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As filed with the United States Securities and Exchange Commission on October 28, 2021.
Registration No. 333-260218​
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
​
Amendment No. 1 to
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Cian PLC
(Exact Name of Registrant as Specified in its Charter)
Not Applicable
(Translation of Registrant’s Name into English)
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Cyprus
(State or Other Jurisdiction of
Incorporation or Organization)
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7370
(Primary Standard Industrial
Classification Code Number)
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Not Applicable
(I.R.S. Employer
Identification No.)
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64 Agiou Georgiou Makri
Anna Maria Lena Court, Flat 201
Larnaca, 6037
Cyprus
Telephone: +357 22 418 200
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
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Cogency Global Inc.
122 East 42nd Street, 18th Floor
New York, NY 10168
+1-800-221-0102
(Name, address, including zip code, and telephone number, including area code, of agent for service)
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Copies to:
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J. David Stewart
Latham & Watkins LLP
Ul. Gasheka 6
Ducat III, Office 510
Moscow, 125047
Russia
+7 495 785 1234
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Pranav L. Trivedi
Skadden, Arps, Slate,
Meagher & Flom (UK) LLP
40 Bank Street
London E14 5DS
United Kingdom
+44 20 7519 7000
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​
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
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†
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities
to be Registered(1)
​ ​ ​
Amount
to be
Registered(2)
​ ​ ​
Proposed Maximum
Offering Price
per Share
​ ​ ​
Proposed Maximum
Aggregate Offering
Price(2)(3)
​ ​ ​
Amount of
Registration Fee(4)
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Ordinary shares, par value €0.0004 per share
​ ​ ​ ​ ​ 20,945,410 ​ ​ ​ ​ ​ $ 16 ​ ​ ​ ​ ​ $ 335,126,560 ​ ​ ​ ​ ​ $ 31,067 ​ ​
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(1)
American depositary shares (“ADSs”) issuable upon deposit of the ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No. 333-260475). Each ADS represents one ordinary share.
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(2)
Includes the aggregate offering price of additional ADSs that may be acquired by the underwriters.
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(3)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
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(4)
The registrant previously paid a registration fee of $9,270 in relation to its filing of its initial registration statement on Form F-1 (No. 333-260218).The remaining $21,797 has been paid herewith.
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and neither we nor the Selling Shareholders are soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
Dated October 28, 2021
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Cian PLC
18,213,400 American Depositary Shares
Representing 18,213,400 Ordinary Shares
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This is the initial public offering of Cian PLC. We are offering 4,042,400 American Depositary Shares (“ADSs”) and certain of our existing shareholders (the “Selling Shareholders”) are offering 14,171,000 ADSs, with each ADS representing one ordinary share. We will not receive any proceeds from the sale of ADSs by the Selling Shareholders. Prior to this offering, there has been no public market for our ordinary shares or ADSs. We currently expect the initial public offering price to be between $13.50 and $16.00 per ADS.
We have applied to have our ADSs listed on the New York Stock Exchange (the “NYSE”) under the symbol “CIAN.” The ADSs have also been approved for listing on the Moscow Exchange (“MOEX”) under the symbol “CIAN.”
We are both an “emerging growth company” and a “foreign private issuer” under applicable U.S. Securities and Exchange Commission rules and will be eligible for reduced public company disclosure requirements. See “Prospectus Summary—Implications of Being an ‘Emerging Growth Company’ and a ‘Foreign Private Issuer.’”
Investing in the ADSs involves risks. See “Risk Factors” beginning on page 16.
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​ ​ ​
Initial public
offering price
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Underwriting
discounts and
commissions(1)
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Proceeds, before
expenses, to us
​ ​
Proceeds, before
expenses, to the Selling
Shareholders
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Per ADS
​ ​ ​ $       ​ ​ ​ ​ $       ​ ​ ​ ​ $       ​ ​ ​ ​ $       ​ ​
Total
​ ​ ​ $ ​ ​ ​ ​ $ ​ ​ ​ ​ $ ​ ​ ​ ​ $ ​ ​ ​
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(1)
We refer you to “Underwriters (Conflicts of Interest)” for additional information regarding underwriting compensation.
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To the extent that the underwriters sell more than 18,213,400 ADSs, the underwriters have a 30-day option to purchase up to an additional 2,732,010 ADSs from the Selling Shareholders, on a pro rata basis, at the initial public offering price, less underwriting discounts and commissions.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the ADSs to purchasers against payment on           , 2021.
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​ Morgan Stanley ​ ​
Goldman Sachs International
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J.P. Morgan
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​ BofA Securities ​ ​
RenCap
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VTB Capital
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​ Alfa CIB ​ ​
AO Raiffeisenbank
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Tinkoff
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Prospectus dated           , 2021
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Source: Company information, SimilarWeb, Google Analytics, Frost & Sullivan
Notes: Unless stated otherwise, all 2021 data includes the N1 Group
1.
Based on (i) share of leads to real estate agents and individual sellers in urban sale and purchase in secondary residential real estate in Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk as of 1Q 2021 and (ii) the number of residential listings for purchases and for rent (excluding short term rentals) (as of April 1, 2021; data for Ekaterinburg and Novosibirsk includes the N1 Group). Regions ranking based on population
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2.
By # of monthly visits based on SimilarWeb data used for global classifieds (Zillow (incl. Trulia), Realtor.com, Rightmove, Redfin, REA Group (realestate.com.au),idealista, Apartments.com, SUUMO and ImmoScout) and Google Analytics data for Cian.ru portal as of September 2021 (excluding N1, major real estate classifieds platform acquired by Cian in 2021)
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3.
Converted to $ based on $/RUB = 72.3436 (average for 2020)
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4.
Sum of real estate agents’ commission pool (~$4 Bn), developers’ advertising budget (~$1 Bn) and mortgage customer acquisition and digital services facilitating transactions market (~$1 Bn). Values converted to $ based on $/RUB = 72.3436 (average for 2020)
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5.
Share of online real estate classifieds in total real estate agents’ commissions in the secondary residential and commercial real estate markets in Russia
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6.
Based on online real estate classifieds penetration in 2020
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Neither we, the Selling Shareholders, nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction, other than the United States, where action for that purpose is required. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ADSs and the distribution of this prospectus outside the United States. We have also been approved by MOEX in relation to the listing and admission of the ADSs to trading on MOEX.
We are incorporated in Cyprus, and a majority of our outstanding securities are owned by non-U.S. residents. Under the rules of the U.S. Securities and Exchange Commission (the “SEC”), we are currently eligible for treatment as a “foreign private issuer.” As a foreign private issuer, we will not be required to file
 
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periodic reports and financial statements with the SEC as frequently or as promptly as domestic registrants whose securities are registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Neither we, the Selling Shareholders nor the underwriters have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus, any amendment or supplement to this prospectus, or in any free writing prospectus we have prepared, and neither we nor the underwriters take responsibility for, and can provide no assurance as to the reliability of, any other information others may give you. Neither we, the Selling Shareholders nor the underwriters are making an offer to sell, or seeking offers to buy, these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date on the cover page of this prospectus, regardless of the time of delivery of this prospectus or the sale of ADSs. Our business, financial condition, results of operations and prospects may have changed since the date on the cover page of this prospectus.
 
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ABOUT THIS PROSPECTUS
We have historically conducted our business through iRealtor LLC, a Russian limited liability company (“iRealtor”). iRealtor is a wholly owned subsidiary of Mimons Investments Limited, which in turn is a wholly owned subsidiary of the issuer, Cian PLC. On February 5, 2021, we acquired N1.RU LLC (“N1” and, together with its subsidiaries, the “N1 Group”), a real estate-focused classifieds business that primarily operates in regional cities in Russia, such as Novosibirsk, Ekaterinburg and Omsk (the “N1 Acquisition”).
Except where the context otherwise requires or where otherwise indicated, the terms “Cian,” the “Company,” the “Cian Group,” the “Group,” “we,” “us,” “our,” “our company” and “our business” refer to Cian PLC, in each case together with its consolidated subsidiaries as a consolidated entity, and the term “Issuer” refers to Cian PLC as a standalone company.
 
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MARKET AND INDUSTRY DATA
We obtained the industry, market and competitive position data in this prospectus from our own internal estimates and research as well as from publicly available information, industry and general publications and research, surveys and studies conducted by third parties, such as SimilarWeb (“SimilarWeb”) and the other third parties stated below.
There are a number of market studies that address either specific market segments, or regional markets, within our industry. However, given the rapid changes in our industry and the markets in which we operate, no industry research that is generally available covers all of the digital real estate classifieds and adjacent market trends we view as key to understanding our industry and our place in Russia, in particular. We believe that it is important that we maintain as broad a view on industry developments as possible. To assist us in formulating our business plan and in anticipation of this offering, we commissioned Frost & Sullivan, a third party market research company, to conduct an independent study of the digital real estate classifieds landscape in Russia, including an overview of macroeconomic, real estate and digital real estate classifieds market dynamics and their evolution over time, an analysis of underlying market trends and potential growth factors, an assessment of the current competitive landscape and other relevant topics, and prepare us a report dated September 7, 2021, titled “Real Estate Advertising Market in Russia” ​(the “Frost & Sullivan Report”).
In connection with the preparation of the Frost & Sullivan Report, we furnished Frost & Sullivan with certain historical information about our company and some data available on the competitive environment. Frost & Sullivan, in conjunction with third-party experts with extensive experience in the Russian real estate classifieds business, conducted research in preparation of the report, including a study of market reports prepared by other parties, interviews and a study of a broad range of secondary sources including other market reports, association and trade press publications, other databases and other sources. We used the data contained in the Frost & Sullivan Report to assist us in describing the nature of our industry and our position in it. Such information is included in this prospectus in reliance on Frost & Sullivan’s authority as an expert in such matters. See “Experts.”
Due to the evolving nature of our industry and competitors, we believe that it is difficult for any market participant, including us, to provide a precise data on the market or our industry. However, we believe that the market and industry data we present in this prospectus provide accurate estimates of the market and our place in it. Industry publications and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this prospectus.
 
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TRADEMARKS, SERVICE MARKS AND TRADENAMES
We have proprietary rights to trademarks used in this prospectus that are important to our business, many of which are registered under applicable intellectual property laws.
Solely for convenience, the trademarks, service marks, logos and trade names referred to in this prospectus are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This prospectus contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
 
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PRESENTATION OF FINANCIAL AND OTHER INFORMATION
We report under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). Our financial statements included in this prospectus are presented in rubles and, unless otherwise specified, all monetary amounts are in rubles. All references in this prospectus to “₽,” “rubles” or “RUB” mean Russian rubles, all references to “$,” “dollars” or “USD” mean U.S. dollars and all references to “€,” “euro” or “EUR” mean euro, unless otherwise noted.
The N1 Group's consolidated financial statements as of and for the years ended December 31, 2020 and 2019 have been prepared in accordance with IFRS.
Unaudited Pro Forma Condensed Combined Financial Information
This prospectus presents the unaudited pro forma condensed combined statement of profit or loss and other comprehensive income of the Cian Group for the six months ended June 30, 2021 and the year ended December 31, 2020. The unaudited pro forma condensed combined financial information is based upon the historical consolidated financial information of the Cian Group and the N1 Group, after giving effect to the N1 Acquisition for the period indicated. The unaudited pro forma condensed combined statements of profit or loss and other comprehensive income for the six months ended June 30, 2021 and for the year ended December 31, 2020 combine the Cian Group’s historical consolidated statements of profit or loss and other comprehensive income for the six months ended June 30, 2021 and the year ended December 31, 2020 and the N1 Group’s historical consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2020 and give effect to the N1 Acquisition as if it occurred on January 1, 2020, the first day of the fiscal year ended December 31, 2020.
The historical financial information has been adjusted to give pro forma effect for transaction accounting adjustments for the N1 Acquisition. The unaudited pro forma condensed combined financial information does not reflect the costs of any integration activities, possible or pending asset dispositions, the benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies that may result from the N1 Acquisition and, accordingly, do not attempt to predict or suggest future results.
The unaudited pro forma condensed combined financial information should be read in conjunction with the financial statements included elsewhere in this prospectus.
Non-IFRS Financial Measures
Certain parts of this prospectus contain non-IFRS financial measures, including Adjusted EBITDA, Core Business Adjusted EBITDA for Moscow and the Moscow region, Core Business Adjusted EBITDA for Other regions, Adjusted EBITDA Margin, Core Business Adjusted EBITDA Margin, Core Business Adjusted EBITDA Margin for Moscow and the Moscow region and Core Business Adjusted EBITDA Margin for Other regions. The non-IFRS financial measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with IFRS and may be different from similarly titled non-IFRS measures used by other companies. See “Selected Consolidated Historical Financial and Other Data” for reconciliation of non-IFRS financial measures to the nearest IFRS measures.
Key Performance Indicators
Throughout this prospectus, we provide a number of key performance indicators used by our management and often used by competitors in our industry. These and other key performance indicators are discussed in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” We define certain terms used in this prospectus as follows:
“Average UMV (Unique Monthly Visitors)” means the average number of users and customers visiting our platform (websites and mobile applications) per month in a particular period, excluding bots. Average UMV for a particular period is calculated by aggregating the UMV for each month within such period and dividing by the number of months. For 2020, 2019, 2018 and their respective semi-annual periods, Average UMV is calculated based on Google Analytics data; for the first half of 2021, Average UMV is calculated as
 
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a sum of Average UMV for the Cian Group (excluding the N1 Group) based on Google Analytics data and Average UMV for the N1 Group based on Yandex.Metrica data.
We calculate UMV using cookies and count the first time a computer or mobile device with a unique IP address accesses our platform during a month. If an individual accesses our platform using different IP addresses within a given month, the first access by each such IP address is counted as a separate unique visitor.
“Listings” means the daily average number of real estate listings posted on our platform by agents and individual sellers for a particular period.
“Leads to agents and individual sellers” means the number of times our users clicked to “show” a customer’s phone number on our platform or sent chat messages to agents or property sellers through our platform in a month, calculated as a monthly average for a particular period.
“Paying accounts” means the number of registered accounts, which were debited at least once during a month for placing a paid listing on our platform or purchasing any value-added services, calculated as a monthly average for a particular period.
We calculate the number of paying accounts to include both individual accounts and master accounts, but excluding subordinated accounts, which can be created under one master account by the real estate agencies for their individual agents as part of our virtual agency offering. For further descriptions of individual accounts, master accounts and subordinated accounts, see “Business — Core Classifieds Business — Products and Services We Offer to Customers.”
“Average revenue per paying account” is calculated as listing revenue in the secondary residential and commercial real estate verticals divided (i) by the number of paying accounts for the corresponding period and (ii) by the number of months during the period.
“Average daily revenue per listing” is calculated as listing revenue divided (i) by the total number of listings for the corresponding period and (ii) by the number of days during the period.
“Leads to developers” means the number of paid target calls, lasting 30 seconds or longer, made through our platform by home searchers to real estate developers, for a particular period.
“Average revenue per lead to developers” is calculated as lead generation revenue (within the Core Business segment) for a period divided by the number of leads (to developers) during such period.
All key performance indicators and other data contained in this prospectus, as of and for the periods prior to 2021, exclude the N1 Group data, unless stated otherwise.
 
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all the information that may be important to you before deciding to invest in the ADSs, and we urge you to read this entire prospectus carefully, including the “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and our audited consolidated financial statements and unaudited interim condensed consolidated financial statements, including the notes thereto, included in this prospectus, before deciding to invest in the ADSs.
Overview
We are a leading online real estate classifieds platform in the large, underpenetrated and growing Russian real estate classifieds market, ranking among the top ten most popular online real estate classifieds globally, based on the September 2021 Google Analytics traffic data for Cian and SimilarWeb traffic data for other online real estate classifieds. Since our founding in 2001, we have become the most recognized and trusted real estate classifieds brand in the most populous Russian regions, according to the Frost & Sullivan Report, and have expanded our business beyond online real estate classifieds listings to offer additional products and services, which turn real estate searches and transactions into a seamless, transparent and efficient experience. Our mission is to use technology and deep insights into the Russian real estate market to help people on the journey to their perfect new place to live or work.
We operate in the Russian real estate market, which, according to the Frost & Sullivan Report, represented approximately USD 238 billion in 2020 and is only starting to digitalize. Being at the forefront of this digitalization trend and, as we believe, being one of the major driving forces behind it, we see an immediately addressable market opportunity of approximately USD 6 billion (in 2020, based on the Frost & Sullivan Report), which comprises real estate agents’ commissions, developers’ advertising budgets as well as adjacent markets, including mortgage advertising and digital services facilitating transactions. Our core online real estate classifieds market is projected to grow at a compound annual growth rate (“CAGR”) of approximately 27% between 2021 and 2025, according to the Frost & Sullivan Report.
Our networked real estate platform connects millions of our users, the real estate buyers and renters, to millions of high-quality real estate listings of all types — residential and commercial, primary and secondary, urban and suburban, for both sale and rent. By offering a unique combination of products, services and insights, we have become a premier destination for our users as well as tens of thousands of our customers, real estate agents, developers, private sellers, landlords and other partners. Our platform aims to provide an end-to-end experience for our customers and users and help them address multiple pain points on their journey to a successful real estate transaction. We strive for our platform to encompass all stages of such journey, from finding the right property and the right buyer or renter, to financing the purchase and ensuring transaction certainty, while allowing participants to transact with ease and efficiency. We derive our revenue:
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In our Core Business segment, from listing fees in the secondary residential and commercial real estate verticals and lead generation fees in the primary residential real estate vertical, as well as fees for listing value-added services, such as premium and highlighted listings and listing auctions, and other value-added services. In June 2020, we introduced a new subscription-based model for customers, which allows our customers to purchase a monthly subscription with us and combine a number of listings with value-added services, improving efficiency for them and stickiness and monetization for us. For more details, see “Business—Our Real Estate Platform—Core Classifieds Business—​Products and Services We Offer to Customers—Subscription Model.” In the first half of 2021, the average share of listings under the subscription model amounted to approximately 41%, as compared to approximately 26% in the second half of 2020. We also charge fees for providing advertising tools through our platform for various parties, primarily real estate developers and banks, which we refer to as our display advertising revenue.
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In our Mortgage Marketplace segment, from fees charged to our partner banks for distributing their mortgage products through our advanced platform for mortgage price comparison, mortgage pre-approval and origination.
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In our Valuation and Analytics segment, from fees charged to our customers and partners for providing access to our proprietary real estate market research, data analytics and market intelligence services, either through sales of individual reports or on a subscription basis.
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In our C2C Rental segment, from fees charged to our users for providing end-to-end solutions facilitating seamless online property rentals (including tenant background checks, digital execution of agreements, online payments and insurance).
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In our End-to-End Offerings segment, from fees charged to our customers and users for services that enable online execution of real estate transactions (including document checking, verification, signing and storage, notary services, registration and tax refunds) and facilitate simultaneous sales and purchases, which, we believe, provides for more efficient real estate transactions.
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Our users can search our property listings free of charge via our mobile applications and our mobile and desktop websites. They can also benefit from a broad scope of various innovative services that we offer, such as real estate valuation and access to a choice of real estate financing options.
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Our networked platform model and our trusted brand have allowed us to achieve the leading position by share of leads to real estate agents and individual sellers and by number of listings in four of the most populous Russian regions, consisting of Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk, which together, according to the Frost & Sullivan Report, in 2020, accounted for 65%, 41% and 75% of the primary residential, secondary residential and commercial real estate markets in the country, respectively. In the first half of 2021, we had approximately 2.1 million listings available through our platform (excluding N1) and an average UMV of approximately 20.3 million (including N1). In 2020, we had approximately 2.1 million listings available through our platform and an average UMV of approximately 16.5 million. We believe that the quantity and quality of our listings database, as well as our expanding end-to-end value proposition, attract an increasing number of buyers and renters, which results in more transactions conducted based on expressions of interest and inquiries generated through our platform (“leads”), which in turn attracts more real estate agents, developers and landlords posting
 
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more listings. We believe that this powerful network effect has allowed us to continuously solidify our market leadership in our core regions of Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk and will allow us to continue strengthening and expanding our position in other regions.
Development of new products, services and features is an integral part of our business and we have a long and successful track record of disrupting the online real estate classifieds market through innovation. This culture of innovation and over 20 years of relevant experience allowed us to move beyond the pure online real estate classifieds model and become a fully-fledged, networked real estate platform enabled by cutting-edge technology, which creates value for all real estate market participants. In our Core Business segment, we provide advanced features that make connecting our customers and our users through our extensive database of property listings more efficient, such as: for users, AI-powered property search and virtual 3D property tours; for real estate agents, Pro.Tools which are our advanced lead management toolkit offerings to boost productivity (including call tracking, duplicates and competition notifications, push notification for competition price decreases, detailed lead information and others); and enterprise features for real estate agencies (including integration tools and tools for the management of marketing costs, performance and employees). To deliver our end-to-end value proposition and make searching and transacting even easier and more seamless for all real estate market participants, we have also created, and are continuing to add, innovative services, such as Mortgage Marketplace, Agent Finder, Property Valuation, Online Transaction Services, Home Swap and others. We intend to continue staying at the forefront of innovation by developing new solutions that will help our users to find their perfect properties to rent or buy and our customers to sell or rent out their real estate in the most efficient way.
We are a technology-driven platform and are committed to delivering the most efficient and stress-free experience through the use of cutting-edge technology, especially in view of the rapid pace of technological changes in our industry, such as increasing use of mobile devices in the real estate market and proliferation of new technologies that improve user experience, such as machine learning. We believe that our mobile-first approach, in which we prioritize our users’ reliance on our mobile applications and websites, not only makes finding a new home or office more convenient for our users, but also increases retention, improves the efficiency and conversion rate of our marketing programs and accelerates the growth of our business. The share of mobile in our average UMV increased to approximately 76.2% in the first half of 2021 from approximately 72.8% in the second half of 2020 and approximately 67.9% in the first half of 2020. Similarly, our share of mobile in leads to agents and individual sellers increased to approximately 66.0% in the first half of 2021 from approximately 64.3% in the second half of 2020 and approximately 63.3% in the first half of 2020.
Our revenue in the year ended December 31, 2020 was RUB 3,972 million, an increase of 10.1% from RUB 3,607 million in the year ended December 31, 2019. Our revenue in the six months ended June 30, 2021 was RUB 2,704 million, an increase of 64.7% from RUB 1,642 million in the six months ended June 30, 2020. Our loss for the year ended December 31, 2020 was RUB 627 million, a decrease of 22.2% from RUB 806 million in the year ended December 31, 2019. Our loss for the six months ended June 30, 2021 was RUB 1,670 million as compared to RUB 405 million in the six months ended June 30, 2020. The increase of our loss was driven primarily by an increase in our share-based payment expense to RUB 1,470 million for the six months ended June 30, 2021 from RUB 249 million for the six months ended June 30, 2020, as a result of the recognition of a portion of our long-term incentive program awards linked to the planned offering, which is a non-recurring item, and the corresponding increase in the fair value estimates of these awards. Our Adjusted EBITDA was RUB 181 million for the year ended December 31, 2020 and a negative RUB 376 million for the year ended December 31, 2019. Our Adjusted EBITDA was RUB 51 million for the six months ended June 30, 2021 and negative RUB 52 million for the six months ended June 30,2020. As of June 30, 2021, December 31, 2020 and December 31, 2019, our total indebtedness outstanding under our credit facilities was RUB 542 million, RUB 728 million and RUB 477 million, respectively. Our results were affected by the measures that we introduced in response to the COVID-19 pandemic, including a temporary suspension of monetization of our listing services across all regions in April 2020. In July 2020, we reinstated the monetization of our listing services in Moscow, the Moscow region, St. Petersburg and the Leningrad region. In the first half of 2021, we also reinstated monetization in certain additional regions; however, the monetization in many other regions remains temporarily suspended and its potential reintroduction is being assessed on a region by region basis. We believe that we are already seeing the
 
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positive effects of these measures in some of the regions in which we reverted back to the paid model, which is illustrated by an increased number of paid listings as compared to the pre-COVID-19 levels. We believe that we are well-positioned to successfully leverage our scale, expertise and experience to continue growing our business and achieve profitability margins enjoyed by our best-in-class international peers.
Corporate Information
We were incorporated under the name Solaredge Holdings Limited in Cyprus on July 7, 2017 pursuant to the Cyprus Companies Law, Cap. 113 (the “Cyprus Companies Law”). On September 3, 2021, Solaredge Holdings Limited was converted from a private limited liability company into a public limited company, and our name changed pursuant to a special resolution at a general meeting of our shareholders to Cian PLC. Our registered office is located at 64 Agiou Georgiou Makri, Anna Maria Lena Court, Flat 201, 6037, Larnaca, Cyprus. Our principal executive office is located at Elektrozavodskaya Ulitsa, 27, Building 8 Moscow, 107023, Russia. The telephone number at this address is +7 (800) 555 3218. Our website address is www.cian.ru. The information contained on, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into, this prospectus. We have included our website for inactive textual reference purposes only.
The following diagram illustrates our corporate structure following the completion of this offering:
[MISSING IMAGE: TM2120160D9-FC_RUSSIANBW.JPG]
Risks Associated with Our Business
Our business is subject to a number of risks of which you should be aware before making an investment decision. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth under the “Risk Factors” section of this prospectus in deciding whether to invest in the ADSs. Among these important risks are the following:
•
our lack of historic profitability and any potential inability to achieve or maintain profitability;
​
•
our ability to maintain our leading market positions, particularly in Moscow, St. Petersburg and certain other regions, and our ability to achieve and maintain leading market position in certain other regions;
​
•
our ability to compete effectively with existing and new industry players in the Russian real estate classifieds market;
​
​
 
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•
our heavy dependence on our brands and reputation;
​
•
any potential failure to adapt to any substantial shift in real estate transactions from, or demand for services in, certain Russian geographic markets;
​
•
any downturns in the Russian real estate market and general economic conditions in Russia;
​
•
any effect on our operations due to cancellation of, or any changes to, the Russian mortgage subsidy program or other government support programs;
​
•
further widespread impacts of the COVID-19 pandemic, or other public health crises, natural disasters or other catastrophic events which may limit our ability to conduct business as normal;
​
•
our ability to establish and maintain important relationships with our customers and certain other parties;
​
•
our ability to successfully implement our strategy;
​
•
our ability to develop and implement new initiatives and to expand our presence in certain regional markets;
​
•
the implementation of our subscription-based model may not materialize as expected;
​
•
any negative effects resulting from updates or changes in search engine algorithms, other traffic-generating arrangements or adjacent products;
​
•
any failure to establish and maintain proper and effective internal control over financial reporting;
​
•
any failure to remediate existing deficiencies we have identified in our internal controls over financial reporting, including our information technology general controls; and
​
•
any new or existing government regulation in the area of data privacy, data protection or other areas.
​
Implications of Being an “Emerging Growth Company” and a “Foreign Private Issuer”
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). As such, we are eligible, for up to five years, to take advantage of certain exemptions from various reporting requirements that are applicable to other publicly traded entities that are not emerging growth companies. These exemptions include:
•
the ability to present more limited financial data, including presenting only two years of audited financial statements and only two years of selected financial data in the registration statement on Form F-1 of which this prospectus is a part;
​
•
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002;
​
•
not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
​
•
not being required to submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency” and “say-on-golden parachutes;” and
​
•
not being required to disclose certain executive compensation related items, such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
​
We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering or such earlier time that we are no longer an emerging growth company. As a result, we do not know if some investors will find the ADSs less attractive. The result may be a less active trading market for the ADSs, and the price of the ADSs may become more volatile.
We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion; (ii) the last day of the fiscal year following the fifth
 
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anniversary of the date of this offering; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of the ADSs that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1 billion in non-convertible debt securities during any three-year period.
Upon consummation of this offering, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
•
the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
​
•
the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
​
•
the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specific information, or current reports on Form 8-K, upon the occurrence of specified significant events.
​
Foreign private issuers, like emerging growth companies, are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company but remain a foreign private issuer, we will continue to be exempt from the more stringent compensation disclosure required of public companies that are neither an emerging growth company nor a foreign private issuer.
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies:
•
the majority of our executive officers or directors are U.S. citizens or residents;
​
•
more than 50% of our assets are located in the United States; or
​
•
our business is administered principally in the United States.
​
Rights of Certain Principal Shareholders to Nominate and Appoint Directors
As at the consummation of this offering, our board of directors will comprise at least seven, but no more than nine directors. Our articles of association provide Elbrus Capital and Maksim Melnikov the right to, among other things, nominate and appoint a certain number of our directors. At any time when Elbrus Capital’s ownership percentage in aggregate is (i) equal to or greater than 30%, it will have the right to nominate and appoint five directors; (ii) greater than or equal to 5% but less than 30%, it will have the right to nominate and appoint between one and four directors, depending on its exact shareholding; (iii) equal to or greater than 7%, the director(s) appointed by it will have the right to appoint the chairman of the board of directors (who has a casting vote in the event of a tie). In addition, until the date that falls five years from the effective date of this registration statement (the “Rights Expiry Date”), at any time when Maksim Melnikov holds (whether directly or through one or more trusts or nominees acting on his behalf) at least one of our shares, he (or, if applicable, such trust(s) or nominee(s)) has the right to nominate and appoint Maksim Melnikov (and only Maksim Melnikov) as a director. For a detailed description of the rights of Elbrus Capital and Maksim Melnikov in this respect and the implications of this, see “Description of Share Capital and Articles of Association—Appointment of Directors” and “Risk Factors—Risks Relating to Our Organizational Structure—Because of their significant voting power and certain provisions of our articles of association, our principal shareholders will be able to exert control over us and our significant corporate decisions such that minority shareholders have limited influence with respect to the replacement or removal of management and with respect to takeovers, even where a takeover would be beneficial to our shareholders as a whole.”
 
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The Offering
ADSs offered by us
4,042,400 ADSs, each representing one ordinary share.
ADSs offered by the Selling Shareholders
14,171,000 ADSs, each representing one ordinary share.
Ordinary shares to be outstanding after this offering
69,042,400 ordinary shares.
Option to purchase additional
ADSs
The Selling Shareholders have granted the underwriters an option to purchase up to 2,732,010 additional ADSs, on a pro rata basis, within 30 days of the date of this prospectus.
American Depositary Shares
The underwriters will deliver ADSs representing our ordinary shares. Each ADS represents one ordinary share.
As an ADS holder, we will not treat you as one of our shareholders. The depositary, The Bank of New York Mellon (the “depositary”), will be the holder of the ordinary shares underlying your ADSs through its custodian.
You will have rights as provided in the deposit agreement. You may surrender your ADSs and withdraw the underlying ordinary shares as provided, and pursuant to the limitations set forth in the deposit agreement. The depositary will charge you fees for, among other items, any such surrender for the purpose of withdrawal. As described in the deposit agreement, we may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs, you agree to be bound by the terms of the deposit agreement then in effect.
To better understand the terms of the ADSs, you should carefully read the “Description of American Depositary Shares” section of this prospectus. You should also read the deposit agreement, which is an exhibit to the registration statement of which this prospectus forms a part.
Depositary
The Bank of New York Mellon
Use of proceeds
We estimate that the net proceeds to us from this offering will be approximately $51.1 million, assuming an initial public offering price of $14.75 per ADS, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We will not receive any proceeds from the sale of ADSs by the Selling Shareholders.
We intend to use the net proceeds from this offering as follows: approximately $27.1 million to repay our obligations outstanding under our Phantom Share Program (for further details, see “Management—Long-Term Incentive Plans”) and the remainder to fund the growth and expansion of our business and other general corporate purposes. See “Use of Proceeds.”
Lock-up
We, the Selling Shareholders, our executive officers, board members and certain other shareholders have agreed, subject
 
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to limited exceptions, not to , and not to clause any direct or indirect affiliate to, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any ADSs, our ordinary shares underlying the ADSs, or any other securities convertible into or exercisable or exchangeable for ADSs or such ordinary shares, enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of ADSs or ordinary shares, or publicly disclose the intention to do any of the above, for a period of 180 days after the date of this prospectus, subject to certain exceptions, without the prior written consent of Morgan Stanley & Co. LLC, Goldman Sachs International and J.P. Morgan Securities LLC, as representatives on behalf of the underwriters. The ADSs of certain of our affiliates will only be able to be resold pursuant to the requirements of Rule 144. See “Shares and ADSs Eligible for Future Sale” for a more detailed description of the restrictions on selling the ADSs after this offering.
Dividend policy
We have not declared or paid cash dividends on our ordinary shares in recent years. In the medium term, we intend to retain all available liquidity sources and future earnings, if any, to fund the development and growth of our business. Any future determination to declare cash dividends would be subject to the discretion of our board of directors and would depend on various factors, including our strategy, results of operations, financial condition, cash flow, working capital requirements, our capital expenditures, applicable provisions of our articles of association, restrictions that may be imposed by applicable law or our credit facilities, and other factors deemed relevant by our board of directors.
Further, the terms of certain of our outstanding borrowings restrict our ability to pay dividends or make distributions on our ordinary shares without consent of a lender, and we may enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends or make distributions on our ordinary shares. See “Dividend Policy.”
Risk factors
See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in the ADSs.
Conflicts of Interest
Entities affiliated with The Goldman Sachs Group, Inc., the parent of Goldman Sachs International, an underwriter in this offering, and Goldman Sachs & Co LLC, its agent in this offering, beneficially own 14.11% of our outstanding ordinary shares in the aggregate immediately prior to this offering. In addition, such entities will be selling shareholders in this offering and will receive 5% or more of the net offering proceeds.
Because of such ownership interest and receipt of net offering proceeds, this offering will be made in compliance with the applicable provisions of FINRA Rule 5121. Rule 5121 requires
 
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that a “qualified independent underwriter” meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence with respect thereto. Morgan Stanley & Co. LLC will act as a “qualified independent underwriter” within the meaning of Rule 5121 in connection with this offering. Further, as required by Rule 5121, Goldman Sachs & Co. LLC will not confirm sales of the ADSs to any account over which it exercises discretionary authority without the prior written approval of the customer. See “Underwriters (Conflicts of Interest)” for more information.
Pre-emptive rights
Under the law of Cyprus, existing holders of shares in Cypriot public companies are entitled to pre-emptive rights on the issue of new shares and other securities which are convertible into shares or accompanied by the right to subscribe for shares in that company (if shares are issued for cash consideration). Our shareholders have authorized the disapplication of pre emptive rights for a period of five years from the date of the completion of this offering. See “Description of Share Capital and Articles of Association—Pre-emptive Rights.”
Listing
We have applied to list the ADSs on the NYSE under the symbol “CIAN.” The ADSs have also been approved for listing on MOEX under the symbol ‘‘CIAN.’’ No assurance can be given that we will be able to maintain such listings.
The number of our ordinary shares to be outstanding after this offering is based on 65,000,000 ordinary shares outstanding as of June 30, 2021 and, unless started otherwise, excludes (i) 197,606 ordinary shares expected to be issued to our CFO under our Phantom Share Program and (ii) up to 1,067,340, ordinary shares, which could be issued to our employees pursuant to our Phantom Share Program settlement (for further details, see “Management—Long-Term Incentive Plans”).
Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:
•
no exercise by the underwriters of their option to purchase additional ADSs in this offering; and
​
•
an initial public offering price of $14.75 per ADS, which is the midpoint of the price range set forth on the cover page of this prospectus.
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SUMMARY CONSOLIDATED FINANCIAL AND OTHER OPERATING DATA
We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB. The following summary consolidated statements of profit or loss and other comprehensive income, consolidated statements of financial position and consolidated statements of cash flows as of and for the years ended December 31, 2020 and 2019 are derived from our audited consolidated financial statements for the years ended December 31, 2020 and 2019, included elsewhere in this prospectus. The summary consolidated statements of profit or loss and other comprehensive income, consolidated statement of financial position and consolidated statement of cash flows as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 are derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The unaudited interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”) using the same accounting principles and on the same basis as the year-end financial statements and include all adjustments that management considers necessary for the fair presentation of the financial information set forth in those statements.
Our historical results are not necessarily indicative of the results that may be expected for any periods in the future. You should read this summary data together with our financial statements and related notes beginning on page F-1 of this prospectus, as well as the sections of this prospectus titled “Selected Consolidated Historical Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other financial information included elsewhere in this prospectus.
Consolidated Statements of Profit or Loss and Other Comprehensive Income
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
​ ​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
(RUB in million, except share and per share data)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Revenue ​ ​ ​ ​ 2,704 ​ ​ ​ ​ ​ 1,642 ​ ​ ​ ​ ​ 3,972 ​ ​ ​ ​ ​ 3,607 ​ ​
Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Marketing expenses
​ ​ ​ ​ (1,129) ​ ​ ​ ​ ​ (636) ​ ​ ​ ​ ​ (1,697) ​ ​ ​ ​ ​ (2,159) ​ ​
Employee-related expenses
​ ​ ​ ​ (2,632) ​ ​ ​ ​ ​ (1,078) ​ ​ ​ ​ ​ (2,208) ​ ​ ​ ​ ​ (1,385) ​ ​
IT expenses
​ ​ ​ ​ (229) ​ ​ ​ ​ ​ (143) ​ ​ ​ ​ ​ (264) ​ ​ ​ ​ ​ (289) ​ ​
Depreciation and amortization
​ ​ ​ ​ (134) ​ ​ ​ ​ ​ (99) ​ ​ ​ ​ ​ (200) ​ ​ ​ ​ ​ (169) ​ ​
Other operating expenses
​ ​ ​ ​ (221) ​ ​ ​ ​ ​ (86) ​ ​ ​ ​ ​ (180) ​ ​ ​ ​ ​ (217) ​ ​
Goodwill impairment
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (256) ​ ​
Total operating expenses
​ ​ ​ ​ (4,345) ​ ​ ​ ​ ​ (2,042) ​ ​ ​ ​ ​ (4,549) ​ ​ ​ ​ ​ (4,475) ​ ​
Operating loss
​ ​ ​ ​ (1,641) ​ ​ ​ ​ ​ (400) ​ ​ ​ ​ ​ (577) ​ ​ ​ ​ ​ (868) ​ ​
Finance costs
​ ​ ​ ​ (31) ​ ​ ​ ​ ​ (36) ​ ​ ​ ​ ​ (72) ​ ​ ​ ​ ​ (38) ​ ​
Finance income
​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 7 ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ (27) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ (3) ​ ​
Loss before income tax
​ ​ ​ ​ (1,692) ​ ​ ​ ​ ​ (432) ​ ​ ​ ​ ​ (639) ​ ​ ​ ​ ​ (902) ​ ​
Income tax benefit
​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 27 ​ ​ ​ ​ ​ 12 ​ ​ ​ ​ ​ 96 ​ ​
Loss for the period
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (806) ​ ​
Total comprehensive loss for the period
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (806) ​ ​
Loss per share, in RUB ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic and diluted loss per share attributable to ordinary equity holders of the parent(1)
​ ​ ​
​
(26)
​ ​ ​ ​
​
(7)
​ ​ ​ ​
​
(11)
​ ​ ​ ​
​
(14)
​ ​
Basic and diluted weighted average number of ordinary shares(1)
​ ​ ​ ​ 63,751,905 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​
​
(1)
The basic and diluted loss per share are adjusted based on the share split as part of the capital reorganization. For further details, see Note 16 to our unaudited interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 and Note 21 to our audited consolidated financial statements for the years ended December 31, 2020 and 2019.
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Consolidated Statements of Financial Position
​ ​ ​
As of June 30,
​ ​
As of December 31,
​
​ ​ ​
2021
​ ​
2020
​ ​
2019
​
(RUB in million)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total non-current assets
​ ​ ​ ​ 2,479 ​ ​ ​ ​ ​ 659 ​ ​ ​ ​ ​ 638 ​ ​
Total current assets
​ ​ ​ ​ 1,208 ​ ​ ​ ​ ​ 711 ​ ​ ​ ​ ​ 328 ​ ​
Total assets
​ ​ ​ ​ 3,687 ​ ​ ​ ​ ​ 1,370 ​ ​ ​ ​ ​ 966 ​ ​
Total equity
​ ​ ​ ​ (251) ​ ​ ​ ​ ​ (872) ​ ​ ​ ​ ​ (245) ​ ​
Total non-current liabilities
​ ​ ​ ​ 212 ​ ​ ​ ​ ​ 741 ​ ​ ​ ​ ​ 576 ​ ​
Total current liabilities
​ ​ ​
​
3,726
​ ​ ​ ​ ​ 1,501 ​ ​ ​ ​ ​ 635 ​ ​
Total liabilities
​ ​ ​ ​ 3,938 ​ ​ ​ ​ ​ 2,242 ​ ​ ​ ​ ​ 1,211 ​ ​
Consolidated Statements of Cash Flows
​ ​ ​
Six Months
Ended June 30,
​ ​
Year Ended
December 31,
​
​ ​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
(RUB in million)
​ ​ ​ ​ ​ ​ ​
Net cash generated from (used in) operating activities
​ ​ ​ ​ 27 ​ ​ ​ ​ ​ (44) ​ ​ ​ ​ ​ 230 ​ ​ ​ ​ ​ (361) ​ ​
Net cash used in investing activities
​ ​ ​ ​ (1,725) ​ ​ ​ ​ ​ (35) ​ ​ ​ ​ ​ (109) ​ ​ ​ ​ ​ (130) ​ ​
Net cash generated from financing activities
​ ​ ​ ​ 2,060 ​ ​ ​ ​ ​ 287 ​ ​ ​ ​ ​ 182 ​ ​ ​ ​ ​ 539 ​ ​
Cash and cash equivalents at the beginning of the period
​ ​ ​ ​ 449 ​ ​ ​ ​ ​ 148 ​ ​ ​ ​ ​ 148 ​ ​ ​ ​ ​ 103 ​ ​
Cash and cash equivalents at the end of the period
​ ​ ​ ​ 810 ​ ​ ​ ​ ​ 356 ​ ​ ​ ​ ​ 449 ​ ​ ​ ​ ​ 148 ​ ​
Other Financial Data: Segment Revenue and Net Margin Data
​ ​ ​
Six Months Ended
June 30,
​ ​
Year Ended December 31,
​
(RUB in million)
​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
Core Business revenue
​ ​ ​ ​ 2,563 ​ ​ ​ ​ ​ 1,597 ​ ​ ​ ​ ​ 3,822 ​ ​ ​ ​ ​ 3,555 ​ ​
Listing revenue
​ ​ ​ ​ 1,697 ​ ​ ​ ​ ​ 979 ​ ​ ​ ​ ​ 2,383 ​ ​ ​ ​ ​ 2,481 ​ ​
Secondary residential real estate
​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 765 ​ ​ ​ ​ ​ 1,819 ​ ​ ​ ​ ​ 1,926 ​ ​
Commercial real estate
​ ​ ​ ​ 364 ​ ​ ​ ​ ​ 214 ​ ​ ​ ​ ​ 564 ​ ​ ​ ​ ​ 555 ​ ​
Lead generation revenue(1)​
​ ​ ​ ​ 595 ​ ​ ​ ​ ​ 407 ​ ​ ​ ​ ​ 991 ​ ​ ​ ​ ​ 622 ​ ​
Display advertising revenue
​ ​ ​ ​ 267 ​ ​ ​ ​ ​ 206 ​ ​ ​ ​ ​ 439 ​ ​ ​ ​ ​ 440 ​ ​
Other revenue
​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 12 ​ ​
Mortgage Marketplace revenue
​ ​ ​ ​ 119 ​ ​ ​ ​ ​ 36 ​ ​ ​ ​ ​ 110 ​ ​ ​ ​ ​ 34 ​ ​
Listing revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Lead generation revenue
​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 1 ​ ​
Display advertising revenue
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 17 ​ ​ ​ ​ ​ 12 ​ ​
Other revenue
​ ​ ​ ​ 116 ​ ​ ​ ​ ​ 32 ​ ​ ​ ​ ​ 90 ​ ​ ​ ​ ​ 21 ​ ​
Valuation and Analytics revenue(2)​
​ ​ ​ ​ 21 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 18 ​ ​
C2C Rental revenue(2)​
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​
End-to-End Offerings revenue(3)
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Revenue ​ ​ ​ ​ 2,704 ​ ​ ​ ​ ​ 1,642 ​ ​ ​ ​ ​ 3,972 ​ ​ ​ ​ ​ 3,607 ​ ​
Loss for the period
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (806) ​ ​
Net margin (in %)
​ ​ ​ ​ (61.8)% ​ ​ ​ ​ ​ (24.7)% ​ ​ ​ ​ ​ (15.8)% ​ ​ ​ ​ ​ (22.3)% ​ ​
​
(1)
Originating from the primary real estate vertical.
​
(2)
All attributed to “Other revenue.” For further details, see Note 4 to each of our unaudited interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 and our audited consolidated financial statements for the years ended December 31, 2020 and 2019.
​
(3)
We commenced our operations as part of the End-to-End Offerings segment in the first half of 2021.
​
​
 
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Segment Data(1)
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
​ ​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
(RUB in million, unless stated otherwise)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Core Business Adjusted EBITDA
​ ​ ​ ​ 406 ​ ​ ​ ​ ​ 110 ​ ​ ​ ​ ​ 532 ​ ​ ​ ​ ​ (193) ​ ​
Mortgage Marketplace Adjusted EBITDA
​ ​ ​ ​ (232) ​ ​ ​ ​ ​ (97) ​ ​ ​ ​ ​ (254) ​ ​ ​ ​ ​ (153) ​ ​
Valuation and Analytics Adjusted EBITDA
​ ​ ​ ​ (36) ​ ​ ​ ​ ​ (69) ​ ​ ​ ​ ​ (119) ​ ​ ​ ​ ​ (81) ​ ​
C2C Rental Adjusted EBITDA
​ ​ ​ ​ (71) ​ ​ ​ ​ ​ (63) ​ ​ ​ ​ ​ (126) ​ ​ ​ ​ ​ (65) ​ ​
End-to-End Offerings Adjusted EBITDA
​ ​ ​ ​ (66) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​
(1)
Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA presented in the table above are our segment measures of profit or loss and, therefore, are not considered non-IFRS financial measures. The sum of Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA differs from Adjusted EBITDA because Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA include adjustments for lease-related amortization and interest, capitalized development costs, and operating expense related to software licenses. For further details on our segmentation, see Note 5 to our interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 and Note 5 to our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019.
​
Non-IFRS Measures(1)
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
​ ​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
(RUB in million, unless stated otherwise)
​ ​ ​ ​ ​ ​
Adjusted EBITDA
​ ​ ​ ​ 51 ​ ​ ​ ​ ​ (52) ​ ​ ​ ​ ​ 181 ​ ​ ​ ​ ​ (376) ​ ​
Adjusted EBITDA Margin
​ ​ ​ ​ 1.9% ​ ​ ​ ​ ​ (3.2)% ​ ​ ​ ​ ​ 4.6% ​ ​ ​ ​ ​ (10.4)% ​ ​
Core Business Adjusted EBITDA for Moscow and the Moscow region
​ ​ ​ ​ 1,069 ​ ​ ​ ​ ​ 615 ​ ​ ​ ​ ​ 1,714 ​ ​ ​ ​ ​ 1,498 ​ ​
Core Business Adjusted EBITDA for Other regions
​ ​ ​ ​ (663) ​ ​ ​ ​ ​ (505) ​ ​ ​ ​ ​ (1,182) ​ ​ ​ ​ ​ (1,691) ​ ​
Core Business Adjusted EBITDA Margin for Moscow and
the Moscow region
​ ​ ​ ​ 56.4% ​ ​ ​ ​ ​ 50.2% ​ ​ ​ ​ ​ 57.1% ​ ​ ​ ​ ​ 55.5% ​ ​
Core Business Adjusted EBITDA Margin for Other regions 
​ ​ ​ ​ (99.4)% ​ ​ ​ ​ ​ (135.8)% ​ ​ ​ ​ ​ (143.8)% ​ ​ ​ ​ ​ (198.0)% ​ ​
​
(1)
See the definitions and reconciliations of the non-IFRS measures to the applicable IFRS measures in “Selected Consolidated Historical Financial and Other Data—Non-IFRS Measures.” Also see the discussions in “Presentation of Financial and Other Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Indicators of Operating and Financial Performance.”
​
​
 
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Other Data(1)
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
​ ​ ​
2021(2)
​ ​
2020
​ ​
2020
​ ​
2019
​
Average UMV (in millions)
​ ​ ​ ​ 20.3 ​ ​ ​ ​ ​ 15.2 ​ ​ ​ ​ ​ 16.5 ​ ​ ​ ​ ​ 13.4 ​ ​
Listings (in millions)
​ ​ ​ ​ 2.1 ​ ​ ​ ​ ​ 2.0 ​ ​ ​ ​ ​ 2.1 ​ ​ ​ ​ ​ 1.9 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 0.3 ​ ​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 0.4 ​ ​
Thereof: Other regions
​ ​ ​ ​ 1.8 ​ ​ ​ ​ ​ 1.6 ​ ​ ​ ​ ​ 1.8 ​ ​ ​ ​ ​ 1.5 ​ ​
Average daily revenue per listing (in RUB)
​ ​ ​ ​ 4.4 ​ ​ ​ ​ ​ 2.7 ​ ​ ​ ​ ​ 3.1 ​ ​ ​ ​ ​ 3.5 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 21.2 ​ ​ ​ ​ ​ 10.3 ​ ​ ​ ​ ​ 13.8 ​ ​ ​ ​ ​ 13.6 ​ ​
Thereof: Other regions
​ ​ ​ ​ 1.5 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 1.1 ​ ​
Leads to agents and individual sellers (in millions)
​ ​ ​ ​ 9.1 ​ ​ ​ ​ ​ 6.5 ​ ​ ​ ​ ​ 8.0 ​ ​ ​ ​ ​ 6.9 ​ ​
Paying accounts (in thousands)
​ ​ ​ ​ 104.3 ​ ​ ​ ​ ​ 85.1 ​ ​ ​ ​ ​ 88.6 ​ ​ ​ ​ ​ 96.7 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 55.7 ​ ​ ​ ​ ​ 49.5 ​ ​ ​ ​ ​ 54.9 ​ ​ ​ ​ ​ 58.1 ​ ​
Thereof: Other regions
​ ​ ​ ​ 50.4 ​ ​ ​ ​ ​ 38.6 ​ ​ ​ ​ ​ 36.2 ​ ​ ​ ​ ​ 42.9 ​ ​
Average revenue per paying account (in RUB)
​ ​ ​ ​ 1,139 ​ ​ ​ ​ ​ 821 ​ ​ ​ ​ ​ 625 ​ ​ ​ ​ ​ 629 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 1,704 ​ ​ ​ ​ ​ 1,120 ​ ​ ​ ​ ​ 885 ​ ​ ​ ​ ​ 877 ​ ​
Thereof: Other regions
​ ​ ​ ​ 622 ​ ​ ​ ​ ​ 429 ​ ​ ​ ​ ​ 292 ​ ​ ​ ​ ​ 327 ​ ​
Leads to developers (in thousands)
​ ​ ​ ​ 113.8 ​ ​ ​ ​ ​ 103.9 ​ ​ ​ ​ ​ 244.8 ​ ​ ​ ​ ​ 179.6 ​ ​
Average revenue per lead to developers (in RUB)
​ ​ ​ ​ 5,238 ​ ​ ​ ​ ​ 3,915 ​ ​ ​ ​ ​ 4,046 ​ ​ ​ ​ ​ 3,470 ​ ​
​
(1)
See the definitions of average UMV, listings, leads to agents and individual sellers, paying accounts, average revenue per paying account, average daily revenue per listing, leads to developers and average revenue per lead to developers in “Presentation of Financial and Other Information” and “Selected Consolidated Historical Financial and Other Data—Other Data.”
​
(2)
Data as of and for the six months ended June 30, 2021 includes the N1 Group from the date of the N1 Acquisition, unless stated otherwise (see “Selected Consolidated Historical Financial and Other Data—Other Data”). Due to rounding, numbers may vary slightly from the numbers presented in our consolidated financial statements included elsewhere in this prospectus.
​
​
 
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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF THE CIAN GROUP
The unaudited pro forma condensed combined financial information is based upon the historical consolidated financial information of the Cian Group and the N1 Group, after giving effect to the N1 Acquisition, for the period indicated. The unaudited pro forma condensed combined statements of profit or loss and other comprehensive income for the six months ended June 30, 2021 and for the year ended December 31, 2020 combine the Cian Group’s historical consolidated statements of profit or loss and other comprehensive income for the six months ended June 30, 2021 and the year ended December 31, 2020 and the N1 Group’s historical consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2020 and give effect to the N1 Acquisition as if it occurred on January 1, 2020, the first day of the fiscal year ended December 31, 2020.
The historical financial information has been adjusted to give pro forma effect for transaction accounting adjustments for the N1 Acquisition. The unaudited pro forma condensed combined financial information does not reflect the costs of any integration activities, possible or pending asset dispositions, the benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies that may result from the N1 Acquisition and, accordingly, do not attempt to predict or suggest future results.
The unaudited pro forma condensed combined financial information should be read in conjunction with the financial statements included elsewhere in this prospectus.
The Cian Group Unaudited Pro Forma Condensed Combined Statement of Profit or Loss and Other Comprehensive Income for the six months ended June 30, 2021
​ ​ ​
Cian
Group
(Historical)
​ ​
N1 Group (from
January 1, 2021 to
February 5, 2021)
​ ​
Transaction
Accounting
Adjustments
​ ​
Notes(1)
​ ​
Unaudited
Pro Forma
Combined
​
​ ​ ​
(RUB in million)
​
Revenue
​ ​ ​
​
2,704
​ ​ ​ ​
​
33
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
2,737
​ ​
Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Marketing expenses
​ ​ ​ ​ (1,129) ​ ​ ​ ​ ​ (16) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,145) ​ ​
Employee-related expenses
​ ​ ​ ​ (2,632) ​ ​ ​ ​ ​ (18) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (2,650) ​ ​
IT expenses
​ ​ ​ ​ (229) ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (230) ​ ​
Depreciation and amortization
​ ​ ​ ​ (134) ​ ​ ​ ​ ​ (2) ​ ​ ​ ​ ​ (7) ​ ​ ​ ​ ​ 3(a) ​ ​ ​ ​ ​ (143) ​ ​
Other operating expenses
​ ​ ​ ​ (221) ​ ​ ​ ​ ​ (27) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (248) ​ ​
Total operating expenses
​ ​ ​ ​ (4,345) ​ ​ ​ ​ ​ (64) ​ ​ ​ ​ ​ (7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (4,416) ​ ​
​ ​ ​ ​ ​ ​ ​
Operating loss
​ ​ ​ ​ (1,641) ​ ​ ​ ​ ​ (31) ​ ​ ​ ​ ​ (7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,679) ​ ​
Finance costs
​ ​ ​ ​ (31) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (31) ​ ​
Finance income
​ ​ ​ ​ 7 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7 ​ ​
Foreign currency exchange gain / (loss), net
​ ​ ​ ​ (27) ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (26) ​ ​
Loss before income tax
​ ​ ​ ​ (1,692) ​ ​ ​ ​ ​ (30) ​ ​ ​ ​ ​ (7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,729) ​ ​
Income tax benefit
​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3(b) ​ ​ ​ ​ ​ 24 ​ ​
Loss for the period
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (29) ​ ​ ​ ​ ​ (6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,705) ​ ​
​
(1)
See section 3 “Pro Forma Adjustments” in “Unaudited Pro Forma Condensed Combined Financial Information.”
​
​
 
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The Cian Group Unaudited Pro Forma Condensed Combined Statement of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2020
​ ​ ​
Cian Group
(Historical)
​ ​
N1 Group
(Historical)
​ ​
Transaction
Accounting
Adjustments
​ ​
Notes(1)
​ ​
Unaudited Pro
Forma
Combined
​ ​ ​ ​ ​
​ ​ ​
(RUB in million)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Revenue ​ ​ ​ ​ 3,972 ​ ​ ​ ​ ​ 563 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4,535 ​ ​ ​ ​ ​ ​
Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Marketing expenses
​ ​ ​ ​ (1,697) ​ ​ ​ ​ ​ (171) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,868) ​ ​ ​ ​ ​ ​
Employee-related expenses
​ ​ ​ ​ (2,208) ​ ​ ​ ​ ​ (214) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (2,422) ​ ​ ​ ​ ​ ​
IT expenses
​ ​ ​ ​ (264) ​ ​ ​ ​ ​ (29) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (293) ​ ​ ​ ​ ​ ​
Depreciation and amortization
​ ​ ​ ​ (200) ​ ​ ​ ​ ​ (24) ​ ​ ​ ​ ​ (85) ​ ​ ​ ​ ​ 3(a) ​ ​ ​ ​ ​ (309) ​ ​ ​ ​ ​ ​
Other operating expenses
​ ​ ​ ​ (180) ​ ​ ​ ​ ​ (54) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (234) ​ ​ ​ ​ ​ ​
Total operating expenses
​ ​ ​ ​ (4,549) ​ ​ ​ ​ ​ (492) ​ ​ ​ ​ ​ (85) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (5,126) ​ ​ ​ ​ ​ ​
Operating profit / (loss)
​ ​ ​ ​ (577) ​ ​ ​ ​ ​ 71 ​ ​ ​ ​ ​ (85) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (591) ​ ​ ​ ​ ​ ​
Finance costs
​ ​ ​ ​ (72) ​ ​ ​ ​ ​ (3) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (75) ​ ​ ​ ​ ​ ​
Finance income
​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12 ​ ​ ​ ​ ​ ​
Foreign currency exchange gain / (loss), net
​ ​ ​ ​ (1) ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ ​
(Loss) / profit before income tax
​ ​ ​ ​ (639) ​ ​ ​ ​ ​ 72 ​ ​ ​ ​ ​ (85) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (652) ​ ​ ​ ​ ​ ​
Income tax benefit / (expense)
​ ​ ​ ​ 12 ​ ​ ​ ​ ​ (14) ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 3(b) ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ ​
(Loss) / profit for the year
​ ​ ​ ​ (627) ​ ​ ​ ​ ​ 58 ​ ​ ​ ​ ​ (74) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (643) ​ ​ ​ ​ ​ ​
​
(1)
See section 3 “Pro Forma Adjustments” in “Unaudited Pro Forma Condensed Combined Financial Information.”
​
​
 
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RISK FACTORS
You should carefully consider the risks described below before making an investment decision. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, results of operations, financial condition or prospects could be materially and adversely affected by any of these risks. The trading price and value of the ADSs could decline due to any of these risks, and you may lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this prospectus.
Risks Related to Our Business and Industry
We have incurred operating losses in the past and may never achieve or maintain profitability.
We incurred a loss of RUB 1,670 million, RUB 806 million and RUB 627 million in the six months ended June 30, 2021 and years ended December 31, 2019 and 2020, respectively. We will need to generate and sustain increased revenue levels or decrease our expenses going forward to achieve profitability, and there can be no assurance that we will be successful in doing so, or that we will be able to maintain or increase profitability once achieved. We expect to continue the development and expansion of our business and anticipate additional costs in connection with legal, accounting and other administrative expenses related to operating as a public company. These expenses may prove higher than we anticipate, and we may not succeed in increasing our revenue sufficiently to offset the expenses associated with such development and operations as a public company. While our revenue has grown in recent years, if our revenue declines or fails to grow at a rate sufficient to offset increases in our operating expenses, we will not be able to achieve or maintain profitability in future periods. We cannot ensure that we will achieve profitability in the future or that, if we become profitable, we will be able to sustain or increase profitability.
Our path to profitability greatly depends on us maintaining our leading market positions, particularly in Moscow, St. Petersburg and certain other regions, and achieving and maintaining leading market positions in certain other cities and regions.
We own and operate a leading online real estate classifieds platform available primarily via our websites “Cian.ru” and “N1.ru” and via our Cian and N1 mobile applications. Through this platform, we offer (i) an opportunity to post real estate listings and to use our value-added services for both professional and private listing customers, which include real estate agents, real estate developers, individual sellers and renters (all referred to as “customers”); (ii) an opportunity to search real estate listings and to use our additional paid and free services for professional and private end-users visiting our platform (referred to as “users”) and (iii) additional services, such as advertisement placement, for third parties, such as banks and other service providers for real estate transactions.
We believe that holding a leading position in an online real estate classifieds market significantly enhances our platform’s value proposition for our customers and users, as a high number of quality listings by customers attracts more users, helping to generate more leads for the customers, which, in turn, attracts more customers. As a result of these strong network effects, a market leader in this industry typically may benefit from operating leverage and greater potential opportunities to monetize its platform.
According to the Frost & Sullivan Report, we currently have a leading position among online real estate classifieds platforms in the most populous Russian regions, including Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk, based on (i) the share of leads to real estate agents and individual sellers (data for the first quarter of 2021; data for Ekaterinburg and Novosibirsk includes the N1 Group) and also (ii) the number of residential listings for purchases and for rent (excluding short term rentals) (as of April 1, 2021; data for Ekaterinburg and Novosibirsk includes the N1 Group). For further details, including definition and calculation of the number of leads, see “Presentation of Financial and Other information—Key Performance Indicators.” In line with our strategy, we also aim to achieve and maintain leading market positions in other regions, see “Business—Strategy—​Continued expansion into Russian regions via organic growth and select M&A opportunities.”
 
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Achieving or maintaining leading market positions is not guaranteed. A decline in the number or quality of listings on our platform for any reason may render our platform less attractive to our users, which, in turn, may decrease the number of visitors to our platform and leads we generate for our customers. Average UMV is one of the key metrics of our platform traffic and our user engagement. Our average UMV consistently grew to 20.3 million in the first half of 2021 (including N1) from 16.5 million in 2020 and 10.3 million in 2018. If our average UMV stagnates or declines, it may have a significant negative effect on the development of our platform, our ability to generate leads to our customers and partners and, consequently, our business, results of operations, financial condition and prospects.
There is a general lack of exclusivity in the online real estate classifieds market, which allows the same property to be listed on multiple competing platforms simultaneously. Other platforms may offer superior interfaces, better overall experiences, or competitive features that we may not possess. As a result of user churn due to these and other factors, such other platforms may become more attractive than ours for both customers and users due to their superior effectiveness in terms of number of users and, as a result, lead generation, as well as number of listings. If we are unable to maintain our current leading market positions, in particular, our leading market positions in Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk, and if we are unable to achieve and maintain leading market positions in certain other regions, it could have a material adverse effect on our business, results of operations, financial condition and prospects.
The online classifieds market is competitive, and we may fail to compete effectively with existing and new industry players, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
We operate in a competitive market that is characterized by the network effect, in which a high number of customers’ listings attracts user traffic, and higher traffic typically results in more leads for our customers, which, in turn, attracts more listings and advertising. Our ability to attract customers depends on a variety of factors, including the number and quality of our listings, reliability of our websites and mobile applications and user-friendly interface, the scope of our value-added service offerings as well as our marketing efforts. If we are unable to meet our customer and user demand, we may lose them to our competitors. Our current or future competitors may be able to better position themselves and it may be difficult for us to accurately assess or predict our future competitive environment and competitive threats that we may face.
We face competition from a variety of digital market players and, in the case of the primary real estate market, from offline advertising media, all of which provide platforms and advertising space to customers. Our key competitors are other vertical classifieds platforms (i.e. platforms specializing in a single category of classifieds), which focus on real estate classifieds, and horizontal classifieds platforms (i.e. generalist online classifieds platforms that offer listings across various product categories, including real estate). Vertical classifieds platforms operating in Russia include DomClick, Yandex.Nedvizhimost and Square Meter. Horizontal classifieds platforms include companies like Avito and Youla. Some of these platforms are owned by large Russian banking groups, such as DomClick, which is owned by Sberbank, and Square Meter, which is owned by VTB. Others are backed by large internet companies, such as Yandex.Nedvizhimost, which is owned by Yandex, one of the largest internet companies in Russia, Youla, which is a classifieds platform of Mail.ru Group, and Avito, which is owned by the international internet conglomerate Naspers. These platforms may enjoy additional competitive advantages, such as greater financial, technical, human and other resources. For example, Yandex continues to invest in its real estate classified services and recently, as part of Yandex.Nedvizhimost, launched Yandex.Arenda, which is a separate service facilitating long-term rentals. Competition against companies that also operate major internet search engines, such as Yandex, is particularly exacerbated by our reliance on paid search advertising to help direct users to our sites, since internet companies and aggregators that own real estate platforms could potentially divert users to other online classifieds platforms. See also “—Our business could be negatively affected by updates or changes in search engine algorithms and pricing model.”
Furthermore, we may also face competition from platforms that offer short-term rentals, such as Airbnb and Booking.com, if these platforms begin placing greater emphasis on more comprehensive real estate offerings that appeal to our current users. We may also face competition from new entrants into the online real estate classifieds market. For example, recently Ozon, one of the largest Russian e-commerce
 
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platforms, announced a launch of its real estate marketplace in partnership with a real estate developer. Additionally, in organizing their real estate search, users may choose to participate in grassroots or community-based initiatives that are increasingly being organized on horizontal classifieds platforms and through social media, such as Facebook and VKontakte.
Industry consolidation could also significantly impact our business and operating results. There has been a relatively high amount of merger and acquisition activity in our market in recent years, which may continue. For example, on October 6, 2021, the Federal Antimonopoly Service of Russia (“FAS”) rejected a proposed business combination between us and Avito. While, as of the date of this prospectus, we are not aware of any contemplated business combination involving the Cian Group, in the future, a competitor, private equity firm or any other company may make a merger or an unsolicited takeover proposal, which may create additional risks and uncertainties with respect to our financial position, operations, strategies and management. Any perceived uncertainties may also affect the market price and volatility of our ADSs. Additionally, if any of our competitors consolidate, we may experience increased competition with consolidated entities having enhanced market power.
Some of the real estate agents or real estate developers in Russia may also form associations and establish their own real estate platforms and advertising channels, including through social media. In addition, we also compete with regional and local players. Given Russia’s large geographical coverage, our competitors operating on regional and local levels may enjoy certain competitive advantages, including greater brand recognition, stronger presence in a particular region and understanding of the local market and local demands, more favorable pricing alternatives and lower operating costs.
There can be no assurance that we will be able to compete successfully against other companies that provide similar services in the competitive environment in which we operate. If we are not able to compete effectively, it could result in us having to make changes to our strategy and business model, and it could have a material adverse effect on our business, results of operations, financial condition and prospects.
We are heavily dependent on our brands and reputation.
Our success depends in large part on our “Cian” and “N1” brand family. In the markets where we are a market leader, our brands are particularly important as they benefit from, and are reinforced by, the network effects of our market-leading positions. According to the Frost & Sullivan Report, our “Cian” brand enjoys market-leading brand awareness in Moscow and St. Petersburg, while our “N1” brand has a strong recognition in numerous regional markets, such as Ekaterinburg and Novosibirsk. However, our brands are also important in the markets where we are working to build our brand recognition and brand awareness.
Awareness and perceived quality and differentiation of our brands are critical aspects of our efforts to attract and expand the number of our customers and users. For example, it may be easier for our competition from horizontal platforms, such as Avito, to leverage their broader platform and build stronger brand awareness in the online real estate classifieds market. Furthermore, some of our competitors, particularly those owned by large Russian banking groups, such as DomClick, may benefit from larger marketing budgets and other resources in promoting their brand. See “—The online classifieds market is competitive, and we may fail to compete effectively with existing and new industry players, which could have a material adverse effect on our business, results of operations, financial condition and prospects.” If we fail to maintain, protect or enhance our brands, we may not be able to increase our prices if and as planned, or we may be required to increase our marketing or sales efforts, which could be costly or prove unsuccessful in avoiding customer and user churn.
Our reputation depends on the accuracy, completeness and timeliness of the listings information that we provide, although the accuracy and completeness of this data is often outside of our control. Furthermore, any events that cause our customers and users to believe that we have failed to maintain high standards of integrity, service, security and quality could affect our brand image or lead to negative publicity about the security, integrity or quality of our platform, which may damage our reputation or lead to loss of trust among our customers and users. We are susceptible to others damaging the reputation of our brands by, for example, posting low-quality listings, such as fraudulent or replicated listings, inappropriate content or inaccurate information on our platform. Such incidents may result in adverse publicity and harm our reputation and brands.
 
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Furthermore, our brands and reputation also depend on our ability to maintain effective customer service, which requires significant personnel expense and which, if not managed properly, could significantly impact our profitability. If we are unable to properly manage or train our customer service representatives, it could compromise our ability to effectively handle our customers’ needs.
If we are unable to protect and maintain our brand recognition and reputation, or if we are required to make significant investments to protect our brands from competition or a deterioration in customer and user perception, we may experience a decline in demand for our services or an increase in operating costs, which, in turn, could have a material adverse effect on our business, results of operations, financial condition and prospects.
Our business is concentrated in certain geographic markets. Our failure to adapt to any substantial shift in real estate transactions from, or demand for services in, these markets to other markets in Russia could adversely affect our financial performance.
For the six months ended June 30, 2021 and the year ended December 31, 2020, Moscow and the Moscow region accounted for 74% and 78% of our Core Business segment revenue, respectively. Historically we also have held a strong market position in St. Petersburg and the Leningrad region. Local and regional conditions in Moscow, St. Petersburg and their respective regions may differ significantly from prevailing conditions in other parts of Russia. Accordingly, events that adversely affect demand for, and sales and rental prices of, real estate in these markets may disproportionately and adversely affect our business, financial condition and results of operations. Any downturn in demand or prices in any of our largest markets, particularly if we are unable to proportionately increase revenue from our other markets, could adversely affect growth of our revenue and market share or otherwise harm our business.
Our top geographic markets are primarily major metropolitan areas, such as Moscow, St. Petersburg, Ekaterinburg and Novosibirsk, where real estate prices, transaction volumes and competition are generally higher than in the majority of other geographic markets in Russia. If, in the future, people migrate to cities outside of the major metropolitan areas due to lower home prices or other factors, including as a result of the novel coronavirus disease (“COVID-19”) pandemic, and if this migration continues to take place over the long term, the relative percentage of residential housing transactions may shift away from the markets where we have historically generated most of our revenue. Our inability to effectively adapt to any general market trends or shifts could have a material adverse effect on our business, results of operations, financial condition and prospects.
We may be significantly impacted by the health of the Russian real estate market and may be negatively affected by downturns in this industry and general economic conditions.
The success of our business depends, directly and indirectly, on the health of the Russian real estate market, which is affected, in part, by general economic conditions and other factors beyond our control. A number of macroeconomic factors could adversely affect demand for real estate, resulting in falling prices and decrease in our customer and user activities, including:
•
slow economic growth or recessionary conditions;
​
•
the ongoing and future impact of the COVID-19 pandemic on the real estate market, including real estate buying, renting, selling, financing and shopping trends as well as any actions taken by governmental authorities in response to the pandemic;
​
•
increased levels of unemployment and/or slowly growing or declining wages;
​
•
increased interest rates;
​
•
weak credit markets;
​
•
inflationary conditions;
​
•
value declines or illiquidity in residential and/or commercial real estate;
​
•
overall conditions in the real estate market, including macroeconomic shifts in demand, and increases in costs for property owners, such as property taxes, fees and insurance costs;
​
 
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•
low levels of user confidence in the Russian economy and/or the Russian real estate industry;
​
•
adverse changes in local or regional economic conditions in the markets that we serve, particularly Moscow, St. Petersburg and their respective regions, and the regional Russian markets into which we are expanding;
​
•
increased mortgage rates or down payment requirements and/or restrictions on mortgage financing availability;
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•
newly enacted and any potential future national, regional or local legislative actions that would affect the residential real estate industry generally or in our key markets, including (i) actions that could increase the tax liability arising from buying, selling or owning real estate, (ii) actions that would change the way real estate commissions are negotiated, calculated or paid and (iii) potential reforms that negatively affect to the mortgage market;
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volatility and general declines in the stock market; and/or
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war, terrorism, political uncertainty, natural disasters, inclement weather, health epidemics or pandemics, acts of God and other events that disrupt local, regional or national real estate markets.
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Our inability to effectively adapt to economic downturns could have a material adverse effect on our business, results of operations, financial condition and prospects.
We may be unable to adapt to structural changes in the real estate market in Russia prompted by decreased reliance on real estate market professionals due to technological innovation or changes in our users’ preferences or government intervention.
We derive the majority of our listing revenue from listings and related value-added services for customers that are real estate market professionals, including primarily real estate agents and agencies. Our current monetization strategy differs significantly for our professional customers and our customers who are individual sellers and renters. Unlike professional customers, individual sellers and renters typically only list the real estate that they own, which results in a very limited amount of listings from one particular customer. We consider these customers to be important for the depth of our listing base (and, as a result, attractiveness to users) and, in the majority of regions, we allow individual sellers and renters to post their listings free of charge, as we currently focus our monetization strategy on professional customers. If market preferences change such that they choose to be less reliant on the services of real estate professionals, such as agents, if the business of real estate professionals is disrupted by technological innovation or other factors or becomes obsolete for other reasons, as has been the case in various industries over the last few decades, our professional customers may significantly reduce their listings on our platform. Thus, if we are unable to respond to such structural change in an efficient manner by adjusting our approach to our customers and our monetization strategy or otherwise, it could have a material adverse effect on our business, results of operation, financial condition and prospects. For further details, see “—Technological changes may disrupt our business or the markets in which we operate and if we cannot keep pace our business could be harmed.”
Furthermore, any structural intervention by the Russian government, including any potential governmental support for any aspects of real estate business or online classifieds businesses in Russia, could create uncertainty and have a significant impact on the competitive dynamics. For example, the Russian government may support shifting sale or rent transactions online by opening access to government registry databases to real estate classifieds platforms or other similar providers. It remains unclear as to what extent, if at all, the Russian government may provide such access and, if so, who may receive such access and what the conditions may be for such access. In addition, if the Russian government decides to mandate any single entity that will be responsible for online real estate transactions in Russia generally, it may also significantly impact the market dynamics and our market share. If the government intervenes in the real estate market in manner adverse to us or in favor of our competitors, it could have a material adverse effect on our business, results of operation, financial condition and prospects.
Our business and results of operations may be affected by the cancellation of, or any changes to, the Russian mortgage subsidy program and other government support programs.
We generate a significant part of our revenue from the lead generation services for real estate developers. Therefore, our revenues and results of operations are significantly affected by the availability of mortgage
 
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financing and lower interest rates, which typically increase the demand for the primary real estate and, consequently, are important factors affecting the leads generated for the real estate developers through our platform. In April 2020, the Russian government instituted a mortgage subsidy program intended to support the construction sector of the economy by offering subsidized mortgages. Under this program, the government compensates participating banks for lowering their interest rates on mortgages for primary real estate. The program has had a strong positive effect on consumer demand for real estate purchases and, accordingly, the sales of real estate developers and their demand for our services. Our lead generation revenue, which is driven by primary real estate developers, increased by 46.3% in the six months ended June 30, 2021 and by 59.6% in 2020. For further details see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Results of Operations—Macroeconomic Environment and the Russian Property Market.” Off the back of this strong underlying real estate market, we were able to increase our fees charged for generated leads. We believe that our competitive pricing allowed us to increase our fees without losing our developer base. In order to maintain our competitive advantages, we may not be able to increase our lead generation fees in the future, which will result in a revenue growing at a slower pace or declining.
In July 2021, the mortgage subsidy program was extended until July 2022 on amended terms, including increase of the mortgage interest rate ceiling from 6.5% to 7.0% and decrease of the maximum subsidized mortgage size from up to RUB 12 million for Moscow, the Moscow region, St. Petersburg and the Leningrad region (and RUB 6 million for other regions) to up to RUB 3 million across all regions. If the program is cancelled or further amended in an adverse manner, the demand for primary real estate may significantly decrease, which in turn may affect our revenue generated from the leads to real estate developers.
Furthermore, there are currently various other governmental support programs in the real estate market designed to help real estate development and mortgage uptake by, among others, families, those living in the Russian Far East, and rural communities. We believe that such programs have also impacted the Russian real estate market and its competitive dynamics. We believe that their cancellation, or any significant changes to such programs, could also have a material adverse effect on our business, results of operation, financial condition and prospects, specifically our revenue from lead generation services and the growth of our Mortgage Marketplace segment.
The COVID-19 pandemic and other public health crises, natural disasters or other catastrophic events may significantly limit our ability to conduct business as normal, disrupt our business operations and materially affect our financial condition.
The COVID-19 pandemic had a significant impact on the economies of most countries, including Russia. The pandemic has resulted in numerous deaths, and the governments of more than 80 countries across the world, including Russia, introduced measures aimed at preventing the further spread of COVID-19, including, among others, travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, quarantines and the imposition of both local and more widespread “work from home” measures. For example, in March 2020, to slow the spread of COVID-19, the Russian government imposed a country-wide lockdown, introducing several “non-working weeks,” bans on public events, closures of public places, border controls and travel and other restrictions. In June 2021 and in September/October 2021, there have been further spikes in the spread of COVID-19 in Moscow and numerous other Russian regions, and the governmental authorities introduced a number of recommendations and restrictions.
The COVID-19 pandemic, its broad impact and preventive measures taken to contain or mitigate the pandemic have had, and are likely to continue to have, significant negative effects on the Russian and global economy, employment levels, employee productivity, residential and commercial real estate and financial markets. This, in turn, has and may increasingly have a negative impact on our customers and users, their ability to effectuate real estate transactions, and in turn, our profitability and ability to operate our business.
In 2020, in response to the COVID-19 pandemic, we introduced several measures to address its effects on our business and customer and user base. Specifically, to support our customers in these unprecedented circumstances, from April 2020, we temporarily suspended monetization of our listing services across all cities and regions, including Moscow, the Moscow region, St. Petersburg and the Leningrad region. The monetization of our listing services in Moscow, the Moscow region, St. Petersburg and the Leningrad region was reinstated in July 2020, with certain discounts being introduced in the third quarter of 2020. Our
 
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listings monetization in most other regions remains temporarily suspended and its potential reintroduction is being assessed on a region-by-region basis. We believe that this suspension in monetization of our listing services was one of the main drivers of a 4.0% decrease in our listing revenue in 2020. Furthermore, during the outbreak, we instituted a work-from-home policy for our employees, suspended a significant part of our marketing and advertising activities, particularly offline marketing and advertising, reduced discretionary spending, paused hiring for non-critical roles, restricted employee travel and switched to virtual meetings. For further details see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Results of Operations—Macroeconomic Environment and the Russian Property Market and the Impact of the COVID-19 Pandemic.” Should the COVID-19 pandemic continue to intensify or should any other global health crises or epidemics arise, we may need to re-introduce these or more severe measures to mitigate the potential adverse consequences for our business operations and our customers’ and users’ financial condition.
The full extent to which the COVID-19 pandemic may impact our financial results, including as a result of its possible impact on the economy, is not certain. The real estate industry is affected by all of the factors that affect the economy in general, and the commercial real estate market was among the hardest hit by the pandemic. There continue to be significant uncertainties associated with the COVID-19 pandemic, including the severity of the disease, its potential variants, the duration of the outbreak and the timing of vaccine rollouts. If the outbreak lasts for a prolonged period in the regions in which we operate, the economy could suffer substantially from the measures and restrictions taken to combat the virus, which would in turn have an adverse impact on the general real estate industry as well as the real estate advertising industry, including our business. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of exacerbating many of the other risks described in this “Risk Factors” section.
Furthermore, we operate in all key metropolitan areas in Russia, including Moscow, St. Petersburg, Ekaterinburg and Novosibirsk and our operations and customer and user base are vulnerable to natural disasters and other catastrophic events. Although the majority of our workforce has temporarily shifted to a remote work environment due to the COVID-19 pandemic, we maintain large employee populations in Moscow and St. Petersburg. An earthquake or other natural disaster or catastrophic event in any of these cities could disrupt our engineering, sales and operations teams as well as equipment critical to the operation of our business. Similarly, a significant natural disaster or other catastrophic event in any major Russian city could negatively impact a large number of our real estate customers and users and cause a decrease in our revenue or traffic.
Our systems and operations, and the systems and operations of other participants in the real estate industry, continue to be impacted by the COVID-19 pandemic and are further vulnerable to interruptions by natural disasters, public health crises and other catastrophic events such as pandemics, earthquakes, hurricanes, fires, floods, power losses, telecommunication failures, cyber-attacks, wars, civil unrests, terrorist attacks and similar events.
If we are unable to develop adequate business continuity and disaster recovery plans to ensure that our business continues to operate during and after a disaster or catastrophic event, and successfully execute on those plans in the event of a disaster, catastrophic event or other emergency, it could have a material adverse effect on our business, results of operations, financial condition and prospects.
We may fail to establish and maintain important relationships with our customers and certain other parties.
Our ability to attract customers and users to our platform depends, to a large degree, on the quantity and the quality of listings and the quality and breadth of our suite of services. As part of our operations, we aim to establish and maintain relationships with a number of customers, such as large real estate agencies and real estate developers. For further details relating risks to our relationships with real estate developers, see “—Our business and results of operations may be affected by the cancellation of, or any changes to, the Russian mortgage subsidy program.” Furthermore, the development of certain new initiatives, such as Mortgage Marketplace, may depend on our ability to establish and maintain strong relationships with certain third parties, such as the leading Russian banks. In addition, in connection with development and advancement of our C2C Rental and End-to-End Offering products, we may also, from time to time, partner, or otherwise depend on contractual arrangements, with banks and other third parties. Our inability
 
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to establish or maintain such relationships could have a material adverse effect on our business, results of operations, financial condition and prospects.
Generally most of our arrangements with customers are short-term, typically for less than a month or on a month-to-month basis. These arrangements may also be terminated with limited notice or cause. We may not succeed in retaining existing customer relationships and customers’ spending, or capturing a greater share of such relationships or spending, if we are unable to convince our customers of the effectiveness and superiority of our products and services as compared to alternatives. The loss of a significant portion of our existing customer relationships, any potential changes to our rights to use or to timely access our customer and user data, our inability to continue to add new customers or changes to the way real estate information is shared, may lead to a decline in the quantity of our listings and result in us covering a smaller universe of properties. This could markedly reduce customer confidence in our products and services and cause customers or users to go elsewhere for real estate listings and information. In addition, we continually evaluate and utilize various pricing and value delivery strategies to better align our revenue opportunities with the growth in our platform usage. Future changes to our pricing or monetization methodologies may cause our customers to reduce or end their engagements with us, see “—The implementation of our subscription model may not materialize as expected.” Any of the above could have a material adverse effect on our business, results of operations, financial condition and prospects.
The real estate developers market in Russia is concentrated and therefore we, to a certain extent, depend on our continued relationship with a number of large real estate developers. In recent years, there has also been a shift of the developers’ advertising budgets from offline to online advertising (for further details, see “Industry—Russian Real Estate Advertising Market”) and our ability to capitalize on this trend, as well as our ability to increase lead generation revenue, depend on our ability to retain and enhance our relationships with large real estate developers. If the real estate developers terminate or substantially reduce their business with us or, if in order to retain our business with the real estate developers, we have to change our monetization policy, this could have a material adverse effect on our business, results of operation, financial condition and prospects.
Furthermore, if our customers or other third parties reduce or end their advertising spending with us, our business could be harmed. Our business depends in part on revenue generated through advertising sales to real estate agents, real estate developers and other real estate professionals and service providers for real estate transactions. Our ability to generate advertising revenue depends on a number of factors, including how successfully we can offer an attractive return on investment to our real estate partners for their advertising spending with us and our ability to continue to develop our advertising products and services to increase adoption by and engagement with our real estate partners. Future changes to our pricing for advertising services or product and service offerings may cause real estate partners to reduce or end their advertising with us. If our real estate partners reduce or end their advertising spending with us, or if we are unable to effectively manage pricing, it could have a material adverse effect on our business, results of operations, financial condition and prospects.
Our business could be negatively affected by updates or changes in search engine algorithms and pricing model.
We rely on internet search engines, such as Google and Yandex, including through the purchase of sales and marketing-related keywords and the indexing of our web pages, to generate a significant portion of the traffic to our platform. Search engines frequently update and change the algorithms that determine the placement and display of results of a customer’s or user’s search. There is a risk that search engines may sometimes do so in a manner that may favors particular content, including their own. For example, in April 2021, the FAS began an investigation into Yandex’s promotion of its own services in the search results, which allegedly lead to a discriminatory effect on listing providers, including real estate classifieds platforms.
If a major search engine updates or changes its algorithms in a manner that negatively affects the placement of our platform in the search results, or if competitive dynamics impact the costs or effectiveness of search engine marketing or other traffic-generating arrangements in a negative manner, it could have a material adverse effect on our business, results of operations, financial condition and prospects. See also “— The online classifieds market is competitive, and we may fail to compete effectively with existing and new industry players, which could have a material adverse effect on our business, results of operations, financial condition and prospects.”
 
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In addition, a certain amount of traffic is directed to our websites through participation in pay-per-click and display advertising campaigns on search engines, such as Google and Yandex. Pricing and operating dynamics for these traffic sources can change rapidly, both technically and competitively, and any increases in prices by search engines could have a material adverse effect on our business, results of operations, financial condition and prospects.
Technological changes may disrupt our business or the markets in which we operate and if we cannot keep pace our business could be harmed.
The online classifieds market has been constantly and rapidly evolving, with frequent technological changes, new product and service introductions, evolving industry standards, changing customers’ needs and the entrance of new market players. The dynamics and future developments of the online classifieds market, and specifically the online real estate classifieds market, depend on a variety of factors, most of which are outside our control. Our expectations with respect to technological and market changes may prove inaccurate, and we may fail to timely identify or execute appropriate product or service development targets. Innovation cycles are increasingly fast paced and require constant investment.
To remain competitive, we must continue to enhance and improve the interface, functionality and features of our platform. These efforts may require us to develop internally, license or acquire increasingly complex technologies. In addition, some of our competitors are continually introducing new products, services and technologies, which may require us to update or modify our own technology to keep pace. As an example of technological change, we believe the industry is currently experiencing an ongoing transition of real estate transactional execution, including paperwork, online to streamline the transaction process. See also “—We may be unable to adapt to structural changes in the real estate market in Russia prompted by decreased reliance on real estate market professionals due to technological innovation or changes in our users’ preferences or government intervention.” As such, we believe that our ability to meet the necessary technological and regulatory requirements, including our ability to get access to the necessary governmental databases, and offer our customers and users access to such services and seamlessly implement such services on our platform would be critical to the future development of our business. If we fail to offer our customers new technological solutions in accordance with market trends or if we fail to launch innovative products in time and ahead of our competitors, we may lose our competitive edge and our market share, which may adversely affect our business, results of operations, financial condition and prospects.
We depend heavily on our ability to drive and to adapt to technological changes and innovation. Developing and integrating new services and technologies into our existing businesses could be expensive and time consuming. Furthermore, such new features, functions and services may not achieve market acceptance or serve to enhance our brand loyalty. Any failure to innovate, or to respond quickly and effectively to technological or other advances, emerging industry standards or business models, could have a material adverse effect on our business, results of operations, financial condition and prospects.
Our continued growth depends on our ability to successfully implement our strategy, which is subject to a variety of risks and uncertainties, including regulatory risks.
Our strategy includes the following key elements: (i) enhancement of monetization in secondary and commercial real estate verticals, (ii) online penetration growth in the primary real estate vertical as developers shift marketing online, (iii) continued expansion into the Russian regions through organic growth and selective acquisitions and (iv) development of an end-to-end real estate platform, comprising new business lines and new service offerings. For further details, see “Business — Our Strategy.” There is no assurance that we will be able to implement and successfully manage our strategy or that this strategy will be effective or profitable.
For instance, our ability to enhance monetization in the secondary and commercial real estate verticals, as well as online penetration growth in the primary real estate vertical depends on a number of factors, including growth and further expansion of our value-added services as well as development of new services and offerings. In this context, we may fail to successfully develop and introduce new services and offerings, which may result in higher churn and lower than expected growth rates as well as a potential loss of market share to our competitors. See also “— We may devote significant costs and management time to the implementation of new initiatives, including development of new business lines and new service offerings, as well
 
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as certain strategic regional expansion efforts, with no guarantee of success.” Our expansion into the Russian regions through organic growth and selective acquisitions depends on our ability to compete effectively with existing market players and new entrants, to achieve the business synergies with acquired business and to respond to users and customer demands in particular regions.
In addition, our strategies will require us in the future to devote financial and operational assets and management time to their execution. Our success also depends on our ability to appropriately manage our expenses associated with the growth as we invest in our strategic development.
Furthermore, in order to boost our strategy of developing a leading end-to-end real estate platform and excel beyond our current targets (for further details, see “Business — Our Strategy — Development of end-to-end real estate platform”), we may need to obtain certain licenses, permits or registrations to strengthen service offerings. Such licensing or compliance processes may be time consuming and expensive, and we may not be successful in acquiring any newly required licenses or permits. If we fail to obtain and maintain required licenses, permits or registrations or comply with the attendant legal requirements, we may face fines, penalties, sanctions, experience a loss of revenues or have to discontinue providing certain services and suffer a competitive disadvantage.
Among other things, in order to develop and enhance our Mortgage Marketplace, we consider obtaining access to the status of a financial platform operator as stipulated under the recently adopted Federal Law No. 211-FZ “On Performing Financial Transactions Using a Financial Platform” dated July 20, 2020 (“Financial Platform Law”). Under this law, entities that operate platforms matching financial services providers with consumers may apply for the financial platform operator status through inclusion in a specialized register maintained by the Central Bank of Russia (“CBR”). It is expected that such status will afford access to certain standardized customer information on government-ran electronic systems and databases.
We believe that access to the financial platform operator status could help us in further advancement of our Mortgage Marketplace. Such status, however, is subject to certain requirements, including a restriction on foreign ownership, which we currently are unable to comply with. In order to assist us in obtaining access rights to the financial platform operator status, our Chief Executive Officer, Maksim Melnikov, has agreed to establish a company which is expected to apply for such financial platform operator status. It is expected that we will participate in this company as an equity investor. To facilitate this process, we have extended certain loans to Mr. Melnikov’s company (for further details, see “Related Party Transactions — Agreements with Board Members and Executive Officers”). As of the date of this prospectus, such loans have since been either discharged or written off, in each case without the right to reborrow. We are still in the process of evaluating the requirements for our participation and structuring such potential arrangement.
There can be no assurance that we will be able to obtain access to the status of a financial platform operator or, even if we obtain such access, that we will be able to maintain it on terms satisfactory to us or at all. Moreover, the Financial Platform Law is new and remains largely untested. Its interpretation and enforcement may involve significant uncertainties. As a result, there can be no assurance that any structure we devise for such purpose will be able to satisfy the applicable regulatory requirements. We may be found to be in violation of relevant laws and regulations relating to financial platform operators if our proposed arrangements in this regard are deemed to be inconsistent with the regulatory framework.
If we are unable to implement our growth strategy, or if our new initiatives do not yield the expected results, our business, financial condition and results of operations could be materially adversely affected. If we fail to obtain any licenses or permits that are required or desirable for our business, our development and growth prospects may suffer and, if our competitors have better access to such licenses and permits, we may lose our customers and market share. Any failure by us to manage these and multiple other risks associated with implementing our growth strategy successfully could materially and adversely affect our business, financial condition and results of operations.
We may devote significant costs and management time to the implementation of new initiatives, including development of new business lines and new service offerings, as well as certain strategic regional expansion efforts, with no guarantee of success.
The industries for residential and commercial real estate transaction services, technology, information platforms and advertising are dynamic, and the expectations and behaviors of customers and users shift constantly and rapidly.
 
