate.Russian law contains provisions aimed at establishing a framework for limitation of liability of online serviceproviders for the information communicated by third parties over such providers’ networks. Substantial ambiguity remains inRussian law around the scope and protection of such limitation of liability. In particular, there is little clarity on the48 Table of Contentslimitation of liability with respect to types of online service providers other than providers transmitting information andhosting providers (such as those caching data or providing information location tools). Because the law has not been givendetailed binding interpretation, our exposure to liability will depend significantly on the interpretation of these provisionsby the courts and officials.The Russian Civil Code also imposes strict liability for infringement of intellectual property rights if suchinfringement is committed in connection with business activities. It is unclear how these provisions apply to online serviceproviders.Russian law establishes a system for the blocking of websites on the internet that make available specific categoriesof illegal information related to child pornography, suicide or drug use as well as other restricted information. Current lawalso permits the blocking of websites for violation of data protection, copyright and related rights. The procedure for deletingsuch information is complex and strictly enforced and the failure to follow such procedures may lead to the blocking of theapplicable website by all Russian internet service providers and telecommunication service operators.Other legislation is currently in place in Russia that allows blocking of websites that contain extremist information(including containing calls for mass rioting, extremist activity and participation in mass assemblies conducted in violation ofestablished procedure) at the request of certain governmental authorities without prior notification. Only a subsequent post-blocking notification to the relevant website owner or hosting provider is required. The categories of illegal information towhich access can be restricted may be interpreted broadly or be expanded by government authorities depending oncircumstances. We may find ourselves subject to such blocking if government authorities interpret information provided byour services as violating these rules and we may be unable to prevent this blocking of our services.Russian law also restricts the circulation of certain identified categories of publicly available and distributedinformation that may be harmful for minors. In particular, there is a requirement to take administrative and technical measuresto prevent dissemination of restricted information. In addition, the circulation of information products must be accompaniedby a relevant mark identifying the age restriction category of information.This legislation, as well any similar additional regulations, and the interpretation of such legislation andregulations, may impose new requirements on us and our operations and lead to material legal liability, which can bedifficult to foresee or limit. See “Risk Factors—We may be held liable for information or content displayed on, retrieved byor linked to our websites and mobile applications, or distributed by our users; or we may be required to block certain contentor access to our websites could be restricted; any of which could harm our reputation and business” Laws and Regulations Applicable to Yandex.MoneyOur Yandex.Money joint venture with Sberbank, in which we hold an approximately 25% interest, is subject tolaws and regulations specifically applicable to electronic payments and encrypted information. Under the regulationsgoverning electronic payment systems, payments with digital money fall into the sphere of banking activities, and suchpayments are regarded as a special transaction entered into without the need to open an account. Such transactions, however,have to be performed by a credit organization supervised by the Central Bank of Russia. To comply with this law, ourYandex.Money joint venture established a non-banking credit organization subsidiary, which obtained the required licensefrom the Central Bank of Russia.Under Russian law, a variety of activities related to encryption require a special permit (license) granted by theFederal Security Service (the “FSS”) subject to the applicant’s continued compliance with a number of licensingrequirements, including the requirement to use only certified encryption means and equipment and to ensure timelyextension of such certification when its terms expire.Our Yandex.Money joint venture with Sberbank uses encryption algorithms, as permitted by the applicable license,for the protection of transfers performed by its customers and may be required to obtain additional licenses for their use. Therequirements for the grant and maintenance of licenses for the use of encryption algorithms are very broad and unclear,leaving the regulator with much discretion in applying and enforcing the applicable laws. See also “Risk Factors— Becausethe range of the services we provide is increasing and the legal framework governing the operations in our markets isevolving, we may be required to obtain additional licenses, permits or registrations or comply with other49 Table of Contentsrequirements, which may be costly or may limit our flexibility to run our business”.As a holder of an encryption license, Yandex.Money joint venture is subject to the strategic enterprises law, whichrestricts the acquisition of voting shares or participation interests and establishment of control by foreign legal entities andindividuals, as well as states, international organizations and entities controlled by them, with respect to business entitieswith strategic importance. See also “Risk Factors— If the Russian government were to apply existing limitations on foreignownership to our business, or specifically impose limitations on foreign ownership of internet businesses in Russia, it couldmaterially adversely affect our group and the value of our Class A shares”.While we are currently in compliance with the Strategic Companies Law, the Strategic Companies Law may preventour Yandex.Money joint venture from pursuing strategic transactions which could further grow the Yandex.Money business.Mass Media RegulationRussian law requires certain parties that disseminate news and similar mass communications and information to beregistered with the appropriate Russian governmental body, Roscomnadzor, and to comply with restrictions regarding thedistributed content. The law currently permits electronic network publications (websites) to register as mass media. Asregistration under this amendment is voluntary, we elected not to register our online properties as mass media. See “RiskFactors—Because the range of the services we provide is increasing and the legal framework governing the operations in ourmarkets is evolving, we may be required to obtain additional licenses, permits or registrations or comply with otherrequirements, which may be costly or may limit our flexibility to run our business.”Since 2016, Russian law imposes a limit of no more than 20% on non-Russian ownership and control, direct orindirect, of Russian mass media. Accordingly, if our core business were to be required to register as a mass media, or if suchlaw were otherwise amended to cover our business, it would have a material impact on the ownership structure of ourbusiness and could materially adversely affect the value of our Class A shares. See also “Risk Factors— If the Russiangovernment were to expand limitations on foreign ownership to our business, it could materially adversely affect our groupand the value of our Class A shares.”Apart from that, in March 2019 a new law came into force that imposes liability for the dissemination of fake newsin mass media or telecommunication networks if such news are potentially of social importance. The liability includes finesup to 1,5 million rubles (depending mainly on the consequences of such violation). It is difficult to predict how these normswill be interpreted in practice. If this regulation is to be applied to our services, we might be held liable for the informationpublished by third parties.Privacy and Personal Data Protection RegulationWe are subject to Russian and foreign laws regarding privacy and the protection of our users’ personal data. Wepublish on our websites our privacy policies and practices concerning the use, processing, storage and disclosure of user data.Any failure by us to comply with our privacy policies as well as Russian or other applicable laws and regulations relating toprivacy and the protection of user data may result in proceedings against us by governmental authorities, individuals or otherthird parties, which may adversely impact our business. In addition, the adoption and interpretation of data protection laws,and their application to internet operations, are often unclear, difficult to predict and in a constant state of development.Although we believe that we comply with all current requirements, these laws could in the future be interpreted and appliedin a manner that is inconsistent with current practice. For instance, in May 2014 the Court of Justice of the European Unionestablished that an operator of a search engine can be obligated to remove from the list of search results links to webpagescontaining inaccurate or outdated information related to an individual. Russian personal data laws have been amended,granting a similar right to Russian citizens, who from January 2016 have been able to apply for the removal of search resultsthat link to inaccurate or irrelevant information about them. In addition, in May 2018, the GDPR came into force in the EU.We believe that we have taken all necessary steps to comply with the applicable requirements of the GDPR, although ourexposure is relatively limited. Nevertheless, some provisions of the GDPR are formulated broadly and their interpretation bythe competent authorities might be unpredictable. Therefore, we may fail to interpret all the requirements in accordance withthe official interpretation and may be held liable for noncompliance.Russian data protection laws provide that an individual must freely consent to the production of her/his personal50 Table of Contentsdata. Such consent must be concrete, informed and conscious, and may be provided in any form evidencing the fact thatconsent has been provided, unless otherwise established by federal law, which requires that it be made in writing, signed bydigital electronic signature or evidenced in a similar manner prescribed by laws and regulations.We, like our peers, seek this consent from our users by asking them to click on a button or select a check-box inappropriate circumstances prior to commencement of the account registration process, indicating the user’s consent to ourcollection, use, storage and processing of personal data. Furthermore, most of our services do not require the creation of anaccount prior to their use and we collect only limited information in these circumstances. In particular, we place cookies anduse other widespread technologies that assist us in improving user experience of our products and services and ultimatelybenefit both our users and advertisers through behavioral targeting of advertising. No clear legislative guidelines have beenprovided addressing whether our practices are compliant with the requirements of the data protection legislation in Russiaand abroad. There is a risk that such laws may be interpreted and applied in a manner that is not consistent with our currentdata protection practices. Complying with various regulations in this area may cause us to incur additional costs or to changeour business practices. Further, any failure by us to protect our users’ privacy and data may result in a decrease of userconfidence in our services, and may ultimately result in a loss of users, which would adversely affect our business.Russian legislation also regulates “organizers of information distribution”. Organizers of information distributionmust retain a broad range of data relating to and generated by users for a period of time and provide such data to security andinvestigation authorities at their request. Organizers of information distribution that use encryption when delivering orprocessing electronic messages have to provide the security authorities with information necessary for decoding thedelivered or processed messages. If an organizer of information distribution fails to comply with the above requirements, theRussian authorities can prescribe the blocking of access to the services of such organizer of information distribution.Russian personal data law also requires that companies store all personal data of Russian users only in databaseslocated inside Russia. Although we have data centers located in Russia, this law could limit our flexibility in managing ouroperations globally. Failure to comply with applicable data protection legislation may lead to the restriction of access to ourservices. For example, in 2016 a Russian court ordered the blocking of access to a popular social networking website forviolation of data protection legislation.Licenses for the Provision of Communication ServicesEntities that provide certain telecommunication services for a fee are required under Russian law to obtain a“telematics” license from Roscomnadzor. In order to increase our range of services and diversify our business, we haveobtained the telematics licenses necessary for the provision of certain of our services in Russia. However, we generally do notcharge a fee for the online services we provide to our users and therefore believe that we are not required to hold a telematicslicense for provision of these services. We do, however, generate revenue from ads directed to our users. As a result, it ispossible that a Russian court or government agency may construe our online advertising revenues as a fee and determine thatwe are required to hold an additional telematics license for such services, which would require us to apply for and complywith the terms of any such license.Additionally, we may in certain cases offer user services for a fee, which could require us to comply with thelicensing requirements described above.Antimonopoly RegulationRussian law grants to FAS as the antimonopoly regulator wide powers and authorities to maintain competition inthe market, including approval or monitoring of mergers and acquisitions, establishment of rules of conduct for marketplayers occupying dominant positions, prosecution of any wrongful abuse of a dominant position, and the prevention ofcartels and other anti-competitive agreements or practices. The regulator may impose significant administrative fines (up to15% of the annual revenue derived in the market where the violation occurred) on market players that abuse their dominantposition or otherwise restrict competition, and is entitled to challenge contracts, agreements or transactions that are inviolation of the antimonopoly regulation. We may be considered to possess a substantial market share in the onlineadvertising market; however, we are not recognized by the regulator as occupying a dominant position in any market.However, we understand that the regulator from time to time focuses on internet services, could in the future recognize51 Table of Contentsonline advertising as a separate market and could identify dominant players and impose conduct limitations and otherrestrictions.In addition, the Russian Government is currently analyzing the “fifth antimonopoly package” developed by FAS –the amendments to the existing antimonopoly legislation in the sphere of digital markets and IP. The new legislation aims tofacilitate the review of cases in the above-mentioned sphere. In particular, the document specifies new triggers fordetermining the dominant position of a digital transactional platform. Therefore, this legislation, if adopted, may have a far-reaching impact on our business, which is difficult to estimate at the present time.Taxation RegulationTaxation of legal entities and individuals in Russia is regulated primarily by the Tax Code of the RussianFederation. The scope and application of the Tax Code is elaborated by numerous regulations and clarifications from theMinistry of Finance of Russia and by the Federal Tax Service, which enforces the tax laws. Russian tax law and proceduresare still not fully developed and local divisions of the Federal Tax Service have considerable autonomy in tax lawinterpretation and often interpret tax rules inconsistently. Also, there is extensive court practice on the construction of theCode’s provisions, which can sometimes be unpredictable or even contradictory. Both the substantive provisions of theRussian tax law and the interpretation and application of those provisions by the Russian tax authorities and by Russiancourts may be subject to rapid and unpredictable change. See “Risk Factors—Changes in the tax systems of Russia and othercountries in which we operate, as well as unpredictable or unforeseen application of existing rules, may materially adverselyaffect our business, financial condition and results of operations.”Consumer protection legislationRecent amendments to Russian consumer protection legislation impose duties on aggregators of information aboutgoods and services. These norms are applicable to some of our and Yandex.Market’s services and the failure to comply withsuch norms could lead to liability.Securities RegulationOur Class A ordinary shares are currently listed on the NASDAQ Global Select Market and in June 2014 wereadmitted to trading on Moscow Exchange; therefore, we are required to comply with specific Russian regulation concerninginformation disclosure, insider trading and certain other requirements as may be applied to foreign issuers in Russia.Applicability of Other RegulationsBecause our services are accessible to Russian-language speakers worldwide and are becoming increasinglyavailable to other users globally, certain foreign jurisdictions, including those in which we have not established a localoffice, employees or infrastructure, may require us to comply with their local laws. The recent draft law that has been already passed by the State Duma may lead to much tighter regulation of trafficrouting in the Russian internet. While it is not entirely clear yet how this regulation will be applied in practice, given thatsubordinate acts will have to be drawn up for its implementation, its enactment, among other things, may lead to arequirement that Russian internet traffic should be routed through Russian communication centers. This can reduce the datatransfer speed significantly and even result in interruptions and delays of the online services in the Russian internet segment.The draft law must now be approved by Russian parliament's upper house — the Federation Council. Item 4A. Unresolved Staff Comments.None. Item 5. Operating and Financial Review and Prospects.You should read the following discussion and analysis of our financial condition and results of operations inconjunction with the “Selected Consolidated Financial Information” section of this Annual Report and our consolidated52 Table of Contentsfinancial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, thisdiscussion contains forward‑looking statements based on our current expectations that involve risks, uncertainties andassumptions. Our actual results may differ materially from those anticipated in these forward‑looking statements as a resultof various factors, including those set forth in the “Risk Factors” and “Forward‑Looking Statements” sections andelsewhere in this Annual Report.OverviewWe are one of the largest European internet companies and the leading search provider in Russia. Our principalconstituencies are:·Users. We provide our users with advanced search capabilities and an extensive range of online services thatenable them to find relevant, objective information quickly and easily, as well as communicate, connect,arrange transportation and shop over the internet.·Advertisers. Our online advertising platform allows advertisers to reach a large audience of users in theirmarkets and deliver cost‑effective online advertising. With Yandex.Direct, our auction‑based advertisingplatform, advertisers can promote their products and services through relevant ads targeted to a particular userquery, the content of a website or webpage being viewed, or user behavior or characteristics.·Yandex ad network partners. We have relationships with a large number of third‑party websites, which we referto as the Yandex ad network. In addition to serving ads on our own websites, we also serve ads on our networkpartners’ websites and share the fees generated by these ads with our partners, providing an important revenuestream for them.Our yandex.ru website first began generating revenue in 1998. We became profitable in 2003 and have beenprofitable every year since then.Online advertising revenues accounted for 95.6%, 93.0% and 80.4% of our total revenues in 2016, 2017 and 2018,respectively. Our online advertising revenues consist of fees charged to advertisers for serving online ads on our websites andthose of our partners in the Yandex ad network. We place the significant majority of our performance‑based ads throughYandex.Direct. We sell approximately half of our performance-based ads on a prepaid basis. Our Yandex.Direct advertiserspay us on a cost‑per‑click (CPC) basis, which means that we recognize revenue only when a user clicks on one of ouradvertisers’ ads. Our brand advertising is generally sold on a cost‑per‑thousand (CPM) impressions basis. For these ads, werecognize as revenue the fees charged to advertisers when their ads are displayed. We recognize our online advertisingrevenues net of value added tax and sales commissions and bonuses. In Russia VAT rate was 18% in 2018, raised to 20%starting 2019. Although the largest part of our revenues is generated by direct sales to our advertisers, a significant portion ofour advertising is sold through media agencies. We recognize revenues from those advertising sales net of the commissionsand bonuses paid to these agencies.We benefit from a large and diverse base of advertisers. Our advertisers include individuals and small, medium andlarge enterprises across Russia and the other countries in which we operate, as well as large multinational corporations. Noindividual advertiser accounted for more than 1.1% of our total revenues in 2016, 2017 or 2018. On a geographical basis, wegenerated more than 91% of our total revenues in each of 2016, 2017 and 2018 from advertisers and other customers withbilling addresses in Russia, including the Russian offices of large multinational corporations.We serve ads both on our own websites and on the websites of our partners in the Yandex ad network. Forperformance‑based ads served on the websites of our partners in the Yandex ad network, we recognize as revenue the feespaid to us by advertisers each time a user clicks on one of their performance‑based ads or, for those advertisers paying forbrand ads on a CPM basis, as their ads are displayed. We pay our partners in the Yandex ad network fees for serving ouradvertisers’ ads on their websites. These fees are primarily based on revenue‑sharing arrangements. As such, the fees paid toour partners in the Yandex ad network are calculated as a percentage of the revenues we earn by serving ads on partners’websites. We account for the fees we pay to our partners in the Yandex ad network as traffic acquisition costs, a component ofcost of revenues. Since we launched our Yandex ad network in 2006, these costs annually have, in aggregate, amounted tomore than one‑half of the revenues we have earned from serving ads on the Yandex ad network and we expect them tocontinue to do so in the foreseeable future. Yandex ad network partners do not pay us any fees associated with our servingads on their websites.53 Table of ContentsOur agreements with our partners in the Yandex ad network generally have an indefinite term but may be terminatedby either party at will with no termination fees. Agreements with larger partners in the Yandex ad network are individuallynegotiated and vary in duration but typically renew automatically. In 2016, 2017 and 2018, none of our ad network partnersaccounted for more than 10% of our total revenues. In 2018, Mail.ru Group continued to be our most significant ad networkpartner.We believe the most significant factors that influence our ability to continue to increase our online advertisingrevenues include the following:·the level of internet penetration and usage in Russia and the other markets in which we operate;·the absolute and relative level of traffic on our own websites and those of our partners in the Yandex adnetwork;·the relevance, objectivity and quality of our search results and the quality of our other services and of theYandex ad network;·our search market share, including on mobile devices, with a larger market share allowing us to better monetizeour users’ search activity and attract and retain advertisers, as well as partners in our Yandex ad network;·the demand for online advertising in Russia and the other markets in which we operate, particularly amongsmall and medium‑size businesses;·our ability to effectively monetize traffic generated by our websites and those of the Yandex ad networkpartners, including through improvements to our advanced auction and advertising placement system, whilemaintaining an attractive return on investment for our advertisers; and·our ability to effectively monetize mobile search where the number of search queries is growing more quicklythan on desktops.SegmentsStarting 2018, we revised our organizational structure, separating several focus areas into product lines andgeographies. As a result, our businesses are now organized in the following operating segments:·Search and Portal, which includes all our services offered in Russia, Belarus and Kazakhstan (and, for periodsprior to the imposition of sanctions on Yandex by the government of Ukraine in May 2017, all our servicesoffered in Ukraine), other than those described below. Since Q1 2018, our Search and Portal segment alsoincludes Search and Portal in Turkey and Yandex Launcher, both previously reported in Other Bets andExperiments, and Yandex.Travel, previously reported in Classifieds;·Taxi (including our ride-sharing business, which consists of Yandex.Taxi as well as Uber in Russia and othercountries, Food Delivery business, which includes Yandex.EATs, Uber.EATs and Food Party, a meal kitsubscription service, and our Self-Driving Cars division);·E‑commerce (including the Yandex.Market service for the period prior to April 27, 2018, the date of thecompletion of the Yandex.Market joint venture between Yandex and Sberbank);·Classifieds (including Auto.ru, Yandex.Realty and Yandex.Jobs);·Media Services (including KinoPoisk, Yandex.Music, Yandex.Afisha, Yandex.TV program, our productioncenter Yandex.Studio and our subscription service Yandex.Plus, which we launched in Q1 and Q2 2018respectively); and54 Table of Contents·Other Bets and Experiments, where we aim to prove new business models. These include:·Zen, our proprietary algorithmic personalized content feed;·Yandex.Cloud (prior to Q1 2018 was a part of Search and Portal segment);·Yandex.Drive, our car-sharing service, launched in February 2018;·Geolocation services;·Yandex.Health (prior to Q1 2018 was a part of Search and Portal segment); and·Yandex Data Factory.Key Trends Impacting Our Results of OperationsAlthough the Russian economy demonstrated healthy growth in 2018 compared to the previous year, themacroeconomic environment was significantly defined by volatility of the local currency, higher inflation rates and otherfactors that impacted our financial results. In addition to the impact of the current macroeconomic environment, the trendsdescribed below are key drivers of our results of operations.Our business and revenues have grown rapidly since inception, and the effectiveness of performance‑basedadvertising as a medium has contributed to the rapid growth of our business. Advertising spending continues to shift fromoffline to online as the internet evolves, and we expect that our business will continue to grow. However, we expect that ourrevenue growth rate will continue to decline over time as a result of a number of factors, including challenges in maintainingour growth rate as our revenues increase to higher levels, increasing competition, particularly on mobile devices, changes inthe nature of queries, the evolution of the overall online advertising market and the declining rate of growth in internet usersin Russia as overall internet penetration increases.Our operating margins, representing our income from operations as a percentage of revenues, may fluctuate in thefuture depending on the percentage of our online advertising revenues that we derive from the Yandex ad network comparedwith our own websites. The operating margin we realize on revenues generated from the websites of our partners in theYandex ad network is significantly lower than the operating margin generated from our own websites. The percentage of ouronline advertising revenues derived from the Yandex ad network decreased from 27.1% in 2016 to 25.5% in 2017 and to23.4% in 2018. We do not expect the rate of online advertising revenues growth in 2019 to be higher than in 2018.Growth in mobile search may also have an impact on our operating margins. The number of search queries frommobile devices, including smartphones and tablets is growing more quickly than desktop queries. Queries from mobiledevices represented 49.2% of our total search queries and 41.4% of our search revenues in Q4 2018. To date, growth inmobile usage has not had a material impact on our pricing and revenues. However, we have seen some evidence that thisgrowth may exert modest downward pressure on our operating margins in the future due to the ongoing transition to mobileplatforms and related distribution TAC.Recent and future capital expenditures may also put pressure on our operating margins. Our capital expendituresincreased from RUB 9,625 million in 2016 to RUB 12,389 million in 2017, and to RUB 28,323 million in 2018. We spentapproximately 35% of our total capital expenditures in 2018 on acquisition of the property site for our new Moscowheadquarters and 50% on servers and data center expansion to support growth in our current operations. Our depreciation andamortization expense slightly decreased as a percentage of revenues from 12.7% in 2016 to 11.9% in 2017, and continueddecreasing to 9.5% in 2018. We currently expect our capital expenditures in 2019 to be in mid-teens as a percentage ofrevenues, excluding the effect of the headquarters construction. However, if we decide to undertake any new capital projects,our capital expenditures may increase as a percentage of our revenues in 2019.To support further brand enhancement and respond to competitive pressures, we spent larger amounts in 2017 and2018 on advertising and marketing than we have spent historically, in absolute terms. A significant portion of ouradvertising and marketing expense in 2017 and 2018 relates to our efforts to promote primarily our Yandex.Taxi and our55 Table of ContentsSearch services, and to support our brand in Russia and the other markets in which we operate. As of December 2018, theYandex.Taxi service was available in 213 cities with 100,000+ population and in 142 cities with population within the rangeof 50,000-100,000 citizens across Russia, Armenia, Azerbaijan, Belarus, Estonia, Finland, Georgia, Israel, Ivory Coast,Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Serbia and Uzbekistan. In 2018 the service added 400 cities and morethan doubled the amount of countries of presence. We expect to continue to invest in advertising and marketing. Wecurrently expect our overall advertising and marketing costs in 2019 to remain roughly stable as a percentage of revenues incomparison to 2018 due to continuing investment to promote our services. This spending will not significantly impact ouroperating margin rate. However, we expect our operating margin to decrease as a percentage of revenues in the near term as aresult of the increasing contribution of our business units as a percentage of total revenues, given that their operating marginsare lower than those of our core business, as well as due to investments in new initiatives in Search and Portal.Our revenues are impacted by seasonal fluctuations in internet usage and in advertising expenditures. Internet usageand advertising expenditures generally slow down during the months when there are extended Russian public holidays andvacations, and are significantly higher in the fourth quarter of each year. Moreover, expenditures by advertisers tend to becyclical, reflecting overall economic conditions, retail patterns and advertising budgeting and buying patterns.Inflation in Russia has also impacted our results of operations and may continue to do so. According to the RussianFederal State Statistics Service, Rosstat, the consumer price index in Russia increased by 5.4% and 2.5% in 2016 and 2017,respectively, and by 4.3% in 2018. We can provide no assurance that the annual rate of inflation will not increasesignificantly in 2019. Higher rates of inflation may accelerate increases in our operating expenses and capital expendituresand reduce the value and purchasing power of our ruble‑denominated assets, such as cash and cash equivalents.Changes in the value of the U.S. dollar compared with the Russian ruble can also negatively affect our results ofoperations. See “Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Risk.”Recent AcquisitionsWe did not complete any business combinations in 2016.ShkulevIn June 2017, we completed the acquisition of assets and assumption of liabilities of Hearst Shkulev Digital LLC(“Shkulev”), one of the biggest regional auto classifieds with the leading position in Sverdlovsk and Chelyabinsk regions ofthe Russian Federation, for cash consideration of RUB 401 million, including contingent consideration of RUB 52 million,subject to successful technical integration and client base transition. As of December 31, 2018, contingent consideration inthe amount of RUB 44 million was paid.FoodFoxIn December 2017, we completed the acquisition of a 100% ownership interest in Deloam Management Limited andits subsidiary (“FoodFox”), one of the leading food delivery operators in Moscow. The primary purpose of the acquisition ofFoodFox was to enlarge the range of services we provided. The fair value of consideration transferred totaled RUB 595million and consisted of cash consideration of RUB 541 million and deferred consideration of RUB 54 million. The deferredconsideration arrangement requires us to pay the additional cash consideration to FoodFox’s former shareholders andconvertible debt holders, if and when certain legal conditions are met within a four-year period.Other Acquisition in 2017During the year ended December 31, 2017, we completed another acquisition for total consideration ofapproximately RUB 66 million. 56 Table of ContentsUberIn February 2018, we and Uber International C.V. ( “Uber”), a subsidiary of Uber Technologies Inc., completed thecombination of Yandex.Taxi Holding B.V. with several Uber legal entities into MLU B.V., a Dutch private limited liabilitycompany. We and Uber have each contributed our legal entities operating our ride-sharing and food delivery businesses inRussia, Azerbaijan, Armenia, Belarus,Georgia, Kazakhstan, Kyrgyzstan and Moldova and $100.0 million (RUB 5,722million as of the date of acquisition) and $225.0 million (RUB 12,874 million as of the date of acquisition) in cash,respectively. The merger was accounted for as a business combination. A further description of the acquisition and itsaccounting implications can be found in Note 4 of our audited consolidated financial statements included elsewhere in thisAnnual Report. EdadealIn October 2018, we completed the acquisition of 90% in Edadeal LLC and its subsidiary (“Edadeal”), a daily dealand coupon aggregator, which is used to find deals for grocery stores, thus increasing our ownership from 10% to 100%. Cashconsideration transferred totaled RUB 233 million. The key product of Edadeal is a mobile app for iOS and Androidaggregating information regarding discounts at nearby supermarkets and stores. Other Acquisitions in 2018During the year ended December 31, 2018, we completed other acquisitions for total consideration of approximatelyRUB 751 million. A further description of the acquisitions and their accounting implications can be found in Note 4 of our auditedconsolidated financial statements included elsewhere in this Annual Report. Formation of Yandex.Market joint venture in 2018Yandex.MarketOn April 27, 2018, we and Sberbank formed a joint venture based on the Yandex.Market platform. As a part of the deal,Sberbank subscribed for new ordinary shares of Yandex.Market for RUB 30,000 million (approximately $500 million as ofsigning of the Subscription Agreement). Since that date, we and Sberbank each hold an equal number of the outstandingshares in Yandex.Market, with up to 10% of outstanding shares allocated to management and an equity incentive pool. Weretained a non-controlling interest and significant influence over Yandex.Market's business. Accordingly, Yandex.Market'sresults of operations before the transaction are classified within continuing operations.A further description of the acquisitions, the joint venture formation and their accounting implications can be foundin Note 4 of our audited consolidated financial statements included elsewhere in this Annual Report. 57 Table of ContentsResults of OperationsThe following table presents our historical consolidated results of operations as a percentage of revenues for theperiods indicated: Year ended December 31, 2016 2017 2018 Revenues100.0% 100.0% 100.0%Operating costs and expenses: Cost of revenues 26.0 25.5 28.1 Product development 20.8 19.9 17.7 Sales, general and administrative 23.6 28.8 28.4 Depreciation and amortization 12.7 11.9 9.5 Total operating costs and expenses 83.1 86.1 83.7 Income from operations 16.9 13.9 16.3 Interest income 3.8 3.1 2.6 Interest expense (1.6) (1.0) (0.6) Effect of Yandex.Market deconsolidation — — 22.1 Other (loss)/income, net (4.5) (1.6) 2.3 Income before income tax expense 14.6 14.4 42.7 Income tax expense 5.7 5.2 6.8 Net income8.9% 9.2% 35.9%Our consolidated income from operations decreased from 16.9% in 2016 to 13.9% in 2017 and increased to 16.3%in 2018. The increase in 2018 compared with 2017 was primarily due to a decrease as percentage of our total revenues indepreciation and amortization expenses reflecting expiration of useful lives of part of our equipment and intangible assets.The other factor was a decrease as percentage of our total revenues in advertising and marketing expenses. The decrease in2017 compared with 2016 was primarily due to the increase in marketing and advertising expenses as a percentage of ourtotal revenues, reflecting our efforts to promote our Yandex.Taxi and our Search services, and to support our brand in Russiaand the other markets in which we operate.58 Table of ContentsThe following table presents our historical results of operations by reportable segment for the periods indicated: Year ended December 31, 2016 2017 2018 (in millions of RUB) RevenuesSearch and Portal 69,581 84,196 103,505 E‑commerce 4,718 4,968 1,697 Classifieds 1,270 2,060 3,717 Taxi 2,313 4,891 19,213 Media Services 648 1,187 1,909 Other Bets and Experiments 385 1,047 4,144 Eliminations (2,990) (4,295) (6,528) Total revenues 75,925 94,054 127,657 Adjusted operating costs and expenses Search and Portal 48,722 55,629 64,994 E‑commerce 3,355 3,412 1,970 Classifieds 1,360 1,986 3,922 Taxi 4,438 12,900 23,743 Media Services 1,081 1,694 2,754 Other Bets and Experiments 2,957 4,513 8,338 Eliminations (2,990) (4,295) (6,528) Total adjusted operating costs and expenses 58,923 75,839 99,193 Adjusted operating income Search and Portal 20,859 28,567 38,511 E‑commerce 1,363 1,556 (273) Classifieds (90) 74 (205) Taxi (2,125) (8,009) (4,530) Media Services (433) (507) (845) Other Bets and Experiments (2,572) (3,466) (4,194) Eliminations — — — Total adjusted operating income 17,002 18,215 28,464 Eliminations represent the elimination of transaction results between the reportable segments, primarily related toadvertising, cross-charge of office rent expenses, administrative support services and brand royalties. Adjusted operatingcosts and expenses of reportable segments exclude share‑based compensation expense, amortization of acquisition‑relatedintangible assets and compensation expense related to contingent consideration, as well as the one-off loss related to thesuspension of our business in Ukraine.For the reconciliation between total adjusted operating income and net income see Note 16 — “Information aboutsegments, revenues & geographic areas” in the Notes to our consolidated financial statements included elsewhere in thisAnnual Report.59 Table of ContentsRevenuesThe following table presents our consolidated revenues, by source, in absolute terms and as a percentage of totalrevenues for the periods presented: Year ended December 31, 2016 2017 2018 RUB % of Revenues RUB % of Revenues RUB % of Revenues (in millions of RUB, except percentages) Online advertising revenues(1): Yandex websites 52,888 69.7%65,149 69.3%78,696 61.6%Yandex ad network websites 19,691 25.9 22,251 23.7 24,041 18.8 Total online advertising revenues 72,579 95.6 87,400 93.0 102,737 80.4 Revenues related to Taxi segment 2,313 3.0 4,891 5.2 19,213 15.1 Other revenues 1,033 1.4 1,763 1.8 5,707 4.5 Total revenues 75,925 100.0%94,054 100.0%127,657 100.0%(1)We record revenue net of VAT, sales agency commissions and bonuses and discounts. Because it is impractical to trackcommissions, bonuses and discounts for online advertising revenues generated on our own websites and on those of ourpartners in the Yandex ad network separately, we have allocated commissions, bonuses and discounts between our ownwebsites and those of our partners in the Yandex ad network proportionally to their respective revenue contributions.Online advertising revenues. Total online advertising revenues increased by RUB 15,337 million, or 17.5%, from2017 to 2018 and by RUB 14,821 million, or 20.4%, from 2016 to 2017. Our total online advertising revenues excludingYandex.Market increased by RUB 18,516 million, or 22.4%, from RUB 82,616 million in 2017 to RUB 101,132 million in2018, and increased by RUB 15,169 million, or 22.5%, from RUB 67,447 million in 2016 to RUB 82,616 million in 2017.Online advertising revenue growth over the periods under review resulted primarily from growth in sales ofperformance‑based online ads, driven by an increase in the number of paid clicks and an increase in average cost‑per‑clickpaid by our advertisers. We currently do not expect the rate of online advertising revenues growth in 2019 to be higher thanin 2018.Paid clicks on our own websites together with those of our Yandex ad network partners increased 10% from 2017 to2018 and 9% from 2016 to 2017. The average cost‑per‑click on our own websites together with those of our partners in theYandex ad network increased 7% from 2017 to 2018 and 10% from 2016 to 2017.During the periods under review, the year‑over‑year rates of change in paid clicks and average cost‑per‑click on aquarterly basis were as follows: Year-over-year Year-over-year growth in paid growth in Quarter clicks, % cost-per-click, % First Quarter 2016 18 12 Second Quarter 2016 13 14 Third Quarter 2016 12 10 Fourth Quarter 2016 12 8 First Quarter 2017 12 10 Second Quarter 2017 10 9 Third Quarter 2017 6 12 Fourth Quarter 2017 10 9 First Quarter 2018 7 8 Second Quarter 2018 10 6 Third Quarter 2018 13 5 Fourth Quarter 2018 10 7 The rate of change in paid clicks and average cost‑per‑click, and their correlation with the rate of increase in ourrevenues, may fluctuate from period to period based on such factors as seasonality, advertiser competition for keywords,60 Table of Contentsour ability to launch enhanced advertising products that seek to deliver increasingly targeted ads, the fees advertisers arewilling to pay based on how they manage their advertising costs, and general economic conditions.Revenues of Yandex.Taxi. Revenues of Yandex.Taxi mainly represent commissions for providing ride-sharingservices related to our Yandex.Taxi and Uber services and commissions for food delivery services. For ride-sharing servicesprovided to individual transportation services users, we are not a principal and report only Yandex.Taxi’s commission fees asrevenue. For services provided to corporate transportation services clients we act as the principal and revenue and relatedcosts are recorded gross. For food delivery services provided to individual service users, we are not a principal and reportonly Yandex.EATs’s commission fees as revenue. The increases of Yandex.Taxi revenues in both 2018 and 2017 are due torobust growth in the number of rides across our territories driven by aggressive investments in our existing markets as well asin geographical expansion and the effect of the business combination with Uber.Other revenues. Other revenues principally represent our revenue from car-sharing business and revenues fromMedia Services. Other revenues increased by RUB 3,944 million, or 223.7%, from 2017 to 2018 and by RUB 730 million, or70.7%, from 2016 to 2017.Revenues by reportable segment. Our revenues attributable to the Search and Portal segment increased by RUB19,309 million, or 22.9%, from 2017 to 2018 and by RUB 14,615 million, or 21.0%, from 2016 to 2017. The growth in thissegment’s revenues is in line with the growth in our overall online advertising revenues. Search and Portal revenuesaccounted for approximately 81.1% of total revenues in 2018, compared with 89.5% in 2017 and 91.6% in 2016.Our revenues attributable to the E‑commerce segment decreased by RUB 3,271 million, or 65.8%, from 2017 to2018 due to effect of deconsolidation of Yandex.Market and increased by RUB 250 million, or 5.3%, from 2016 to 2017.E‑commerce revenues accounted for approximately 1.3% of total revenues in 2018, compared with 5.3% in 2017 and 6.2% in2016. The decrease of this segment’s share of total revenues in 2017 compared with 2016 is primarily due to higher revenuegrowth in other reportable segments and decrease of advertising and marketing spend in E-commerce in 2017.Our revenues attributable to the Classifieds segment increased by RUB 1,657 million, or 80.4%, from 2017 to 2018and by RUB 790 million, or 62.2%, from 2016 to 2017. Classifieds revenues accounted for approximately 2.9% of totalrevenues in 2018, compared with 2.2% in 2017 and 1.7% in 2016. The increase of this segment’s share of total revenues in2018 compared to 2017 and in 2017 compared to 2016 is primarily due to rapid growth in its mature markets as well as in theregions, supported by our increased marketing spend in Classifieds in 2017 and 2018, and also due to M&A deals in 2017.Our revenues attributable to the Taxi segment increased by RUB 14,322 million, or 292.8%, from 2017 to 2018 andby RUB 2,578 million, or 111.5%, from 2016 to 2017. Taxi revenues accounted for approximately 15.1% of total revenues in2018, compared with 5.2% in 2017 and 3.0% in 2016. The increase of this segment’s share of total revenues in 2017 and2018 is primarily due to robust growth in the number of rides across our territories, the effect of the business combinationwith Uber and geographical expansion as well as optimization of our investments.Our revenues attributable to the Media Services segment increased by RUB 722 million, or 60.8%, from 2017 to2018 and by RUB 539 million, or 83.2%, from 2016 to 2017. Media Services revenues accounted for approximately 1.5% oftotal revenues in 2018, compared with 1.3% in 2017 and 0.9% in 2016. The increase of this segment’s share of total revenuesin 2017 and 2018 is primarily due to growth in the number of subscriptions to Yandex.Music service and tickets commissionrevenues.Our revenues attributable to the Other Bets and Experiments category increased by RUB 3,097 million, or 295.8%,from 2017 to 2018 and by RUB 662 million, or 171.9%, from 2016 to 2017. Other Bets and Experiments revenues wereprimarily related to Yandex.Drive and Zen services and increased to approximately 3.2% of total revenues in 2018, comparedwith 1.1% in 2017 and 0.5% in 2016, respectively.Operating Costs and ExpensesOur operating costs and expenses consist of cost of revenues; product development expenses; sales, general andadministrative expenses and depreciation and amortization expense. In addition to the reasons discussed below with61 Table of Contentsrespect to each category, we generally expect our total operating costs and expenses to increase in absolute terms and as apercentage of revenues in the near term; see “—Key Trends Impacting Our Results of Operations”.Cost of revenues. Cost of revenues consists primarily of traffic acquisition costs. Traffic acquisition costs are theamounts paid to our partners in the Yandex ad network for serving our online ads on their websites and to our partners whodistribute our products or otherwise direct search queries to our websites. These amounts are primarily based onrevenue‑sharing arrangements. Some of our distribution partners are compensated on the basis of the number of installationsof Yandex browser or search bars and applications.The agreements with our distribution partners provide for payment of fees to them on a non‑refundable basisfollowing the period in which the distribution fees are earned. We do not have a standard term or termination provision thatapplies to agreements with our distribution partners. Our largest distribution partner since 2012, Opera, accounted inaggregate for 18% of our distribution costs in 2018, and 26% and 23% in 2016 and 2017 accordingly. The Opera agreementalso provides for a 12‑month “revenue tail” period should that agreement be terminated.Cost of revenues also includes the expenses associated with the operation of our data centers, including relatedpersonnel costs and share-based compensation expense, rent, utilities and telecommunications bandwidth costs, as well ascontent acquisition costs.The following table presents the primary components of our cost of revenues in absolute terms and as a percentageof revenues for the periods presented: Year ended December 31, 2016 2017 2018 (in millions of RUB, except percentages) Traffic acquisition costs: Traffic acquisition costs related to the Yandex ad network 11,015 12,907 14,785 Traffic acquisition costs related to distribution partners 3,935 4,438 5,713 Total traffic acquisition costs 14,950 17,345 20,498 as a percentage of revenues 19.7%18.4%16.1%Costs related to Taxi segment: 244 1,240 5,681 as a percentage of revenues 0.3%1.3%4.5%Other cost of revenues 4,560 5,352 9,711 as a percentage of revenues 6.0%5.7%7.6%Total cost of revenues 19,754 23,937 35,890 as a percentage of revenues 26.0%25.5%28.1%Cost of revenues increased by RUB 11,953 million, or 49.9%, from 2017 to 2018, primarily due to a RUB4,441 million increase in Yandex.Taxi costs and to a RUB 3,153 million increase in traffic acquisition costs, and by RUB4,183 million, or 21.2%, from 2016 to 2017, primarily due to an increase of RUB 2,395 million in traffic acquisition costs.The majority of our traffic acquisition costs relate to the Yandex ad network, with a smaller portion relating to distributionrelationships. Traffic acquisition costs relating to the Yandex ad network increased by RUB 1,878 million from 2017 to 2018and by RUB 1,892 million from 2016 to 2017, representing our Yandex ad network partners’ share in the increased amountof Yandex ad network revenue for the period, which increased by RUB 1,790 million from 2017 to 2018 and by 2,560million from 2016 to 2017. Our network partner traffic acquisition costs as a percentage of network partner revenuesincreased to 61.5% in 2018 compared with 58.0% in 2017 and 55.9% in 2016. In addition, the amounts paid to ourdistribution partners increased by RUB 1,275 million from 2017 to 2018 and by RUB 503 million from 2016 to 2017 due togrowth in our existing distribution relationships, as well as the additions of new distribution partners. As a percentage of totalrevenues, traffic acquisition costs decreased from 19.7% in 2016 to 18.4% in 2017 and to 16.1% in 2018, as a result of lowerrate of partner revenue growth.Costs related to the Taxi segment increased by RUB 4,441 million, or 358%, from 2017 to 2018, primarily due tothe expansion of our corporate ride-sharing business, where revenue and related costs are recorded gross, and Yandex.EATslogistics services.Costs related to the Taxi segment increased by RUB 996 million, or 408%, from 2016 to 2017, primarily due to theexpansion of our corporate ride-sharing business and increase in other outsourced services. 62 Table of ContentsOther cost of revenues increased by RUB 4,359 million, or 81.4%, from 2017 to 2018, primarily due to an increaseof RUB 1,914 in Yandex.Drive costs. Other factors include the increase of expenses in our Media Services business due togrowing transactions in Yandex.Music and content acquisition costs, costs of sales of Yandex.Station, Yandex.Phone andvehicles via Yandex.Classifieds and remunerations to Zen authors.Other cost of revenues, increased by RUB 792 million, or 17.4%, from 2016 to 2017, primarily due to an increase ofRUB 531 in content acquisition and costs and RUB 142 million increase in personnel costs other than share-basedcompensation expense.We anticipate that cost of revenues will continue to increase in absolute terms primarily as a result of increases intraffic acquisition, devices production and logistics costs, Yandex.Drive direct expenses, Yandex.EATs logistic services aswell as content and data center costs, and will continue to increase as a percentage of revenues in the near term. The primarydrivers of increases in our future traffic acquisition costs are an increase of revenues derived from the websites of our partnersin the Yandex ad network, as well as the extent to which we use distribution partners to direct search queries to our websiteand for mobile search. The change in the product mix of the Yandex ad network to products with higher terms (turbo, video,ssp) is partly offset by the change in the mix of Yandex ad network partners to partners with more favorable terms. Inaddition, our traffic acquisition costs as a percentage of online advertising revenues may fluctuate in the future based onwhether we are successful in negotiating more Yandex ad network and distribution arrangements that provide for lowerrevenue sharing obligations or, alternatively, in less favorable revenue sharing arrangements as a result of increasedcompetition for these arrangements with existing and potential new partners.Product development. Product development expenses consist primarily of personnel costs incurred for thedevelopment, enhancement and maintenance of our search engine and other Yandex services and technology platforms. Wealso include rent and utilities attributable to office space occupied by development staff in product development expenses.We expense product development costs as they are incurred.The following table presents our product development expenses in absolute terms and as a percentage of revenuesfor the periods presented: Year ended December 31, 2016 2017 2018 (in millions of RUB, except percentages) Product development expenses 15,832 18,761 22,569 as a percentage of revenues 20.8% 19.9% 17.7%Product development expenses increased by RUB 3,808 million, or 20.3%, from 2017 to 2018, and by RUB2,929 million, or 18.5%, from 2016 to 2017. These increases were primarily due to increases in salaries in 2018 and 2017, aswell as increases in share-based compensation expense. Development personnel headcount increased from 3,709 as ofDecember 31, 2016 to 4,290 as of December 31, 2017, and to 4,582 as of December 31, 2018. As a percentage of revenues,product development expenses slightly decreased by 2.2% from 2017 to 2018 reflecting the slower growth in headcount in2018, and decreased by 0.9% from 2016 to 2017 primarily reflecting the appreciation of the Russian ruble in 2017 whichresulted in slower growth in allocable Moscow office rent and utilities which are U.S. dollar denominated.We anticipate that product development expenses will increase in absolute terms but will not change materially as apercentage of revenues in 2019.Sales, general and administrative. Sales, general and administrative expenses consist of compensation and officerent expenses for personnel engaged in customer service, sales, sales support, finance, human resources, facilities, informationtechnology and legal functions; fees for professional services; and advertising and marketing expenditures.63 Table of ContentsThe following table presents our sales, general and administrative expenses in absolute terms and as a percentage ofrevenues for the periods presented: Year ended December 31, 2016 2017 2018 (in millions of RUB, except percentages) Sales, general and administrative expenses 17,885 27,081 36,200 as a percentage of revenues 23.6% 28.8% 28.4%Sales, general and administrative expenses increased by RUB 9,119 million, or 33.7%, from 2017 to 2018 and byRUB 9,196 million, or 51.4%, from 2016 to 2017. The increase in 2018 compared to 2017 was primarily due to an increase inpersonnel expenses by RUB 2,947 million which resulted from an increase in sales, general and administrative headcountfrom 2,716 as of December 31, 2017 to 3,712 as of December 31, 2018, as well as salary increases in 2017 and 2018.Personnel expenses increased by RUB 1,025 million in 2017 compared to 2016, as a result of a headcount increase from2,095 as of December 31, 2016 to 2,716 as of December 31, 2017.Additional factors contributing to the overall increase from 2017 to 2018 were increases in advertising andmarketing expenses, mainly in Russia, by RUB 2,318 million, increases of RUB 1,631 million in bank and payment systemscommissions mainly related to Yandex.Taxi, RUB 1,028 million in other professional and outsourced services, RUB 624million in office rent and utilities expenses due to additional rent agreements, RUB 519 million in recruiting and trainingservices (which include training costs and related travel and lodging expenses, team-building and other events for staff, etc.)and business travel expenses, RUB 384 million in share‑based compensation expense and RUB 376 million in officeexpenses. These increases were partially compensated by a decrease of RUB 404 million in certain provisions related toUkraine that we provided for in 2017 following the imposition of sanctions in May 2017, and by RUB 354 million of certainallowances we provided for in 2018 compared to 2017 due to VAT provision accrued in 2017 related to the results of prioryears' tax audits.Additional factors contributing to the overall increase from 2016 to 2017 were increases of RUB 547 million inshare‑based compensation expense and RUB 273 million in recruiting and training services and business travel expenses, aswell as of RUB 518 million in bank and payment systems commissions mainly related to Yandex.Taxi and an increase byRUB 489 million in consulting and audit expenses, an increase of RUB 404 million in certain provisions related to Ukrainefollowing the imposition of sanctions in May 2017 and RUB 233 million in other professional and outsourced services.These increases were partially compensated by a decrease of RUB 477 million of VAT provision accrued in 2016 related tothe results of prior years' tax audits.We anticipate that our sales, general and administrative expenses in 2019 will continue to increase in absolute termsin comparison to 2018, as we continue to invest in the promotion of our products and services.Depreciation and amortization. Depreciation and amortization expense relates to the depreciation of our propertyand equipment, mainly servers and networking equipment, leasehold improvements, data center equipment and officefurniture, and the amortization of our intangible assets with definite lives.The following table presents our depreciation and amortization expense in absolute terms and as a percentage ofrevenues for the periods presented: Year ended December 31, 2016 2017 2018 (in millions of RUB, except percentages) Depreciation and amortization expense 9,607 11,239 12,137 as a percentage of revenues 12.7% 11.9% 9.5%Depreciation and amortization expense increased by RUB 898 million, or 8.0%, from 2017 to 2018 and by RUB1,632 million, or 17.0%, from 2016 to 2017. The increases in absolute terms for 2018 as compared to 2017 and for 2017 ascompared to 2016 were primarily due to RUB 328 million and RUB 1,338 million increases, respectively, in depreciationexpense related to server and network equipment and infrastructure systems, RUB 196 million and RUB 156 millionincreases, respectively, in amortization expense related to technologies and licenses, and RUB 177 million64 Table of Contentsand RUB 49 million increases, respectively, in office furniture and equipment. The increases in depreciation andamortization expense in 2017 and 2018 were primarily the result of our investments in servers and the launch of our new datacenter in Vladimir in 2017. The increase in depreciation and amortization expense in 2018 compared with 2017 was partlyoffset by expiration of useful lives of part of our equipment and intangible assets.We anticipate that depreciation and amortization expense will increase in absolute terms as we continue to invest inour technology infrastructure and in business acquisitions, and slightly decrease as a percentage of revenues in the near term.Any depreciation of the Russian ruble may also result in a material increase in our capital expenditures and respectivedepreciation and amortization.Share‑based compensation. In our consolidated statements of income, share‑based compensation expense isrecorded in the same functional area as the expense for the recipient’s cash compensation. As a result, share‑basedcompensation expense is allocated among our cost of revenues, product development expenses and sales, general andadministrative expenses.The following table presents our aggregate share‑based compensation expense in absolute terms and as a percentageof revenues for the periods presented: Year ended December 31, 2016 2017 2018 (in millions of RUB, except percentages) Share‑based compensation expense 3,422 4,193 6,552 as a percentage of revenues 4.5% 4.5% 5.1%Share‑based compensation expense increased by RUB 2,359 million, or 56.3%, from 2017 to 2018, because of newequity‑based awards granted in 2017 and 2018.Share‑based compensation expense increased by RUB 771 million, or 22.5%, from 2016 to 2017, because of newequity‑based awards granted in 2016 and 2017.The share‑based compensation expense for 2017 and 2018 includes RUB 267 million and RUB 564 million,respectively, related to Business Unit Equity Awards as described in Note 15 to our consolidated financial statements.We anticipate that share‑based compensation expense will increase in absolute terms in the near term because ofnew equity‑based awards.Adjusted operating costs and expenses by reportable segments. Our adjusted operating costs and expensesattributable to the Search and Portal segment increased by RUB 9,365 million, or 16.8%, from 2017 to 2018 and by RUB6,907 million, or 14.2%, from 2016 to 2017. These increases were primarily due to increases in traffic acquisition costs,personnel expenses and advertising and marketing expenses both in 2018 and 2017, as well as office rent and utilitiesexpenses in 2018 and depreciation and amortization expense in 2017.Our adjusted operating costs and expenses attributable to the E‑commerce segment decreased by RUB 1,442million, or 42.3%, from 2017 to 2018 and increased by RUB 57 million, or 1.7%, from 2016 to 2017. The decrease in 2018 ismainly due to deconsolidation of Yandex.Market in April 2018. The increase in 2017 was primarily due to increase inpersonnel expenses.Our adjusted operating costs and expenses attributable to the Classifieds segment increased by RUB 1,936 million,or 97.5%, from 2017 to 2018 and by RUB 626 million, or 46.0%, from 2016 to 2017. These increases were primarily due toincreases in advertising and marketing investments in both 2017 and 2018 as we continued to invest in the development ofthe service, an increase in cost of vehicles purchased and resold in 2018 compared with 2017, as well as increases inpersonnel expenses and allocable office rent and utilities in both 2017 and 2018 resulting from increases in headcount overthe periods.Our adjusted operating costs and expenses attributable to the Taxi segment increased by RUB 10,843 million, or84.1%, from 2017 to 2018 and by RUB 8,462 million, or 190.7%, from 2016 to 2017. With respect to 2018 compared65 Table of Contentsto 2017, the primary factor contributing to the overall increase was the growth of our EATs and corporate ride-sharingbusinesses (with growth in expenses in line with revenue growth), as well as significant growth in the number of rides in theride-sharing segment (with absolute growth but a decline as a percentage of revenues). In addition, 2018 includes threequarters of Uber costs, as well as one-off M&A related expenses. With respect to 2017 compared to 2016, the primary factorcontributing to the overall increase was an increase of RUB 5,118 million in advertising and marketing expenses. The otherfactors are increases in personnel expenses resulting from growth in headcount over the periods as we continue to invest inthe development of the service. We anticipate that advertising and marketing expenses of the Taxi segment will increase inabsolute terms but decrease as a percentage of revenues.Our adjusted operating costs and expenses attributable to the Media Services segment increased by RUB 1,060million, or 62.6%, from 2017 to 2018 and by RUB 613 million, or 56.7% from 2016 to 2017. These increases are mainly dueto increases of marketing and advertising expenses, content acquisition costs as well as increases of personnel expenses inboth 2017 and 2018.Our adjusted operating costs and expenses attributable to the Other Bets and Experiments category increased byRUB 3,825 million, or 84.8%, from 2017 to 2018, and increased by RUB 1,556 million, or 52.6%, from 2016 to 2017. Theincrease in 2018 compared to 2017 was primarily due to rapid growth of our new initiatives, Yandex.Drive andYandex.Cloud, launched in 2018, and continued investment in Zen and Geolocation Services. With respect to 2017compared to 2016, the overall increase was primarily due to increase of personnel headcount and depreciation andamortization expense in Geolocation Services.Interest IncomeInterest income increased from RUB 2,909 million in 2017 to RUB 3,382 million in 2018, principally as a result ofan increase of average amounts of our deposits during the year and an increase of average interest rates of our RUB and USD-nominated investments. Interest income in 2017 increased from RUB 2,863 million in 2016 to RUB 2,909 million in 2017principally as a result of an increase of average interest rates on our USD-nominated investments.Interest ExpenseInterest expense increased from RUB 897 million in 2017 to RUB 945 million in 2018 mostly due to an increase ofamortization of debt discount related to our convertible notes by RUB 44 million. Interest expense decreased from RUB1,208 million in 2016 to RUB 897 million in 2017 mostly due to the decrease of amortization of debt discount related to ourconvertible notes by RUB 227 million.Effect of Yandex.Market deconsolidationOn April 27, 2018, we deconsolidated Yandex.Market from our consolidated financial results and accounted for thisinvestment under the equity method within investments in non-marketable equity securities on the consolidated balancesheets, initially at fair value of RUB 29,985 million. This resulted in a gain on the deconsolidation in the amount of RUB28,244 million. Starting April 27, 2018, we record our share of Yandex.Market’s financial results within the other(loss)/income, net line in the consolidated statements of income.Other (Loss)/Income, netOur other (loss)/income, net primarily consists of foreign exchange losses and gains generally resulting fromchanges in the value of the U.S. dollar compared with the Russian ruble, and other non‑operating gains and losses, includinggains from the sale of equity securities, gains and losses from repurchases of convertible notes and gains and losses frominvestments in equity securities.66 Table of ContentsThe following table presents the components of our other (loss)/income, net in absolute terms and as a percentage ofrevenues, for the periods presented: Year ended December 31, 2016 2017 2018 (in millions of RUB, except percentages) Foreign exchange (losses)/gains(3,834)(1,784)3,155Gains from sale of equity securities15733 —Gains/(losses) from repurchases of convertible debt53(6) —Other229291(233)Total other (loss)/income, net(3,395)(1,466)2,922as a percentage of revenues(4.5)% (1.6)% 2.3%Because the functional currency of our operating subsidiaries in Russia is the Russian ruble, changes in the rublevalue of these subsidiaries’ monetary assets and liabilities that are denominated in other currencies (primarily the U.S. dollar)due to exchange rate fluctuations are recognized as foreign exchange gains or losses in our consolidated statements ofincome. In 2018 because of the material depreciation of the ruble, we recorded foreign exchange gain of RUB 3,122 millionin our Russian subsidiaries as other income, net, arising from changes in the value of the U.S. dollar compared with theRussian ruble during the year. In 2016 and 2017 we recognized foreign exchange losses in our Russian subsidiaries in theamount of RUB 3,710 million and RUB 1,683 million due to significant appreciation of the Russian ruble against the U.S.dollar. Although the U.S. dollar values of our U.S. dollar‑denominated cash, cash equivalents and term deposits are notimpacted by these currency fluctuations, they result in upward and downward revaluations of the ruble equivalent of theseU.S. dollar‑denominated monetary assets.In 2016, we repurchased $87.4 million in principal amount of our outstanding convertible notes for $82.0 millionresulting in a gain of RUB 53 million. In 2017, we repurchased $12.0 million in principal amount of our outstandingconvertible notes for $11.6 million resulting in a loss of RUB 6 million. During 2018, we did not repurchase any convertibledebt notes before the due date. In December 2018, the notes matured and we repaid in full the remaining amount ofoutstanding principal in respect of the notes in the face amount of $321.3 million.Items recognized as “Other” in “Other (loss)/income, net” include gains and losses from investments in equitysecurities, changes in the fair value of derivative instruments and other non‑operating gains and losses.Income Tax ExpenseThe following table presents our income tax expense and effective tax rate for the periods presented: Year ended December 31, 2016 2017 2018 (in millions of RUB, except percentages) Income tax expense 4,324 4,926 8,603 Effective tax rate 38.9% 36.3% 15.8%Our income tax expense increased by RUB 3,677 million from 2017 to 2018 and increased by RUB 602 millionfrom 2016 to 2017, primarily as a result of changes in taxable income.Our effective tax rate decreased by 20.5 percentage points from 2017 to 2018. Our effective tax rate was lower in2018 than in 2017 primarily due to the effect of Yandex.Market deconsolidation which is non-taxable, as well as due tocertain provisions related to the results of prior years' tax audits recognized in 2017 and reversed in 2018, partly offset by anincrease in share‑based compensation expense, which is non‑deductible, and deferred tax asset valuation allowancesprovided on operations of our newly acquired Uber and Food Delivery businesses. Adjusted for these effects, our effective taxrate would have been 24.4% and 24.3% in 2018 and 2017, respectively.67 Table of ContentsOur effective tax rate decreased by 2.6 percentage points from 2016 to 2017. Our effective tax rate was lower in2017 than in 2016 primarily due to the effects of certain provisions recognized in 2016 related to the results of prior years'tax audits, partly offset by an increase in share‑based compensation expense, which is non‑deductible. Adjusted for theseeffects, our effective tax rate would have been 24.3% and 23.4% in 2017 and 2016, respectively.See “Critical Accounting Policies, Estimates and Assumptions—Tax Provisions” for additional information aboutour income tax expense.A reconciliation of our statutory income tax rate to our effective tax rate is set forth in Note 10 of our auditedconsolidated financial statements included elsewhere in this Annual Report.Quarterly Results of OperationsThe following tables present our unaudited quarterly results of operations in rubles and as a percentage of revenuefor the eight consecutive quarters ended December 31, 2018. You should read the following tables together with ourconsolidated financial statements and related notes contained elsewhere in this Annual Report. We have prepared theunaudited quarterly information on the same basis as our audited consolidated financial statements. These tables includenormal recurring adjustments that we consider necessary for a fair presentation of our results of operations for the quarterspresented.Both seasonal fluctuations in internet usage and in advertising expenditures have affected, and are likely tocontinue to affect, our business. Internet usage and advertising expenditures generally slow down during the summer months,and increase significantly in the fourth quarter of each year. Moreover, expenditures by advertisers tend to be cyclical,reflecting overall economic conditions and budgeting and buying patterns.Because the functional currency of our operating subsidiaries in Russia is the Russian ruble, changes in the rublevalue of these subsidiaries’ monetary assets and liabilities that are denominated in other currencies (primarily the U.S. dollar)due to exchange rate fluctuations are recognized as foreign exchange gains or losses in our statements of income. As a result,our quarterly results of operations have been and will likely continue to be affected by the impact of foreign currencyfluctuations on our reported results of operations, particularly changes in the value of the U.S. dollar as compared to theRussian ruble.68 Table of ContentsOur operating results for any quarter are not necessarily indicative of results for any future quarters or for a full year. Quarter ended Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, 2017 2017 2017 2017 2018 2018 2018 2018 (in millions of RUB) Consolidated statements of income data: Revenues 20,652 22,104 23,438 27,860 26,573 29,672 32,570 38,842 Operating costs and expenses: Cost of revenues(1) 5,348 5,747 6,045 6,797 6,712 8,252 9,070 11,856 Product development(1) 4,518 4,473 4,569 5,201 5,803 5,370 5,542 5,854 Sales, general and administrative(1) 4,948 6,064 8,047 8,022 8,009 8,776 8,957 10,458 Depreciation and amortization 2,463 2,823 2,930 3,023 2,890 2,926 3,118 3,203 Total operating costs and expenses 17,277 19,107 21,591 23,043 23,414 25,324 26,687 31,371 Income from operations 3,375 2,997 1,847 4,817 3,159 4,348 5,883 7,471 Interest income 709 688 732 780 708 817 928 929 Interest expense (228) (217) (226) (226) (221) (243) (260) (221) Effect of Yandex.Market deconsolidation — — — — — 28,244 — — Other (loss)/income, net (2,255) 1,389 (626) 26 (400) 2,424 627 271 Income before income tax expense 1,601 4,857 1,727 5,397 3,246 35,590 7,178 8,450 Income tax expense 782 1,373 874 1,897 1,395 2,259 2,410 2,539 Net income 819 3,484 853 3,500 1,851 33,331 4,768 5,911 Net loss attributable to noncontrolling interests 16 30 48 26 529 715 334 148 Net income attributable to Yandex N.V. 835 3,514 901 3,526 2,380 34,046 5,102 6,059 (1)These amounts exclude depreciation and amortization expense, which is presented separately, and include share‑basedcompensation expense. Quarter ended Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, 2017 2017 2017 2017 2018 2018 2018 2018 As a percentage of revenues: Revenues 100.0% 100.0% 100.0% 100.0%100.0% 100.0% 100.0% 100.0%Operating costs and expenses: Cost of revenues(1) 25.9 26.0 25.8 24.4 25.3 27.8 27.8 30.5 Product development(1) 21.9 20.2 19.5 18.6 21.8 18.0 17.0 15.2 Sales, general and administrative(1) 24.0 27.4 34.3 28.8 30.1 29.6 27.5 26.9 Depreciation and amortization 11.9 12.8 12.5 10.9 10.9 9.9 9.6 8.2 Total operating costs and expenses 83.7 86.4 92.1 82.7 88.1 85.3 81.9 80.8 Income from operations 16.3 13.6 7.9 17.3 11.9 14.7 18.1 19.2 Interest income 3.4 3.1 3.1 2.8 2.7 2.8 2.8 2.4 Interest expense (1.0) (1.0) (0.9) (0.8) (0.9) (1.0) (0.8) (0.5) Effect of Yandex.Market deconsolidation — — — — — 95.2 — — Other (loss)/income, net (10.9) 6.3 (2.7) 0.1 (1.5) 8.2 1.9 0.7 Income before income tax expense 7.8 22.0 7.4 19.4 12.2 119.9 22.0 21.8 Income tax expense 3.8 6.2 3.8 6.8 5.2 7.6 7.4 6.6 Net income 4.0 15.8 3.6 12.6 7.0 112.3 14.6 15.2 Net loss attributable to noncontrolling interests 0.1 0.1 0.2 0.1 2.0 2.4 1.1 0.4 Net income attributable to Yandex N.V. 4.1%15.9%3.8%12.7%9.0%114.7%15.7%15.6%(1)These amounts exclude depreciation and amortization expense, which is presented separately, and include share‑basedcompensation expense.Liquidity and Capital ResourcesAs of December 31, 2018, we had RUB 68,798 million ($990.3 million) in cash and cash equivalents. Cashequivalents consist of bank deposits with original maturities of three months or less. Our current investment policy permits usto hold up to 50% of our total cash, cash equivalents, term deposits and debt securities in U.S. dollars. In order to achieve thissplit of our currency holdings, we convert a portion of the rubles received from operations, as well69 Table of Contentsas from maturing deposits, into U.S. dollars. We maintain our U.S. dollar‑denominated accounts principally in theNetherlands and in Russia. Our U.S. dollar‑denominated holdings as of December 31, 2018 accounted for approximately66.5% of our cash and cash equivalents. The net proceeds to us in December 2013 from the sale of our 1.125% convertible senior notes due December 15,2018, were approximately $593.9 million; we also received net proceeds of $89.2 million related to the exercise of theunderwriters’ over-allotment option in January 2014. From time to time, we repurchased and retired outstanding notes.During 2016, we repurchased and retired an aggregate of $87.4 million principal amount of the outstanding notes for$82.0 million. During 2017, we repurchased and retired an aggregate of $12.0 million principal amount of the outstandingnotes for $11.6 million. During 2018, we did not repurchase outstanding notes before the due date. In December 2018, thenotes matured and we repaid in full the remaining amount of outstanding principal in respect of the notes in the face amountof $321.3 million when such amounts came due. As of December 31, 2018 no notes remained outstanding.A further description of the accounting treatment related to the notes can be found in Note 11 of our auditedconsolidated financial statements included elsewhere in this Annual Report. The net proceeds from convertible notes werereceived by our parent company, a Dutch holding company that generates no operating cash flow itself.Other than the proceeds from our convertible note offering, our principal source of liquidity has been cash flowgenerated from the operations of our Russian subsidiaries. Under current Russian legislation, there are no restrictions on ourability to distribute dividends from our Russian operating subsidiaries to our parent other than a requirement that dividendsbe limited to the cumulative net profits of our Russian operating subsidiaries, calculated in accordance with Russianaccounting principles, which differs from the cumulative net profit calculated in accordance with U.S. GAAP primarily due tothe treatment of accrued expenses (such as rent, sales agency commissions and bonuses, etc.), deferred taxes and differencesarising from the capitalization and depreciation of property and equipment and amortization of intangible assets. In addition,these dividends cannot result in negative net assets in our Russian subsidiaries or render them insolvent. Pursuant toapplicable Russian statutory rules, the amount that our principal Russian operating subsidiary would be permitted to pay as adividend to our parent company as of December 31, 2018 was approximately RUB 79,572 million ($1,145.4 million).We are required to pay 5% withholding tax on all dividends paid from our Russian operating subsidiaries to ourparent company. Starting in 2014, we began to accrue for a 5% dividend withholding tax on the portion of the current yearprofit of our principal Russian operating subsidiary that is considered not to be permanently reinvested in Russia. We alsoprovided in 2017 for a 5% dividend withholding tax on the portion of the profit for 2013 of our principal Russian operatingsubsidiary that was considered not to be indefinitely reinvested in Russia. As of December 31, 2018, the cumulative