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Our success depends on our continued effort to introduce new initiatives, including development of new business lines and new service offerings. As a result, we must continually invest significant resources into research and development, including hiring of relevant personnel, in order to improve the attractiveness and comprehensiveness of our products and services and adapt to changes in technology and customer and user preferences. It is costly to introduce new initiatives and they may fail to achieve the targeted financial results and other performance indicators. Our new initiatives, including launching of new businesses lines that have not been tested on the Russian market, may fail to attract or engage our customers or users, and may reduce confidence in our products and services, negatively impact the quality of our brands, expose us to increased market or legal risks, subject us to new laws and regulations or otherwise harm our business. We may have to expend significant time and resources before we find a product’s market fit, or fail to find it altogether, in which case we may lose the money and time spent.
Furthermore, in order to expand our platform as part of our strategy, we may attempt to expand our presence in certain regional markets in Russia through organic growth and selective acquisitions. We may be unable to reach and maintain the desired market share in these regional markets, and we may fail in our efforts to monetize such expansion efforts.
If we are unable to provide products and services that are sought after by our customers and users on devices they prefer, then they may become dissatisfied and use competitors’ mobile applications, websites, products and services. If we are unable to successfully innovate, we may be unable to retain our current customers and users or attract additional ones, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
The implementation of our subscription model may not materialize as expected.
Historically, our pricing model has primarily focused on selling listings to real estate professionals on our platform on a pay-per-listing, or listing package, basis. Under this arrangement, our customers may take down their listings to avoid additional spending anytime they believe the listings may not be generating sufficient views, for example during weekends or holiday periods. In order to improve our operating results, stimulate our revenue growth as well as provide additional convenience for our customers and maintain a robust listing base, in June 2020, we introduced a new subscription-based model for customers, which allows our customers to list their properties and use some of our value-added services for a monthly fee. Under this model, the customers have little economic incentive to take down listings during periods of lower user traffic and are generally incentivized to maintain a certain level of listings from period to period. In addition, we introduced special discount systems within the subscription-based model that incentivize our customers to use our subscription-based model. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Changes in Our Pricing Models, Monetization Strategy and Penetration of our Value-Added Services.”
While we aim to incentivize customer migration to the subscription-based model by offering various customer discounts as well as providing additional value-added services to our customers, there is no guarantee that our subscription model will develop as expected. In particular, the introduction of this new model may develop slower than expected, and the implementation of the model may not be successful across all regions and across all customer groups. Our current or potential customers may determine that there is no compelling business justification for subscription to our listing services and may choose to stay or shift back to our pay-per-listing model or to choose our competitors’ services instead. We may be required to modify our subscription model, for example, by adjusting prices or included services, or abandon it altogether, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.
Ensuring that we have adequate internal controls over financial reporting in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be frequently re-evaluated. Our internal controls over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with the International Financial Reporting Standards. In connection with the
 
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offering, we began the process of documenting, reviewing, and improving our internal controls and procedures for compliance with Section 404 of the Sarbanes-Oxley Act, which will require annual management assessment of the effectiveness of our internal control over financial reporting. We have begun recruiting additional finance and accounting personnel with certain skill sets that we will need as a public company. If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may be unable to produce timely and accurate financial statements.
Implementing any appropriate changes to our internal controls may distract our officers and employees, entail substantial costs to modify our existing processes, and take significant time to complete. These changes may, however, prove ineffective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could have a material adverse effect on our business, results of operations, financial condition and prospects.
We have identified significant deficiencies in our internal controls over financial reporting, including our information technology general controls. If we are unable to remediate these deficiencies, or if other deficiencies or material weaknesses are identified, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner.
Prior to this offering, we have been a private company with limited accounting and financial reporting personnel and other resources with which we address our internal controls over financial reporting. In the course of preparing our consolidated financial statements as of and for the years ended December 31, 2020 and 2019, we identified certain significant deficiencies in our internal control environment. A “significant deficiency” is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness yet important enough to merit attention by those responsible for oversight of the company’s financial reporting. In particular, in the course of preparing our financial statements for the years ended December 31, 2020 and 2019, we identified certain significant deficiencies in our internal control environment, including deficiencies relating to (i) insufficient segregation of duties and controls over change management in our IT systems and (ii) insufficient controls over access management controls over access management in our IT systems.
To remedy our identified significant deficiencies, we are in the process of adopting several measures intended to improve our internal controls over financial reporting, including: (i) reviewing and formalizing the change management process; (ii) introducing segregation of duties throughout the change management process; (iii) implementing a full software development lifecycle procedure including testing and change approval; (iv) ensuring the storage of the evidences of related control procedures; and (v) implementing a formal access management process ensuring appropriate approval procedure for changes in access rights and permissions.
However, implementation of these measures may not fully address the significant deficiencies identified in our internal controls over financial reporting, and we cannot assure that we will be successful in remediating the significant deficiencies. Our failure to correct the significant deficiencies or our failure to discover and address any other deficiencies or potential material weaknesses could result in inaccuracies in our financial statements and impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis.
Management’s initial certification under Section 404 is expected to be required with our second annual report on Form 20-F. In support of such certifications, we will be required to make significant changes and enhancements, including hiring personnel with relevant experience in necessary functions. In addition, once we cease to be an “emerging growth company,” as defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation. As a result,
 
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we anticipate investing significant resources to enhance and maintain our financial controls, reporting system and procedures over the coming years.
While documenting and testing our internal control procedures, and in order to satisfy the future requirements of Section 404, we may identify other deficiencies or potential weaknesses in our internal controls over financial reporting. If we fail to maintain the adequacy of our internal controls over financial reporting, as these standards are modified, supplemented or amended, from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404.
Generally, if we fail to achieve and maintain an effective internal control environment, it could result in material misstatements in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our businesses, financial condition, results of operations and prospects, as well as the trading price of our issued equity instruments, including the ADSs, may be materially and adversely affected. Additionally, ineffective internal controls over financial reporting could expose us to increased risk of fraud or misuse of corporate assets, and subject us to potential delisting from the stock exchange, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.
We may make acquisitions, divestments and investments, which could result in operating difficulties and other harmful consequences.
From time to time, we may evaluate a wide array of potential strategic opportunities, including acquisitions, divestments and investments. Potential successful growth through acquisitions is dependent upon our ability to identify suitable acquisition targets, conduct appropriate due diligence, negotiate transactions on favorable terms and ultimately complete such acquisitions, and integrate acquired entities, including taking steps to retain key personnel of the acquisition targets. There can be no assurance that acquisition opportunities will be available on acceptable terms or at all, or that we will be able to obtain necessary financing or regulatory approvals to complete the potential acquisitions.
The acquisitions may not result in the intended benefits to our business, and we may not successfully evaluate or utilize the acquired products, technology or personnel, or accurately forecast the financial impact of an acquisition transaction. The process of integrating an acquired company, business or technology could create unforeseen operating difficulties and expenditures. The areas where we face risks include, among others: diversion of management time and focus from business operations to acquisition integration tasks; customer and industry acceptance of products and services offered by the acquired company; implementation or remediation of controls, procedures and policies at the acquired company; coordination of product, engineering, and sales and marketing functions; retention of employees from the acquired company; liability for activities of the acquired company before the acquisition; litigation or other claims arising in connection with the acquired company; and impairment charges associated with goodwill and other acquired intangible assets.
For example, in February 2021, as part of our regional strategic expansion efforts, we acquired the N1 Group. While the N1 Acquisition is complete, we are still in the process of integrating the N1 Group into our business, which is subject to a number of risks, including undiscovered liabilities, lack of synergies and complications in the integration process. For specific risks related thereto, see “—Risks Related to the N1 Acquisition.”
Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments could cause us to fail to realize the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities, and could have a material adverse effect on our business, results of operations, financial condition and prospects.
We engage in certain de minimis activities relating to Crimea, and these activities could impede our ability to raise funding in international capital markets and subject us to liability for noncompliance relating to various trade and economic sanctions laws and regulations.
In response to certain geopolitical tensions, a number of countries, including the United States, the European Union, the United Kingdom and Canada, imposed a variety of trade and economic sanctions
 
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aimed at Russia as well as certain individuals and entities within Russia and Ukraine. See “—Deterioration of Russia’s relations with other countries and adoption, maintenance and expansion of international embargo, economic or other sanctions against Russia could negatively affect the Russian economy and our business, financial condition and results of operations.” In December 2014, the President of the United States issued Executive Order Number 13685, which established a region-specific embargo under U.S. law for the Crimea region. Among other things, this embargo generally prohibits U.S. persons and U.S. companies from engaging in investments in the Crimea region and most import or export trade in goods and services with parties in the Crimea region. Pursuant to Executive Order Number 13685, the Office of Foreign Assets Control (OFAC) has also placed parties operating in the Crimea region on the Specially Designated Nationals and Blocked Persons List (“SDN List”). U.S. persons and U.S. companies are generally prohibited from engaging in most transactions or dealings with parties on the SDN List. Non-U.S. persons and companies may be designated on the SDN List if they engage in significant transactions with persons designated on the SDN List under U.S. sanctions programs with respect to Russia. The European Union and the United Kingdom have also imposed broad-based sanctions targeting Crimea, including prohibitions on acquiring any new, or extending any existing participation in ownership of, real estate located in Crimea or Sevastopol. Although we have no facilities, assets or employees located in Crimea, customers and clients located in this region have access to our platform. Currently, approximately one percent of our revenue comes from the Crimea region. While we believe that the current United States, EU and U.K. sanctions do not preclude us from conducting our current business and do not create a material risk of application of any sanctions to us, new sanctions imposed by the United States and certain EU member states or other countries may restrict certain of our operations in the future.
To the extent applicable, existing and new or expanded future sanctions may negatively impact our revenue and profitability, and could impede our ability to effectively manage our legal entities and operations or raise funding from international financial institutions or the international capital markets. Although we take steps to comply with applicable laws and regulations, our failure to successfully comply with applicable sanctions may expose us to negative legal and business consequences, including civil or criminal penalties, government investigations and reputational harm.
We depend upon retaining and attracting current and prospective highly skilled executives and other personnel, and a loss of these persons or our culture could adversely affect our market position and business.
Our business depends on the efforts and talents of motivated and experienced executives and other highly skilled employees, including particularly software engineers and other IT personnel, marketing professionals and sales staff. We need to attract, develop, motivate and retain highly qualified and skilled employees, and any failure to do so could materially adversely affect our business, financial condition and results of operations. Likewise, the failure to maintain our business culture of innovation and achievement, particularly as we become a public company, could constitute a significant obstacle in our future hiring initiatives of highly skilled and motivated employees and executives.
The loss of any of our senior management or key employees could materially impact our ability to execute our business plan and strategy, and we may not be able to find adequate replacements in a timely manner. The market for highly skilled senior management or other key employees is limited. We also do not currently maintain insurance coverage for loss of key management. Our hiring potential is significantly dependent on our reputation and publicity, including any media coverage of this offering. If we do not succeed in attracting well-qualified executives and other employees or retaining and motivating existing executives and other employees, it could have a material adverse effect on our business, results of operations, financial condition and prospects.
Our fraud detection processes and information security systems may not successfully detect all fraudulent activity by third parties aimed at our employees or customers, which could adversely affect our reputation and business results.
Third-party actors have attempted in the past, and may attempt in the future, to conduct fraudulent activity by engaging with our customers by, for example, posting fake real estate listings on our sites and attempting to solicit personal information or money from customers, and by engaging with our employees by, for example, making fake requests for transfer of funds or sensitive information. Though we have
 
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sophisticated fraud detection processes and have taken other measures to identify fraudulent activity on our mobile applications, websites and internal systems, we may not be able to detect and prevent all such activity. Similarly, the third parties we use to effectuate these transactions may fail to maintain adequate controls or systems to detect and prevent fraudulent activity. Persistent or pervasive fraudulent activity may cause our customers and users to lose trust in us and decrease or terminate their usage of our services, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
We may be subject to claims, suits, government investigations and other proceedings that may result in adverse outcomes.
We are, from time to time, involved in, or may in the future be subject to, claims, suits, government investigations and proceedings arising from our business, including actions with respect to intellectual property, advertising, privacy, consumer protection, information security, real estate, data protection or law enforcement matters, tax matters, labor and employment and commercial claims, as well as actions involving content generated by our customers. Such claims, suits, government investigations and proceedings are inherently uncertain, and their results cannot be predicted. Regardless of the outcome, any such legal proceedings can have an adverse impact on us because of legal costs, diversion of management time and other factors. In addition, it is possible that a resolution of one or more of such proceedings could result in reputational harm, liability, penalties or sanctions, as well as judgments, consent decrees or orders preventing us from offering certain features, functionalities, services or requiring a change in our business practices or technologies, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
We are exposed to the risk of violations of anti-corruption laws, anti-money laundering laws, and other similar laws and regulations.
We operate and conduct business in Russia, where there may be a heightened risk of fraud, money laundering, bribery and corruption. We have policies and procedures designed to assist in compliance with applicable laws and regulations and we may be subject to the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”) and the U.K. Bribery Act 2010 (the “Bribery Act”). The FCPA prohibits providing, offering, promising or authorizing, directly or indirectly, anything of value to government officials, political parties or political candidates for the purposes of obtaining or retaining business or securing any improper business advantage. The provisions of the Bribery Act extend beyond bribery of government officials and create offences in relation to commercial bribery. These provisions are more stringent than the FCPA in a number of other respects, including jurisdiction, non-exemption of facilitation payments and penalties. In particular, the Bribery Act (unlike the FCPA) does not require proof of corrupt intent to be established in relation to bribery of a public official and also creates offences for being bribed as well as bribing another person. Furthermore, unlike the vicarious liability regime under the FCPA, whereby corporate entities can be liable for the acts of their employees, the Bribery Act also includes an offense applicable to corporate entities and partnerships, which carry on part of their business in the U.K. and fail to prevent bribery, which can take place anywhere in the world, by persons who perform services for or on behalf of them, subject to a defense of having adequate procedures in place to prevent the bribery from occurring. This offence can render parties criminally liable for the acts of their agents, joint venture, or commercial partners even if done without their knowledge, thereby making the Bribery Act even more expansive than the FCPA.
While we maintain internal compliance policies and procedures designed to provide reasonable assurance that we, our employees, distributors and other intermediaries comply with the anti-corruption laws to which we are subject, we cannot provide any assurances that these policies and procedures will be followed at all times or effectively detect and prevent all violations of the applicable laws and every instance of fraud, money laundering, bribery and corruption. We can provide no assurances that violations of applicable anti-bribery or money laundering laws, including the FCPA or the Bribery Act will not occur. As a result, we could be subject to potential civil or criminal penalties under relevant applicable laws. In addition, such violations could also negatively impact our reputation, and consequently, could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
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Some of our potential losses may not be covered by insurance, and we may not be able to obtain or maintain adequate insurance coverage.
The insurance industry in Russia is not yet fully developed, and many forms of insurance protection common in more developed countries are not yet fully available or are not available on comparable or commercially acceptable terms. Accordingly, while we hold certain mandatory types of insurance policies in Russia, we do not currently maintain insurance coverage for business interruption, property damage or loss of key management personnel. We do not hold insurance policies to cover for any losses resulting from counterparty and credit risks or fraudulent transactions. There are also certain losses, including losses from certain security breaches, litigation, regulatory action, and others, for which we may not be insured because it may not be deemed economically feasible or prudent to do so, among other reasons. We also do not generally maintain separate funds or otherwise set aside reserves for most types of business-related risks. Accordingly, our lack of insurance coverage or reserves with respect to business-related risks may expose us to substantial losses, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Risks Related to the N1 Acquisition
The N1 Group may have liabilities that are not known, probable or estimable at this time.
As a result of the N1 Acquisition, the N1 Group became our subsidiary, and we remain subject to all of its liabilities. See “Business—N1 SPA.” There could be unasserted claims or assessments that we failed or were unable to discover or identify in the course of performing due diligence investigations of the N1 Group. In addition, there may be liabilities that are neither probable nor estimable at this time that may become probable or estimable in the future. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our financial results. We may learn additional information about the N1 Group that adversely affects us, such as unknown, unasserted or contingent liabilities and issues relating to compliance with applicable laws.
Without limitation to the generality of the foregoing, the N1 Group is subject to various rules, regulations, laws and other legal requirements, enforced by governments, regulatory agencies and other public authorities. Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by the N1 Group or any of the N1 Group’s directors, officers, employees or agents could have a significant impact on the N1 Group’s business and reputation and could subject the N1 Group to, among other things, fines and penalties and criminal, civil and administrative legal sanctions, including potential restrictions or limitations on services, resulting in reduced revenue and profits. Such misconduct could include the failure to comply with regulations prohibiting bribery, control over financial reporting, money laundering, breaches of economic sanctions and any other applicable laws or regulations. Any such instances, individually or in the aggregate, could have a material adverse effect on our business, results of operations, financial condition and prospects.
The synergies attributable to the N1 Acquisition may vary from expectations.
We are currently in the process of integrating the N1 Group’s business, in particular, we are aligning operational structures and migrating its divisions under the control of the Cian Group management. In July 2021, as part of our integration of the N1 Group, we launched a listing algorithm, which allows for simultaneous posting of listings on both the Cian and N1 websites and mobile applications once posted on any one of them. We are planning to maintain N1 website and mobile application in the mid-term for the convenience of N1’s users. Although we expect substantial synergies between our businesses, we may fail to realize the anticipated benefits and expected synergies from the N1 Acquisition and our business, results of operations, financial condition and prospects may be materially adversely affected.
The success of the N1 Acquisition will depend, in significant part, on our ability to successfully manage the acquired business, grow the revenue of the combined company and realize the anticipated strategic benefits and expected synergies from the combination. The integration process, to the extent the two businesses are to be integrated, could take longer than anticipated and could result in the loss of key employees, the disruption of each company’s ongoing businesses, tax costs or inefficiencies or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could
 
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adversely affect our ability to maintain relationships with customers, employees or other third parties, or our ability to achieve the anticipated benefits of the N1 Acquisition and could harm our financial performance.
We believe that combining the Cian and N1 businesses will allow the Group to benefit from the advantages of joined platforms and systems. However, achieving these goals requires realization of the targeted cost synergies expected from the N1 Acquisition. These anticipated benefits of the transaction, including any operating, technological, strategic and revenue opportunities, may not be realized fully, or at all, or may take longer to realize than expected.
We have performed an inspection of assets to be acquired, which we believe to be generally consistent with industry practices. However, the accuracy of our assessments of the assets and our estimates are inherently uncertain. If problems are identified after the closing of the N1 Acquisition, the sale and purchase agreement provides for limited recourse against the sellers. If we are not able to achieve these objectives and realize the anticipated benefits and synergies expected from the N1 Acquisition within the anticipated timing or at all, our business, results of operations, financial condition and prospects may be materially adversely affected.
Any integration and transition associated with the N1 Acquisition, together with the resulting increased scale, may affect our internal control over financial reporting and ability to effectively and timely report financial results.
While we do not anticipate fully integrating the N1 Group’s business with Cian’s business, at least within the first few years following the closing of the transaction, the additional scale of the combined company’s operations, together with the complexity of any integration efforts, including changes to or implementation of critical information technology systems, may adversely affect our ability to report financial results on a timely basis. In addition, we may have to train new employees and third-party vendors. Due to the complexity of the N1 Acquisition, we cannot be certain that any changes to our internal control over financial reporting will be effective for any period or on an ongoing basis. If we are unable to accurately report our financial results in a timely manner or are unable to assert that our internal controls over financial reporting are effective, our business, results of operations, financial condition and prospects, and the market perception thereof, may be materially adversely affected.
Our actual results of operations may differ materially from the Unaudited Pro Forma Condensed Combined Financial Information included in this prospectus.
The unaudited pro forma condensed combined financial information included in this prospectus is presented for illustrative purposes only and is not necessarily indicative of what our actual results of operations would have been had the N1 Acquisition and this offering been completed on the dates indicated. The unaudited pro forma condensed combined financial information has been derived from the audited historical financial statements of Cian and the N1 Group. The assets and liabilities of N1 have been estimated using assumptions that our management believes are reasonable utilizing information currently available. The process for estimating the fair value of acquired assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. In addition, the assumptions used in preparing the unaudited pro forma condensed combined financial information may not prove to be accurate, and other factors may adversely affect our business, results of operations, financial condition and prospects.
Risks Related to Our Technology and Intellectual Property
The integrity of customer and user information stored by us, or the effectiveness of our platforms or systems in general, may be compromised, which may damage our reputation and brand and lead to a loss in customer and user confidence and the demand for our products and services.
Our brand and reputation depend upon our handling our customers’ and users’ information safely, as well as our ability to provide a safe online platform for their real estate needs. Our services involve the storage, transmission and processing of customer and user information, some of which may be private and sensitive, such as names, addresses, contact details and financial account information. Any security breaches and administrative or technical failures could expose us to a risk of data loss or exposure, including with respect
 
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to user and employee data, as well as loss of intellectual property and other confidential business information, which could result in potential significant losses and litigation as well as significant reputational harm.
Similarly to other website and mobile application providers, our websites and mobile applications and other IT systems are vulnerable to computer viruses, break-ins, phishing attacks, attempts to overload our servers with denial-of-service or other cyber-security attacks or threats and similar disruptions, any of which could lead to loss of critical data, availability or the unauthorized disclosure or use of personal or other confidential information. Further, outside parties may attempt to fraudulently induce our employees, officers, directors, customer or users to disclose sensitive information in order to gain access to our or their information, and our information technology and infrastructure may be vulnerable to attacks by hackers or breaches due to error, malfeasance or other disruptions. For example, hackers could steal customer or user profile passwords and manipulate information about such customers or users on our system, or about objects listed by customers on our platform. As the volume of data we publish increases, and potential threats to data quality become more complex, the risk of harm to our data integrity also increases. Furthermore, any change in the general perception of data privacy and data security may negatively impact our customers’ and users’ willingness to use our services.
We engage third-party vendors to process and store certain customer information, some of which may be private or include personally identifiable information. We also depend on vendors to host some of the systems and infrastructure used to provide our services. See “—Any significant disruption in the service of our websites or mobile applications could damage our business, reputation and brand.” If our vendors fail to maintain adequate information security systems and our systems or our customers’ or users’ information is compromised, our business, results of operations, financial condition and prospects could be harmed.
Any significant disruption in the service of our websites or mobile applications could damage our business, reputation and brand.
Reliable performance of our network infrastructure and our platform is critical to our brand, reputation and our ability to attract customers and users and deliver quality products and services. Neither we, nor any third-party service providers, may fully prevent downtime or outages with respect to our critical infrastructure, including those caused by events or catastrophic occurrences, such as earthquakes, floods, fires, power loss, telecommunication failures, terrorist attacks, computer viruses, or similar events. See “—The COVID-19 pandemic and other public health crises, natural disasters or other catastrophic events may significantly limit our ability to conduct business as normal, disrupt our business operations and materially affect our financial condition.” Any downtime of our websites or mobile applications, or failure in maintaining and keeping the information on our websites or mobile applications up to date, for any reason, may damage our reputation and lead to a loss of customers or users. For example, in November 2019, we experienced downtime of our “Cian.ru” website and mobile application for approximately seven hours, which resulted in reputational damage as well as various compensations paid to our customers in the form of free services and discounts.
Furthermore, we rely on a number of third-party service providers to support essential functions of our business. For example, we store a significant amount of information about our customers, real estate partners, employees, and business on third-party data storage and cloud services, and we rely on these third-party service providers to provide services on a timely and effective basis. Additionally, we rely on telecommunication operators, payment service providers, such as YooMoney, servicers such as Yandex.Maps to display listings on the map view, and other third parties for the key aspects of maintaining our operations and providing our services to our customers and users. Our influence over these third parties is limited and any failure by any of our third-party service providers to perform as expected or as required by contract could result in significant disruptions and costs to our operations.
We do not carry business interruption insurance sufficient to compensate us for potentially significant losses, including potential harm to the future growth of our business, which may result from interruptions in our service as a result of any system failures. Any errors, defects, disruptions or other performance problems with our services could be further exacerbated as a result of the COVID-19 pandemic. All or any of the above factors could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
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We may be unable to secure intellectual property protection for all of our technology, enforce our intellectual property rights, or protect our other proprietary business information.
Our success and ability to compete depends in part on our intellectual property and our other proprietary business information. To protect our proprietary rights, we plan to rely on trademark, copyright and patent law, trade-secret protection and contractual provisions and restrictions. However, we may be unable, or may have historically been unable, to uniformly include the necessary intellectual property protections in contractual agreements with our employees, independent contractors, customers, users or third parties, or secure intellectual property protection for all of our technology, or the steps we take to enforce our intellectual property rights may be inadequate. Furthermore, we may also be unable to protect our proprietary business information from misappropriation.
If we are unable to secure intellectual property rights, our competitors could use our intellectual property to market offerings similar to ours, and we would have no recourse to enjoin or stop their actions. Additionally, any of our intellectual property rights may be challenged by others and invalidated through administrative processes or litigation. Moreover, even where we may have secured our intellectual property rights, others may infringe on our intellectual property, and we may be unable to successfully enforce our rights against such infringers because we may be unaware of the infringement or our legal actions may not be successful. Finally, others may misappropriate our proprietary business information, and we may be unaware of the misappropriation or unable to enforce our legal rights in a cost-effective manner. If any of these events were to occur, our ability to compete effectively would be impaired.
Intellectual property disputes are costly to defend and could harm our business, results of operations, financial condition and reputation.
From time to time, we may face allegations that we have infringed on trademarks, copyrights, patents and other intellectual property rights of third parties. As we grow our business, we expect that we will continue to be subject to intellectual property claims and allegations. Patent and other intellectual property disputes or litigation may be protracted and expensive, and their results may be difficult to predict and may require us to stop offering certain services or features, purchase licenses that may be expensive to procure or modify our services. In addition, patent or other intellectual property disputes or litigation may result in significant settlement costs. Even if these matters do not result in litigation or are resolved in our favor or without significant cash settlements, the time and resources necessary to resolve them could have a material adverse effect on our business, results of operations, financial condition and prospects.
We may use open source software in a manner that could be harmful to our business.
We use open source software in connection with our technology and services. The original developers of the open source code provide no warranties on such code. Moreover, some open source software licenses require users who distribute open source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. The use of such open source code may ultimately require us to replace certain code used in connection with our services, pay a royalty to use some open source code or discontinue certain services.
From time to time, we may be subject to claims brought against companies that incorporate open source software into their products or services, claiming ownership of, or demanding release of, the source code, the open source software and/or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result in litigation, and we may be required to purchase a costly license or remove open source software, devote additional research and development resources to changing our services, make certain source code for our proprietary technology generally available, or waive certain of our intellectual property rights, any of which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
In order to protect our technologies and strategic business and operations information, we rely in part on confidentiality agreements with our employees, independent contractors, and certain other third parties.
 
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These agreements may not be enough to fully mitigate the possibility of inadvertent or intentional disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in an event of unauthorized disclosure of confidential information. The loss of trade secret protection could make it easier for third parties to compete with our services by copying functionality. Others may independently discover our trade secrets and proprietary information, and in such cases, we could not assert any trade secret rights against such parties.
Further, if our employees, contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Any changes in, or unfavorable interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection of our trade secrets or other proprietary information could have a material adverse effect on our business, results of operations, financial condition and prospects.
We may not be able to halt the operations of websites that aggregate or misappropriate our data.
From time to time, third parties have misappropriated our data through website scraping, robots or other means, and aggregated this data on their websites with data from other companies. In addition, “copycat” websites may attempt to imitate our brand and the functionality of our website. When we have become aware of such websites, we have employed technological or legal measures in an attempt to halt their operations. We may not be able, however, to detect all such websites in a timely manner and, even if we could, technological and legal measures may be insufficient to halt their operations. In some cases, our available remedies may not be adequate to protect us against the impact of the operation of such websites. In addition, if such activity creates confusion among customers or real estate partners, our brands and business could be harmed. Regardless of whether we can successfully enforce our rights against the operators of these websites, any measures that we may take could require us to expend significant financial or other resources, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Risks Related to Our Financial Position
Covenants under our existing credit facilities, specifically the Facility Agreement, limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial condition or results of operations.
As of June 30, 2021 and December 31, 2020, we had an outstanding loan balance of RUB 542 million and RUB 728 million under the syndicated credit facility agreement (the “Facility Agreement”) with AO Raiffeisenbank (“Raiffeisenbank”) as the Original Lender, the Facility Agent, and the Pledge Manager, and PAO Rosbank (“Rosbank”) as the Original Lender, for further details see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Credit Facilities.” The Facility Agreement contains covenants customary for credit facilities of this type, including maintenance covenants and incurrence covenants relating to debt incurrence, liens, restricted payments, asset sales, transactions with affiliates, and mergers or sales of all or substantially all of our assets, as well as the customary provisions regarding events of default.
Specifically, the Facility Agreement contains certain maintenance covenants, which are tested on a quarterly, semi-annual and annual basis, including with respect to revenue, net assets, EBITDA, EBITDA and advertising expenses and current liquidity ratio (as defined and calculated pursuant to the definitions set out in the Facility Agreement). On December 31, 2020, iRealtor LLC breached the maintenance covenants under the Facility Agreement in relation to its net assets and EBITDA and advertising expenses and, in May 2021, we obtained a waiver from AO Raiffeisenbank as the Facility Agent with respect to this breach of covenants. However, since the waiver was obtained after the reporting date, the non-current portion of the loans was reclassified into the short-term portion as of December 31, 2020. Also, as of June 30, 2021, iRealtor LLC technically breached the maintenance covenant under the Facility Agreement requiring that its net assets calculated in accordance with the Russian Accounting Standards (“RAS”) must be positive as of the end of each semi-annual period and the covenant that requires that its current liquidity ratio must be at
 
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least 1.5:1 as of the end of each quarter. On June 30, 2021, iRealtor LLC received waivers from Raiffeisenbank in relation to these technical breaches. Additionally, as of September 30, 2021, iRealtor LLC technically breached the covenants as to the maintenance of certain levels of EBITDA. In October 2021, iRealtor LLC received waiver from Raiffeisenbank in relation to this technical breach. For further details, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Credit Facilities.”
Any potential future breaches of covenants may result in defaults, even if we satisfy our payment obligations to the respective obligee. We may not be able to comply with these covenants in the future, which could result in the declaration of an event of default and cause us to be unable to borrow under the Facility Agreement or result in the acceleration of the maturity of indebtedness outstanding under the Facility Agreement, which would require us to pay all outstanding amounts. In addition, the Facility Agreement is collateralized with, among others, pledges of 100% of shares in Fastrunner Investments Limited, 100% of shares in Mimons Investments Limited, 51% of shares in our key operating subsidiary, iRealtor LLC, pledges of rights to the software, trademarks, and rights under the license agreements. We face a risk of losing these assets, if, in case of an event of default, the lenders decide to enforce the pledges. If the maturity of any indebtedness we incur is accelerated, we may not have sufficient funds available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us or at all. Our failure to repay such indebtedness could result in the foreclosing on all or a portion of our assets and force us to curtail, or even to cease, our operations.
We may need to raise additional funds to finance our future capital needs, and we may not be able to raise additional funds on terms acceptable to us, or at all.
Growing and operating our business, including through the development of new and enhanced services, may require significant cash outlays and capital expenditures. If cash on hand, cash generated from operations and cash equivalents and investment balances are not sufficient to meet our cash and liquidity needs, we may need to seek additional capital, and we may not be able to raise the necessary cash on terms acceptable to us, or at all. The financing arrangements we pursue or assume may require us to grant certain rights, take certain actions, or agree to certain restrictions that could negatively impact our business.
Furthermore, market volatility resulting from the COVID-19 pandemic and the related Russian and global economic impact and other factors could also adversely impact our ability to access funds as and when needed. If additional capital is not available on terms acceptable to us or at all, we may need to modify, delay, limit or terminate our business plans, which would harm our ability to grow our operations and could have a material adverse effect on our business, results of operations, financial condition and prospects.
We rely on assumptions, estimates and business data to calculate our key performance indicators and other business metrics such as the average UMV, listings, leads to agents and individual sellers, paying accounts, average revenue per paying account, average daily revenue per listing, leads to developers and average revenue per lead to developers, and real or perceived inaccuracies in these metrics may harm our reputation and negatively affect our business.
Certain of our performance metrics are calculated using third party applications or internal company data that have not been independently verified. While these numbers are based on what we believe to be reasonable calculations for the applicable periods of measurement, there are inherent challenges in measuring such information. For example, our average UMV shows the average number of users and customers visiting our platform (websites and mobile application) per month in a particular period, excluding bots. This metric has its limitations because, for example, if users or customers access our platform through a website and a mobile application, they are counted twice and it does not allow us to track how many individual visitors are accessing our platform.
We regularly review and may adjust our processes for calculating our performance metrics to improve accuracy. Our measurements of certain metrics may differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology. If real estate professionals, our customers, users, investors or financing sources do not perceive our average UMV, listings, leads to agents and individual sellers, paying accounts, average revenue per paying account, average daily revenue per listing, leads to developers and average revenue per lead to developers to be accurate representations of our customers and user engagement, or if we discover material inaccuracies in our key performance indicators,
 
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our reputation may be harmed, and real estate professionals and advertisers may be less willing to allocate their resources to our products and services, while investors or financing sources may be less willing to invest in or trade the ADSs. Additionally, operational metrics are important for our decision-making process and if we rely on inaccurate data, we could make incorrect decisions based on these metrics, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Risks Relating to the Regulatory Environment
Existing and evolving government regulation in the area of data privacy and data protection could adversely affect our business.
We collect, process, store and transmit large amounts of data, including confidential, sensitive, proprietary, business and personal information. The effectiveness of our technology and platform, and our ability to offer our services to our customers and users rely on the processing, protection and security of data. Our collection and use of this data for targeted advertisements, data analytics and outreach communications might raise privacy and data protection concerns that could negatively impact the demand for our services. We use third-party technology and systems for encryption, employee email and other functions.
Processing of customer and user data is subject to certain requirements and restrictions in Russia. In accordance with Russian law, personal data is defined as any information relating, directly or indirectly, to an identified or identifiable individual. Under Russian law, subject to certain exceptions, we must obtain consent in order to process an individual’s personal data. Furthermore, Russian law generally requires companies to use certified encryption and other technical means to protect personal data. An entity which, separately or jointly with other entities, arranges for the processing of personal data and determines the purposes of such processing, scope of personal data to be processed and actions (operations) performed on personal data, is defined as a data operator (data controller). Data operators are obliged to notify the Russian Federal Service for Supervision of Information Technologies and Communications (“Roskomnadzor”), the principal Russian data protection authority, of the commencement of the personal data processing (subject to a limited number of exceptions). Following such notification, the data operators are included into a specific register. We are registered as a data operator in such register.
As a matter of Russian law, we are required to conduct certain types of processing of personal data of Russian citizens (when collecting such personal data) with the use of Russian databases (this obligation is referred to as the “Russian data localization rules”). While we store some of our data on the cloud platforms located abroad, we continuously monitor that this is done in accordance with the Russian law requirements and we conduct the key processing actions for collection of personal data of Russian citizens using Russian databases.
Russia is continuing to develop its legal framework, including with respect to data privacy and data protection. For example, in March 2021, new rules which restrict the usage of publicly available personal data (including data available on the internet) were adopted. These require, among other things, obtaining a user’s consent in a specific form for the processing of such data and changing processing rules and procedures. For further information on the applicable regulatory framework, see “Regulations—Privacy and Personal Data Protection Regulation.”
Roskomnadzor, among its other functions, supervises compliance with the data protection legislation and conducts scheduled and unscheduled audits over activities of data operators, maintains the register of personal data operators, infringers of personal data processing requirements and blocked websites, initiates legal proceedings in cases of violations, and imposes fines or other penalties. Roskomnadzor may require us to improve our data-related policies and security measures, which may adversely affect our ability to manage our business or make it costlier to do so. If audits by Roskomnadzor result in a determination that we fail to comply with data-related legislation, including the Russian data localization rules, we could experience financial losses, our reputation may be harmed, and we could be restricted from providing certain types of services until we comply with the relevant requirements. Failure to comply with the data privacy laws may lead to civil and administrative liability and, in extreme cases, criminal liability may follow for individuals (Russia does not have the notion of criminal liability of legal entities). Such liability may take the form of fines, or, in extreme cases, suspension of activities and/or blocking of our resources for access from the territory of Russia. The size of fines for violations of the Russian data privacy rules is being constantly increased by
 
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the Russian legislature (currently, the maximum fine for violation of Russian data localization requirements is RUB 18 million (equivalent to approximately US $258,480 as of October 26 , 2021)). Persons processing personal data in violation of the rules are also obliged to terminate or procure the termination of any wrongful processing of personal data. Moreover, under Federal Law No. 236-FZ “On the Internet Activities of Foreign Entities in the Russian Federation” dated July 1, 2021 (“FZ-236”), further consequences may apply for noncompliance with data localization requirements and certain requirements of FZ-236, which may include, for example, restriction on personal data processing, payments from Russian citizens, and advertising.
We may also be subject to data protection laws in other jurisdictions where our customers and users may access our platform. Such data protection laws may require significant compliance efforts and, if we are unable to fully comply, could result in liability. For example, in 2016, the European Union adopted the General Data Protection Regulation (“GDPR”), which became effective in May 2018. The GDPR generally applies extraterritorially and imposes stringent requirements for controllers and processors of personal data. Non-compliance with the GDPR is subject to significant penalties, including fines of up to the greater of €20 million or 4% of total worldwide revenue, and injunctions on processing of personal data. Other jurisdictions are similarly introducing or enhancing privacy and data security laws, rules and regulations, which could increase our compliance costs and risks associated with non-compliance.
Additionally, we are subject to laws, rules and regulations regarding cross-border transfers of personal data, including laws relating to transfer of personal data outside the European Economic Area (“EEA”). We rely on transfer mechanisms that are recognized in the market but, depending on the changes in law and interpretation, we may not be able to rely on existing mechanisms for cross-border transfer of data, transfer of such data to and from certain jurisdictions may be restricted.
We use cookies and other related technologies that assist us in improving the customer and user experience and personalizing our services that ultimately benefit various groups of our customers and users through behavioral targeting, which makes our services more customized and our advertising more relevant. We cannot be certain as to whether our practices are compliant with the requirements of applicable data protection legislation in Russia and abroad, and such laws are still being developed and could be interpreted or applied in a manner that is not consistent with our current data protection practices.
We also record customer and user calls to improve our services. We do so subject to prior notification of the fact that the call will be recorded and, if individuals proceed with the call, they are deemed to have accepted such practice. Information so recorded may be subject to specific rules (such as privacy of communications), whose processing and transfer by IT companies is subject to additional restrictions, which are broadly defined and may be inconsistently applied in Russia.
If we were found to be subject to, and in violation of any privacy, data protection or data security laws or regulations, our business may be materially and adversely impacted and we would likely have to change our business practices and potentially our service portfolio. These laws and regulations could impose significant costs on us and could make it more difficult for us to use our current technology. Furthermore, if these requirements and restrictions are amended, interpreted or applied in a manner not consistent with current practice, we could face fines or orders requiring that we change our operating practices, and our business, prospects, financial condition and results of operations could be materially and adversely affected. In extreme cases, the relevant data protection authorities may block access to our websites or suspend our activities.
In addition, we may be required to disclose personal data pursuant to demands from government agencies, including from law enforcement agencies, intelligence agencies and state and municipal regulators in the course of audits, as a requirement for obtaining or maintaining any licenses or permits, which we may require to operate our business in the future. Any such disclosure may result in a failure, or perceived failure, by us to comply with privacy and data protection policies, notices, laws, rules, and regulations (including due to conflicts of laws), could result in proceedings or actions against us in the same or other jurisdictions, and could have an adverse impact on our reputation.
 
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We operate in a rapidly evolving environment of increasing regulatory complexity and failure to comply with existing or new rules and regulations or to obtain and maintain required licenses or authorizations, could materially and adversely affect our business, financial condition, results of operations and development prospects.
We are subject to, or affected by, a variety of laws and regulations, including laws regarding real estate, data protection, competition, the internet, labor and taxation. Actual or alleged failure to comply with one or more of these laws or regulations could result in administrative or legal proceedings, fines, third party damage actions and other penalties, which in turn could harm our reputation. Changes to such laws or regulations, or the interpretation thereof, or the adoption of new laws and regulations, are extremely difficult for us to predict and may place additional financial or other burdens on, or otherwise negatively impact our business, thereby increasing the cost or reducing the profitability of our services, limiting the scope of our offering or affecting the competitive landscape generally. In addition, Russian authorities have the right to conduct periodic tax, labor or other inspections of our operations and properties. Regulatory authorities exercise considerable discretion in matters of enforcement and interpretation of applicable laws, regulations and standards, the issuance and renewal of licenses, approvals, authorizations and permits and in monitoring licensees’ compliance with the terms thereof. If authorities choose to enforce specific interpretations of the applicable legislation that differ from ours, we may be found to be in violation and subject to penalties or other liabilities. In addition, government authorities may claim unpaid taxes and impose fines if certain of our contracts with independent contractors are reclassified as employee contracts.
As with other technology companies around the world, we are operating in an increasingly uncertain and challenging environment, in part due to increased scrutiny from governmental authorities. We are also subject to evolving regulation of dissemination of information on the internet. In particular, in recent years, the Russian authorities have adopted a series of laws aimed at regulating the technology and internet sectors.
For example, in July 2016, Federal Law No. 374-FZ, also known as the “Yarovaya Law” ​(the “Yarovaya Law”) amending, among others, Federal Law No. 149 FZ dated July 27, 2006 “On Information, Information Technology and Data Protection,” as amended (the “Law on Information”) entered into force. The Yarovaya Law requires the arrangers of information distribution by means of internet to store metadata (information confirming the fact of receipt, transmission, delivery and/or processing of text messages, pictures or other communications) and the contents of communications, including text messages, pictures or other communications, for a certain period of time. Although messaging is not the primary aim of our platform, our customers and users can exchange electronic messages (e.g., users can send messages to real estate agents and post messages on the forum). In order to comply with the Yarovaya Law, we store the metadata of all electronic communications, the contents of all electronic communications and the communicating parties’ details on Russia-based servers as required by the applicable regulation. Furthermore, the Ministry of Digital Development, Communications and Mass Media of the Russian Federation is working on draft amendments to the Law on Information, which is aimed at unifying the approach to big data processing. The expected impact that the contemplated draft amendments may have on our businesses and the expected timing for the amendments’ adoption is yet to be assessed. For further information on applicable requirements set out by the Law on Information, see “Regulations—Internet Regulation.”
Additionally, Federal Law No. 90-FZ dated May 1, 2019 “On certain amendments to the Federal Law “On Communications” and the Federal Law “On Information, Information Technology and Data Protection” (the “Sovereign Internet Law”) imposes a number of obligations on entities having autonomous system numbers (these numbers are defined as unique identifiers of the autonomous systems, “ASN,” which in turn, are systems of IP-networks and routers that adhere to a common routing policy and to which several IP-addresses can be assigned (the “Internet Providers”)). The Internet Providers are required to, among other things, install certain software and hardware to determine IP addresses, take part in practical trainings arranged by the Russian authorities and provide necessary assistance to the Russian investigative authorities.
Russia is also introducing various internet monitoring systems. For example, the register of foreign platforms that are prohibited from accepting payments in the territory of Russia has recently been introduced to prevent infringements. The regulations generally require a request from a governmental authority to take down allegedly infringing or illegal information prior to blocking a particular website. However, in some
 
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cases, access to such information can be blocked without notification or prior judicial scrutiny. If information of the above-mentioned types of information is posted on our platform and we fail to identify and delete it in a timely manner, our websites might be blocked and our business may be materially adversely affected. Similarly, the Unified Information System on Record of Online Advertisements (ERIR) has recently been introduced and will be launched in September 2022. In connection with the introduction of ERIR advertisers and operators of advertising systems will be obligated to provide certain information about advertisements to the authorities directly or via a counterparty using specific software, which, if it applied to us, could increase costs and require changes to information systems.
Russia has recently introduced legal framework for, and is currently developing and implementing rules on, measuring the total audience of certain websites in order to moderate content and to monitor compliance with the new rules established by FZ-236. These rules may apply to, among others, social networks, digital mass media, audiovisual services, news aggregators and other resources, and require the operator to assist with measuring its audiences by installing special software or providing certain information requested by the operator. Pursuant to Russian law the social network is defined rather broadly as any digital platform which is (i) designed to or applied for provision or dissemination (via users’ personal accounts) of information in the Russian language; (ii) could be used for distribution of advertisements targeted at the persons located in Russia; and (iii) has more than 500,000 daily users located in Russia. Roskomnadzor is required to maintain a register of such social networks and calculate their daily audience. Platforms regarded as social networks will be required to monitor and delete illegal content and submit a report on such activities. In the absence of underlying regulations it is still difficult to assess the applicability of the framework amendments to online classified platforms and the impact that they may have on our business and operations.
Furthermore, our continued success will substantially depend upon our ability to introduce new initiatives, projects and features. See “—We may devote significant costs and management time to the implementation of new initiatives, including development of new business lines and new service offerings, as well as certain strategic regional expansion efforts, with no guarantee of success.” Some of those initiatives may require us to obtain licenses or permits. We cannot assure you that we will be able to secure or, if secured, renew, any licenses or permits on terms acceptable to us. If we fail to obtain the necessary licenses or permits, we may lose our customers and users and market share and our development and growth prospects may suffer.
If the Russian government were to apply existing limitations on foreign ownership to our business, or impose new limitations on foreign ownership of internet businesses in Russia, it could materially adversely affect our business.
Over the past few years, Russian legislators have introduced a number of laws and regulations restricting foreign ownership and control of companies involved in certain strategically important activities in Russia, as well as companies that are classified as “mass media” businesses. For example, in 2016, an amendment to the Russian mass media law came into force that reduced the permitted level of foreign ownership in companies that hold Russian mass media registrations. The amendment limited the ownership and control, direct or indirect, of Russian mass media entities by non-Russian entities and individuals to 20%. In order to bring its ownership structure in compliance with new mass media regulation, a Russian non-state broadcaster listed on Nasdaq at the time when new mass media regulation came into force, had to sell its operating business in Russia and apply for a delisting from Nasdaq thereafter.
Currently, technology, the internet and online advertising are not industries specifically covered by legislation restricting foreign ownership. However, from time to time, proposals have been considered by the Russian government and the State Duma, the lower house of the Russian Parliament, which, if adopted, would impose foreign ownership or control restrictions on certain large technology or internet companies. For example, in 2018 draft legislation that would restrict foreign ownership of news aggregators was introduced. Although, to date, activities on our platform do not meet the criteria of news aggregators provided by the Law on Information, there can be no assurance that our platform will be not deemed to be a news aggregator in the future. The draft legislation is broadly worded and if adopted and applied to activities on our platform, we may be required to restructure or otherwise adapt our operations or corporate structure to comply with such restrictions. At this time, we cannot anticipate whether the draft legislation will be adopted or, if it is adopted, whether such restrictions will be applied to us.
 
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Furthermore, in 2019, certain Russian legislators proposed a draft law which was aimed at restricting foreign ownership in information resources of significant importance for the Russian information and communication infrastructure (potentially including a broad range of activities related to processing of personal data of customers and users located within Russia). The proposal was withdrawn in November 2019 following criticism from the business community. In December 2020, a draft law was submitted to the State Duma that is aimed at prohibiting foreign ownership in excess of 20% in Russian audiovisual services, including online video streaming services. If similar legislation applicable to our online classified business were to be proposed or adopted, we may be required to restructure or business or otherwise adapt our operations or corporate structure to comply with such restrictions, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
The FAS could determine that we hold a dominant position in our markets, which would result in limitations on our operational flexibility and may adversely affect our business, financial condition and results of operations.
The Russian anti-monopoly authorities impose various requirements on companies that occupy a dominant position in their markets. The Russian Federal Law No. 135-FZ “On Protection of Competition” dated July 26, 2006, as amended, (the “Competition Law”) establishes certain restrictions on activities of such companies. When determining market dominance, the FAS needs to identify and define the relevant market, in which the entity in question operates. There are numerous aspects to be taken into account when making this determination, including the interchangeability or substitutability of the services for the user, their pricing and intended use, and the calculation of market shares of companies operating in this market. Different approaches may be applied in this respect by the FAS and market participants. In a number of court cases, Russian courts have found concerted actions where competitors acted in a similar way within the same period of time, although, arguably, there have been legitimate economic reasons for such behavior and the behavior was not aimed at restriction of competition.
Under the Competition Law, business combinations exceeding certain thresholds are subject to prior approval by the FAS. The FAS will determine whether any acquisition subject to its prior approval negatively impacts competitive conditions in the relevant markets or adversely affects consumers in these markets. On October 6, 2021, the FAS rejected a proposed business combination between us and Avito, citing that such combination would result in an entity with a dominant market position.
To date, aside from receipt of routine inquiries from the FAS, we have not engaged with them to define our market position. We believe that our operations are in compliance with Russian anti-monopoly regulations. If the FAS were to conclude that we hold a dominant position in one or more of the markets in which we operate, it could result in heightened scrutiny of our business and industry, limit our ability to complete future acquisitions or require us to pre-clear any substantial changes to our standard agreements with our customers, other partners and the authorities. In addition, if we were to decline to conclude a contract with a third party, this could, in certain circumstances, be regarded as an abuse of a dominant market position. Any abuse of a dominant market position could lead to administrative penalties and the imposition of fines linked to our revenue.
In addition, in 2019, the FAS publicized draft amendments to the Competition Law, known as the “5th Antimonopoly Pack.” The 5th Antimonopoly Pack is still under discussion between the government authorities and has not yet been submitted to the Russian Parliament. As currently drafted, the 5th Antimonopoly Pack gives the FAS authority to regulate digital platforms (i.e., internet infrastructure for interaction of sellers and buyers). Dominance of a digital platform will be determined on the basis of the so-called “network effect” criterion, or the situation where the increasing number of the registered customers and users of this network adds value to this network, including to the goods and services available at such network. A digital platform will be deemed to have a dominant position if its market share exceeds 35% and network effects enable it to affect the general terms of trade in a certain product in the relevant market, push other businesses out of the market or impede access to the market for other businesses. In August 2021, the FAS introduced a draft guidance on the basic principles of interaction between participants of digital markets. This guidance provides for, among others, reasonable transparency of digital platforms, neutrality towards other market participants, including competitors, and safeguards for the platform users’ rights. Given the lack of enforcement practice in Russia related to digital platforms, we cannot evaluate the impact of this initiative on our business practices.
 
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Russian anti-monopoly authorities have also been known to determine that a market player has been in violation of antitrust laws solely on the basis of circumstantial evidence pointing to its anti-competitive behavior without any written or oral evidence to support this. Any abuse of a dominant market position could lead to administrative penalties and the imposition of a fine of up to 15% of our annual revenue for the previous year. These limitations and penalties could have a material adverse effect on our business, results of operations, financial condition and prospects.
We may be subject to existing or new advertising legislation that could restrict the types and relevance of the ads featured on our platform, which would result in a loss of advertisers and therefore a reduction in our revenue.
Russian law prohibits the sale and advertising of certain products, and heavily regulates advertising of certain other products and services. Ads for certain products and services, such as financial services, as well as ads aimed at minors and some others, must comply with specific rules and must, in certain cases, contain required disclaimers.
Further amendments to legislation regulating advertising may impact our ability to provide some of our services or limit the type of advertising we may offer. The application of these laws to parties that merely serve or distribute ads and do not market or sell the product or service, however, can be unclear. Pursuant to our terms of service, we require that our advertisers have all the required licenses or authorizations. If our advertisers do not comply with these requirements, and these laws are interpreted to apply to us, or if our ad serving system fails to include the necessary disclaimers, we may be exposed to administrative fines or other sanctions, and may have to limit the types of advertisers that we serve.
The regulatory framework in Russia governing the use of behavioral targeting in online advertising is unclear. If new legislation were to be adopted, or current legislation were to be interpreted as restricting the use of behavioral targeting in online advertising, our ability to enhance the targeting of our advertising could be significantly limited, which could result in a loss of advertisers or a reduction in the relevance of the ads we serve, which would reduce the number of clicks on the ads and, therefore, reduce our revenue.
Risks Relating to the Russian Federation
Investing in securities of issuers in emerging markets, such as Russia, generally involves a higher degree of risk than investments in securities of issuers from more developed countries and carries risks that are not typically associated with investing in more mature markets.
Emerging markets, such as Russia, are subject to greater risks than more developed markets, including significant legal, economic, tax and political risks. Investors into businesses operating in the emerging markets should be aware that these markets are subject to greater risk and should note that emerging economies, such as the economies of Russia, are subject to potential instability and any information set out herein may become outdated relatively quickly.
Financial or economic crises, whether global or limited to a single large emerging market country, tend to adversely affect prices in the capital markets of most or all emerging market countries, as investors move their money to more stable, developed markets. Over the past few years, the Russian capital markets have been highly volatile, variably due to the impact of global economic slowdowns, sharp declines in oil prices, deteriorating conditions in the Russian economy itself, the COVID-19 pandemic or international sanctions. As has happened in the past, various adverse factors, such as significant ruble depreciation; capital outflows; worsening of various economic indicators; geopolitical disputes, such as the crisis in Ukraine and imposition of additional trade and economic sanctions against Russia in connection therewith; or an increase in overall perceived risks associated with investing in emerging economies, could hinder foreign investment in Russia and adversely affect the Russian economy. In addition, during times of economic crises and market volatility, businesses that operate in emerging markets can face severe liquidity constraints, as available funding may often be reduced or withdrawn. Generally, investments in emerging markets are only suitable for sophisticated investors who fully appreciate the significance of the risks involved, and investors are urged to consult with their own legal and financial advisors before making an investment in the ADSs.
 
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Changes in government policy, other government actions and political risks could adversely affect the Group’s operations and the value of investments in Russia.
While the political situation in Russia has been relatively stable since 2000, future policy and regulation may be less predictable than in less volatile markets. Any future political instability could result in a worsening of the overall economic situation, including capital flight and a slowdown of investment and business activity. In January 2020, the current Russian President Vladimir Putin proposed a number of constitutional reforms aimed at altering the balance of power between the legislative, executive and judicial branches, and introducing certain other changes to the Constitution of Russia. In addition, further amendments were proposed in March 2020, under which the previous and/or current President of Russia would be allowed to participate in presidential elections for two terms following the amendment of the Constitution, and previous presidential terms, which had been served or started prior to these amendments becoming effective, would not be accounted for. The amendments were approved in a nationwide vote, and took effect on July 4, 2020. The impact of these amendments, plus other relevant political steps and actions on the political, economic, social, regulatory and business landscape in Russia could take time to become fully evident and cannot be predicted with significant amount of certainty.
Future changes in the Russian Government, the State Duma or the presidency, major policy shifts or eventual lack of consensus between the president, the Russian Government, Russia’s parliament and powerful economic groups could lead to political instability. Shifts in governmental policy and regulation in the Russian Federation are less predictable than in many Western countries, and could disrupt political, economic, social, regulatory and business processes and environments.
Russian authorities have been reported to sometimes apply policies selectively and arbitrarily, including through withdrawal of licenses, sudden and unexpected tax audits, criminal prosecutions, asset freezes, seizures or confiscations, regulatory measures, and civil actions. Federal and local governmental entities have, in the past, used common defects in share issuances and registration as pretexts for court claims and other demands to invalidate such issuances and registrations and/or to void transactions, which may be seen as being influenced by political or business considerations. Some observers have noted that takeovers of major private sector companies by state-controlled companies following tax, environmental and other challenges in recent years may reflect a shift in official policy in favor of state control at the expense of individual or private ownership, at least where large and important enterprises are concerned. This has, in turn, resulted in significant fluctuations in the market price of Russian securities and had a negative impact on foreign investments in the Russian economy, over and above any recent general market dislocations. Any similar actions by the Russian authorities which result in a further negative effect on investor confidence in Russia’s business and legal environment could have a further material adverse effect on the Russian securities market and prices of Russian securities or securities issued or backed by Russian entities, including the ADSs.
Deterioration of Russia’s relations with other countries and adoption, maintenance and expansion of international embargo, economic or other sanctions against Russia could negatively affect the Russian economy and our business, financial condition and results of operations.
The United States, the European Union and the United Kingdom, as well as 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 with named participants in certain industries, including named Russian financial state-owned institutions, and sanctions that prohibit most commercial activities of U.S. and EU persons in Crimea and Sevastopol. See “—We engage in certain de minimis activities relating to Crimea, and these activities could impede our ability to raise funding in international capital markets and subject us to liability for noncompliance relating to various trade and economic sanctions laws and regulations.”
On August 2, 2017, the U.S. enacted the Countering America’s Adversaries Through Sanctions Act which, inter alia, imposed sanctions against certain Russian entities, and provided for “secondary sanctions” targeting non-U.S. persons who engage in certain activities involving Russia, whereby they may face adverse economic consequences in the form of denial of certain U.S. benefits or the imposition of sanctions. In January 2018, pursuant to CAATSA, the U.S. administration submitted to the U.S. Congress a report on senior Russian political figures, “oligarchs” and “parastatal” entities. The identification of any individuals
 
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in the report does not automatically lead to the imposition of new sanctions and it is not possible to predict whether any such identification could have a material adverse effect on the Russian economy or our business. Neither our directors, nor senior management are included in the report.
In August 2018, the U.S. Department of State imposed new sanctions on Russia under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the “CBW Act”). In August 2019, following Russia’s alleged failure to meet certain conditions under the CBW Act, the U.S. Department of State imposed additional sanctions against Russia, relating to Russian sovereign debt, multilateral lending and export restrictions for dual-use technologies that can be used for chemical and biological warfare. Most recently, on April 15, 2021, President Biden announced an executive order imposing additional sanctions that target 32 entities and officials and, along other measures, prohibit U.S. financial institutions from buying ruble-denominated bonds issued by the Central Bank of Russia, the Ministry of Finance and the National Fund.
Moreover, from time to time, U.S. legislators introduce draft legislation for consideration directed at imposing further sanctions against Russia. These initiatives, if enacted, could affect, among other things, Russian sovereign debt, Russian energy projects and Russian energy and financial sectors and may have an adverse impact on the Russian economy in general and, thus, our operations.
There is significant uncertainty regarding the extent or timing of any potential further economic or trade sanctions or potential easing of such measures. Relations between Russia and the U.S., certain EU members and the U.K. have recently been strained due to a number of issues, including geopolitical confrontations, economic interests and trade wars, as well as Russian internal political and social events, and there can be no assurance that the governments of the U.S., EU., U.K. or other countries will not impose further sanctions against Russia, or specific individuals, entities or sectors of the Russian economy. New tensions in relations between Russia and the U.S., EU, U.K. and other countries, could result in adoption and implementation of these and other new sanctions, which could have a material adverse effect on the Russian economy and on our business, results of operations, financial condition and prospects.
In the ordinary course of business, our companies, like many Russian companies, have routine commercial operations with Russian persons and entities that are currently subject to sectoral sanctions (such as Russian state-owned banks). There can be no assurance that the U.S. government would not view such activities as meeting the criteria for U.S. economic sanctions. In addition, because of the nature of our business, we do not generally identify our customers. Therefore, we are not always able to screen them against the SDN List published by OFAC and other sanctions lists.
Although our transactions and commercial relations with these entities are not legally prohibited by applicable sanctions, and we take steps to comply with applicable laws and regulations, should the sanctions regime with respect to these entities be widened, or should we fail to successfully comply with applicable sanctions, or become subject to sanctions in the future, we may face negative legal and business consequences, including civil or criminal penalties, government investigations and reputational harm. The executive orders authorizing the U.S. sanctions provide that persons may be designated to be in violation if, inter alia, they materially assist, or provide financial, material or technological support for goods or services to, or in support of blocked or designated parties. EU financial sanctions prohibit the direct and indirect provision of funds or economic resources to or for the benefit of sanctioned parties.
Most of our employees, associates and affiliates are not U.S. persons and, therefore, are restricted in dealings with U.S.-sanctioned persons only to the extent those dealings are subject to U.S. jurisdiction. However, it is possible that existing sanctions regimes may be widened or that new sanctions may be imposed on our counterparties, or that we, our employees, associates or affiliates could become subject to sanctions in the future, which could have a material adverse effect on our business.
If we become a sanctioned person pursuant to U.S., EU or U.K. sanction laws, either as a result of the above activities or through a targeting of a broader segment of the Russian economy, it will have a material adverse impact on our business. For example, we might be unable to conduct business with persons or entities subject to the jurisdiction of the relevant sanctions regimes, including international financial institutions and rating agencies, transact in U.S. dollars, raise funds from international capital markets, acquire equipment from international suppliers or access assets held abroad. Moreover, if we become subject
 
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to U.S. or U.K. sanctions, investors subject to the jurisdiction of an applicable sanctions regime may become restricted in their ability to sell, transfer or otherwise deal in or receive payments with respect to the ADSs, which could make the ADSs partially or completely illiquid and have a material adverse effect on their market value. We are also aware of initiatives by U.S. governmental entities and U.S. institutional investors, such as pension funds, to adopt or consider adopting laws, regulations, or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with certain countries, which could limit the liquidity of the ADSs and thereby have an adverse impact on their value. There can be no assurance that the foregoing will not occur or that such occurrence will not have a material adverse effect on the price of the ADSs. Any of the above could have a material adverse impact on our business, financial condition, results of operations or prospects.
New or escalated tensions between Russia and neighboring states or other states could negatively affect the Russian economy.
Over the past several years, Russia has been involved in conflicts, both economic and military, involving neighboring or more distant states. On several occasions, this resulted in deterioration of relations between Russia and other countries, including the United States and various countries in Europe. Many of these jurisdictions are home to financial institutions and corporations that are significant investors in Russia and whose investment strategies and decisions may be affected by such conflicts and by worsening relations between Russia and other countries. The continuing political instability and deteriorating economic conditions in Ukraine, together with the conflict in Eastern Ukraine, have affected relations between Russia and Ukraine. On March 2014, following a public referendum, the Crimean peninsula and the city of Sevastopol were proclaimed as new separate constituents of Russia by the governing authorities of Russia, Crimea and Sevastopol. The events relating to Ukraine and Crimea prompted condemnation by members of the international community, and were strongly opposed by the EU and the United States, with a resulting material negative impact on their relationships with Russia. Tensions between Russia and the EU and between Russia and the U.S. further increased in subsequent years as a result of the conflict in Syria and a host of other issues.
Emergence of new or escalated tensions between Russia and neighboring states or other states could negatively affect the Russian economy. This, in turn, may result in a general lack of confidence among international investors in the region’s economic and political stability and in Russian investments generally. Such lack of confidence may result in reduced liquidity, increased trading volatility and significant declines in the price of listed securities of companies with significant operations in Russia, including the ADSs, and in our inability to raise debt or equity capital in the international capital markets, which may affect our ability to achieve the level of growth to which we aspire.
Economic instability in Russia could adversely affect our business.
We operate only in Russia and a result, our business and results of operations are heavily dependent on the economic conditions in Russia. In the past years, the Russian economy and markets have been subject to abrupt downturns and significant volatility. For example, the Russian economy has been adversely affected by the introduction of sanctions against Russia and the decline of oil prices, which resulted in a decline in GDP of 2.0% in 2015. The impact of the economic downturn on the Russian economy led to, among other things, a reduction in the disposable income of the general population, a crisis of bank liquidity, a significant depreciation of the ruble against the U.S. dollar and Euro and the rise of unemployment. According to the Russian Federal State Statistics Service (“Rosstat”), in 2017, 2018 and 2019, Russia’s GDP grew by 1.8%, 2.8% and 2.0% in real terms, respectively. However, in 2020, Russia’s GDP declined by 3.1%, mostly due to the economic impact of the COVID-19 pandemic and the associated government lockdown measures imposed in response to it.
Moreover, as Russia produces and exports large quantities of crude oil, natural gas, metals and other commodities, its economy is particularly vulnerable to fluctuations in the prices of commodities on the global market. In particular, the Brent Crude oil price suffered a significant decrease during 2014 and 2015. Most recently, oil prices fell again with the price of Brent Crude declining from $45.3 per barrel on March 6, 2020 to $31.43 per barrel on March 9, 2020 and then dropping to $26.53 per barrel on April 20, 2020 as a result of sharply falling demand for oil triggered by the significant slowdown of business activity and a
 
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deteriorating global macro outlook caused by the spread of the coronavirus epidemic, while Russia and OPEC for some time were unable to reach an agreement on extended oil production cuts in response to the falling demand. As of October 26, 2021, the Brent Crude oil price recovered to $86.40 per barrel.
The ruble / U.S. dollar exchange rate has also been volatile and amounted to RUB 61.91 per $1.00 and RUB 73.88 per $1.00 as of December 31, 2019 and 2020, respectively. As of October 26, 2021, ruble / U.S. dollar exchange rate amounted to RUB 70.13 per $1.00. While currency volatility has, in the past, led to increased demand for real estate assets as stores of value against prospects of a devaluing ruble, currency weakness also had adverse effect on the Russian economy as a whole due to raising prospects of accelerating inflation (from higher ruble-denominated prices of imports), higher interest rates and poor real incomes dynamics. Based on information published by Rosstat, during 2020, real personal income of the Russian population decreased by approximately 3%. Downturns in household incomes and changes in patterns of user behavior amid the spread of the pandemic may negatively affect user confidence and dissuade or delay people from buying real estate, which may lead to lower real estate prices, reduced transaction volumes and, consequently, decreased demand for our services.
Starting in February 2015, the CBR initiated a period of dovish monetary policy with gradual reductions in key interest rate, which resulted in the declining of the average interest rate on new mortgage loans (from 14.2% in February 2015 to 7.78% as of the date of this prospectus, according to CBR data). However, in March 2021, the CBR began to reverse its monetary policy by gradually increasing the key interest rate, which, in September 2021, was approved at the level of 6.75%. Currently, the increase in the key interest rate has had a limited impact on mortgage interest rates mainly due to the mortgage subsidies program and a high level of competition in the banking market. However, there can be no assurance that the subsidies program will continue to prevent mortgage interest rates from further growth or will be further extended by the government. See also “—Our business and results of operations may be affected by the cancellation of, or any changes to, the Russian mortgage subsidy program.” The higher key interest rate environment may increase mortgage interest rates, which may offset the positive effect of the previous CBR policy, result in a decrease of property sales volumes and affect our lead generation revenue.
While a gradual economic recovery in Russia may be possible in 2021, there is a risk that Russia’s economy may not grow in the future due to renewed unfavorable economic conditions (both globally and in Russia) and geopolitical factors, COVID-19 infection rates growth or other adverse developments, and this consequently may materially and adversely affect our business, results of operations, financial condition and prospects.
Inflation may increase our costs and exert downward pressure on our operating margins.
Russia has experienced high inflation in the past. Since 2016, inflation in Russia relatively stabilized, and, according to Rosstat, stood at 4.3%, 3.0% and 4.9% in 2018, 2019 and 2020, respectively. In September 2021 the level of inflation amounted to 7.4%, based on Rosstat estimates, mainly as a result of COVID-19 pandemic. A return to high and sustained inflation could lead to market instability, new financial crises, reductions in consumer purchasing power and the erosion of consumer confidence, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Social instability in Russia could increase support for stronger centralized authority, nationalism, political repression or violence and could materially adversely affect our operations.
A decrease in the price of oil, as well as increased unemployment rates, failure by the government and many private enterprises to pay full salaries on a regular basis and failure of salaries and benefits to keep pace with increasing cost of living led in the past, and could lead in the future, to labor and social unrest in the markets in which we operate. Labor and social unrest may have political, social and economic consequences, such as increased support for stronger of centralized authority; increased nationalism, including restrictions on foreign involvement in the Russian economy; and increased political repressions and violence. An occurrence of any of the foregoing events could restrict our operations and lead to the loss of revenue, and our business, results of operations, financial condition and prospects could be materially and adversely affected.
 
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Crime and corruption could disrupt our ability to conduct our business and, thus, materially adversely affect our operations.
The stability, effectiveness, fairness, transparency and strength of government institutions, rule of law and business practices in Russia have been varied and have changed along with political and economic changes over the years. The local and international press have reported on high levels of corruption in Russia, including the bribery of officials for initiating investigations by state agencies, obtaining licenses or other permissions or obtaining the right to supply products or services to state agencies. Press reports have also described instances in which government officials engaged in selective investigations and prosecution to further the commercial interests of certain government officials or certain companies or individuals. Additionally, published reports indicate that a significant number of Russian media regularly publish slanted articles in return for payment. The proliferation of organized or other crime, corruption and other illegal activities that disrupt our ability to effectively conduct our business or any claims that we have been involved in corruption, or illegal activities, even if false, that generate negative publicity could have a material adverse effect on our business, results of operations, financial condition and prospects.
The ongoing development of the Russian legal system and Russian legislation creates an uncertain environment for investment and for business activity.
As Russia continues to develop its legal framework, it may still differ substantially from international standards and the requirements of a modern market economy. The current regulatory environment in Russia may result in inconsistent interpretations, applications and enforcement of the law. Among the possible risks of the current Russian legal system are:
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inconsistencies between and among the constitution, federal and regional laws and subordinate legislation (presidential decrees and governmental, ministerial and local orders, decisions and resolutions) and other acts;
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the lack of judicial and administrative guidance on interpreting certain legislation as well as conflicting interpretations of supreme general jurisdiction and arbitrazh courts;
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the relative inexperience of judges and courts in interpreting certain aspects of legislation;
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the lack of an independent judiciary;
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a high degree of discretion on the part of governmental authorities, which could result in arbitrary actions such as suspension or termination of our licenses;
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the possibility of rapid change in the current legislation, which could create ambiguities in interpretation and potential non-compliance; and
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poorly developed bankruptcy and liquidation procedures and court practices that create possibilities of abuse.
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In addition, legislation in Russia may often still have substantial gaps in the regulatory infrastructure. Any of these weaknesses could affect our ability to enforce our rights under our licenses and contracts, or to defend ourselves against claims by others. Moreover, it is possible that regulators, judicial authorities or third parties may challenge our internal procedures and bylaws, as well as our compliance with applicable laws, decrees and regulations.
The Russian banking system remains underdeveloped, the number of creditworthy banks in Russia is limited and another banking crisis could place severe liquidity constraints on our business.
Instability in the Russian banking sector may adversely affect the Russian economy, which may in turn negatively impact our business. Increases in the level of underperforming loans in recent years has generally weakened the level of capital for banks, which, in turn, may lead them to shrink their loan portfolios, and as a result, debt funding may become less available for individuals and businesses. Recessionary trends in the Russian economy and stricter enforcement by the CBR affected a number of notable Russian banks, which were either acquired, liquidated or taken over for financial rehabilitation by other Russian banks, the Deposit Insurance Agency or the CBR in recent years.
 
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Serious deficiencies, instability or crises in the Russian banking sector, or other problems experienced by Russian banks, including deterioration in their credit portfolios, difficulties in accessing liquidity, meaningful financial losses or reduction of profitability, falling capital ratios, suspension or revocation of their licenses or takeovers for subsequent liquidation or rehabilitation, resulted in the past, and may result in the future, in significant adverse consequences for our market and business. For example, in such circumstances, buyers of real estate or real estate developers may find themselves with reduced access to bank financing, which may reduce their demand, activity and transaction volumes in the real estate market, and, in turn, slow down demand for our services. We also may face forfeiture of, or delays in accessing our cash reserves, withdrawal/transactional limits on our bank accounts or other restrictions being imposed on our business, which could have a material adverse effect on our business, prospects, financial condition and results of operations. In addition, the instability of the Russian banking sector may also impede the development of new products for our Mortgage Marketplace services. Furthermore, as we may seek debt financing from Russian banks in the future, if a banking crisis were to re-occur in Russia, our ability to access such financing may be limited, which in turn could have a material adverse effect on our business, results of operations, financial condition and prospects, and investors may lose some or all of the value of their investment.
The companies incorporated in Russia may be forced into liquidation due to formal non-compliance with certain requirements of Russian law, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Certain provisions of Russian law may allow a court to order liquidation of a Russian legal entity on the basis of its formal non-compliance with certain requirements in connection with its formation or reorganization or during its operation. There were cases in the past in which formal deficiencies in the establishment process of a Russian legal entity or non-compliance with provisions of Russian law have been used by Russian courts as a basis for the liquidation of a legal entity. For example, in Russian corporate law, negative net assets calculated on the basis of the Russian Accounting Standards as of the end of the financial year following the second or any subsequent financial year of a company’s operation can serve as a basis for a court to order the liquidation of the company, upon a claim by governmental authorities (if no decision is taken to decrease the charter capital or liquidate the company). Many Russian companies have negative net assets due to very low historical asset values reflected on their Russian balance sheets. However, their solvency (i.e., their ability to pay debts as they come due) is not otherwise adversely affected by such negative net assets. In addition, according to Russian court practice, formal non-compliance with certain requirements that may be remediated by a non-compliant legal entity should not itself serve as a basis for liquidation of such legal entity.
Although iRealtor LLC, our key operating subsidiary, had negative net assets as of June 30, 2021, December 31, 2020 and December 31, 2019, its net assets as of December 31, 2018 were positive. Under the relevant legislative requirement, a company may be forced into liquidation only after having negative net assets for two consecutive years, however, as this requirement is temporarily not applicable in 2020 due to the COVID-19 pandemic, we believe that we and our subsidiaries are currently fully compliant with the applicable legal requirements and neither we nor iRealtor LLC should be subject to liquidation on such grounds. We expect to take all necessary measures aimed at ensuring that iRealtor LLC has positive net assets by the required time in order to continue to be in compliance with all applicable requirements. However, weaknesses in the Russian legal system create an uncertain legal environment, which makes the decisions of a Russian court or a governmental authority difficult, if not impossible, to predict. If involuntary liquidation were to occur, such liquidation could lead to significant negative consequences to our business and financial condition.
Risks Relating to Russian Taxation
Changes in Russian tax law could adversely affect the Group’s business.
Generally, Russian taxes that the Group is subject to are substantial and include, among others: corporate income tax, value-added tax (“VAT”), property tax, payroll related insurance payments, other taxes and duties. The Group is also subject to the liabilities of a tax agent with respect to taxes due from some of its counterparties. Laws related to these taxes and duties, such as the Tax Code of Russia (the “Tax
 
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Code”), have been in force for a relatively short period of time in comparison with tax legislation in more developed market economies, and the Russian government’s implementation of such legislation is often unclear or inconsistent. Historically, the system of tax collection has been relatively ineffective, resulting in continuous changes being introduced to existing laws and the interpretations thereof.
Although the Russian tax climate and the quality of tax legislation generally improved with the introduction of the Tax Code, the possibility exists that Russia may impose arbitrary and/or onerous taxes and penalties in the future.
Since Russian federal, regional and local tax laws and regulations are subject to frequent change, and since some sections of the Tax Code are comparatively new, interpretation and application of these laws and regulations is often unclear, unstable or non-existent. Differing interpretations of tax regulations may exist both among and within government bodies at the federal, regional and local levels, increasing the number of existing uncertainties and leading, in practice, to the inconsistent enforcement of these tax laws and regulations.
Furthermore, the taxpayers, the Ministry of Finance and the Russian tax authorities often interpret tax laws differently. There can be no assurance that the Russian tax authorities will not take positions contrary to those set out in the private clarification letters issued by the Ministry of Finance to specific taxpayers’ queries. In some instances, the Russian tax authorities have applied new interpretations of tax laws retroactively, issued tax claims for periods for which the statute of limitations had expired and reviewed the same tax period several times. During the past several years, the Russian tax authorities have taken more assertive positions in their interpretation of tax legislation, which has led to an increased number of material tax assessments issued by them as a result of tax audits of companies operating in various industries, including the financial industry.
Since taxpayers and the Russian tax authorities often interpret tax laws differently, taxpayers often have to resort to court proceedings to defend their position against the Russian tax authorities. In the absence of binding precedent or consistent court practice, rulings on tax or other related matters by different courts relating to the same or similar circumstances may be inconsistent or contradictory. Clarifications of the Russian tax authorities and the Ministry of Finance may, in practice, be revised by courts in a way that is unfavorable for the taxpayer.
The Russian tax system is, therefore, impeded by the fact that, at times, it continues to be characterized by the inconsistent judgments of local tax authorities. It is, therefore, possible that transactions and activities of the Group that have not been challenged in the past may be challenged in the future.
In 2017, the general anti-avoidance rules were introduced in the Tax Code by Article 54.1 of the Tax Code, which replaced the previously existing rule set by Resolution No. 53 of the Plenum of the Supreme Arbitration Court of the Russian Federation dated October 12, 2006, which defined an unjustified tax benefit mainly by reference to circumstances such as the absence of business purpose or transactions where the form does not match the substance, and which could lead to the disallowance of tax benefits resulting from the transaction or the re-characterization of the transaction for tax purposes.
The Russian Federation, like a number of other countries in the world, is actively involved in implementing measures and policies against tax evasion through the use of low tax jurisdictions as well as aggressive cross-border tax planning structures.
In the framework of such policies and measures, the Tax Code was amended to introduce controlled foreign companies rules and other anti-avoidance instruments including the concept of “beneficial ownership” for tax treaty purposes and the concept of tax residency for legal entities. These changes imposed significant limitations on tax planning. These factors raise the risk of a sudden imposition of arbitrary or onerous taxes on operations in Russia and abroad, and the application of the abovementioned rules may result in the imposition of fines, penalties and enforcement measures, which could have a material adverse effect on the business, results of operations, financial condition and prospects of the Group.
The Tax Code has been amended to allow, in certain cases, for judicial recovery of outstanding tax arrears of subsidiary/associated companies from principal (dominant or interest-holding) companies, which follows previous trends in court practice. These amendments and initiatives may have a significant effect
 
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on the Group and may expose the Group to additional tax and administrative risks, as well as to extra costs necessary to secure compliance with the new rules. These facts create tax risks for the Group in Russia that may be substantially more significant than typically found in countries with more developed tax systems.
In 2017, country-by-country reporting (the “CbCR”) requirements were introduced in the Tax Code. Introduction of mandatory filing of CbCR is, in general, in line with the Organisation for Economic Co-operation and Development (“OECD”) recommendations within the Base Erosion and Profit Shifting (“BEPS”) initiative. This initiative could potentially give rise to new adjustments and interpretations of the Russian tax law on the basis of international best practice that would cause additional an tax burden for the Group’s business.
On May 1, 2019, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “MLI”) was ratified by the Russian Federation. Starting in 2021, the MLI could limit tax benefits granted by most double tax treaties to which Russia is a party.
Starting from 2019 the standard VAT rate increased from 18% to 20%
In 2020, the Russian government introduced initiatives related to the increase of withholding tax rates applied to dividends and interest, paid to certain jurisdictions, channeling significant resources from the Russian Federation. The proposals to amend double tax treaties by increasing the withholding tax rate on interest income and dividends to 15% with certain exemptions (currently most Russian double tax treaties provide for a 5%-10% withholding tax on dividends and a 0% withholding tax on interest) were sent, in 2020, to Cyprus, Luxembourg, Malta and the Netherlands. The corresponding amendments to double tax treaties with Cyprus, Malta and Luxembourg were ratified at the end of 2020. Relevant amendments were made to the double tax treaties with Cyprus and Malta and are in effect from January 1, 2021, whereas amendments to the double tax treaty with Luxemburg will come into force on January 1, 2022. Without reaching an agreement with the Netherlands, in May 2021, the State Duma of the Russian Federation passed the law on denunciation of the treaty.
Moreover, there is uncertainty whether and which amendments to the Russian double tax treaties will be made, or whether such or other Russian double tax treaties will eventually be denounced or terminated.
All of the above and other changing conditions create tax risks in Russia that are more significant than those typically found in jurisdictions with more developed tax systems, and complicate tax planning and related business decisions of the Group. In addition, there can be no assurance that the current tax rates will not be increased, that new taxes will not be introduced or that additional sources of revenue or income, or other activities, will not be subject to new taxes or similar charges or fees in the future. There can also be no assurance that the Tax Code will not be changed in the future in a manner that will adversely affect the stability and predictability of the tax system.
It is expected that Russian tax legislation will progressively become more sophisticated. The introduction of new taxes or amendments to current taxation rules may affect the Group’s overall tax efficiency and may result in significant additional tax liabilities. The Group cannot provide holders of the ADSs with any assurance that additional Russian tax exposures will not arise. Such additional tax exposures could have a material adverse effect on the Group’s business, results of operations, financial condition or prospects, and the trading price of the ADSs.
The Group is subject to tax audits by the Russian tax authorities, which may result in additional tax liabilities.
Tax returns, together with related documentation, are subject to review and investigation by the tax authorities, which are authorized by Russian law to impose severe fines and penalties. Generally, tax returns remain open and subject to inspection by the tax authorities for a period of three years immediately preceding the year in which the decision to conduct a tax audit is taken. However, the fact that a year has been reviewed by the tax authorities does not prevent any tax returns relating to that year from being reviewed further by the tax authorities during the three-year limitation period. A repeated tax audit may be conducted by a higher-level tax authority as a measure of control over the activities of lower-level tax authorities, or in connection with the reorganization or liquidation of a taxpayer, or as a result of the filing by such taxpayer of an amended tax return decreasing the tax payable. Therefore, previous tax audits may not preclude subsequent tax claims relating to the audited period. Furthermore, on July 14, 2005, the Constitutional
 
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Court of Russia issued a decision allowing the statute of limitations for tax penalties to be extended beyond the three-year term set out in the Tax Code if a court determines that a taxpayer has obstructed or hindered a tax inspection. Moreover, the Tax Code provides for the possibility of an extension of the three-year statute of limitations for tax offences if the taxpayer obstructed the performance of the tax review and this has become an insurmountable obstacle for the tax audit. Because the terms “obstructed,” “hindered” and “insurmountable obstacles” are not specifically defined in Russian law, the Russian tax authorities may attempt to interpret these terms broadly, effectively linking any difficulty experienced by them in the course of their tax audit with obstruction by the taxpayer and use that as a basis to seek additional tax adjustments and penalties beyond the three-year limitation term. Therefore, the statute of limitations is not entirely effective.
Tax audits or inspections may result in additional costs to the Group, in particular if the relevant tax authorities conclude that the Group did not satisfy its tax obligations in any given year. Such audits or inspections may also impose additional burdens on the Group by diverting the attention of management resources. The outcome of these audits or inspections could have a material adverse effect on the Group’s business, results of operations, financial condition or prospects, and the trading price of the ADSs.
Russian transfer pricing rules may adversely affect the Group’s business, financial condition and results of operations.
Russian transfer pricing legislation has been in effect since January 1, 2012. The rules are technically elaborate, detailed and, to a certain extent, aligned with the international transfer pricing principles developed by the OECD.
The rules allow the Russian tax authorities to make transfer pricing adjustments and impose additional tax liabilities for transactions which are considered “controlled” for Russian transfer pricing purposes. The list of “controlled” transactions includes transactions performed with non-Russian related companies, certain categories of Russian related companies, non-Russian related companies that are residents in certain offshore zones and cross-border transactions in commodities. The rules have considerably increased the compliance burden for taxpayers compared to the law which was in effect before 2012 due to, inter alia, a shifting of the burden of proving market prices from the Russian tax authorities to the taxpayer and obliging the taxpayer to keep specific documentation. Furthermore, the taxpayers are obliged to notify the Russian tax authorities of “controlled” transactions. Although the transfer pricing rules are supposed to be in line with international transfer pricing principles developed by the OECD, there are certain significant differences with respect to how these principles are reflected in the local rules. Special transfer pricing rules apply to transactions with securities and derivatives. It is difficult to evaluate what effect transfer pricing rules may have on the Group.
Since the Russian transfer pricing rules came into force, transactions between affiliated parties have been examined by the Russian tax authorities for compliance with the “arm’s-length principle.” The Tax Code provides that an audit of the proper calculation and payment of taxes in connection with the conclusion of transactions between interdependent persons shall be performed by the Federal Tax Service. However, territorial tax authorities currently try to scrutinize terms and conditions of transactions concluded between related parties for “unjustified tax benefits.” Consequently, due to the uncertainties in the interpretation of Russian transfer pricing legislation, no assurance can be given that the Russian tax authorities will not challenge the Group’s transfer prices or make adjustments which could affect the Group’s tax position unless the Group is able to confirm the use of market prices with respect to “controlled” transactions supported by the appropriate transfer pricing documentation. The imposition of additional tax liabilities under the Russian transfer pricing rules may have a material adverse effect on the Group’s business, results of operations, financial condition or prospects, and the trading price of the ADSs.
The Company may be exposed to taxation in Russia if the Company is treated as having a permanent establishment in Russia.
The Tax Code contains the concept of a permanent establishment in Russia as a means for taxing foreign legal entities that carry on regular entrepreneurial activities in Russia beyond preparatory and auxiliary activities. Russia’s double taxation treaties concluded with other countries, including Cyprus (the Agreement between the Russian government and the government of the Republic of Cyprus for the Avoidance
 
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of Double Taxation with respect to Taxes on Income and on Capital dated December 5, 1998 (the “Russia-Cyprus Tax Treaty”)), where the Company is domiciled, also contain a similar concept. However, the practical application of the concept of a permanent establishment under Russian domestic tax law is not well developed and foreign companies having even limited operations in Russia (which would not normally satisfy the criteria for creating a permanent establishment under international rules), may be at risk of being treated as having a permanent establishment in Russia and, consequently, as liable for Russian taxation.
Although the Company seeks to conduct its affairs so that it is not treated as having a permanent establishment in Russia, no assurance can be given that the Company will not be treated as having such a permanent establishment. If the Company were to be treated as having a permanent establishment in Russia, it would be subject to Russian taxation in a manner broadly similar to the taxation of a Russian legal entity.
Only the amount of the income of a foreign entity that is attributable to its permanent establishment should be subject to taxation in Russia. Pursuant to the transfer pricing rules (discussed above), such amount of income is to be measured based on the functions carried out by a Russian permanent establishment, accepted economic (commercial) risks attributable to such activity and the assets deployed. In order to determine the amount of income of a foreign entity that is attributable to a permanent establishment in Russia, the Russian tax authorities may perform a functional analysis of an activity performed by a foreign entity in the territory of Russia. Nevertheless, the risk still exists that the tax authorities might seek to assess Russian tax on the entire amount of income of a foreign company.
Having a permanent establishment in Russia may lead to other adverse tax implications, including being challenged on a reduced withholding tax rate under an applicable double taxation treaty, and a potential effect on VAT and property tax obligations. There is also a risk that penalties could be imposed by the tax authorities for failure to register a permanent establishment with the Russian tax authorities.
Recent events in Russia suggest that the tax authorities may be becoming more active in seeking to investigate whether, and asserting that, foreign entities operate through a permanent establishment in Russia.
Any such taxes or penalties could have a material adverse effect on the Group’s business, financial condition, results of operations or prospects, and the trading price of the ADSs.
It should also be noted that Russian tax legislation has a concept of tax residency for legal entities. According to this concept, foreign legal entities which are managed from Russia are considered tax residents of the Russian Federation. There are certain rules for determining the place of effective management for foreign companies. In particular, a foreign entity is considered to be managed from Russia if such entity and its business meet at least one of the following criteria: (i) its executive body (bodies) regularly acts (act) on its behalf from Russia; or (ii) its senior (management) staff (persons authorized to plan, supervise and manage the undertaking’s business, and who are liable therefor) predominantly perform their management functions (that is, making decisions and carrying out other actions relating to the business of the entity falling within the competence of its executive bodies) in Russia. The Group may not rule out the possibility that, as a result of these regulations, certain foreign companies of the Group might be deemed to have become Russian tax residents, subject to all applicable Russian taxes, which could have a material adverse effect on the Group’s business, results of operations, financial condition or prospects and the trading price of the ADSs.
The Company may encounter difficulties in obtaining lower rates of the Russian withholding income tax envisaged by the Russia-Cyprus Tax Treaty for dividends distributed from the Company’s subsidiaries.
Dividends paid by a Russian legal entity to a foreign legal entity are generally subject to Russian withholding income tax at a rate of 15%, however, such rate may be reduced pursuant to an applicable double taxation treaty. The Company intends to rely on the Russia-Cyprus Tax Treaty.
On September 8, 2020, the Protocol on Amendments to the Russia-Cyprus Tax Treaty (hereinafter the “ Protocol”) was signed. According to the Protocol, withholding tax rate in respect of dividend income was increased to 15% (though it provides for a number of exceptions where the lower rate of 5% is envisaged).
The reduced 5% tax rate in respect of dividend income is envisaged for certain categories of income recipients. These include companies that are beneficial owners of dividend income and whose shares are
 
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listed on a registered stock exchange, provided that: (a) such company’s free float represents at least 15% of its voting shares, and (b) such company directly holds, and, on the day of payment of the dividends, has held for 365 days, at least 15% of the capital of the company paying the dividends.
In February 2021, the Russian Ministry of Finance provided clarification regarding the application of the reduced tax rate under the Russia-Cyprus Tax Treaty and the Protocol. The Russian Ministry of Finance clarified that the term “registered stock exchange” for the purposes of the double-tax treaty means any stock exchange incorporated and regulated as such under the laws of any of the Contracting Parties (i.e. Russia or Cyprus).
Since we have been approved to list the ADSs on MOEX, the Group believes that the 5% Russian withholding tax rate should apply to dividends received by the Company from its Russian subsidiaries pursuant to the above tax relief available under the Russia-Cyprus Tax Treaty. Although the Group will seek to claim treaty protection or benefits where possible, there is a risk that the applicability of the reduced Russian withholding tax rate of 5% may be challenged by the Russian tax authorities. As a result, there can be no assurance that the Group would be able to avail itself of the reduced withholding tax rate in practice.
Furthermore, the Company will be subject to Russian withholding tax to be withheld at source at a rate of 15%, which will apply to dividends payable by its Russian subsidiaries, if the treaty clearance procedures are not duly performed by the date when the dividend payment is made. In this case, the Company may seek to claim a tax refund from the Russian tax authorities in an amount equal to the difference between the tax withheld at the 15% rate and the tax calculated at the reduced rate of 5%, as appropriate. The application for the refund may be filed with the tax authorities within a three year period; and the tax authorities are obliged to make a decision on refund within six month of receipt of the relevant application from the taxpayer (to the extent the right to apply the reduced tax rate is confirmed). However, in practice, obtaining a tax refund may take considerably longer and there can be no assurance that such refund will be available.
Further changes and restrictions in the application of reduced tax rates envisaged by the Russia-Cyprus Tax Treaty for dividends distributed from the Company’s subsidiaries could have a material adverse effect on the Group’s business, results of operations, financial condition or prospects and the trading price of the ADSs.
The Russian tax authorities may challenge the application of reduced social security contributions, VAT and corporate profits tax rates by one of our companies.
Starting from January 1, 2021, Russian IT companies can apply a reduced profits tax rate (3% instead of the general rate of 20%), as well as reduced VAT tax rate (0% instead of general tax rate 20%) and a reduced social security contributions rate (7.6% instead of general rate of 30%) in relation to payments to employees. In order to apply the reduced profit tax and social security contributions rates, a taxpayer should be officially accredited to perform IT activity, the share of its income from development and sale of own-developed computer programs and databases, and/or from rendering of services involving development, adaptation, modification and support of computer programs and databases (“preferential IT activity”) should comprise 90% of total income, and the average headcount should be at least seven employees. The VAT exemption applies for providing rights to the use of software and databases included in the Unified Register of Russian Software for Computers and Databases.
Historically, N1 Technologies LLC, a subsidiary of the N1 Group, applied reduced social security contributions, profits tax and VAT rates in accordance with the requirements of the Russian tax legislation.
Starting from January 1, 2021, the Tax Code also establishes that when calculating the share of income from preferential IT activity, income from providing rights that enable users to disseminate advertising information on the internet and/or have access to it; place classified ads; search information about potential counterparties and/or enter into transactions should not be taken into account. Thus, the use of reduced rates by companies that are engaged in such businesses will be restricted. The question of whether the restriction will be broadly interpreted in practice, and to what extent, remains open.
 
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Following the N1 Acquisition, we conducted an organizational restructuring whereby the IT teams of the Cian Group and the N1 Group joined together as part of N1 Technologies, which, as a qualifying IT company, is expected to benefit from the reduced profit tax, VAT and social security contributions rates under the Russian Tax Code. Following the restructuring, N1 Technologies operates as a shared service center rendering services to our subsidiaries with respect to development and adaptation of IT products which are being used primarily within the Cian Group. Such practice is widely used by IT companies in Russia.
The amended Russian Tax Code provision regarding application of the reduced tax rates by IT companies is relatively untested. Given the absence of substantial administrative and court practice, the tax authorities may challenge the application of reduced rates by N1 Technologies prior to, or following, our planned organizational restructuring. This may have an adverse effect on our business, results of operations, financial condition and prospects.
Risks Relating to Our Organizational Structure
The rights of our shareholders are governed by Cyprus law and our articles of association and differ in some important respects from the typical rights of shareholders under U.S. state laws.
Our corporate affairs are governed by our articles of association and by the laws governing companies incorporated in Cyprus. The rights of our shareholders and the responsibilities of members of our board of directors under Cyprus law and our articles of association are different than under the laws of some U.S. states. For example, existing holders of shares in Cypriot public companies are entitled, as a matter of law, to pre-emptive rights on the issue of new shares or other securities convertible into shares in that company (if shares are issued for cash consideration). The pre-emptive rights, however, may be disapplied by our shareholders at a general meeting for a specified period.
In addition, our articles of association include other provisions, which differ from provisions typically included in the governing documents of most companies organized in the U.S. For example:
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our shareholders are able to convene an extraordinary general meeting as provided in section 126 of the Cyprus Companies Law;
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our articles of association and the Cyprus Companies Law require the approval of no less than 75% of present and voting shareholders for certain matters, including, among other things, amendments to our constitutional documents, dissolution or liquidation of our company, reducing the share capital and buying back shares; and
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under our articles of association, a company making a takeover bid for all our shares may, subject to certain conditions, acquire upon the same terms the shares of shareholders who have not accepted the offer where holders of only 80% or more of our shares have accepted the offer. See “— In the event of a takeover, our minority shareholders do not benefit from the same protections that the minority shareholders of a Cypriot company listed on a regulated market in the European Union would be entitled to as regards mandatory offers and squeeze-out.”
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As a result of such differences (among others), our shareholders may have rights different to those generally available to shareholders of companies organized under U.S. state laws, and our board of directors may find it more difficult to approve certain actions.
As a holder of the ADSs, you may not be able to exercise your pre-emptive rights in relation to future issuances of ordinary shares.
To raise funding in the future, we may issue additional ordinary shares. Generally, existing holders of shares in Cypriot public companies are entitled by law to pre-emptive rights on the issue of new shares or securities convertible into shares in that company (provided that such shares are paid in cash and the pre-emption rights have not been disapplied by our shareholders). You may not be able to exercise pre-emptive rights for ordinary shares where there is an issue of shares for non-cash consideration or where pre-emptive rights are disapplied. You may also not be able to exercise pre-emption rights directly (but possibly only by instructing the depositary as the registered holder of shares), as only holders of shares and not of ADSs have such rights in Cyprus. In the United States, we may be required to file a registration statement under the Securities Act to implement pre-emptive rights. We can give no assurances that an exemption from
 
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the registration requirements of the Securities Act would be available to enable U.S. holders of ordinary shares to exercise such pre-emptive rights and, if such exemption is available, we may not take the steps necessary to enable U.S. holders of ordinary shares to rely on it. Accordingly, you may not be able to exercise your pre-emptive rights on future issuances of ordinary shares, and, as a result, your percentage ownership interest in us would be diluted. As our shareholders have authorized the disapplication of pre-emptive rights for a period of five years from the date of the completion of this offering, any issuances of shares after the expiry of such period will be subject to pre-emptive rights unless those rights are additionally disapplied. Furthermore, rights offerings are difficult to implement effectively under the current U.S. securities laws, and our ability to raise capital in the future may be compromised if we need to do so through a rights offering in the United States.
Because of their significant voting power and certain provisions of our articles of association, our principal shareholders will be able to exert control over us and our significant corporate decisions such that minority shareholders have limited influence with respect to the replacement or removal of management and with respect to takeovers, even where a takeover would be beneficial to our shareholders as a whole.
Immediately prior to this offering, our principal shareholders, Ronder Investment Limited, Speedtime Trading Limited and Onlypiece Trading Limited, investment vehicles associated with Elbrus Capital, controlled 65.34% of our issued and outstanding ordinary shares. Upon completion of this offering, the shares owned by investment vehicles associated with Elbrus Capital will collectively represent 47.0% of the voting power of our outstanding capital stock.
As at the consummation of this offering, our board of directors will comprise at least seven, but no more than nine directors. Our articles of association provide to Elbrus Capital and to Maksim Melnikov (or to one or more trusts or nominees acting on his behalf) the right to nominate and appoint a certain number of such directors. They provide that at any time when (i) Elbrus Capital’s ownership percentage in aggregate is equal to or greater than 30%, it will have the right to nominate and appoint five directors (which constitute more than 50% of our directors); (ii) Elbrus Capital’s ownership percentage in aggregate is greater than or equal to 5% and less than 30%, it will have the right to nominate and appoint between one and four directors (with four directors constituting more than 50% of our directors where our board of directors comprises seven directors in total), depending on Elbrus Capital’s exact shareholding; (iii) Elbrus Capital’s ownership percentage in aggregate is equal to or greater than 7%, the director(s) appointed by Elbrus Capital will have the right to appoint the chairman of the board of directors (who has a casting vote in the event of a tie); and (iv) until the date that falls five years from the effective date of this registration statement (the “Rights Expiry Date”), Maksim Melnikov holds (whether directly or through one or more trusts or nominees acting on his behalf) at least one of our shares, he (or, if applicable, such trust(s) or nominee(s)) will have the right to nominate and appoint Maksim Melnikov (and only Maksim Melnikov) as a director. For a detailed description of the rights of Elbrus Capital and Maksim Melnikov in this respect, see “Description of Share Capital and Articles of Association—Appointment of Directors.” As a result, Elbrus Capital and Maksim Melnikov may have the ability to significantly influence – and, in the case of Elbrus Capital, at any time when directors appointed by it constitute at least half of the board of directors, to determine – the outcome of all matters submitted to our Board of Directors for approval. The interests of Elbrus Capital and Maksim Melnikov might not coincide with the interests of the other holders of the ADSs. This concentration of ownership may harm the value of the ADSs. In particular, given their limited influence over our board of directors, our minority shareholders have limited ability to influence the removal or replacement of our management and have limited influence over whether any proposed merger, consolidation or amalgamation of our Company proceeds. This may discourage transactions that otherwise would be beneficial to our shareholders and could involve payment of a premium over prevailing market prices for our ADSs, which may in turn depress the price of our ADSs.
We may be subject to defense tax in Cyprus.
Cyprus tax resident companies must pay a Special Contribution for the Defense Fund of the Republic of Cyprus (the “defense tax”) at a rate of 17% on deemed dividend distributions to the extent that their ultimate direct or indirect shareholders are individuals who are both Cyprus tax residents and Cyprus domiciled. A Cypriot company that does not distribute at least 70% of its after tax profits within two years from the end of the year in which the profits arose, is deemed to have distributed this amount as a dividend
 
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two years after that year end. The amount of this deemed dividend distribution, subject to the defense tax, is reduced by any actual dividend paid out of the profits of the relevant year at any time up to the date of the deemed distribution and the resulting balance of profits will be subject to the defense tax to the extent of the appropriation of shares held in the company at that time by Cyprus tax residents. The profits to be taken into account in determining the deemed dividend do not include fair value adjustments to any movable or immovable property.
The defense tax payable as a result of a deemed dividend distribution is paid in the first instance by the Company which may recover such payment from its Cypriot shareholders by deducting the amount from an actual dividend paid to such shareholders from the relevant profits. To the extent that we are unable to recover this amount due to a change in shareholders or no actual dividend is ever paid out of the relevant profits, we will suffer the cost of this defense tax. Imposition of this tax could have a material adverse effect on our business, prospects, financial condition and results of operations if we are unable to recover the tax from shareholders as described above.
In September 2011, the Commissioner of the Inland Revenue Department of Cyprus issued Circular 2011/10, which exempted from the defense tax any profits of a company that is tax resident in Cyprus imputed indirectly to shareholders that are themselves tax residents in Cyprus to the extent that these profits are indirectly apportioned to shareholders who are ultimately not Cyprus tax residents.
Risks Related to the Offering and Ownership of the ADSs
Our operating results and the price of the ADSs may be volatile, and the market price of the ADSs after this offering may drop below the price you pay.
Our operating results are likely to fluctuate in the future in response to numerous factors, many of which are beyond our control. In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could subject the market price of the ADSs to wide price fluctuations regardless of our operating performance. The trading price of the ADSs may also be subject to price fluctuations in response to other factors, such as fluctuations in our actual or projected results of operations because of the depreciation of the ruble, which is our presentational currency.
In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile due to factors specific to our own operations, including the following:
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variations in our revenues, earnings and cash flow;
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announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;
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announcements of new services and expansions by us or our competitors;
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changes in financial estimates by securities analysts;
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detrimental negative publicity about us, our competitors or our industry;
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additions or departures of key personnel;
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potential litigation or regulatory investigations; and
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other events or factors, including those resulting from war, epidemics, incidents of terrorism or responses to these events.
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These and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for the ADSs to fluctuate substantially. Fluctuations in our quarterly operating results could limit or prevent investors from readily selling their ADSs and may otherwise negatively affect the market price and liquidity of ADSs. In addition, in the past, when the market price of ADSs has been volatile, holders have sometimes instituted securities class action litigation against the company that issued the ADSs. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our business, profitability and reputation.
 
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We are eligible to be treated as an emerging growth company, as defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make the ADSs less attractive to investors because we may rely on these reduced disclosure requirements.
We are eligible to be treated as an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. For as long as we continue to be an emerging growth company, we may also take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including presenting only limited selected financial data and not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
Most of such requirements relate to disclosures that we would only be required to make if we also ceased to be a foreign private issuer in the future. As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if our total annual revenue exceeds $1.07 billion, if we issue more than $1 billion in non-convertible debt securities during any three-year period, or if before that time we are a “large accelerated filer” under U.S. securities laws. We cannot predict if investors will find the ADSs less attractive because we may rely on these exemptions. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the ADS price may be more volatile.
We will be a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
Upon the closing of this offering, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (ii) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time, and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, and current reports on Form 8-K containing disclosure of material events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, you may not have the same protections as afforded to shareholders of a company that is not a foreign private issuer.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2022. In the future, we would lose our foreign private issuer status if (i) more than 50% of our outstanding voting securities are owned by U.S. residents and (ii) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose
 
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our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the NYSE. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange. These expenses will relate to, among other things, the obligation to present our financial information in accordance with U.S. GAAP in the future.
As a foreign private issuer, we are permitted to rely on exemptions from certain of the NYSE corporate governance standards, including the requirement that a majority of our board of directors consist of independent directors. Our reliance on such exemptions may afford less protection to holders of the ADSs.
As a company not listed on the regulated market of the Cyprus Stock Exchange, we are not required to comply with any corporate governance code requirements applicable to Cypriot public companies.
The NYSE corporate governance rules require listed companies to have, among other things, a majority of independent board members and independent director oversight of executive compensation, nomination of directors and corporate governance matters. As a foreign private issuer, we are permitted to, and we intend to, follow home country practice in lieu of the above requirements. As long as we rely on the foreign private issuer exemption to certain of the NYSE corporate governance standards, a majority of the directors on our board of directors are not required to be independent directors, our compensation committee is not required to be comprised entirely of independent directors and we will not be required to have a nominating committee. We intend to avail ourselves of the exemptions afforded to foreign private issuers and intend to follow home country practice for our compensation, governance and nominating committee. See “Management—Board Committee Composition—Compensation, Governance and Nominating Committee.” Therefore, our board of directors’ approach to governance may be different from that of a board of directors consisting of a majority of independent directors, and, as a result, the management oversight of our Company may be more limited than if we were subject to all of the NYSE corporate governance standards.
Accordingly, our shareholders will not have the same protection afforded to shareholders of companies that are subject to all of the NYSE corporate governance standards, and the ability of our independent directors to influence our business policies and affairs may be reduced.
A substantial part of our net proceeds from this offering will go to repay the obligations outstanding under our Phantom Share Program, and we have broad discretion in the use of the remaining net proceeds from this offering and may not use them efficiently.
We intend to use the net proceeds from this offering as follows: approximately $27.1 million to repay our obligations outstanding under our Phantom Share Program (for further details, see “Management—Long-Term Incentive Plans”) and the remainder to fund the growth and expansion of our business and other general corporate purposes. See “Use of Proceeds.” Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of the ADSs. You will not have the opportunity to assess whether the proceeds are being used appropriately before you make your investment decision. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The failure by our management to apply these funds effectively could result in financial losses that could adversely affect our business and cause the price of the ADSs to decline. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
If you purchase ADSs in this offering, you will suffer immediate and substantial dilution of your investment.
The initial public offering price of the ADSs is substantially higher than the net tangible book deficit per ADS. Therefore, if you purchase the ADSs in this offering, you will pay a price per ADS that substantially exceeds our pro forma net tangible book value per ADS after this offering. Based on the initial public offering price of $14.75 per ADS, you will experience immediate dilution of $14.49 per ADS, representing the difference between our net tangible book value per ADS after giving effect to this offering at the initial public offering price. See “Dilution” for more detail.
 