amountof unremitted earnings upon which dividend withholding taxes have not been provided is approximately RUB 71,752million ($1,032.8 million). We estimate that the amount of the unrecognized deferred tax liability related to these earnings isapproximately RUB 3,588 million ($51.6 million). See “Risk Factors— Taxes payable on dividends from our Russianoperating subsidiaries to our parent company might not benefit from relief under the Netherlands‑Russia tax treaty.”As of December 31, 2018, we had no outstanding indebtedness. We do not currently maintain any line of credit orother similar source of liquidity.Cash FlowsIn summary, our cash flows were: Year ended December 31, 2016 2017 2018 (in millions of RUB) Net cash provided by operating activities 25,286 23,772 28,212 Net cash (used in)/provided by investing activities (13,106) (7,788) 25,959 Net cash used in financing activities (5,549) (587) (32,804) Effect of exchange rate changes on cash (3,449) (976) 4,288 _________________________________________________________________________________70 Table of Contents* In Q1 2017, Yandex elected to early adopt Accounting Standards Update ("ASU") No. 2016-18—Statement ofCash Flows (Topic 230): Restricted Cash, which provided revised guidance on the classification and presentation ofrestricted cash in the statement of cash flows on a retrospective basis. Prior periods have been adjusted accordingly.Cash provided by operating activities. Cash provided by operating activities consists of net income adjusted fornon‑cash items, including depreciation and amortization expense, amortization of debt discount and issuance costs,share‑based compensation expense, deferred tax benefit/expense, foreign exchange gains and losses, gain from sale of equitysecurities, effect of deconsolidation of Yandex.Market, income/losses from equity method investments, gains/losses fromrepurchases of convertible debt, and the effect of changes in working capital.Cash provided by operating activities increased by RUB 4,440 million from 2017 to 2018. This increase wasprimarily due to an increase of RUB 7,399 million in net cash from operations before changes in working capital, partlyoffset by a decrease in cash provided by changes in working capital of RUB 2,959 million. Cash used in working capital wasRUB 3,937 million in 2018 and increased between the periods primarily due to a significant increase in prepaid expensesand other assets, primarily arising from funds receivable mainly related to the Yandex.Taxi business and VAT reclaimable, aswell as accounts receivables, net in 2018 compared to 2017.Cash provided by operating activities decreased by RUB 1,514 million from 2016 to 2017. This decrease wasprimarily due to a decrease of RUB 2,821 million in cash provided by changes in working capital partially offset by anincrease in net cash from operations before changes in working capital of RUB 1,307 million. Cash used in working capitalwas RUB 978 million in 2017 and decreased between the periods primarily due to a significant increase in prepaid expensesand other assets in 2017 compared to 2016, principally arising from increases in funds receivable from payment processingsystems and interest receivable accrued, as well as a decrease in accounts payable and accrued liabilities that were primarilyrelated to tax provisions we accrued in 2016 as a result of prior years' tax audits.We believe that our existing cash, cash equivalents and cash generated from operations will be sufficient to satisfyour currently anticipated cash requirements through at least the next 12 months. To the extent that our cash, cash equivalentsand cash from operating activities are insufficient to fund our future activities, we may be required to raise additional fundsthrough equity or debt financings, including bank credit arrangements. Additional financing may not be available on termsfavorable to us or at all.Cash used in investing activities.Cash provided by investing activities in 2018 increased by RUB 33,747 million compared to 2017 as a result ofincreases in maturities of term deposits (net of investments) of RUB 34,228 million, and an increase in cash provided by newbusinesses combinations (net of cash used in acquisitions) of RUB 20,762 million related to the business combination withUber, which were partly eliminated by increases in capital expenditures of RUB 15,934 million, a decrease in proceeds fromdebt securities of RUB 2,887 million and effect of deconsolidation of cash and cash equivalents of Yandex.Market of RUB2,181 million.Cash used in investing activities in 2017 decreased by RUB 5,318 million compared to 2016 as a result of decreasesin investments in term deposits (net of repayments) of RUB 4,632 million and in investments in debt securities (net ofproceeds from maturities) of RUB 3,521 million, as well as decreases in loans granted of RUB 384 million and investments innon-marketable equity securities of RUB 300 million, which were partly compensated by increases in capital expenditures ofRUB 2,764 million and in cash paid for acquisitions of new businesses of RUB 918 million.Our total capital expenditures were RUB 28,323 million in 2018 and RUB 12,389 million in 2017. Our capitalexpenditures have historically consisted primarily of the purchases of servers and networking equipment. In 2018 theyincluded the acquisition cost of the property site for our new Moscow headquarters, which amounted to RUB 9.7 billion. Wealso incurred significant capital expenditures in 2017 and 2018 related to the construction of one of our large data centers.To manage enhancements in our search technology, expected increases in internet traffic, advertising transactions and newservices, and to support our overall business expansion, we will continue to invest in data center operations, technology,corporate facilities and information technology infrastructure in 2019 and thereafter. Moreover, we may spend a significantamount of cash on acquisitions and licensing transactions from time to time.71 Table of ContentsCash used in financing activities.For 2018, cash outflow from financing activities was RUB 32,804 million, reflecting RUB 21,281 million used forrepayment of our outstanding convertible notes, RUB 10,085 million used in repurchase of our ordinary shares and RUB1,504 million paid as contingent consideration, partly offset by proceeds of RUB 115 million from share option exercises.For 2017, cash outflow from financing activities was RUB 587 million, reflecting RUB 668 million used torepurchase our outstanding convertible notes and RUB 195 million paid as contingent consideration, partly offset byproceeds of RUB 328 million from share option exercises.Off‑Balance Sheet ItemsWe do not currently engage in off‑balance sheet financing arrangements, and do not have any material interest orobligation, including a contingent obligation, arising out of a variable interest, in entities referred to as variable interestentities, which include special purpose entities and other structured finance entities.Contractual ObligationsThe following table sets forth our contractual obligations as of December 31, 2018: Payments due by period 2020 2022 Through through through Total 2019 2021 2023 Thereafter (in millions of RUB) Long‑term operating lease obligations 19,387 6,545 11,639 791 412 Data centers related purchase obligations 247 217 30 — — Other purchase obligations 4,921 2,761 2,084 76 — Payments related to business acquisitions 136 96 20 20 — Total contractual obligations 24,691 9,619 13,773 887 412 The table above presents our long‑term rent obligations for our office and data center facilities, contractual purchaseobligations related to data center operations and facility build‑outs, as well as other purchase obligations primarily related tofixed utilities fees, devices production, content assets and other services and obligations. For agreements denominated inU.S. dollars, the amounts shown in the table above are based on the U.S. dollar/Russian ruble exchange rate prevailing onDecember 31, 2018. All amounts shown include value added tax, where applicable.Critical Accounting Policies, Estimates and AssumptionsOur accounting policies affecting our financial condition and results of operations are more fully described in ourconsolidated financial statements for the years ended December 31, 2016, 2017 and 2018, included elsewhere in this AnnualReport. The preparation of these consolidated financial statements requires us to make judgments in selecting appropriateassumptions for calculating financial estimates, which inherently contain some degree of uncertainty. We base our estimateson historical experience and on various other assumptions that we believe to be reasonable under the circumstances, theresults of which form the basis of making judgments about the carrying values of assets and liabilities and the reportedamounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions. We believe our critical accounting policies that affect the moresignificant judgments and estimates used in the preparation of our consolidated financial statements are as follows:Tax ProvisionsSignificant judgment is required in evaluating our uncertain tax positions and determining our income tax expense.FASB authoritative guidance on accounting for uncertainty in income taxes requires a two‑step approach to recognizing andmeasuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weightof available evidence indicates that it is more likely than not that the position will be sustained72 Table of Contentson audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefitas 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 thefinal 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 isdifferent from the amounts recorded, such differences will impact the income tax expense in the period in which suchdetermination is made. The income tax expense includes the impact of reserve provisions and changes to reserves that areconsidered appropriate, as well as the related net interest. Our actual Russian taxes may be in excess of the estimated amountexpensed to date and accrued as of December 31, 2018, due to ambiguities in, and the evolution of, Russian 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 Doing Business and Investing in Russia and Other Countries in which We Operate—Changes in the tax systems of Russia and other countries in which we operate, as well as unpredictable or unforeseenapplication 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 berealized. A valuation allowance is recognized to reduce deferred tax assets to amounts that are more likely than not toultimately be utilized based on our ability to generate sufficient future taxable income. Establishing or reducing a taxvaluation allowance requires us to make assessments about the timing of future events, including the probability of expectedfuture taxable income and available tax planning strategies. If actual events differ from management’s estimates, or to theextent that these estimates are adjusted in the future, any changes in the valuation allowance could materially impact ourconsolidated financial statements.Recognition and Impairment of Goodwill and Intangible AssetsThe FASB authoritative guidance requires us to recognize the assets of businesses acquired and respective liabilitiesassumed based on their fair values. Our estimates of the fair value of the identified intangible assets of businesses acquiredare based on our expectations of the future results of operations of such businesses. The fair value assigned to identifiableintangible assets acquired is supported by valuations that involve the use of a large number of estimates and assumptionsprovided by management.We assess the carrying value of goodwill arising from business combinations on an annual basis, or more frequentlyif 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 our reporting unitscompared with our internal budgets or changes in projected results, changes in the manner of utilization of the asset, andnegative market conditions or economic trends. We determine whether impairment has occurred by assigning goodwill to thereporting unit identified in accordance with the authoritative guidance, and comparing the carrying amount of the reportingunit to the fair value of the reporting unit. We generally measure the fair value of the reporting unit by consideringdiscounted estimated future cash flows using an appropriate discount rate. Therefore, our judgment as to the future prospectsof our business has a significant impact on our results and financial condition. If these future prospects do not materialize asexpected or there is a future adverse change in market conditions, we may be unable to recover the carrying amount of anasset, resulting in future impairment losses.Share‑Based Compensation ExpenseWe estimate the fair value of share options and share appreciation rights (together, “Share‑Based Awards”) that areexpected to vest using the Black‑Scholes‑Merton (BSM) pricing model and recognize the fair value ratably over the requisiteservice period using the straight‑line method. We used the following assumptions in our option‑pricing model when valuingShare‑Based Awards for grants made in the year ended December 31, 2018: 2017 2018 Dividend yield — — Expected annual volatility 40%39%Risk-free interest rate 2.23%2.72-2.90%Expected life of the awards (years) 7.19 7.07-7.11 Weighted-average grant date fair value of awards (per share)$11.86$14.62 73 Table of Contents No share options grants were made for the year ended December 31, 2016. No SARs grants were made for the yearsended December 31, 2016, 2017 and 2018.To determine the expected option term, we use the “simplified method” as allowed under the SEC’s accountingguidance, which represents the weighted‑average period during which our awards are expected to be outstanding.With respect to price volatility, for 2017 and 2018 grants we used historical volatility of our own shares.We base the risk‑free interest rate on the U.S. Treasury yield curve in effect at the grant date.We did not declare any external dividends with respect to 2016, 2017 or 2018 and do not have any plans to paydividends in the near term. We therefore use an expected dividend yield of zero in our option pricing model for awardsgranted in the years ended December 31, 2017 and 2018.Until the fourth quarter of 2016, we determined the amount of share‑based compensation expense based on awardsthat we ultimately expect to vest, taking into account estimated forfeitures. U.S. GAAP required forfeitures to be estimated atthe time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Wecalculated the forfeiture rate by reference to our historical employee turnover rate. If our actual forfeiture rate is materiallydifferent from the estimate, share‑based compensation expense could be materially lower than what has been recorded.Starting the fourth quarter of 2016, we early adopted an Accounting Standard Update (“ASU”), which simplifies certainaspects of the accounting for share-based payment transactions to employees. We also elected to account for forfeitures asthey occur, rather than estimate expected forfeitures.Recent Accounting PronouncementsSee Note 2 — “Summary of Significant Accounting Policies” in the Notes to our consolidated financial statementsincluded elsewhere in this Annual Report.Quantitative and Qualitative Disclosures About Market RiskForeign Currency Exchange RiskThe functional currency of our Russian operating subsidiaries, which account for the significant majority of ouroperations, is the Russian ruble. Therefore, our reported results of operations are impacted by fluctuations in exchange ratesto the extent that we recognize foreign exchange gains and losses on monetary assets and liabilities denominated incurrencies other than the ruble, primarily the U.S. dollar. Total U.S. dollar denominated cash and cash equivalents and termdeposits held in Russia amounted to RUB 14,327 million and RUB 32,953 million as of December 31, 2018 and 2017,respectively. If the U.S. dollar had been stronger/weaker by 15% relative to the value of the Russian ruble as of December 31,we would have recognized additional foreign exchange gains/losses before tax of RUB 2,036 million and RUB 4,888 millionin 2018 and 2017, respectively.Furthermore, the revenues and expenses of our Russian operating subsidiaries are primarily denominated in Russianrubles. However, as was customary in the Russian real estate market, the majority of our rent expenses, currently includingthe leases for our Moscow headquarters, is denominated in U.S. dollars. Additionally, a major portion of our capitalexpenditures, primarily servers, networking and engineering equipment imported by Russian suppliers, can also bematerially affected by changes in the dollar‑ruble and euro‑ruble exchange rate. In the event of a material appreciation of theU.S. dollar against the ruble, such as that which occurred in 2015, the ruble equivalents of these U.S. dollar‑denominatedexpenditures increase and negatively impact our net income and cash flows.The leases of our Moscow headquarters currently entail outstanding commitments of approximatelyRUB 16,549 million as of December 31, 2018. The rent under some leases we entered into before 2017 is denominated inU.S. dollars, but payable in rubles at the then‑current exchange rate quoted by the Central Bank of Russia. The leases protectthe landlord against depreciation of the U.S. dollar against the ruble. There are also some leases we entered into in 2017 and2018 which contain protection of us as the lessee against appreciation of the U.S. dollar against the ruble. The landlord’sprotection from U.S. dollar depreciation and our protection from U.S. dollar appreciation represent embedded derivatives thatmust be bifurcated and accounted for separately under U.S. GAAP. At the end of each period, we74 Table of Contentsre‑measure the fair value of these embedded derivatives and record any change in fair value as foreign exchange gains orlosses in the statements of income. We estimate the fair value of these derivative instrument using a model that is sensitive tochanges in the U.S. dollar to Russian ruble exchange rate. If the U.S. dollar had been weaker by 15% relative to the value ofthe Russian ruble as of December 31, 2018, we would have recognized additional foreign exchange gains before tax of RUB11 million in 2018. If the U.S. dollar had been stronger by 15% relative to the value of the Russian ruble as of December 31,2018, we would have recognized additional foreign exchange losses before tax of RUB 11 million in 2018. In March 2017,we designated a portion of our U.S. dollar-denominated term deposits with a third party bank as a hedging instrument toprotect us from risk that our U.S. dollar-denominated Moscow headquarters rent expenses will be adversely affected bychanges in the exchange rates and to avoid income statement volatility. As of December 31, 2018, this deposit was used infull amount. See Note 6 — “Derivative and non-derivative financial instruments” in the Notes to our consolidated financialstatements included elsewhere in this Annual Report.The functional currency of our Dutch parent company is the U.S. dollar. The functional currency of our subsidiariesincorporated in other countries is generally the respective local currency. The financial statements of these non‑Russianentities have been translated into rubles using the current rate method, where balance sheet items are translated into rubles atthe period‑end exchange rate and revenue and expenses are translated using a weighted average exchange rate for therelevant period. The resulting translation gains and losses for the years ended December 31, 2016, 2017 and 2018 areincluded as a foreign currency translation adjustment recorded as part of accumulated other comprehensive income on ourconsolidated balance sheets. U.S. dollar cash and cash equivalents comprise the largest portion of our assets in theNetherlands. Total U.S. dollar denominated cash and cash equivalents held in the Netherlands amounted to RUB 30,315million and RUB 8,291 million as of December 31, 2018 and 2017, respectively. If the U.S. dollar had been stronger/weakerby 15% relative to the value of the Russian ruble as of December 31, we would have recognized additional othercomprehensive gains/losses of RUB 5,136 million and RUB 1,338 million in 2018 and 2017, respectively.Subsequent to December 31, 2018, the Russian ruble remained volatile against foreign currencies, including theU.S. dollar. The currency exchange rate as of December 31, 2018 was RUB 69.4706 to $1.00 and, during the period fromDecember 31, 2018 to April 17, 2019, the exchange rate of the Russian ruble appreciated to RUB 64.2422 to $1.00. Thelowest rate reached during this period was RUB 69.4706 to $1.00 as of from January 1, 2019 to January 9, 2019. The highestrate reached during this period was RUB 63.7420 to $1.00 as of March 22, 2019.Interest Rate RiskWe had cash and cash equivalents of RUB 68,798 million as of December 31, 2018. We do not believe that we haveany material exposure to changes in the fair value of our cash and cash equivalents as a result of changes in interest rates. Wedo not enter into investments for trading or speculative purposes. Declines in interest rates, however, will reduce futureinvestment income.In December 2013, we issued and sold $600.0 million in aggregate principal amount of 1.125% convertible seniornotes due December 15, 2018. In January 2014, we issued and sold an additional $90.0 million in aggregate principalamount of such notes. During 2015, we repurchased and retired an aggregate of $119.4 million principal amount of theoutstanding notes for $102.3 million. During 2016, we repurchased and retired an aggregate of $87.4 million principalamount of the outstanding notes for $82.0 million. During 2017, we repurchased and retired an aggregate of $12.0 millionprincipal amount of the outstanding notes for $11.6 million. We carried the convertible notes at face value less unamortizeddiscount and debt issuance costs on our balance sheet. The fair value of the notes changed when the market price of ourshares or interest rates fluctuate. During 2018 we repaid in full the remaining amount of outstanding principal in respect ofconvertible debt notes in the face amount of $321.3 million and did not repurchase outstanding notes before the due date. Ona going forward basis, we are no longer exposed to this interest rate risk.75 Table of Contents Item 6. Directors, Senior Management and Employees.The following table sets forth certain information with respect to each of our executive officers and directors andtheir respective age and position as of the date of this Annual Report:Name Age Date ofExpirationof CurrentTerm ofOffice DirectororExecutiveOfficerSince TitleArkady Volozh 55 2020 2000 Executive Director and Chief Executive OfficerJohn Boynton 53 2021 2000 Chairman and Non-Executive DirectorEsther Dyson 67 2021 2006 Non-Executive DirectorHerman Gref 55 2020 2014 Non-Executive DirectorRogier Rijnja 56 2019 2013 Non-Executive DirectorCharles Ryan 51 2019 2011 Non-Executive DirectorIlya Strebulaev 43 2021 2018 Non-Executive DirectorAlexander Voloshin 63 2019 2010 Non-Executive DirectorG. Gregory Abovsky 42 N/A 2014 Chief Financial Officer, Chief Operating OfficerMr. Volozh is the principal founder of Yandex and has been our Chief Executive Officer and a director since 2000. Aserial entrepreneur with a background in computer science, Mr. Volozh co-founded several successful IT enterprises,including InfiNet Wireless, a Russian provider of wireless networking technology, and CompTek International, one of thelargest distributors of network and telecom equipment in Russia. In 2000, Arkady left his position as CEO at CompTekInternational to become the CEO of Yandex. Mr. Volozh started working on search in 1989, which led to him establishingArkadia Company in 1990, a company developing search software. His earlier achievements include the development ofelectronic search for use in patents, Russian classical literature and the Bible. Mr. Volozh holds a degree in appliedmathematics from the Gubkin Institute of Oil and Gas.Mr. Boynton has been a non-executive director since 2000. In 2016 he was appointed to serve as Chairman of theBoard. Mr. Boynton is the president of Firehouse Capital Inc., a privately held investment company with investments in avariety of early stage companies. John also serves on the boards of several companies and non-profit organizations. Mr.Boynton served as a founder and managing director of Wilson Alan LLC from 2001 through 2006, as vice president ofcorporate strategy and development at Forrester Research from 1997 to 2001, as a strategy consultant with MercerManagement Consulting from 1995 to 1997, and as co-founder and president of CompTek International from 1990 to 1995.Mr. Boynton graduated from Harvard College.Ms. Dyson has been a non-executive director at Yandex since 2006. Ms. Dyson is executive founder of Wellville, aUS-based 10-year non-profit project to demonstrate the value of investing in health. Ms. Dyson is an active investor andboard member in a variety of IT, healthcare and aerospace start-ups, and also sits on the board of Luxoft (LXFT -NYSE) andPressreader, two other IT companies of Russian origin. She started her career as a fact-checker for Forbes Magazine, and thenspent five years as a securities analyst on Wall Street. At New Court Securities, Ms. Dyson comprised the sell-side researchdepartment, and worked on the initial public offering of Federal Express, among others. At Oppenheimer & Co., she followedthe nascent software and personal computer markets. From 1982 to 2004, as the owner of EDventure Holdings, she edited itsnewsletter Release 1.0 and ran its annual PC Forum conference, where Yandex CEO Arkady Volozh spoke in 2005. Inaddition to Yandex and Luxoft, her Russian interests have included advisory board seats with both IBS Group and SUP/LiveJournal, and investments in the technology companies Epam, Ostrovok, TerraLink, UCMS and Zingaya. She sits on theboards of 23andMe (genetics) and SWVL (a Cairo-based dynamic transportation company). She was an early investor inFlickr and del.icio.us (sold to Yahoo!), Medstory and Powerset (sold to Microsoft), Brightmail (sold to Symantec), andPostini (sold to Google), Meetup (sold to WeWork), and Geometric Intelligence and Jump (sold to Uber), among others. Sheis the author of “Release 2.0: A design for living in the digital age” (1997). She earned a B.A. in economics from HarvardUniversity.Mr. Gref has been a non-executive director since 2014. Mr. Gref has served since 2007 as the Chief ExecutiveOfficer and Chairman of the Executive Board of Sberbank of Russia, one of the largest commercial banks in Russia. From2000 to 2007, Mr. Gref was the Minister for Economic Development of the Russian Federation. He previously served in anumber of government positions at the federal and regional levels in Russia. Mr. Gref received a degree in law from OmskState University in 1990, a Ph.D. in law from St. Petersburg State University in 1993 and has a Ph.D. in76 Table of Contentseconomics. Mr. Gref holds a Citation and Certificate of Honor from the President of the Russian Federation, the Order forDistinguished Service of Grade IV and the Stolypin Medal.Mr. Rijnja has been a non-executive director of Yandex since 2013. Mr. Rijnja, is Senior Vice President of HumanResources and a member of the executive committee at D.E Master Blenders, a Dutch public company listed on theAmsterdam stock exchange. Prior to joining D.E Master Blenders in 2011, Mr. Rijnja served as head of the human resourcesdepartments at several international companies, including Maxeda (2008 to 2011), Numico N.V. (2004 to 2008) andAmazon.com (2002 to 2004). Prior to this, he was director of global management development at Reckitt Benckiser PLCfrom 1998 to 2002, and a human resources manager for Nike Europe from 1996 to 1998. Between 1989 and 1996, Mr. Rijnjaheld several positions at Apple in The Netherlands and the United States. Mr. Rijnja has a degree in law studies from LeidenUniversity in The Netherlands.Mr. Ryan became a non-executive director of Yandex at the time of its initial public offering in 2011. A financeprofessional with 29 years of experience in both the Russian and international markets, Mr. Ryan co-founded UnitedFinancial Group (UFG) and became its Chairman and CEO in 1994. In 1998, Mr. Ryan initiated the New Technology Groupwithin UFG Asset Management, which sponsored an early-stage technology investment in ru-Net Holdings whoseinvestments include Yandex. In 2006, Deutsche Bank acquired 100% of UFG's investment banking business, and Mr. Ryanwas appointed chief country officer and CEO of Deutsche Bank Group in Russia and remained in that position until the endof 2008, when he became chairman of UFG Asset Management. From 2008 through the end of 2010, Mr. Ryan was aconsultant for Deutsche Bank. Prior to founding UFG, Mr. Ryan worked as an associate and principal banker with theEuropean Bank for Reconstruction and Development in London from 1991 to 1994 and as a financial analyst with CS FirstBoston from 1989 to 1991. Mr. Ryan is also a founder and the general partner of Almaz Capital Partners, an international VCfirm, 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 HarvardUniversity.Mr. Strebulaev has been a non-executive director of Yandex since 2018. Mr. Strebulaev has been on the faculty atthe Graduate School of Business, Stanford University since 2004 and currently is the David S. Lobel Professor of PrivateEquity and a tenured Professor of Finance. He has also been a Research Associate at the National Bureau of EconomicResearch since 2010. He graduated from the London Business School with a doctorate in Finance. He also holds degrees fromLomonosov Moscow State University (B.Sc. Economics) and the New Economic School, Moscow (M.A. Economics). Inaddition to his qualifications in Finance, Mr. Strebulaev brings to the Board his expertise in the global technology industry,as well as his experience in corporate innovation and leadership.Mr. Voloshin has been a non-executive director of Yandex since August 2010 after serving as an advisor to thecompany for two years. Since February 2012, Mr. Voloshin has served as Chairman of the Board and Independent Director atJSC Freight One. As the leader of the Moscow International Financial Centre working group, Mr. Voloshin championed anoverhaul to Russia’s corporate governance rules, helping to update guidance in line with global best practice. He also servedas Chairman of the Board of Directors of Uralkali from 2010 to 2014. Prior to joining our Board of Directors, Mr. Voloshinserved as Chairman of the Board of MMC Norilsk Nickel from 2008 to 2010 and as Chairman of the Board of Directors ofRAO "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 asAssistant to Chief of Staff from 1997 to 1998. Mr. Voloshin has been Chairman of the Board at Moscow Business SchoolSkolkovo since 2016. He graduated from the Moscow Institute of Transport Engineers in 1978 and holds a degree ineconomics from the All-Russia Foreign Trade Academy.Mr. Abovsky was appointed Chief Operating Officer of Yandex in 2017 in addition to his role of Chief FinancialOfficer, which he has been performing since 2014. Mr. Abovsky joined Yandex as Vice President of Investor Relations inJanuary 2013, taking on the additional role of Vice President of Corporate Development in October 2013. Mr. Abovskybegan his career in the investment banking division of Morgan Stanley, and has over 17 years of experience in a variety offinance and investment management roles in the media and technology sectors. Mr. Abovsky holds a B.A. in BusinessEconomics and Russian Literature from Brown University and an M.B.A. with High Distinction from Harvard BusinessSchool.To our knowledge, there are no family relationships among any of the members of our board or senior management.77 Table of ContentsCompensation and Share Ownership of Executive Officers and Directors.The aggregate cash compensation paid or accrued in 2018 for members of our management team (a total of 10persons), as a group, was RUB 388 million ($5.6 million).In May 2011, we granted each of our non‑executive directors an option to acquire 28,000 Class A shares at theinitial public offering price of $25.00 per share, effective on the closing of our initial public offering. Such options vestedover a four‑year period. In May 2013, we granted to a new non‑executive director an option to acquire 28,000 Class A sharesat a price of $27.74 per share. In May 2014, we granted a new non‑executive director an option to acquire 28,000 Class Ashares at a price of $33.09 per share.In May 2015, our Compensation Committee and Board approved grants of further equity awards to the members ofour Board. Each member was granted 14,000 restricted shares units (below – “RSUs”). In addition, the chairman was grantedan additional 14,000 RSUs; each member of the audit committee and compensation committee (other than the committeechairmen) was granted an additional 2,000 RSUs; and each chairmen of such committees was granted an additional 5,000RSUs. Such awards vest over four years, with 25% vesting in May 2016 and the remainder vesting quarterly over thefollowing three years.In May 2016, we made an offer to our non‑executive directors to exchange up to an aggregate of 196,000 of theiroutstanding options for RSUs based on an exchange ratio of 2:1. As a result of exchange, a total of seven non‑executivedirectors exchanged an aggregate of 196,000 options for an aggregate of 98,000 RSUs. The replacement RSUs are subject toan additional 12 months vesting period beyond the original vesting schedule of the exchanged options. In addition, noexercise of the replacement RSUs are permitted for a 12 month period starting from the date of the exchange which occurredin May 2016.In November 2016, our Compensation Committee and Board approved grants of additional 14,000 RSUs to the newchairman of the Board of Directors. The award vests over four years, with 25% vesting in June 2017 and the remaindervesting quarterly over the following three years.In November 2016, our Compensation Committee and Board approved grants of 600,000 RSUs to our executivedirector. The award vests over four years, with 25% vesting in December 2018 and the remainder vesting quarterly over thefollowing three years.In May 2017, our Compensation Committee and Board approved grants of 125,000 RSUs to our non-executivedirectors. The award vests over four years, with 25% vesting in April 2018 and the remainder vesting quarterly over thefollowing three years.In October 2018, our Compensation Committee and Board approved grants of 15,000 RSUs to a non-executivedirector. The awards vest over three years, with 25% vesting in July 2018 and the remainder vesting quarterly over thefollowing two years.For information on share ownership and options held by our directors and senior management, please see “MajorShareholders and Related Party Transactions”.Corporate GovernanceWe have an audit committee, a compensation committee and a nominating and corporate governance committee.We have adopted a charter for each of these committees.Audit CommitteeOur audit committee consists of Messrs. Ryan (chairperson), Boynton and Strebulaev. Each member satisfies the“independence” requirements of the NASDAQ listing standards, and Mr. Ryan qualifies as an “audit committee financialexpert,” as defined in Item 16A of Form 20‑F and as determined by our board of directors. The audit committee oversees ouraccounting and financial reporting processes and the audits of our consolidated financial statements. The audit committee isresponsible for, among other things:78 Table of Contents · making recommendations to our board of directors regarding the appointment by the shareholders of ourindependent auditors; · coordinating our board’s oversight of the internal control over financial reporting, disclosure controls andprocedures and code of conduct; · overseeing the work of the independent auditors, including resolving disagreements between management andthe 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 theindependent auditors; · reviewing and approving all proposed related‑party transactions; · discussing the annual audited consolidated and statutory financial statements with management; · annually reviewing and reassessing the adequacy of our audit committee charter; · meeting separately with the independent auditors to discuss critical accounting policies, observations oninternal controls, the auditor’s engagement letter and independence letter and other material writtencommunications between the independent auditors and the management; · establishing procedures for an annual internal audit; · 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 of directorsfrom time to time. Compensation CommitteeOur compensation committee consists of Messrs. Rijnja (chairperson), Boynton and Ms. Dyson. Each membersatisfies the “independence” requirements of the NASDAQ listing standards. The compensation committee assists the boardof directors in reviewing and approving or recommending our compensation structure, including all forms of compensationrelating to our directors and management. Members of our management may not be present at any committee meeting whilethe compensation of our chief executive officer is deliberated. Subject to the terms of the remuneration policy approved byour general meeting of shareholders from time to time, as required by Dutch law, the compensation committee is responsiblefor, among other things:79 Table of Contents · reviewing and making recommendations to the board of directors with respect to compensation of ourexecutive and non‑executive directors; · reviewing and approving the compensation, including equity compensation, change‑of‑control benefits andseverance arrangements, of our chief financial officer and such other members of our management as it deemsappropriate; · overseeing the evaluation of our management; · reviewing periodically and making recommendations to our board of directors with respect to any incentivecompensation and equity plans, programs or similar arrangements; · exercising the rights of our board of directors under any equity plans, except for the right to amend any suchplans unless otherwise expressly authorized to do so; and · attending to such other matters as are specifically delegated to our compensation committee by our boardof directors from time to time.Nominating and Corporate Governance CommitteeOur nominating and corporate governance committee consists of Messrs. Boynton (chairperson), Rijnja andVoloshin. Each member satisfies the “independence” requirements of the NASDAQ listing standards. The nominating andcorporate governance committee assists the board of directors in selecting individuals qualified to become our directors andin determining the composition of the board of directors and its committees. The nominating and corporate governancecommittee is responsible for, among other things: · recommending to the board of directors persons to be nominated for election or re‑election as directors at anymeeting of the shareholders; · overseeing the board of directors’ annual review of its own performance and the performance of its committees;and · considering, preparing and recommending to the board of directors a set of corporate governance guidelinesapplicable to the company. Employment AgreementsSubstantially all of our employees are employed by our operating subsidiaries. Our employment agreementsgenerally contain the minimum statutory notice periods required under Russian law. The employment agreements betweenour subsidiaries and certain senior managers and other employees contain non‑competition and non‑solicitation provisions,although we understand that such provisions are generally unenforceable under Russian law.80 Table of ContentsEmployeesThe following table indicates the composition of our workforce as of December 31 each year indicated: 2016 2017 2018 Russia 5,877 7,166 8,318 Other 394 279 449 Total 6,271 7,445 8,767 2016 2017 2018 Product development 3,709 4,290 4,582 Sales, general and administration 2,095 2,716 3,712 Cost of sales 467 439 473 Total 6,271 7,445 8,767 The number of employees as of December 31, 2016 and 2017 included employees of the Yandex.Market before itsdeconsolidation in April 2018, as described in Note 4 to our consolidated financial statements. This was partly compensatedby a headcount reclassification from sales, general and administrative, that we implemented to ensure consistency in internalreporting for positions that we treat as outsource labor.We also typically employ several hundred contract workers on a part‑time basis which are not reflected in the tableabove, 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 workstoppage. We believe our employee relations are good.Employee PlansWe grant equity awards in the form of share options, share appreciation rights, restricted shares and restricted shareunits (or so called “deferred shares”) under our Fourth Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”)and our 2016 Equity Incentive Plan (the “2016 Plan” and together with the 2007 Plan, the “Plans”) (“CompanyAwards”). Our 2016 Plan was approved at our 2016 annual general meeting of shareholders on May 27, 2016 and replacedour 2007 Plan. However, there remain unexercised grants under our 2007 Plan. The total number of shares available forissuance under the Plans is equal to 15% of the aggregate number of Class A and Class B shares outstanding from time totime.Additionally, the 2016 Plan provides employees at certain of our business units, including Taxi, Classifieds andMarket (the “Participating Subsidiaries”), the opportunity to receive equity awards in respect of such ParticipatingSubsidiary (the “Business Unit Equity Awards”). Business Unit Equity Awards and any awards granted to management of theParticipating Subsidiaries outside of the 2016 Plan are to not exceed 20% of such Participating Subsidiary’s shares issuedand outstanding from time to time. In the future, additional of our business units may become Participating Subsidiaries.Plan administration. Our board of directors or its compensation committee administers our Plans. Although ourPlans sets forth certain terms and conditions of our equity awards, our board of directors or its compensation committeedetermines 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 Company Awards to employees and directors of and consultants to our company and itssubsidiaries. With respect to Business Unit Equity Awards, we may grant awards in the equity of a Participating Subsidiary toemployees, officers, members of the board of directors, advisors and consultants of such Participating Subsidiary.Exercise price and term of equity awards. With respect to the Company Awards, the exercise price of options ormeasurement price of share appreciation rights awards is the average closing price per Class A share on the NASDAQ GlobalSelect Market on the 20 trading days immediately following the grant date. With respect to Business Unit Equity Awards, theexercise price of options or measurement price of share appreciation rights shall be determined from time to81 Table of Contentstime by the Board (following consultation with an independent valuation expert). Restricted share unit awards have noexercise or measurement price. Equity awards are generally exercisable up until the tenth anniversary of the grant date solong as the grantee’s relationship with us has not terminated.Vesting schedule. The notice of grant specifies the vesting schedule. Awards generally vest over a four‑year period,with 4/16ths vesting on the first anniversary of grant and an additional 1/16th vesting each quarter thereafter. When agrantee’s employment or service is terminated, the grantee may generally exercise his or her options that have vested as ofthe termination date within ninety days of termination or as determined by our plan administrator.Class A and Class B Shares. Outstanding options granted prior to October 2008 may be exercised, pursuant to theirterms and the terms of the 2007 Plan, as follows: · In the event that an optionee intends to exercise an option and immediately sell the shares acquired, we willissue Class A shares upon such exercise. · In the event that an optionee intends to exercise an option and hold the shares acquired for some period oftime, we will issue Class B shares upon such exercise. Such Class B shares will be subject to the transfer andconversion provisions applicable to all Class B shares.Equity awards granted since October 2008 are in respect of Class A shares only, in accordance with their terms andthe terms of the Plans.Amendment and Termination. Our board of directors may at any time amend, suspend or terminate our 2016 Plan.Prior to any such amendment, suspension or termination, our board of directors must first make a determination that shareoptions already granted will not be adversely affected. Unless terminated earlier, our 2016 Plan will continue in effect untilMay 2026.Equity Award Exchanges. In May 2016, we made an offer to our non‑executive directors to exchange up to an aggregate of 196,000 of theiroutstanding options for RSUs based on an exchange ratio of 2:1. As a result of exchange, a total of seven nonexecutivedirectors exchanged an aggregate of 196,000 options for an aggregate of 98,000 RSUs. The replacement RSUs are subject toan additional 12 months vesting period beyond the original vesting schedule of the exchanged options. In addition, noexercise of the replacement RSUs is permitted for a 12 month period starting the date of exchange.In February 2018, we made an offer to our senior employees of one of our Business units to exchange up to anaggregate of 425,230 of their outstanding Business Unit Equity Awards for an aggregate of 2,029,987 RSUs. Thereplacement RSUs are fully vested. Item 7. Major Shareholders and Related Party Transactions.The following table contains information concerning each of our directors and members of our senior managementand each shareholder known by us to beneficially own more than five percent of each class of our outstanding ordinaryshares. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission andincludes voting or investment power with respect to our shares.The number of shares outstanding used in calculating the percentage for each listed shareholder includes restrictedshare units in respect of Class A shares and the shares underlying options held by such shareholder that are to be exercisablewithin 60 days of February 15, 2019. The percentage of beneficial ownership is based on 287,216,939 Class A shares and37,878,658 Class B shares outstanding as of February 15, 2019. All holders of our ordinary shares, including thoseshareholders listed below, have the same voting rights with respect to such shares. Class A shares have one vote per share,and Class B shares have 10 votes per share.82 Table of Contents Shares Beneficially Owned as of February 15, 2019 Class A Shares Class B Shares Total Percentage Number of Number of By Voting By Number of Name of Beneficial Owner Shares % Shares % Power(1) Shares Directors and Senior Management: Arkady Volozh(2) 343,674 * 32,209,684 85.03% 48.41% 10.01%John Boynton(3) 116,484 * 0 — * * Esther Dyson(4) 179,063 * 0 — * * Rogier Rijnja(5) 18,127 * 0 — * * Charles Ryan(6) 410,688 * 0 — * * Alexander Voloshin(7) 70,029 * 0 — * * Herman Gref(8) 14,789 * 0 — * * Ilya Strebulaev(9) 5,370 * 0 — * * G. Gregory Abovsky(10) 159,015 * 0 — * * All current directors and seniormanagement as a group (9 persons)(11) 1,317,239 0.46% 32,209,684 85.03% 48.56% 10.31%Principal Shareholders: Vladimir Ivanov 9,157,491 3.19% 3,318,884 8.76% 6.36% 3.84%OppenheimerFunds Inc.(12) 18,365,269 6.39% 0 — 2.76% 5.65%Harding Loevner LP(13) 15,661,134 5.45% 0 — 2.35% 4.82%Wellington Management Group LLP(14) 14,896,593 5.19% 0 — 2.24% 4.58% Total shares held by directors,management and 5% holders 59,397,726 20.68% 35,528,568 93.80% 62.26% 29.20%*Represents beneficial ownership of less than one percent of such class. (1) Percentage of total voting power represents voting power with respect to all of our Class A and Class B shares, votingtogether as a single class. Each holder of Class B shares is entitled to ten votes per Class B share and each holder of ClassA shares is entitled to one vote per Class A share on all matters submitted to our shareholders for a vote. The Class Ashares and Class B shares vote together as a single class on all matters submitted to a vote of our shareholders, except asmay otherwise be required by Dutch law or our articles of association. Each Class B share is convertible at any time bythe holder into one Class A share and one Class C share. (2) Includes (a) 6,174 vested restricted share units in respect of Class A shares, and (b) options to purchase 337,500 Class Ashares that are exercisable within 60 days after February 15, 2019. Excludes (a) 875 restricted shares units in respect ofClass A shares, and (b) options to purchase 262,500 Class A shares that are not vested or exercisable within 60 days afterFebruary 15, 2019. (3) Includes (a) 60,000 Class A shares held by trusts, the beneficiaries of which include Mr. Boynton or members of hisfamily, (b) 42,396 Class A shares held by the John W. Boynton IV Trust of 2006, and (c) 14,088 vested restricted shareunits in respect of Class A shares. Other than in respect of the shares held by the John W. Boynton IV Trust of 2006, Mr.Boynton disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. Excludes31,001 restricted share units in respect of Class A shares that are not vested or exercisable within 60 days after February15, 2019. (4) Includes 19,063 vested restricted share units in respect of Class A shares. Excludes 12,250 restricted share units inrespect of Class A shares that are not vested or exercisable within 60 days after February 15, 2019. (5) Includes 18,127 vested restricted share units in respect of Class A shares. Excludes 12,250 restricted share units inrespect of Class A shares that are not vested or exercisable within 60 days after February 15, 2019.83 Table of Contents (6) Includes (a) 184,892 Class A shares held by trusts, the beneficiaries of which include Mr. Ryan or members of hisfamily and by Mr. Ryan directly, (b) 25,796 vested restricted share units in respect of Class A shares, (c) 60,000 ClassA shares held by UFG Russia Select Fund, and (d) 140,000 Class A shares held by UFG Special Situations Fund(together with the UFG Russia Select Fund, the “UFG Funds”). Mr. Ryan acts as Chairman and is a shareholder of theUFG Funds and may be deemed to have voting and dispositive power over the Class A Shares held by the UFG Funds.Mr. Ryan disclaims beneficial ownership of the Class A shares held by the UFG Funds except to the extent of hispecuniary interest therein. Excludes 12,438 restricted share units in respect of Class A shares that are not vested orexercisable within 60 days after February 15, 2019. (7) Includes (a) 20,029 vested restricted share units in respect of Class A shares, and (b) options to purchase 50,000 ClassA shares that are exercisable within 60 days after February 15, 2019. Excludes 6,500 restricted share units in respectof Class A shares that are not vested or exercisable within 60 days after February 15, 2019. (8) Includes 14,789 vested restricted share units in respect of Class A shares. Excludes 7,200 restricted share units inrespect of Class A shares that are not vested or exercisable within 60 days after February 15, 2019. (9) Includes 5,370 vested restricted share units in respect of Class A shares. Excludes 14,063 restricted share units inrespect of Class A shares that are not vested or exercisable within 60 days after February 15, 2019. (10) Consists of (a) 29,328 vested restricted share units in respect of Class A shares, and (b) options to purchase129,687 Class A shares that are exercisable within 60 days after February 15, 2019. Excludes (a) 368,125 restrictedshare units in respect of Class A shares, and (b) options to purchase 700,313 Class A shares with a strike price of$40.00 per share, which were granted at a strike price above fair market value on the date of the grant inconnection with Mr. Abovsky’s additional responsibilities as Chief Operating Officer, which are not vested orexercisable within 60 days after February 15, 2019. (11) Includes (a) 152,764 vested restricted share units in respect of Class A shares, and (b) options to purchase 517,187Class A shares that are exercisable within 60 days after February 15, 2019. Excludes (a) 464,702 restricted shareunits in respect of Class A shares, and (b) options to purchase 962,813 Class A shares and restricted share units thatare not vested or exercisable within 60 days after February 15, 2019. (12) The number of shares reported is based solely on the Schedule 13G filed by OppenheimerFunds Inc. on January14, 2019 and represents its respective beneficial ownership as of December 31, 2018.(13)The number of shares reported is based solely on the Schedule 13G filed by Harding Loevner LP on February 14,2019 and represents its respective beneficial ownership as of December 31, 2018.(14)The number of shares reported is based solely on the Schedule 13G filed by Wellington Management Group LLPon February 12, 2019 and represents its respective beneficial ownership as of December 31, 2018. Holdings by U.S. ShareholdersAs of February 15, 2019, there was one holder of record of Class A shares (Cede & Co., as nominee for DTC) locatedin the United States, which held approximately 99.98% of our outstanding Class A shares by number, which representedapproximately 43.12% of our outstanding shares by voting power.Related Party TransactionsShareholders’ AgreementShareholders holding an aggregate of approximately 46 million Class A and Class B shares, representingapproximately 55% of the voting power of our outstanding shares, are parties to a shareholders agreement, the principal termsof which are as follows:84 Table of ContentsBoard composition. The parties have agreed to vote all of our shares held by them in favor of electing or re‑electingthose persons nominated by our board of directors for election or re‑election as a director at any general meeting of ourshareholders.Compliance with foreign ownership laws. The parties have agreed to comply with any applicable laws from time totime in effect that regulate the owners of Yandex by non‑Russian parties.Amendments to articles of association. The parties have agreed that they will vote against any proposal to amendthe articles of association in such a way as to eliminate: · our multiple class share structure, with differential voting rights; · the staggered three‑year terms of our directors; · the 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; · the authorized preference shares; · requirements that certain matters, including an amendment of our articles of association, may only be brought to ourshareholders for a vote upon a proposal by our board of directors; · the supermajority requirements for shareholder approval of certain significant corporate actions, including a legalmerger or demerger of our company or the amendment of our articles of association; · the right of our board of directors to approve the accumulation by a party, group of related parties or parties acting inconcert of the legal or beneficial ownership of 25% or more, in number or by voting power, of our outstanding Class Aand Class B shares (taken together); or · the rights of the holder of the priority share.Term and Amendment. The shareholders agreement will remain in effect so long as any Class B shares remainoutstanding. The agreement may be terminated and amended, and any provision thereof waived, with the prior writtenconsent of parties to the agreement holding shares representing more than 662/3% of the voting power of the outstandingshare capital held by parties to the agreement. The agreement will terminate with respect to any particular shareholder uponits affirmative election if it no longer holds any Class B Shares, as a result of the transfer of all Class B shares held by it, or thevoluntary or mandatory conversion of all Class B Shares held by it into Class A Shares.Registration Rights AgreementWe are party to a registration rights agreement with our major shareholders that allows them to require us to registerClass A shares held by them under the U.S. Securities Act of 1933, as amended (the “Securities Act”), under certaincircumstances.Demand registration rights. Shareholders party to the agreement together holding approximately 34 millionClass A and Class B shares have the right to require that we register their securities for sale. Certain other shareholders havethe right to join in a demand registration. We have the right not to effect a demand registration (a) if we have already effectedone demand registration, (b) if the aggregate price, net of underwriters’ discounts or commissions, of all registrable securitiesincluded in such registration is less than $7,500,000, (c) if the initiating shareholders propose to85 Table of Contentsregister securities that may be immediately registered on Form F‑3, or (d) in a jurisdiction where we would be required toqualify to do business or execute a general consent to service of process in effecting such a registration. We have the right todefer filing of a registration statement for up to 120 days if our board of directors determines in good faith that filing of aregistration statement would be detrimental to us, but we cannot exercise such deferral right more than once in any 12‑monthperiod.Piggyback registration rights. If we propose to file a registration statement for a public offering of our securitiesother than relating to an employee share option, share purchase or similar plan or pursuant to a merger, exchange offer, orsimilar transaction, then we must offer holders of registrable securities an opportunity to include in this registration all or anypart of their registrable securities. We must use our best effort to cause the underwriters in any underwritten offering to permitthe shareholders who so requested to include their shares on the same terms and conditions as our securities to be registered.Form F‑3 registration rights. When we are eligible to use Form F‑3, one or more shareholders party to theagreement holding shares with an aggregate market value of at least $50,000,000 have the right to request that we file aregistration statement on Form F‑3. We are not obligated to file a registration statement on Form F‑3 if (a) we have alreadyeffected two registrations on Form F‑3 for holders of registrable securities during the 12‑month period preceding aregistration request, (b) the aggregate price, net of underwriters’ commissions or discounts, of registrable securities includedin such registration is less than $10 million, or (c) in a jurisdiction where we would be required to qualify to do business orexecute a general consent to service of process in effecting such a registration. We have the right to defer filing of aregistration statement for up to 120 days if our board of directors determines in good faith that filing of a registrationstatement would be detrimental to us, but we cannot exercise such deferral right more than once in any 12‑month period.Expenses of registration. We will pay all expenses relating to any demand, piggyback or F‑3 registration, other thanunderwriting commissions and discounts.Relationship with SberbankSberbank is a major financial institution and the largest savings bank in the Russian Federation. Approximately51% of its voting shares are held by the Central Bank of the Russian Federation. Herman Gref, the Chief Executive Officerand Chairman of the Executive Board of Sberbank, is a member of our Board of Directors.Priority ShareIn September 2009, we issued our priority share to Sberbank for its nominal value of €1.00. As the holder of ourpriority share, Sberbank has the right to approve the accumulation by a party, group of related parties or parties acting inconcert, of the legal or beneficial ownership of shares representing 25% or more, in number or by voting power, of ouroutstanding Class A and Class B shares (taken together), if our board of directors has otherwise approved such accumulationof shares. In addition, any decision by our board of directors 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, includingthe sale of our principal Russian operating subsidiary, is subject to the prior approval of the holder of our priority share. Thepriority share does not carry any rights to control the management or operations of our company, and its economic rights arelimited to its pro rata entitlement to dividends and other distributions. Our articles of association provide that the priorityshare may only be held by a party that is specifically nominated by our board of directors for this purpose. The rights of thepriority share would terminate if any law is adopted or amended in Russia that restricts the ownership by non‑Russian partiesof internet businesses in Russia.Our board of directors and shareholders approved the priority share mechanism with the objective of strengtheningcontrol over our company’s ownership structure and providing transparency into changes in share ownership. We believethat this structure allows us to avoid the dominance of any single group of investors. In addition, we believe that thismechanism allows us to attract appropriate levels of both Russian and non‑Russian investment.In nominating Sberbank as the party to which the priority share would be issued, our board of directors consideredthree principal criteria: the holder had to be controlled by the Russian government, the holder had to be public, and theholder could not have interests in the internet or media sectors that would conflict with the interests of our business. Ourboard also considered Sberbank to be an appropriate holder of the priority share in light of what our86 Table of Contentsboard believes to be its respected and professional management team. Because our board views the holder of the priorityshare as playing a valuable role in contributing to the stability of our business and the transparency of our shareholder base,and because the priority share carries only an immaterial economic interest in our company, we issued the priority share foronly nominal consideration.Yandex.Money Joint VentureIn July 2013, we sold a 75 percent (less 1 ruble) interest in our Yandex.Money business to Sberbank for $60 millionin cash and entered into a joint venture arrangement with Sberbank in respect of the future operation of this business, whichcontinues under the Yandex.Money brand. Our joint venture agreement with Sberbank provides for standard minorityprotections and addresses corporate governance matters such as veto rights, deadlock mechanisms and rights of first refusaland co‑sale.Following the sale of the controlling interest and deconsolidation of Yandex.Money in July 2013, we retained anoncontrolling interest and significant influence over Yandex.Money’s business. We continue to use Yandex.Money forpayment processing and sublease to Yandex.Money part of our premises. The amount of revenues from subleasing and otherservices was RUB 86 million and RUB 51 million ($0.7 million) for the years ended December 31, 2017 and 2018,respectively. The amount of fees for online payment commissions was RUB 439 million and RUB 432 million ($6.2 million)for the years ended December 31, 2017 and 2018 respectively. As of December 31, 2017 and 2018, the amount of receivablesrelated to payment processing was RUB 158 million and RUB 344 million ($5.0 million), respectively. We believe that theterms of the agreements with Yandex.Money are comparable to the terms obtained in arm’s‑length transactions withunrelated similarly situated customers and suppliers.Yandex.Market Joint VentureFollowing the formation of Yandex.Market joint venture with Sberbank and the deconsolidation of Yandex.Marketin April 2018, we retained a noncontrolling interest and significant influence over Yandex.Market’s business. The Companycontinues to provide advertising services and to sublease to Yandex.Market part of its premises. The amount of revenuesfrom advertising services was RUB 469 million ($6.8 million) for the year ended December 31, 2018. The amount ofrevenues from subleasing and other services was RUB 1,001 million ($14.4 million) for the year ended December 31, 2018.As of December 31, 2018, the amount of receivables from Yandex.Market was RUB 407 million ($5.9 million) and amount ofpayables was RUB 70 million ($1.0 million).Advisory Fees; Lending ArrangementsIn December 2015, we engaged Sberbank CIB, an affiliate of Sberbank, as our financial advisor in connection with aproposed acquisition of the office complex in central Moscow in which our Russian headquarters are located. Pursuant to thisengagement, we paid Sberbank CIB advisory fees of $0.2 million. In September 2016, we terminated this transaction becauseof changing market conditions.Internet-acquiring agreement with SberbankIn October 2017 the Company entered into new internet-acquiring agreement with Sberbank. The amount of feeswas RUB 45 million and RUB 844 million ($12.1 million) for the years ended December 31, 2017 and 2018 respectively. Asof December 31, 2018, the amount of receivables related to internet-acquiring was RUB 1,081 million ($15.6 million).Loans granted to related partiesAs of December 31, 2017 and 2018, we had loans outstanding in the aggregate principal amount of RUB 173million and RUB 207 million ($3.0 million), respectively, to the CEOs of our business units, principally in connection withtheir purchase of equity interests in those subsidiaries, and to certain senior employees. The interest rate on the loans is up to8% per annum and they mature in 2019-2028. Item 8. Financial Information.See the financial statements beginning on page F‑1.87 Table of ContentsDividendsWe do not have any present plan to pay cash dividends on our shares in the near term. Any future determination asto the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on thenexisting conditions, including our financial condition, operating results, contractual restrictions, capital requirements,business prospects and other factors our board of directors may deem relevant.If and when we pay dividends in the future, they will be payable on a pari passu basis on the outstanding Class Aand Class B shares and the priority share. Although our Class C shares are technically entitled to a maximum dividend of€0.01 per share when we declare dividends on our Class A and Class B shares, we intend to repurchase all Class C sharesissued upon conversion of our Class B shares promptly following their issuance such that no dividends would be payable onour Class C shares. Cash dividends on our shares, if any, will be paid in U.S. dollars. Item 9. The Listing.MarketsOur Class A ordinary shares are currently listed on the NASDAQ Global Select Market, under the symbol “YNDX”.In June 2014, our Class A ordinary shares were admitted to trading on Moscow Exchange (MOEX) and are currentlylisted in the Listing A Level 1, top quotation list on MOEX, under the symbol “YNDX”. Item 10. Additional Information.Memorandum and Articles of AssociationWe incorporate by reference into this Annual Report the description of our amended articles of associationcontained in our F‑1 registration statement (File No. 333‑173766) originally filed with the SEC on April 28, 2011, asamended. Our articles of association were amended as of May 21, 2012, May 22, 2013, May 23, 2014, May 22, 2015 and 1June, 2016. Such amendments reduced the number of authorized shares upon the conversion of our Class B shares into ClassA shares or were technical in nature to conform with changes in the requirements of Dutch law.Material ContractsConvertible debtWe issued and sold $690 million in aggregate principal amount of 1.125% convertible senior notes due 2018, toqualified institutional buyers in reliance on Rule 144A under the United States Securities Act of 1933, as amended, intransactions closing December 17, 2013, and January 14, 2014.In connection with the offering of the notes, we entered into an Indenture, dated December 17, 2013, with the Bankof New York Mellon, a New York banking corporation, as trustee, which includes the terms and conditions upon which thenotes are to be authenticated, issued and delivered. The notes were convertible into cash, Class A shares of Yandex or acombination of cash and Class A shares, at our election, based on an initial conversion rate of 19.4354 Class A shares per$1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $51.45 per Class Ashare, subject to adjustment on the occurrence of certain events. Prior to June 15, 2018, the notes were convertible only uponthe occurrence of certain events and during certain periods, and thereafter, at any time until the close of business on thebusiness day immediately preceding the maturity date of the notes.The notes beared interest at a rate of 1.125% per year, payable semi‑annually in arrears on June 15 and December 15of each year, beginning on June 15, 2014. The notes matured on December 15, 2018, unless earlier repurchased, redeemed orconverted in accordance with their terms. The notes were senior unsecured obligations of the Company and we did not havethe right to redeem the notes prior to maturity, except in connection with certain changes in tax laws.88 Table of ContentsThe net proceeds from the convertible note offering were approximately $683 million, after deducting the initialpurchasers’ discount and estimated offering expenses.In 2014-2017, we repurchased an aggregate of $368.7 million principal amount of the convertible notes for anaggregate of $327.1 million in the open market. In December 2018, the convertible notes matured and we repaid in full theremaining $321 million aggregate principal amount of the outstanding notes. Yandex.Taxi joint venture with UberContribution Agreement with respect to Yandex.TaxiOn July 13, 2017, we entered into a Contribution Agreement (the “Contribution Agreement”) with UberInternational C.V. (“Uber”), a wholly owned subsidiary of Uber Technologies, Inc., to combine Yandex.Taxi and the ride-sharing, food delivery and related logistics businesses of Uber in Russia and neighboring countries. On February 7, 2018, thetransaction contemplated by the Contribution Agreement was closed.As of December 31, 2018, the combined business operated in Russia, Armenia, Azerbaijan, Belarus, Côte d’Ivoire,Estonia, Finland, Georgia, Israel, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Serbia and Uzbekistan.Pursuant to the Contribution Agreement, the parties contributed their respective businesses within the territories to anewly formed Dutch company, MLU B.V. (“MLU”). In addition, Yandex contributed $100 million in cash and Ubercontributed $225 million in cash to MLU at closing. Further, Yandex sold Uber an additional 2% stake in MLU in exchangefor shares of Class A common stock of Uber. As of December 2018, MLU is owned 61.00% by Yandex, 37.96% by Uber and1.04% by the employees based on the total number of outstanding shares.The Contribution Agreement contains warranties, indemnities and covenants customary for a joint venturecombination of this nature.Both parties have licensed their respective brands to MLU for use in the territories. In addition, Yandex licensed itscore maps, location-based services and related technology to MLU. The MLU business now operates on the existingYandex.Taxi technology platform.Uber granted Yandex a right to require Uber to repurchase the Uber Class A shares received by Yandex in respect ofthe secondary sale described above, and Uber has a right to require Yandex to sell such Uber shares back to Uber during suchperiod, in each case at an agreed valuation and during an agreed time period.At closing and in connection with the Contribution Agreement, Yandex and Uber entered into a deed of covenant,pursuant to which each agreed to accept certain restrictive covenants towards MLU in the ride-sharing, food delivery, andrelated logistics business in the territories for an agreed period, as well as certain non-solicitation restrictions with respect toemployees of MLU.Shareholders Agreement with respect to Yandex.TaxiOn February 7, 2018, Yandex and Uber entered into a shareholders agreement (the “Shareholders Agreement”) inrespect of the governance and operation of MLU. Pursuant to the Shareholders Agreement, Yandex has the right to appoint amajority of the members of the supervisory board of MLU. As a significant minority shareholder, Uber has protective rightscustomary for a joint venture of this nature. Both parties have agreed to customary restrictions on transfer of their shares inMLU, as well as customary rights of first refusal, tag-along, drag along and public offering registration rights.Yandex.Market joint venture with SberbankSubscription Agreement with respect to Yandex.MarketOn December 12, 2017, we and our wholly owned subsidiary Yandex.Market B.V. entered into a subscriptionagreement (the “Subscription Agreement”) with Public Joint Stock Company “Sberbank of Russia” (“Sberbank”).89 Table of ContentsPursuant to the Subscription Agreement, an affiliate of Sberbank subscribed for new ordinary shares ofYandex.Market for 30 billion rubles (approximately $500 million as of signing). As a result of the transaction, Yandex andSberbank each own approximately 45% of the issued shares in the capital of Yandex.Market (on a fully diluted basis); 10% isheld by an equity incentive foundation to facilitate current and future equity ownership by management and employees ofYandex.Market. The Subscription Agreement contains warranties, indemnities and covenants customary for a transaction ofthis nature.Yandex.Market engages in e-commerce, with a core focus on a B2C online retail marketplace. In the RussianFederation, other CIS states, Baltics states and Georgia, the principal shareholders can engage in the core business solelythrough Yandex.Market.We continue to provide to Yandex.Market the rights to use the Yandex.Market brand, as well as technology,promotion and related services, all of which on arms’ length terms. Sberbank has also entered into an agreement withYandex.Market to provide promotion and related services on arms’ length terms.Shareholders Agreement with respect to Yandex.MarketAt the closing of the Yandex.Market joint venture described above, we, Sberbank and Yandex.Market, amongothers, entered into a shareholders’ agreement (the “Shareholders’ Agreement”) in respect of the governance and operation ofYandex.Market. Pursuant to the Shareholders’ Agreement, the board of directors of Yandex.Market has sevenmembers: three are appointed by Yandex (one of whom is independent of Yandex); three are appointed by Sberbank (one ofwhom is independent of Sberbank); and the fourth is initially the Chief Executive Officer of Yandex.Market. Each principalshareholder has protective rights customary for a joint venture of this nature. Both parties agreed to customary restrictions ontransfer of their shares in Yandex.Market, as well as customary rights of first refusal, tag-along, drag along and public offeringinitiation. Yandex and Sberbank also agreed to certain restrictive covenants in the exclusive territories, as well as certainnon-solicitation restrictions with respect to employees of Yandex.Market. The transaction was closed on April 27, 2018.Sale and Purchase Agreement with Respect to the Property Site for the New Moscow Headquarters In December 2018, we announced the purchase of rights to a land plot of approximately 4 hectares situated at 15Kosygina Street, Moscow, Russia (“Property Site”). In connection with the acquisition of the Property Site, we, directly and indirectly, entered into a series ofagreements with Orlenok Hotel Complex OJSC, the owner of the principal facility on the Property Site, as well as a number ofadditional owners of smaller adjacent facilities and lease rights to the land. We have acquired the rights to the land, buildingsand fixtures, including the underlying long-term land leases from the Moscow City government related to the land plot. Inparticular, on November 27, 2018 we entered into a sale and purchase agreement with a special purpose vehicle NAPA LLCwhich aggregated all the rights to the Property Site and the facilities on the Property Site. The total aggregate acquisition cost of the Property Site is approximately US$145 million (exclusive of 18% VAT).The transaction agreements contain representations, warranties and undertakings customary for a transaction of this nature,including a condition that all purchases and sales of individual facilities be completed simultaneously, as well as a conditionthat appropriate additional governmental approvals and permits be obtained. Exchange ControlsUnder existing laws of the Netherlands, there are no exchange controls applicable to the transfer to persons outsideof the Netherlands of dividends or other distributions with respect to, or of the proceeds from the sale of, shares of a Dutchcompany.90 Table of ContentsTaxationTaxation in the NetherlandsGeneralThe information set out below is a general summary of the material Dutch tax consequences in connection with theacquisition, ownership and transfer of our Class A shares. The summary does not purport to be a comprehensive descriptionof all the Dutch tax considerations that may be relevant for a particular holder of our Class A shares, who may be subject tospecial tax treatment under any applicable law, and this summary is not intended to be applicable in respect of all categoriesof holders of the Class A shares. In particular, this summary is not applicable in respect of any holder who is, is deemed to beor is treated as a resident of the Netherlands for Dutch tax purposes nor to a holder that holds, alone or together with hispartner, whether directly or indirectly, the ownership of, or certain other rights over, shares representing 5% or more of ourtotal issued and outstanding capital (or the issued and outstanding capital of any class of shares), or rights to acquire shares,whether or not already issued, that represent at any time 5% or more of our total issued and outstanding capital (or the issuedand outstanding capital of any class of shares) or the ownership of, or certain other rights over, profit participating certificatesthat relate to 5% or more of the annual profit and/or to 5% or more of our liquidation proceeds. Such interest in our Class Ashares is further referred to as a Substantial Interest (aanmerkelijk belang).Please note that under Dutch tax law an individual is considered as a holder of Class A shares as well if he/she isdeemed to hold an interest in the Class A shares pursuant to the attribution rules of article 2.14a of the Dutch Income Tax Act2001, with respect to property that has been segregated, for instance in a trust or a foundation.The summary is based upon the tax laws of the Netherlands as in effect on the date of this Annual Report, as well asregulations, rulings and decisions of the Netherlands and its taxing and other authorities available on or before such date andnow in effect. All references in this summary to the Netherlands and Netherlands law are to the European part of the Kingdomof The Netherlands and its law, respectively, only. All of the foregoing is subject to change, which could apply retroactivelyand could affect the continuing validity of this summary. As this is a general summary, we recommend that investors orshareholders consult with their own tax advisors as to the Dutch or other tax consequences of the acquisition, ownership andtransfer of our Class A shares, including, in particular, the application to their particular situations of the tax considerationsdiscussed below.The following summary does not address the tax consequences arising in any jurisdiction other than the Netherlandsin connection with the acquisition, ownership and transfer of our Class A shares.Our company currently takes the view that it is a resident of the Netherlands for tax purposes, including for purposesof tax treaties concluded by the Netherlands, and this summary so assumes. This summary further assumes that the holders ofClass A shares will be treated for Dutch tax purposes as the absolute beneficial owners of those Class A shares and anydividends (as defined below) received or realized with respect to such shares.Dividend Withholding TaxGeneralDividends paid on the Class A shares to a holder of such shares are generally subject to Dutch dividend withholdingtax at a rate of 15%. The term “dividends” for this purpose includes, but is not limited to:·distributions in cash or in kind, deemed and constructive distributions, and repayments of paid‑in capital notrecognized for Dutch dividend withholding tax purposes;·liquidation proceeds, proceeds of redemption of shares or, generally, consideration for the repurchase of sharesin excess of the average paid‑in capital recognized for Dutch dividend withholding tax purposes;·the par value of shares issued to a shareholder or an increase of the par value of shares, as the case may be, to theextent that it does not appear that a contribution to the capital recognized for Dutch dividend withholding taxpurposes was made or will be made; and91 Table of Contents·partial repayment of