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The ADSs will trade on more than one market and this may result in increased volatility and price variations between such markets.
The ADSs will trade on both the NYSE and MOEX. Trading in the ADSs on these markets will occur in different currencies (U.S. dollars on the NYSE and rubles on MOEX) and at different times (due to different time zones, trading days and public holidays in the United States and Russia). The trading prices of the ADSs on these two markets may differ due to these and other factors. The liquidity of trading in the ADSs on MOEX is limited. This may impair your ability to sell your ADSs on MOEX at the time when you wish to sell them or at a price that you consider reasonable. In addition, trading of a small number of ADSs on that market could adversely and significantly impact the price of the ADSs and could, in turn, impact the price of ADSs traded on the NYSE. Any decrease in the trading price of the ADSs on one of these markets could cause a decrease in the trading price of the ADSs on the other market. Additionally, as there is no direct trading or settlement between the two stock markets, the time required to move the ADSs from one market to another may vary and there is no certainty of when ADSs that are moved will be available for trading or settlement.
You may not be able to exercise your right to vote with respect to the ordinary shares underlying your ADSs.
ADS holders may only exercise voting rights with respect to the ordinary shares underlying their respective ADSs in accordance with the provisions of the deposit agreement. ADS holders may vote only by instructing the depositary to vote on their behalf. If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send or make voting materials available to you. For instructions to be valid, they must reach the depositary by a date set by the depositary. The depositary will try, as far as practical, to vote or to have its agents vote the deposited ordinary shares as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary may try to vote as you instruct, but it is not required to do so. Except by instructing the depositary as described above, you will not be able to exercise voting rights unless you surrender your ADSs and withdraw the ordinary shares. However, you may not know about the meeting far enough in advance to withdraw those ordinary shares in time to be able to vote them as you might have planned, and after such a withdrawal you would no longer hold ADSs, but rather you would directly hold the underlying ordinary shares.
The depositary will try, as far as practical, to vote the ordinary shares underlying the ADSs as instructed by the ADS holders. In such an instance, if we ask for your instructions, the depositary, upon timely notice from us, will notify you of the upcoming vote and arrange to deliver our voting materials to you. We cannot guarantee that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ordinary shares or to withdraw your ordinary shares so that you can vote them yourself. Voting instructions may be given only in respect of a number of ADSs representing an integral number of ordinary shares or other deposited securities. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise any right to vote that you may have with respect to the underlying ordinary shares, and there may be nothing you can do if the ordinary shares underlying your ADSs are not voted as you requested. In addition, the depositary is only required to notify you of any particular vote if it receives notice from us in advance of the scheduled meeting. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the ordinary shares underlying your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise voting rights and there may be nothing you can do if the ordinary shares underlying your ADSs are not voted as you requested.
Purchasers of ADSs in this offering may be subject to limitations on transfer of their ADSs.
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or, from time to time, when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under
 
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any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement. In addition ADS holders may not be able to cancel their ADSs and withdraw ordinary shares when they owe money for fees, taxes and similar charges.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our ordinary shares provides that, to the fullest extent permitted by applicable law, holders and beneficial owners of ADSs irrevocably waive the right to a jury trial of any claim that they may have against us or the depositary arising from or relating to our ordinary shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. The waiver continues to apply to claims that arise during the period when a holder holds the ADSs, even if the ADS holder subsequently withdraws the underlying ordinary shares.
However, you will not be deemed, by agreeing to the terms of the deposit agreement, to have waived our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder. In fact, you cannot waive our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder. If we or the depositary opposed a demand for jury trial relying on above-mentioned jury trial waiver, it is up to the court to determine whether such waiver was enforceable considering the facts and circumstances of that case in accordance with the applicable state and federal law.
If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court or by the United States Supreme Court. Nonetheless, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York. In determining whether to enforce a jury trial waiver provision, New York courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim, none of which we believe are applicable in the case of the deposit agreement or the ADSs. If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary relating to the matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not have the right to a jury trial regarding such claims, which may limit and discourage lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary according to the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may have different outcomes compared to that of a jury trial, including results that could be less favorable to the plaintiff(s) in any such action.
Moreover, as the jury trial waiver relates to claims arising out of or relating to the ADSs or the deposit agreement, we believe that, as a matter of construction of the clause, the waiver would likely continue to apply to ADS holders who withdraw the ordinary shares from the ADS facility with respect to claims arising before the cancellation of the ADSs and the withdrawal of the ordinary shares, and the waiver would most likely not apply to ADS holders who subsequently withdraw the ordinary shares represented by ADSs from the ADS facility with respect to claims arising after the withdrawal. However, to our knowledge, there has been no case law on the applicability of the jury trial waiver to ADS holders who withdraw the ordinary shares represented by the ADSs from the ADS facility.
Holders of the ADSs or ordinary shares have limited choice of forum, which could limit your ability to obtain a favorable judicial forum for complaints against us, the depositary or our respective directors, officers or employees.
The deposit agreement governing the ADSs provides that (i) the deposit agreement and the ADSs will be interpreted in accordance with the laws of the State of New York, and (ii) as an owner of ADSs, you
 
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irrevocably agree that any legal action arising out of the deposit agreement and the ADSs involving us or the depositary may only be instituted in a state or federal court in the city of New York. Any person or entity purchasing or otherwise acquiring any ADSs, whether by transfer, sale, operation of law or otherwise, shall be deemed to have notice of and have irrevocably agreed and consented to these provisions.
These forum provisions may increase your cost and limit your ability to bring a claim in a judicial forum that you find favorable for disputes with us, the depositary, or our and the depositary’s respective directors, officers or employees, which may discourage such lawsuits against us, the depositary, and our and the depositary’s respective directors, officers or employees. However, there is uncertainty as to whether a court would enforce such forum selection provision. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with the U.S. federal securities laws and the rules and regulations promulgated thereunder. Also, we may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended. See “Description of American Depositary Shares” section for more information.
To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all lawsuits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all lawsuits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, actions by holders of the ADSs or ordinary shares to enforce any duty or liability created by the Exchange Act, the Securities Act or the respective rules and regulations thereunder must be brought in a federal court in the city of New York. Holders of the ADSs or ordinary shares will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
You have the right to arbitration under the deposit agreement. However, it may not be most beneficial.
The deposit agreement provides that ADS holders and the depositary have the right to elect to have any claim they may have against us arising out of or relating to the ordinary shares or ADSs or the deposit agreement settled by arbitration in New York, New York rather than in a court of law, and to have any judgment rendered by the arbitrators entered in any court having jurisdiction. An arbitral tribunal in any such arbitration would not have the authority to award any consequential, special, or punitive damages and its award would have to conform to the provisions of the deposit agreement. The deposit agreement does not give us the right to require that any claim, whether brought by us or against us, be arbitrated.
A significant portion of our total issued and outstanding ADSs are eligible to be sold into the market in the near future, which could cause the market price of the ADSs to drop significantly, even if our business is doing well.
Sales of a substantial number of the ADSs in the public market, or the perception in the market that the holders of a large number of ADSs intend to sell, could reduce the market price of the ADSs. After giving effect to the sale of ADSs in this offering, we will have 69,042,400 ADSs outstanding (or ADSs 69,042,400 outstanding if the underwriters exercise their option to purchase additional ADSs in full). The ADSs sold in this offering or issuable pursuant to the equity awards we grant will be freely tradable without restriction under the Securities Act, except as described in the next paragraph with respect to the lock-up arrangements and for any of the ADSs that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.
We, the Selling Shareholders, our executive officers, directors and holders of almost all of our outstanding shares and warrants have agreed with the underwriters, subject to certain exceptions, not to, and not to clause any direct or indirect affiliate to, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any ADSs, our ordinary shares underlying the ADSs, or any other securities convertible into or exercisable or exchangeable for ADSs or such ordinary shares, enter into any swap or other arrangement that transfers to another, in whole or in part, any of the
 
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economic consequences of ownership of ADSs or ordinary shares, or publicly disclose the intention to do any of the above, during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of the representatives on behalf of the underwriters. Such ADSs will, however, be able to be resold after the expiration of the lock-up periods, as well as pursuant to customary exceptions thereto or upon the waiver of the lock-up arrangements. The ADSs of certain of our affiliates will only be able to be resold pursuant to the requirements of Rule 144. See “Shares and ADSs Eligible for Future Sale” for a more detailed description of the restrictions on selling the ADSs after this offering.
In the future, we may also issue additional securities if we need to raise capital or make acquisitions, which could constitute a material portion of our then-issued and outstanding ADSs.
Our shareholders may face difficulties in protecting their interests because we are a Cypriot company.
We are, and will upon the consummation of this offering be, a Cypriot company with limited liability. Our corporate affairs are governed by our articles of association and by the laws that govern companies incorporated in Cyprus. The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us are to a large extent governed by the laws of Cyprus, and may be different than the rights and obligations of shareholders and boards of directors in companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board is required by Cypriot law to consider the interests of our company, shareholders, employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, the interests of our shareholders. Furthermore, the rights of our shareholders and the responsibilities of our directors under our articles of association and the laws of Cyprus may not be as clearly defined as under statutes or judicial precedent in existence in jurisdictions in the United States. Therefore, you may have more difficulty protecting your interests than would shareholders of a corporation incorporated in a jurisdiction in the United States.
As a result of all of the above, our shareholders may have more difficulty in protecting their interests in the face of actions taken by our management or members of our board of directors than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of Cypriot law and the laws applicable to companies incorporated in the State of Delaware and their shareholders, see “Description of Share Capital and Articles of Association.”
In the event of a takeover, our minority shareholders do not benefit from the same protections that the minority shareholders of a Cypriot company listed on a regulated market in the European Union would be entitled to as regards mandatory offers and squeeze-out.
As of the date of this registration statement, Cyprus law does not require a mandatory offer to be made in respect of an acquisition of shares in a Cypriot company that is not listed on a regulated market in the European Union (such as the Company). Accordingly, mandatory tender offers with respect to our shares are governed by our articles of association. They require a person that directly or indirectly acquires, together with any parties acting in concert, (i) 30% or more but no more than 50% or (ii) 50% or more of the voting rights (whether from our shares or shares represented by ADSs), to make a tender offer to all of our other shareholders at a price per share not less than the highest price paid by such the acquirer and any parties acting in concert with it for any shares (including shares represented by ADSs) (including those included in the proposed transfer) in the preceding 12 months, or, if no such transfers have taken place in respect of shares, at a price and on terms determined by our board of directors at its discretion to be comparable to any offer for purchase of shares in the Company (see “Description of Share Capital and Articles of Association—Provisions Relevant to Takeovers”). However, this provision does not apply to the Depositary and to Elbrus Capital or its affiliates, which means such persons can individually or collectively go below 30% or 50% of the voting power, as the case may be, and subsequently acquire more than 30% or 50% of the voting power, as the case may be, without making a tender offer. Accordingly, neither Cyprus law nor the mandatory tender offer provision in our articles of association provides a minority shareholder with a right to dispose of its shares in all scenarios in which a shareholder, together with parties acting in concert, if applicable, may acquire control over us.
 
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In addition, our articles of association offer our shareholders less protection from squeeze-out in a takeover situation than is available under the laws of Cyprus (and many other jurisdictions). To facilitate acquisitions of the entire issued share capital of public companies, Cypriot law provides for a ‘squeeze-out’ mechanism whereby a company making a takeover bid for all the shares of another company (or whole class thereof) may, subject to certain conditions, acquire upon the same terms the shares of shareholders who have not accepted the offer. See “Description of Share Capital and Articles of Association—Relevant Provisions of Cypriot Law.” In order to protect the interests of shareholders who have not accepted the offer, squeeze-out is only available under the laws of Cyprus (and many other jurisdictions) where holders of 90% or more of the shares concerned have accepted the offer. Our articles of association allow for squeeze-out where holders of only 80% or more of our shares have accepted the offer. See “Description of Share Capital and Articles of Association—Provisions Relevant to Takeovers.” Accordingly, as compared to Cyprus law, our articles of association offer our shareholders less protection from being required to sell their shares on terms that they consider unfavorable, and the purchaser of a significant stake in our company would need relatively low minority shareholder acceptance of its offer in order to be able to squeeze out other minority shareholders.
There may be difficulties in enforcing foreign judgments against us, our directors or our management, as well as against the Selling Shareholders.
Certain of our directors and management and certain of the other parties named in this prospectus reside outside the United States. Most of our assets and such persons’ assets are located outside the United States. As a result, it may be difficult or impossible for investors to effect service of process upon us within the United States or other jurisdictions, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. See “Enforcement of Civil Liabilities.”
In particular, investors should be aware that there is uncertainty as to whether the courts of Cyprus or any other applicable jurisdictions would recognize and enforce judgments of U.S. courts obtained against us or our directors or our management as well as against the Selling Shareholders predicated upon the civil liability provisions of the securities laws of the United States, or any state in the United States or entertain original actions brought in Cyprus or any other applicable jurisdictions courts against us, our directors or our management, as well as against the Selling Shareholders predicated upon the securities laws of the United States or any state in the United States.
If we are classified as a passive foreign investment company for U.S. federal income tax purposes, U.S. investors may be subject to adverse tax consequences.
A non-U.S. corporation will be classified as a passive foreign investment company (a “PFIC”) for any taxable year if either: (a) at least 75% of its gross income is “passive income” for purposes of the PFIC rules or (b) at least 50% of the value of its assets (generally determined on the basis of a quarterly average) is attributable to assets that produce or are held for the production of passive income. For these purposes, passive income includes interest, dividends and other investment income, with certain exceptions. For these purposes, cash and other assets readily convertible into cash are considered passive assets, and the company’s goodwill and other unbooked intangibles are generally taken into account. The PFIC rules also contain a look-through rule whereby we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.
Based on the anticipated market price of the ADSs in this offering and the current and anticipated composition of our income, assets and operations and those of our subsidiaries, we do not expect to be treated as a PFIC for the current taxable year or in the foreseeable future. This is a factual determination, however, that depends on, among other things, the composition of our income and assets, and the value of our assets and those of our subsidiaries, from time to time, and thus the determination can only be made annually after the close of each taxable year. Because the value of our assets for the purposes of the asset test will generally be determined by reference to the aggregate value of our outstanding ADSs, our PFIC status will depend in large part on the market price of the ADSs, which may fluctuate significantly. Therefore, there can be no assurances that we will not be classified as a PFIC for the current taxable year or for any future taxable year. U.S. investors should consult their tax advisors about the potential application of the
 
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PFIC rules to their investment in the ADSs. For a more detailed discussion of PFIC tax consequences, see “Material Tax Considerations—Material U.S. Federal Income Tax Considerations for U.S. Holders—Passive Foreign Investment Company Rules.”
Changes in our tax rates or exposure to additional tax liabilities or assessments could affect our profitability, and audits by tax authorities could result in additional tax payments.
We are affected by various taxes imposed in different jurisdictions, including direct and indirect taxes imposed on our global activities. Significant judgment is required in determining our provisions for taxes, and there are many transactions and calculations where the ultimate tax determination is uncertain. The amount of income tax we pay is subject to ongoing audits by tax authorities. If audits result in payments or assessments, our future results may include unfavorable adjustments to our tax liabilities, and we could be adversely affected. Any significant changes to the tax system in the jurisdictions where we operate could adversely affect our business, results of operations, financial condition and prospects.
General Risk Factors
We cannot assure you that a market will develop for the ADSs or what the price of the ADSs will be, and public trading markets may experience volatility. Investors may not be able to resell their ADSs at or above the initial public offering price.
Before this offering, there was no public trading market for the ADSs, and we cannot assure you that one will develop or be sustained after this offering. If a market does not develop or is not sustained, it may be difficult for you to sell your ADSs. Public trading markets may also experience volatility and disruption. This may affect the pricing of the ADSs in the secondary market, the transparency and availability of trading prices, the liquidity of the ADSs and the extent of regulation applicable to us. We cannot predict the prices at which the ADSs will trade. The initial public offering price for the ADSs will be determined through our negotiations with the underwriters and may not bear any relationship to the market price at which the ADSs will trade after this offering or to any other established criteria of the value of our business. It is possible that, in future quarters, our operating results may be below the expectations of securities analysts and investors. As a result of these and other factors, the price of the ADSs may decline.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding the ADSs adversely, the price and trading volume of the ADSs could decline.
The trading market for the ADSs is influenced by the research and reports that industry or securities analysts publish about us, our business, our market or our competitors. If any of the securities or industry analysts who cover us, or may cover us in the future, change their recommendation regarding the ADSs adversely, or provide more favorable relative recommendations about our competitors, the price of the ADSs would likely decline. If any securities or industry analyst who covers us or may cover us in the future were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of the ADSs to decline.
We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and could also make it more difficult for us to attract and
 
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retain qualified members of our board of directors. We also expect that as a public company, we may face increased demand for more detailed and more frequent reporting on environmental, social and corporate governance reports and disclosure.
We are evaluating these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
We are not currently required to comply with the rules of the SEC implementing Section 404 and therefore are not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a publicly traded company, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our annual reports and provide an annual management report on the effectiveness of control over financial reporting. Though we will be required to disclose material changes in internal control over financial reporting on an annual basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. Additionally, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. We currently have limited accounting personnel and we have begun the process of evaluating the adequacy of our accounting personnel staffing level and other matters related to our internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses once we are a public company, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. As a result, the market price of the ADSs could be negatively affected, and we could become subject to investigations by the stock exchange on which the ADSs are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
 
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that relate to our current expectations and views of future events. These forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions.
These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the risk factors set forth in “Risk Factors” and the following:
•
our lack of historic profitability and any potential inability to achieve or maintain profitability;
​
•
our ability to maintain our leading market positions, particularly in Moscow and St. Petersburg, and our ability to achieve and maintain leading market position in certain other regions;
​
•
our ability to compete effectively with existing and new industry players in the Russian real estate classifieds market;
​
•
any potential failure to adapt to any substantial shift in real estate transactions from, or demand for services in, certain Russian geographic markets;
​
•
any downturns in the Russian real estate market and general economic conditions in Russia;
​
•
any effect on our operations due to cancellation of, or changes to the Russian mortgage subsidy program;
​
•
further widespread impacts of the COVID-19 pandemic, or other public health crises, natural disasters or other catastrophic events which may limit our ability to conduct business as normal;
​
•
our ability to establish and maintain important relationships with our customers and certain other parties;
​
•
our ability to successfully implement our strategy;
​
•
our ability to develop and implement new initiatives and to expand our presence in certain regional markets;
​
•
the implementation of our subscription-based model may not materialize as expected;
​
•
any negative effects resulting from updates or changes in search engine algorithms, other traffic-generating arrangements or adjacent products;
​
•
any failure to establish and maintain proper and effective internal control over financial reporting;
​
•
any failure to remediate existing deficiencies we have identified in our internal controls over financial reporting, including our information technology general controls; and
​
•
any new or existing government regulation in the area of data privacy, data protection or other areas.
​
The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of
 
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unanticipated events. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results or performance may be materially different from what we expect.
 
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USE OF PROCEEDS
We estimate that the net proceeds to us from this offering will be approximately $51.1 million, assuming an initial public offering price per ADS of $14.75, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and expenses of the offering that are payable by us.
Each $1.00 increase (decrease) in the assumed initial public offering price per ADS would increase (decrease) our net proceeds, after deducting the estimated underwriting discounts and commissions and expenses, by $3.7 million, assuming that the number of ADSs offered by us, as set forth on the cover of this prospectus, remains the same. Each increase (decrease) of 1,000,000 ADSs in the number of ADSs offered by us would increase (decrease) our net proceeds, after deducting the estimated underwriting discounts and commissions and expenses, by approximately $13.7 million, assuming no change in the assumed initial public offering price per ADS. Expenses of this offering will be paid by us.
We will not receive any proceeds from the sale of ADSs by the Selling Shareholders.
The principal purposes of this offering are to create a public market for the ADSs, facilitate access to the public equity markets and increase our visibility in the marketplace. We intend to use the net proceeds from this offering as follows:
•
approximately $27.1 million to repay our obligations outstanding under our Phantom Share Program (for further details, see “Management—Long-Term Incentive Plans”); and
​
•
the remainder to fund the growth and expansion of our business and other general corporate purposes.
​
The amount of what, and timing of when, we actually spend for these purposes may vary significantly and will depend on a number of factors, including our future revenue and cash generated by operations and the other factors described in “Risk Factors.” Accordingly, our board of directors will have broad discretion in deploying the net proceeds of this offering.
 
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DIVIDEND POLICY
We have not declared or paid cash dividends on our ordinary shares in recent years. In the medium term, we intend to retain all available liquidity sources and future earnings, if any, to fund the development and growth of our business. Any future determination to declare cash dividends would be subject to the discretion of our board of directors and would depend on various factors, including our strategy, results of operations, financial condition, cash flow, working capital requirements, our capital expenditures, applicable provisions of our articles of association, restrictions that may be imposed by applicable law or our credit facilities, and other factors deemed relevant by our board of directors.
Further, the terms of certain of our outstanding borrowings restrict our ability to pay dividends or make distributions on our ordinary shares without consent of a lender, and we may enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends or make distributions on our ordinary shares.
 
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CAPITALIZATION
The table below sets forth our cash and cash equivalents and capitalization as of June 30, 2021:
•
on an actual basis; and
​
•
on an as adjusted basis to reflect the issuance and sale of ADSs by us in this offering at the assumed initial public offering price of $14.75 per ADS, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
​
This table should be read in conjunction with “Use of Proceeds,” “Selected Consolidated Historical Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 and our audited consolidated financial statements for the years ended December 31, 2020 and 2019, included elsewhere in this prospectus.
​ ​ ​
As of June 30, 2021
​
​ ​ ​
Actual
​ ​
As Adjusted(1)
​
​ ​ ​
(RUB in million)
​
Cash and cash equivalents
​ ​ ​ ​ 810 ​ ​ ​ ​ ​ 4,362 ​ ​
Borrowings, current portion
​ ​ ​ ​ 542 ​ ​ ​ ​ ​ 542 ​ ​
Borrowings, non-current portion
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total borrowings
​ ​ ​ ​ 542 ​ ​ ​ ​ ​ 542 ​ ​
Equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Share capital
​ ​ ​ ​ 0.26 ​ ​ ​ ​ ​ 0.39 ​ ​
Share premium
​ ​ ​ ​ 2,416 ​ ​ ​ ​ ​ 5,967 ​ ​
Accumulated losses
​ ​ ​ ​ (2,667) ​ ​ ​ ​ ​ (2,667) ​ ​
Total equity (deficit)
​ ​ ​ ​ (251) ​ ​ ​ ​ ​ 3,300 ​ ​
Total capitalization
​ ​ ​ ​ 1,101 ​ ​ ​ ​ ​ 8,204 ​ ​
​
(1)
A $1.00 increase or decrease in the assumed initial public offering price of $14.75 per ADS, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the as adjusted amount of each of cash and cash equivalents, share premium, total shareholders’ equity and total capitalization by approximately $3.7 million, assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions. An increase or decrease of 1,000,000 ADSs in the number of ADSs offered by us, as set forth on the cover page of this prospectus, would increase or decrease the as adjusted amount of each of cash and cash equivalents, share premium, total shareholders’ equity and total capitalization by approximately $13.7 million, assuming no change in the assumed initial public offering price of $14.75 per ADS, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions.
​
Significant Changes to Our Capitalization since June 30, 2021
In August, pursuant to a special resolution at a general shareholder meeting, we:
•
made a 1-for-2,500 split of our ordinary shares;
​
•
increased the authorized share capital by the creation of additional 121,625,000 ordinary shares of EUR 0.0004 each; and
​
•
issued and allotted 56,797,500 fully paid ordinary shares of EUR 0.0004 each to our existing shareholders on a pro rata basis, resulting in a share split of our ordinary shares.
​
There have been no other significant changes to our capitalization since June 30, 2021.
 
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DILUTION
If you invest in the ADSs in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and the as adjusted net tangible book value per share immediately following the consummation of this offering.
At June 30, 2021, we had a historical net tangible book value of $(32.95) million, corresponding to a net tangible book value of $(0.51) per share or $(0.51) per ADS based on an ordinary share to ADS ratio of one to one. Net tangible book value per share represents the amount of our total assets less our total liabilities, excluding goodwill and other intangible assets, divided by the total number of our ordinary shares outstanding.
After giving effect to the sale by us of 4,042,400 ADSs (representing an aggregate of 4,042,400 ordinary shares) in this offering at the assumed initial public offering price of $14.75 per ADS, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value at June 30, 2021 would have been approximately $18.11 million, representing $0.26 per share or $0.26 per ADS. This represents an immediate increase in net tangible book value of $0.77 per share or $0.77 per ADS to existing shareholders and an immediate dilution in net tangible book value of $14.49 per share or $14.49 per ADS to new investors purchasing ADSs in this offering at the assumed initial public offering price. Dilution in net tangible book value per ADS to new investors is determined by subtracting as adjusted net tangible book value per ADS after this offering from the assumed initial public offering price per ADS paid by new investors.
The following table illustrates this dilution to new investors purchasing ADSs in the offering:
​ ​ ​
No exercise
​ ​
Full exercise
​
​ ​ ​
(in USD)
​
Assumed initial public offering price
​ ​ ​ ​ 14.75 ​ ​ ​ ​ ​ 14.75 ​ ​
Historical net tangible book value per ADS as of June 30, 2021
​ ​ ​ ​ (0.51) ​ ​ ​ ​ ​ (0.51) ​ ​
Increase in net tangible book value per ADS attributable to this offering
​ ​ ​ ​ 0.77 ​ ​ ​ ​ ​ 0.77 ​ ​
As adjusted net tangible book value per ADS after this offering
​ ​ ​ ​ 0.26 ​ ​ ​ ​ ​ 0.26 ​ ​
Dilution per ADS to new investors in this offering
​ ​ ​ ​ 14.49 ​ ​ ​ ​ ​ 14.49 ​ ​
Each $1.00 increase (decrease) in the assumed initial public offering price of $14.75 per ADS, which is the midpoint of the price range set forth on the cover page of this prospectus, respectively, would increase (decrease) the as adjusted net tangible book value after this offering by $0.05 per ADS and the dilution per share to new investors in the offering by $0.95 per ADS, assuming that the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same.
The following table summarizes, as of June 30, 2021, the total number of ordinary shares purchased from us, the total consideration paid to us and the average price per share paid by the existing shareholders and by new investors purchasing ADSs in this offering.
​ ​ ​
Ordinary Shares Purchased
(including those represented by
ADSs)
​ ​
Total Consideration
​ ​
Average Price
Per Share
(including those
represented by
ADSs)
​
​ ​ ​
Number
​ ​
Percent
​ ​
Amount
​ ​
Percent
​
Existing shareholders
​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ $ 0 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ $ 14.75 ​ ​
New investors
​ ​ ​ ​ 4,042,400 ​ ​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 60 ​ ​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 14.75 ​ ​
Total
​ ​ ​ ​ 4,042,400 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 60 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 14.75 ​ ​
Sales by the Selling Shareholders in this offering will reduce the number of ordinary shares held by existing shareholders to 50,829,000, or approximately 73.6% of the total number of ordinary shares outstanding after the offering, assuming no exercise by the underwriters of their option to purchase additional ADSs in this offering, or 48,096,990, or approximately 69.7% of the total number of ordinary shares outstanding after the offering, assuming full exercise by the underwriters of their option to purchase additional ADSs in this offering.
 
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SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OTHER DATA
We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB. The following selected consolidated statements of profit or loss and other comprehensive income, consolidated statements of financial position and consolidated statements of cash flows as of and for the years ended December 31, 2020 and 2019 are derived from our audited consolidated financial statements for the year ended December 31, 2020 and 2019, included elsewhere in this prospectus. The summary consolidated statements of profit or loss and other comprehensive income, consolidated statement of financial position and consolidated statement of cash flows as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 are derived from our unaudited interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 included elsewhere in this prospectus. The unaudited interim condensed consolidated financial statements have been prepared in accordance with IAS 34 using the same accounting principles and on the same basis as the year-end financial statements and include all adjustments that management considers necessary for the fair presentation of the financial information set forth in those statements.
Our historical results are not necessarily indicative of the results that may be expected for any periods in the future. You should read this summary data together with our financial statements and related notes beginning on page F-1 of this prospectus, as well as the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other financial information included elsewhere in this prospectus.
Consolidated Statements of Profit or Loss and Other Comprehensive Income
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
(RUB in million, except share and per share data)
​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
Revenue ​ ​ ​ ​ 2,704 ​ ​ ​ ​ ​ 1,642 ​ ​ ​ ​ ​ 3,972 ​ ​ ​ ​ ​ 3,607 ​ ​
Operating expenses
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Marketing expenses
​ ​ ​ ​ (1,129) ​ ​ ​ ​ ​ (636) ​ ​ ​ ​ ​ (1,697) ​ ​ ​ ​ ​ (2,159) ​ ​
Employee-related expenses
​ ​ ​ ​ (2,632) ​ ​ ​ ​ ​ (1,078) ​ ​ ​ ​ ​ (2,208) ​ ​ ​ ​ ​ (1,385) ​ ​
IT expenses
​ ​ ​ ​ (229) ​ ​ ​ ​ ​ (143) ​ ​ ​ ​ ​ (264) ​ ​ ​ ​ ​ (289) ​ ​
Depreciation and amortization
​ ​ ​ ​ (134) ​ ​ ​ ​ ​ (99) ​ ​ ​ ​ ​ (200) ​ ​ ​ ​ ​ (169) ​ ​
Other operating expenses
​ ​ ​ ​ (221) ​ ​ ​ ​ ​ (86) ​ ​ ​ ​ ​ (180) ​ ​ ​ ​ ​ (217) ​ ​
Goodwill impairment
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (256) ​ ​
Total operating expenses
​ ​ ​ ​ (4,345) ​ ​ ​ ​ ​ (2,042) ​ ​ ​ ​ ​ (4,549) ​ ​ ​ ​ ​ (4,475) ​ ​
Operating loss
​ ​ ​ ​ (1,641) ​ ​ ​ ​ ​ (400) ​ ​ ​ ​ ​ (577) ​ ​ ​ ​ ​ (868) ​ ​
Finance costs
​ ​ ​ ​ (31) ​ ​ ​ ​ ​ (36) ​ ​ ​ ​ ​ (72) ​ ​ ​ ​ ​ (38) ​ ​
Finance income
​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 7 ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ (27) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ (3) ​ ​
Loss before income tax
​ ​ ​ ​ (1,692) ​ ​ ​ ​ ​ (432) ​ ​ ​ ​ ​ (639) ​ ​ ​ ​ ​ (902) ​ ​
Income tax benefit
​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 27 ​ ​ ​ ​ ​ 12 ​ ​ ​ ​ ​ 96 ​ ​
Loss for the period
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (806) ​ ​
Total comprehensive loss for the period
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (806) ​ ​
Loss per share, in RUB ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic and diluted loss per share attributable to ordinary equity holders of the parent(1)
​ ​ ​
​
(26)
​ ​ ​ ​
​
(7)
​ ​ ​ ​
​
(11)
​ ​ ​ ​
​
(14)
​ ​
Basic and diluted weighted average number of ordinary shares(1)
​ ​ ​ ​ 63,751,905 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​
​
(1)
The basic and diluted loss per share are adjusted based on the share split as part of the capital reorganization. For further details, see Note 16 to our unaudited interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 and Note 21 to our audited consolidated financial statements for the years ended December 31, 2020 and 2019.
​
 
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Selected Consolidated Statements of Financial Position
​ ​ ​
As of June 30,
​ ​
As of December 31,
​
(RUB in million)
​ ​
2021
​ ​
2020
​ ​
2019
​
Total non-current assets
​ ​ ​ ​ 2,479 ​ ​ ​ ​ ​ 659 ​ ​ ​ ​ ​ 638 ​ ​
Total current assets
​ ​ ​ ​ 1,208 ​ ​ ​ ​ ​ 711 ​ ​ ​ ​ ​ 328 ​ ​
Total assets
​ ​ ​ ​ 3,687 ​ ​ ​ ​ ​ 1,370 ​ ​ ​ ​ ​ 966 ​ ​
Total equity
​ ​ ​ ​ (251) ​ ​ ​ ​ ​ (872) ​ ​ ​ ​ ​ (245) ​ ​
Total non-current liabilities
​ ​ ​ ​ 212 ​ ​ ​ ​ ​ 741 ​ ​ ​ ​ ​ 576 ​ ​
Total current liabilities
​ ​ ​ ​ 3,726 ​ ​ ​ ​ ​ 1,501 ​ ​ ​ ​ ​ 635 ​ ​
Total liabilities
​ ​ ​ ​ 3,938 ​ ​ ​ ​ ​ 2,242 ​ ​ ​ ​ ​ 1,211 ​ ​
Selected Consolidated Statements of Cash Flows
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
(RUB in million)
​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
Net cash generated from (used in) operating activities
​ ​ ​ ​ 27 ​ ​ ​ ​ ​ (44) ​ ​ ​ ​ ​ 230 ​ ​ ​ ​ ​ (361) ​ ​
Net cash used in investing activities
​ ​ ​ ​ (1,725) ​ ​ ​ ​ ​ (35) ​ ​ ​ ​ ​ (109) ​ ​ ​ ​ ​ (130) ​ ​
Net cash generated from financing activities
​ ​ ​ ​ 2,060 ​ ​ ​ ​ ​ 287 ​ ​ ​ ​ ​ 182 ​ ​ ​ ​ ​ 539 ​ ​
Cash and cash equivalents at the end of the period
​ ​ ​ ​ 810 ​ ​ ​ ​ ​ 356 ​ ​ ​ ​ ​ 449 ​ ​ ​ ​ ​ 148 ​ ​
Other Financial Data: Segment Revenue and Net Margin Data
​ ​ ​
Six Months Ended
June 30,
​ ​
Year Ended December 31,
​
(RUB in million)
​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
Core Business revenue
​ ​ ​ ​ 2,563 ​ ​ ​ ​ ​ 1,597 ​ ​ ​ ​ ​ 3,822 ​ ​ ​ ​ ​ 3,555 ​ ​
Listing revenue
​ ​ ​ ​ 1,697 ​ ​ ​ ​ ​ 979 ​ ​ ​ ​ ​ 2,383 ​ ​ ​ ​ ​ 2,481 ​ ​
Secondary residential real estate
​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 765 ​ ​ ​ ​ ​ 1,819 ​ ​ ​ ​ ​ 1,926 ​ ​
Commercial real estate
​ ​ ​ ​ 364 ​ ​ ​ ​ ​ 214 ​ ​ ​ ​ ​ 564 ​ ​ ​ ​ ​ 555 ​ ​
Lead generation revenue(1)
​ ​ ​ ​ 595 ​ ​ ​ ​ ​ 407 ​ ​ ​ ​ ​ 991 ​ ​ ​ ​ ​ 622 ​ ​
Display advertising revenue
​ ​ ​ ​ 267 ​ ​ ​ ​ ​ 206 ​ ​ ​ ​ ​ 439 ​ ​ ​ ​ ​ 440 ​ ​
Other revenue
​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 12 ​ ​
Mortgage Marketplace revenue
​ ​ ​ ​ 119 ​ ​ ​ ​ ​ 36 ​ ​ ​ ​ ​ 110 ​ ​ ​ ​ ​ 34 ​ ​
Listing revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Lead generation revenue
​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 1 ​ ​
Display advertising revenue
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 17 ​ ​ ​ ​ ​ 12 ​ ​
Other revenue
​ ​ ​ ​ 116 ​ ​ ​ ​ ​ 32 ​ ​ ​ ​ ​ 90 ​ ​ ​ ​ ​ 21 ​ ​
Valuation and Analytics revenue(2)
​ ​ ​ ​ 21 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 18 ​ ​
C2C Rental revenue(2)
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​
End-to-End Offerings revenue(3)
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Revenue ​ ​ ​ ​ 2,704 ​ ​ ​ ​ ​ 1,642 ​ ​ ​ ​ ​ 3,972 ​ ​ ​ ​ ​ 3,607 ​ ​
Loss for the period/year
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (806) ​ ​
Net margin (in %)
​ ​ ​ ​ (61.8)% ​ ​ ​ ​ ​ (24.7)% ​ ​ ​ ​ ​ (15.8)% ​ ​ ​ ​ ​ (22.3)% ​ ​
​
(1)
Originating from the primary real estate vertical.
​
(2)
All attributed to “Other revenue.” For further details, see Note 4 to each of our unaudited interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 and our audited consolidated financial statements for the years ended December 31, 2020 and 2019.
​
(3)
We commenced our operations as part of the End-to-End Offerings segment in the first half of 2021.
​
 
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Other Financial Data: Core Business Revenue by Region
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
(RUB in million)
​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​ ​
2018(1)
​
Core Business revenue: Moscow and the
Moscow region
​ ​ ​ ​ 1,896 ​ ​ ​ ​ ​ 1,225 ​ ​ ​ ​ ​ 3,000 ​ ​ ​ ​ ​ 2,701 ​ ​ ​ ​ ​ 2,127 ​ ​
Core Business revenue: Other regions
​ ​ ​ ​ 667 ​ ​ ​ ​ ​ 372 ​ ​ ​ ​ ​ 822 ​ ​ ​ ​ ​ 854 ​ ​ ​ ​ ​ 572 ​ ​
Core Business revenue
​ ​ ​ ​ 2,563 ​ ​ ​ ​ ​ 1,597 ​ ​ ​ ​ ​ 3,822 ​ ​ ​ ​ ​ 3,555 ​ ​ ​
2,699
​
​
(1)
The selected consolidated financial data as of and for the year ended December 31, 2018 has been derived from our consolidated financial statements not included in this prospectus, and which have not been audited in accordance with the standards of the PCAOB. Such consolidated financial statements were prepared on a basis consistent with our audited financial statements included in this prospectus.
​
Segment Data(1)
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
(RUB in million,unless stated otherwise)
​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
Core Business Adjusted EBITDA
​ ​ ​ ​ 406 ​ ​ ​ ​ ​ 110 ​ ​ ​ ​ ​ 532 ​ ​ ​ ​ ​ (193) ​ ​
Mortgage Marketplace Adjusted EBITDA
​ ​ ​ ​ (232) ​ ​ ​ ​ ​ (97) ​ ​ ​ ​ ​ (254) ​ ​ ​ ​ ​ (153) ​ ​
Valuation and Analytics Adjusted EBITDA
​ ​ ​ ​ (36) ​ ​ ​ ​ ​ (69) ​ ​ ​ ​ ​ (119) ​ ​ ​ ​ ​ (81) ​ ​
C2C Rental Adjusted EBITDA
​ ​ ​ ​ (71) ​ ​ ​ ​ ​ (63) ​ ​ ​ ​ ​ (126) ​ ​ ​ ​ ​ (65) ​ ​
End-to-End Offerings Adjusted EBITDA
​ ​ ​ ​ (66) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​
(1)
Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA presented in the table above are our segment measures of profit or loss and, therefore, are not considered non-IFRS financial measures. The sum of Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA differs from Adjusted EBITDA because Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA include adjustments for lease-related amortization and interest, capitalized development costs, and operating expense related to software licenses. For further details on our segmentation, see Note 5 to our interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 and Note 5 to our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019.
​
Non-IFRS Measures
To provide investors with additional information regarding our results of operations, we have disclosed here and elsewhere in this prospectus certain non-IFRS financial measures: Adjusted EBITDA, Core Business Adjusted EBITDA for Moscow and the Moscow region, Core Business Adjusted EBITDA for Other regions, Adjusted EBITDA Margin, Core Business Adjusted EBITDA Margin for Moscow and the Moscow region and Core Business Adjusted EBITDA Margin for Other regions.
The non-IFRS financial measures presented herein should not be considered in isolation or as an alternative or a substitute to loss for the period, which is the most directly comparable IFRS measure, or any other measure of financial performance calculated and presented in accordance with IFRS. Adjusted EBITDA, Core Business Adjusted EBITDA for Moscow and the Moscow region, Core Business Adjusted EBITDA for Other regions, Adjusted EBITDA Margin, Core Business Adjusted EBITDA Margin for Moscow and the Moscow region and Core Business Adjusted EBITDA Margin for Other regions have limitations as analytical tools, and you should not consider them in isolation. Some of these limitations are:
•
they exclude depreciation and amortization expense and, although these are non-cash expenses, the assets being depreciated may have to be replaced in the future, increasing our cash requirements;
​
•
they do not reflect interest expense, or the cash required to service our debt, which reduces cash available to us;
​
•
they do not reflect income tax payments that reduce cash available to us;
​
 
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•
they do not reflect share-based compensation expenses and, therefore, does not include all of our employee-related expenses; and
​
•
other companies, including companies in our industry, may calculate those measures differently, which reduces their usefulness as comparative measures.
​
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
(RUB in million, unless stated otherwise)
​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
Core Business Adjusted EBITDA: ​ ​ ​ ​ ​
Core Business Adjusted EBITDA for Moscow and the Moscow region(1)
​ ​ ​ ​ 1,069 ​ ​ ​ ​ ​ 615 ​ ​ ​ ​ ​ 1,714 ​ ​ ​ ​ ​ 1,498 ​ ​
Core Business Adjusted EBITDA for Other regions(1)
​ ​ ​ ​ (663) ​ ​ ​ ​ ​ (505) ​ ​ ​ ​ ​ (1,182) ​ ​ ​ ​ ​ (1,691) ​ ​
Core Business Adjusted EBITDA(2)
​ ​ ​ ​ 406 ​ ​ ​ ​ ​ 110 ​ ​ ​ ​ ​ 532 ​ ​ ​ ​ ​ (193) ​ ​
Mortgage Marketplace Adjusted EBITDA
​ ​ ​ ​ (232) ​ ​ ​ ​ ​ (97) ​ ​ ​ ​ ​ (254) ​ ​ ​ ​ ​ (153) ​ ​
Valuation and Analytics Adjusted EBITDA
​ ​ ​ ​ (36) ​ ​ ​ ​ ​ (69) ​ ​ ​ ​ ​ (119) ​ ​ ​ ​ ​ (81) ​ ​
C2C Rental Adjusted EBITDA
​ ​ ​ ​ (71) ​ ​ ​ ​ ​ (63) ​ ​ ​ ​ ​ (126) ​ ​ ​ ​ ​ (65) ​ ​
End-to-End Offerings Adjusted EBITDA
​ ​ ​ ​ (66) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Adjusted EBITDA(3)
​ ​ ​ ​ 51 ​ ​ ​ ​ ​ (52) ​ ​ ​ ​ ​ 181 ​ ​ ​ ​ ​ (376) ​ ​
Adjusted EBITDA Margin(4)
​ ​ ​ ​ 1.9% ​ ​ ​ ​ ​ (3.2)% ​ ​ ​ ​ ​ 4.6% ​ ​ ​ ​ ​ (10.4)% ​ ​
Core Business Adjusted EBITDA Margin(4)
​ ​ ​ ​ 15.8% ​ ​ ​ ​ ​ 6.9% ​ ​ ​ ​ ​ 13.9% ​ ​ ​ ​ ​ (5.4)% ​ ​
Core Business Adjusted EBITDA Margin for Moscow and the Moscow region(4)
​ ​ ​ ​ 56.4% ​ ​ ​ ​ ​ 50.2% ​ ​ ​ ​ ​ 57.1% ​ ​ ​ ​ ​ 55.5% ​ ​
Core Business Adjusted EBITDA Margin for Other regions(4)
​ ​ ​ ​ (99.4)% ​ ​ ​ ​ ​ (135.8)% ​ ​ ​ ​ ​ (143.8)% ​ ​ ​ ​ ​ (198.0)% ​ ​
​
(1)
For the purpose of calculating Core Business Adjusted EBITDA for Moscow and the Moscow region and Core Business Adjusted EBITDA for Other regions: (i) revenues are attributed to the relevant region based primarily on the location of the relevant property listed; and (ii) costs are directly attributed to the relevant region with respect to which they were incurred, when possible. Due to the integrated structure of our business, certain costs may benefit all our regions. These costs primarily include certain headcount-related expenses, certain marketing and advertising costs, product development, IT expenses (including hosting and technical support expenses and telecommunication services), office maintenance expenses and other general corporate expenses, such as finance, accounting, legal, human resources, recruiting and facilities costs. These costs are allocated to Moscow and the Moscow region and Other regions based on the estimated benefit each region receives from such expenses, using specific allocation drivers representing this benefit.
​
(2)
Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA presented in the table above are our segment measures of profit or loss and, therefore, are not considered non-IFRS financial measures. The sum of Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA differs from Adjusted EBITDA because Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA include adjustments for lease related amortization and interest, capitalized development costs, and operating expense related to software licenses. For further details on our segmentation, see Note 5 to our interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 and Note 5 to our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019.
​
(3)
We define Adjusted EBITDA as loss for the period adjusted to exclude income tax benefit, finance costs, finance income, foreign currency exchange loss, net, depreciation and amortization, share-based payments under our equity-based incentive program consisting of phantom share options, IPO-related costs and goodwill impairment.
​
Adjusted EBITDA is a supplemental non-IFRS financial measure that is not required by, or presented in accordance with, IFRS. We present Adjusted EBITDA in this prospectus because it is an alternative measure used by our chief operating decision-maker (“CODM”), who is our Chief Executive Officer, to evaluate the operating performance for the Group. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results.
The sum of Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA differs from Adjusted EBITDA because Core Business Adjusted EBITDA, Mortgage Marketplace Adjusted EBITDA, Valuation and Analytics Adjusted EBITDA, C2C Rental Adjusted EBITDA and End-to-End Offerings Adjusted EBITDA presented in the table above are our segment measures of profit or loss and, therefore, are not considered non IFRS financial measures and include adjustments for lease related amortization and interest, capitalized development costs, and operating expense related to software licenses.
 
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The following is a reconciliation of our Adjusted EBITDA to our loss for the period, the most directly comparable IFRS financial measure, for each of the periods indicated:
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
(RUB in million)
​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
Loss for the period
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (806) ​ ​
Income tax benefit
​ ​ ​ ​ (22) ​ ​ ​ ​ ​ (27) ​ ​ ​ ​ ​ (12) ​ ​ ​ ​ ​ (96) ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ 27 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3 ​ ​
Finance costs, net(i)
​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 32 ​ ​ ​ ​ ​ 61 ​ ​ ​ ​ ​ 31 ​ ​
Goodwill impairment(ii)
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 256 ​ ​
IPO-related costs(ii)
​ ​ ​ ​ 88 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Depreciation and amortization
​ ​ ​ ​ 134 ​ ​ ​ ​ ​ 99 ​ ​ ​ ​ ​ 200 ​ ​ ​ ​ ​ 169 ​ ​
Share-based payments(iii)
​ ​ ​ ​ 1,470 ​ ​ ​ ​ ​ 249 ​ ​ ​ ​ ​ 558 ​ ​ ​ ​ ​ 67 ​ ​
Adjusted EBITDA
​ ​ ​ ​ 51 ​ ​ ​ ​ ​ (52) ​ ​ ​ ​ ​ 181 ​ ​ ​ ​ ​ (376) ​ ​
​
(i)
Comprises finance costs and finance income for the respective periods.
​
(ii)
Non-recurring items, such as IPO-related costs and goodwill impairment, are evaluated for adjustment as and when they occur.
​
(iii)
For the purposes of CODM’s assessment of operating performance, the fair value adjustments related to re-measurement of share-based payments liability are not analyzed.
​
(4)
We define Adjusted EBITDA Margin, Core Business Adjusted EBITDA Margin, Core Business Adjusted EBITDA Margin for Moscow and the Moscow region and Core Business Adjusted EBITDA Margin for Other regions as Adjusted EBITDA, Core Business Adjusted EBITDA and Core Business Adjusted EBITDA for Moscow and the Moscow region and Core Business Adjusted EBITDA for Other regions divided by revenue, Core Business revenue, Core Business revenue for Moscow and the Moscow region, and Core Business Adjusted EBITDA for Other regions respectively.
​
Other Data
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
​ ​ ​
2021*
​ ​
2020
​ ​
2020
​ ​
2019
​
Average UMV(1) (in millions)
​ ​ ​ ​ 20.3 ​ ​ ​ ​ ​ 15.2 ​ ​ ​ ​ ​ 16.5 ​ ​ ​ ​ ​ 13.4 ​ ​
Listings(2) (in millions)
​ ​ ​ ​ 2.1 ​ ​ ​ ​ ​ 2.0 ​ ​ ​ ​ ​ 2.1 ​ ​ ​ ​ ​ 1.9 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 0.3 ​ ​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 0.4 ​ ​
Thereof: Other regions
​ ​ ​ ​ 1.8 ​ ​ ​ ​ ​ 1.6 ​ ​ ​ ​ ​ 1.8 ​ ​ ​ ​ ​ 1.5 ​ ​
Average daily revenue per listing(3) (in RUB)
​ ​ ​ ​ 4.4 ​ ​ ​ ​ ​ 2.7 ​ ​ ​ ​ ​ 3.1 ​ ​ ​ ​ ​ 3.5 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 21.2 ​ ​ ​ ​ ​ 10.3 ​ ​ ​ ​ ​ 13.8 ​ ​ ​ ​ ​ 13.6 ​ ​
Thereof: Other regions
​ ​ ​ ​ 1.5 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 1.1 ​ ​
Leads to agents and individual sellers(4) (in millions)
​ ​ ​ ​ 9.1 ​ ​ ​ ​ ​ 6.5 ​ ​ ​ ​ ​ 8.0 ​ ​ ​ ​ ​ 6.9 ​ ​
Paying accounts(5) (in thousands)
​ ​ ​ ​ 104.3 ​ ​ ​ ​ ​ 85.1 ​ ​ ​ ​ ​ 88.6 ​ ​ ​ ​ ​ 96.7 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 55.7 ​ ​ ​ ​ ​ 49.5 ​ ​ ​ ​ ​ 54.9 ​ ​ ​ ​ ​ 58.1 ​ ​
Thereof: Other regions
​ ​ ​ ​ 50.4 ​ ​ ​ ​ ​ 38.6 ​ ​ ​ ​ ​ 36.2 ​ ​ ​ ​ ​ 42.9 ​ ​
Average revenue per paying account(6) (in RUB)
​ ​ ​ ​ 1,139 ​ ​ ​ ​ ​ 821 ​ ​ ​ ​ ​ 625 ​ ​ ​ ​ ​ 629 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 1,704 ​ ​ ​ ​ ​ 1,120 ​ ​ ​ ​ ​ 885 ​ ​ ​ ​ ​ 877 ​ ​
Thereof: Other regions
​ ​ ​ ​ 622 ​ ​ ​ ​ ​ 429 ​ ​ ​ ​ ​ 292 ​ ​ ​ ​ ​ 327 ​ ​
Leads to developers(7) (in thousands)
​ ​ ​ ​ 113.8 ​ ​ ​ ​ ​ 103.9 ​ ​ ​ ​ ​ 244.8 ​ ​ ​ ​ ​ 179.6 ​ ​
Average revenue per lead to developers(8) (in RUB)
​ ​ ​ ​ 5,238 ​ ​ ​ ​ ​ 3,915 ​ ​ ​ ​ ​ 4,046 ​ ​ ​ ​ ​ 3,470 ​ ​
​
*
Data as of and for the six months ended June 30, 2021 includes the N1 Group from the date of the N1 Acquisition, unless stated otherwise.
​
(1)
The average number of users and customers visiting our platform (websites and mobile applications) per month in a particular period, excluding bots. Average UMV for a particular period is calculated by aggregating the UMV for each month within such period and dividing by the number of months. For 2020, 2019, 2018 and their respective semi-annual periods, Average UMV is calculated based on Google Analytics data; for the first half of 2021, Average UMV is calculated as a sum of Average UMV for the Cian Group (excluding the N1 Group) based on Google Analytics data and Average UMV for the N1 Group based on Yandex. Metrica data.
​
 
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We calculate UMV using cookies and count the first time a computer or mobile device with a unique IP address accesses our platform during a month. If an individual accesses our platform using different IP addresses within a given month, the first access by each such IP address is counted as a separate unique visitor.
(2)
The daily average number of real estate listings posted on our platform by agents and individual sellers for a particular period. Data for the six months ended June 30, 2021 excludes the N1 Group.
​
(3)
Calculated as listing revenue divided (i) by the total number of listings for the corresponding period and (ii) by the number of days during the period.
​
(4)
The number of times our users clicked to “show” a customer’s phone number on our platform or sent chat messages to agents or property sellers through our platform in a month, calculated as a monthly average for a particular period.
​
(5)
The number of registered accounts, which were debited at least once during a month for placing a paid listing on our platform or purchasing any value-added services, calculated as a monthly average for a particular period.
​
We calculate the number of paying accounts to include both individual accounts and master accounts, but excluding subordinated accounts, which can be created under one master account by the real estate agencies for their individual agents as part of our virtual agency offering. For further descriptions of individual accounts, master accounts and subordinated accounts, see “Business—Core Classifieds Business—Products and Services We Offer to Customers.”
(6)
Calculated as listing revenue in the secondary residential and commercial real estate verticals divided (i) by the number of paying accounts for the corresponding period and (ii) by the number of months during the period.
​
(7)
The number of paid target calls, lasting 30 seconds or longer, made through our platform by home searchers to real estate developers, for a particular period.
​
(8)
Calculated as lead generation revenue for a period divided by the number of leads (to developers) during such period. Due to rounding, numbers may vary slightly from the numbers presented in our consolidated financial statements included elsewhere in this prospectus.
​
All key performance indicators contained in this prospectus, as of and for the periods prior to 2021, exclude the N1 Group data, unless stated otherwise.
 
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information set forth below gives effect to the N1 Acquisition and should be read in conjunction with, and is qualified by reference to, “Selected Consolidated Historical Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere in this prospectus.
On February 5, 2021, we acquired 100% ownership in N1.RU LLC, a real estate-focused classifieds business that primarily operates in regional cities in Russia such as Novosibirsk, Ekaterinburg and Omsk.
The unaudited pro forma condensed combined financial information is based on and should be read in conjunction with the following historical financial statements and accompanying notes:
•
audited consolidated financial statements and accompanying notes of the Cian Group as of and for the year ended December 31, 2020 included elsewhere in this prospectus;
​
•
unaudited interim condensed consolidated financial statements of the Cian Group as of and for the six months ended June 30, 2021 included elsewhere in this prospectus; and
​
•
audited consolidated financial statements and accompanying notes of the N1 Group as of and for the year ended December 31, 2020 included elsewhere in this prospectus.
​
The historical financial information has been adjusted to give pro forma effect for transaction accounting adjustments for the N1 Acquisition.
The unaudited pro forma condensed combined financial information included herein has been prepared in accordance with Article 11 of Regulation S-X, considering the amendment to improve the financial disclosures that are effective on January 1, 2021. The unaudited pro forma condensed combined financial information included herein is presented for informational purposes only and does not purport to represent what our actual consolidated results of operations would have been had the N1 Acquisition actually occurred on the dates indicated, nor is it indicative of future consolidated results of operations or financial condition. The actual results of operations and financial position may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The unaudited pro forma condensed combined financial information included herein has been prepared using the acquisition method of accounting under IFRS. Adjustments included in the column under the heading “Transaction accounting adjustments” in the unaudited pro forma condensed combined statements of profit or loss and other comprehensive income for the six months ended June 30, 2021 and for the year ended December 31, 2020 consist of those necessary to reflect the accounting for the N1 Acquisition as if it took place on January 1, 2020.
The acquisition of the N1 Group has been reflected in the Cian Group’s unaudited interim condensed consolidated statement of financial position as of June 30, 2021 and, therefore, no unaudited pro forma condensed combined statement of financial position has been presented herein.
The unaudited pro forma condensed combined financial statements do not reflect any cost savings, operating synergies or revenue enhancements that the Cian Group may achieve as a result of the N1 Acquisition, costs necessary to achieve such measures, or costs to integrate the operations of the Cian Group.
 
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CIAN GROUP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2021
​ ​ ​
Cian
Group
(Historical)
​ ​
N1 Group (from
January 1, 2021 to
February 5, 2021)
​ ​
Transaction
Accounting
Adjustments
​ ​
Notes
​ ​
Unaudited
Pro Forma
Combined
​
​ ​ ​
(RUB in million)
​
Revenue
​ ​ ​
​
2,704
​ ​ ​ ​
​
33
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
2,737
​ ​
Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Marketing expenses
​ ​ ​ ​ (1,129) ​ ​ ​ ​ ​ (16) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,145) ​ ​
Employee-related expenses
​ ​ ​ ​ (2,632) ​ ​ ​ ​ ​ (18) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (2,650) ​ ​
IT expenses
​ ​ ​ ​ (229) ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (230) ​ ​
Depreciation and amortization
​ ​ ​ ​ (134) ​ ​ ​ ​ ​ (2) ​ ​ ​ ​ ​ (7) ​ ​ ​ ​ ​ 3(a) ​ ​ ​ ​ ​ (143) ​ ​
Other operating expenses
​ ​ ​ ​ (221) ​ ​ ​ ​ ​ (27) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (248) ​ ​
Total operating expenses
​ ​ ​ ​ (4,345) ​ ​ ​ ​ ​ (64) ​ ​ ​ ​ ​ (7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (4,416) ​ ​
​ ​ ​ ​ ​ ​ ​
Operating loss
​ ​ ​ ​ (1,641) ​ ​ ​ ​ ​ (31) ​ ​ ​ ​ ​ (7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,679) ​ ​
Finance costs
​ ​ ​ ​ (31) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (31) ​ ​
Finance income
​ ​ ​ ​ 7 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7 ​ ​
Foreign currency exchange gain / (loss), net
​ ​ ​ ​ (27) ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (26) ​ ​
Loss before income tax
​ ​ ​ ​ (1,692) ​ ​ ​ ​ ​ (30) ​ ​ ​ ​ ​ (7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,729) ​ ​
Income tax benefit
​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3(b) ​ ​ ​ ​ ​ 24 ​ ​
Loss for the period
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (29) ​ ​ ​ ​ ​ (6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,705) ​ ​
 
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CIAN GROUP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2020
​ ​ ​
Cian Group
(Historical)
​ ​
N1 Group
(Historical)
​ ​
Transaction
Accounting
Adjustments
​ ​
Notes
​ ​
Unaudited Pro
Forma
Combined
​ ​ ​ ​ ​
​ ​ ​
(RUB in million)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Revenue ​ ​ ​ ​ 3,972 ​ ​ ​ ​ ​ 563 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4,535 ​ ​ ​ ​ ​ ​
Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Marketing expenses
​ ​ ​ ​ (1,697) ​ ​ ​ ​ ​ (171) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,868) ​ ​ ​ ​ ​ ​
Employee-related expenses
​ ​ ​ ​ (2,208) ​ ​ ​ ​ ​ (214) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (2,422) ​ ​ ​ ​ ​ ​
IT expenses
​ ​ ​ ​ (264) ​ ​ ​ ​ ​ (29) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (293) ​ ​ ​ ​ ​ ​
Depreciation and amortization
​ ​ ​ ​ (200) ​ ​ ​ ​ ​ (24) ​ ​ ​ ​ ​ (85) ​ ​ ​ ​ ​ 3(a) ​ ​ ​ ​ ​ (309) ​ ​ ​ ​ ​ ​
Other operating expenses
​ ​ ​ ​ (180) ​ ​ ​ ​ ​ (54) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (234) ​ ​ ​ ​ ​ ​
Total operating expenses
​ ​ ​ ​ (4,549) ​ ​ ​ ​ ​ (492) ​ ​ ​ ​ ​ (85) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (5,126) ​ ​ ​ ​ ​ ​
Operating profit / (loss)
​ ​ ​
​
(577)
​ ​ ​ ​
​
71
​ ​ ​ ​ ​ (85) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
(591)
​ ​ ​ ​ ​ ​
Finance costs
​ ​ ​ ​ (72) ​ ​ ​ ​ ​ (3) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (75) ​ ​ ​ ​ ​ ​
Finance income
​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12 ​ ​ ​ ​ ​ ​
Foreign currency exchange gain / (loss), net
​ ​ ​ ​ (1) ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ ​
(Loss) / profit before income tax
​ ​ ​ ​ (639) ​ ​ ​ ​ ​ 72 ​ ​ ​ ​ ​ (85) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (652) ​ ​ ​ ​ ​ ​
Income tax benefit / (expense)
​ ​ ​ ​ 12 ​ ​ ​ ​ ​ (14) ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 3(b) ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ ​
(Loss) / profit for the year
​ ​ ​ ​ (627) ​ ​ ​ ​ ​ 58 ​ ​ ​ ​ ​ (74) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (643) ​ ​ ​ ​ ​ ​
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. Basis of Presentation
The unaudited pro forma condensed combined financial information is based on historical consolidated financial statements of the Cian Group and the N1 Group as adjusted to give effect to the N1 Acquisition for the periods indicated. The unaudited pro forma condensed combined statements of profit or loss and other comprehensive income for the six months ended June 30, 2021 and for the year ended December 31, 2020 combine the Cian Group’s historical consolidated statements of profit or loss and other comprehensive income for the six months ended June 30, 2021 and the year ended December 31, 2020 and the N1 Group’s historical consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2020 and give effect to the N1 Acquisition as if it occurred on January 1, 2020, the first day of the fiscal year ended December 31, 2020.
2. Purchase Price Allocation
On February 5, 2021, the Cian Group acquired 100% of the voting shares of the N1 Group, one of the leading regional online real estate classifieds in Russia, for total cash consideration of RUB 1,785 million. The Cian Group financed the acquisition through the issuance of 281 ordinary shares (5,566,900 after the share split) for RUB 2,265 million in cash pursuant to the Investment Agreement. For further details, see “Related Party Transaction—Relationship with Shareholders—Investment Agreement.” The acquisition has been accounted for using the acquisition method in accordance with IFRS 3, Business Combinations.
The table below summarizes preliminary allocations of the consideration to assets acquired and liabilities assumed based on their fair values (provisional accounting) as of the acquisition date. Management is still
 
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in the process of finalizing its analysis over the key assumptions used in the determination of the fair values of intangible assets and the resulting impact on the amounts of deferred tax liability and goodwill. All information presented with respect to such assets and liabilities assumed as it relates to these acquisitions is preliminary and subject to revision pending the final fair value analysis.
​ ​ ​
(RUB in million)
​
Assets ​ ​ ​ ​ ​ ​ ​
Intangible assets
​ ​ ​ ​ 1,046 ​ ​
Right-of-use assets
​ ​ ​ ​ 18 ​ ​
Property and equipment
​ ​ ​ ​ 7 ​ ​
Cash and cash equivalents
​ ​ ​ ​ 134 ​ ​
Other assets
​ ​ ​ ​ 49 ​ ​
Total assets
​ ​ ​ ​ 1,254 ​ ​
Liabilities ​ ​ ​ ​ ​ ​ ​
Contract liabilities
​ ​ ​ ​ (21) ​ ​
Trade and other payables
​ ​ ​ ​ (51) ​ ​
Lease liabilities
​ ​ ​ ​ (18) ​ ​
Deferred tax liabilities
​ ​ ​ ​ (130) ​ ​
Other liabilities
​ ​ ​ ​ (34) ​ ​
Total liabilities
​ ​ ​ ​ (254) ​ ​
Total identifiable net assets at fair value
​ ​ ​ ​ 1,000 ​ ​
Goodwill arising on acquisition
​ ​ ​ ​ 785 ​ ​
Purchase consideration transferred
​ ​ ​ ​ 1,785 ​ ​
3. Pro Forma Adjustments
The transaction accounting adjustments included in the unaudited pro forma condensed combined statements of profit or loss and other comprehensive income for the six months ended June 30, 2021 and for the year ended December 31, 2020, are as follows:
(a)
Represents amortization expense related to the fair value of acquired identifiable intangible assets. As part of the valuation analysis, we identified intangible assets, such as trademarks, customer base and software. The fair value of identifiable intangible assets is determined primarily using the “income approach,” which requires a forecast of all of the expected future cash flows.
​
The following table summarizes the fair values of the N1 Group’s identifiable intangible assets and their estimated useful lives and uses a straight-line method of amortization as this represents management’s best estimate of the pattern of utilization for the intangible assets:
(RUB in million)
​ ​
Fair values of
identifiable
assets
​ ​
Estimated useful
lives in years
​ ​
Imputed
amortization
expense from
January 1, 2021 to
February 5, 2021
​ ​
Imputed
amortization
expense for the
year ended
December 31, 2020
​
Customer base
​ ​ ​ ​ 753 ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 50 ​ ​
Trademarks
​ ​ ​ ​ 254 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 28 ​ ​
Software
​ ​ ​ ​ 36 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 7 ​ ​
Transaction accounting adjustments
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 85 ​ ​
​
(b)
Represents the tax effect, calculated at the Cyprus statutory tax rate of 12.5% in effect for the periods presented, of the temporary differences arising on acquired identifiable assets recognized at their fair values.
​
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Selected Consolidated Historical Financial and Other Data,” and our consolidated financial statements and the related notes included elsewhere in this prospectus. The following discussion is based on our financial information prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board.
This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this prospectus. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those contained in any forward-looking statements. This discussion and analysis of our financial condition and results of operations has been updated for the restatement referenced in Note 5 to the consolidated financial statements included elsewhere in this prospectus.
Overview
We are a leading online real estate classifieds platform in the large, underpenetrated and growing Russian real estate classifieds market, ranking among the top ten most popular online realestate classifieds globally, based on the September 2021 Google Analytics traffic data for Cian and SimilarWeb traffic data for other online real estate classifieds. Since our founding in 2001, we have become the most recognized and trusted real estate classifieds brand in the most populous Russian regions, according to the Frost & Sullivan Report and have expanded our business beyond online real estate classifieds listings to offer additional products and services, which turn real estate searches and transactions into a seamless, transparent and efficient experience. Our mission is to use technology and deep insights into the Russian real estate market to help people on the journey to their perfect new place to live or work.
We operate in the Russian real estate market, which, according to the Frost & Sullivan Report, represented approximately USD 238 billion in 2020 and is only starting to digitalize. Being at the forefront of this digitalization trend and, as we believe, being one of the major driving forces behind it, we see an immediately addressable market opportunity of approximately USD 6 billion (in 2020, based on the Frost & Sullivan Report), which comprises real estate agents’ commissions, developers’ advertising budgets as well as adjacent markets, including mortgage advertising and digital services facilitating transactions. Our core online real estate classifieds market is projected to grow at a CAGR of approximately 27% between 2021 and 2025, according to the Frost & Sullivan Report.
Our networked real estate platform connects millions of our users, the real estate buyers and renters, to millions of high-quality real estate listings of all types — residential and commercial, primary and secondary, urban and suburban, for both sale and rent. By offering a unique combination of products, services and insights, we have become a premier destination for our users as well as tens of thousands of our customers, real estate agents, developers, private sellers, landlords and other partners. Our platform aims to provide an end-to-end experience for our customers and users and help them address multiple pain points on their journey to a successful real estate transaction. We strive for our platform to encompass all stages of such journey, from finding the right property and the right buyer or renter, to financing the purchase and ensuring transaction certainty, while allowing participants to transact with ease and efficiency. We derive our revenue:
•
In our Core Business segment, from listing fees in the secondary residential and commercial real estate verticals and lead generation fees in the primary residential real estate vertical, as well as fees for listing value-added services, such as premium and highlighted listings and listing auctions, and other value-added services. In June 2020, we introduced a new subscription-based model for customers, which allows our customers to purchase a monthly subscription with us and combine a number of listings with value-added services, improving efficiency for them and stickiness and monetization for us. For more details, see “Business—Our Real Estate Platform—Core Classifieds Business—​Products and Services We Offer to Customers—Subscription Model.” In the first half of 2021, the average share of listings under the subscription model amounted to approximately 41% as compared to approximately 26% in the second half of 2020. We also charge fees for providing advertising
​
 
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tools through our platform for various parties, primarily real estate developers and banks, which we refer to as our display advertising revenue.
•
In our Mortgage Marketplace segment, from fees charged to our partner banks for distributing their mortgage products through our advanced platform for mortgage price comparison, mortgage pre-approval and origination.
​
•
In our Valuation and Analytics segment, from fees charged to our customers and partners for providing access to our proprietary real estate market research, data analytics and market intelligence services, either through sales of individual reports or on a subscription basis.
​
•
In our C2C Rental segment, from fees charged to our users for providing end-to-end solutions and facilitating seamless online property rentals (including tenant background checks, digital execution of agreements, online payments and insurance).
​
•
In our End-to-End Offerings segment, from fees charged to our customers and users for services that enable online execution of real estate transactions (including document checking, verification, signing and storage, notary services, registration and tax refunds) and facilitate simultaneous sales and purchases, which, we believe, provides for more efficient real estate transactions.
​
Our users can search our property listings free of charge via our mobile applications and our mobile and desktop websites. They can also benefit from a broad scope of various innovative services that we offer, such as real estate valuation and access to a choice of real estate financing options.
[MISSING IMAGE: TM2120160D9-PH_NETWRK4CLR.JPG]
Our networked platform model and our trusted brand have allowed us to achieve the leading position by share of leads to real estate agents and individual sellers and by number of listings in four of the most populous Russian regions, consisting of Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk, which together, according to the Frost & Sullivan Report, in 2020, accounted for 65%, 41% and 75% of the primary residential, secondary residential and commercial real estate markets in the country, respectively. In the first half of 2021, we had approximately 2.1 million listings available through our platform (excluding N1) and an average UMV of approximately 20.3 million (including N1). In 2020, we had approximately 2.1 million listings available through our platform and an
 
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average UMV of approximately 16.5 million. We believe that the quantity and quality of our listings database, as well as our expanding end-to-end value proposition, attract an increasing number of buyers and renters, which results in more transactions conducted based on expressions of interest and inquiries generated through our platform (“leads”), which in turn attracts more real estate agents, developers and landlords posting more listings. We believe that this powerful network effect has allowed us to continuously solidify our market leadership in our core regions of Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk and will allow us to continue strengthening and expanding our position in other regions.
Development of new products, services and features is an integral part of our business, and we have a long and successful track record of disrupting the online real estate classifieds market through innovation. This culture of innovation and over 20 years of relevant experience allowed us to move beyond the pure online real estate classifieds model and become a fully-fledged, networked real estate platform enabled by cutting-edge technology, which creates value for all real estate market participants. In our Core Business segment, we provide advanced features that make connecting our customers and our users through our extensive database of property listings more efficient, such as: for users, AI-powered property search and virtual 3D property tours; for real estate agents, Pro.Tools which are our advanced lead management toolkit offerings to boost productivity (including call tracking, duplicates and competition notifications, push notification for competition price decreases, detailed lead information and others); and enterprise features for real estate agencies (including integration tools and tools for the management of marketing costs, performance and employees). To deliver our end-to-end value proposition and make searching and transacting even easier and more seamless for all real estate market participants, we have also created, and are continuing to add, innovative services, such as Mortgage Marketplace, Agent Finder, Property Valuation, Online Transaction Services, Home Swap and others. We intend to continue staying at the forefront of innovation by developing new solutions that will help our users to find their perfect properties to rent or buy and our customers to sell or rent out their real estate in the most efficient way.
We are a technology-driven platform and are committed to delivering the most efficient and stress-free experience through the use of cutting-edge technology, especially in view of the rapid pace of technological changes in our industry, such as increasing use of mobile devices in the real estate market and proliferation of new technologies that improve user experience, such as machine learning. We believe that our mobile-first approach, in which we prioritize our users’ reliance on our mobile applications and websites, not only makes finding a new home or office more convenient for our users, but also increases retention, improves the efficiency and conversion rate of our marketing programs and accelerates the growth of our business. The share of mobile in our average UMV increased to approximately 76.2% in the first half of 2021 from approximately 72.8% in the second half of 2020 and approximately 67.9% in the first half of 2020. Similarly, our share of mobile in leads to agents and individual sellers increased to approximately 66.0% in the first half of 2021 from approximately 64.3% in the second half of 2020 and approximately 63.3% in the first half of 2020.
Our revenue in the year ended December 31, 2020 was RUB 3,972 million, an increase of 10.1% from RUB 3,607 million in the year ended December 31, 2019. Our revenue in the six months ended June 30, 2021 was RUB 2,704 million, an increase of 64.7% from RUB 1,642 in the six months ended June 30, 2020. Our loss for the year ended December 31, 2020 was RUB 627 million, a decrease of 22.2% from RUB 806 million in the year ended December 31, 2019. Our loss for the six months ended June 30, 2021 was RUB 1,670 million as compared to RUB 405 million in the six months ended June 30, 2020. The increase of our loss was driven primarily by an increase in our share-based payment expense to RUB 1,470 million for the six months ended June 30, 2021 from RUB 249 million for the six months ended June 30, 2020, as a result of the recognition of a portion of our long-term incentive program awards linked to the planned offering, which is a non-recurring item, and the corresponding increase in the fair value estimates of these awards. Our Adjusted EBITDA was RUB 181 million for the year ended December 31, 2020 and negative RUB 376 million for the year ended December 31, 2019. Our Adjusted EBITDA was RUB 51 million for the six months ended June 30, 2021 and negative RUB 52 million for the six months ended June 30, 2020. As of June 30, 2021, December 31, 2020 and 2019, our total indebtedness outstanding under our credit facilities was RUB 542 million, RUB 728 million and RUB 477 million, respectively. Our results were affected by the measures that we introduced in response to the COVID-19 pandemic, including a temporary suspension of monetization of our listing services across all regions in April 2020. In July 2020, we reinstated the
 
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monetization of our listing services in Moscow, the Moscow region, St. Petersburg and the Leningrad region. In the first half of 2021, we also reinstated monetization in certain additional regions; however, the monetization in many other regions remains temporarily suspended and its potential reintroduction is being assessed on a region-by-region basis. We believe that we are already seeing the positive effects of these measures in some of the regions in which we reverted back to the paid model, which is illustrated by an increased number of paid listings as compared to the pre-COVID-19 levels. We believe that we are well-positioned to successfully leverage our scale, expertise and experience to continue growing our business and achieve profitability margins enjoyed by our best-in-class international peers.
Key Factors Affecting Our Results of Operations
Our results of operations in the periods presented were affected and are expected to continue to be affected, by the following principal factors relating to our business and industry:
Market Position, Platform Traffic, Network Effects and Our Strategic Growth Objectives
Pricing flexibility and the overall ability to monetize a platform in the digital real estate classifieds business largely depend on one’s market position and the value of the product and service offerings to all platform customers, users and other third parties. We generally define leading market positions as No. 1 or No. 2 positions in terms of market share of leads to real estate agents and individual sellers and number of platform listings. Market leaders in the digital real estate classifieds space often benefit from strong network effects, whereby the more quality content is added to the platform, the more attractive the platform becomes for users, which increases user traffic to the platform and, in turn, increases the number of leads generated for customers, which raises the platform’s relevance for customers, driving up the number of listings. For further details regarding our platform, including the definition of leads and their calculation principles, see “Business—Our Business Model.”
With respect to platform traffic, our average UMV consistently grew in the period under review to 20.3 million in the first half of 2021 (including N1) from 17.8 million in the second half of 2020, 15.2 million in the first half of 2020, 14.1 million in the second half of 2019 and 12.7 million in the first half of 2019. Average UMV is one of the key metrics of our platform traffic and our user engagement. We believe that a stable growth in our average UMV plays a critical role in our overall platform development, including its network effects. A stable growth in our average UMV is also important for our ability to generate more leads to our customers and partners and to successfully scale our new initiatives and offerings, including as part of our Mortgage Marketplace, Valuation and Analytics, C2C Rental and End-to-End Offerings segments.
Furthermore, we believe that pricing flexibility and monetization opportunities in the digital real estate classifieds business are significantly affected by the ability to achieve and maintain strong market positions. Specifically, we believe that, in general, leading market positions, in conjunction with attractive product and service offerings and positive user experience, enable higher operating leverage, allow for greater platform monetization opportunities and lead to higher operating margins. In addition, we also believe that our current leading market positions and the inherent network effects of our platform are essential drivers for our growth and expansion of our business in line with our strategic objectives. For further details on our strategic growth objectives, see “Business—Our Strategy.”
We have leading market positions in most populous Russian regions, such as Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg, Novosibirsk and certain other regions. For further details, see “Business—Our Strengths—Leading Russian online real estate classifieds platform with the #1 position in largest Russian markets.” However, we hold less prominent positions in certain other Russian regions. Our profitability and results depend greatly on our ability to maintain our leading market positions in key Russian regions and our ability to achieve and maintain strong market positions in certain other Russian regions.
Furthermore, our market positions and, therefore, profitability, results and the overall ability to grow and expand our business, have been, and are expected to continue to be, impacted by our competitive environment. For further details on our competition, see “Business—Competition.” We compete mainly on the basis of platform traffic, which, in turn, is driven by (i) the number and quality of property listings, (ii) user experience and quality of services and (iii) breadth of existing offerings and development of
 
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additional product and service offerings for our customers and users. Any future market entrants or new initiatives by our existing competitors could affect our ability to compete successfully, increase or maintain our pricing levels, monetize our platform and generally grow our business. See “Risk Factors—Risks Related to Our Business and Industry—The online classifieds market is highly competitive, and we may fail to compete effectively with existing and new industry players, which could have a material adverse effect on our business, results of operations, financial condition and prospects.”
Changes in Our Pricing Models, Monetization Strategy and Penetration of our Value—Added Services
Our pricing models and monetization strategy can impact our results of operations, including our profitability. Historically, our pricing model has primarily focused on selling listings to our professional real estate customers on a pay-per-listing or listing package basis, where fees are charged for every day a single listing or multiple listings are publicly displayed on our platform. For further details, see “Business—Products and Services We Offer to Customers.” In June 2020, in order to improve the service and value proposition for our customers, stimulate our revenue growth and maintain a sizeable base of listings, we introduced a new subscription-based model for customers, which allows our customers to list their properties and use some of our value-added services for a monthly fee. We aim to incentivize customer migration to the subscription model, in part, through the use of special discounts and promotions. However, we also plan to continue to offer our pay-per-listing model to allow our customers, particularly smaller real estate agencies and individual agents, greater flexibility and convenience. In the first half of 2021, the average share of listings under the subscription model amounted to approximately 41% as compared to approximately 26% in the second half of 2020. Overall, we believe that the switch to the subscription model should bring additional convenience to our customers and lead to more efficient monetization of the platform.
Furthermore, our results of operations are also affected by our customers’ use of our value-added services to boost listings. In the six months ended June 30, 2021 and the year ended December 31, 2020, value-added services accounted for 46% and 52% of our listing revenue, respectively. We believe that the customers’ acceptance of our value-added services is primarily driven by our marketing and sales efforts, as well as by the overall market conditions.
Moreover, any other actual or potential developments in our platform monetization strategy may also have a significant impact on our results. For example, in 2020, due to the COVID-19 pandemic, we temporarily offered our listing services free of charge across all cities and regions, including Moscow and St. Petersburg. We believe that this cancellation in monetization of our listings was one of the main drivers of a 4.0% decrease in our listing revenue in 2020. For further information, see “—Macroeconomic Environment and the Russian Property Market and the Impact of the COVID-19 Pandemic.”
Macroeconomic Environment and the Real Estate Market in Russia
Our business model is based on our position as one of the main digital platforms for real estate owners, buyers and tenants in Russia. Real estate platforms, such as ours, are a key part of the real estate search process in Russia, and our business and results of operations may be affected by the macroeconomic environment and the health of the Russian real estate market.
Overall, the Russian real estate classifieds market remains significantly underpenetrated compared to other developed markets, with penetration of the online real estate classifieds services of only 3.3% in 2020, which is approximately 5x, 4x and 3x times lower than that of the United States, the United Kingdom and Germany, respectively (according to the Frost & Sullivan Report). We believe that the monetization of our services is still in its early stages, and we have a strong potential for sustainable growth in a large and expanding market. We see a significant structural upside in monetization of the secondary residential and commercial real estate verticals, as supported both by the overall penetration of classifieds spend in real estate agents’ commissions and by our current monetization. For further details, see “Business—Our Strengths—​Robust financial profile demonstrating strong growth and clear path to profitability.” Furthermore, we believe that there is a strong monetization potential in the primary residential real estate vertical, which is driven by a structural shift in the developers’ advertising budgets from offline to online. Specifically, according to the Frost & Sullivan Report, the developers’ spend in Russia is expected to grow from approximately RUB 2.9 billion in 2020 to approximately RUB 10.4 billion by 2025, as the share of online classifieds in their total advertising budgets is expected to increase from approximately 5% in 2020 to approximately 11%
 
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in 2025. We believe that we are well-positioned to capitalize on this structural trend because of our high brand awareness, our experience, the broad size of our user base and our value-added services, which contribute to the strength of our primary business. For further details, see “Industry—Russian real estate market dynamics.” Generally, we believe that the growing penetration of the online real estate classifieds services will have a positive impact on our revenue and business.
In addition, our revenue and results of operations may be affected by other Russian real estate market conditions, such as the supply of properties on the real estate market, driven, in part, by the pace of new construction, the availability of credit for real estate buyers as well as prevailing interest rates. For example, we believe that the low interest rate environment and the Russian government’s implementation of the mortgage subsidy program in April 2020, and its subsequent extension until July 2021, had a strong positive effect on the primary residential real estate market in Russia and, consequently, the demand for our services, primarily in our Core Business and Mortgage Marketplace segments. Our lead generation revenue, which is driven by primary real estate developers, increased by 59.6% to RUB 994 million in 2020 from RUB 623 million in 2019. Our lead generation revenue further increased by 46.3% to RUB 597 million in the six months ended June 30, 2021 from RUB 408 million in the six months ended June 30, 2020. Our lead generation revenue from our Mortgage Marketplace segment increased to RUB 2 million in the six months ended June 30, 2021 from RUB 1 million in the six months ended June 30, 2020. In July 2021, this mortgage subsidy program was extended until July 2022 on amended terms, including increase of the mortgage interest rate ceiling from 6.5% to 7.0% and decrease of the maximum subsidized mortgage size from up to RUB 12 million for Moscow, the Moscow region, St. Petersburg and the Leningrad region (and RUB 6 million for other regions) to up to RUB 3 million across all regions. If the program is cancelled or further amended in an adverse manner, the demand for primary real estate and mortgage financing may significantly decrease, which, in turn, may affect our revenue generated from the leads to real estate developers, as well as revenues and growth prospects of our Mortgage Marketplace segment. For further details, see “Risk Factors—Risks Related to Our Business and Industry—Our business and results of operations may be affected by the cancellation of, or any changes to, the Russian mortgage subsidy program.”
Generally, if the real estate market experiences a slowdown, property listings tend to stay on our platform longer and our customers may be more prone to use our value-added services to further promote their listings to users. If a listing stays on our platform longer, it correspondingly increases our revenue. As such, a slowdown in the real estate market may not have a directly negative impact on our results. However, any significant decline in the supply of properties on the market, due to a general slowdown in the real estate market, a decline in the pace of new construction or otherwise, may result in fewer property listings and, consequently, decreased traffic on our platform and lower number of leads to developers, which could negatively impact our results. For further details, see “Risk Factors—Risks Related to Our Business and Industry—We may be significantly impacted by the health of the Russian real estate market and may be negatively affected by downturns in this industry and general economic conditions.”
Overall, our second half of the year may be stronger than the first half due to lower activity across the primary and secondary real estate markets during certain calendar periods, such as the New Year and May holidays, when typically fewer real estate transaction are taking place.
The Impact of the COVID-19 Pandemic
Since its outbreak in December 2019 to date, the COVID-19 pandemic has impacted our business operations and demand across all customer and user groups. Similarly to other countries, at several points in 2020, Russian federal and local government authorities introduced measures aimed at preventing the further spread of COVID-19, including, among others, lockdowns, bans on public events, closures of public places, border controls, travel restrictions and widespread “work-from-home” measures.
In response to the COVID-19 pandemic, we introduced several measures to mitigate its effects on our business as well as customer and user base. Specifically, to support our customers in these unprecedented circumstances, from April 2020, we temporarily offered our listing services free of charge across all cities and regions, including Moscow, the Moscow region, St. Petersburg and the Leningrad region. The monetization of our listings in Moscow, the Moscow region, St. Petersburg and the Leningrad region was reinstated in July 2020, with certain discounts offered in the third quarter of 2020. In the second and third quarters of 2021, we also reinstated monetization in some additional regions. The monetization in many other regions
 
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remains temporarily suspended and its potential reintroduction is being assessed on a region by region basis. Starting from February 2021, our operations include the N1 Group, which did not have a similar suspension in monetization in 2020. Following the N1 Acquisition, we did not introduce any such monetization suspension on the websites “N1.ru,” “MLSN.ru” or N1 mobile application. In July 2021, as part of our integration of the N1 Group, we launched a reverse feed function, which allows our customers to automatically post listings on both platforms simultaneously. With this function, our monetization strategy was aligned across our platforms, with Cian monetization being fully reinstated in regions covered by the website “N1.ru” or N1 mobile application. We are planning to fully reinstate Cian monetization in the regions covered by “MLSN.ru” website in the fall of 2021. For further details, see “Business — N1 Acquisition” and “Risk Factors—Risks Related to Our Business and Industry—The COVID-19 pandemic and other public health crises, natural disasters or other catastrophic events may significantly limit our ability to conduct business as normal, disrupt our business operations and materially affect our financial condition.”
We believe that the measures we took in response to the pandemic were some of the main drivers of a 4.0% decrease in our listing revenue to RUB 2,383 million in 2020 from RUB 2,481 million in 2019. However, our average UMV increased to approximately 20.3 million in the first half of 2021 (including N1) from approximately 16.5 million in 2020 and approximately 13.4 million in 2019. We believe that this dynamic was supported by our decision to temporarily suspend the monetization of our listings, as many of our customers used this opportunity to post listings on our platform, which, in turn, increased user traffic. We also believe that the reinstatement of monetization in certain regions in the second quarter of 2021 was one of the main drivers behind a 73.3% increase in our listing revenue to RUB 1,697 million in the six months ended June 30, 2021 from RUB 979 million in the six months ended June 30, 2020.
The following table presents our average UMV and paying accounts for the periods indicated:
​ ​ ​
2021
​ ​
2020
​ ​
2019
​
​ ​ ​
First half
​ ​
Second half
​ ​
First half
​ ​
Second half
​ ​
First half
​
Average UMV(1) (in millions)
​ ​ ​ ​ 20.3 ​ ​ ​ ​ ​ 17.8 ​ ​ ​ ​ ​ 15.2 ​ ​ ​ ​ ​ 14.1 ​ ​ ​ ​ ​ 12.7 ​ ​
Paying accounts(1) (in thousands)
​ ​ ​ ​ 104.3 ​ ​ ​ ​ ​ 92.2 ​ ​ ​ ​ ​ 85.1 ​ ​ ​ ​ ​ 100.7 ​ ​ ​ ​ ​ 92.7 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 55.7 ​ ​ ​ ​ ​ 60.3 ​ ​ ​ ​ ​ 49.5 ​ ​ ​ ​ ​ 59.1 ​ ​ ​ ​ ​ 57.1 ​ ​
Thereof: Other regions
​ ​ ​ ​ 50.4 ​ ​ ​ ​ ​ 33.8 ​ ​ ​ ​ ​ 38.6 ​ ​ ​ ​ ​ 46.0 ​ ​ ​ ​ ​ 39.8 ​ ​
Average revenue per paying account (in RUB)
​ ​ ​ ​ 1,139 ​ ​ ​ ​ ​ 1,104 ​ ​ ​ ​ ​ 821 ​ ​ ​ ​ ​ 1,046 ​ ​ ​ ​ ​ 884 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 1,704 ​ ​ ​ ​ ​ 1,476 ​ ​ ​ ​ ​ 1,120 ​ ​ ​ ​ ​ 1,406 ​ ​ ​ ​ ​ 1,188 ​ ​
Thereof: Other regions
​ ​ ​ ​ 622 ​ ​ ​ ​ ​ 530 ​ ​ ​ ​ ​ 429 ​ ​ ​ ​ ​ 578 ​ ​ ​ ​ ​ 460 ​ ​
​
(1)
See the definitions of average UMV and paying accounts in “Presentation of Financial and Other Information” and “Selected Consolidated Historical Financial and Other Data—Other Data.”
​
Our paying accounts in Moscow and the Moscow region were approximately 55.7 thousand in the first half of 2021 as compared to approximately 54.9 thousand in 2020 and approximately 58.1 thousand in 2019, with an average revenue per paying account of RUB 885 and RUB 877 in 2020 and 2019, respectively. Our paying accounts in other Russian regions were approximately 50.4 thousand in the first half of 2021 as compared to approximately 36.2 thousand in 2020 and approximately 42.9 thousand in 2019, with an average revenue per paying account of RUB 292 and RUB 327 in 2020 and 2019, respectively. We believe that the level of paying accounts was primarily impacted by the aforementioned temporary suspension of monetization of our listings. As the monetization of our listings in Moscow and the Moscow region was reinstated in July 2020 (along with St. Petersburg and the Leningrad region), the number of paying accounts in Moscow and the Moscow region increased in the second half of 2020. As mentioned above, our listings monetization in certain other regions remains temporarily suspended and its potential reintroduction is being assessed on a region-by-region basis. For further details, see “— Changes in Our Pricing Models, Monetization Strategy and Customer Acceptance of our Value-Added Services.”
Furthermore, during the COVID-19 pandemic crisis in 2020, we optimized our marketing and advertising expenses in order to align our marketing budgets with the suspension in monetization discussed above. Additionally, we also reduced discretionary spending and paused hiring for non-critical roles. This had a direct impact on our results of operations as our marketing expenses decreased by 21.4% to RUB
 
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1,697 million for the year ended December 31, 2020 from RUB 2,159 million for the year ended December 31, 2019, which was primarily driven by an 85.5% decrease in our offline marketing expenses to RUB 139 million in 2020 from RUB 959 million in 2019. In 2020, we also instituted a work-from-home policy for our employees and significantly restricted employee travel. Overall, we believe that the combination of these cost optimization efforts and changes in our monetization approach helped us to address the COVID-19 pandemic crisis in 2020, with our total revenue increasing by 10.1% to RUB 3,972 million for the year ended December 31, 2020 from RUB 3,607 million for the year ended December 31, 2019. Our total operating expenses during the same period increased slightly by 1.7% to RUB 4,549 million in 2020 from RUB 4,475 million in 2019, which was primarily driven by an increase in our employee-related expenses of 59.4% and offset by a decrease in our marketing expenses, as discussed above. Going forward, as we emerge from the COVID-19 pandemic, we generally expect that we will need to increase our operating expenses.
The broader macroeconomic environment remains highly uncertain, and we are continuing to closely monitor the impact of the COVID-19 pandemic on our market, customers, users and business, which may continue to affect our financial results going forward. For example, the COVID-19 pandemic and its aftermath may have contributed to the developments in our competitive environment. Additionally, if the possibility of arranging or attending real estate viewings or completing real estate transactions deteriorates due to any further lock-down measures or other tightening of regulations and general guidelines, it may result in our customers and users choosing to postpone any planned real estate transactions, which would result in a general slow-down of the real estate market and, thus, could have an adverse effect on our financial results. See “Risk Factors—Risks Related to Our Business and Industry—Natural disasters, public health crises or other catastrophic events, like the COVID-19 pandemic, may significantly limit our ability to conduct business as normal, disrupt our business operations and materially affect our financial condition.”
Investments in Regional Expansion and New Initiatives
In line with our strategy, we focus our investments on regional expansion and the development and implementation of new initiatives, as part of development of our end-to-end real estate platform, comprising new business lines and new service offerings for our customers and users. While we hold leading market positions in key regions, such as Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg, Novosibirsk and certain other regions, we believe that our profitability and results also greatly depend on our ability to achieve and maintain strong market positions in other Russian cities and regions. As such, we dedicate significant resources, including marketing efforts, to regional expansion and development. We plan to continue to execute our regional expansion strategy with profitability in mind, focusing on regional centers with certain population level thresholds, where our resources can be spent most efficiently. For further details, see “Business—Strategy—Continued expansion into Russian regions via organic growth and select M&A opportunities.” For example, as part of our strategy, in February 2021, we acquired the N1 Group, which is a real estate-focused classifieds business that operates in regional cities in Russia, such as Ekaterinburg, Novosibirsk and Omsk. While the N1 Acquisition is complete, we are still in the process of integrating the N1 Group into our business. In particular, we are aligning operational structures and migrating the N1 Group’s divisions under the control of the Cian Group management. For additional information, see “Business — N1 Acquisition” and “Unaudited Pro Forma Condensed Combined Financial Information.” As a result, the N1 Acquisition will impact the comparability of our 2021 and 2020 financial results.
We believe that achieving our ultimate goal of developing a comprehensive end-to-end real estate platform for our customers and users requires investments in innovation as well as the development of new products and business models. Our new initiatives, once significantly developed, are typically distinguished into separate operating and reporting segments, such as our Mortgage Marketplace, Valuation and Analytics, C2C Rental and End-to-End Offerings operating and reporting segments. For further details on these segments, see “Business—Our Business Model.” For the six months ended June 30, 2021 and the years ended December 31, 2020 and 2019, respectively, the revenues from each of these reporting segments were: RUB 119 million, RUB 110 million and RUB 34 million (for Mortgage Marketplace); RUB 21 million, RUB 39 million and RUB 18 million (for Valuation and Analytics); RUB 1 million, RUB 1 million and RUB nil million (C2C Rental) and RUB nil million for the six months ended June 30, 2021 (End-to-End Offerings). These revenue numbers, together, accounted only for 5.2%, 3.8% and 1.4% in the aggregate of our total revenue for the six months ended June 30, 2021 and the years ended December 31, 2020 and 2019, respectively.
 
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Our investments in regional development and the initiatives aimed at expansion of our end-to-end real estate platform are reflected in our operating expenses as part of the advertising and marketing costs, employee- and IT-related expenses. For example, while our total marketing expenses decreased by 21.4% to RUB 1,697 million in 2020 from RUB 2,159 million in 2019, our online marketing expenses have increased by 32.1% to RUB 1,498 million in 2020 from RUB 1,134 million in 2019, which was driven, in part, by our investment in marketing for regional development as well as our marketing expenses for some of our new initiatives.
Taxation
During the period under review, we relied on a VAT exemption for our listing revenue under the 2008 VAT exemption for software and database licenses under the Russian Tax Code. The exemption was available for revenue from software license agreements under which we provided our customers with access to our platform. In July 2020, the Russian tax code underwent changes, which substantially narrowed the scope of the 2008 VAT exemption. From January 1, 2021, licensing of computer software and databases will only be exempt from VAT when: (i) it relates to software or databases included in the Russian National Software Register and (ii) it does not involve software used for advertising, counterparty searches, online trade or marketplace purposes. Consequently, starting from January 1, 2021, revenue from the provision of access to advertising and online marketplace software does not qualify as income from eligible activities and we no longer qualify for this exemption.
In the years ended December 31, 2020 and 2019, this VAT exemption for our listing revenue amounted to RUB 504 million and RUB 495 million (based on accounts prepared in accordance with the Russian Accounting Standards).
In addition, the Russian Tax Code establishes reduced rates with respect to profits tax, VAT and social security contributions for companies which carry out IT activities, develop and sell own-developed computer programs and databases, and/or render services involving development, adaptation, modification and support of computer programs and databases. In order to apply the reduced rates, a taxpayer should be officially accredited to perform IT activity, the share of its income related to these activities should comprise 90% of total income, and the average headcount should be at least seven employees. Historically, N1 Technologies, a subsidiary of the N1 Group, has applied such reduced rates.
Following the N1 Acquisition, we conducted an organizational restructuring whereby the IT teams of the Cian Group and the N1 Group joined together as part of N1 Technologies, which, as a qualifying IT company, is expected to benefit from the reduced tax rates. Following the restructuring, N1 Technologies operates as a shared service center rendering services to our subsidiaries with respect to development and adaptation of IT products, which are being used primarily within the Cian Group. Such practice is widely used by IT companies in Russia. We expect to benefit from this reduced social security contributions rate on the Group-level from the second half of 2021. See “Risk Factors—Risks Related to Taxation—The Russian tax authorities may challenge the application of a reduced social security contributions, VAT and corporate profits tax rates by one of our companies.”
Segment Reporting
We identified our operating segments based on how our chief operating decision-maker (“CODM”), who is our Chief Executive Officer, manages the business, allocates resources, makes operating decisions and evaluates operating performance. We have identified the following reporting segments on this basis:
•
Core Business, which comprises sales of our listings, lead generation solutions for real estate developers and value-added services as well as display advertising on our platform;
​
•
In our Mortgage Marketplace segment, from fees charged to our partner banks for distributing their mortgage products through our advanced platform for mortgage price comparison, mortgage pre-approval and origination.
​
•
In our Valuation and Analytics segment, from fees charged to our customers and partners for providing access to our proprietary real estate market research, data analytics and market intelligence services, either through sales of individual reports or on a subscription basis.
​
 
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•
In our C2C rental segment, from fees charged to our users for providing end-to-end solutions facilitating seamless online property rentals (including tenant background checks, digital execution of agreements, online payments and insurance).
​
•
In our End-to-End Offerings segment, from fees charged to our customers and users for services that enable online execution of real estate transactions (including document checking, verification, signing and storage, notary services, registration and tax refunds) and facilitates imultaneous sales a purchases, which, we believe, provides for more efficient real estate transactions.
​
Our users can search our property listings free of charge via our mobile applications and websites. They can also benefit from a broad scope of various innovative services that we offer, such a s real estate valuation, and access to a choice of real estate financing options.
The financial reporting is based on a Group-wide organizational and management structure. For further details on these segments, see “Business—Our Business Model.”
Explanation of Key Components of Our Consolidated Statement of Profit or Loss and Other Comprehensive Income
Certain individual line items of our consolidated statement of profit or loss and other comprehensive income:
Revenue
We generate revenue primarily from our offerings of: (i) listings and value-added services for our customers (which we refer to as our listing revenue), (ii) lead generation solutions for real estate developers (which we refer to as our lead generation revenue), (iii) advertising tools for various parties, primarily real estate developers and banks (which we refer to as our display advertising revenue) and (iv) through our Mortgage Marketplace, Valuation and Analytics, C2C Rental and End-to-End Offerings segments, new business lines and services for various parties, such as, for example, banks in the context of our Mortgage Marketplace services (which we refer to as our “other revenue”).
Listing revenue, lead generation revenue and display advertising revenue primarily relate to the Core Business reporting segment, while other revenue primarily represents lines of business related to our Mortgage Marketplace, Valuation and Analytics, C2C Rental and End-to-End Offerings segments.
Listing revenue, lead generation revenue and display advertising revenue
Listing revenue.   Listing revenue represents revenue from offering online listings and related value-added services, such as different listing promotion options, to customers on our websites and mobile applications on a cost-per-time basis (both, under the pay-per-listing or listing package and subscription models). We receive payment prior to the public posting of online listings on our platform and delivery of value-added services. Customers can purchase either individual listings and value-added services, listing packages or subscriptions, which combine a number of listings and value-added services. The average time between receipt of payment from the customer and delivery of online listings is approximately 30 days.
For the year ended December 31, 2020, our listing revenue comprised 52% of revenue from value-added services and 48% of revenue from listings and others.
Further, as part of our value proposition we offer our customers a loyalty program, which allows our customers who purchase listings with us to accumulate points that can be redeemed against future purchases on our platform. The loyalty points give rise to a separate performance obligation for us, as they provide a material right to acquire additional services at a discount for a customer, that the customer would not receive without entering into that contract.
Lead generation revenue.    Lead generation revenue represents fees that we charge real estate developers for our establishment and referral of contacts (or leads) based on the number of qualifying calls (validated user connections) received from primary real-estate listing posted primarily through our platform (as part of the “Core Business” segment) or through our partner bank’s site (as part of the “Mortgage Marketplace”
 
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segment), i.e., when a user is reviewing a mortgage on our partner bank’s site, this user can access our full data base of primary real-estate listings and will be presented with an option to contact a particular developer. We receive payment after the delivery of verification of the number of validated connections. Payment is generally due within 20 to 30 days from our provision of these services. For further details, see “Business—​Our Business Model.”
Display advertising revenue.   Display advertising revenue represents fees third parties pay us: (i) when they choose to place advertisements in particular areas of our websites and mobile applications as well as (ii) for certain miscellaneous special projects related to marketing. Advertising revenue is recognized over time based on the upfront monthly fees agreed to in media plans (which include a target for views or clicks during the period of advertisement). Payment is generally due within 20 to 30 days from providing advertising services.
Other Revenue
Other revenue primarily consists of fees and earnings from our new business initiatives and new models of monetization of our website and mobile application traffic and content database (including lines of business related to our Mortgage Marketplace, Valuation and Analytics, C2C Rental and End-to-End Offerings segments. As of the date hereof, the segments that primarily contribute to this revenue are our Mortgage Marketplace and Valuation and Analytics as C2C Rental and End-to-End Offerings segments were recently launched and generate little or no revenue.
Other revenue in Mortgage Marketplace comprises commission fees charged to banks for distributing their mortgage products to our users. Upon sale, we charge the banks a fixed rate commission fee based on the mortgage amount. Our performance obligation with respect to these transactions is to arrange the transaction through our platform. The service is considered to be provided and the Mortgage Marketplace commission is recognized on a net basis at the time of signing of the mortgage agreement between the bank and the individual user. Payment is generally due within 20 to 30 days from providing these services. If an individual user decides not to sign the mortgage agreement immediately following the receipt of the mortgage approval, but the signing of the mortgage agreement nevertheless occurs within six months of the user getting an approval on our platform, our service will be recognized and fees will be collected.
Other revenue in Valuation and Analytics represents fees for providing access to our database of real estate content, either in the form of individual reports or on a subscription basis. Cash collected from sales of subscriptions is initially recorded as deferred revenue in the consolidated statement of financial position and subsequently recognized as revenue over the subscription period. Revenue from sales of individual reports is recognized at the time of delivery of the report to the customer. Payment is generally due within 20 to 30 days from providing an individual report or on a prepayment basis in case of subscription.
Currently, any revenues arising from our services provided under C2C Rental and End-to-End Offerings segments are recognized as other revenue.
Operating expenses
Our operating expenses consist primarily of: (i) advertising and marketing expenses, (ii) employee-related expenses, (iii) IT expenses (including hosting and technical support expenses and telecommunication services), (iv) depreciation and amortization expenses, (v) other operating expenses, including office maintenance expenses and other general corporate expenses, and (vi) goodwill impairment as a result of a write-off of goodwill from our acquisition of the EMLS Group (“EMLS”).
Finance income
Finance income comprises income from short-term deposits.
Finance costs
Finance costs comprise interest and similar expenses related to the Facility Agreement and lease liabilities. For further details, see “—Credit Facilities.”
 
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Foreign currency exchange loss, net
Foreign currency exchange loss, net is derived from cash and cash equivalents denominated in foreign currency, including the cash balances of our Cypriot companies and a one-off effect of a convertible loan received from the Investors under the Investment Agreement in connection with the N1 Acquisition financing. The convertible loan was settled by issuance of 281 ordinary shares (5,566,900 ordinary shares after the share split) in favor of the Investors. For further details, see “Related Party Transaction—Relationship with Shareholders—Investment Agreement.”
Income tax benefit
Income tax benefit comprises the taxes levied on taxable income in individual countries, including Russia and Cyprus, as well as changes in deferred tax assets and liabilities that are recognized in profit or loss.
Results of Operations
The following table sets forth our results of operations for the periods indicated:
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
(in RUB million, except share and per share data)
​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
Revenue ​ ​ ​ ​ 2,704 ​ ​ ​ ​ ​ 1,642 ​ ​ ​ ​ ​ 3,972 ​ ​ ​ ​ ​ 3,607 ​ ​
Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Marketing expenses
​ ​ ​ ​ (1,129) ​ ​ ​ ​ ​ (636) ​ ​ ​ ​ ​ (1,697) ​ ​ ​ ​ ​ (2,159) ​ ​
Employee-related expenses
​ ​ ​ ​ (2,632) ​ ​ ​ ​ ​ (1,078) ​ ​ ​ ​ ​ (2,208) ​ ​ ​ ​ ​ (1,385) ​ ​
IT expenses
​ ​ ​ ​ (229) ​ ​ ​ ​ ​ (143) ​ ​ ​ ​ ​ (264) ​ ​ ​ ​ ​ (289) ​ ​
Depreciation and amortization
​ ​ ​ ​ (134) ​ ​ ​ ​ ​ (99) ​ ​ ​ ​ ​ (200) ​ ​ ​ ​ ​ (169) ​ ​
Other operating expenses
​ ​ ​ ​ (221) ​ ​ ​ ​ ​ (86) ​ ​ ​ ​ ​ (180) ​ ​ ​ ​ ​ (217) ​ ​
Goodwill impairment
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (256) ​ ​
Total operating expenses
​ ​ ​ ​ (4,345) ​ ​ ​ ​ ​ (2,042) ​ ​ ​ ​ ​ (4,549) ​ ​ ​ ​ ​ (4,475) ​ ​
Operating loss
​ ​ ​ ​ (1,641) ​ ​ ​ ​ ​ (400) ​ ​ ​ ​ ​ (577) ​ ​ ​ ​ ​ (868) ​ ​
Finance costs
​ ​ ​ ​ (31) ​ ​ ​ ​ ​ (36) ​ ​ ​ ​ ​ (72) ​ ​ ​ ​ ​ (38) ​ ​
Finance income
​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 7 ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ (27) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ (3) ​ ​
Loss before income tax
​ ​ ​ ​ (1,692) ​ ​ ​ ​ ​ (432) ​ ​ ​ ​ ​ (639) ​ ​ ​ ​ ​ (902) ​ ​
Income tax benefit
​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 27 ​ ​ ​ ​ ​ 12 ​ ​ ​ ​ ​ 96 ​ ​
Loss for the period
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (806) ​ ​
Total comprehensive loss for the period
​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (806) ​ ​
Loss per share, in RUB ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic and diluted loss per share attributable to ordinary equity holders of the parent(1)
​ ​ ​
​
(26)
​ ​ ​ ​
​
(7)
​ ​ ​ ​
​
(11)
​ ​ ​ ​
​
(14)
​ ​
Basic and diluted weighted average number of ordinary shares(1)
​ ​ ​ ​ 63,751,905 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​
​
(1)
The basic and diluted loss per share are adjusted based on the share split as part of the capital reorganization. For further details, see Note 16 to our unaudited interim condensed consolidated financial statements for the six months ended June 30, 2021 and Note 21 to our audited consolidated financial statements for the years ended December 31, 2020 and 2019.
​
 
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Six months ended June 30, 2021 compared to six months ended June 30, 2020
Revenue
Our revenue increased by 64.7% to RUB 2,704 million for the six months ended June 30, 2021 from RUB 1,642 million for the six months ended June 30, 2020. The increase was primarily driven by the growth in listing revenue and lead generation revenue as outlined below.
The following table sets forth a breakdown of our revenue for the periods indicated:
​ ​ ​
Six Months Ended June 30,
​
(in RUB million)
​ ​
2021
​ ​
2020
​
Listing revenue
​ ​ ​ ​ 1,697 ​ ​ ​ ​ ​ 979 ​ ​
Lead generation revenue
​ ​ ​ ​ 597 ​ ​ ​ ​ ​ 408 ​ ​
Display advertising revenue
​ ​ ​ ​ 268 ​ ​ ​ ​ ​ 209 ​ ​
Other revenue
​ ​ ​ ​ 142 ​ ​ ​ ​ ​ 46 ​ ​
Total revenue
​ ​ ​ ​ 2,704 ​ ​ ​ ​ ​ 1,642 ​ ​
Listing revenue
Our listing revenue increased by 73.3% to RUB 1,697 million in the six months ended June 30, 2021 from RUB 979 million for the six months ended June 30, 2020. This increase was primarily driven by our reinstatement of monetization in certain regions following the temporary suspension of monetization in April 2020 due to COVID-19. We reinstated monetization of our listing services in Moscow, the Moscow region, St. Petersburg and the Leningrad region in July 2020, with certain discounts being offered in the third quarter of 2020. In the second and third quarters of 2021, we also continued reinstating monetization in several other regions. Our listing revenue growth was also driven by price increases on our listings in the spring of 2021, which is done as part of periodic review of listing rates, and additional revenues from the N1 Group, which we acquired in February 2021. For details on our monetization approach to the N1 Group see, “—Key Factors Affecting Our Results of Operations—The Impact of the COVID 19 Pandemic.”
Our listing revenue growth was partially offset by changes in the VAT exemptions under the Russian Tax Code which came in effect on January 1, 2021. For further details, see “—Key Factors Affecting Our Results of Operations—Taxation.”
In the six months ended June 30, 2021, we had approximately 2.1 million listings on our platform (excluding N1), compared to approximately 2.0 million in the six months ended June 30, 2020. In the six months ended June 30, 2021, we had an average of approximately 104.3 thousand paying accounts with an average revenue per paying account of RUB 1,139. In the six months ended June 30, 2020, we had approximately 85.1 thousand paying accounts with an average revenue per paying account of RUB 821. This growth in the six months ended June 30, 2021, was primarily driven by the reinstatement of monetization of our listing services in certain regions and inclusion of the N1 Group in our platform.
Lead generation revenue
Our lead generation revenue increased by 46.3% to RUB 597 million in the six months ended June 30, 2021 from RUB 408 million in the six months ended June 30, 2020. This growth was primarily driven by certain price increases introduced in April 2021, which impacted our average revenue per lead to developers, as well as the growing penetration of some of our value-added services, such as our auction tool. We believe that the growth of our lead generation revenue was also impacted by continued demand for primary real estate development in Russia, which was partly driven by the Russian government’s implementation of the mortgage subsidy scheme in April 2020. We believe that this mortgage subsidy scheme significantly supported the demand for primary real estate in Russia and, correspondingly, the demand for our services.
The growth in our lead generation revenue was slightly offset by a decline in the supply of new properties on the market, which, in turn, was primarily driven by a decrease in the volumes of new real estate development, which was impacted by a slowdown in construction driven by the COVID-19 pandemic.
 