paid‑in capital, recognized for Dutch dividend withholding tax purposes, if and to theextent that there are net profits (zuivere winst), within the meaning of the Dutch Dividend Withholding Tax Act1965 (Wet op de dividendbelasting 1965), unless the general meeting of our shareholders has resolved inadvance to make such a repayment and provided that the par value of the shares concerned has been reduced bya corresponding amount by way of an amendment of our articles of association.Generally we are responsible for the withholding of taxes at source and the remittance of the amounts withheld tothe Dutch tax authorities; the dividend withholding tax will not be for our account.If we have received a profit distribution from a foreign subsidiary located (a) in a jurisdiction with which theNetherlands has concluded a treaty for the avoidance of double taxation or (b) in Bonaire, St. Eustatius, Saba, Aruba, Curacaoor St. Maarten, in which subsidiary we hold at least 25% of the nominal paid‑up capital or if the relevant tax treaty thereinprovides, we hold at least 25% of the voting rights, which distribution is exempt from Dutch corporate income tax and hasbeen subject to a foreign withholding tax of at least 5%, we are not required to transfer to the Dutch tax authorities the fullamount of Dutch dividend withholding tax in respect of dividends distributed by our company. The amount that does nothave to be transferred to the Dutch tax authorities can generally not exceed the lesser of (i) 3% of the portion of the dividendsdistributed by our company that is subject to Dutch dividend withholding tax; and (ii) 3% of the profit distributions ourcompany received from qualifying foreign subsidiaries in the calendar year in which our company distributes the dividends(up to the moment of such dividend distribution) and the two previous calendar years; further limitations and conditionsapply.The amount of Dutch withholding tax that we may retain reduces the amount of dividend withholding tax that weare required to pay to the Dutch tax authorities, but does not reduce the amount of tax we are required to withhold fromdividends paid to a holder of our Class A shares. Upon request, a holder of our Class A shares will be notified by ourcompany of the amount of the Dutch withholding tax that was retained by us.Non‑residents of the Netherlands (including but not limited to U.S. holders)The following is a description of the material Dutch tax consequences of holders of our Class A shares who undercertain circumstances may not be subject to the above described 15% Dutch dividend withholding tax.Entities (i) that are resident in another EU Member State, in a State of the European Economic Area (the “EEA”)i.e. Iceland, Norway and Liechtenstein, or a country outside the EU/EEA which has an arrangement for the exchange of taxinformation with the Netherlands; and (ii) that are not subject to taxation by reference to profits in such State, in principlehave the possibility to obtain a full refund of Dutch dividend withholding tax, provided such entities would not have beensubject to Dutch corporate income tax either had they been resident within the Netherlands, and provided further that suchentities do not perform a similar function to that of a tax exempt investment institutions or fiscal investment institutions asreferred to in the Dutch Corporate Income Tax Act 1969, and with respect to entities resident in a country outside theEU/EEA which has an arrangement for the exchange of tax information with the Netherlands, provided such entities holdtheir Class A shares as a portfolio investment, i.e. such shares are not held with a view to the establishment or maintenance oflasting and direct economic links between such holder of Class A shares and our company, and these shares do not allowsuch holder to effectively participate in the management or control of our company.Further, a holder of Class A shares who is resident in another EU Member State or in a State of the EEA i.e. Iceland,Norway and Liechtenstein, in principle has the possibility to obtain a refund of Dutch dividend withholding tax, providedthat (i) such dividends are not taxable with the holder of Class A shares for personal income tax purposes or corporate incometax purposes and (ii) insofar the Dutch dividend withholding tax exceeds the amount of personal income tax or corporateincome tax that would have been due had the holder of Class A shares been resident in the Netherlands, and with respect to aholder of Class A shares resident in a country outside the EU/EEA which has an arrangement for the exchange of taxinformation with the Netherlands, provided the Class A shares are held by such holder as a portfolio investment, i.e. suchshares are not held with a view to the establishment or maintenance of lasting and direct economic links between such holderof Class A shares and our company, and these shares do not allow such holder to effectively participate in the management orcontrol of our company.A holder of Class A shares who is considered to be a resident of the United States and is entitled to the benefits ofthe 1992 Double Taxation Treaty between the United States and the Netherlands (“U.S. holder”), as amended most92 Table of Contentsrecently by the Protocol signed March 8, 2004 (the “Treaty”) will generally be subject to Dutch dividend withholding tax atthe rate of 15% unless such U.S. holder is an exempt pension trust as described in article 35 of the Treaty, or an exemptorganization as described in article 36 of the Treaty.U.S. holders that are exempt pension trusts or exempt organizations as described in articles 35 and 36, respectively,of the Treaty may qualify for an exemption from Dutch withholding tax and may generally claim (i) in the case of an exemptpension trust full exemption at source by timely filing two completed copies of form IB 96 USA signed by the U.S. holderaccompanied with U.S. form 6166 (as issued by the U.S. Internal Revenue Service and valid for the relevant tax year) or (ii) inthe case of either an exempt pension trust or an exempt organization a full refund by filing through the withholding agent asmentioned in article 9 of the Dutch Dividend Withholding Tax Act 1965 (which is generally the company) one of thefollowing forms signed by the U.S. holder within three years after the end of the calendar year in which the withholding taxwas levied:·if the U.S. holder is an exempt pension trust as described in article 35 of the Treaty: two completed copies ofForm IB 96 USA accompanied with U.S. Form 6166 as issued by the U.S. Internal Revenue Service valid for therelevant tax year and·if the U.S. holder is an exempt organization as described in article 36 of the Treaty: two completed copies ofForm IB 95 USA accompanied with U.S. Form 6166 as issued by the U.S. Internal Revenue Service, valid for therelevant tax year.Taxes on Income and Capital GainsGeneralThe description of taxation set out in this section of this Annual Report is not intended for any holder of Class Ashares who is:·an individual for whom the income or capital gains derived from the Class A shares are attributable toemployment activities the income from which is taxable in the Netherlands; or·an individual who or an entity which holds, or is deemed to hold, a Substantial Interest in our company (asdefined above).Non‑residents of the Netherlands (including, but not limited to, U.S. holders)A Non‑Resident of the Netherlands who holds Class A shares is generally not subject to Dutch income or corporateincome tax (other than dividend withholding tax described above) on the income and capital gains derived from the Class Ashares, provided that:·such Non‑Resident of the Netherlands does not derive profits from an enterprise or deemed enterprise, whetheras an entrepreneur (ondernemer) or pursuant to a co‑entitlement to the net worth of such enterprise (other than asan entrepreneur or a shareholder) which enterprise is, in whole or in part, carried on through a permanentestablishment or a permanent representative in the Netherlands or effectively managed in the Netherlands and towhich enterprise or part of an enterprise, as the case may be, the Class A shares are attributable or deemedattributable;·in the case of a Non‑Resident of the Netherlands who is an individual, (a) such individual does not carry out anyactivities in the Netherlands with respect to the Class A shares that exceed ordinary active asset management(normaal vermogensbeheer), (b) the benefits derived from such Class A shares are not intended as remunerationfor activities performed by a holder of Class A shares or by a person connected to such holder as meant byarticle 3.92b paragraph 5 of the Dutch Income Tax Act 2001 and (c) such individual does not derive income orcapital gains from the Class A shares that are taxable as benefits from “other miscellaneous activities” in theNetherlands (resultaat uit overige werkzaamheden in Nederland);93 Table of Contents·in the case of a Non‑Resident of the Netherlands which is an entity, it is neither entitled to a share in the profitsof an enterprise effectively managed in the Netherlands, nor co‑entitled to the net worth of such enterprise, otherthan by way of the holding of securities, to which enterprise the Class A shares or payments in respect of theClass A shares are attributable; and·in the case of a Non‑Resident of the Netherlands who is an individual, such individual is not entitled to a sharein the profits of an enterprise effectively managed in the Netherlands, other than by way of the holding ofsecurities or, through an employment contract, to which enterprise the Class A shares or payments in respect ofClass A shares are attributable.A U.S. holder that is entitled to the benefits of the Treaty and whose Class A shares are not attributable to a Dutchenterprise or deemed enterprise, will generally not be subject to Dutch taxes on any capital gain realized on the disposal ofsuch Class A shares.Gift, Estate or Inheritance TaxesNo Dutch gift, estate or inheritance taxes will arise on the transfer of Class A shares by way of a gift by, or on thedeath of, a holder of Class A shares who is neither resident nor deemed to be resident in the Netherlands, unless in the case ofa gift of the Class A shares by an individual who at the date of the gift was neither resident nor deemed to be resident in theNetherlands (i) such individual dies within 180 days after the date of the gift, while being resident or deemed to be residentin the Netherlands; or (ii) the gift of the Class A shares is made under a condition precedent and the holder of these shares isresident, or is deemed to be resident, in the Netherlands at the time the condition is fulfilled.For purposes of Dutch gift, estate and inheritance taxes, an individual who holds the Dutch nationality will bedeemed to be resident in the Netherlands if he or she has been resident in the Netherlands at any time during the ten yearspreceding the date of the gift or his or her death. Additionally, for purposes of Dutch gift tax, an individual not holding theDutch nationality will be deemed to be resident in the Netherlands if he or she has been resident in the Netherlands at anytime during the twelve months preceding the date of the gift. Applicable tax treaties may override deemed residency.Value‑Added TaxThere is no Dutch value‑added tax payable in respect of payments in consideration for the sale of the Class A shares(other than value added taxes on fees payable in respect of services not exempt from Dutch value added tax).Other Taxes and DutiesThere is no Dutch registration tax, capital tax, customs duty, stamp duty or any other similar documentary tax orduty other than court fees payable in the Netherlands by a holder of Class A shares in respect of or in connection with theexecution, delivery and enforcement by legal proceedings (including any foreign judgment in the courts of the Netherlands)of the Class A shares.ResidenceOther than as set forth above, a holder of Class A shares will not become or be deemed to become a resident of theNetherlands, nor will a holder of Class A shares otherwise become subject to taxation in the Netherlands, solely by reason ofholding the Class A shares.Taxation in the United StatesThe following summary of the material U.S. federal income tax consequences of the acquisition, ownership anddisposition of our Class A shares is based upon current law and does not purport to be a comprehensive discussion of all thetax considerations that may be relevant to a decision to purchase our Class A shares. This summary is based on currentprovisions of the Internal Revenue Code, existing, final, temporary and proposed United States Treasury Regulations,administrative rulings and judicial decisions, in each case as available on the date of this Annual Report. All of the foregoingare subject to change, which change could apply retroactively and could affect the tax consequences described below.94 Table of ContentsThis section summarizes the material U.S. federal income tax consequences to U.S. holders, as defined below, ofClass A shares. This summary addresses only the U.S. federal income tax considerations for U.S. holders that hold the Class Ashares as capital assets. This summary does not address all U.S. federal income tax matters that may be relevant to a particularU.S. holder, nor does it address any state, local or foreign tax matters or matters relating to any U.S. federal tax other than theincome tax. Each investor should consult its own professional tax advisor with respect to the tax consequences of thepurchase, ownership and disposition of the Class A shares. This summary does not address tax considerations applicable to aholder of Class A shares that may be subject to special tax rules including, without limitation, the following:·certain financial institutions;·insurance companies;·dealers or traders in securities, currencies, or notional principal contracts;·tax‑exempt entities;·regulated investment companies;·persons that hold the Class A shares as part of a wash sale, hedge, straddle, conversion, constructive sale orsimilar transaction;·persons that hold the Class A shares through partnerships or certain other pass‑through entities;·persons that own (or are deemed to own) 10% or more of our voting shares; and·persons that have a “functional currency” other than the U.S. dollar.Further, this summary does not address alternative minimum tax consequences or indirect effects on the holders ofequity interests in entities that own our Class A shares. In addition, this discussion does not consider the U.S. taxconsequences to non‑U.S. holders of Class A shares.For the purposes of this summary, a “U.S. holder” is a beneficial owner of Class A shares that is, for U.S. federalincome tax purposes:·an individual who is either a citizen or resident of the United States;·a corporation, or other entity that is treated as a corporation for U.S. federal income tax purposes, created ororganized in or under the laws of the United States or any state of the United States or the District of Columbia;·an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or·a trust, if a court within the United States is able to exercise primary supervision over its administration and oneor more “United States persons,” within the meaning of the Internal Revenue Code, have the authority tocontrol all of the substantial decisions of such trust.If a partnership holds Class A shares, the tax treatment of a partner will generally depend upon the status of thepartner and upon the activities of the partnership.We will not seek a ruling from the U.S. Internal Revenue Service (“IRS”) with regard to the U.S. federal income taxtreatment of an investment in our Class A shares, and we cannot assure you that that the IRS will agree with the conclusionsset forth below.Distributions. Subject to the discussion under “Passive Foreign Investment Company Considerations” below, thegross amount of any distribution (including any amounts withheld in respect of Dutch withholding tax) actually or95 Table of Contentsconstructively received by a U.S. holder with respect to Class A shares will be taxable to the U.S. holder as a dividend to theextent paid out of our current or accumulated earnings and profits as determined under U.S. federal income tax principles.Distributions in excess of our current and accumulated earnings and profits will be non‑taxable to the U.S. holder to theextent of, and will be applied against and reduce, the U.S. holder’s adjusted tax basis in the Class A shares. Distributions inexcess of our current and accumulated earnings and profits and such adjusted tax basis will generally be taxable to the U.S.holder as capital gain from the sale or exchange of property. However, since we do not calculate our earnings and profitsunder U.S. federal income tax principles, it is expected that any distribution will be reported as a dividend, even if thatdistribution would otherwise be treated as a non‑taxable return of capital or as capital gain under the rules described above.The amount of any distribution of property other than cash will be the fair market value of that property on the date ofdistribution. The U.S. holder will not be eligible for any dividends‑received deduction in respect of the dividend otherwiseallowable to corporations.Under the Internal Revenue Code, qualified dividends received by certain non‑corporate U.S. holders(i.e. individuals and certain trusts and estates) currently are subject to a maximum income tax rate of 20%. This reducedincome tax rate is applicable to dividends paid by “qualified foreign corporations” to such non‑corporate U.S. holders thatmeet the applicable requirements, including a minimum holding period (generally, at least 61 days during the 121‑dayperiod beginning 60 days before the ex‑dividend date). We believe that we are a qualified foreign corporation under theInternal Revenue Code. Accordingly, dividends paid by us to non‑corporate U.S. holders with respect to Class A shares thatmeet the minimum holding period and other requirements are expected to be treated as “qualified dividend income.”However, dividends paid by us will not qualify for the 20% U.S. federal income tax rate cap if we are treated, for the tax yearin which the dividends are paid or the preceding tax year, as a “passive foreign investment company” for U.S. federal incometax purposes, as discussed below. Dividends paid by us that are not treated as qualified dividends will be taxable at thenormal (and currently higher) ordinary income tax rates, except to the extent that they are taxable otherwise if we are apassive foreign investment company as described below.Dividends received by a U.S. holder with respect to Class A shares generally will be treated as foreign source incomefor the purposes of calculating that holder’s foreign tax credit limitation. Subject to applicable conditions and limitations,and subject to the discussion in the next two paragraphs, any Dutch income tax withheld on dividends may be deducted fromtaxable income or credited against a U.S. holder’s U.S. federal income tax liability. The limitation on foreign taxes eligiblefor the U.S. foreign tax credit is calculated separately with respect to specific classes of income. For this purpose, dividendsdistributed by us generally will constitute “passive category income” (but, in the case of some U.S. holders, may constitute“general category income”).A “United States person,” within the meaning of the Internal Revenue Code, that is an individual, an estate or anonexempt trust is generally subject to a 3.8% surtax on the lesser of (i) the United States person’s “net investment income”for the year and (ii) the excess of the United States person’s “modified adjusted gross income” for that year over a threshold(which, in the case of an individual, will be between $125,000 and $250,000, depending on the individual’s U.S. tax filingstatus). A U.S. holder’s net investment income generally will include, among other things, dividends on, and gains from thesale or other taxable disposition of, our Class A shares, unless (with certain exceptions) those dividends or gains are derivedin the ordinary course of a trade or business. Net investment income may be reduced by deductions properly allocablethereto; however, the U.S. foreign tax credit may not be available to reduce the surtax.Upon making a distribution to shareholders, we may be permitted to retain a portion of the amounts withheld asDutch dividend withholding tax. See “—Taxation in the Netherlands—Dividend Withholding Tax—General.” The amountof Dutch withholding tax that we may retain reduces the amount of dividend withholding tax that we are required to pay tothe Dutch tax authorities but does not reduce the amount of tax we are required to withhold from dividends paid to U.S.holders. In these circumstances, it is likely that the portion of dividend withholding tax that we are not required to pay to theDutch tax authorities with respect to dividends distributed to U.S. holders would not qualify as a creditable tax for U.S.foreign tax credit purposes.Sale or other disposition of Class A shares. A U.S. holder will generally recognize gain or loss for U.S. federalincome tax purposes upon the sale or exchange of Class A shares in an amount equal to the difference between the U.S. dollarvalue of the amount realized from such sale or exchange and the U.S. holder’s tax basis for those Class A shares. Subject tothe discussion under “Passive Foreign Investment Company Considerations” below, this gain or loss will be capital gain orloss and will generally be treated as from sources within the United States. Capital gain or loss will be long‑term capital gainor loss if the U.S. holder held the Class A shares for more than one year at the time of the sale or96 Table of Contentsexchange; in general, long‑term capital gains realized by non‑corporate U.S. holders are eligible for reduced rates of tax. Thedeductibility of losses incurred upon the sale or other disposition of capital assets is subject to limitations.Passive foreign investment company considerations. A corporation organized outside the United States generallywill be classified as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes in any taxable yearin which, after applying the applicable look‑through rules, either: (i) at least 75% of its gross income is passive income, or(ii) at least 50% of the average gross value of its assets is attributable to assets that produce passive income or are held for theproduction of passive income. In arriving at this calculation, a pro rata portion of the income and assets of each corporationin which we own, directly or indirectly, at least a 25% interest by value, must be taken into account. Passive income for thispurpose generally includes dividends, interest, royalties, rents and gains from commodities and securities transactions. Webelieve that we were not a PFIC for any prior tax year after 2013. Based on estimates of our gross income and the averagevalue of our gross assets, and on the nature of the active businesses conducted by our “25% or greater” owned subsidiaries,we do not expect to be a PFIC in the current taxable year and do not expect to become one in the foreseeable future.However, because our status for any taxable year will depend on the composition of our income and assets and the value ofour assets for such year, and because this is a factual determination made annually after the end of each taxable year, therecan be no assurance that we will not be considered a PFIC for the current taxable year or any future taxable year. In particular,the value of our assets may be determined in large part by reference to the market price of our Class A shares, which mayfluctuate considerably. If we were a PFIC for any taxable year during which a U.S. holder held Class A shares, gainrecognized by the U.S. holder on a sale or other disposition (including a pledge) of the Class A shares would be allocatedratably over the U.S. holder’s holding period for the Class A shares. The amounts allocated to the taxable year of the sale orother disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to eachother taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for thattaxable year, and an interest charge would be imposed on the resulting tax liability for that taxable year. Similar rules wouldapply to the extent any distribution in respect of Class A shares exceeds 125% of the average of the annual distributions onClass A shares received by a U.S. holder during the preceding three years or the holder’s holding period, whichever is shorter.Elections may be available that would result in alternative treatments (such as a mark‑to‑market treatment) of the Class Ashares. In addition, if we are considered a PFIC for the current taxable year or any future taxable year, U.S. holders will berequired to file annual information returns for such year, whether or not the U.S. holder disposed of any Class A shares orreceived any distributions in respect of Class A shares during such year.Backup Withholding and Information Reporting. U.S. holders generally will be subject to information reportingrequirements with respect to dividends on Class A shares and on the proceeds from the sale, exchange or disposition ofClass A shares that are paid within the United States or through U.S.‑related financial intermediaries, unless the U.S. holder isan “exempt recipient.” In addition, certain U.S. holders who are individuals may be required to report to the IRS informationrelating to their ownership of the Class A shares, subject to certain exceptions (including an exception for shares held in anaccount maintained by a U.S. financial institution). U.S. holders may be subject to backup withholding (currently at 24%) ondividends and on the proceeds from the sale, exchange or disposition of Class A shares that are paid within the United Statesor through U.S.‑related financial intermediaries, unless the U.S. holder provides a taxpayer identification number and a dulyexecuted IRS Form W‑9 or otherwise establishes an exemption. Backup withholding is not an additional tax and the amountof any backup withholding will be allowed as a credit against a U.S. holder’s U.S. federal income tax liability and may entitlesuch holder to a refund, provided that the required information is timely furnished to the IRS.Documents on DisplayWe are subject to the periodic reporting and other informational requirements of the Securities Exchange Act of1934, as amended, or the Exchange Act. Under the Exchange Act, we are required to file reports and other information withthe SEC. Specifically, we are required to file annually a Form 20‑F no later than four months after the close of each fiscalyear, which is December 31. Such reports and other information, when so filed, may be accessed at www.sec.gov/edgar or atir.yandex.com/sec.cfm. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing thefurnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders areexempt from the reporting and short‑swing profit recovery provisions contained in Section 16 of the Exchange Act.97 Table of Contents Item 11. Quantitative and Qualitative Disclosures About Market Risk.See “Operating and Financial Review and Prospects—Quantitative and Qualitative Disclosures About MarketRisk.” PART II. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.Not applicable. Item 15. Controls and Procedures.Evaluation of Disclosure Controls and ProceduresThe company’s management, with the participation of the company’s chief executive officer and chief financialofficer, evaluated the effectiveness of the company’s disclosure controls and procedures as of December 31, 2018. The term“disclosure controls and procedures,” as defined in Rules 13a 15(e) and 15d 15(e) under the Exchange Act, means controlsand other procedures of a company that are designed to ensure that information required to be disclosed by a company in thereports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the timeperiods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls andprocedures designed to ensure that information required to be disclosed by a company in the reports that it files or submitsunder the Exchange Act is accumulated and communicated to the company’s management, including its principal executiveand principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Managementrecognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonableassurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefitrelationship of possible controls and procedures. Based on the evaluation of the company’s disclosure controls andprocedures as of December 31, 2017, the company’s chief executive officer and chief financial officer concluded that, as ofsuch date, the company’s disclosure controls and procedures were effective at the reasonable assurance level.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate “internal control over financialreporting,” as defined in Rules 13a 15(f) and 15d 15(f) under the Exchange Act. This rule defines internal control overfinancial reporting as a process designed by, or under the supervision of, a company’s chief executive officer and chieffinancial officer and effected by its board of directors, management and other personnel, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenanceof records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, and that receipts and expenditures of the companyare being made only in accordance with authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.Management assessed the design and operating effectiveness of our internal control over financial reporting as ofDecember 31, 2018. This assessment was performed under the direction and supervision of our chief executive officer andchief financial officer, and based on criteria established in Internal Control—Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, we concluded that as ofDecember 31, 2018, our internal control over financial reporting was effective.No change in the company’s internal control over financial reporting occurred during the fiscal year endedDecember 31, 2018 that has materially affected, or is reasonably likely to materially affect, the company’s internal controlover financial reporting.During 2018, we implemented internal controls to ensure we have adequately evaluated our contracts and properlyassessed the impact of the new accounting standard related to revenue recognition on our consolidated financial98 Table of Contentsstatements to facilitate the adoption on January 1, 2018. There were no significant changes to our internal control overfinancial reporting upon adoption of the new standard. During 2018, we implemented internal controls to ensure we haveadequately evaluated our lease portfolio and properly assessed the impact of the new accounting standard related to leases onour consolidated financial statements to facilitate the adoption on January 1, 2019. We do not expect significant changes toour internal control over financial reporting due to the adoption of the new standard.The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by JSCKPMG, our independent registered public accounting firm. Their report may be found below. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and Board of DirectorsYandex N.V.: Opinion on Internal Control Over Financial ReportingWe have audited Yandex N.V. and subsidiaries’ (together, the “Company”) internal control over financial reportingas of December 31, 2018, based on the criteria established in Internal Control – Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in allmaterial respects, effective internal control over financial reporting as of December 31, 2018, based on the criteria establishedin Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and therelated consolidated statements of income, comprehensive income, cash flows, and shareholders’ equity for the years thenended, and the related notes (collectively, the consolidated financial statements), and our report dated April 19, 2019expressed an unqualified opinion on those consolidated financial statements.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting andfor its assessment of the effectiveness of internal control over financial reporting, included in the accompanyingManagement’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on theCompany’s internal control over financial reporting based on our audit. We are a public accounting firm registered with thePCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities lawsand the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether effective internal control over financial reporting wasmaintained in all material respects. Our audit of internal control over financial reporting included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also includedperforming such other procedures as we considered necessary in the circumstances. We believe that our audit provides areasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal control over financial reporting includes those policiesand procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and thatreceipts and expenditures of the company are being made only in accordance99 Table of Contentswith authorizations of management and directors of the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effecton the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate. /s/ JSC “KPMG”Moscow, RussiaApril 19, 2019 100 Table of Contents Item 16A. Audit Committee Financial Expert.Mr. Ryan qualifies as an “audit committee financial expert,” as defined in Item 16A of Form 20‑F and as determinedby our board of directors. Item 16B. Code of Ethics.We have adopted a written code of ethics applicable to directors, members of senior management and employees ofthe company and any of the company’s direct and indirect subsidiaries. Our code of ethics is posted on our company websiteat: ir.yandex.com/documents.cfm.Any amendments to our code of ethics will be disclosed on our website within five business days of the occurrence. Item 16C. Principal Accountant Fees and Services.The following table summarizes the fees of JSC KPMG, our independent registered public accounting firm, or itsaffiliates billed to us for each of the last two fiscal years: 2017 2018 (RUB in million) Audit Fees(1) 18.1 69.1 Audit Related Fees(2) — — Tax Fees(3) 1.8 — All Other Fees 6.7 1.1 Total Fees 26.6 70.2 The following table summarizes the fees of AO Deloitte & Touche, our predecessor independent registered publicaccounting firm, or its affiliates billed to us for 2017 fiscal year: 2017 (RUB in million)Audit Fees(1)32.2Audit Related Fees(2)0.4Tax Fees(3)2.0All Other Fees (4)—Total Fees34.6 (1)Audit fees for 2018 and 2017 were for professional services provided for the review of interim financial statements andthe audit of our consolidated annual financial statements included in our Annual Reports on Form 20‑F or servicesnormally provided in connection with statutory and regulatory filings or engagements for those fiscal years.(2)Audit‑related fees consist of fees for assurance and related services that are reasonably related to the performance of theaudit or review of our financial statements and which are not reported under “Audit Fees”.(3)Tax fees consist of fees for tax compliance and tax advice services.(4)All other fees relate to due diligence investigations and advisory services.Pre‑Approval Policies for Non‑Audit ServicesIn 2011, we established a policy pursuant to which we will not engage our auditors to perform any non‑auditservices unless the audit committee pre‑approves the service. The audit committee pre‑approved all of the non‑audit101 Table of Contentsservices performed for us by JSC KPMG during 2018. Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.None. Item 16F. Changes in Registrant’s Certifying AccountantNone. Item 16G. Corporate Governance.The Sarbanes Oxley Act of 2002, as well as related rules subsequently implemented by the SEC, requires foreignprivate issuers, including our company, to comply with various corporate governance practices. In addition, NASDAQ rulesprovide that foreign private issuers may follow home country practice in lieu of the NASDAQ corporate governancestandards, subject to certain exceptions and except to the extent that such exemptions would be contrary to U.S. federalsecurities laws. The home country practices followed by our company in lieu of NASDAQ rules are described below:·We do not follow NASDAQ’s quorum requirements applicable to meetings of shareholders. In accordance withDutch law and generally accepted business practice, our articles of association do not provide quorumrequirements generally applicable to general meetings of shareholders.·We do not follow NASDAQ’s requirements regarding the provision of proxy statements for general meetings ofshareholders. Dutch law does not have a regulatory regime for the solicitation of proxies and the solicitation ofproxies is not a generally accepted business practice in the Netherlands. We do intend to provide shareholderswith an agenda and other relevant documents for the general meeting of shareholders.We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicablecorporate governance requirements of the Sarbanes Oxley Act, the rules adopted by the SEC and NASDAQ’s listingstandards. As a Dutch company listed on a government recognized stock exchange, we are required to apply the provisions ofthe Dutch Corporate Governance Code, or explain any deviation from the provisions of such code in our Dutch AnnualReport required by Dutch law. 102 Table of ContentsYANDEX N.V.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReports of Independent Registered Public Accounting Firms F‑2Consolidated Balance Sheets as of December 31, 2017 and 2018 F‑4Consolidated Statements of Income for the Years Ended December 31, 2016, 2017 and 2018 F‑5Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2017 and 2018 F‑6Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2017 and 2018 F‑7Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2016, 2017 and 2018 F‑8Notes to the Consolidated Financial Statements F‑9 F-1 Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and Board of DirectorsYandex N.V.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of Yandex N.V. and subsidiaries (together, the“Company”) as of December 31, 2018 and 2017, the related consolidated statements of income, comprehensive income, cashflows and shareholders’ equity for the years then ended, and the related notes (collectively, the consolidated financialstatements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial positionof the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years thenended, in conformity with U.S. generally accepted accounting principles.The accompanying consolidated financial statements as of and for the year ended December 31, 2018 and 2017have been translated into United States dollars solely for the convenience of the reader. We have audited the translation and,in our opinion, the consolidated financial statements expressed in Russian rubles have been translated into United Statesdollars on the basis set forth in Note 2 “Summary of significant accounting policies – Foreign currency translation” of thenotes to the consolidated financial statements.We also have audited the adjustments to the 2016 consolidated financial statements to retrospectively apply thechange in accounting, as described in Note 2 “Summary of significant accounting policies – Reclassifications and changes inpresentation” and Note 16 “Information about segments, revenues & geographic areas”. In our opinion, such adjustments areappropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2016consolidated financial statements of the Company other than with respect to the adjustments and, accordingly, we do notexpress an opinion or any other form of assurance on the 2016 consolidated financial statements taken as a whole.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on thecriteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizationsof the Treadway Commission, and our report dated April 19, 2019 expressed an unqualified opinion on the effectiveness ofthe Company’s internal control over financial reporting.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility isto express an opinion on these consolidated financial statements based on our audits. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of materialmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of materialmisstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respondto those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles usedF-2 Table of Contentsand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financialstatements. We believe that our audits provide a reasonable basis for our opinion. /s/ JSC “KPMG”We have served as the Company’s auditor since 2017.Moscow, RussiaApril 19, 2019 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Shareholders of Yandex N.V.:We have audited, before the effects of the adjustments to retrospectively apply the change in accounting described in Note 2“Summary of significant accounting policies – Reclassifications and changes in presentation” and Note 16 “Informationabout segments, revenues & geographic areas” to the consolidated financial statements, the consolidated statements ofincome, comprehensive income, cash flows and shareholders’ equity of Yandex N.V. and subsidiaries (together, the“Company”) for the year ended December 31, 2016 (the 2016 consolidated financial statements before the effects of theadjustments discussed in Note 2 and Note 16 to the consolidated financial statements are not presented herein). Thesefinancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion onthese financial statements based on our audits.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believethat our audit provides a reasonable basis for our opinion.In our opinion, such consolidated financial statements, before the effects of the adjustments to retrospectively apply thechange in accounting described in Note 2 and Note 16 to the consolidated financial statements, present fairly, in all materialrespects, the results of operations of Yandex N.V. and subsidiaries and their cash flows for the year ended December 31, 2016,in conformity with accounting principles generally accepted in the United States of America.Our audit also comprehended the translation of Russian ruble amounts into U.S. dollar amounts and, in our opinion, suchtranslations have been made in conformity with the basis stated in Note 2. Such U.S. dollar amounts are presented solely forthe convenience of readers in the United States of America.We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change inaccounting described in Note 2 and Note 16 to the consolidated financial statements and, accordingly, we do not express anopinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properlyapplied. Those retrospective adjustments were audited by other auditors. /s/ AO Deloitte & Touche CISMoscow, Russia March 22, 2017 F-3 Table of ContentsYANDEX N.V.CONSOLIDATED BALANCE SHEETS(In millions of Russian rubles (“RUB”) and U.S. dollars (“$”), except share and per share data)d As of December 31, Notes 2017 2018 2018 RUB RUB $ ASSETS Current assets: Cash and cash equivalents 5 42,662 68,798 990.3 Term deposits 23,040 — — Accounts receivable, net 5, 17 9,746 14,570 209.7 Prepaid expenses 1,269 2,608 37.5 Other current assets 5 4,039 6,444 92.8 Total current assets 80,756 92,420 1,330.3 Property and equipment, net 8 21,171 39,740 572.0 Intangible assets, net 9 5,023 11,545 166.2 Goodwill 9 9,328 52,662 758.0 Long-term prepaid expenses 1,788 1,800 26.0 Term deposits, non-current 5,005 — — Investments in non-marketable equity securities 4, 5 2,001 36,484 525.2 Deferred tax assets 10 2,171 3,239 46.6 Other non-current assets 5 3,301 3,808 54.8 TOTAL ASSETS 130,544 241,698 3,479.1 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued liabilities 5, 17 11,111 16,886 243.1 Income and non-income taxes payable 5 4,213 4,059 58.4 Deferred revenue 2,464 2,792 40.2 Convertible debt 11 17,834 — — Total current liabilities 35,622 23,737 341.7 Deferred tax liabilities 10 959 1,572 22.6 Other accrued liabilities 1,316 569 8.2 Total liabilities 37,897 25,878 372.5 Commitments and contingencies 12 Redeemable noncontrolling interests 14 9,821 13,035 187.6 Shareholders’ equity: Priority share: €1 par value; 1 share authorized, issued and outstanding 13 — — — Preference shares: €0.01 par value; 1,000,000,001 shares authorized, nil shares issued andoutstanding 13 — — — Ordinary shares: par value (Class A €0.01, Class B €0.10 and Class C €0.09); sharesauthorized (Class A: 1,000,000,000, Class B: 46,997,887 and Class C: 46,997,887); sharesissued (Class A: 289,364,467 and 292,437,655, Class B: 40,692,286 and 37,878,658, andClass C: 4,166,448 and nil, respectively); shares outstanding (Class A: 285,612,556 and286,848,365, Class B: 40,692,286 and 37,878,658, and Class C: nil) 13 271 263 3.8 Treasury shares at cost (Class A: 3,751,911 and 5,589,290, respectively) 13 (3,814) (10,769) (155.0) Additional paid-in capital 16,469 69,729 1,003.7 Accumulated other comprehensive income 2, 5 1,864 8,182 117.7 Retained earnings 68,036 112,644 1,621.5 Total equity attributable to Yandex N.V. 82,826 180,049 2,591.7 Noncontrolling interests - 22,736 327.3 Total shareholders’ equity 82,826 202,785 2,919.0 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 130,544 241,698 3,479.1 The accompanying notes are an integral part of the consolidated financial statements. F-4 Table of ContentsYANDEX N.V.CONSOLIDATED STATEMENTS OF INCOME(In millions of Russian rubles and U.S. dollars, except share and per share data) Year ended December 31, Notes 2016 2017 2018 2018 RUB RUB RUB $ Revenues 16, 17 75,925 94,054 127,657 1,837.6 Operating costs and expenses: Cost of revenues(1) 19,754 23,937 35,890 516.6 Product development(1) 15,832 18,761 22,569 324.9 Sales, general and administrative(1) 17 17,885 27,081 36,200 521.1 Depreciation and amortization 9,607 11,239 12,137 174.7 Total operating costs and expenses 63,078 81,018 106,796 1,537.3 Income from operations 12,847 13,036 20,861 300.3 Interest income 2,863 2,909 3,382 48.7 Interest expense 11 (1,208) (897) (945) (13.6) Effect of Yandex.Market deconsolidation 4, 10 — — 28,244 406.6 Other (loss)/income, net 5 (3,395) (1,466) 2,922 42.0 Income before income tax expense 11,107 13,582 54,464 784.0 Income tax expense 10 4,324 4,926 8,603 123.9 Net income 6,783 8,656 45,861 660.1 Net loss attributable to noncontrolling interests 15 120 1,726 24.9 Net income attributable to Yandex N.V. 6,798 8,776 47,587 685.0 Net income per Class A and Class B share: Basic 3 21.19 27.02 145.67 2.10 Diluted 3 20.84 26.49 141.98 2.04 Weighted average number of Class A and Class Bshares outstanding: Basic 3 320,788,967 324,747,888 326,667,118 326,667,118 Diluted 3 326,136,949 331,243,961 335,162,062 335,162,062 (1)These balances exclude depreciation and amortization expenses, which are presented separately, and include share‑based compensationexpenses of: Cost of revenues 193 178 180 2.6Product development 2,238 2,477 4,450 64.1Sales, general and administrative 991 1,538 1,922 27.7 The accompanying notes are an integral part of the consolidated financial statements. F-5 YANDEX N.V.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions of Russian rubles and U.S. dollars) Year ended December 31, Notes 2016 2017 2018 2018 RUB RUB RUB $ Net income 6,783 8,656 45,861 660.1 Foreign currency translation adjustment: Foreign currency translation adjustment, net of tax ofnil (2,100) 968 8,102 116.6 Reclassification adjustment, net of tax of nil 5 (103) — — — Foreign currency translation adjustment, net of tax of nil (2,203) 968 8,102 116.6 Total other comprehensive (loss)/income (2,203) 968 8,102 116.6 Total comprehensive income 4,580 9,624 53,963 776.7 Total comprehensive loss/(income) attributable tononcontrolling interests 15 120 (133) (1.9) Total comprehensive income attributable to YandexN.V. 4,595 9,744 53,830 774.8 The accompanying notes are an integral part of the consolidated financial statements.F-6 YANDEX N.V. CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions of Russian rubles and U.S. dollars) Year ended December 31, Notes 2016* 2017 2018 2018 RUB RUB RUB $ CASH FLOWS FROM OPERATING ACTIVITIES: Net income 6,783 8,656 45,861 660.1 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment 7,655 9,131 9,833 141.5 Amortization of intangible assets 1,952 2,108 2,304 33.2 Amortization of debt discount and issuance costs 911 684 728 10.5 Share-based compensation expense 3,422 4,193 6,552 94.4 Deferred tax benefit (864) (1,513) (1,862) (26.8) Foreign exchange losses/(gains) 3,834 1,784 (3,155) (45.4) Gain from sale of equity securities (157) (33) — — Effect of deconsolidation of Yandex.Market 4 — — (28,244) (406.6) (Income)/loss from equity method investments (205) (353) 195 2.8 (Gain)/loss from repurchases of convertible debt (53) 6 — — Other 165 87 (63) (1.0) Changes in operating assets and liabilities excluding the effect of acquisitions: Accounts receivable, net (2,385) (1,996) (4,705) (67.7) Prepaid expenses and other assets 113 (2,224) (5,887) (84.7) Accounts payable and accrued liabilities 3,817 2,921 6,176 88.9 Deferred revenue 298 321 479 6.9 Net cash provided by operating activities 25,286 23,772 28,212 406.1 CASH FLOWS (USED IN)/PROVIDED BY INVESTING ACTIVITIES: Purchases of property and equipment and intangible assets (9,625) (12,389) (28,323) (407.7) Proceeds from sale of property and equipment 177 73 235 3.5 Acquisitions of businesses, net of cash acquired 4 — (918) 19,844 285.6 Investments in non-marketable equity securities (491) (191) (155) (2.2) Proceeds from sale of equity securities 4 — 267 34 0.5 Investments in debt securities (3,159) — — — Proceeds from maturity of debt securities 2,525 2,887 — — Investments in term deposits (70,430) (70,082) (55,592) (800.2) Maturities of term deposits 68,447 72,731 92,469 1,331.0 Loans granted (550) (166) (372) (5.4) Deconsolidation of cash and cash equivalents of Yandex.Market — — (2,181) (31.4) Net cash (used in)/provided by investing activities (13,106) (7,788) 25,959 373.7 CASH FLOWS USED IN FINANCING ACTIVITIES: Proceeds from exercise of share options 431 328 115 1.7 Repurchase of share options — (77) — — Repurchases of convertible debt 11 (5,397) (668) — — Repayment of convertible debt — — (21,281) (306.3) Repurchases of ordinary shares — — (10,085) (145.2) Payment for contingent consideration (680) (195) (1,504) (21.7) Other financing activities 97 25 (49) (0.7) Net cash used in financing activities (5,549) (587) (32,804) (472.2) Effect of exchange rate changes on cash and cash equivalents (3,449) (976) 4,288 61.7 Net change in cash and cash equivalents 3,182 14,421 25,655 369.3 Cash and cash equivalents at beginning of period 25,628 28,810 43,231 622.3 Cash and cash equivalents at end of period 28,810 43,231 68,886 991.6 Reconciliation of cash and cash balances: Cash and cash equivalents, beginning of period 24,238 28,232 42,662 614.1 Restricted cash, beginning of period 1,390 578 569 8.2 Cash and cash balances, beginning of period 25,628 28,810 43,231 622.3 Cash and cash equivalents, end of period 28,232 42,662 68,798 990.3 Restricted cash, end of period 578 569 88 1.3 Cash and cash balances, end of period 28,810 43,231 68,886 991.6 Supplemental disclosure of cash flow information: Cash paid for income taxes 4,531 5,704 8,874 127.7 Cash paid for acquisitions 4 — 918 956 13.8 Interest paid 264 208 112 1.6 Non-cash investing activities: Settlement of loans granted and interest receivable through acquisition 4 — — 795 11.5 Change in accounts payable for property and equipment (230) 38 27 0.4 Settlement of investments in relation to purchases of intangible assets — 173 — — Fair value of contingent consideration included in purchase price at acquisition 4 — 151 — — * In Q1 2017, Yandex elected to early adopt Accounting Standards Update ("ASU") No. 2016-18—Statement of Cash Flows (Topic 230): Restricted Cash, which provided revisedguidance on the classification and presentation of restricted cash in the statement of cash flows on a retrospective basis. Prior periods have been adjusted accordingly. The accompanying notes are an integral part of the consolidated financial statements. F-7 YANDEX N.V.CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY(In millions of Russian rubles and U.S. dollars, except share and per share data) Priority Share Ordinary Shares Accumulated Non- Redeemable Issued and Issued and Treasury Additional Other redeemable non- Outstanding Outstanding shares at Paid-In Comprehensive Retained NCI controlling Shares Amount Shares Amount cost Capital Income/(Loss) Earnings Total interests RUB RUB RUB RUB RUB RUB RUB RUB RUBBalance as of January 1,2016 1 — 319,252,171 75 (12,531) 17,257 3,099 62,197 — 70,097 —Share-based compensationexpense — — — — — 3,422 — — — 3,422 —Exercise of share options(Note 15) — — 3,364,769 — — 435 — — — 435 —Tax withholding related toexercise of share awards — — — — — (24) — — — (24) —Class B shares conversion — — — 209 — (209) — — — — —Reissue of shares for optionsexercised — — — — 4,163 (4,163) — — — — —Repurchase of convertibledebt — — — — — (113) — — — (113) —Windfall tax benefit — — — — — (29) — — — (29) —Foreign currency translationadjustment — — — — — — (2,203) — — (2,203) —Net income / (loss) — — — — — — — 6,798 — 6,798 (15)Decrease in ownership insubsidiaries — — — — — 3 — — — 3 221Change in redemption valueof redeemable noncontrollinginterests — — — — — — — (1,300) — (1,300) 1,300Balance as ofDecember 31, 2016 1 — 322,616,940 284 (8,368) 16,579 896 67,695 — 77,086 1,506Share-based compensationexpense — — — — — 4,193 — — — 4,193 —Exercise of share options(Note 15) — — 3,687,902 — — 335 — — — 335 —Tax withholding related toexercise of share awards — — — — — (85) — — — (85) —Class B shares conversion — — — (13) — 13 — — — — —Reissue of shares for optionsexercised — — — — 4,554 (4,554) — — — — —Repurchase of convertibledebt — — — — — (12) — — — (12) —Foreign currency translationadjustment — — — — — — 968 — — 968 —Net income / (loss) — — — — — — — 8,776 — 8,776 (120)Change in redemption valueof redeemable noncontrollinginterests — — — — — — — (8,435) — (8,435) 8,435Balance as ofDecember 31, 2017 1 — 326,304,842 271 (3,814) 16,469 1,864 68,036 — 82,826 9,821Share-based compensationexpense — — — — — 6,552 — — — 6,552 —Exercise of share options(Note 15) — — 3,182,860 — — 110 — — — 110 —Tax withholding related toexercise of share awards — — — — — (84) — — — (84) —Class B shares conversion — — — (8) — 8 — — — — —Repurchases of shares (Note13) — — (4,760,679) — (10,157) — — — — (10,157) —Reissue of shares for optionsexercised — — — — 3,202 (3,202) — — — — —Foreign currency translationadjustment — — — — — — 6,243 — 1,809 8,052 50Business combination — — — — — 49,384 — — 22,588 71,972 278Settlement of contingentconsideration by Class Ashares — — — — — 500 — — — 500 —Other — — — — — (8) 75 (28) — 39 —Net income / (loss) — — — — — — — 47,587 (1,661) 45,926 (65)Change in redemption valueof redeemable noncontrollinginterests — — — — — — — (2,951) — (2,951) 2,951Balance as ofDecember 31, 2018 1 — 324,727,023 263 (10,769) 69,729 8,182 112,644 22,736 202,785 13,035Balance as ofDecember 31, 2018, $ — 3.8 (155.0) 1,003.7 117.7 1,621.5 327.3 2,919.0 187.6 The accompanying notes are an integral part of the consolidated financial statements F-8 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)1. ORGANIZATION AND DESCRIPTION OF THE BUSINESSYandex N.V., together with its consolidated subsidiaries (together, the “Company”), is a technology company thatbuilds intelligent products and services powered by machine learning. The Company generates substantial part of itsrevenues from online advertising, while other revenues, primarily represented by commission-based revenues of its Taxibusiness, continue increasing their share in the Company’s revenue structure.Yandex N.V. was incorporated under the laws of the Netherlands in June 2004 and is the holding company ofYandex LLC, incorporated in the Russian Federation in October 2000, and other subsidiaries.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of PresentationThe accompanying consolidated financial statements have been prepared in conformity with accounting principlesgenerally accepted in the United States of America (“U.S. GAAP”). The accompanying consolidated financial statementsdiffer from the financial statements prepared by the Company’s individual legal entities for statutory purposes in that theyreflect certain adjustments, not recorded in the accounting records of the Company's individual legal entities, which areappropriate to present the financial position, results of operations and cash flows in accordance with U.S. GAAP.Distributable retained earnings of the Company are based on amounts reported in statutory accounts of individual entitiesand may significantly differ from amounts calculated on the basis of U.S. GAAP.Principles of ConsolidationThe consolidated financial statements include the accounts of the parent company and the entities it controls. Allinter‑company transactions and balances within the Company have been eliminated upon consolidation.Noncontrolling interests in consolidated subsidiaries are included in the consolidated balance sheets as a separatecomponent of equity. We report consolidated net income inclusive of both the Company’s and the noncontrolling interests’share, as well as amounts of consolidated net income/(loss) attributable to each of the Company and the noncontrollinginterests.Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets andliabilities at the date of the consolidated financial statements and amounts of revenues and expenses for the reporting period.Actual results could differ from those estimates. The most significant estimates relate to investments in non-marketableequity securities, redeemable noncontrolling interests, impairment assessments of goodwill and intangible assets, useful livesof property and equipment and intangible assets, accounts receivable allowance, fair values of share-based awards, deferredtax assets, fair values of financial instruments, income taxes and contingencies. The Company bases its estimates onhistorical experience and on various other assumptions that are believed to be reasonable, the results of which form the basisfor making judgments about the carrying values of assets and liabilities.Reclassifications and changes in presentationIn the first quarter of 2017, Yandex elected to early adopt an ASU “Statement of Cash Flows: Restricted Cash”,which provided revised guidance on the classification and presentation of restricted cash in the statement of cash flows on aretrospective basis. Prior periods have been adjusted accordingly. The effect of the reclassifications is presented below:F-9 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Consolidated Statements of Cash flows 2016 RUB CASH FLOWS FROM OPERATING ACTIVITIES: Prepaid expenses and other assets (163) CASH FLOWS USED IN FINANCING ACTIVITIES: Payment for contingent consideration (528) Effect of exchange rate changes on cash and cash equivalents (121) Net change in cash and cash equivalents (812) Cash and cash equivalents at beginning of period 1,390 Cash and cash equivalents at end of period 578 Also certain reclassifications have been made to the prior years’ consolidated statements of income due toaggregation/separation of certain line items in 2017.Consolidated Statements of IncomeIn 2016 interest expense was netted against interest income, starting 2017 interest expense is presented as a separateline in the consolidated statements of income. 2016 RUB Interest income 2,863 Interest expense (1,208) Interest income, net 1,655 OtherIn 2017, the Company changed the presentation of the effective income tax rate reconciliation from reconciling toexpected income tax expense at 20% in prior years to the Dutch statutory rate of 25% (see Note 10).Foreign Currency TranslationThe functional currency of the Company’s parent company is the U.S. dollar. The functional currency of theCompany’s operating subsidiaries is generally the respective local currency. The Company has elected the Russian ruble asits reporting currency. All balance sheet items are translated into Russian rubles based on the exchange rate on the balancesheet date and revenue and expenses are translated at monthly weighted average rates of exchange. Translation gains andlosses are recorded as foreign currency translation adjustments in other comprehensive income. Foreign exchange transactiongains and losses are included in other (loss)/income, net in the accompanying consolidated statements of income.Convenience TranslationTranslations of amounts from RUB into U.S. dollars for the convenience of the reader have been made at theexchange rate of RUB 69.4706 to $1.00, the prevailing exchange rate as of December 31, 2018. No representation is madethat the RUB amounts could have been, or could be, converted into U.S. dollars at such rate.F-10 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Certain Risks and ConcentrationsThe Company’s revenues are principally derived from online advertising, the market for which is highlycompetitive and rapidly changing. Significant changes in this industry or changes in users’ internet preferences or advertiserspending behavior could adversely affect the Company’s financial position and results of operations.In addition, the Company’s principal business activities are within the Russian Federation. Laws and regulationsaffecting businesses operating in the Russian Federation are subject to frequent changes, which could impact the Company’sfinancial position and results of operations.Other revenues, primarily represented by commission-based revenues of the Taxi business, continue increasing theirshare in the Company’s revenue structure. Significant changes in the ride-sharing industry could adversely affect theCompany's financial position and results of operation.Approximately half of the Company’s revenue is collected on a prepaid basis; credit terms are extended to majorsales agencies and to larger loyal clients. Accounts receivable are typically unsecured and are primarily derived fromrevenues earned from customers located in the Russian Federation.No individual customer or groups of affiliated customers represented more than 15% of the Company’s revenues oraccounts receivable in 2016, 2017 and 2018.Financial instruments that can potentially subject the Company to a significant concentration of credit risk consist,in addition to accounts receivable, primarily of cash, cash equivalents and term deposits. The primary focus of theCompany’s treasury strategy is to preserve capital and meet liquidity requirements.The Company’s treasury policy addresses the level of credit exposure by working with different geographicallydiversified banking institutions, subject to their conformity to an established minimum credit rating for bankingrelationships. To manage the risk exposure, the Company maintains its portfolio of investments in a variety of term depositsand money market funds.Revenue RecognitionOn January 1, 2018, the Company adopted Accounting Standards Update (the “ASU”) on revenue from contractswith customers (Topic 606), using the modified retrospective method applied to those contracts which were not completed asof January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while priorperiod amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting underTopic 605. The adoption of Topic 606 did not have a material impact on the Company’s consolidated financial statementsand there was no adjustment to beginning retained earnings on January 1, 2018.Revenue is recognized when the control of promised goods or services is transferred to the Company’s customers inan amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods orservices. The Company identifies its contracts with customers and all performance obligations within those contracts. TheCompany then determines the transaction price and allocates the transaction price to the performance obligations within theCompany's contracts with customers, recognizing revenue when, or as, the Company satisfies its performance obligations.Revenue is recorded net of value added tax (“VAT”).The Company’s revenue disaggregated by revenue source for the years ended December 31, 2016, 2017 and 2018consists of the following:F-11 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data) 2016 2017 2018 2018 RUB RUB RUB $ Online advertising revenues(1): Yandex websites 52,888 65,149 78,696 1,132.8 Yandex ad network websites 19,691 22,251 24,041 346.1 Total online advertising revenues 72,579 87,400 102,737 1,478.9 Revenues of Taxi business 2,313 4,891 19,213 276.6 Other revenues 1,033 1,763 5,707 82.1 Total revenues 75,925 94,054 127,657 1,837.6 (1)The Company records revenue net of VAT, sales agency commissions and bonuses and discounts. Because it isimpractical to track commissions, bonuses and discounts for online advertising revenues generated on Yandex websitesand on those of the Yandex ad network members separately, the Company has allocated commissions, bonuses anddiscounts between its Yandex websites and the Yandex ad network websites proportionately to their respective grossrevenue contributions.(2)As noted above, prior period amounts have not been adjusted under the modified retrospective method.Revenues disaggregated by geography, based on the billing address of the customer, consist of the following: 2016 2017 2018 2018 RUB RUB RUB $ Revenues: Russia 69,619 87,470 118,128 1,700.4 Rest of the world 6,306 6,584 9,529 137.2 Total revenues 75,925 94,054 127,657 1,837.6 The Company’s principal revenue streams and their respective accounting treatments are discussed below:Online Advertising RevenuesThe Company’s online advertising revenues are generated from serving online ads on its own websites and onYandex ad network members’ websites. Advance payments received by the Company from advertisers are recorded asdeferred revenue on the Company’s consolidated balance sheet and recognized as online advertising revenues in the periodservices are provided.Advertising sales commissions and bonuses that are paid to agencies are accounted for as an offset to revenues andamounted to RUB 5,633, RUB 7,375 and RUB 9,367 ($134.8) in 2016, 2017 and 2018, respectively.In accordance with U.S. GAAP, the Company reports online advertising revenues gross of fees paid to Yandex adnetwork members, because the Company is the principal to its advertisers and retains collection risk. The Company recordsfees paid to ad network members as traffic acquisition costs, a component of cost of revenues.The Company recognizes online advertising revenues based on the following principles:The Company’s Yandex.Direct service offers advertisers the ability to place performance-based ads on Yandex andYandex ad network member websites targeted to users’ search queries or website content. The Company recognizes asrevenues fees charged to advertisers as “click‑throughs” occur. A “click‑through” occurs each time a user clicks onF-12 (2)(2) Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)one of the performance‑based ads that are displayed next to the search results or on the content pages of Yandex or Yandexad network members’ websites.The Company recognized revenue for Yandex.Market services in the consolidated statements of income until thedeconsolidation of Yandex.Market in April 2018 (Note 4). Yandex.Market services are priced on a cost per click (CPC) basis,similar to Yandex.Direct.The Company recognizes revenue from brand advertising on its websites and on Yandex ad network memberwebsites as “impressions” are delivered. An “impression” is delivered when an advertisement appears on pages viewed byusers.The Company may accept a lower consideration than the amount promised per the contract for certain revenuetransactions and certain customers may receive cash-based incentives or credits, which are accounted for as variableconsideration when estimating the amount of revenue to recognize. The Company believes that there will be no significantchanges to the estimates of variable consideration.Revenues of Taxi businessThe revenues of the Taxi business primarily consist of commissions for providing ride-sharing services related to theYandex.Taxi and Uber after the transaction (Note 4) and commissions for food delivery services.For ride-sharing services provided to individual transportation services users, the Company is not a principal andreports only Yandex.Taxi’s and Uber’s commission fees as revenue. For services provided to corporate transportation servicesclients the Company acts as the principal and revenue and related costs are recorded gross. In the regions, where revenuesexceed promotional discounts to users and minimum fare guarantees, the discounts and guarantees are netted againstrevenues. For the regions, where discounts to users and minimum fare guarantees exceed the related revenues, the excess ispresented in sales, general and administrative expenses in the statement of operations and other comprehensive income.For food delivery services provided to individual service users, the Company is not a principal and reports onlyYandex.EATs’s commission fees as revenue. In the regions, where revenues exceed promotional discounts to users, thediscounts are netted against revenues. For the regions, where discounts to users exceed the related revenues, the excess ispresented in sales, general and administrative expenses in the statement of operations and other comprehensive income.The Company recorded RUB 14,311 ($206.0) of promotional discounts to users and minimum fare guarantees in2018 (RUB 9,737 in 2017), of which RUB 11,574 ($166.6) (RUB 4,606 in 2017) were netted against revenues and RUB2,737 ($39.4) (RUB 5,131 in 2017) were presented in sales, general and administrative expenses.Other RevenueThe Company’s other revenue primarily consists of revenues from car-sharing business.The Company’s revenue from car-sharing business is recognized over the period when the car rental service isprovided to users.Practical Expedients and ExemptionsThe Company accounts for sales commissions as incurred because the amortization period is one year or less.F-13 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)The Company does not disclose the value of unsatisfied performance obligations as of period end for contracts withan original expected duration of one year or less and contracts for which the Company recognizes revenue at the amount towhich the Company has the right to invoice for services performed.Cost of RevenuesCost of revenues primarily consists of traffic acquisition costs. Traffic acquisition costs consist of amountsultimately paid to Yandex ad network members and to certain other partners (“distribution partners”) who distribute theCompany’s products or otherwise direct search queries to the Company’s websites. These amounts are primarily based onrevenue‑sharing arrangements with ad network members and distribution partners. Traffic acquisition costs are expensed asincurred. Cost of revenues also includes expenses associated with the operation of the Company’s data centers, includingpersonnel costs, share-based compensation, rent, utilities and bandwidth costs; as well as content acquisition costs and othercost of revenues.Product Development ExpensesProduct development expenses consist primarily of personnel costs incurred for the development of, enhancement toand maintenance of the Company’s search engine and other Company’s websites and technology platforms. Productdevelopment expenses also include rent and utilities attributable to office space occupied by development staff.Software development costs, including costs to develop software products, are expensed before technologicalfeasibility is reached. Technological feasibility is typically reached shortly before the release of such products and as a result,development costs that meet the criteria for capitalization were not material for the periods presented.Advertising and Promotional ExpensesThe Company expenses advertising and promotional costs in the period in which they are incurred. For the yearsended December 31, 2016, 2017 and 2018, promotional and advertising expenses totaled approximately RUB 7,132, RUB13,054 and RUB 15,372 ($221.3), respectively.Government Funds ContributionsThe Company makes contributions to governmental pension, medical and social funds on behalf of its employees.In Russia, the amount was calculated using a regressive rate (from 14% to 4% for accredited IT outsourcing providers andfrom 30% to 15% for other companies in 2017 and 2018 and from 30% to 15% for all companies in 2016) based on theannual compensation of each employee. These contributions are expensed as incurred.Share‑Based CompensationThe Company grants share options, share appreciation rights (“SARs”), restricted share units (“RSUs”) and businessunit equity awards (together, “Share‑Based Awards”) to its employees and consultants.The Company estimates the fair value at the grant date of share options, SARs and business unit equity awards thatare expected to vest using the Black‑Scholes‑Merton (“BSM”) pricing model and recognizes the fair value on a straight‑linebasis over the requisite service period. The fair value of RSUs is measured based on the fair market values of the underlyingshare on the dates of grant.The assumptions used in calculating the fair value of Share‑Based Awards represent the Company’s best estimates,but these estimates involve inherent uncertainties and the application of management judgment. As a result, ifF-14 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)factors change and the Company uses different assumptions, the Company’s share‑based compensation expense could bematerially different in the future. In particular, before the fourth quarter of 2016 the Company was required to estimate theprobability that performance conditions that affect the vesting of certain awards would be achieved, and only recognizedexpense for those shares expected to vest. Starting from the fourth quarter of 2016 the Company accounts for forfeitures asthey occur.Cancellation of an award accompanied by the concurrent grant of a replacement award is accounted for as amodification of the terms of the cancelled award (“modification awards”). The compensation costs associated with themodification awards are recognized if either the original vesting condition or the new vesting condition has been achieved.Such compensation costs cannot be less than the grant‑date fair value of the original award. The incremental compensationcost is measured as the excess of the fair value of the replacement award over the fair value of the cancelled award at thecancellation date. Therefore, in relation to the modification awards, the Company recognizes share‑based compensation overthe vesting periods of the new awards, which comprises (1) the amortization of the incremental portion of share‑basedcompensation over the remaining vesting term and (2) any unrecognized compensation cost of the original award, usingeither the original term or the new term, whichever is higher for each reporting period.Income TaxesCurrent tax expense/(benefit) is calculated as the estimated amount expected to be recovered from or paid to thetaxing authorities based on the taxable income for the period. Deferred tax assets and liabilities are recognized for the futuretax consequences attributable to differences between the financial statement carrying amounts of existing assets andliabilities and their respective tax bases and for carryforwards. Deferred tax assets, including those for operating losscarryforwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in whichthose temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of achange in tax rates is recognized in income in the period that includes the enactment date. Deferred tax expense representsthe change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assetsand liabilities are classified as non‑current. Deferred tax assets are reduced by a valuation allowance when, in the opinion ofmanagement, and to the amount that it is more likely than not to be realized. In making such a determination, managementconsider all available evidence, including future reversals of existing taxable temporary differences, projected future taxableincome, tax-planning strategies, and results of recent operations.The tax benefits of tax positions are recognized in the financial statements if it is more likely than not that they willbe sustained on audit by the taxing authorities, including resolution of related appeals or litigation processes, if any.Recognized tax benefits are measured as the largest amount that is greater than 50 percent likely of being realizedupon settlement.The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expenseline in the consolidated statements of income. Accrued interest and penalties are presented in the consolidated balance sheetswithin other accrued liabilities, non-current or accounts payable and accrued liabilities together with unrecognized taxbenefits based on the timing of expected resolution.Comprehensive IncomeComprehensive income is defined as the change in equity during a period from non‑owner sources. U.S. GAAPrequires the reporting of comprehensive income in addition to net income. Comprehensive income of the Company includesnet income and foreign currency translation adjustments. For the years ended December 31, 2016, 2017 and 2018 totalcomprehensive income included, in addition to net income, the effect of translating the financial statements of theCompany’s legal entities domiciled outside of Russia from these entities’ functional currencies into Russian rubles.F-15 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Accumulated other comprehensive income of RUB 1,864 as of December 31, 2017 and RUB 8,182 ($117.7) as ofDecember 31, 2018 solely comprises cumulative foreign currency translation adjustment.Noncontrolling Interests and Redeemable Noncontrolling InterestsInterests held by third parties in consolidated majority-owned subsidiaries are presented as noncontrolling interests,which represent the noncontrolling stockholders’ interests in the underlying net assets of the Company’s consolidatedmajority-owned subsidiaries. Noncontrolling interests that are not redeemable are reported in the equity section of theconsolidated balance sheets. The net income attributable to noncontrolling interest reflects the share of the net income of theCompany’s consolidated subsidiaries, in which there are either noncontrolling interests or redeemable noncontrollinginterests.Ownership interests in the Company’s consolidated subsidiaries held by the senior employees of these subsidiariesare considered redeemable as according to the terms of the business unit equity awards the employees have the right toredeem their interests for cash. Accordingly, such redeemable noncontrolling interests have been presented as mezzanineequity in the consolidated balance sheets. Adjustments to the redemption value of the redeemable noncontrolling interestsare recorded through retained earnings.Fair Value of Financial InstrumentsFinancial instruments carried on the balance sheet include cash and cash equivalents, term deposits, restricted cash,investments in equity securities, accounts receivable, loans to employees, accounts payable, accrued liabilities andconvertible debt. The carrying amounts of cash and cash equivalents, short-term deposits, current restricted cash, accountsreceivable, accounts payable and accrued liabilities approximate their respective fair values due to the short‑term nature ofthose instruments.Term DepositsBank deposits are classified depending on their original maturity as (i) cash and cash equivalents if the originalmaturities are three months or less; (ii) current term deposits if the original maturities are more than three months, but no morethan one year; and (iii) non‑current term deposits if the original maturities are more than one year.Investments in Equity SecuritiesInvestments in the stock of entities in which the Company can exercise significant influence but does not own amajority equity interest or otherwise control are accounted for using the equity method. The Company records its share of theresults of these companies within the other (loss)/income, net line on the consolidated statements of income. Investments inthe non‑marketable stock of entities in which the Company can exercise little or no influence are accounted for using thecost method. Both equity and cost method accounted investments are included in investments in non‑marketable equitysecurities line on the consolidated balance sheets.The Company reviews its investments in equity securities for other-than-temporary impairment whenever events orchanges in business circumstances indicate that the carrying value of the investment may not be fully recoverable.Investments identified as having an indication of impairment are subject to further analysis to determine if the impairment isother-than-temporary and this analysis requires estimating the fair value of the investment. The determination of fair value ofthe investment involves considering factors such as current economic and market conditions, the operating performance ofthe companies including current earnings trends and forecasted cash flows, and other company and industry specificinformation. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to other(loss)/income, net and a new cost basis in the investment is established.F-16 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Variable Interest EntitiesEntities that do not have sufficient equity at risk to allow the entity to finance its activities without additionalfinancial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interestare referred to as variable interest entities (“VIE”). A VIE is consolidated by the variable interest holder that is determined tohave the controlling financial interest (primary beneficiary) as a result of having both the power to direct the activities of aVIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or right to receivebenefits from the VIE that could potentially be significant to the VIE. The Company determines whether it is the primarybeneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractualterms, nature of the VIE’s operations and purpose, and the Company’s relative exposure to the related risks of the VIE on thedate it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on anongoing basis.As of December 31, 2017, the Company held interests in a third party, Edadeal, a Russian limited liability company(“Edadeal”) through loans and 10% equity investments. Edadeal was primarily financed by the Company’s loans andoperates an application for grocery shopping offers, coupons and cashback. The Company had treated Edadeal as a VIE sinceEdadeal did not have sufficient equity at risk. The Company had determined that it should not consolidate Edadeal as it wasnot the primary beneficiary and lacks power through voting or similar rights to direct the activities that most significantlyaffect Edadeal’s economic performance. The Company’s investments related to Edadeal included in investments in non-marketable equity securities and loans granted to third parties (Note 5) totaled RUB 361 as of December 31, 2017,representing the Company’s maximum exposure to loss. In October 2018, the Company acquired the remaining 90% interestin Edadeal (Note 4).Accounts Receivable, NetAccounts receivable are stated at their net realizable value. The Company provides an allowance for doubtfulaccounts based on management’s periodic review for recoverability of accounts receivable from customers and otherreceivables. The Company evaluates the collectability of its receivables based upon various factors, including the financialcondition and payment history of major customers, an overall review of collections experience of other accounts andeconomic factors or events expected to affect the Company’s future collections.Property and EquipmentProperty and equipment are recorded at cost and depreciated over their useful lives. Capital expenditures incurredbefore property and equipment are ready for their intended use are capitalized as assets not yet in use.Depreciation is computed under the straight‑line method using estimated useful lives as follows: Estimated useful livesServers and network equipment 3.0 – 4.0 yearsInfrastructure systems 3.0 - 10.0 yearsOffice furniture and equipment 3.0 yearsBuildings 10.0 - 20.0 yearsLeasehold improvements the shorter of 5.0 years or the remaining period of the lease termOther equipment 2.0 ‑ 5.0 years Land is not depreciated.Depreciation of assets included in assets not yet in use commences when they are ready for the intended use.F-17 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Goodwill and Intangible AssetsGoodwill represents the excess of purchase consideration over the Company’s share of fair value of the net assets ofacquired businesses. During the measurement period, which may be up to one year from the acquisition date, the Companymay prospectively apply adjustments to the assets acquired and liabilities assumed with the corresponding offset togoodwill. Goodwill is not subject to amortization but is tested for impairment at least annually.The Company performs a qualitative assessment to determine whether further impairment testing on goodwill isnecessary. If the Company believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair valueof a reporting unit is less than its carrying amount, a quantitative impairment test is required. Otherwise, no further testing isrequired. The quantitative impairment test is performed by comparing the carrying value of each reporting unit’s net assets(including allocated goodwill) to the fair value of those net assets. If the reporting unit’s carrying amount is greater than itsfair value, the Company recognizes a goodwill impairment charge for the amount by which the carrying value of a reportingunit exceeds its fair value. The Company did not recognize any goodwill impairment for the years ended December 31, 2016,2017 and 2018.The Company amortizes intangible assets using the straight-line method and estimated useful lives of assets rangingfrom 1 to 16 years, with a weighted‑average life of 8.2 years: Estimated useful livesAcquisition-related intangible assets: Content and software 1.0-10.0 yearsCustomer relationships 2.0-16.0 yearsPatents and licenses 6.8 yearsNon-compete agreements 2.0-5.0 yearsTrade names and domain names 2.0-10.0 yearsWorkforce 4.0 yearsSupplier relationships 1.0 yearOther technologies and licenses the shorter of 5.0 years or the underlying license termsImpairment of Long-lived Assets Other Than GoodwillThe Company evaluates the carrying value of long‑lived assets other than goodwill for impairment whenever eventsor changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. When such adetermination is made, management’s estimate of undiscounted cash flows to be generated by the assets is compared to thecarrying value of the assets to determine whether impairment is indicated. If impairment is indicated, the amount of theimpairment recognized in the consolidated financial statements is determined by estimating the fair value of the assets andrecording a loss for the amount by which the carrying value exceeds the estimated fair value. This fair value is usuallydetermined based on estimated discounted cash flows.Recently Adopted Accounting PronouncementsIn the fourth quarter of 2018, the Company early adopted an ASU that expands the scope of ASC Compensation -Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Thenew standard was applied on a prospective basis. The adoption of this ASU did not have a material effect on the Company’sconsolidated financial statements.Effective December 31, 2018, the Company adopted an ASU on accounting for the income tax consequences ofintra-entity transfers of assets other than inventory that requires to recognize the tax expense from the sale of the asset inF-18 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated inconsolidation. The amendments in this update eliminate the exception for an intra-entity transfer of an asset other thaninventory. The amendments are required to be applied on a modified retrospective basis through a cumulative-effectadjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this ASU did not have amaterial effect on the Company’s consolidated financial statements.Effective December 31, 2018, the Company adopted an ASU on other income - gains and losses from thederecognition of nonfinancial assets (Subtopic 610-20). The amendment clarifies the scope and application of ASC 610-20on the sale or transfer of nonfinancial assets, including real estate, and in substance nonfinancial assets to noncustomers,including partial sales. An entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promisedto a counterparty and derecognize each asset when the counterparty obtains control of it. In addition, the amendment requiresan entity to derecognize a distinct nonfinancial asset, or an in-substance nonfinancial asset, in a partial sale transaction whenthe entity does not retain a controlling financial interest in the legal entity that holds the asset and transfers control of theasset. Once control is transferred, any non-controlling interest received is required to be measured at fair value. The newstandard was applied on a retrospective basis. The adoption of this ASU did not have a material effect on the Company’sconsolidated financial statements.Effect of Recently Issued Accounting PronouncementsIn February 2016, the FASB issued an ASU on accounting for leases which introduces a model that brings mostleases on the lessee’s balance sheet. The amendments are effective for annual reporting periods beginning after December 15,2018, including interim periods within those annual reporting periods. Further in January 2018, the FASB has issued an ASUwhich permits an entity to elect an optional transition practical expedient to not evaluate under new Topic “Leases” landeasements that exist or expired before the entity’s adoption of new Topic “Leases” and that were not previously accountedfor as leases under current Topic “Leases”. Further in July 2018, the FASB issued an ASU which provides entities with anadditional (and optional) transition method to adopt the new lease requirements in ASU “Leases” by allowing entities toinitially apply the new requirements by recognizing the cumulative effect adjustment to the opening balance of retainedearnings in the period of adoption. This guidance further provides lessors with a practical expedient by class of underlyingasset, to not separate non-lease components from the associated lease component. In December 2018, the FASB issued anASU which provides an election for lessors to exclude sales and related taxes from consideration in the contract, requireslessors to exclude from revenue and expense lessor costs paid directly to a third party by lessees, and clarifies lessors’accounting for variable payments related to both lease and nonlease components. This ASU is effective for reporting periodsbeginning after December 15, 2018. Also, in March 2019, the FASB issued an ASU codification improvements, whichprovide clarification on implementation issues. The implementation issues include determining the fair value of theunderlying asset by lessors that are not manufacturers or dealers, presentation on the statement of cash flows for sales-typeand direct financing leases, and transition disclosures related to Topic “Accounting Changes and Error Corrections”. TheCompany adopted the standard effective January 1, 2019, using a modified retrospective method, with certain practicalexpedients available, and will restate comparative periods. The standard will have a material impact on the Company’sconsolidated balance sheets, but it will not have a material impact on its consolidated statements of income andcomprehensive income, its consolidated statements of shareholders’ equity, or its consolidated statements of cash flows.Adoption of the standard will result in the recognition of additional right-of-use assets and lease liabilities for operatingleases of approximately RUB 14 billion and RUB 13 billion as of December 31, 2017 and approximately RUB 16 billion($0.2 billion) and RUB 18 billion ($0.3 billion) as of December 31, 2018, respectively, primarily relating to real estate.In June 2016, the FASB issued an ASU which requires the measurement and recognition of expected credit losses forfinancial assets held at amortized cost to be presented at the net amount expected to be collected. The ASU is effective forreporting periods beginning after December 15, 2019. Early adoption is permitted for reporting periods beginning afterDecember 15, 2018. The Company is currently evaluating the effect that this guidance will have on the consolidatedfinancial statements and related disclosures. The effect will largely depend on the composition and credit quality of ourinvestment portfolio and the economic conditions at the time of adoption.F-19 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)In July 2017, the FASB issued an ASU which makes limited changes to the Board’s guidance on classifying certainfinancial instruments as either liabilities or equity. The ASU’s objective is to improve (1) the accounting for instruments with“down-round” provisions and (2) the readability of the guidance in ASC Distinguishing Liabilities From Equity, ondistinguishing liabilities from equity by replacing the indefinite deferral of certain pending content with scope exceptions.This ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Companyadopted the standard effective January 1, 2019, and is currently evaluating the effect that the guidance will have on theconsolidated financial statements and related disclosures.In August 2017, the FASB issued amendments to hedge accounting intended to better align a company's riskmanagement strategies and financial reporting for hedging relationships through changes to both the designation andmeasurement guidance for qualifying hedging relationships and presentation of hedge results. The amendments expand andrefine accounting for both nonfinancial and financial risk components and align the recognition and presentation of theeffects of the hedging instrument and hedged item in the financial statements. This ASU is effective for reporting periodsbeginning after December 15, 2018, with early adoption permitted. The Company adopted the standard effective January 1,2019, and is currently evaluating the effect that the guidance will have on the consolidated financial statements and relateddisclosures.In February 2018, the FASB issued an ASU that amends the guidance on the reclassification of certain tax effectsfrom accumulated other comprehensive income in ASC “Income Statement – Reporting Comprehensive Income”. The ASUpermits entities to reclass from accumulated other comprehensive income to retained earnings for stranded tax effectsresulting from the newly enacted U.S. federal corporate income tax rate as a result of the Tax Cuts and Jobs Act. The amountof the reclassification is the difference between the historical corporate income tax rate and the newly enacted twenty-onepercent corporate income tax rate. The ASU also requires an entity to disclose a description of its accounting policy forreleasing income tax effects from accumulated other comprehensive income. The ASU is effective for reporting periodsbeginning after December 15, 2018, with early adoption permitted. The Company adopted the standard effective January 1,2019, and is currently evaluating the impact that the guidance will have on the consolidated financial statements.In August 2018, the FASB issued an ASU which modifies certain disclosure requirements of fair value measurementsby removing certain disclosures, modifying certain disclosures and adding additional disclosures. This ASU is effective forreporting periods beginning after December 15, 2019, with early adoption permitted. The Company currently anticipatesadopting the standard effective January 1, 2020, and is currently evaluating the impact that the guidance will have on theconsolidated financial statements.In August 2018, the FASB issued an ASU which aligns the requirements for capitalizing implementation costsincurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costsincurred to develop or obtain internal-use software. This ASU is effective for reporting periods beginning after December 15,2019, with early adoption permitted. The Company currently anticipates adopting the standard effective January 1, 2020,and is currently evaluating the impact that the guidance will have on the consolidated financial statements.In October 2018, the FASB issued an ASU which provides that indirect interest held through related parties incommon control arrangements should be considered on a proportional basis for determining whether fees paid to decisionmakers and service providers are variable interest. This ASU is effective for reporting periods beginning after December 15,2019, with early adoption permitted. The Company currently anticipates adopting the standard effective January 1, 2020,and is currently evaluating the impact that the guidance will have on the consolidated financial statements.In March 2019, the FASB issued an ASU which aligns the accounting for production costs of episodic televisionseries with the accounting for production costs of films. In addition, the ASU modifies certain aspects of the capitalization,impairment, presentation and disclosure requirements in ASC “Entertainment—Films—Other Assets—F-20 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Film Costs” and the impairment, presentation and disclosure requirements in ASC “Entertainment—Broadcasters—Intangibles—Goodwill and Other”. This ASU is effective for the reporting periods beginning after December 15, 2019, withearly adoption permitted. The Company is currently evaluating the effect that this guidance will have on the consolidatedfinancial statements.No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management tohave a material impact on the Company’s present or future financial statements.3. NET INCOME PER SHAREBasic net income per Class A and Class B ordinary share for the years ended December 31, 2016, 2017 and 2018 iscomputed on the basis of the weighted average number of ordinary shares outstanding using the two class method. Basic netincome per share is computed using the weighted average number of ordinary shares outstanding during the period,including restricted shares. Diluted net income per ordinary share is computed using the effect of the outstandingShare‑Based Awards calculated using the “treasury stock” method.The computation of the diluted net income per Class A share assumes the conversion of Class B shares, while thediluted net income per Class B share does not assume the conversion of those shares. The net income per share amounts arethe same for Class A and Class B shares because the holders of each class are legally entitled to equal per share distributionswhether through dividends or in liquidation. The number of Share‑Based Awards excluded from the diluted net income perordinary share computation, because their effect was anti-dilutive for the years ended December 31, 2016, 2017 and 2018,was 2,362,417, 1,862,125 and 3,016,826, respectively. The effects of Business Unit Equity Awards were excluded from thediluted net income per ordinary share computation for the years ended December 31, 2016 and 2018, because the effects wereanti-dilutive. The effects of Business Unit Equity Awards were excluded from the diluted net income per ordinary sharecomputation for the year ended December 31, 2017, because the effects were not significant.The Company’s convertible debt provided for a flexible settlement feature. In December 2018, the convertible debtmatured and the Company repaid the convertible debt for cash (Note 11). The convertible debt was anti‑dilutive in the yearsended December 31, 2016, 2017 and 2018.F-21 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)The components of basic and diluted net income per share were as follows: Year ended December 31, 2016 2017 2018 Class A Class B Class A Class B Class A Class A Class B Class B RUB RUB RUB RUB RUB $ RUB $ Net income,allocated for basic 5,825 973 7,583 1,193 42,010 604.7 5,577 80.3 Reallocation of netincome as a resultof conversion ofClass B toClass A shares 973 — 1,193 — 5,577 80.3 — — Reallocation of netincome toClass B shares — (1) — (19) — — (140) (2.0) Net income,allocated fordiluted 6,798 972 8,776 1,174 47,587 685.0 5,437 78.3 Weighted averageordinary sharesoutstanding—basic 274,863,606 45,925,361 280,586,437 44,161,451 288,380,711 288,380,711 38,286,407 38,286,407 Dilutive effect of: Conversion ofClass B toClass A shares 45,925,361 — 44,161,451 — 38,286,407 38,286,407 — — Share-BasedAwards 5,347,982 694,042 6,496,073 146,027 8,494,944 8,494,944 6,529 6,529 Weighted averageordinary sharesoutstanding—diluted 326,136,949 46,619,403 331,243,961 44,307,478 335,162,062 335,162,062 38,292,936 38,292,936 Net income pershare attributableto ordinaryshareholders: Basic 21.19 21.19 27.02 27.02 145.67 2.10 145.67 2.10 Diluted 20.84 20.84 26.49 26.49 141.98 2.04 141.98 2.04 4. BUSINESS COMBINATIONS AND INVESTMENT TRANSACTIONSAcquisitions in 2018UberIn February 2018, the Company and Uber International C.V. ( “Uber”), a subsidiary of Uber TechnologiesInc., completed the combination of Yandex.Taxi Holding B.V. with several Uber legal entities into MLU B.V., a Dutchprivate limited liability company. The Company and Uber have each contributed their legal entities operating the ride-sharing and food delivery businesses in Russia, Kazakhstan, Azerbaijan, Armenia, Belarus and Georgia, and $100.0 (RUB5,722 as of the date of acquisition) and $225.0 (RUB 12,874 as of the date of acquisition) in cash, respectively. The mergerwas accounted for as a business combination.Immediately after the completion of the transaction, Uber Technologies Inc. transferred 1,527,507 of its Class ACommon Shares to the Company in exchange for additional 2.03% in the share capital of MLU B.V. At the same time, UberTechnologies Inc. entered into an arrangement with the Company to hold an option to repurchase these shares after the 3-year period from the one-year anniversary of deal close, while the Company has an option to sell these shares to Uber.As a result of the above transactions, 61.00% of share capital of the combined entity is held by the Company,37.96% by Uber and 1.04% by the employees of the Yandex.Taxi business based on the total number of outstanding shares.F-22 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)The acquisition-date fair value of the consideration transferred amounted to RUB 53,261 ($766.7), which consistedof cash consideration, in the amount of RUB 3,061 ($44.1) and non-cash consideration, represented by the fair value of non-controlling interest in the Yandex.Taxi business contributed.The fair value of non-cash consideration at the acquisition date was RUB 50,200 ($722.6), which was determinedusing a discounted cash flow model. This fair value measurement is based on significant unobservable inputs and thusrepresents a Level 3 measurement as defined by ASC 820.Set out below is the condensed balance sheet of Uber business contributed as of February 7, 2018, reflecting theallocation of the purchase price to net assets acquired:February 7, 2018RUBASSETS:Cash and cash equivalents 20,762 Other current assets 314 Property and equipment 70 Intangible assets 7,257 Goodwill 42,026 Investments in non-marketable equity securities 4,392 Total assets 74,821 LIABILITIES:Other current liabilities 403Deferred tax liabilities 1,508 Total liabilities 1,911 Total net assets acquired 72,910 Fair value of the noncontrolling interest 19,649 Total purchase consideration 53,261 Of the RUB 7,257 ($104.5) assigned to intangible assets, approximately RUB 2,115 ($30.5) relates to the acquiredlicense for Uber brand that will be amortized over a period of 6.9 years and approximately RUB 5,142 ($74.0) representscustomer relationships that will be amortized over a period of 15.9 years.The RUB 42,026 ($604.9) of goodwill was assigned to the Taxi reportable segment. The Company expects toachieve significant synergies and cost reductions using Yandex’s deep technological expertise and the global ride-sharingexpertise of Uber. None of the goodwill is expected to be deductible for income tax purposes.The Сompany recognized RUB 319 ($4.6) and RUB 482 ($6.9) of acquisition related costs that were expensed inthe years ended December 31, 2017 and December 31, 2018, respectively. These costs are recorded in sales, general andadministrative expenses in the statement of operations and other comprehensive income.The fair value of the noncontrolling interest was determined based on the fair value of Uber business contributed.The fair value was estimated using a discounted cash flow model. As Uber was a private company as of the date of thetransaction, the fair value measurement is based on significant inputs that are not observable in the market and thusrepresents a Level 3 measurement as defined in ASC 820.F-23 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Fair value of Uber business was determined using cash flow projections based on financial budgets and forecastscovering a five-year period. The cash flows beyond that five-year period have been estimated based on sustainable long-termgrowth rates.The pro forma consolidated income statement of Uber business as if had been included in the consolidated results ofthe Company for the year ended December 31, 2017, would include revenue in the amount of RUB 668 ($9.6) and net loss inthe amount of RUB 7,531 ($108.4).The results of operations of Uber business contributed after acquisition for the period since February 7, 2018 toDecember 31, 2018 include revenue in the amount of RUB 861 ($12.4) and net loss in the amount of RUB 1,380 ($19.9).The unaudited pro forma consolidated income statement as if had been included in the consolidated results of theCompany for the year ending December 31, 2018, would include revenue in the amount of RUB 1,031 ($14.8) and net lossin the amount of RUB 1,495 ($21.5).The unaudited pro forma amounts have been calculated after applying the Company’s accounting policies andadjusting the results of Uber business contributed to reflect the additional amortization that would have been chargedassuming the fair value adjustments to intangible assets had been applied on January 1, 2017, together with theconsequential tax effects.EdadealIn October 2018, the Company completed the acquisition of 90% in Edadeal LLC and its subsidiary (“Edadeal”), adaily deal and coupon aggregator, which is often used to find deals for grocery stores, thus increasing the Company’s share init from 10% to 100%. As of the date of acquisition, the Company measured the fair value of the Company’s initial 10%equity investments in Edadeal at the amount of RUB 26 ($0.4), which was reflected in the purchase consideration. Cashconsideration transferred totaled RUB 233 ($3.4). The acquisition is accounted for as a business combination. Set out below is the condensed balance sheet of Edadeal as of October 5, 2018, reflecting an allocation of thepurchase price to net assets acquired: F-24 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)October 5, 2018RUBASSETS:Cash and cash equivalents20Accounts receivable176Other current assets15Intangible assets, net357Goodwill622Deferred tax assets5Total assets1,195Long-term debt621Short-term debt174Accounts payable and accrued liabilities84Deferred tax liabilities57Total liabilities936Net assets259Total purchase consideration259 The RUB 622 ($9.0) assigned to goodwill is attributable to the Search and Portal reportable segment and isprimarily attributable to expected synergies that result from convergence with Edadeal’s unique audience and data. Of theRUB 357 ($5.1) assigned to intangible assets, approximately RUB 251 ($3.6) relates to software that will be amortized overa period of 4.0 years, RUB 61 ($0.9) relates to customer relationships and RUB 45 ($0.6) relates to brand.The results of operations of Edadeal for the period prior to acquisition would not have had a material impact on theCompany’s results of operations for the years ended December 31, 2017 and 2018. Accordingly, no pro forma financialinformation is presented. The results of operations of Edadeal did not have a material impact on the Company’s results ofoperations for the year ended December 31, 2018. Formation of Yandex.Market joint venture in 2018Yandex.MarketOn April 27, 2018, the Company and Sberbank formed a joint venture based on the Yandex.Market platform. As a partof the deal, Sberbank subscribed for new ordinary shares of Yandex.Market for RUB 30,000 ($431.8). Since that date, each ofthe Company and Sberbank hold an equal number of the outstanding shares in Yandex.Market, with up to 10% ofoutstanding shares allocated to management and an equity incentive pool. The Company retained a non-controlling interestand significant influence over Yandex.Market's business. Accordingly, Yandex.Market's results of operations before thetransaction are classified within continuing operations.On April 27, 2018, the Company deconsolidated Yandex.Market from the Company’s consolidated financial resultsand accounted for its investment under the equity method within Investments in non-marketable equity securities, initially atfair value of RUB 29,985 ($431.6). It resulted in a gain on the deconsolidation in the amount of RUB 28,244 ($406.6). Fairvalue has been determined using valuation techniques such as discounted cash flows. Starting April 27, 2018, the Companyrecords a share of Yandex.Market’s financial results within the other (loss)/income, net line in the consolidated statements ofincome. F-25 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)OtherDuring the year ended December 31, 2018, the Company completed other acquisitions for total consideration ofapproximately RUB 751 ($10.8). In aggregate, RUB 17 ($0.2) was cash acquired, RUB 14 ($0.2) was attributed to propertyand equipment, RUB 130 ($1.9) was attributed to intangible assets, RUB 792 ($11.4) was attributed to goodwill, RUB 15 ($0.2) was attributed to deferred tax liabilities, RUB 22 ($0.3) was attributed to net current assets assumed and RUB 209 ($3.0) was attributed to redeemable noncontrolling interests. Goodwill is mainly attributable to the Taxi reportable segmentand primarily arises due to specific synergies that result from the integration with the existing operations of other businessesor technologies of the Company.Acquisitions in 2017ShkulevIn June 2017, the Company completed the acquisition of assets and assumption of liabilities of Hearst ShkulevDigital LLC (“Shkulev”), one of the biggest regional auto classifieds with the leading position in Sverdlovsk andChelyabinsk regions of the Russian Federation, for a cash consideration of RUB 401, including a contingent consideration ofRUB 52, subject to successful technical integration and client base transition. As of December 31, 2018, the contingentconsideration in the amount of RUB 44 ($0.6) was paid. The Company accounted for the acquisition as a businesscombination.Set out below is the condensed balance sheet of Shkulev as of June 28, 2017, reflecting an allocation of thepurchase price to net assets acquired: June 28, 2017 RUB ASSETS: Intangible assets 59 Deferred tax assets 68 Goodwill 274 Total assets 401 Net assets 401 Total purchase consideration 401 The RUB 274 assigned to goodwill is attributable to the Classifieds reportable segment and primarily arises due tospecific synergies that result from convergence with other vertical aggregators developed by the Company and theCompany’s distribution capabilities. Of the RUB 59 assigned to intangible assets, approximately RUB 22 relates to softwareand website, RUB 12 relates to domain name and trademark, RUB 10 relates to customer relationships and RUB 15 representsnon-compete agreements.The results of operations of Shkulev for the period prior to acquisition would not have had a material impact on theCompany’s results of operations for the years ended December 31, 2016 and 2017. Accordingly, no pro forma financialinformation is presented. The results of operations of Shkulev did not have a material impact on the Company’s results ofoperations for the year ended December 31, 2017. F-26 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)FoodFoxIn December 2017, the Company completed the acquisition of a 100% ownership interest in Deloam ManagementLimited and its subsidiary (“FoodFox”). FoodFox is one of the leading food delivery operators in Moscow. The primarypurpose of the acquisition of FoodFox was to enlarge the range of services provided by the Company. The fair value ofconsideration transferred totaled RUB 595 and consisted of cash consideration of RUB 541 and deferred consideration ofRUB 54. The deferred consideration arrangement requires the Company to pay the additional cash consideration toFoodFox’s former shareholders and convertible debt holders, when certain legal conditions are being met within four-yearperiod.Set out below is the condensed balance sheet of FoodFox as of December 22, 2017, reflecting an allocation of thepurchase price to net assets acquired: December 22, 2017 RUB ASSETS: Intangible assets 82 Goodwill 639 Other current assets 25 Total assets 746 LIABILITIES: Current liabilities 20 Other non-current liabilities 115 Deferred tax liabilities 16 Total liabilities 151 Net assets 595 Total purchase consideration 595 The RUB 639 assigned to goodwill is attributable to the Taxi reportable segment and primarily arises due toexpected synergies and the assembled workforce of FoodFox that does not qualify for separate recognition. None of thegoodwill is expected to be deductible for income tax purposes. As of December 31, 2017, there were no changes in therecognized amount of goodwill resulting from the acquisition of FoodFox. Of the RUB 82 assigned to intangible assets,approximately RUB 63 relates to software that will be amortized over a period of 5.0 years. The remaining RUB 19 wasassigned to client relationships.The results of operations of FoodFox for the period prior to acquisition would not have had a material impact on theCompany’s results of operations for the year ended December 31, 2016. Accordingly, no pro forma financial information ispresented.The pro forma consolidated income statement as if had been included in the consolidated results of the Company forthe year ending December 31, 2017, would include revenue in the amount of RUB 104 and net loss in the amount of RUB409. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results ofFoodFox to reflect the additional amortization that would have been charged assuming the fair value adjustments tointangible assets had been applied on January 1, 2017, together with the consequential tax effects. The results of operations of FoodFox after acquisition for the period since December 22, 2017 to December 31, 2017did not have a material impact on the Company’s results of operations for the year ended December 31, 2017.F-27 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)OtherDuring the year ended December 31, 2017, the Company completed another acquisition for total consideration ofapproximately RUB 66. In aggregate, RUB 30 was attributed to intangible assets, RUB 29 was attributed to goodwill andRUB 7 was attributed to deferred tax assets. Goodwill is attributable to the Classifieds reportable segment and primarilyarises due to specific synergies that result from convergence with other vertical aggregators developed by the Company andthe Company’s distribution capabilities. Acquisitions in 2016The Company did not complete any business combinations in 2016. 5. CONSOLIDATED FINANCIAL STATEMENTS DETAILS Cash and Cash EquivalentsCash and cash equivalents as of December 31, 2017 and 2018 consisted of the following: 2017 2018 2018 RUB RUB $ Cash 11,963 6,330 91.1 Cash equivalents: Bank deposits 30,686 62,463 899.1 Investments in money market funds 3 3 0.1 Other cash equivalents 10 2 — Total cash and cash equivalents 42,662 68,798 990.3 Accounts Receivable, NetAccounts receivable as of December 31, 2017 and 2018 consisted of the following: 2017 2018 2018 RUB RUB $ Trade receivables 10,398 15,240 219.3 Allowance for doubtful accounts (652) (670) (9.6) Total accounts receivable, net 9,746 14,570 209.7 Movements in the allowance for doubtful accounts are as follows: 2016 2017 2018 2018 RUB RUB RUB $ Balance at the beginning of the period 295 450 652 9.4 Charges to expenses 211 243 103 1.5 Utilization (56) (41) (85) (1.3) Balance at the end of the period 450 652 670 9.6 F-28 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data) Other Current AssetsOther current assets as of December 31, 2017 and 2018 consisted of the following: 2017 2018 2018 RUB RUB $ Funds receivable 802 2,217 31.9 VAT reclaimable 882 2,002 28.8 Loans to employees 624 744 10.7 Other receivables 184 398 5.7 Inventory 40 265 3.8 Interest receivable 763 261 3.8 Loans granted to related parties (Note 17) — 174 2.5 Prepaid income tax 25 78 1.1 Restricted cash 549 71 1.1 Prepaid other taxes 14 21 0.3 Loans granted to third parties 53 11 0.2 Other 103 202 2.9 Total other current assets 4,039 6,444 92.8 Restricted cash as of December 31, 2017 and 2018 consisted of the pledged cash in customs in the amount of RUB138 and RUB 4 ($0.1), the cash reserved in a special escrow account before lapse of the claim period for warranties receivedin relation to the acquisition of Auto.ru in the amount of RUB 403 and nil, respectively, and other restricted cash in the totalamount of RUB 8 and RUB 67 ($1.0), respectively. Other Non‑current AssetsOther non‑current assets as of December 31, 2017 and 2018 consisted of the following: 2017 2018 2018 RUB RUB $ Loans to employees 1,492 2,139 30.8 VAT reclaimable 638 626 8.9 Loans granted to third parties 849 402 5.8 Non-current content assets, net 29 335 4.8 Other receivables 57 73 1.1 Restricted cash 20 17 0.2 Loans granted to related parties (Note 17) 173 33 0.5 Interest receivable 43 5 0.1 Other non-current assets — 178 2.6 Total other non-current assets 3,301 3,808 54.8 F-29 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data) The loans granted to third parties as of December 31, 2018 represent a U.S. dollar loan bearing interest of 2% whichis convertible in equity securities in 2019 and a RUB-denominated loan bearing interest of 3% per annum maturing in 2020– 2025.Investments in Non-Marketable Equity SecuritiesInvestments in non‑marketable equity securities as of December 31, 2017 and 2018 consisted of the following: 2017 2018 2018 RUB RUB $ Yandex.Market B.V. (Note 4) — 29,404 423.3 Uber International C.V. (Note 4) — 4,392 63.2 Yandex.Money 1,206 1,676 24.1 Other 795 1,012 14.6 Total investments in non-marketable equity securities 2,001 36,484 525.2 Other includes limited partnership stakes in unaffiliated venture capital funds and minority investments inunaffiliated technology companies in the amount of RUB 632 and RUB 866 ($12.5) as of December 31, 2017 and 2018.In July 2013, the Company completed the sale of a 75% (less one ruble) interest in the charter capital ofYandex.Money to Sberbank for a cash consideration of RUB 1,964 ($59.1 at the exchange rate as of the sale date). TheCompany retained a noncontrolling interest (25% plus one ruble) and significant influence over Yandex.Money's business;accordingly, the Company accounts for its investment under the equity method. The Company records its share of the resultsof the investee in the amount of income of RUB 374 and income of RUB 464 ($6.7) for the years ended December 31, 2017and 2018, respectively, within the other (loss)/income, net line in the consolidated statements of income.Summarized Financial Information for Yandex.Market B.V.The following tables present summarized information about the assets, liabilities and results of operations of ourequity method investee Yandex.Market B.V. for the period since the deconsolidation of Yandex.Market (Note 4) toDecember 31, 2018: 2018 (unaudited) 2018 RUB $Current assets33,816 486.8Non-current assets442 6.4Current liabilities3,050 43.9Non-current liabilities46 0.7 F-30 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data) 2018* 2018 RUB $Total revenues6,196 89.2Total operating expenses(8,026) (115.5)Net loss(611) (8.8) * Since April 28 till December 31, 2018 (unaudited) The Company records its share of the results of the investee in the amount of loss of RUB 576 ($8.3) for the yearended December 31, 2018, within the other (loss)/income, net line in the consolidated statements of income. Accounts Payable and Accrued LiabilitiesAccounts payable and accrued liabilities as of December 31, 2017 and 2018 comprise the following: 2017 2018 2018 RUB RUB $ Trade accounts payable and accrued liabilities 9,202 15,213 219.0 Salary and other compensation expenses payable/accrued to employees 1,909 1,673 24.1 Total accounts payable and accrued liabilities 11,111 16,886 243.1 Other (Loss)/Income, NetThe following table presents the components of other (loss)/income, net for the periods presented: 2016 2017 2018 2018 RUB RUB RUB $ Foreign exchange (losses)/gains (3,834) (1,784) 3,155 45.4 Gain from sale of equity securities 157 33 — — Gain/(loss) from repurchases of convertible debt 53 (6) — — Other 229 291 (233) (3.4) Total other (loss)/income, net (3,395) (1,466) 2,922 42.0 Income tax payableIncome and non-income taxes payable line of consolidated balance sheets included income tax payable in theamount of RUB 630 and RUB 843 ($12.1) as of December 31, 2017 and 2018, respectively.Reclassifications Out of Accumulated Other Comprehensive IncomeFor the year ended December 31, 2016, the reclassification of foreign currency translation gain of RUB 103 fromaccumulated other comprehensive income resulted from liquidation of a foreign subsidiary.F-31 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)There were no reclassifications of losses out of accumulated other comprehensive income in the years endedDecember 31, 2017 and 2018.6. DERIVATIVE AND NON-DERIVATIVE FINANCIAL INSTRUMENTSThe Company does not enter into derivative arrangements for hedging, trading or speculative purposes. However,some of the Company’s contracts have embedded derivatives that are bifurcated and accounted for separately from the hostagreements. None of these derivatives are designated as hedging instruments.The Company recognizes such derivative instruments as either assets or liabilities on the accompanyingconsolidated balance sheets at fair value and records changes in the fair value of the derivatives in the accompanyingconsolidated statements of income as other (loss)/income, net.The fair value of derivative instruments as of December 31, 2017 and 2018 is as follows: Balance Sheet Location 2017 2018 2018 RUB RUB $ Foreign exchange contracts Other non-current assets — 70 1.0 Total derivative assets — 70 1.0 Foreign exchange contracts Other accrued liabilities 18 1 0.1 Total derivative liabilities 18 1 0.1 The effect of derivative instruments not designated as hedging instruments on income for the years endedDecember 31, 2016, 2017 and 2018 amounted to a gain of RUB 33, RUB 41 and a loss RUB 1 ($0.1), respectively.The Company used non-derivative financial instruments to protect the Company from the risk that the U.S. dollar-denominated Moscow office rent expenses will be adversely affected by changes in the exchange rates and to avoid incomestatement volatility. In March 2017, the Company designated $102.8 (RUB 5,976 at the exchange rate as of the date ofdesignation) of its U.S. dollar-denominated deposits with a third party bank as a hedging instrument to hedge the foreigncurrency exposure to changes in the fair value of the unrecognized firm commitment on its Moscow headquarters operatinglease arrangements. As of December 31, 2018, this deposit was used in full amount.The Company also used non-derivative financial instruments to protect the Company from risk that the U.S. dollar-denominated purchases of its servers and network equipment will be adversely affected by changes in the exchange rates andto avoid volatility of balances related to property and equipment, net on the consolidated balance sheets. In the first quarterof 2018, the Company designated $80.4 (RUB 4,572 at the exchange rate as of the date of designation) of its U.S. dollar-denominated deposits with a third party bank as a hedging instrument to hedge the foreign currency exposure to changes inthe fair value of the unrecognized firm commitments on purchases of its servers and network equipment. As of December 31,2018, these deposits were used in full amount.The change in fair value of the designated portion of the U.S. dollar-denominated deposits due to changes in foreigncurrency exchange rates was recognized in other (loss)/income, net in the consolidated statements of income along with thechange in the fair value of the unrecognized firm commitment that is attributable to foreign currency exchange rates. Thechange in fair value of the unrecognized firm commitment was included within other current assets on the consolidatedbalance sheets and amounted to RUB 31 and nil as of December 31, 2017 and 2018, respectively.The fair value of non-derivative financial instruments designated as hedging instruments as of December 31, 2017and 2018 amounted to RUB 2,731 and nil, respectively, and was included within current term deposits on the consolidatedbalance sheets.F-32 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)7. FAIR VALUE MEASUREMENTSFair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants. A three‑tier fair value hierarchy is established as a basis forconsidering such assumptions and for inputs used in the valuation methodologies in measuring fair value:Level 1—observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets orliabilities;Level 2—inputs other than quoted prices included within Level 1 that are observable for the asset orliability, either directly or indirectly; andLevel 3—inputs for the asset or liability that are not based on observable market data (unobservableinputs).The fair value of assets and liabilities as of December 31, 2017, including those measured at fair value on a recurringbasis, consisted of the following: Level 1 Level 2 Level 3 Total RUB RUB RUB RUB Assets : Cash equivalents: Bank deposits(1) (Note 5) — 30,686 — 30,686 Investments in money market funds (Note 5) 3 — — 3 Term deposits, current — 23,040 — 23,040 Term deposits, non-current — 5,013 — 5,013 Restricted cash (Note 5) 569 — — 569 Loans to employees (Note 5) — 2,116 — 2,116 Loans granted (Note 5) — 1,075 — 1,075 572 61,930 — 62,502 Liabilities: Convertible debt — 18,323 — 18,323 Contingent consideration(2) — — 188 188 Derivative contracts(2) (Note 6) — 18 — 18 Redeemable noncontrolling interests (Note 14) — — 9,821 9,821 — 18,341 10,009 28,350 (1)Bank deposits with original maturities of three months or less are included in cash equivalents. Bank deposits withmaturities of more than three months are classified as term deposits.(2)Amounts are measured at fair value on a recurring basis. The Company had no other financial assets or liabilitiesmeasured at fair value on a recurring basis during the year ended December 31, 2017.F-33 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)The fair value of assets and liabilities as of December 31, 2018, including those measured at fair value on a recurringbasis, consisted of the following: Fair value measurement using Level 1 Level 2 Level 3 Total Total RUB RUB RUB RUB $ Assets : Cash equivalents: Bank deposits(1) (Note 5) — 62,463 — 62,463 899.1 Investments in money market funds (Note 5) 3 — — 3 0.1 Derivative contracts(2) (Note 6) — 70 — 70 1.0 Restricted cash (Note 5) 88 — — 88 1.3 Loans to employees (Note 5) — 2,883 — 2,883 41.5 Loans granted (Note 5) — 620 — 620 9.0 91 66,036 — 66,127 952.0 Liabilities: Contingent consideration(2) — — 83 83 1.2 Derivative contracts(2) (Note 6) — 1 — 1 0.1 Redeemable noncontrolling interests (Note 14) — — 13,035 13,035 187.6 — 1 13,118 13,119 188.9 (1)Bank deposits with original maturities of three months or less are included in cash equivalents. Bank deposits withmaturities of more than three months are classified as term deposits.(2)Amounts are measured at fair value on a recurring basis. The Company had no other financial assets or liabilitiesmeasured at fair value on a recurring basis during the year ended December 31, 2018.The fair values of the Company’s Level 1 financial assets are based on quoted market prices of identical underlyingsecurities. The fair values of the Company’s Level 2 financial assets and liabilities are based on quoted prices and marketobservable data of similar instruments.There were no transfers of financial assets and liabilities between the levels of the fair value hierarchy during theyears ended December 31, 2016, 2017 and 2018.The total gains attributable to bank deposits and investments in money market funds amounted to RUB 2,583, RUB2,598 and RUB 2,897 ($41.7) in 2016, 2017 and 2018, respectively. Such amounts are included in interest income in theconsolidated statements of income.The Company measures at fair value non-financial assets and liabilities recognized as a result of businesscombinations.F-34 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)The Company measures the fair value of non-current term deposits and convertible debt for disclosure purposes.There were no term deposits or convertible debt as of December 31, 2018.The carrying amounts and fair values of non-current term deposits and convertible debt as of December 31, 2017were as follows: 2017 Carryingamount Fair value RUB RUB Term deposits, non-current 5,005 5,013 Convertible debt (17,834) (18,323) Total (12,829) (13,310) The Company did not estimate the fair value of non‑marketable equity investments carried at cost because it did notidentify events or changes in circumstances that might have had a significant adverse effect on the fair value of theseinvestments. Furthermore, the Company believes it is not practicable to estimate the fair value of these equity investmentssince quoted market prices are not available and the cost of obtaining independent valuations appears excessive consideringthe materiality of the investments to the Company.8. PROPERTY AND EQUIPMENT, NETProperty and equipment, net of accumulated depreciation, as of December 31, 2017 and 2018 consisted of thefollowing: 2017 2018 2018 RUB RUB $ Servers and network equipment 34,165 49,570 713.4 Land, land rights and buildings 5,835 16,261 234.1 Infrastructure systems 7,621 8,753 126.0 Office furniture and equipment 2,090 3,585 51.6 Leasehold improvements 976 1,325 19.1 Other equipment 82 519 7.5 Assets not yet in use 694 1,435 20.7 Total 51,463 81,448 1,172.4 Less: accumulated depreciation (30,292) (41,708) (600.4) Total property and equipment, net 21,171 39,740 572.0 In December 2018, the Company purchased rights to a land plot in Moscow, Russia, from third parties. TheCompany has acquired the rights to the land and buildings, including the underlying long-term land leases from the MoscowCity government related to the land plot for the total amount of approximately RUB 10,046 ($144.6). The Company intendsto move its headquarters to this land plot.Assets not yet in use primarily represent infrastructure systems, computer equipment and other assets underinstallation, including related prepayments, and comprise the cost of the assets and other direct costs applicable to purchaseand installation. Leasehold improvements included in assets not yet in use amounted to RUB 32 and RUB 250 ($3.6) as ofDecember 31, 2017 and 2018, respectively.Depreciation expenses related to property and equipment for the years ended December 31, 2016, 2017 andF-35 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)2018 amounted to RUB 7,655, RUB 9,131 and RUB 9,833 ($141.5), respectively.9. GOODWILL AND INTANGIBLE ASSETS, NETThe changes in the carrying amount of goodwill are as follows: SearchandPortal E-commerce Classifieds Taxi Media Services Total Total RUB RUB RUB RUB RUB RUB $ Balance as of January 1, 2017 1,657 106 4,885 224 1,564 8,436 Goodwill acquired — — 303 639 — 942 — Foreign currency translation adjustment (50) — — — — (50) Balance as of December 31, 2017 1,607 106 5,188 863 1,564 9,328 134.3 Goodwill acquired 641 — — 42,799 — 43,440 625.2 Disposal due to Yandex.Marketdeconsolidation (Note 4) — (106) — — — (106) (1.5) Balance as of December 31, 2018 2,248 — 5,188 43,662 1,564 52,662 758.0 Goodwill is non-deductible for tax purposes for all business combinations completed in the years ended December31, 2016, 2017 and 2018.In the years ended December 31, 2016 and 2017 the goodwill of Kinopoisk was represented within Other Bets andExperiments, but in the year ended December 31, 2018 due to the new structure of reportable segments (Note 16), it isincluded in Media Services.Intangible assets, net of amortization, as of December 31, 2017 and 2018 consisted of the following intangibleassets: 2017 2018 Less: Net Less: Net Net Accumulated carrying Accumulated carrying carrying Cost amortization value Cost amortization value value RUB RUB RUB RUB RUB RUB $ Acquisition-related intangible assets: Trade names and domain names 1,149 (406) 743 3,331 (803) 2,528 36.4 Customer relationships 905 (320) 585 6,108 (731) 5,377 77.4 Content and software 646 (468) 178 1,040 (554) 486 7.0 Workforce 276 (224) 52 276 (276) — — Patents and licenses 52 (29) 23 52 (37) 15 0.2 Non-compete agreements 41 (24) 17 41 (34) 7 0.1 Supplier relationships — — — 12 (7) 5 0.1 Total acquisition-related intangible assets: 3,069 (1,471) 1,598 10,860 (2,442) 8,418 121.2 Other intangible assets: Technologies and licenses 7,473 (4,872) 2,601 7,937 (5,321) 2,616 37.6 Assets not yet in use 824 — 824 511 — 511 7.4 Total other intangible assets: 8,297 (4,872) 3,425 8,448 (5,321) 3,127 45.0 Total intangible assets 11,366 (6,343) 5,023 19,308 (7,763) 11,545 166.2 Amortization expenses of acquisition-related intangible assets for the years ended December 31, 2016, 2017 and2018 were RUB 488, RUB 379 and RUB 1,007 ($14.4) respectively.F-36 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Trade names and domain names in the amount of RUB 2,115 ($30.5) and customer relationships in the amount ofRUB 5,142 ($74.0) represent intangible assets acquired in 2018 under the transaction with Uber (Note 4).Amortization expenses of other intangible assets for the years ended December 31, 2016, 2017 and 2018 were RUB1,464, RUB 1,729 and RUB 1,297 ($18.8), respectively.Estimated amortization expense over the next five years and thereafter for intangible assets is as follows: Acquired Other Total intangible intangible intangible assets assets assets RUB RUB RUB $ 2019 1,089 1,123 2,212 31.8 2020 979 755 1,734 25.0 2021 953 465 1,418 20.4 2022 907 196 1,103 15.9 2023 822 77 899 12.9 Thereafter 3,668 — 3,668 52.8 Total 8,418 2,616 11,034 158.8 10. INCOME TAXIncome taxes are computed in accordance with Russian Federation, Dutch and other national tax laws. The taxableincome of Yandex LLC was subject to federal and local income tax at a combined nominal rate of 20% for the years endedDecember 31, 2016, 2017 and 2018. Yandex N.V. is incorporated in the Netherlands, and its taxable profits were subject toincome tax at the rate of 25% in the years ended December 31, 2016, 2017 and 2018.Dividends paid to Yandex N.V. by its Russian subsidiaries are subject to a 5% dividend withholding tax, computedin accordance with the laws of the Russian Federation and in reliance on the provisions of the Netherlands-Russia tax treaty.Due to the so‑called participation exemption, dividends distributed by the Company’s Russian subsidiaries to Yandex N.V.are exempt from tax in the Netherlands.F-37 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Income tax expense for the years ended December 31, 2016, 2017 and 2018 consisted of the following: 2016 2017 2018 2018 RUB RUB RUB $ Current tax expense —Russia (4,908) (5,640) (8,220) (118.3) Current tax expense —Netherlands — (503) (1,672) (24.1) Current tax expense—other (280) (296) (573) (8.3) Total current tax expense (5,188) (6,439) (10,465) (150.7) Deferred tax benefit – Russia 331 1,108 1,254 18.0 Deferred tax benefit – Netherlands 374 346 270 3.9 Deferred tax benefit—other 159 59 338 4.9 Total deferred tax benefit 864 1,513 1,862 26.8 Total income tax expense (4,324) (4,926) (8,603) (123.9) The components of income before income tax expense for the years ended December 31, 2016, 2017 and 2018 are asfollows: 2016 2017 2018 2018 RUB RUB RUB $ Income before income tax expense —Russia 15,683 18,269 35,397 509.5 (Loss)/income before income tax expense —Netherlands (5,030) (6,140) 17,665 254.3 Income before income tax expense —other 454 1,453 1,402 20.2 Total income before income tax expense 11,107 13,582 54,464 784.0 The amount of income before income tax expense in Netherlands in the year ended December 31, 2018 includes theeffect of deconsolidation of Yandex.Market (Note 4) in the amount of RUB 28,244 ($406.6) which is non-taxable.The amount of income tax expense that would result from applying the Dutch statutory income tax rate to incomebefore income taxes reconciled to the reported amount of income tax expense is as follows for the years ended December 31,2016, 2017 and 2018: 2016 2017 2018 2018 RUB RUB RUB $ Expected expense at Dutch statutory income taxrate of 25% 2,776 3,396 13,616 196.0 Effect of: Tax on inter-company dividends 449 872 802 11.5 Non-deductible share-based compensation 848 1,048 1,638 23.6 Other expenses not deductible for tax purposes 374 612 721 10.4 Accrual/(reversal) of unrecognized tax benefit 944 227 (102) (1.5) Effect of deconsolidation of Yandex.Market — — (7,061) (101.6) Difference in foreign tax rates (1,460) (1,331) (1,932) (27.7) Change in valuation allowance 145 332 850 12.2 Other 248 (230) 71 1.0 Income tax expense 4,324 4,926 8,603 123.9 F-38 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Movements in the valuation allowance are as follows: 2016 2017 2018 2018 RUB RUB RUB $ Balance at the beginning of the period (837) (659) (922) (13.3) Charges to expenses (145) (332) (850) (12.2) Foreign currency translation adjustment 323 69 42 0.6 Balance at the end of the period (659) (922) (1,730) (24.9) As of December 31, 2017 and 2018, the Company included accrued interest and penalties related to unrecognizedtax benefits, totaling RUB 117 and RUB 32 ($0.5), respectively, as a component of other accrued liabilities, non-current andRUB nil and RUB 36 ($0.5), respectively, as a component of accounts payable and accrued liabilities. As of December 31,2017 and 2018, RUB 290 and RUB 239 ($3.4), respectively, of unrecognized tax benefits, if recognized, would affect theeffective tax rate. The interest and penalties recorded as part of the income tax expense in the years ended December 31,2016, 2017 and 2018 resulted in an expense of RUB 170, an expense of RUB 99 and a benefit of RUB 50 ($0.7),respectively. In the first half of year 2019 the Company anticipates a refund of RUB 291 ($4.2) of income taxes and RUB126 ($1.8) of interest and penalties settled in 2017 with the taxing authority under the tax audit for the years 2013-2014following resolution of the taxing authority to reduce tax assessment. The Company does not anticipate any significantincreases or decreases in unrecognized tax benefits over the next twelve months.A reconciliation of the total amounts of unrecognized tax benefits is as follows: 2016 2017 2018 2018 RUB RUB RUB $ Balance at the beginning of the period 37 580 290 4.2 Increases related to prior years tax positions 478 98 9 0.1 Decreases related to prior years tax positions (9) (13) (111) (1.6) Increases related to current year tax positions 74 41 51 0.7 Settlements — (416) — — Balance at the end of the period 580 290 239 3.4 F-39 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Temporary differences between the tax and accounting bases of assets and liabilities and carryforwards give rise tothe following deferred tax assets and liabilities as of December 31, 2017 and 2018: 2017 2018 2018 RUB RUB $ Assets/(liabilities) arising from tax effect of:Deferred tax assetAccrued expenses1,6382,69638.8Net operating loss carryforward2,3833,25446.8Intangible assets3373995.7Property and equipment1565538.0Other51280.5Total deferred tax asset4,5656,93099.8Valuation allowance(922)(1,730)(24.9)Total deferred tax asset, net of valuation allowance3,6435,20074.9Deferred tax liabilityConvertible debt discount(138) — —Property and equipment(511)(1,129)(16.3)Intangible assets(311)(1,684)(24.2)Unremitted earnings(1,456)(510)(7.3)Other(15)(210)(3.1)Total deferred tax liability(2,431)(3,533)(50.9)Net deferred tax asset/(liability)1,2121,66724.0Net deferred tax assets2,1713,23946.6Net deferred tax liabilities(959)(1,572)(22.6)As of December 31, 2018, Yandex N.V. had net operating loss carryforwards (“NOLs”) for Dutch income taxpurposes of RUB 3,501 ($50.4). These NOLs expire in the 2025-2027 tax years. As of December 31, 2018, a benefit of RUB239 ($3.4) related to the Dutch NOLs described above would be recorded by the Company in additional paid‑in capital ifand when realized.As of December 31, 2018, the Group had NOLs for Russian income tax purposes of RUB 6,318 ($90.9). In Russiathe indefinite term of carryforward of tax losses was introduced in November 2016 for tax losses generated in all years,whereas previously restricted to 10 years. The law also specified that the tax base for each of the years of 2017-2020 may bereduced by 50% maximum of tax losses carried forward.As of December 31, 2018, the Dutch entities of the Group (other than Yandex N.V. described above) also had NOLsfor Dutch income tax purposes of RUB 4,878 ($70.2). For Dutch corporate tax purposes tax losses incurred in 2018 may beset against taxable profit of the tax years 2019 up to and including 2027.The Company did not provide for dividend withholding taxes on the unremitted earnings of its foreign subsidiariesin 2012 and earlier years because they were considered indefinitely reinvested outside of the Netherlands. The Company hasaccrued for a 5% dividend withholding tax on the portion of the current year profit of the Company’s principal Russianoperating subsidiary that is considered not to be indefinitely reinvested in Russia. Historically, this only included profitsgenerated starting in 2014. The Company also provided in 2017 for a 5% dividend withholding tax on the portion of theprofit for 2013 of the Company’s principal Russian operating subsidiary that was considered not to be indefinitely reinvestedin Russia. As of December 31, 2018, the amount of unremitted earnings upon which dividend withholding taxes have notbeen provided is approximately RUB 71,752 ($1,032.8). The Company estimates that the amount of the unrecognizeddeferred tax liability related to these earnings is approximately RUB 3,588 ($51.6). F-40 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)The tax years 2017-2018 remain open for examination by the Russian tax authorities with respect to the Company’sprincipal Russian operating subsidiary, Yandex LLC. A tax audit of Yandex LLC covering the tax years 2015-2016 wascompleted by the Russian tax authorities in 2018 and all related income tax charges assessed were fully accrued in theCompany’s consolidated financial statements as of December 31, 2018. The tax years 2014-2018 remain open forexamination by the Dutch tax authorities with respect to Yandex N.V.11. CONVERTIBLE DEBTIn December 2013, the Company issued and sold $600.0 (RUB 19,719 at the exchange rate as of sale date) inaggregate principal amount of 1.125% convertible senior notes due December 15, 2018 at par. The Company also granted tothe initial purchasers a right to purchase up to an additional $90.0 (RUB 2,981 at the exchange rate as of sale date) inaggregate principal amount of notes solely to cover over‑allotments. In January 2014, the Company issued and sold anadditional $90.0 in aggregate principal amount of 1.125% convertible senior notes due December 15, 2018 (together, the“Notes”) at par. Interest at an annual rate of 1.125% was payable semiannually on June 15 and December 15 of each year,beginning on June 15, 2014. The Notes were convertible into cash, Class A shares of the Company or a combination of cashand Class A shares, at the Company’s election, under circumstances described below, based on an initial conversion rate of19.44 Class A shares per $1,000 principal amount of Notes (which represented an initial conversion price of approximately$51.45 per share), subject to adjustment on the occurrence of fundamental change as defined in the agreement. The Noteswere convertible, at the option of the holder, prior to June 15, 2018, if i) the last reported sale price of the Class A shares for atleast 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days was greater than or equal to130% of the conversion price on each applicable trading day; ii) during a 5 business day period after any 10 consecutivetrading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurementperiod was less than 98% of the product of the last reported sale price of the Company’s Class A shares and the conversionrate on each such trading day; iii) upon the occurrence of specified corporate events. On or after June 15, 2018, the Notescould be converted at the option of the holder regardless of the foregoing circumstances at any time until the close ofbusiness on the business day immediately preceding the maturity date of the Notes. The Company did not have the right toredeem the Notes prior to maturity, except in connection with certain changes in tax laws. Prior to June 15, 2018, none of theconditions allowing the conversion of the Notes had been met. The Company elected cash settlement for all conversions ofthe Notes on or after June 15, 2018. In December 2018, the Notes matured and the Company repaid in full $321.3 (RUB21,281 at the exchange rate as of the date of settlement) aggregate principal amount of the outstanding Notes. The Companyrecorded no gain or loss on the settlement of the Notes.The net proceeds to the Company from the sale of the Notes (including over‑allotments) were approximately RUB22,479 ($683.1 at the exchange rates as of sale date). Debt issuance costs were approximately RUB 228 ($4.1), of whichRUB 38 ($0.7) was allocated to additional paid‑in capital and RUB 190 ($3.4) was allocated to deferred issuance costswhich were presented as a reduction of the carrying value of the Notes and were amortized as interest expense over the termof the Notes. As of December 31, 2017 and 2018, unamortized deferred issuance cost was RUB 29 and nil, respectively.The Company separately accounted for the liability and equity components of the Notes. The carrying value of theliability component of RUB 18,972 ($576.7 at the exchange rates as of sale date) was initially recognized at the presentvalue of its cash flows using a discount rate of 4.84%, the Company’s estimated borrowing rate at the date of the issuance fora similar debt instrument without the conversion feature. Debt discount was amortized using the effective interest methodover the period from the origination date through the stated maturity date. The value of the equity component of RUB 3,728 ($113.3 at the exchange rates as of sale date) as of December 31, 2017 was calculated by deducting the fair value of theliability component from the initial proceeds ascribed to the convertible debt instrument as a whole and was recorded as adebt discount.During 2018, the Company did not repurchase principal amount of the outstanding Notes before the due date;during 2017, the Company repurchased and retired $12.0 in aggregate principal amount of the outstanding Notes forF-41 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)cash consideration of RUB 668; during 2016, the Company repurchased and retired $87.4 in aggregate principal amount ofthe outstanding Notes for cash consideration of RUB 5,397. The Company recorded a loss of RUB 6 and gain of RUB 53 onthe extinguishment of the debt within the other (loss)/income, net line in the consolidated statements of income for the yearsended December 31, 2017 and 2016, respectively.The carrying value of the Notes as of December 31, 2017 consisted of the following: 2017 RUB 1.125% Convertible Senior Notes due December 2018 18,507 Unamortized debt discount (644) Unamortized debt issuance cost (29) Total convertible debt 17,834 The Company recognized RUB 1,208, RUB 897 and RUB 945 ($13.6) as interest expenses related to thecontractual interest coupon, amortization of the debt discount and issuance expenses for the years ended December 31, 2016,2017 and 2018, respectively. The effective interest rate on the liability component for 2016, 2017 and 2018 was 5.1%, 5.1%,and 4.8%.12. COMMITMENTS AND CONTINGENCIESLease and Other CommitmentsIn December 2008, the Company signed an agreement for a ten‑year lease of office space in Moscow. In April 2011,the Company entered into two more lease agreements to increase the size of its rented office space located in its headquarterscomplex in Moscow for the remaining period of the original lease. In April 2014, the Company further extended itsheadquarters complex signing a seven‑year lease agreement for additional office space and extending the existing rentagreements to 2021. During the years 2017 and 2018 the Company signed additional agreements to rent additional officespace in Moscow until the end of years 2021 and 2022.As of December 31, 2018, future minimum lease payments due under the Moscow leases and other non‑cancellableoperating leases for more than one year are as follows: Moscow headquarters Other Payments due in the years ending December 31, lease leases Total Total RUB RUB RUB $ 2019 5,799 746 6,545 94.3 2020 5,850 610 6,460 93.0 2021 4,590 589 5,179 74.5 2022 310 296 606 8.7 2023 and thereafter — 597 597 8.6 Total 16,549 2,838 19,387 279.1 For the purposes of the disclosure above, the Company assumed no changes in the rented space or rental pricespecified in existing rental agreements as of the reporting date. U.S. dollar amounts have been translated into RUB at a rate ofRUB 69.4706 to $1.00, the official exchange rate quoted as of December 31, 2018 by the Central Bank of the RussianFederation.F-42 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)For the years ended December 31, 2016, 2017 and 2018, rent expenses under operating leases totaled approximatelyRUB 4,419, RUB 4,208 and RUB 5,015 ($72.2), respectively.Additionally, the Company has entered into purchase commitments for other goods and services and acquisition ofbusinesses, which total RUB 3,074 ($44.2) in 2019, RUB 1,216 ($17.5) in 2020, RUB 918 ($13.2) in 2021, RUB 96 ($1.4)in 2022, and nil in 2023 and thereafter.Legal ProceedingsIn the ordinary course of business, the Company is a party to various legal proceedings, and subject to claims,certain of which relate to copyright infringement, as well as to the alleged breach of certain contractual arrangements. TheCompany intends to vigorously defend any lawsuit and believe that the ultimate outcome of any pending litigation, otherlegal proceedings or other matters will have no material adverse effect on financial condition, results of operations orliquidity of the Company.As of December 31, 2018, the Company was subject to certain claims in the aggregate claimed amount ofapproximately RUB 2,372 ($34.2). The Company has not recorded a liability in respect of those claims as of December 31,2018.Environment and Current Economic SituationThe Company’s operations are primarily located in the Russian Federation. Consequently, the Company is exposedto the economic and financial markets of the Russian Federation which display characteristics of an emerging market. Thelegal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changeswhich together with other legal and fiscal impediments contribute to the challenges faced by entities operating in theRussian Federation.In particular, taxes are subject to review and investigation by a number of authorities authorized by law to imposefines and penalties. Although the Company believes it has provided adequately for all tax liabilities based on itsunderstanding of the tax legislation, the above factors may create tax risks for the Company. In addition to the obligationsshown in the lease commitments section above, approximately RUB 239 ($3.4) of unrecognized tax benefits have beenrecorded as liabilities, and the Company is uncertain as to if or when such amounts may be settled (Note 10). Related tounrecognized tax benefits, the Company has also recorded a liability for potential penalties of RUB 46 ($0.7) and interest ofRUB 22 ($0.3). As of December 31, 2018, except for the income tax contingencies described above, the Company accruedRUB 517 ($7.4) for contingencies related to non‑income taxes, including penalties and interest. Additionally, the Companyhas identified possible contingencies related to non-income taxes, which are not accrued. Such possible non-income taxcontingencies could materialize and require the Company to pay additional amounts of tax. As of December 31, 2018, theCompany estimates such contingencies related to non-income taxes, including penalties and interest, to be up toapproximately RUB 3,477 ($50.0).In the past two years the Russian economy has returned to growth, recovering from the recession of 2015-2016. In2018 the growth was mainly driven by the mining, trade and construction sectors.Economic growth and higher oil prices have strengthened the fiscal position of the state. In 2018, the budgetbalance has shifted to the surplus from the deficit in 2017. The government initiated the tax and pension reform. In July2018, the parliament approved a VAT rate hike (to 20 per cent, from 18 per cent) and the reform of the oil sector taxation,providing for the gradual elimination of the oil export duty (from 30% currently) and its replacement by a higher mineralextraction tax, shifting the tax base from oil exports to oil production. The pension reform envisages a hike in the retirementage. All these measures were aimed to support financial stability of the state in the coming years.F-43 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)In February 2018, Standard & Poor’s changed the outlook for Russia’s sovereign credit ratings from negative (BB+) to stable(BBB-) and in February 2019 reiterated stable rating for Russia.After the Russian ruble’s 5% appreciation against the US dollar in 2017 on the back of oil price recovery,it depreciated by 17% against the U.S. dollar in 2018. Foreign exchange interventions set by the new fiscal rule, togetherwith the new round of the U.S. sanctions against Russia (which triggered a sell-off of Russian financial assets), have exerteddownward pressure on the exchange rate since April 2018. The Russian ruble depreciation was followed by increasinginflation. In 2018 inflation was 4.3% compared to 2.5% in 2017.The imposition of economic sanctions on Russian individuals and legal entities by the European Union, the UnitedStates of America, Japan, Canada, Australia and others, as well as retaliatory sanctions imposed by the Russian government,have resulted in increased economic and political uncertainty including more volatile equity markets, a depreciation of theRussian Ruble, a reduction in both local and foreign direct investment inflows and a significant tightening in the availabilityof credit. In particular, some Russian entities may be experiencing difficulties in accessing international equity and debtmarkets and may become increasingly dependent on Russian state banks to finance their operations. The longer term effectsof recently implemented sanctions, as well as the threat of additional future sanctions, are difficult to determine.The above mentioned have led to reduced access of Russian businesses to international capital markets, increasedinflation and other negative economic consequences. The impact of further economic developments on future operations andfinancial position of the Company is at this stage difficult to determine.13. SHARE CAPITALThe Company has three authorized classes of ordinary shares, Class A, Class B and Class C with €0.01, €0.10 and€0.09 par value, respectively. The principal features of the three classes of ordinary shares are as follows:·Class A shares, par value €0.01 per share, entitled to one vote per share. The Class A shares share ratably withthe Class B shares, on a pari passu basis, in any dividends or other distributions.·Class B shares, par value €0.10 per share, entitled to ten votes per share. Class B shares may only be transferredto qualified holders. In order to sell a Class B share, it must be converted into a Class A share.·Class C shares, par value €0.09 per share, entitled to nine votes per share. The Class C shares are entitled to afixed nominal amount in the event of a dividend or distribution limited to €0.01 per share in any one financialyear if any such shares were to be outstanding on the record date for a dividend declaration. The Class C sharesare used for technical purposes related to the conversion of Class B shares into Class A shares. During theperiods between conversion and cancellation, all Class C shares are held by Yandex Conversion Foundation(Stichting Yandex Conversion). Yandex Conversion Foundation was incorporated under the laws of theNetherlands in October 2008 for the sole purpose of facilitating the conversion of Class B shares into Class Ashares. Yandex Conversion Foundation is managed by a board of directors appointed by the Company.On September 21, 2009, the Company issued a Priority Share to Sberbank. The holder of the Priority Share has theright to veto the accumulation of stakes in the Company in excess of 25% by a single entity, a group of related parties orparties acting in concert. The holder of the Priority Share does not have any rights to influence operating decisions of theCompany nor is it entitled to a seat on the Company’s Board. Transfer of the Priority Share requires the approval of theBoard. The Priority Share has been purchased by Sberbank at its par value of €1 and is entitled to a normal pro rata dividenddistribution.F-44 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)The Company’s articles of association authorize a special class of preference shares as a form of an anti‑takeoverdefense. The Company’s Board has the irrevocable authority for a period of five years to issue preference shares and grantrights to subscribe for preference shares up to the Company’s authorized share capital from time to time. This authority maybe renewed by a resolution of the general meeting of shareholders for a subsequent period of up to five years. The preferenceshares, if issued, would be entitled to receive preferential dividends at a rate of 12-month EURIBOR plus 200 basis points onthe amount paid thereon, prior and in preference to distributions in respect of ordinary shares. No preference shares have beenissued.The share capital as of each balance sheet date is as follows (EUR in millions): December 31, 2017 December 31, 2018 Shares EUR RUB Shares EUR RUB Authorized: 2,093,995,776 2,093,995,776 Priority share 1 1 Preference shares 1,000,000,001 1,000,000,001 Class A ordinary shares 1,000,000,000 1,000,000,000 Class B ordinary shares 46,997,887 46,997,887 Class C ordinary shares 46,997,887 46,997,887 Issued and fully paid: 334,223,202 €7.3 299 330,316,314 €6.7 265 Priority share 1 — — 1 — — Preference shares — — — — — — Class A ordinary shares 289,364,467 2.9 127 292,437,655 2.9 129 Class B ordinary shares 40,692,286 4.1 146 37,878,658 3.8 136 Class C ordinary shares 4,166,448 0.3 26 — — — Class C shares held in treasury are not disclosed as such due to the technical nature of this class of shares.The Company repurchases its Class A shares from time to time in part to reduce the dilutive effects of itsShare‑Based Awards to employees of the Company.In June 2018, the Company's Board of Directors authorized a program to repurchase up to $100 worth of Class Ashares from time to time in open market transactions in effect for up to twelve months. In July 2018, the Company's Board ofDirectors authorized an increase in the existing program to approximately $150 worth of Class A shares.There were no repurchases in the years ended December 31, 2016 and 2017. For the year ended December 31, 2018,the Company repurchased 4,760,679 Class A shares at an average price of $31.55 per share for a total amount of RUR 10,085 ($145.2). Treasury stock is accounted for under the cost method.14. REDEEMABLE NONCONTROLLING INTERESTSRedeemable noncontrolling interests (RNCI) mainly relate to the equity incentive arrangements the Company hasmade available to the senior employees of the Taxi and Classifieds business units, pursuant to which such persons areeligible to acquire depositary receipts, or receive options to acquire depositary receipts (DRs), which entitle them toeconomic interests in the respective subsidiaries of the Company.The redeemable noncontrolling interests as of December 31, 2017 and 2018 were measured at the redemption valueand consisted of the following: 2017 2018 2018 F-45 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data) RUB RUB $ RNCI related to the DRs acquired by the senior employees 2,497 3,554 51.1 RNCI related to the options to acquire DRs 7,324 9,203 132.5 RNCI recognized in connection with the business combinations — 278 4.0 Total redeemable noncontrolling interests 9,821 13,035 187.6 15. SHARE‑BASED COMPENSATIONEmployee Equity Incentive PlanThe Company has granted Share‑Based Awards to employees of the Company pursuant to its Fourth Amended andRestated 2007 Equity Incentive Plan (the “2007 Plan”) and the 2016 Equity Incentive Plan (the “2016 Plan,” and togetherwith the 2007 Plan, the “Plans”).On February 7, 2007, the Company’s Board adopted the 2007 Plan, which superseded the previous 2001 EmployeeShare Option Plan, and subsequently amended the 2007 Plan on October 11, 2007, October 14, 2008, November 10, 2011,February 10, 2012, and July 24, 2013. The 2016 Plan was approved at the 2016 annual general meeting of shareholders onMay 27, 2016 and replaced the 2007 Plan. However, there remain unexercised grants under the 2007 Plan. A share optionissued under the Plans entitles the holder to purchase an ordinary share at a specified exercise price. SARs issued under thePlans entitle the holder to receive a number of Class A shares determined by reference to appreciation from and after the dateof grant in the fair market value of a Class A share over the measurement price. RSUs awarded under the Plans entitle theholder to receive a fixed number of Class A shares at no cost upon the satisfaction of certain time‑based vesting criteria. Theholders of RSUs have no rights to dividends or dividends equivalent. The 2016 Plan provides for the issuance of Share‑BasedAwards to employees, officers, advisors and consultants of the Company and members of the Board of the Company toacquire or, in regard to SARs, to benefit from the appreciation of ordinary shares representing in the aggregate a maximum of15% of the issued share capital of the Company.Under the Plans, the award exercise or measurement price per share is set at the “fair market value” and denominatedin U.S. dollars on the date the Share-Based Awards are granted by the Company’s Board. For purposes of the Plans, “fairmarket value” means (A) at any time when the Company’s shares are not publicly traded, the price per share most recentlydetermined by the Board to be the fair market value; and (B) at any time when the shares are publicly traded, (i) in the case ofRSUs, the closing price per Class A Share (as adjusted to account for the ratio of shares to depositary shares, if necessary) onthe date of such determination; and (ii) in the case of Options and Share Appreciation Rights, the average closing price perClass A Share (as adjusted to account for the ratio of Class A Shares to such depositary shares, if necessary) on the 20 tradingdays immediately following the date of determination. Share-Based Awards granted under the Plans generally vest over afour‑year period. Approximately 25% of the Share‑Based Awards vest after one year, with the remaining Share‑Based Awardsvesting in equal amounts on the last day of each quarter over the following three years. If a grantee ceases to be an eligibleparticipant because of termination by the grantee for good reason or because of termination by the Company for any reasonother than for cause within three months following the consummation of a change of control under 2007 Plan and ninemonths under 2016 Plan, the Share Based Award(s) held by such grantee shall become fully vested and immediatelyexercisable. The maximum term of a Share‑Based Award granted under the Plans may not exceed ten years. The 2016 Planexpires at midnight on May 27, 2026. After its expiration, no further grants can be made under the 2016 Plan but the vestingand effectiveness of Share‑Based Awards previously granted will remain unaffected.F-46 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)The Company estimates the fair value of share options and SARs using the BSM pricing model. The weightedaverage assumptions used in the BSM pricing model for grants made under the 2016 Plan in the years ended December 31,2017 and 2018 were as follows: 2017 2018 Dividend yield — — Expected annual volatility 40%39%Risk-free interest rate 2.23%2.72-2.90%Expected life of the awards (years) 7.19 7.07-7.11 Weighted-average grant date fair value of awards (per share)$11.86$14.62 No share options grants were made for the year ended December 31, 2016. No SARs grants were made for the yearsended December 31, 2016, 2017 and 2018.The Company used the following assumptions in the BSM pricing model when valuing its Share‑Based Awards:·Expected volatility. For 2017 and 2018 grants, the Company used historical volatility of the Company’s ownshares.