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The following table presents the average number of leads generated for our real estate developer customers and the average revenue per lead for the periods indicated:
​ ​ ​
Six Months Ended June 30,
​
​ ​ ​
2021
​ ​
2020
​
Leads to developers(1) (in thousands)
​ ​ ​ ​ 113.8 ​ ​ ​ ​ ​ 103.9 ​ ​
Average revenue per lead to developers(2) (in RUB)
​ ​ ​ ​ 5,238 ​ ​ ​ ​ ​ 3,915 ​ ​
​
(1)
The number of paid target calls, lasting 30 seconds or longer, made by home searchers through our platform to real estate developers during a particular period of time.
​
(2)
Calculated as lead generation revenue in relation to the number of leads (for developers) during the period.
​
Display advertising revenue
Our display advertising revenue increased by 28.2% to RUB 268 million in the six months ended June 30, 2021 from RUB 209 million in the six months ended June 30, 2020. This increase was primarily driven by higher demand for our display advertising services from developers and additional revenues from the N1 Group.
Other revenue
Our other revenue increased to RUB 142 million in the six months ended June 30, 2021 from RUB 46 million in the six months ended June 30, 2020. This increase was primarily driven by the growth and development of our Mortgage Marketplace.
Total operating expenses
Our total operating expenses increased by 112.8% to RUB 4,345 million in the six months ended June 30, 2021 from RUB 2,042 million in the six months ended June 30, 2020, primarily driven by an increase in our marketing and employee-related expenses.
Marketing expenses
Our marketing expenses increased to RUB 1,129 million for the six months ended June 30, 2021 from RUB 636 million for the six months ended June 30, 2020. This increase was primarily driven by growth in our online and offline marketing starting from the second half of 2020, following the end of COVID-19 lockdown-related restrictions.
The following table sets forth a breakdown of our marketing expenses for the periods indicated:
​ ​ ​
Six months ended June 30,
​
(in RUB million)
​ ​
2021
​ ​
2020
​
Online marketing
​ ​ ​ ​ (810) ​ ​ ​ ​ ​ (545) ​ ​
Offline marketing
​ ​ ​ ​ (294) ​ ​ ​ ​ ​ (62) ​ ​
Other marketing expenses
​ ​ ​ ​ (25) ​ ​ ​ ​ ​ (29) ​ ​
Total marketing expenses
​ ​ ​ ​ (1,129) ​ ​ ​ ​ ​ (636) ​ ​
Employee-related expenses
Employee-related expenses increased by 144.2% to RUB 2,632 million in the six months ended June 30, 2021 from RUB 1,078 million in the six months ended June 30, 2020. Excluding share-based payments, employee-related expenses were RUB 1,162 million in the six months ended June 30, 2021 compared to RUB 829 million in the six months ended June 30, 2020. This increase was primarily due to an increase in headcount, driven by roll-out of some of our new initiatives, the N1 Acquisition and hirings in preparation for the offering. Share-based payment expense increased to RUB 1,470 million for the six months ended June 30, 2021 from RUB 249 million for the six months ended June 30, 2020, as a result of the recognition
 
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of a portion of our long-term incentive program awards linked to the planned offering, which is a non-recurring item, and the corresponding increase in the fair value estimates of these awards. See Note 13 to our unaudited interim condensed consolidated financial statements for the six months ended June 30, 2021 and June 30, 2020.
The following table sets forth a breakdown of our employee-related expenses for the periods indicated:
​ ​ ​
Six months ended June 30,
​
(in RUB million)
​ ​
2021
​ ​
2020
​
Wages, salaries and related taxes
​ ​ ​ ​ (1,124) ​ ​ ​ ​ ​ (808) ​ ​
Share – based payment expense
​ ​ ​ ​ (1,470) ​ ​ ​ ​ ​ (249) ​ ​
Other employee – related expenses
​ ​ ​ ​ (38) ​ ​ ​ ​ ​ (21) ​ ​
Total employee – related expenses
​ ​ ​ ​ (2,632) ​ ​ ​ ​ ​ (1,078) ​ ​
IT expenses
Our IT expenses increased by 60.1% to RUB 229 million in the six months ended June 30, 2021 from RUB 143 million in the six months ended June 30, 2020. This increase was primarily driven by our transition to cloud hosting services and the N1 Acquisition.
Depreciation and amortization
Our depreciation and amortization increased by 35.4% to RUB 134 million in the six months ended June 30, 2021 from RUB 99 million in the six months ended June 30, 2020. This increase was primarily driven by the amortization of identifiable intangible assets acquired through the N1 Acquisition, such as customer base, trademarks and software.
Other operating expenses
Other operating expenses increased by 157.0% to RUB 221 million in the six months ended June 30, 2021 from RUB 86 million in the six months ended June 30, 2020, primarily driven by the offering-related consulting costs.
Operating loss
As a result of the foregoing, we had an operating loss of RUB 1,641 million in the six months ended June 30, 2021, compared to an operating loss of RUB 400 million in the six months ended June 30, 2020. This increase in loss was primarily driven by an increase in our total operating expenses, which, in turn, was mainly driven by an increase in employee-related costs and primarily related to share-based payment expenses.
Finance income and finance costs
Finance income increased by 75.0% to RUB 7 million for the six months ended June 30, 2021 from RUB 4 million for the six months ended June 30, 2020. This increase was primarily due to an increase in free cash available for placement on bank deposits and the corresponding increase in the related interest income.
Finance costs decreased by 13.9% to RUB 31 million for the six months ended June 30, 2021 from RUB 36 million for the six months ended June 30, 2020, primarily due to a partial repayment under the Credit Facility and the corresponding decrease in related finance costs.
Foreign currency exchange loss, net
Foreign currency exchange loss, net, increased to RUB 27 million for the six months ended June 30, 2021 from nil for the six months ended June 30, 2020. Foreign currency exchange loss, net, for the six months ended June 30, 2021 was driven by the USD to RUB conversion of cash from a convertible loan received
 
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from the Investors under the Investment Agreement in connection with the N1 Acquisition financing. The convertible loan was settled by issuance of 281 ordinary shares (5,566,900 ordinary shares after the share split) to the Investors pursuant to the Investment Agreement. For further details, see “Related Party Transaction—Relationship with Shareholders—Investment Agreement.”
Loss before income tax
Loss before income tax increased by 291.7% to RUB 1,692 million for the six months ended June 30, 2021 from RUB 432 million for the six months ended June 30, 2020, for the reasons outlined above with respect to the various line items comprising loss before income tax.
Income tax benefit
Our income tax benefit decreased by 18.5% to RUB 22 million for the six months ended June 30, 2021 from RUB 27 million for the six months June 30, 2020. This decrease was primarily driven by a decrease in taxable loss due to non-deductible offering-related consulting costs.
Total comprehensive loss for the year
Our total comprehensive loss for the year increased by 312.3% to RUB 1,670 million for the six months ended June 30, 2021 from RUB 405 million for the six months ended June 30, 2020, for the reasons outlined above with respect to the various line items comprising total comprehensive loss for the year.
Year Ended December 31, 2020 Compared with Year Ended December 31, 2019
Revenue
Our revenue increased by 10.1% to RUB 3,972 million for the year ended December 31, 2020 from RUB 3,607 million for the year ended December 31, 2019. The increase was primarily driven by the increase in our lead generation revenue and other revenue and was partially offset by a decrease in our listing revenue as outlined below.
The following table sets forth a breakdown of our revenue for the periods indicated:
​ ​ ​
Year Ended December 31,
​
​ ​ ​
2020
​ ​
2019
​
​ ​ ​
(in RUB million)
​
Listing revenue
​ ​ ​ ​ 2,383 ​ ​ ​ ​ ​ 2,481 ​ ​
Lead generation revenue
​ ​ ​ ​ 994 ​ ​ ​ ​ ​ 623 ​ ​
Display advertising revenue
​ ​ ​ ​ 456 ​ ​ ​ ​ ​ 452 ​ ​
Other revenue
​ ​ ​ ​ 139 ​ ​ ​ ​ ​ 51 ​ ​
Total revenue
​ ​ ​ ​ 3,972 ​ ​ ​ ​ ​ 3,607 ​ ​
Listing revenue
Our listing revenue decreased by 4.0% to RUB 2,383 million in 2020 from RUB 2,481 million in 2019. This decrease was primarily driven by our decision to temporarily offer our listing services free of charge across all cities and regions in April 2020 due to the COVID-19 pandemic. The monetization of our listing services in Moscow, the Moscow region, St. Petersburg and the Leningrad region was reinstated in July 2020, with certain discounts being introduced in the third quarter of 2020. Our listings monetization in most of our other regions remains temporarily suspended and its potential reintroduction is being assessed on a region-by-region basis. For further details, see “—Key Factors Affecting Our Results of Operations—Macroeconomic Environment and the Russian Property Market and the Impact of the COVID-19 Pandemic.”
In 2020, we had approximately 2.1 million listings on our platform, compared to approximately 1.9 million in 2019. In 2020, we had an average of approximately 88.6 thousand paying accounts with an
 
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average revenue per paying account of RUB 625. In 2019, we had approximately 96.7 thousand paying accounts with an average revenue per paying account of RUB 629.
Lead generation revenue
Our lead generation revenue increased by 59.6% to RUB 994 million in 2020 from RUB 623 million in 2019. We believe that this was primarily driven by (i) the growth in the number of leads to developers, which was approximately 244.8 thousand in 2020 as compared to 179.6 thousand in 2019 and (ii) growth in the average revenue per lead to developers, which increased to RUB 4,046 in 2020 from RUB 3,470 in 2019.
The following table presents the average number of leads generated for our real estate developer customers and the average revenue per lead for the periods indicated:
​ ​ ​
2020
​ ​
2019
​
​ ​ ​
Second half
​ ​
First half
​ ​
Second half
​ ​
First half
​
Leads to developers(1)(in thousands)
​ ​ ​ ​ 140.9 ​ ​ ​ ​ ​ 103.9 ​ ​ ​ ​ ​ 90.1 ​ ​ ​ ​ ​ 89.5 ​ ​
Average revenue per lead to developers(2)(in RUB)
​ ​ ​ ​ 4,143 ​ ​ ​ ​ ​ 3,915 ​ ​ ​ ​ ​ 3,679 ​ ​ ​ ​ ​ 3,259 ​ ​
​
(1)
The number of paid target calls, lasting 30 seconds or longer, made by home searchers through our platform to real estate developers during a particular period of time.
​
(2)
Calculated as lead generation revenue in relation to the number of leads (for developers) during the period.
​
We believe that this growth was driven by our continuous focus on providing attractive offerings to our real estate developer customers as well as a significant increase in Russian real estate development activities in general, which was partly driven by the Russian government’s implementation of the mortgage subsidy scheme in April 2020. We believe that this mortgage subsidy scheme had a strong positive effect on real estate developers’ business and correspondingly their demand for our services.
Display advertising revenue
Our display advertising revenue increased by 0.9% to RUB 456 million in 2020 from RUB 452 million in 2019. This increase was primarily the result of us securing new arrangements with advertising clients and increase in pricing for some of our display advertising services.
Other revenue
Our other revenue increased by 172.5% to RUB 139 million in 2020 from RUB 51 million in 2019. This increase was primarily driven by revenue from our Mortgage Marketplace which was launched in April 2019.
Total operating expenses
Our total operating expenses increased by 1.7% to RUB 4,549 million in 2020 from RUB 4,475 million in 2019, primarily driven by an increase of 59.4% in our employee-related expenses to RUB 2,208 million in 2020 from RUB 1,385 million in 2019, which was primarily driven by (i) an increase in our share-based payment expense to RUB 558 million in 2020 from RUB 67 million in 2019, which was driven by an increase in the fair value estimates of the awards under our long-term incentive program and (ii) an increase of 29.2% in wages, salaries and related taxes, which, in turn, was driven by an increase in our employee headcount. Our employee headcount increase was primarily driven by our hirings to support the development and roll-out of our new initiatives. These increases in operating expenses were partially offset by the goodwill impairment in connection with our acquisition of EMLS in 2014. In 2019, the operating expenses of RUB 4,475 million, included RUB 256 million of goodwill impairment, with no impairment recognized in 2020.
Marketing expenses
Our marketing expenses decreased by 21.4% to RUB 1,697 million for the year ended December 31, 2020 from RUB 2,159 million for the year ended December 31, 2019. This decrease was primarily driven by an 85.5% decrease in our offline marketing expenses, which was mainly the result of us suspending the majority
 
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of our offline marketing, including print and television advertising, during the COVID-19 pandemic, in order to optimize costs and offset revenue shortfalls from the temporary suspension in monetization discussed above.
The following table sets forth a breakdown of our marketing expenses for the periods indicated:
​ ​ ​
Year Ended December 31,
​
​ ​ ​
2020
​ ​
2019
​
​ ​ ​
(in RUB million)
​
Online marketing
​ ​ ​ ​ (1,498) ​ ​ ​ ​ ​ (1,134) ​ ​
Offline marketing
​ ​ ​ ​ (139) ​ ​ ​ ​ ​ (959) ​ ​
Other marketing expenses
​ ​ ​ ​ (60) ​ ​ ​ ​ ​ (66) ​ ​
Total marketing expenses
​ ​ ​ ​ (1,697) ​ ​ ​ ​ ​ (2,159) ​ ​
Employee-related expenses
Employee-related expenses increased by 59.4% to RUB 2,208 million in 2020 from RUB 1,385 million in 2019. This increase was primarily due to: (i) an increase in share-based payment expense to RUB 558 million in 2020 from RUB 67 million in 2019, which was driven by an increase in the fair value estimates of the awards under our long-term incentive program, and (ii) a 29.2% increase in wages, salaries and related taxes, which was driven by an increase in our employee headcount, despite the temporary freeze on hiring of non-essential workers, which we established due to the COVID-19 pandemic. Our hiring in the period primarily related to our efforts to setup new teams which focus on the development and roll-out of new projects that we have launched, or plan to launch.
Our employee personnel headcount increased by 17.9% to 551 in 2020 from 469 in 2019.
The following table sets forth a breakdown of our employee-related expenses for the periods indicated:
​ ​ ​
Year Ended December 31,
​
​ ​ ​
2020
​ ​
2019
​
​ ​ ​
(in RUB million)
​
Wages, salaries and related taxes
​ ​ ​ ​ (1,610) ​ ​ ​ ​ ​ (1,246) ​ ​
Share – based payment expense
​ ​ ​ ​ (558) ​ ​ ​ ​ ​ (67) ​ ​
Other employee – related expenses
​ ​ ​ ​ (40) ​ ​ ​ ​ ​ (72) ​ ​
Total employee – related expenses
​ ​ ​ ​ (2,208) ​ ​ ​ ​ ​ (1,385) ​ ​
IT expenses
Our IT expenses decreased by 8.7% to RUB 264 million in 2020 from RUB 289 million in 2019. This decrease was primarily driven by a decrease in our development and technical support outsourcing, which was partially offset by an increase in our hosting expenses.
Depreciation and amortization
Our depreciation and amortization increased by 18.3% to RUB 200 million in 2020 from RUB 169 million in 2019. This increase was driven by a shorter amortization period of the “EMLS” trademark following management’s decision to gradually cease operations of the website “EMLS.ru” and transfer its customer base to our main website “Cian.ru” and the Cian mobile application as well as certain purchases of new software for our ongoing operations and their amortization.
Other operating expenses
Other operating expenses decreased by 17.1% to RUB 180 million in 2020 from RUB 217 million in 2019, primarily driven by a decrease in the office maintenance expenses due to the shift to remote working arrangements.
 
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Goodwill impairment
In the year ended December 31, 2019, we recognized RUB 256 million in goodwill impairment as a result of a write-off of goodwill from our acquisition of EMLS in 2014. The goodwill related to the acquisition was allocated to the cash-generating unit of EMLS. In December 2019, we decided to gradually cease the operations of the website “EMLS.ru” over the course of the following two years by transferring its customer base to our main website, “Cian.ru” and the Cian mobile application, triggering a goodwill impairment charge. No similar charges were incurred in the year ended December 31, 2020.
Operating loss
As a result of the foregoing, we had an operating loss of RUB 577 million in 2020, compared to an operating loss of RUB 868 million in 2019, which amounted to a decrease of 33.5%. This decrease in loss was primarily driven by the increase in our revenue, which, in turn, was driven by the increase in lead generation revenue, and offset by a slight increase in our total operating expenses, which, in turn, was primarily driven by an increase in employee-related costs and share-based payment expenses and offset by a decrease in our marketing expenses.
Finance income and finance costs
Finance income increased by 57.1% to RUB 11 million for the year ended December 31, 2020 from RUB 7 million for the year ended December 31, 2019. This increase was primarily due to an increase in free cash available for placement on bank deposits and corresponding increase in the related interest income.
Finance costs increased by 89.5% to RUB 72 million for the year ended December 31, 2020 from RUB 38 million for the year ended December 31, 2019, primarily due to a drawdown under the Facility Agreement in the amount of RUB 320 million in 2020 and, thus, an increase in interest charges.
Foreign currency exchange loss, net
Foreign currency exchange loss, net, decreased by 66.7% to RUB 1 million for the year ended December 31, 2020 from RUB 3 million for the year ended December 31, 2019.
Loss before income tax
Loss before income tax decreased by 29.2% to RUB 639 million for the year ended December 31, 2020 from RUB 902 million for the year ended December 31, 2019, for the reasons outlined above with respect to the various line items comprising loss before income tax.
Income tax benefit
Our income tax benefit decreased by 87.5% to RUB 12 million for the year ended December 31, 2020 from RUB 96 million for the year ended December 31, 2019. This decrease was primarily driven by an offset of RUB 88 million through utilizing accumulated tax losses against taxable profit of iRealtor LLC in the fourth quarter of 2020 and a general decrease in taxable loss.
Total comprehensive loss for the year
Our total comprehensive loss for the year decreased by 22.2% to RUB 627 million for the year ended December 31, 2020 from RUB 806 million for the year ended December 31, 2019, for the reasons outlined above with respect to the various line items comprising total comprehensive loss for the year.
 
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Key Indicators of Operating and Financial Performance(1)
In addition to operational and financial measures determined in accordance with IFRS, we make use of the following performance indicators and other business metrics in evaluating our past results and future prospects.
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
​ ​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
Average UMV(1) (in millions)
​ ​ ​ ​ 20.3 ​ ​ ​ ​ ​ 15.2 ​ ​ ​ ​ ​ 16.5 ​ ​ ​ ​ ​ 13.4 ​ ​
Listings (in millions)
​ ​ ​ ​ 2.1 ​ ​ ​ ​ ​ 2.0 ​ ​ ​ ​ ​ 2.1 ​ ​ ​ ​ ​ 1.9 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 0.3 ​ ​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 0.4 ​ ​
Thereof: Other regions
​ ​ ​ ​ 1.8 ​ ​ ​ ​ ​ 1.6 ​ ​ ​ ​ ​ 1.8 ​ ​ ​ ​ ​ 1.5 ​ ​
Average daily revenue per listing (in RUB)
​ ​ ​ ​ 4.4 ​ ​ ​ ​ ​ 2.7 ​ ​ ​ ​ ​ 3.1 ​ ​ ​ ​ ​ 3.5 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 21.2 ​ ​ ​ ​ ​ 10.3 ​ ​ ​ ​ ​ 13.8 ​ ​ ​ ​ ​ 13.6 ​ ​
Thereof: Other regions
​ ​ ​ ​ 1.5 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 1.1 ​ ​
Leads to agents and individual sellers (in millions)
​ ​ ​ ​ 9.1 ​ ​ ​ ​ ​ 6.5 ​ ​ ​ ​ ​ 8.0 ​ ​ ​ ​ ​ 6.9 ​ ​
Paying accounts (in thousands)
​ ​ ​ ​ 104.3 ​ ​ ​ ​ ​ 85.1 ​ ​ ​ ​ ​ 88.6 ​ ​ ​ ​ ​ 96.7 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 55.7 ​ ​ ​ ​ ​ 49.5 ​ ​ ​ ​ ​ 54.9 ​ ​ ​ ​ ​ 58.1 ​ ​
Thereof: Other regions
​ ​ ​ ​ 50.4 ​ ​ ​ ​ ​ 38.6 ​ ​ ​ ​ ​ 36.2 ​ ​ ​ ​ ​ 42.9 ​ ​
Average revenue per paying account (in RUB)
​ ​ ​ ​ 1,139 ​ ​ ​ ​ ​ 821 ​ ​ ​ ​ ​ 625 ​ ​ ​ ​ ​ 629 ​ ​
Thereof: Moscow and the Moscow region
​ ​ ​ ​ 1,704 ​ ​ ​ ​ ​ 1,120 ​ ​ ​ ​ ​ 885 ​ ​ ​ ​ ​ 877 ​ ​
Thereof: Other regions
​ ​ ​ ​ 622 ​ ​ ​ ​ ​ 429 ​ ​ ​ ​ ​ 292 ​ ​ ​ ​ ​ 327 ​ ​
Leads to developers (in thousands)
​ ​ ​ ​ 113.8 ​ ​ ​ ​ ​ 103.9 ​ ​ ​ ​ ​ 244.8 ​ ​ ​ ​ ​ 179.6 ​ ​
Average revenue per lead to developers (in RUB)
​ ​ ​ ​ 5,238 ​ ​ ​ ​ ​ 3,915 ​ ​ ​ ​ ​ 4,046 ​ ​ ​ ​ ​ 3,470 ​ ​
​
(1)
See the definitions of average UMV, listings, leads to agents and individual sellers, paying accounts, average revenue per paying account, average daily revenue per listing, leads to developers and average revenue per lead to developers in “Presentation of Financial and Other Information” and “Selected Consolidated Historical Financial and Other Data—Other Data.”
​
Selected Segment Information
Our reporting segments comprise Core Business, Mortgage Marketplace, Valuation and Analytics, C2C Rental and End-to-End Offerings, and they are presented in a manner consistent with the internal reporting provided to the CODM.
The following tables set forth our revenue and Adjusted EBITDA breakdown per segment for the periods indicated.
​ ​ ​
Six Months Ended June 30, 2021
​
​ ​ ​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation
and
Analytics
​ ​
C2C
Rental
​ ​
End-to-End
Offering
​ ​
Total
​
​ ​ ​
(in RUB millions)
​
Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Listing revenue
​ ​ ​ ​ 1,697 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,697 ​ ​
Lead generation revenue
​ ​ ​ ​ 595 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 597 ​ ​
Display advertising revenue
​ ​ ​ ​ 267 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 268 ​ ​
Other revenue
​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 116 ​ ​ ​ ​ ​ 21 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 142 ​ ​
Total revenue
​ ​ ​
​
2,563
​ ​ ​ ​
​
119
​ ​ ​ ​
​
21
​ ​ ​ ​
​
1
​ ​ ​ ​ ​ — ​ ​ ​ ​
​
2,704
​ ​
Adjusted EBITDA
​ ​ ​ ​ 406 ​ ​ ​ ​ ​ (232) ​ ​ ​ ​ ​ (36) ​ ​ ​ ​ ​ (71) ​ ​ ​ ​ ​ (66) ​ ​ ​ ​ ​ 1 ​ ​
 
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​ ​ ​
Six Months Ended June 30, 2020
​
​ ​ ​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation
and
Analytics
​ ​
C2C
Rental
​ ​
End-to-End
Offering(1)
​ ​
Total
​
​ ​ ​
(in RUB millions)
​
Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Listing revenue
​ ​ ​ ​ 979 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 979 ​ ​
Lead generation revenue
​ ​ ​ ​ 407 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 408 ​ ​
Display advertising revenue
​ ​ ​ ​ 206 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 209 ​ ​
Other revenue
​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 32 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 46 ​ ​
Total revenue
​ ​ ​ ​ 1,597 ​ ​ ​ ​ ​ 36 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,642 ​ ​
Adjusted EBITDA
​ ​ ​ ​ 110 ​ ​ ​ ​ ​ (97) ​ ​ ​ ​ ​ (69) ​ ​ ​ ​ ​ (63) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (119) ​ ​
​
(1)
We commenced our operations as part of the End-to-End Offerings segment in the first half of 2021.
​
​ ​ ​
Year Ended December 31, 2020
​
​ ​ ​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation
and
Analytics
​ ​
C2C
Rental
​ ​
End-to-End
Offering(1)
​ ​
Total
​
​ ​ ​
(in RUB millions)
​
Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Listing revenue
​ ​ ​ ​ 2,383 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,383 ​ ​
Lead generation revenue
​ ​ ​ ​ 991 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 994 ​ ​
Display advertising revenue
​ ​ ​ ​ 439 ​ ​ ​ ​ ​ 17 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 456 ​ ​
Other revenue
​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 90 ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 139 ​ ​
Total revenue
​ ​ ​ ​ 3,822 ​ ​ ​ ​ ​ 110 ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,972 ​ ​
Adjusted EBITDA
​ ​ ​ ​ 532 ​ ​ ​ ​ ​ (254) ​ ​ ​ ​ ​ (119) ​ ​ ​ ​ ​ (126) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 33 ​ ​
​
(1)
We commenced our operations as part of the End-to-End Offerings segment in the first half of 2021.
​
​ ​ ​
Year Ended December 31, 2019
​
​ ​ ​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation
and
Analytics
​ ​
C2C
Rental
​ ​
End-to-End
Offerings(1)
​ ​
Total
​
​ ​ ​
(in RUB millions)
​
Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Listing revenue
​ ​ ​ ​ 2,481 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,481 ​ ​
Lead generation revenue
​ ​ ​ ​ 622 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 623 ​ ​
Display advertising revenue
​ ​ ​ ​ 440 ​ ​ ​ ​ ​ 12 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 452 ​ ​
Other revenue
​ ​ ​ ​ 12 ​ ​ ​ ​ ​ 21 ​ ​ ​ ​ ​ 18 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 51 ​ ​
Total revenue
​ ​ ​
​
3,555
​ ​ ​ ​
​
34
​ ​ ​ ​
​
18
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
3,607
​ ​
Adjusted EBITDA
​ ​ ​ ​ (193) ​ ​ ​ ​ ​ (153) ​ ​ ​ ​ ​ (81) ​ ​ ​ ​ ​ (65) ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ (492) ​ ​
​
(1)
We commenced our operations as part of the End-to-End Offerings segment in the first half of 2021.
​
Six Months Ended June 30, 2021 and 2020
Our Core Business Adjusted EBITDA increased to RUB 406 million in the six months ended June 30, 2021 from RUB 110 million in the six months ended June 30, 2020. This increase was driven by growth of Core Business Adjusted EBITDA for Moscow and the Moscow region to RUB 1,069 million in the six months ended June 30, 2021 from RUB 615 million in the six months ended June 30, 2020.This increase was driven
 
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primarily by revenue growth in our Core Business segment, which, in turn, resulted from the growth in our listing revenue discussed above.
Our Mortgage Marketplace Adjusted EBITDA increased to a negative RUB 232 million in the six months ended June 30, 2021 from a negative RUB 97 million in the six months ended June 30, 2020, which was primarily due to an increase of marketing expenses associated with the roll out of the project. This was partially offset by growth in revenue generated by our Mortgage Marketplace platform, driven by continuous development and enhancement of the platform including higher top of mind awareness, as well as the addition of new bank partners, which was also supported by the Russian mortgage subsidy program. For further details on the Russian mortgage subsidy program, see “Risk Factors—Risks Related to Our Business and Industry—Our business and results of operations may be affected by the cancellation of, or any changes to, the Russian mortgage subsidy program.”
Our Valuation and Analytics Adjusted EBITDA decreased to a negative RUB 36 million in the six months ended June 30, 2021 from a negative RUB 69 million in the six months ended June 30, 2020, which was primarily driven by revenue growth of the segment as well as optimization of employee-related expenses.
Our C2C Rental Adjusted EBITDA increased to a negative RUB 71 million in the six months ended June 30, 2021 from a negative RUB 63 million in the six months ended June 30, 2020, which was primarily driven by an increase in IT expenses related to the segment.
Year Ended December 31, 2020 and 2019
Our Core Business Adjusted EBITDA increased to RUB 532 million in 2020 from a negative RUB 193 million in 2019. This increase was driven by growth of Core Business Adjusted EBITDA for Moscow and the Moscow region to RUB 1,714 million in 2020 from RUB 1,498 million in 2019. We believe that this growth was primarily driven by growth in our lead generation revenue and a decline in our marketing expenses, which was partly offset by an increase in our overall employee-related expenses.
Our Mortgage Marketplace Adjusted EBITDA increased to a negative RUB 254 million in 2020 from a negative RUB 153 million in 2019, which was primarily driven by our investments in marketing related to the Mortgage Marketplace platform.
Our Valuation and Analytics Adjusted EBITDA increased to a negative RUB 119 million in 2020 from a negative RUB 81 million in 2019, which was primarily driven by increase in employee-related expenses.
Our C2C Rental Adjusted EBITDA increased to a negative RUB 126 million in 2020 from a negative RUB 65 million in 2019, which primarily resulted from an increase in employee-related expenses driven by our investments in the development of this service.
Liquidity and Capital Resources
Prior to this offering, our principal sources of liquidity have been financial support from our shareholders as well as debt facilities. Our principal needs for liquidity are operating expenses, expenditures related to debt service, capital expenditures and acquisitions. Our long-term capital needs generally result from our need to fund our growth strategy. Our ability to generate cash from our operations depends on future operating performance, which is dependent to some extent on general economic, financial, legislative, regulatory and other factors, many of which are beyond our control, as well as the other factors discussed in “Risk Factors.”
Our cash and cash equivalents were RUB 810 million, RUB 449 million and RUB 148 million as of June 30, 2021, December 31, 2020 and 2019, respectively. Our cash and cash equivalents primarily consist of cash in the bank and on hand and short-term deposits. Short-term deposits are made for varying periods of between one day and three months, depending on our immediate cash requirements, and earn interest at the respective market short-term deposit rates.
Working capital position
As of June 30, 2021, our current assets totaled RUB 1,208 million while our current liabilities totaled RUB 3,726 million. As of December 31, 2020, our current assets totaled RUB 711 million while current
 
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liabilities totaled RUB 1,501 million (due to the covenant breach under the Facility Agreement in 2020 and the first six months of 2021, the non-current portion of our borrowings under the Facility Agreement was reclassified into a current portion as of December 31, 2020 and June 30, 2021, for further details see “—Credit Facilities”), resulting in a negative working capital of RUB 790 million, including RUB 332 million in contract liabilities as of December 31, 2020 and RUB 2,518 million, including RUB 344 million in contract liabilities as of June 30, 2021. Our working capital mainly comprises trade and other receivables, cash, short-term borrowings, trade payables as well as advances paid and prepaid expenses. Due to the inherent nature of our business, a significant portion of our customers pay upfront for our products and services, and such upfront payments are recorded as liabilities. We expect that contract liabilities will continue to be significant and thus negative working capital will be maintained in the future periods.
We believe that our current cash and cash equivalents, our operating cash flows, expected availability under our credit facilities and anticipated proceeds from this offering will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the 12 months following the date of this prospectus and to make the required principal and interest payments on our indebtedness.
Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated.
​ ​ ​
Six Months Ended June 30,
​ ​
Year Ended December 31,
​
(RUB in million)
​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​
Net cash generated from (used in) operating activities
​ ​ ​ ​ 27 ​ ​ ​ ​ ​ (44) ​ ​ ​ ​ ​ 230 ​ ​ ​ ​ ​ (361) ​ ​
Net cash used in investing activities
​ ​ ​ ​ (1,725) ​ ​ ​ ​ ​ (35) ​ ​ ​ ​ ​ (109) ​ ​ ​ ​ ​ (130) ​ ​
Net cash generated from financing activities
​ ​ ​ ​ 2,060 ​ ​ ​ ​ ​ 287 ​ ​ ​ ​ ​ 182 ​ ​ ​ ​ ​ 539 ​ ​
Cash and cash equivalents at the end of the period
​ ​ ​ ​ 810 ​ ​ ​ ​ ​ 356 ​ ​ ​ ​ ​ 449 ​ ​ ​ ​ ​ 148 ​ ​
Net cash generated from (used in) operating activities
Our cash flow from operating activities is primarily generated from cash received from our customers, payments for operating expenses, finance income and finance costs and changes in working capital. We typically use our cash flows generated from operating activities to provide working capital for current and future operations.
Net cash generated from operating activities was RUB 27 million for the six months ended June 30, 2021 compared to a net cash used in operating activities of RUB 44 million for the six months ended June 30, 2020, resulting in an overall change of RUB 71 million. The change was primarily driven by changes in the working capital including primarily increase in trade and other payables.
Net cash generated from operating activities was RUB 230 million for the year ended December 31, 2020, compared to net cash used in operating activities of RUB 361 million for the year ended December 31, 2019, resulting in an overall change of RUB 591 million. The change was primarily a result of a decrease in our loss before income tax, excluding non-cash effects of share-based payments. liability revaluation, depreciation and amortization as well as goodwill impairment.
Net cash used in investing activities
Our investing activities primarily consist of the purchase of property and equipment and intangible assets, such as office equipment, computer software and development costs.
Net cash used in investing activities increased to RUB 1,725 million for the six months ended June 30, 2021 from RUB 35 million for the six months ended June 30, 2020, primarily due to the payment of RUB 1,651 million (net of cash acquired) in connection with the N1 Acquisition.
Net cash used in investing activities decreased to RUB 109 million for the year ended December 31, 2020 from RUB 130 million for the year ended December 31, 2019, primarily due to a decrease in purchase of intangible assets.
 
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Net cash generated from financing activities
Our financing activities primarily consist of receipt or repayment of borrowings.
Net cash generated from financing activities increased to RUB 2,060 million for the six months ended June 30, 2021 from RUB 287 million for the six months ended June 30, 2020, primarily due to RUB 2,265 million in proceeds from the convertible loan issued pursuant to the Investment Agreement in connection with the N1 Acquisition, which was subsequently converted into our ordinary shares.
Net cash generated from financing activities decreased to RUB 182 million for the year ended December 31, 2020 from RUB 539 million for the year ended December 31, 2019, primarily due to a decrease in proceeds from borrowings to RUB 320 million in 2020 from RUB 672 million in 2019 and absence of contributions from shareholders in 2020. In 2019, we received an irrevocable contribution from the existing shareholders in the amount of RUB 118 million. The contribution was accounted for as the increase in share premium. No similar transactions were recorded in 2020.
Capital Expenditures
Our capital expenditures for the six months ended June 30, 2021 were RUB 74 million, of which RUB 50 million was attributable to purchases of intangible assets, and RUB 24 million was attributable to purchases of property and equipment.
Our capital expenditures for the year ended December 31, 2020 were RUB 111 million, of which RUB 21 million was attributable to purchases of property and equipment, RUB 43 million was attributable to capitalized development costs and RUB 47 million was attributable to purchases of intangible assets. Our capital expenditures for the year ended December 31, 2019 were RUB 128 million, of which RUB 24 million was attributable to purchases of property and equipment, RUB 22 million was attributable to capitalized development costs, and RUB 82 million was attributable to purchases of intangible assets. Our capital expenditures mainly include the purchase of property, plant and equipment as well as certain intangible assets.
Credit Facilities
On July 31, 2019, our wholly-owned subsidiary, iRealtor LLC, entered into a syndicated credit facility agreement (the “Facility Agreement”) with Raiffeisenbank as the Original Lender, the Facility Agent, and the Pledge Manager, and Rosbank as the Original Lender for the total amount of up to RUB 800 million, split into two tranches of up to RUB 500 million (“Tranche 1”) and up to RUB 300 million (“Tranche 2”).
The Facility Agreement contains restrictive maintenance and negative covenants that limit our ability, among others, to encumber or dispose of assets, incur or guarantee indebtedness, amend the constitutional documents, alter the share capital and pay dividends. The maintenance covenants under the Facility Agreement also impose on iRealtor LLC obligations to maintain: (i) positive net assets calculated in accordance with the RAS (tested on semi-annual basis); (ii) a certain amount of revenue and EBITDA (calculated pursuant to the formula set out in the Facility Agreement); (iii) a certain ratio of advertising expenses, EBITDA and the current liquidity ratio (tested on a quarterly basis), and (iv) a certain ratio of EBITDA and advertising expenses and the amount of EBITDA (tested on an annual basis).
As of June 30 2020, iRealtor LLC technically breached the maintenance covenant under the Facility Agreement requiring that its net assets calculated in accordance with the RAS must be positive as of the end of each semi-annual period and the covenants as to the maintenance at the end of each quarter of certain levels of revenue and of combined EBITDA and advertising expenses. On September 9, 2020, iRealtor LLC received waivers from Raiffeisenbank in relation to these technical breaches. On December 31, 2020, iRealtor LLC breached its maintenance covenants under the Facility Agreement related to its net assets and EBITDA and advertising expenses, and, in May 2021, obtained a waiver from Raiffeisenbank as the Facility Agent with respect to this breach of covenants. However, since the waiver was obtained after the reporting date, the non-current portion of the loans was reclassified into the short-term portion as of December 31, 2020.
 
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Also, as of September 30, 2021 (and previously, as of June 30, 2021), iRealtor LLC technically breached the maintenance covenant under the Facility Agreement requiring that its net assets calculated in accordance with the RAS must be positive as of the end of each semi-annual period and the covenant that requires that its current liquidity ratio must be at least 1.5:1 as of the end of each quarter. On October 6, 2021, with respect to September 30, 2021 breaches (and on June 30, 2021, with respect to June 30, 2021 breaches), iRealtor LLC received waivers from Raiffeisenbank in relation to these technical breaches. Additionally, as of September 30, 2021 (and previously, as of June 30, 2021), iRealtor LLC technically breached the covenants as to the maintenance of certain levels of EBITDA. In October 2021 (and September 2021, respectively), iRealtor LLC received waivers from Raiffeisenbank in relation to these technical breaches.
The Facility Agreement is secured by, among other things, pledges of 100% shares in Fastrunner Investments Limited, 100% shares in Mimons Investments Limited, 51% shares in our key operating subsidiary, iRealtor LLC, pledges of rights to the software, trademarks and rights under the license agreements with, and the guarantees from, the Company, Mimons Investments and Fastrunner Investments.
The Facility Agreement also contains certain restrictions on our ability to declare and pay dividends, including that we cannot declare and pay dividends, except in the following cases: (i) annual distributions of dividends by iRealtor LLC to Mimons Investments Limited in the amount not exceeding RUB 60 million annually, and subsequent distributions of the dividends from Mimons Investments Limited to Solaredge Holdings Limited (renamed Cian PLC) and Fastrunner Investments Limited, and from Fastrunner Investments Limited to Solaredge Holdings Limited; (ii) distributions of dividends by iRealtor LLC, Mimons Investments Limited, Cian PLC (formerly Solaredge Holdings Limited) and Fastrunner Investments Limited for repayment of any potential shareholder loans, subject to standard conditions, including the Net Debt to EBITDA ratio; and (iii) distributions made with the prior written consent of the Facility Agent acting on the basis of the Consent of the Majority of the Lenders. Capitalized terms have the definitions provided in the Facility Agreement.
As detailed further in the table below, as of June 30, 2021, the total outstanding indebtedness under the Facility Agreement was RUB 542 million.
​
Tranche
​ ​
Contractual interest rate
​ ​
Maturity date
​ ​
Carrying amount, incl. accrued
interest (in RUB million)
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
June 30,
2021
​ ​
December 31,
2020
​
​
Tranche 1
​ ​
CBR key rate plus 3.35%
​ ​ 2021 – 2022 ​ ​ ​ ​ 286 ​ ​ ​ ​ ​ 429 ​ ​
​
Tranche 2
​ ​
CBR key rate plus 3.8%
​ ​ 2021 – 2024 ​ ​ ​ ​ 256 ​ ​ ​ ​ ​ 299 ​ ​
​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 542 ​ ​ ​ ​ ​ 728 ​ ​
​ Current ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 542 ​ ​ ​ ​ ​ 728 ​ ​
​ Non-current ​ ​ ​ ​ ​ ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ — ​ ​
Contractual Obligations and Commitments
As of June 30, 2021, we had no material contractual obligations and other commitments except for the lease liabilities of RUB 110 million.
Off-Balance Sheet Arrangements
We did not have, during the period presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships.
Critical Accounting Policies and Significant Judgments and Estimates
We have provided a summary of our significant accounting policies, estimates and judgments in Note 2 (Significant Accounting Policies) and Note 3 (Significant Accounting Judgments, Estimates and Assumptions) to our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019. The following critical accounting discussion pertains to the accounting policies, judgments, estimates and
 
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assumptions that management believes are most critical to the portrayal of our historical financial condition and results of operations. Other companies in similar businesses may use different estimation policies and methodologies, which may impact the comparability of our financial condition, results of operations and cash flows to those of other companies. For additional information, see Notes 2 and 3 to our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019.
Basis of Consolidation
Our consolidated financial statements, which are included elsewhere in this prospectus, comprise the unaudited interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 and our audited consolidated financial statements for the years ended December 31, 2020 and 2019. Control is achieved when we are exposed, or have rights, to variable returns from involvement with the investee and have the ability to affect those returns through our power over the investee. Specifically, we control an investee if, and only if, we have: (i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to use its power to affect its returns.
We reassess whether or not we control an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Consolidation of a subsidiary begins when we obtain control over the subsidiary and ceases when we lose control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date we gain control until the date we cease to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with our accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to the transactions between members of the Group are eliminated in full on consolidation.
If we lose control over a subsidiary, we derecognize the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.
Foreign Currencies
Our consolidated financial statements are presented in rubles, which is also the Company’s functional currency. For each entity, we determine the functional currency and items included in the financial statements of each entity, which are measured using that functional currency. The functional currency of all of our subsidiaries is the RUB.
Transactions in foreign currencies are initially recorded by our subsidiaries in their functional currency at exchange rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into functional currency at exchange rates prevailing at the reporting date. Differences arising on settlement or translation of monetary items are recognized within “Foreign currency exchange gain / (loss), net,” in the consolidated statement of profit or loss and other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.
The RUB is not a fully convertible currency outside Russia. Within the Russian Federation, official exchange rates are determined by the Central Bank of the Russian Federation.
Going Concern
Our consolidated financial statements for the six months ended June 30, 2021 and June 30, 2020 and for the years ended December 31, 2020 and December 31, 2019 have been prepared by management on the assumption that the Group will be able to continue as a going concern, which presumes that the Group will, for the foreseeable future, be able to realize its assets and discharge its liabilities in the normal course of business.
 
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The following indicators could give rise to a going-concern risk as of June 30, 2021: for the six months ended June 30, 2021, we incurred a loss of RUB 1,670 million (six months ended June 30, 2020: RUB 405 million), as of June 30, 2021, we had a net liability position of RUB 251 million (December 31, 2020: RUB 872 million) and net cash of RUB 268 million (December 31, 2020: net debt of RUB 279 million), we also had a negative working capital (defined as total current asset less total current liabilities) of RUB 2,518 million (December 31, 2020: RUB 790 million), including RUB 344 million of contract liabilities (December 31, 2020: RUB 332 million).
However, we generated positive operating cash flow of RUB 27 million for the six months ended June 30, 2021 (six months ended June 30, 2020: negative operating cash flow of RUB 44 million).
The following indicators could give rise to a going-concern risk as of December 31, 2020: for the year ended December 31, 2020, we incurred a loss of RUB 627 million, as compared to a loss of RUB 806 million for the year ended December 31, 2019. As of December 31, 2020, we had a net liability position of RUB 872 million (2019: RUB 245 million) and net debt of RUB 279 million (2019: RUB 329 million), we also had a negative working capital (defined as total current asset less total current liabilities) of RUB 790 million (2019: RUB 307 million), including RUB 332 million of contract liabilities (2019:RUB 184 million).
However, we generated positive operating cash flow of RUB 230 million in 2020 as compared to a negative operating cash flow of RUB 361 million in 2019. For a detailed description of the matters considered by the management in determining the appropriateness of the going concern basis, see Note 3 (Significant Accounting Judgments, Estimates and Assumptions) to our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019.
Share-Based Payments
Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model, such as discount and terminal growth rates, revenue growth rates and Adjusted EBITDA Margin, affecting the fair value of the ordinary shares of the Group, which is the basis for the valuation of the share-based payment liability. We initially measure the cost of cash-settled transactions with employees at the fair value of the liability incurred. For cash-settled share-based payment transactions, the liability needs to be re-measured at the end of each reporting period up to the date of settlement, with any changes in fair value recognized in profit or loss. This requires a reassessment of the estimates used at the end of each reporting period. For further information, including the assumptions and models used for estimating fair value for share-based payment transactions, see Note 16 to our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019.
Also, as described in Note 16, a portion of cash payment to which participants of the option program are entitled to is linked to certain liquidity events, such as an initial public offering. As of December 31, 2020 and 2019, we determined that this performance condition for the recognition of share-based payments was not yet probable, and no related share-based compensation expense was recognized during the years then ended. These costs are expected to be recognized once the performance condition occurs or becomes probable.
Useful lives of Intangible Assets
The estimation of the useful lives of intangible assets acquired through business combinations or generated internally is a matter of judgment based on the experience with similar assets. The future economic benefits embodied in the assets are consumed principally through their use. However, other factors related to the economic environment and market situation often result in the diminution of the economic benefits embodied in the assets. Our management assesses the remaining useful lives in accordance with the current market conditions of the assets and the estimated period during which the assets are expected to earn benefits for the Group.
Compliance with Tax Legislation
The taxation system in the Russian Federation continues to evolve and is characterized by frequent changes in legislation, official pronouncements and court decisions, which are sometimes contradictory and
 
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subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year generally remains open for review by the tax authorities during the three subsequent calendar years. However, under certain circumstances a tax year may remain open longer.
This may potentially impact our tax position and create additional tax risks. This legislation and its application is still evolving and the impact of legislative changes should be considered based on the actual circumstances. Our management believes that it has adequately provided for tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the tax authorities and courts, especially due to the reform of the supreme courts that are resolving tax disputes, could differ, and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.
Recent Accounting Pronouncements
Certain new accounting standards and interpretations have been issued by the IASB, but are not yet effective for the December 31, 2020 reporting period and have not been early adopted by us. These standards are not expected to have a material impact on us. For additional information, see Note 2.3 to our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain financial risks in the ordinary course of our business. These risks primarily consist of market risk, which comprises interest rate risk and foreign currency risk, credit risk and liquidity risk. For further discussion and sensitivity analysis of these risks, see Note 19 to our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our exposure to the risk of changes in market interest rates relates primarily to our borrowings with floating interest rates.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on our borrowings affected. With all other variables held constant, our loss before tax is affected through the impact on floating rate borrowings, as follows:
​ ​ ​
Change in
interest rates
​ ​
Effect on profit
before tax
​
Year ended December 31, 2020 ​ ​ ​ ​ ​ ​ ​
Borrowings with floating interest rates
​ ​
+1%/-1%
​ ​
(7) / 7
​
Year ended December 31, 2019 ​ ​ ​ ​ ​ ​ ​
Borrowings with floating interest rates
​ ​
+1%/-1%
​ ​
(5) / 5
​
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates is currently limited because our operating activities are mainly carried out in rubles.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. We are exposed to credit risk from our operating activities (primarily trade receivables) and from our cash and cash equivalents held with banks.
Trade receivables
We perform an impairment analysis at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due. The calculation reflects the probability-weighted outcome. Generally, accounts receivables are written-off if past due for more than three years.
 
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The following table sets out information about the credit risk exposure on our trade receivables using a provision matrix:
​ ​ ​
< 30 days
​ ​
31-60 days
​ ​
61-90 days
​ ​
> 90 days
​ ​
Total
​
2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Expected credit loss rate
​ ​ ​ ​ 1.1% ​ ​ ​ ​ ​ 5.7% ​ ​ ​ ​ ​ 7.6% ​ ​ ​ ​ ​ 69.4% ​ ​ ​ ​ ​ ​ ​ ​
Total gross carrying amount
​ ​ ​ ​ 128 ​ ​ ​ ​ ​ 17 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6 ​ ​ ​ ​ ​ 151 ​ ​
Expected credit loss
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 6 ​ ​
​ ​ ​
< 30 days
​ ​
31-60 days
​ ​
61-90 days
​ ​
> 90 days
​ ​
Total
​
2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Expected credit loss rate
​ ​ ​ ​ 1.2% ​ ​ ​ ​ ​ 7.6% ​ ​ ​ ​ ​ 7.9% ​ ​ ​ ​ ​ 62.4% ​ ​ ​ ​ ​ ​ ​ ​
Total gross carrying amount
​ ​ ​ ​ 83 ​ ​ ​ ​ ​ 6 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8 ​ ​ ​ ​ ​ 97 ​ ​
Expected credit loss
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 6 ​ ​
Cash and cash equivalents
Our cash and cash equivalents were RUB 810 million and RUB 356 million as of June 30, 2021 and 2020, respectively.
Our cash and cash equivalents were RUB 449 million and RUB 148 million as of December 31, 2020 and 2019, respectively. Our cash and cash equivalents are primarily held with banks, which are rated not less than BBB- to BBB, based on Standard & Poor’s and Fitch ratings. As of December 31, 2020 and 2019, we held 94% and 95%, respectively, of our cash and cash equivalents with banks having external credit ratings of BBB-/BBB.
Our impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. We consider that our cash and cash equivalents have low credit risk based on the external credit ratings of the counterparties. No impairment allowance was recognized as of December 31, 2020 and 2019.
Liquidity risk
Liquidity risk is the risk that we will not be able to settle all liabilities as they fall due. We manage our liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecasts and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The table below summarizes the maturity profile of our financial liabilities based on contractual undiscounted payments:
​ ​ ​
Within 1 year
​ ​
1 to 3 years
​ ​
3 to 5 years
​ ​
> 5 years
​ ​
Total
​
2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Trade and other payables
​ ​ ​ ​ 197 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 197 ​ ​
Borrowings
​ ​ ​ ​ 416 ​ ​ ​ ​ ​ 340 ​ ​ ​ ​ ​ 44 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 800 ​ ​
Lease liabilities
​ ​ ​ ​ 43 ​ ​ ​ ​ ​ 76 ​ ​ ​ ​ ​ 8 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 127 ​ ​
Total financial liabilities
​ ​ ​ ​ 656 ​ ​ ​ ​ ​ 416 ​ ​ ​ ​ ​ 52 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 1,124 ​ ​
​ ​ ​
Within 1 year
​ ​
1 to 3 years
​ ​
3 to 5 years
​ ​
> 5 years
​ ​
Total
​
2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Trade and other payables
​ ​ ​ ​ 80 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 80 ​ ​
Borrowings
​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 408 ​ ​ ​ ​ ​ 84 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 581 ​ ​
Lease liabilities
​ ​ ​ ​ 73 ​ ​ ​ ​ ​ 34 ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 107 ​ ​
Total financial liabilities
​ ​ ​ ​ 242 ​ ​ ​ ​ ​ 442 ​ ​ ​ ​ ​ 84 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 768 ​ ​
 
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Internal Control over Financial Reporting
In the course of preparing our financial statements for the years ended December 31, 2020 and 2019, we identified certain significant deficiencies in our internal control environment, including deficiencies relating to (i) insufficient segregation of duties and controls over change management in our IT systems and (ii) insufficient controls over access management in our IT systems.
To remedy our identified significant deficiencies, we are in the process of adopting several measures intended to improve our internal controls over financial reporting, including: (i) reviewing and formalizing the change management process; (ii) introducing segregation of duties throughout the change management process; (iii) implementing a full software development lifecycle procedure including testing and change approval; (iv) ensuring the storage of the evidences of related control procedures; and (v) implementing a formal access management process ensuring appropriate approval procedure for changes in access rights and permissions.
However, we cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to significant deficiencies in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses or significant deficiencies. See “Risk Factors—Risks Related to Our Business and Industry—We have identified significant deficiencies in our internal controls over financial reporting, including our information technology general controls. If we are unable to remediate these deficiencies, or if other deficiencies or material weaknesses are identified, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner.”
JOBS Act
We are an emerging growth company, as defined in the JOBS Act. We intend to rely on certain reduced reporting and other requirements that are otherwise generally applicable to public companies. As an emerging growth company, we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, which would otherwise be required beginning with our second annual report on Form 20-F, and (ii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis).
 
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BUSINESS
Overview
We are a leading online real estate classifieds platform in the large, underpenetrated and growing Russian real estate classifieds market, ranking among the top ten most popular online real estate classifieds globally, based on the September 2021 Google Analytics traffic data for Cian and SimilarWeb traffic data for other online real estate classifieds. Since our founding in 2001, we have become the most recognized and trusted real estate classifieds brand in the most populous Russian regions, according to the Frost & Sullivan Report and have expanded our business beyond online real estate classifieds listings to offer additional products and services, which turn real estate searches and transactions into a seamless, transparent and efficient experience. Our mission is to use technology and deep insights into the Russian real estate market to help people on the journey to their perfect new place to live or work.
We operate in the Russian real estate market, which, according to the Frost & Sullivan Report, represented approximately USD 238 billion in 2020 and is only starting to digitalize. Being at the forefront of this digitalization trend and, as we believe, being one of the major driving forces behind it, we see an immediately addressable market opportunity of approximately USD 6 billion (in 2020, based on the Frost & Sullivan Report), which comprises real estate agents’ commissions, developers’ advertising budgets as well as adjacent markets, including mortgage advertising and digital services facilitating transactions. Our core online real estate classifieds market is projected to grow at a CAGR of approximately 27% between 2021 and 2025, according to the Frost & Sullivan Report.
Our networked real estate platform connects millions of our users, the real estate buyers and renters, to millions of high-quality real estate listings of all types — residential and commercial, primary and secondary, urban and suburban, for both sale and rent. By offering a unique combination of products, services and insights, we have become a premier destination for our users as well as tens of thousands of our customers, real estate agents, developers, private sellers, landlords and other partners. Our platform aims to provide an end-to-end experience for our customers and users and helps them address multiple pain points on their journey to a successful real estate transaction. We strive for our platform to encompass all stages of such journey, from finding the right property and the right buyer or renter, to financing the purchase and ensuring transaction certainty, while allowing participants to transact with ease and efficiency. We derive our revenue:
•
In our Core Business segment, from listing fees in the secondary residential and commercial real estate verticals and lead generation fees in the primary residential real estate vertical, as well as fees for listing value-added services, such as premium and highlighted listings and listing auctions, and other value-added services. We estimate that a majority of Moscow and Saint Petersburg real estate developers were present on our platform in 2020. In June 2020, we introduced a new subscription-based model for customers, which allows our customers to purchase a monthly subscription with us and combine a number of listings with value-added services, improving efficiency for them and stickiness and monetization for us. For more details, see “Business—Our Real Estate Platform—Core Classifieds Business—Products and Services We Offer to Customers—Subscription Model.” In the first half of 2021, the average share of listings under the subscription model amounted to approximately 41% as compared to approximately 26% in the second half of 2020. We also charge fees for providing advertising tools through our platform for various parties, primarily real estate developers and banks, which we refer to as our display advertising revenue. In 2020, we derived 96% of our revenue from our Core Business segment (of which 48% from the secondary residential real estate vertical, 37% from the primary residential real estate vertical and 15% from the commercial real estate vertical).
​
•
In our Mortgage Marketplace segment, from fees charged to our partner banks for distributing their mortgage products through our advanced platform for mortgage price comparison, mortgage pre-approval and origination.
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•
In our Valuation and Analytics segment, from fees charged to our customers and partners for providing access to our proprietary real estate market research, data analytics and market intelligence services, either through sales of individual reports or on a subscription basis.
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•
In our C2C Rental segment, from fees charged to our users for providing end-to-end solutions and facilitating seamless online property rentals (including tenant background checks, digital signing of agreements, online payments and insurance).
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•
In our End-to-End Offerings segment, from fees charged to our customers and users for services that enable online execution of real estate transactions (including document checking, verification, execution and storage, notary services, registration and tax refunds) and facilitate simultaneous sales and purchases, which, we believe, provides for more efficient real estate transactions.
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Our users can search our property listings free of charge via our mobile applications and our mobile and desktop websites. They can also benefit from a broad scope of various innovative services that we offer, such as real estate valuation and access to a choice of real estate purchase financing options.
[MISSING IMAGE: TM2120160D9-PH_NETWRK4CLR.JPG]
Our networked platform model and our trusted brand have allowed us to achieve the leading position by share of leads to real estate agents and individual sellers and by number of listings in four of the most populous Russian regions, consisting of Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk, which together, according to the Frost & Sullivan Report, in 2020, accounted for 65%, 41% and 75% of the primary residential, secondary residential and commercial real estate markets in the country, respectively. In the first half of 2021, we had approximately 2.1 million listings available through our platform (excluding N1) and an average UMV of approximately 20.3 million (including N1). In 2020, we had approximately 2.1 million listings available through our platform and an average UMV of approximately 16.5 million. We believe that the quantity and quality of our listings database, as well as our expanding end-to-end value proposition, attract an increasing number of buyers and renters, which results in more transactions conducted based on expressions of interest and inquiries generated through our platform (“leads”), which in turn attracts more real estate agents, developers and landlords posting more listings. We believe that this powerful network effect has allowed us to continuously solidify our market leadership in our core regions of Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk, and will allow us to continue strengthening and expanding our position in other regions.
 
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Development of new products, services and features is an integral part of our business, and we have a long and successful track record of disrupting the online real estate classifieds market through innovation. This culture of innovation and over 20 years of relevant experience allowed us to move beyond the pure online real estate classifieds model and become a fully-fledged, networked real estate platform enabled by cutting-edge technology, which creates value for all real estate market participants. In our Core Business segment, we provide advanced features that make connecting our customers and our users through our extensive database of property listings more efficient, such as: for users, AI-powered property search and virtual 3D property tours; for real estate agents, Pro.Tools which are our advanced lead management toolkit offerings to boost productivity (including call tracking, duplicates and competition notifications, push notification for competition price decreases, detailed lead information and others); and enterprise features for real estate agencies (including integration tools and tools for the management of marketing costs, performance and employees). To deliver our end-to-end value proposition and make searching and transacting even easier and more seamless for all real estate market participants, we have also created, and are continuing to add, innovative services, such as Mortgage Marketplace, Agent Finder, Property Valuation, Online Transaction Services, Home Swap and others). We intend to continue staying at the forefront of innovation by developing new solutions that will help our users to find their perfect properties to rent or buy and our customers to sell or rent out their real estate in the most efficient way.
We are a technology-driven platform and are committed to delivering the most efficient and stress-free experience through the use of cutting-edge technology, especially in view of the rapid pace of technological changes in our industry, such as increasing use of mobile devices in the real estate market and proliferation of new technologies that improve user experience, such as machine learning. We believe that our mobile-first approach, in which we prioritize our users’ reliance on our mobile applications and websites, not only makes finding a new home or office more convenient for our users, but also increases retention, improves the efficiency and conversion rate of our marketing programs and accelerates the growth of our business. The share of mobile in our average UMV increased to approximately 76.2% in the first half of 2021 from approximately 72.8% in the second half of 2020 and approximately 67.9% in the first half of 2020. Similarly, our share of mobile in leads to agents and individual sellers increased to approximately 66.0% in the first half of 2021 from approximately 64.3% in the second half of 2020 and approximately 63.3% in the first half of 2020.
Our revenue in the year ended December 31, 2020 was RUB 3,972 million, an increase of 10.1% from RUB 3,607 million in the year ended December 31, 2019. Our revenue in the six months ended June 30, 2021 was RUB 2,704 million, an increase of 64.7% from RUB 1,642 in the six months ended June 30, 2020. Our loss for the year ended December 31, 2020 was RUB 627 million, a decrease of 22.2% from RUB 806 million in the year ended December 31, 2019. Our loss for the six months ended June 30, 2021 was RUB 1,670 million as compared to RUB 405 million in the six months ended June 30, 2020. The increase of our loss was driven primarily by an increase in our share-based payment expense to RUB 1,470 million for the six months ended June 30, 2021 from RUB 249 million for the six months ended June 30, 2020, as a result of the recognition of a portion of our long-term incentive program awards linked to the planned offering, which is a non-recurring item, and the corresponding increase in the fair value estimates of these awards. Our Adjusted EBITDA was RUB 181 million for the year ended December 31, 2020 and a negative RUB 376 million for the year ended December 31, 2019. Our Adjusted EBITDA was RUB 51 million for the six months ended June 30, 2021 and negative RUB 52 million for the six months ended June 30, 2020. As of June 30, 2021, December 31, 2020 and 2019, our total indebtedness outstanding under our credit facilities was RUB 542 million, RUB 728 million and RUB 477 million, respectively. Our results were affected by the measures that we introduced in response to the COVID-19 pandemic, including a temporary suspension of monetization of our listing services across all regions in April 2020. In July 2020, we reinstated the monetization of our listing services in Moscow,the Moscow region, St. Petersburg and the Leningrad region. In the first half of 2021, we also reinstated monetization in certain additional regions; however, the monetization in many other regions remains temporarily suspended and its potential reintroduction is being assessed on a region by region basis. We believe that we are already seeing the positive effects of these measures in some of the regions in which we reverted back to the paid model, which is illustrated by an increased number of paid listings as compared to the pre-COVID-19 levels. We believe that we are well-positioned to successfully leverage our scale, expertise and experience to continue growing our business and achieve profitability margins enjoyed by our best-in-class international peers.
 
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Our Strengths
We believe that the following strengths have contributed, and will continue to contribute, to our success:
Leading Russian online real estate classifieds platform with the #1 position in largest Russian markets
We are a leading online real estate classifieds platform in the large and growing Russian real estate market, with a strong presence across Russia and leading positions in key metropolitan areas, with approximately 2.1 million listings available via our platform and approximately 16.5 million average UMV in 2020. In the first half of 2021, we had approximately 2.1 million listings available through our platform (excluding N1) and an average UMV of approximately 20.3 million (including N1). We are also among the top ten online real estate companies globally in terms of traffic, based on the September 2021 Google Analytics traffic data for Clan and SimilarWeb traffic data for other online real estate classifieds. Most importantly, we are the number one player in terms of share of leads to real estate agents and individual sellers in four of Russia’s largest real estate markets, being Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg (data for which includes N1 Group) and Novosibirsk (data for which includes N1 Group), where we generated 2.7x, 1.4x, 2.2x and 2.9x more leads in the three months ended March 31, 2021, respectively, compared to the second largest competitor, according to the Frost & Sullivan Report. The number of leads is one of the most important measures for real estate agents when it comes to assessment of a platform’s efficiency. We are also the number one player by the number of secondary residential and commercial real estate listings in these metropolitan regions. These four regions play a major role in the Russian economy, with a combined population of 35 million, GDP of USD 542 billion and a real estate market size of USD 92 billion in 2020, and accounted for the majority of the online real estate classifieds market in Russia, with a combined share of 65% in primary residential, 41% in secondary residential and 75% in commercial real estate market verticals in 2020, according to the Frost & Sullivan Report.
Powerful network effect reinforcing our market-leading position
We believe that our online real estate platform creates a powerful network effect that benefits both our customers and users. The quantity and quality of our listings database attract an increasing number of buyers and renters, which leads to more transactions completed based on our listings, which, in turn, attracts more real estate agents, developers and landlords posting more listings and generating more leads.
The following diagram provides a simplified overview of the network effects embedded in our business model and growth strategy:
[MISSING IMAGE: TM2120160D7-PC_CUSTOMER4C.JPG]
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(1)
Includes the N1 Group.
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This virtuous cycle helps us maintain and improve our competitive market position and grow our business, as demonstrated by the following:
•
the number of average UMV grew to approximately 20.3 million in the first half of 2021 from approximately 9.6 million in the first half of 2018;
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•
the number of paying accounts grew to approximately 104.3 thousand in the first half of 2021, representing an increase of approximately 35% since the first half of 2018; and
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•
the number of leads to agents and individual sellers grew to approximately 9.1 million in the first half of 2021, representing an increase of approximately 59% since the first half of 2018.
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Strong brand power fueling further growth and protecting our competitive position
In 2001, we established Cian as one of the first online real estate platforms in Russia, and have since grown it into one of the most recognized classifieds brands in the country. According to the Frost & Sullivan Report, we had the highest top-of-mind brand awareness in the two largest real estate markets in Russia, 56% in Moscow and 49% in St. Petersburg on average during the year ended December 31, 2020. This is 1.6 and 1.2 times higher compared to our nearest competitor, respectively, with brand awareness for other competitors in these markets in single digits. We believe that we also enjoy a strong top-of-mind brand awareness across all Russian regions. This brand recognition and the attraction that our brand has with Russian internet users is driving high organic growth of our platform, with 85% and 83% of our traffic coming from free channels in Moscow and Russia as a whole, respectively, in 2020, based on Google Analytics data.
We believe that the strength of our brand that was achieved on the back of our foundational business, online real estate classifieds in the secondary residential real estate vertical, is helping us grow and improve monetization in newer parts of our business, such as, for example, Mortgage Marketplace and Valuation and Analytics. We also believe that our brand positions us well to protect our strong competitive position in our core regions and our core products and services offerings.
We intend to further increase the strength of our brand and user loyalty by continuing to focus on the quality of customer and user experiences on our platform.
The most comprehensive services offering in the Russian market delivered through our cutting-edge technology platform with a mobile-first approach
We are a technology-driven company with a culture of relentless innovation aimed at continuously disrupting the real estate market and improving the experience of our customers and users on our platform. In addition to over two million property listings available on our platform, we believe that we have developed the broadest services offering among Russian online real estate classifieds players in order to create a holistic, convenient, stress-free experience of buying, selling and renting real estate for our users and customers.
This unique and comprehensive services offering includes, among others:
Value-added services, such as:
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Listing value-added services that help our customers boost listings, including our listings auction feature, which is unique on the Russian market;
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Best-in-class toolkit for property searchers, comprising such features as enhanced property listings (with detailed information on the property and the neighborhood and over 80% visual coverage for the property through machine-learning-generated floor plans); flat selector option to select a particular flat in a particular property on the map; 3D virtual tours for primary real estate; and option for detailed parameter specification to find the optimal property. Furthermore, in the second half of 2021, we plan to offer our users an option to search property by photo and “swipe left” selector, which will allow our users to create pipeline deck for follow-ups on their select properties;
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•
Pro.Tools for real estate agents that help them complete deals quickly and efficiently by offering them a diverse toolkit of advanced services, such as an automated call tracking system, duplicates and competition notifications, push notification for competition price decreases, detailed lead
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information (including past search queries and price ranges), property collections sharable with their clients and call notes. All these functions are conveniently accessible through our recently launched Pro.Tools feature that provides access to all client relationship management tools available on our platform;
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Media tools for developers allowing them to advertise their properties and deliver tailored marketing campaigns via our platform; and
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New initiatives, such as:
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Mortgage Marketplace platform for mortgage price comparison, mortgage pre-approval and origination, with cooperation from leading Russian banks;
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•
Valuation and Analytics services to provide our customers access to market information through our broad database of real estate content, which encompass services such as:
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•
Agent Finder service to match real estate agents with prospective buyers and renters; and
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Property Valuation tool for our customers and users providing an easy-to-use real estate valuation, utilizing our proprietary algorithms and our property data, recent comparable sales and property listings;
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C2C (Customer-to-Customer) Rental service to facilitate seamless rental transactions, including searches of properties or tenants, tenant background checks, digital signing of agreements, online payments and insurance; and
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End-to-End Offerings, which comprise:
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•
Home Swap service, which we are planning to launch in the first half of 2022 to provide an alternative way to finance a real estate purchase by facilitating simultaneous sales and purchases of properties; and
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Online Transaction Services, which we launched in the second half of 2021 to enable execution of real estate transactions fully online, including document checking, verification, signing and storage, notary services, registration and tax refunds.
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We believe that the increasing penetration of these services will help us increase monetization, widen the competitive gap and boost our growth.
In June 2020, we introduced the subscription model, which, we believe, improves efficiency for our customers and bolsters our stickiness and monetization. A subscription allows a customer to post a certain number of listings and provides access to certain value-added services as part of the monthly subscription offering. In the first half of 2021, the average share of listings under the subscription model amounted to approximately 41% as compared to approximately 26% in the second half of 2020.
Being at the forefront of consumer trends and technological changes, we had recognized the shift in user behavior towards mobile consumption and developed our high-quality mobile application in 2015. Our Cian mobile application has been downloaded more than 21.2 million times as of December 31, 2020 and was the #1 Google Play mobile application in the “Home” category in Russia as of May 2021. More than 63.8% of our leads to real estate agents or individual sellers came through our mobile application and our mobile website in 2020, compared to 25.8% in 2018. The share of mobile in our average UMV increased to approximately 76.2% in the first half of 2021 from approximately 72.8% in the second half of 2020 and approximately 67.9% in the first half of 2020. Similarly, our share of mobile in leads to agents and individual sellers increased to approximately 66.0% in the first half of 2021 from approximately 64.3% in the second half of 2020 and approximately 63.3% in the first half of 2020.
We aim to utilize the most relevant cutting-edge technologies to continuously improve user experience on our platform. AI-powered search and call tracking, virtual 3D property tours, a map-based flat selector, detailed search parameter specification and other advanced technology features play a prominent part in our offering.
 
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Robust financial profile demonstrating strong growth and clear path to profitability
Our financial profile combines proven ability to grow rapidly (21% revenue CAGR over the two-year period ended December 31, 2020, which was above other publicly listed international peers such as Scout24, Rightmove and REA), high profit margin potential (as demonstrated by the 56.4% and 57.1% Adjusted EBITDA Margin that we were able to achieve in the six months ended June 30, 2021 and the year ended December 31, 2020 in our Core Business segment in Moscow and the Moscow region) and an inherently asset-light business model with low capital expenditure and negative working capital. Our net margin was a negative 61.8% in the six months ended June 30, 2021, as compared to a negative 15.8% in 2020. This change was driven primarily by an increase in our share-based payment expense to RUB 1,470 million for the six months ended June 30, 2021 from RUB 249 million for the six months ended June 30, 2020, as a result of the recognition of a portion of our long-term incentive program awards linked to the planned offering, which is a non-recurring item, and the corresponding increase in the fair value estimates of these awards. We believe that this profile positions us well to capitalize on the substantial runway for future growth and profitability by investing further into lower-penetrated regions and new services, while also increasing monetization of our existing offerings.
Overall, we believe that the Russian real estate classifieds market remains significantly underpenetrated compared to other developed markets. According to the Frost & Sullivan Report, the penetration of the online real estate classifieds services in Russia was only 3.3% in 2020, which is approximately 5x, 4x and 3x times lower than that of the United States, the United Kingdom and Germany, respectively. In addition, real estate developers in Russia are projected to increase their spend on online real estate classifieds by approximately 3.5 times by 2025, according to the Frost & Sullivan Report. We believe that the monetization of our services is still in its early stages, and we have a strong potential for sustainable expansion in a large and growing market.
We also believe that our new services, such as Mortgage Marketplace and Online Transaction Services, can become meaningful additional drivers of our future growth. For example, the number of successful mortgage applications processed through our Mortgage Marketplace grew to 5,939 applications in 2020 from 1,134 applications in 2019.
Over the past years, we have generally been able to increase our monetization as measured by our average revenue per paying account and our average daily revenue per listing, as set out in the table below:
​ ​ ​
Six Months Ended June 30,
​ ​
Year ended December 31
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​ ​ ​
2021
​ ​
2020
​ ​
2020
​ ​
2019
​ ​
2018
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​ ​ ​
(in RUB)
​ ​ ​
Moscow and the Moscow Region ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Average revenue per paying account
​ ​ ​ ​ 1,704 ​ ​ ​ ​ ​ 1,120 ​ ​ ​ ​ ​ 885 ​ ​ ​ ​ ​ 877 ​ ​ ​ ​ ​ 760 ​ ​
Average daily revenue per listing
​ ​ ​ ​ 21.2 ​ ​ ​ ​ ​ 10.3 ​ ​ ​ ​ ​ 13.8 ​ ​ ​ ​ ​ 13.6 ​ ​ ​ ​ ​ 8.8 ​ ​
Other Russian regions ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Average revenue per paying account
​ ​ ​ ​ 622 ​ ​ ​ ​ ​ 429 ​ ​ ​ ​ ​ 292 ​ ​ ​ ​ ​ 327 ​ ​ ​ ​ ​ 292 ​ ​
Average daily revenue per listing
​ ​ ​ ​ 1.5 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 1.1 ​ ​ ​ ​ ​ 0.6 ​ ​
We see further growth potential from increased monetization, as we are reintroducing listing fees that were temporarily suspended during the COVID-19 pandemic in 2020. We are also benefitting from the increased share of subscription-based listings, which, we believe, helps with customer retention, improves listings base stability and quality and supports our revenue growth.
Despite investing heavily in the development of new services, we achieved positive Adjusted EBITDA of RUB 51 million during the six months ended June 30, 2021 (with Adjusted EBITDA Margin of 1.9%) and RUB 181 million during the year ended December 31, 2020 (with Adjusted EBITDA Margin of 4.6%), turning from negative Adjusted EBITDA of RUB 376 million during the year ended December 31, 2019 (with Adjusted EBITDA Margin of negative 10.4%). Our Core Business Adjusted EBITDA Margin was 15.8% in the six months ended June 30, 2021, as compared to 13.9% in the year ended December 31, 2020,
 
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compared to negative 5.4% in the year ended December 31, 2019. Our net margin was a negative 61.8% in the six months ended June 30, 2021, a negative 15.8% and a negative 22.3% in 2020 and 2019, respectively.
Entrepreneurial management team with track record of innovation and backed by blue-chip shareholders
Our entrepreneurial management team has a proven track record of execution and innovation as evidenced by our competitive position, industry-leading growth and clear path to profitability. Since 2018, our management has achieved a 21% revenue CAGR, driven by a number of factors, including improvement in monetization as measured by our average revenue per paying account. They also achieved a 110% total revenue growth in the primary residential real estate vertical, which we launched in 2015 and develop via a novel market-disrupting lead generation model. Additionally, our management achieved a significant growth in services, such as Mortgage Marketplace since its launch in 2019.
We believe that our management team has a proven ability to identify and capitalize on key market opportunities, as demonstrated by our success in capturing the mobile trend, entering and successfully competing in new regions and introducing new services unique to the Russian online real estate classifieds market.
We also believe that the combination of our entrepreneurial management team and reputable international shareholders, like Elbrus Capital and the Goldman Sachs Group, who are also experienced and supportive investors, provides us with a distinct competitive advantage as we continue to execute our ambitious growth strategy.
Our Strategy
We plan to continue developing our end-to-end real estate offerings for our customers and users, further enhance monetization in our core regions as well as expand our presence and boost monetization in other Russian regions. We also aim to continue growing faster than the Russian online real estate classifieds market, thereby increasing our market share and reaching profitability across other regions. Our growth strategy is based on the following key pillars:
Enhancement of monetization in the secondary residential and commercial real estate verticals
We see significant structural upside in monetization of the secondary residential and commercial real estate verticals, as supported both by the overall penetration of classifieds spend in real estate agents’ commissions, with Russian penetration at 3.3% in 2020 as compared to other markets with developed online real estate services such as Australia at 9.9%, Germany at 10.4%, U.K. at 12.9% and United States at 16.0%, and by Cian’s current monetization of just USD 8.6 in average monthly revenue per paying account in 2020, which is below best-in-class international publicly traded peers, according to the Frost & Sullivan Report.
We are confident in our ability to increase our monetization levels in these verticals thanks to our powerful networked platform model, our strong brand and our continued product enhancements and offerings development.
Online penetration growth in primary residential real estate vertical as developers shift marketing online
We believe that Russian real estate developers will continue shifting their advertising budgets from offline to online. According to the Frost & Sullivan Report, developers’ spend in Russia is expected to grow from approximately RUB 2.9 billion in 2020 to approximately RUB 10.4 billion by 2025, as the share of online classifieds in their total advertising budgets is expected to increase from approximately 5% in 2020 to approximately 11% in 2025. We believe that we are well-positioned to capitalize on this trend because of our high brand awareness, our experience, the broad size of our user base and our value-added services, which contribute to the strength of our primary business. We have a demonstrable track record of growing monetization in this vertical as our number of leads to developers increased from approximately 151.2 thousand in 2018 to approximately 244.8 thousand in 2020, while our average revenue per lead to developers increased from RUB 3,123 to RUB 4,046 over the same period.
 
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Continued expansion into Russian regions via organic growth and select M&A opportunities
We see strong demand for our services outside our core regions, where competing offerings are often lacking in the type of convenience and efficiency provided by our platform and services, including our diverse end-to-end services. We have been executing, and plan to continue to execute, our regional expansion strategy with profitability in mind, focusing on regional centers with certain population level thresholds, where our resources can be spent most efficiently.
We started active monetization of our customer base in the Russian regions, other than Moscow and the Moscow region and St. Petersburg and the Leningrad region, several years ago. However, from April 2020, we temporarily suspended monetization of our listing services across all cities and regions to support our customer and user base during the COVID-19 pandemic. The monetization of our listing services in Moscow, the Moscow region, St. Petersburg and the Leningrad region was reinstated in July 2020. Our listings monetization in most other regions remains temporarily suspended and its potential reintroduction is being assessed on a region-by-region basis.
We also plan to pursue select M&A opportunities to enhance our geographic footprint. In February 2021, we completed the acquisition of the N1 Group, the leading real estate platform in key cities in the Urals and Siberia, such as Ekaterinburg, Novosibirsk and Omsk. For further details, see “—N1 Acquisition.” As a result of the N1 Acquisition, we became the largest platform in the third and fourth largest cities in Russia.
Development of end-to-end real estate platform
Our vision for Cian goes beyond the classic classifieds concept. Our ultimate goal is to address multiple user and customer pain points that arise during each stage of their real estate journey, from searching for the right property or the right buyer or renter, to financing the purchase or ensuring deal certainty, to going through highly inefficient workflows during the actual transaction. We are developing our end-to-end online real estate classifieds platform to address these issues and to give all real estate market participants a “one-stop shop” experience for finding, financing and transacting on real estate properties.
[MISSING IMAGE: TM2120160D12-ORG_DEVELOP4C.JPG]
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(1)
In offering Home Swap, we plan to act primarily as an intermediary, charging commission. The Home Swap program is currently in its testing phase, where we check different consumer hypotheses to find the best product market fit. Within the testing period, we expect to purchase properties for our own account to support the development of this service. The total amount of such purchases is not expected to exceed RUB 200 million. The testing phase is expected to be completed by the end of 2022
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(2)
Launched in 2021​
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We plan to continue to actively develop and improve our new and existing services. We believe that the increasing adoption of these services by our customers, users and partners will reinforce our powerful network effect, positioning us for accelerated growth and supporting our ability to achieve profitability margins enjoyed by our best-in-class international peers.
 
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Our History
We were founded in Moscow in 2001 as an online real estate classifieds platform. At that time, the online real estate classifieds market in Russia was in the early stages of development and Russian real estate agents and real estate developers invested a significant amount of money into traditional offline advertising in various forms.
In this environment, our founders saw a significant potential in industry digitalization and in the creation of an online classifieds platform that would consolidate real estate listings in one place to facilitate efficient real estate transactions. Since 2001, we have grown our presence in Moscow and the Moscow region, as well as in other key metropolitan areas, organically and through acquisitions, and we continue a nationwide expansion, investing in our brand and our platform.
The summary timeline below sets out some of our key development milestones to date:
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2001: Launch of our online real estate classifieds platform (Cian.ru) in Moscow and start of our platform build-up.
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•
2014: Merger with realty.dmir.ru. Acquisition of EMLS, a classifieds platform, focusing on St. Petersburg and the Leningrad region.
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2015: Launch of the primary residential real estate vertical offerings on our website.
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2016: Expansion of our coverage to select regions, including Nizhniy Novgorod, Samara, Krasnodar, Ufa and Kazan.
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2018: Launch of our first federal marketing campaign.
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2019: Launch of our Mortgage Marketplace (Cian Mortgage) and further expansion of our suite of services.
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2020: Introduction of our subscription model.
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2021: Acquisition of the N1 Group, a real estate-focused classifieds business that operates in key cities in the Urals and Siberia, such as Ekaterinburg, Novosibirsk and Omsk.
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Our Business Model
We own and operate a leading digital real estate classifieds platform for both sale and rent of residential and commercial, primary and secondary, urban and suburban real estate in Russia. We operate through our websites, “Cian.ru,” “N1.ru,” “EMLS.ru” and “MLSN.ru” as well as through our Cian and N1 mobile applications.
Through our platform, we service the following key audiences:
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platform visitors (referred to as “users”), who use our platform, typically free of charge, to search for properties and a variety of information and services to help them navigate through buying or renting transactions;
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customers, who list properties and look for buyers or tenants, and comprise: (i) professional customers, such as real estate agents (both agents working for real estate agencies and independent agents), real estate developers as well as (ii) private customers, such as individual sellers and landlords who choose to list their property directly without any intermediary (all referred to as “customers”); and
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other third parties, such as banks and other real estate professionals and service providers for real estate transactions who are interested in reaching our users in order to promote their brands or offer other products or services.
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The following diagram provides a simplified overview of our platform and audience:
 
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[MISSING IMAGE: TM2120160D4-FC_OVERVIEW4C.JPG]
Our platform provides a comprehensive inventory of up-to-date real estate listings to users and connects them, typically free of charge, with our professional and private customers. We believe that by providing superior content, a wide suite of services and a compelling user experience, we drive traffic to our platform, engaging a large audience of property seekers. The breadth and engagement of our user base reinforces the value offered to our customers through higher number of expressions of interest and inquiries (“leads”) generated from users via our platform. A higher number of customers’ property listings on our platform, in turn, draws a greater number of users. We believe this virtuous cycle, whereby more content attracts more traffic and vice versa, generates powerful self-reinforcing network effects, which drives growing market share, scale, profitability and other strong benefits to our platform.
In addition to our core base of users and customers, we also service various third parties operating in the real estate market, such as banks and other real estate professionals and service providers for real estate transactions who can use our platforms to promote their products or services.
Overall, we believe that we are building a large and active community of users and customers, who are attracted by the comprehensive content available on our platform, which forms the foundation of our best-in-class offering. We focus on the quality and quantity of listings on our platform, as well as the breadth of services and features offered to our users, customers and other third parties. We believe that this focus enables us to offer the greatest level of inventory and choice to users and is the key driver of user traffic and customer leads. We believe that our established powerful network underpins our market leadership.
We monetize our platform by offering: (i) listings and value-added services for our customers; (ii) lead generation solutions for real estate developers; (iii) advertising tools for various parties, primarily real estate developers and banks; and (iv) new business lines and new service offerings for various parties, such as banks in the context of our Mortgage Marketplace segment or our users and other partners in the context of our Valuation and Analytics, C2C Rental and End-to-End Offerings segments.
Based on the above approach to the monetization of our platform, we recognize the following reporting segments:
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Core Business, which comprises our core classifieds platform, including our listing and value-added services for secondary residential and commercial real estate customers, our lead generation solutions and value-added services for primary residential real estate customers, such as developers, as well as our advertising tools.
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In our Mortgage Marketplace segment, from fees charged to our partner banks for distributing their mortgage products through our advanced platform for mortgage price comparison, mortgage pre-approval and origination.
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In our Valuation and Analytics segment, from fees charged to our customers and partners for providing access to our proprietary real estate market research, data analytics and market intelligence services, either through sales of individual reports or on a subscription basis.
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In our C2C Rental segment, from fees charged to our users for providing end-to-end solutions facilitating seamless online property rentals (including tenant background checks, digital execution of agreements, online payments and insurance).
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In our End-to-End Offerings segment, from fees charged to our customers and users for services that enable online execution of real estate transactions (including document checking, verification, signing and storage, notary services, registration and tax refunds) and facilitate simultaneous sales and purchases, which, we believe, provides for more efficient real estate transactions.
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Our users can search our property listings free of charge via our mobile applications and our mobile and desktop websites. They can also benefit from a broad scope of various innovative services that we offer, such as real estate valuation, and access to a choice of real estate financing options.
Our reporting segments correspond to our operating segments. For further details on our segmentation, see Note 5 to our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019, included elsewhere in this prospectus.
Our Key Audiences
Customers
Our customers include (i) professional listing customers, such as real estate agents (both agents working for real estate agencies and independent agents) and real estate developers as well as (ii) private listing customers, such as individual property owners (sellers and renters) who choose to list their property directly without any intermediary.
We generally differentiate our diverse base of secondary residential and commercial real estate customers (real estate agencies, agents and individual sellers) in three categories:
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Large agencies, which we define as agencies with, on a 30-day rolling-average basis, more than 300 listings on our platform. In 2020, large agencies accounted for approximately 32% of listings on our platform and generated 15% of listing revenue. Our relationship with such agencies is managed by our key account managers, who use various business-to-business marketing techniques (such as webinars, training sessions and conferences) to maintain and strengthen the relationships.
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Mid-size agencies, which we define as agencies with, on a 30-day rolling-average basis, between 30 and 300 listings on our platform. In 2020, mid-size agencies accounted for approximately 31% of listings on our platform and generated 34% of listing revenue. The relationship with this group is typically managed by our sales managers, who use business-to-business marketing techniques similar to those used for large agencies.
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Small agencies, which we define as agencies with, on a 30-day rolling-average basis, fewer than 30 listings on our platform. In 2020, small agencies accounted for approximately 15% of listings on our platform and generated 32% of listing revenue. Such agencies typically access our platform on a self-service basis, using our small and medium-sized business (SMB) tools.
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In 2020, private listing customers accounted for approximately 22% of listings on our platform and generated 19% of listing revenue.
The key metric we use to measure the size of our customer base is the number of paying accounts. For further details on this and other data, see “Selected Consolidated Historical Financial and Other Data—​Other Data.” In 2020, we had an average of approximately 88.6 thousand paying accounts as compared to approximately 96.7 thousand in 2019.
Users
Our users comprise individuals who utilize our platform, typically free of charge, to search for properties to buy or rent and a variety of information and services to help them navigate through various real estate
 
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transactions. The key metric we use to measure our user base is average UMV. In the first half of 2021, our average UMV amounted to approximately 20.3 million (including N1), as compared to approximately 16.5 million in 2020 and 13.4 million in 2019.
Furthermore, we also provide services to other third parties, such as banks and other service providers for real estate transactions, who are interested in reaching our users in order to promote their brand or acquire customers and get leads through our platform.
Our Real Estate Platform
Our real estate platform connects millions of users to tens of thousands of customers through our extensive database of property listings. Our vision for our platform goes beyond the classic classifieds concept and our ultimate goal is to provide a comprehensive end-to-end experience for our customers and users that helps them address multiple pain points on their journey to a successful real estate transaction. To achieve this goal, we develop and improve a suite of products and services to address users’ and customers’ needs and provide all real estate market participants with a “one-stop shop” experience for finding, financing and transacting on real estate properties.
Core Classifieds Business
Products and Services We Offer to Users
Our main products comprise listings for sale and rent of residential and commercial real estate, which users can browse through on our platform. Our users can browse listings and use other products and services on our websites and mobile applications free of charge. We believe that our products and services help our users to research the secondary and primary residential, as well as the commercial real estate, verticals; explore alternatives; and make better-informed decisions. A typical listing includes the asking price; a detailed description of the property, including certain specifications (size, number of rooms, floor, etc.); its location and neighborhood; images and plans; as well as 3D property virtual tours.
The below graphic highlights key features of our offering for property searchers:
[MISSING IMAGE: TM2120160D4-PH_MORTAG4C.JPG]
Users can conduct searches through a search engine results page or on a map and can narrow their searches to specific cities and districts, areas near particular subway stations within a city or areas within boundaries that users can draw on our digital maps. To make the search procedure as efficient as possible, we provide custom search filters, including price range, number of rooms and size, as well as some other more narrowed criteria, such as parking space availability, ceiling height, view, renovations and specific keywords to identify attributes that meet our users’ requirements. After selecting search parameters, users are directed to a page listing available properties, which they can toggle to a map view. Our property search is backed-up by AI-powered proprietary technologies and machine learning algorithms, which we believe provide our users with more convenient and efficient search tools. For additional convenience, users can utilize a variety of complimentary features, such as an opportunity to rank listing results according to different criteria,
 
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save listings to favorites, chat with the customer, share listings with their contacts, set up automated monitoring and updates for listings that fit individually tailored criteria, and others.
In the first half of 2021, we had approximately 2.1 million listings available through our platform (excluding N1) and an average UMV of approximately 20.3 million (including N1). In 2020, we had approximately 2.1 million listings available through our platform and an average UMV of approximately 16.5 million. We monitor all listing information uploaded to our websites and mobile applications through a multi-step process: all listings go through automatic verifications, with some listings also going through manual verification by our monitoring team. The verifications are set up to identify common anomalies in posted information to limit unreliable, irrelevant or incorrect information. If we discover any false information in a listing, we contact the listing party or, in some cases, we immediately delete the listing. We can also impose sanctions on an account of the listing party or a particular listing by downplaying it in the search engine results.
Our platform is accessible anytime and anywhere through: (i) our websites “Cian.ru,” “N1.ru” ​(for properties located in Novosibirsk, Ekaterinburg and certain other regions), “EMLS.ru” ​(for properties located in St. Petersburg and the Leningrad region) and “MLSN.ru” ​(for properties located in Omsk and certain other regions) and (ii) our Cian and N1 mobile applications. Our mobile applications are currently available via iOS and Android to meet the needs of users who increasingly conduct their real estate searches on mobile devices.
In addition to property listings, our users benefit from unique and diverse services that can help them search for a particular property, research the real estate market in general, connect with real estate agents and make informed decisions throughout the transaction process (see “End-to-end real estate platform”). In addition, our users can get free access to a variety of real estate information, including access to analytical reports with insights into comparable historical price trends for a selected property as well as other listed properties in the same building, Cian news magazine, blogs and a Q&A forum.
We strive to offer our users the best mobile experience and provide services that can be accessed through smartphone devices at any time and from any place. We employ a mobile-first approach, in which we prioritize our users’ reliance on our mobile applications and mobile websites. We believe that our mobile-first approach and strong technological platform optimized for mobile devices have helped us to increase our mobile traffic, engage a large audience of users, and support the increase in user traffic as well as customer leads. In 2020, our share of mobile traffic was approximately 68.1% as compared to approximately 67.5% in 2019. Our share of mobile in leads to agents and individual sellers increased to approximately 63.8% in 2020 from approximately 57.9% in 2019, according to our estimates based on Google Analytics data. In the first half of 2021, and years 2020 and 2019, the cumulative downloads for our Cian mobile application were approximately 26.3 million, approximately 21.2 million and approximately 13.3 million, respectively.
The table below sets out the development of the share of mobile in our average UMV and leads to agents and individual sellers over the respective periods:
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2021
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2020
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2019
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First half
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Second half
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First half
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Second half
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First half
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Average UMV (in millions)
​ ​ ​ ​ 20.3 ​ ​ ​ ​ ​ 17.8 ​ ​ ​ ​ ​ 15.2 ​ ​ ​ ​ ​ 14.1 ​ ​ ​ ​ ​ 12.7 ​ ​
Thereof: Share in mobile (in %)
​ ​ ​ ​ 76.2% ​ ​ ​ ​ ​ 72.8% ​ ​ ​ ​ ​ 67.9% ​ ​ ​ ​ ​ 70.2% ​ ​ ​ ​ ​ 66.6% ​ ​
Leads to agents and individual sellers (in millions)
​ ​ ​ ​ 9.1 ​ ​ ​ ​ ​ 9.6 ​ ​ ​ ​ ​ 6.5 ​ ​ ​ ​ ​ 7.3 ​ ​ ​ ​ ​ 6.6 ​ ​
Thereof: Share in mobile (in %)
​ ​ ​ ​ 66.0% ​ ​ ​ ​ ​ 64.3% ​ ​ ​ ​ ​ 63.3% ​ ​ ​ ​ ​ 61.3% ​ ​ ​ ​ ​ 54.5% ​ ​
Products and Services We Offer to Customers
Listings
We connect millions of Russian real estate buyers and renters to millions of high-quality real estate listings placed by tens of thousands of real estate agents, private sellers and landlords. We offer our professional and private customers a range of listing options in order to maximize their exposure to relevant buyers and renters.
 
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Our platform allows our customers to publish listings with detailed content, including descriptions, multiple photographs, virtual 3D property tours, maps and other information. All listing offerings include the display of listings across our full platform, including both our websites and mobile applications. We provide our customers with built-in solutions to assist them in completing and submitting their listing information in a standardized format. We update the listing data on our platform on a daily basis through our proprietary technologies and software. We monitor all listing information uploaded to our platform and conduct periodic checks and verifications of listing information posted on our platform. We built a multi-level listing verification process, which includes both automatic checks and manual moderation. We developed a special scrolling system that checks listings using all available information, such as the description of the property, specified filters, photos, digital fingerprints, call-tracking data, as well as reliable information obtained from various public sources. If, following such automatic verification, our scrolling system detects any verification issues, the listing undergoes the manual verification conducted by our moderators.
Our professional listing customers, such as real estate agents, can typically purchase various quantities of listings through a pay-per-listing model or through a subscription model. They can set up individual accounts as well as master or subordinated accounts, described below. For further details, see “—Subscription Model.”
Our private listing customers can set up an individual account and post their listings free of charge or for a fee, depending on the region. In some regions, our professional listing customers can also currently post their listings free of charge.
In addition, we offer our customers multiple options to enhance the exposure and effectiveness of their listings through listing value-added services described below.
Value-Added Services
Our customers can purchase a broad range of our value-added services to help them boost, promote and improve the visibility of their listings in search results (the “listing value-added services”). Our key listing value-added services include options such as:
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auctions, which, we believe, are a unique feature on our platform that provides customers with an opportunity to place an auction bid to raise the ranking of their listings in search results. The auction feature also provides for an “Autobroker” assistant, through which customers are able to choose optimal rates in the auction, change rates promptly and quickly respond to developments in competitors’ behavior;
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featuring listings on the home page of the site;
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boosting listings to the top of search results, by buying special boosting packages that allow customer to display listings higher in search results. The listings placed under boosting packages may be further heightened by using the auction tool.
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In addition to the listing value-added services, we also offer our customers a broad range of our so-called Pro.Tools for real estate agents that help them operate quicker and more efficiently. In particular, our customers may benefit from a call-tracking system, customer checks and appointment and calendar scheduling.
Our customers can individually select these Pro.Tools to fit their specific needs and can use our recently launched Pro.Tools services that provide access to all Pro.Tools available on our platform. We believe that Pro.Tools provides our customers with a great opportunity to efficiently track, manage and communicate with users and measure and quantify the value generated by the leads from our platform.
Additionally, we also offer enterprise services that help real estate agencies to manage marketing costs, track performance using productivity metrics, achieve software integration and manage employees (for example by posting vacancies or bringing multiple employee accounts under a single master account).
We also offer some additional services to our customers free of charge, such as free access to a variety of real estate information through our Cian news magazine, blogs and a Q&A forum, as well as access to
 
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analytical reports with insights into comparable historical price trends for a selected property as well as other listed properties in the same building.
In general, we believe that increasing penetration of our value-added services will contribute to our monetization improvement, widen the competitive gap and boost our growth. We also believe that the level of penetration of our value-added services depends on a number of factors, including:
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the overall condition of the real estate market, as customers tend to invest more in listing promotions during periods of reduced real estate demand;
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our market share, as customers are incentivized to promote listings on the platform with a higher user base; and
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competition among customers themselves.
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We also aim to drive the penetration of our value-added services through our subscription model, featuring different sets of value-added options as part of premium subscriptions, hence increasing its value for our customers.
We continue to extend our suite of offerings, develop new products and services, and further improve our existing products and services to meet different customers’ needs.
For the year ended December 31, 2020, our listing revenue comprised 52% of revenue from value-added services and 48% of revenue from listings and others.
Subscription Model
Historically, our pricing model has primarily focused on selling listings to real estate professionals on a pay-per-listing, or listing package, basis. Under the pay-per-listing model, our customers pay per day that their listing is posted and they may take it down anytime, for example, during weekends or holiday periods.
To stimulate our revenue growth and maintain a robust listing base, as well as offer additional convenience and efficiency to our customers, in June 2020, we introduced a new subscription-based model for customers. Through our monthly subscription model, our customers can purchase a fixed number of listings and use some of our value-added services. As part of our subscription model, we currently offer four different subscription levels (platinum, gold, silver and bronze), varying by the number of listings and value-added services included in the bundles. We believe that our customers benefit from the personalized approach, whereby they can choose the most suitable terms for their subscription, including the amount of the value-added services. In both pay-per-listing and subscription models, the applicable fee is payable in advance of posting the listing.
While we plan to continue to offer our pay-per-listing model to allow our customers greater flexibility and convenience, we incentivize our customers to migrate to the subscription model by offering them special discounts and promotions. For example, our customers can receive a subscription fee discount that may be scaled up further if the number of listings placed by the relevant customer increases compared to the previous subscription period. In addition, for purchasing certain ads under the subscription model, our customers get cash-back in the form of additional points, which can be used for auction promotions. We actively promote our subscriptions offering, particularly for our large customers, and subscription model penetration rates have typically been higher among such customers.
We introduced the subscription model in June 2020. In the first half of 2021, the share of listings placed under the subscription model amounted to approximately 41% as compared to approximately 26% in the second half of 2020.
Leads for Real Estate Developers
Real estate developers are the key customer group of our primary residential real estate vertical. As part of our proposition to this group, we offer a pay-per-lead pricing model whereby we charge fees based on the number of leads developers receive in the form of qualifying calls (validated user connections) from placing listings on our platform. We believe that access to potential buyers is critical for real estate developers, as they look for efficient ways to market their projects and reduce their investment risk.
 
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In contrast to real estate agents and individual property sellers, real estate developers have certain specific needs and requirements when they advertise properties in their projects, as newly-built properties in a specific development project usually share a number of features and developers tend to offer several similar properties simultaneously. Correspondingly, in evaluating primary residential real estate properties, users tend to pay more attention to the features of a particular residential complex as a whole, such as its location, information about nearby schools, hospitals, neighborhood amenities and available commuting options, rather than characteristics of the specific real estate property. Therefore, listings placed by developers on our platform often differ from the secondary residential and commercial real estate listings and can include, for example, specialized pages providing detailed information about residential complexes with specifications of properties offered in such complexes rather than listings of particular properties. Taking into account the needs of our customers, we strive to offer special tools tailored for the requirements of real estate developers to help them generate more leads from our platform and expand our business with them.
We believe that developers are attracted to our platform primarily due to: (i) access to a larger base of users searching specifically for real estate than other alternatives, (ii) our monetization model, based on lead-generation, which is better tailored to developers’ objectives and aligns their interest with ours, and (iii) the comprehensive set of value-added services we offer, including our auction tool and featured listings capabilities.
In order to track the amount of qualifying calls received by real estate developers through our platform, we employ call-tracking tools, in particular, we acquire phone numbers from telecom operators and display these numbers as contact details in the relevant listings instead of the numbers provided by the developer. All calls from users are first directed to our numbers, which are then redirected to the relevant real estate developers’ numbers. As the owner of the phone number displayed on the website, we can request the relevant call statistics from the telecom operator on all incoming calls from users, and therefore track the amount of qualifying calls.
Real estate developers can also use value-added services, such as auctions or featured listings to increase the number of leads. Value-added services for real estate developers are not purchased on a per- listing basis, but rather paid for through higher price-per-lead rates.
Advertising Services
We leverage our platform by offering advertising space and services as well as certain miscellaneous special marketing projects to various parties aiming to reach our transaction-ready audience (including our users, real estate developers, banks and commercial real estate professionals).
We believe that our user base composition is highly attractive for advertisers. In the first half of 2021, we had approximately 2.1 million listings available through our platform (excluding N1) and an average UMV of approximately 20.3 million (including N1). In 2020, our average UMV amounted to approximately 16.5 million. We provide our advertisers the opportunity to reach the specific audience segments that are the most attractive to them. In addition, we have exclusive tailored advertising terms with several major players in the market. For example, we provide certain exclusive advertising options to certain developers and housing development institutions, including tailored search filters, exclusive banners on the lease section of our website and placement of the real estate developer’s buildings on the maps displayed on our platform.
Our display advertising revenue is largely driven by the upfront monthly fees agreed in our media plans, which also include targeted number of views or clicks during the advertisement period. Our advertising pricing models include offers such as cost-per-click model; cost per 1,000 impressions model (whereby an advertiser pays for every 1,000 instances of the advertisement being rendered on users’ screens), as well as certain special offers.
End-to-End Real Estate Platform
Our vision for Cian goes beyond the classic classifieds concept. Our mission and strategy is to become a single “go-to” place to address the full spectrum of our user and customer needs across the real estate journey, from searching for the right property or right buyer or renter, to financing the purchase or ensuring deal certainty and efficient workflow during the actual transaction (see “—Our Strategy—End-to-end real estate platform”).
 
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As part of this strategy, we are focusing on the creation of a comprehensive end-to-end real estate platform and developing and launching new business lines and services that complement our core classifieds business and expand our product and service offerings. In particular, our end-to-end real estate platform currently encompasses products and services offered under our core classifieds business as well as our Mortgage Marketplace, Valuation and Analytics, C2C Rental and End-to-End Offerings segments, which are in varying stages of development, roll-out and ongoing operation.
The following diagram provides a simplified overview of our envisaged end-to-end real estate platform:
[MISSING IMAGE: TM2120160D4-FC_OUREND4C.JPG]
The products and services that we offer as part of our end-to-end real estate platform aim to address the following needs of our users and customers:
Finding the right property to buy or the right buyer
Users and customers are able to find the right property to buy or the right buyer through our core classifieds platform and the Agent Finder, a service for matching real estate agents and users, which we launched in 2020. The Agent Finder allows users to search our agents’ database or submit an application outlining the main criteria for their preferred agents. The agents purchase access to the database of applications and we connect them with the relevant clients.
Financing the purchase
We launched our Mortgage Marketplace platform in 2019. Through our cooperation with various leading Russian banks, the Mortgage Marketplace offers our users a number of unique features to cater to their specific mortgage financing needs:
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a price comparison tool for mortgages (including calculation of early prepayments) from a number of leading Russian banks with no commissions or hidden fees;
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an opportunity to apply directly for a mortgage pre-approval with multiple banks via Cian by submitting one easy-to-complete application; and
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a personalized mortgage pre-approval decision and interest rate offer from several leading Russian banks, generated within minutes of application.
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We believe that our unique direct integration with banks under the Mortgage Marketplace not only allows the banks to attract buyers actively looking for a mortgage, but also assists our users in better understanding and planning their home purchase budgets and in obtaining financing in record time.
In addition to the Mortgage Marketplace, we are launching a new sell-to-buy transaction service (Home Swap) in the first half of 2022. This service allows our users to buy a new property and sell their existing one
 
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in a single transaction, enabling them to purchase and move into their new property without waiting for the sale of their current property. We believe that this service may reduce the deal closing cycle from approximately six months to potentially as little as one week. In offering Home Swap, we plan to act primarily as an intermediary, charging commission. The Home Swap program is currently in its testing phase, where we check different consumer hypotheses to find the best product market fit. Within the testing period, we expect to purchase properties for our own account to support the development of this service. The total amount of such purchases is not expected to exceed RUB 200 million. The testing phase is expected to be completed in by the end of 2021. Overall, we do not expect to invest any significant capital or take any significant risk on our balance sheet as part of the Home Swap offering.
Transacting with ease by eliminating inefficient workflows and closing the deal online
We strive to ensure that our users can transact efficiently and with ease and, for this purpose, are developing or aim to launch the following set of products and services:
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We provide free access to a Property Valuation tool, which is a valuation, conducted using our proprietary algorithms and our property data, recent comparable sales and property listings.
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In the second half of 2021, we also launched a full suite of offerings for Online Transaction Services, including legal verification of the property, secure online payments, services for online certification of documents by a notary, assistance with verification of documents before the transaction, electronic document signing, storage of documents and assistance with state registration services.
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In addition to the aforementioned products and services that we offer, or plan to offer, as part of the end-to-end real estate platform, we have rolled out, or are developing and planning to launch, the following products and services:
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C2C Rental Service.   In 2019, we launched our C2C Rental service, which aims to cover all needs of landlords and tenants in the course of a rental transaction, including searches for relevant properties/​tenants, execution of related agreements, online payments and insurance.
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We offer data analytics and market intelligence services to our customers by providing access to market information through our broad database of real estate content. In the second half of 2021, we also aim to launch our subscription-based Information and Analytics platform for commercial real estate professionals, such as real estate agents, consultants, banks and investors. As part of this offering, we plan to collect data on commercial real estate from multiple sources (including our proprietary databases, governmental registers and databases, various open sources and other information collected by our specialists), analyze, arrange and customize relevant data for specific client preferences.
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Through these initiatives, we aim to establish ourselves as a first-in-class platform that offers a comprehensive suite of products and services. We believe that the end-to-end platform offering is the future of the real estate classifieds market, and we see an excellent opportunity in disrupting the market and building the platform that provides greater value to our users and customers.
Our Geographic Coverage
Our operations have Russia-wide coverage, with a particular focus on key metropolitan areas, particularly Moscow and the Moscow region, St. Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk. We also cover other cities and regions, including Samara, Nizhniy Novgorod, Krasnodar, Ufa, Kazan, Omsk, Krasnoyarsk, Archangelsk, Chelyabinsk, Tyumen and Perm as well as other cities and regions.
The following map provides a simplified overview of our key regional presence and share of leads in the respective regions:
 
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[MISSING IMAGE: TM2120160D9-MAP_GEOGRPH4C.JPG]
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Source: Frost & Sullivan Report
(1)
Includes leads related to urban sale and purchase in secondary real estate market
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(2)
Sum of Cian and N1
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(3)
Ranked by mortgage market size. Weighted average calculated as share of leads in each region weighted by estimated size of mortgage market in respective region. Excluding Moscow and the Moscow region, Saint Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk.
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Moscow and the Moscow region have historically been our strongest market, accounting for 74% of our Core Business segment revenue in the six months ended June 30, 2021 and 78% of our Core Business segment revenue in 2020. Core Business segment revenue for Moscow and the Moscow region was RUB 1.9 billion and RUB 1.2 billion in the six months ended June 30, 2021 and 2020, respectively, and RUB 3.0 billion, RUB 2.7 billion and RUB 2.1 billion in 2020, 2019 and 2018, respectively. Core Business Adjusted EBITDA Margin for Moscow and the Moscow region was 56.4% in the six months ended June 30, 2021 and 57.1% in 2020.
According to the Frost & Sullivan Report, we were the leader in brand awareness in Moscow and St. Petersburg with approximately 56% and approximately 49% of all respondents in the respective cities naming our brand as the “top of mind” real estate classifieds platform (figures are averages for 2020). Our next closest competitor in the respective locations followed with approximately 35% and approximately 41%. For further details, see “—Our Brand.”
According to the Frost & Sullivan Report, in the first three months of 2021, we were also the leader in the share of leads to real estate agents and individual sellers with 56% in Moscow and the Moscow region and 41% in St. Petersburg and the Leningrad region.
In the first half of 2021, we had approximately 2.1 million listings available through our platform (excluding N1) and an average UMV of approximately 20.3 million (including N1). In 2020, we had approximately 2.1 million listings available through our platform, comprising approximately 367,000 listings in Moscow and the Moscow region, approximately 133,000 listings in St. Petersburg and the Leningrad region as well as 1.6 million listings in other regions.
N1 Acquisition
On December 22, 2020, we entered into an agreement for the sale and purchase of the entire share capital of N1. See “—Material Contracts—N1 SPA.” The N1 Group is a real estate-focused classifieds
 
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business that operates in Russian regional cities such as Novosibirsk, Ekaterinburg and Omsk through a website and as a mobile application. The N1 Acquisition was completed on February 5, 2021.
We are currently in the process of integrating N1 into our operations, including our IT, product, sales and marketing, human resources and other core operations. Following the N1 Acquisition, we did not introduce any monetization suspension on the websites “N1.ru,” “MLSN.ru” or N1 mobile application, which we offered in some of our regions from April 2020. In July 2021, as part of our integration of the N1 Group, we launched a reverse feed function, which allows users to post listings simultaneously on both the Cian and the N1 Group websites and mobile applications by applying for the listing on any website or mobile application of our platforms. With this function, our monetization strategy was aligned across our platform, including website “N1.ru” or N1 mobile application, with Cian monetization being fully reinstated in regions covered by the website “N1.ru” or N1 mobile application. We are planning to fully reinstate Cian monetization in the regions covered by “MLSN.ru” website in the fall of 2021.
We are planning to maintain the N1 website and mobile application in the mid-term for the convenience of N1’s users. For the risks related to N1 Acquisition, see “Risk Factors—Risks Related to the N1 Acquisition.”
Marketing and Sales
Our marketing and sales efforts are primarily focused on attracting new and working with our existing, users. We believe that both our marketing and sales efforts help us in strengthening our reputation as a leading online real estate classifieds platform in Russia.
We also strive to monitor our competitors’ marketing activity, including by market vertical, to effectively adjust our marketing and sales mix. We collect and analyze vast amounts of data to assess our performance and ensure efficient spending, and our marketing strategy is constantly evolving to address the developing needs of our users.
Marketing
Our marketing efforts are focused on promoting our brand names, which drive our traffic, and on strengthening our reputation as a leading real estate classifieds platform in Russia. We deploy a diverse mix of marketing and communications channels to reach our users and customers. We believe that we are not dependent on any single marketing channel. In the years ended December 31, 2020 and 2019, our online marketing expenses amounted to RUB 1,498 million and RUB 1,134 million, respectively, or 88.3% and 52.5% of our total marketing expenses for the respective periods. In the six months ended June 30, 2021 and 2020, our online marketing expenses amounted to RUB 810 million and RUB 545 million, respectively, or 71.7% and 85.7% of our total marketing expenses for the respective periods.
We generally use two types of marketing channels: (i) brand awareness channels, such as television and blogs, and (ii) performance channels, such as contextual advertising and social networks. Our users typically use our platform free of charge. According to our estimates, based on Google Analytics data, in 2020, approximately 83% of our website traffic came from free channels, such as organic search, direct type-in (where a user types our name into a search engine), email distributions to our registered users, through referrals (where a current user refers a new user to our website), email, push and others. The portion of our platform traffic from paid channels, such as advertising, including cost-per-click and meta search, has generally decreased in recent periods, accounting for approximately 16%, 17% and 22% of all traffic in the first half of 2021 and the years ended December 31, 2020 and 2019, respectively.
Our paid marketing campaigns consist of online and television ads as well as other promotions, including through social media channels. We conduct nationwide, as well as regional, marketing campaigns, advertising our platform as a whole, as well as campaigns for different projects, for example, targeted ads for our Mortgage Marketplace. We believe that our paid advertising campaigns promote awareness and help to generate more platform traffic.
The chart below represents our approximate traffic breakdown by marketing channels in 2020:
 
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[MISSING IMAGE: TM2120160D4-PC_CHANNEL4CLR.JPG]
We offer online residential community services through our websites that provide a forum for visitors to share personal views and other information regarding different aspects of the Russian real estate market, specific property developments, residential communities and other subjects. In addition, we aggregate and post real estate related news on our website and publish an electronic magazine that provides analytics and research on various aspects of the Russian real estate market. We believe that our board forums, blogs and other online community-oriented services are valuable means of enhancing loyalty and brand awareness among our users and, correspondingly, customers, by creating virtual communities sharing a common interest in real estate and home-related topics. We use such forums, news aggregators and magazines to increase website traffic, our users’ loyalty and brand image.
Our Brand
We believe that our brand recognition is one of the key factors in our ability to attract new users as well as increase the total number of listings and leads on our platform. According to the Frost & Sullivan Report, we were the leader in brand awareness in Moscow and St. Petersburg, with approximately 56% and approximately 49% of all respondents in the respective cities naming our brand as the “top of mind” real estate classifieds platform. Our next closest competitor in the respective locations followed with approximately 35% and approximately 41%.
Our strong brand position and our marketing and sales activities reinforce each other: a strong brand generates a good starting position for our marketing and sales efforts in acquiring new users and listings, which in turn increases the value of our platform to our audience and enhances our audience’s perception of us as a competent, valuable and market-leading platform.
We believe that the strength of our brand is particularly reinforced by marketing channels such as:
•
Digital media and partnerships with social media influencers, which offer us a wide user reach. The vast majority of our ads include user engagement tracking, enabling better control over the quality and frequency of our contact with intended audience. We also use various digital media purchasing tools with contact frequency tracking and post view analytics services;
​
•
TV advertising campaigns, which we believe drive our top of mind brand awareness among a broad user base; and
​
•
Outdoor advertising, which, as a more traditional channel, diversifies our marketing efforts. While it is used less often than digital media channels, we believe that it has been particularly effective in some key regional centers.
​
Sales
We believe that one of the factors representing our significant competitive advantage is our specialized sales team, which has extensive real estate market- and region-specific experience and works directly with our customers. Our sales strategy focuses on: (i) attracting customers from the secondary market, such as real estate agents and private property owners, and from the primary market, such as real estate developers; (ii) attracting content and increasing revenues from these customers; (iii) communicating, through training and events, the value of our professional tools and services to customers; and (iv) providing ongoing support to our customers in using our platform.
 
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In targeting our customers, we deploy a mix of sales strategies, including loyalty programs and business-to-business channels. For example, we have a loyalty points program available to all customers, which allows our customers to accumulate bonus points that can be redeemed against future promotion of listings on our platform. Our business-to-business channels include education services (including webinars, seminars and personal training sessions for customers); industry events (including professional real estate conferences and expert sessions); brochures and other printed education materials; and other communication channels.
To motivate our sales and marketing personnel, in addition to the base salary, we offer them certain performance incentives, such as commissions and bonuses. Sales targets are set for sales personnel according to monthly, quarterly and annual sales plans.
Our Technological Platform
Our users access our platform through websites and mobile applications. We design, test and update our websites and applications and develop in-house proprietary solutions, such as our mobile application, AI-powered property search as well as numerous other tools and features. In respect of the development and deployment of software, we have adopted the principles of agile software development methodologies, such as continuous integration and continuous live deployment. We generally tend to use well-known and proven open source tools rather than third-party proprietary tools to eliminate dependency on any third-party vendor.
In view of the rapid pace of technological changes in our industry, such as the increasing use of mobile devices by all participants in the real estate market, we stick to a mobile-first approach that we believe makes finding a new home or office more convenient for our users. Our users mainly access our platform from mobile devices, with the share of mobile in leads to agents and individual sellers increasing from approximately 25.8% in 2018 to approximately 57.9% in 2019 and approximately 63.8% in 2020, according to our estimates based on Google Analytics data. In 2019, we had approximately 13.4 million in average UMV, compared to approximately 16.5 million in average UMV in 2020.
Our mobile application “Cian.ru” is ranked among the top applications on app store-generated lists for lifestyle-related free applications on both the App Store and Google Play in Russia, with average rating of 4.8 in the App Store as of May 2021. As of May 2021, “Cian.ru” was ranked as the #1 mobile application in the “Home” category on Google Play in Russia.
As of the end of 2019 and 2020, the cumulative downloads for our Cian mobile application were approximately 13.3 million and approximately 21.2 million, respectively.
Our mobile applications are predominantly developed internally and partially by software consulting and development companies according to our instructions. We believe that this approach allows us to better control the quality of our applications and promptly respond to evolving user and customer needs. Our mobile applications and mobile versions of our websites are fully functional and support substantially all activities available on the desktop version of our websites. We offer our clients unparalleled services including tools for individuals to find a real estate agent and valuation services which are not supported in our competitors’ mobile applications.
According to SimilarWeb ranking, our “Cian.ru” website had the first position in the “Business and Consumer Services” category in Russia, in the “Real Estate” sub-category. We believe that the satisfaction of our users and customers ultimately rests on the appeal and functionality of our platform. Our technology and product teams spend considerable time and resources upgrading and enhancing our websites and mobile applications. In addition, we maintain a focus on ensuring customer satisfaction through the call center that provides our users and customers support throughout their entire journey.
We have a bespoke customized set of features for different groups of users and customers, and we continue to develop our platform to provide users and customers with a simple and clear interface. We also strive to offer our customers optimal integration capabilities, including adapters for enterprise software integration, application programming interfaces and tool exports. We estimate that our platform is able to handle approximately 10,000 requests per second.
 
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As of December 31, 2020, our services were supported and enhanced by a team of over 200 experienced and dedicated information technology employees, including software engineers, data scientists with strong machine learning experience and system administrators, as well as a product development team of over 60 employees with an in-depth knowledge of information technologies and real estate classifieds business. We also provide ongoing education to our information technology team and product development team to ensure that our team is up to date on new technologies and advances in our markets.
Product Development
Our approach to product development is focused on long-term revenue potential and is modular in structure. In this structure, each product, or key service (such as Mortgage Marketplace) is being developed by a dedicated team (typically including a product leader, several product managers, a tech development team for desktop and mobile channels, and product designers and analysts) and is assessed based on product-specific business metrics (such as, revenue, number of listings, number of completed mortgage applications and mortgages signed, number of valuation requests, amount of subscribing renters, number of leads in rentals, and amount of requests for online transaction services and Home Swap services). While each team generally works independently, we hold weekly meetings across teams to exchange views and synchronize development process. Our integrated service teams, comprising product research specialists, machine learning experts, AI-and data specialists, and back-end infrastructure support, provide support across the product teams.
The chart below represents key steps in our product development approach, including the examples of offerings developed:
[MISSING IMAGE: TM2120160D9-FC_FORESIGHT4C.JPG]
Intellectual Property and Security
Our Intellectual Property
Our key intellectual property consists of rights to software, databases and trademarks relating to the design and content of our websites, including our brand name and various logos and slogans, and domain names.
Software and databases.   Our main intellectual property assets are our software, including our websites and mobile applications. Although state registration of software and databases with the Russian Federal
 
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Service for Intellectual Property (“Rospatent”) is not mandatory under Russian law, we registered our software and databases, as we believe it provides us with additional protection of our intellectual property rights.
Trademarks.   We own 22 trademarks registered in Russia, of which the most important is the trademark protecting our main brand name “Cian,” valid until March 7, 2028.
Domains.   We own 22 domains, of which most correspond to our main brand. The domains are listed under various generic top-level domains and country code top level domains. The most important generic domains are in the “.ru” zone.
Security and Data Protection
We have built a comprehensive system to protect our, our users and our customers’ data, as it is the backbone of our business. We protect data with a combination of processing procedures and technology tools in accordance with our information security strategy. In addition to our main workforce at the information department, we also have a special manager focused primarily on information security matters.
Our information security team has three areas of focus: product security, infrastructure security and protection of personal data.
To ensure the security of our products, we embed product security in our product teams and strive to ensure that our applications use secure and approved libraries to execute all standard technical functions. We also implement standard secure software development lifecycle tools and approaches for all product development teams, such as requirement and architecture review, static and dynamic application security testing, manual code review and manual security assessment
To protect our infrastructure and workstations, we employ standard security tools, such as network segmentation, intrusion detection systems, firewalls and antivirus software. Our approach to infrastructure security is focused on resilience and defense: we thoroughly examine all systems to ensure we can successfully detect and prevent information security incidents.
We use a combination of technical and organizational measures to ensure the security of our user and customer personal data. We restrict access to personal data, encrypt it in transit, use multiple layers of encryption for sensitive data and employ automatic data retention policies for sensitive personal data. To ensure compliance with personal data laws and regulations, we regularly review changes in the personal data laws and regulatory standards.
Our Employees
Our management believes that a superior user experience can only be created with an engaged and motivated workforce. For our business model to work, we believe that we must retain and attract talented people who can drive the platform and continue to refine, improve and develop our offerings. Hence, we strive to hire the best top-level management talent as well as talented software developers, sales, marketing, content, financial and administrative staff. It is important for us to be a workplace where employees are satisfied, motivated and want to stay, and where talented people are attracted to join. In line with our corporate culture focused on productivity and further development, we offer certain performance-based bonuses to certain employees, such as sales teams and certain members of the management.
As of June 30, 2021 and December 31, 2020 and 2019, we had a total of 756, 551 and 469 employees, respectively. The table below sets out the number of employees by category:
 
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Department
​ ​
As of June 30,
​ ​
As of December 31,
​
​
2021(1)
​ ​
2020
​ ​
2019
​
Commercial
​ ​ ​ ​ 239 ​ ​ ​ ​ ​ 165 ​ ​ ​ ​ ​ 150 ​ ​
Finance
​ ​ ​ ​ 32 ​ ​ ​ ​ ​ 26 ​ ​ ​ ​ ​ 22 ​ ​
General administration
​ ​ ​ ​ 48 ​ ​ ​ ​ ​ 28 ​ ​ ​ ​ ​ 33 ​ ​
Human resources
​ ​ ​ ​ 29 ​ ​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 16 ​ ​
Information Technology
​ ​ ​ ​ 287 ​ ​ ​ ​ ​ 219 ​ ​ ​ ​ ​ 189 ​ ​
Legal
​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 1 ​ ​
Marketing
​ ​ ​ ​ 31 ​ ​ ​ ​ ​ 26 ​ ​ ​ ​ ​ 19 ​ ​
Product
​ ​ ​ ​ 86 ​ ​ ​ ​ ​ 63 ​ ​ ​ ​ ​ 39 ​ ​
Total ​ ​ ​ ​ 756 ​ ​ ​ ​ ​ 551 ​ ​ ​ ​ ​ 469 ​ ​
​
(1)
Including the N1 Group.
​
As of June 30, 2021, women comprised 42% of our total employee headcount. In addition, we also engage independent contractors for certain services, including for IT development services, moderating services and others. As of December 31, 2020, we had a total of 274 independent contractors.
As required by Russian laws and regulations, we contribute to mandatory employee social benefits plans, including pension and unemployment insurance.
We typically enter into employment agreements, which include confidentiality clauses, with our employees.
Facilities
The principal executive office is located at Elektrozavodskaya Ulitsa, 27, Building 8 Moscow, 107023, Russia. We have leased the certain premises at this property for a term of two years, which we further extended until June 30, 2024.
Competition
Our market is competitive and is characterized by the network effect, in which a high number of listings attracts audience traffic and more traffic, in turn, attracts listings and advertising. Furthermore, the business of providing online real estate services in Russia is becoming increasingly more competitive.
According to Frost & Sullivan Report, the online residential property service market in Russia is concentrated and there are over 4,000 websites with ads for real estate. We face competition from a variety of digital market players and, in the case of primary real estate market, also from offline advertising media, all of which provide platforms and advertising space to customers. Our key competitors are other vertical classifieds platforms (or platforms specializing in a single category of classifieds), which focus on real estate classifieds, such as DomClick, Yandex.Nedvizhimost and Square Meter. Some of these platforms are owned by large Russian banking groups, such as DomClick, which is owned by Sberbank, and Square Meter, which is owned by VTB. Others are owned by large internet companies, such as Yandex.Nedvizhimost, which is owned by Yandex, one of the largest internet companies in Russia. Our key competitors also include horizontal classifieds platforms (or generalist online classifieds platforms that offer listings across various product categories, including real estate), such as Avito and Youla. Some of these platforms are also supported by larger internet companies, for example, Youla is the classifieds platform of Mail.ru Group, and Avito is owned by Naspers. Furthermore, we may also face competition from platforms that offer short-term rentals, such as Airbnb and Booking.com, if these platforms begin placing greater emphasis on more comprehensive real estate offerings that appeal to our current users. For further information, see “Risk Factors—Risks Related to Our Business and Industry—The online classifieds market is competitive, and we may fail to compete effectively with existing and new industry players, which could have a material adverse effect on our business, results of operations, financial condition and prospects.”
 
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Legal Proceedings
We are not currently involved in any material litigation or regulatory actions, the outcome of which would, in our management’s judgment, have a material adverse effect on our financial condition or results of operations, nor are we aware of any such material litigation or regulatory actions threatened against us.
Material Contracts
The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which we are or have been a party, for the two years immediately preceding the date of this prospectus.
The following summary of our material contracts is not intended to be a complete description of these contracts, and it is qualified in its entirety by reference to the full text of such contracts, which are filed as exhibits to the registration statement of which this prospectus forms a part. We urge you to review these exhibits in their entirety.
The following summary excludes the agreement that we entered in connection with the Credit Facility, which is summarized under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Credit Facilities.”
N1 SPA
On December 22, 2020, we, through our subsidiary Mimons Investments Limited, entered into a share purchase agreement for the sale and purchase of the entire share capital of the N1 Group (the “N1 SPA”) with the shareholders of N1, comprising Hearst Shkulev Digital Regional Network B.V. (“HSDRN BV”) and three private individuals (together with HSDRN BV, the “Sellers” and, each individually, a “Seller”), as well as HS Holding B.V., Limited Liability Company “HS Publishing,” Limited Liability Company “Hearst Shkulev Media” and Limited Liability Company “InterMediaGroup,” acting as guarantors for some of the Sellers. Pursuant to the N1 SPA, we acquired 100% ownership of the N1 Group through the purchase of the entire share capital of N1.RU LLC.
The total consideration for the N1 Acquisition was RUB 1,785 million and was provided to us through an equity injection by our shareholders. The N1 Acquisition closed on February 5, 2021.
Under the N1 SPA, subject to certain de minimis exceptions, the Sellers are subject to standard non-compete and non-solicitation obligations.
Pursuant to the N1 SPA, a Seller is not liable for any claim under the N1 SPA unless we provide a notice: (i) in respect of any claim for breach of a Fundamental Warranty or the Title Indemnity, as defined under the N1 SPA, no later than three (3) years following the Completion Date; (ii) in respect to any Tax Claim, as defined under the N1 SPA, no later than the last day of the third full calendar year following the Completion Date, subject to some de minimis exceptions; and (iii) in respect to any other claims, no later than eighteen (18) months following the Completion Date.
For the risks related to the N1 Acquisition, see “Risk Factors—Risks Related to the N1 Acquisition.”
 
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INDUSTRY
Introduction
Russian Macroeconomic Backdrop
Russia is the fifth largest economy in Europe in terms of nominal GDP, which totaled approximately $1.5 trillion in 2020, according to the IMF, and the ninth most populous country globally with a population of approximately 146.2 million as of January 1, 2021, according to Rosstat. Russia has the highest GDP per capita among the BRIC countries in 2020 based on purchasing power parity, according to the IMF.
The IMF expects the Russian economy to return to growth in 2021 after the global recession in 2020 triggered by COVID-19. Real GDP is forecasted to grow at a CAGR of approximately 3.2% from 2021 to 2023, according to the IMF, accompanied by real disposable income growth at a CAGR of approximately 2.6% over the same period (source: Frost & Sullivan Report). The recovery of the Russian economy is expected to be driven by strong oil prices, increasing household consumption and continued government measures and stimulus to support the economy. The Russian economy demonstrated a higher resilience to the impact of COVID-19 and the global recession in 2020 as compared to major developed countries, with real GDP in Russia contracting by 3.0% in 2020 according to Rosstat. This compares favorably against key developed countries with 2020 real GDP contracting by 3.5% in the U.S., 9.9% in the U.K. and 4.9% in Germany, according to the IMF.
Current macroeconomic conditions in Russia are favorable for the real estate market due to recovering consumer incomes, stability in the labor market, with unemployment rate of 5.6% in January-March 2021, and a low interest rates environment bolstering capital investments. Starting in February 2015, the CBR initiated a period of dovish monetary policy with gradual reductions in the key interest rate, with the CBR’s proactive policy aimed at supporting the Russian economy during the global recession in 2020, which resulted in the lowest interest rates since 1992, according to the CBR. Starting in March 2021, the CBR made a series of key rate increases from 4.25% in February 2021, to 7.5%% in October 2021, however, the key rate still remains significantly lower compared to historical levels.
The below table summarizes the key Russian macroeconomic indicators:
Key Russian Macroeconomic Indicators
​ ​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​ ​
2021F
​ ​
2022F
​ ​
2023F
​ ​
2024F
​ ​
2025F
​
Real GDP YoY growth (%)
​ ​ ​ ​ 0.2% ​ ​ ​ ​ ​ 1.8% ​ ​ ​ ​ ​ 2.8% ​ ​ ​ ​ ​ 2.0% ​ ​ ​ ​ ​ (3.0)% ​ ​ ​ ​ ​ 3.8% ​ ​ ​ ​ ​ 3.8% ​ ​ ​ ​ ​ 2.1% ​ ​ ​ ​ ​ 1.8% ​ ​ ​ ​ ​ 1.8% ​ ​
Consumer Price Index YoY growth (%)
​ ​ ​ ​ 5.4% ​ ​ ​ ​ ​ 2.5% ​ ​ ​ ​ ​ 4.3% ​ ​ ​ ​ ​ 3.0% ​ ​ ​ ​ ​ 4.9% ​ ​ ​ ​ ​ 4.5% ​ ​ ​ ​ ​ 3.4% ​ ​ ​ ​ ​ 3.8% ​ ​ ​ ​ ​ 4.0% ​ ​ ​ ​ ​ 4.0% ​ ​
Real Disposable Income YoY growth (%)
​ ​ ​ ​ (4.5)% ​ ​ ​ ​ ​ (0.5)% ​ ​ ​ ​ ​ 0.1% ​ ​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ (3.5)% ​ ​ ​ ​ ​ 3.0% ​ ​ ​ ​ ​ 2.4% ​ ​ ​ ​ ​ 2.5% ​ ​ ​ ​ ​ 2.6% ​ ​ ​ ​ ​ 2.8% ​ ​
​
Source:   IMF, Frost & Sullivan Report, Rosstat
Internet Adoption in Russia
Internet penetration in Russia has increased rapidly over the last decade driven by economic growth, substantial investments in broadband infrastructure, increasing affordability of personal computers and growing ownership of smartphones. Today, the internet audience in Russia is the largest among European countries and the sixth largest in the world, with approximately 115 million individuals accessing the internet in 2020, according to Frost & Sullivan. In 2020, Russia had relatively high internet and smartphone penetration rates of approximately 82% and 79%, respectively (source: Frost & Sullivan Report), which is comparable to many developed markets. The development, in parallel, of a diverse array of digital media, e-commerce websites and mobile apps has promoted the use of the internet as a fixture of Russian consumers’ lifestyles, resulting in rapidly increasing the amount of time Russian consumers spend online and on mobile devices. This trend is having an increasing influence on the allocation of marketing budgets. The share of online advertising as a portion of total advertising expenditures in Russia has increased from 38%
 
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in 2016 to 53% in 2020, according to Association of Russian Communications Agencies. The below charts represent the comparison of GDP and internet usage in Russia to other relevant markets, as well as comparisons of internet penetration by country and possession of smartphones by country:
[MISSING IMAGE: TM2120160D4-BC_GDPNUMBER4C.JPG]
​
Sources:   Frost & Sullivan Report (Number of Internet Users), IMF (population, GDP per capita)
[MISSING IMAGE: TM2120160D4-BC_INTEROWN4C.JPG]
​
Source:   Frost & Sullivan
(1)
% of households.
​
Russian Real Estate Market, Historical Developments and Prospects
Size of Russian Real Estate Market
Frost & Sullivan estimates the size of the Russian real estate market as the value of all purchase/sale and rental transactions, including both residential and commercial properties. According to Frost & Sullivan, the Russian real estate market reached RUB 17,210 billion in 2020 compared to RUB 12,431 billion in 2016, implying a CAGR of 8.5% for the period. The market continued growing throughout the COVID-19 pandemic despite the recession in 2020. The following table sets out the evolution of the value of the Russian real estate market:
Russian real estate market dynamics
Metric
​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​ ​
CAGR
2016 – 20
​
Value of Russian real estate market (RUB Bn)
​ ​ ​ ​ 12,431 ​ ​ ​ ​ ​ 12,772 ​ ​ ​ ​ ​ 14,762 ​ ​ ​ ​ ​ 16,122 ​ ​ ​ ​ ​ 17,210 ​ ​ ​ ​ ​ 8.5% ​ ​
​
Source:   Frost & Sullivan Report
 
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According to Frost & Sullivan projections, the Russian real estate market is set to reach approximately RUB 25,556 billion by 2025, representing a CAGR of 7.8% (2021 – 2025), driven by several fundamental factors including:
•
Interest rates on mortgage loans close to all-time lows;
​
•
Economic recovery with growing consumer income and stable labor market with low unemployment rate;
​
•
Obsolete existing housing stock and living space undersupply;
​
•
Continued government programs incentivizing demand for residential real estate and supply of new residential properties; and
​
•
Negative real interest rates on savings accounts making investments into real estate property increasingly more attractive for Russian consumers.
​
The following table outlines the forecast for the Russian real estate market:
Russian Real Estate Market Forecast
​ ​ ​
2020
​ ​
2021F
​ ​
2022F
​ ​
2023F
​ ​
2024F
​ ​
2025F
​ ​
CAGR
2021 – 25F
​
Value of Russian real estate market RUB Bn
​ ​ ​ ​ 17,210 ​ ​ ​ ​ ​ 18,933 ​ ​ ​ ​ ​ 20,642 ​ ​ ​ ​ ​ 22,339 ​ ​ ​ ​ ​ 23,989 ​ ​ ​ ​ ​ 25,556 ​ ​ ​ ​ ​ 7.8% ​ ​
​
Source:   Frost & Sullivan Report
Interest Rates on Mortgage Loans Close to All-Time Lows in Russia
Mortgage lending is one of the major drivers of the residential real estate market in Russia. According to Frost & Sullivan, 45% of all transactions in primary and secondary residential real estate in Russia in 2020 involved mortgage financing. This share increased 1.7x from 27% in 2016, according to Frost & Sullivan. The following table sets out the changes in the share of residential property transactions in Russia:
Share of Residential Property Transactions Involving Mortgage Financing
​ ​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​
Share of residential property transactions involving mortgage
​ ​ ​ ​ 27% ​ ​ ​ ​ ​ 35% ​ ​ ​ ​ ​ 41% ​ ​ ​ ​ ​ 37% ​ ​ ​ ​ ​ 45% ​ ​
​
Source:   Frost & Sullivan Report
Over the last four years, the mortgage lending market in Russia has been growing substantially with total value of issued mortgage loans expanding at a CAGR of 30.4% from 2016 – 2020. Key drivers of this growth included (i) gradual reduction of interest rates on mortgage loans as a result of the CBR’s dovish monetary policy and (ii) government stimulus programs subsidizing mortgage lending.
The following table sets forth the volume of mortgage loans issued and the weighted-average interest rate on ruble denominated mortgage loans:
Mortgage Market Dynamics
​ ​ ​
Year ended December 31,
​
​ ​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​ ​
CAGR
2016 – 20
​
Value of issued mortgage loans, RUB Bn
​ ​ ​ ​ 1,472 ​ ​ ​ ​ ​ 2,021 ​ ​ ​ ​ ​ 3,012 ​ ​ ​ ​ ​ 2,848 ​ ​ ​ ​ ​ 4,260 ​ ​ ​ ​ ​ 30.4% ​ ​
Average interest rate for issued mortgage loans (%)
​ ​ ​ ​ 12.5% ​ ​ ​ ​ ​ 10.6% ​ ​ ​ ​ ​ 9.6% ​ ​ ​ ​ ​ 9.9% ​ ​ ​ ​ ​ 7.6% ​ ​ ​ ​ ​ ​ ​ ​
​
Sources:   DOM.RF, Frost & Sullivan Report
 
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The period of the CBR’s dovish monetary policy that started in February 2015 and continued until March 2021 has resulted in historically low interest rates, with key interest rates declining by 12.75% in February 2015 to 4.25% in February 2021. The average interest rate on new mortgage loans declined from 14.2% (for newly issued mortgage loans) to 7.2% (combined for both primary and secondary residential real estate) over the same period of time. In March 2021, the CBR started a series of key rate increases, which resulted in the key rate growing from 4.25% in February 2021 to 7.5% in October 2021. Despite these key rate increases, average mortgage rates remained relatively resilient, changing by 0.58% since February 2021 to 7.78% as of September 2021.
Mortgage market growth accelerated in 2020, largely as a result of a new government-subsidized mortgage lending program as part of the anti-COVID-19 fiscal response. In April 2020 the Russian government introduced a new stimulus, “Program 6.5%,” allowing borrowers to obtain a mortgage loan at an interest rate of 6.5% or lower for newly built apartments, to incentivize demand and support the Russian economy during the global recession triggered by COVID-19. The program applied to mortgage loans up to RUB 12 million for primary residential properties in Moscow, the Moscow region, St. Petersburg and the Leningrad region, and up to RUB 6 million in other regions. On July 1, 2021 the program was prolonged for one year with revised conditions. The threshold for interest rates on mortgage loans under the new program increased to 7.0%, while the maximum mortgage amount was reduced to RUB 3 million across all regions.
Other government stimulus programs introduced over the last three years to support mortgage lending in Russia include a family mortgage program, a Far Eastern mortgages program, and a rural mortgages program.
Family mortgages.
Launched in 2018, the program offered mortgage loans at interest rates of 6% or lower to families with two or more children. The program applied to mortgages of up to RUB 8 million in Moscow, the Moscow region, Saint Petersburg and the Leningrad region and RUB 3 million in other regions. Initial terms of the program allowed users to receive such mortgages for primary real estate apartments only, but in April 2021 the program was extended to construction of residential houses. In June 2021, the government decided to expand the program to cover families with one child and increased the maximum mortgage amount to RUB 12 million in Moscow, the Moscow region, Saint Petersburg and the Leningrad region and RUB 6 million in other regions.
Far Eastern mortgages.
Launched in 2019, the program incentivizes young families to buy residential properties in the Far East. The program allows users to obtain mortgage loans up to RUB 6 million at a 2% interest rate.
Rural mortgages.
Launched in 2020, the program offers mortgage loans for residential properties in rural locations at an interest rate of 3%. The program applies to mortgages of up to RUB 5 million in the Leningrad region, Yamalo-Nenets Autonomous District and the Far East, and up to RUB 3 million in other regions.
Obsolete Existing Housing Stock and Living Space Undersupply
According to Frost & Sullivan, undersupply on the Russian real estate market will be one of the factors driving primary real estate market growth and property prices.
Existing Russian residential housing stock includes a substantial amount of aging or obsolete stock dating from the Soviet era. 32% of the total residential housing space in Russia was commissioned before 1970, while 38% was built between 1970 and 1995 (as of December 31, 2018 (latest available data)).
According to Rosstat, as of December 31, 2020, the total area of residential real estate stock in Russia was approximately 27 square meters per capita. This is considerably lower compared to 40 – 80 square meters per capita stock in developed countries, according to DOM RF.
 
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Government Stimulus Programs
Over the last decades, the Russian government incentivized demand for residential real estate and supply of new residential properties in order to mitigate the shortage of living space per capita through the introduction of other stimulus programs. The key initiatives include the following:
Stimulus Programs Incentivizing Demand:
•
Maternity capital.   Launched in January 2007, the program offers financial compensation for each first or subsequently born or adopted child. The funds can be spent on family housing, including as a down payment for a mortgage. In 2021, the “maternity capital” payment amounts to RUB 483.9 thousand for the first child and RUB 639.4 thousand for the second child, according to the Pension Fund of the Russian Federation. Payments under the maternity capital program are currently envisaged until 2026.
​
•
Young family program.   The federal program subsidizes house purchases for new families (where both spouses are below 35 years old). The government provides 30% of the calculated (according to program regulations) house price for children-free families and 35% for families with children. The funds may be used for house purchase as well as construction, mortgage down-payment or prepayment.
​
Programs to Address Living Space Undersupply and Reduce Obsolete Housing Stock:
•
Government program “Providing affordable and comfortable housing and utilities for citizens of the Russian Federation.”   In 2017 the Russian government approved a new program for 2018 – 2030 aimed at improving housing conditions through subsidizing capital repair of residential properties, as well as incentivizing construction of new properties with the major goal of achieving the construction of 120 million square meters of new residential properties per annum by 2030. The total approved financing for the program for 2021 – 2025 is approximately RUB 1.9 trillion according to the Russian Government decree of December 30, 2017 No. 1710.
​
•
Moscow housing renovation program.   Launched in 2018, the program aims to relocate over one million Moscow citizens from older buildings constructed in the 1950s and 1960s to newly built apartments. Over 350,000 new residential apartments with a total area exceeding 20 million square meters are envisaged to be built under the program by 2032. Over 5,000 old residential buildings are expected to be demolished.
​
A similar renovation program has been underway in Saint Petersburg since 2008. In 2020, the Russian government introduced a law regulating voluntary participation in renovation program across the entirety of Russia.
Negative Real Interest Rates on Savings Accounts
Real interest rates on savings accounts in Russia have been declining over the last years and, in 2020, entered a negative territory. According to the CBR, average interest rates on individuals’ savings accounts, for a period of more than one year, were 4.20% in March 2021 as compared to 5.79% annualized CPI in the same period.
As a result of this trend, the opportunity cost of holding money in savings accounts has increased, bolstering investment demand for residential and commercial properties.
Russian Real Estate Market Verticals
Frost & Sullivan differentiates three key verticals of Russian real estate market:
•
Secondary residential real estate vertical:   includes purchase and sale and rental of secondary residential properties.
​
•
Primary residential real estate vertical:   includes purchase and sale of primary residential properties.
​
•
Commercial real estate vertical:   includes purchase and sale and rental of commercial properties.
​
 
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Secondary residential real estate is the largest vertical accounting for 69% of the total market in value terms in 2020, according to Frost & Sullivan. Primary residential real estate is the second largest vertical, accounting for 24% of the market in value terms in 2020, with commercial real estate being the smallest vertical amounting to approximately 7% of the market in 2020. Historically, the primary residential real estate market was the fastest growing vertical; its total value reached RUB 4,131 billion in 2020 compared to RUB 2,556 billion in 2016 implying a CAGR of 12.7%.
Commissions of new residential properties in Russia reached 82.2 million square meters in 2020, largely driven by reduced mortgage rates coupled with the government’s household support packages, including mortgage subsidies, from the demand side, and programs to mitigate living space undersupply and renovate old housing stock, from the supply side. The following table measures the commissioning of new residential properties in Russia per square meter:
Dynamics of Commissioning of New Residential Properties in Russia
​ ​ ​
Year ended December 31,
​
​ ​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​ ​
CAGR
2016 – 20
​
Commissioning of new residential properties (MM sq. m.)
​ ​ ​ ​ 80.2 ​ ​ ​ ​ ​ 79.2 ​ ​ ​ ​ ​ 75.7 ​ ​ ​ ​ ​ 82.0(1) ​ ​ ​ ​ ​ 82.2 ​ ​ ​ ​ ​ 0.6% ​ ​
​
Source:   Rosstat
(1)
Starting from 2019, includes commissioning of residential properties built on territories designed for gardening (since January 1, 2019 Russian legislation allows residency registration for these territories)
​
The primary residential real estate market is projected to lead market growth in the near future at an estimated 2021 – 2025 CAGR of approximately 8.6%, according to Frost & Sullivan. Secondary and commercial real estate markets are projected to grow at a CAGR of 7.6% and 6.4%, respectively, for the same period. The following tables summarizes the dynamics of the number of transactions in the Russian real estate market and different verticals of the Russian real estate market:
Dynamics of Number of Transactions on the Russian Real Estate Market
​ ​ ​
Year ended December 31,
​
​ ​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​ ​
2021F
​ ​
2022F
​ ​
2023F
​ ​
2024F
​ ​
2025F
​ ​
2016 – 20
CAGR
​ ​
2021 – 25
CAGR
​
Total residential
​ ​ ​ ​ 2,960 ​ ​ ​ ​ ​ 2,871 ​ ​ ​ ​ ​ 3,196 ​ ​ ​ ​ ​ 3,223 ​ ​ ​ ​ ​ 3,253 ​ ​ ​ ​ ​ 3,368 ​ ​ ​ ​ ​ 3,476 ​ ​ ​ ​ ​ 3,569 ​ ​ ​ ​ ​ 3,646 ​ ​ ​ ​ ​ 3,705 ​ ​ ​ ​ ​ 2.4% ​ ​ ​ ​ ​ 2.4% ​ ​
Secondary real estate residential
vertical(1)
​ ​ ​ ​ 2,258 ​ ​ ​ ​ ​ 2,172 ​ ​ ​ ​ ​ 2,400 ​ ​ ​ ​ ​ 2,440 ​ ​ ​ ​ ​ 2,489 ​ ​ ​ ​ ​ 2,578 ​ ​ ​ ​ ​ 2,657 ​ ​ ​ ​ ​ 2,724 ​ ​ ​ ​ ​ 2,779 ​ ​ ​ ​ ​ 2,821 ​ ​ ​ ​ ​ 2.5% ​ ​ ​ ​ ​ 2.3% ​ ​
Primary real estate residential vertical
​ ​ ​ ​ 702 ​ ​ ​ ​ ​ 699 ​ ​ ​ ​ ​ 797 ​ ​ ​ ​ ​ 783 ​ ​ ​ ​ ​ 764 ​ ​ ​ ​ ​ 790 ​ ​ ​ ​ ​ 819 ​ ​ ​ ​ ​ 845 ​ ​ ​ ​ ​ 867 ​ ​ ​ ​ ​ 884 ​ ​ ​ ​ ​ 2.1% ​ ​ ​ ​ ​ 2.8% ​ ​
​
(1)
Sale and purchase transactions (excl. rental)
​
 
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Dynamics of Different Verticals of the Russian Real Estate Market
​ ​ ​
Year ended December 31,
​
​ ​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​ ​
2021F
​ ​
2022F
​ ​
2023F
​ ​
2024F
​ ​
2025F
​ ​
2016 – 20
CAGR
​ ​
2021 – 25
CAGR
​
Secondary residential
real estate
(RUB Bn)
​ ​ ​ ​ 8,928 ​ ​ ​ ​ ​ 8,966 ​ ​ ​ ​ ​ 10,153 ​ ​ ​ ​ ​ 11,112 ​ ​ ​ ​ ​ 11,868 ​ ​ ​ ​ ​ 13,046 ​ ​ ​ ​ ​ 14,199 ​ ​ ​ ​ ​ 15,342 ​ ​ ​ ​ ​ 16,454 ​ ​ ​ ​ ​ 17,513 ​ ​ ​ ​ ​ 7.4% ​ ​ ​ ​ ​ 7.6% ​ ​
As % of total
​ ​ ​ ​ 72% ​ ​ ​ ​ ​ 70% ​ ​ ​ ​ ​ 69% ​ ​ ​ ​ ​ 69% ​ ​ ​ ​ ​ 69% ​ ​ ​ ​ ​ 69% ​ ​ ​ ​ ​ 69% ​ ​ ​ ​ ​ 69% ​ ​ ​ ​ ​ 69% ​ ​ ​ ​ ​ 69% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Primary residential real estate (RUB Bn)
​ ​ ​ ​ 2,556 ​ ​ ​ ​ ​ 2,778 ​ ​ ​ ​ ​ 3,530 ​ ​ ​ ​ ​ 3,883 ​ ​ ​ ​ ​ 4,131 ​ ​ ​ ​ ​ 4,581 ​ ​ ​ ​ ​ 5,041 ​ ​ ​ ​ ​ 5,500 ​ ​ ​ ​ ​ 5,947 ​ ​ ​ ​ ​ 6,369 ​ ​ ​ ​ ​ 12.7% ​ ​ ​ ​ ​ 8.6% ​ ​
As % of total
​ ​ ​ ​ 21% ​ ​ ​ ​ ​ 22% ​ ​ ​ ​ ​ 24% ​ ​ ​ ​ ​ 24% ​ ​ ​ ​ ​ 24% ​ ​ ​ ​ ​ 24% ​ ​ ​ ​ ​ 24% ​ ​ ​ ​ ​ 25% ​ ​ ​ ​ ​ 25% ​ ​ ​ ​ ​ 25% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Commercial real estate
(RUB Bn)
​ ​ ​ ​ 946 ​ ​ ​ ​ ​ 1,028 ​ ​ ​ ​ ​ 1,079 ​ ​ ​ ​ ​ 1,128 ​ ​ ​ ​ ​ 1,212 ​ ​ ​ ​ ​ 1,307 ​ ​ ​ ​ ​ 1,403 ​ ​ ​ ​ ​ 1,498 ​ ​ ​ ​ ​ 1,589 ​ ​ ​ ​ ​ 1,675 ​ ​ ​ ​ ​ 6.4% ​ ​ ​ ​ ​ 6.4% ​ ​
As % of total
​ ​ ​ ​ 8% ​ ​ ​ ​ ​ 8% ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total market (RUB Bn)
​ ​ ​ ​ 12,431 ​ ​ ​ ​ ​ 12,772 ​ ​ ​ ​ ​ 14,762 ​ ​ ​ ​ ​ 16,122 ​ ​ ​ ​ ​ 17,210 ​ ​ ​ ​ ​ 18,933 ​ ​ ​ ​ ​ 20,642 ​ ​ ​ ​ ​ 22,339 ​ ​ ​ ​ ​ 23,989 ​ ​ ​ ​ ​ 25,556 ​ ​ ​ ​ ​ 8.5% ​ ​ ​ ​ ​ 7.8% ​ ​
​
Source:   Frost & Sullivan Report
Regional Breakdown of Russian Real Estate Market
The value of real estate markets in Russia differs significantly across regions, due to differences in the size of total regional population, prices of real estate, as well as income levels. According to Frost & Sullivan, Moscow and the Moscow region amounted to, approximately, a 36% share of the Russian real estate market by value in 2020, with a 31% share in the secondary residential real estate vertical, a 45% share in the primary residential real estate vertical and a 63% share in the commercial real estate vertical. The second largest region in terms of value of the real estate market is Saint Petersburg and the Leningrad region, accounting for approximately 9% of the total Russian real estate market. Novosibirsk and Ekaterinburg, the third and fourth largest cities in Russia, each amounted to approximately 2% of total Russian real estate market by value in 2020.
According to Frost & Sullivan, Moscow, with RUB 237 thousand, had the highest average price per square meter on the secondary real estate market in 2020, while Saint Petersburg, Novosibirsk and Ekaterinburg had RUB 139.2 thousand, RUB 77.7 thousand and RUB 76.6 thousand, respectively. The average price per square meter on the secondary real estate market in Russia, for cities with a population of not less than 100 thousand, was RUB 80.7 thousand in 2020. The following table outlines the structure of the Russian real estate market:
Structure of Russian Real Estate Market (2020)
​ ​ ​
Secondary
residential
real estate
​ ​
Primary
residential real
estate
​ ​
Commercial
real estate
​ ​
Total
real estate market
​
Region / Metric
​ ​
Value,
RUB Bn
​ ​
Share of
total, %
​ ​
Value,
RUB Bn
​ ​
Share of
total, %
​ ​
Value,
RUB Bn
​ ​
Share of
total, %
​ ​
Value,
RUB Bn
​ ​
Share of
total, %
​
Moscow and the Moscow region
​ ​ ​ ​ 3,651 ​ ​ ​ ​ ​ 31% ​ ​ ​ ​ ​ 1,854 ​ ​ ​ ​ ​ 45% ​ ​ ​ ​ ​ 769 ​ ​ ​ ​ ​ 63% ​ ​ ​ ​ ​ 6,273 ​ ​ ​ ​ ​ 36% ​ ​
St. Petersburg and the Leningrad region
​ ​ ​ ​ 829 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 580 ​ ​ ​ ​ ​ 14% ​ ​ ​ ​ ​ 85 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 1,494 ​ ​ ​ ​ ​ 9% ​ ​
Ekaterinburg
​ ​ ​ ​ 189 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 137 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 25 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 351 ​ ​ ​ ​ ​ 2% ​ ​
Novosibirsk
​ ​ ​ ​ 146 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 125 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 25 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 295 ​ ​ ​ ​ ​ 2% ​ ​
Other regions
​ ​ ​ ​ 7,053 ​ ​ ​ ​ ​ 59% ​ ​ ​ ​ ​ 1,435 ​ ​ ​ ​ ​ 35% ​ ​ ​ ​ ​ 309 ​ ​ ​ ​ ​ 25% ​ ​ ​ ​ ​ 8,796 ​ ​ ​ ​ ​ 51% ​ ​
Total ​ ​ ​ ​ 11,868 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 4,131 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 1,212 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 17,210 ​ ​ ​ ​ ​ 100% ​ ​
​
Source:   Frost & Sullivan Report
 
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Russian Real Estate Market Participants
Home Buyers
A home buyers’ key objectives in a real estate transaction are finding and buying the right object in an efficient and safe manner. Potential home buyers use digital property portals to become better informed about relevant properties for sale, insights on the property market and to get inspiration for their current or future home. As buyers start thinking about buying a new home, they also want to find out more about mortgages, home insurance and other services that are part of the buying process.
Home Sellers
Maximizing the value from their property transaction through a fast and smooth process are the main goals for most home sellers. The seller has a high incentive to engage a professional real estate agent in the property sale. According to Frost & Sullivan, most sellers in Russia usually consult with real estate agencies and/or agents to sell their properties.
Real Estate Agencies and Agents
Real estate agencies in Russia vary widely in size and comprise both large federal or regional agencies at one end of the spectrum and small, often single-agent operations, at the other. According to Frost & Sullivan estimates, there were approximately 15 thousand agents working at large real estate agencies (with headcount of more than 90 agents per agency), approximately 140 thousand agents working at medium-sized real estate agencies (with headcount of 6-89 agents per agency), and approximately 55 thousand agents who either work at small agencies (with headcount of 3-5 agents) or acting as independent individual agents in 2020. According to the Frost & Sullivan Report, approximately 75% of sale and purchase transactions within the secondary residential property market involved real estate agencies or agents.
Real Estate Developers
The largest professional construction and real estate companies (real estate developers) in Russia are PIK, Setl Group, LSR and INGRAD. Their sales processes are different to the secondary market due to, for example, the amount of identical properties for sale at the same time from a single large development project, and the fact that the property sale process usually runs for several years. The ability to effectively reach a wide and relevant audience in the marketing process is important for real estate developers as they try to de-risk their project portfolio. They use property classifieds as part of their marketing efforts to build their brand and inform the market about their upcoming projects and new builds for sale. Part of developers’ advertising budgets is allocated to the services of advertising agencies, which also use online real estate classifieds to promote developers’ projects and new builds.
The chart below illustrates top-10 largest Russian real estate companies by residential space commissioned in 2020:
Top-10 of Russian Real Estate Developers by Commissioned Residential Properties 2020 (‘000 sq. m)
[MISSING IMAGE: TM2120160D4-BC_TOPRESSIAN4C.JPG]
 
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​
Source:   portal “United Resource for Developers (ERZ.RF)”
Our Total Addressable Market
We define our market opportunity in terms of a total addressable market (“TAM”) over the long-term. Based on Frost & Sullivan estimates, in 2020 our TAM comprised approximately RUB 472 billion, which includes:
•
Real estate agents’ commissions pool of approximately RUB 320 billion estimated by Frost & Sullivan as the percentage commissions applied to the total value of real estate transactions intermediated by agents in Russia. We address this market through (i) our core classifieds business, as agents spend part of their commissions revenue on properties advertising through our platform, as well as (ii) through development of our end-to-end platform covering services traditionally carried out by agents.
​
•
Primary real estate advertising market of approximately RUB 63 billion comprising advertising budgets of real estate developers in Russia. We address this market through our core classifieds business, as developers in Russia allocate part of their advertising budgets to promote new builds and projects through online real estate classifieds platforms.
​
•
Mortgage customer acquisition market of approximately RUB 85 billion comprising Russian banks’ spend on attracting new mortgage borrowers. Frost & Sullivan estimates this spend to be approximately 2% of the total value of new mortgages issued in Russia. We address this market through our mortgage marketplace, as our partner banks use it to attract new borrowers.
​
•
Online transaction services market comprising revenues of online services for document preparation and signing, legal checks, and notary and state registration. This market is only starting to emerge in Russia and has significant growth potential, according to Frost & Sullivan. Frost & Sullivan’s indicative assessment of this market in 2020 is approximately RUB 4 billion. We are planning to address this emerging opportunity through Online Transaction Services, which we launched in 2021.
​
Russian Real Estate Advertising Market
Overview, Historical Developments and Prospects
The Russian real estate advertising market comprises online classifieds platforms, real estate agents’ and real estate developers’ own websites, other property portals, non-property websites, online social media as well as offline advertising that mainly includes newspapers, TV and outdoors ads. According to Frost & Sullivan, the total real estate advertising expenditure in Russia amounted to approximately RUB 76 billion in 2020, of which approximately RUB 14 billion (18%) and approximately RUB 26 billion (35%) were related to online classifieds and other digital marketing channels. Frost & Sullivan expects the total real estate advertising market in Russia to grow at approximately 12.5% CAGR in 2021 – 2025.
According to Frost & Sullivan, the combination of continued migration of advertising to online media, higher efficiency of online classifieds platforms compared to other advertising channels and substantial room for gradual increases in monetization will drive the continued growth of the online classifieds channel’s share of total real estate advertising spend. This trend will be further enhanced by value added services and features designed to boost the search ranking and prominence of online advertisements on real estate classifieds platforms. As a result, the share of online real estate classifieds in total real estate advertising spend in Russia is expected to grow from 18% in 2020 to approximately 34% in 2025, based on Frost & Sullivan estimates. Frost & Sullivan expects the online real estate classifieds market to grow at a CAGR of approximately 26.8% in 2021 – 2025 compared to a CAGR of 24.0% in 2016 – 2020, demonstrating slight acceleration following the post-COVID-19 market rebound. According to Frost & Sullivan, lower CAGR in 2016 – 2020 compared to projected growth is largely due to market growth slowdown in 2020 as a result of the impact of COVID-19.
The table below illustrates the evolution of real estate advertising spend in Russia with breakdown by online and offline channels.
 
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Real Estate Advertising Spend in Russia by Channel
​ ​ ​
Year ended December 31,
​
(RUB Bn)
​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​ ​
2021F
​ ​
2022F
​ ​
2023F
​ ​
2024F
​ ​
2025F
​ ​
2016 – 20
CAGR
​ ​
2021 – 25
CAGR
​
Online classifieds
​ ​ ​ ​ 5.8 ​ ​ ​ ​ ​ 7.6 ​ ​ ​ ​ ​ 9.9 ​ ​ ​ ​ ​ 12.5 ​ ​ ​ ​ ​ 13.6 ​ ​ ​ ​ ​ 18.2 ​ ​ ​ ​ ​ 23.3 ​ ​ ​ ​ ​ 29.7 ​ ​ ​ ​ ​ 37.7 ​ ​ ​ ​ ​ 47.1 ​ ​ ​ ​ ​ 24.0% ​ ​ ​ ​ ​ 26.8% ​ ​
as % of total
​ ​ ​ ​ 13.8% ​ ​ ​ ​ ​ 16.0% ​ ​ ​ ​ ​ 16.2% ​ ​ ​ ​ ​ 18.0% ​ ​ ​ ​ ​ 18.0% ​ ​ ​ ​ ​ 21.0% ​ ​ ​ ​ ​ 23.7% ​ ​ ​ ​ ​ 26.8% ​ ​ ​ ​ ​ 30.3% ​ ​ ​ ​ ​ 33.9% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Other digital channels
​ ​ ​ ​ 12.9 ​ ​ ​ ​ ​ 15.1 ​ ​ ​ ​ ​ 20.2 ​ ​ ​ ​ ​ 23.5 ​ ​ ​ ​ ​ 26.4 ​ ​ ​ ​ ​ 31.6 ​ ​ ​ ​ ​ 37.5 ​ ​ ​ ​ ​ 43.5 ​ ​ ​ ​ ​ 49.7 ​ ​ ​ ​ ​ 56.0 ​ ​ ​ ​ ​ 19.6% ​ ​ ​ ​ ​ 15.4% ​ ​
as % of total
​ ​ ​ ​ 31.2% ​ ​ ​ ​ ​ 31.8% ​ ​ ​ ​ ​ 33.0% ​ ​ ​ ​ ​ 33.6% ​ ​ ​ ​ ​ 34.9% ​ ​ ​ ​ ​ 36.5% ​ ​ ​ ​ ​ 38.1% ​ ​ ​ ​ ​ 39.3% ​ ​ ​ ​ ​ 39.9% ​ ​ ​ ​ ​ 40.3% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Offline channels
​ ​ ​ ​ 22.8 ​ ​ ​ ​ ​ 24.8 ​ ​ ​ ​ ​ 31.2 ​ ​ ​ ​ ​ 33.8 ​ ​ ​ ​ ​ 35.6 ​ ​ ​ ​ ​ 36.8 ​ ​ ​ ​ ​ 37.6 ​ ​ ​ ​ ​ 37.7 ​ ​ ​ ​ ​ 37.1 ​ ​ ​ ​ ​ 35.7 ​ ​ ​ ​ ​ 11.8% ​ ​ ​ ​ ​ (0.7)% ​ ​
as % of total
​ ​ ​ ​ 55.0% ​ ​ ​ ​ ​ 52.3% ​ ​ ​ ​ ​ 50.8% ​ ​ ​ ​ ​ 48.4% ​ ​ ​ ​ ​ 47.0% ​ ​ ​ ​ ​ 42.5% ​ ​ ​ ​ ​ 38.2% ​ ​ ​ ​ ​ 34.0% ​ ​ ​ ​ ​ 29.8% ​ ​ ​ ​ ​ 25.8% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total
​ ​ ​ ​ 41.5 ​ ​ ​ ​ ​ 47.5 ​ ​ ​ ​ ​ 61.3 ​ ​ ​ ​ ​ 69.8 ​ ​ ​ ​ ​ 75.6 ​ ​ ​ ​ ​ 86.6 ​ ​ ​ ​ ​ 98.4 ​ ​ ​ ​ ​ 110.9 ​ ​ ​ ​ ​ 124.4 ​ ​ ​ ​ ​ 138.8 ​ ​ ​ ​ ​ 16.2% ​ ​ ​ ​ ​ 12.5% ​ ​
​
Source:   Frost & Sullivan Report
Similar to the overall real estate market, the real estate advertising market in Russia can be naturally split into secondary, primary and commercial real estate advertising verticals. The size of each vertical of the real estate advertising market is largely defined by the real estate agents’ and real estate developers’ marketing budgets. The latter varies depending on the value, volume and type of the real estate developer’s transactions, which ultimately impacts the size of real estate agents’ commissions in the secondary and commercial real estate verticals and real estate developers’ budgets in the primary real estate vertical.
Secondary Real Estate Advertising Market
Real estate agents play a central role in the secondary housing advertising market in Russia. According to Frost & Sullivan, approximately 75% of transactions with secondary residential property in 2020 involved real estate agencies or agents. Importantly, agencies or agents in Russia do not have exclusivity and, as a result, a single property can be advertised by several agents and often is listed on multiple advertising platforms.
Real estate agents’ commissions and costs structure:   The primary source of income for real estate agents is the agent commission that is typically paid by the seller or landlord. In Russia, real estate agent commissions for properly sale normally vary from 2% to 3.5% of the properly value, whereas commissions in rental vertical usually constitute approximately 55% of the monthly rental rate on average, according Frost & Sullivan. In relative terms, commissions charged by real estate agents in Russia are broadly in line with commissions charged by real estate agents in developed markets (according to Frost & Sullivan).
According to Frost & Sullivan, real estate agents’ commissions from rental and sales transactions in the secondary housing market in Russia represented approximately RUB 258 billion in 2020, RUB 208 billion of which is derived from agency fees earned on residential sales transactions and RUB 50 billion from residential rental transactions. Frost & Sullivan estimates the real estate agents’ commissions pool in the secondary real estate market to grow at approximately 7.7% CAGR in 2021-25, reaching approximately RUB 383 billion in 2025, largely driven by the overall Russian real estate market growth.
Advertising Market Size and Outlook:   According to Frost & Sullivan, the advertising market in the secondary residential real estate market in Russia amounted to RUB 9.1 billion in 2020, of which 91% was attributable to online real estate classifieds. Similar to other markets, high popularity of online classifieds in Russia compared to offline marketing channels is explained by the multiple advantages of digital classifieds platforms. While offline classifieds media and other offline advertising channels tend to be local and lack the breadth of market information, online real estate classifieds engage with a large and qualified audience while being, at the same time, much more cost-effective at generating qualified sales leads. Taking into account leads conversion into actual transactions, cost efficiency of online real estate classifieds is exceptionally high with estimated return on investment (ROI) of 15.8x in 2021, according to Frost & Sullivan.
Nevertheless, in contrast to developed markets, online real estate classifieds in Russia are significantly under-monetized and comprise a small portion of real estate agents’ commissions. According to Frost &
 
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Sullivan, Russian real estate agencies and agents allocated approximately 3.3% of their revenue to marketing in 2020 as compared to 16.0%, 12.9%, 10.4% and 9.9% in the U.S., U.K., Germany and Australia, respectively.
The chart below illustrates online classifieds spend as a percentage of real estate agents’ commissions for Russia and other markets:
Online Classifieds Spend as a Percentage of Agents’ Commissions by Country (2020)(1)
[MISSING IMAGE: TM2120160D4-BC_CLASSIFIE4C.JPG]
​
Source:   Frost & Sullivan Report
(1)
Includes commissions and advertising spend in secondary and commercial real estate verticals for Russia
​
According to Frost & Sullivan, online classifieds platforms in Russia will continue to increase base prices per basic listing, deepen value-added services (VAS) penetration and introduce subscription models that ultimately will drive increased monetization of these platforms. This trend will come in line with developed market precedents. For example, subscription model proliferation occurred in developed markets several years ago, with Scout24 introducing a subscription model in 2014 in Germany and, most recently, Hemnet launching its first subscription product for real estate agents in 2018 in Sweden. Expansion of services offerings, in parallel, will extend the value proposition of digital real estate classifieds in Russia beyond providing a highly liquid marketplace, thereby offering real estate agents, home sellers and landlords multiple options to enhance the effectiveness of their listings and providing them with real-time market insights. As a result of these trends, Frost & Sullivan expects the online classifieds market in the secondary housing vertical in Russia to grow from RUB 8.3 billion in 2020 to approximately RUB 29.6 billion in 2025, implying a 27.5% 2021 – 25 CAGR. The table below sets out the advertising market size in the Russian secondary real estate market:
Advertising Market Size in Secondary Real Estate Market in Russia
​ ​ ​
Year ended December 31,
​
(RUB Bn)
​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​ ​
2021F
​ ​
2022F
​ ​
2023F
​ ​
2024F
​ ​
2025F
​ ​
CAGR
2016 – 21
​ ​
CAGR
2021 – 25
​
Real estate agents’ commissions
​ ​ ​ ​ 196.2 ​ ​ ​ ​ ​ 197.7 ​ ​ ​ ​ ​ 222.8 ​ ​ ​ ​ ​ 243.9 ​ ​ ​ ​ ​ 258.4 ​ ​ ​ ​ ​ 284.6 ​ ​ ​ ​ ​ 310.0 ​ ​ ​ ​ ​ 335.2 ​ ​ ​ ​ ​ 359.8 ​ ​ ​ ​ ​ 383.4 ​ ​ ​ ​ ​ 7.1% ​ ​ ​ ​ ​ 7.7% ​ ​
Total real estate agents’ spend on marketing
​ ​ ​ ​ 3.7 ​ ​ ​ ​ ​ 5.2 ​ ​ ​ ​ ​ 6.8 ​ ​ ​ ​ ​ 8.6 ​ ​ ​ ​ ​ 9.1 ​ ​ ​ ​ ​ 12.2 ​ ​ ​ ​ ​ 15.8 ​ ​ ​ ​ ​ 20.0 ​ ​ ​ ​ ​ 25.3 ​ ​ ​ ​ ​ 31.7 ​ ​ ​ ​ ​ 25.1% ​ ​ ​ ​ ​ 26.8% ​ ​
Real estate agents’ spend on online classifieds
​ ​ ​ ​ 3.3 ​ ​ ​ ​ ​ 4.6 ​ ​ ​ ​ ​ 6.1 ​ ​ ​ ​ ​ 7.8 ​ ​ ​ ​ ​ 8.3 ​ ​ ​ ​ ​ 11.2 ​ ​ ​ ​ ​ 14.6 ​ ​ ​ ​ ​ 18.5 ​ ​ ​ ​ ​ 23.5 ​ ​ ​ ​ ​ 29.6 ​ ​ ​ ​ ​ 25.8% ​ ​ ​ ​ ​ 27.5% ​ ​
Real estate agents’ spend on other advertising channels
​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 0.5 ​ ​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 1.0 ​ ​ ​ ​ ​ 1.3 ​ ​ ​ ​ ​ 1.5 ​ ​ ​ ​ ​ 1.8 ​ ​ ​ ​ ​ 2.1 ​ ​ ​ ​ ​ 19.0% ​ ​ ​ ​ ​ 18.6% ​ ​
​
Source:   Frost & Sullivan Report
 
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Regional Breakdown of Secondary Housing Advertising Market.   The secondary advertising market in Russia is highly concentrated in the top-4 most populous regions, accounting for 44% of the total Russian market. Moscow and the Moscow region is by far the largest market with a 34.3% share. St. Petersburg (including the Leningrad region), Ekaterinburg and Novosibirsk accounted for 7.3%, 1.3% and 1.0% in 2020, respectively. The table below is a regional break-down of the secondary real estate and online real estate classifieds markets:
Secondary Real Estate Advertising and Online Real Estate Classifieds Markets Breakdown by Region in 2020
​ ​ ​
Real estate advertising market
​ ​
Online real estate classifieds market
​
Region / Metric
​ ​
Value,
RUB Bn
​ ​
Share of total, %
​ ​
Value,
RUB Bn
​ ​
Share of total, %
​
Moscow and the Moscow region
​ ​ ​ ​ 3.1 ​ ​ ​ ​ ​ 34.3% ​ ​ ​ ​ ​ 2.9 ​ ​ ​ ​ ​ 34.3% ​ ​
St. Petersburg and the Leningrad region
​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ 7.3% ​ ​ ​ ​ ​ 0.6 ​ ​ ​ ​ ​ 7.3% ​ ​
Ekaterinburg
​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ 1.3% ​ ​
Novosibirsk
​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ 1.0% ​ ​
Other regions
​ ​ ​ ​ 5.1 ​ ​ ​ ​ ​ 56.0% ​ ​ ​ ​ ​ 4.7 ​ ​ ​ ​ ​ 56.0% ​ ​
Total ​ ​ ​ ​ 9.1 ​ ​ ​ ​ ​ 100.0% ​ ​ ​ ​ ​ 8.3 ​ ​ ​ ​ ​ 100.0% ​ ​
​
Source:   Frost & Sullivan Report
Primary Real Estate Advertising Market
In contrast to the secondary real estate advertising market, real estate agents play a smaller role in primary real estate advertising in Russia, which is mostly driven by real estate developers’ marketing expenditures. According to Frost & Sullivan, developers in Russia are starting to more actively utilize marketing channels to build their brand, inform the market about upcoming projects, advertise new builds for sale and eventually acquire a larger customer base. With growing nominal consumer incomes, declining mortgage rates and, as a result, increasing affordability of housing in Russia, prices for real estate are no longer the only driver of consumer choices, with marketing becoming increasingly more effective in impacting home buyers’ decisions. According to Frost & Sullivan, real estate developers’ total spend on marketing grew at a CAGR of 14.9% in 2016 – 20 (from RUB 36.4 billion in 2016 to RUB 63.4 billion in 2020), and is expected to continue its growth at a CAGR of 8.7% in 2021 – 2025, totaling approximately RUB 98.6 billion in 2025 driven by developers’ willingness to allocate higher budgets to marketing and overall primary real estate market growth.
Developers in Russia use a more diverse span of marketing channels compared to real estate agents, with approximately 45% of their marketing spend in 2020 attributable to digital marketing, including online classifieds, social media and context advertising, and approximately 55% attributable to offline marketing campaigns, including TV and banner adverting, among other channels, according to Frost & Sullivan. In 2020 online classifieds accounted for 5% in this structure.
The figure below illustrates developers’ marketing budgets breakdown by channel:
Structure of Developers’ Marketing Budgets in 2020
[MISSING IMAGE: TM2120160D4-PC_RUSSION4C.JPG]
 
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​
Source:   Frost & Sullivan Report
While still allocating budgets to relatively expensive offline campaigns such as banner advertising and TV in order to increase overall brand awareness, the core of real estate developers’ marketing strategy in Russia, according to a survey conducted by Frost & Sullivan, is targeted marketing that results in high quality leads generation. Conversely, offline channels, such as banner advertising, are highly localized, whereas TV is not targeted at all (source: Frost & Sullivan). According to Frost & Sullivan, ubiquitous internet adoption in Russia and the increasing time consumers spend online make digital advertising increasingly more attractive for real estate developers, allowing them to target a broader audience, ultimately increasing the cost efficiency of advertising campaigns. As a result, Frost & Sullivan estimates real estate developers’ marketing budgets to migrate into digital channels, with the share of online marketing growing from approximately 45% in 2020 to approximately 65% in 2025.
Within digital channels, online classifieds are increasingly generating high quality leads for developers, according to Frost & Sullivan. We believe that constantly improving advertising functionality and the growing popularity of online classifieds platforms among property searchers allows developers to leverage online classifieds’ broad, and yet targeted, audience to deliver effective marketing and branding campaigns through display advertising and other tools that result in substantial returns. As a result, Frost & Sullivan expects the share of online real estate classifieds to grow from approximately 5% in 2020 to approximately 11% in 2025. Coupled with growing developers advertising budgets, this will result in a growing spend on online real estate classifieds in primary housing vertical. Frost & Sullivan estimates this to grow at a CAGR of 27.8% from 2021 – 2025 (from RUB 2.9 billion in 2020 to approximately RUB 10.4 billion in 2025). The figures below illustrate the evolution of developers’ adverting budgets breakdown in relative and absolute terms.
The following charts outline the structure of real estate developers’ budgets in absolute and relative terms:
Developers’ Advertising Budgets’ Structure in Absolute Terms
[MISSING IMAGE: TM2120160D4-BC_ABSOLUTE4C.JPG]
 
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Developers’ Advertising Budgets’ Structure in Relative Terms
[MISSING IMAGE: TM2120160D4-BC_RELATIVE4C.JPG]
​
Source: Frost & Sullivan Report
Regional Breakdown of Primary Housing Advertising Market
The value of the primary real estate advertising market in Russia differs materially by region, with the top-4 most populous regions accounting for 77% of the market. According to Frost & Sullivan, the primary real estate advertising market in Moscow and the Moscow region, Saint Petersburg and the Leningrad region, Ekaterinburg and Novosibirsk, comprised RUB 37.1 billion, RUB 8.7 billion, RUB 1.7 billion and RUB 1.6 billion in 2020, respectively. The following table sets forth the regional breakdown of the Russian primary real estate advertising and online real estate classifieds markets:
Primary Real Estate Advertising and Online Real Estate Classifieds Markets Breakdown by Region in 2020
​ ​ ​
Real estate advertising market
​ ​
Online real estate classifieds market
​
Region / Metric
​ ​
Value,
RUB Bn
​ ​
Share of total,
%
​ ​
Value,
RUB Bn
​ ​
Share of total,
%
​
Moscow and the Moscow region
​ ​ ​ ​ 37.1 ​ ​ ​ ​ ​ 58.5% ​ ​ ​ ​ ​ 1.7 ​ ​ ​ ​ ​ 58.5% ​ ​
St. Petersburg and the Leningrad region
​ ​ ​ ​ 8.7 ​ ​ ​ ​ ​ 13.7% ​ ​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 13.7% ​ ​
Ekaterinburg
​ ​ ​ ​ 1.7 ​ ​ ​ ​ ​ 2.7% ​ ​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ 2.7% ​ ​
Novosibirsk
​ ​ ​ ​ 1.6 ​ ​ ​ ​ ​ 2.5% ​ ​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ 2.5% ​ ​
Other regions
​ ​ ​ ​ 14.3 ​ ​ ​ ​ ​ 22.6% ​ ​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ 22.6% ​ ​
Total ​ ​ ​ ​ 63.4 ​ ​ ​ ​ ​ 100.0% ​ ​ ​ ​ ​ 2.9 ​ ​ ​ ​ ​ 100.0% ​ ​
​
Source:   Frost & Sullivan Report
Commercial Real Estate Advertising Market
According to Frost & Sullivan, the Russian commercial real estate advertising market totaled RUB 3.0 billion in 2020 and is set to grow at a CAGR of 22.2% in 2021-2025, reaching approximately RUB 8.6 billion in 2025, driven by growing online classifieds monetization and commercial real estate agents’ commissions pool.
 
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Advertising Market Size in Commercial Real Estate Vertical in Russia
​ ​ ​
Year ended December 31,
​
(RUB Bn)
​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​ ​
2021F
​ ​
2022F
​ ​
2023F
​ ​
2024F
​ ​
2025F
​ ​
CAGR
2016 – 21
​ ​
CAGR
2021 – 25
​
Real estate agents’ commissions
​ ​ ​ ​ 47.9 ​ ​ ​ ​ ​ 52.0 ​ ​ ​ ​ ​ 54.6 ​ ​ ​ ​ ​ 57.0 ​ ​ ​ ​ ​ 61.2 ​ ​ ​ ​ ​ 65.9 ​ ​ ​ ​ ​ 70.7 ​ ​ ​ ​ ​ 75.5 ​ ​ ​ ​ ​ 80.1 ​ ​ ​ ​ ​ 84.4 ​ ​ ​ ​ ​ 6.3% ​ ​ ​ ​ ​ 6.4% ​ ​
Total real estate agents’
spend on marketing
​ ​ ​ ​ 1.3 ​ ​ ​ ​ ​ 1.6 ​ ​ ​ ​ ​ 2.0 ​ ​ ​ ​ ​ 2.7 ​ ​ ​ ​ ​ 3.0 ​ ​ ​ ​ ​ 3.8 ​ ​ ​ ​ ​ 4.8 ​ ​ ​ ​ ​ 5.8 ​ ​ ​ ​ ​ 7.1 ​ ​ ​ ​ ​ 8.6 ​ ​ ​ ​ ​ 23.6% ​ ​ ​ ​ ​ 22.2% ​ ​
Real estate agents’ spend on online classifieds
​ ​ ​ ​ 1.0 ​ ​ ​ ​ ​ 1.3 ​ ​ ​ ​ ​ 1.6 ​ ​ ​ ​ ​ 2.2 ​ ​ ​ ​ ​ 2.4 ​ ​ ​ ​ ​ 3.1 ​ ​ ​ ​ ​ 3.9 ​ ​ ​ ​ ​ 4.8 ​ ​ ​ ​ ​ 5.9 ​ ​ ​ ​ ​ 7.1 ​ ​ ​ ​ ​ 24.4% ​ ​ ​ ​ ​ 22.9% ​ ​
Real estate agents’
spend on other
advertising channels .
​ ​ ​ ​ 0.3 ​ ​ ​ ​ ​ 0.3 ​ ​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 0.5 ​ ​ ​ ​ ​ 0.6 ​ ​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ 0.9 ​ ​ ​ ​ ​ 1.0 ​ ​ ​ ​ ​ 1.2 ​ ​ ​ ​ ​ 1.4 ​ ​ ​ ​ ​ 20.6% ​ ​ ​ ​ ​ 18.7% ​ ​
​
Source: Frost & Sullivan Report
According to Frost & Sullivan, the commercial real estate advertising market in Russia is concentrated around economic hubs including the top-4 most populous cities that account for 75% of the total market. Moscow and the Moscow region comprise a disproportionately high share of the commercial real estate advertising market, totaling 64%. St. Petersburg (including the Leningrad region), Ekaterinburg and Novosibirsk accounted for 7%, 2% and 2% of the market in 2020, respectively.
Mortgage Customer Acquisition Market
According to Frost & Sullivan, the large and growing mortgage market in Russia presents a significant opportunity for platforms that allow banks to attract new mortgage borrowers. Frost & Sullivan estimates the total value of mortgages issued in Russia in 2020 at RUB 4.3 trillion and expects this amount to grow at a CAGR of 9.1% in 2021 – 2025 to approximately RUB 6.7 trillion, largely driven by the overall real estate market growth. Another significant trend in the Russian mortgage market, according to Frost & Sullivan, is the digitalization of mortgage transactions. During the COVID-19 pandemic, this trend accelerated, as the CBR authorized banks to issue mortgage loans online. According to Frost & Sullivan, banks in Russia could spend approximately 2% of average mortgage value on advertising and marketing tools and platforms, such as Mortgage Marketplace, implying a mortgage advertising and customer acquisition market size of approximately RUB 85 billion in 2020, which is expected to reach approximately RUB 135 billion by 2025.
Mortgage Market and Mortgage Customer Acquisition Market in Russia
​ ​ ​
Year ended December 31,
​
(RUB Bn)
​ ​
2016
​ ​
2017
​ ​
2018
​ ​
2019
​ ​
2020
​ ​
2021F
​ ​
2022F
​ ​
2023F
​ ​
2024F
​ ​
2025F
​ ​
CAGR
2016 – 21
​ ​
CAGR
2021 – 25
​
Value of issued mortgage
loans
​ ​ ​ ​ 1,472 ​ ​ ​ ​ ​ 2,021 ​ ​ ​ ​ ​ 3,012 ​ ​ ​ ​ ​ 2,848 ​ ​ ​ ​ ​ 4,260 ​ ​ ​ ​ ​ 4,760 ​ ​ ​ ​ ​ 5,270 ​ ​ ​ ​ ​ 5,778 ​ ​ ​ ​ ​ 6,273 ​ ​ ​ ​ ​ 6,742 ​ ​ ​ ​ ​ 30.4% ​ ​ ​ ​ ​ 9.1% ​ ​
Tota real estate agents’ spend on marketing
​ ​ ​ ​ 29.4 ​ ​ ​ ​ ​ 40.4 ​ ​ ​ ​ ​ 60.2 ​ ​ ​ ​ ​ 57.0 ​ ​ ​ ​ ​ 85.2 ​ ​ ​ ​ ​ 95.2 ​ ​ ​ ​ ​ 105.4 ​ ​ ​ ​ ​ 115.6 ​ ​ ​ ​ ​ 125.5 ​ ​ ​ ​ ​ 134.8 ​ ​ ​ ​ ​ 30.4% ​ ​ ​ ​ ​ 9.1% ​ ​
​
Source: Frost & Sullivan Report
Russia’s Online Real Estate Classifieds Competitive Landscape
We compete with other vertical and horizontal digital classifieds platforms; other online channels, including specialized and non-specialized web-portals; social networks and traditional offline marketing channels. According to Frost & Sullivan, real estate adverting market participants compete on the basis of the quality of customer and user experience, which includes the breadth of services offering, depth, accuracy and usefulness of listings data base as well as brand awareness and reputation. Competition also occurs for the marketing budgets of developers and professional real estate agents based on audience and the cost-effectiveness of lead generation services.
 
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According to Frost & Sullivan, online classifieds are more cost efficient and have higher lead generation ability compared to other real estate advertising channels. Coupled with value added services designed to boost the search ranking and prominence of online advertisements, advanced search tools and multiple services make online real estate classifieds’ value proposition more attractive for real estate agents and users compared to other real estate advertising channels.
Cian is the #1 online real estate classifieds platform in top-4 Russian regions (namely Moscow and the Moscow region, Saint Petersburg and the Leningrad region, Novosibirsk and Ekaterinburg) in terms of listings and leads generation to real estate agents and individual sellers and brand awareness, according to the Frost & Sullivan Report. These cities account for over 57% of the total online real estate classifieds market in Russia and have a combined Gross Regional Product and population comparable to some European countries, such as Sweden and Austria. According to Frost & Sullivan, approximately 80% of all real estate agents in residential real estate in Russia were engaged on Cian platform in 2020. Over the last three years, Cian maintained the #1 market position in these key regions with share of leads to real estate agents remaining above 50% in Moscow and the Moscow region and above 40% in Saint Petersburg and the Leningrad region. Cian also maintained a substantial gap compared to the next largest competitor, with share of leads to real estate agents and individual sellers in Moscow, being 3.1x larger compared to the #2 competitor in both the first quarter of 2018 and the first quarter of 2021. In combined Moscow and the Moscow region, Cian’s share of leads to real estate agents and individual sellers was 2.7x and 3.3x larger compared to the #2 competitor in the first quarter of 2021 and the first quarter of 2018, respectively, and in Saint Petersburg and the Leningrad region, this share was 1.3x and 1.4x larger compared to the #2 competitor in the first quarter of 2018 and the first quarter of 2021, respectively. In Ekaterinburg, Cian’s gap (including N1) compared to the #2 competitor widened from 1.0x in the first quarter of 2018 to 2.2x in the first quarter of 2021. In Novosibirsk, Cian’s gap (including N1) compared to the #2 competitor widened from 1.5x in the first quarter of 2018 to 2.9x in the first quarter of 2021. Cian also holds leading positions in Russian regions outside of the top-4 cities and plans to further expand its market share in these regions.
In addition to that, Cian has the widest offering in Moscow among online real estate classifieds (according to Frost & Sullivan) with multiple VAS features to facilitate properties advertising and searches as well as multiple services.
Cian is also a leader in terms of leads to real estate developers in Moscow among real estate portals, with 31% of such leads attributable to Cian in the year ended December 31, 2020, with the closest competitor accounting for 15% of such leads in the same period, according to Calltouch.
Cian’s major competitors are Avito, Yandex, Nedvizhimost, DomClick and Youla.
Avito is the leading Russian horizontal classifieds platform owned by Naspers, with leading positions in Russian regions. Avito is one of the leading players in terms of share of leads to real estate agents and individual sellers and number of listings in the top-4 Russian regions, where it has the #2 and #3 positions (depending on the metric and region). Avito’s database includes multiple C2C listings in addition to listings posted by real estate agents, in contrast to Cian’s listings, which are mostly posted by real estate agents. As a leading horizontal classifieds platform in Russia, historically, Avito has had a large audience and high brand awareness, which we believe makes it a strong competitor for Cian. Nevertheless, we believe that our real estate-specific customer and user functionality and unique ability to generate high quality leads make our platform extremely well positioned to deliver value to real estate agents and to property searchers, compared to horizontal competitors.
Yandex. Nedvizhimost is a real estate classifieds platform owned by Yandex, which is one of the main search engines in Russia. The platform has solid positions in the primary housing vertical, where we see it as the major competitor to Cian.
DomClick is a real estate classifieds launched in 2017 by Sberbank, the major bank in Russia. DomClick actively develops online mortgage platform and other services which are complementary to Sberbank’s offering and comparable to some of Cian’s products. DomClick does not charge a listing fee for base listings.
Youla is a horizontal classifieds platform owned by the Mail.ru Group, one of the leading Russian internet companies. Historically, Youla has focused on C2C listings, with a lower presence in primary housing vertical.
 
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Apart from other online real estate classifieds platforms in primary real estate vertical, Cian also competes with other digital channels, namely context advertising and social networks, which accounted for 21% and 19% shares in total developers advertising spend in 2020, respectively, according to Frost & Sullivan.
Beyond our core classifieds business, Cian’s C2C short-term rental service competes with such platforms as Booking.com and Airbnb.
The tables below illustrate key quantitative metrics of major online real estate classifieds in Russia:
Average Share of Leads to Real Estate Agents and Individual Sellers by Region
​ ​ ​
As of the first quarter of 2021(1)
​
​ ​ ​
Cian
​ ​
Avito
​ ​
Dom Click
​ ​
Yandex
Nedvizhimost
​ ​
Youla
​
Moscow and the Moscow Region
​ ​ ​ ​ 56% ​ ​ ​ ​ ​ 20% ​ ​ ​ ​ ​ 19% ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 2% ​ ​
St. Petersburg and the Leningrad Region
​ ​ ​ ​ 41% ​ ​ ​ ​ ​ 29% ​ ​ ​ ​ ​ 25% ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 2% ​ ​
Ekaterinburg
​ ​ ​ ​ 52%(2) ​ ​ ​ ​ ​ 19% ​ ​ ​ ​ ​ 23% ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 5% ​ ​
Novosibirsk
​ ​ ​ ​ 57%(2) ​ ​ ​ ​ ​ 18% ​ ​ ​ ​ ​ 20% ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 4% ​ ​
Centers of Other Top-20 Regions(3)
​ ​ ​ ​ 34% ​ ​ ​ ​ ​ 39% ​ ​ ​ ​ ​ 19% ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 6% ​ ​
​
Source: Frost & Sullivan Report
(1)
Average for urban sale and purchase in secondary vertical
​
(2)
Represents the sum of Cian and N1
​
(3)
Ranked by mortgage market size. Weighted average calculated as share of leads in each region weighted by estimated size of mortgage market in respective region. Excluding Moscow, Saint Petersburg, Ekaterinburg and Novosibirsk
​
Listings by Region
​ ​ ​
As of April 2021(1)
​
(‘000s)
​ ​
Cian
​ ​
Avito
​ ​
DomClick
​ ​
Yandex
Nedvizhimost
​ ​
Youla
​
Moscow
​ ​ ​ ​ 109 ​ ​ ​ ​ ​ 84 ​ ​ ​ ​ ​ 81 ​ ​ ​ ​ ​ 56 ​ ​ ​ ​ ​ 30 ​ ​
Moscow and the Moscow Region
​ ​ ​ ​ 220 ​ ​ ​ ​ ​ 144 ​ ​ ​ ​ ​ 153 ​ ​ ​ ​ ​ 104 ​ ​ ​ ​ ​ 60 ​ ​
St. Petersburg and the Leningrad Region
​ ​ ​ ​ 104 ​ ​ ​ ​ ​ 94 ​ ​ ​ ​ ​ 90 ​ ​ ​ ​ ​ 70 ​ ​ ​ ​ ​ 17 ​ ​
Ekaterinburg
​ ​ ​ ​ 56(2) ​ ​ ​ ​ ​ 45 ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 13 ​ ​
Novosibirsk
​ ​ ​ ​ 105(2) ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 34 ​ ​ ​ ​ ​ 7 ​ ​
​
Source:   Frost & Sullivan Report
(1)
Primary and secondary residential listings for rent and purchase (excl. short term rent)
​
(2)
Including N1 listings for Cian
​
Top-of-Mind Brand Awareness
​ ​ ​
Average for 2020
​
​ ​ ​
Cian
​ ​
Avito Realty
​ ​
DomClick
​ ​
Yandex Realty
​ ​
Other
​
Moscow
​ ​ ​ ​ 56% ​ ​ ​ ​ ​ 35% ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 4% ​ ​
St. Petersburg
​ ​ ​ ​ 49% ​ ​ ​ ​ ​ 41% ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 2% ​ ​
​
Source: Frost & Sullivan Report
 
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REGULATION
We are subject to an extensive and constantly evolving legal framework in Russia. Due to the changing interpretation of laws and regulations, we could also be subject to laws and regulations to which we are not currently subject and which could materially affect our operations. The following is only a summary and, as such, is not intended to provide an exhaustive description of all of the regulatory requirements to which we are subject in Russia.
Privacy and Personal Data Protection Regulation
We are subject to Russian laws regarding privacy and the protection of our customers’ and clients’ personal data. Pursuant to Federal Law No. 152-FZ “On Personal Data” dated July 27, 2006 (the “Personal Data Law”), the notion of “personal data” under Russian law includes any data which relates (directly or indirectly) to an identified or identifiable individual. There is no closed list of information which denotes personal data and any data (or set of data) which identifies a specific individual is treated as personal data. Typically, name and contact details are considered to be personal data.
Russian law uses the term “data operator” to denote a person who determines the scope and purposes of the data processing (this is equivalent to the notion of the “data controller” under the GDPR). Russia also has a notion of “person involved into the data processing by the data operator” ​(this is equivalent to the notion of “data processor” under the GDPR).
The Personal Data Law, among other matters, requires that a data subject must, subject to a limited number of exceptions, provide informed and conscious consent to the processing (i.e., any action or combination of actions performed on personal data, including the collection, recording, systematization, accumulation, storage, use, transfer (distributing, providing or authorizing access to), blocking, deleting and destroying) of his/her personal data.
The Personal Data Law does not require the consent to be hand-written for most types of personal data and processing actions, but requires the consent to be in a form that, from an evidential perspective, sufficiently attests to the fact that it has been given by the relevant individual. We seek the consent from our customers and clients by asking them to click on a button or select a check-box, in appropriate circumstances, prior to the commencement of the account registration process on our platform or the use of our services, indicating the customer’s or user’s consent to our collection, use, storage, transferring and other processing of personal data. The “ticking the box” approach is not prohibited by Russian law and is supported by some official but non-obligatory comments by the Russian authorities for most types of personal data as being compliant, provided that such “ticking the box” is a pre-condition to using the service and the service cannot be used without the customers and clients having ticked the box.
The amendments to the Personal Data Law, which entered into force on March 1, 2021, set forth new rules on the processing of personal data that is made available to the general public (the “Relevant Data”). Relevant Data comprises customer and user profiles which are publicly available. The Relevant Data can only be processed/transferred to third parties to the extent there is consent from the data subject (the consent shall be in the form to be prepared by Roskomnadzor, the Russian data protection authority). The data subject may specify (in such consent) certain restrictions on data processing (such restrictions may, however, not apply to processing in state or public interest). In the absence of consent, the data operator cannot disclose the Relevant Data to third parties or otherwise process it. The burden of proof in respect of receipt of consent to processing of the Relevant Data lies with the data operator. In the absence of the consent, the data operator can process the Relevant Data internally (i.e. without transfer to third parties), only if the data subject directly provided the Relevant Data to such data operator.
The Personal Data Law also provides for the right to withdraw consent, in which case the person processing personal data has the obligation to destroy the data relating to the relevant subject. The new rules with respect to the Relevant Data also allow the data subject to demand that the data operator/third parties cease to process his/her Relevant Data. Unless the processing is stopped upon receipt of the relevant request, the data subject can oblige the data operator to stop the processing through court proceedings. The rules do not apply to processing by the Russian state authorities.
 