·Expected term. The expected term of awards granted has been calculated following the “simplified” method,using half of the sum of the contractual and vesting terms, because the Company has no historical pattern ofexercises sufficient to estimate the expected term on a more reliable basis.·Dividend yield. This assumption is measured as the average annualized dividend estimated to be paid by theCompany over the expected life of the award as a percentage of the share price at the grant date. The Companydid not declare any dividends with respect to 2016, 2017 or 2018. Currently, the Company does not have anyplans to pay dividends in the near term. Because optionees were generally compensated for dividends and theCompany has no plans to pay cash dividends in the near term, it used an expected dividend yield of zero in itsoption pricing model for awards granted in the years ended December 31, 2017 and 2018.·Fair value of ordinary shares. The Company estimated the fair value of its ordinary shares using the closingprice of its ordinary shares on the NASDAQ Global Select Market on the date of grant.·Risk‑free interest rate. The Company used the risk-free interest rates based on the U.S. Treasury yield curve ineffect at the grant date.The following table summarizes awards activity for the Company: Options SARs RSUs Weighted Weighted Weighted average exercise average exercise average exercise Quantity price per share Quantity price per share Quantity price per share Outstanding as ofDecember 31, 2017 2,729,928 $26.68 159,210 $32.10 11,219,107 — Granted 1,334,000 40.00 — — 6,226,234 — Exercised (462,495) 4.09 (2,100) 20.99 (2,758,622) — Forfeited — — (866) 21.00 (773,049) — Cancelled — — (1,250) 16.95 (48,256) — Outstanding as ofDecember 31, 2018 3,601,433 $34.51 154,994 $32.44 13,865,414 — F-47 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data) The following table summarizes information about outstanding and exercisable awards as of December 31, 2018: Awards Outstanding Awards Exercisable Average Average Remaining Aggregate Remaining Aggregate Type of Number Contractual Intrinsic Number Contractual Intrinsic Exercise Price ($) award outstanding Life (in years) Value exercisable Life (in years) Value $3.43 Option 104,600 0.56 2.5 104,600 0.56 2.5 $3.51 Option 73,725 0.86 1.8 73,725 0.86 1.8 $4.16 Option 102,238 1.45 2.4 102,238 1.45 2.4 $8.77 Option 306,870 1.86 5.7 306,870 1.86 5.7 $40.00 Option 3,014,000 9.02 — 627,500 8.95 — Total Options 3,601,433 7.79 12.4 1,214,933 5.32 12.4 $16.95 SARs 1,250 2.97 — 1,250 2.97 — $20.99 SARs 3,744 2.91 — 3,744 2.91 — $32.85 SARs 150,000 4.56 — 150,000 4.56 — Total SARs 154,994 4.51 — 154,994 4.51 — Total RSUs RSU 13,865,414 8.36 379.2 5,298,083 7.75 144.9 Total Options, SARs, RSUs 17,621,841 8.21 391.6 6,668,010 7.23 157.3 The following table summarizes information about non‑vested share awards: Options SARs RSUs Weighted Weighted Weighted Average Average Average Grant Grant Grant Date Fair Date Fair Date Fair Quantity Value Quantity Value Quantity ValueNon-vested as of December 31, 2017 1,680,000 $11.86 866 $12.45 8,836,337 $24.57Granted 1,334,000 14.62 — — 6,226,234 34.61Vested (627,500) 12.75 — — (5,673,935) 29.01Forfeited — — (866) 12.45 (773,049) 27.13Cancelled — — — — (48,256) 27.01Non-vested as of December 31, 2018 2,386,500 $13.17 — $— 8,567,331 $28.68In February 2018, the Company settled its liability in respect of contingent consideration related to the number ofqualifying taxi trips following RosTaxi acquisition in January 2015 by 259,560 of its RSUs equivalent to RUB 500. TheseRSUs have the same vesting provisions as Share-Based Awards granted under the 2016 Plan. As of December 31, 2018, theseRSUs are fully vested and exercisable.As of December 31, 2018, there was RUB 17,656 ($254.2) of unamortized share‑based compensation expenserelated to unvested share options and RSUs which is expected to be recognized over a weighted average period of 3.04 years.Business Unit Equity AwardsThe Company finalized the process of restructuring certain of the business units into separate legal structures in itsE-Commerce, Taxi, Classifieds operating segments (the “Participating Subsidiaries”) in 2016 and in Media Services in 2018.In connection with this restructuring, and to align the incentives of the relevant employees with the operations of theParticipating Subsidiaries, the Company granted 4.0 million equity incentive awards under the 2016 Plan to the senioremployees of these business units in total in 2015-2018, which entitle the participants to receive options to acquireredeemable depositary receipts of shares in the respective operating subsidiaries (Note 14) upon the satisfaction ofF-48 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)defined vesting criteria (the “Business Unit Equity Awards”), of which 3.1 million remain outstanding as of December 31,2018. The exercise price of the Business Unit Equity Awards shall be determined from time to time by the Board and thestandard vesting schedule for Business Unit Equity Awards under the 2016 Plan is consistent with Shared Based Awardsgranted in the Company’s shares. Business Unit Equity Awards and any awards granted to management of the ParticipatingSubsidiaries outside of the 2016 Plan are not to exceed 20% of such Participating Subsidiary’s shares issued and outstandingfrom time to time.In February 2018, the Company offered the senior employees of one of its Business units an opportunity toexchange up to an aggregate of 425,230 of their outstanding Business Unit Equity Awards for an aggregate of 2,029,987RSUs. The replacement RSUs are fully vested. The exchange was accounted for as a modification of the Business Unit EquityAwards resulting in additional RUB 195 ($2.8) recognized immediately upon modification.The Company has recorded share-based compensation expense in respect of Business Equity Awards in the amountof RUB 260, RUB 267 and RUB 564 ($8.1) for the years ended December 31, 2016, 2017 and 2018, respectively.Share‑Based Compensation ExpenseThe Company recognized share‑based compensation expense of RUB 3,422, RUB 4,193 and RUB 6,552 ($94.4) forthe years ended December 31, 2016, 2017 and 2018, respectively. The Company recognized RUB 36, RUB 62 and RUB 104($1.5) in related income tax benefits from Share-Based Awards exercised for the years ended December 31, 2016, 2017 and2018, respectively.16. INFORMATION ABOUT SEGMENTS, REVENUES & GEOGRAPHIC AREASStarting from 2015, following the changes in the Company’s organizational structure, the Company’s chiefoperating decision maker (“CODM”) is the management committee including its CEO, COO and a group of CEO and COO’sdirect reports. The Company reports its financial performance based on the following reportable segments: Search and Portal,E-commerce, Taxi, Media Services and Classifieds. In 2018, Search and Portal segment also includes Search and Portal inTurkey and Yandex Launcher, previously reported in Other Bets and Experiments, and Yandex.Travel, previously reported inClassifieds. In 2018, Media Services were broken out from Other Bets and Experiments and now constitute a separatereportable segment. The results of the Company’s remaining operating segments, including Zen, Yandex.Cloud,Yandex.Health, Yandex.Drive, Yandex Data Factory and Geolocation Services, that do not meet the quantitative or thequalitative thresholds for disclosure, are combined into the other category defined as Other Bets and Experiments which isshown separately from the reportable segments and reconciling items. Previously Yandex.Cloud, Yandex.Health andGeolocation Services were a part of Search and Portal segment. Yandex.Drive is the Company’s car-sharing service, launchedin February 2018. Segment results below have been restated for all periods presented to reflect these reclassifications.Reportable segments derive revenues from the following services:·Search and Portal offers a broad range of services in Russia, Belarus, Kazakhstan and, for periods prior to theimposition of sanctions on Yandex by the government of Ukraine in May 2017, all services of the Companyoffered in Ukraine, among which are search, location-based, personalized and mobile services, that enable theCompany’s users to find relevant and objective information quickly and easily and to communicate andconnect over the internet, from both their desktops and mobile devices;·Taxi (including ride-sharing business, which consists of Yandex.Taxi as well as Uber in Russia and othercountries, Food Delivery business, which includes Yandex.EATs, Uber.EATs and Food Party, meal kitsubscription service, and the Self-Driving Cars division);F-49 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)·E-commerce — the Company’s Yandex.Market service for the period prior to April 27, 2018, the date of thecompletion of the Yandex.Market joint venture between Yandex and Sberbank of Russia;· Classifieds (including Auto.ru, Yandex.Realty and Yandex.Jobs) which derives revenues from onlineadvertising and listing fees; and· Media Services (including KinoPoisk, Yandex.Music, Yandex.Afisha, Yandex.TV program, theCompany’s production center Yandex.Studio and subscription service Yandex.Plus launched in Q1 and Q2 2018respectively) which derives revenue from online advertising and transaction revenues, including music and videocontent subscriptions as well as event tickets sales.The Company accounts for intersegment revenues as if the services were provided to third parties, that is, at the levelapproximating current market prices.F-50 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)The measures of the segments’ profits and losses that are used by the CODM to assess segment performance anddecide how to allocate resources are presented below. Each segment’s assets and capital expenditures are not reviewed by theCODM. 2016 2017 2018 2018 RUB RUB RUB $ Search and Portal: Revenues from external customers 66,591 79,901 96,977 1,395.9 Intersegment revenues 2,990 4,295 6,528 94.0 Depreciation and amortization (8,608) (9,859) (10,248) (147.5) Adjusted operating income 20,859 28,567 38,511 554.4 E-commerce: Revenues from external customers 4,718 4,968 1,697 24.4 Intersegment revenues — — — — Depreciation and amortization (72) (54) (11) (0.2) Adjusted operating income 1,363 1,556 (273) (3.9) Classifieds: Revenues from external customers 1,270 2,060 3,717 53.5 Intersegment revenues — — — — Depreciation and amortization (19) (53) (67) (1.0) Adjusted operating income (90) 74 (205) (3.0) Taxi: Revenues from external customers 2,313 4,891 19,213 276.6 Intersegment revenues — — — — Depreciation and amortization (39) (46) (745) (10.7) Adjusted operating income (2,125) (8,009) (4,530) (65.2) Media Services: Revenues from external customers 648 1,187 1,909 27.5 Intersegment revenues — — — — Depreciation and amortization (100) (99) (71) (1.0) Adjusted operating income (433) (507) (845) (12.2) Other Bets and Experiments: Revenues from external customers 385 1,047 4,144 59.7 Intersegment revenues — — — — Depreciation and amortization (769) (1,128) (995) (14.3) Adjusted operating loss (2,572) (3,466) (4,194) (60.4) Eliminations: Revenues from external customers — — — — Intersegment revenues (2,990) (4,295) (6,528) (94.0) Depreciation and amortization — — — — Adjusted operating income — — — — Total: Revenues from external customers 75,925 94,054 127,657 1,837.6 Intersegment revenues — — — — Depreciation and amortization (9,607) (11,239) (12,137) (174.7) Adjusted operating income 17,002 18,215 28,464 409.7 F-51 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)The reconciliation between adjusted operating income and net income is as follows: 2016 2017 2018 2018 RUB RUB RUB $ Adjusted operating income 17,002 18,215 28,464 409.7 Less: share-based compensation expense (3,422) (4,193) (6,552) (94.4) Add: interest income2,8632,9093,38248.7Less: interest expense(1,208)(897)(945)(13.6)Less: other (loss)/income, net(3,395)(1,466)2,92242.0Add: effect of Yandex.Market deconsolidation — — 28,244 406.6 Less: operating losses resulting from sanctions in Ukraine — (404) — — Less: amortization of acquisition-related intangible assets (488) (379) (1,007) (14.4) Less: compensation expense related to contingentconsideration (245) (203) (44) (0.6) Less: income tax expense (4,324) (4,926) (8,603) (123.9) Net income 6,783 8,656 45,861 660.1 The Company’s revenues consist of the following: 2016 2017 2018 2018 RUB RUB RUB $ Online advertising revenues(1): Yandex websites 52,888 65,149 78,696 1,132.8 Yandex ad network websites 19,691 22,251 24,041 346.1 Total online advertising revenues 72,579 87,400 102,737 1,478.9 Revenues of Taxi business 2,313 4,891 19,213 276.6 Other revenues 1,033 1,763 5,707 82.1 Total revenues 75,925 94,054 127,657 1,837.6 (1)The Company records revenue net of VAT, sales agency commissions and bonuses and discounts. Because it isimpractical to track commissions, bonuses and discounts for online advertising revenues generated on Yandexwebsites and on those of the Yandex ad network members separately, the Company has allocated commissions,bonuses and discounts between its Yandex websites and the Yandex ad network websites proportionately to theirrespective gross revenue contributions.The following table sets forth long‑lived assets other than financial instruments and deferred tax assets bygeographic area: 2016 2017 2018 2018 RUB RUB RUB $ Long-lived assets: Russia 24,499 30,689 100,118 1,441.1 Finland 8,327 6,802 5,946 85.6 Rest of the world 1,546 587 900 13.0 Total long-lived assets 34,372 38,078 106,964 1,539.7 For information regarding revenue disaggregated by geography, see Note 2 — Summary of SignificantF-52 Table of ContentsYANDEX N.V.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018(in millions of Russian rubles and U.S. dollars, except share and per share data)Accounting Policies, Revenue Recognition. 17. RELATED‑PARTY TRANSACTIONSThe Company has in place a registration rights agreement with its major shareholders that allows them to require theCompany to register Class A shares held by them under the U.S. Securities Act of 1933, as amended (the “Securities Act”),under certain circumstances. In such circumstances, the Company is obliged to pay all expenses, other than underwritingcommissions and discounts, relating to any such registration.Following the sale of a controlling interest to Sberbank and the deconsolidation of Yandex.Money in July 2013, theCompany retained a noncontrolling interest and significant influence over Yandex.Money’s business. The Companycontinues to use Yandex.Money for payment processing and to sublease to Yandex.Money part of its premises. The amountof revenues from subleasing and other services was RUB 106, RUB 86 and RUB 51 ($0.7) for the years ended December 31,2016, 2017 and 2018, respectively. The amount of fees for online payment commissions was RUB 173, RUB 439 and RUB432 ($6.2) for the years ended December 31, 2016, 2017 and 2018, respectively. As of December 31, 2017 and 2018, theamount of receivables related to payment processing was RUB 158 and RUB 344 ($5.0), respectively. The Companybelieves that the terms of the agreements with Yandex.Money are comparable to the terms obtained in arm’s‑lengthtransactions with unrelated similarly situated customers and suppliers of the Company.Following the formation of Yandex.Market joint venture with Sberbank and the deconsolidation of Yandex.Marketin April 2018 (Note 4), the Company retained a noncontrolling interest and significant influence over Yandex.Market’sbusiness. The Company continues to provide advertising and other services and to sublease to Yandex.Market part of itspremises. The amount of revenues from advertising services was RUB 469 ($6.8) for the year ended December 31, 2018. Theamount of revenues from subleasing and other services was RUB 1,001 ($14.4) for the year ended December 31, 2018. As ofDecember 31, 2018, the amount of receivables from Yandex.Market was RUB 407 ($5.9) and amount of payables was RUB70 ($1.0). The Company believes that the terms of the agreements with Yandex.Market are comparable to the terms obtainedin arm’s‑length transactions with unrelated similarly situated customers and suppliers of the Company.As of December 31, 2017 and 2018, the amount of loans granted to certain senior employees was RUB 173 and RUB207 ($3.0), respectively (Note 5). The loans bear interest rate up to 8% per annum and mature in 2019-2028.18. SUBSEQUENT EVENTSIn February 2019, the Company granted RSUs to purchase an aggregate of up to 570,282 Class A shares to itsemployees pursuant to the 2016 Plan.In February 2019, the Company designated $59.7 (RUB 3,915 at the exchange rate as of the dates of designation) ofdeposits with a third party bank as a hedging instrument to hedge its exposure to changes in the fair value of theunrecognized firm commitments on its servers and network equipment arrangements that are attributable to foreign currencyrisk for the period ending December 31, 2019. The maturities of such deposits are aligned with the purchase paymentsschedule.In March 2019, the Company completed the acquisition of 100% of the shares in Znanie Company Limited(“TheQuestion”). TheQuestion is an internet-based question-and-answer social network. The primary purpose of theacquisition of TheQuestion was to enlarge the database of answers to specific search queries and to enhance the quality ofsearch results provided by Yandex’s Search portal. The Company has not presented a purchase price allocation related to thefair values of assets acquired and liabilities assumed because the initial accounting for the acquisition was incomplete as ofthe issuance date of the consolidated financial statements. F-53 Table of Contents PART III. Item 17. Financial StatementsSee “Item 18. Financial Statements.” Item 18. Financial Statements.See the financial statements beginning on page F‑1.110 Table of Contents Item 19. Exhibits.ExhibitNumber Description of Document1.1 Amended Articles of Association of the Company, amended as of June 1, 2016(incorporated by reference to Exhibit 1.1 of our Annual Report on Form 20-F (file no. 001-35173) filed with the Securities and Exchange Commission on March 27, 2018) 4.2* Contribution Agreement dated as of July 13, 2017 among MLU B.V., Yandex N.V., Stichting Yandex EquityIncentive and Uber International C.V. (incorporated by reference to Exhibit 4.2 of our Annual Report onForm 20-F (file no. 001-35173) filed with the Securities and Exchange Commission on March 27, 2018)4.3* Shareholders Agreement in relation to MLU B.V. dated as of February 7, 2018 among Yandex N.V., UberInternational C.V. and Stichting MLU Equity Incentive and MLU B.V. (incorporated by reference to toExhibit 4.3 of our Annual Report on Form 20-F (file no. 001-35173) filed with the Securities and ExchangeCommission on March 27, 2018)4.4* Subscription Agreement dated as of 12 December 2017 among Yandex N.V., PJSC "Sberbank of Russia" andYandex Market B.V. (incorporated by reference to Exhibit 4.4 of our Annual Report on Form 20-F (file no.001-35173) filed with the Securities and Exchange Commission on March 27, 2018)4.5* 4.6* Shareholders Agreement dated as of April 27, 2018 among PJSC "Sberbank of Russia", Sberbank Nominee,Yandex N.V., Stichting Yandex Market Equity Incentive and Yandex Market B.V. Amendment Deed to Contribution Agreement dated 31 January 2017 among MLU B.V., Yandex N.V.,Stichting Yandex Equity Incentive and Uber International C.V. (incorporated by reference to Exhibit 4.6 ofour Annual Report on Form 20-F (file no. 001-35173) filed with the Securities and Exchange Commission onMarch 27, 2018)7.1 Amended and Restated Shareholders Agreement (incorporated by reference to Exhibit 10.1 from ourRegistration Statement on Form F‑1 (file no. 333‑173766) filed with the Securities and ExchangeCommission on April 28, 2011)7.2 Amended and Restated Registration Rights Agreement (incorporated by reference to Exhibit 10.2 from ourRegistration Statement on Form F‑1 (file no. 333‑173766) filed with the Securities and ExchangeCommission on April 28, 2011)7.3*Agreement for Sale and Purchase of Future Thing dated November 27, 2018 by and between LimitedLiability Company NAPA and Limited Liability Company YANDEX (Translation)8.1Principal Subsidiaries12.1Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes‑Oxley Act of 200212.2Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes‑Oxley Act of 200213.1Certification by Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of theSarbanes‑Oxley Act of 200215.1Consent of JSC KPMG, Independent Registered Public Accounting Firm 15.2Consent of AO Deloitte & Touche CIS, Independent Registered Public Accounting Firm. 101 The following financial information formatted in eXtensible Business Reporting Language (XBRL):(i) Consolidated Balance Sheets as of December 31, 2017 and 2018, (ii) Consolidated Statements of Incomefor the Years Ended December 31, 2016, 2017 and 2018, (iii) Consolidated Statements of ComprehensiveIncome for the Years Ended December 31, 2016, 2017 and 2018, (iv) Consolidated Statements of Cash Flowsfor the Years Ended December 31, 2016, 2017 and 2018, (v) Consolidated Statements of Shareholders’Equity for the Years Ended December 31, 2016, 2017 and 2018, and (vi) Notes to Consolidated FinancialStatements*Confidential treatment requested as to certain portions, which portions have been omitted and filed separately with theSecurities and Exchange Commission† Filed herewith 111 †††††††† Table of Contents SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20‑F and that it has duly causedand authorized the undersigned to sign this Annual Report on its behalf. YANDEX N.V. By:/s/ ARKADY VOLOZH Name:Arkady Volozh Title:Chief Executive Officer Date: April 19, 2019 112 Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Exhibit 4.5 Dated ___ April 2018PJSC “SBERBANK OF RUSSIA”and“DIGITAL ASSETS” LIMITEDandYANDEX N.V.andSTICHTING YANDEX.MARKET EQUITY INCENTIVEandYANDEX.MARKET B.V.SHAREHOLDERS’ AGREEMENTrelating to YANDEX.MARKET B.V. Linklaters CISPaveletskaya sq. 2, bld. 2Moscow 115054Telephone: (+7) 495 797 9797Facsimile: (+7) 495 797 9798Ref. L-263619 Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Table of ContentsClausePageInterpretation2Purpose of joint venture15 Conduct and development of the Business16 Related Party Transactions. Group Company claims16 Contracts with YNV and Sberbank17 Budgets, Business Plans and financial information26 Powers and duties of the Board of Directors30 Board Reserved Matters30 Appointment of Directors31 Replacement and removal of Directors34 Chair35 Director remuneration35 Board meetings35 Committees of Directors37 Management Team. Corporate secretary38 Meetings of Shareholders38 Shareholder Reserved Matters39 Private Placement40 Stichting matters41 Distributions42 Additional finance for the Company42 Transfers44 Default49 Deadlock49 Terms and consequences of transfers of Shares50 IPO53 Duration, termination and survival54 Expansion of Joint Venture56 Restrictions58 Confidentiality64 General67 25.7)75 Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Shareholders’ AgreementThis Agreement is made on ___ April 2018 between:(1)Sberbank of Russia, a public joint stock company incorporated under the laws of the RussianFederation whose registered office is at 19 Vavilova St., 117997 Moscow, Russia and registeredwith the Unified State Register of Legal Entities under number 1027700132195 (“Sberbank”);(2)«Digital assets» Limited, a limited liability company incorporated under the laws of the RussianFederation whose registered office is at 19 Vavilova St., 117997 Moscow, Russia and registeredwith the Unified State Register of Legal Entities under number 5157746082160 (“SberbankNominee”);(3)Yandex N.V., a public limited liability company incorporated under the laws of the Netherlands(naamloze vennootschap met beperkte aansprakelijkheid), having its official seat (statutaire zetel) inAmsterdam, the Netherlands, and its office at Schiphol Boulevard 165, 1118BG Schiphol, theNetherlands, registered with the Dutch Trade Register of the Chambers of Commerce under number27265167 (“YNV”);(4)Stichting Yandex.Market Equity Incentive, a foundation incorporated under the laws of theNetherlands, having its registered office in Schiphol Boulevard 165, 1118 BG Schiphol, theNetherlands, registered with the trade register of the Chamber of Commerce under number 71530975(“Stichting”); and(5)Yandex.Market B.V., a private company with limited liability incorporated under the laws of theNetherlands (besloten vennootschap met beperkte aansprakelijkheid), having its official seat(statutaire zetel) in Amsterdam, the Netherlands, and its office at Schiphol Boulevard 165, 1118BGSchiphol, the Netherlands, registered with the Dutch Trade Register of the Chambers of Commerceunder number 66115582 (the “Company”),(each a “Party” and together the “Parties”).Recitals:(A)Sberbank Nominee has subscribed for a stake in the issued share capital of the Company in orderto carry on the Business (as defined below) together with YNV for mutual profit on the terms set outin a separate agreement between Sberbank, the Company and YNV executed on 12 December 2017(the “Subscription Agreement”).(B)Sberbank, YNV and the Company have agreed that Shares representing **. of the issued sharecapital of the Company (on a fully diluted basis) have been issued to Stichting in order to incentivisecertain employees of the Group in accordance with the terms of this Agreement and the IncentiveProgramme.(C)In consideration of the mutual undertakings set out in this Agreement and other TransactionDocuments, the Shareholders have agreed to hold their Shares and to regulate their respectiverights in the Company on the terms and conditions of this Agreement.It is agreed as follows: Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. PART A – INTERPRETATION1InterpretationIn this Agreement, unless the context otherwise requires, the provisions in this Clause 1 apply:1.1Definitions“**” has the meaning set out in the Subscription Agreement;“AA Dispute” has the meaning set out it in Clause 5.3;“Acceptance Notice” has the meaning set out it in Clause 22.4.3(i)(a);“Additional Investor” has the meaning set out in Clause 18.1;“Additional Securities” has the meaning set out in Clause 21.1.1(i);"Advertising" means advertising materials, content, files and/or any other information intended topromote any goods, offers, products, services, information, in any form;“Advertising Code’’ means a software module intended for the display of the Advertising on theAdvertising Inventories;“Advertising Inventories” means Internet resources (including sites and mobile applications) onwhich the Advertising Code is installed and the Advertising are placed;“Advertising Network” means a technological platform that combines various AdvertisingInventories;“Third-Party Advertising Network Provider” has the meaning set out in Clause 5.8.3;“Affiliate” means, in relation to any person, any other person directly or indirectly Controlling,Controlled by or under common Control with, such person, provided that, for the purposes of thisAgreement, the Central Bank of the Russian Federation shall not be deemed to be an Affiliate ofSberbank (and vice versa);“Agreed Form” means, in relation to a document, such document in the terms agreed between thePrincipals and signed for identification by or on behalf of the Principals;“Agreement” means this agreement as modified, amended or replaced from time to time;“Alice” means the AI Personal Assistant developed by YNV or its Affiliates;****“Ancillary Agreements” means the Sberbank Ancillary Agreements and the YNV AncillaryAgreements;“Appointed Director” means any Sberbank Director or any YNV Director as the context mayrequire;“Appointing Shareholder” has the meaning set out in Clause 9.2.2;“Appointment Dispute” has the meaning set out in Clause 9.2.3; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Articles” means the articles of association (statuten) of the Company from time to time;“Auditors” means KPMG (or its Dutch and/or Russian affiliate(s)) or such other Big Four Firm whichis appointed as auditor of the Group from time to time;“Big Four Firm” means any “big four” accounting firm (Deloitte Touche Tohmatsu, EY, KPMG,PricewaterhouseCoopers, or any successor in title to any of their respective valuation businesses);“Board” means the board of directors of the Company;“Board Reserved Matters” has the meaning set out in Clause 8.1;“Board Super Majority” has the meaning set out in Clause 8.1;****“Budget” means the budget for the Group approved or amended from time to time by the Board,being initially the document, in the Agreed Form and marked “Budget”;“Business” has the meaning set out in Clause 2;“Business Day” means a day which is not a Saturday, a Sunday or a public holiday in Moscow, theRussian Federation or Amsterdam, the Netherlands;“Business Plan” means the Initial Business Plan or any Subsequent Business Plan;“CEO” means the chief executive officer (general director) of the Russian OpCo from time to time,the first such person (following the date of this Agreement) being Maxim Grishakov;“CEO Notice” has the meaning set out in Clause 9.2.2(i);“CEO Qualified IPO” means a fully underwritten IPO where: (i) the valuation of the Group (for 100per cent. of equity) is not less than ** (ii) at least ** of the share capital of the Group (post-offering)is to be offered via such IPO, and (iii) **;“CFO” means the chief financial officer of the Russian OpCo from time to time, the first such person(following the date of this Agreement) being Alexander Balakhnin;“Chair” means the Chairman of the Board from time to time;“Closing” has the meaning set out in the Subscription Agreement;“Company Advertising” means advertising materials in any form intended to advertise any of theCompany Services and/or the Company Resources, or their individual elements;“Company Data” means the data set out in (i) para. 2 of Schedule 1 to the Sberbank Data SharingAgreement and (ii) para. 1.2 of Schedule 1 to the YNV Data Sharing Agreement;“Company Resources” means the Advertising Inventories, as well as any other digital and/or offlineinventory owned by the Company and/or its Subsidiaries and used to provide the CompanyServices;“Company Service” means any of the services offered by the Company and/or its Subsidiaries toInternet users, partners, customers and/or clients (for the avoidance of doubt, including vendors andpurchasers); Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Company Web Counter” has the meaning set out in Clause 5.9.2(iii);“Conducting Shareholder” has the meaning set out it in Clause 5.3.1;“Confidential Information” has the meaning set out in Clause 30.2;“Consenting Shareholder” has the meaning set out in Clause 9.2.2;“Control” means, in relation to a person, where a person (or Persons Acting In Concert) has director indirect control, whether exercised or not, (1) of the affairs of that person, or (2) over more than 50per cent. of the total voting rights conferred by all the issued shares in the capital of that personwhich are ordinarily exercisable in general meeting or (3) of a majority of the board of directors ofthat person (in each case whether pursuant to relevant constitutional documents, contract orotherwise) and "Controlling" and “Controlled” shall be construed accordingly;“Core Business” means **;“Core Business Commencement” means, in respect of a jurisdiction where the Core Business is tobe commenced pursuant to the relevant approval of the Board, satisfaction of all the followingconditions in relation to operation of the Core Business:(i)**(ii)**(a)**(b)**“CPA” means the cost per acquisition (action) model, i.e. a model for online advertising or promotionservices where the advertiser pays for a specified action, including a sale or a form submit (e.g.,contact request, newsletter sign up, registration etc.);“CTO” means the chief executive officer (general director) of Market.Lab from time to time, the firstsuch person (following the date of this Agreement) being Alexey Shevenkov;“Deadlock Appointees” has the meaning set in Clause 24.2.1;“Deadlock Matter” has the meaning set out in Clause 24.1.3;“Deed of Adherence” means a deed substantially in the form set out in Schedule 1;“Defaulting Shareholder” has the meaning set out in Clause 23;“Director” means any director (besturder) of the Company appointed by a Shareholder in accordancewith the terms of this Agreement and the Articles;“Dispute” has the meaning set out in Clause 31.1.1;“Dissenting Shareholder” has the meaning set out in Clause 26.3;“Dividend Policy” means the dividend policy of the Group, in the Agreed Form;“DR” means a depositary receipt (certificaten van aandelen) that may be issued by Stichting inrespect of the Stichting Shares, each representing **“Drag-along Exit” has the meaning set out in Clause 22.4.4(i); Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Drag-along Notice” has the meaning set out in Clause 22.4.4(i);“Drag-along Shares” has the meaning set out in Clause 22.4.4(i);“Dragged Shareholder” has the meaning set out in Clause 22.4.4(i);“Dragging Shareholder” has the meaning set out in Clause 22.4.4(i);“Encumbrance” means any claim, charge, mortgage, lien, option, equitable right, power of sale,pledge, hypothecation, retention of title, right of pre-emption, right of first refusal, usufruct,attachment (beslag) or other third party right or security interest of any kind or an agreement,arrangement or obligation to create any of the foregoing;“End Date” has the meaning set out in Clause 22.4.3(i)(a);“Excess Additional Securities” has the meaning set out in Clause 21.1.1(i);“Exclusivity Period” means, in respect of any Principal, the period from the date of this Agreementuntil **“Exclusivity Territory” means:(iii)**(iv)**(c)**(d)**“Existing Operations” has the meaning set out in Clause 28.2.4;“Financial Services Provider” means any provider of payment and/or financial services (excluding,for the avoidance of doubt, Sberbank and any of its Affiliates), **“Financial Year” means a financial year of the Group commencing (other than in the case of itsinitial financial period) on 1 January and ending on 31 December or on such other dates as theBoard may resolve as a Board Reserved Matter in accordance with this Agreement and the Articles;“FinServices Experiment” has the meaning set out in Clause 5.2.1;“Group” means the Company, the Russian OpCo, Market Lab and any other Group Companies fromtime to time;“Group Companies” means the Company, the Russian OpCo, Market Lab and their subsidiariesfrom time to time, and “Group Company” means any one of them;“IFRS Accounts” means the consolidated accounts of the Group to be prepared by the Company inaccordance with Clauses 6.2.1(ii), 6.2.1(iv) and 6.2.1(vi); “IFRS Costs” means any direct incremental costs of the Group (including the relevant allocation ofinternal staff time) in relation to preparation of the IFRS Accounts as required by, and pursuant to,the deadlines set out in Clause 6.2.3;“Incentive Programme” means the equity incentive programme (including the relevant eligibilitycriteria, applicable good and bad leaver provisions and vesting criteria settlement Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. terms) under which certain employees of the Group are eligible to acquire DRs (subject to theapplicable terms and conditions), in the Agreed Form;“Independent Director” means a reputable professional with knowledge and experience in Businessand board experience who:(v)is not related to or affiliated with any Shareholder or the Group, whether by way ofemployment (whether current or former), directorship, shareholding (save for holding no morethan 1 per cent. of shares) or otherwise, unless each other member of the Board confirmsthat in his/her reasonable opinion such relation or affiliation with any Shareholder or theGroup would not affect such professional’s independence from each of Shareholders and theGroup;(vi)shall declare himself/herself free from any conflict of interests relevant in suchprofessional’s capacity as a Director independent from each of the Shareholders and theGroup, including any relation or affiliation with any Shareholder or the Group referred to insub-paragraph (i) of this definition; and(vii)shall not, in the reasonable opinion of each other member of the Board, have any conflict ofinterests that would affect such professional’s independence from each of the Group andany Shareholder;“Initial Business Plan” means the ** strategic business plan for the Group in relation to the periodfrom Closing until **, as set out in Schedule 5;“Initiating Shareholder” has the meaning set out in Clause 26.1;“Intellectual Property Rights” means, without limitation, trade marks, service marks, trade names,domain names, get-up, logos, patents, inventions, registered and unregistered design rights,copyrights, semi-conductor topography rights, database rights and all other similar rights which maysubsist in any part of the world now or in the future (including Know-how) including, where suchrights are obtained or enhanced by registration, any registration of such rights and applications andrights to apply for such registrations;“Interest” includes an interest of any kind in or in relation to any Share or any right to control thevoting or other rights attributable to any Share, disregarding any conditions or restrictions to whichthe exercise of any right attributed to such interest may be subject;“IPO” means the underwritten initial public offering in respect of and admission of all or any part ofthe Shares or depository receipts (or equivalent) representing Shares, of the Company to trading on**,;“Junior Employee” means any employee of the Group who **,;“Key Employee” means any member of the Senior Management;“Know-how” means confidential and proprietary industrial and commercial information andtechniques in any form including, without limitation, drawings, formulae, test results, reports, projectreports and testing procedures, instruction and training manuals, tables or operating conditions,market forecasts, lists and particulars of customers and suppliers;“Laws” means the laws and regulations of the Netherlands, the Russian Federation and any otherlaws and regulations for the time being in force applicable to any member of the Group or anyShareholder or their Affiliates (as appropriate) including, where applicable, the rules Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. of any stock exchange on which the securities of a Shareholder or its Affiliates are listed or othergovernmental or regulatory body to which a Shareholder or its Affiliates are subject; “LCIA” has the meaning set out in Clause 31.1.1;“Link” has the meaning set out in Clause 5.12.2;“Lock-up Period” has the meaning set out in Clause 22.1.1;“Login” means, in respect of the Services and/or the Resources of the Company, YNV or Sberbank,as the case may be, a password, code or other method of identifying a person who uses any suchServices and/or Resources, required to access the separate account of each such person with suchResources and/or Services;“Losses” means all losses, liabilities, costs (including legal costs and attorneys’, experts’ andconsultants’ fees), charges, expenses, actions, proceedings, claims and demands;“Loyalty Programs” means the Sberbank Loyalty Program and the Yandex Loyalty Program;“Management Team” means both Senior Management and Senior Employees;“Market Lab” means Yandex.Market Lab LLC, a Russian limited liability company incorporatedunder the laws of the Russian Federation whose registered office is at 16 Lva Tolstogo Street,Moscow, 119021, Russia, and registered with the Unified State Register of Legal Entities undernumber 1167746241222;“Material Change to the Budget” means, in relation to an approved Budget for any Financial Year:(A) any decrease of ** or more in budgeted (i) gross merchandise value or (ii) revenue (sales); or (B)any increase or decrease of ** or more in budgeted (i) EBITDA, (ii) net profit or (iii) CAPEX;“Material Change to the Business Plan” means, in relation to an approved Business Plan: (A) anydecrease of ** or more for any Financial Year in planned (i) gross merchandise value or (ii) revenue(sales); or (B) any increase or decrease of ** or more for any Financial Year in planned (i) EBITDA,(ii) net profit or (iii) CAPEX; “New Opportunity” has the meaning set out in Clause 28.2.1;“New Opportunity Jurisdiction” has the meaning set out in Clause 28.2.1;“Niche Products Business” has the meaning set out in Clause Error! Reference source notfound.;“Non-contributing Shareholder” has the meaning set out in Clause 21.1.2;“Non-defaulting Shareholder” has the meaning set out in Clause 23;“Notice” means has the meaning set out in Clause 31.4.1;“Offer” has the meaning set out in Clause 22.4.2(i);“Offeror” has the meaning set out in Clause 22.4.1;“Option Agreements” has the meaning set out in the Subscription Agreement;“Outstanding Amount” has the meaning set out in Clause 21.1.2; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Party” means a party to this Agreement, and “Parties” shall be construed accordingly;“Permitted Web Counter” has the meaning set out in Clause 5.9.4;“Persons Acting In Concert”, in relation to a person, means persons which actively co-operatethrough the acquisition by them of shares in that person or a holding company of that person,pursuant to an agreement or understanding (whether formal or informal), with a view to obtaining orconsolidating Control of that person;“Pre-Agreed Deputy” means an individual mutually agreed between the Principal Shareholders to bea replacement of the CEO or CFO (as applicable) solely for the purposes of Clause 24; “Price Comparison Business” means the business the primary purpose of which is to provideconsumers with comparison of online prices of online retailers and merchants for non-perishableconsumer goods potentially leading to transactions completed on the websites or apps of suchonline retailers or online merchants that is substantially similar to such business carried out throughthe website “market.yandex.ru” or Yandex.Market app as of the date of this Agreement. For theavoidance of doubt, the business of comparison of special offers and (or) discounts for goods,providing or facilitating cashbacks and business of Edadeal as carried out through the website“edadeal.ru”, “yandex.ru”, “edadeal.yandex.ru”, “yandex.edadeal.ru”, Edadeal app or Yandex app asof the date of this Agreement shall not be considered Price Comparison Business;“Principals” means Sberbank and YNV, and “Principal” means either of them;“Principal Shareholders” means Sberbank Nominee and YNV, and “Principal Shareholder”means either of them;“Private Placement” has the meaning set out in Clause 18.1;“Promotion Channel” means a method or format for the placement of the Company Advertising,including, Internet advertising, outdoor advertising, television and/or radio advertising;“Qualified IPO” means a fully underwritten IPO where: (i) the valuation of the Group (for 100 percent. of equity) is not less than ** and (ii) at least ** of the share capital of the Group are sold viasuch IPO;“Qualified IPO Notice” has the meaning set out in Clause 26.3;“Realisation Date” has the meaning set out in Clause 18.1;“Regulatory Condition” means a bona fide requirement for material consent, clearance, approval orpermission necessary to enable a Transferring Shareholder, the Remaining Shareholder and/orOfferor to be able to complete a transfer of Shares under applicable Laws;“Related Party Transaction” has the meaning set out in Clause 4.1;“Remaining Shareholder” has the meaning set out in Clause 22.4.1(vi)(a);“Requesting Shareholder” has the meaning set out in Clause 6.2.5;“Resources” means the Company Resources, the Yandex Resources or the Sberbank Resources,as the context may require; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Restricted Employee” means **“Restricted Party” means such entity or entities as may be agreed by the Principals in writing or bya simple majority of the Board from time to time;“Restricted Transferee” means such entity or entities as may be agreed by the Principals in writingfrom time to time;“Right” means any right, power or remedy in connection with this Agreement;“Rules” has the meaning set out in Clause 31.1.1;“Russian OpCo” means Yandex.Market LLC, a Russian limited liability company incorporated underthe laws of the Russian Federation whose registered office is at 16 Lva Tolstogo Street, Moscow,119021, Russia and registered with the Unified State Register of Legal Entities under number1167746491395;“Sberbank Ancillary Agreements” means:(viii)**(ix)**(x)**“Sberbank Assistant” has the meaning set out in Clause Error! Reference source not found.;“Sberbank Data” means the data set out in para. 3 of Schedule 1 to the Sberbank Data SharingAgreement;“Sberbank Directors” has the meaning set out in Clause 9.1.2(i)(a)(II);“Sberbank Financial Services Agreement” means **“Sberbank Independent Director” has the meaning set out in Clause 9.1.2(i)(a)(I);“Sberbank Loyalty Program” means any customer reward program for users of the SberbankServices maintained by Sberbank from time to time during the term of this Agreement, including theprogram "Thank you from Sberbank";“Sberbank Promotion” means all of the Company’s activities aimed at placing information aboutSberbank, references to the Sberbank Resources, and to marketing and/or other advertisingmaterials of Sberbank on the Company Resources and/or the Company Services;“Sberbank Resources” means the Advertising Inventories, as well as any other digital and/or offlineinventory owned by Sberbank and/or its Affiliates and used to provide Sberbank Services;“Sberbank Service” means any of the services offered by Sberbank and/or its Affiliates to Internetusers, partners, customers and/or clients (for the avoidance of doubt, including vendors andpurchasers);“Sberbank Shares” means voting Shares of Class B of EUR 0.002 each;“Sberbank Special Promotion Services Request” has the meaning set out in Clause 29.2.3; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Sberbank Web Counter” has the meaning set out in Clause 5.9.2(ii);“Search Wizard” means **"Service" means any of the Company Services, the Yandex Services or the Sberbank Services, asthe context may require;“Security Enforcement Opportunity” means any investment opportunity that:(xi)**(xii)** (e)**(f)**“Senior Employee” means persons holding positions in the Russian OpCo or in Market Lab (asapplicable) listed in Part B of Error! Reference source not found.;“Senior Management” means those positions in the Russian OpCo or in Market Lab listed in Part Aof Error! Reference source not found.;“Shareholder” means any holder of Shares from time to time having the benefit of this Agreement,including under the terms of a Deed of Adherence;“Shareholder Reserved Matters” has the meaning set out in Clause 17.2;“Shareholder’s Group” means a Principal Shareholder and any Affiliate of that PrincipalShareholder from time to time;“Shares” means all the shares in the issued share capital of the Company from time to time;“Stichting Shares” means voting shares of Class C of EUR 0.002 each in the share capital of theCompany that may be issued to and held by Stichting from time to time;“Subscription Agreement” has the definition set out in Recital (A);“Subscription Price” has the meaning set out in Clause 21.1.1(i);“Subsequent Business Plan” means a strategic business plan for the Group for a period of **which, once approved, replaces the Initial Business Plan or the previous Subsequent Business Plan(as applicable) in all respects;“Surviving Provisions” means Clause 1 (Interpretation), Clause 5 (Contracts with YNV andSberbank), Clause 27 (Duration, termination and survival), Clause 28 (Expansion of Joint Venture),Clause 28.6 (Restrictions), Clause 30 (Confidentiality), Clause 31.1 (Arbitration), Clause 31.2 (Governing law and submission to jurisdiction), Clause 31.4 (Notices), Clause 31.5 (Wholeagreement and remedies), Clause 31.6 (Legal advice and reasonableness), Clause 31.9 (Nopartnership), Clause 31.11 (Survival of rights, duties and obligations), Clause 31.12 (Waiver),Clause 31.13 (Variation), Clause 31.14 (No assignment), Clause 31.16 (Invalidity/severance),Clause 31.18 (Costs) and Clause 31.19 (Third Party Rights), and any other provisions of thisAgreement to the extent relevant to the interpretation or enforcement of such provisions;“Tag-along” has the meaning set out in Clause 22.4.1(vi);“Tag-along Default” has the meaning set out in Clause 22.4.3(ii)(c); Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Tag-along Default Notice” has the meaning set out in Clause 22.4.3(ii)(c);“Tag-along Shares” has the meaning set out in Clause 22.4.3(ii)(a);“Tag Portion” has the meaning set out in Clause 22.4.1(vi)(a);“Taxation” or “Tax” means all forms of taxation (other than deferred tax) and statutory,governmental, state, provincial, local governmental or municipal impositions, duties, contributionsand levies, in each case in the nature of tax, whether levied by reference to income, profits, gains,net wealth, asset values, turnover, added value or otherwise and shall further include payments to aTax Authority on account of Tax, in each case of the Netherlands, the Russian Federation orelsewhere in the world wherever imposed and whether chargeable or primarily against or attributabledirectly or primarily to a Group Company or any other person and all penalties and interest relatingthereto;“Tax Authority” means any taxing or other authority competent to impose any liability in respect ofTaxation or responsible for the administration and/or collection of Taxation or enforcement of anylaw in relation to Taxation;“Technology Agreement” means **“Third Party Offer” has the meaning set out in Clause 22.4.1;“Third Party Offer Price” has the meaning set out in Clause 22.4.1(iv);“Third-Party Advertising Network Provider” has the meaning set out in Clause 5.8.2(ii);“Third-Party Promotion Channels Provider” has the meaning set out in Clause 5.10.1;“Traffic” means visits by a certain number of Internet users to an Advertising Inventory over acertain period of time;“Transaction Documents” has the meaning set out in the Subscription Agreement;“Transfer”, in the context of Shares or any Interest in Shares, means any of the following: (a) sell,assign, transfer or otherwise dispose of, or grant any option over, any Shares or any Interest inShares; (b) create or permit to subsist any Encumbrance over Shares or any Interest in Shares; (c)enter into any agreement in respect of the votes or any other rights attached to any Shares or anyInterest in Shares (including under this Agreement); or (d) renounce or assign any right to receiveany Shares or any Interest in Shares;“Transfer Date” has the meaning set out in Clause 25.1.3;“Transfer Notice” has the meaning set out in Clause 22.4.2;“Transferee” has the meaning set out in Clause 22.3;“Transferor” has the meaning set out in Clause 22.3;“Transferring Shareholder” has the meaning set out in Clause 22.4.1;“Transfer Shares” has the meaning set out in Clause 22.4.1;“Unsuitable Director” means a Director who has been charged with (or is suspected of) having, ordetermined by a court of competent jurisdiction to have, acted in material breach of the Laws orcommitted any serious criminal offence, or a material breach of any fiduciary duty in relation to theGroup; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “VAT” means within the European Union such Tax as may be levied in accordance with (but subjectto derogations from) Council Directive 2006/112/EC and outside the European Union any Tax leviedby reference to added value or sales;“Web Counter” means a program element designed to collect information about users visiting and/orusing the respective Company Services and/or Company Resources;“Yandex Advertising Network” means the Advertising Network that is owned and operated by YNVand its Affiliates, official website of which is available at https://partner2.yandex.ru/;“Yandex Data” means the data set out in para. 1.1 of Schedule 1 to the YNV Data SharingAgreement;“Yandex Loyalty Program” means any customer reward program for users of the Yandex Servicesmaintained by Yandex Service Companies from time to time during the term of this Agreement,including the program “Yandex+”;“Yandex Promotion” means all of the Company’s activities aimed at placing information about YNVand/or its Affiliates, references to the Yandex Resources, and to marketing and/or other advertisingmaterials of YNV and/or its Affiliates on the Company Resources and/or the Company Services;“Yandex Resources” means the Advertising Inventories, as well as any other digital and/or offlineinventory owned by YNV and/or its Affiliates and used to provide the Yandex Services;“Yandex Service” means any of the services offered by any Yandex Service Company to Internetusers, partners, customers and/or clients (for the avoidance of doubt, including vendors andpurchasers);“Yandex Service Company” means (i) YNV, (ii) any Affiliate of YNV, (iii) any entity in which YNVholds or is entitled to acquire (directly or indirectly) no less than 25 per cent. of economic or votingrights, (iv) any entity which is treated by YNV as an Affiliate for the purposes of advertising orpromotion, including co-branding activities, and/or (v) any entity that the Principal Shareholders haveagreed in writing to treat as a Yandex Service Company for the purposes of this Agreement;“Yandex Services Promotion Features” means **“Yandex Web Counter” has the meaning set out in Clause 5.9.2(i);“YM Shopping Skill” has the meaning set out in Clause Error! Reference source not found.;"YNV Advertising Code" means the Advertising Code the rights to which belong to YNV and/or itsAffiliates;“YNV Ancillary Agreements” means:(xiii)**(xiv)**(xv)**(xvi)**(xvii)** Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (xviii)**(xix)**“YNV Assistant” has the meaning set out in Clause Error! Reference source not found.;“YNV Directors” has the meaning set out in Clause 9.1.2(ii)(a)(II);“YNV Independent Director” has the meaning set out in Clause 9.1.2(ii)(a)(I); “YNV Shares” means voting Shares of Class A of EUR 0.002 each; and“YNV Special Promotion Services Request” has the meaning set out in Clause 29.2.2(i).19.1Singular, plural, genderReferences to one gender include all genders and references to the singular include the plural andvice versa.19.2References to persons and companiesReferences to:19.2.1a person includes any company, corporation, firm, joint venture, partnership orunincorporated association (whether or not having separate legal personality); and19.2.2a company include any company, corporation or any body corporate, wherever incorporated.19.3References to subsidiaries and holding companiesA company is a “subsidiary” of another company (its “holding company”) if that other company,directly or indirectly, through one or more subsidiaries:19.3.1holds a majority of the voting rights in it;19.3.2is a member or shareholder of it and has the right to appoint or remove a majority of itsboard of directors or equivalent managing body;19.3.3is a member or shareholder of it and controls alone, or pursuant to an agreement with othershareholders or members, a majority of the voting rights in it; or19.3.4has the right to exercise a dominant influence over it, for example by having the right to givedirections with respect to its operating and financial policies, with which directions itsdirectors are obliged to comply.19.4Schedules etc.References to this Agreement shall include any Recitals and Schedules to it and references toClauses and Schedules are to Clauses of, and Schedules to, this Agreement. References toparagraphs and Parts are to paragraphs and Parts of the Schedules.19.5InformationReferences to books, records or other information mean books, records or other information in anyform, including paper, electronically stored data, magnetic media, film and microfilm. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 19.6Legal termsReferences to any English legal term shall, in respect of any jurisdiction other than England andWales, be construed as references to the term or concept which most nearly corresponds to it inthat jurisdiction.19.7HeadingsHeadings shall be ignored in interpreting this Agreement.19.8Non-limiting effect of wordsThe words “including”, “include”, “in particular” and words of similar effect shall not be deemed tolimit the general effect of the words which precede them.19.9Winding upReferences to the winding up of a person include any equivalent or analogous procedure under thelaw of any jurisdiction in which that person is incorporated, domiciled or resident or carries onbusiness or has assets.19.10Joint and several liabilityAny provision of this Agreement which is expressed to bind more than one person shall bind each ofthem severally and not jointly and severally.19.11Modification etc. of statutesReferences to a statute or statutory provision include that statute or provision as from time to timemodified or re-enacted or consolidated.19.12DocumentsReferences to any document (including this Agreement) or to a provision in a document, shall beconstrued as a reference to such document or provision as amended, supplemented, modified,restated or novated from time to time.19.13Non-applicability of contra proferentemThe Parties acknowledge and agree that this Agreement has been jointly drafted by the Parties andaccordingly the contra proferentem rule (or any similar rule of interpretation) shall not be appliedagainst any Party. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. PART B – SCOPE OF THE JOINT VENTURE2Purpose of joint ventureThe business of the Group shall be to engage in e-commerce on a worldwide basis, including,without limitation, through:2.1**2.2**2.3**2.4**2.5**2.6**2.7**2.8**(together, the “Business”). Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. PART C – CONDUCT AND OPERATIONS OF THE COMPANY3Conduct and development of the Business3.1General3.1.1The Shareholders agree that their respective rights and obligations in relation to the Groupand the Business shall be regulated by this Agreement and the Articles. The Shareholdersagree to comply with the provisions of this Agreement and all provisions of the Articleswhich relate to them.3.1.2Sberbank shall procure that Sberbank Nominee complies with all of its obligations under thisAgreement, other Transaction Documents and the Articles.3.1.3The Shareholders shall (so far as they lawfully can) ensure that the Company complies withall of its obligations under this Agreement, other Transaction Documents and the Articles.3.1.4The Company agrees to comply with all of its obligations under this Agreement, otherTransaction Documents and the Articles and procure that the Group Companies do thesame.3.2Conduct and promotion of the BusinessThe Shareholders shall vote their Shares and otherwise act within their power (so far as they lawfullycan) to ensure the following:3.2.1that the Business shall be conducted in accordance with the Business Plan and Budget;and3.2.2that the Company shall not act, and shall procure (insofar as it lawfully can) that any GroupCompany shall not act, otherwise than in accordance with applicable Laws, the TransactionDocuments and the Articles.4Related Party Transactions. Group Company claims4.1Subject to Clause 5 and unless the Principal Shareholders agree otherwise (including in respect ofany amendment to an Ancillary Agreement), the Principal Shareholders and the Company shallprocure that any new (and any extension or other modification of any existing) transaction,arrangement or dealing by any member of the Group with any member of a Shareholder’s Group (a“Related Party Transaction”) shall be entered into by such member on an arm’s length commercialbasis, on terms not unfairly prejudicial to the interest of either Principal Shareholder or the Groupand shall be subject to the prior consent of the Board by a Board Super Majority.4.2Where a Group Company may have a claim against any Principal Shareholder or its Affiliate(including under the Subscription Agreement or otherwise), all decisions relating to any action inrespect of the conduct of such claim by the relevant Group Company (including any action requiredto initiate proceedings, compromise, settle, defend, remedy, mitigate, appeal or apply for anyinterim injunction or other application or action (including interim defence)) shall be taken by asimple majority of the Board. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 5Contracts with YNV and SberbankThe Principals and the Company shall procure that:5.1YNV (or its relevant Affiliate) shall provide services and grant rights to the Group pursuant to eachof the YNV Ancillary Agreements (and shall ensure that each such YNV Ancillary Agreementremains in full force and effect) during the period from the date of this Agreement until the date thatis:5.1.1in case of **5.1.2in case of **5.1.3in case of **in each case, following the earlier of **. Notwithstanding the foregoing, ** and5.1.4in case of any other **.5.2Sberbank (or its relevant Affiliate) shall provide services to the Group pursuant to each of the **,provided that:5.2.1 **(i)**(ii)******5.2.2**(i)**(ii)**5.2.3**(i)**(ii)**(iii)**(a)**(b)**(iv)**(a)**(b) (c)**(I)**(II)** Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 5.2.4**5.3Conduct of AA DisputesThe Principal Shareholders shall procure that in case of any dispute or claim arising out of or inconnection with any Ancillary Agreement (including as a result of a breach or termination of suchAncillary Agreement) between a Principal Shareholder (or its Affiliate) and a Group Company (an“AA Dispute”):5.3.1the Company shall as soon as reasonably practicable give written notice to the otherPrincipal Shareholder (the “Conducting Shareholder”) stating reasonable details (to theextent known to the Company at the relevant time) of the nature of the AA Dispute, copiesof any formal demand or complaint, the circumstances giving rise to it, and (if practicable) abona fide estimate of any alleged loss (if applicable);5.3.2the Appointed Directors of the Conducting Shareholder shall be entitled to take such actionon behalf of the Company as they shall deem necessary to avoid, dispute, deny, defend,resist, appeal, compromise or contest such claim or liability in connection with the AADispute, and the Appointed Directors of the other Principal Shareholder shall recusethemselves from any discussions of decisions in such regard (whether or not so required byLaws), and the presence of such Appointed Directors of the other Principal Shareholder shallnot be required for to constitute a quorum of the Board for such purposes; and5.3.3the Group Companies shall allow the Conducting Shareholder to investigate the AA Dispute(including whether and to what extent any amount is or may be payable in respect thereof)and shall make available to the Conducting Shareholder all such information it mayreasonably require.5.4**5.5**5.6**5.6.1**(i)**(ii)**(iii)**(iv)****5.6.2**5.7For the avoidance of doubt, nothing in Clause 5.2 or in any agreement between the Group andSberbank (including its Affiliates) or any Financial Service Provider shall restrict any vendor orpurchaser which uses the Group’s marketplace or online retail store from:5.7.1using any payment card as a means of payment solely on the basis of the issuing bank of suchcard; or5.7.2using any payment or financial services available to such vendors or purchasers; or Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 5.7.3borrowing money from any third party; or5.7.4using any other means of payment for acquisition of any goods or services.5.8Principles of interaction in connection with the placement of the Advertising on the CompanyResources5.8.1Subject to Clauses 5.8.2 and 5.8.3, the Company Resources shall incorporate the YNVAdvertising Code and the installation of the Advertising Code of any third-party AdvertisingNetwork or use of any other code, software or technology, either owned and/or provided bythe third party and/or by the Company, resulting in the placement of Advertising from anythird-party Advertising Network shall not be allowed.5.8.2(x) Advertising Code of any third-party Advertising Network may be installed on theCompany Resources and/or (y) other code, software or technology, either owned and/orprovided by any third party and/or by the Company, and resulting in the placement ofAdvertising from any third-party Advertising Network could be used only if all of the followingconditions are met:(i)the Group shall arrange for a tender procedure or any other procedure for solicitationof alternative proposals in respect of the Advertising Network no later than ** prior tothe proposed start of integration with such Advertising Network;(ii)YNV (or its Affiliate) shall be entitled to take part in such procedure on an equalfooting with any third-party provider of the Advertising Network (each, a "Third-PartyAdvertising Network Provider");(iii)where a Third-Party Advertising Network Provider selected by the Company pursuantto such procedure offers commercial terms and conditions of cooperation that aremore favourable to the Group than the terms and conditions of the YandexAdvertising Network, YNV (or its Affiliate) shall be entitled within ** from the date ofsuch Third-Party Advertising Network Provider’s offer to match such terms andconditions, in which case the Advertising will continue to be placed on the CompanyResources through the Yandex Advertising Network;(iv)if YNV (or its Affiliate) fails to match such terms and conditions:(a)the engagement of the relevant Third-Party Advertising Network Provider forintegration with the Advertising Network shall be subject to prior approval bythe Board as a Board Reserved Matter; and(b)no later than ** in advance of the relevant Board meeting, the CEO shallprepare and provide to the Board a memorandum setting out a detailedexplanation of the rationale (including strategic considerations) for the Groupfor terminating cooperation with YNV and beginning cooperation with the third-party Advertising Network.(v)if the Board approves engagement of the relevant Third-Party Advertising NetworkProvider for integration with the Advertising Network as a Board Reserved Matterpursuant to Clause 5.8.2(iv)(a), the relevant contract with Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (or terms of engagement of) such Third-Party Advertising Network Provider shallprovide that the Third-Party Advertising Network Provider shall not:(a)make any public announcements in relation to its engagement by the Group;(b)use the Group’s name in its own advertising or promotion;(c)advertise or promote any of its products or services analogous to YandexServices:(I)to or among the Group’s customers on the Group’s properties; or(II)to or among any users of the Company Resources that came to theCompany Resources through any promotion channel contemplated byclause 4 of the Technology Agreement (other than any such userswho had visited the Company Resources at least once in the six-month period prior to their first visit of the Company Resourcesthrough such Promotion Channel).5.8.3Without prejudice to Clauses 5.8.1 and 5.8.2 above, the Company may, in order to improvethe Company Services and/or the Company Resources, and in preparation for theprocedures described in Clause 5.8.2 above, conduct experiments related to the installationof an Advertising Code of a third-party Advertising Network on the Company Resources(each, an “AdvServices Experiment”), provided all of the following conditions are satisfied: (i)the AdvServices Experiment will not account for more than ** of the monthly Trafficof the Company Resource and/or Resource element (and all such AdvServicesExperiments running simultaneously in any calendar month may not account formore than ** of the monthly Traffic of the Company Resource and/or the CompanyResource element);(ii)the duration of an AdvServices Experiment in respect of any Third-Party AdvertisingNetwork Provider will be limited, and, in any case, may not exceed ** in aggregatewithin a calendar year in respect of such Third-Party Advertising Network Provider;and(iii)the Company shall notify the Principal Shareholders of an AdvServices Experimentin advance, but, in any event, at least ** before the beginning of the AdvServicesExperiment. Such notice shall include the identity of the Third-Party AdvertisingNetwork Provider and any other persons participating in the AdvServices Experiment(including when the Advertising Code is not owned by the Third-Party AdvertisingNetwork Provider).5.9Principles of interaction in connection with the installation of Web Counters on the CompanyResources5.9.1The Yandex Web Counter (as defined in Clause 5.9.2(i)) shall be installed on the CompanyResources. In addition to the Yandex Web Counter, the Company or its Subsidiaries mayalso install the Sberbank Web Counter (as defined in Clause 5.9.2(ii)) and/or the CompanyWeb Counter (as defined in Clause 5.9.2(iii)) Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. on the Company Resources. No other Web Counters may be installed on any CompanyResources, except as otherwise provided for in Clause 5.9.3.5.9.2A Web Counter installed on the Company Resources shall meet the following criteria:(i)In the case of the Web Counter of YNV and/or its Affiliates:(a)such Web Counter shall not have access to the Sberbank Data; and(b)such Web Counter (i) shall have been developed by YNV and/or its Affiliatesindependently and is not a version, a modification and/or other adaptation ofany Web Counters owned by any third party (including Google and Facebook)or (ii) if developed by a third party, shall have been assigned or exclusivelylicensed to YNV and/or its Affiliates, subject to compliance with Clause 5.15(the “Yandex Web Counter”);(ii)In the case of the Web Counter of Sberbank and/or its Affiliates:(a)such Web Counter shall not have access of the Yandex Data; and(b)such Web Counter (i) shall have been developed by Sberbank and/or itsAffiliates independently and is not a version, a modification and/or otheradaptation of any Web Counters owned by any third party (including Googleand Facebook), or (ii) if developed by a third party, shall have been assignedor exclusively licensed to Sberbank and/or its Affiliates, subject to compliancewith Clause 5.15(the “Sberbank Web Counter”);(iii)In the case of the Company Web Counter:(a)such Web Counter shall not have access to the Yandex Data or the SberbankData; and(b)such Web Counter (i) shall have been developed by the Company and/or itsSubsidiaries independently and is not a version, a modification and/or otheradaptation of any Web Counters owned by third parties (including Google andFacebook), or (ii) if developed by a third party, shall have been assigned orexclusively licensed to the Company and/or its Subsidiaries, subject tocompliance with Clause 5.15(the “Company Web Counter”).5.9.3Notwithstanding Clauses 5.9.1 and 5.9.2 above and subject to Clause 5.9.4 below, a third-party Web Counter may be installed on the Company Resources, in the following cases:(i)in case of a Permitted Web Counter, on a mobile application if such mobileapplication constitutes a Company Resource, provided that in addition to such WebCounter, the Yandex Web Counter shall also be installed on such mobile application.In addition to the Yandex Web Counter, the Sberbank Web Counter may also beinstalled on such Company Resource; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (ii)in case of a Permitted Web Counter, in the event the placement of such WebCounter is required for the monitoring of the efficiency of the Company Advertisingplacement, provided that such Web Counter will not have access to the Yandex Dataor the Sberbank Data, and will be placed (used) solely on the page (section) of theCompany Service and/or Company Resource, to which the Internet users areredirected when interacting with the Company Advertising;(iii)in the event the placement of a third-party Web Counter is effected for the purposesof an experiment conducted by the Company on the Company Resources and/orCompany Services, provided that all of the following conditions are satisfied:(a)such experiment shall not account for more than ** of the monthly Trafficand/or audience of the Company Resource and/or Company Resourceelement (and all such experiments running simultaneously in any calendarmonth may not account for more than ** of the monthly Traffic and/oraudience of the Company Resource and/or the Company Resource element);(b)the duration of an experiment in respect of such third-party Web Counter willbe limited, and, in any case, may not exceed any ** in aggregate within acalendar year in respect of such third party Web Counter; and(c)the Company shall notify the Principal Shareholders of an experiment inadvance, but, in any event, not less than ** before the beginning of theexperiment. It being understood that such notification shall include the identityof the third party that owns the relevant Web Counter.5.9.4For the purposes of Clause 5.9.3, a “Permitted Web Counter” means any Web Counterowned by Facebook, Google, Criteo (remarketing network), Adjust (for mobile applications)or iTunes Connect (for mobile applications). The list of Permitted Web Counters may beamended based on a reasoned request of a Principal Shareholder or the Company inaccordance with the following procedure:(i)any amendment to the list of the Permitted Web Counters shall be subject to priorapproval by the Board as a Board Reserved Matter; and(ii)no later than ** in advance of the relevant Board meeting, the Company or therelevant Principal Shareholder shall prepare and provide to the Board a reasonedrequest setting out a detailed explanation of the rationale (including strategicconsiderations) for the proposed amendment of the list of the Permitted WebCounters.5.10Principles for the Distribution of the Company Advertising5.10.1The Company may from time to time place Company Advertising using the PromotionChannels owned and/or provided by any third party (a “Third-Party Promotion ChannelsProvider”), provided that the Parties shall ensure that the following procedure is compliedwith (other than in case of any advertising services Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. as placed with Third-Party Promotion Channels Providers as of the date of this Agreement): (i)the Company shall notify the Principal Shareholders of its intention to placeCompany Advertising using new Third-Party Promotion Channels Provider and therelevant terms of the Third-Party Promotion Channels Provider offer;(ii)YNV (or its Affiliate) shall be entitled to provide its offer in respect of placing suchCompany Advertising. In case a Promotion Channel can only be provided to theCompany by YNV (or its Affiliate) in an agent capacity or through an advertisingreseller, Sberbank (or its Affiliate), including in an agent capacity or through anadvertising reseller, shall also be entitled to provide its offer in respect of placementof the Company Advertising through such Promotion Channel; and(iii)within ** from the date of the Company’s written notice pursuant to Clause 5.10.1(i),YNV (or its Affiliate) shall be entitled to match an offer of a Third-Party PromotionChannels Provider or of Sberbank (if allowed pursuant to Clause 5.10.1(ii)) in respectof the relevant Promotion Channel(s), whichever offer is selected pursuant to atender procedure or any other procedure for solicitation of alternative proposals inrespect of the relevant Promotion Channel(s), provided thе matching offer of YNV (orits Affiliate) is “equivalent” to the offer of a Third-Party Promotion Channels Provideror Sberbank (as the case may be), in which case the Company shall place suchCompany Advertising with YNV (or its Affiliate). 5.10.2The Parties shall separately agree on what constitutes an “equivalent” matching offer for thepurposes of Clause 5.10.1(iii), having regard to, among other things, the audience of therelevant Company Advertising, (if applicable) CTR and the offer price.5.10.3In case YNV (or its Affiliate) fails to match the offer, the relevant contract entered into bythe Company with (or terms of engagement of) the Third-Party Promotion Channels Providershall provide that the Third-Party Promotion Channels Provider shall not:(i)make any public announcements in relation to the provision of any services to theGroup;(ii)use the Group’s name in its own advertising or promotion, other than to advertise orpromote specific products and/or services provided to the Group by such Third-PartyPromotion Channels Provider;(iii)advertise or promote any of its products or services analogous to Yandex Services:(a)to or among the Group’s customers on the Group’s properties; or(b)to or among the users of the Company Resources, which came to theCompany Resources through any promotion channel contemplated by clause4 of the Technology Agreement (other than any such users who had visitedthe Company Resources at least once in the six-month Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. period prior to their first visit of the Company Resources through suchPromotion Channel).5.11Principles of interaction in connection with the use of Logins in the Company Services andthe Company Resources5.11.1In providing the Company Services, the Company, and its Subsidiaries shall use the Logininfrastructure of YNV (and/or its Affiliates) (“Яндекс.