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According to the Personal Data Law, personal data operators are required to conduct certain types of processing (“restricted processing actions”) of personal data of Russian citizens (when gathering such personal data) at collection of such data with the use of Russian databases (this obligation is referred to as the “Russian data localization rules”). Such “restricted processing actions” include recording, systematization, accumulation, storage, clarification (update, modification) and extraction/download. Roskomnadzor comments prohibit parallel input of gathered personal data into a Russian information system and a foreign-based system. This data may be transferred abroad by way of cross-border transfer from a Russian-based system only (and subject to the rules on cross-border transfer described below).
Russia also has restrictions on cross-border transfer of personal data, pursuant to which the transfer of personal data is allowed (subject to the rules on consent to processing described above) to countries which are either signatories to the Strasbourg Convention on Automated Processing of Personal Data 1981, or whitelisted by Roskomnadzor. If a country to which the transfer is made is neither of those (such as the United States), cross-border transfer is only permitted subject to a written consent of the data subject specifying the relevant country, or for certain specific purposes, such as the carrying out of an agreement with the data subject (e.g. a service or employment agreement), protection of vital interests of data subjects, including safety, or a constitutional regime.
In addition, pursuant to Federal Law No. 218-FZ “On Credit Histories” dated December 30, 2004 (the “Credit Histories Law”) and as amended on July 31, 2020, we also seek separate consents from our users, required to obtain credit reports on them from credit bureaus. The Credit Histories Law does not require the consent to be hand-written and allows our customers to sign by using e-signatures, subject to certain mandatory requirements including our identification of the relevant individual.
Intellectual Property Regulation
We hold intellectual property rights to trademarks and copyrights, and we enjoy their protection under Russian law and international conventions. The Civil Code (Part IV) is the basic law in Russia that governs intellectual property rights, including their protection and enforcement. According to the Civil Code, the software and databases that we develop internally generally do not require registration and enjoy legal protection simply by virtue of being created and either publicly disclosed or existent in a certain physical form. In addition, we obtain exclusive rights to materials that are subject to copyright protection and that are created for us on the basis of agreements with the authors of such materials. Also, subject to compliance with the requirements of the Civil Code, we are deemed to have acquired exclusive rights to copyright objects (including software and databases) created by our employees during the course of their employment with us and within the scope of their job functions, which includes the right to their further use and disposal.
Software may be registered by a copyright holder, at its discretion, with Rospatent, but such registration is not customary.
Trademarks, inventions, utility models and industrial designs require mandatory registration with Rospatent in order to have legal protection in Russia. Trademarks registered abroad under the Madrid Agreement Concerning the International Registration of Marks dated April 14, 1891 (the “Madrid Agreement”) and/or the Protocol to the Madrid Agreement dated June 27, 1989 have equal legal protection in Russia as trademarks registered locally. Our main brands are registered as trademarks in Russia and in the European Union.
Registration of a trademark in Russia by Rospatent is valid for ten years after the filing. This term may be extended for an additional ten years an unlimited number of times. The same term applies to international registration of a trademark under the Madrid Agreement. The registration is valid with respect to certain classes of goods or services selected by an applicant and will not be protected if used for other types of goods or services. In the absence of registration, the entity using the designation may not be able to protect its trademark against unauthorized use by a third party. If a third party has previously registered a trademark similar to the designation in question, then the entity may be held liable for unauthorized use of such trademark.
The transfer, license or encumbrance of intellectual property rights to trademarks or other registrable intellectual property under assignment agreements, franchising agreements, license agreements and pledge
 
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agreements are subject to registration with Rospatent. Failure to comply with the registration requirements results in the respective transfer, license or encumbrance being treated as non-existent, and use of the relevant intellectual property in the absence of registration of the relevant transfer, license or encumbrance may trigger civil, administrative or criminal liability. The registration of a copyright license, including over a registered software or database, is not required. However, such copyright license must be made in writing.
The Civil Code recognizes a concept of a well-known trademark, i.e., a mark which, as a result of its widespread use, has become well known in association with certain goods among Russian consumers.
Well-known trademarks enjoy more legal benefits than ordinary trademarks — these include:
•
broader coverage — an owner of a well-known trademark may exercise its exclusive rights in association with goods beyond those for which the relevant trademark was originally registered, provided that the use of an identical or confusingly similar trademark by a third party would cause consumers to associate the third party’s trademark with the owner of the well-known trademark and would affect the legitimate interests of the owner of the well-known trademark; and
​
•
an unlimited registration period — well-known trademarks registration generally remains effective for an unlimited period of time.
​
In order to register our main trademark as a well-known trademark, we are planning to submit the relevant application to Rospatent. We will need to provide Rospatent with certain documents including evidence that the relevant mark has become well known (such as the results of consumer surveys and documentary evidence of costs incurred for the advertising of the mark).
Russian law also contains provisions on the liability of online service providers (the Civil Code uses the term “information intermediary,” which is defined as a person enabling the publication of any materials on the internet) for the materials/information published by third parties on such providers’ networks if such materials/information infringe third party intellectual property rights. However, such liability is limited only to cases where the online service provider knew or should have known that published materials/​information infringe third party rights (for example, online service providers are exempt from the general rule of strict liability for infringement of intellectual property rights if such infringement is committed in connection with business activities).
Advertising Regulation
The principal Russian law governing advertising is the Russian Federal Law No. 38-FZ “On Advertising” dated March 13, 2006, as amended (the “Advertising Law”). The Advertising Law provides for a wide array of restrictions, prohibitions and limitations pertaining to contents and methods of advertising.
Set forth below is a non-exhaustive list of the types and methods of advertising that are prohibited regardless of the advertised product and the advertising medium:
•
advertising that judges or otherwise humiliates those who do not use the advertised product;
​
•
statements that the advertised product has been approved by state or municipal authorities or officials;
​
•
depiction of smoking and alcohol consumption;
​
•
use of pornographic or indecent materials in advertising;
​
•
advertising that may induce criminal, violent or cruel behavior;
​
•
use of foreign words that may lead to the advertising being misleading;
​
•
advertising of healing properties of a product that is not a registered medicine or medical service; and
​
•
omission of material facts that leads to advertising being misleading.
​
The law also prohibits advertisements for certain regulated products and services without appropriate certification, licensing or approval. Advertisements for products such as alcohol, tobacco, pharmaceuticals,
 
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baby food, financial instruments or securities and financial services, as well as incentive sweepstakes and advertisements aimed at minors, must comply with specific rules and must, in certain cases, contain specified disclosure. In addition, the distribution of advertisements over the internet (for example, by email) may require the prior express consent of recipients.
Russian advertising laws define and prohibit, among other things, “unfair,” “untrue” and “hidden” advertising (i.e. advertising that influences consumers without their knowledge). Advertising based on improper comparisons of the advertised products with products sold by other sellers is deemed unfair. It is also prohibited to advertise goods which may not be produced and distributed under Russian law.
In some cases, violation of these Russian laws can lead to civil action by third parties who suffer damages, or administrative penalties imposed by FAS. Further amendments to legislation regulating advertising may impact our ability to provide some of our services or limit the type of advertising we may offer.
Internet Regulation
The Law on Information introduced the main regulations of the dissemination of information on the internet. According to the Law on Information, a person assuring the functioning of information systems and/or software which is used to receive, transmit, deliver and/or process electronic messages of an internet user (e.g., messages on website forum) is deemed to be an arranger of information distribution by means of internet (the “Internet Arranger”). The arrangers are required to notify Roskomnadzor of such activity, in accordance with a government regulation, once they received requests from Roskomnadzor to fulfill this notification requirement given their role as arrangers. All arrangers should be included in a special register maintained by Roskomnadzor. Although messaging is not the primary aim of our platform, we cannot exclude the possibility that Russian regulators may allege that we are subject to the regulations applicable to arrangers.
The Yarovaya Law requires arrangers to store metadata (information confirming the fact of receipt, transmission, delivery and/or processing of text messages, pictures or other communications) and the contents of communications, including text messages, pictures or other communications for a certain period of time. In addition, the arrangers are required to supply, to investigatory and prosecutorial authorities, the information about the users and any other information “which is necessary for these authorities to achieve their statutory goals,” as well as any information and codes necessary to decode the information.
In addition, the Sovereign Internet Law provides, among other things, certain requirements for Internet Providers, entities holding an autonomous system number and the Internet Arrangers. Certain entities within the N1 Group were holding an autonomous system number, which we inherited as part of the N1 Acquisition The Internet Providers and Internet Arrangers are required to install certain software and hardware to determine IP addresses, install Russian-origin equipment for countering certain cyber threats, take part in practical trainings arranged by the Russian authorities and provide necessary assistance to the Russian investigative authorities. Failure to comply with the obligations and the legal requirements applicable to the Internet Arrangers or the Internet Providers could result in administrative (such as administrative fines or blocking of access to the online platform from within the territory of Russia) and other types of liability established by Russian law.
Antimonopoly Regulation
The Competition Law vests the FAS as the antimonopoly regulator with wide powers and authorities to ensure competition in the market, including prior approval of mergers and acquisitions, monitoring the activities of market participants that occupy dominant positions, prosecution of any wrongful abuse of a dominant position and the prevention of cartels and other anti-competitive agreements or practices. The FAS may impose significant administrative fines on market participants that abuse their dominant position or otherwise restrict competition and is entitled to challenge contracts, agreements or transactions that are performed in violation of the Competition Law. Furthermore, for systematic violations, a court may order, pursuant to a suit filed by the FAS, a compulsory split up or spin off of the violating company, and no affiliation can be preserved between the new entities established as a result of such a mandatory reorganization. We understand that the FAS could, in the future, focus on the markets in which we are
 
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active and could identify dominant positions so that limitations and other requirements contained in the Competition Law would apply to their operations.
The Competition Law expressly provides for its extraterritorial application to transactions and actions that are performed outside of Russia but lead, or may have led, to the restriction of competition in Russia.
The Competition Law provides for mandatory pre approval by the FAS for mergers, acquisitions, company formations and certain other transactions involving companies that meet certain financial thresholds. Under the Competition Law, if an acquirer has acted in violation of the merger control rules and, for example, acquired shares without obtaining the prior approval of the FAS, the transaction may be invalidated by a court order, if the suit is initiated by the FAS, provided that such transaction has led or may lead to the restriction of competition, for example, by means of strengthening of a dominant position in the relevant market.
The Competition Law, as well as the Advertising Law, restricts unfair competition in terms of information flow such as: (i) dissemination of false, inaccurate, or distorted information that may inflict losses on an entity or cause damage to its business reputation; (ii) misrepresentation with respect to the nature, method, and place of manufacture, consumer characteristics, quality and quantity of a commodity or with respect to its producers; (iii) incorrect comparison of the products manufactured or sold by it with the products manufactured or sold by other entities; (iv) sale of commodities in violation of intellectual property rights, including trademarks and brands; or (v) illegal receipt, use, and disclosure of information constituting commercial, official or other secret protected by law.
More generally, Russian legislation provides for civil and administrative liability for the violation of antimonopoly legislation. It also provides for criminal liability of company managers for violations of certain provisions of antimonopoly legislation.
 
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MANAGEMENT
Executive Officers and Board Members
The following individuals are our executive officers, and, prior to the consummation of the offering, we expect to appoint the following board members. The table below includes their ages as of the date of this prospectus:
Name
​ ​
Age
​ ​
Position
​
Executive Officers ​ ​ ​ ​ ​ ​ ​
Maksim Melnikov ​ ​
44
​ ​ Chief Executive Officer and Director ​
Mikhail Lukyanov ​ ​
34
​ ​ Chief Financial and Strategy Officer ​
Board Members ​ ​ ​ ​ ​ ​ ​
Maksim Melnikov ​ ​
44
​ ​ Chief Executive Officer, Director ​
Dmitri Krukov ​ ​
52
​ ​ Chairperson of the Board ​
Dmitry Antipov ​ ​
41
​ ​ Director ​
Simon Baker ​ ​
54
​ ​ Director ​
Douglas Gardner ​ ​
58
​ ​ Director ​
Chloe Harford ​ ​
46
​ ​ Director ​
Gilles Blanchard ​ ​
57
​ ​ Director ​
Unless otherwise indicated, the current business addresses for our executive officers and the members of our board of directors is at Anna Maria Lena Court, Flat 201, 64 Agiou Georgiou Makri, Larnaca, 6037 Cyprus. Our principal executive office is located at Elektrozavodskaya Ulitsa, 27, Building 8 Moscow, 107023, Russia.
Executive Officers
The following is a brief summary of the business experience of our executive officers.
Maksim Melnikov has served as our Chief Executive Officer since February 2014. Mr. Melnikov served on the board of HeadHunter Group PLC, an online recruitment platform in Russia and the CIS region, since May 2019. From 2010 to 2014, Mr. Melnikov served as Chief Executive Officer and director for Media3 Holding, a large print and digital media holding company focused on selling print media businesses and investing in online media ventures. Mr. Melnikov received a Master in Finance with honors from the Finance Academy under the Government of the Russian Federation, where he focused on banking, securities and public markets. Mr. Melnikov later received a Master of Business Administration from Stanford Graduate School of Business at Stanford University.
Mikhail Lukyanov has served as our key operating subsidiary’s Chief Financial and Strategy Officer since May 2015. Prior to joining us in March 2014, Mr. Lukyanov served as an investment manager in Media 3 LLC. Mr. Lukyanov holds a Masters in Finance from Financial University under the Government of the Russian Federation. Mr. Lukyanov is responsible, among other things, for development of our strategy, our accounting and financial reporting processes.
Board Members
Upon consummation of the offering and until and including the date that falls one year after the effective date of this registration statement, our board will comprise at least seven directors (including at least three independent directors), but not more than nine directors (including at least three independent directors). Following such date, unless and until otherwise determined by the Company in a general meeting, our board will comprise nine directors (including at least three independent directors). See “Description of Share Capital and Articles of Association — Board of Directors.” Following their election by the board of directors or appointment (as the case may be), each board member may serve for an indefinite term, provided that at each annual general meeting, any director (other than a director that Elbrus Capital is
 
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entitled to appoint and, until the Rights Expiry Date, Maksim Melnikov as director) then in office for whom it is the fourth annual general meeting following (i) his or her initial appointment by the board of directors or (ii) his or her last re-election by the annual general meeting (as the case may be), shall retire from office, but shall be eligible for re-appointment. If Maksim Melnikov is a director at the time of the fourth Annual General Meeting following the Rights Expiry Date, he shall retire from office as director, but shall be eligible for re-appointment.
The following is a brief summary of the business experience of our board members.
Dmitri Krukov is the founder and a senior partner at Elbrus Capital, a Russia and CIS-focused private equity business. Currently, Mr. Krukov is a director on the boards for the HeadHunter Group PLC, an online recruitment platform in Russia and the CIS region, and DS Russia Management GmbH, a logistics company. Previously, Mr. Krukov was a managing director in investment banking and finance at Renaissance Capital from 2002 to 2007, and a Vice President in the mergers, acquisitions and restructuring department at Morgan Stanley from 1996 to 2002. Mr. Krukov received a Master of Science in Applied Mathematics from Lomonosov Moscow State University and received a certificate from the Harvard Business School Executive Education program on Making Corporate Boards More Effective. Mr. Krukov also attended the MBA program at the Stanford Graduate School of Business in 1994 – 1995.
Dmitry Antipov is a partner at Elbrus Capital, a Russia and CIS-focused private equity business. Prior to joining Elbrus Capital in 2013, Mr. Antipov was an investment director at Baring Vostok Capital Partners, where he served as an investment manager from 2008 to 2010 and an investment director from 2010 to 2013. From 2004 to 2005, he was a senior manager in the Investment Department at VTB Bank. Before VTB Bank, Mr. Antipov held various positions in corporate finance at Deloitte & Touche and Ernst & Young. Mr. Antipov received a Ph.D. in Economics from Moscow State University in 2004 and an MBA from Stanford Graduate School of Business in 2007.
Simon Baker is the founder and Executive Chairman of CAV Investment Group, a private fund investing in a range of global internet-based businesses. He is also the Chairman of PropTech Group Limited and has served as a board member of several listed companies, including REA Group Limited, iProperty Group Limited, and Mitula Group Limited. Mr. Baker previously served as the Chief Executive Officer and Managing Director of the REA Group Limited, a digital advertising company that operates Australia’s leading property platforms, as well as real estate platforms in Europe, Asia and the United States. Mr. Baker received a Bachelor of Science in Computer Science from Monash University and an MBA from Melbourne Business School.
Douglas Gardner is the founder and Managing Director of CAIGAN Capital, an advisory and director services firm. He currently serves as a board member and the Chairman of Audit & Finance Committee of Kaspi.kz and a board member of MTS Bank, a subsidiary of Mobile TeleSystems PJSC, and has served as a board member of several listed companies, including Chelpipe Group. Mr. Gardner was previously elected as the Managing Partner of Ernst & Young, Russia & CIS and has also served as the Head of Financial Services and Managing Partner for Central Asia at Arthur Andersen. Mr. Gardner received a Bachelor of Business Administration in Accounting and International Business from the University of Oklahoma.
Chloe Harford is a senior product, strategy and business executive with 20 years of experience scaling high-growth tech-enabled mission-driven companies across the globe. Ms. Harford currently serves on the board of directors of Roofstock, an online real estate investing platform; JetClosing, a digital title and escrow company; and Overstory, a realtime vegetation intelligence platform. Previously, Ms. Harford served as Vice President of Product at OfferUp, the largest mobile marketplace for local buyers and sellers in the United States. Prior to OfferUp, Ms. Harford served in multiple senior executive roles at Zillow Group, a portfolio of some of the world’s largest real estate brands, including as Vice President of Strategy, and served as a board member for REI. Ms. Harford received an MBA from INSEAD, a Ph.D. in Volcanology from Bristol University and an M.A. in Natural Sciences from Cambridge University.
Gilles Blanchard has extensive experience working with property portal companies in a variety of real estate markets around the world. Currently, Mr. Blanchard is the Chairman of Zameen.com, the leading property portal based in Pakistan that lists real estate dealers, developers, agencies and properties for sale and rent. Mr. Blanchard was also the co-founder and chief technology executive of Seloger.com, the leading
 
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property website in France. Mr. Blanchard has served as a board member or chairman for several companies, including Seloger.com, Bayut.com, EMPG and Apimo.com. Mr. Blanchard received his Masters of Science in Telecommunications from the University of Paris XIII.
Composition of our Board of Directors
Unless and until otherwise determined by the Company in general meeting, until and including the date that falls one year after the effective date of this registration statement, our board will comprise at least seven directors (including at least three independent directors), but not more than nine directors (including at least three independent directors). Following such date, unless and until otherwise determined by the Company in a general meeting, our board will comprise nine directors (including at least three independent directors). See “Description of Share Capital and Articles of Association—Board of Directors.” Our board members do not have a retirement age requirement under our articles of association. Our board members prior to the completion of this offering have been elected in accordance with our articles of association to serve until their successors are duly elected and qualified. There are no family relationships among any of our directors or executive officers.
Corporate Governance
The Cyprus Securities and Exchange Commission has issued corporate governance guidelines pursuant to Public Offer and Prospectus Law of 2005, together with certain related disclosure requirements pursuant to Transparency Requirements Law of 2007 (the “Prospectus Law”). The proposed regulations are recommended as “best practices” for issuers to follow. As we will not be listed in a “regulated market” in accordance with the Prospectus Law, such guidelines will not apply to us.
Foreign Private Issuer Status
As a foreign private issuer whose ADSs will be listed on the NYSE, we will have the option to follow certain Cypriot corporate governance practices rather than those of the NYSE, except to the extent that such laws would be contrary to U.S. securities laws and provided that we disclose the practices we are not following and describe the home country practices we are following. We intend to rely on this “foreign private issuer exemption” with respect to the following NYSE requirements:
•
We will follow home country practice that permits our independent directors to constitute less than the majority of the directors on our board of directors, rather than NYSE corporate governance rule 303A.01, which requires that a majority of the board be independent (although all members of the audit committee must be independent under the Exchange Act);
​
•
We will follow home country practice that permits us not to hold regular executive sessions where only non-management directors are present, rather than the NYSE corporate governance rule 303A.03, which requires an issuer to have regularly scheduled meetings at which only non-management directors attend;
​
•
We will follow home country practice that permits our nominating, compensation and corporate governance committee not to consist entirely of independent directors, rather than NYSE corporate governance rules 303A.04 and 303A.05, which requires boards to have a nominating and corporate governance committee and compensation committee consisting entirely of independent directors;
​
•
We will follow home country practice that does not require our board of directors to be nominated by the nominating and corporate governance committee, rather than NYSE corporate governance rule 303A.04, which requires director nominees for the next annual general meeting of shareholders to either be selected, or recommended for the board’s selection, by the nominating and corporate governance committee comprised solely of independent directors;
​
•
We will follow home country practice that generally permits the board of directors, without shareholder approval, to establish or materially amend any equity compensation plans, rather than NYSE corporate governance rule 303A.08, which requires that our shareholders’ approve the establishment of, or any material amendments to any equity compensation plan;
​
 
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•
We will follow home country practice, and not the NYSE corporate governance rules, relating to matters requiring shareholder approval. Under Cyprus law and our articles of association, the business of the Company shall be managed by the Board. The Board of directors is consequently authorized to take any decisions that are not reserved to the shareholders either by law or the articles of association. According to Cyprus law, the matters to be decided by the shareholders include, among others: (i) amendments to the articles of association, (ii) changes to the company’s name, (iii) purchase of the company’s own shares; (iv) liquidation of the company, (v) reduction of the company’s capital, (vi) increase of the company’s authorized capital and others.
​
Except as stated above, we intend to comply with the rules generally applicable to U.S. domestic companies listed on the NYSE. We may, in the future, decide to use other foreign private issuer exemptions with respect to some or all of the other NYSE listing requirements. Following our home country governance practices, as opposed to the requirements that would otherwise apply to a company listed on the NYSE, may provide less protection than is accorded to investors under the NYSE listing requirements applicable to domestic issuers. For more information, see “Risk Factors—Risks Relating to our Initial Public Offering and Ownership of our ADSs—As a foreign private issuer, we are permitted to rely on exemptions from certain of the NYSE corporate governance standards, includingthe requirement that a majority of our board of directors consist of independent directors. Our reliance onsuch exemptions may afford less protection to holders of the ADSs.”
Board Committee Composition
The board has established, or will establish prior to the completion of this offering, an audit committee; a compensation, governance and nominating committee; and a strategy committee. Under our articles of association, for as long as Elbrus Capital holds the power to appoint at least one director, the director(s) appointed by it shall have the right to appoint, remove and substitute one of their number as a member of any one committee other than the audit committee.
Audit Committee
The audit committee, which is expected to consist of Douglas Gardner, Simon Baker and Chloe Harford, will assist the board in overseeing our accounting and financial reporting processes and the audits of our financial statements. Douglas Gardner will serve as Chairman of the committee. The audit committee will consist exclusively of members of our board who are financially literate, and Douglas Gardner is considered an “audit committee financial expert” as defined by the SEC. Our board has determined that Douglas Gardner, Simon Baker and Chloe Harford satisfy the “independence” requirements set forth in Rule 10A-3 under the Exchange Act. The audit committee will be governed by a charter that complies with NYSE rules.
Upon the completion of this offering, the audit committee will be responsible for:
•
the appointment, compensation, retention and oversight of any accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit services;
​
•
pre-approving the audit services and non-audit services to be provided by our independent auditor before the auditor is engaged to render such services;
​
•
evaluating the independent auditor’s qualifications, performance and independence, and presenting its conclusions to the full board on at least an annual basis;
​
•
reviewing and discussing with the board and the independent auditor our annual audited financial statements and quarterly financial statements prior to the filing of the respective annual and quarterly reports;
​
•
reviewing our compliance with laws and regulations, including major legal and regulatory initiatives and also reviewing any major litigation or investigations against us that may have a material impact on our financial statements; and
​
•
approving or ratifying any related person transaction (as defined in our related person transaction policy) in accordance with our related person transaction policy.
​
 
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The audit committee will meet as often as one or more members of the audit committee deem necessary, but in any event will meet at least four times per year. The audit committee will meet at least once per year with our independent accountant, without our executive officers being present.
Compensation, Governance and Nominating Committee
The compensation, governance and nominating committee will assist the board in: (i) determining executive officer compensation, (ii) developing our corporate governance principles and (iii) identifying individuals qualified to become members of our board consistent with criteria established by our board. The committee composition will be determined following the completion of this offering. The committee will also recommend to the board for determination the compensation of each of our executive officers.
Under SEC and the NYSE rules, there are heightened independence standards for members of the compensation committee, including a prohibition against the receipt of any compensation from us other than standard board member fees. As a foreign private issuer, we are permitted to, and intend to follow home country practice in lieu of the above requirements.
Upon the completion of this offering, the committee will be responsible for:
•
identifying, reviewing and approving corporate goals and objectives relevant to executive officer compensation;
​
•
analyzing the possible outcomes of the variable remuneration components and how they may affect the remuneration of our executive officers;
​
•
evaluating each executive officer’s performance in light of such goals and objectives and determining each executive officer’s compensation based on such evaluation;
​
•
determining any long-term incentive component of each executive officer’s compensation in line with the remuneration policy and reviewing our executive officer compensation and benefits policies generally;
​
•
periodically reviewing, in consultation with our Chief Executive Officer, our management succession planning;
​
•
reviewing and assessing risks arising from our compensation policies and practices for our employees and whether any such risks are reasonably likely to have a material adverse effect on us;
​
•
drawing up selection criteria and appointment procedures for board members;
​
•
reviewing and evaluating the composition, function and duties of our board;
​
•
recommending nominees for selection to our board and its corresponding committees;
​
•
making recommendations to the board as to determinations of board member independence;
​
•
leading the board in a self-evaluation, at least annually, to determine whether it and its committees are functioning effectively;
​
•
overseeing and recommending, for adoption by the general meeting of shareholders the compensation for our board members; and
​
•
developing and recommending to the board our rules governing the board and code of business conduct and ethics and reviewing and reassessing the adequacy of such rules governing the board and Code of Business Conduct and Ethics and recommending any proposed changes to the board.
​
Strategy Committee
The strategy committee will assist our board in overseeing our strategic initiatives. The committee composition will be determined following the completion of this offering.
Upon the completion of this offering, the strategy committee will be responsible for:
•
reviewing and making recommendations on the Group’s long-term strategic goals and objectives;
​
 
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•
reviewing business strategies and strategic development plans;
​
•
reviewing and making recommendations on material strategic transactions, including major financing and investment proposals;
​
•
meeting with management periodically to monitor and advise on the Group’s strategic goals;
​
•
advising the Group’s management on potential strategic initiatives, business strategies and goals; and
​
•
discussing and making recommendations to the Board on the implementation of the Group’s strategy and any other matters relating to the strategic planning.
​
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics, which covers a broad range of matters including the handling of conflicts of interest, compliance issues and other corporate policies such as equal opportunity and non-discrimination standards. This Code of Business Conduct and Ethics applies to all of our executive officers, board members and employees.
Duties of Board Members and Conflicts of Interest
Under Cyprus law, our directors each owe fiduciary duties at common law, including a duty to act honestly, in good faith and in what the director believes are the best interests of our company. When exercising powers or performing duties as a director, the director is required to exercise the care, diligence and skill that a responsible director would exercise in the same circumstances taking into account, without limitation, the nature of the company, the nature of the decision and the position of the director and the nature of the responsibilities undertaken by him. The directors are required to exercise their powers for a proper purpose and must not act or agree to the company acting in a manner that contravenes our amended and restated memorandum and articles of association or Cyprus law.
A director who is in any way, directly or indirectly, interested in a contract or proposed contract with us shall declare the nature of his or her interest at a meeting of the directors in accordance with the Cyprus Companies Law. Directors who have an interest in any contract or arrangement shall not have the right to vote (and shall not be counted in the quorum).
Executive Officer and Board Member Compensation
The compensation for each of our executive officers is comprised of the following elements: base salary, bonuses, and grants under our equity-based incentive program consisting of phantom share options, for further details, see “Management—Long-Term Incentive Plans”).
The total amount of compensation paid and benefits in kind provided to our executive officers and members of our board for the year ended December 31, 2020 was RUB 351 million, including RUB 38 million of short-term employee benefits and RUB 313 million of share-based payment expense. We do not currently maintain any bonus or profit-sharing plan for the benefit of our executive officers; however, certain of our executive officers are eligible to receive annual bonuses pursuant to the terms of their employment agreements and, from time to time, our employees may participate in incentive programs related to performance of specific business units.
Executive Officer and Board Member Employment Agreements
Each of our executive officers currently has an employment agreement for an indefinite period of time, with the exception of our CEO, who has an agreement for a term of three years. These agreements each contain customary provisions regarding confidentiality of information and assignment of inventions. The agreement with our CEO contains a noncompetition clause.
Long-Term Incentive Plans
Phantom Share Program
Prior to this offering we had a long-term incentive program for certain senior employees, which provided for cash payments based on the value of our ordinary shares (the "Phantom Share Program"). We
 
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refer to an award with respect to one ordinary share as a phantom share. Phantom shares typically vest over a four- or five-year period following the grant date, subject to the participant's continued employment through each vesting date. The program provides that its participants are entitled to a cash payment with respect to their phantom shares upon occurrence of certain liquidity events, such as this offering. The amount of the cash payment in respect of a vested phantom share is determined based on the increase in our ordinary share price between the grant date and the time of payment. As a condition of receiving an allocation of phantom shares, participants must agree to restrictions on competitive activity, solicitation of our employees, and use of our confidential information, which apply at all times during the participant’s employment and for two years thereafter.
In connection with this offering, we amended the terms of the long-term incentive program, such that the employees may choose to receive payment for vested phantom shares in cash or in ordinary shares upon the completion of this offering.
Starting from 2015, we have granted phantom share awards equivalent to an aggregate of 4,923,042 phantom shares (as adjusted for 1-for-2,500 share split that was effected on August 5, 2021) to 30 employees (including four former employees), 69.0% of which have vested as of the date of this prospectus. 2,377,324 of these phantom shares were granted to our CEO (who is also one of our shareholders and owns directly 4,318,805 of our ordinary shares as of the date of this prospectus), 68.8% of which have vested as of the date of this prospectus, and 297,165 phantom shares were granted to our CFO, all of which are vested as of the date of this prospectus. The phantom shares issued to our CEO are expected to be fully settled in cash, and the settlement payment is expected to be approximately $19.6 million, assuming an initial public offering price of $14.75 per ADS, which is the midpoint of the price range set forth on the cover page of this prospectus. The phantom shares issued to our CFO are expected to be partly settled in cash and partly in shares. The amount of ordinary shares expected to be issued to our CFO is 197,606, and the settlement payment is expected to be approximately $792 thousand, in both cases, assuming an initial public offering price of $14.75 per ADS, which is the midpoint of the price range set forth on the cover page of this prospectus.
Following the settlement of the Phantom Share Program, assuming an initial public offering price of $14.75 per ADS, which is the midpoint of the price range set forth on the cover page of this prospectus, the maximum amount of ordinary shares for other employees (excluding the CEO and the CFO) to be issued is expected to be 1,067,340, which is equivalent to approximately $15.3 million. As of the date hereof, we cannot estimate with certainty how many vested phantom shares our employees will opt to receive in either cash or in ordinary shares. The final settlement split between shares and cash will be selected by our employees after the completion of this offering. The Phantom Share Program will be terminated upon completion of this offering.
The share-based awards provided in Note 13 of our unaudited interim condensed consolidated financial statements for the six months ended June 30, 2021 and 2020 and our audited consolidated financial statements for the years ended December 31, 2020 and 2019 include all share-based awards granted. Since some of those grants were downsized upon termination of employment agreements, the number of share-based awards differs from the actual granted and vested amounts outlined above.
Proposed New Option Program
In connection with this offering, we intend to adopt a new long-term incentive plan (the “2021 Restricted Stock Units Plan” or the “2021 Plan”) to help align the interests of our management, employees and directors with those of our shareholders. In accordance with the 2021 Plan, we may grant the restricted stock units (the “RSU”) or other share-based awards. The 2021 Plan is scheduled to expire on December 31, 2031, although previously granted awards will remain outstanding after such date in accordance with their terms. The material terms of the 2021 Plan are summarized below.
Plan administration.   The 2021 Plan will be administered by our compensation governance and nominating committee, including determination of terms and conditions of all RSUs, approval of amendments to any RSU in accordance with the 2021 Plan, amendment and repeal of administrative rules, guidelines and practices relating to the 2021 Plan.
 
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Eligibility.   We may grant RSUs to our employees, officers, directors and our contractors. Our compensation governance and nominating committee, as an administrator of the 2021 Plan, shall select recipients of the RSUs. Members of the board are eligible to receive the RSUs under the 2021 Plan subject to stockholders approval to the extent, if any, such approval is required by the applicable law or the our articles of association.
Vesting schedule.   Awards under the 2021 Plan generally vest over a four-year period, with 1/4 vesting on the first anniversary of the grant and an additional 1/4 vesting each calendar year thereafter. RSUs that have not become vested as of the date of termination of the participant’s employment or service, shall be forfeited upon such termination.
Available pool.   We may grant the RSUs or other share-based awards under the 2021 Plan for up to a maximum number of ordinary shares equal to 6.5% of the aggregate number of our ordinary shares issued and outstanding (by number) as of the date of adoption of the 2021 Plan. Each RSU carries the right to receive one share upon satisfaction of the applicable vesting conditions. Subject to certain conditions, awards in the form of RSUs or any other share-based awards issued under the 2021 Plan shall reduce the available pool by one share for each granted RSU.
Insurance and Indemnification
Our articles of association provide that, subject to certain limitations, we will indemnify our directors and officers against any losses or liabilities which they may sustain or incur in or about the execution of their duties including liability incurred in defending any proceedings whether civil or criminal in which judgment is given in their favor or in which they are acquitted. We expect the service agreements with our independent directors will provide for indemnification of this type.
Insofar as the Securities Act permits executive officers, board members and our controlling persons (pursuant to the foregoing provisions) to be indemnified with respect to liabilities arising under the Securities Act, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
 
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information relating to the beneficial ownership of our ordinary shares as of September 30, 2021 and as adjusted to reflect the sale of the ADSs in this offering by:
•
each person, or group of affiliated persons, known by us to beneficially own 5% or more of our outstanding ordinary shares;
​
•
each of our executive officers and our directors; and
​
•
all of our executive officers and our board of directors as a group.
​
For further information regarding material transactions between us and principal shareholders, see “Related Party Transactions.”
The number of ordinary shares beneficially owned by each entity, person, executive officer or board member is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days of September 30, 2021 through the exercise of any option, warrant or other right. Except as otherwise indicated, and subject to applicable community property laws, we believe that each shareholder identified in the table possesses sole voting and investment power over all common stock shown as beneficially owned by the shareholder.
The percentage of shares beneficially owned before the offering is computed on the basis of 65,000,000 of our ordinary shares as of September 30, 2021. The percentage of shares beneficially owned after the offering is based on the number of our ordinary shares to be outstanding after this offering, including the 14,171,000 ADSs that the Selling Shareholders are selling in this offering, and assumes no exercise of the option to purchase additional ADSs from the Selling Shareholders. Ordinary shares that a person has the right to acquire within 60 days of September 30, 2021 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all executive officers and board members as a group. Unless otherwise indicated below, the address for each beneficial owner listed is 64 Agiou Georgiou Makri, Anna Maria Lena Court, Flat 201, 6037, Larnaca, Cyprus.
 
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​ ​ ​ ​ ​ ​
Ordinary shares beneficially owned
after this offering
​
​ ​ ​
Number of ordinary
shares beneficially
owned before this
offering
​ ​
Shares offered
hereby
​ ​
No exercise of
underwriters’
option to purchase
additional ADSs
​ ​
Full exercise of
underwriters’
option to purchase
additional ADSs
​
Name of beneficial owner
​ ​
Number
​ ​
Percent
​ ​
Number
​ ​
Percent
​ ​
Number
​ ​
Percent
​ ​
Number
​ ​
Percent
​
5% or Greater Shareholders ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Elbrus Capital Funds(1)
​ ​ ​ ​ 42,474,855 ​ ​ ​ ​ ​ 65.3% ​ ​ ​ ​ ​ 10,027,269 ​ ​ ​ ​ ​ 15.4% ​ ​ ​ ​ ​ 32,447,586 ​ ​ ​ ​ ​ 47.0% ​ ​ ​ ​ ​ 30,514,441 ​ ​ ​ ​ ​ 44.2% ​ ​
Entities affiliated with The Goldman Sachs Group, Inc.(2)
​ ​ ​ ​ 9,172,509 ​ ​ ​ ​ ​ 14.1% ​ ​ ​ ​ ​ 2,165,404 ​ ​ ​ ​ ​ 3.3% ​ ​ ​ ​ ​ 7,007,105 ​ ​ ​ ​ ​ 10.1% ​ ​ ​ ​ ​ 6,589,640 ​ ​ ​ ​ ​ 9.5% ​ ​
MPOC Technologies Ltd(3)
​ ​ ​ ​ 7,488,571 ​ ​ ​ ​ ​ 11.5% ​ ​ ​ ​ ​ 1,767,867 ​ ​ ​ ​ ​ 2.7% ​ ​ ​ ​ ​ 5,720,704 ​ ​ ​ ​ ​ 8.3% ​ ​ ​ ​ ​ 5,379,879 ​ ​ ​ ​ ​ 7.8% ​ ​
Executive Officers and Board Members
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Maksim Melnikov
​ ​ ​ ​ 4,318,805 ​ ​ ​ ​ ​ 6.6% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ 4,318,805 ​ ​ ​ ​ ​ 6.3% ​ ​ ​ ​ ​ 4,318,805 ​ ​ ​ ​ ​ 6.3% ​ ​
Mikhail Lukyanov(4)
​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​
Dmitry Antipov
​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​
Dmitri Krukov
​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​
Simon Baker 
​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​
Douglas Gardner
​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​
Chloe Harford
​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​
Gilles Blanchard
​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​
All executive officers and board members as a group (eight
persons)
​ ​ ​ ​ 4,318,805 ​ ​ ​ ​ ​ 6.6% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ 4,318,805 ​ ​ ​ ​ ​ 6.3% ​ ​ ​ ​ ​ 4,318,805 ​ ​ ​ ​ ​ 6.3% ​ ​
Other Selling Shareholders ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Joox Limited(5)​
​ ​ ​ ​ 819,496 ​ ​ ​ ​ ​ 1.4% ​ ​ ​ ​ ​ 210,460 ​ ​ ​ ​ ​ 0.3% ​ ​ ​ ​ ​ 609,036 ​ ​ ​ ​ ​ 0.9% ​ ​ ​ ​ ​ 568,461 ​ ​ ​ ​ ​ 0.8% ​ ​
​
(1)
Includes 18,602,560 ordinary shares directly held by Ronder Investments Limited, an investment vehicle associated with Elbrus Capital Fund II L.P. and Elbrus Capital Fund IIB L.P.; 17,869,552 ordinary shares directly held by Speedtime Trading Limited, an investment vehicle associated with Elbrus Capital Fund II L.P. and Elbrus Capital Fund IIB L.P.; and 6,002,743 ordinary shares directly held by Onlypiece Trading Limited, an investment vehicle associated with Elbrus Capital Fund III A.S.C.SP (together with Elbrus Capital Fund II L.P. and Elbrus Capital Fund IIB L.P., the “Elbrus Capital Funds”). Elbrus Capital General Partner II Limited is the general partner of Elbrus Capital Fund II L.P. and Elbrus Capital Fund IIB L.P. Evert Brunekreef and Daniel Thomas Rewalt are the directors of Elbrus Capital General Partner II Limited. Mr. Brunekreef and Mr. Rewalt disclaim beneficial ownership of the investments held by Elbrus Capital General Partner II Limited. Elbrus Capital Fund III GP S.à r.l. is acting as the general partner of Elbrus Capital Fund III A.S.C.SP. Elmira Askerova, Horiana Secara and Riccardo Zorzetto are the directors of Elbrus Capital Fund III GP S.à r.l. Each of Ms. Askerova, Ms. Secara and Mr. Zorzetto disclaim beneficial ownership of the investments held by Elbrus Capital Fund III GP S.à r.l. The Senior Partners of the Elbrus Capital Funds are Dmitri Krukov, Alexander Savin and Rob Thielen. Each of Mr. Krukov, Mr. Savin and Mr. Thielen disclaims beneficial ownership of these shares except to the extent of any pecuniary interest therein. The address for Ronder Investments Limited is Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands. The address for Speedtime Trading Limited is 6 Ioanni Stylianou, Floor: 2nd, flat/ office 202, Nicosia, 2003, Cyprus. The address for Onlypiece Trading Limited is Katalanou 1, 1st floor, flat/office 101, Aglantzia 2121, Nicosia, Cyprus. The registered office address for Elbrus Capital Fund IIB L.P. is One Nexus Way, Camana Bay, Grand Cayman, KY1-9005, Cayman Islands. The registered office address for Elbrus Capital Fund II L.P is One Nexus Way, Camana Bay, Grand Cayman, KY1-9005, Cayman Islands. The registered office address for Elbrus Capital Fund III A.S.C.SP is 412F, route d’Esch, L-2086 Luxembourg.
​
(2)
Includes 8,360,256 ordinary shares directly held by ELQ Investors II Ltd; 178,299 ordinary shares directly held by Stonebridge 2020 Offshore Holdings II, L.P.; 316,977 ordinary shares directly held by Stonebridge 2020, L.P.; and 316,977 ordinary shares directly held by West Street EMS Partners, SLP (collectively, the “GS Entities”). Affiliates of Goldman Sachs & Co. LLC and The Goldman Sachs Group, Inc. are the ultimate parent undertaking, general partner or investment manager of each of the GS Entities. Each of Goldman Sachs & Co. LLC and The Goldman Sachs Group, Inc. disclaims beneficial ownership over the shares described above. The registered office address for ELQ Investors II Ltd is Plumtree Court, 25 Shoe Lane, London, United Kingdom, EC4A 4AU. The registered office address for Stonebridge 2020 Offshore Holdings II, L.P. is P.O. Box 309, Ugland House, South Church Street, George Town, Cayman Islands, KY1-1104. The registered office address for Stonebridge 2020, L.P.
​
 
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is Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801. The registered office address for West Street EMS Partners, SLP is 2, Rue du Fossé, Luxembourg, L-1536. The address of each of Goldman Sachs & Co. LLC and The Goldman Sachs Group, Inc. is 200 West Street, New York, NY 10282.
(3)
MPOC Technologies Ltd is an investment vehicle associated with our founder Dmitry Demin. MPOC Technologies Ltd is controlled by Dmitry Demin, who may be deemed to have beneficial ownership of the shares held by MPOC Technologies Ltd. The address for MPOC Technologies Ltd. is Vistra Tortola, British Virgin Islands.
​
(4)
Does not include 197,606 ordinary shares expected to be issued to Mikhail Lukyanov under the Phantom Share Program (for further details, see “Management — Long-Term Incentive Plans”)
​
(5)
Joox Limited is an investment vehicle associated with its founder Sergey Osipov. It specialises on online classifieds and is owned by Sergey Osipov, who may be deemed to have beneficial ownership of the shares held by Joox Ltd. The address of the company is Quijano Chambers P.O. Box 3159, Road Town, Tortola, British Virgin Islands.
​
 
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RELATED PARTY TRANSACTIONS
The following is a description of related party transactions we have entered into since January 1, 2018 with any of our members of our board or executive officers and the holders of more than 5% of our ordinary shares.
Relationship with Shareholders
Loans from Shareholders
On January 22, 2019, we entered into a loan agreement with our shareholders, Ronder Investments Limited, Speedtime Trading Limited, MPOC Technologies Limited and Joox Limited, for the total amount of U.S.$ 2,687,600 and with an annual interest rate of 8%, which was repaid in full by December 31, 2019.
Arrangements with HeadHunter, an associate of Elbrus Capital
We place our advertising with, among other sources, the website operated by HeadHunter LLC (“HeadHunter”) (an associate of Elbrus Capital, one of our significant shareholders). In addition, we also use HeadHunter’s informational, consulting and other services available on its website. For the years ended December 31, 2020 and 2019, our purchases from HeadHunter totaled RUB 3 million and RUB 4 million, respectively. Our relations with HeadHunter are governed by two framework service agreements, which have indefinite duration and may be terminated by each party by prior written notice.
Advisory Compensation
Mikhail Zhukov, the Chief Executive Officer of HeadHunter, provided us with advisory services in connection with this offering. As compensation for such services, we have agreed to issue to Mr. Zhukov 11,706 shares or respective cash amount as may be agreed between us and Mr. Zhukov upon completion of this offering.
Investment Agreement
On December 31, 2020, we entered into an investment agreement with certain of our shareholders, Onlypiece Trading Limited, Stonebridge 2020 Offshore Holdings II, L.P., Stonebridge 2020 L.P., ELQ Investors II Ltd and Otaga Limited (together, the “Investors”). According to the terms of the investment agreement, in consideration for the issuance of 281 ordinary shares (5,566,900 ordinary shares after the share split) in favor of the Investors, the Investors paid to us the subscription price by way of set-off against principal amount of the loan provided earlier in accordance with the investment agreement. The principal amount of the loan totaled RUB 2,265 million and was utilized primarily for financing of the N1 Acquisition.
Pre-IPO Shareholders’ Agreement
We entered into a shareholders’ agreement with our existing shareholders, dated August 6, 2018, as further amended (the “Pre IPO Shareholders’ Agreement”), which sets out rights and obligations of the parties and corporate governance regulations with regard to us and our subsidiaries. The Pre-IPO Shareholders’ Agreement will terminate upon the completion of this offering.
Registration Rights Agreement
We intend to enter into a registration rights agreement with certain of our shareholders (the “Registration Rights Agreement”) prior to the consummation of this offering. The Registration Rights Agreement will provide such shareholders certain registration rights relating to our ordinary shares held by them and any ADSs issued with respect to them, subject to customary restrictions and exceptions. Under the Registration Rights Agreement, the shareholders will have certain demand registration rights and piggyback registration rights exercisable following the expiration of any related lock-up period, subject to customary restrictions and exceptions. All fees, costs and expenses of registrations, other than underwriting discounts and commissions, are expected to be borne by us.
 
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Coordination Agreement
In connection with this offering, certain of our shareholders intend to enter into a coordination agreement (the “Coordination Agreement”) prior to the consummation of this offering. The Coordination Agreement will for a period of three years following the consummation of this offering, among other things: (i) establish a procedure for the parties to follow prior to initiating any registered offering pursuant to the Registration Rights Agreement so as to coordinate on the timing and size of any such offer, (ii) establish a special shareholder coordination committee for this purpose and (iii) provide for certain tag-along rights with respect to the registration and sale of our ordinary shares and any ADSs issued with respect to them.
Agreements with Board Members and Executive Officers
For a description of our agreements with our board members and executive officers, please see “Management—Executive Officer and Board Member Employment Agreements.”
On January 18, 2019, our subsidiary iRealtor LLC, acting as a borrower, entered into a loan agreement with Maksim Melnikov, our shareholder, Director and the Chief Executive Officer, acting as a lender, for the total amount of U.S.$ 308,600 and with an annual interest rate of 8%, which was repaid in full by December 31, 2019.
As part of our strategic efforts to obtain access to the status of a financial platform operator (for further details see “Risk Factors—Risks Related to Our Business and Industry—Our continued growth depends on our ability to successfully implement our strategy, which is subject to avariety of risks and uncertainties, including regulatory risks.”), on August 6, 2021, our subsidiary MLSN LLC entered into a loan agreement with Financial Platform JSC, a company incorporated and fully owned by Maksim Melnikov, our shareholder, Director and the Chief Executive Officer. The credit line under the loan agreement was for a total amount of RUB 20 million and bore interest of 6.5% (the “MLSN Loan”). On October 11, 2021, our other subsidiary, Mimons Investments Limited, issued a loan to Financial Platform JSC in the amount of RUB 25 million for the purposes of refinancing the MLSN Loan (the “Mimons Loan”). The outstanding principal amount under the MLSN Loan at the repayment date was RUB 16 million. Financial Platform JSC repaid the outstanding amount of RUB 16 million under the MLSN Loan on October 13, 2021. The Mimons Loan was forgiven pursuant to the agreement between the parties on October 13, 2021.
Rights of Certain Principal Shareholders to Nominate and Appoint Directors
For a description of the rights of Elbrus Capital and Maksim Melnikov with respect to the nomination and appointment of our directors, please see “Description of Share Capital and Articles of Association—​Appointment of Directors.”
Indemnification Agreements
We intend to enter into indemnification agreements with our board members and executive officers. Our articles of association provide that, subject to certain limitations, we will indemnify our directors and officers against any losses or liabilities which they may sustain or incur in or about the execution of their duties including liability incurred in defending any proceedings whether civil or criminal in which judgment is given in their favor or in which they are acquitted. See “Management—Insurance and Indemnification” for a description of these indemnification agreements.
Related Party Transaction Policy
We have adopted a written related person transaction policy, which sets forth the policies and procedures for the review and approval, or ratification of, related person transactions. This policy covers, with certain exceptions set forth in Item 404 of Regulation S K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involved exceeds a certain threshold and a related person had or will have a direct or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person.
 
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DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF ASSOCIATION
The following is a summary of certain provisions of the articles of association that we intend to adopt in connection with this offering and the Cyprus law insofar as they relate to the material terms of our ordinary shares. These summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of our articles of association and Cyprus law. Prospective investors are urged to read the complete form of our articles of association which have been filed with the SEC as an exhibit to our registration statement of which this prospectus is a part.
Purpose and Share Capital
Our objects are set forth in full in Regulation 3 of our memorandum of association. As of June 15, 2021 our issued and fully paid share capital amounted to EUR 3,281, which consisted of 3,281 ordinary shares with a nominal value of EUR 1.00, and our authorized share capital amounted to EUR 3,350, which consisted of 3,350 ordinary shares with a nominal value of EUR 1.00. As of August 5, 2021, our issued and fully paid share capital amounted to EUR 26,000 which consisted of 65,000,000 ordinary shares with a nominal value of EUR 0.0004, and our authorized share capital amounted to EUR 52,000 which consisted of 130,000,000 ordinary shares with a nominal value of EUR 0.0004 each.
Changes in Our Share Capital during the Last Three Fiscal Years
Since January 1, 2018, our issued share capital changed as follows:
•
During 2018, we issued 2,000 ordinary shares of nominal value EUR 1.00 each, which resulted in an increase in the issued share capital of the Company to EUR 3,000 of issued and fully paid share capital as of December 31, 2018.
​
•
During February, 2021, we issued 281 ordinary shares of nominal value EUR 1.00 each (5,566,900 ordinary shares after the share split with a nominal value of EUR 0.0004), which resulted in an increase in the issued share capital to EUR 3,281 of issued and fully paid share capital as of June 15, 2021.
​
Significant Changes to Our Capitalization since June 30, 2021
In August, pursuant to a special resolution at a general meeting of the Company, we:
•
made a 1-for-2,500 split of our ordinary shares;
​
•
increased the authorized share capital by the creation of additional 121,625,000 ordinary shares of EUR 0.0004 each; and
​
•
issued and allotted 56,797,500 fully paid ordinary shares of EUR 0.0004 each to our existing shareholders on a pro rata basis.
​
Ordinary Shares
General
There are no limitations on the rights to own our ordinary shares, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on our ordinary shares under Cyprus Law or our articles of association.
Voting Rights
Holders of our ordinary shares are entitled to one vote per share.
Every shareholder will have:
•
one vote on a show of hands; and
​
•
one vote for every ordinary share such shareholder holds on a poll.
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Notwithstanding the foregoing, if a general meeting is proposed:
•
(i) for the amendment of our articles of association in relation to the procedure and rights to appoint and remove any director that Elbrus Capital is entitled to appoint and remove or (ii) for consideration of any resolution that would directly or indirectly affect the rights of Elbrus Capital to appoint and remove the directors it is entitled to appoint and remove, the shares held by Elbrus Capital shall, if Elbrus Capital votes against such resolutions, confer on it in total the same number of votes as the shares held by all other shareholders who have voted in favour of such resolutions; and
​
•
for the amendment of our articles of association in relation to the procedure and rights to appoint and remove Maksim Melnikov as director or (ii) for consideration of any resolution that would directly or indirectly affect the rights of Maksim Melnikov (or of any trusts or nominees acting on his behalf) to appoint and remove Maksim Melnikov as director, the shares held by Maksim Melnikov (or, if applicable, such trust(s) or nominee(s)) shall, if Maksim Melnikov (or, if applicable, such trust(s) or nominee(s)) votes against such resolutions and until the Rights Expiry Date only, confer in total the same number of votes as the shares held by all other shareholders who have voted in favour of such resolutions.
​
Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by:
•
the chairman of such meeting;
​
•
at least three shareholders having the right to vote at the meeting present in person or by proxy;
​
•
one or more shareholders representing in aggregate at least 10% of the total voting rights of all shareholders having a right to vote at such meeting present in person or by proxy; or
​
•
one or more shareholders, present in person or by proxy, holding shares conferring a right to vote at such meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth (1/10) of the total sum paid up on all the shares conferring that right.
​
Each shareholder is entitled to attend general meetings, to address the meeting and, subject to all calls and other amounts payable by such shareholder in respect of its shares having been paid, to exercise any voting rights such shareholder may have.
A corporate shareholder may, by resolution of its directors or other governing body, authorize a person to act as its representative at general meetings and that person may exercise the same powers as the corporate shareholder could exercise if it were an individual shareholder. No shareholder is entitled to vote at any general meeting unless all calls and other amounts payable by such shareholder in respect of shares have been fully paid.
Shareholders may attend meetings in person or be represented by proxy authorized in writing.
The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorized in writing, or, if the appointer is a corporation, either under seal, or under the hand of an officer or attorney duly authorized. A proxy does not need to be a shareholder.
The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of that power or authority, shall be deposited at our registered office or at such other place within Cyprus as is specified for that purpose in the notice convening the meeting at any time before the time for holding the meeting or adjourned meeting, at which the person named in the instrument proposes to vote, or, in the case of a poll, at any time before the time appointed for the taking of the poll, and in default the instrument of proxy shall not be treated as valid.
We have not provided for cumulative voting for the election of directors.
Commissions
Our articles of association allow for our directors to approve the payment of commissions in accordance with section 52 of the Companies Law, in connection with the sale of shares in the Company.
 
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Dividends
We may only pay out dividends of the profits as shown in our adopted annual IFRS accounts. Under Cyprus law, we are not allowed to make distributions if the distribution would reduce our net assets below the total sum of the issued share capital and the reserves that we must maintain under Cyprus law and our articles of association.
Interim dividends can only be paid if interim accounts are drawn up showing that funds available for distribution are sufficient and the amount to be distributed may not exceed the total profits made since the end of the financial year for which the annual accounts have been drawn up, plus any profits transferred from the last financial year, and the withheld funds made of the reserves available for this purpose, minus any losses of the previous financial years and funds which must be put in reserve pursuant to the requirements of the law and our articles of association.
Pre-emptive Rights
Under the Cyprus Companies Law, each existing shareholder has a right of pre-emption to subscribe for any new shares to be issued by us and/or other securities giving the right to purchase our shares, or which are convertible into our shares in cash, in proportion to the aggregate number of such shares and/or securities of such shareholder, except that there are no obligatory pre-emption rights with respect to shares issued for non-cash consideration.
Under our articles of association, we have to notify all shareholders in writing of the number of ordinary shares and/or other securities, giving the right to purchase our shares or which are convertible into our shares, which the shareholders are entitled to acquire and the time period within which the offer, if not accepted, shall be deemed to have been rejected.
Each shareholder will have not less than 14 business days following dispatch of the notice of the offer to notify us of its desire to exercise its pre-emption right on the same terms and conditions proposed in the notice. If all the shareholders do not fully exercise all their pre-emption rights, the board of directors, provided that such authority has been granted by the general meeting, may decide to offer and sell the remaining shares to third parties on terms not more favorable than those indicated in the notice.
Shareholders’ pre-emption rights may be waived by a resolution of the general meeting adopted by a majority of two-thirds of the votes corresponding either to the represented securities or to the represented issued share capital if less than half of the issued share capital is represented, and a simple majority when at least half of the issued share capital is represented. In connection with such waiver, the board of directors must present a written report indicating the reasons why the right of pre-emption should be waived and justifying the proposed issue price. A copy of the said resolution of the general meeting must be delivered to the Registrar of Companies in Cyprus and be published in the Official Gazette of the Republic of Cyprus.
Our shareholders have authorized the disapplication of pre-emptive rights for a period of five years from the date of the completion of this offering in connection with the issue of all newly issued ordinary shares, including, to the extent relevant, any ordinary shares issued in the form of ADSs.
Variation of Rights
Under the Cyprus Companies Law and our articles of association, generally any change to the amount of our share capital, the division of our share capital into additional classes, or any change to the rights attached to any class of shares must be approved by a separate vote of each class of shares affected by the change. Variation of class rights requires approval by a majority of two-thirds of the votes corresponding either to the represented securities or to the represented issued share capital if less than half of the issued share capital is represented and a simple majority when at least half of the issued share capital is represented. Members voting against the variation of that class, who between them hold or represent 15% of the issued shares of that class, may apply to the court to set aside the variation.
Alteration of Capital
The following alterations to our share capital may be effected by approval of a majority of two-thirds of the votes corresponding either to the represented securities or to the represented issued share capital, if
 
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less than half of the issued share capital is represented, and by simple majority when at least half of the issued share capital is represented at a general meeting of our shareholders:
•
an increase in our authorized share capital;
​
•
the consolidation and division of any or all of our shares into shares representing a greater proportion of our share capital each;
​
•
the subdivision of all or part of our shares; and
​
•
the cancellation of any shares that have not been taken by any person at the date of the passing of the resolution.
​
We may also, by special resolution of a general meeting of shareholders, reduce our share capital, any capital redemption reserve account or any share premium account. Following the adoption of a special resolution for the reduction of capital, a company must apply to the Cypriot court for ratification of such special resolution. The Cypriot court shall take into account the position of the creditors of the company in deciding whether to ratify the resolution. Once the court ratifies the resolution, the court order, together with the special resolution, are filed with the Cyprus Registrar of Companies.
Issuance of Shares
Our articles of association provide for a possibility to issue multiple classes of shares and the share capital of the Company may be divided into multiple classes of shares. The general meeting may, pursuant to our articles of association and in accordance with the Cyprus Companies Law, grant authority to the board of directors to issue and allot new shares out of the authorized but unissued share capital of the Company for a period of a maximum of five years subject to any pre-emption rights in our articles of association. Such power may be renewed one or more times by the general meeting for a maximum of five years each time. Our shareholders have for a period of five years authorized our board of directors to issue and allot 65 million shares out of our authorized but unissued share capital.
Buyback of Shares
The Company may, subject to certain statutory requirements, terms and conditions, buyback shares in its issued share capital not exceeding 10% in nominal value of the entire issued share capital of the Company. The relevant provisions regarding the buyback of shares under the Cyprus Companies Law are vague and unclear in some respects, and their practical implication is unclear and could prevent a buyback. As relevant provisions are broadly drafted, there is a strong argument that the Cyprus Companies Law only applies to companies the shares of which are listed on the Cyprus Stock Exchange, noting that if the shares are not listed on the Cyprus Stock Exchange, there are considerable gaps relating to, for example, what the maximum buyback price is and what is the maximum percentage of shares that can be bought back. The Cyprus Companies Law provides that a company can purchase its own shares, provided that it is permitted to do so via its articles of association and via the passing of a special resolution, which gives authority to the board of directors to proceed with a buyback. The authority granted to the directors can have a maximum duration of 12 months from the date the decision on the buyback is taken and should also set the terms and method of acquisition, including the proposed maximum number of shares to be acquired, the minimum and maximum price and the maximum duration of holding of the shares. The maximum duration of the period over which the company can hold the shares cannot exceed two years, and a buyback cannot be carried out unless it is done using realized and non-distributed profits, which would have been available for distribution as dividends. As the Cyprus Companies Law is currently drafted, these relevant provisions only apply to shares and do not clearly apply to ADSs and, therefore, there is a strong argument that the Company cannot buy back the ADSs.
Resolutions
The Cyprus Companies Law names three types of resolutions that may be submitted to a shareholder vote: ordinary resolutions, extraordinary resolutions and special resolutions.
 
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There is no definition in the Cyprus Companies Law of an ordinary resolution. An ordinary resolution must be approved by a majority vote of shareholders having voting rights present at the meeting, voting in person or through a proxy and the company must provide at least 14-days advance notice of such meeting to shareholders.
The Cyprus Companies Law defines extraordinary resolutions and special resolutions. An extraordinary resolution must be approved by at least 75% of shareholders having voting rights present at the meeting, voting in person or through a proxy. The meeting requires an advance notice of at least 14 days and such notice must specify the intention to propose the resolution as an extraordinary resolution. A special resolution must be approved by at least 75% of shareholders having voting rights present at the meeting, voting in person or through a proxy and the company must provide at least 21 days’ advance notice of such meeting to shareholders.
A special resolution is required, among other things, to amend our articles of association, to change the name of the company, to reduce company’s share capital and to amend the objectives of the company.
Certain resolutions, such as a resolution waiving pre-emption rights in respect of a new issue of shares for a cash consideration or a resolution altering the company’s share capital, require a majority of two-thirds of the votes, corresponding either to the represented securities or to the represented issued share capital if less than half of the issued share capital is represented. Alternatively, they require a simple majority of the votes when at least half of the issued share capital is represented.
The Cyprus Companies Law provides for the approval of certain matters requiring the 75% vote of our shareholders, including, but not limited to, the following matters:
•
amendments to the memorandum of association (such resolution also requires confirmation by the court);
​
•
changes to the company’s name;
​
•
amendments to the company’s articles of association;
​
•
the purchase of the company’s own shares; and
​
•
the reduction of the company’s capital (such resolution also requires confirmation by the court).
​
Meetings of Shareholders
We are required to hold an annual general meeting of shareholders each year on such day and at such place as the directors may determine. The directors may, whenever they think fit, decide to convene an extraordinary general meeting. Under the Cyprus Companies Law, extraordinary general meetings can also be convened by the request of shareholders holding at the date of the deposit of the requisition at least 10% of such of the paid in capital of the company as of the date of the deposit carries the right of voting at general meetings of the company.
Annual general meetings and meetings where a special resolution will be proposed can be convened by the board of directors by issuing a notice in writing specifying the matters to be discussed at least 21 days prior to the meeting. All other general meetings may be convened by the board by issuing a written notice at least 14 days prior to the meeting. Meetings may be called by shorter notice and shall be deemed to have been duly called if it is so agreed:
•
in the case of an annual general meeting, by all the shareholders entitled to attend and vote; and
​
•
in the case of any other meeting, by shareholders representing a majority in number of the shareholders entitled to attend and vote at the meeting and that hold at least 95% in nominal value of the shares entitled to vote at the meeting.
​
Pursuant to our articles of association, we may give notice to a shareholder either personally or by sending it by post or email to the intended recipient or to such shareholder’s registered address. Where a notice is sent by post, service of the notice shall be deemed effected provided that it has been properly mailed, addressed, and posted, at the expiration of twenty-four (24) hours after the same is posted. Where a notice
 
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is sent by electronic mail, service of the notice shall be deemed to be effected as soon as it is sent, provided there is no notification of non-receipt.
We may give notice to the joint shareholders of a share by giving the notice to the joint shareholder first named in the register of members in respect of the share. We may give notice to the persons entitled to a share in consequence of the death or bankruptcy of a shareholder by sending it through the post in a prepaid letter addressed to them by name, or by the title of representative of the deceased, or trustee of the bankrupt, or by any like descriptions, at the address, if any, supplied for the purpose by the persons claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred.
Notice of every general meeting shall be given in any manner described above to:
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Elbrus Capital only, in the case of a general meeting convened for the consideration of the appointment or removal of a director appointed by Elbrus Capital;
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•
Maksim Melnikov (or one or more trusts or nominees acting on his behalf) only, in the case of a general meeting convened prior to the Rights Expiry Date for the consideration of the appointment or removal of Maksim Melnikov as director;
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every shareholder except those shareholders who have not supplied us a registered address for the giving of notices to them;
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every person upon whom the ownership of a share devolves by reason of his being a legal personal representative or a trustee in bankruptcy of a shareholder, but for his death or bankruptcy would be entitled to receive notice of the meeting; and
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•
our auditor (only in the case of annual general meetings).
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No other person shall be entitled to receive notices of general meetings.
The quorum for a general meeting will consist of at least two shareholders, present in person or by proxy holding in aggregate at least one-third of our issued shares, provided that, if the general meeting is called for the consideration of the appointment or removal of a director appointed by Elbrus Capital or of Maksim Melnikov as director, only the presence of Elbrus Capital or Maksim Melnikov (or one or more trusts or nominees acting on his behalf), respectively, is required for such general meeting to be quorate. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of shareholders or called for the consideration of the appointment or removal of a director appointed by Elbrus Capital or, until the Rights Expiry Date, of Maksim Melnikov as director, shall be dissolved; in any other case it shall stand adjourned to the same day of the next week, at the same time and place or on such other day and at such other time and place as the board of directors may determine and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present in person or by proxy and entitled to vote, shall constitute a quorum.
Subject to the provisions of the Cyprus Companies Law and in accordance with our articles of association, a resolution in writing signed (or approved by letter or email) by all the shareholders entitled to receive notice of and to attend and vote at general meetings (or being corporations by their duly authorized representatives) shall be as valid and effective as if the same had been passed at a general meeting duly convened and held.
Inspection of Books and Records
Under the Cyprus Companies Law and our articles of association, our directors are required to cause accounting books to be properly maintained with respect to:
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all sums of money received and expended by us and the matters in respect of which the receipt and expenditure takes place;
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all sales and purchases of goods by us; and
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our assets and liabilities.
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Proper books shall not be deemed to be kept if there are not kept such books of account as are adequate to give a true and fair view of our affairs and to explain our transactions.
No shareholder (other than a shareholder who is also a director) will have any right of inspecting any of our accounts or books or documents except as conferred by statute or authorized by the directors or by our shareholders in general meeting.
According to Cyprus Companies Law, every company shall keep at its registered office a register of directors and secretary, a register of its members, a register of debentures and a register of charges and mortgages. These registers shall, except when these are duly closed, be open to the inspection of any shareholder without any charge during business hours (subject to such reasonable restrictions as the company may by its articles of association or in general meeting impose, so that not less than two hours in each day are allowed for inspection).
The books containing the minutes of proceedings of any general meeting of a company shall be kept at the registered office of the company, and shall during business hours be open to the inspection of any shareholder without charge (subject to such reasonable restrictions as the company may by its articles of association or in general meeting impose, so that not less than two hours in each day are allowed for inspection).
Furthermore, any shareholder and any holder of debentures of a company are entitled to be furnished on demand, without charge, a copy of every balance sheet of the company, including every document required by law to be annexed thereto, together with a copy of the auditors’ report on the balance sheet.
Board of Directors
Appointment of the Chairman
For as long as Elbrus Capital holds at least 7% of our issued shares, the director(s) appointed by it shall have the right to appoint the chairman of the board of directors. In circumstances where Elbrus Capital holds less than 7% of our issued shares, the board of directors shall elect the chairman.
Appointment of Directors
Our articles of association provide that, unless and until otherwise determined by the Company in General Meeting, until and including the date that falls one year after the effective date of this registration statement, the number of directors shall be at least seven (including at least three independent directors) but not more than nine (including at least three independent directors). Following such date, unless and until otherwise determined by the Company in General Meeting, the number of directors shall be nine (including at least three independent directors).
For as long as Elbrus Capital holds:
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at least 30% of our issued shares, it shall have the right to nominate, appoint, remove and substitute five directors;
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•
less than 30% but at least 20% of our issued shares, it shall have the right to nominate, appoint, remove and substitute four directors;
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•
less than 20% but at least 15% of our issued shares, it shall have the right to nominate, appoint, remove and substitute three directors;
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•
less than 15% but at least 10% of our issued shares, it shall have the right to nominate, appoint, remove and substitute two directors;
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•
less than 10% but at least 5% of our issued shares, it shall have the right to nominate, appoint, remove and substitute one director.
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Until the Rights Expiry Date, for as long as Maksim Melnikov holds (whether directly or through one or more trusts or nominees acting on his behalf) at least one of our issued shares, he (or, if applicable, such trust(s) or nominee(s)) shall have the right to nominate, appoint and remove Maksim Melnikov (and only
 
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Maksim Melnikov) as a director. If Maksim Melnikov is a director as at the Rights Expiry Date, he may continue as a director until he retires as director (see “—Retirement of Directors”), or he resigns from, is removed as, or is disqualified from, acting as a director.
Subject to the foregoing, our board of directors shall have power at any time to appoint any person to be a director, either to fill a vacancy or as an addition to the existing directors, but the total number of directors shall not at any time exceed the number fixed in accordance with our articles of association. Any director so appointed shall hold office only until the next following annual general meeting, and shall then be eligible for re-election. The directors may act notwithstanding any vacancy, but, if and so long as their number is reduced below the number fixed by our articles of association as the necessary quorum for a board meeting, the directors may act for the purpose of appointing directors so as to reach that number (except with respect to vacancies relating any director that Elbrus Capital may be entitled to appoint or, until the Rights Expiry Date, to Maksim Melnikov as director), or of summoning a general meeting, but for no other purpose.
Retirement of Directors
At each annual general meeting, any director (other than a director that Elbrus Capital is entitled to appoint and, until the Rights Expiry Date, Maksim Melnikov as director) then in office for whom it is the fourth annual general meeting following (i) his initial appointment by the board of directors or (ii) his last re-election by the annual general meeting (as the case may be), shall retire from office, but shall be eligible for re-appointment. If Maksim Melnikov is a director at the time of the fourth Annual General Meeting following the Rights Expiry Date, he shall retire from office as director, but shall be eligible for re-appointment.
Removal of Directors
Under Cyprus law, notwithstanding any provision in our articles of association, a director may be removed by an ordinary resolution of the general shareholders’ meeting, which must be convened with at least 28 days’ notice (although special quorum and voting arrangements apply to general meetings concerning the removal of any director that Elbrus Capital is entitled to appoint or, until the Rights Expiry Date, of Maksim Melnikov as director, see “—Ordinary Shares—Voting Rights” and “—Meetings of Shareholders”). The Company may, by ordinary resolution, of which special notice has been given in accordance with section 136 of the Cyprus Companies Law, remove any director before the expiration of his period of office notwithstanding anything in the articles of association or in any agreement between the Company and such director. Such removal shall be without prejudice to any claim such director may have for damages for breach of any contract of service between him and the Company. The office of any of the directors shall be vacated or shall be precluded from being elected if the relevant person becomes, among other things, (a) bankrupt or makes any arrangements or composition with his or her creditors generally, or (b) permanently incapable or performing his or her duties due to mental or physical illness or due to his or her death.
Powers of the Board of Directors
Our board of directors has been granted authority to manage our business affairs and may exercise all such powers of the company as are not, by law or by our articles of association, required to be exercised by the company in general meeting.
Proceedings of the Board of Directors
Our board of directors may meet, adjourn, and otherwise regulate its meetings as it thinks fit, and questions arising at any meeting shall be decided by a simple majority of votes present at the meeting. Any director may, and the secretary at the request of a director shall, at any time, summon a meeting of the board. It shall be necessary to give at least ninety-six hours’ notice of a meeting of the board to each director. A meeting may be held by telephone or other means whereby all persons present may at the same time hear and be heard by everybody else present, and persons who participate in this way shall be considered present at the meeting. In such case, the meeting shall be deemed to be held where the secretary of the meeting is located. A majority of board and committee meetings shall take place in Cyprus where the management and control of the Company shall remain.
 
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The quorum necessary for the transaction of the business by our board of directors shall be determined by the board of directors and in case it is not so determined, then at least half the total number of directors attending a meeting in person or by an alternate shall form a quorum.
A resolution at a duly constituted meeting of our board of directors is approved by a simple majority of votes of all the directors, unless a higher majority is required on a particular matter. The chairman has a second or casting vote in case of a tie. According to our articles of association, a resolution in writing will be as valid as if it had been passed at a meeting of our board of directors when it has been signed (or approved by letter or email) by all of our directors.
Each director may nominate another person to act as his alternate director, either to act for a specific purpose or in general, and at his discretion may remove such alternate director. Such alternate directors may be appointed only upon prior written approval of the board of directors (excluding the vote of the director proposing to appoint an alternate) and may not create or lead to an actual or potential conflict of interest for such alternate director.
For so long as each of Elbrus Capital, MPOC Technologies Ltd and Goldman Sachs Group holds, respectively, at least 5% of the voting rights exercisable at the general meeting, they each shall have the respective right to appoint one person to attend any meeting or meetings of the board of directors and/or any committee established by the board of directors as an observer.
Committees of the Board of Directors
Our articles of association provide that the board of directors may delegate any of its powers to a committee or committees of directors, as the board of directors sees fit. Any committee so formed shall conform to any regulations that may be imposed on it by the board of directors. For as long as Elbrus Capital holds the power to appoint at least one director, the director(s) appointed by it shall have the right to appoint, remove and substitute one of their number as a member of any one committee other than the audit committee.
Interested Directors
A director who is in any way, directly or indirectly, interested in a contract or proposed contract with us shall declare the nature of his interest at a meeting of the directors in accordance with the Cyprus Companies Law. Directors who have an interest in any contract or arrangement shall not have the right to vote (and shall not be counted in the quorum).
Notification of Shareholdings by Directors and Substantial Shareholders
There is no requirement under our articles of association or the Cyprus Companies Law for the notification of shareholdings by our directors and substantial shareholders. As none of our securities are listed on a regulated market in Cyprus or the European Union, there are no notification requirements under relevant Cyprus and European Union legislation.
Provisions Relevant to Takeovers
As none of our securities are listed on a regulated market in Cyprus or the European Union, neither the Cyprus Takeover Law nor the European Union’s Takeover Directive apply to purchases of our shares.
Our articles of association make provision for situations where a person (or group of persons acting in concert) acquires (whether by issue, transfer, or direct or indirect acquisition) shares and/or other securities giving a right to purchase our shares, or which are convertible into shares, where the result would be that such person(s) would directly or indirectly hold securities carrying:
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30% or more, but not more than 50%, of the voting rights in the Company; or
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•
50% or more of the voting rights in the Company.
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In such cases, subject to certain exceptions (including the discretion of the board of directors) the articles of association provide, among other things, that the transfer or issue of shares and/or other securities giving a right to purchase our shares or which are convertible into our shares to a person shall not be registered, and no person may directly or indirectly acquire an interest in shares and/or other securities
 
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giving a right to purchase our shares or which are convertible into our shares, unless such person or group of persons acting in concert simultaneously makes an unconditional cash offer to all shareholders (open for acceptance for not less than 14 calendar days) to purchase all shares held by such shareholders at a price per share not less than the highest price paid by the offeror (or persons acting in concert with it) for any shares (including shares represented by depositary receipts and those included in the proposed transfer) in the preceding 12 months (or during the period during which the offer is open), or, if no such transfers have taken place in respect of shares, at a price and on terms determined by the board of directors at its discretion to be comparable to any offer for purchase of our shares. The Depository shall not be deemed to have acquired shares by reason of holding them for the purposes of the issuance of depository receipts and the requirement to make an offer does not apply to any transfer or issue of shares and/or securities giving a right to purchase our shares, or which are convertible into shares, to Elbrus Capital or any direct or indirect acquisition (including by means of entry into a voting arrangement) of an interest in our shares or securities giving a right to purchase our shares, or which are convertible into shares, by Elbrus Capital or its affiliates.
If the proposed acquirer (together with any person acting in concert with them) has acquired or has contracted pursuant to acceptances of the offer to acquire such number of our shares as would together with any other shares held by the proposed acquirer (or persons acting in concert with them) carry 80% or more of the voting rights, the proposed acquirer may give irrevocable notice to all shareholders requiring them to accept the offer, and such shareholders (and any person that becomes a shareholder following delivery of such notice pursuant to the exercise of a pre-existing option or right to acquire our shares) shall be deemed to have accepted such offer and shall accordingly be obliged to transfer their shares at the same time as the other shares sold under the offer or, if later, seven calendar days after the date of the notice being given or deemed delivered. See “Risk Factors—In the event of a takeover, our minority shareholders do not benefit from the same protections that the minority shareholders of a Cypriot company listed on a regulated market in the European Union would be entitled to as regards mandatory offers and squeeze-out.”
Relevant Provisions of Cypriot Law
The liability of our shareholders is limited. Under the Cyprus Companies Law, a shareholder of a company is not personally liable for the acts of the company, except that a shareholder may become personally liable by reason of his or her own acts.
As of the date of this prospectus, Cypriot law does not contain any requirement for a mandatory offer to be made by a person acquiring shares or shares represented by depositary shares of a Cypriot company even if such an acquisition confers on such person control over us if neither the shares nor shares represented by depositary shares are listed on a regulated market in the EEA. Neither our shares nor shares represented by depositary shares are listed on a regulated market in the EEA.
Irrespective of the provisions of our articles of association, it is possible to effect a squeeze-out pursuant to the provisions of the Cyprus Companies Law. The effect of these provisions is that, where a company makes a takeover bid for all the shares or for the whole of any class of shares of another company, and the offer is accepted by the holders of 90% of the shares concerned, the offeror can upon the same terms acquire the shares of shareholders who have not accepted the offer, unless such persons can persuade the Cypriot courts not to permit the acquisition. If the offeror company already holds more than 10% of the value of the shares concerned, additional requirements need to be met before the minority can be squeezed out. If the company making the takeover bid acquires sufficient shares to aggregate, together with those which it already holds, more than 90%, then within one month of the date of the transfer which gives the 90%, it must give notice of the fact to the remaining shareholders and such shareholders may, within three months of the notice, require the bidder to acquire their shares and the bidder shall be bound to do so upon the same terms as in the offer or as may be agreed between them or upon such terms as the court may order.
 
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Material Differences in Cyprus Law and our Articles of Association and Delaware Law
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Cyprus Law
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Delaware Law
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General Meetings
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We are required to hold an annual general meeting of shareholders each year on such day and at such place as the directors may determine. The directors may, whenever they think fit, decide to convene an extraordinary general meeting.
Extraordinary general meetings may be convened at the request of the shareholders holding at the date of the deposit of the request at least 10% of such of the paid up share capital of the company as of the date of the deposit carries the right of voting at general meetings of the company and if the company fails, within 21 days from the date of the request, to call a meeting, the requestors (or any of them representing more than 50% of the total voting rights of all of them), may themselves convene a meeting but any meeting so convened shall not be held after the expiration of three months from the said date. If the company fails to hold its annual general meeting, it may be subject to fines and it may be ordered to hold a meeting by the Council of Ministers.
​ ​ Annual shareholder meetings are typically held at such time or place as designated in the certificate of incorporation or the bylaws. A special meeting of shareholders may be called by the board of directors or by any other person authorized in the certificate of incorporation or bylaws. The meeting may be held inside or outside Delaware. Whenever shareholders are required to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, and the means of remote communication, if any. ​
Quorum Requirements for General Meetings
​ ​ The Cyprus Companies Law provides that a quorum at a general meeting of shareholders may be fixed by the articles of association, otherwise a quorum consists of three members. Our articles provide the quorum required for most general meetings consists of two shareholders, present in person or by proxy, holding, in aggregate, at least one-third of our issued shares. See “—Meetings of Shareholders.” ​ ​ The certificate of incorporation or bylaws may specify the number to constitute a quorum, but in no event shall a quorum consist of less than one third of the shares entitled to vote at the meeting. In the absence of such specification, the majority of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of shareholders. ​
Removal of Directors
​ ​ Under the Cyprus Companies Law, any director may be removed by an ordinary resolution of the general meeting, provided that a special notice of 28 days prior to the general meeting of the shareholders has been given (however, under our articles of association, special quorum and voting arrangements apply to general meetings concerning the removal of any director that Elbrus Capital is entitled to appoint or, until the Rights Expiry Date, of Maksim Melnikov as director, see “—Ordinary ​ ​ Under the Delaware General Corporation Law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except (a) unless the certificate of incorporation provides otherwise, in the case of a corporation whose board is classified, shareholders may affect such removal only for cause, or (b) in the case of a corporation having cumulative voting, if less than the entire board is to ​
 
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Shares—Voting Rights” and “—Meetings of Shareholders”). The director concerned must receive a copy of the notice of the intended resolution and that director is entitled to be heard on the resolution at the meeting.
The director concerned may make representations either orally or in writing to the company, not exceeding a reasonable length, and require that the shareholders of the company be notified of such representations, either via advance notice or at the shareholders’ general meeting, unless a court in Cyprus determines that such rights are being abused to secure needless publicity for a defamatory matter.
Such removal shall be without prejudice to any claim such director may have for damages for breach of any contract of service between him and the company.
​ ​ be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors, or, if there are classes of directors, at an election of the class of directors of which he is a part. ​
Directors’ Fiduciary Duties
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Under Cyprus law, the directors of a company have certain duties towards the company and its shareholders. These duties consist of statutory duties and common law duties.
Statutory duties under the Cyprus Companies Law include, among others, the duty to cause the preparation of the financial accounts in accordance with IAS/IFRS and the disclosure of directors’ salaries and pensions in the company’s accounts or in a statement annexed thereto.
In general, the directors of a Cyprus company owe a duty to manage the company in accordance with the provisions of applicable law and within the regulations of the memorandum and articles of association of the company, and failure to do so will lead to the directors being liable for breach of their fiduciary duties. In addition, directors must disclose any interests that they may have and have a statutory duty to avoid any conflict of interest. This duty is imposed on those directors who are either directly or indirectly interested in a contract or proposed contract with the company. Failure to reveal the nature of their interest at a board meeting would
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Directors have a duty of care and a duty of loyalty to the corporation and its shareholders. The duty of care requires that a director act in good faith, with the care of a prudent person, and in the best interest of the corporation. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation.
Directors and officers must refrain from self-dealing, usurping corporate opportunities and receiving improper personal benefits, and ensure that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director or officer and not shared by the shareholders generally. Contracts or transactions in which one or more of the corporation’s directors has an interest are allowed assuming (a) the shareholders or the board of directors must approve in good faith any such contract or transaction after full disclosure of the material facts or (b) the contract or transaction must have been “fair” as to the corporation at the time it was approved.
Directors may vote on a matter in which they have an interest so long as the director has disclosed any interests in the
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result in the imposition of a fine and, potentially, can also cause a relevant resolution to be invalid and make a relevant director liable to the company for breach of duty.
Directors also have a duty to conduct the affairs of the company in a manner that is not oppressive to some of the members constituting a minority.
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​ ​ ​ In addition, according to common law, directors must act in accordance with their duty of good faith and in the best interests of the company. They must exercise their powers for the particular purposes of which they were conferred and not for an extraneous purpose (for a proper purpose), and must display a reasonable degree of skill that may be expected from a person of his knowledge and experience. ​ ​ ​ ​
Cumulative Voting
​ ​ The company’s articles of association can contain provisions in relation to cumulative voting. Our articles of association do not contain provision on cumulative voting. ​ ​ Cumulative voting is not permitted unless explicitly allowed in the certificate of incorporation. ​
Shareholder Action by Written Consent
​ ​ According to our articles of association, a resolution in writing signed (or approved by letter or email) by all the shareholders then entitled to receive notice of and to attend and vote at general meetings shall be as valid and effective as if the same had been passed at a general meeting of the company duly convened and held. ​ ​ Although permitted by Delaware law, publicly listed companies do not typically permit shareholders of a corporation to take action by written consent. ​
Business Combinations
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The Cyprus Companies Law provides for schemes of arrangement, which are arrangements or compromises between a company and any class of shareholder or creditors and used in certain types of reconstructions, amalgamations, capital reorganizations or takeovers.
Under Cyprus Companies Law, arrangements and reconstructions, require:
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the approval at a shareholders’ or creditors’ meeting convened by order of the court, representing a majority in value of the creditors or class of creditors or in number of votes of members or class of members, as the case may be, present and voting either
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​ ​ Under the Delaware General Corporation Law, the vote of a majority of the outstanding shares of capital stock entitled to vote thereon generally is necessary to approve a merger or consolidation or the sale of all or substantially all of the assets of a corporation. The Delaware General Corporation Law permits a corporation to include in its certificate of incorporation a provision requiring for any corporate action the vote of a larger portion of the stock or of any class or series of stock than would otherwise be required. ​
 
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in person or by proxy at the meeting;
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the approval of the court; and
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the submission of the relevant court order approving the arrangement or reconstruction for registration with the Registrar of Companies, and a copy any such court order must be enclosed to any copy of the memorandum of association issued after the date of the said court order.
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The Cyprus Companies Law allows for the merger of public companies as follows: (a) merger by absorption of one or more public companies by another public company; (b) merger of public companies by way of incorporation of a new public company; and (c) fragmentation of public companies meaning (i) fragmentation by way of absorption and (ii) fragmentation by way of incorporation of new companies. These transactions require, inter alia (and subject to requirements of other sections of the Cyprus Companies Law):
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a majority in value of the creditors or class of creditors or in number of votes members or class of members, as the case may be, present and voting either in person or by proxy at the meeting;
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the directors of the companies to enter into and to approve a written reorganization or division plan, as applicable;
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the directors of the companies to prepare a written report explaining the terms of the transaction;
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the aforementioned plan and report to be examined by independents experts (one for each participant company) or a joint expert appointed by the Court for such limited purpose further to an application made by the participant companies, and the presentation of an expert report (save in prescribed circumstances), unless all the shareholders and holders of other titles carrying voting rights in each of the participant have agreed that the examination and the expert report are
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​ ​ Under the Delaware General Corporation Law, no vote of the shareholders of a surviving corporation to a merger is needed, however, unless required by the certificate of incorporation, if (a) the agreement of merger does not amend in any respect the certificate of incorporation of the surviving corporation, (b) the shares of stock of the surviving corporation are not changed in the merger and (c) the number of shares of common stock of the surviving corporation into which any other shares, securities or obligations to be issued in the merger may be converted does not exceed 20% of the surviving corporation’s common stock outstanding immediately prior to the effective date of the merger. In addition, shareholders may not be entitled to vote in certain mergers with other corporations that own 90% or more of the outstanding shares of each class of stock of such corporation, but the shareholders will be entitled to appraisal rights. ​
 
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not required; and
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the approval of the court.
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​ ​ ​ The Cyprus Companies Law provides for the cross border merger between Cyprus companies and companies registered in another European Union jurisdiction. ​ ​ ​ ​
Interested Shareholders
​ ​ There are no equivalent provisions under the Cyprus Companies Law relating to transactions with interested shareholders. However, such transactions must be in the corporate interest of the company. ​ ​ Section 203 of the Delaware General Corporation Law provides (in general) that a corporation may not engage in a business combination with an interested stockholder for a period of three years after the time of the transaction in which the person became an interested stockholder. The prohibition on business combinations with interested stockholders does not apply in some cases, including if: (a) the board of directors of the corporation, prior to the time of the transaction in which the person became an interested stockholder, approves (i) the business combination or (ii) the transaction in which the stockholder becomes an interested stockholder; (b) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or (c) the board of directors and the holders of at least two-thirds of the outstanding voting stock not owned by the interested stockholder approve the business combination on or after the time of the transaction in which the person became an interested stockholder. ​
​ ​ ​ ​ ​ ​ For the purpose of Section 203, the Delaware General Corporation Law, subject to specified exceptions, generally defines an interested stockholder to include any person who, together with that person’s affiliates or associates, (a) owns 15% or more of the outstanding voting stock of the corporation (including any rights to acquire stock pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise of conversion or exchange rights, and stock with respect to which the person has ​
 
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​ ​ ​ ​ ​ ​ voting rights only), or (b) is an affiliate or associate of the corporation and owned 15% or more of the outstanding voting stock of the corporation at any time within the previous three years. ​
Limitations on Personal Liability of Directors
​ ​ Under the Cyprus Companies Law, a director who vacates office remains liable, subject to applicable limitation periods, under any provisions of the Cyprus Companies Law that impose liabilities on a director in respect of any acts or omissions or decisions made while that person was a director. ​ ​ Under Delaware law, a corporation’s certificate of incorporation may include a provision eliminating or limiting the personal liability of a director to the corporation and its stockholders for damages arising from a breach of fiduciary duty as a director. However, no provision can limit the liability of a director for (a) any breach of the director’s duty of loyalty to the corporation or its stockholders; (b) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (c) intentional or negligent payment of unlawful dividends or stock purchases or redemptions; or (d) any transaction from which the director derives an improper personal benefit. ​
Indemnification of Directors and Officers
​ ​ Under the Cyprus Companies Law, a director shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceeding, whether civil or criminal, in which judgment is given in his favor or in which he is acquitted or under a court application under which relief is granted to him by the court. ​ ​ Under Delaware law, subject to specified limitations in the case of derivative suits brought by a corporation’s shareholders in its name, a corporation may indemnify any person who is made a party to any third party action, suit or proceeding on account of being a director, officer, employee or agent of the corporation (or was serving at the request of the corporation in such capacity for another corporation, partnership, joint venture, trust or other enterprise) against expenses, including attorney’s fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding through, among other things, a majority vote of directors who were not parties to the suit or proceeding (even though less than a quorum), if the person: ​
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acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation or, in some circumstances, at least not opposed to its best interests; and
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in a criminal proceeding, had no
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reasonable cause to believe his or her conduct was unlawful.
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​ ​ ​ ​ ​ ​ Delaware law permits indemnification by a corporation under similar circumstances for expenses (including attorneys’ fees) actually and reasonably incurred by such persons in connection with the defense or settlement of a derivative action or suit, except that no indemnification may be made in respect of any claim, issue or matter as to which the person is adjudged to be liable to the corporation unless the Delaware Court of Chancery or the court in which the action or suit was brought determines upon application that the person is fairly and reasonably entitled to indemnity for the expenses which the court deems to be proper. ​
​ ​ ​ ​ ​ ​ To the extent a director, officer, employee or agent is successful in the defense of such an action, suit or proceeding, the corporation is required by Delaware law to indemnify such person for reasonable expenses incurred thereby. Expenses (including attorneys’ fees) incurred by such persons in defending any action, suit or proceeding may be paid in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of that person to repay the amount if it is ultimately determined that that person is not entitled to be so indemnified. ​
Appraisal Rights
​ ​ There is no general concept of appraisal rights under the Cyprus Companies Law, although there are instances when a shareholder’s shares may have to be acquired by another shareholder at a price ordered by the court. One such example is where a shareholder complains of oppression. ​ ​ The Delaware General Corporation Law provides for shareholder appraisal rights, or the right to demand payment in cash of the judicially determined fair value of the shareholder’s shares, in connection with certain mergers and consolidations. ​
Shareholder Suits
​ ​ Under Cyprus law, generally, the company, rather than its shareholders, is the proper claimant in an action in respect of a wrong done to the company or where there is an irregularity in the company’s internal management. Notwithstanding this general position, Cyprus law provides that a court may, in a limited set of circumstances, allow a shareholder to bring a derivative claim ​ ​ Under the Delaware General Corporation Law, a shareholder may bring a derivative action on behalf of the corporation to enforce the rights of the corporation. An individual also may commence a class action suit on behalf of himself and other similarly situated shareholders where the requirements for maintaining a class action under Delaware law have been met. A person ​
 
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​ ​ ​ (that is, an action in respect of and on behalf of the company). ​ ​ may institute and maintain such a suit only if that person was a shareholder at the time of the transaction which is the subject of the suit. In addition, under Delaware case law, the plaintiff normally must be a shareholder at the time of the transaction that is the subject of the suit and throughout the duration of the derivative suit. Delaware law also requires that the derivative plaintiff make a demand on the directors of the corporation to assert the corporate claim before the suit may be prosecuted by the derivative plaintiff in court, unless such a demand would be futile. ​
Amendment of Governing Documents
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Under the Cyprus Companies Law, a company may alter the objects contained in its memorandum by a special resolution of the shareholders of the company (approved by 75% of those present and voting) and the alteration shall not take effect until, and except in so far as, it is confirmed on petition by a court in Cyprus.
The articles of association of a company may be altered or additions may be made to it by special resolution of the shareholders of the company.
​ ​ Under the Delaware General Corporation Law, a corporation’s certificate of incorporation may be amended only if adopted and declared advisable by the board of directors and approved by a majority of the outstanding shares entitled to vote, and the bylaws may be amended with the approval of a majority of the outstanding shares entitled to vote and may, if so provided in the certificate of incorporation, also be amended by the board of directors. ​
Dividends and Repurchases
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Under Cyprus law, we are not allowed to make distributions if the distribution would reduce our net assets below the total sum of the issued share capital and the reserves that we must maintain under Cyprus law and our articles of association. Dividends may be declared at a general meeting of shareholders, but no dividend may exceed the amount recommended by the directors. In addition, the directors may on their own declare and pay interim dividends.
No distribution of dividends may be made when, on the closing date of the last financial year, the net assets, as set out in our Company’s annual accounts are, or following such a distribution would become lower than the amount of the issued share capital and those reserves which may not be distributed under the Cyprus law or our articles of association.
​ ​ Under the Delaware General Corporation Law, a Delaware corporation may pay dividends out of its surplus (the excess of net assets over capital), or in case there is no surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year (provided that the amount of the capital of the corporation is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets). In determining the amount of surplus of a Delaware corporation, the assets of the corporation, including stock of subsidiaries owned by the corporation, must be valued at their fair market value as determined by the board of directors, without regard to their historical book value. Dividends may be paid in the form of shares, property or cash. ​
​ ​ ​ Interim dividends can only be paid if interim accounts are drawn up showing ​ ​ ​ ​
 
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​ ​ ​ that funds available for distribution are sufficient and the amount to be distributed may not exceed the total profits made since the end of the last financial year for which the annual accounts have been drawn up, plus any profits transferred from the last financial year and the withheld funds made of the reserves available for this purpose, minus any losses of the previous financial years and funds which must be put in reserve pursuant to the requirements of the law and articles of association. ​ ​ ​ ​
​ ​ ​ In general, a public company may acquire its own shares either directly, through a subsidiary or through a person acting in its name but for the account of the company, provided that the articles of association of the company allow this and as long as the conditions of the Cyprus Companies Law are met. These conditions include, inter alia, the following: ​ ​ ​ ​
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shareholder approval via special resolution (valid for 12 months from such resolution);
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the total nominal value of shares acquired by the company, including shares previously acquired and held by the company in a portfolio and the shares which a person acting in his name but who acquired same on behalf of the company, may not exceed the lesser of either 10% of the company’s issued capital or 25% of the average value of the transactions, which in the case of a listed company, was negotiated during the last 30 days;
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the shares to be repurchased need to be fully paid;
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the company must pay for shares repurchased out of the realized and non-distributable profits; and
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such repurchases may not have the effect of reducing the company’s net assets below the amount of the company’s issued capital plus those reserves which may not be distributed under the law or our articles of association.
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​ ​ ​ and unclear in some respects, and their practical implication is unclear and could prevent a buyback. As the Cyprus Companies Law is drafted, these relevant provisions only apply to shares and do not clearly apply to ADSs and, therefore, there is a strong argument that the company cannot buy back the ADSs. ​ ​ ​ ​
Pre-emption Rights
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Under the Cyprus Companies Law, each existing shareholder has a right of pre-emption entitling them to the right to subscribe for their pro-rata shares of any new share issuance made by the company for a cash consideration.
If all the shareholders do not fully exercise all their pre-emption rights, the board of directors, provided that such authority has been granted to them by the general meeting, may decide to offer and sell the remaining shares to third parties on terms not more favorable than those indicated in the notice.
​ ​ Under the Delaware General Corporation Law, shareholders have no preemptive rights to subscribe for additional issues of stock or to any security convertible into such stock unless, and to the extent that, such rights are expressly provided for in the certificate of incorporation. ​
​ ​ ​ Shareholders’ pre-emption rights may be waived by a resolution of the general meeting adopted by a specified majority. The decision is passed by a majority of two-thirds of the votes corresponding either to the represented securities or to the represented issued share capital. When at least half of the issued share capital is represented, a simple majority will suffice. In connection with such waiver, the board of directors must present a written report indicating the reasons why the right of pre-emption should be waived and justifying the proposed issue price. Our shareholders have authorized the disapplication of pre-emptive rights for a period of five years from the date of the completion of this offering in connection with the issue of all newly issued ordinary shares, including, to the extent relevant, any ordinary shares issued in the form of ADSs and only relates to shares issued for cash consideration. ​ ​ ​ ​
Listing
We have applied to list the ADSs on the NYSE under the symbol “CIAN.” We have also applied to list the ADSs on MOEX under the symbol “CIAN.”
 
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DESCRIPTION OF AMERICAN DEPOSITARY SHARES
American Depositary Shares
The Bank of New York Mellon, as depositary, will register and deliver American Depositary Shares, also referred to as ADSs. Each ADS will represent one ordinary share (or a right to receive one ordinary share) deposited with The Bank of New York Mellon, acting through an office located in the United Kingdom, as custodian for the depositary. Each ADS will also represent any other securities, cash or other property that may be held by the depositary. The deposited shares together with any other securities, cash or other property held by the depositary are referred to as the deposited securities. The depositary’s office at which the ADSs will be administered and its principal executive office are located at 240 Greenwich Street, New York, New York 10286.
You may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having uncertificated ADSs registered in your name, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution that is a direct or indirect participant in The Depository Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.
Registered holders of uncertificated ADSs will receive statements from the depositary confirming their holdings.
As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. The laws of Cyprus govern shareholder rights. The depositary will be the holder of the shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR. See “Where You Can Find More Information” for directions on how to obtain copies of those documents.
Dividends and Other Distributions
How will you receive dividends and other distributions on the shares?
The depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions in proportion to the number of shares your ADSs represent.
Cash.   The depositary will convert any cash dividend or other cash distribution we pay on the shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible, or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.
Before making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. See “Material Tax Considerations.” The depositary will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some of the value of the distribution.
 
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Shares.   The depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs. It will sell shares which would require it to deliver a fraction of an ADS (or ADSs representing those shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed shares (or ADSs representing those shares) sufficient to pay its fees and expenses in connection with that distribution.
Rights to purchase additional shares.   If we offer holders of our securities any rights to subscribe for additional shares or any other rights, the depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders or (iii) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its fees and expenses. To the extent the depositary does not do any of those things, it will allow the rights to lapse. In that case, you will receive no value for them. The depositary will exercise or distribute rights only if we ask it to and provide reasonably satisfactory assurances to the depositary that it is legal to do so. If the depositary will exercise rights, it will purchase the securities to which the rights relate and distribute those securities or, in the case of shares, new ADSs representing the new shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary. U.S. securities laws may restrict the ability of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.
Other Distributions.   The depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability of the depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions we make on our shares or any value for them if it is illegal or impractical for us to make them available to you.
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary will deliver ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.
How can ADS holders withdraw the deposited securities?
You may surrender your ADSs to the depositary for the purpose of withdrawal. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible. However, the depositary is not required to accept surrender of ADSs to the extent it would require delivery of a fraction of a deposited
 
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share or other security. The depositary may charge you a fee and its expenses for instructing the custodian regarding delivery of deposited securities.
How do ADS holders interchange between certificated ADSs and uncertificated ADSs?
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.
Voting Rights
How do you vote?
ADS holders may instruct the depositary how to vote the number of deposited shares their ADSs represent. If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary. The depositary will try, as far as practical, and subject to the laws of Cyprus and the provisions of our articles of association or similar documents, to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary may try to vote as you instruct, but it is not required to do so.
Except by instructing the depositary as described above, you will not be able to exercise voting rights unless you surrender your ADSs and withdraw the shares. However, you may not know about the meeting enough in advance to withdraw the shares. In any event, the depositary will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote as instructed.
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise voting rights and there may be nothing you can do if your shares are not voted as you requested.
In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to Deposited Securities, if we request the Depositary to act, we agree to give the depositary notice of any such meeting and details concerning the matters to be voted upon at least 40 days in advance of the meeting date.
 
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Fees and Expenses
​ Persons depositing or withdrawing shares or ADS holders must pay: ​ ​ For: ​
​ $5.00 (or less) per 100 ADSs (or portion of 100 ADSs) ​ ​
Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
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​ $.05 (or less) per ADS ​ ​ Any cash distribution to ADS holders ​
​ A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs ​ ​ Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders ​
​ $.05 (or less) per ADS per calendar year ​ ​ Depositary services ​
​ Registration or transfer fees ​ ​ Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares ​
​ Expenses of the depositary ​ ​
Cable (including SWIFT) and facsimile transmissions (when expressly provided in the deposit agreement)
Converting foreign currency to U.S. dollars
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​ Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes ​ ​ As necessary ​
​ Any charges incurred by the depositary or its agents for servicing the deposited securities ​ ​ As necessary ​
The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.
The depositary may convert currency itself or through any of its affiliates, or the custodian or we may convert currency and pay U.S. dollars to the depositary. Where the depositary converts currency itself or through any of its affiliates, the depositary acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction
 
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spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained by it or its affiliate in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligation to act without negligence or bad faith. The methodology used to determine exchange rates used in currency conversions made by the depositary is available upon request. Where the custodian converts currency, the custodian has no obligation to obtain the most favorable rate that could be obtained at the time or to ensure that the method by which that rate will be determined will be the most favorable to ADS holders, and the depositary makes no representation that the rate is the most favorable rate and will not be liable for any direct or indirect losses associated with the rate. In certain instances, the depositary may receive dividends or other distributions from us in U.S. dollars that represent the proceeds of a conversion of foreign currency or translation from foreign currency at a rate that was obtained or determined by us and, in such cases, the depositary will not engage in, or be responsible for, any foreign currency transactions and neither it nor we make any representation that the rate obtained or determined by us is the most favorable rate and neither it nor we will be liable for any direct or indirect losses associated with the rate.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.
Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities
The depositary will not tender deposited securities in any voluntary tender or exchange offer unless instructed to do so by an ADS holder surrendering ADSs and subject to any conditions or procedures the depositary may establish.
If deposited securities are redeemed for cash in a transaction that is mandatory for the depositary as a holder of deposited securities, the depositary will call for surrender of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs upon surrender of those ADSs.
If there is any change in the deposited securities such as a sub-division, combination or other reclassification, or any merger, consolidation, recapitalization or reorganization affecting the issuer of deposited securities in which the depositary receives new securities in exchange for or in lieu of the old deposited securities, the depositary will hold those replacement securities as deposited securities under the deposit agreement. However, if the depositary decides it would not be lawful and practical to hold the replacement securities because those securities could not be distributed to ADS holders or for any other reason, the depositary may instead sell the replacement securities and distribute the net proceeds upon surrender of the ADSs.
If there is a replacement of the deposited securities and the depositary will continue to hold the replacement securities, the depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADSs in exchange for new ADSs identifying the new deposited securities.
If there are no deposited securities underlying ADSs, including if the deposited securities are cancelled, or if the deposited securities underlying ADSs have become apparently worthless, the depositary may call for surrender of those ADSs or cancel those ADSs upon notice to the ADS holders.
 
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Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended.
How may the deposit agreement be terminated?
The depositary will initiate termination of the deposit agreement if we instruct it to do so. The depositary may initiate termination of the deposit agreement if:
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60 days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted its appointment;
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we delist the ADSs from an exchange in the United States on which they were listed and do not list the ADSs on another exchange in the United States or make arrangements for trading of ADSs on the U.S. over-the-counter market;
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we delist our shares from an exchange outside the United States on which they were listed and do not list the shares on another exchange outside the United States
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the depositary has reason to believe the ADSs have become, or will become, ineligible for registration on Form F-6 under the Securities Act of 1933;
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we appear to be insolvent or enter insolvency proceedings;
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all or substantially all the value of the deposited securities has been distributed either in cash or in the form of securities;
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there are no deposited securities underlying the ADSs or the underlying deposited securities have become apparently worthless; or
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there has been a replacement of deposited securities.
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If the deposit agreement will terminate, the depositary will notify ADS holders at least 90 days before the termination date. At any time after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as soon as practicable after the termination date.
After the termination date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities, except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities or reverse previously accepted surrenders of that kind that have not settled if it would interfere with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all the deposited securities have been sold. The depositary will continue to collect distributions on deposited securities, but, after the termination date, the depositary is not required to register any transfer of ADSs or distribute any dividends or other distributions on deposited securities to the ADSs holder (until they surrender their ADSs) or give any notices or perform any other duties under the deposit agreement except as described in this paragraph.
Limitations on Obligations and Liability
Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:
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are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith, and the depositary will not be a fiduciary or have any fiduciary duty to holders of ADSs;
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are not liable if we are or it is prevented or delayed by law or by events or circumstances beyond our or its ability to prevent or counteract with reasonable care or effort from performing our or its obligations under the deposit agreement;
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are not liable if we or it exercises discretion permitted under the deposit agreement;
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are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;
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have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person;
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may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person;
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are not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and
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the depositary has no duty to make any determination or provide any information as to our tax status, or any liability for any tax consequences that may be incurred by ADS holders as a result of owning or holding ADSs or be liable for the inability or failure of an ADS holder to obtain the benefit of a foreign tax credit, reduced rate of withholding or refund of amounts withheld in respect of tax or any other tax benefit.
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In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary may require:
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payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities;
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satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
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compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.
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The depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.
Your Right to Receive the Shares Underlying your ADSs
ADS holders have the right to cancel their ADSs and withdraw the underlying shares at any time except:
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when temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of shares is blocked to permit voting at a shareholders’ meeting; or (iii) we are paying a dividend on our shares;
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when you owe money to pay fees, taxes and similar charges; or
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•
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of shares or other deposited securities.
​
This right of withdrawal may not be limited by any other provision of the deposit agreement.
 
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Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and Profile Modification System, also referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that facilitates interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC participant. Profile is a feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that transfer.
In connection with and in accordance with the arrangements and procedures relating to the DRS/​Profile, the parties to the deposit agreement understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery as described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile system and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.
Shareholder Communications; Inspection of Register of Holders of ADSs
The depositary will make available for your inspection at its office, all communications that it receives from us as a holder of deposited securities that we make generally available to holders of deposited securities. The depositary will send you copies of those communications or otherwise make those communications available to you if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.
Jury Trial Waiver
The deposit agreement provides that, to the extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable in the facts and circumstances of that case in accordance with applicable case law. You will not, by agreeing to the terms of the deposit agreement, be deemed to have waived our or the depositary’s compliance with U.S. federal securities laws or the rules and regulations promulgated thereunder.
Arbitration
The deposit agreement gives the depositary or an ADS holder asserting a claim against us the right to require us to submit that claim to binding arbitration in New York under the Rules of the American Arbitration Association, including any securities law claim. However, a claimant could also elect not to submit its claim to arbitration and instead bring its claim in any court having jurisdiction of it. The deposit agreement does not give us the right to require anyone to submit any claim to arbitration.
 
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SHARES AND ADSS ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for ADSs or our ordinary shares, and we cannot assure you that there will be an active public market for ADSs following this offering. We cannot predict what effect sales of ADSs in the public market or the availability of ADSs for sale will have on the market price of ADSs. Future sales of substantial amounts of ADSs in the public market, including ordinary shares issued upon exercise of options or warrants, or the perception that such sales may occur, however, could adversely affect the market price of ADSs and also could adversely affect our future ability to raise capital through the sale of ADSs or other equity-related securities at times and prices we believe appropriate. See “Risk Factors—Risks Related to the Offering and Ownership of the ADSs” for more information.
Upon completion of this offering, we will have 69,042,400 ordinary shares outstanding. All of the ADSs expected to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for ADSs held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, substantially all of whom are subject to lock-up restrictions or are restricted from selling shares by Rule 144. The ADSs held by our affiliates will be deemed “restricted securities” as that term is defined under Rule 144. Restricted securities may be sold in the public market only if their offer and sale is registered under the Securities Act or if the offer and sale of those securities qualify for an exemption from registration, including exemptions provided by Rules 144 and 701 under the Securities Act, which are summarized below.
Rule 144
In general, a person who has beneficially owned our ordinary shares that are restricted shares for at least six months would be entitled to sell such securities, provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Persons who have beneficially owned our ordinary shares that are restricted shares for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three month period only a number of securities that does not exceed the greater of either of the following:
•
1% of the number of our ordinary shares then outstanding; or
​
•
the average weekly trading volume of the ADSs on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;
​
provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144 to the extent applicable.
Rule 701
In general, under Rule 701, any of our employees, board members, officers, consultants or advisors who purchase shares from us in connection with a compensatory share or option plan or other written agreement before the effective date of this offering are entitled to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirements or other restrictions contained in Rule 701.
The SEC has indicated that Rule 701 will apply to typical share options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described below, beginning 90 days after the date of this prospectus, may be sold by persons other than “affiliates,” as defined in Rule 144, subject only to the manner of sale provisions of Rule 144 and by “affiliates” under Rule 144 without compliance with its one-year minimum holding period requirement.
Regulation S
Regulation S provides generally that sales made in offshore transactions are not subject to the registration or prospectus-delivery requirements of the Securities Act.
 
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Lock-Up Agreements
We, the Selling Shareholders, our executive officers, board members and certain other shareholders have agreed, subject to limited exceptions, not to offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise dispose of, directly or indirectly, or enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the ordinary shares or such other securities for a period of 180 days after the date of this prospectus, subject to certain exceptions, without the prior written consent of Morgan Stanley & Co. LLC, Goldman Sachs International and J.P. Morgan Securities LLC, as representatives on behalf of the underwriters. These agreements are described below under the section captioned “Underwriters (Conflicts of Interest).”
The representatives have advised us that they have no present intent or arrangement to release any ADSs, ordinary shares or other securities subject to a lock-up with the underwriters and will consider the release of any lock-up on a case-by-case basis. Upon a request to release any ADSs, ordinary shares or other securities subject to a lock-up, the representatives would consider the particular circumstances surrounding the request, including, but not limited to, the length of time before the lock-up expires, the number of ADSs, ordinary shares or other securities requested to be released, reasons for the request, the possible impact on the market for ADSs and whether the holder of our ordinary shares requesting the release is an officer, director or other affiliate of ours.
Registration Rights
We intend to enter into the Coordination Agreement and Registration Rights Agreement upon consummation of this offering, pursuant to which we will agree under certain circumstances to file a registration statement to register the resale of the shares held by certain of our existing shareholders, as well as to cooperate in certain public offerings of such shares. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. See “Related Party Transactions—Registration Rights Agreement.”
Share Options
We intend to file one or more registration statements on Form S-8 under the Securities Act to register the offer and sale of any ordinary shares issued or reserved for issuance under our share plan. We expect to file the registration statement covering these ordinary shares after the date of this prospectus, which will permit the resale of such shares by persons who are non-affiliates of ours in the public market without restriction under the Securities Act, subject, with respect to certain of such ordinary shares, to the provisions of the lock-up agreements described above.
 
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MATERIAL TAX CONSIDERATIONS
The following summary contains a description of the material Cyprus, Russian and U.S. federal income tax consequences of the acquisition, ownership and disposition of ADSs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase ADSs. The summary is based upon the tax laws of Cyprus and regulations thereunder, the tax laws of Russia and regulations thereunder and on the tax laws of the United States and regulations thereunder as of the date hereof, which are subject to change.
Prospective holders of the ADSs should consult their tax advisers as to which countries’ tax laws could be relevant to acquiring, holding and disposing of ADSs and receiving payments of dividends and the consequences of such actions under the tax laws of those countries. The information and analysis contained in this section are limited to issues relating to taxation, and prospective holders should not apply any information or analysis set out below to other issues, including (but not limited to) the legality of transactions involving the ADSs.
Material Cyprus Tax Considerations
The following discussion is a summary of the material Cyprus tax considerations relating to the purchase, ownership and disposition of the ADSs.
Tax Residency
As a rule, a company is considered to be a resident of Cyprus for tax purposes if its management and control is exercised in Cyprus.
The Cyprus Tax Authorities have published guidelines which indicate the minimum requirements that need to be satisfied for a company to be considered a tax resident of Cyprus and be eligible to obtain a tax residency certificate. Such requirements include the following: (i) the company is incorporated in Cyprus and is a tax resident only in Cyprus; (ii) the company’s board of directors has a decision making power that is exercised in Cyprus in respect of key management and commercial decisions necessary for the company’s operations and general policies and, specifically, whether the majority of the meetings of the board of directors take place in Cyprus and the minutes of the meetings of the board of directors are prepared and kept in Cyprus, and, also, whether the majority of the board of directors are tax residents of Cyprus; (iii) the shareholders’ meetings take place in Cyprus; (iv) the terms and conditions of the general powers of attorney issued by the company do not prevent the company and its board of directors from exercising control and making decisions; (v) the corporate seal and all statutory books and records are maintained in Cyprus; (vi) the corporate filings and reporting functions are performed by representatives located in Cyprus; (vii) the agreements relating to the company’s business or assets are executed or signed in Cyprus.
With respect to an individual holder of ADSs, he/she may be considered to be a resident of Cyprus for tax purposes in a tax year (which is the calendar year) if he/she is physically present in Cyprus for a period or periods exceeding in aggregate more than 183 days in that calendar year. As of January 1, 2017, an individual can elect to be a tax resident of Cyprus even if he/she spends less than or equal to 183 days in Cyprus provided that he/she spends at least 60 days in Cyprus and satisfies all of the following criteria within the same tax year:
•
the individual does not stay in any other country for one or more periods exceeding, in aggregate, 183 days in the same tax year;
​
•
the individual is not a tax resident in any other country for the same tax year;
​
•
the individual exercises any business in Cyprus and/or is employed in Cyprus and/or is an officer of a Cyprus tax resident person at any time during the relevant tax year provided that such is not terminated during the tax year; and
​
•
the individual maintains a permanent residence in Cyprus (by owning or leasing such residence).
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Corporate income tax rate
A company which is considered a resident of Cyprus for tax purposes is subject to income tax in Cyprus on its worldwide income, subject to certain exemptions. The rate of the corporate income tax is currently 12.5%.
 
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Personal income tax rate
An individual who is considered a resident of Cyprus for tax purposes is subject to income tax in Cyprus on its worldwide income, subject to certain exemptions. The personal income tax rates are currently as follows:
Taxable Income
​ ​
Tax Rate
​ ​
Cumulative Tax
​
Euro
​ ​
%
​ ​
Euro
​
0 – 19.500
​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​
19.501 – 28.000
​ ​ ​ ​ 20 ​ ​ ​ ​ ​ 1.700 ​ ​
28.001 – 36.300
​ ​ ​ ​ 25 ​ ​ ​ ​ ​ 3.775 ​ ​
36.301 – 60.000
​ ​ ​ ​ 30 ​ ​ ​ ​ ​ 10.885 ​ ​
60.001 and over
​ ​ ​ ​ 35 ​ ​ ​ ​ ​ ​ ​ ​
Taxation of income and gains of the Company
Gains from the disposal of securities
Subject to the following paragraph, any gain from disposal by the Company of securities (the definition of securities includes, among others, shares, ADRs and bonds of companies and options thereon) shall be exempt from taxation in Cyprus.
In the case of a Cyprus company which is the direct or indirect (subject to conditions for indirect ownership) owner of immovable property situated in Cyprus that does not have its shares listed on any recognized stock exchange, any gain from the disposal of such shares will be subject to capital gains tax at the rate of 20%, but only if the value of the immovable property is more than 50% of the value of the assets of the company whose,shares are sold. The Company is not the owner of immovable property situated in Cyprus.
Dividend income
Dividend income (whether received from Cyprus resident or non-Cyprus resident companies) is exempt from income tax in Cyprus.
Dividend income received by a tax resident of Cyprus is subject to a special contribution for defense (the “SDC”) at a rate of 17%. In the case the recipient of dividend is a company that is tax resident of Cyprus, such as the Company:
•
It is exempt from the SDC on dividends if it receives the dividend from another company, which is a tax resident of Cyprus.
​
•
It is exempt from the SDC on dividends if it receives the dividend from another company which is not a tax resident of Cyprus. This exemption will not apply if: (i) the payer engages directly or indirectly more than 50% in activities which lead to investment income and (ii) the foreign tax burden of the payer is substantially lower than the tax burden of the recipient. A circular has been issued by the Cyprus Tax Authorities clarifying that “significantly lower” means an effective tax rate of less than 6.25% on the profit distributed.
​
Foreign tax paid or withheld on dividend income received by a Cyprus tax resident company can be credited against Cypriot tax payable on the same income provided proof of payment can be furnished.
Interest income
The tax treatment of interest income of any company which is a tax resident of Cyprus, such as the Company, will depend on whether such interest income is treated as “active” or “passive.”
Interest income which consists of interest which has been received by a company which is a tax resident of Cyprus in the ordinary course of its business, including interest which is closely connected with the
 
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ordinary course of its business (i.e. “active”) will be subject to income tax at the rate of 12.5%, after the deduction of any allowable business expenses.
Any other interest income, that is interest received not in the recipient’s ordinary course of business or in close relation to it (i.e. “passive”), will be subject to the SDC at a rate of 30% which is levied on the gross interest received.
Specifically, interest income arising in connection with the provision of loans to related or associated parties should be generally considered as income arising from activities closely connected with the ordinary carrying on of a business and should, as such, be exempt from the SDC and only be subject to income tax.
Taxation of income and gains of the holders of the ADSs
Individual Non-Cyprus tax resident holders of the ADSs
Under Cyprus legislation there is no withholding tax on dividends paid to non-Cyprus tax residents. As a response to the EU Council’s invitation to all EU member states to adopt, from January 1, 2021, tax measures in relation to persons that are tax resident in jurisdictions included in the EU list of non-cooperative jurisdictions for tax purposes (the “Relevant Persons”), Cyprus is currently in the process of introducing withholding taxes on dividend and interest payments made to Relevant Persons, and, in this respect, the tax position of Relevant Persons may be affected.
Non-Cyprus tax residents are not subject to tax on the disposal of securities (including ADSs) in Cyprus.
Individual Cyprus tax resident holders of the ADSs
Gains from disposal of ADSs
Any gain from the disposal by a Cyprus tax resident individual of securities (including ADSs) shall be exempt from the SDC and income tax. The term “securities” is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons incorporated in Cyprus or abroad and options thereon. Circulars have been issued by the Cyprus Tax Authorities clarifying that the term also includes among others, options on securities, short positions on securities, futures/forwards on securities, swaps on securities, depositary receipts on securities (including ADSs), rights of claim on bonds and debentures (rights on interest of these instruments are not included), index participations only if they result on securities, repurchase agreements or repos on securities, units in open-end or close-end collective investment schemes.
Such gains are also not subject to capital gains tax provided that the Company the shares of which are disposed of does not directly or indirectly own any immovable property situated in Cyprus or such shares are listed on any recognized stock exchange. The Company is not the owner of immovable property situated in Cyprus.
Dividend income
Cyprus tax resident individual holders of ADSs are exempt from income tax on dividend income, but are subject to the SDC on dividends at the rate of 17% provided that they are also Cyprus domiciled. The tax is withheld prior to payment by the company to the shareholder.
An individual is considered to have his domicile in Cyprus if:
•
subject to certain exceptions, if he/she has his/her domicile of origin in Cyprus based on the provisions of the Cyprus Wills and Succession Law, Cap. 195; or
​
•
has been a tax resident of Cyprus for at least 17 years out of the last 20 years prior to the tax year.
​
Individuals holders of ADSs must consult their own tax advisors on the consequences of their residence or domicile in relation to the taxes applied to the payment of dividends.
 
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Corporate Non-Cyprus tax resident holders of ADSs
No withholding tax applies in Cyprus with respect to payment of dividends by the Company to non-Cyprus tax resident holders of ADSs. As a response to the EU Council’s invitation to all EU member states to adopt from January 1, 2021 tax measures in relation      Relevant Persons, Cyprus is currently in the process of introducing withholding taxes on dividend and interest payments made to Relevant Persons, and, in this respect, the tax position of Relevant Persons may be affected.
Non-Cyprus tax residents are not subject to tax on the disposal of securities (including ADSs) in Cyprus.
Corporate Cyprus tax resident holders of ADSs
Gains from disposal of the ADSs
Any gain from disposal by a Cyprus tax resident company of securities (including ADSs) shall be exempt from the SDC and income tax. The term “securities” is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons incorporated in Cyprus or abroad and options thereon. Circulars have been issued by the Cyprus Tax Authorities clarifying that the term also includes among others, options on securities, short positions on securities, futures/forwards on securities, swaps on securities, depositary receipts on securities (including ADSs), rights of claim on bonds and debentures (rights on interest of these instruments are not included), index participations (only if they result on securities), repurchase agreements or repos on securities, units in open-end or close-end collective investment schemes.
Such gains are also not subject to capital gains tax, provided that the company the shares in which are disposed of does not directly or indirectly own any immovable property situated in Cyprus or such shares are listed on any recognized stock exchange. The Company is not the owner of immovable property situated in Cyprus.
Dividend income
Dividend income received by a Cyprus tax resident company, holder of ADSs, is exempt from income tax in Cyprus.
Dividend income received or deemed to be received by a Cyprus tax resident company, is exempt from the SDC, except in the event that the payer is not a Cyprus tax resident company in which case the SDC is levied at the rate of 17% provided the following conditions are met:
•
the payer engages, directly or indirectly, in activities, more than 50% of which lead to investment income; and
​
•
the foreign tax burden of the payer is substantially lower than the tax burden of the recipient. A circular has been issued by the Cyprus Tax Authorities clarifying that “significantly lower” means an effective tax rate of less than 6.25% on the profit distributed.
​
Foreign tax paid or withheld on dividend income received by the Cyprus tax resident company can be credited against Cypriot tax payable on the same income provided proof of payment can be furnished.
Deemed distribution rules
If the Company does not distribute at least 70% of its after-tax profits within two years of the end of the year in which the profits arose, the Company would be deemed to have distributed this amount as a dividend two years after that year end. On such amount of deemed dividend the SDC, currently at a rate of 17%, is imposed to the extent that the ultimate direct/indirect shareholders of the Company are individuals who are both Cyprus tax resident and Cyprus tax domiciled.
The SDC may also be payable on deemed dividends in case of liquidation or capital reduction of the company.
 
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Tax Deductibility of Expenses, Including Interest Expense
The deductibility of the interest expenses by the Company is subject to the interest limitation rules. More specifically:
•
The interest limitation rule limits the deductibility of exceeding borrowing costs of the Cyprus tax resident company/Cyprus group to up to 30% of adjusted taxable profit (taxable EBITDA).
​
•
The interest limitation rule contains an annual EUR3 million safe-harbor threshold. This means that borrowing costs up to and including EUR3 million are, in any case, not limited by this rule (the EUR3 million threshold would apply in cases where ‘30% of taxable EBITDA’ results in an amount below EUR3 million).
​
•
In the case of a Cyprus group the EUR3 million applies for the aggregate exceeding borrowing costs of the Cyprus group and not per taxpayer. The interest limitation rule applies to exceeding borrowing costs, irrespective of whether the financing is with related parties or third parties.
​
Arm’s length principles
Cyprus legislation contains principles that require transactions to be conducted on an arm’s length basis and enables the authorities to ignore transactions which do not satisfy the arm’s length principles
We cannot exclude the possibility that the respective tax authorities may challenge the arm’s length principle applied to transactions with our related parties and, therefore, additional tax liabilities may accrue. If additional taxes are assessed with this respect, they may be material.
Stamp duty
Cyprus levies stamp duty on every instrument if:
•
it relates to any property situated in Cyprus; or
​
•
it relates to any matter or thing which is performed or done in Cyprus.
​
There are documents which are subject to stamp duty in Cyprus at a fixed fee (ranging from €0.05 to €35) and documents which are subject to stamp duty based on the value of the document. The above obligation arises irrespective of whether the instrument is executed in Cyprus or abroad.
If payable, (a) the maximum amount of stamp duty would be Euro €20,000 and (b) if not paid (i) this does not affect the validity of the relevant document and (ii) before the document is presented before any authority in Cyprus or is produced in evidence in a Cyprus court, the stamp duty together with a penalty of up to Euro €4,100 would have to be paid.
In cases where the stamp duty Commissioner can estimate the value of a document, he or she has the authority to impose stamp duty as per the above rates. Any transactions involving ADSs between parties not resident in Cyprus will not be subject to stamp duty. There are no applicable stamp duties with respect to the purchase and sale of ADSs.
Withholding Taxes on Interest
No withholding taxes shall apply in Cyprus with respect to payments of interest by the company to non-Cyprus tax resident lenders (both corporations and individuals).
Capital Duty
Capital duty is payable to the Registrar of Companies, and amounts to a €20 flat duty on every issue, whether the shares are issued at their (par) nominal value or at a (share) premium.
Material Russian Tax Considerations
The following discussion is a summary of the material Russian tax considerations relating to the purchase, ownership and disposition of the ADSs.
 
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General
The following is a summary of certain Russian tax considerations relevant to the purchase, ownership and disposal of ADSs by Russian residents and non-resident investors, as well as the taxation of dividend income, and is based on the laws of the Russian Federation in effect at the date hereof, which are subject to change (possibly with retroactive effect).
The summary does not seek to address the applicability of, and procedures in relation to, taxes levied by the regions, municipalities or other non-federal authorities of the Russian Federation. Nor does the summary seek to address the availability of double tax treaty relief in respect of the ADSs, and it should be noted that there may be practical difficulties, including satisfying certain documentation requirements, involved in claiming relief under an applicable double tax treaty. Prospective holders should consult their own professional advisers regarding the tax consequences of investing in the ADSs. The summary does not seek to make representations with respect to the Russian tax consequences for any particular holder.
The provisions of the Tax Code applicable to holders of, and transactions involving, the ADSs are ambiguous and lack interpretive guidance. Both the substantive provisions of the Tax Code applicable to financial instruments, and the interpretation and application of those provisions by the Russian tax authorities, may be subject to more rapid and unpredictable change and inconsistency than in jurisdictions with more developed capital markets or more developed taxation systems. In particular, the interpretation and application of such provisions will, in practice, rest substantially with local tax inspectorates.
In practice, interpretation by different tax inspectorates may be inconsistent or contradictory and may involve the imposition of conditions, requirements or restrictions not provided for by the existing legislation. Similarly, in the absence of binding precedents, different Russian court rulings on tax or related matters relating to the same or similar circumstances may also be inconsistent or contradictory.
For the purposes of this section, a “Russian Resident Holder” means a holder of ADSs who is:
•
a Russian legal entity or organization (including international companies registered in accordance with Federal Law No. 290-FZ “On International Companies” dated August 3, 2018);
​
•
a foreign legal entity or organization, in each case organized under a foreign law, that is recognized as a Russian tax resident based on Russian domestic law;
​
•
a foreign legal entity or organization, in each case organized under a foreign law, that is, in the case of conflicting tax residency statuses based on the relevant foreign law and Russian law, recognized as a Russian tax resident based on the provisions of an applicable double tax treaty (for the purposes of the application of such double tax treaty);
​
•
a foreign legal entity or organization which purchases, holds and/or disposes of ADSs through its permanent establishment in Russia;
​
•
a legal entity or an organization, in each case organized under a foreign law, which has voluntarily recognized itself as a Russian tax resident; or
​
•
an individual actually present in Russia for an aggregate period of 183 calendar days (including days of arrival to the Russian Federation and including days of departure from the Russian Federation) or more in any period comprised of 12 consecutive months (days of medical treatment and education outside the Russian Federation are also counted as days spent in the Russian Federation if the individual departed from the Russian Federation for these purposes for less than six months). The interpretation of this definition by the Russian Ministry of Finance states that, for tax withholding purposes, an individual’s tax residence status should be determined on the date of the actual income payment (based on the number of days in Russia in the 12-month period preceding the date of the payment). Given that the tax residency status of an individual may change, an individual’s final tax liability in the Russian Federation for any reporting calendar year should be determined based on the number of days spent in Russia in such calendar year, and may require a reassessment.
​
For the purposes of this section, a “Non-Resident Holder” is a holder of ADSs who does not fall under the definition of a Russian Resident Holder.
 
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ADS holders should consult their own tax advisors regarding their tax status in Russia.
Taxation of Acquisition of the ADSs
Generally, no Russian tax implications should arise for Russian Resident Holders and Non-Resident Holders upon purchase of the ADSs.
However, in certain circumstances, taxable income in the form of a material benefit (deemed income) may arise for individual holders if the ADSs are purchased at a price below market value. If the acquisition price of the ADSs is below the lower threshold of the range of fair market value calculated under a specific procedure for the determination of market prices of securities for tax purposes, the difference may be subject to the Russian personal income tax at a rate of 30% for individuals who are Non-Resident Holders (arguably, this would be subject to reduction or elimination under an applicable double tax treaty) and at a rate from 13% to 15% under the progressive personal income tax scale for individuals who are Russian Resident Holders. Starting from January 1, 2021, the annual income for a Russian tax resident individuals within RUB 5 million should be taxed at the rate of 13%, while the annual income (with certain exceptions) exceeding this threshold should be taxed at the rate of 15%.
Under Russian tax legislation, the taxation rate of the income of individuals who are considered Non-Resident Holders will depend on whether this income would be assessed as received from Russian or non-Russian sources. Although Russian tax legislation does not contain any provisions on how the relevant material benefit should be sourced, the tax authorities may infer that such income should be considered as Russian source income if the ADSs are purchased “in the Russian Federation.” In the absence of any additional guidance as to what should be considered as the purchase of securities “in the Russian Federation,” the Russian tax authorities may apply various criteria in order to determine the source of the related material benefit, including consideration of the place of the conclusion of the acquisition transaction, the location of the issuer, or other similar criteria.
Also, in certain circumstances, Russian Resident Holders that are legal entities or organizations acquiring the ADSs must fulfill the responsibilities of a Russian tax agent (i.e., a legal entity that is a resident in the Russian Federation for tax purposes paying taxable Russian source income to non-resident legal persons and organizations being responsible for withholding Russian tax) with respect to withholding tax from the sales proceeds for the ADSs to be transferred to a Non-Resident Holder that is a legal entity disposing of ADSs (see “—Taxation of Capital Gains”). Starting from January 1, 2020, in certain circumstances, Russian Resident Holders that are legal entities or organizations acquiring the ADSs from Russian Resident and Non-resident Holders who are individuals under sale or barter agreements must fulfil the responsibilities of a Russian tax agent. Holders of ADSs should consult their own tax advisers with respect to the tax consequences of acquiring the ADSs.
Taxation of Dividends
Non-resident Holders
Generally, Non-Resident Holders of ADSs should not be subject to any Russian taxes in respect of distributions made by the Group with respect to the ADSs.
Russian Resident Holders
Payments of dividends by the Company to a Russian Resident Holder who is an individual, a legal entity or organization resident in the Russian Federation for tax purposes should generally be subject to Russian income tax. Such tax generally should not exceed 13% in respect of dividend payments made to a Russian Resident Holder that is a legal entity or organization. Where a dividend payment is made to an individual that is a Russian Resident Holder, such tax effectively should not exceed 13% of the gross dividend income which falls within the annual progressive income tax scale threshold of RUB 5 million in respect of the relevant tax basket on dividends and should not exceed 15% of the gross dividend payment received by each individual Russian Resident Holder in excess of such annual progressive dividends income tax scale threshold. Russian Resident Holders should determine the amount of tax to be paid on their own, based on the amount of dividends received.
 
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Russian Resident Holders should therefore consult their own tax advisers with respect to the tax consequences of their receipt of dividend income with respect to the holding of the ADSs.
Taxation of Capital Gains
The following sections summarize the taxation of capital gains in respect of the disposition of the ADSs.
Taxation of Legal Entities and Organizations
Russian Resident Holders
Capital gains arising from the sale or other disposal of ADSs by a Russian Resident Holder, which is a legal entity or an organization, will be taxable at the regular Russian corporate profits tax rate of 20%. Russian Resident Holders that are legal entities may be able to offset losses incurred on operations in the quoted shares against other types of income (excluding income from non-quoted securities and derivatives). Special tax rules apply to Russian organizations that hold a broker and/or dealer license as well as certain other licenses related to the securities market. The Tax Code also establishes special rules for the calculation of the tax base for the purposes of transactions with securities, which are subject to TP control in Russia.
The Tax Code contains a certain exemption from capital gains taxation on ADSs for shares where immovable property located in the Russian Federation constitutes, directly or indirectly, less than 50% of assets, determined based on financial accounts data as of the end of the month preceding the date of disposal, provided that such shares are owned by the taxpayer for a period of more than five years. Specific conditions to apply the above exemption are envisaged for Russian organizations qualified as international holding companies under the Russian tax law (the holding period should not be less than 365 days and the participation share should be not less than 15%).
Russian Resident Holders of the ADSs who are legal entities or organizations should, in all events, consult their own tax advisers with respect to the tax consequences of gains derived from the disposal of the ADSs.
Non-Resident Holders
A Non-Resident Holder that is a legal entity or organization generally should not be subject to any Russian taxes in respect of any gain or other income realized on the sale, exchange or other disposal of the ADSs unless more than 50% of assets of shares represented by the ADS directly or indirectly consist of immovable property situated in Russia. Otherwise, it is possible that any proceeds from the sale, exchange or other disposal of ADSs may be regarded as Russian source income received by Non-Resident Holders that are legal entities or organizations, subject to Russian income tax at a rate of 20%. The above tax may be reduced or eliminated under an applicable double tax treaty, provided that the recipient of the income is its beneficial owner, such income is not attributable to a permanent establishment in Russia, the necessary requirements to qualify for the treaty relief and the appropriate administrative requirements under the Russian tax legislation have been met.
Capital gains that are received by a Non-Resident Holder that is a legal entity or an organization, from the sale or other disposal of ADSs that are recognized as quoted securities under the requirements of the Tax Code, generally should not be subject to profits tax in Russia. However, there is uncertainty regarding whether the above exemption may be applied to depository receipts which represent shares of a company that has more than 50% of its that assets consist of immovable property situated in Russia.
Non-Resident Holders that are legal entities or organizations should consult their own tax advisors with respect to the tax consequences of the sale, exchange or other disposal of the ADSs.
Taxation of Individuals
Russian Resident Holders
Capital gains arising from the sale, exchange or other disposal of the ADSs by individuals who are Russian Resident Holders must be declared on the holder’s tax return and are subject to personal income
 
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tax at a rate from 13% to 15% (according to the progressive personal income tax scale) unless the tax was properly withheld by a tax agent. The income in respect of sale of the ADSs by an individual is calculated as the sale proceeds less expenses proved by documentary evidence related to the purchase of these ADSs (including the cost of the securities and the expenses associated with the purchase, keeping and sale of these ADSs and amounts on which personal income tax was accrued and paid on acquisition (receipt) of the ADSs and the amount of tax paid).
Russian tax legislation contains a requirement that a financial result in respect of activities connected with securities quoted on a stock exchange, must be calculated separately from a financial result in respect of trading in non-quoted securities. Amount of loss from transactions with securities quoted on a stock exchange may be deducted against tax base for operations with derivatives quoted on a stock exchange where the underlying assets are securities, stock indexes or derivatives.
Russian Resident Holders may carry forward losses arising from dealing with quoted securities to offset future capital gains from the sale, exchange or other disposal of other quoted securities for the period of up to ten years. No loss carry-forward is available for non-quoted securities and derivatives.
The Tax Code contains a certain exemption from capital gains taxation for shares where immovable property located in the Russian Federation constitutes directly or indirectly less than 50% of assets determined based on financial accounts data as of the end of the month preceding the date of disposal, provided that such shares are owned by the taxpayer for a period of more than five years.
The Tax Code also contains certain tax deductions that may be applied by Russian Resident Holders who are individuals in respect of income from the sale of the ADSs given that, at the moment of sale, the ADSs qualify as quoted and are held by a Russian Resident Holder for at least three years. The amount of such deduction is determined using a specific formula and depends on how long the ADSs were held by a Russian Resident Holder.
Resident Holders should consult their own tax advisors with respect to their tax position regarding the ADSs.
Non-Resident Holders
A Non-Resident Holder who is an individual should not generally be subject to Russian taxes in respect of any gains realized on the sale, exchange or other disposal of ADSs, provided that the proceeds of such sale, exchange or disposal are not received from a source within Russia.
However, in the event that the proceeds from a sale, exchange or other disposal of ADSs are deemed to be received from a source within Russia, a Non-Resident Holder that is an individual may be subject to Russian tax in respect of such proceeds at a rate of 30% of the gain (such gain being computed as the sales price less any available documented cost deduction, including the acquisition price of the ADSs and other documented expenses, such as depositary expenses and brokers’ fees), subject to any available double tax treaty relief, provided that the necessary requirements to qualify for the treaty relief and the appropriate administrative requirements under the Russian tax legislation have been met.
According to Russian tax legislation, income received from the sale, exchange or other disposal of the ADSs should be treated as having been received from a Russian source if such sale, exchange or other disposal occurs in Russia. Russian tax law gives no clear indication as to how to identify the source of income received from the sale, exchange or other disposal of securities except that income received from the sale of securities “in Russia” will be treated as having been received from a Russian source. In the absence of any guidance as to what should be considered as the sale, exchange or other disposal of securities “in Russia,” the Russian tax authorities may apply various criteria in order to determine the source of the sale or other disposal, including looking at the place of conclusion of the transaction, the location of the issuer or other similar criteria. There is no assurance, therefore, that the proceeds received by Non-Resident Holders (individuals) from a sale, exchange or other disposal of the ADSs will not become subject to tax in Russia.
The tax may be withheld at the source of payment if the individual acts via a professional intermediary that is registered in Russia for tax purposes (such as an asset manager, licensed broker or other intermediary that carries out operations under a brokerage service agreement, agency agreement, asset management
 
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agreement, commission agreement or commercial mandate agreement), otherwise the Non-Resident Holder (individual) shall be liable to file a tax return and pay the tax due to the Russian budget.
Starting from January 1, 2020, in absence of a licensed broker or an asset manager as mentioned above, Russian tax agent responsibilities should also be fulfilled by Russian legal entities or organizations acquiring the ADSs from the Non-Resident Holders (individuals) under sale or barter agreements.
Non-Resident Holders who are individuals should consult their own tax advisors with respect to the tax consequences arising from the acquisition, sale, exchange or other disposal of the ADSs and the receipt of the proceeds from sources within Russia in their respect.
Double Tax Treaty Procedures
Where a Non-Resident Holder of ADSs receives income from a Russian source, the Russian tax (if applicable under Russian domestic tax law) may be reduced or eliminated in accordance with the provisions of a double tax treaty. Advance treaty relief should be available for those eligible, subject to the requirements of Russian laws. In order for a Non-Resident Holder to benefit from the applicable double tax treaty, documentary evidence is required to confirm the applicability of the double tax treaty under which benefits are claimed.
Currently, a Non-Resident Holder that is a legal entity or an organization is required to provide a tax residence confirmation issued by the competent tax authority of the relevant treaty country (duly apostilled or legalized, translated into Russian and notarized). The tax residency confirmation needs to be renewed on an annual basis and provided before the first payment of income in each calendar year. For a Non-Resident Holder that is a legal entity or organization, this should be a tax residency certificate for the relevant year.
In order to benefit from the applicable double tax treaty, the person claiming such benefits must be the beneficial owner of the relevant income. In addition to a certificate of tax residency, the tax agent is obliged to obtain a confirmation from the Non-Resident Holder that is a legal entity or organization, that it is the beneficial owner of the relevant income. Russian tax law provides neither the form of such confirmation nor the precise list of documents which can demonstrate the beneficial owner status of the recipient with respect to the received income. Thus, there can be no assurance that treaty relief at source will be available in practice. According to the recent clarifications of the Russian tax authorities, a foreign company may not benefit from a double tax treaty if its activity does not have a real business purpose, if such company does not bear any risks that are normal for business activity, such company does not benefit from the use of such income and its employees actually do not control/manage such company. If activities of the company are limited to investments and/or financing of a group of companies, it cannot be considered as an independent business activity and it is not enough to confirm the beneficial owner status of the recipient of income. In addition, it is unclear how the beneficial ownership concept will evolve in the future.
A Non-Resident Holder who is an individual willing to obtain the advance double tax treaty relief at source should confirm to a tax agent that he or she is tax resident in a relevant foreign jurisdiction having a double tax treaty with Russia by providing the tax agent with a personal identity document and a document confirming the tax residency of an individual in a relevant jurisdiction. To date, the Russian tax authorities do not generally make additional requests for confirmation of tax residency. However, due to the lack of available practice there is some uncertainty as to how these rules will be applied by the Russian tax authorities in the future. Non-Resident Holders should consult their own tax advisors regarding possible tax treaty relief and procedures for obtaining such relief with respect to any Russian taxes imposed on any payments received with respect to the ADSs.
Refund of Tax Withheld
If Russian withholding tax on income derived from Russian sources by a Non-Resident Holder has been withheld at the source of payment and such Non-Resident Holder is entitled to benefits of an applicable double tax treaty allowing such Non-Resident Holder not to pay the tax in Russia or pay the tax at a reduced rate in relation to such income, an application for the refund of the tax withheld may be made within three years from the end of the tax period in which the tax was withheld.
 
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In order to obtain a refund, the Non-Resident Holder, that is a legal entity or an individual, is required to file certain documents with the Russian tax authorities, along with the tax refund claim. The list of such documents is stipulated by the Tax Code in respect of legal entities.
The Russian tax authorities may, in practice, require a wide variety of documentation confirming the right to benefits under a double tax treaty. Such documentation, in practice, may not be explicitly required by the Tax Code. Obtaining a refund of Russian tax withheld may be a time-consuming process and can involve considerable practicable difficulties, depending to a large extent on the position of the local tax inspectorates. No assurance can be given that a refund of Russian tax withheld will be granted in practice.
Non-Resident Holders should consult their own tax advisors should they need to obtain a refund of Russian taxes withheld on any payments received with respect to the ADSs.
Material U.S. Federal Income Tax Considerations for U.S. Holders
The following is a description of the material U.S. federal income tax consequences for the U.S. Holders (as defined below) of owning and disposing of ADSs.
This summary applies only to U.S. Holders that acquire ADSs in exchange for cash in this offering, hold ADSs as capital assets within the meaning of Section 1221 of the Code (as defined below) and have the U.S. dollar as their functional currency.
This discussion is based on the tax laws of the United States as in effect on the date of this prospectus, including the Internal Revenue Code of 1986, as amended (the “Code”), and U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this prospectus, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, and any such change could apply retroactively and could affect the U.S. federal income tax consequences described below. The statements in this prospectus are not binding on the U.S. Internal Revenue Service (the “IRS”) or any court, and thus we can provide no assurances that the U.S. federal income tax consequences discussed below will not be challenged by the IRS or will be sustained by a court if challenged by the IRS. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. Furthermore, this summary does not address any estate or gift tax consequences, any state, local or non-U.S. tax consequences or any other tax consequences other than U.S. federal income tax consequences.
The following discussion does not describe all of the tax consequences that may be relevant to any particular investor or to persons in special tax situations such as:
•
banks and certain other financial institutions;
​
•
regulated investment companies;
​
•
real estate investment trusts;
​
•
insurance companies;
​
•
broker-dealers;
​
•
traders that elect to mark to market;
​
•
tax-exempt entities or governmental organizations;
​
•
individual retirement accounts or other tax-deferred accounts;
​
•
persons liable for alternative minimum tax or the Medicare contribution tax on net investment income;
​
•
U.S. expatriates and former citizens or long-term residents of the United States;
​
•
persons holding ADSs as part of a straddle, hedging or other risk reduction strategy, constructive sale, conversion or integrated transaction or investment;
​
•
persons that actually or constructively own 10% or more of our stock by vote or value;
​
•
persons that are resident or ordinarily resident in or have a permanent establishment in a jurisdiction outside the United States;
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•
persons who acquired ADSs pursuant to the exercise of any employee share option or otherwise as compensation; and
​
•
partnerships (or entities or arrangements treated as partnerships for U.S. federal income tax purposes) or other pass-through entities and persons holding ADSs through partnerships or other pass-through entities.
​
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL INCOME TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSS.
As used herein, the term “U.S. Holder” means a beneficial owner of ADSs that, for U.S. federal income tax purposes, is or is treated as:
•
an individual who is a citizen or resident of the United States;
​
•
a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
​
•
an estate whose income is subject to U.S. federal income taxation regardless of its source; or
​
•
a trust that (1) is subject to the supervision of a court within the United States and the control of one or more U.S. persons or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
​
The tax treatment of a partner in an entity or arrangement treated as a partnership for U.S. federal income tax purposes that holds ADSs generally will depend on such partner’s status, the activities of the partnership and certain determinations made at the partner level. Partnerships that hold the ADSs and U.S. Holders that are partners in such partnership should consult their tax advisors regarding the tax consequences to them of the purchase, ownership and disposition of ADSs.
Treatment of ADSs
Generally, we expect that holders of ADSs should be treated for U.S. federal income tax purposes as holding the ordinary shares represented by the ADSs and the following discussion assumes that such treatment will be respected. If so, no gain or loss will be recognized upon an exchange of ordinary shares for ADSs or an exchange of ADSs for ordinary shares. The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the beneficial ownership of the underlying shares. Accordingly, the creditability of foreign taxes and the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders, if any, as described below, could be affected by actions taken by intermediaries in the chain of ownership between the holder of an ADS and us.
Dividends and Other Distributions on ADSs
If we make distributions of cash or property on our ordinary shares, subject to the PFIC rules discussed below, the gross amount of distributions made by us with respect to ADSs (including the amount of any non-U.S. taxes withheld therefrom, if any) generally will be includible as dividend income in a U.S. Holder’s gross income in the year actually or constructively received by the U.S. Holder, to the extent such distributions are paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts, if any, not treated as dividend income will constitute a return of capital and will first be applied to reduce a U.S. Holder’s tax basis in its ADSs, but not below zero, and then any excess will be treated as capital gain realized on a sale or other disposition of the ADSs. Because we do not maintain calculations of earnings and profits under U.S. federal income tax principles, a U.S. Holder should expect to treat all cash distributions as dividends for U.S. federal income tax purposes. Such dividends will not be eligible for the dividends-received deduction allowed to U.S. corporations with respect to dividends received from other U.S. corporations. Dividends received by non-corporate U.S. Holders may be “qualified dividend income,” which is taxed at the lower applicable long-term capital gains rate, provided that (1) either the ADSs are readily tradable on an established securities market in the United States
 
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or we are eligible for the benefits of the income tax treaty between the United States and Cyprus; (2) we are not a PFIC (as discussed below) for either the taxable year in which the dividend was paid or the immediately preceding taxable year and (3) certain other requirements are met. In this regard, the ADSs will generally be considered to be readily tradable on an established securities market in the United States if they are listed on the NYSE, as we intend the ADSs will be. U.S. Holders should consult their tax advisors regarding the availability of the lower rate for dividends paid with respect to ADSs.
The amount of any distribution paid in foreign currency will be equal to the U.S. dollar value of such currency, translated at the spot rate of exchange on the date such distribution is received, regardless of whether the payment is in fact converted into U.S. dollars at that time. If dividends received in foreign currency are converted into U.S. dollars on the day they are received, the U.S. Holder generally will not be required to recognize foreign currency gain or loss in respect of the dividend income.
Dividends on ADSs generally will constitute foreign source income for foreign tax credit limitation purposes. Subject to certain complex conditions and limitations, foreign taxes withheld at the rate applicable to the U.S. Holder on any distributions on ADSs, if any, may be eligible for credit against a U.S. Holder’s federal income tax liability. If a refund of the tax withheld is available under the laws of the applicable foreign jurisdiction or income tax treaty, the amount of tax withheld that is refundable will not be eligible for such credit against a U.S. Holder’s U.S. federal income tax liability (and will not be eligible for the deduction against U.S. federal taxable income), even though the procedures for claiming refunds for such taxes and the practical likelihood such refunds will be made available in a timely fashion are uncertain. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to ADSs will generally constitute “passive category income.” The rules relating to the determination of the U.S. foreign tax credit are complex, and U.S. Holders should consult their tax advisors regarding the availability of a foreign tax credit in their particular circumstances and the possibility of claiming an itemized deduction (in lieu of the foreign tax credit) for any foreign taxes paid or withheld.
Sale or Other Taxable Disposition of ADSs
Subject to the PFIC rules discussed below, upon a sale or other taxable disposition of ADSs, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in such ADSs (generally the cost of such ADSs to the U.S. Holder). Any such gain or loss generally will be treated as long-term capital gain or loss if the U.S. Holder’s holding period in the ADSs exceeds one year. Non-corporate U.S. Holders (including individuals) generally will be subject to U.S. federal income tax on long-term capital gain at preferential rates. The deductibility of capital losses is subject to significant limitations. Gain or loss, if any, realized by a U.S. Holder on the sale or other disposition of ADSs generally will be treated as U.S. source gain or loss for U.S. foreign tax credit limitation purposes. The use of any foreign tax credits relating to any Russian taxes imposed upon such sale may be limited. U.S. Holders are strongly urged to consult their tax advisors as to the availability of tax credits for any Russian taxes withheld on the sale of ADSs.
Passive Foreign Investment Company Rules
We will be classified as a PFIC for any taxable year if either: (a) at least 75% of our gross income is “passive income” for purposes of the PFIC rules or (b) at least 50% of the value of our assets (generally determined on the basis of a quarterly average) is attributable to assets that produce or are held for the production of passive income. For these purposes, passive income includes interest, dividends and other investment income, with certain exceptions. For these purposes, cash and other assets readily convertible into cash are considered passive assets, and the company’s goodwill and other unbooked intangibles are generally taken into account. The PFIC rules also contain a look-through rule whereby the Company will be treated as owning its proportionate share of the assets and earning its proportionate share of the income of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of the stock.
Under the PFIC rules, if we were considered a PFIC at any time that a U.S. Holder holds ADSs, we would continue to be treated as a PFIC with respect to such investment unless (i) we cease to be a PFIC and (ii) the U.S. Holder has made a “deemed sale” election under the PFIC rules.
 
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Based on the anticipated market price of the ADSs in this offering and our current and anticipated composition of the income, assets and operations and those of our subsidiaries, we do not expect to be treated as a PFIC for the current taxable year or in the foreseeable future. This is a factual determination, however, that depends on, among other things, the composition of our income and assets, and the market value of our assets, and those of our subsidiaries, from time to time, and thus the determination can only be made annually after the close of each taxable year. Because the market value of the assets for the purposes of the asset test will generally be determined by reference to the aggregate value of our outstanding ADSs, our PFIC status will depend in large part on the market price of the ADSs, which may fluctuate significantly. Therefore there can be no assurances that we will not be classified as a PFIC for the current taxable year or for any future taxable year.
If we are considered a PFIC at any time that a U.S. Holder holds ADSs, any gain recognized by the U.S. Holder on a sale or other disposition of the ADSs, as well as the amount of any “excess distribution” (defined below) received by the U.S. Holder, would be allocated ratably over the U.S. Holder’s holding period for the ADSs. The amounts allocated to the taxable year of the sale or other disposition (or the taxable year of receipt, in the case of an excess distribution) and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed. For the purposes of these rules, an excess distribution is the amount by which any distribution received by a U.S. Holder on ADSs exceeds 125% of the average of the annual distributions on the ADSs received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter.
If we are treated as a PFIC with respect to a U.S. Holder for any taxable year, the U.S. Holder will be deemed to own equity in any of the foreign corporations in which we directly or indirectly own equity that are also PFICs (“lower-tier PFICs”). In such case, a U.S. Holder may also be subject to the adverse tax consequences described above with respect to any gain or “excess distribution” realized or deemed realized in respect of a lower-tier PFIC.
A U.S. Holder may, in certain circumstances, avoid certain of the tax consequences generally applicable to holders of stock in a PFIC by electing to mark the ADSs to market, provided the ADSs are “marketable stock.” If such an election is made, in any taxable year that we are a PFIC, a U.S. Holder would generally be required to report gain or loss to the extent of the difference between the fair market value of the ADSs at the end of the taxable year and such U.S. Holder’s tax basis in such ADSs at that time. Any gain under this computation, and any gain on an actual disposition of the ADSs, in a taxable year in which we are a PFIC, would be treated as ordinary income. Any loss under this computation, and any loss on an actual disposition of the ADSs in a taxable year in which we are a PFIC, would be treated as ordinary loss to the extent of the cumulative net-mark-to-market gain previously included. Any remaining loss from marking the ADSs to market will not be allowed, and any remaining loss from an actual disposition of the ADSs generally would be capital loss. A U.S. Holder’s tax basis in the ADSs would be adjusted annually for any gain or loss recognized under the mark-to-market election. There can be no assurances that the ADSs will be marketable stock for these purposes. In addition, an election for mark-to-market treatment would likely not be available with respect to any lower-tier PFICs. A mark-to-market election is made on a shareholder-by-shareholder basis, applies to all of the ADSs held or subsequently acquired by an electing U.S. Holder and can only be revoked with consent of the IRS (except to the extent the ADSs no longer constitute “marketable stock”).
We do not intend to supply U.S. Holders with the information needed to make a qualified electing fund election with respect to the ADSs if we were a PFIC.
If we are considered a PFIC, a U.S. Holder will also be subject to annual information reporting requirements. Failure to comply with such information reporting requirements may result in significant penalties and may suspend the running of the statute of limitations. U.S. Holders should consult their tax advisors about the potential application of the PFIC rules to an investment in ADSs.
Information Reporting and Backup Withholding
Dividend payments with respect to ADSs and proceeds from the sale, exchange or redemption of ADSs may be subject to information reporting to the IRS and U.S. backup withholding. A U.S. Holder
 
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may be eligible for an exemption from backup withholding if the U.S. Holder furnishes a correct taxpayer identification number and makes any other required certification or is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status may be required to provide such certification on IRS Form W-9.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s U.S. federal income tax liability, and such U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing an appropriate claim for refund with the IRS and furnishing any required information. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
Information with Respect to Foreign Financial Assets
Certain U.S. Holders who are individuals (and certain entities) that hold an interest in “specified foreign financial assets” ​(which may include the ADSs) are required to report information relating to such assets, subject to certain exceptions (including an exception for ADSs held in accounts maintained by certain financial institutions). U.S. Holders should consult their tax advisors regarding the effect, if any, of this and any other information reporting requirement on their acquisition, ownership and disposition of the ADSs.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE IMPORTANT TO YOU. EACH PROSPECTIVE PURCHASER SHOULD CONSULT ITS TAX ADVISORS ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN ADSs UNDER THE INVESTOR’S OWN CIRCUMSTANCES.
 
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UNDERWRITERS (CONFLICTS OF INTEREST)
Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC, Goldman Sachs International and J.P. Morgan Securities LLC are acting as representatives, have severally agreed to purchase, and we and the Selling Shareholders have agreed to sell to them, severally, the number of ADSs indicated below.
Underwriters
​ ​
Number of
ADSs
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Morgan Stanley & Co. LLC
​ ​ ​ ​ ​ ​ ​
Goldman Sachs International
​ ​ ​ ​ ​ ​ ​
J.P. Morgan Securities LLC
​ ​ ​ ​ ​ ​ ​
BofA Securities, Inc.
​ ​ ​ ​ ​ ​ ​
Renaissance Securities (Cyprus) Limited
​ ​ ​ ​ ​ ​ ​
VTB Capital plc
​ ​ ​ ​ ​ ​ ​
AO Raiffeisenbank
​ ​ ​ ​ ​ ​ ​
Tinkoff Bank
​ ​ ​ ​ ​ ​ ​
Alfa Capital Markets Ltd
​ ​ ​ ​ ​ ​ ​
Total
​ ​ ​ ​ 18,213,400 ​ ​
The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the ADSs subject to their acceptance of the ADSs from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the ADSs offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the ADSs offered by this prospectus if any such ADSs are taken. However, the underwriters are not required to take or pay for the ADSs covered by the underwriters’ over-allotment option described below.
The Selling Shareholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to 2,732,010 additional ADSs, on a pro rata basis, at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the ADSs offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional ADSs as the number listed next to the underwriter’s name in the preceding table bears to the total number of ADSs listed next to the names of all underwriters in the preceding table.
The following table shows the per ADS and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us and the Selling Shareholders. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional 2,732,010 ADSs in aggregate from the Selling Shareholders.
​ ​ ​ ​ ​ ​
Total
​
​ ​ ​
Per ADS
​ ​
No
Exercise
​ ​
Full
Exercise
​
Public offering price
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Underwriting discounts and commissions to be paid by us and the Selling Shareholders
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proceeds, before expenses, to us
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proceeds, before expenses, to the Selling Shareholders
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $4.2 million. We have agreed to reimburse the underwriters for certain of their out-of-pocket expenses in connection with this offering in an amount not to exceed $100,000.
 
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The offering of the ADSs by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.
We have applied to list the ADSs on the NYSE under the symbol “CIAN.” We have also applied to list the ADSs on MOEX under the symbol “CIAN.”
We, the Selling Shareholders, our executive officers, board members and certain other shareholders have agreed that, without the prior written consent of the representatives on behalf of the underwriters, we and they will not, and not to clause any direct or indirect affiliate to, and will not publicly disclose an intention to, during the period ending 180 days after the date of this prospectus (the “restricted period”) take any of the following actions regardless of whether any such transaction described above is to be settled by delivery of ADSs, ordinary shares or any other securities convertible into or exercisable or exchangeable for ADSs or ordinary shares in cash or otherwise:
•
offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any ADSs, ordinary shares or any securities convertible into or exercisable or exchangeable for ADSs or ordinary shares; or
​
•
file any registration statement with the SEC relating to the offering of any ADSs, ordinary shares or any securities convertible into or exercisable or exchangeable for ADSs or ordinary shares; or
​
•
enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of ADSs or ordinary shares.
​
Subject to certain restrictions and requirements, the restrictions described in the immediately preceding paragraph do not apply to:
•
transfers pursuant to a will, other testamentary document or intestate succession;
​
•
transfers to any trust, partnership, limited liability company or other entity for the direct or indirect benefit of the lock-up party or the immediate family of the lock-up party;
​
•
distributions to limited partners or stockholders of the lock-up party;
​
•
transfers to the lock-up party’s affiliates, subsidiaries, partners, members, shareholders or to any investment fund or other entity controlled or managed by the lock-up party;
​
•
transfers to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under the first four items above;
​
•
transfers which occur by operation of law or pursuant to an order of a court, including pursuant to a domestic relations order or in connection with a divorce settlement, or to comply with any regulations related to the lock-up party’s ownership of ordinary shares or ADSs;
​
•
transfers to the Company or its affiliates upon death, disability or termination of employment, in each case, of the lock-up party pursuant to an employee benefit plan;
​
•
exercise of outstanding options and distributions or transfers to settle restricted stock or other equity awards pursuant to plans disclosed herein;
​
•
transfers to the Company or its subsidiary in connection with the vesting, settlement, or exercise of certain restricted stock units, options, or other rights to purchase shares of common stock or ADSs, provided that any shares received upon such exercise, vesting or settlement shall be bound by the lockup agreement;
​
•
sales, transfers or other dispositions pursuant to a bona fide third-party tender offer, merger, strategic sale, consolidation or other similar transaction involving a change of control of the Company in which the acquiring party, or a group of parties, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of more than 50% of the total voting power of the voting stock of the Company following such transaction, provided that any ordinary shares not so transferred will remain subject to the lock up agreement;
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•
transfers to the Company in connection with the repurchase of ordinary shares or ADSs issued pursuant to an employee benefit plan, in connection with any contractual arrangement in effect on the date of this agreement that provides for the repurchase of ordinary shares or ADSs by the Company, or in connection with the termination of employment with the Company;
​
•
transactions relating to securities acquired in open market transactions after the completion of the public offering;
​
•
the establishment of a trading plan on behalf of a shareholder, officer or director of the Company pursuant to Rule 10b5-1 under the Exchange Act for the transfer of ADSs or Ordinary Shares, provided that such plan does not provide for the transfer of ADSs or Ordinary Shares during the restricted period;
​
•
transfers made with the prior written consent of the representatives, on behalf of the underwriters;
​
•
a bona fide gift or gifts; and
​
•
any demands or requests for, or exercise of any right with respect to, or taking of any action in preparation of, the registration by the Company under the Securities Act of the lock-up party’s ordinary shares or ADSs, in each case pursuant to the Registration Rights Agreement with the Company to which the lock-up party is a party, except for certain actions during the restricted period;
​
The representatives, in their sole discretion, may release the ADSs and other securities subject to the lock-up agreements described above in whole or in part at any time.
In order to facilitate the offering of the ADSs, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the ADSs. Specifically, the underwriters may sell more ADSs than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of ADSs available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing ADSs in the open market. In determining the source of ADSs to close out a covered short sale, the underwriters will consider, among other things, the open market price of ADSs compared to the price available under the over-allotment option. The underwriters may also sell ADSs in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing ADSs in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the ADSs in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, ADSs in the open market to stabilize the price of the ADSs. These activities may raise or maintain the market price of the ADSs above independent market levels or prevent or retard a decline in the market price of the ADSs. The underwriters are not required to engage in these activities and may end any of these activities at any time.
We, the Selling Shareholders and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of ADSs to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make internet distributions on the same basis as other allocations.
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.
In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity
 
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securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.
Certain of the underwriters are expected to make offers and sales both inside and outside the United States through their respective selling agents. Any offers or sales in the United States will be conducted by broker-dealers registered with the SEC. Goldman Sachs International will offer ADSs in the United States through its SEC-registered broker-dealer affiliate in the United States, Goldman Sachs & Co. LLC. Renaissance Securities (Cyprus) Limited will offer ADSs in the United States through its SEC-registered broker-dealer affiliate in the United States, RenCap Securities Inc. VTB Capital plc is not an SEC-registered broker-dealer or a FINRA member. However, VTB Capital plc has engaged Xtellus Capital Partners Inc. (“Xtellus”), a broker-dealer registered with the SEC and FINRA, to act as its agent pursuant to Rule 15a-6 under the Exchange Act with respect to securities transactions effected by VTB Capital plc with U.S. investors in connection with this offering. Xtellus is not an affiliate of VTB Capital plc. AO Raiffeisenbank is not an SEC-registered broker-dealer and will not offer or sell any of the ADSs in the United States or to U.S. persons in connection with this offering. Tinkoff Bank is not an SEC-registered broker-dealer and will not offer or sell any of the ADSs in the United States or to U.S. persons in connection with this offering. Alfa Capital Markets Ltd is not an SEC-registered broker-dealer or a FINRA member. However, Alfa Capital Markets Ltd has engaged StoneX Financial Inc. (“StoneX”), a broker-dealer registered with the SEC and FINRA, to act as its chaperone pursuant to Rule 15a-6 under the Exchange Act with respect to securities transactions effected by Alfa Capital Markets Ltd with U.S. investors in connection with this offering. StoneX is not an affiliate of Alfa Capital Markets Ltd.
Our employees and real estate agent customers in the Russian Federation may elect to participate in the offering and any ADSs allocated pursuant to such election will be at the IPO price through Tinkoff Bank, via its online brokerage platform.
Pricing of the Offering
Prior to this offering, there has been no public market for the ADSs. The initial public offering price will be determined by negotiations between us, the Selling Shareholders and the representatives. Among the factors considered in determining the initial public offering price were our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.
The address for Morgan Stanley & Co. LLC is 1585 Broadway, New York, New York 10036, United States of America. The address for Goldman Sachs International is Plumtree Court, 25 Shoe Lane, London EC4A 4AU, United Kingdom. The address for J.P. Morgan Securities LLC is 383 Madison Avenue, New York, New York 10179, United States of America. The address for BofA Securities, Inc. is One Bryant Park, New York, New York 10036, United States of America. The address for Renaissance Securities (Cyprus) Limited is 2-4 Arch Makariou III Ave, 9th Floor, Capital Center, 1065 Nicosia, Cyprus. The address for VTB Capital plc is 14 Cornhill, London EC3V 3ND. The address for AO Raiffeisenbank is 17/1 Troitskaya Street, Moscow 129090, Russia. The address for Tinkoff Bank is 38A, building 26, 2nd Khutorskaya Street, Moscow 127287, Russia. The address for Alfa Capital Markets Ltd is 5 Themistokli Dervi Street, Elenion Building, 1066 Nicosia, Cyprus.
Conflicts of Interest
Entities affiliated with The Goldman Sachs Group, Inc., the parent of Goldman Sachs International, an underwriter in this offering, and Goldman Sachs & Co LLC, its agent in this offering, beneficially own 14.11% of our outstanding ordinary shares in the aggregate immediately prior to this offering. In addition, such entities will be selling shareholders in this offering and will receive 5% or more of the net offering proceeds.
 
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Because of such ownership interest and receipt of net offering proceeds, this offering will be made in compliance with the applicable provisions of FINRA Rule 5121. Rule 5121 requires that a “qualified independent underwriter” meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence with respect thereto. Morgan Stanley & Co. LLC will act as a “qualified independent underwriter” within the meaning of Rule 5121 in connection with this offering. Further, as required by Rule 5121, Goldman Sachs & Co LLC will not confirm sales of the ADSs to any account over which it exercises discretionary authority without the prior written approval of the customer.
Selling Restrictions
Other than in the United States and Russia, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published, in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
European Economic Area
In relation to each Member State of the European Economic Area and the United Kingdom (each, a “Relevant State”), no securities have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the securities which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of securities may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation:
(a)
to any legal entity which is a qualified investor as defined under the Prospectus Regulation;
​
(b)
to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the representatives; or
​
(c)
in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
​
provided that no such offer of ADSs shall require us or any representative to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
For the purposes of this provision, the expression an “offer to the public” in relation to any of ADSs in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any of ADSs to be offered so as to enable an investor to decide to purchase any of ADSs, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended).
United Kingdom
Each underwriter has represented and agreed that:
(a)
it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“FSMA”)) received by it in connection with the issue or sale of ADSs in circumstances in which Section 21(1) of the FSMA does not apply to us; and
​
(b)
it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to ADSs in, from or otherwise involving the United Kingdom.
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Canada
The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption form, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this offering memorandum (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Hong Kong
The ADSs may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (“Companies (Winding Up and Miscellaneous Provisions) Ordinance”) or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (“Securities and Futures Ordinance”), or (ii) to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the ADSs may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to ADSs which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the ADSs may not be circulated or distributed, nor may the ADSs be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined under Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”)) under Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.
Where the ADSs are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for six months after that corporation has acquired the ADSs under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation’s securities pursuant to Section 275(1A) of the SFA, (3) where no consideration is or will
 
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be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore (“Regulation 32”).
Where the ADSs are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for six months after that trust has acquired the ADSs under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.
Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA. The securities may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.
 
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EXPENSES OF THE OFFERING
We estimate that our expenses in connection with this offering, other than underwriting discounts and commissions, will be as follows:
Expenses
​ ​
Amount
​
SEC registration fee
​ ​ ​ $ 31,067 ​ ​
FINRA filing fee
​ ​ ​ ​ 50,769 ​ ​
Stock exchange listing fee
​ ​ ​ ​ 150,000 ​ ​
Printing expenses
​ ​ ​ ​ 280,000 ​ ​
Legal fees and expenses
​ ​ ​ ​ 2,285,110 ​ ​
Accounting fees and expenses
​ ​ ​ ​ 960,772 ​ ​
Miscellaneous costs
​ ​ ​ ​ 451,472 ​ ​
Total
​ ​ ​
​
4,209,190
​ ​
All amounts in the table are estimates except the SEC registration fee, the stock exchange listing fee and the FINRA filing fee. We will pay all of the expenses of this offering.
 
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LEGAL MATTERS
The validity of the ordinary shares underlying the ADSs and other and certain legal matters of Cyprus law in connection with this offering will be passed upon for us by Antis Triantafyllides & Sons LLC. Certain matters of U.S. federal law will be passed upon for us by Latham & Watkins LLP. Certain legal matters with respect to Cyprus law will be passed upon for the underwriters by Chrysses Demetriades & Co. LLC. Certain matters of U.S. federal law will be passed upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom (UK) LLP.
 
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EXPERTS
The consolidated financial statements as of December 31, 2020 and 2019, and for each of the two years in the period ended December 31, 2020, included in this prospectus, have been audited by AO Deloitte & Touche CIS, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The address of AO Deloitte & Touche CIS is 5 Lesnaya Street, Moscow, 125047, Russia.
The consolidated financial statements of the N1 Group included in this prospectus have been audited by AO Deloitte & Touche CIS, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The address of AO Deloitte & Touche CIS is 5 Lesnaya Street, Moscow, 125047, Russia.
Certain statistical data contained herein has been derived from and included herein in reliance upon the Frost & Sullivan Report prepared by Frost & Sullivan, a third party market research company, commissioned by us upon the authority of said firm as experts with respect to the matters covered by its report. Frost & Sullivan does not have any interest in our securities.
 
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ENFORCEMENT OF CIVIL LIABILITIES
We are organized in Cyprus, and substantially all of our and our subsidiaries’ assets are located outside the United States, and all members of our board of directors are resident outside of the United States. As a result, it may not be possible to effect service of process within the United States upon us or any of our subsidiaries or such persons or to enforce U.S. court judgments obtained against us or them in jurisdictions outside the United States, including actions under the civil liability provisions of U.S. securities laws. In addition, it may be difficult to enforce, in original actions brought in courts in jurisdictions outside the United States, liabilities predicated upon U.S. securities laws.
Further, most of our and our subsidiaries’ assets are located in Russia. Judgments rendered by a court in any jurisdiction outside Russia will generally be recognized by courts in Russia only if (i) an international treaty exists between Russia and the country where the judgment was rendered providing for the recognition of judgments in civil cases and/or (ii) a federal law of Russia providing for the recognition and enforcement of foreign court judgments is adopted. No such federal law has been passed, and no such treaty exists, between Russia, on the one hand, and the United States, on the other hand. Even if an applicable international treaty is in effect or a foreign judgment might otherwise be recognized and enforced on the basis of reciprocity, the recognition and enforcement of a foreign judgment will in all events be subject to exceptions and limitations provided for in Russian law. For example, a Russian court may refuse to recognize or enforce a foreign judgment if its recognition or enforcement would contradict Russian public policy. In addition, Russian courts have limited experience in the enforcement of foreign court judgments.
In the absence of an applicable treaty, enforcement of a final judgment rendered by a foreign court may still be recognized by a Russian court on the basis of reciprocity, if courts of the country where the foreign judgment is rendered have previously enforced judgments issued by Russian courts. There are no publicly available judgments in which a judgment made by a court in the United States was upheld and deemed enforceable in Russia. In any event, the existence of reciprocity must be established at the time the recognition and enforcement of a foreign judgment is sought, and it is not possible to predict whether a Russian court will in the future recognize and enforce on the basis of reciprocity a judgment issued by a foreign court, including a U.S. court.
Russia is a party to the United Nations (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards, but it may be difficult to enforce arbitral awards in Russia due to a number of factors, including compliance with the procedure for the recognition and enforcement of foreign arbitral awards by Russian courts established by the Arbitrazh Procedural Code of Russia, limited experience of Russian courts in international commercial transactions, official and unofficial political resistance to enforcement of awards against Russian companies in favor of foreign investors, Russian courts’ inability to enforce such orders and corruption. Furthermore, enforcement of any arbitral award pursuant to arbitration proceedings may be limited by the mandatory provisions of Russian laws relating to categories of non arbitrable disputes and the exclusive jurisdiction of Russian courts, and specific requirements to arbitrability of certain categories of disputes, including in respect of the ADSs (i.e., specific requirements in relation to a type of an arbitral institution, arbitration rules, seat of arbitration and parties to an arbitration agreement for consideration of so called corporate disputes in relation to Russian companies) and the application of Russian laws with respect to bankruptcy, winding up or liquidation of Russian companies.
Therefore, a litigant who obtains a final and conclusive judgment in the United States would most likely have to litigate the issue again in a Russian court of competent jurisdiction. The possible need to re-litigate a judgment obtained in a foreign court on the merits in Russia may also significantly delay the enforcement of such judgment. Under Russian law, certain amounts may be payable by the claimant upon the initiation of any action or proceeding in any Russian court. These amounts, in many instances, depend on the amount of the relevant claim.
Shareholders may originate actions in either Russia or Cyprus based upon either applicable Russian or Cypriot laws, as the case may be.
However, it is doubtful whether a Russian or Cypriot court would accept jurisdiction and impose civil liability in an original action commenced in Russia or Cyprus, as applicable, and predicated solely upon U.S. federal securities laws.
 
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement (including amendments and exhibits to the registration statement) on Form F-1 under the Securities Act. This prospectus, which is part of the registration statement, does not contain all of the information set forth in the registration statement. The rules and regulations of the SEC allow us to omit certain information from this prospectus that is included in the registration statement and the exhibits and schedules to the registration statement. For further information, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement.
Statements made in this prospectus concerning the contents of any contract, agreement or other document are not complete descriptions of all terms of these documents. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed for a complete description of its terms. Each statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit. You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part completely.
Upon the closing of this offering, we will become subject to the informational requirements of the Exchange Act. Accordingly, we will be required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. The SEC maintains an internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
 
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GLOSSARY OF KEY TERMS
Except where the context otherwise requires or where otherwise indicated, the terms “Cian,” the “Company,” the “Cian Group,” the “Group,” “we,” “us,” “our,” “our company” and “our business” refer to Cian PLC, in each case together with its consolidated subsidiaries as a consolidated entity, and the term the “Issuer” refers to Cian PLC as a standalone company.
“Average Unique Monthly Visitors (UMV)” means the average number of users and customers visiting our platform (websites and mobile application) per month in a particular period, excluding bots. Average UMV for a particular period is calculated by aggregating the UMV for each month within such period and dividing by the number of months. For 2020, 2019, 2018 and their respective semi-annual periods, Average UMV is calculated based on Google Analytical data; for the first half of 2021, Average UMV is calculated as a sum of Average UMV for the Cian Group (excluding N1 Group) based on Google Analytics data and Average UMV for the N1 Group based on Yandex.Metrica data.We calculate UMV using cookies and count the first time a computer or mobile device with a unique IP address accesses our platform during a month. If an individual accesses our platform using different IP addresses within a given month, the first access by each such IP address is counted as a separate unique visitor.
“Average daily revenue per listing” is calculated as listing revenue divided (i) by the total number of listings for the corresponding period and (ii) by the number of days during the period.
“Average revenue per lead to developers” is calculated as lead generation revenue (within the Core Business segment) for a period divided by the number of leads (to developers) during such period.
“Average revenue per paying account” is calculated as listing revenue in the secondary residential and commercial real estate verticals divided (i) by the number of paying accounts for the corresponding period and (ii) by the number of months during the period.
“C2C Rental” means the operating and reporting segment which comprises end-to-end solutions in property rentals, where commission is charged for digitalizing, facilitation and operating property rentals service (including tenant background checks, digital signing of agreements, online payments and insurance).
“Core Business” means the operating and reporting segment which comprises our core classifieds platform, including our listing and value-added services for secondary residential and commercial real estate customers as well as our lead generation solutions and value-added services for primary residential real estate customers, such as developers, as well as our advertising tools.
“Cumulative app downloads” means the number of times the Cian mobile application was downloaded via iOS and Android as of a particular date.
“Customers” means professional and private companies and individuals who list properties on our platform. Our customers include (i) professional listing customers, such as real estate agents (both agents working for real estate agencies and independent agents) and real estate developers, as well as (ii) private listing customers, such as individual sellers and renters who choose to list their property directly without any intermediary.
“End-to-End Offerings” means the operating and reporting segment which comprises Online Transaction Services, which enable online execution of real estate transactions (including document checking, verification, signing and storage, notary services, registration and tax refunds) and Home Swap service offerings, which facilitate simultaneous real estate sales and purchases.
“Leads to developers” means the number of paid target calls, lasting 30 seconds or longer, made through our platform by home searchers to real estate developers, for a particular period.
“Leads to agents and individual sellers” means the number of times our users clicked to “show” a customer’s phone number on our platform or sent chat messages to agents or property sellers through our platform in a month, calculated as a monthly average for a particular period.
“Listings” means the daily average number of real estate listings posted on our platform by agents and individual sellers for a particular period.
 
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“Mortgage Marketplace” means the operating and reporting segment which comprises solutions for our partner banks for distributing their mortgage products through our advanced platform for mortgage price comparison, mortgage pre-approval and origination.
“Number of listings” is a metric presented in the Frost & Sullivan Report, which means the primary and secondary residential real estate listings for rent and purchase (excluding short-term rental) as of particular date.
“Valuation and Analytics” means the operating and reporting segment which comprises our proprietary real estate market research, data analytics and market intelligence services.
“Paying accounts”means the number of registered accounts, which were debited at least once during a month for placing a paid listing on our platform or purchasing any value-added services, calculated as a monthly average for a particular period. We calculate the number of paying accounts to include both individual accounts and master accounts, but excluding subordinated accounts, which can be created under one master account by the real estate agencies for their individual agents as part of our virtual agency offering. For further descriptions of individual accounts, master accounts and subordinated accounts, see “Business—Core Classifieds Business—Products and Services We Offer to Customers.”
“Share of leads to real estate agents and individual sellers” is a metric presented in the Frost & Sullivan Report, which means the share of calls made, and chat messages sent, through our platform in the total number of calls made, and chat messages sent, by property searchers to real estate agents and individual sellers during a particular period. Includes calls and chats related only to urban sale and purchase in secondary residential real estate vertical.
“Share of mobile in leads to agents and individual sellers” means the share of leads to agents and individual sellers, generated via the Cian mobile application and mobile website, as compared to total leads to agents and individual sellers through our platform. Calculated as a monthly average for a particular period.
“Share of mobile traffic” means the share of traffic generated via the Cian mobile application and mobile website as compared to the entire traffic of the Cian platform. Calculated per period (not average).
“Short term rental” means the leasing of a residential property with rental payments calculated on a per diem basis. This number is excluded from the “Number of listings” measure.
“Subscription model” means our monthly subscription model whereby our customers pay a fixed price to post real estate listings for a month-long period.
“Users” means the end users who use our platform, typically free of charge, to search for properties and a variety of information and services (including real estate listings) to help them navigate through various real estate transactions.
 
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Interim Condensed Consolidated Financial Statements of the Cian Group
​
Condensed Consolidated Financial Statements for the three and six months ended June 30, 2021 and
2020
​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ F-2 ​ ​
​ ​ ​ ​ ​ F-3 ​ ​
​ ​ ​ ​ ​ F-4 ​ ​
​ ​ ​ ​ ​ F-5 ​ ​
​ ​ ​ ​ ​ F-6 ​ ​
Consolidated Financial Statements of the Cian Group
​ ​ ​ ​ ​ F-22 ​ ​
​ ​ ​ ​ ​ F-23 ​ ​
​ ​ ​ ​ ​ F-24 ​ ​
​ ​ ​ ​ ​ F-25 ​ ​
​ ​ ​ ​ ​ F-26 ​ ​
​ ​ ​ ​ ​ F-27 ​ ​
Consolidated Financial Statements of the N1 Group
​ ​ ​ ​ ​ F-60 ​ ​
​ ​ ​ ​ ​ F-61 ​ ​
​ ​ ​ ​ ​ F-62 ​ ​
​ ​ ​ ​ ​ F-63 ​ ​
​ ​ ​ ​ ​ F-64 ​ ​
​ ​ ​ ​ ​ F-65 ​ ​
 
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CIAN GROUP
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND
JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
​ ​ ​
Three months ended
June 30,
​ ​
Six months ended
June 30,
​
​
2021
​ ​
2020
​ ​
2021
​ ​
2020
​
Revenue
​ ​ ​ ​ 4 ​ ​ ​ ​
​
1,456
​ ​ ​ ​
​
600
​ ​ ​ ​
​
2,704
​ ​ ​ ​
​
1,642
​ ​
Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Marketing expenses
​ ​ ​ ​ 7 ​ ​ ​ ​ ​ (524) ​ ​ ​ ​ ​ (140) ​ ​ ​ ​ ​ (1,129) ​ ​ ​ ​ ​ (636) ​ ​
Employee-related expenses
​ ​ ​ ​ 8 ​ ​ ​ ​ ​ (1,833) ​ ​ ​ ​ ​ (610) ​ ​ ​ ​ ​ (2,632) ​ ​ ​ ​ ​ (1,078) ​ ​
IT expenses
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (133) ​ ​ ​ ​ ​ (65) ​ ​ ​ ​ ​ (229) ​ ​ ​ ​ ​ (143) ​ ​
Depreciation and amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (70) ​ ​ ​ ​ ​ (48) ​ ​ ​ ​ ​ (134) ​ ​ ​ ​ ​ (99) ​ ​
Other operating expenses
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (177) ​ ​ ​ ​ ​ (22) ​ ​ ​ ​ ​ (221) ​ ​ ​ ​ ​ (86) ​ ​
Total operating expenses
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (2,737) ​ ​ ​ ​ ​ (885) ​ ​ ​ ​ ​ (4,345) ​ ​ ​ ​ ​ (2,042) ​ ​
Operating loss
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,281) ​ ​ ​ ​ ​ (285) ​ ​ ​ ​ ​ (1,641) ​ ​ ​ ​ ​ (400) ​ ​
Finance costs
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (15) ​ ​ ​ ​ ​ (21) ​ ​ ​ ​ ​ (31) ​ ​ ​ ​ ​ (36) ​ ​
Finance income
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 4 ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (27) ​ ​ ​ ​ ​ — ​ ​
Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,292) ​ ​ ​ ​ ​ (303) ​ ​ ​ ​ ​ (1,692) ​ ​ ​ ​ ​ (432) ​ ​
Income tax benefit
​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 27 ​ ​
Loss for the period
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,287) ​ ​ ​ ​ ​ (288) ​ ​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​
Total comprehensive loss for the period
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,287) ​ ​ ​ ​ ​ (288) ​ ​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (405) ​ ​
Loss per share, in RUB ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic and diluted loss per share attributable to ordinary equity holders of the parent
​ ​ ​ ​ ​ ​ ​ ​ ​
​
(20)
​ ​ ​ ​
​
(5)
​ ​ ​ ​
​
(26)
​ ​ ​ ​
​
(7)
​ ​
Basic and diluted weighted average number of ordinary shares
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 65,000,000 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 63,751,905 ​ ​ ​ ​ ​ 59,433,100 ​ ​
The basic and diluted loss per share and basic and diluted weighted average number of shares are adjusted based on the share split with reference to Note 16 regarding the capital reorganization.
The accompanying notes are an integral part of these interim condensed consolidated financial statements
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CIAN GROUP
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF JUNE 30, 2021 AND DECEMBER 31, 2020 (UNAUDITED)
(in millions of Russian Rubles)
​ ​ ​
Note
​ ​
June 30,
2021
​ ​
December 31,
2020
​
Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-current assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Property and equipment
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 45 ​ ​ ​ ​ ​ 31 ​ ​
Right-of-use assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 121 ​ ​ ​ ​ ​ 125 ​ ​
Goodwill
​ ​ ​ ​ 6 ​ ​ ​ ​ ​ 785 ​ ​ ​ ​ ​ — ​ ​
Intangible assets
​ ​ ​ ​ 6 ​ ​ ​ ​ ​ 1,256 ​ ​ ​ ​ ​ 257 ​ ​
Deferred tax assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 248 ​ ​ ​ ​ ​ 237 ​ ​
Other non-current assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 9 ​ ​
Total non-current assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,479 ​ ​ ​ ​ ​ 659 ​ ​
Current assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advances paid and prepaid expenses
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 61 ​ ​ ​ ​ ​ 88 ​ ​
Trade and other receivables
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 216 ​ ​ ​ ​ ​ 154 ​ ​
Prepaid income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10 ​ ​ ​ ​ ​ — ​ ​
Cash and cash equivalents
​ ​ ​ ​ 10 ​ ​ ​ ​ ​ 810 ​ ​ ​ ​ ​ 449 ​ ​
Other current assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 111 ​ ​ ​ ​ ​ 20 ​ ​
Total current assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,208 ​ ​ ​ ​ ​ 711 ​ ​
Total assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,687 ​ ​ ​ ​ ​ 1,370 ​ ​
Equity and liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Share capital
​ ​ ​ ​ 11 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Share premium
​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 2,416 ​ ​ ​ ​ ​ 125 ​ ​
Accumulated losses
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (2,667) ​ ​ ​ ​ ​ (997) ​ ​
Total equity
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (251) ​ ​ ​ ​ ​ (872) ​ ​
Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Borrowings
​ ​ ​ ​ 12 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Employee share-based payment liability
​ ​ ​ ​ 13 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 636 ​ ​
Lease liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 69 ​ ​ ​ ​ ​ 77 ​ ​
Deferred tax liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 143 ​ ​ ​ ​ ​ 28 ​ ​
Total non-current liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 212 ​ ​ ​ ​ ​ 741 ​ ​
Current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Employee share-based payment liability
​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 2,106 ​ ​ ​ ​ ​ — ​ ​
Borrowings
​ ​ ​ ​ 12 ​ ​ ​ ​ ​ 542 ​ ​ ​ ​ ​ 728 ​ ​
Contract liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 344 ​ ​ ​ ​ ​ 332 ​ ​
Trade and other payables
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 496 ​ ​ ​ ​ ​ 316 ​ ​
Income tax payable
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 15 ​ ​
Other taxes payable
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 196 ​ ​ ​ ​ ​ 74 ​ ​
Lease liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ ​ 36 ​ ​
Total current liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,726 ​ ​ ​ ​ ​ 1,501 ​ ​
Total liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,938 ​ ​ ​ ​ ​ 2,242 ​ ​
Total liabilities and equity
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,687 ​ ​ ​ ​ ​ 1,370 ​ ​
The accompanying notes are an integral part of these interim condensed consolidated financial statements
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CIAN GROUP
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles)
​ ​ ​
Note
​ ​
Share
capital
​ ​
Share
premium
​ ​
Accumulated
losses
​ ​
Total
equity
​
Balance at January 1, 2021
​ ​ ​ ​ ​ ​ ​ ​ ​ ​   — ​ ​ ​ ​
​
125
​ ​ ​ ​
​
(997)
​ ​ ​ ​
​
(872)
​ ​
Loss and total comprehensive loss for the period
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,670) ​ ​ ​ ​ ​ (1,670) ​ ​
Issue of ordinary shares
​ ​ ​ ​ 11 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,291 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,291 ​ ​
Balance at June 30, 2021
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
2,416
​ ​ ​ ​
​
(2,667)
​ ​ ​ ​
​
(251)
​ ​
Balance at January 1, 2020
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
125
​ ​ ​ ​
​
(370)
​ ​ ​ ​
​
(245)
​ ​
Loss and total comprehensive loss for the period
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (405) ​ ​ ​ ​ ​ (405) ​ ​
Balance at June 30, 2020
​ ​ ​ ​ ​ ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 125 ​ ​ ​ ​ ​ (775) ​ ​ ​ ​ ​ (650) ​ ​
​ ​ ​
Note
​ ​
Share
capital
​ ​
Share
premium
​ ​
Accumulated
losses
​ ​
Total
equity
​
Balance at April 1, 2021
​ ​ ​ ​ ​ ​ ​   — ​ ​ ​ ​
​
2,416
​ ​ ​ ​
​
(1,380)
​ ​ ​ ​
​
1,036
​ ​
Loss and total comprehensive loss for the period
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,287) ​ ​ ​ ​ ​ (1,287) ​ ​
Balance at June 30, 2021
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
2,416
​ ​ ​ ​
​
(2,667)
​ ​ ​ ​
​
(251)
​ ​
Balance at April 1, 2020
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
125
​ ​ ​ ​
​
(487)
​ ​ ​ ​
​
(362)
​ ​
Loss and total comprehensive loss for the period
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (288) ​ ​ ​ ​ ​ (288) ​ ​
Balance at June 30, 2020
​ ​ ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 125 ​ ​ ​ ​ ​ (775) ​ ​ ​ ​ ​ (650) ​ ​
The accompanying notes are an integral part of these interim condensed consolidated financial statements
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CIAN GROUP
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles)
​ ​ ​
Note
​ ​
Six months ended June 30,
​
​
2021
​ ​
2020
​
Cash flows from operating activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,692) ​ ​ ​ ​ ​ (432) ​ ​
Adjusted for: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Depreciation and amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 134 ​ ​ ​ ​ ​ 99 ​ ​
Employee share-based payment expense
​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 1,470 ​ ​ ​ ​ ​ 249 ​ ​
Finance income
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (7) ​ ​ ​ ​ ​ (4) ​ ​
Finance costs
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31 ​ ​ ​ ​ ​ 36 ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 27 ​ ​ ​ ​ ​ — ​ ​
Changes in allowances on trade receivables and advances paid
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3 ​ ​
Working capital changes: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Increase in trade and other receivables
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (57) ​ ​ ​ ​ ​ (25) ​ ​
Decrease / (increase) in advances paid and prepaid expenses
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 16 ​ ​ ​ ​ ​ (8) ​ ​
Increase in other assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (62) ​ ​ ​ ​ ​ (20) ​ ​
Increase / (decrease) in trade and other payables
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 117 ​ ​ ​ ​ ​ (83) ​ ​
(Decrease) / increase in contract liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (9) ​ ​ ​ ​ ​ 79 ​ ​
Increase in other liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101 ​ ​ ​ ​ ​ 106 ​ ​
Cash generated from (used in) operating activities
​ ​ ​ ​ ​ ​ ​ ​ ​
​
70
​ ​ ​ ​ ​ — ​ ​
Income tax paid
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (18) ​ ​ ​ ​ ​ (14) ​ ​
Interest received
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 4 ​ ​
Interest paid
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (30) ​ ​ ​ ​ ​ (34) ​ ​
Net cash generated from (used in) operating activities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 27 ​ ​ ​ ​ ​ (44) ​ ​
Cash flows from investing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Acquisition of a subsidiary, net of cash acquired
​ ​ ​ ​ 6 ​ ​ ​ ​ ​ (1,651) ​ ​ ​ ​ ​ — ​ ​
Purchase of property and equipment
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (24) ​ ​ ​ ​ ​ (10) ​ ​
Purchase of intangible assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (50) ​ ​ ​ ​ ​ (27) ​ ​
Loans collected from employees
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2 ​ ​
Net cash used in investing activities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,725) ​ ​ ​ ​ ​ (35) ​ ​
Cash flows from financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proceeds from the issue of ordinary shares
​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 2,265 ​ ​ ​ ​ ​ — ​ ​
Proceeds from borrowings
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 320 ​ ​
Repayment of borrowings
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (186) ​ ​ ​ ​ ​ — ​ ​
Payment of principal portion of lease liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (19) ​ ​ ​ ​ ​ (33) ​ ​
Net cash generated from financing activities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,060 ​ ​ ​ ​ ​ 287 ​ ​
Net increase in cash and cash equivalents
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 362 ​ ​ ​ ​ ​ 208 ​ ​
Cash and cash equivalents at the beginning of the period
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 449 ​ ​ ​ ​ ​ 148 ​ ​
Effect of exchange rate changes on cash and cash equivalents
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ — ​ ​
Cash and cash equivalents at the end of the period
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 810 ​ ​ ​ ​ ​ 356 ​ ​
The accompanying notes are an integral part of these interim condensed consolidated financial statements
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
1.   GENERAL INFORMATION
The interim condensed consolidated financial statements of Cian PLC and its subsidiaries (collectively, the “Cian Group” or the “Group”) as of and for the three and six months ended June 30, 2021 were authorized for issue in accordance with a resolution of the directors on September 2, 2021 (October 12, 2021, as to the effects of the restatement discussed in Note 5).
Cian PLC (formerly Solaredge Holdings Limited) (the “Company” or the “parent”) is a public liability company incorporated and domiciled in Cyprus. The registered office is located at Agiou Georgiou Makri, 64, Anna Maria Lena Court, flat/office 201, 6037, Larnaca, Cyprus. The Group’s principal place of business is Elektrozavodskaya street 27/8, premise I, floor 5, Moscow, 107023, the Russian Federation.
The Group is principally engaged in online real estate classifieds business within the Russian Federation through the Group’s websites and mobile application.
The ultimate controlling party of the Group as of June 30, 2021 are Elbrus Capital Fund II L.P., Elbrus Capital Fund IIB L.P. and Elbrus capital Fund III A. S.C.SP. (together “Elbrus Capital”), which own an aggregate of 65.34% as of June 30, 2021.
2.   BASIS OF PREPARATION, GOING CONCERN AND CHANGES IN ACCOUNTING POLICIES
Basis of preparation
The interim condensed consolidated financial statements as of and for the three and six months ended June 30, 2021 and June 30, 2020, have been prepared on a going concern basis in accordance with IAS 34 Interim Financial Reporting.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), and should be read in conjunction with the Group’s annual consolidated financial statements as of and for the year ended December 31, 2020.
2.2   Going concern
These interim condensed consolidated financial statements have been prepared by management on the assumption that the Group will be able to continue as a going concern, which presumes that the Group will, for the foreseeable future, be able to realize its assets and discharge its liabilities in the normal course of business.
There were following indicators that could give rise to the risk of a going concern: for the six months ended June 30, 2021, the Group incurred a loss of 1,670 (six months ended June 30, 2020: 405), as of June 30, 2021, the Group had a net liability position of 251 (December 31, 2020: 872) and net cash of 268 (December 31, 2020: net debt of 279), the Group also had a negative working capital (defined as total current asset less total current liabilities) of 2,518 (December 31, 2020: 790), including 344 of contract liabilities (December 31, 2020: 332).
However, the Group generated positive operating cash flow of 27 for the six months ended June 30, 2021 (six months ended June 30, 2020: negative operating cash flow of 44). The following matters have been considered by management in determining the appropriateness of the going concern basis of preparation in these interim condensed consolidated financial statements.
COVID-19
In March 2020, the World Health Organization declared the COVID-19 virus a global pandemic. The highly contagious disease has spread to most of the countries including Russia, creating a negative impact
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
on customers, workforces, and suppliers, disrupting economies and financial markets, and potentially leading to a worldwide economic downturn. The Group aimed to adapt to such adverse changes in conditions by exploring new ways of monetization and promotion of its products and services and cost optimization. As a result, the Group avoided any significant adverse impact on revenue or operating loss. However, the full impact of the COVID-19 outbreak continues to evolve as of the date of issuance of these interim condensed consolidated financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Group’s financial condition, liquidity, and future results of operations.
Technical default
The Group has bank loans that are subject to certain covenants (Note 12). These covenants impose some pledges and restrictions in respect of certain financial indicators. On June 30, 2021, the Group breached some of the financial covenants associated with these bank loans, thus the non-current portion of the loans in the amount of 169 was reclassified into the short-term portion at June 30, 2021. The Group obtained a waiver from the bank in September 2021, confirming that the bank will not claim early repayment of the loans as of June 30, 2021.
Financing
The Group had approximately 850 of cash and cash equivalents as of September 2, 2021. Management is confident, based on their current operating plan, that existing cash and cash equivalents, together with cash flows from operating activities and financial support from the major shareholders of the Group who intend to provide an additional equity financing to the Group in case it is not able to meet its financial liabilities, that the Group will be able to meet anticipated cash needs for working capital, capital expenditures, general and administrative expenses and business expansion for at least the next twelve months.
2.3   New standards, interpretations and amendments
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements as of and for the year ended December 31, 2020, except for the adoption of new standards effective as of January 1, 2021. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Several amendments apply for the first time in 2021, but do not have an impact on the interim condensed consolidated financial statements of the Group and are not expected to have an impact on the annual consolidated financial statements of the Group.
3.   SEASONALITY
The Group’s business operations are not significantly influenced by seasonality factors.
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
4.   REVENUE FROM CONTRACTS WITH CUSTOMERS
4.1   Disaggregated revenue information
Set out below is the disaggregation of the Group’s revenue from contracts with customers by type and timing of revenue recognition:
For the three months ended June 30, 2021
​ ​ ​
At a point
in time
​ ​
Over
time
​ ​
Total
revenue
​
Listing revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 943 ​ ​ ​ ​ ​ 943 ​ ​
Lead generation revenue
​ ​ ​ ​ 296 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 296 ​ ​
Display advertising revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 134 ​ ​ ​ ​ ​ 134 ​ ​
Other revenue
​ ​ ​ ​ 77 ​ ​ ​ ​ ​ 6 ​ ​ ​ ​ ​ 83 ​ ​
Total revenue
​ ​ ​ ​ 373 ​ ​ ​ ​ ​ 1,083 ​ ​ ​ ​ ​ 1,456 ​ ​
For the six months ended June 30, 2021
​ ​ ​
At a point
in time
​ ​
Over
time
​ ​
Total
revenue
​
Listing revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,697 ​ ​ ​ ​ ​ 1,697 ​ ​
Lead generation revenue
​ ​ ​ ​ 597 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 597 ​ ​
Display advertising revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 268 ​ ​ ​ ​ ​ 268 ​ ​
Other revenue
​ ​ ​ ​ 126 ​ ​ ​ ​ ​ 16 ​ ​ ​ ​ ​ 142 ​ ​
Total revenue
​ ​ ​ ​ 723 ​ ​ ​ ​ ​ 1,981 ​ ​ ​ ​ ​ 2,704 ​ ​
For the three months ended June 30, 2020
​ ​ ​
At a point
in time
​ ​
Over
time
​ ​
Total
revenue
​
Listing revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 299 ​ ​ ​ ​ ​ 299 ​ ​
Lead generation revenue
​ ​ ​ ​ 182 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 182 ​ ​
Display advertising revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 97 ​ ​ ​ ​ ​ 97 ​ ​
Other revenue
​ ​ ​ ​ 18 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 22 ​ ​
Total revenue
​ ​ ​ ​ 200 ​ ​ ​ ​ ​ 400 ​ ​ ​ ​ ​ 600 ​ ​
For the six months ended June 30, 2020
​ ​ ​
At a point
in time
​ ​
Over
time
​ ​
Total
revenue
​
Listing revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 979 ​ ​ ​ ​ ​ 979 ​ ​
Lead generation revenue
​ ​ ​ ​ 408 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 408 ​ ​
Display advertising revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 209 ​ ​ ​ ​ ​ 209 ​ ​
Other revenue
​ ​ ​ ​ 33 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 46 ​ ​
Total revenue
​ ​ ​ ​ 441 ​ ​ ​ ​ ​ 1,201 ​ ​ ​ ​ ​ 1,642 ​ ​
 
F-8
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
Listing, lead generation and display advertising revenues relate to the “Core Business” operating segment, while other revenue represents operating segments “Mortgage Marketplace”, “Valuation and Analytics”, “C2C Rental” and “End-to-End Offerings” generated no revenue for the periods presented in the interim condensed consolidated financial statements (Note 5).
5.   SEGMENT INFORMATION
The chief operating decision-maker (CODM) of the Group is the Chief Executive Officer. The CODM reviews the Group’s internal reporting based on the management accounts in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.
In evaluating the performance of the Group’s operating segments and allocating resources, the CODM reviews selected items of each segment’s statement of profit or loss and other comprehensive income including revenue and Adjusted EBITDA (an operating profit / (loss) for the period before depreciation and amortization and other adjustments for non-cash effects described in the table “Reconciliation of Adjusted EBITDA to Loss before income tax”). All other financial information is presented on a consolidated basis. Assets and liabilities are not allocated to the different operating segments for internal reporting purposes.
The Group identifies its operating segments based on how the CODM manages the business, allocates resources, makes operating decisions and evaluates operating performance. The Group has identified the following operating segments on this basis, as these segments are analyzed separately by management:
—
Core Business;
​
—
Mortgage Marketplace;
​
—
Valuation and Analytics;
​
—
C2C Rental; and
​
—
End-to-End Offerings.
​
The “Core Business” segment represents the mature main service line of real estate online classifieds and related advertising services provided on the Group’s platform (websites cian.ru, n1.ru, mlsn.ru and emls.ru and mobile applications). This segment relates to the online real estate classified platform, where clients like real estate agencies and agents, developers and individual property owners place their property listings and related advertising materials.
Each of the other operating segments represents the Group’s new offerings focused on developing different transactional business models;
—
Mortgage Marketplace represents a platform for mortgage price comparison, mortgage pre-approval and origination, where the Group earns commissions from its partner banks for distributing their mortgage products;
​
—
Valuation and Analytics — services where the Group earns fees derived from the customers for providing access to the Group’s proprietary real estate market research, data analytics and market intelligence services;
​
—
C2C Rental — a service to facilitate seamless rental transactions, where the Group earns revenue for providing an end to end solution in property rentals;
​
—
End-to-End Offerings — a service, that enables online execution of real estate transactions (including document checking, verification, signing and storage, notary services, registration and tax refunds) and facilitates simultaneous sales and purchases for our customers and users. It is a new operating segment, which emerged in 2021.
​
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
Restatement of segment information. The Group previously aggregated “Mortgage Marketplace”, “Valuation and Analytics”, “C2C Rental” and “End-to-End Offerings” operating segments within one reportable segment (“Adjacent Services”), however the Group’s management determined that the aggregation of these operating segments within one reportable segment was not appropriate under paragraph 12 of IFRS 8. As a result, information on segments presented in this note has been restated to present each operating segment as a separate reportable segment.
All revenue in all periods presented in the financial statements is derived from third parties and there is no inter-segment revenue. The Group operates only in Russia.
Revenue and costs are directly attributed to the Group’s segments when possible. However, due to the integrated structure of the Group’s business, certain costs incurred by one segment may benefit the other segments. These costs primarily include headcount-related expenses, marketing and advertising costs, product development, IT expenses (including hosting and technical support expenses and telecommunication services), office maintenance expenses and other general corporate expenses such as finance, accounting, legal, human resources, recruiting and facilities costs. These costs are allocated to each segment based on the estimated benefit each segment receives from such expenses, using specific allocation drivers representing this benefit. Substantially all assets and liabilities relate to the “Core Business” operating segment.
Management reporting is different from IFRS, the differences are IFRS adjustments listed below, which are not analyzed by the CODM in assessing the operating performance of the business:
—
Reclassification of lease related amortization and interest — for the purposes of CODM’s assessment of operating performance rental expenses are considered operating expenses included in Adjusted EBITDA, rather than depreciation and interest expense, thus, IFRS 16 ‘Leases’ is not applied in internal reporting;
​
—
Reclassification of operating expense related to software licenses to amortization — for the purposes of CODM’s assessment of operating performance expenses related to software licenses are considered operating expenses included in Adjusted EBITDA, rather than amortization of intangible assets;
​
—
Capitalized development costs — for the purposes of CODM’s assessment of operating performance expenses none of the expenses are capitalized; and
​
—
Share-based payments — for the purposes of CODM’s assessment of operating performance the fair value adjustments related to remeasurement of share-based payments liability are not analyzed;
​
as well as non-recurring items, such as IPO costs, that occur from time to time and are evaluated for adjustment as and when they occur.
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
Information on each of the reportable and other segments and reconciliation to Loss before income tax is as follows:
​ ​ ​
For the three months ended June 30, 2021
​
​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation an
Analytics
​ ​
C2C Rental
​ ​
End-to End
Offerings
​ ​
Total
​
Revenue, including:
​ ​ ​ ​ 1,372 ​ ​ ​ ​ ​ 74 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,456 ​ ​
Listing revenue
​ ​ ​ ​ 943 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 943 ​ ​
Lead generation revenue
​ ​ ​ ​ 295 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 296 ​ ​
Display advertising revenue
​ ​ ​ ​ 133 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 134 ​ ​
Other revenue
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 72 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 83 ​ ​
Adjusted EBITDA
​ ​ ​ ​ 295 ​ ​ ​ ​ ​ (107) ​ ​ ​ ​ ​ (18) ​ ​ ​ ​ ​ (35) ​ ​ ​ ​ ​ (39) ​ ​ ​ ​ ​ 96 ​ ​
Reconciliation of Adjusted EBITDA to Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Adjusted EBITDA
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 96 ​ ​
Depreciation and amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (70) ​ ​
Finance expenses, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (11) ​ ​
IPO-related costs
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (88) ​ ​
Reclassification of lease related amortization and interest
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12 ​ ​
Reclassification of operating expense related to software licenses to amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11 ​ ​
Share-based payments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,242) ​ ​
Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,292) ​ ​
 
F-11
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
​ ​ ​
For the six months ended June 30, 2021
​
​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation
and
Analytics
​ ​
C2C Rental
​ ​
End-to-End
Offerings
​ ​
Total
​
Revenue, including:
​ ​ ​ ​ 2,563 ​ ​ ​ ​ ​ 119 ​ ​ ​ ​ ​ 21 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,704 ​ ​
Listing revenue
​ ​ ​ ​ 1,697 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,697 ​ ​
Lead generation revenue
​ ​ ​ ​ 595 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 597 ​ ​
Display advertising revenue
​ ​ ​ ​ 267 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 268 ​ ​
Other revenue
​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 116 ​ ​ ​ ​ ​ 21 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 142 ​ ​
Adjusted EBITDA
​ ​ ​ ​ 406 ​ ​ ​ ​ ​ (232) ​ ​ ​ ​ ​ (36) ​ ​ ​ ​ ​ (71) ​ ​ ​ ​ ​ (66) ​ ​ ​ ​ ​ 1 ​ ​
Reconciliation of Adjusted EBITDA to Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Adjusted EBITDA
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1 ​ ​
Depreciation and amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (134) ​ ​
Finance expenses, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (24) ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (27) ​ ​
IPO-related costs
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (88) ​ ​
Reclassification of lease related amortization and interest
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30 ​ ​
Reclassification of operating expense related to software licenses to amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 20 ​ ​
Share-based payments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,470) ​ ​
Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,692) ​ ​
​ ​ ​
For the three months ended June 30, 2020
​
​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation
and
Analytics
​ ​
C2C Rental
​ ​
Total
​
Revenue, including:
​ ​ ​ ​ 580 ​ ​ ​ ​ ​ 16 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 600 ​ ​
Listing revenue
​ ​ ​ ​ 299 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 299 ​ ​
Lead generation revenue
​ ​ ​ ​ 182 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 182 ​ ​
Display advertising revenue
​ ​ ​ ​ 97 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 97 ​ ​
Other revenue
​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 16 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 22 ​ ​
Adjusted EBITDA
​ ​ ​ ​ 26 ​ ​ ​ ​ ​ (30) ​ ​ ​ ​ ​ (32) ​ ​ ​ ​ ​ (33) ​ ​ ​ ​ ​ (69) ​ ​
Reconciliation of Adjusted EBITDA to Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Adjusted EBITDA
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (69) ​ ​
Depreciation and amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (48) ​ ​
Finance expenses, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (18) ​ ​
Capitalized development costs
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11 ​ ​
Reclassification of lease related amortization and interest
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 18 ​ ​
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
​ ​ ​
For the three months ended June 30, 2020
​
​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation
and
Analytics
​ ​
C2C Rental
​ ​
Total
​
Reclassification of operating expense related to software licenses to amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7 ​ ​
Share-based payments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (204) ​ ​
Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (303) ​ ​
​
​ ​ ​
For the six months ended June 30, 2020
​
​ ​ ​
Core Business
​ ​
Mortgage Marketplace
​ ​
Valuation and analytics
​ ​
C2C Rental
​ ​
Total
​
Revenue, including:
​ ​ ​
​
1,597
​ ​ ​ ​
​
36
​ ​ ​ ​
​
9
​ ​ ​ ​ ​ — ​ ​ ​ ​
​
1,642
​ ​
Listing revenue
​ ​ ​ ​ 979 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 979 ​ ​
Lead generation revenue
​ ​ ​ ​ 407 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 408 ​ ​
Display advertising revenue
​ ​ ​ ​ 206 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 209 ​ ​
Other revenue
​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 32 ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 46 ​ ​
Adjusted EBITDA
​ ​ ​ ​ 110 ​ ​ ​ ​ ​ (97) ​ ​ ​ ​ ​ (69) ​ ​ ​ ​ ​ (63) ​ ​ ​ ​ ​ (119) ​ ​
​ Reconciliation of Adjusted EBITDA to Loss before income tax ​ ​ ​ ​ ​ ​ ​
​
Adjusted EBITDA
​ ​ ​ ​ (119) ​ ​
​
Depreciation and amortization
​ ​ ​ ​ (99) ​ ​
​
Finance expenses, net
​ ​ ​ ​ (32) ​ ​
​
Capitalized development costs
​ ​ ​ ​ 16 ​ ​
​
Reclassification of lease related amortization and interest
​ ​ ​ ​ 37 ​ ​
​
Reclassification of operating expense related to software licenses to amortization
​ ​ ​ ​ 14 ​ ​
​
Share-based payments
​ ​ ​ ​ (249) ​ ​
​
Loss before income tax
​ ​ ​ ​ (432) ​ ​
6.   BUSINESS COMBINATION
On February 5, 2021, the Group completed its acquisition of 100% of N1.ru LLC with its subsidiaries (the “N1 Group”), a real estate-focused classifieds business that primarily operates in regional cities in Russia, such as Novosibirsk, Ekaterinburg and Omsk, for a total cash consideration of 1,785. The primary reason for the business combination was to enhance the Group’s position in Russia’s regions outside Moscow and Saint-Petersburg. The acquisition has been accounted for using the acquisition method. The Group’s interim condensed consolidated financial statements include the results of the N1 Group from February 5, 2021 until June 30, 2021.
The table below summarizes preliminary allocations of the consideration to assets acquired and liabilities assumed based on their fair values (provisional accounting) as of the acquisition date. Management is still in the process of finalizing its analysis over the key assumptions used in the determination of the fair values of intangible assets and the resulting impact on the amounts of deferred tax liability and goodwill.
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
All information presented with respect to such assets and liabilities assumed as it relates to these acquisitions is preliminary and subject to revision pending the final fair value analysis.
​ ​ ​
February 5,
2021
​
Assets ​ ​ ​ ​ ​ ​ ​
Customer base
​ ​ ​ ​ 753 ​ ​
Trademarks
​ ​ ​ ​ 254 ​ ​
Other intangible assets
​ ​ ​ ​ 39 ​ ​
Right-of-use assets
​ ​ ​ ​ 18 ​ ​
Property and equipment
​ ​ ​ ​ 7 ​ ​
Cash and cash equivalents
​ ​ ​ ​ 134 ​ ​
Other assets
​ ​ ​ ​ 49 ​ ​
Total assets
​ ​ ​ ​ 1,254 ​ ​
Liabilities ​ ​ ​ ​ ​ ​ ​
Contract liabilities
​ ​ ​ ​ (21) ​ ​
Trade and other payables
​ ​ ​ ​ (51) ​ ​
Lease liabilities
​ ​ ​ ​ (18) ​ ​
Deferred tax liabilities
​ ​ ​ ​ (130) ​ ​
Other liabilities
​ ​ ​ ​ (34) ​ ​
Total liabilities
​ ​ ​ ​ (254) ​ ​
Total identifiable net assets at fair value
​ ​ ​ ​ 1,000 ​ ​
Goodwill arising from the acquisition
​ ​ ​ ​ 785 ​ ​
Purchase consideration transferred
​ ​ ​ ​ 1,785 ​ ​
Analysis of cash flows from the acquisition: ​ ​ ​ ​ ​ ​ ​
Net cash acquired with the subsidiary (included in cash flows from investing activities)
​ ​ ​ ​ 134 ​ ​
Cash paid
​ ​ ​ ​ (1,785) ​ ​
Net cash flow from the acquisition
​ ​ ​ ​ (1,651) ​ ​
As of the acquisition date, the fair value of trade receivables was 5. Trade receivables comprised gross contractual amounts of 17, of which 12 was expected to be uncollectable as of the acquisition date.
Deferred tax liabilities represent the tax effect of temporary differences arising on identifiable assets recognized at their fair values.
If the acquisition of the N1 Group had taken place on January 1, 2021, consolidated revenue for the six months ended June 30, 2021 would have been 2,737 and consolidated loss for the same period would have been 1,705.
The goodwill recognized is primarily attributed to the expected synergies from combining the activities of the N1 Group with those of the Cian Group. The goodwill is not deductible for income tax purposes.
The Group incurred acquisition-related costs of 16 relating to external legal fees and due diligence costs. These costs have been included in other operating expenses in the consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2020.
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
7.   MARKETING EXPENSES
​ ​ ​
Three months ended
June 30,
​ ​
Six months ended
June 30,
​
​
2021
​ ​
2020
​ ​
2021
​ ​
2020
​
Online marketing
​ ​ ​ ​ (408) ​ ​ ​ ​ ​ (101) ​ ​ ​ ​ ​ (810) ​ ​ ​ ​ ​ (545) ​ ​
Offline marketing
​ ​ ​ ​ (103) ​ ​ ​ ​ ​ (25) ​ ​ ​ ​ ​ (294) ​ ​ ​ ​ ​ (62) ​ ​
Other marketing expenses
​ ​ ​ ​ (13) ​ ​ ​ ​ ​ (14) ​ ​ ​ ​ ​ (25) ​ ​ ​ ​ ​ (29) ​ ​
Total marketing expenses
​ ​ ​ ​ (524) ​ ​ ​ ​ ​ (140) ​ ​ ​ ​ ​ (1,129) ​ ​ ​ ​ ​ (636) ​ ​
Marketing expenses are only purchased advertising exclusive of any employee-related expenses.
8.   EMPLOYEE-RELATED EXPENSES
​ ​ ​
Three months ended
June 30,
​ ​
Six months ended
June 30,
​
​
2021
​ ​
2020
​ ​
2021
​ ​
2020
​
Wages, salaries and related taxes
​ ​ ​ ​ (567) ​ ​ ​ ​ ​ (399) ​ ​ ​ ​ ​ (1,124) ​ ​ ​ ​ ​ (808) ​ ​
Share-based payment expense (note 13)
​ ​ ​ ​ (1,242) ​ ​ ​ ​ ​ (204) ​ ​ ​ ​ ​ (1,470) ​ ​ ​ ​ ​ (249) ​ ​
Other employee-related expenses
​ ​ ​ ​ (24) ​ ​ ​ ​ ​ (7) ​ ​ ​ ​ ​ (38) ​ ​ ​ ​ ​ (21) ​ ​
Total employee-related expenses
​ ​ ​ ​ (1,833) ​ ​ ​ ​ ​ (610) ​ ​ ​ ​ ​ (2,632) ​ ​ ​ ​ ​ (1,078) ​ ​
9.   INCOME TAX
The Group calculates the period income tax benefit / (expense) based on the best estimate of the weighted average annual income tax rate expected for the full financial year. The major components of income tax benefit for the three and six months ended June 30, 2021 and June 30, 2020 are:
​ ​ ​
Three months ended
June 30,
​ ​
Six months ended
June 30,
​
​
2021
​ ​
2020
​ ​
2021
​ ​
2020
​
Current income tax expense
​ ​ ​ ​ (2) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2) ​ ​ ​ ​ ​ — ​ ​
Deferred tax benefit
​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 27 ​ ​
Income tax benefit
​ ​ ​ ​   5 ​ ​ ​ ​ ​  15 ​ ​ ​ ​ ​  22 ​ ​ ​ ​ ​  27 ​ ​
10.   CASH AND CASH EQUIVALENTS
​ ​ ​
June 30,
2021
​ ​
December 31,
2020
​
Short-term deposits
​ ​ ​ ​ 263 ​ ​ ​ ​ ​ 406 ​ ​
Cash at banks and on hand
​ ​ ​ ​ 547 ​ ​ ​ ​ ​ 43 ​ ​
Total cash and cash equivalents
​ ​ ​ ​ 810 ​ ​ ​ ​ ​ 449 ​ ​
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
11.   SHARE CAPITAL AND SHARE PREMIUM
Number of shares
​ ​
Authorised
​ ​
Issued and fully paid
​
​
June 30,
2021
​ ​
December 31,
2020
​ ​
June 30,
2021
​ ​
December 31,
2020
​
Ordinary shares of EUR 0.0004 each
​ ​ ​ ​ 66,366,961 ​ ​ ​ ​ ​ 66,366,961 ​ ​ ​ ​ ​ 65,000,000 ​ ​ ​ ​ ​ 59,433,100 ​ ​
​ ​ ​ ​ ​ 66,366,961 ​ ​ ​ ​ ​ 66,366,961 ​ ​ ​ ​ ​ 65,000,000 ​ ​ ​ ​ ​ 59,433,100 ​ ​
​ ​ ​
Number of
ordinary shares
​ ​
Share
capital
​ ​
Share
premium
​
At January 1, 2020
​ ​ ​
​
59,433,100
​ ​ ​ ​ ​   — ​ ​ ​ ​
​
125
​ ​
At December 31, 2020
​ ​ ​
​
59,433,100
​ ​ ​ ​ ​ — ​ ​ ​ ​
​
125
​ ​
Issue of ordinary shares
​ ​ ​ ​ 5,566,900 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,291 ​ ​
At March 31, 2021
​ ​ ​ ​ 65,000,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,416 ​ ​
At June 30, 2021
​ ​ ​ ​ 65,000,000 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 2,416 ​ ​
Share amounts in the tables above are presented on a split-adjusted basis (note 16).
12.   BORROWINGS
​ ​ ​
Interest rate
​ ​
Currency
​ ​
Maturity
​ ​
June 30,
2021
​ ​
December 31,
2020
​
​
Amount, incl.
accrued interest
​ ​
Amount, incl.
accrued interest
​
Bank loan
​ ​
CBR key rate+3.35%
​ ​ ​ ​ RUB ​ ​ ​ ​ ​ 2021-2022 ​ ​ ​ ​ ​ 286 ​ ​ ​ ​ ​ 429 ​ ​
Bank loan
​ ​
CBR key rate+3.8%
​ ​ ​ ​ RUB ​ ​ ​ ​ ​ 2021-2024 ​ ​ ​ ​ ​ 256 ​ ​ ​ ​ ​ 299 ​ ​
Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 542 ​ ​ ​ ​ ​ 728 ​ ​
Current ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 542 ​ ​ ​ ​ ​ 728 ​ ​
Non-current
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
The bank loans are subject to certain covenants. These covenants impose some pledges and restrictions in respect of certain financial indicators of its key operational subsidiary iRealtor LLC, calculated in accordance with Russian Accounting Standards (“RAS”). The loans are secured by 100% shares of Fastrunner Investment Limited, 100% shares of Mimons Investments Limited, 51% shares of iRealtor LLC, software rights and Cian trademarks and rights under license agreements. As of June 30, 2021, the Group technically breached the maintenance covenant requiring that net assets of iRealtor LLC must be positive as of the end of each semi-annual period, a covenant that requires that iRealtor LLC current liquidity ratio must be at least 1.5:1 as of the end of each quarter and the covenant as to the maintenance at the end of each quarter of certain level of EBITDA. The Group obtained a waiver from the bank in September 2021 with respect to the breach of covenants. However, the non-current portion of the loans was reclassified into the short-term portion as of June 30, 2021 since the waiver was obtained after the reporting date.
13.   SHARE-BASED COMPENSATION
In the first half of 2021, the Group granted 88.5 (1,753,276.4 after the share-split, note 16) share-based compensation awards to certain employees that entitle them to a cash payment after five years of service under the existing share-based compensation plan, described in the annual consolidated financial statements.
 