Паспорт” or another Login infrastructureof YNV (and/or its Affiliates), which may be developed in the future), where the set ofauthorization methods and options are determined by YNV (and/or its Affiliates).5.11.2In the event the Company decides to use another Login infrastructure instead of the Logininfrastructure of YNV (and/or its Affiliates), in providing the Company Services as describedin Clause 5.11.1, the Company and its Subsidiaries (i) shall use the Logins of Sberbank andthe Logins of YNV (and/or its Affiliates) or (ii) may use the Logins of third parties (other thanany Restricted Party, unless the Principal Shareholders agree otherwise) and/or the Loginsof the Company. If the Logins of Sberbank, the Logins of the Company, and/or the Logins ofsuch third parties are so used, the Company shall ensure "end-to-end identification" betweensuch Logins and the principal Login of YNV (and/or its Affiliates), or otherwise ensure thelink between such Logins and the principal Login of YNV (and/or its Affiliates), which iscompatible with, and accounts for, the Login infrastructure of YNV (and/or its Affiliates). TheParties acknowledge and agree that YNV may refuse "end-to-end identification" or other linkbetween the Login of YNV (and/or its Affiliates) and any other Login (including the Logins ofSberbank) in case such actions require unreasonable development costs or may jeopardizeinformation security of the Yandex Services, in which case the Login infrastructure of YNV(and/or its Affiliates) shall be used in accordance with Clause 5.11.1.5.12Principles of cooperation in connection with the Yandex Promotion and the SberbankPromotion5.12.1The Company shall carry out the Yandex Promotion and the Sberbank Promotion by meansand on the terms to be determined in the relevant contracts between the Company and YNV(or its Affiliate) and between the Company and Sberbank (or its Affiliate) respectively.5.12.2Without prejudice to Clause 5.12.1 above, the Company and its respective Subsidiariesshall place on each page and/or in each element of the Company Services and/or theCompany Resources, a clickable link(s) directing the users, partners and/or customers ofthe Company Services to the Yandex Resource(s) (at YNV’s choice) and the SberbankResource(s) (at Sberbank’s choice) (each, a “Link”).5.12.3Notwithstanding the foregoing, the placement of each Link shall be carried out subject todesign and product policy requirements of the Company and/or content of the respectiveCompany Service and/or Company Resource. If the Company concludes in good faith thatthe proposed placement of a Link does not comply with such requirements, the Company isentitled to refuse the placement of such Link.5.13Principles of cooperation in connection with Loyalty Programs Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 5.13.1The Company shall participate in the Yandex Loyalty Program on the terms and conditionsto be determined in an agreement between the Company and YNV (or its relevant Affiliate)based on the following principle: the terms and conditions for participation of the Company inthe Yandex Loyalty Program (including in respect of the availability and amount ofreimbursement of the Company’s costs for participation in the Yandex Loyalty Program) willbe analogous to the terms of participation of other Yandex Services in the Yandex LoyaltyProgram.5.13.2The Company shall participate in the Sberbank Loyalty Program on the terms and conditionsto be determined in an agreement between Sberbank (or its relevant Affiliate) and theCompany.5.14Promotion Ancillary AgreementsThe Principal Shareholders and the Company shall procure that the following agreements areentered into as soon as practicable following the date of this Agreement (unless entered into beforethat):5.14.1agreement(s) in respect of promotion of YNV (and/or its Affiliate) by the Group; and5.14.2agreement(s) in respect of promotion of Sberbank by the Group.Neither the Company, nor any of its Subsidiaries shall resell or grant access to any third parties(other than to any Group Companies) to services obtained by the Company pursuant to any of theAncillary Agreements, except if such resale or grant of access are expressly permitted under suchAncillary Agreements.5.15DataIn connection with the placement of the Advertising on the Company Resources and furtherdevelopment of the Company Services, the Company shall not:5.15.1sell or otherwise transfer any Yandex Data or Sberbank Data received by the Company toany third party;5.15.2sell or otherwise offer any services which will be based on or will use any Yandex Data orSberbank Data; and5.15.3sell or otherwise transfer the Company Data to any third party, save for YNV or Sberbank (ortheir respective Affiliates), subject to compliance with the rules provided for in therespective Data Sharing Agreement, and subject to Clause 5.10 above.5.16SLA of the Technology AgreementThe Principal Shareholders and the Company agree that during six (6) months following the date ofthis Agreement, the Russian OpCo and Yandex LLC will negotiate in good faith amendments to theService Level Agreement (set out in Part 3 of Schedule 2 to the Technology Agreement). Followingthe expiration of such six-month period, the CTO shall report to the Directors the outcomes of suchnegotiations.5.17Yandex and Sberbank ecosystemsRecognising the unique ties between the Group and Yandex consumer ecosystem, the Partiesagree that they have an aspiration to preserve such ties between the Group and Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Yandex consumer ecosystem and maintain the Group within the Yandex and Sberbankecosystems.6Budgets, Business Plans and financial information 6.1Accounting principlesThe Shareholders agree that the Company shall initially prepare its and the Group’s consolidatedfinancial statements in accordance with US GAAP, although the accounting principles inaccordance with which the Company prepares such financial statements may be changed by theBoard from time to time, provided that, unless required by Law, the Board shall not implement anychange to the accounting principles which may prejudice the ability of the Company to implement anIPO or a Qualified IPO.6.2Information 6.2.1The Shareholders agree that the Company shall prepare and shall submit to the PrincipalShareholders: (i)annual audited consolidated accounts of the Group prepared in accordance with USGAAP, confirmed by the Auditor – ** (ii)annual audited consolidated accounts of the Group (consisting solely of consolidatedstatement of financial position, consolidated statement of comprehensive income,consolidated statement of changes in equity, without notes thereto, information onoperations with related parties), all in the format provided by Sberbank (and takinginto consideration the materiality threshold of the Sberbank’s group) prepared inaccordance with IFRS with: (a)preliminary draft accounts (consisting of consolidated statement of financialposition, consolidated statement of comprehensive income, and consolidatedstatement of changes in equity, without notes thereto, and excludinginformation on operations with related parties) ** and(b)audited and confirmed by Auditor accounts – **. It is understood and agreed that the audit of the annual consolidated accounts of theGroup shall be performed by Auditors acting as a component auditor under Sberbankauditor’s referral instructions. Referral instructions will be pre-agreed by the Auditorsand the component auditor in due course;(iii)quarterly consolidated accounts of the Group prepared in accordance with USGAAP, including a statement of income, balance sheet and statement of cashflow,each reviewed by the Auditors and confirmed by the Auditor – within ** of the end ofthe calendar quarter to which they relate;(iv)quarterly consolidated accounts of the Group (consisting solely of consolidatedstatement of financial position, consolidated statement of comprehensive income,consolidated statement of changes in equity, without notes thereto, information onoperations with related parties), all in the format provided by Sberbank, (and takinginto consideration the materiality threshold of the Sberbank’s group) prepared inaccordance with IFRS, Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. reviewed and confirmed by the Auditors – ** of the end of the calendar quarter towhich they relate, save for the first and second calendar quarters of 2018 for whichthe quarterly consolidated accounts of the Group shall be reviewed and confirmed byAuditors ** of the end of the respective quarter. It is understood and agreed that thereview of the quarterly consolidated accounts of the Group shall be performed byAuditors acting as a component auditor under Sberbank auditor’s referralinstructions. Referral instructions will be pre-agreed by the Auditors and thecomponent auditor in due course; (v)a quarterly report on the consolidated financial and trading position and affairs of theGroup (consisting solely of a statement of income), including performance againstthe Business Plan and Budget prepared by the CEO in the form to be determined bythe Board – ** of the end of each calendar quarter;(vi)monthly unaudited consolidated management accounts of the Group (prepared inaccordance with IFRS) in the format agreed by the Principal Shareholders andcontained on a DVD initialled for identification purposes by legal advisors of each ofthe Principals – ** of the end of each month (starting from the month ending on 31March 2018); (vii)a copy of all financial statements and accounts that are required by Laws to beprepared by any Group Company for statutory or Taxation purposes – at the sametime when they are due to be filed with the relevant governmental or Tax Authorities;and(viii)such other information relating to the Business or financial condition of the Companyor of any Group Company as any Principal Shareholder may reasonably require toenable it and/or its Affiliates to comply with applicable Laws, requests fromgovernmental or regulatory bodies to which it is subject, Tax and reporting andinformation requirements – within a reasonable period of time following such requestfor the information.6.2.2The Shareholders agree that the Company shall engage a Big Four Firm to prepare anappraisal for the purposes of purchase price allocation (PPA) for the subsequent use for thepurposes of preparation of the reports listed in Clause 6.2.1. The timing and scope of workfor such appraisal shall be agreed by the Shareholders promptly following Closing.6.2.3Sberbank shall compensate to the Company the IFRS Costs, provided that if the Companyadopts the IFRS as its primary financial reporting standards in respect of consolidatedaccounts of the Company and its subsidiaries (other than solely for statutory reportingpurposes) Sberbank shall no longer compensate any future IFRS Costs to the Company.6.2.4The Company shall at all times procure that the Group provides each Principal Shareholderwith the same information in respect of the affairs of the Group as provided by the Group tothe other Principal Shareholder (other than, for the avoidance of doubt, information providedpursuant to terms of any Ancillary Agreement). Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 6.2.5Without limiting the generality of Clause 6.2.3 and in addition to the rights set out in Clause15.2 relating to the provision of information to the Board, a Principal Shareholder (the“Requesting Shareholder”) acting through its Appointed Director may, at its own expense,at all reasonable times and after giving reasonable notice to the Company and the otherPrincipal Shareholder (who, at its own expense, shall be provided by the Group with thesame information as the Requesting Shareholder): (i)discuss the affairs, finances and accounts of the Group with the Management Team;(ii)inspect and make copies of all books, records, accounts and documents relating tothe Business and the affairs of the Group; and(iii)provide a certificate signed by the CEO of the Principal Shareholder to require thatthe books and records of any Group Company be audited up to once per calendaryear by a Big Four Firm auditor (other than the Auditor) appointed by such PrincipalShareholder (such auditor being bound by customary confidentiality obligations). TheParties shall procure that each Group Company provides such cooperation as isreasonably sought by any such auditor in performing such audit.6.3Approval of Subsequent Business Plans and Budgets6.3.1The Parties shall procure that, no later than ** of each Financial Year (starting from 2018),the CEO prepares:(i)a Subsequent Business Plan for the period of the **; and(ii)a Budget for the Group for the **,and submits them to the Board for approval. The Board shall have ** from the date itreceives such Subsequent Business Plan and such Budget to decide whether or not toapprove each of them, subject to such amendments as the Board agrees to be appropriate.In the event that the Board rejects any such Subsequent Business Plan and/or the Budget,the CEO shall have a further period of ** to submit a revised Subsequent Business Planand/or a revised Budget. The Board shall have a further period of ** from the date it receivessuch revised Subsequent Business Plan and/or such revised Budget to decide whether ornot to approve it, subject to such amendments as the Board agrees to be appropriate.6.3.2The Parties shall procure that each Subsequent Business Plan (based on the amountsprepared under IFRS or in a form comparable with the relevant IFRS Accounts) shall includethe following in relation to each of the relevant Financial Years:(i)**(ii)**(iii)**(iv)**(v)** Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 6.3.3The Parties shall procure that each Budget (based on the amounts prepared under IFRS oror in a form comparable with the relevant IFRS Accounts) shall include the following inrelation to the relevant Financial Year:(i)**(ii)**(iii)**(iv)**(v)**(vi)**The Shareholders agree that the Company shall prepare and shall submit for each Boardmeeting (but no more than once a quarter) an updated forecast of the selected line items ofthe Budget based on the actual performance of the Group.6.3.4If in any Financial Year:(i)a Subsequent Business Plan is not approved, the expenditures section of the lastapproved Business Plan for the relevant upcoming Financial Year shall apply, savethat each relevant item of expenditure shall be increased by no more than ** unlessand until the new Subsequent Business Plan is approved; and/or(ii)a Budget is not approved, the expenditures section of the previous Financial YearBudget shall continue to apply, save that each relevant item of expenditure shall beincreased by no more than ** unless and until the new Budget is approved.(iii) Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. PART D – MANAGEMENT AND CONTROL 7Powers and duties of the Board of Directors7.1The Board shall be responsible for the supervision and overall management of the Business of theGroup:7.1.1in accordance with the Business Plan and Budget; and7.1.2in the interests of the Shareholders collectively so as to maximise the Group’s equity value,without regard to the individual interests of any of the Shareholders.7.2The Board shall be responsible for deciding all matters in relation to the Business of the Group otherthan any Shareholder Reserved Matters.7.3The Board shall review all the information which the Management Team provides it in accordancewith Clause 15.2 and shall ensure that the Management Team competently fulfil their duties inaccordance with Clause 15.1.8Board Reserved Matters8.1Subject to the provisions of Clauses 24 and 25.2.2, the Shareholders shall procure so far as theylawfully can that no action is taken or resolution passed by the Company or any Group Company,and the Company shall not take, and shall procure that no Group Company shall take, any action inrespect of those matters set out in Error! Reference source not found. (the “Board ReservedMatters”) without the prior written approval of:8.1.1(unless Sberbank Nominee is a Transferring Shareholder and Clause 25.2.2 applies) for solong as Sberbank (together with its Affiliates) holds:(i)** in the share capital of the Company or more, at least two Sberbank Directors; and(ii)less than ** but more than ** in the share capital of the Company, at least oneSberbank Director; and8.1.2(unless YNV is a Transferring Shareholder and Clause 25.2.2 applies) for so long as YNV(together with its Affiliates) holds:(i)** in the share capital of the Company or more, at least two YNV Directors; and(ii)less than ** but more than ** in the share capital of the Company, at least one YNVDirector,(the “Board Super Majority”). 8.2Once the Board has passed a resolution in relation to a Board Reserved Matter, the matter shall bereferred to the Company or relevant Group Company (as the case may be) for implementation.8.3A series of related transactions shall be construed as a single transaction, and any amountsinvolved in the related transactions shall be aggregated, to determine whether a matter is a BoardReserved Matter. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 9Appointment of Directors9.1Number and identity of appointees9.1.1Unless the Principal Shareholders agree otherwise in writing, the Board shall compriseseven Directors.9.1.2Subject to Clause 10.3:(i)Sberbank Nominee shall appoint, for so long as Sberbank (together with its Affiliates)holds:(a)no less than ** in the share capital of the Company or more:(I)one Director who is an Independent Director (the “SberbankIndependent Director”); and(II)two Directors who do not need to be Independent Directors (the“Sberbank Directors”);(b)less than **, but no less than ** in the share capital of the Company, theSberbank Independent Director and one Sberbank Director; and(c)less than **, but no less than ** in the share capital of the Company, theSberbank Independent Director;(d)less than **, but no less than ** in the share capital of the Company, onerepresentative to attend all meetings of the Board in a nonvoting observercapacity. The Company shall give such observer copies of all notices,minutes, consents, and other materials that it provides to the Directors at thesame time and in the same manner as provided to the Directors; provided,however, that such observer shall agree to hold in confidence and trust and toact in a fiduciary manner with respect to all information so provided; andprovided further that the Company reserves the right (subject to a decision ofa simple majority of Directors) to withhold any information and to exclude suchobserver from any meeting or portion thereof if access to such information orattendance at such meeting could adversely affect the attorney-client privilegebetween the Company and its counsel or result in disclosure of trade secretsor a conflict of interest, or if such observer is or becomes engaged (whetheras a shareholder, employee or director) or interested in any business which isof the same type as the Core Business (other than any passive shareholdingof not more than ** of the outstanding shares of any company);(ii)YNV shall appoint, for so long as YNV (together with its Affiliates) holds:(a)no less than ** in the share capital of the Company or more:(I)one Director who is an Independent Director (the “YNV IndependentDirector”); and(II)two Directors who do not need to be Independent Directors (the “YNVDirectors”); Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (b)less than **, but no less than **in the share capital of the Company, the YNVIndependent Director and one YNV Director; and(c)less than **, but no less than ** in the share capital of the Company, the YNVIndependent Director;(d)less than **, but no less than ** in the share capital of the Company, onerepresentative to attend all meetings of the Board in a nonvoting observercapacity. The Company shall give such observer copies of all notices,minutes, consents, and other materials that it provides to the Directors at thesame time and in the same manner as provided to the Directors; provided,however, that such observer shall agree to hold in confidence and trust and toact in a fiduciary manner with respect to all information so provided; andprovided further that the Company reserves the right (subject to a decision ofa simple majority of Directors) to withhold any information and to exclude suchobserver from any meeting or portion thereof if access to such information orattendance at such meeting could adversely affect the attorney-client privilegebetween the Company and its counsel or result in disclosure of trade secretsor a conflict of interest, or if such observer is or becomes engaged (whetheras a shareholder, employee or director) or interested in any business which isof the same type as the Core Business (other than any passive shareholdingof not more than ** of the outstanding shares of any company);(iii)subject to Clause 9.1.2(iv), the Principal Shareholders shall procure that the CEO (asmay change from time to time) shall always be appointed as a Director untilcompletion of the Private Placement;(iv)following completion of the Private Placement:(a)the CEO shall resign and be removed from his position of Director; and(b)the Additional Investor shall appoint one Director.9.1.3From the date of this Agreement, the Board shall consist of:(i)Sberbank Directors: ** and **(ii)Sberbank Independent Director: **(iii)YNV Directors: **and **(iv)YNV Independent Director: **; and(v)**9.2Competency of proposed Directors. Appointment Disputes9.2.1Where a Principal Shareholder (or the Additional Investor) is entitled to appoint a newDirector in accordance with this Agreement or the Articles it shall:(i)take reasonable steps to ensure that its appointee is able to perform his/her dutiescompetently; and Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (ii)at least ** prior to the intended date of an appointment, (to the extent reasonablypracticable) notify the other (or each) Principal Shareholder (and the AdditionalInvestor, if applicable) of the name, qualifications, experience and intended date ofappointment of the person it intends to appoint as a Director (except in the case ofthe first Directors named in Clause 9.1.3).9.2.2Any appointment of an Appointed Director by a Principal Shareholder (the “AppointingShareholder”) (except in the case of the first Directors named in Clause 9.1.3) shall besubject to prior consent of the other Principal Shareholder (the “Consenting Shareholder”).If the Consenting Shareholder:(i)elects not to give its consent in respect of such appointment, the ConsentingShareholder shall, within ** following receipt of the notice under Clause 9.2.1(ii), senda notice signed by its Chief Executive Officer (or in case where Sberbank Nomineeis the Consenting Shareholder, the Chief Executive Officer of Sberbank) to the ChiefExecutive Officer of the Appointing Shareholder (or in case where SberbankNominee is the Appointing Shareholder, the Chief Executive Officer of Sberbank)setting out the reasons why consent in respect of such appointment is not given (the“CEO Notice”); or(ii)does not send the CEO Notice within ** following receipt of the notice under Clause9.2.1(ii), it shall be deemed to have consented to the appointment of the relevantAppointed Director.9.2.3If the Consenting Shareholder sends a CEO Notice under Clause 9.2.2(i), the PrincipalShareholders shall, as soon as practicable following the date of the CEO Notice, refer therelevant dispute in respect of appointment of the Appointed Director (the “AppointmentDispute”) to the Chief Executive Officers of the Principals.9.2.4If the Chief Executive Officers of the Principals are unable to reach agreement on theAppointment Dispute within ** of it being referred to them, the Appointing Shareholder shallsend a notice to the Consenting Shareholder setting out the names of three alternativecandidates to the position of an Appointed Director, including their qualifications, experienceand intended date of appointment. If the Consenting Shareholder:(i)notifies the Appointing Shareholder of its choice in favour of one of the threecandidates within ** following the date of such notice from the AppointingShareholder, the relevant chosen candidate shall be appointed as the AppointedDirector; or(ii)does not notify the Appointing Shareholder of its choice in favour of any of thecandidates within ** following the date of such notice from the AppointingShareholder, the Appointing Shareholder shall be free (by sending a notice to theConsenting Shareholder and the Company) to appoint any of the relevant threecandidates as the Appointed Director,and, in each case, the relevant Appointment Dispute shall be deemed to have beenresolved.9.3Other directorships. Conflict of interest Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Each Director shall declare himself/herself free from any conflict of interests relevant in his/hercapacity as a Director and shall disclose to the Board information on any his/her engagement(whether as a shareholder, director, employee or otherwise) or Interest in any business which is ofthe same type as the Core Business:9.3.1upon his/her appointment as a Director, in the case of any such engagement or Interest heldat the time of appointment; or9.3.2as soon as reasonably practicable, but in any event no later than at the next Board meeting,in the case of any new engagement or Interest during their period of service with theCompany.10Replacement and removal of Directors10.1A Director may be removed as a director of the Company at any time:10.1.1subject to Clause 10.3, by notice in writing to the Company by the Principal Shareholder orthe Additional Investor (as the case may be) who appointed him/her;10.1.2by notice in writing to the Company by any Principal Shareholder where such Director is anUnsuitable Director; or10.1.3subject to Clause 10.3, if he/she becomes engaged (whether as a shareholder, director,employee or otherwise) or interested in any business which is of the same type as, orsubstantially similar to, the Core Business (other than any passive shareholding of not morethan three per cent. of the outstanding shares of any company), by a simple majority of theBoard upon a request from any Principal Shareholder,and the Principal Shareholder (or the Additional Investor, as applicable) that appointed such Directorshall promptly remove such Director from his/her position and shall promptly appoint anotherDirector in his/her place in accordance with Clause 9 and the Articles.10.2A Principal Shareholder (or the Additional Investor, as applicable) whose appointee has either beenremoved or has resigned as a Director shall fully indemnify and hold harmless the otherShareholders and the Group against all Losses incurred by the other Shareholders and/or the Groupin respect of any claim made as a result of the removal or resignation of the Director.10.3Subject to Clause 10.1.2, no Director (whose name is set out in Clause 9.1.3) may be removed orreplaced, prior to the earlier of:10.3.1the ** anniversary of Closing; or10.3.2the date which is ** from completion of a Private Placement,unless:10.3.3the Principal Shareholders agree otherwise;10.3.4in the event of such Director’s death or incapacity; or10.3.5in the case of the CEO:(i)where the CEO has been replaced in accordance with this Agreement (and a newCEO is to be appointed as a Director under Clause 9.1.2(ii)(d)); or Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (ii)the Additional Investor becomes entitled to appoint a Director under Clause 9.1.2(iv)(b).11Chair11.1The Chair shall chair all meetings of the Board at which he/she is present but shall not have acasting vote. The Chair shall ensure that all relevant papers for any Board meeting are properlycirculated in advance and that all such Board meetings are quorate.11.2The Board shall decide by majority vote who shall act as Chair.11.3Board meetings shall be chaired by the Chair if he/she is present. If the Chair is not present at anyBoard meeting, the Directors present may appoint any one of their number to act as Chair for thepurpose of the meeting.12Director remuneration Any Director who incurs expenses in fulfilling their duties as a Director shall be entitled to have suchreasonable expenses reimbursed by the Company. Otherwise (but without prejudice to anyremuneration payable to a Director in respect of executive duties carried out under any separateservice agreement with the Group) the Directors (other than Independent Directors) shall not beentitled to receive any remuneration by way of salary, commission, fees or otherwise in relation tothe performance of their duties as Directors. The remuneration of the Independent Directors shall besubject to decision of the Principal Shareholders.13Board meetings13.1FrequencyThe Board shall decide how often Board meetings shall take place provided that:13.1.1they are held at least ** unless the Board Super Majority agrees otherwise; and13.1.2any Director or the CEO may convene a Board meeting on notice in accordance with Clause13.3.1.13.2Place13.2.1All Board meetings shall be held in Amsterdam, unless the majority of Directors agreeotherwise, taking into account the respective Tax considerations of the Group and each ofthe Principal Shareholders and their Affiliates.13.2.2Any one or more Directors may participate in and vote at meetings of the Board through themedium of telephone conference or a similar form of communication equipment providedthat all persons participating in the meeting are able to hear and speak to each otherthroughout the meeting and the meeting is initiated in the Netherlands. A Director soparticipating shall be deemed to be present in person at the meeting and shall be counted inthe quorum. Such a meeting shall be deemed to take place where the largest group of thoseparticipating is assembled or, if there is no such group, where the Chair is present. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 13.2.3In the case of a Board action by written circular resolution, any Director may vote byreturning such circular resolution, duly completed and signed, to such person as isdesignated by the Chair within five (5) Business Days from the date on which such circularresolution is distributed. A circular resolution shall be considered duly taken in respect ofany resolution if Directors representing a quorum exercise their vote (whether in favour,against or by way of abstention) in respect of such resolution in a written resolution dulycompleted and returned in accordance with this Clause 13.2.3.13.3Notice/agenda13.3.1** notice by email or courier shall be given to each of the Directors of all Board meetings,except where a Board meeting is adjourned under Clause 13.4 or where a Board SuperMajority agree to a shorter notice period and all the Directors are notified of the shorternotice period. 13.3.2** of the date of such notice, any Shareholder or Director may propose an item for inclusionin the agenda together with a related resolution to be proposed at such Board meeting.13.3.3** before a meeting, a reasonably detailed agenda shall be sent to each of the Directors byemail or courier which shall:(i)specify whether any Board Reserved Matters are to be considered; and(ii)be accompanied by any relevant papers.13.3.4Each Principal Shareholder (or the Additional Investor, as applicable) shall use itsreasonable endeavours to ensure that at least one Director appointed by it attends eachBoard meeting.13.3.5Any Director may invite a member of the Management Team to attend a meeting of theBoard unless such meeting is to discuss any such person’s remuneration, appraisal orperformance.13.4Quorum13.4.1Without prejudice to Clause 8 and subject to Clauses 5.3.2 and 25.2.2, the quorum at aBoard meeting shall be four Directors, including:(i)(unless Sberbank Nominee is a Transferring Shareholder and Clause 25.2.2 applies)for so long as Sberbank (together with its Affiliates) holds at least 11.25 per cent. ofthe share capital of the Company, at least one Sberbank Director, and(ii)(unless YNV is a Transferring Shareholder and Clause 25.2.2 applies) for so long asYNV (together with its Affiliates) holds at least 11.25 per cent. of the share capital ofthe Company, at least one YNV Director.13.4.2If a quorum is not present within half an hour of the time appointed for the meeting or if aquorum ceases to be present during the course of the meeting, the Director(s) present shalladjourn the Board meeting to a specified place and time not less than ** after the originaldate, where the quorum shall be any four Directors (for the avoidance of doubt, withoutprejudice to Clause 8). Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 13.4.3Notice of the adjourned Board meeting shall be given to all of the Directors.13.5Voting. Resolutions. Minutes13.5.1Subject to the other provisions of this Agreement (including Clause 8.1):(i)at any Board meeting each Director shall have one vote, save for, for the wholeduration of an Appointment Dispute, the Appointed Director(s) of the AppointingShareholder shall always have the same number of votes as all Appointed Directorsof the Consenting Shareholder; and(ii)decisions at Board meetings shall be taken by a simple majority of the votes of allDirectors.13.5.2Minutes of each Board meeting and copies of all resolutions of the Board shall be circulatedto each Director. Simultaneous notes of any meeting of the Board shall be made by aperson present at such meeting designated by the Chair.14Committees of Directors14.1Any Board committee shall always be constituted by the Board on the following basis:14.1.1for so long as a Principal Shareholder (together with its Affiliates) holds at least ** of theshare capital of the Company, it shall be entitled to appoint at least one member to eachBoard committee; and14.1.2for so long as YNV (together with its Affiliates) holds at least ** of the share capital of theCompany, YNV shall be entitled to appoint a majority of members to each of the Boardcommittees.14.2The Principal Shareholders shall procure that the Board shall constitute the CompensationCommittee as soon as practicable following the date of this Agreement consisting of the followingmembers:14.2.1**;14.2.2** and14.2.3**14.3For so long as a Principal Shareholder (together with its Affiliates) holds at least **14.4of the share capital of the Company, the quorum for the Compensation Committee meeting shallinclude at least one member appointed by such Principal Shareholder.14.5Decisions of the Compensation Committee shall be taken by a simple majority, provided that if aSberbank Nominee member does not vote in favour of any decision of the CompensationCommittee, the relevant matter shall be decided by the Board and the Principal Shareholders shallprocure that no Group Company shall take any action in respect of such matter until the relevantBoard decision. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 15Management Team. Corporate secretary15.1Authority and accountability of the Management TeamThe day-to-day affairs of the Group, including relevant business and operational matters, shall berun by the Management Team under the supervision of the Board: 15.1.1in accordance with the Business Plan and Budget; and15.1.2subject to applicable Law, in the interests of the Shareholders collectively so as tomaximise the Group’s equity value, without regard to the individual interests of any of theShareholders,provided that the Management Team shall not take any decision in relation to (a) any of theShareholder Reserved Matters without the prior approval of both Principal Shareholders and (b) anyof the Board Reserved Matters without the prior approval of a Board Super Majority. For theavoidance of doubt (and without prejudice to Clause 5.17), the Management Team shall only reportto, and take direction from, the Board (acting collectively as the Board) and not either PrincipalShareholder directly or any individual member of the Board.15.2CEO to provide information to the BoardThe CEO shall provide information to the members of the Board on an equal and timely basis andshall not separately disclose information relating to the Business to any Shareholder or any Affiliateof a Shareholder or any other person unless required by the Laws and then only after informing theBoard and the Shareholders (unless legally prohibited from doing so) of the requirement to makesuch disclosure.15.3Pre-Agreed DeputiesAs soon as reasonably practicable following the date of this Agreement (and following any removalof any of the CEO and CFO), the Principal Shareholders shall agree on the Pre-Agreed Deputies foreach of the CEO and CFO.15.4Corporate secretaryThe Board may delegate certain authorities in relation to operation of the day to day affairs of theCompany to a corporate secretary of the Company (save for any Board Reserved Matter).15.5Conflicts of interest policyThe Principal Shareholders shall instruct their respective Appointed Directors to consider theadoption by the Board of a policy setting out conflict of interest and non-competition rules applicableto officers of the Group Companies.16Meetings of ShareholdersGeneral meetings of Shareholders (algemene vergadering van aandeelhouders) of the Companyshall be held at least once per calendar year and shall take place in accordance with the applicableprovisions of the Articles, including the following provisions:16.1the quorum shall be one duly authorised representative of each Principal Shareholder; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 16.2each Principal Shareholder shall be notified at least ** in advance of the time, date and place for themeeting;16.3the notice of meeting shall set out an agenda identifying in reasonable detail the matters to bediscussed;16.4the chairman of the meeting shall not have a casting vote; and16.5meetings may be held by video, teleconference and other electronic conferencing means and thepersons convening the meetings shall use reasonable endeavours to ensure they are held atlocations reasonably convenient for all Principal Shareholders.17Shareholder Reserved Matters17.1Shareholders meetings shall be governed by this Agreement, the Articles and the Laws.17.2Subject to Clause 25.2.2, the Shareholders shall procure, as far as they lawfully can, that no actionis taken or resolution passed by the Company or any Group Company, and the Company shall nottake, and shall procure that no Group Company shall take, any action, in each case, in respect ofthe matters listed in Error! Reference source not found. (“Shareholder Reserved Matters”),without the prior written approval of all the Principal Shareholders. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. PART E – PRIVATE PLACEMENT18Private Placement18.1The Parties shall use their commercially reasonable efforts to procure that by the date which is **following Closing (or such later date as the Board may unanimously agree) (the “Realisation Date”),a third party (the “Additional Investor”) will have subscribed for a minority stake in the share capitalof the Company (the “Private Placement”) subject to the following key terms and conditions of thePrivate Placement:18.1.1subscription for cash;18.1.2pre-money valuation of the Group being not less than the post-money valuation of the Groupimmediately following Closing; and18.1.3the Additional Investor shall adhere to the terms of this Agreement by executing the Deed ofAdherence and shall have the following rights and obligations:(i)shares to be issued to the Additional Investor shall have the same voting rights(other than in respect of appointment of Directors) and dividend rights as theSberbank Shares and the YNV Shares; and(ii)the Additional Investor shall be entitled to appoint one Director (in accordance withClause 9.1.2(iv)(b)).18.2The Parties acknowledge that it is the Shareholders’ and the Company’s preference that theAdditional Investor shall be a strategic investor, rather than a financial investor. The Parties furtheracknowledge that, in the **, they shall use all commercially reasonable efforts to attract a strategicinvestor, rather than a financial investor, as the Additional Investor. In the event that a strategicinvestor does not subscribe for Shares within **, then the Parties shall use their commerciallyreasonable efforts to attract a financial investor as the Additional Investor instead.18.3Within **, the Principal Shareholders shall choose and engage (on behalf of the Company) suchprofessional investment advisers as they consider appropriate in relation to achieving andcompleting the Private Placement, and the Parties further acknowledge and agree that the Company(and not the Shareholders) shall bear any and all costs of such advisers in such circumstances. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. PART F – MANAGEMENT INCENTIVES19Stichting matters19.1Issue of Stichting SharesThe Parties agree that any further issue of any Shares to Stichting shall be subject to prior approvalby the Principal Shareholders or the Board Super Majority, unless the Incentive Programmeprovides otherwise.19.2Redemption of Stichting SharesThe Board may at any time decide by a simple majority of votes that any portion of Stichting Sharesheld by Stichting in respect of which no DRs have been issued shall be redeemed (or cancelled) bythe Company, in which case the Shareholders shall procure that all corporate decisions are taken inorder to carry out such redemption (or cancellation).19.3Incentive ProgrammeWithout prejudice to Clause 19.4, the Parties shall procure that:19.3.1the Group Companies shall comply with the Incentive Programme; and19.3.2no changes are made to the Incentive Programme without a prior written approval of bothPrincipal Shareholders.19.4Stichting obligationsStichting shall:19.4.1exercise voting rights in respect of any Stichting Share only following issue of a DR inrespect of such underlying Stichting Share and:(i)in case of any Stichting Shares underlying a DR that may:(a)have been issued in accordance with the Subscription Agreement; or(b)be issued under any **,or as otherwise expressly approved by the Board (as a Board Reserved Matter), atthe direction of the holder of such DR; and(ii)in case of any other Stichting Shares, in the same proportions as all other Sharesare voted by the other Shareholders;19.4.2not issue any DRs without the prior written consent of the management board of Stichting,which shall be appointed by the Board;19.4.3not register any transfer of any DRs without the prior written consent of the CompensationCommittee; and19.4.4take all such actions as may be required from time to time to give effect to this Agreementand the Incentive Programme. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. PART G – COMPANY FINANCE 20Distributions20.1The declaration and payment of distributions to the Shareholders shall be decided by the Board inaccordance with the Dividend Policy and subject to the requirements of the Laws. 20.2For the avoidance of doubt, no Stichting Share shall be entitled to receive any distribution payableto Shareholders unless a DR has been issued in respect thereof.21Additional finance for the Company21.1Preemptive rights21.1.1Issues of Shares(i)Subject to Clause 26, any allotment of Shares proposed to be made by the Companyand approved in accordance with this Agreement (such Shares being called“Additional Securities”) shall first be offered for subscription to the PrincipalShareholders in the proportion that the number of Shares for the time being held byeach Principal Shareholder bears to the total number of such Shares in issue held byboth Principal Shareholders. Such offer shall be made by notice in writing specifyingthe number of Additional Securities to which the relevant Principal Shareholder isentitled and the subscription price per Share (the “Subscription Price”) and limitinga time (being not less than three weeks) beyond which the offer (if not accepted)shall be deemed to have been declined. Such offers are not transferable other thanto an Affiliate of a Principal Shareholder (provided that, in case such Affiliatesubscribes for any Additional Securities, Clause 22.3 shall apply mutatis mutandis),cannot be split or consolidated and can be accepted in full or in part. A PrincipalShareholder who accepts the offer in full shall be entitled to indicate that it wouldaccept, on the same terms, the Additional Securities (specifying a maximum numberof parcels) which have not been accepted by the other Principal Shareholder(“Excess Additional Securities”). (ii)A Principal Shareholder which does not accept the offer in respect of all or a portionof its respective portion of the Additional Securities shall be deemed to have waivedits pre-emptive rights (as set out in this Agreement, in the Articles or otherwise) withrespect to all or that portion of the Additional Securities set out in the offer which thePrincipal Shareholder did not accept.(iii)Any Excess Additional Securities shall be allotted to the Principal Shareholder whohas indicated it would accept Excess Additional Securities (provided that noPrincipal Shareholder shall be allotted more than the maximum number of ExcessAdditional Securities such Principal Shareholder has indicated it is willing to accept).(iv)Clause 21.1.1(i) shall not apply to:(a)any allotment of Additional Securities proposed to be made by the Companyto an employee or proposed employee if such allotment is made pursuant toan agreement, plan or program which has been Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. approved by the Principal Shareholders or the Board Super Majority; or(b)any allotment of Additional Securities which are to be issued and allotted inconnection with any merger, consolidation or amalgamation of the Companywhich has been approved by the Principal Shareholders.21.1.2Failure to subscribe for Additional SecuritiesIf a Principal Shareholder (or its Affiliate, as applicable) (the “Non-contributingShareholder”) has accepted the offer to subscribe for Additional Securities pursuant toClause 21.1.1(i) and thereafter fails to complete such subscription and to pay the relevantsubscription amount (the “Outstanding Amount”) on the completion date set by theCompany therefor, the other Principal Shareholder shall be entitled to:(i)subscribe for its portion of Additional Securities at the Subscription Price; and (ii)(in its sole discretion) elect to subscribe for up to the number of Shares calculatedon the basis of the following formula:**,**21.1.3In the event that any Principal Shareholder becomes precluded from subscribing for anyAdditional Securities pursuant to this Clause 21.1 as a result of any sanctions introducedafter the date of this Agreement against the other Principal Shareholder, the PrincipalShareholders shall enter into good faith discussions on available alternative solutions inrespect of financing to be provided to the Group.21.2Debt finance21.2.1If at any time the Board determines that the Group needs additional debt finance, theCompany shall invite Sberbank, in its absolute discretion, to make an offer to provide suchfinance and, provided such offer is on terms at least equivalent (taken as a whole) to thebest terms offered by any third party lenders, the Group shall procure such debt financefrom Sberbank.21.2.2The Parties agree that, subject to Clause 21.1, there is no obligation on the PrincipalShareholders to provide any further financing to the Group. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. PART G – EXIT22Transfers22.1General prohibition on disposal of Shares during Lock-up PeriodA Principal Shareholder may not Transfer any of its Shares or any Interest in Shares:22.1.1** (the “Lock-up Period”), to any person, other than with the prior consent of the otherPrincipal Shareholder, unless Clause 22.3 provides otherwise; and22.1.2following expiry of the Lock-up Period, unless permitted or required to do so under Clause22.3 or 22.4.22.2General prohibition on disposal of Stichting SharesStichting may not Transfer any of the Stichting Shares or any Interest in Stichting Shares to anyperson at any time, other than:22.2.1with the prior written consent of the Principal Shareholders;22.2.2in accordance with the Incentive Programme; or22.2.3if required to do so under Clause 22.4.4.22.3Transfer to Group MembersA Principal Shareholder (the “Transferor”) may at any time Transfer its Shares (together with anyrights (including rights accrued) and obligations in respect of such Shares) to, in the case of YNV,any companies directly or indirectly controlled by YNV from time to time; and in the case ofSberbank Nominee, Sberbank and any companies directly or indirectly controlled by Sberbank fromtime to time, (in each case, a “Transferee”) on giving prior notice to the other Principal Shareholder,copied to the Company, provided that:22.3.1all consents, clearances, approvals or permissions necessary to enable the Transferorand/or the Transferee to be able to complete a transfer of Shares pursuant to this Clause22.3 under the rules or regulations of any governmental, statutory or regulatory body inthose jurisdictions where the Transferor, the Transferee, the Company or any of theirAffiliates carries on business, have been or are received prior to the Transfer being effected;22.3.2the Transferor (but not a subsequent transferor in a series of Transfers) shall remain party tothis Agreement and shall be jointly and severally liable with the Transferee under thisAgreement as a Principal Shareholder in respect of the transferred Shares;22.3.3the Transferee shall, and the Transferor shall procure that the Transferee shall, retransfer itsShares to the Transferor or another permitted Transferee of the Transferor immediately if theTransferee ceases to be a member of the Transferor’s group; and22.3.4the Transferor and the Transferee shall bear all costs, expenses and Taxes associated withany Transfer made pursuant to this Clause 22.3. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 22.4Transfer to a third party following expiry of the Lock-up Period22.4.1Written offer from a third party/right of first refusalWithout prejudice to Clause 22.3, following expiry of the Lock-up Period, a PrincipalShareholder (the “Transferring Shareholder”) may Transfer all or part of its Shares(together with any rights accrued in respect of such Shares) (the “Transfer Shares”) only if itreceives a bona fide offer for such Transfer Shares (the “Third Party Offer”) from a bonafide third party (acting as a principal) which is not a Restricted Transferee (the “Offeror”)which:(i)states whether the Third Party Offer is for all or part (specifying the number) of theTransferring Shareholder’s Shares;(ii)does not provide for any financing or similar conditions precedent to acquisition ofthe Transfer Shares;(iii)includes (a) a confirmation that the Board of Directors of the Offeror has approvedthe Third Party Offer and (b) confirmation that the Offeror has readily available cashfor the acquisition of the Transfer Shares, or a comfort letter from a reputable bankor any other evidence demonstrating to the reasonable satisfaction of Sberbank thatthe Offeror would be able to complete the acquisition of the Transfer Shares;(iv)states the price of the Third Party Offer which shall be for cash consideration (the“Third Party Offer Price”);(v)contains all material terms and conditions (including the intended completion date ofthe offer); and(vi)includes an offer to acquire:(a)such portion (the “Tag Portion”) of Shares held by the other PrincipalShareholder (the “Remaining Shareholder”) as reflects, as nearly aspossible, the number of the Transfer Shares as a proportion of the totalnumber of Shares held by the Transferring Shareholder; and(b)where the Offeror intends to acquire (from one or more TransferringShareholders) more than ** of the share capital of the Company, in addition tothe Tag Portion, all other Shares held by the Remaining Shareholder,at the same cash price as, and on no less favourable terms than, the TransferShares (a “Tag-along”).The Principal Shareholders shall procure that the Company shall reasonably cooperate withany Principal Shareholder in order to facilitate a Third Party Offer (at the cost of suchPrincipal Shareholder).22.4.2Issue of Transfer Notice to the Remaining ShareholderIf a Principal Shareholder receives a Third Party Offer which it wishes to accept, aTransferring Shareholder shall issue a notice (the “Transfer Notice”) to the RemainingShareholder, copied to the Company, containing notification of the Third Party Offer(including the name of the Offeror, the price offered for the Transfer Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Shares and all material terms and conditions of the Third Party Offer) and upon issuing suchTransfer Notice, the Transferring Shareholder shall:(i)be deemed to make an offer to sell the Transfer Shares to the RemainingShareholder (the “Offer”) at the same cash price and on no less favourable termsand conditions than those set out in the Third Party Offer; and(ii)provide confirmation that:(a)the Company shall be the agent of the Transferring Shareholder for the sale ofthe Transfer Shares; and(b)the Remaining Shareholder may elect to proceed in accordance with one ofthe options in Clause 22.4.3.22.4.3Choices open to the Remaining ShareholderThe Remaining Shareholder who receives a Transfer Notice may do one of the following:(i)Accept the Offer(a)Before the expiry of the period of ** (the “End Date”), if the RemainingShareholder wishes to buy the Transfer Shares at the Third Party Offer Priceit shall send a notice to the Transferring Shareholder, copied to the Company,accepting the Offer (the “Acceptance Notice”). An Acceptance Notice shall beirrevocable. If the Remaining Shareholder does not wish to accept the Offer itmay either send a notice to the Transferring Shareholder, copied to theCompany, by the End Date declining the Offer or do nothing in which case itshall be deemed to have declined the Offer. (b)If the Transferring Shareholder:(I)has received from the Remaining Shareholder a notice declining theOffer; or(II)has not received the Acceptance Notice from the RemainingShareholder on or prior to the End Date,the Transferring Shareholder shall then be free to accept the Third Party Offerand enter into legally binding documents to sell the Transfer Shares to theOfferor ** at the Third Party Offer Price and on terms being no morefavourable than those of the Third Party Offer, provided that the Offeror entersinto a Deed of Adherence in the form required by this Agreement.(c)The sale and transfer of the Transfer Shares to the Remaining Shareholdershall be completed in accordance with Clause 25 and the terms andconditions of the relevant Transfer. In the event of any conflict between theprovisions of Clause 25 and the terms and conditions of the relevant Transfer,the former shall take precedence. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (ii)Tag-along(a)If the Remaining Shareholder wishes to sell some or all of the relevant portionof its Shares pursuant to Clause 22.4.1(vi) it shall send a notice to theTransferring Shareholder by the End Date, copied to the Company, electing inits sole discretion to sell the Tag Portion of or, (where Clause 22.4.1(vi)(b)applies) at the sole discretion of such Remaining Shareholder, some or all ofits Shares (the “Tag-along Shares”) to the Offeror at the same cash price as,and on no less favourable terms than, those contained in the Third PartyOffer.(b)The Transferring Shareholder shall then be prohibited from selling the TransferShares to the Offeror unless the Offeror agrees to purchase the Tag-alongShares at the same time, at the same cash price as and on no lessfavourable terms than those contained in the Third Party Offer.(c)In the event that the Transferring Shareholder fails to comply with the terms ofthis Clause 22.4.3(ii) (the “Tag-along Default”), the Remaining Shareholdershall be entitled to give notice (the “Tag-along Default Notice”) within ** ofthe Tag-along Default occurring, requiring the Transferring Shareholder topurchase all of the Tag-along Shares held by the Remaining Shareholder atthe same cash price as, and on no less favourable terms than, the TransferShares, and the Transferring Shareholder shall be obligated to complete suchpurchase within ** following receipt of such Tag-along Default Notice.22.4.4Drag-along(i)Subject to the right of the Remaining Shareholder under Clause 22.4.3(i) to exerciseits right of first refusal, if the Transferring Shareholder(s) (the “DraggingShareholder”) accepts the Third Party Offer and, as a result, the Offeror (togetherwith any Person Acting In Concert with it) will acquire ** of the share capital of theCompany, then ** Business Days of the date on which the Dragging Shareholderaccepts the Third Party Offer the Offeror or the Dragging Shareholder may serve anotice (the “Drag-along Notice”) (in accordance with Clause 22.4.4(ii)) on each otherShareholder (the “Dragged Shareholder”) requiring it to sell to the Offeror suchportion of Shares held by such Dragged Shareholder as reflects, as nearly aspossible, the number of the Transfer Shares as a proportion of the total number ofShares held by the Dragging Shareholder (the “Drag-along Shares”) on the sameterms and conditions as the Third Party Offer (the “Drag-along Exit”).(ii)The Drag-along Notice shall specify:(a)that each of the Dragged Shareholders is required to sell all its Drag-alongShares;(b)the name of the Offeror;(c)the cash price per a Drag-along Share, which shall be no less than the cashprice per Share to be sold by the Dragging Shareholder(s); and Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (d)the proposed date of completion of the Drag-along Exit.(iii)The Drag-along Notice shall be accompanied by copies of all documents to beexecuted by the Dragged Shareholders to give effect to the sale of the Drag-alongShares.(iv)Each Dragged Shareholder, upon receipt of the Drag-along Notice and accompanyingdocuments, shall be obliged to:(a)sell all its Drag-along Shares (including giving warranties as to its title to itsDrag-along Shares and its capacity to transfer the Drag-along Shares) on thedate of completion of the Drag-along Exit;(b)return to the Dragging Shareholders, by no later ** prior to the anticipated dateof completion of the Drag-along Exit, the duly executed documents, all ofwhich shall be held against payment of the aggregate consideration due; and(c)bear an amount of any costs of a Drag-along Exit in the same proportion asthe consideration for its Drag-along Shares bears to the aggregateconsideration for all Shares to be paid in connection with the Drag-along Exit.(v)Completion of any transfer pursuant to this Clause 22.4.4 shall take place at thesame time as completion of the transfer of the Transfer Shares. In order to effectsuch completion, the Offeror shall transfer the purchase price for the Drag-alongShares to the Company, to receive and hold on behalf of each Dragged Shareholder,and each Dragged Shareholder shall deliver duly executed instrument(s) for sharetransfer (including a duly executed deed of transfer or a power of attorney authorisingthe execution of a deed of transfer on its behalf) for the Drag-along Shares to theCompany. The Company’s receipt of the purchase price as agent on behalf of eachDragged Shareholder shall be a good discharge to the Offeror who shall not be boundto see to the application of those moneys. The Company shall hold the purchaseprice in trust for each Dragged Shareholder without any obligation to pay interest. Ifany Dragged Shareholder fails to deliver its duly executed instrument(s) for sharetransfer for its Drag-along Shares to the Company by completion, the Directors shallauthorise any Director to transfer such Drag-along Shares on behalf of such DraggedShareholder to the Offeror to the extent the Offeror has, by completion, put theCompany in funds to pay the purchase price. The Directors shall then authoriseregistration of the transfer.22.4.5Failure to transferIf a Transferring Shareholder, a Remaining Shareholder or a Dragged Shareholder does notcomply with its sale or purchase obligations in this Clause 22, then the provisions of Clause25.2 shall apply.22.4.6Failure of third party to complete saleIf the Offeror fails to acquire the Transfer Shares in accordance with this Clause 22, then theprocedures set out in this Clause 22 shall be complied with in full in respect of each new orrevised offer, whether by the same Offeror or not. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 23DefaultIf a Shareholder (the “Defaulting Shareholder”) commits a breach of this Agreement, any otherShareholder (the “Non-defaulting Shareholder”) may serve a notice upon the DefaultingShareholder specifying the breach and requiring the Defaulting Shareholder immediately to stop thebreach and, to the extent possible, to make good the consequences of the breach within **. Wherethe breach has prejudiced the Non-defaulting Shareholder, it may seek an immediate remedy of aninjunction, specific performance or similar order to enforce the Defaulting Shareholder’s obligations.This does not affect the Non-defaulting Shareholder’s right subsequently to claim damages or othercompensation for breach under applicable Laws.24Deadlock24.1Circumstances leading to deadlock24.1.1Unless Clause 24.2.2(ii) applies, if the Board has not passed a resolution in respect of anyBoard Reserved Matter which has been put to it two or more times in accordance with thisAgreement and the Articles, in each case either because the Board Super Majority has notvoted in favour of it or because the relevant Board meetings have been adjourned for thelack of a quorum, then such Board Reserved Matter shall no longer require approval by theBoard Super Majority, and will instead only require the unanimous consent of both theSberbank Independent Director and the YNV Independent Director.24.1.2If the Sberbank Independent Director and the YNV Independent Director are unable to reachagreement on a matter referred to them under Clause 24.1.1 within 15 Business Days of thatmatter being referred to them, then any Director may refer the matter for discussion betweenthe Principal Shareholders.24.1.3If:(i)the Principal Shareholders are unable to reach agreement on any matter referred tothem under Clause 24.1.2 within ** of that matter being referred to them; or(ii)the Principal Shareholders have not passed a resolution in respect of anyShareholder Reserved Matter which has been put to them two or more times inaccordance with this Agreement and the Articles, either because the requisitemajority has not voted in favour of it or because three or more consecutive meetingsof Shareholders have been adjourned for the lack of a quorum,the matter or resolution shall be a “Deadlock Matter”.24.2Referral to chief executive officers for resolution24.2.1The Principal Shareholders shall as soon as practicable refer the Deadlock Matter to theChief Operating Officer of YNV and Sberbank First Deputy Chief Executive Officer forresolution (the “Deadlock Appointees”). 24.2.2If: Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (i)the Deadlock Appointees are unable to reach agreement on the Deadlock Matterwithin ** of that matter being referred to them; or(ii)the Board does not approve engagement of the relevant Financial Services Provideras a Board Reserved Matter pursuant to Clause 5.2.3(iii)(a) ,the matter shall be referred to the Chief Executive Officers of YNV and Sberbank, who shallmeet in person at least once within ** of any such referral to seek to resolve such matter.24.3Outcome of Deadlock Matter24.3.1If a matter is not resolved pursuant to Clause 24.2.2 within ** of that matter being referred tothe Deadlock Appointees, then the status quo of such matter shall continue to apply, unlessthe relevant Deadlock Matter is in respect of a Board Reserved Matter set out in:(i)paragraph Error! Reference source not found. of Error! Reference source notfound. (other than in respect of the CEO or CFO appointment or removal), in whichcase the matter will be solely and promptly determined by the CEO; or(ii)paragraph Error! Reference source not found. of Error! Reference source notfound. in respect of the CEO or CFO appointment or removal, in which case:(a)the Pre-Agreed Deputy of such CEO or CFO shall temporarily replace theCEO or CFO (as applicable) and for all intents and purposes the relevant Pre-Agreed Deputy shall be the CEO or CFO (as applicable) until replaced inaccordance with this Clause 24.3.1(ii);(b)each Principal Shareholder shall promptly give notice to the other PrincipalShareholder of two suitable candidates (such that there are four candidates inaggregate) to replace such CEO or CFO;(c)each Principal Shareholder shall then promptly notify each other, rejecting oneof the other Principal Shareholder’s candidates nominated in Clause 24.3.1(ii)(b) above, such that each Principal Shareholder shall have one candidateremaining; and(d)finally, the Chair shall promptly determine, by way of coin toss in the presenceof at least one YNV Director and one Sberbank Director, which one of theremaining two candidates should be appointed as CEO or CFO (asapplicable), and upon such determination, the Pre-Agreed Deputy shall beimmediately removed from the position of CEO or CFO (as applicable) and therelevant candidate should be appointed to the relevant position.25Terms and consequences of transfers of Shares25.1Completion of transferAny transfers of the Transfer Shares made under the provisions of Clause 22 (except by aTransferring Shareholder or a Remaining Shareholder to an Offeror under Clause 22.4.3(i) Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. which shall be made as agreed with the Offeror) shall be made in accordance with the followingterms set out in this Clause 25.1:25.1.1Each of the Transferring Shareholder and the Remaining Shareholder shall use reasonableendeavours to ensure the satisfaction of any Regulatory Condition applying to it as soon aspossible.25.1.2If any of the Regulatory Conditions is not satisfied or waived ** after service of the TransferNotice, then the Transfer Notice shall lapse and the Transferring Shareholder shall be free tosell the Transfer Shares to the Offeror who had previously made a Third Party Offer but wasunable to proceed as a result of the rights of first refusal contained in Clause 22.4.2 onterms being no more favourable than those of the Third Party Offer.25.1.3Completion of the transfer of the Transfer Shares shall take place ** after the date of theAcceptance Notice or the date of satisfaction or waiver of the last of the RegulatoryConditions (whichever is the later) (the “Transfer Date”) and at such reasonable time andplace as the Transferring Shareholder and the Remaining Shareholder shall agree or, failingwhich, at 12:00 (Amsterdam time) at the registered office of the Company.25.1.4On or before the Transfer Date the Transferring Shareholder shall deliver to the RemainingShareholder in respect of the Transfer Shares:(i)duly executed instrument(s) for share transfer (including a duly executed power ofattorney authorising the execution of a notarial deed of transfer on its behalf); and(ii)a power of attorney in such form and in favour of such person as the RemainingShareholder may nominate to enable the Remaining Shareholder to exercise allrights of ownership including, without limitation, voting rights.25.1.5Upon the execution of the notarial deed of transfer as referred to in Clause 25.1.4, theRemaining Shareholder shall pay the total consideration due for the Transfer Shares to theTransferring Shareholder on the Transfer Date.25.2Failure to transfer If a Transferring Shareholder fails or refuses to comply with its obligations to transfer TransferShares under Clause 22 on or before the Transfer Date for a reason other than failure to satisfy aRegulatory Condition:25.2.1the Company shall be deemed to be appointed as agent on behalf of the TransferringShareholder to receive the purchase money in trust for the Transferring Shareholder (withoutany obligation to pay interest) and cause the Remaining Shareholder to be registered as theholder of the Transfer Shares being sold. The receipt by the Company of the purchasemoney shall be a good discharge by the Remaining Shareholder (who shall not be bound tosee to the application of those moneys). After the Remaining Shareholder has beenregistered as holder of the Transfer Shares being sold in exercise of these powers:(i)the validity of the transfer shall not be questioned by any person; and Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (ii)the Transferring Shareholder shall be entitled to the purchase money for the TransferShares; and25.2.2the Transferring Shareholder shall not exercise any of its powers or rights in relation tomanagement of, and participation in the profits of, the Company under this Agreement, theArticles or otherwise. The Appointed Directors appointed by such Transferring Shareholder(or its predecessor in title) shall not (and the Transferring Shareholder shall procure thateach such Appointed Director shall not):(i)vote at any Board meeting;(ii)attend any Board meeting (and their attendance would not be required in order toconstitute a quorum); or(iii)receive or request any information from the Company.25.3Company to be informed of noticesThe Principal Shareholders shall keep the Company informed at all times of the issue and contentsof any notices served pursuant to Clause 22 or 25 and any election or acceptance relating to thosenotices.25.4Business to be run as going concernThe Principal Shareholders shall do all things within their power to ensure that the Businesscontinues to be run as a going concern during the period between the service of any notice pursuantto Clause 22 or 25 and the completion of any transfers of Shares.25.5Transfer termsAny sale and/or transfer of the Transfer Shares under Clause 22 shall be on terms that thoseShares:25.5.1are transferred free from all Encumbrances (other than those created under this Agreementand the Articles); and25.5.2are transferred with the benefit of all rights attaching to them as at the date of the relevanttransfer.25.6Further assuranceEach of the Principal Shareholders and the Company shall use reasonable endeavours to effect atransfer of the Transfer Shares in accordance with the terms of this Agreement as quickly as ispracticable and in any event within any time period specified in this Agreement.25.7Deed of AdherenceThe Principal Shareholders shall procure that no person other than an existing Shareholder acquiresany Shares unless it enters into a Deed of Adherence agreeing to be bound by this Agreement as aShareholder and any other agreements entered into in connection with the Business as aShareholder. The Shareholders agree that in signing a Deed of Adherence such person shall havethe benefit of the terms of this Agreement and shall be a Party to this Agreement.25.8Removal of appointees Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. If a Principal Shareholder ceases to be a Principal Shareholder it shall, and it shall procure that allits appointees to the Board and to the board of directors of any Group Company (if applicable) shall,do all such things and sign all such documents as may otherwise be necessary to ensure theresignation or dismissal of such persons from such appointments in a timely manner in accordancewith Clause 10. 25.9Power of Attorney25.9.1Each Principal Shareholder irrevocably appoints the other Principal Shareholder, by way ofsecurity for the performance of its obligations under Clause 22, its attorney to execute,deliver and/or issue any necessary document, agreement, certificate and instrumentrequired to be executed by it under the provisions of Clauses 22 or 25, including any transferof the Transfer Shares or other documents which may be necessary to transfer title to theTransfer Shares.25.9.2Any purchase money payable to a Transferring Shareholder shall, to the extent that it is notpaid to, or to the order of, the Transferring Shareholder on or before the appropriatecompletion date, bear interest against the Remaining Shareholder (or the DraggingShareholder where a Dragged Shareholder is required to sell Drag-along Shares underClause 22.4.4) at the rate of three per cent. per annum calculated on a daily basis from suchdate until the Transferring Shareholder is reimbursed by the Remaining Shareholder.26IPO26.1Each Principal Shareholder (the “Initiating Shareholder”) shall have the right to convene a meetingof the Board to consider approval of an IPO, provided that such notice includes the followingproposed parameters of the potential IPO:26.1.1the relevant stock exchange;26.1.2the minimum amount to be raised;26.1.3type of Shares to be offered for sale (including proportions of new Shares to be issuedand/or existing Shares to be sold by each of the Shareholders);26.1.4valuation parameters; and26.1.5financial advisors and the terms of their engagement.26.2If the Board meeting convened by the Initiating Shareholder under Clause 26.1 approves the IPO,the Shareholders shall co-operate fully with each other and the Company and their respectivefinancial and other advisers and use their reasonable endeavours to assist the Company to achievean IPO in accordance with the rules and regulations of the relevant international securities exchangeand other applicable Laws and regulations.26.3Following expiry of the Lock-up Period, if the Board meeting convened by the Initiating Shareholderunder Clause 26.1 does not approve the IPO which satisfies the criteria of a Qualified IPO ** theInitiating Shareholder may send a notice (the “Qualified IPO Notice”) to the Dissenting Shareholder(with a copy to the Company) requiring that the Company initiates a Qualified IPO and indicating thefollowing parameters of such Qualified IPO (which should be materially the same as parameters ofthe IPO rejected by the Board):26.3.1the relevant stock exchange; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 26.3.2the minimum amount to be raised;26.3.3type of Shares to be offered for sale through the Qualified IPO (including proportion of newShares to be issued and/or existing Shares);26.3.4valuation parameters; and26.3.5financial advisors and the terms of their engagement.26.4In case where Clause 26.3 applies:26.4.1the Shareholders shall procure (including by way of taking all necessary corporate actions)that the Company fully cooperates with the respective financial and other advisers and shalluse their reasonable endeavours to assist the Company to achieve the Qualified IPO inaccordance with the rules and regulations of the relevant international securities exchangeand other applicable Laws and regulations as soon as reasonably practicable following thedate of the Qualified IPO Notice; and26.4.2**(i)**(a)**(b)**** (ii)**26.5Following expiry of the Lock-up Period, unless Clauses 26.2 to 26.4 apply, the CEO may, afterconsultation with each of the Principal Shareholders, send a notice to the Principal Shareholdersrequiring that the Company initiates a CEO Qualified IPO.26.6**26.6.1**(i)**(ii)**(iii)****26.6.2**(i)**(ii)****27Duration, termination and survival27.1Duration and terminationThis Agreement shall continue in full force and effect without limit in time until the earlier of: Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 27.1.1the Principal Shareholders agreeing in writing to terminate it;27.1.2an effective resolution is passed or a binding order is made for the winding-up of theCompany; and27.1.3the date on which all of the Shares, to the extent remaining in issue, are owned by oneShareholder,provided that this Agreement shall cease to have effect as regards any Principal Shareholder whoceases to hold any Shares save for the Surviving Provisions which shall continue in force aftertermination generally or in relation to any such Principal Shareholder.27.2Termination on Qualified IPONotwithstanding the provisions of Clause 27.1 (and subject to Clause 27.3), effective upon theclosing of a Qualified IPO, this Agreement shall be deemed to be amended and restated to excludesuch provisions of this Agreement (save for the Surviving Provisions which shall continue in forceafter termination), as may be determined by an opinion of a reputable law firm of internationalstanding with an established practice in the jurisdiction of the relevant stock exchange to berequired to be excluded in order to comply with the listing rules of the relevant stock exchange orother applicable mandatory legal requirements. The Principal Shareholders further agree to negotiatein good faith any amendments to this Agreement as may be recommended by such law firm or bythe managing underwriter of such Qualified IPO to be advisable in connection with such QualifiedIPO.27.3Effect of terminationTermination of this Agreement shall be without prejudice to any liability or obligation in respect ofany matters, undertakings or conditions which shall not have been observed or performed by therelevant Party prior to such termination. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. PART H – PROTECTION OF THE BUSINESS AND SHAREHOLDERS28Expansion of Joint Venture28.1Development of BusinessSubject to the provisions of this Clause 28 and Clause 28.3, the Shareholders shall procure that anyexpansion, development or evolution of the Core Business within the Exclusivity Territory shall onlybe effected through the Company or a Group Company.28.2New Opportunities28.2.1If any Principal or its Affiliate:(i)identifies or becomes aware of any investment opportunity (other than a SecurityEnforcement Opportunity) relevant to the Core Business; or(ii)identifies an opportunity to start operating any Core Business,(a “New Opportunity”), in each case, in a jurisdiction outside the Exclusivity Territory (the“New Opportunity Jurisdiction”), then such Principal shall notify the Board in writing withreasonable details as to the nature of the relevant New Opportunity, including the relevantNew Opportunity Jurisdiction. In any event, none of the Principals or their Affiliates shallmake or commit to make any capital expenditure or make any other form of investment inrelation to a New Opportunity unless and until the Board accepts or rejects such NewOpportunity pursuant to the terms of this Clause 28.2.28.2.2If the Board approves the New Opportunity by a simple majority of votes, then:(i)the Principals shall procure that the Group shall use reasonable endeavours toimplement such New Opportunity in the New Opportunity Jurisdiction as soon asreasonably practicable; and(ii)if the Group fails to complete the Core Business Commencement in such NewOpportunity Jurisdiction within ** (unless a longer time period is determined by theBoard Super Majority) following the relevant Board approval, the Principal thatnotified the Board of such New Opportunity shall be free to proceed on its own withsuch New Opportunity within the New Opportunity Jurisdiction at its sole cost, riskand expense28.2.3If the Board does not approve (or fails to vote on) the New Opportunity within one month ofreceiving notice of it pursuant to Clause 28.2.1:(i)the Principal that did not notify the Board of such New Opportunity shall not (andshall procure that its Affiliates shall not) take any actions to pursue such NewOpportunity in the New Opportunity Jurisdiction; and(ii)the Principal that notified the Board of such New Opportunity (unless any of itsAppointed Directors voted against approval of the New Opportunity) shall be free toproceed on its own with such New Opportunity within the New OpportunityJurisdiction at its sole cost, risk and expense. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 28.2.4In the event that the Board decides (by a simple majority) that the Group shall commenceoperations in a New Opportunity Jurisdiction where a Principal (or its Affiliate) has alreadystarted operations pursuant to Clause 28.2.2(ii) or 28.2.3(ii) (the “Existing Operations”):(i)following such Board decision, the Principals shall negotiate in good faith for a periodof ** with a view to agreeing whether the relevant interest in the Existing Operationsshould be transferred to the Group (and the Principal that owns the ExistingOperations shall be deemed to have granted exclusivity for such ** period to theother Principal and the Group);(ii)if the Principals:(a)agree that the relevant interest in the Existing Operations shall be transferredto the Group, then the Parties shall take all such actions as are required toeffect such transfer on the terms agreed (and following such transfer therelevant New Opportunity Jurisdiction shall become part of the ExclusivityTerritory); or(b)fail to agree that the relevant interest in the Existing Operations shall betransferred to the Group, then the relevant Principal shall use its commerciallyreasonable efforts (taking into consideration the relevant market conditions) todivest the relevant interest in the Existing Operations within the following **.28.2.5If the Group starts operations in any jurisdiction which is not covered by the Brand LicenceAgreement, YNV shall procure that as soon as practicable following the start of suchoperations:(i)Yandex LLC files applications for registration of “YANDEX” trade marks (in Latin and,if relevant, in Cyrillic or other local alphabet) with the local trade mark authorities inthe relevant jurisdiction in respect of such ICGS classes as may be necessary forthe operation of the Business in such jurisdiction (if no such trade marks areregistered in such jurisdiction already); and(ii)Yandex LLC and the Russian OpCo shall:(a)execute an amendment or an additional agreement to the Brand LicenceAgreement (in the form reasonably acceptable to Sberbank), according towhich the Brand Licence Agreement shall cover the relevant “YANDEX” trademarks registered (or to be registered, as applicable) in the relevant jurisdiction;and(b)file such amendment or additional agreement to the Brand Licence Agreementfor registration with the local trade mark authorities in the relevant jurisdiction(to the extent required under applicable Laws).28.3****28.4**** Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 28.5****28.5.1**28.5.2** 28.5.3**(i)**(ii)**(iii)**28.5.4** 28.5.5**(i)**(ii)**(iii)**28.6Changes to advertising formats for online retailers related to products/goods search queries(«товарные запросы») Without prejudice to Clause 29.2.2(iii), YNV shall, when it becomes commercially feasible, but inany event no later than before, or simultaneously with, the start of any discussions with any onlineretailer in respect of a full commercial launch of any substantial changes to visualisation ofadvertising formats on Yandex search engine results page for online retailers related toproducts/goods search queries («товарные запросы»):28.6.1provide reasonable notification thereof to the Group; and28.6.2discuss adoption of such changes by the Group.29Restrictions29.1Restrictive covenantsSubject to Clauses 28.1, Yandex and Sberbank promotion and advertising and 29.6, eachPrincipal undertakes to the other Principal and the Company that neither it nor any of its Affiliatesshall during the Exclusivity Period:29.1.1carry on, be engaged in or be economically interested in any business which is of the sametype as the Core Business (or any part of it) within the Exclusivity Territory;29.1.2employ any Key Employee whether as an employee, a consultant or otherwise;29.1.3induce or seek to induce any Restricted Employee to become employed whether as anemployee, a consultant or otherwise by any Principal or any of its Affiliates, whether or notsuch Restricted Employee would thereby commit a breach of his/her employment contractor contract of service, provided that a Principal shall not be prohibited from recruiting: Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (i)following expiry of ** following the date of this Agreement, any Senior Employee; and(ii)any Junior Employee,in each case, pursuant to (a) any public announcement, general solicitation or advertisingnot specifically targeting such individual; (b) a referral by any search firm, employmentagency or other similar entity that has not been specifically instructed to solicit suchindividual; or (c) an unsolicited inbound approach from such Restricted Employee;29.1.4establish any joint venture (whether incorporated or not) with any Restricted Party within theExclusivity Territory; or29.1.5other than as permitted under Clause 29.2, promote any B2C online retail marketplace forthe purchase of physical goods within the Exclusivity Territory or any online retailer ofphysical goods (other than the Group’s marketplace(s)).29.2Yandex and Sberbank promotion and advertising29.2.1Nothing in this Agreement shall restrict any Principal or its Affiliates from providingadvertising or promotion services (other than as carried out through the Price ComparisonBusiness), including such advertising or promotion services that are monetised through costper click model, cost per mile model or CPA model, including, in case of YNV, on allYandex website or app properties, Yandex Advertising Network, Yandex ServiceCompanies, including Yandex app, Yandex.Search, Yandex.Direct, Yandex.Browser,Yandex.Video, Edadeal, Yandex.Images, Yandex.Collections, Yandex Geo products or anyother similar current or future Yandex property, application or service, to any third party,including any Restricted Party, in each case, other than as expressly restricted by thisClause 29.2.29.2.2YNV undertakes to each of Sberbank and the Company that neither YNV nor its Affiliatesshall, during the Exclusivity Period and on the Exclusivity Territory:(i)provide any YNV Special Promotion Services to any Restricted Party in respect ofthe Core Business, provided that the provision of any specific YNV SpecialPromotion Services shall be permitted upon a written request by YNV containingreasonable details in respect of such YNV Special Promotion Services to enable theCEO or the Board (as applicable) to make an informed decision (the “YNV SpecialPromotion Services Request”):(a)during the period from the date of this Agreement until ** with the prior writtenconsent of the CEO (such consent shall not be unreasonably withheld,conditioned or delayed); and(b)during the period after ** with the prior approval of a simple majority of theBoard, provided that if, within ** from the date on which the Board receives anYNV Special Promotion Services Request, the Board does not reject suchYNV Special Promotion Services Request, the Board shall be deemed to havegranted its approval to such YNV Special Promotion Services Request; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (ii)provide to any Restricted Party Search Wizards for the period of ** from the datehereof; or(iii)take any voluntary actions, the primary purpose of which is to divert advertisingtraffic which comes to the Group from Yandex search results page. 29.2.3Sberbank undertakes to each of YNV and the Company that neither Sberbank nor itsAffiliates shall, during the Exclusivity Period and on the Exclusivity Territory provide anySberbank Special Promotion Services to any Restricted Party in respect of the CoreBusiness, provided that the provision of any specific Sberbank Special Promotion Servicesshall be permitted upon a written request by Sberbank containing reasonable details inrespect of such Sberbank Special Promotion Services to enable the CEO or the Board (asapplicable) to make an informed decision (the “Sberbank Special Promotion ServicesRequest”):(i)during the period from the date of this Agreement until the ** with the prior writtenconsent of the CEO (such consent shall not be unreasonably withheld, conditionedor delayed); and(ii)during the period after the first anniversary of the date of this Agreement with theprior approval of a simple majority of the Board, provided that if, within ** from thedate on which the Board receives a Sberbank Special Promotion Services Request,the Board does not reject such Sberbank Special Promotion Services Request, theBoard shall be deemed to have granted its approval to such Sberbank SpecialPromotion Services Request.29.2.4Notwithstanding the foregoing, the restrictions set forth in Clauses 29.2.2(i) and 29.2.3 shallnot apply to experiments related to the launch of new advertising products or theenhancement of current advertising products, which could involve non-standard visualrepresentations or could be based on new underlying functional principles.29.2.5For the purposes of this Clause 29.2:“YNV Special Promotion Service” means:(i)**(ii)**(a)**(b)** (c)**(d)**“Sberbank Special Promotion Service” means:(iii)**(a)**(b)** Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (c)**(d)**29.3Reasonableness of restrictionsEach Party agrees that the restrictions contained in Clause 28 and this Clause 28.6 are no greaterthan are reasonable and necessary for the protection of the interest of each Principal and theCompany, but if any such restriction shall be held to be void but would be valid if deleted in part orreduced in application, such restriction shall apply with such deletion or modification as may benecessary to make it valid and enforceable.29.4Reimbursement of expenses for breach of non-solicitation restrictionsThe Parties acknowledge and agree that the Group’s employees are experienced professionals, andthat the Group will incur substantial expenses in the event there is a necessity to replace them ortrain new employees as a consequence of breach of Clause 29.1.2 or 29.1.3 by either Principal. Inthe event that an employee of the Group having an annual base salary greater than ** leaves hisemployment as a result of solicitation in breach of Clause 29.1.2 or 29.1.3, the breaching Principalshall be liable to reimburse the Group for expenses resulting from recruitment or training of a newemployee in the amount of ** for each such employee (without prejudice to any other rights andremedies that the Group or the other Principal may have in relation to such breach).29.5DurationThe covenants set out in this Clause 28.6 shall survive in accordance with Clause 29.1 for theExclusivity Period.29.6ExclusionsNothing contained in Clause 28 or this Clause 28.6 precludes or restricts a Principal or any of itsAffiliates from:29.6.1holding or being interested in a stake of no more than:(i)**(ii)**29.6.2fulfilling any obligation pursuant to this Agreement and any other Transaction Document;29.6.3operating any Core Business in connection with implementation of any New Opportunity in aNew Opportunity Jurisdiction under Clause 28.2.2(ii) or 28.2.3(ii); 29.6.4pursuing any Security Enforcement Opportunity, provided that if, as a result of suchSecurity Enforcement Opportunity, a Principal acquires any interest in any person engagedin any activity which activity would otherwise be in breach of Clause 29.1 (for the avoidanceof doubt, subject to the applicable exclusions under Clause 29.6, including in respect of theinterest thresholds set out in Clause 29.6.1):(i)the relevant Principal shall promptly notify the other Principal of such acquisition; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (ii)following such notification, the Principals shall negotiate in good faith for a period ofsix months with a view to agreeing whether the relevant interest should betransferred to the Group;(iii)if the Principals:(a)agree that the relevant interest shall be transferred to the Group, then thePrincipals shall (and shall procure that the Company shall) take all suchactions as are required to effect such transfer on the terms agreed; or(b)fail to agree that the relevant interest shall be transferred to the Group, thenthe acquiring Principal shall use its commercially reasonable efforts (takinginto consideration the relevant market conditions) to divest the relevantinterest within the following 36 months;29.6.5operating any existing or future online or e-commerce businesses (including any onlineadvertising or promotion business, including, for the avoidance of doubt, Price ComparisonBusiness) in the following spheres:(i)**(ii)**(iii)**(iv)**(v)**(vi)**(vii)**(viii)**(ix)**(x)**(xi)**(xii)**(xiii)**29.6.6in the case of Sberbank only:(i)**(a)**(b)**(c)**(ii)** (iii)** Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (iv)**29.6.7in the case of YNV only, **29.7Non-DiscriminationYNV undertakes to each of Sberbank and the Company that during the Exclusivity Period, andwithin the Exclusivity Territory YNV shall (and shall procure that its Affiliates shall):29.7.1in relation to any Yandex Services Promotion Features, treat the Group as a YandexService Company; and 29.7.2provide Yandex Services Promotion Features to the Group on similar and non-discriminatoryterms as compared with the terms and conditions of promotion of other Yandex ServiceCompanies, subject to restrictions which also apply to other Yandex Service Companies(including restrictions applicable to priority advertising campaigns of a relevant YandexService Company or a service of YNV Affiliate). YNV and its Affiliates shall have the rightnot to include in any new Yandex Services Promotion Features any promotion tools whichmay be created in the future and which: (a) constitute a part of the correspondingfunctionality of a service of a Yandex Service Company; or (b) assume the need fortechnical integration with the service providing the promotion tool; or (c) are provided toYandex Service Companies on a commercial basis, including in accordance with the policyof the service providing such promotion tool.29.8General principles of co-operation between the Company and the Principal Shareholders29.8.1The Parties intend that, other than as set out in the Transaction Documents, the Company’srelationship with each of the Principal Shareholders shall be based on the principles ofreciprocity and mutual benefit, having regard to the industry and market standing of theCompany and each of the Principal Shareholders.29.8.2Each of the Principal Shareholders may invite the Company to participate in its newbusiness initiatives and pilot projects, but the Board shall be free to decide, in its solediscretion, to what extent the Group shall participate therein (if at all).29.8.3Unless otherwise required by applicable Laws, the Parties agree that the internal corporateby-laws, policies, standards or other regulations of the Principal Shareholders shall notdirectly apply to the Company, and that the Board shall be free to decide, in its solediscretion, to what extent (if at all) to implement any such by-laws, policies standards orregulations at the Group level.29.9**29.9.1**29.9.2**29.9.3**(i)**(a)**(b)** Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. **(ii)**30Confidentiality30.1AnnouncementsNo public announcement of any kind shall be made in respect of this Agreement except asotherwise agreed in writing between the Principal Shareholders or unless required by the Laws, inwhich case the Principal Shareholder concerned shall take all reasonable steps to obtain theconsent of the other Principal Shareholder to the contents of the announcement, such consent notto be unreasonably withheld or delayed, and the Principal Shareholder or the Affiliate of the PrincipalShareholder making the announcement (as the case may be) shall (unless it is not reasonablypracticable to do so) give a copy of the text to the other Principal Shareholder prior to theannouncement being released.30.2Confidential Information Subject to Clauses 30.1 and 30.3, each Party shall keep confidential and shall procure that itsrespective Affiliates and their respective officers, employees, agents and advisers keep confidentialthe following (the “Confidential Information”):30.2.1all communications between each Shareholder and the Group;30.2.2all information and other materials supplied to or received by each Shareholder from theGroup which are either marked “confidential” or are by their nature intended to be for theknowledge of the recipient alone; and30.2.3any information relating to:(i)this Agreement, the Business which a Shareholder may have or acquire throughownership of an Interest in the Company, all information concerning the businesstransactions and/or financial arrangements of the Group; and(ii)the customers, business, assets or affairs of a Shareholder or its Affiliates and allinformation concerning the business transactions and/or financial arrangements of aShareholder or its Affiliate which the other Parties may have, or acquire, throughbeing a Shareholder or making appointments to the Board,and shall not use any Confidential Information for its own business purposes or disclose anyConfidential Information to any third party without the consent of the other Parties.30.3Exclusions30.3.1Clause 30.2 shall not prohibit disclosure or use of any information if and to the extent:(i)the information is or becomes publicly available (other than by breach of thisAgreement);(ii)both Principal Shareholders have given prior written approval to the disclosure oruse;(iii)information about the Group which the Board has confirmed in writing to theShareholders is not confidential; Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (iv)the information is independently developed by a Party after the date of thisAgreement;(v)the disclosure or use is required by law, any governmental or regulatory body or anystock exchange on which the shares of either Party or any of its Affiliates is listed(including where this is required as part of any actual or potential offering, placingand/or sale of securities of that Party or any of its Affiliates); (vi)the disclosure or use is required for the purpose of any judicial or arbitral proceedingsarising out of or in connection with this Agreement or any documents to be enteredpursuant to it; (vii)the disclosure of information is made to any Tax Authority to the extent suchdisclosure is reasonably required for the purposes of the tax affairs of the Partyconcerned or any of its Affiliates;(viii)the disclosure of information is made by a Principal Shareholder to its Affiliates,directors, employees or professional advisers on a need to know basis and on termsthat such parties undertake to comply with the provisions of this Clause 30 as if theywere a party to this Agreement; or(ix)the disclosure of information is made by a Principal Shareholder on a confidentialbasis to a bona fide third party (not being a Restricted Transferee) or professionaladvisers or financiers of such third party wishing to acquire Shares from suchPrincipal Shareholder in accordance with the terms of this Agreement to the extentthat any such persons need to know the information for the purposes of considering,evaluating, advising on or furthering the potential purchase PROVIDED THAT nosuch disclosure shall be made unless such person has agreed to be bound toobserve the restrictions under this Clause 30 to which the Principal Shareholderconcerned is subject,provided that prior to disclosure or use of any information pursuant to Clause 30.3.1(v) or30.3.1(vi), the Party concerned shall consult with the other Parties insofar as is reasonablypracticable.30.4Return of Confidential InformationWhere a Principal Shareholder ceases to be a Shareholder, such Principal Shareholder shallpromptly return all written Confidential Information provided to it or its Affiliates or its or theirofficers, employees, agents or advisers which is in such Principal Shareholder’s possession orunder its custody and control without keeping any copies thereof, provided that such PrincipalShareholder may retain any Confidential Information relating to the other Shareholders, theCompany, the Group or the Business as may be required by the Laws or contained or referred to inboard minutes or in documents referred to therein and such Principal Shareholder’s advisers maykeep one copy of any documents in their possession for record purposes without prejudice to anyduties of confidentiality contained in this Agreement.30.5Damages not an adequate remedy Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Without prejudice to any other rights or remedies which a Shareholder may have under thisAgreement or any other Transaction Document, the Shareholders acknowledge and agree thatdamages would not be an adequate remedy for any breach of this Clause 30 and the remedies ofinjunction, specific performance and other equitable relief are appropriate for any threatened oractual breach of any such provision and no proof of special damages shall be necessary for theenforcement of the rights under this Clause 30.30.6Duration of confidentiality obligationsThe obligations contained in this Clause 30 shall last indefinitely notwithstanding the termination ofthis Agreement or a person ceasing to be party to this Agreement. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. PART I – GENERAL31General31.1Arbitration31.1.1The Parties agree that, in respect of any claim, dispute or difference or controversy ofwhatever nature arising out of, relating to, or in connection with this Agreement (including aclaim, dispute, difference or controversy regarding its existence, termination, validity,interpretation, performance, breach, the consequences of its nullity or any non-contractualobligations arising out of or in connection with this Agreement) (each, a “Dispute”), theyshall notify in writing the other parties and attempt in good faith to resolve such Dispute. Ifno such resolution can be reached during the ** following the date of such written notice,then such Dispute shall be referred upon the application of any party to, and finally settledby, arbitration in accordance with the London Court of International Arbitration (“LCIA”)Rules (the “Rules”) as in force at the date of this Agreement, which Rules, as amended bythis Clause 31.1, are deemed to be incorporated into this Clause 31.1, and capitalisedterms used in this Clause 31.1 which are not otherwise defined in this Agreement have themeaning given to them in the Rules.31.1.2The number of arbitrators shall be three, one of whom shall be nominated by the Claimant(s)between them, one by the Respondent(s) between them, and the third of whom, who shallact as presiding arbitrator of the tribunal, shall be nominated by the two party-nominatedarbitrators, provided that if the third arbitrator has not been nominated within ** of thenomination of the second party nominated arbitrator, such third arbitrator shall be appointedby the LCIA. 31.1.3The seat of arbitration shall be London, England and the language of arbitration shall beEnglish. Sections 45 and 69 of the Arbitration Act 1996 shall not apply.31.1.4No party shall be required to give general discovery of documents but may be required onlyto produce specific, identified documents or classes of documents which are relevant to theDispute.31.1.5Each party agrees that the arbitration agreement set out in this Clause 31.1 and thearbitration agreement contained in each other Transaction Document (other than theAncillary Agreements and all documents entered into pursuant to the Ancillary Agreements)shall together be deemed to be a single arbitration agreement.31.1.6Each party consents to being joined to any arbitration commenced under any TransactionDocument on the application of any other party if the Arbitral Tribunal so allows, andsubject to and in accordance with the Rules. Before the constitution of the Arbitral Tribunal,any party to an arbitration commenced pursuant to this Clause 31.1 may effect joinder byserving notice on any party to any Transaction Document whom it seeks to join to thearbitration proceedings, provided that such notice is also sent to all other parties to theDispute and the LCIA Court within ** of service of the Request for Arbitration. The joinedparty will become a claimant or respondent party (as appropriate) to the arbitrationproceedings and participate in the arbitrator appointment process in Clause 31.1.2. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 31.1.7An Arbitral Tribunal constituted under this Agreement may consolidate an arbitrationhereunder with an arbitration under any other Transaction Document if the arbitrationproceedings raise common questions of law or fact, and subject to and in accordance withthe Rules. For the avoidance of doubt, this Clause 31.1.7 is an agreement in writing by allparties to any arbitrations to be consolidated for the purposes of Article 22.1(ix) of theRules. If an Arbitral Tribunal has been constituted in more than one of the arbitrations inrespect of which consolidation is sought pursuant to this Clause 31.1.7, the Arbitral Tribunalwhich shall have the power to order consolidation shall be the Arbitral Tribunal appointed inthe arbitration with the earlier Commencement Date under Article 1.4 of the Rules (i.e. thefirst-filed arbitration). Notice of the consolidation order must be given to any arbitratorsalready appointed in relation to any of the arbitration(s) which are to be consolidated underthe consolidation order, all parties to those arbitration(s) and the LCIA Registrar. Anyappointment of an arbitrator in the other arbitrations before the date of the consolidationorder will terminate immediately and the arbitrator will be deemed to be discharged. Thistermination is without prejudice to the validity of any act done or order made by thatarbitrator or by any court in support of that arbitration before that arbitrator’s appointment isterminated; his or her entitlement to be paid proper fees and disbursements; and the datewhen any claim or defense was raised for the purpose of applying any limitation bar or anysimilar rule or provision. If this clause operates to exclude a party’s right to choose its ownarbitrator, each party irrevocably and unconditionally waives any right to do so.31.1.8To the extent permitted by applicable Laws, each party waives any objection, on the basisthat a Dispute has been resolved in a manner contemplated by Clauses 31.1.6 to 31.1.7, tothe validity and/or enforcement of any arbitral award.31.1.9Each party agrees that any arbitration under this Clause 31.1 shall be confidential to theparties and the arbitrators and that each party shall therefore keep confidential, withoutlimitation, the fact that the arbitration has taken place or is taking place, all non-publicdocuments produced by any other party for the purposes of the arbitration, all awards in thearbitration and all other non-public information provided to it in relation to the arbitralproceedings, including hearings, save to the extent that disclosure may be requested by aregulatory authority, or required of it by legal duty, to protect or pursue a legal right or toenforce or challenge an award in bona fide legal proceedings before a state court or otherjudicial authority.31.1.10The law of this arbitration agreement, including its validity and scope, shall be English law.31.1.11This agreement to arbitrate shall be binding upon the parties, their successors andpermitted assigns.31.2Governing law and submission to jurisdiction31.2.1This Agreement and any non-contractual obligations arising out of or in connection with itshall be governed by English law.31.2.2Each of the Parties irrevocably submits to the non-exclusive jurisdiction of the courts ofEngland to support and assist the arbitration process pursuant to Clause 31.1, Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. including if necessary the grant of interlocutory relief pending the outcome of that process.31.3WarrantiesEach Party warrants to each other Party that each of the following statements is true and accurateas of the date of this Agreement:31.3.1it is validly existing and is a company duly incorporated under the law of its jurisdiction ofincorporation;31.3.2it has the legal right and full power and authority to enter into and perform this Agreement;31.3.3this Agreement will, when executed, constitute valid and binding obligations on it; and31.3.4it has taken all corporate action required by it to authorise it to enter into and to perform thisAgreement.31.4Notices31.4.1Any notice or other communication in connection with this Agreement (each, a “Notice”)shall be:(i)in writing;(ii)in English language; and(iii)delivered by hand, registered post, pre-paid recorded delivery, pre-paid specialdelivery or courier using an internationally recognised courier company.31.4.2A Notice to Sberbank shall be sent to such party at the following address, or such otherpersons or address as Sberbank may notify to the other Parties from time to time:PJSC Sberbank of Russia19 Vavilova StreetMoscow 117997Russia Attention: ** ******with a copy (which shall not constitute Notice) to:**Linklaters CISPaveletskaya sq.2 bld. 2Moscow 115054 Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. RussiaEmail: **31.4.3A Notice to Sberbank Nominee shall be sent to such party at the following address, or suchother person or address as Sberbank Nominee may notify to the other Parties from time totime:«Digital assets» Limited19 Vavilova StreetMoscow 117997RussiaAttention: **Email: 31.4.4A Notice to YNV shall be sent to such party at the following address, or such other personor address as YNV may notify to the Parties from time to time:Yandex N.V.Schiphol Boulevard 165Schiphol 1118 BGNetherlandsAttention: **Email: ** with a copy (which shall not constitute Notice) to: **Yandex LLC16 Lva Tolstogo StreetMoscow 119021 RussiaEmail: ** **Morgan, Lewis & Bockius UK LLPCondor House, 5-10 St. Paul's ChurchyardLondon EC4M 8AL United KingdomEmail: **31.4.5A Notice to the Stichting shall be sent to such party at the following address, or such otherperson or address as Stichting may notify to the Parties from time to time:Stichting Yandex.Market Equity IncentiveSchiphol Boulevard 165Schiphol 1118 BGNetherlandsAttention: Yandex.Market B.V 31.4.6A Notice to the Company shall be sent to such party at the following address, or such otherperson or address as the Company may notify to the Parties from time to time:Yandex.Market B.V.Schiphol Boulevard 165Schiphol 1118 BG Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. NetherlandsAttention: **Email: ** with a copy (which shall not constitute Notice) to: **Morgan, Lewis & Bockius UK LLPCondor House, 5-10 St. Paul's ChurchyardLondon EC4M 8AL United KingdomEmail: ** 31.4.7A Notice shall be effective upon receipt and shall be deemed to have been received:(i)at 9:00 am on the second Business Day after posting or at the time recorded by thedelivery service; or(ii)at the time of delivery, if delivered by hand or courier.31.5Whole agreement and remedies31.5.1This Agreement contains the whole agreement between the Parties relating to the subjectmatter of this Agreement at the date of this Agreement to the exclusion of any terms impliedby law which may be excluded by contract and supersedes any previous written or oralagreement between the Parties in relation to the matters dealt with in this Agreement.31.5.2Each Party agrees and acknowledges that:(i)in entering into this Agreement, it is not relying on any representation, warranty orundertaking not expressly incorporated into it; and(ii)its only right and remedy in relation to any representation, warranty or undertakingmade or given in connection with this Agreement shall be for breach of the terms ofthis Agreement and each of the Parties waives all other rights and remedies(including those in tort or arising under statute) in relation to any such representation,warranty or undertaking.31.5.3In this Clause 31.5 “this Agreement” includes the Transaction Documents and alldocuments entered into pursuant to this Agreement.31.5.4Nothing in this Clause 31.5 excludes or limits any liability for fraud.31.6Legal advice and reasonablenessEach Party to this Agreement confirms that it has received independent legal advice relating to allthe matters provided for in this Agreement, including the terms of Clause 31.5, and agrees that theprovisions of this Agreement (including all documents entered into pursuant to this Agreement) arefair and reasonable.31.7Unlawful fetterThe Company is not bound by any provision of this Agreement to the extent it constitutes anunlawful fetter on any statutory power of the Company. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 31.8Conflict with the ArticlesIn the event of any ambiguity or discrepancy between the provisions of this Agreement and theArticles, it is intended that the provisions of this Agreement shall prevail and accordingly theShareholders shall exercise all voting and other rights and powers available to them so as to giveeffect to the provisions of this Agreement and shall further if necessary procure any requiredamendment to the Articles provided that such amendment to the Articles shall not contraveneapplicable Laws. The Company is not bound by this Clause 31.8. 31.9No partnershipNothing in this Agreement shall be deemed to constitute a partnership between the Parties hereto orconstitute any Party the agent of any other Party for any purpose.31.10Release etc.Any liability owing from any Shareholder or the Company under this Agreement may in whole or inpart be released, compounded or compromised or time or indulgence given by a Shareholder or theCompany in its absolute discretion without in any way prejudicing or affecting its Rights against anyother Party under the same or a like liability, whether joint and several or otherwise, or the Rights ofany other Party.31.11Survival of rights, duties and obligations31.11.1Termination of this Agreement for any cause shall not release a Party from any liabilitywhich at the time of termination has already accrued to another Party or which thereaftermay accrue in respect of any act or omission prior to such termination.31.11.2If a Party ceases to be a Party to this Agreement for any cause, such Party shall not bereleased from any liability which at the time of the cessation has already accrued to anotherParty or which thereafter may accrue in respect of any act or omission prior to suchcessation.31.12WaiverNo failure of any Shareholder or the Company to exercise, and no delay by it in exercising, anyRight shall operate as a waiver of that Right, nor shall any single or partial exercise of any Rightpreclude any other or further exercise of that Right or the exercise of any other Right.31.13VariationNo amendment to this Agreement shall be effective unless signed by or on behalf of each of thePrincipal Shareholders.31.14No assignment31.14.1Except as otherwise expressly provided in this Agreement (including pursuant to Clause22.3), none of the Parties may, without the prior written consent of the others, assign, grantany security interest over, hold on trust or otherwise transfer the benefit of the whole or anypart of this Agreement.31.14.2This Agreement shall be binding on the Parties and their respective successors andassigns. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 31.15Further assuranceEach of the Parties shall (i) from time to time execute such documents and perform such acts andthings as any Party may reasonably request from time to time in order to carry out the intendedpurpose of this Agreement; (ii) vote its Shares so as to give full effect to this Agreement; (iii) causeeach Director appointed by it to take all steps necessary to carry out the intended purposes of thisAgreement; and (iv) use reasonable endeavours to procure that any necessary third party shallexecute such documents and do such acts and things as may reasonably be required in order tocarry out the intended purpose of this Agreement.31.16Invalidity/severance31.16.1If any provision in this Agreement shall be held to be illegal, invalid or unenforceable, inwhole or in part, the provision shall apply with whatever deletion or modification is necessaryso that the provision is legal, valid and enforceable and gives effect to the commercialintention of the Parties.31.16.2To the extent it is not possible to delete or modify the provision, in whole or in part, underClause 31.16.1, then such provision or part of it shall, to the extent that it is illegal, invalid orunenforceable, be deemed not to form part of this Agreement and the legality, validity andenforceability of the remainder of this Agreement shall, subject to any deletion ormodification made under Clause 31.16.1, not be affected.31.17CounterpartsThis Agreement may be entered into in any number of counterparts, all of which taken together shallconstitute one and the same instrument. Any Party may enter into this Agreement by executing anysuch counterpart.31.18CostsEach Party shall bear all costs incurred by it in connection with the preparation, negotiation andexecution of this Agreement.31.19Third party rightsA person who is not a party to this Agreement has no right under the Contracts (Rights of ThirdParties) Act 1999 to enforce any term of, or enjoy any benefit under, this Agreement except that anyperson who enters into a Deed of Adherence in accordance with Clause 25.7 may enforce and relyon this Agreement to the same extent as if it were a party to it. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. In witness of which this Agreement has been duly executed on the date set out on the first page hereof.EXECUTED by ____________ on behalf of PJSC Sberbank of Russia: EXECUTED by ____________ on behalf of «Digital assets» Limited: EXECUTED by ____________ on behalf of Yandex N.V.: EXECUTED by ____________ on behalf of Stichting Yandex.MarketEquity Incentive: EXECUTED by ____________ on behalf of Yandex.Market B.V.: Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Schedule 1 Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Deed of Adherence(Clause 25.7)This Deed of Adherence is made on [date] by [ ], a company incorporated [in [ ] /under thelaws of [ ]] under registered number [ ] whose [registered/principal office is at [ ]] (the“New Shareholder”).Recitals:(D)[ ] (the “Transferor”) is proposing to transfer to the New Shareholder [number] shares of[ ] each in the capital of Yandex.Market B.V. (the “Company”).(E)This Deed of Adherence is entered into in compliance with Clause 25.7 (Deed of Adherence) of ashareholders’ agreement made on [date] between (1) [ ] , (2) [ ],and (4) [ ] assuch agreement has been or may be amended, supplemented or novated from time to time (the“Agreement”).It is agreed as follows:1The New Shareholder confirms that it has been supplied with and has read a copy of the Agreement.2The New Shareholder agrees (a) to assume the benefit of the rights of the Transferor under theAgreement (including any rights accrued in respect of the shares transferred by the Transferor) and(b) to observe, perform and be bound by all the obligations and terms of the Agreement capable ofapplying to the New Shareholder and which are to be performed on or after the date of this Deed, tothe intent and effect that the New Shareholder shall be deemed with effect from the date on which theNew Shareholder is registered as a member of the Company to be a party to the Agreement (as ifnamed as a party to the Agreement).3This Deed is made for the benefit of (a) the original Parties to the Agreement and (b) any other personor persons who after the date of the Agreement (and whether or not prior to or after the date of thisDeed) adhere to the Agreement.4The address of the New Shareholder for the purposes of Clause 31.4 (Notices) of the Agreement areas follows:[●]5Clauses 31.1 (Arbitration) and 31.2 (Governing law and submission to jurisdiction) of the Agreementshall apply to this Deed as if set out in full herein. Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. In witness of which this Deed has been executed and delivered as a deed on the date stated at thebeginning of this Deed.EXECUTED AND DELIVEREDas a DEED by [●] acting by[name of director] a Director inthe presence of: Witness’s signature:Name: Address:Occupation: [Also to be executed by each other party hereto] TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. EXHIBIT 7.3 27 November 2018 Limited Liability Company “NAPA”andLimited Liability Company “YANDEX” AGREEMENT FOR SALE AND PURCHASE OF FUTURE THING No. 10204824in respect of facilities located at:15 Kosygina Street, Gagarinsky district, Moscow Moscow TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Contents Page1................................................DEFINITIONS AND INTERPRETATION2Beneficiary: LLC “YANDEX” corr. acct.: ** INN: 7736207543 KPP: 997750001 BIK: 044525187 settlement acct.: **12or other details of the Purchaser of which the Purchaser may notify the Seller in accordance with theprovisions of the Agreement;12Beneficiary: LLC “YANDEX” Beneficiary’s address: 16 L’va Tolstogo Street, Moscow, 119021, Russia.................12Account number: ** Beneficiary’s bank: VTB BANK (PJSC) SWIFT: VTBRRUMM Bank’s address: 43/1Vorontsovskaya Street, Moscow, 109147, Russian Federation12or other details of the Purchaser of which the Purchaser may notify the Seller in accordance with theprovisions of the Agreement;12Beneficiary: LLC “NAPA” corr. acct.: ** INN: 7703466743 KPP: 770301001 BIK: 044525187 settlement acct.: **.12or other details of the Seller of which the Seller may notify the Purchaser in accordance with theprovisions of the Agreement;13“Third Component” has the meaning given in Clause 3.1(c);...............................................................................132................................SUBJECT MATTER OF THE AGREEMENT143......PURCHASE PRICE AND PAYMENT PROCEDURE154....TRANSFER OF TITLE AND STATE REGISTRATION185.TRANSFER OF THE FACILITIES AND THE LAND PLOT206..................................................................................LIABILITY OF THE PARTIES227....................................REPRESENTATIONS AND WARRANTIES238..............................................RECOVERY OF PECUNIARY LOSSES259................................................................................................QUALITY ASSURANCE2610..........................................................................................................................................................TERM2711..........................................................................................................................TERMINATION2812..........................................................................................................................................NOTICES3013............................................................................................................FORCE MAJEURE31 TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 14............................................................................................................CONFIDENTIALITY3215..........GOVERNING LAW AND DISPUTE RESOLUTION3316..............................................................................................................MISCELLANEOUS33 TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. THIS SALE AND PURCHASE AGREEMENT (“Agreement”) is made on 27 November 2018 in Moscow, theRussian FederationBETWEEN:(1)Limited Liability Company “NAPA”, primary state registration number (OGRN) 1187746900428,located at: Suite 6 / Office 470, 10 Presnenskaya Embankment, Moscow, 123112, Russian Federation (the“Seller”), represented by General Director Evgeny Mikhailovich Alyoshin, acting pursuant to the Charter, and(2)Limited Liability company “YANDEX”, primary state registration number 1027700229193, located at:16 L’va Tolstogo Street, Moscow, 119021, Russian Federation (the “Purchaser”), represented by AndreyOlegovich Korolenko, acting pursuant to the power of attorney certified by Tatiana Yevgenyevna Nechaeva, notaryof the city of Moscow, on 9 November 2018, registry No. 77/767-n/77-2018-3-880,also together referred to as the “Parties” and each separately as a “Party”.RECITALS:(A)As of the Execution Date: (i) OJSC owns the OJSC Premises, Metal Fencing and Other Property and OJSCpossesses and uses the Land Plot under the Land Lease; (ii) the Owners of Third Party Premises own the ThirdParty Premises and an interest in the right of lease / use in respect of the Land Plot.(B)The OJSC Premises, the OJSC Lease Right and a part of the Other Property are mortgaged/pledged to VTBBank as security for OJSC’s obligations under the Facility Agreement.(C)The Purchaser wishes to purchase the entire Building by purchasing the OJSC Premises, the Third PartyPremises and Other Property as well as the Land Lease Right and the Metal Fencing (the OJSC Premises, ThirdParty Premises, Other Property and Metal Fencing are hereinafter referred to as the “Facilities”). In order toensure that the Purchaser is able to purchase the Facilities and the Land Lease Right, the Seller intends topurchase the Facilities and the Land Lease Right and then, upon the purchase of all Facilities and the LandLease Right, sell them to the Purchaser on the terms and subject to the conditions hereof.(D)The following agreements and documents have been agreed and approved by the Parties and executed prior tothe Execution Date: (i) OJSC Collateral Account Agreements and Seller Collateral Account Agreements; (ii)Addendum to the Facility Agreement between VTB Bank and OJSC; (iii) Annexes to the Security Documents;(iv) Addendum to the Korston-Moscow Lease between OJSC and Limited Liability Company “Korston-Moscow” (primary state registration number 1077746247347); and (v) Option Agreements.(E)The following agreements have been agreed and approved by the Parties and have been or will be signed on orabout the Execution Date: (i) OJSC Account Pledges and Seller Account Pledges; and (ii) the SettlementAgreement.(F)The approval of the Seller’s management bodies regarding the execution of the Agreement and the Third PartySPAs has been obtained (Minutes of the Extraordinary General Meeting of Shareholders of the Seller No. 12dated 26 November 2018 in respect of the Agreement, Minutes of Extraordinary General Meetings ofShareholders of the Seller Nos. 2, 3, 4, 5, 6 and 7 dated 13 November 2018 and Nos. 8 and 9 dated 19November 2018 in respect of the Third Party SPAs), and copies thereof have been transferred to the Purchaseron the Execution Date.(G)The approval of OJSC’s management bodies has been obtained with respect to the execution of the SettlementAgreement, the OJSC SPA and other related documents (minutes of the Extraordinary General Meeting ofShareholders of the Seller dated 24 September 2018), and a copy thereof has been transferred to the Purchaser.(H)Capitalized terms used but not defined in these Recitals shall have the meanings given to them in thisAgreement. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. THE PARTIES HEREBY AGREE AS FOLLOWS:1.DEFINITIONS AND INTERPRETATION1.1In this Agreement, unless otherwise expressly required by the context, the following capitalized terms and expressionsshall have the following meanings:“Documents Acceptance Certificate” means the acceptance certificate in respect of documents, executed by thePurchaser (as the transferee) and Limited Liability Company VTB Capital Zhilaya Nedvizhimost’, primary stateregistration number 1147746229377 (as the transferor), dated 12 November 2008;“Landlord” means the City Property Department of the city of Moscow or its successor;“Affiliate” means, in relation to any person, another person which directly or indirectly controls, is controlledby, or is under common control with, such person and persons controlled by such person, and members ofa group of such person within the meaning of Federal Law No. 135-FZ “On Protection of Competition” dated26 July 2006 (as amended on the Execution Date); for the purposes of this definition, a person is deemed tobe “controlled” by another person if the latter is entitled (directly or indirectly, by virtue of ownership ofshares or participation interests, or voting rights held by contract or otherwise) to appoint and/or removeexecutive bodies, all or a majority of members of the board of directors or other members of themanagement bodies of such person, or to give directions which are binding for such person, and the terms“control” and “to control” shall be construed accordingly;“VTB Bank” means VTB Bank (Public Joint-Stock Company), a joint-stock company organized under thelaws of the Russian Federation, located at: 29 Bol’shaya Morskaya Street, 190000, Saint Petersburg,primary state registration number 1027739609391, general license of the Central Bank of the RussianFederation No. 1000;“Second Part of the Security Payment” has the meaning given in Clause 3.3;“Guarantee Period” has the meaning given in Clause 9.1;“State Registration” means state registration with the USRRP of the transfer of title to the Real Propertiesor any of them and the Land Lease Right, if it is subject to state registration, to the Purchaser;“Civil Code” means the Civil Code of the Russian Federation (as amended);“VTB Group” means VTB Bank and its subsidiaries / dependent entities included in the consolidatedIFRS statements of VTB Bank;“Transfer Deed Date” means the relevant date of execution of the Transfer Deed by the Parties, unlessotherwise expressly required by the context;“Execution Date” means the date of execution of this Agreement by the Parties;“Payment Date” has the meaning given in Clause 3.8;“Registration Date” means the relevant date of State Registration, unless otherwise expressly required bythe context; TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Defect” means:(a)any non-conformity of the Facilities and/or the Land Plot to the requirements of this Agreement and/or ApplicableLaw; and/or(b)any physical defect or deficiency in the Facilities if such defect or deficiency impedes or makes impossible thePermitted Use of any Facility or any part thereof;“** SPA” means the notarized sale and purchase agreement between **. ** (as sellers) and the Seller (as purchaser) inrespect of the ** Premises;“OJSC SPA” means the notarized sale and purchase agreement in respect of the OJSC Premises,including OJSC’s Lease Right, to be executed between the Seller (as purchaser) and OJSC (as seller);“Third Party SPAs” means the notarized sale and purchase agreements and sale and purchase optionagreements in respect of the Third Party Premises, to be executed between the Seller (as purchaser) andOwners of Third Party Premises (as sellers);“Land Lease” means the lease agreement in respect of the Land Plot No. М-06-011534 dated 09 June 1998,between OJSC and other tenants (as tenant) and the Landlord (as landlord), as amended by the followingaddenda;(a)No. М-06-011534/1 dated 16 December 1998;(b)No. М-06-011534/2 dated 07 April 1999;(c)No. М-06-011534/3 dated 10 September 1999;(d)No. М-06-011534/4 dated 13 June 2000;(e)No. М-06-011534/5 dated 13 February 2001;(f)No. М-06-011534/6 dated 27 June 2005;with the lease period expiring on 09 June 2047, and subject to the agreements for accession to the lease:(a)dated 07 September 2005 with ** (as tenant) (subject to the agreement for assignment of land lease rights dated04 July 2017 and the addendum to the Land Lease dated 14 June 2018);(a)dated 20 March 2007 with LLC “RESONANCE-K” (as tenant);(a)dated 21 March 2007 with LLC “Galla Inter” (as tenant);(a)dated 22 March 2007 with LLC “GEMALADA” (as tenant);(a)dated 26 March 2007 with LLC “OFFICE-RENT” (as tenant);(a)dated 27 March 2007 with LLC “ANIKS” (as tenant),with the lease period expiring on 09 June 2047;“Land Lease 2” means the lease agreement in respect of Land Plot 2 No. М-06-506983 dated08 September 2004, between OJSC (as tenant) and the Landlord (as landlord), with the initial lease period beinguntil 08 September 2009 and subsequently prolonged for an indefinite period;“Land Lease 3” means the lease agreement in respect of Land Plot 3 No. М-06-507994 dated 31January 2006, between OJSC (as tenant) and the Landlord (as landlord), with the initial lease period being until22 September 2010 and subsequently prolonged for an indefinite period; TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Korston Moscow Lease” means lease agreement in respect of real property No. 200/11 dated01 August 2011 between OJSC (as landlord) and Korston-Moscow (as tenant), as amended by the followingaddenda: No. 1 dated 16 November 2011, No. 2 dated 01 January 2012, No. 3 dated 07 February 2012,No. 4 dated 01 July 2013, No. 5 dated 01 January 2014, No. 6 dated 07 February 2014, No. 7 dated 02 May2014, No. 8 dated 01 July 2014, No. 9 dated 18 December 2014, No. 10 dated 01 April 2015, No. 11 dated23 December 2015, No. 12 dated 24 December 2015, No. 12/1 dated 31 December 2015, No. 13 dated21 April 2016, No. 14 dated 31 May 2016, No. 13 dated 31 December 2016, and the Addendum to theKorston Moscow Lease;“Mortgage” means mortgage (pledge of real property) agreement No. 31-108/19/550-13-ZN/454dated 20 December 2013 between OJSC (as mortgagor) and VTB Bank (previously known as OJSC “Bankof Moscow”) (as mortgagee) in respect of the OJSC Premises and OJSC’s interest in the lease right to theLand Plot, as amended by the following addenda: No. 1 dated 11 April 2014, No. 2 dated 09 July 2014, No. 3dated 30 December 2014 and No. 4 dated 30 December 2016;“Bank Assignment Agreement” means the agreement for assignment of rights (claims) in respectof, inter alia, the rights (claims) of VTB Bank against OJSC under the Facility Agreement to be entered intobetween VTB Bank (as assignor) and the Purchaser (as assignee);“Equipment Pledges” means equipment pledge agreement No. 31-108/15/454-13-DO/1 dated 30 June2017 between OJSC (as pledgor) and VTB Bank (as pledgee) and equipment pledge agreement No. 31-108/15/454-13-DO/2 dated 27 July 2017 between Korston Moscow (as pledgor) and VTB Bank (aspledgee);“OJSC Account Pledges” means the agreement for pledge of rights under bank (collateral) accountagreement No. ** and the agreement for pledge of rights under bank (collateral) account agreement No. ** inrespect of, inter alia, the OJSC Collateral Account, entered into on 20 November 2018 between OJSC (aspledgor) and VTB Bank (as pledgee and account bank) to secure the obligations of OJSC under the FacilityAgreement in the form agreed with the Purchaser;“Seller Account Pledges” means the agreements for pledge of rights under the Seller Collateral AccountAgreements, to be entered into between the Seller (as pledgor) and VTB Bank (as pledgee and accountbank) to secure the obligations of the Seller under the Bank Guarantee in the form agreed with thePurchaser;“OJSC Collateral Account Agreements” means the bank account agreement in respect of foreigncurrency bank account (collateral account) No. ** and bank account agreement in respect of Russiancurrency bank account (collateral account) No. ** (in respect of the OJSC Collateral Account), entered intoon 1 November 2018 between OJSC (as client) and VTB Bank (as account bank);“Seller Collateral Account Agreements” means the bank account agreement in respect of foreigncurrency bank account (collateral account) No. ** and bank account agreement in respect of Russiancurrency bank account (collateral account) No. **, entered into on 09 November 2018 in respect of the SellerCollateral Accounts between the Seller (as client) and VTB Bank (as account bank);“Utility Services Agreements” means the agreements to which OJSC is a party, listed in Schedule 6;“Asset Charges” means the Mortgage, Equipment Pledges and agreement for pledge of lease rights toland plots No. 552-13-ZN/454-DI/4 dated 12 April 2017 between OJSC (as pledgor) and VTB Bank (aspledgee) in respect of the lease right to Land Plot 2 and Land Plot 3;“Option Agreements” means, collectively, the Put Option and Put Option 2; TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Subleases” means sublease agreements between Korston Moscow (as tenant) and the subtenants listedin the OJSC SPA, which will be executed after the Execution Date in the form agreed with the Purchaser;“Security Documents” means the documents set out in the Settlement Agreement and transferred under theDocuments Acceptance Certificate;“Participation Interest” means the participation interest in the Seller’s charter capital, with a nominal value ofnine hundred ninety-nine thousand nine hundred roubles (RUB 999,900), which constitutes ninety-nine pointninety-nine percent (99.99%) of the Seller’s charter capital;“Participation Interest 2” means the participation interest in the Seller’s charter capital, with a nominalvalue of one hundred roubles (RUB 100), which constitutes zero point zero one percent (0.01%) of the Seller’scharter capital;“Transaction Documents” means agreements and documents listed in Schedule 4, provided that, for thepurposes of this Agreement, the term “Transaction Documents” and each of documents and transactionsdesignated as the Transaction Documents and listed in Schedule 4 means the version of the relevant documenttransferred to the Purchaser under the Documents Acceptance Certificate, and in case of any change inagreements (draft agreements) and/or documents after the execution of the Documents Acceptance Certificate,subject only to those changes that have been agreed with the Purchaser;“Annexes to Seller Collateral Account Agreements” has the meaning given in the SettlementAgreement;“Annexes to Security Documents” means addenda or confirmation letters to the Security Documentswhich confirm or reflect amendments to the Facility Agreement set out in the Addendum to the FacilityAgreement, which were entered into prior to the Execution Date between VTB Bank and the relevant party toeach Security Document or executed by the relevant security providers under the Security Documents andtransferred to the Purchaser under the Documents Acceptance Certificate;“Addendum to the Korston Moscow Lease” means addendum No. 15 to the Korston Moscow Leasedated 30 October 2018, registered with the USRRP on 09 November 2018, which, inter alia, reduces thelease period under the Korston Moscow Lease;“Addendum to the Facility Agreement” means addendum No. 8 dated 15 November 2018 to the FacilityAgreement entered into by OJSC (as borrower) and VTB Bank (as lender);“USRRP” means the Unified State Register of Real Property of the Russian Federation;“USRLE” means the Unified State Register of Legal Entities of the Russian Federation;“Seller’s Representations” means representations as to circumstances, given by the Seller hereunder andset out in Clause 7.1 hereof (for the Seller) and Schedule 5;“Parties’ Representations” means all representations as to circumstances, given by each Party to theother Party with respect to itself and set out in Clause 7.1 hereof;“OJSC Collateral Account” means settlement (collateral) RUB account of OJSC No. **, opened with VTBBank (Russian bank identification code (BIK) 044525187, correspondent account **, Russian Classifier ofBusinesses and Organizations (OKPO) 00032520, Russian taxpayer identification number (INN)7702070139, OGRN 1027739609391); TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Seller Collateral Accounts” means the Seller RUB Collateral Account and the Seller USD CollateralAccount;“Seller RUB Collateral Account” means settlement (collateral) RUB account of the Seller No. **, openedwith VTB Bank (BIK 044525187, correspondent account **, OKPO 00032520, INN 7702070139, OGRN1027739609391);“Seller USD Collateral Account” means settlement (collateral) USD account of the Seller No. **, openedwith VTB Bank (BIK 044525187, correspondent account **, OKPO 00032520, INN 7702070139, OGRN1027739609391);“Building” means the building with cadastral number 77:06:0001002:1032 located on the Land Plot;“Land Code” means the Land Code of the Russian Federation, as amended;“Land Plot” means the land plot with cadastral number 77:06:0001002:60 and total area of 31,812 sq. m,located at the address established in relation to the landmark within the boundaries of the land plot; postaladdress of the landmark: Plot 15, Kosygina Street, Moscow, land category: land for habitation, permitteduse: hotel service (4.7) (land designated for hotels (1.2.6)); business management (4.1) (land designated forbusiness and commercial office buildings (1.2.7)); catering (4.6) (land designated for trading, cateringand amenities facilities (1.2.5)), which is, as of the Execution Date, leased by OJSC and the persons setout in paragraph (b) of the definition of the “Land Plot Encumbrances” under the Land Lease, as reflected inthe USRLE extract referred to in Schedule 2 hereto;“Land Plot 2” means the land plot with cadastral number 77:06:0001002:129 and total area of 7,312sq. m, located at the address established in relation to the landmark within the boundaries of the land plot; postaladdress of the landmark: Plot 15, Kosygina Street, Moscow, which is, as of the Execution Date, leased by OJSCunder Land Lease 2;“Land Plot 3” means the land plot with cadastral number 77:06:0001002:85 and total area of 500 sq. m,located at the address established in relation to the landmark within the boundaries of the land plot; postaladdress of the landmark: Plot 15, Kosygina Street, Moscow, which is, as of the Execution Date, leased by OJSCunder Land Lease 3;“Other Property” means non-removable improvements of the Land Plot and non-removableimprovements of the Real Properties, including those listed in Schedule 3 hereto, but excluding the propertywhich is included in the OJSC Premises and set out in the definition of “OJSC Premises”;“Other Agreements” means the agreements to which OJSC is a Party as of the Execution Date, listed inSchedule 7;“Utility Services” means power supply, heat supply, water supply, waste water collection and waterdisposal;“OJSC Component” has the meaning given in Clause 3.1(a);“Third Party Component” has the meaning given in Clause 3.1(b); “Confidential Information” has the meaning given in Clause 14.1;“Korston Moscow” means Limited Liability Company “Korston-Moscow”, OGRN 1077746247347, INN7736553504, located at: 15 Kosygina Street, 119334, Moscow, 100% participatory interest in which is heldby OJSC as of the Execution Date; TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Facility Agreement” means facility agreement (facility) No. 31-108/15/454-13-KR dated 30 October 2013between OJSC (as borrower) and VTB Bank (previously known as OJSC “Bank of Moscow”) (as lender),as amended by addenda No. 1 dated 07 November 2013, No. 2 dated 30 January 2014, No. 3 dated 26 May2014, No. 4 dated 16 September 2014, No. 5 dated 30 December 2016, No. 6 dated 24 May 2017, No. 7dated 08 May 2018 and the Addendum to the Facility Agreement;“VTB Bank Exchange Rate” means the RUB/USD exchange rate expressed as USDRUB_MOEX –(minus) 10 kopecks as on the relevant payment date, provided that, for the purposes of this definition,USDRUB_MOEX means the RUB/USD exchange rate expressed as the amount of Roubles for one USDollar, for next day settlements, announced by PJSC Moscow Exchange (MOEX) on the webpagemoex.com/en/fixing as MOEX USD/RUB FX Fixing at approximately 12:35 p.m. (Moscow time) on therelevant payment date;“Metal Fencing” means the metallic fencing with cadastral number 77:06:0001002:9415 and the length of841 m, located on the Land Plot, which, as of the Execution Date, is owned by OJSC in accordance withOrder of the State Committee of the Russian Federation for the Management of State Property No. 658-Rdated 28 July 1997 and the Transfer Deed dated 28 September 1997, which is confirmed by Certificate ofState Registration of Right dated 03 May 2012, series 77-AN 750797, issued by the Moscow Office of theFederal Service for State Registration, Cadastral Records and Cartography, of which a registration entrywas made in the Unified State Register of Rights to Real Property and Transactions with It on 03 May 2012under No. 77-77-22/026/2012-650, and the USRRP extract referred to in Schedule 2 hereto;“IFRS” means the international accounting standards, international financial reporting standards and relatedinterpretations issued, adopted and amended from time to time by the International Accounting StandardsBoard;“Tax” means:(a)all taxes, levies and insurance premiums, including all federal, regional, local and other taxes, special taxtreatments, duties, excises, contributions to the Pension Fund of the Russian Federation, Social Insurance Fundof the Russian Federation, Mandatory Medical Insurance Fund of the Russian Federation and other taxes, leviesand insurance premiums of any kind (whether direct or withheld, whether or not they require filing a return andwhether paid to the budget or to non-budgetary funds), charged or collected by any Authority;(b)all arrears, penalties, fines and interest relating to any tax, levy or insurance premium referred to in paragraph (a)of this definition; and(c)any liability to set off or refund from the budget in relation to the payment of any tax, levy or insurance premiumreferred to in paragraph (a) of this definition;“VAT” means the value added tax provided for by Applicable Law;“OJSC” means Open Joint-Stock Company Hotel Complex “ORLYONOK”, organized and existing under thelaws of the Russian Federation, located at: 15 Kosygina Street, Moscow, 119334, Russian Federation, OGRN1027739582815;“Security Payment” means, together, the First Part of the Security Payment and the Second Part of the SecurityPayment; TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Encumbrance” means any encumbrance or restriction, third party right or limitation or rights, whether ornot registered, which is established or claimed by contract, law or judicial act which has come into effect(whenever adopted), including, but not limited to:(a)any pledge, mortgage (including mortgage by law), charge, lease, sublease, easement, attachment, injunction,lien, right of perpetual use, right of free use for a fixed period, trust or pre-emption right;(b)third party right under option to enter into a contract, option agreement, preliminary agreement, sale and purchaseagreement in respect of a future thing, sale and purchase agreement with deferred performance, or in accordancewith any other agreement or transaction;(c)other transaction or agreement on disposal of property;(d)actual use;(e)attachment or prohibition of certain actions, or legal claims registered by a competent authority or filed with acourt; and/or(f)any agreement or transaction creating or establishing any of the above,with the exception of the Permitted Encumbrances;“Other Property Encumbrances” means the following Encumbrances existing as of the Execution Date in respect of theOther Property: the pledge under the Equipment Pledges;“Third Party Premises Encumbrances” means the encumbrances designated as the “PermittedEncumbrances” in the Third Party SPAs;“Premises Encumbrances” means the following Encumbrances existing as of the Execution Date inrespect of the Premises:(a)lease under the Korston Moscow Lease (for the avoidance of doubt, subject to the Addendum to the KorstonMoscow Lease);(a)sublease under the Subleases;(a)pledge (mortgage) under the Mortgage;“Land Plot Encumbrances” means the following Encumbrances existing as of the Execution Date inrespect of the Land Plot:(a)pledge (mortgage) of lease rights under the Mortgage; and(a)lease to the benefit of the following legal entities and individuals: OJSC, Limited Liability Company“RESONANCE-K”, Limited Liability Company “Galla Inter”, Limited Liability Company “GEMALADA”, LimitedLiability Company “OFFICE-RENT”, Limited Liability Company “ANIKS”, **, under the Land Lease;“Circumstances of Losses” has the meaning given in Clause 8.1;“Facilities” has the meaning given in Recital (C);“Real Properties” means all Facilities, with the exception of the Other Property;“OJSC Facilities” means all Facilities, with the exception of the Third Party Premises;“Put Option” means the notarized agreement dated 12 November 2018 for the option to enter into the sale andpurchase agreement in respect of the Participation Interest between the Seller’s Member and the Purchaser,pursuant TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. to which the Purchaser has offered to the Seller’s Member to enter into the sale and purchase agreement inrespect of the Participation Interest;“Put Option 2” means the notarized agreement dated 12 November 2018 for the option to enter into the saleand purchase agreement in respect of Participation Interest 2 between Seller’s Member 2 and YandexTechnologies, pursuant to which Yandex Technologies has offered to Seller’s Member 2 to enter into the saleand purchase agreement in respect of Participation Interest 2;“Authority” means any legislative, executive or judicial authority (whether federal, regional or municipal) ofany country (or international / supranational organization), and any organizations, institutions, enterprisesand other persons vested with governmental or other public powers;“First Part of the Security Payment” has the meaning given in Clause 3.2;“First Claim” has the meaning given in Clause 11.6;“Initial Registration” means state registration with the USRRP of the transfer to the Seller of title to theFacilities and, if subject to state registration, the Land Lease Right under the OJSC SPA and the Third PartySPAs;“Initial Transfer Deeds” means transfer deeds in respect of transfer and acceptance of the Facilities andthe Land Plot under the OJSC SPA and Third Party SPAs, to be made and executed by the Seller withOJSC and the Owners of Third Party Premises in accordance with the OJSC SPA and Third Party SPAs,respectively;“Transfer Deed” means the transfer deed(s) in respect of transfer and acceptance of the Facilities and theLand Plot hereunder between the Seller and the Purchaser, which shall be made and executed by theParties in the form set out in Schedule 1 (if more than one transfer deed is made, with necessaryadjustments to such form with respect to the transferred property);“Purchase Price” has the meaning given in Clause 3.1;“** Premises” means the premises with cadastral number 77:06:0001001:2695 and total area of 236.3sq. m, owned jointly by ** (1/2 share) and ** (1/2 share);“OJSC Premises” means non-residential premises with cadastral number 77:06:0001002:9745 and totalarea of 42,184.2 sq. m (including the property in such premises), located in the Building which, as of theExecution Date, is owned by OJSC in accordance with Order of the State Committee of the RussianFederation for the Management of State Property No. 658-R dated 28 July 1997 and the Transfer Deeddated 28 September 1997, of which a registration entry was made in the Unified State Register of Rights toReal Property and Transactions with It on 29 January 1999 under No. 77-01/00-001/1998-35252b, which isconfirmed by Certificate of State Registration of Right dated 25 September 2015, issued by the MoscowOffice of the Federal Service for State Registration, Cadastral Records and Cartography and the USRRPextract referred to in Schedule 2 hereto;“Third Party Premises” means the following non-residential premises located in the Building (other than theOJSC Premises):(b)premises with cadastral number 77:06:0001001:2696 and total area of 214.6 sq. m, owned by Limited LiabilityCompany “ANIKS”, OGRN 1037739514504, INN 7706032582;(c)** Premises; TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (d)premises with cadastral number 77:06:0001001:2693 and total area of 733.3 sq. m, owned by **;(e)premises with cadastral number 77:06:0001001:2690 and total area of 211.2 sq. m, owned by Limited LiabilityCompany “Galla Inter”, OGRN 1027739126227, INN 7709286151;(f)premises with cadastral number 77:06:0001001:2694 and total area of 498.2 sq. m, owned by Limited LiabilityCompany “CONTINENT-PROFILE”, OGRN 1027739085934, INN 7721205254;(g)premises with cadastral number 77:06:0001001:2692 and total area of 422.9 sq. m, owned by Limited LiabilityCompany “OFFICE-RENT”, OGRN 1027739904928, INN 7736200330;(h)premises with cadastral number 77:06:0001001:2691 and total area of 530.8 sq. m, owned by Limited LiabilityCompany “RESONANCE-K”, OGRN 1027739079994, INN 7709284210;(i)premises with cadastral number 77:06:0001001:2689 and total area of 507.7 sq. m, owned by **; and(j)premises with cadastral number 77:06:0001001:2688 and total area of 1,190.4 sq. m, owned jointly by ** (1/4share), ** (1/4 share), ** (1/4 share) and ** (1/4 share);“Lease Right” means:(a)if the Seller’s lease right in respect of the entire Land Plot is registered with the USRRP as a result of acquisitionof the Facilities, the lease right in respect of the entire Land Plot; OR(b)if the Seller’s lease right in respect of the entire Land Plot is not registered with the USRRP as a result ofacquisition of the Facilities:(i)any interest in the lease right in respect of the Land Plot (if any interest held by the Seller in the leaseright in respect of the Land Plot is registered with the USRRP as a result of acquisition of the Facilities);and/or(ii)the right to use the Land Plot (to the extent that the Seller’s lease right or an interest held by the Seller inthe lease right in respect of the Land Plot is not registered with the USRRP as a result of acquisition ofthe Facilities);“OJSC’s Lease Right” means a 91/100 interest in the lease right in respect of the Land Plot owned byOJSC as of the Execution Date under the Land Lease;“Applicable Law” means all laws and regulations which are in force in the Russian Federation and in anyregion or municipality of the Russian Federation, including technical regulations, sanitary rules andregulations (SanPiN), construction rules and regulations (SNiP), regional construction rules (TSN), firesafety rules and regulations (PPB and NPB), technical conditions (TU) and special technical conditions(STU), judicial acts (including orders, judgments, regulations, rulings and verdicts) which affect the relevantissue or person;“Interest” has the meaning given in Clause 11.9 of the Agreement;“Business Day” means any day which is not a statutory holiday in Russia or Saturday or Sunday (with theexception of any Saturday or Sunday officially declared a business day in Russia by a relevant Authority);“Reverse SPAs” means notarized sale and purchase option agreements in respect of the Third PartyPremises (with the exception of the ** Premises), to be entered into between the Seller (as seller) and therespective Owners of Third Party Premises (as purchaser); TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. “Permitted Use” means the use of the Facilities and the Land Plot for hotel services, business managementand/or catering, operating trading facilities or amenities;“Permitted Encumbrances” means, in relation to the Facilities and the Land Plot: Other PropertyEncumbrances, Premises Encumbrances (provided that, for the avoidance of doubt, the lease under theKorston Moscow Lease is always subject to the Addendum to the Korston Moscow Lease), Third PartyPremises Encumbrances and Land Plot Encumbrances;“Transaction Expenses” means reasonable and documented expenses of the Seller actually incurred inconnection with the Transaction and agreed in writing with the Purchaser; for the avoidance of doubt, theTransaction Expenses do not include expenses of any third party (with the exception of the Seller) but mayinclude the Seller’s expenses for services of third parties in connection with the Transaction;“Registration Authority” means the Authority empowered to carry out state cadastral registration and state registrationof rights;“Encumbrance Release Registration” means, in aggregate:(a)removal of the entry on mortgage of the OJSC Premises and OJSC’s Lease Right from the USRRP; and(b)registration of notification of the removal of information on the pledge of movable property relating to the pledge ofthe lease right to Land Plot 2 and Land Plot 3 and the pledge of Other Property from the register of notifications ofpledge of movable property (if such registration has been initially made in respect of the Asset Charges);in each case, pledged with VTB Bank as security for OJSC’s obligations under the Facility Agreement;“Roubles” or “RUB” means the lawful currency of the Russian Federation as of the Execution Date;“Transaction” means acquisition by the Seller of title to all Facilities and Land Lease Rights for furtherdisposal by the Seller and acquisition by the Purchaser of title to all Facilities and Land Lease Rights;“Owners of Third Party Premises” means the following legal entities and individuals and their successors:(a)Limited Liability Company “ANIKS”, OGRN 1037739514504, INN 7706032582, which owns the premises withcadastral number 77:06:0001001:2696 and total area of 214.6 sq. m;(b)** and **, who jointly own ** Premises;(c)**, who owns the premises with cadastral number 77:06:0001001:2693 and total area of 733.3 sq. m;(d)Limited Liability Company “Galla Inter”, OGRN 1027739126227, INN 7709286151, which owns the premises withcadastral number 77:06:0001001:2690 and total area of 211.2 sq. m;(e)Limited Liability Company “CONTINENT-PROFILE”, OGRN 1027739085934, INN 7721205254, which owns thepremises with cadastral number 77:06:0001001:2694 and total area of 498.2 sq. m;(f)Limited Liability Company “OFFICE-RENT”, OGRN 1027739904928, INN 7736200330, which owns the premiseswith cadastral number 77:06:0001001:2692 and total area of 422.9 sq. m;(g)Limited Liability Company “RESONANCE-K”, OGRN 1027739079994, INN 7709284210, which owns the premiseswith cadastral number 77:06:0001001:2691 and total area of 530.8 sq. m;(h)**, who owns the premises with cadastral number 77:06:0001001:2689 and total area of 507.7 sq. m; and TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (i)** and **, who jointly own the premises with cadastral number 77:06:0001001:2688 and total area of 1,190.4sq. m;“Bank Guarantee” means the master agreement for the issuance of guarantees provided by VTB Bank (asguarantor) at the request of the Seller (as principal) to the benefit of OJSC and the Owners of Third PartyPremises (as beneficiaries) in accordance with the OJSC SPA and Third Party SPAs (as appropriate), inthe form of bank guarantees set out in the schedules to the OJSC SPA and Third Party SPAs;“Settlement Agreement” means the settlement agreement to be entered into by and between the Seller, thePurchaser, OJSC and VTB Bank;“Gross-Up Amount” means, in relation to any amount payable hereunder which is subject to VAT payableby its recipient, such amount by which the relevant payment shall be increased so that, upon payment ofsuch VAT, the recipient would keep such amount of payment as if such VAT was not payable or paid;“Debt Amount” means the amount of the principal and interest accrued on the principal under the FacilityAgreement as well as the amount of all other payments due from OJSC under the Facility Agreement as ofthe relevant date;“Surplus Amount” has the meaning given in Clause 5.7(a);“Purchaser’s Account” means the following bank details of the Purchaser with VTB Bank:Beneficiary: LLC “YANDEX”corr. acct.: **INN: 7736207543 KPP: 997750001BIK: 044525187settlement acct.: **or other details of the Purchaser of which the Purchaser may notify the Seller in accordance with theprovisions of the Agreement;“Purchaser’s USD Account” means the following bank details of the Purchaser with VTB Bank:Beneficiary: LLC “YANDEX”Beneficiary’s address: 16 L’va Tolstogo Street, Moscow, 119021, RussiaAccount number: **Beneficiary’s bank: VTB BANK (PJSC)SWIFT: VTBRRUMMBank’s address: 43/1 Vorontsovskaya Street, Moscow, 109147, Russian Federationor other details of the Purchaser of which the Purchaser may notify the Seller in accordance with theprovisions of the Agreement;“Seller’s Account” means the following bank details of the Seller with VTB Bank:Beneficiary: LLC “NAPA”corr. acct.: **INN: 7703466743 TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. KPP: 770301001BIK: 044525187settlement acct.: **or other details of the Seller of which the Seller may notify the Purchaser in accordance with theprovisions of the Agreement;“Third Component” has the meaning given in Clause 3.1(c);“Notice of Readiness” has the meaning given in the Settlement Agreement;“Notices” has the meaning given in Clause 12.1 of the Agreement;“Payment Conditions” has the meaning given in Clause 3.6;“Seller’s Member” means Limited Liability Company VTB Capital Zhilaya Nedvizhimost’, primary stateregistration number 1147746229377, located at: 17 floor, 10 Presnenskaya Embankment, Moscow, 123112;“Seller’s Member 2” means Limited Liability Company “Transportniye Kontsessii (Sakha)”, primary stateregistration number 1137746413243, located at: 12 Presnenskaya Embankment, Moscow, 123112;“Yandex Technologies” means Limited Liability Company “YANDEX.TECHNOLOGIES”, primary stateregistration number 1177746494166, located at: 16 L’va Tolstogo Street, Moscow, 119021, Russian Federation.7.1For the purposes of interpretation of this Agreement, unless otherwise is expressly required by the context:(a)the title and headings are included in the text of this Agreement for ease of reference only and shall not affect itsinterpretation;(b)words used in the singular include the plural and vice versa, and words used in a particular gender include allother genders;(c)“include”, “including”, “inclusive” and “in particular” shall be interpreted without any limitation (as if they werefollowed by “but not limited to”);(d)any reference to “written” or “in writing” means any method of reproduction of words in fixed (physical, non-deletable) written form (for the avoidance of doubt, this does not include email);(e)“person” means any person with separate legal capacity (including legal entities, individuals and unincorporatedorganizations, including partnerships, joint ventures, firms, associations, trusts, governmental and other publicauthorities and officials), wherever and however established or organized;(f)reference to any law or specific provision of any law means such law or provision as of the Execution Date,including any regulations adopted thereunder;(g)this Agreement serves for the benefit of, and is binding on, the Parties’ successors and assignees (in the lattercase, to the extent and on terms and conditions on which the transfer of the Agreement, assignment of claims ortransfer of debt (as applicable) is allowed by the provisions hereof);(h)references to Sections, Clauses, paragraphs and Schedules in this Agreement mean sections, clauses of, andschedules to, this Agreement, and references to Parts of Schedules mean parts of the relevant Schedule; th TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (i)references in this Agreement to any Transaction Documents agreed with the Purchaser mean versions of suchdocuments (draft documents) transferred to the Purchaser under the Documents Acceptance Certificate, and incase of any amendments to agreements and/or documents after the execution of the Documents AcceptanceCertificate, subject only to such amendments which have been agreed with the Purchaser;(j)references in this Agreement to the “latest Transfer Deed Date”, “later of Transfer Deed Dates” or any similarexpression mean:(i)if all Facilities and the Land Plot are transferred from the Seller to the Purchaser hereunder by onetransfer deed, the date of execution of the Transfer Deed by the Parties;(ii)if the Facilities are transferred from the Seller to the Purchaser hereunder in accordance with Clause 5.2in stages under several Transfer Deeds, the date of execution by the Parties of the Transfer Deed inrespect of the last Facility (so that, upon execution by the Parties of such Transfer Deed, there are nomore Facilities (and no Land Plot) that have not been transferred by the Seller to the Purchaserhereunder);(k)for the purposes of the references in this Agreement to the VTB Bank Exchange Rate and conversion of USDollars into Roubles and vice versa, the Parties shall (including by means of exercise of their rights under theSettlement Agreement) ensure a single conversion rate and VTB Bank Exchange Rate for settlements on therelevant payment date;(l)all schedules to the Agreement constitute an integral part hereof and shall have the same legal effect as theAgreement, as if they were expressly set forth in the Agreement, and any reference to “this Agreement” or the“Agreement” shall be construed as a reference to the Agreement including the schedules to it; and(m)the time of day set out in this Agreement or legally meaningful communications of the Parties (unless the Partiesprovide otherwise) shall be Moscow time.2.SUBJECT MATTER OF THE AGREEMENT2.1The Parties recognize and agree that:(a)as of the Execution Date, copies of the Transaction Documents executed by the parties to such agreements onthe Execution Date and draft execution versions of other Transaction Documents which will be executed after theExecution Date are transferred to the Purchaser under the Documents Acceptance Certificate dated12 November 2018;(b)they assume that:(i)on or about the Execution Date, VTB Bank, the Seller, the Purchaser and OJSC entered into or will enterinto the Settlement Agreement; and(i)after the execution of the Third Party SPAs (with the exception of the ** SPA, which will be executedlater), but prior to the execution of OJSC SPA, the Seller’s Member will accept the Put Option andSeller’s Member 2 will accept Put Option 2.2.2The Parties have agreed, within the meaning of Article 327.1 of the Civil Code, that, subject to:(a)the Initial Registration of all Real Properties and, if it is subject to registration, the Land Lease Right, in eachcase without any Encumbrances, save for the Permitted Encumbrances;(b)transfer of title to the Participation Interest, free of Encumbrances, to the Purchaser (state registration of thePurchaser with the USRLE as the Seller’s member holding the title to the Participation Interest); and TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (c)transfer of title to Participation Interest 2, free of Encumbrances, to Yandex (state registration of Yandex with theUSRLE as the Seller’s member holding the title to Participation Interest 2),the Seller will transfer to the Purchaser, and the Purchaser will accept the title to all Facilities and the Land Lease Right,free from any Encumbrances, subject to the Permitted Encumbrances and provisions of this Agreement relating to theEncumbrance Release Registration, and the Purchaser will pay the Purchase Price for the Facilities, including the LandLease Right, on terms and subject to the conditions of, and in the manner prescribed by, this Agreement.2.3The Facilities and the Land Plot shall be suitable for use in accordance with the Permitted Use and consistent with therequirements set out in the Agreement.2.4The Parties hereby agree and recognize that this Agreement is an agreement for sale and purchase of a future thing andthe purpose of this Agreement is the acquisition by the Purchaser of title to the entire Building and the Land LeaseRights, which is an essential condition taken into account by the Parties when entering into this Agreement;2.5In accordance with Article 35 of the Land Code and Articles 271 and 552 of the Civil Code, simultaneously with thetransfer of title to the OJSC Premises, Metal Fencing and Third Party Premises, the Purchaser acquires the title to theLand Plot. The Seller will transfer, and the Purchaser will accept the Facilities and the Land Plot on the same terms,within the same scope and in the same condition as OJSC, and the Owners of Third Party Premises shall transfer andthe Seller shall accept the relevant Facilities and the Land Plot from OJSC and the Owners of Third Party Premises inaccordance with the OJSC SPA and Third Party SPAs under the Initial Transfer Deeds.2.6The Facilities and the Land Plot shall be transferred to the Purchaser together with all documents relating to theFacilities, the Land Plot and the Lease Right which shall be received by the Seller from OJSC and the Owners of ThirdParty Premises under the Initial Transfer Deeds in accordance with the OJSC SPA and Third Party SPAs.2.7For the avoidance of doubt, the title to the Facilities and the Land Lease Rights shall be transferred to the Purchasertogether with their constituent elements (provided that the price of such elements is included in the Purchase Price setout in Clause 3.1 of the Agreement).2.8The Parties shall cooperate in good faith to ensure the Encumbrance Release Registration in respect of the Facilities andthe Land Plot, which includes filing of applications and other documents required by the relevant Governmental Authorityand/or notary for the Encumbrance Release Registration in accordance with the Settlement Agreement.2.9The Parties will do everything in their power, including in accordance with Applicable Law, to ensure proper transfer of thelease right in respect of the Land Plot to the Purchaser. If necessary, the Seller will also provide all assistance for theexecution of the addendum to the Land Lease on transfer of the lease right and all rights and duties under the LandLease to the Purchaser.3.PURCHASE PRICE AND PAYMENT PROCEDURE3.1The Purchase price to be paid by the Purchaser to the Seller (“Purchase Price”) consists of the following components:(a)** and the applicable VAT (“OJSC Component”);(b)** and the applicable VAT (“Third Party Component”); and(c)** and the applicable VAT (“Third Component”). TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 3.2The Purchaser will, as security for its monetary obligation to pay the Third Component of the Purchase Price, provide tothe Seller the first part of the security payment by transfer to the Seller’s Account of ** (“First Part of the SecurityPayment”) within three (3) Business Days from the Execution Date.3.3Subject to satisfaction of the conditions set out in Clause 3.4, the Purchaser will, as security for its monetary obligationsto pay the OJSC Component and the Third Party Component of the Purchase Price, provide to the Seller the second partof the security payment by transfer of the following amounts to the Seller RUB Collateral Account:(a)**, to be transferred in Roubles to the Seller RUB Collateral Account and further converted from Roubles into USDollars and transferred to the Seller USD Collateral Account in the manner prescribed by clause 5.1(a) of theSettlement Agreement, so that the amount in US Dollars credited to the Seller USD Collateral Account is notless than. The Parties will submit to VTB Bank payment instructions and instructions for purchase/sale ofcurrency in the manner prescribed by clause 5.1(a) of the Settlement Agreement to enable VTB Bank ensure asingle conversion rate for the settlements;(a)**the amounts set out in paragraphs (a) and (b) above being the “Second Part of the Security Payment”.In accordance with the Tax Code of the Russian Federation, the Security Payment is not subject to VAT.3.4The Second Part of the Security Payment shall be paid by the Purchaser within ** Business Days from the date ofsatisfaction of the following conditions and occurrence of the following events (and such obligation of the Purchaser iscontingent on satisfaction of such conditions and occurrence of such obligations within the meaning of Article 327.1 ofthe Civil Code):(a)provision of all of the following documents by the Seller to the Purchaser:(i)notarized copies of Third Party SPAs (with the exception of the ** SPA, which will be executed later);(i)notarized copies of the following corporate and/or other required approvals from the Owners of ThirdParty Premises and the Seller in respect of the Transaction Documents:(A)the Seller’s corporate approval for the execution of the Transaction Documents;(B)corporate approvals from the following Owners of Third Party Premises for the execution of theThird Party SPAs: Limited Liability Company “ANIKS”, Limited Liability Company “Galla Inter”,Limited Liability Company “CONTINENT-PROFILE”, Limited Liability Company “OFFICE-RENT”,Limited Liability Company “RESONANCE-K”;(C)notarized spousal consent to the execution of the Third Party SPAs or a statement to the effectthat the relevant person was not and is not married, with notarized signature, or notarizedprenuptial agreement under which such spousal consent is not required, with respect to thefollowing Owners of Third Party Premises: **(i)notarized copy of the Addendum to the Korston Moscow Lease bearing a stamp confirming stateregistration with the USRRP;(b)receipt by the Purchaser of the Notice of Readiness from the Seller;(c)transfer of the title to the Participation Interest, free of Encumbrances, to the Purchaser (state registration of thePurchaser with the USRLE as the Seller’s member holding the title to the Participation Interest);(d)transfer of the title to Participation Interest 2, free of Encumbrances, to Yandex Technologies (state registrationof Yandex Technologies with the USRLE as the Seller’s member holding the title to Participation Interest 2), TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. and provided that, as of the date of payment of the Second Part of the Security Payment in accordance with the firstparagraph of this Clause 3.4:(e)all of the Transaction Documents executed as of that payment date remain valid obligations of the partiesthereto, have not been amended (as compared to the versions agreed with the Purchaser) without thePurchaser’s consent, no claim or waiver has been made in respect of any such Transaction Document ortermination or amendment thereof, and no claim has been made to challenge, invalidate or void any suchTransaction Document (or any provisions thereof) or to make any provision of any Transaction Documentunenforceable;(f)the Purchaser has not found any of the Seller’s Representations (as defined in the Put Option) under the PutOption to be untrue and Yandex Technologies has not found any of the Seller’s Representations (as defined inPut Option 2) under Put Option 2 to be untrue.3.5The Seller shall, no later than ** Business Days from the date of payment of the Second Part of the Security Payment,provide the Purchaser with a notarized copy of the notarized OJSC SPA executed by the Seller and OJSC. The Sellerand the Purchaser hereby confirm that if the Purchaser is not provided with a notarized copy of the executed andnotarized OJSC SPA within ** Business Days from the date of payment of the Second Part of the Security Payment, thePurchaser may unilaterally repudiate the Agreement out of court.3.6The Parties agree that, in accordance with Articles 327.1 and 328 of the Civil Code, payment of the Purchase Price bythe Purchaser is counter performance contingent on satisfaction of all of the following conditions (the “PaymentConditions”):(a)State Registration in respect of all Real Properties and, if it is subject to state registration, the Land Lease Right,in each case free of Encumbrances, with the exception of the Permitted Encumbrances;(b)provision by the Seller to the Purchaser of the original confirmation letter issued by the Seller’s general directoron the Registration Date (which in this case shall mean the latest Registration Date for all Real Properties) whichconfirms that all of the Seller’s Representations set out in Schedule 5 are true as of that Registration Date;(c)no party to any Transaction Document and no third party has made any claim to terminate/repudiate (upon thegrounds provided by such agreements and/or Applicable Law), amend, invalidate or avoid any such agreement(or any of its provisions) and/or to make any provision of any such agreement unenforceable;(d)the Purchaser has not found any of the Seller’s Representations (as defined in the Put Option) under the PutOption to be untrue and Yandex Technologies has not found any of the Seller’s Representations (as defined inPut Option 2) under Put Option 2 to be untrue.3.7For the avoidance of doubt, the Purchaser shall not make payment, including partial payment, if the Seller has providedan incomplete set of documents or if any document provided by the Seller does not comply with any requirements of theSettlement Agreement or this Agreement, and/or the Payment Conditions are not satisfied.3.8The Purchase Price shall be paid by the Purchaser on the ** Business Day after the satisfaction of the last of theconditions set out in Clauses 3.6(a) and 3.6(b), provided that the conditions set out in Clauses 3.6(c) to 3.6(d) are alsosatisfied on such Business Day (the “Payment Date”).3.9The Purchase Price shall be paid by the Purchaser by transfer of funds in Roubles to the Seller’s Account, provided that,to the extent that a part of the Purchase Price is denominated in US Dollars, conversion shall be made in the manner setout in Clause 3.3(a).3.10The Parties agree that the Security Payment shall be refunded to the Purchaser (provided that the conversion shall bemade with the use of a single conversion rate for the Parties’ settlements, so that the amount credited to the Purchaser’sUSD Account is no less than the USD amount debited from the Seller USD Collateral Account, and for TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. these purposes the Parties will submit to VTB Bank payment instructions and instructions for purchase/sale of currencyin the manner prescribed by the Settlement Agreement) on the earlier of the following dates:(a)In full, on the date falling no later than ** Business Days after receipt of the Purchase Price from the Purchaser;or(b)the Second Part of the Security Payment in full and the First Part of the Security Payment less the TransactionExpenses, in each case no later than ** Business Days after the expiration (termination) of the Agreement forany reason (including in accordance with Clause 10.3),provided, however, that if on the date of expiration (termination) of the Agreement at least one independent guarantee isissued securing the Seller’s obligations under OJSC SPA and/or Third Party SPAs, the Second Part of the SecurityPayment shall be refunded no later than ** Business Days from the date of termination of the Bank Guarantee.3.11The Parties agree that the Purchaser may (but is not obliged to) set off its obligation to pay the Purchase Price againstthe Seller’s obligation to refund the Security Payment to the Purchaser in accordance with Clause 3.10. With respect toany amounts denominated in US Dollars, such set-off shall be made in US Dollars without conversion.3.12If upon expiration of ** calendar days from the Execution Date the Payment Conditions are not satisfied for any reason,the Purchaser may repudiate this Agreement. The Seller may not demand that the Purchaser purchase the Facilities,including the Land Lease Right, and pay the Purchase Price (or any part thereof), unless all Payment Conditions aresatisfied.3.13The Purchaser may (but is in no event obliged to) at its sole discretion pay the Purchase Price early and/or prior to thesatisfaction of all or certain Payment Conditions and, in particular, set off its obligation to pay the Purchase Price againstthe Seller’s obligation to refund the Security Payment to the Purchaser in accordance with Clause 3.10.3.14Without prejudice to any rights the Purchaser may have under Applicable Law, the Parties acknowledge and agree thatthe loss of the Purchaser’s title to any Facility and/or the Land Lease Right (not related to the Purchaser’s actions afterthe relevant Registration Date) and/or the creation of an Encumbrance (with the exception of the PermittedEncumbrances) in respect of any Facility and/or the Land Plot (not related to the Purchaser’s actions after the relevantRegistration Date) on grounds arising (or as a result of facts / circumstances arising) prior to the latest Transfer DeedDate shall terminate the Seller’s right to receive the Purchase Price (within the meaning of Article 327.1 of the CivilCode) and, accordingly, the Purchaser’s obligation to pay the Purchase Price and deposit the Security Payment.3.15For the purposes of clause 5 of Article 488 of the Civil Code, neither the Facilities nor the Land Lease Right are deemedto be pledged (mortgaged) to the Seller until the Purchase Price is paid in full.3.16The Parties may agree upon an alternative procedure for payment of the Purchase Price hereunder with the use of lettersof credit in accordance with the Settlement Agreement, and in that case the Parties will amend this Agreementaccordingly and, in particular, remove the provisions on transfer of the Security Payment, adjustment of the PaymentConditions and accommodation of terms for opening letters of credit. For the avoidance of doubt, unless the Partiesagree upon an alternative procedure for payment of the Purchase Price, the provisions of this Section 3 on the procedurefor payment of the Purchase Price shall apply without restriction.4.TRANSFER OF TITLE AND STATE REGISTRATION4.1The Parties shall initiate the procedure of the state registration of transfer of title to the Real Properties and, if it issubject to state registration, the Land Lease Right from the Seller to the Purchaser only upon satisfaction of theconditions set out in Clause 2.2. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 4.2The Parties shall, within ** Business Days after satisfaction of the conditions set out in Clause 2.2, ensure that theirauthorized representative appears before the Registration Authority and files with the Registration Authority thedocuments required (from each Party) for State Registration of all Real Properties and, if it is subject to stateregistration, the Land Lease Right (including an application for state registration of the transfer of title to the RealProperties and, if the Seller’s lease right or interest in the lease right in respect of the Land Plot was registered as aresult of acquisition of the Facilities, an application for state registration of the transfer of the lease right or interest in thelease right to the Land Plot).4.3The Parties shall cooperate in good faith to procure State Registration in respect of all of the Real Properties and, if it issubject to state registration, the Land Lease Right. For the purposes of carrying out and completing such StateRegistration, each Party shall promptly take, or cause to be taken, any actions that may be required of it to carry out andcomplete such State Registration, including signing all necessary documents (as well as amendments and supplementsthereto) as may be required of it by the Registration Authority to carry out such State Registration, promptly submittingsuch documents (as well as amendments and supplements thereto) to the relevant Registration Authority and furtherapplying to the Registration Authority for State Registration in respect of all of the Real Properties and, if it is subject tostate registration, the Land Lease Right in case of refusal to carry out State Registration or suspension thereof.4.4If, in the course of State Registration in respect of all of the Real Properties and, if it is subject to state registration, theLand Lease Right, the Registration Authority requires to amend and/or supplement this Agreement for the purposes ofsuch State Registration, the Parties will immediately agree upon and introduce the required amendments and/orsupplements to this Agreement, provided that the Parties shall use their best efforts to ensure that such amendmentsand/or supplements do not cause any change in the material terms of this Agreement.4.5The costs on payment of the state fee for State Registration shall be borne by the Purchaser.4.6The title to the Facilities and the Land Lease Right shall pass from the Seller to the Purchaser on the relevantRegistration Date.4.7The Seller shall not, prior to the Transfer Deed Date and without the Purchaser’s prior consent, enter into, amend,terminate (including by repudiation) or agree to enter into, amend or terminate any agreement in respect of the Facilities(or any of them) and/or the Land Plot, including the Korston Moscow Lease, create, or allow the creation of, anyEncumbrances in respect of the Facilities (or any of them) and/or the Land Plot, or take any actions or allow anyomissions which could adversely affect the rights and legitimate interests of the Purchaser as acquirer of the Facilitiesand the Land Lease Right.4.8From the Transfer Deed Date the Purchaser shall exercise the rights of possession, use and disposal of the relevantFacility and the Land Lease Right and shall bear the costs associated with maintaining such Facility and the Land LeaseRight, provided that, subject to Clauses 4.9 and 4.10 hereof, any indebtedness (including any tenant’s liability) arisingunder the Land Lease prior to (and inclusive of) the Transfer Deed Date, including as a result of the reversal of judicialacts reducing the cadastral value of the OJSC Premises and/or the Land Plot, shall be paid by the Seller.4.9Unless otherwise agreed by the Parties in writing:(a)the Seller will ensure that OJSC pays for the Utility Services under the Utility Services Agreements and forservices under the Other Agreements prior to (and inclusive of) the relevant Transfer Deed Date by exercising itsrights under the OJSC SPA;(b)the Seller will ensure that the Owners of Third Party Premises pay for utility services in respect of the ThirdParty Premises prior to (and inclusive of) the relevant Transfer Deed Date by exercising its rights under the ThirdParty SPAs.4.10The Seller will promptly and in full: TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (a)pay or cause the payment of (by exercising its rights under the OJSC SPA and Third Party SPAs) Taxes andother mandatory payments in respect of the Facilities and the Land Plot,(b)repay or cause the repayment of (by exercising its rights under the OJSC SPA and Third Party SPAs) allindebtedness on Taxes and other mandatory payments in respect of the Facilities and the Land Plot, includingunder the Land Lease, and(c)perform or cause the performance of (by exercising its rights under the OJSC SPA and Third Party SPAs)monetary obligations relating to operation and maintaining of the Facilities and the Land Plot,in each case, in respect of payments, indebtedness and obligations (as applicable) which shall be paid (performed) priorto (and inclusive of) the latest Transfer Deed Date.If such payment, indebtedness or obligation is identified after the latest Transfer Deed Date, the Seller shall at its ownexpense repay (perform) it or cause it to be repaid (performed) (by exercising its rights under the OJSC SPA and ThirdParty SPAs) within ** Business Days from the date of receipt of the relevant written request from the Purchaser.If the rent under the Land Lease for the period prior to (and inclusive of) the latest Transfer Deed Date is paid by thePurchaser and not by the Seller, the Seller shall also compensate to the Purchaser such rent within ** Business Daysfrom the date of receipt by the Seller of the relevant written request from the Purchaser.4.11The risk of loss or deterioration of the Facilities and the Land Plot shall pass from the Seller to the Purchaser on thelatest Transfer Deed Date.4.12The right to derive income and profit from the use of the Facilities shall pass from the Seller to the Purchaser on thelatest Transfer Deed Date.5.TRANSFER OF THE FACILITIES AND THE LAND PLOT 5.1The Seller will transfer to the Purchaser all of the Facilities and the Land Plot, and the Purchaser will acceptall of the Facilities and the Land Plot in the same condition in which the Seller shall accept the Facilities andthe Land Plot from OJSC and the Owners of Third Party Premises in accordance with the terms of theOJSC SPA and Third Party SPAs, within ** Business Days after all of the following requirements are met:(a)State Registration in respect of all of the Real Properties and, if it is subject to State Registration, theLand Lease Rights, in each case free of Encumbrances, other than any Permitted Encumbrances;(b)The absence of Defects and compliance of the Facilities and the Land Plot with the requirementsstipulated in the Agreement, including their suitability for use in accordance with the Permitted Use;and(c)With the exception of the premises leased under the Korston Moscow Lease, removal from theOJSC Premises of any furniture and other property owned by OJSC.5.2The Parties will use their best efforts to ensure that the acceptance and transfer of the Facilities and theLand Plot from the Seller to the Purchaser hereunder take place on the same Business Day as the transferof the Facilities and the Land Plot to the Seller from OJSC and the Owners of Third Party Premises underthe OJSC SPA and Third Party SPAs. The Parties agree that if OJSC or any of the Owners of Third PartyPremises evades the transfer in accordance with the terms of the OJSC SPA and Third Party SPAs, or ifthe conditions for the transfer stipulated by the OJSC SPA or by the relevant Third Party SPA have not beenmet, the Parties may agree to transfer the Facilities and the Land Plot in several stages (being as close aspossible to each other), subject to the principle that the transfer of the relevant TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Facility by OJSC and/or the Owners of Third Party Premises to the Seller and by the Seller to the Purchasershall be performed on the same day. On the day of the transfer of the OJSC Premises, the Seller willprovide the Purchaser with the original confirmation letter from the general director of the Seller, confirmingthat the Seller’s Representations given in Schedule 5 are true on the Transfer Deed Date in respect of suchOJSC Premises, OJSC Facilities and/or the Land Plot.5.3Unless otherwise agreed between the Parties, the Seller will fully comply with the terms of the OJSC SPAand Third Party SPAs, including the terms relating to acceptance and transfer of the Facilities and the LandPlot set out in clause 5 of the OJSC SPA and the relevant provisions of the Third Party SPAs.5.4The Facilities shall be transferred to the Purchaser at the location of the Facilities. Each Party will procurethe appearance of its authorized representative for the signing of the documents required for the transfer ofthe Facilities to the Purchaser on the date determined in accordance with Clause 5.1.5.5The Parties shall additionally execute other documents required in accordance with Applicable Law inrespect of accounting, utility services, taxes and fees for the performance of the acceptance and transfer ofthe Facilities. The Parties will execute, simultaneously with the execution of the Transfer Deed, a fixedassets transfer deed on the form OS-1A, and the Seller shall transfer to the Purchaser all documents whichare to be received by the Seller upon the transfer of the Facilities to the Seller from OJSC and the Owners ofThird Party Premises pursuant to the terms of the OJSC SPA and Third Party SPAs, including reconciliationacts and other documents in relation to the Facilities.5.6The Seller will fully assist the Purchaser in the re-execution of those Utility Services Agreements and OtherAgreements as will be indicated by the Purchaser, at its discretion, to the Purchaser.5.7If: (a)the Purchaser receives from the Landlord under the Land Lease any rent payable under the LandLease which was overpaid by OJSC/the Seller/the Owners of Third Party Premises during the periodfrom ** up to and including the latest Transfer Deed Date as result of a decrease in the cadastralvalue of the Land Plot for the specified period (the “Surplus Amount”) and/or(b)the Purchaser sets off the Surplus Amount against the rent payable by Purchaser under the LandLease for the period following the latest Transfer Deed Date (including such date)the Purchaser will pay the Seller the Surplus Amount actually received or credited by the Purchaser within **Business Days from the later of:(i)the relevant receipt or setting off of the Surplus Amount (or any part thereof) by the Purchaseror(ii)execution of the relevant reconciliation act with the Landlord under the Land Lease, and thePurchaser shall request such reconciliation acts within ** Business Days upon receipt of theSeller’s request.5.8For a period of ** following the latest Transfer Deed Date the Seller will refrain from any actions or omissions(and ensure that OJSC refrains from any actions or omissions) which could lead to a breach of any of theSeller’s Representations specified in Schedule 5.5.9The Seller will ensure the cancellation of all entries in the USRRP in respect of state registration of thefollowing encumbrances: TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (a)the lease under the Korston Moscow Lease: the Seller will ensure that not later than ** BusinessDays following the expiration of the Korston Moscow Lease (subject to the Addendum to the KorstonMoscow Lease), or within any other period agreed with the Purchaser, Korston Moscow, togetherwith the Seller or the Purchaser, shall file an application with the USRRP for the cancellation of therelevant entry; and(b)the sublease (lease) under the sublease agreements recorded in the USRRP on the Execution Date,any Registration Date and/or any Transfer Deed Date: not later than ** Business Days following theexpiration of the Korston Moscow Lease or within any other period agreed with the Purchaser.5.10The Seller will (by exercising its rights under the OJSC SPA) ensure dismantling by OJSC at the expenseof OJSC the temporary metal hangar with an area of approximately 300 sq. m, located on the Land Plot,within ** from the date of the Purchaser’s notice to the Seller in respect of such dismantling.6.LIABILITY OF THE PARTIES6.1For any failure to perform or undue performance of its obligations hereunder, the Party that has failed toperform or unduly performed the obligation shall indemnify the other Party against losses (subject to Clause6.3) in accordance with Applicable Law to the extent not covered by the penalty, if such penalty is providedby this Agreement, and shall be held liable in the amount and in compliance with the procedure stipulatedherein.6.2In case of any failure to comply with the timeframe stipulated herein for the transfer by the Seller of theFacilities and the Land Plot to the Purchaser, including due to breach by the Seller of its obligationsstipulated herein, other than any delay in transfer by the Seller due to unreasonable evasion or refusal on thepart of the Purchaser to execute the Transfer Deed, upon the Purchaser’s request the Seller will pay to thePurchaser a penalty in the amount of ** of the Purchase Price payable to the Seller for each ** delay inperformance by the Seller of its obligation to transfer the Facilities and the Land Plot. 6.3Other than in the case specified in Clause 9.5, the Parties may not be held liable for any lost income (profit)that the other Party could possibly have received. The Purchaser may not be held liable to the Seller underand in connection with this Agreement in the absence of fault on the part of the Purchaser. In the event of aconflict between this Clause and other provisions of the Agreement, the provisions of this Clause will prevail.6.4In case of any failure to comply with the timeframe for payment of the Surplus Amount referred to in Clause5.7, the Purchaser will, upon the Seller’s request, pay the Seller a penalty in the amount of ** of the SurplusAmount due for each ** delay in the Purchaser’s performance of its payment obligation.6.5The Parties acknowledge and agree that the penalties stipulated hereby are proportionate to theconsequences of the breach of obligations by the other Party or breach of representations and warranties(as the case may be), and the recovery of such penalties in the amount stipulated in this Agreement will notresult in a Party obtaining unjust enrichment. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 7.REPRESENTATIONS AND WARRANTIES7.1Within the meaning of Article 431.2 of the Civil Code, as on the Execution Date each Party provides thefollowing representations and warranties concerning itself to the other Party:(a)it is a legal entity duly incorporated and existing in accordance with the legislation of the RussianFederation, has the right to conduct its business and to own property, may be held liable to the fullextent of such property, and may acquire and exercise proprietary rights on its own behalf, incurobligations and act as plaintiff and defendant in court;(a)no applications have been filed and no awards have been rendered declaring the Party bankrupt orintroducing any insolvency (bankruptcy) procedure in respect of the Party, the Party does not meetany bankruptcy requirements and there are no grounds for the occurrence of any of the above;(b)no decisions have been adopted regarding the reorganization or voluntary liquidation of the Party;(c)the Party has the legal capacity to enter into this Agreement, perform its obligations and concludetransactions hereunder, including receipt of all necessary corporate approvals (including obtainingapproval of a major transaction and/or an interested party transaction and/or any other approvalrequired under Applicable Law and/or constitutional documents of the Party);(d)the persons executing this Agreement on behalf of the Party have been duly authorized; and(e)execution of this Agreement by the Party and performance of its obligations hereunder does notviolate and will not lead to:(i)violation of any provisions of its constitutional documents;(i)violation of Applicable Law by such Party;(i)violation of any act of any Authority (including any court) being binding upon the Party; or(i)violation of any agreement or breach of any transaction binding upon the Party.7.1Within the meaning of Article 431.2 of the Civil Code, the Seller shall provide the representations andwarranties listed in Schedule 5 to the Purchaser on each Registration Date and each Transfer Deed Date,and will ensure the accuracy of such representations and warranties on each Registration Date and eachTransfer Deed Date (provided that the transfer of title to the Facilities and the Land Lease Rights to thePurchaser may not be considered a breach of such representations and warranties or a default under theobligation to ensure the accuracy of the representations and warranties on the relevant Transfer Deed Date). 7.1The Parties acknowledge and agree that:(a)the Parties’ Representations are material for the purpose of execution and performance of theAgreement by the Parties, and the Parties in executing and performing the Agreement are relying onthe Parties’ Representations;(a)the Seller’s Representations are material for the purpose of execution and performance of theAgreement by the Purchaser (within the meaning of paragraph 2 of Article 431.2 of the Civil Code); TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. (a)the Seller gives the representations and warranties set out in Schedule 5 and concerning OJSC, theOJSC Facilities and the Land Plot, relying on the corresponding representations and warranties ofOJSC under the OJSC SPA to the extent that the corresponding representations and warranties inthis Agreement are identical to the representations and warranties of OJSC given to the Seller underthe OJSC SPA and do not depend on any actions or omission to act on the part of the Seller; and(a)the Seller gives the representations and warranties set out in Schedule 5 and concerning the Ownersof Third Party Premises, the Third Party Premises and the Land Plot, relying on the correspondingrepresentations and warranties of the Owners of Third Party Premises under the Third Party SPAsto the extent that the corresponding representations and warranties in this Agreement are identical tothe representations and warranties of the Owners of Third Party Premises given to the Seller underthe Third Party SPAs and do not depend on any actions or omission to act on the part of the Seller.7.1If any of the Seller’s Representations is inaccurate and/or the Seller fails to ensure the accuracy of any ofthe Seller’s Representations on each Registration Date and/or each Transfer Deed Date (provided that thetransfer of title to the Facilities and the Land Lease Rights to the Purchaser may not be considered a breachof such representations or a default under the obligation to ensure the accuracy of the representations on therelevant Transfer Deed Date), the Seller shall within ** Business Days upon receipt of the relevantPurchaser’s request: (a)pay the Purchaser a penalty in the amount (increased by the Gross-Up Amount) equal to ** of thePurchase Price for each breach (failure by the Seller to ensure the accuracy) of the Seller’sRepresentations, to the Purchaser’s Account; and(a)to the extent not covered by such penalty, indemnify the Purchaser against any losses incurred as aresult of the breach (failure to ensure the accuracy) of such representation, by payment to thePurchaser’s Account.7.1The Parties acknowledge and agree that the invalidity of one or several provisions of Clause 7.4 of theAgreement shall not render the entire Clause 7.4 of the Agreement invalid, in accordance with Article 180 ofthe Civil Code. Without limiting the generality of the foregoing, the Parties agree that if the provisions ofClause 7.4 of the Agreement are deemed to contravene Applicable Law, or for any other reason becomeinvalid, illegal or unenforceable in any way due to the fact that in the event of a breach of any of the Seller’sRepresentations the civil law rights of the Purchaser are protected either by payment of a penalty or byrecovery of damages, but not both of these means of protection of civil law rights of the Purchaser, in theevent of a breach of any of the Seller’s Representations set out in Clause 7.4 of the Agreement, the civil lawrights of the Purchaser shall be duly protected by payment of the penalty referred to in Clause 7.4 of theAgreement.7.2The Parties acknowledge and agree that the provisions of this Agreement on the Seller’s Representations(including the consequences of a breach of such representations) shall also apply to representations andwarranties given in confirmation letters and transfer deeds provided by the Seller to the Purchaser inaccordance with the provisions of this Agreement.7.1The Seller will deliver to the Purchaser copies of the OJSC Account Pledges, the Land Lease, Subleases,Utility Services Agreements and Other Agreements, including all addenda thereto, which the Seller shallreceive from OJSC under the OJSC SPA, as well as copies of all agreements in respect of or in connectionwith the Third Party Premises (including all leases and subleases), which the Seller shall receive from theOwners of Third Party Premises under the Third Party SPAs, under a transfer deed, TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. which shall also include a representation given by the Seller to the Purchaser confirming that copies of suchdocuments are copies received by the Seller from OJSC and the Owners of Third Party Premises under theOJSC SPA and Third Party SPAs, respectively.8.RECOVERY OF PECUNIARY LOSSES8.1Without prejudice to other rights of the Purchaser provided for by Applicable Law, upon request of thePurchaser the Seller shall fully indemnify the Purchaser against all pecuniary losses (within the meaning ofArticle 406.1 of the Civil Code) incurred as a result of any of the following circumstances (“Circumstancesof Losses”):(a)the Purchaser's loss of title to any of the Facilities and/or Land Lease Rights (including as a result ofthe title being declared absent, recovery from illegal possession by another party, invalidation orvoidance of transactions on the basis of which the Facilities and/or Land Lease Rights werepurchased, declaration as unauthorized construction and/or demolition on the grounds provided forby Applicable Law and/or clarification of the boundaries of the Land Plot (or part thereof)) on grounds(or as a result of any facts/circumstances) that arose prior to the latest of the Transfer Deed Dates(inclusively) in relation to all of the Facilities and the Land Plot; and/or(b)creation of any Encumbrances in respect of any of the Facilities and/or the Land Plot on grounds (oras a result of any facts/circumstances) that arose prior to the latest of the Transfer Deed Dates(inclusively) in relation to all of the Facilities and the Land Plot; and/or(c)inability to use any of the Facilities and/or the Land Plot for its intended purpose and/or in accordancewith the Permitted Use on grounds (or as a result of any facts/circumstances) that arose prior to thelatest of the Transfer Deed Dates (inclusively) in relation to all of the Facilities and the LandPlot; and/or(d)submission of any claims against the Purchaser by Authorities or other third parties (including claimsfor recovery of unjust enrichment) in connection with any of the Facilities and/or the Land Plot(including under and/or in connection with the Land Lease, including joint and several liability underthe Land Lease) as a result of circumstances that arose prior to the latest Transfer Deed Date(inclusively) in relation to all of the Facilities and the Land Plot (including as a result of reversal ofjudicial acts on reduction of the cadastral value of the OJSC Premises and/or the Land Plot), otherthan any claims arising after the latest Transfer Deed Date in respect of all of the Facilities and theLand Plot due to registration by the Purchaser of documentation for the performance of construction(reconstruction) works on the Land Plot; and/or (e)default by Korston Moscow under any of its obligations under the Korston Moscow Lease during theperiod from the latest Transfer Deed Date (inclusively) in respect of all of the Facilities and the LandPlot (other than the obligation to pay the rent under such agreement); and/or(f)performance by any person of any illegal actions in the Facilities and/or on the Land Plot during theperiod prior to the expiration date of the Korston Moscow Lease (inclusively) or any other KorstonMoscow lease concluded in respect of the OJSC Premises or any part thereof; and/or(g)infliction of any losses, damage and/or harm by any person to any legal entity and/or individual in theFacilities and/or on the Land Plot during the period prior to the expiration date of the Korston MoscowLease (inclusively) or any other Korston Moscow lease concluded in respect of the OJSC Premisesor any part thereof. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 8.2The Parties agree that upon the occurrence of any of the circumstances referred to in Clause 8.1, theamount of the indemnification against the pecuniary losses shall be calculated as follows:(a)upon the occurrence of any of the circumstances referred to in Clauses 8.1(a) to 8.1(c), the amountof the indemnification against the relevant losses shall be the aggregate of the following:(i)the monies paid to the Seller for the Facilities, including the Land Lease Right; and(i)upon the occurrence of the circumstance referred to in Clause 8.1(a) and/or 8.1(b), expensesfor the satisfaction of the claims of the legal owner in connection with the actual title to anduse of the Facilities and/or the Land Plot;(b)upon the occurrence of the circumstance referred to in Clause 8.1(d), the amount of theindemnification against the relevant losses shall be the aggregate of the following:(i)the amount of the relevant claims of the Authorities or third parties (including administrativefines); and(i)the amount of all losses incurred by the Purchaser due to the existence of the relevantobligation referred to in Clause 8.1(d);(c)upon the occurrence of any of the circumstances referred to in Clauses 8.1(e) to 8.1(g), the amountof the indemnification against the relevant losses shall be the aggregate of the amounts referred to inClauses 8.2(a) to 8.2(b).8.1The Seller will indemnify the Purchaser against the pecuniary losses referred to in Clause 8.1 of theAgreement by transferring monies to the Purchaser's Account within 15 (fifteen) Business Days from thedate of receipt of the relevant request from the Purchaser. For the avoidance of doubt, requests may bepresented repeatedly in the event that new pecuniary losses provided for by this Agreement are incurred.Pecuniary losses, indemnification against which is required in accordance with this Clause 8.3, shall bereimbursed by paying to the Purchaser the amounts of the pecuniary losses without any deductions and/orwithholdings. If any fee or tax is charged in respect of any amount, the amount to be transferred to thePurchaser shall be increased by the amount of such tax or fee.8.1Pecuniary losses referred to in this Clause 8 shall be reimbursed irrespective of the recognition of thisAgreement as void or invalid, in whole or in part.9.QUALITY ASSURANCE9.1The OJSC Facilities may not have any Defects, shall be suitable for their use in accordance with thePermitted Use, and shall also comply with the requirements stipulated in the Agreement during the followingguarantee period (the “Guarantee Period”): until ** (inclusively), but not later than the expiration date of theKorston Moscow Lease, subject to the extension of such period by entering into a supplementaryagreement between the parties to the above lease after the Execution Date.If any of the OJSC Facilities cannot be used as intended due to any detected flaws (defects), the GuaranteePeriod in respect of the OJSC Facility that could not be used as intended due to the detected flaws (defects)shall be prolonged by an amount of time equal to the amount of time it could not be used as intended. 9.2The Seller shall be responsible for any flaws (defects) in the OJSC Facilities detected by the Purchaser, ofwhich the Purchaser notifies the Seller within the Guarantee Period. The warranty period for TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. materials/parts replaced upon guarantee repair shall remain in force until the end of the Guarantee Period.9.3If during the Guarantee Period the Purchaser detects any flaws (defects) in the OJSC Facilities, thePurchaser shall notify the Seller thereof in writing, stating the list of flaws (defects), and shall call uponrepresentatives of the Seller to agree on the list of flaws (defects) and the timeframes for their remediationby the Seller. Notwithstanding other provisions of this Agreement, in the event of an emergency the Purchaser has theright to immediately proceed with remediation and may recover from the Seller reasonable documentedcosts incurred for the purpose of remediation, if the Seller subsequently admits that the emergency arosedue to any flaws (defects) for which the Seller may be held liable during the Guarantee Period, or if that factis confirmed by a court. The Purchaser will notify the Seller of the occurrence of an emergency within oneday of becoming aware of it. The Parties understand an emergency to mean situations where untimely remediation or delayedremediation may result in significant damage to any of the OJSC Facilities and/or the Land Plot and/or asituation directly threatening the condition of any of the OJSC Facilities and/or the Land Plot, includingqualitative characteristics thereof, as well as the life, health and property of people on the territory of any ofthe OJSC Facilities and/or on the Land Plot. 9.4If the Seller fails to perform its obligation to remedy flaws (defects) within the period agreed by the Parties orwithin a reasonable period, the Purchaser shall be entitled to remedy such defects on its own or with theinvolvement of third parties, and the Seller shall indemnify the Purchaser against the documented costs ofremedying such defects by payment to the Purchaser’s Account.9.5Notwithstanding other remedies available to the Purchaser in accordance with this Agreement or ApplicableLaw, if any flaws (defects) interfere with or limit the use by the Purchaser of any of the OJSC Facilitiesand/or the Land Plot, the Seller shall indemnify the Purchaser against the losses incurred due to theimpossibility to use the OJSC Facilities and/or the Land Plot (in full or in part), including full compensation ofall fines, penalties, lost rent and other revenues not received by the Purchaser under contracts in relation tothe OJSC Facilities to which the Purchaser is a party.10.TERM10.1Subject to Clause 10.2, within the meaning of paragraph 1 of Article 157 of the Civil Code, the Agreementshall take effect on the date of satisfaction of the last of the following conditions:(a)transfer of title to the Participation Interest to the Purchaser (state registration of the Purchaser withthe USRLE as the Seller’s member holding the Participation Interest), free of Encumbrances; and(b)transfer of title to Participation Interest 2 to Yandex Technologies (state registration of YandexTechnologies with the USRLE as the Seller’s member holding Participation Interest 2), free ofEncumbrances.10.2Notwithstanding Clause 10.1, the Purchaser performs the obligation to make the First Part of the SecurityPayment in accordance with Clause 3.2 within the timeframe specified in Clause 3.2, and may not requestthe return of the First Part of the Security Payment before the earlier of the dates specified in Clause 3.10. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 10.3In the event that not all of the conditions set out in Clause 10.1 above are satisfied by **, this Agreementshall terminate in full, save for Clauses 1, 3.2, 3.10, 6.3, 7 (with respect to the Parties’ Representations onthe Execution Date), 10.2, 10.3, 12, 14, 15 and 16. 11.TERMINATION11.1Without prejudice to any rights that the Purchaser may have by virtue of Applicable Law, in accordance with paragraph 2of Article 310 of the Civil Code and Article 450.1 of the Civil Code, the Purchaser has the right to unilaterally waive(repudiate) this Agreement by written notification of the Seller about the waiver (repudiation) of the Agreement in thecases:(a)stipulated by Clause 3.12; and/or(b)if any party to any of the Transaction Documents or any third party imposes any of the following requirements:termination/waiver (on the grounds stipulated by such agreements and/or Applicable Law), amendment,invalidation or voidance of any of such agreements (or any provision thereof) and/or unenforceability of any termsand conditions of any of such agreements; and/or(c)stipulated by Clause 3.5; and/or(d)if any of the Seller’s Representations referred to in Clause 7.1 is inaccurate on the Execution Date, any of theRegistration Dates or the Transfer Deed Dates, and/or if any of the Seller’s Representations (other than thosereferred to in Clause 7.1) is inaccurate on any of the Registration Dates or the Transfer Deed Dates (and, for thepurposes of representations on the relevant Transfer Deed Date, the transfer of title to the Facilities and LandLease Rights to the Purchaser in itself does not serve as a basis for the termination of the Agreement inaccordance with this Clause 11.1(d)); and/or(e)if the Registration Authority denies State Registration of the transfer of title to any of the Real Properties, and/or,if it is subject to state registration, the Land Lease Rights to the Purchaser for any reason; and/or(f)if at the time of State Registration or before or on the Transfer Deed Date in respect of any Facility and/or LandPlot there are any restrictions, registered with the USRRP and/or unregistered, of rights or encumbrances,agreements for participation in shared construction, legally asserted rights of claim, information on objections toregistered rights, information on the existence of a decision on seizure of any Facility and/or Land Plot for stateand municipal needs, claims and information on the existence of filed but not yet examined applications for stateregistration of rights (assignment or termination of rights), restrictions of title to or encumbrance over real estate,transactions in respect of any Facility and/or Land Plot, information on the performance of state registration ofany transaction, right or restriction of rights without the consent of a third party or any authority required by law(this circumstance (regarding information on the performance of state registration of a transaction, right orrestriction of rights without the consent of a third party or authority required by law) does not apply to theMortgage), or any other Encumbrances (other than any Encumbrances arising solely due to the actions of thePurchaser following the relevant Registration Date, and Permitted Encumbrances); and/or(g)if the Facilities and/or the Land Plot are not transferred to the Purchaser pursuant to the terms of this Agreementwithin ** Business Days following inception of the Seller’s duty to transfer such Facilities and the Land Plot;and/or(h)if any insolvency (bankruptcy) and/or liquidation and/or reorganization proceedings (if applicable) are initiated inrespect of the Seller, any Owner of Third Party Premises and/or OJSC in accordance with Applicable Law.11.2In the cases referred to in Clause 11.1, the Agreement shall be deemed terminated on the date the Purchaser sendswritten notice to the Seller on repudiation of this Agreement. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 11.3The Seller may not waive this Agreement, other than in cases when such waiver is permitted by mandatory provisions ofApplicable Law.11.4Unless otherwise agreed by the Parties, the Seller agrees within ** Business Days from the date of termination of theAgreement for any reason to return to the Purchaser the Purchase Price paid under this Agreement (using the commonexchange rate for settlements between the Parties so that the amount credited to the Purchaser's Account (in US dollars)is not less than the amount (in US dollars) debited from the Seller’s USD Collateral Account) in full. To enable VTB Bankto provide a common exchange rate for settlements, the Parties agree to submit to VTB Bank payment orders andinstructions for purchasing/selling foreign currency in accordance with the procedure stipulated in the SettlementAgreement.11.5Upon the termination of this Agreement by the Purchaser:(a)on the grounds referred to in Clause 11.1(d), 11.1(f) and/or 11.1(h);(b)on the grounds referred to in Clause 11.1(a), 11.1(e) or 11.1(g), unless the relevant ground arose solely as aresult of wrongful actions (or omission to act) on the part of the Purchaser or illegal actions (or omission to act)on the part of the Registration Authority;(c)on the grounds stipulated by Applicable Law; and/or(d)through the courts due to a material breach of the Agreement by the Seller,in addition to the obligation referred to in Clause 11.4, the Seller shall, within ** Business Days from the date of receipt ofthe relevant claim of the Purchaser, indemnify the Purchaser against the expenses actually incurred by the Purchaserand specified in Clause 8.2(a)(ii) hereof, as well as expenses related to state registration and registration of the transferof title to the OJSC Facilities and the OJSC Lease Rights. However, the Purchaser shall not compensate the Seller forall the benefits obtained by the Purchaser in connection with the use of the Facilities, less the necessary maintenanceexpenses incurred by the Purchaser.11.6A claim by the Purchaser, referred to in Clause 11.5, must be submitted within ** Business Days from the date oftermination of the Agreement (the “First Claim”) and may be submitted repeatedly (upon expiration of the specifiedperiod) in the event that new expenses, envisaged in Clause 11.5, are incurred.11.7In case of termination of the Agreement after State Registration, the Purchaser agrees, after and subject to theperformance by the Seller of all actions referred to in Clause 11.4, and also, if applicable, in Clause 11.5 (in respect ofthe First Claim), to submit, together with the Seller, to the Registration Authority documents required for registration ofthe transfer of title to the Real Properties and, if they are subject to state registration, the Land Lease Rights from thePurchaser to the Seller, and the Seller agrees to take all actions required of it in connection with such registration.11.8In case of termination of the Agreement after the Transfer Deed Date, the Purchaser agrees to return the Facilities andthe Land Plot to the Seller after and subject to performance by the Seller of all actions referred to in Clause 11.4 andalso, if applicable, in Clause 11.5 (in respect of the First Claim). In this case, the Parties shall also execute a transferdeed in respect of fixed assets, on form OS-1А.11.9If the Seller’s obligation to return the received Purchase Price and/or Security Payment (or any part thereof) arises on thegrounds stipulated herein and/or by Applicable Law:(a)interest shall accrue on the relevant amounts of the Purchase Price and/or Security Payment pursuant to Article317.1 of the Civil Code on the terms set out in this Clause 11.9 ("Interest"); and(b)the Interest accrual period will begin on the date following the date on which the Seller is obliged, in accordancewith this Agreement, to return the appropriate amount of the Purchase Price and/or Security Payment to thePurchaser, and will end on the date the Purchaser receives the appropriate amount of the Purchase Price and/orSecurity Payment on the Purchaser’s Account. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 11.10The Parties confirm that if the Purchaser sends a notice of the Purchaser's waiver of the Agreement, none of thePurchaser's actions taken prior to the date of receipt of the Purchaser's notice of the waiver by the Seller may beconstrued as confirmation of the Agreement for the purposes of paragraph 5 of Article 450.1 of the Civil Code.11.11Termination of the Agreement in accordance with this Section 10 does not relieve the Seller from liability for its breachesthat occurred prior to the date of termination of this Agreement.11.12If the Purchaser loses the title to the Facilities and/or the Land Lease Rights (including as a result of invalidation of title,recovery from illegal possession by another party, nullity of the transactions on the basis of which the Facilities and/orthe Land Lease Rights were acquired, invalidation of transactions on the basis of which the Objects and/or the LeaseRights of the Land Plot were acquired, expropriations (including for state or municipal needs), recognition of anyconstruction and/or demolition as unauthorized on the grounds stipulated by Applicable Law and/or clarification of theborders of the Land Plot (or any part thereof)) on grounds (or as a result of any facts/circumstances) that arose prior tothe latest Transfer Deed Date, including as a result of any expropriation for state or municipal needs on the basis of anyterritorial planning document adopted prior to the latest Transfer Deed Date (irrespective of the existence of an approvedterritorial development plan) (other than in cases of any loss of title by the Purchase solely due to the actions of thePurchaser after the relevant Registration Date), the Seller shall, within five (5) Business Days from the date of receipt ofthe relevant claim from the Purchaser, perform all actions specified in Clause 11.4 and indemnify the Purchaser againstthe expenses actually incurred by the Purchaser and specified in Clause 11.5 (for the avoidance of doubt, the claims ofthe Purchaser may be submitted repeatedly in the event that new expenses, envisaged in Clause 11.5, are incurred).11.13In the event of invalidation of this Agreement, the Seller shall, within ** Business Days from the date of receipt of thePurchaser's claim, perform all actions specified in Clause 11.4. If the Agreement is invalidated due to any circumstancesrelated to any breach of the Seller’s Representations and/or due to any circumstances of which the Seller was or, actingreasonably and prudently, ought to have been aware on the Execution Date (other than any circumstances connectedwith any breach of the Purchaser’s Representations), the Seller shall indemnify the Purchaser against the expensesactually incurred by the Purchaser and specified in Clause 11.5 (for the avoidance of doubt, the claims of the Purchasermay be submitted repeatedly in the event that new expenses, envisaged in Clause 11.5, are incurred).11.14The Parties acknowledge and agree that the waiver of this Agreement by the Purchaser in accordance with this Section11 and other provisions of this Agreement shall in all cases be deemed a reasonable and bona fide action.11.15The Parties acknowledge and agree that in the event of termination of this Agreement the provisions of Clauses 11.4 to11.11 shall be deemed an agreement between the Parties on the consequences of termination of the Agreement withinthe meaning of paragraph 2 of Article 453 of the Civil Code.12.NOTICES12.1All notices and other legally significant communications sent by one Party to the other Party ("Notices") shall beexecuted in writing and delivered by hand, by registered mail or certified mail with a delivery receipt notification, byanother generally accepted delivery service (courier service) or otherwise against signature to the relevant Party to theaddresses given below (or to any other address which the relevant Party may specify to the other Party in accordancewith this Agreement): PartyAddressSellerSuite 6 / Office 470, 10 Presnenskaya Embankment,Moscow, 123112, Russian FederationAttention ofE.M. AlyoshinPurchaser16 L’va Tolstogo Street, Moscow, 119021, RussianFederation TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Attention ofA.O. Korolenkowith a copy to be sent by email to the following email addresses:PartyEmail addressSeller**Attention ofE.M. AlyoshinPurchaser**Attention ofA.O. Korolenko12.2Each Party may, by sending a Notice to the other Party in accordance with Clause 12.1 above, change its address forreceiving Notices and/or other details specified in Clause 12.1. Such change shall take effect upon the expiration of **Business Days from the date of receipt of the Notice of the respective change by the other Party.12.3Any Notice delivered before 6:00 p.m. at the place of delivery on a Business Day shall be deemed received on the sameday. Any Notice received after 6:00 p.m. on a Business Day or at any time not on a Business Day shall be deemedreceived on the immediately following Business Day.12.4Without prejudice to paragraph 2 of clause 1 of Article 165.1 of the Civil Code, each Notice shall be deemed received atthe time of its delivery to the addressee. If at the time of delivery of any notice the addressee is absent at the specifiedpostal address, such notice shall be deemed delivered to the receiving Party on the day on which such fact wasregistered by the courier or postal service worker who delivered the document.13.FORCE MAJEUREDefinition13.1In this Agreement, “Force Majeure” means any circumstance beyond the reasonable control of a Party invoking ForceMajeure, including floods, storms, earthquakes, hurricanes, tornadoes, other Acts of God, warfare, acts of terrorism,explosions, bombings, revolutions, uprisings, political changes (including expropriation and nationalization), civil unrest,strikes, lockouts, embargoes, sanctions or similar measures, economic or financial restrictions or bans introduced and/orimposed by any Authority, but excluding a shortage of funds for any reason.Exemption from liability13.2A Party shall be released from the performance of its respective obligations under this Agreement to the extent that theinability to perform such obligations arose due to Force Majeure that has a material adverse effect on the Party invokingthe Force Majeure during the period that the Force Majeure remains in effect or continues to have effect. At the sametime, the Parties agree to perform all their other obligations that are unaffected by the Force Majeure.Notification13.3A Party invoking Force Majeure shall as soon as possible, but in any case no later than ** days after the onset of theForce Majeure, notify the other Party in writing about the occurrence of such circumstances. Such notice shall containinformation on the nature of the Force Majeure and, to the extent possible, the estimated period of time that the ForceMajeure will remain in effect, as well as the estimated impact of the Force Majeure on the ability of the Party invokingForce Majeure to perform its obligations hereunder.Termination13.4Upon termination of the effects of Force Majeure, the Party invoking Force Majeure shall promptly, but in any case nolater than ** days after such termination, notify the other Party in writing of such termination. If a Party invoking ForceMajeure delays sending or fails to send the other Party a notice of the onset or termination of Force Majeure, it shall beheld liable to the other Party for additional damage or losses caused by such failure to notify or delay in sending thenotice.Duration13.5If Force Majeure or the effects thereof last more than ** months in a row, or if at any time it can reasonably be assumedthat the Force Majeure or its effects will last for more than ** months, the Parties will immediately hold negotiationsbased on the principles of good faith to negotiate such changes to this Agreement as will allow the TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Parties to continue performing their obligations hereunder in the manner and by means which most closely approximatethose agreed upon at the time of execution of this Agreement.14.CONFIDENTIALITYConfidentiality undertaking14.1The Parties agree to keep confidential information relating to the terms of this Agreement and informationreceived from each other in connection with the conclusion and execution of this Agreement ("ConfidentialInformation"). Each Party agrees:(a)not to transfer to third parties originals or copies of documents containing Confidential Information;(b)not to disclose and not to allow disclosure to third parties and not to otherwise make public anyConfidential Information; and(c)not to use Confidential Information for purposes unrelated to the performance of this Agreement.Exceptions to the confidentiality undertaking14.2The confidentiality undertaking stipulated in Clause 14.1 does not apply:(a)to information independently prepared by the relevant Party or lawfully obtained from a third party tothe extent that the disclosing Party has the right to disclose such information;(b)provided that the disclosing Party notifies the other Party in advance of the disclosure planned inaccordance with this Clause 14.2, will consult with and consider in good faith the recommendationsof the other Party regarding the scope and terms of disclosure of Confidential Information, regarding:(i)the disclosure of Confidential Information, to the extent such disclosure is required inaccordance with Applicable Law, rules of any stock exchange or a binding decision, ruling orrequirement of any court or other competent Authority;(i)disclosure of Confidential Information to any rating agencies, banks and other credit orfinancial organizations, specialized depositories and auditors of the Purchaser;(c)to any disclosure of Confidential Information to Affiliates of the Purchaser, VTB Group, Yandex N.V.,professional advisors, officers and employees of a Party, VTB Group and Yandex N.V.;(d)subject to each person’s confidentiality undertaking similar to the one assumed by the Parties inaccordance with this Clause 14, in respect of:(i)disclosure of Confidential Information to the extent reasonably necessary for the preparationand reflection of such information in the consolidated financial statements of either Party or its(direct or indirect) parent company in accordance with the accounting and financial reportingrules and/or standards applicable to that Party;(i)disclosure to a Party’s professional advisors of information, the disclosure of which isrequired for purposes related to this Agreement;(e)to any disclosure of Confidential Information for the purposes of resolving disputes hereunder by anycourt or arbitral tribunal. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 14.3Each Party shall inform the persons referred to in Clause 14.2 and receiving Confidential Information thatsuch information is confidential and shall instruct them to keep it confidential and not disclose it to any thirdparty (other than those to persons to whom it has already been disclosed in accordance with the terms ofthis Agreement).15.GOVERNING LAW AND DISPUTE RESOLUTION15.1This Agreement and all rights and obligations of the Parties hereunder are governed by and shall beconstrued in accordance with Russian law.15.2Any disputes arising between the Parties under or in connection with this Agreement shall be resolved bythe Parties through negotiations. For the purposes of paragraph 5 of Article 4 of the Arbitrazh ProcedureCode of the Russian Federation, each Party is entitled to refer a dispute to the Arbitrazh Court of the City ofMoscow, provided that the dispute is not resolved within ** Business Days from the date of the Notice(claim).16.MISCELLANEOUS16.1Settlements. The Parties agree that settlements based on prepayment, advance payment, payment byinstallments or deferred payment hereunder (if applicable) are not a commercial loan in the meaning ofArticle 823 of the Civil Code, and in accordance with Article 317.1 of the Civil Code the lender is not entitledto demand interest from the debtor accrued on the amount of the debt during the period of use of the funds,unless expressly provided otherwise by this Agreement. Without limiting the foregoing, the Parties herebyconfirm and agree that (a) the procedure of payment by the Purchaser of the Purchase Price stipulatedherein is not a form of attraction by the Purchaser of financing from the Seller, and that the provisions ofArticle 823 of the Civil Code are not applicable to payment of the Purchase Price; and (b) unless expresslyprovided otherwise by this Agreement, interest may not accrue on any part of the Purchase Price (includingin accordance with Article 317.1 of the Civil Code) during the period from the Execution Date to the due dateof payment of the relevant amount in accordance with this Agreement.16.2Waiver of claim. The Purchaser's failure to submit a claim regarding any action or omission to act on thepart of the Seller (including the failure to give notice regarding the waiver of the Agreement), irrespective ofthe period during which such action or omission to act continues, does not constitute waiver by thePurchaser of any rights provided to it by this Agreement. The express or implied waiver by the Purchaser atany time of any claim in respect of a breach of any term of this Agreement may not be construed as awaiver of the claim upon a breach of any other term of this Agreement or as consent to any subsequentbreach of the same or any other term of this Agreement. If any action of the Seller requires the consent of orapproval by the Purchaser, the Purchaser’s consent to or approval of such action in any specific case maynot be construed as consent or approval of the same action in any subsequent case or of any other action inthat case or in any subsequent case.16.3Set-off. Unless expressly provided otherwise herein, or unless the Parties agree otherwise in writing: (i) allamounts payable under this Agreement by the Seller must be paid in full without any withholding ordeduction, unless such withholding or deduction is required in accordance with Applicable Law; (ii) the Selleris not entitled to demand any set-off or to perform any set-off on the basis of a counterclaim against thePurchaser in order to justify withholding of payment of any amount, in full or in part. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. 16.4Gross-up. The amounts payable by the Seller to the Purchaser hereunder shall be increased by the Gross-Up Amount. However, for the avoidance of doubt, the provisions of this Agreement do not imply double VATpayments and such double payments are not allowed.16.5Partial invalidity. If one or more provisions of this Agreement for any reason become invalid, illegal orunenforceable in any respect, such invalidity, illegality or unenforceability will have no impact on the validity,legality and enforceability of the other provisions hereof. The Parties confirm that in accordance with Article180 of the Civil Code the invalidity of one or several provisions of this Agreement will not render theAgreement invalid as a whole. The Parties agree to to use their best efforts to replace any provision of thisAgreement that is illegal, invalid or unenforceable in any respect with an appropriate legal, valid andenforceable provision, the effect of which will most closely approximate the desired effect of the illegal,invalid or unenforceable provision.16.6Scope. The scope of the transaction, its consequences, liability, rights and obligations, as well as provisionsof Parts I and II of the Civil Code, including those expressly specified in this Agreement, are known andclear to the Parties. The Parties confirm that the transaction hereunder is not made under the influence ofdelusion, deception, violence, threat or adverse circumstances.16.7Term of payments. Unless this Agreement provides for a different timeframe for specific payments, a Partywill make the appropriate payment to the settlement account of the other Party within ** Business Daysupon receipt of the relevant request from the other Party.16.8Rounding. The amounts of payments received as a result of calculations in accordance with thisAgreement are subject to mathematical rounding to two decimal places.16.9Survival. The Parties agree that Clauses 1, 3.10, 6.3, 7, 8, 11, 12, 14, 15 and 16 shall survive thetermination of this Agreement.16.10Material change of circumstances. With the exception of the provisions of Clause 2.4, which byagreement of the Parties are material for the Parties, a material change of the circumstances relied upon bythe Parties in entering into this Agreement (as defined in Article 451 of the Civil Code) may not serve asgrounds for amendment or termination of this Agreement by either of the Parties.16.11Amendments and addenda. Any amendments and/or addenda to this Agreement shall be effective only ifmade in writing and signed by both of the Parties.16.12Counterparts. This Agreement is executed in the Russian language in three (3) original counterparts, eachhaving equal legal force, one for the Seller, one for the Purchaser and one for the Registration Authority. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. TRANSLATION Certain information in this document has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Confidential treatment has been requested with respect to theomitted portions. Double asterisks denote omissions. Signatures of the Parties:Seller ___________________________Name: Evgeny Mikhailovich AlyoshinGeneral Director /Seal/Purchaser___________________________Name: Andrey Olegovich Korolenko,acting pursuant to the power of attorney certified by Tatiana Yevgenyevna Nechaeva, notary of the city of Moscow,on 9 November 2018, registry No. 77/767-n/77-2018-3-880 /Seal/ Exhibit 8.1 SUBSIDIARIES OF YANDEX N.V. Name of Subsidiary(1)Jurisdiction of OrganizationYANDEX LLCRussiaAutopark Laboratory LLCRussiaBIGFOOD LLCRussiaClinic Yandex.Health LLCRussiaDeloam Management LimitedCyprusEdadil LLCRussiaEdadil Promo LLCRussiaEnergiya LLCRussiaFood Party LLC (3)RussiaGIS Technologies LLCRussiaINO CPE SDARussiaKinopoisk LLCRussiaMLU B.V. (5)The NetherlandsNAPA LLCRussiaOpteum LLCRussiaSPB Software Ltd.Hong KongUBER AZERBAIJAN LLC AzerbaijanUber ML B.V.The NetherlandsUber ML Holdco B.V.The NetherlandsUber Systems Bel LLCBelarusUber.Technology LLCRussiaYandex Advertising LLCBelarusYandex Advertising Services LCTurkeyYandex Auto.ru AGSwitzerlandYandex DC LLCRussiaYandex DC Vladimir LLCRussiaYandex Europe AGSwitzerlandYandex Europe B.V.The NetherlandsYandex Information Technology Co., Ltd. (Shanghai)ChinaYandex Media Services B.VThe NetherlandsYandex OyFinlandYandex Services AGSwitzerlandYandex Inc.Delaware, USAYandex.Autobuses LLCRussiaYandex.Classifieds Holding B.V.The NetherlandsYandex.Classifieds LLCRussiaYandex.Classifieds Technology LLCRussiaYandex.Cloud LLCRussiaYandex.Drive LLCRussiaYandex.Food LLCRussiaYandex.Fuel LLCRussia YANDEX.GO ISRAEL Ltd.IsraelYANDEX.ISRAEL Ltd.IsraelYandex.Kazahstan LLPKazakhstanYandex.Medialab LLCRussiaYandex.Mediaservices LLCRussiaYandex.OFD LLCRussiaYandex.Probki LLC(2)RussiaYandex.Prosveshcheniye LLC (4)RussiaYandex.Studio LLCRussiaYandex.Taxi AM LLCArmeniaYandex.Taxi B.V.The NetherlandsYandex.Taxi Corp AM LLCArmeniaYandex.Taxi Corp LLPKazakhstanYandex.Taxi Holding B.V.The NetherlandsYandex.Taxi Kazahstan LLPKazakhstanYandex.Taxi LLCRussiaYandex.Taxi Technology LLCRussiaYandex.Taxi Ukraine LLCUkraineYandex.Technologies LLCRussiaYandex.Technology GmbHGermanyYandex.Telecom LLCRussiaYandex.Testing LLC RussiaYandex.Ukraine LLC(2)UkraineYandexBel LLCBelarusZen.Platform LLCRussia (1) Directly or indirectly held (2) Yandex N.V. owns a 99.9% interest (3) Yandex N.V. owns a 83.3% interest (4) Yandex N.V. owns a 95.0% interest (5) Yandex N.V. owns a 61.0% interest Exhibit 12.1 Certification by the Chief Executive OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Arkady Volozh, certify that: 1. I have reviewed this annual report on Form 20-F of Yandex N.V. (the “Company”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present inall material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periodspresented in this report; 4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and (d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during theperiod covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’sinternal control over financial reporting; and 5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or personsperforming the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financialinformation; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theCompany’s internal control over financial reporting. Date: April 19, 2019 By:/S/ ARKADY VOLOZH Name:Arkady Volozh Title:Chief Executive Officer Exhibit 12.2 Certification by the Chief Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Greg Abovsky, certify that: 1. I have reviewed this annual report on Form 20-F of Yandex N.V. (the “Company”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present inall material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periodspresented in this report; 4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and (d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during theperiod covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’sinternal control over financial reporting; and 5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or personsperforming the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financialinformation; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theCompany’s internal control over financial reporting. Date: April 19, 2019 By:/S/ GREG ABOVSKY Name:Greg Abovsky Title:Chief Operating Officer / Chief Financial Officer Exhibit 13.1 Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report on Form 20-F of Yandex N.V. (the “Company”) for the year ended December 31, 2018,as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), the undersigned ArkadyVolozh, as Chief Executive Officer of the Company, and Greg Abovsky, as Chief Financial Officer of the Company, eachhereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company. Date: April 19, 2019 By:/s/ Arkady Volozh Name:Arkady Volozh Title:Chief Executive Officer By:/s/ Greg Abovsky Name:Greg Abovsky Title: Chief Operating Officer / Chief Financial Officer Exhibit 15.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of DirectorsYandex N.V. We consent to the incorporation by reference in the registration statements (Nos. 333-177622 and 333-213317) on Form S-8,of Yandex N.V. of our reports dated April 19, 2019, with respect to the the consolidated balance sheets of Yandex N.V. andsubsidiaries as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income,cash flows and shareholders’ equity for the years then ended, and the related notes and the effectiveness of internal controlover financial reporting as of December 31, 2018, which reports appear in the December 31, 2018 annual report on Form 20-Fof Yandex N.V. Our report on the consolidated financial statements dated April 19, 2019, refers to the translation of the consolidatedfinancial statements as of and for the year ended December 31, 2018 into United States dollars presented solely for theconvenience of the reader. In addition, our report on the consolidated financial statements refers to a change in accounting,and to our audit of the adjustments that were applied to reflect such change in the 2016 consolidated financial statements, asmore fully described in Note 2 Summary of significant accounting policies – Reclassifications and changes in presentationand Note 16 Information about segments, revenues & geographic areas. However, we were not engaged to audit, review, orapply any procedures to the 2016 consolidated financial statements other than with respect to such adjustments. /s/ JSC “KPMG” Moscow, Russia April 19, 2019 Exhibit 15.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement Nos. 333-177622 and 333-213317 on Form S-8 ofour report dated March 22, 2017, relating to the consolidated financial statements for the year ended December 31, 2016(before retrospective adjustments to the financial statements) of Yandex N.V. and subsidiaries (“the Company”) (notpresented herein) (which report expresses an unqualified opinion on the financial statements and includes an explanatoryparagraph referring to translations of Russian ruble amounts into U.S. dollar amounts presented solely for the convenience ofthe readers in the United States of America), appearing in this Annual Report on Form 20-F of the Company for the yearended December 31, 2018. /s/ AO Deloitte & Touche CISMoscow, RussiaApril 19, 2019
Continue reading text version or see original annual report in PDF format above