F-16
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
The amount of the cash payment is determined based on the increase in the share price of the Company between the grant date and the time of exercise. The plan stipulates the following payments:
1.
Liquidity event payments. Participants of the program are entitled to a cash payment upon occurrence of some liquidity events such as an initial public offering (“IPO”) or an acquisition of control over the Group by a third party.
​
2.
Non-liquidity event payments. Participants of the program are entitled to a cash payment after the termination of the service period if the net debt (calculated as borrowings less cash and cash equivalents) does not exceed three times the lowest between EBITDA (calculated as operating profit/(loss) plus amortization and depreciation) and Adjusted EBITDA (calculated as described in Note 5) as of the date of the notice sent by the participants to the Company.
​
The fair value of the liability, classified as a share-based payment liability, is remeasured at each reporting date and at settlement date. The Group recognized the share-based payment liability as of June 30, 2021 based on both the liquidity and non-liquidity events. The Group recognized share-based payment liability as of December 31, 2020 based only on the non-liquidity events. The Group did not recognize the liability based on the liquidity events in the consolidated statements of financial position as of December 31, 2020, as the Group did not consider any potential initial public offering path advanced enough for it to qualify as a liquidity event.
The following table provides information about share-based awards as of June 30, 2021 and December 31, 2020:
​ ​ ​ ​ ​ ​ ​ ​ ​
Number of awards
outstanding as of
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Fair value per award,
USD as of
​ ​
Fair value per award,
RUB as of
​
Allocation
year
​ ​
Number of
awards
granted
​ ​
June 30,
2021
​ ​
December 31,
2020
​ ​
Vesting
period,
years
​ ​
Exercise
price,
USD
​ ​
June 30,
2021
​ ​
December 31,
2020
​ ​
June 30,
2021
​ ​
December 31,
2020
​
2015
​ ​ ​ ​ 135.00 ​ ​ ​ ​ ​ 115.50 ​ ​ ​ ​ ​ 57.75 ​ ​ ​ ​ ​    4 ​ ​ ​ ​ ​ 49,322 ​ ​ ​ ​ ​ 181,394 ​ ​ ​ ​ ​ 110,745 ​ ​ ​ ​ ​ 13,127,901 ​ ​ ​ ​ ​ 8,181,364 ​ ​
2017
​ ​ ​ ​ 13.50 ​ ​ ​ ​ ​ 13.50 ​ ​ ​ ​ ​ 6.75 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 42,760 ​ ​ ​ ​ ​ 189,684 ​ ​ ​ ​ ​ 118,086 ​ ​ ​ ​ ​ 13,727,867 ​ ​ ​ ​ ​ 8,723,686 ​ ​
2018
​ ​ ​ ​ 19.50 ​ ​ ​ ​ ​ 13.32 ​ ​ ​ ​ ​ 9.75 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 69,000 ​ ​ ​ ​ ​ 161,450 ​ ​ ​ ​ ​ 92,101 ​ ​ ​ ​ ​ 11,684,508 ​ ​ ​ ​ ​ 6,804,026 ​ ​
2019
​ ​ ​ ​ 6.00 ​ ​ ​ ​ ​ 3.20 ​ ​ ​ ​ ​ 3.00 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 69,000 ​ ​ ​ ​ ​ 161,450 ​ ​ ​ ​ ​ 92,101 ​ ​ ​ ​ ​ 11,684,508 ​ ​ ​ ​ ​ 6,804,026 ​ ​
2019
​ ​ ​ ​ 6.00 ​ ​ ​ ​ ​ 2.50 ​ ​ ​ ​ ​ 3.00 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 80,012 ​ ​ ​ ​ ​ 150,381 ​ ​ ​ ​ ​ 82,462 ​ ​ ​ ​ ​ 10,883,419 ​ ​ ​ ​ ​ 6,091,938 ​ ​
2019
​ ​ ​ ​ 12.00 ​ ​ ​ ​ ​ 6.79 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 80,012 ​ ​ ​ ​ ​ 150,381 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 10,883,419 ​ ​ ​ ​ ​ — ​ ​
2021
​ ​ ​ ​ 76.50 ​ ​ ​ ​ ​ 12.70 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 110,000 ​ ​ ​ ​ ​ 120,013 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8,685,617 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ ​ 268.50 ​ ​ ​ ​ ​ 167.51 ​ ​ ​ ​ ​  80.25 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
The following table provides information about share-based awards as of June 30, 2021 and December 31, 2020 on a split-adjusted basis (note 16):
​ ​ ​ ​ ​ ​ ​ ​ ​
Number of awards
outstanding as of
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Fair value per award,
USD as of
​ ​
Fair value per award,
RUB as of
​
Allocation
year
​ ​
Number of
awards
granted
​ ​
June 30,
2021
​ ​
December 31,
2020
​ ​
Vesting
period,
years
​ ​
Exercise
price,
USD
​ ​
June 30,
2021
​ ​
December 31,
2020
​ ​
June 30,
2021
​ ​
December 31,
2020
​
2015
​ ​ ​ ​ 2,674,489 ​ ​ ​ ​ ​ 2,288,174 ​ ​ ​ ​ ​ 1,144,087 ​ ​ ​ ​ ​    4 ​ ​ ​ ​ ​   2.49 ​ ​ ​ ​ ​    9.16 ​ ​ ​ ​ ​  5.59 ​ ​ ​ ​ ​    663 ​ ​ ​ ​ ​  413 ​ ​
2017
​ ​ ​ ​ 267,449 ​ ​ ​ ​ ​ 267,449 ​ ​ ​ ​ ​ 133,724 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 2.16 ​ ​ ​ ​ ​ 9.57 ​ ​ ​ ​ ​ 5.96 ​ ​ ​ ​ ​ 693 ​ ​ ​ ​ ​ 440 ​ ​
2018
​ ​ ​ ​ 386,315 ​ ​ ​ ​ ​ 263,883 ​ ​ ​ ​ ​ 193,158 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 3.48 ​ ​ ​ ​ ​ 8.15 ​ ​ ​ ​ ​ 4.65 ​ ​ ​ ​ ​ 590 ​ ​ ​ ​ ​ 343 ​ ​
2019
​ ​ ​ ​ 118,866 ​ ​ ​ ​ ​ 63,395 ​ ​ ​ ​ ​ 59,433 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 3.48 ​ ​ ​ ​ ​ 8.15 ​ ​ ​ ​ ​ 4.65 ​ ​ ​ ​ ​ 590 ​ ​ ​ ​ ​ 343 ​ ​
2019
​ ​ ​ ​ 118,866 ​ ​ ​ ​ ​ 49,528 ​ ​ ​ ​ ​ 59,433 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 4.04 ​ ​ ​ ​ ​ 7.59 ​ ​ ​ ​ ​ 4.16 ​ ​ ​ ​ ​ 549 ​ ​ ​ ​ ​ 308 ​ ​
2019
​ ​ ​ ​ 237,732 ​ ​ ​ ​ ​ 134,517 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 4.04 ​ ​ ​ ​ ​ 7.59 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 549 ​ ​ ​ ​ ​ — ​ ​
2021
​ ​ ​ ​ 1,515,544 ​ ​ ​ ​ ​ 251,600 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 5.55 ​ ​ ​ ​ ​ 6.06 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 439 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ ​ 5,319,261 ​ ​ ​ ​ ​ 3,318,546 ​ ​ ​ ​ ​ 1,589,835 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Set out below are the movements in the Group’s share-based payment liabilities during the six months ended June 30, 2021 and the year ended December 31, 2020:
​ ​ ​
Six months ended
June 30,
2021
​ ​
Year ended
December 31,
2020
​
Share-based payment liabilities at the beginning of the period
​ ​ ​ ​ 636 ​ ​ ​ ​ ​ 78 ​ ​
New awards granted
​ ​ ​ ​ 184 ​ ​ ​ ​ ​ — ​ ​
Remeasurement during the period(i)
​ ​ ​ ​ 1,286 ​ ​ ​ ​ ​ 558 ​ ​
Share-based payment liabilities at the end of the period
​ ​ ​ ​ 2,106 ​ ​ ​ ​ ​ 636 ​ ​
​
(i)
The remeasurement during the six months ended June 30, 2021 is mainly attributable to recognition of the liquidity event.
​
The fair value of the awards was estimated, at the grant date and at the end of each reporting period, using the Option pricing model, taking into account the terms and conditions on which the award was granted.
The weighted average inputs used in the measurement of the fair values as of June 30, 2021 and December 31, 2020 are as follows:
​ ​ ​
June 30,
2021
​ ​
December 31,
2020
​
Expected annual volatility
​ ​ ​ ​ 44.11% ​ ​ ​ ​ ​ 45.20% ​ ​
Expected term, years
​ ​ ​ ​ 0.3 ​ ​ ​ ​ ​ 1.5 ​ ​
Dividend yield
​ ​
None
​ ​
None
​
Risk-free interest rate
​ ​ ​ ​ 0.05% ​ ​ ​ ​ ​ 0.1% ​ ​
Fair value per ordinary share, USD (after the share split, note 16)
​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 13 ​ ​
Fair value per ordinary share, RUB (after the share split, note 16)
​ ​ ​ ​ 937 ​ ​ ​ ​ ​ 939 ​ ​
Given the absence of a public trading market for ordinary shares of the Company, the fair value per ordinary share was determined by reference to discounted future cash flows generated by the Group. The key assumptions used in the estimation of the business enterprise value are consistent with those followed in
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
the preparation of the Group’s annual consolidated financial statements as of and for the year ended December 31, 2020, except for recognition of N1 Group acquisition, as it took place in 2021.
The following table demonstrates the sensitivity to a reasonably possible change in key assumptions affecting the fair value per ordinary share. With all other variables held constant, the Group’s share-based payment liabilities are affected as follows:
​ ​ ​
Change in share-based
payment liabilities
​
10% change in forecasted revenue
​ ​ ​ ​ 20% ​ ​
10% change in terminal period Adjusted EBITDA margin
​ ​ ​ ​ 12% ​ ​
10% change in discount rate
​ ​ ​ ​ 21% ​ ​
10% change in terminal growth rate
​ ​ ​ ​ 6% ​ ​
The forfeiture rate is assessed as remote.
14.   RELATED PARTIES
Related parties include shareholders, ultimate owners and members of key management personnel as well as companies which are under legal ownership, significant influence or control of shareholders or ultimate owners of the Group.
Transactions with key management personnel
Key management comprises directors of the Group and the Chief Executive Officer as well as the Chief Financial Officer of the Group’s main operating subsidiary. The remuneration of key management personnel for the three and six months ended June 30, 2021 and June 30, 2020 amounted to:
​ ​ ​
Three months ended
June 30,
​ ​
Six months ended
June 30,
​
​
2021
​ ​
2020
​ ​
2021
​ ​
2020
​
Short-term employee benefits(ii)
​ ​ ​ ​ (10) ​ ​ ​ ​ ​ (9) ​ ​ ​ ​ ​ (21) ​ ​ ​ ​ ​ (18) ​ ​
Share-based payment expense(iii)
​ ​ ​ ​ (1,094) ​ ​ ​ ​ ​ (119) ​ ​ ​ ​ ​ (1,204) ​ ​ ​ ​ ​ (137) ​ ​
Total key management remuneration
​ ​ ​ ​ (1,104) ​ ​ ​ ​ ​ (128) ​ ​ ​ ​ ​ (1,225) ​ ​ ​ ​ ​ (155) ​ ​
​
(ii)
Short-term benefits include salaries, bonuses, paid annual leave and social security contributions.
​
(iii)
Amounts related to the participation of the key management personnel in the incentive scheme accrued in the interim condensed consolidated statement of profit or loss and other comprehensive income.
​
During the six months ended June 30, 2021 and June 30, 2020, there were no transactions or outstanding balances with key management personnel, except for disclosed in the table above. No guarantees have been given or received.
Transactions with the ultimate controlling party
During the six months ended June 30, 2021 and June 30, 2020, there were no transactions or outstanding balances with Elbrus Capital, the ultimate controlling party. No guarantees have been given or received.
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
Other related party transactions
The following table provides the total amount of transactions that have been entered into with other related parties during the six months ended June 30, 2021 and June 30, 2020, as well as balances with related parties as of June 30, 2021 and December 31, 2020:
​ ​ ​ ​ ​ ​ ​ ​ ​
Sales
to related
parties
​ ​
Purchases
from related
parties
​ ​
Amounts owed
by related
parties
​ ​
Amounts owed
to related
parties
​
Associate of Elbrus Capital
​ ​ ​ ​ 2021 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Associate of Elbrus Capital
​ ​ ​ ​ 2020 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
15.   CONTINGENCIES
Legal proceedings
The Group has been, and continues to be, subject to legal proceedings and adjudications from time to time, none of which has had, individually or in the aggregate, a material adverse impact on the Group. Management believes that the ultimate liability, if any, arising from such proceedings and adjudications, will not have a material adverse impact on the Group’s financial position or operating results.
Russian Federation tax and regulatory environment
The taxation system in the Russian Federation continues to evolve and is characterised by frequent changes in legislation, official pronouncements and court decisions, which are sometimes contradictory and subject to varying interpretation by different tax authorities. Management’s interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by a number of authorities, which may impose severe fines, penalties and interest charges.
Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive and substance-based position in their interpretation and enforcement of tax legislation and as a result, it is possible that transactions and activities that have not been challenged in the past may be challenged. As such, significant additional taxes, penalties and interest may be assessed. A tax year generally remains open for review by the tax authorities during the three subsequent calendar years, while under certain circumstances reviews may cover longer periods.
The Group estimates that possible exposure in relation to the above mentioned tax risks, that are more than remote, but for which no liability is required to be recognized, could be up to approximately 63.
Until January 1, 2021, the Group relied on a VAT exemption for its listing revenue under the 2008 VAT exemption for software and database licenses under the Russian Tax Code. The exemption was available for revenue from software license agreements under which the Group provided its customers with access to its platform. In July 2020, the Russian tax code underwent changes, which substantially narrowed the scope of the 2008 VAT exemption. From January 1, 2021, licensing of computer software and databases is only exempt from VAT when: (i) it relates to software or databases included in the Russian National Software Register and (ii) it does not involve software used for advertising, counterparty searches, online trade or marketplace purposes. Consequently, starting from January 1, 2021, revenue from the provision of access to advertising and online marketplace software does not qualify as income from eligible activities and the Group no longer qualifies for this exemption.
Operating environment
The Group’s operations are concentrated in the Russian Federation. Consequently, the Group is exposed to the economic and financial environment in the Russian Federation, which display the
 
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CIAN GROUP
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020 (UNAUDITED)
(in millions of Russian Rubles, unless otherwise stated)
characteristics of an emerging market. The legal, tax and regulatory frameworks continue to develop and are subject to varying interpretations and frequent changes which combined with other legal and fiscal impediments, aggravate the challenges faced by entities operating in the Russian Federation.
Starting in 2014, the United States of America, the European Union and some other countries have imposed and gradually expanded economic sanctions against a number of Russian individuals and legal entities. The imposition of the sanctions has led to increased economic uncertainty, including more volatile equity markets, a depreciation of the Russian Ruble, a reduction in both local and foreign direct investment inflows and a significant tightening in the availability of credit. As a result, some Russian entities may experience difficulties accessing the international equity and debt markets and may become increasingly dependent on state support for their operations. The long-term effects of the imposed and possible additional sanctions are difficult to determine.
The Group’s interim condensed consolidated financial statements reflect management’s assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management’s assessment.
COVID-19
In March 2020, the World Health Organization declared the COVID-19 virus a global pandemic. The highly contagious disease has spread to most of the countries including Russia, creating a negative impact on customers, workforces, and suppliers, disrupting economies and financial markets, and potentially leading to a worldwide economic downturn. The Group aimed to adapt to such adverse changes in conditions by exploring new ways of monetization and promotion of its products and services and cost optimization. As a result, the Group avoided any significant adverse impact on revenue or operating loss. However, the full impact of the COVID-19 outbreak continues to evolve as of the date of issuance of these interim condensed consolidated financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Group’s financial condition, liquidity, and future results of operations.
16.   EVENTS AFTER THE REPORTING PERIOD
Capital reorganization
In August, pursuant to a special resolution at a general meeting of its shareholders, the Company:
•
made a 1-for-2,500 split of its ordinary shares;
​
•
increased the authorized share capital by the creation of additional 121,625,000 ordinary shares of EUR 0.0004 each; and
​
•
issued and allotted 56,797,500 fully paid ordinary shares of EUR 0.0004 each to its existing shareholders on a pro rata basis.
​
All share and per share amounts and related information in these interim condensed consolidated financial statements have been retroactively adjusted, where applicable, to reflect the impact of the share split and pro rata allotment of ordinary shares issued (collectively, the “share split”).
 
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Cian PLC
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Cian PLC (formerly, Solaredge Holdings Limited) and subsidiaries (the “Group”) as of December 31, 2020 and 2019, the related consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on the Group’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group 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 and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ AO Deloitte & Touche CIS
Moscow, the Russian Federation
June 23, 2021 (September 2, 2021, as to the effects of the share split arising from the capital reorganization as described within Note 21; October 12, 2021, as to the effects of the restatement discussed in Note 5)
We have served as the Group’s auditor since 2018.
 
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CIAN GROUP
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
​ ​ ​
Note
​ ​
2020
​ ​
2019
​
Revenue
​ ​
4
​ ​ ​
​
3,972
​ ​ ​ ​
​
3,607
​ ​
Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Marketing expenses
​ ​
6
​ ​ ​ ​ (1,697) ​ ​ ​ ​ ​ (2,159) ​ ​
Employee-related expenses
​ ​
7
​ ​ ​ ​ (2,208) ​ ​ ​ ​ ​ (1,385) ​ ​
IT expenses
​ ​ ​ ​ ​ ​ ​ (264) ​ ​ ​ ​ ​ (289) ​ ​
Depreciation and amortization
​ ​ ​ ​ ​ ​ ​ (200) ​ ​ ​ ​ ​ (169) ​ ​
Other operating expenses
​ ​ ​ ​ ​ ​ ​ (180) ​ ​ ​ ​ ​ (217) ​ ​
Goodwill impairment
​ ​
8
​ ​ ​ ​ — ​ ​ ​ ​ ​ (256) ​ ​
Total operating expenses
​ ​ ​ ​ ​ ​ ​ (4,549) ​ ​ ​ ​ ​ (4,475) ​ ​
Operating loss
​ ​ ​ ​ ​ ​ ​ (577) ​ ​ ​ ​ ​ (868) ​ ​
Finance costs
​ ​ ​ ​ ​ ​ ​ (72) ​ ​ ​ ​ ​ (38) ​ ​
Finance income
​ ​ ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 7 ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ (3) ​ ​
Loss before income tax
​ ​ ​ ​ ​ ​ ​ (639) ​ ​ ​ ​ ​ (902) ​ ​
Income tax benefit
​ ​
9
​ ​ ​ ​ 12 ​ ​ ​ ​ ​ 96 ​ ​
Loss for the year
​ ​
3
​ ​ ​
​
(627)
​ ​ ​ ​
​
(806)
​ ​
Total comprehensive loss for the year
​ ​ ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (806) ​ ​
Loss per share, in RUB ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic and diluted loss per share attributable to ordinary equity holders of
the parent
​ ​ ​ ​ ​ ​
​
(11)
​ ​ ​ ​
​
(14)
​ ​
Basic and diluted weighted average number of ordinary shares
​ ​ ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​
The basic and diluted loss per share and basic and diluted weighted average number of shares are adjusted based on the share split with reference to Note 21 regarding the capital reorganization.
The accompanying notes are an integral part of these consolidated financial statements
F-23
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CIAN GROUP
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF
DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles)
​ ​ ​
Note
​ ​
December 31,
2020
​ ​
December 31,
2019
​
Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-current assets
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Property and equipment
​ ​ ​ ​ ​ ​ ​ 31 ​ ​ ​ ​ ​ 33 ​ ​
Right-of-use assets
​ ​
10
​ ​ ​ ​ 125 ​ ​ ​ ​ ​ 111 ​ ​
Intangible assets
​ ​
11
​ ​ ​ ​ 257 ​ ​ ​ ​ ​ 273 ​ ​
Deferred tax assets
​ ​
9
​ ​ ​ ​ 237 ​ ​ ​ ​ ​ 212 ​ ​
Other non-current assets
​ ​ ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 9 ​ ​
Total non-current assets
​ ​ ​ ​ ​ ​ ​ 659 ​ ​ ​ ​ ​ 638 ​ ​
Current assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advances paid and prepaid expenses
​ ​ ​ ​ ​ ​ ​ 88 ​ ​ ​ ​ ​ 55 ​ ​
Trade and other receivables
​ ​
12
​ ​ ​ ​ 154 ​ ​ ​ ​ ​ 94 ​ ​
Prepaid income tax
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 23 ​ ​
Cash and cash equivalents
​ ​
13
​ ​ ​ ​ 449 ​ ​ ​ ​ ​ 148 ​ ​
Other current assets
​ ​ ​ ​ ​ ​ ​ 20 ​ ​ ​ ​ ​ 8 ​ ​
Total current assets
​ ​ ​ ​ ​ ​ ​ 711 ​ ​ ​ ​ ​ 328 ​ ​
Total assets
​ ​ ​ ​ ​ ​ ​ 1,370 ​ ​ ​ ​ ​ 966 ​ ​
Equity and liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Share capital
​ ​
14
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Share premium
​ ​
14
​ ​ ​ ​ 125 ​ ​ ​ ​ ​ 125 ​ ​
Accumulated losses
​ ​ ​ ​ ​ ​ ​ (997) ​ ​ ​ ​ ​ (370) ​ ​
Total equity
​ ​ ​ ​ ​ ​ ​ (872) ​ ​ ​ ​ ​ (245) ​ ​
Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Borrowings
​ ​
15
​ ​ ​ ​ — ​ ​ ​ ​ ​ 431 ​ ​
Employee share-based payment liability
​ ​
16
​ ​ ​ ​ 636 ​ ​ ​ ​ ​ 78 ​ ​
Lease liabilities
​ ​
10
​ ​ ​ ​ 77 ​ ​ ​ ​ ​ 33 ​ ​
Deferred tax liabilities
​ ​
9
​ ​ ​ ​ 28 ​ ​ ​ ​ ​ 34 ​ ​
Total non-current liabilities
​ ​ ​ ​ ​ ​ ​ 741 ​ ​ ​ ​ ​ 576 ​ ​
Current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Borrowings
​ ​
15
​ ​ ​ ​ 728 ​ ​ ​ ​ ​ 46 ​ ​
Contract liabilities
​ ​
4
​ ​ ​ ​ 332 ​ ​ ​ ​ ​ 184 ​ ​
Trade and other payables
​ ​
17
​ ​ ​ ​ 316 ​ ​ ​ ​ ​ 315 ​ ​
Income tax payable
​ ​ ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ — ​ ​
Other taxes payable
​ ​ ​ ​ ​ ​ ​ 74 ​ ​ ​ ​ ​ 23 ​ ​
Lease liabilities
​ ​
10
​ ​ ​ ​ 36 ​ ​ ​ ​ ​ 67 ​ ​
Total current liabilities
​ ​
3
​ ​ ​
​
1,501
​ ​ ​ ​
​
635
​ ​
Total liabilities
​ ​ ​ ​ ​ ​ ​ 2,242 ​ ​ ​ ​ ​ 1,211 ​ ​
Total liabilities and equity
​ ​ ​ ​ ​ ​ ​ 1,370 ​ ​ ​ ​ ​ 966 ​ ​
Approved for issue and signed by Management on June 23, 2021 (September 2, 2021, as to the effects of the share split arising from the capital reorganization as described within Note 21; October 12, 2021, as to the effects of the restatement discussed in Note 5):
​
/s/ Christina Tillyrou
​
Christina Tillyrou, Director
​ ​ ​ ​ ​
/s/ Christina Maria Oxinou
​
Christina Maria Oxinou, Director
​ ​ ​ ​
The accompanying notes are an integral part of these consolidated financial statements
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CIAN GROUP
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles)
​ ​ ​
Note
​ ​
Share
capital
​ ​
Share
premium
​ ​
Retained
earnings/​
(Accumulated
losses)
​ ​
Total
equity
​
Balance at January 1, 2019
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
7
​ ​ ​ ​
​
437
​ ​ ​ ​
​
444
​ ​
Loss and total comprehensive loss for the year
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (806) ​ ​ ​ ​ ​ (806) ​ ​
Contribution from shareholders
​ ​
14
​ ​ ​ ​ — ​ ​ ​ ​ ​ 118 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 118 ​ ​
Other payments to shareholders
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ (1) ​ ​
Balance at December 31, 2019
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
125
​ ​ ​ ​
​
(370)
​ ​ ​ ​
​
(245)
​ ​
Balance at January 1, 2020
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 125 ​ ​ ​ ​
​
(370)
​ ​ ​ ​
​
(245)
​ ​
Loss and total comprehensive loss for the year
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (627) ​ ​ ​ ​ ​ (627) ​ ​
Balance at December 31, 2020
​ ​ ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 125 ​ ​ ​ ​ ​ (997) ​ ​ ​ ​ ​ (872) ​ ​
The accompanying notes are an integral part of these consolidated financial statements
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CIAN GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles)
​ ​ ​
Note
​ ​
2020
​ ​
2019
​
Cash flows from operating activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Loss before income tax
​ ​ ​ ​ ​ ​ ​ (639) ​ ​ ​ ​ ​ (902) ​ ​
Adjusted for: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Depreciation and amortization
​ ​ ​ ​ ​ ​ ​ 200 ​ ​ ​ ​ ​ 169 ​ ​
Goodwill impairment
​ ​
8
​ ​ ​ ​ — ​ ​ ​ ​ ​ 256 ​ ​
Employee share-based payment expense
​ ​
16
​ ​ ​ ​ 558 ​ ​ ​ ​ ​ 67 ​ ​
Finance income
​ ​ ​ ​ ​ ​ ​ (11) ​ ​ ​ ​ ​ (7) ​ ​
Finance costs
​ ​ ​ ​ ​ ​ ​ 72 ​ ​ ​ ​ ​ 38 ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3 ​ ​
Working capital changes: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Increase in trade and other receivables
​ ​ ​ ​ ​ ​ ​ (61) ​ ​ ​ ​ ​ (14) ​ ​
(Increase) / decrease in advances paid and prepaid expenses
​ ​ ​ ​ ​ ​ ​ (32) ​ ​ ​ ​ ​ 139 ​ ​
(Increase) / decrease in other assets
​ ​ ​ ​ ​ ​ ​ (13) ​ ​ ​ ​ ​ 2 ​ ​
Decrease in trade and other payables
​ ​ ​ ​ ​ ​ ​ (4) ​ ​ ​ ​ ​ (61) ​ ​
Increase in contract liabilities
​ ​ ​ ​ ​ ​ ​ 148 ​ ​ ​ ​ ​ 2 ​ ​
Increase / (decrease) in other liabilities
​ ​ ​ ​ ​ ​ ​ 98 ​ ​ ​ ​ ​ (24) ​ ​
Cash generated from (used in) operating activities
​ ​ ​ ​ ​ ​ ​ 317 ​ ​ ​ ​ ​ (332) ​ ​
Income tax paid
​ ​ ​ ​ ​ ​ ​ (28) ​ ​ ​ ​ ​ — ​ ​
Interest received
​ ​ ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 6 ​ ​
Interest paid
​ ​ ​ ​ ​ ​ ​ (70) ​ ​ ​ ​ ​ (35) ​ ​
Net cash generated from (used in) operating activities
​ ​ ​ ​ ​ ​ ​ 230 ​ ​ ​ ​ ​ (361) ​ ​
Cash flows from investing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Purchase of property and equipment
​ ​ ​ ​ ​ ​ ​ (21) ​ ​ ​ ​ ​ (24) ​ ​
Purchase of intangible assets
​ ​ ​ ​ ​ ​ ​ (90) ​ ​ ​ ​ ​ (104) ​ ​
Loans issued to employees
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2) ​ ​
Loans collected from employees
​ ​ ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ — ​ ​
Net cash used in investing activities
​ ​ ​ ​ ​ ​ ​ (109) ​ ​ ​ ​ ​ (130) ​ ​
Cash flows from financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Contribution from shareholders
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 118 ​ ​
Proceeds from borrowings
​ ​ ​ ​ ​ ​ ​ 320 ​ ​ ​ ​ ​ 672 ​ ​
Repayment of borrowings
​ ​ ​ ​ ​ ​ ​ (71) ​ ​ ​ ​ ​ (197) ​ ​
Payment of principal portion of lease liabilities
​ ​ ​ ​ ​ ​ ​ (67) ​ ​ ​ ​ ​ (53) ​ ​
Other payments to shareholders
​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1) ​ ​
Net cash generated from financing activities
​ ​ ​ ​ ​ ​ ​ 182 ​ ​ ​ ​ ​ 539 ​ ​
Net increase in cash and cash equivalents
​ ​ ​ ​ ​ ​ ​ 303 ​ ​ ​ ​ ​ 48 ​ ​
Cash and cash equivalents at the beginning of the year
​ ​ ​ ​ ​ ​ ​ 148 ​ ​ ​ ​ ​ 103 ​ ​
Effect of exchange rate changes on cash and cash equivalents
​ ​ ​ ​ ​ ​ ​ (2) ​ ​ ​ ​ ​ (3) ​ ​
Cash and cash equivalents at the end of the year
​ ​ ​ ​ ​ ​ ​ 449 ​ ​ ​ ​ ​ 148 ​ ​
The accompanying notes are an integral part of these consolidated financial statements
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
1. GENERAL INFORMATION
The consolidated financial statements of Cian PLC and its subsidiaries (collectively, the “Cian Group” or the “Group”) as of and for the years ended December 31, 2020 and December 31, 2019 were authorized for issue in accordance with a resolution of the directors on June 23, 2021 (September 2, 2021, as to the effects of the share split arising from the capital reorganization as described within Note 21; October 12, 2021, as to the effects of the restatement discussed in Note 5).
Cian PLC (formerly Solaredge Holdings Limited) (the “Company” or the “Parent”) is a public liability company incorporated and domiciled in Cyprus. The registered office is located at Agiou Georgiou Makri, 64, Anna Maria Lena Court, flat/office 201, 6037, Larnaca, Cyprus. The Group’s principal place of business is Elektrozavodskaya street 27/8, premise I, floor 5, Moscow, 107023, Russian Federation.
The Group is principally engaged in online real estate classifieds business within the Russian Federation through the Group’s websites and mobile application.
Subsidiaries of the Company, all of which have been included in these consolidated financial statements, are as follows:
Subsidiary
​ ​
Principal activity / Country
of incorporation
​ ​
% equity interest
​
​
December 31,
2020
​ ​
December 31,
2019
​
iRealtor LLC
​ ​
Online real estate classifieds (Russia)
​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​
Fastrunner Investment Limited
​ ​ Holding (Cyprus) ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​
Mimons Investments Limited
​ ​ Holding (Cyprus) ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​
The ultimate controlling party of the Group are Elbrus Capital Fund II L.P. and Elbrus Capital Fund IIB L.P. (together “Elbrus Capital”) which own an aggregate of 61.4% of the Group’s ordinary shares as of December 31, 2020 and December 31, 2019.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The Group’s consolidated financial statements and the accompanying notes have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
The consolidated financial statements have been prepared on a historical cost basis except for employee share-based payment liability (Note 16) which is measured at fair value on each reporting date.
2.2 Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as of December 31, 2020 and 2019, respectively. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:
•
power over the investee;
​
•
exposure, or rights, to variable returns from its involvement with the investee; and
​
•
the ability to use its power to affect its returns.
​
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
The Group reassesses whether or not it controls an investee if any facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year, are included in the consolidated financial statements from the date the Group gains control over the subsidiary until the date the Group ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to the transactions between members of the Group are eliminated in full on consolidation.
If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.
2.3 New standards, interpretations and amendments
The Group applied for the first-time all standards, interpretations and amendments, relevant for its operations, which are effective for annual periods beginning on or after January 1, 2020. These standards, interpretations and amendments do not have a material impact on the Group’s consolidated financial statements.
•
Amendments to IFRS 7 and IFRS 9: Interest Rate Benchmark Reform. Phase 1.
​
•
Amendment to IFRS 16: COVID-19-Related Rent Concessions.
​
•
Annual Improvements to IFRS Standards 2015-2017 Cycle: Amendments to References to the Conceptual Framework in IFRS Standards, Amendments to IFRS 3 Definition of a business, Amendments to IAS 1 and IAS 8 Definition of material.
​
The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective. The following amended standards and interpretations are not expected to have a material impact on the Group’s consolidated financial statements:
•
IFRS 17 Insurance Contracts (effective date — January 1, 2023).
​
•
Amendments to IFRS 9, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform. Phase 2 (effective date — January 1, 2021).
​
•
Amendments to IAS 1: Classification of Liabilities as Current or Non-current (effective date — January 1, 2023).
​
•
Reference to the Conceptual Framework — Amendments to IFRS 3 (effective date — January 1, 2022).
​
•
Property, Plant and Equipment: Proceeds before Intended Use — Amendments to IAS 16 (effective date — January 1, 2022).
​
•
Onerous Contracts — Costs of Fulfilling a Contract — Amendments to IAS 37 (effective date — January 1, 2022).
​
•
IFRS 1 First-time Adoption of International Financial Reporting Standards — Subsidiary as a first-time adopter (effective date — January 1, 2022).
​
•
IFRS 9 Financial Instruments — Fees in the ‘10 per cent’ test for derecognition of financial liabilities (effective date — January 1, 2022).
​
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
•
IAS 41 Agriculture — Taxation in fair value measurements (effective date — January 1, 2022).
​
2.4 Summary of significant accounting policies
a) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.
The Group determines that it has acquired a business when the acquired set of activities and assets includes an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organized workforce with the necessary skills, knowledge, or experience to perform that process or it significantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortized, but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that are expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (which cannot exceed one year from the acquisition date), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date.
b) Foreign currencies
The Group’s consolidated financial statements are presented in Russian Rubles (“RUB”), which is also the Company’s functional currency. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The functional currency of all of the Company’s subsidiaries is the RUB.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Transactions in foreign currencies are initially recorded by the Group’s subsidiaries in their functional currency at exchange rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into functional currency at exchange rates prevailing at the reporting date. Differences arising on settlement or translation of monetary items are recognized within “Foreign currency exchange gain / (loss), net”, in the consolidated statement of profit or loss and other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.
The RUB is not a fully convertible currency outside Russia. Within the Russian Federation, official exchange rates are determined by the Central Bank of the Russian Federation.
c) Revenue from contracts with customers
Revenue from contracts with customers is recognized when control of products or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those products or services.
i. Listing revenue
Listing revenue is derived from offering online listings and related value-added services, such as different listing promotion options, to the Group’s customers on its websites and mobile applications based on a cost per time basis. Customers can purchase either individual listings and value-added services, listing packages or subscriptions, which combine a number of listings and value-added services. The cash collected from the sale of online listings and related value-added services (both under the pay-per-listing or listing package model and the subscription model) is initially recorded as contract liability (deferred revenue) in the consolidated statement of financial position and subsequently recognized as revenue over time as customers receive and consume the benefits of the access to online listings and related value-added services over the contractual period. The average time period between receipt of payment from the customer and delivery of online listings is 30 days.
ii. Lead generation revenue
Lead generation revenue represents fees charged to real estate developers for establishing and referring contacts (or leads) based on the number of qualified calls (validated user connections) received from primary real-estate listing posted primarily through our platform (as part of the “Core Business” segment) or through our partner bank’s site (as part of the “Mortgage Marketplace” segment). Performance obligation is satisfied at a point in time of occurrence of each qualified call. Payment is received after the delivery of validated connections. Payment is generally due within 20 to 30 days from providing these services.
iii. Display advertising revenue
The Group’s advertising services allow third parties to place advertisements in particular areas of the Group’s websites and mobile application. Advertising revenue is recognized over time based on upfront monthly fees agreed in media plans, which also include targeted number of views or clicks during the period of advertisement. Payment is generally due within 20 to 30 days from providing advertising services.
iv. Loyalty program
The Group has a loyalty points program which allows listing revenue customers to accumulate points that can be redeemed against future purchases. The loyalty points give rise to a separate performance
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
obligation as they provide a material right to acquire additional services at a discount to the customer, that it would not receive without entering into that contract. A portion of transaction price is allocated to the loyalty points awarded to customers based on a stand-alone selling price of points and recognized as deferred revenue (contract liability) in the consolidated statement of financial position. Deferred revenue is recognized as revenue when loyalty points are redeemed, expire or the likelihood of the customer redeeming the points becomes remote. When estimating stand-alone selling price of the loyalty points, the Group considers the likelihood that the customer will redeem the points.
v. Other revenue
The Group explores new ways of monetization of its website and mobile application traffic and content database and develops new business initiatives, primarily Mortgage Marketplace and Data Analytics Services.
Mortgage Marketplace revenue comprises commission fees charged to banks for selling their mortgage products to the Group’s websites and mobile application users. Upon sale, the Group charges the banks a fixed rate commission fee based on the mortgage amount (“Marketplace commission”). The Group’s performance obligation with respect to these transactions is to arrange the transaction through its websites or mobile application. Marketplace commission is recognized on a net basis at the point of signing the mortgage agreement between the bank and the individual user. Payment is generally due within 20 to 30 days from providing these services.
Data Analytics Services revenue represents fees derived from the Group’s customers for providing access to the Group’s database of real estate content. The access can be provided either in the form of an individual report or on a subscription basis. The cash collected from the sales of subscription is initially recorded as deferred revenue in the consolidated statement of financial position and subsequently recognized as revenue over the subscription period. Revenue from sales of individual reports is recognized at the point of delivery of the report to the customer. Payment is generally due within 20 to 30 days from providing an individual report or a prepayment basis in a case of subscription.
d) Operating expenses
Operating expenses consist primarily of advertising and marketing costs, employee-related expenses including payroll, IT expenses including hosting, technical support and telecommunication services, depreciation and amortization expenses and other expenses such as office maintenance, consulting and other general corporate expenses. Operating expenses are expensed as incurred.
e) Income taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Income taxes are computed in accordance with the laws of the Company’s and its subsidiaries’ jurisdictions. Taxable income of the Group’s companies incorporated in Russia and Cyprus is subject to local income taxes at rates of 20.0% and 12.5%, respectively.
Deferred tax
Deferred income taxes are accounted for under the balance sheet method and reflect the tax effect of temporary differences between the tax basis of assets and liabilities and their carrying amounts in the accompanying consolidated financial statements.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
•
when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
​
•
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
​
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
•
when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
​
•
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
​
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Deferred tax assets are derecognized when it is no longer probable that sufficient taxable profit will be available against which the deductible temporary differences can be recognized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.
The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
f) Property and equipment
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. The cost of an item of property and equipment is recognized as an asset if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Group and the cost of the item can be measured reliably. Costs of minor repairs and day-to-day maintenance are expensed when incurred. Cost of replacing major parts or components of property and equipment items that extend the useful lives of assets or increase their revenue-generating capacities are capitalized and the replaced part is retired.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:
​ ​ ​
Useful lives
in years
​
Office equipment
​ ​ ​ ​ 1 – 5 ​ ​
An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of profit or loss when the asset is derecognized.
Property and equipment are also subject to impairment. Refer to the accounting policies in section (i) Impairment of non-financial assets excluding goodwill.
g) Leases
Right-of-use assets
The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term as follows:
​ ​ ​
Lease term
in years
​
Offices
​ ​ ​ ​ 3 – 4 ​ ​
Right-of use assets are also subject to impairment. Refer to the accounting policies in section (i) Impairment of non-financial assets excluding goodwill.
Lease liabilities
At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Presentation in the consolidated statement of cash flows
The Group classifies cash payments for the principal portion of lease liabilities within financing activities and cash payments for the interest portion of the lease liabilities within operating activities.
h) Intangible assets
Intangible assets acquired separately are measured upon initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate:
•
the technical feasibility of completing the intangible asset so that the asset will be available for use or sale;
​
•
its intention to complete and its ability and intention to use or sell the asset;
​
•
how the asset will generate future economic benefits;
​
•
the availability of resources to complete the asset; and
​
•
the ability to measure reliably the expenditure during development.
​
Intangible assets are amortized over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period for an intangible asset is reviewed at least at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
The amortization of intangible assets is recorded in depreciation and amortization within the consolidated statements of profit or loss and other comprehensive income.
Amortization is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:
​ ​ ​
Useful lives
in years
​
Trademarks
​ ​
7
​
Customer base
​ ​
18
​
Computer software
​ ​
1 – 3
​
Video and audio rights
​ ​
1
​
Development costs
​ ​
3 – 5
​
An intangible asset is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
i) Impairment of non-financial assets excluding goodwill
At each reporting date, the Group reviews the carrying amounts of its property and equipment, right-of-use assets and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
j) Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts.
k) Share-based payments
Certain senior level employees of the Group receive remuneration in the form of share-based payments (“phantom shares”), which are settled in cash (cash-settled transactions). For cash-settled share-based payments, a liability is recognized initially at the fair value. At each reporting date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognized in employee benefits expenses.
l) Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
m) Value added tax
Expenses and assets are recognized net of the amount of value added tax (“VAT”), except when the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the VAT is recognized as part of the cost of acquisition of the asset or as part of the expense item.
The net amount of the VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated statement of financial position.
n) Loss per share
Basic and diluted net loss per ordinary share for all periods presented has been determined in accordance with IAS 33 “Earnings per Share”, by dividing income available to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. The Group did not have any dilutive or antidilutive instruments as of December 31, 2020 and 2019.
o) Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, and for which discrete financial information is available. Its operating results (Note 5) are reviewed regularly by the Group’s Chief Executive Officer (CEO) to make decisions about resources to be allocated to the segment and assess its performance. Segment results are reported to the CEO and include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
p) Financial instruments
Initial recognition and measurement
In accordance with IFRS 9, financial assets are classified, at initial recognition, as amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
In accordance with IFRS 9, financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss and financial liabilities at amortized cost, as appropriate.
The Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.
In order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
The Group’s financial assets include cash and cash equivalents, rent security deposits, trade and other receivables. The Group’s financial liabilities include trade and other payables, lease liabilities and borrowings.
Fair value of financial instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Fair value of traded financial instruments is determined on each reporting date on the basis of market quotations or dealers’ quotations without transaction costs deduction. For the financial instruments which are not traded on the market, fair value is determined with the use of appropriate valuation methods. These methods include use of market transactions data, use of data on the current fair value of other similar financial instruments, analysis of discounted cash flows or other valuation methods.
The Group uses the following structure for determination and disclosure of valuation methods of fair value of financial instruments:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
Subsequent measurement
Financial assets and financial liabilities at amortized cost
This category is the most relevant to the Group. The Group measures financial assets at amortized cost if both of the following conditions are met:
•
the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
​
•
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
​
Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in interest expense in the consolidated statement of profit or loss and other comprehensive income.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Group’s consolidated statement of financial position) when:
•
the rights to receive cash flows from the asset have expired; or
​
•
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and
​
•
either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
​
A financial liability is derecognized when the obligation under the liability is discharged or is cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated statement of profit or loss and other comprehensive income.
Impairment of financial assets
The Group recognizes an allowance for expected credit losses (ECLs) for all financial assets measured at amortized cost. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive. ECLs are discounted at the effective interest rate of the financial asset in case of long-term assets.
Under IFRS 9, ECLs are measured on either of the following bases:
•
12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and
​
•
lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.
​
The Group applies a simplified approach in calculating lifetime ECLs for accounts receivable. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
For all other financial assets, the Group recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.
When determining whether the credit risk of a financial instrument has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.
The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if:
•
the financial instrument has a low risk of default — when the counterparty has an external credit rating of ‘investment grade’ in accordance with the globally understood definition (rating BBB- or higher, based on Standard & Poor’s and Fitch ratings);
​
•
the debtor has a strong capacity to meet its contractual cash flow obligations in the near term.
​
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
At each reporting date, the Group assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Allowances for expected credit losses for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
3. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Group’s consolidated financial statements requires management to make judgements; estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities; and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Judgements
In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the consolidated financial statements:
Going concern
These consolidated financial statements have been prepared by management on the assumption that the Group will be able to continue as a going concern, which presumes that the Group will, for the foreseeable future, be able to realize its assets and discharge its liabilities in the normal course of business.
There were following indicators that could give rise to the risk of a going concern: for the year ended December 31, 2020, the Group incurred a loss of 627 (2019: 806), as of December 31, 2020, the Group had a net liability position of 872 (2019: 245) and net debt of 279 (2019: 329), the Group also had a negative working capital (defined as total current asset less total current liabilities) of 790 (2019: 307), including 332 of contract liabilities (2019: 184).
However, the Group generated positive operating cash flow of 230 in 2020 (2019: negative operating cash flow of 361). The following matters have been considered by management in determining the appropriateness of the going concern basis of preparation in these consolidated financial statements.
COVID-19
In March 2020, the World Health Organization declared the COVID-19 virus a global pandemic. The highly contagious disease has spread to most of the countries including Russia, creating a negative impact on customers, workforces, and suppliers, disrupting economies and financial markets, and potentially leading to a worldwide economic downturn. The Group aimed to adapt to such adverse changes in conditions by exploring new ways of monetization and promotion of its products and services and cost optimization. As a result, the Group avoided any significant adverse impact on revenue or operating loss. However, the full impact of the COVID-19 outbreak continues to evolve as of the date of issuance of these consolidated financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Group’s financial condition, liquidity, and future results of operations.
Technical default
The Group has bank loans that are subject to certain covenants (Note 15). These covenants impose some pledges and restrictions in respect of certain financial indicators. On December 31, 2020 the Group
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
breached some of the financial covenants associated with these bank loans, thus the non-current portion of the loans in the amount of 352 was reclassified into the short-term portion at December 31, 2020. The Group obtained a waiver from the bank in May 2021, confirming that the bank will not claim early repayment of the loan as of December 31, 2020 (Note 21).
Financing
The Group had approximately 500 of cash and cash equivalents as of June 23, 2021. Management is confident, based on their current operating plan, that existing cash and cash equivalents, together with cash flows from operating activities and financial support from the major shareholders of the Group who intend to provide an additional equity financing to the Group in case it is not able to meet its financial liabilities, that the Group will be able to meet anticipated cash needs for working capital, capital expenditures, general and administrative expenses and business expansion for at least the next twelve months. After the reporting date the Group received 2,265 from the existing and new shareholders by issuance of 281 (5,566,900 on a share-split basis) ordinary shares (Note 21).
Changes in Russian Tax Law in 2021
Starting from January 1, 2021 due to changes in Russian Tax Law the Group lost the right to use VAT exemption on listing revenue. The Group assessed that this change would not have a material negative impact on its operational and financial results.
Based on the analysis above, management concluded that there is no significant uncertainty as to whether the Group will continue as a going concern, and therefore it is appropriate to prepare these consolidated financial statements on the going concern basis.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on the parameters available at the time of consolidated financial statements preparation. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Share-based payments
Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model, such as discount and terminal growth rates, revenue growth rates and Adjusted EBITDA Margin, affecting the fair value of the ordinary share of the Group, which is the basis for the valuation of the share-based payment liability. The Group initially measures the cost of cash-settled transactions with employees at the fair value of the liability incurred. For cash-settled share-based payment transactions, the liability needs to be remeasured at the end of each reporting period up to the date of settlement, with any changes in fair value recognized in profit or loss. This requires a reassessment of the estimates used at the end of each reporting period. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 16.
Also, as described in Note 16, a portion of cash payment to which participants of the option program are entitled to is linked to certain liquidity events, such as an initial public offering. As of December 31, 2020 and 2019, the Group determined that this performance condition for the recognition of share-based
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
payments was not yet probable, and no related share-based compensation expense was recognized during the years then ended. These costs are expected to be recognized once the performance condition occurs or becomes probable.
Useful lives of intangible assets
The estimation of the useful lives of intangible assets acquired through business combinations or generated internally is a matter of judgment based on the experience with similar assets. The future economic benefits embodied in the assets are consumed principally through their use. However, other factors related to the economic environment and market situation often result in the diminution of the economic benefits embodied in the assets. Management assesses the remaining useful lives in accordance with the current market conditions of the assets and the estimated period during which the assets are expected to earn benefits for the Group.
Compliance with tax legislation
The taxation system in the Russian Federation continues to evolve and is characterized by frequent changes in legislation, official pronouncements and court decisions, which are sometimes contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year generally remains open for review by the tax authorities during the three subsequent calendar years. However, under certain circumstances a tax year may remain open longer.
This may potentially impact the Group’s tax position and create additional tax risks. This legislation and practice of its application is still evolving and the impact of legislative changes should be considered based on the actual circumstances. Management believes that it has adequately provided for tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the tax authorities and courts, especially due to the reform of the supreme courts that are resolving tax disputes, could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.
4. REVENUE FROM CONTRACTS WITH CUSTOMERS
4.1 Disaggregated revenue information
Set out below is the disaggregation of the Group’s revenue from contracts with customers by type and timing of revenue recognition:
For the year ended December 31, 2020
​ ​ ​
At a point in
time
​ ​
Over time
​ ​
Total
revenue
​
Listing revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,383 ​ ​ ​ ​ ​ 2,383 ​ ​
Lead generation revenue
​ ​ ​ ​ 994 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 994 ​ ​
Display advertising revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 456 ​ ​ ​ ​ ​ 456 ​ ​
Other revenue
​ ​ ​ ​ 101 ​ ​ ​ ​ ​ 38 ​ ​ ​ ​ ​ 139 ​ ​
Total revenue
​ ​ ​ ​ 1,095 ​ ​ ​ ​ ​ 2,877 ​ ​ ​ ​ ​ 3,972 ​ ​
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
For the year ended December 31, 2019
​ ​ ​
At a point in
time
​ ​
Over time
​ ​
Total
revenue
​
Listing revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,481 ​ ​ ​ ​ ​ 2,481 ​ ​
Lead generation revenue
​ ​ ​ ​ 623 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 623 ​ ​
Display advertising revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 452 ​ ​ ​ ​ ​ 452 ​ ​
Other revenue
​ ​ ​ ​ 30 ​ ​ ​ ​ ​ 21 ​ ​ ​ ​ ​ 51 ​ ​
Total revenue
​ ​ ​ ​ 653 ​ ​ ​ ​ ​ 2,954 ​ ​ ​ ​ ​ 3,607 ​ ​
Listing, lead generation and display advertising revenues relate to the “Core Business” operating segment, while other revenue represents operating segments “Mortgage Marketplace”, “Valuation and Analytics” and “C2C Rental” ​(Note 5).
4.2 Contract balances
The following table provides information about the Group’s trade receivables and contract liabilities from contracts with customers:
​ ​ ​
2020
​ ​
2019
​
Trade receivables (Note 12)
​ ​ ​ ​ 145 ​ ​ ​ ​ ​ 91 ​ ​
Contract liabilities (including 27 of loyalty points (2019: nil))
​ ​ ​ ​ (332) ​ ​ ​ ​ ​ (184) ​ ​
Contract liabilities represent the transaction price allocated to unsatisfied performance obligations, advances received from customers before the Group transfers the related products or services and loyalty points not redeemed. Contract liabilities are recognized as revenue when the Group transfers control over the related products or services to the customer. The outstanding balances of contract liabilities increased in 2020 due to the continuous increase in the Group’s customer base. The total amount of contract liabilities as of each year end has been or to be recognized as revenue in the subsequent year.
5. SEGMENT INFORMATION
The chief operating decision-maker (CODM) of the Group is the Chief Executive Officer. The CODM reviews the Group’s internal reporting based on the management accounts in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.
In evaluating the performance of the Group’s operating segments and allocating resources, the CODM reviews selected items of each segment’s statement of profit or loss and other comprehensive income including revenue and Adjusted EBITDA (an operating profit / (loss) for the period before depreciation and amortization and other adjustments for non-cash effects described in the table “Reconciliation of Adjusted EBITDA to Loss before income tax”). All other financial information is presented on a consolidated basis. Assets and liabilities are not allocated to the different operating segments for internal reporting purposes.
The Group identifies its operating segments based on how the CODM manages the business, allocates resources, makes operating decisions and evaluates operating performance. The Group has identified the following operating segments on this basis, as these segments are analyzed separately by management:
—
Core Business;
​
—
Mortgage Marketplace;
​
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
—
Valuation and Analytics; and
​
—
C2C Rental.
​
The “Core Business” segment represents the mature main service line of real estate classifieds and related advertising services provided on the Group’s platform (websites cian.ru and emls.ru and mobile application). This segment relates to the online real estate classified platform, where clients like real estate agencies and agents, developers and individual property owners place their property listings and related advertising materials.
Each of the other operating segments represents the Group’s new offerings focused on developing different transactional business models:
—
Mortgage Marketplace represents a platform for mortgage price comparison, mortgage pre-approval and origination, where the Group earns commissions, from its partner banks for distributing their mortgage products;
​
—
Valuation and Analytics — services where the Group earns fees derived from the customers for providing access to the Group’s proprietary real estate market research, data analytics and market intelligence services;
​
—
C2C Rental — a service to facilitate seamless rental transactions, where the Group earns revenue for providing an end to end solution in property rentals.
​
Restatement of segment information. The Group previously aggregated “Mortgage Marketplace”, “Valuation and Analytics” and “C2C Rental” operating segments within one reportable segment (“Adjacent Services”), however the Group’s management determined that the aggregation of these operating segments within one reportable segment was not appropriate under paragraph 12 of IFRS 8. As a result, information on segments presented in this note has been restated to present each operating segment as a separate reportable segment.
All revenue in both years is derived from third parties and there is no inter-segment revenue. The Group operates only in Russia.
Revenue and costs are directly attributed to the Group’s segments when possible. However, due to the integrated structure of the Group’s business, certain costs incurred by one segment may benefit the other segments. These costs primarily include headcount-related expenses, marketing and advertising costs, product development, IT expenses (including hosting and technical support expenses and telecommunication services), office maintenance expenses and other general corporate expenses such as finance, accounting, legal, human resources, recruiting and facilities costs. These costs are allocated to each segment based on the estimated benefit each segment receives from such expenses, using specific allocation drivers representing this benefit. Substantially all assets and liabilities relate to the “Core Business” operating segment.
Management reporting is different from IFRS, the differences are IFRS adjustments listed below, which are not analyzed by the CODM in assessing the operating performance of the business:
—
Reclassification of lease related amortization and interest — for the purposes of CODM’s assessment of operating performance rental expenses are considered operating expenses included in Adjusted EBITDA, rather than depreciation and interest expense, thus, IFRS 16 ‘Leases’ is not applied in internal reporting;
​
—
Reclassification of operating expense related to software licenses to amortization — for the purposes of CODM’s assessment of operating performance expenses related to software licenses are considered operating expenses included in Adjusted EBITDA, rather than amortization of intangible assets;
​
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
—
Capitalized development costs — for the purposes of CODM’s assessment of operating performance expenses none of the expenses are capitalized; and
​
—
Share-based payments — for the purposes of CODM’s assessment of operating performance the fair value adjustments related to remeasurement of share-based payments liability are not analyzed;
​
as well as non-recurring items, such as goodwill impairment, that occur from time to time and are evaluated for adjustment as and when they occur.
Information on each of the reportable and other segments and reconciliation to Loss before income tax is as follows:
​ ​ ​
For the year ended December 31, 2020
​
​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation
and
Analytics
​ ​
C2C Rental
​ ​
Total
​
Revenue, including:
​ ​ ​ ​ 3,822 ​ ​ ​ ​ ​ 110 ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3,972 ​ ​
Listing revenue
​ ​ ​ ​ 2,383 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,383 ​ ​
Lead generation revenue
​ ​ ​ ​ 991 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 994 ​ ​
Display advertising revenue
​ ​ ​ ​ 439 ​ ​ ​ ​ ​ 17 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 456 ​ ​
Other revenue
​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 90 ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 139 ​ ​
Adjusted EBITDA
​ ​ ​ ​ 532 ​ ​ ​ ​ ​ (254) ​ ​ ​ ​ ​ (119) ​ ​ ​ ​ ​ (126) ​ ​ ​ ​ ​ 33 ​ ​
Reconciliation of Adjusted EBITDA to Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Adjusted EBITDA
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 33 ​ ​
Depreciation and amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (200) ​ ​
Finance expenses, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (61) ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) ​ ​
Capitalized development costs
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 43 ​ ​
Reclassification of lease related amortization and interest
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 74 ​ ​
Reclassification of operating expense related to software licenses to amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31 ​ ​
Share-based payments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (558) ​ ​
Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (639) ​ ​
​ ​ ​
For the year ended December 31, 2019
​
​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation
and
Analytics
​ ​
C2C Rental
​ ​
Total
​
Revenue, including:
​ ​ ​ ​ 3,555 ​ ​ ​ ​ ​ 34 ​ ​ ​ ​ ​ 18 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,607 ​ ​
Listing revenue
​ ​ ​ ​ 2,481 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,481 ​ ​
Lead generation revenue
​ ​ ​ ​ 622 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 623 ​ ​
Display advertising revenue
​ ​ ​ ​ 440 ​ ​ ​ ​ ​ 12 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 452 ​ ​
Other revenue
​ ​ ​ ​ 12 ​ ​ ​ ​ ​ 21 ​ ​ ​ ​ ​ 18 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 51 ​ ​
Adjusted EBITDA
​ ​ ​ ​ (193) ​ ​ ​ ​ ​ (153) ​ ​ ​ ​ ​ (81) ​ ​ ​ ​ ​ (65) ​ ​ ​ ​ ​ (492) ​ ​
Reconciliation of Adjusted EBITDA to Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Adjusted EBITDA
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (492) ​ ​
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
​ ​ ​
For the year ended December 31, 2019
​
​
Core
Business
​ ​
Mortgage
Marketplace
​ ​
Valuation
and
Analytics
​ ​
C2C Rental
​ ​
Total
​
Depreciation and amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (169) ​ ​
Finance expenses, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (31) ​ ​
Foreign currency exchange loss, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (3) ​ ​
Capitalized development costs
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 22 ​ ​
Reclassification of lease related amortization and interest
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 71 ​ ​
Reclassification of operating expense related to software licenses to amortization
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 23 ​ ​
Share-based payments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (67) ​ ​
Goodwill impairment
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (256) ​ ​
Loss before income tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (902) ​ ​
​
6. MARKETING EXPENSES
​ ​ ​
2020
​ ​
2019
​
Online marketing
​ ​ ​ ​ (1,498) ​ ​ ​ ​ ​ (1,134) ​ ​
Offline marketing
​ ​ ​ ​ (139) ​ ​ ​ ​ ​ (959) ​ ​
Other marketing expenses
​ ​ ​ ​ (60) ​ ​ ​ ​ ​ (66) ​ ​
Total marketing expenses
​ ​ ​ ​ (1,697) ​ ​ ​ ​ ​ (2,159) ​ ​
Marketing expenses are only purchased advertising exclusive of any employee-related expenses.
7. EMPLOYEE-RELATED EXPENSES
​ ​ ​
2020
​ ​
2019
​
Wages, salaries and related taxes
​ ​ ​ ​ (1,610) ​ ​ ​ ​ ​ (1,246) ​ ​
Share-based payment expense (Note 16)
​ ​ ​ ​ (558) ​ ​ ​ ​ ​ (67) ​ ​
Other employee-related expenses
​ ​ ​ ​ (40) ​ ​ ​ ​ ​ (72) ​ ​
Total employee-related expenses
​ ​ ​ ​ (2,208) ​ ​ ​ ​ ​ (1,385) ​ ​
8. GOODWILL IMPAIRMENT
Goodwill of 256 was recognized in 2014 as a result of an acquisition of EMLS Group (“EMLS”), a leading online real estate classifieds website in Saint-Petersburg and the Leningrad region. Goodwill was allocated to the cash-generating unit (CGU) of EMLS. In December 2019, management of the Group decided to gradually cease the operations of the website “emls.ru” during the next two years and transfer its customer base (Note 11) to the Group’s main website “cian.ru” and Cian mobile application, and, accordingly, goodwill was written off in full as of December 31, 2019.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
9. INCOME TAX
The major components of income tax benefit for the years ended December 31, 2020 and 2019 are:
​ ​ ​
2020
​ ​
2019
​
Current income tax expense
​ ​ ​ ​ (18) ​ ​ ​ ​ ​ — ​ ​
Adjustments in respect of current income tax of previous years
​ ​ ​ ​ (1) ​ ​ ​ ​ ​ — ​ ​
Deferred tax benefit
​ ​ ​ ​ 31 ​ ​ ​ ​ ​ 96 ​ ​
Income tax benefit
​ ​ ​ ​ 12 ​ ​ ​ ​ ​ 96 ​ ​
The major part of the Group’s pre-tax losses and income tax expenses / benefits is generated in Russia. Pre-tax gains or losses of the Group’s companies in Cyprus mainly relate to foreign exchange gains and losses and other items which are generally non-taxable (non-deductible) in that jurisdiction. These items affect pre-tax loss but do not have any impact on income tax expense / benefit.
Below is a reconciliation of theoretical income tax based on the Russian statutory income tax rate of 20% to the actual tax recorded in the consolidated statement of profit or loss and other comprehensive income:
​ ​ ​
2020
​ ​
2019
​
Loss before income tax
​ ​ ​ ​ (639) ​ ​ ​ ​ ​ (902) ​ ​
Income tax benefit calculated at Russia’s statutory income tax rate (20%)
​ ​ ​ ​ 128 ​ ​ ​ ​ ​ 180 ​ ​
Goodwill impairment
​ ​ ​ ​ — ​ ​ ​ ​ ​ (51) ​ ​
Adjustments in respect of current income tax of previous years
​ ​ ​ ​ (1) ​ ​ ​ ​ ​ — ​ ​
Share-based payments
​ ​ ​ ​ (112) ​ ​ ​ ​ ​ (13) ​ ​
Other non-deductible expenses
​ ​ ​ ​ (3) ​ ​ ​ ​ ​ (20) ​ ​
Income tax benefit for the year
​ ​ ​ ​ 12 ​ ​ ​ ​ ​ 96 ​ ​
Set out below is the summary of deferred tax assets and liabilities as of December 31, 2020 and 2019:
​ ​ ​
Consolidated statement of
financial position
as of December 31,
​ ​
Consolidated statement of
profit or loss
​
​
2020
​ ​
2019
​ ​
2020
​ ​
2019
​
Deferred tax assets arising from: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Tax losses carried forward
​ ​ ​ ​ 149 ​ ​ ​ ​ ​ 166 ​ ​ ​ ​ ​ (17) ​ ​ ​ ​ ​ 88 ​ ​
Revenue recognition
​ ​ ​ ​ 59 ​ ​ ​ ​ ​ 32 ​ ​ ​ ​ ​ 27 ​ ​ ​ ​ ​ 1 ​ ​
Lease liabilities
​ ​ ​ ​ 23 ​ ​ ​ ​ ​ 20 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 20 ​ ​
Employee benefits
​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 19 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 8 ​ ​
Intangible assets
​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 2 ​ ​
Trade receivables
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total deferred tax assets before set-off
​ ​ ​ ​ 271 ​ ​ ​ ​ ​ 240 ​ ​ ​ ​ ​ 31 ​ ​ ​ ​ ​ 119 ​ ​
Set-off of tax
​ ​ ​
​
(34)
​ ​ ​ ​
​
(28)
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net deferred tax assets
​ ​ ​
​
237
​ ​ ​ ​
​
212
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Deferred tax liabilities arising from: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Intangible assets
​ ​ ​ ​ (33) ​ ​ ​ ​ ​ (36) ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 2 ​ ​
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
​ ​ ​
Consolidated statement
of
financial position
as of December 31,
​ ​
Consolidated statement
of
profit or loss
​
​
2020
​ ​
2019
​ ​
2020
​ ​
2019
​
Right-of-use assets
​ ​ ​ ​ (25) ​ ​ ​ ​ ​ (22) ​ ​ ​ ​ ​ (3) ​ ​ ​ ​ ​ (22) ​ ​
Property and equipment
​ ​ ​ ​ (2) ​ ​ ​ ​ ​ (3) ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ (1) ​ ​
Other items
​ ​ ​ ​ (2) ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ (2) ​ ​
Total deferred tax liabilities before set-off
​ ​ ​
​
(62)
​ ​ ​ ​
​
(62)
​ ​ ​ ​ ​ — ​ ​ ​ ​
​
(23)
​ ​
Set-off of tax
​ ​ ​
​
34
​ ​ ​ ​
​
28
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net deferred tax liabilities
​ ​ ​
​
(28)
​ ​ ​ ​
​
(34)
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net deferred tax asset / (liability)
​ ​ ​
​
209
​ ​ ​ ​
​
178
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Deferred tax benefit / (expense)
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
31
​ ​ ​ ​
​
96
​ ​
The Group has accumulated tax losses of 745 (2019: 830) that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. The losses have arisen in the key Russian operating subsidiary of the Group. The Group recognized deferred tax assets in respect of these losses as they are fully recoverable in the near future according to the management’s forecast. In such assessment management took into account differences between Russian Tax Law and IFRS, historical deviations from the budget and actual offset of 88 from the balance of accumulated losses against taxable profit of the subsidiary in 2020.
10. LEASES
The Group leases several office buildings to provide employees with comfortable working conditions. Set out below are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period:
​ ​ ​
Right-of-use
assets
​ ​
Lease
liabilities
​
As of January 1, 2019
​ ​ ​ ​ 177 ​ ​ ​ ​ ​ (153) ​ ​
Additions
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Depreciation expense
​ ​ ​ ​ (66) ​ ​ ​ ​ ​ — ​ ​
Interest expense
​ ​ ​ ​ — ​ ​ ​ ​ ​ (12) ​ ​
Payments
​ ​ ​ ​ — ​ ​ ​ ​ ​ 65 ​ ​
As of December 31, 2019
​ ​ ​ ​ 111 ​ ​ ​ ​ ​ (100) ​ ​
Additions
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Remeasurement / modification
​ ​ ​ ​ 81 ​ ​ ​ ​ ​ (80) ​ ​
Depreciation expense
​ ​ ​ ​ (67) ​ ​ ​ ​ ​ — ​ ​
Interest expense
​ ​ ​ ​ — ​ ​ ​ ​ ​ (7) ​ ​
Payments
​ ​ ​ ​ — ​ ​ ​ ​ ​ 74 ​ ​
As of December 31, 2020
​ ​ ​ ​ 125 ​ ​ ​ ​ ​ (113) ​ ​
The maturity analysis of lease liabilities based on contractual undiscounted payments is disclosed in Note 19.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
11. INTANGIBLE ASSETS
​ ​ ​
Trademarks
​ ​
Customer
base
​ ​
Computer
software
​ ​
Video/​
audio rights
​ ​
Development
costs
​ ​
Other
​ ​
Total
​
Cost ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
At January 1, 2019
​ ​ ​ ​ 76 ​ ​ ​ ​ ​ 186 ​ ​ ​ ​ ​ 44 ​ ​ ​ ​ ​ 52 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 363 ​ ​
Additions
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 30 ​ ​ ​ ​ ​ 52 ​ ​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 105 ​ ​
Disposals
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ (1) ​ ​
At December 31, 2019
​ ​ ​ ​ 76 ​ ​ ​ ​ ​ 186 ​ ​ ​ ​ ​ 74 ​ ​ ​ ​ ​ 104 ​ ​ ​ ​ ​ 26 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 467 ​ ​
At January 1, 2020
​ ​ ​ ​ 76 ​ ​ ​ ​ ​ 186 ​ ​ ​ ​ ​ 74 ​ ​ ​ ​ ​ 104 ​ ​ ​ ​ ​ 26 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 467 ​ ​
Additions
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 37 ​ ​ ​ ​ ​ 14 ​ ​ ​ ​ ​ 43 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 94 ​ ​
Disposals
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ (1) ​ ​
At December 31, 2020
​ ​ ​
​
76
​ ​ ​ ​
​
186
​ ​ ​ ​
​
111
​ ​ ​ ​
​
118
​ ​ ​ ​
​
69
​ ​ ​ ​ ​ — ​ ​ ​ ​
​
560
​ ​
Amortization ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
At January 1, 2019
​ ​ ​
​
(31)
​ ​ ​ ​
​
(43)
​ ​ ​ ​
​
(27)
​ ​ ​ ​
​
(8)
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
(109)
​ ​
Amortization charge
​ ​ ​ ​ (8) ​ ​ ​ ​ ​ (10) ​ ​ ​ ​ ​ (23) ​ ​ ​ ​ ​ (43) ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (85) ​ ​
Disposals
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
At December 31, 2019
​ ​ ​
​
(39)
​ ​ ​ ​
​
(53)
​ ​ ​ ​
​
(50)
​ ​ ​ ​
​
(51)
​ ​ ​ ​
​
(1)
​ ​ ​ ​ ​ — ​ ​ ​ ​
​
(194)
​ ​
At January 1, 2020
​ ​ ​
​
(39)
​ ​ ​ ​
​
(53)
​ ​ ​ ​
​
(50)
​ ​ ​ ​
​
(51)
​ ​ ​ ​
​
(1)
​ ​ ​ ​ ​ — ​ ​ ​ ​
​
(194)
​ ​
Amortization charge
​ ​ ​ ​ (18) ​ ​ ​ ​ ​ (10) ​ ​ ​ ​ ​ (31) ​ ​ ​ ​ ​ (47) ​ ​ ​ ​ ​ (3) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (109) ​ ​
Disposals
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
At December 31, 2020
​ ​ ​
​
(57)
​ ​ ​ ​
​
(63)
​ ​ ​ ​
​
(81)
​ ​ ​ ​
​
(98)
​ ​ ​ ​
​
(4)
​ ​ ​ ​ ​ — ​ ​ ​ ​
​
(303)
​ ​
Carrying amounts ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
At December 31, 2019
​ ​ ​ ​ 37 ​ ​ ​ ​ ​ 133 ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 53 ​ ​ ​ ​ ​ 25 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 273 ​ ​
At December 31, 2020
​ ​ ​ ​ 19 ​ ​ ​ ​ ​ 123 ​ ​ ​ ​ ​ 30 ​ ​ ​ ​ ​ 20 ​ ​ ​ ​ ​ 65 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 257 ​ ​
Trademark related to EMLS.ru
Following the decision of management to gradually cease the operations of the website “emls.ru” and transfer its client base to the Group’s main website “cian.ru” and Cian mobile application (Note 8), the useful life of EMLS trademark was revised accordingly. The remaining useful life as of December 31, 2020 is one year.
Impairment test
Group’s non-current assets are fully attributable to the “Core Business” cash-generating unit (CGU). The “Core Business” CGU represents the main service line of real estate classifieds and related advertising services provided on the Cian’s platform (website cian.ru and mobile application). “Mortgage Marketplace”, “Valuation and Analytics” and “C2C Rental” each represent a separate CGU, however the Group did not recognize any assets related to such CGU’s as of December 31, 2020 and 2019, as there was no convincing evidence available that these services would generate future economic benefits.
As substantially the entire customer base from “EMLS” was transferred to the main Cian platform, for the purposes of impairment testing as of December 31, 2020 the remaining assets of “EMLS” were allocated to the “Core Business” CGU.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
At December 31, 2020 management estimated the recoverable amount of the “Core Business” CGU. The recoverable amount of the CGU represented its value in use, determined by reference to discounted future cash flows generated from the continuing use of the CGU. The key assumptions used in the estimation of the CGU’s recoverable amount represented management’s assessment of future trends in the Group’s business and were based on the relevant external and internal historical data. Cash flows were projected based on past experience, actual operating results and the Group’s five-year business plan and based on the following key assumptions: revenue growth rates, Adjusted EBITDA margin, discount rate, and terminal value growth rate. At December 31, 2020 the estimated recoverable amounts of the “Core Business” CGU exceeded its carrying amount.
Discount rate and terminal growth rate.   The pre-tax discount rate applied to the cash flow projections is 18%, and the annual growth rate for the free cash flows after 2025 is 5%. The discount rate applied is based on the risk-free rate for 10-year government bonds in Russia, market risk premium, and adjusted for a risk premium to reflect both the increased risk of investing in equities and the systemic risk of the specific operating segment. A long-term growth rate in perpetuity has been determined based on the nominal GDP rates for Russia.
Revenue growth rates and Adjusted EBITDA margin.   Revenue growth rates and Adjusted EBITDA margin were projected taking into account the levels experienced over the past years and the estimated sales volume and price growth for the next five years.
Sensitivity to changes in estimates.   Management estimated that a decrease in revenues by 10%, or 15 percentage points decrease in Adjusted EBITDA margin, or an increase in the discount rate by 5 percentage points would not result in impairment of non-current assets and a significant headroom of the recoverable amount over the carrying amount would still remain.
12. TRADE AND OTHER RECEIVABLES
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​
Trade receivables from third parties
​ ​ ​ ​ 151 ​ ​ ​ ​ ​ 97 ​ ​
Other receivables from third parties
​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 3 ​ ​
Allowance for expected credit losses
​ ​ ​ ​ (6) ​ ​ ​ ​ ​ (6) ​ ​
Total trade and other receivables
​ ​ ​ ​ 154 ​ ​ ​ ​ ​ 94 ​ ​
Trade and other receivables are non-interest bearing and are generally on terms of 20 to 30 days.
Set out below is the movement in the allowance for expected credit losses of accounts receivable:
​ ​ ​
2020
​ ​
2019
​
Balance at the beginning of the year
​ ​ ​ ​ (6) ​ ​ ​ ​ ​ (6) ​ ​
Allowance for expected credit losses
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Balance at the end of the year
​ ​ ​ ​ (6) ​ ​ ​ ​ ​ (6) ​ ​
Information about the Group’s exposure to credit and market risks is presented in Note 19.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
13. CASH AND CASH EQUIVALENTS
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​
Short-term deposits
​ ​ ​ ​ 406 ​ ​ ​ ​ ​ 100 ​ ​
Cash at banks and on hand
​ ​ ​ ​ 43 ​ ​ ​ ​ ​ 48 ​ ​
Total cash and cash equivalents
​ ​ ​ ​ 449 ​ ​ ​ ​ ​ 148 ​ ​
The Group’s cash and cash equivalents are mainly denominated in Russian Rubles.
Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective market short-term deposit rates. Information about the credit risk over cash and cash equivalents is presented in Note 19.
14. SHARE CAPITAL
Number of shares
​ ​
Authorized
​ ​
Issued and fully paid
​
​
December 31,
2020
​ ​
December 31,
2019
​ ​
December 31,
2020
​ ​
December 31,
2019
​
Ordinary shares of EUR 0.0004 each
​ ​ ​ ​ 66,366,961 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​
​ ​ ​ ​ ​ 66,366,961 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​ ​ ​ ​ 59,433,100 ​ ​
Share amounts in the table above are presented on a split-adjusted basis (note 21).
In 2019, the existing shareholders provided irrevocable contribution of 118 to the Company. The contribution was accounted as the increase in share premium. There have been no transactions involving share premium in 2020.
In October 2020, the authorized share capital of the Company was increased from 59,433,100 to 66,366,961 shares.
In February 2021, the Group issued 5,566,900 (after the share split as set out in Note 21) ordinary shares to the existing and new shareholders and received 2,265 in cash (Note 21).
15. BORROWINGS
​ ​ ​
Interest rate
​ ​
Currency
​ ​
Maturity
​ ​
December 31,
2020
​ ​
December 31,
2019
​
​
Amount, incl.
accrued interest
​ ​
Amount, incl.
accrued interest
​
Bank loan
​ ​
CBR key rate+3.35%
​ ​
RUB
​ ​
2021-2022
​ ​ ​ ​ 429 ​ ​ ​ ​ ​ 299 ​ ​
Bank loan
​ ​
CBR key rate+3.8%
​ ​
RUB
​ ​
2021-2024
​ ​ ​ ​ 299 ​ ​ ​ ​ ​ 178 ​ ​
Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 728 ​ ​ ​ ​ ​ 477 ​ ​
Current ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 728 ​ ​ ​ ​ ​ 46 ​ ​
Non-current ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 431 ​ ​
The bank loans are subject to certain covenants. These covenants impose some pledges and restrictions in respect of certain financial indicators. The loans are secured by 100% shares of Fastrunner Investment Limited, 100% shares of Mimons Investments Limited, 51% shares of iRealtor LLC, software rights and Cian trademarks and rights under license agreements. At December 31, 2020, the Group breached some of the financial covenants associated with the bank loans. The Group obtained a waiver from the bank in May 2021
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
with respect to the breach of covenants. However, the non-current portion of the loans was reclassified into the short-term portion at December 31, 2020 since the waiver was obtained after the reporting date.
16. SHARE-BASED COMPENSATION
In 2018, the Group’s Board of Directors approved a new long-term incentive program for certain senior level employees. In 2018 and 2019, the Group granted an aggregate of 3,565,986 shares (after the share split as set out in Note 21) (“phantom shares”) to employees that entitle them to a cash payment after one to five years of service depending on the participant. No awards were granted in 2020. The amount of the cash payment is determined based on the increase in the share price of the Company between the grant date and the time of exercise. The plan stipulates the following payments:
1.
Liquidity event payments.   Participants of the program are entitled to a cash payment upon occurrence of some liquidity events such as an initial public offering (“IPO”) or an acquisition of control over the Group by a third party.
​
2.
Non-liquidity event payments.   Participants of the program are entitled to a cash payment after the termination of the service period if the net debt (calculated as borrowings less cash and cash equivalents) does not exceed three times the lowest between EBITDA (calculated as operating profit plus amortization and depreciation) and Adjusted EBITDA (calculated as described in Note 5) as of the date of the notice sent by the participants to the Company.
​
The Group recognized share-based payment liability at December 31, 2020 and 2019 based only on the non-liquidity events. The Group did not recognize the liability based on the liquidity events in the consolidated statements of financial position at December 31, 2020 and 2019 due to a low probability of such events in the foreseeable future until the plans will not be well advanced.
The following table provides information about share-based awards as of December 31, 2020 and 2019:
​
Allocation
year
​ ​
Number of
awards
​ ​
Number of awards
outstanding
As of December 31,
​ ​
Vesting
period,
years
​ ​
Exercise
price, USD
​ ​
Fair value per award,
USD
As of December 31,
​ ​
Fair value per award,
RUB
As of December 31,
​
​
2020
​ ​
2019
​ ​
2020
​ ​
2019
​ ​
2020
​ ​
2019
​
​
2015
​ ​ ​ ​ 67.50 ​ ​ ​ ​ ​ 57.75 ​ ​ ​ ​ ​ 57.75 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 49,322 ​ ​ ​ ​ ​ 110,745 ​ ​ ​ ​ ​ 19,942 ​ ​ ​ ​ ​ 8,181,364 ​ ​ ​ ​ ​ 1,234,517 ​ ​
​
2017
​ ​ ​ ​ 6.75 ​ ​ ​ ​ ​ 6.75 ​ ​ ​ ​ ​ 6.75 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 42,760 ​ ​ ​ ​ ​ 118,086 ​ ​ ​ ​ ​ 15,449 ​ ​ ​ ​ ​ 8,723,686 ​ ​ ​ ​ ​ 956,350 ​ ​
​
2018
​ ​ ​ ​ 9.75 ​ ​ ​ ​ ​ 9.75 ​ ​ ​ ​ ​ 9.75 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 69,000 ​ ​ ​ ​ ​ 92,101 ​ ​ ​ ​ ​ 84 ​ ​ ​ ​ ​ 6,804,026 ​ ​ ​ ​ ​ 5,174 ​ ​
​
2019
​ ​ ​ ​ 3.00 ​ ​ ​ ​ ​ 3.00 ​ ​ ​ ​ ​ 3.00 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 69,000 ​ ​ ​ ​ ​ 92,101 ​ ​ ​ ​ ​ 44 ​ ​ ​ ​ ​ 6,804,026 ​ ​ ​ ​ ​ 2,730 ​ ​
​
2019
​ ​ ​ ​ 3.00 ​ ​ ​ ​ ​ 3.00 ​ ​ ​ ​ ​ 3.00 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 80,012 ​ ​ ​ ​ ​ 82,462 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6,091,938 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ ​ ​ 90.00 ​ ​ ​ ​ ​ 80.25 ​ ​ ​ ​ ​ 80.25 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
The following table provides information about share-based awards as of December 31, 2020 and 2019 on a split-adjusted basis (note 21):
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
​
Allocation
year
​ ​
Number of
awards
​ ​
Number of awards
outstanding
As of December 31,
​ ​
Vesting
period,
years
​ ​
Exercise
price, USD
​ ​
Fair value per award,
USD
As of December 31,
​ ​
Fair value per award,
RUB
As of December 31,
​
​
2020
​ ​
2019
​ ​
2020
​ ​
2019
​ ​
2020
​ ​
2019
​
​
2015
​ ​ ​ ​ 1,337,245 ​ ​ ​ ​ ​ 1,144,087 ​ ​ ​ ​ ​ 1,144,087 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 2.49 ​ ​ ​ ​ ​ 5.59 ​ ​ ​ ​ ​ 1.01 ​ ​ ​ ​ ​ 413 ​ ​ ​ ​ ​ 62 ​ ​
​
2017
​ ​ ​ ​ 133,724 ​ ​ ​ ​ ​ 133,724 ​ ​ ​ ​ ​ 133,724 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 2.16 ​ ​ ​ ​ ​ 5.96 ​ ​ ​ ​ ​ 0.78 ​ ​ ​ ​ ​ 440 ​ ​ ​ ​ ​ 48 ​ ​
​
2018
​ ​ ​ ​ 193,158 ​ ​ ​ ​ ​ 193,158 ​ ​ ​ ​ ​ 193,158 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 3.48 ​ ​ ​ ​ ​ 4.65 ​ ​ ​ ​ ​ 0.00 ​ ​ ​ ​ ​ 343 ​ ​ ​ ​ ​ 0 ​ ​
​
2019
​ ​ ​ ​ 59,433 ​ ​ ​ ​ ​ 59,433 ​ ​ ​ ​ ​ 59,433 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 3.48 ​ ​ ​ ​ ​ 4.65 ​ ​ ​ ​ ​ 0.00 ​ ​ ​ ​ ​ 343 ​ ​ ​ ​ ​ 0 ​ ​
​
2019
​ ​ ​ ​ 59,433 ​ ​ ​ ​ ​ 59,433 ​ ​ ​ ​ ​ 59,433 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 4.04 ​ ​ ​ ​ ​ 4.16 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 308 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ ​ ​ 1,782,993 ​ ​ ​ ​ ​ 1,589,835 ​ ​ ​ ​ ​ 1,589,835 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Set out below are the movements in the Group’s share-based payment liabilities during 2020 and 2019:
​ ​ ​
2020
​ ​
2019
​
Share-based payment liabilities at the beginning of the year
​ ​ ​
​
78
​ ​ ​ ​ ​ 11 ​ ​
Remeasurement during the year
​ ​ ​ ​ 558 ​ ​ ​ ​ ​ 59 ​ ​
Non-liquidity event payments
​ ​ ​ ​ — ​ ​ ​ ​ ​ 8 ​ ​
Share-based payment liabilities at the end of the year
​ ​ ​ ​ 636 ​ ​ ​ ​ ​ 78 ​ ​
The fair value of the awards was estimated, at the grant date and at the end of each reporting period, using the Option pricing model, taking into account the terms and conditions on which the award was granted.
The weighted average inputs used in the measurement of the fair values for the years ended December 31, 2020 and 2019 are the following:
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​
Expected annual volatility
​ ​ ​ ​ 45.20% ​ ​ ​ ​ ​ 40.88% ​ ​
Expected term, years
​ ​ ​ ​ 1.5 ​ ​ ​ ​ ​ 2.5 ​ ​
Dividend yield
​ ​ ​ ​ None ​ ​ ​ ​ ​ None ​ ​
Risk-free interest rate
​ ​ ​ ​ 0.1% ​ ​ ​ ​ ​ 1.61% ​ ​
Fair value per ordinary share, USD (after the share split as set out in Note 21)
​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 5 ​ ​
Fair value per ordinary share, RUB (after the share split as set out in Note 21)
​ ​ ​ ​ 939 ​ ​ ​ ​ ​ 333 ​ ​
Expected volatility.   Because the Company’s shares are not publicly traded, expected volatility has been estimated based on an analysis of the implied share price volatility of comparable public companies for an expected term equal to 1.5 years (2019: 2.5 years).
Expected term.   As the contractual terms of the awards are unlimited, the expected terms of the instruments have been assessed based on the vesting period and management’s best estimate for the effects of non-transferability, exercise restrictions and behavioral considerations.
Dividend yield.   Expected dividend yield is nil, the Company did not declare any dividends with respect to 2019 and 2020 and does not have any plans to pay dividends in the near term.
Risk-free rate was assessed based on US Treasury bonds yield.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Fair value per ordinary share.   Given the absence of a public trading market for ordinary shares of the Company, the fair value per ordinary share was determined by reference to discounted future cash flows generated by the Group. The key assumptions used in the estimation of the business enterprise value are consistent with the inputs in the impairment test as disclosed in Note 11.
The following table demonstrates the sensitivity to a reasonably possible change in key assumptions affecting the fair value per ordinary share. With all other variables held constant, the Group’s share-based payment liabilities are affected as follows:
​ ​ ​
Change in share-based
payment liabilities
​
10% change in forecasted revenue
​ ​ ​ ​ 22% ​ ​
10% change in terminal period Adjusted EBITDA margin
​ ​ ​ ​ 13% ​ ​
10% change in discount rate
​ ​ ​ ​ 52% ​ ​
10% change in terminal growth rate
​ ​ ​ ​ 40% ​ ​
The forfeiture rate is assessed as remote.
17. TRADE AND OTHER PAYABLES
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​
Trade payables
​ ​ ​ ​ 196 ​ ​ ​ ​ ​ 75 ​ ​
Tax risks provision
​ ​ ​ ​ — ​ ​ ​ ​ ​ 140 ​ ​
Annual bonus provision
​ ​ ​ ​ 66 ​ ​ ​ ​ ​ 59 ​ ​
Unused vacation provision
​ ​ ​ ​ 53 ​ ​ ​ ​ ​ 36 ​ ​
Other payables
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 5 ​ ​
Trade and other payables
​ ​ ​ ​ 316 ​ ​ ​ ​ ​ 315 ​ ​
Trade payables are non-interest bearing and are normally settled on 60-day terms. Information about the Group’s exposure to liquidity risk in relation to its trade and other payables is included in Note 19.
18. RELATED PARTIES
Related parties include shareholders, ultimate owners and members of key management personnel as well as companies which are under legal ownership, significant influence or control of shareholders or ultimate owners of the Group.
Transactions with key management personnel
Key management comprises directors of the Group and CEO and CFO of the main operating subsidiary.
The remuneration of key management personnel for the year ended December 31, 2020 and 2019 amounted to:
​ ​ ​
2020
​ ​
2019
​
Short-term employee benefits
​ ​ ​ ​ (38) ​ ​ ​ ​ ​ (37) ​ ​
Share-based payment expense
​ ​ ​ ​ (313) ​ ​ ​ ​ ​ (47) ​ ​
Total key management remuneration
​ ​ ​ ​ (351) ​ ​ ​ ​ ​ (84) ​ ​
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
During 2019, the Group received a loan of 46 from key management personnel which was repaid in full by the end of that year. During 2020, there were no transactions or outstanding balances with key management personnel, except for disclosed in the table above. No guarantees have been given or received.
Transactions with the ultimate controlling party
During 2020, there were no transactions or outstanding balances with Elbrus Capital, the ultimate controlling party. No guarantees have been given or received.
During 2019, the Group received a loan of 148 from Elbrus Capital which was repaid in full by the end of that year.
Other related party transactions
The following table provides the total amount of transactions that have been entered into with other related parties for the relevant financial year.
​ ​ ​ ​ ​ ​ ​ ​ ​
Sales
to related
parties
​ ​
Purchases
from related
parties
​ ​
Amounts owed
by related
parties
​ ​
Amounts owed
to related
parties
​
Associate of Elbrus Capital
​ ​ ​ ​ 2020 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Associate of Elbrus Capital
​ ​ ​ ​ 2019 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Outstanding balances with related parties at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees given or received.
19. FINANCIAL RISK MANAGEMENT
19.1 Financial assets and financial liabilities
The following table shows the carrying amounts of financial assets and financial liabilities. The Group does not hold any financial assets and financial liabilities other than those measured at amortized cost. Management assessed that the carrying values of the Group’s financial assets and financial liabilities measured at amortized cost are a reasonable approximation of their fair values on the basis of short-term nature or calculation of amortised cost using market rates.
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​
Financial assets measured at amortized cost ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash and cash equivalents (Note 13)
​ ​ ​ ​ 449 ​ ​ ​ ​ ​ 148 ​ ​
Trade and other receivables (Note 12)
​ ​ ​ ​ 154 ​ ​ ​ ​ ​ 94 ​ ​
Rent security deposits
​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 9 ​ ​
Total financial assets
​ ​ ​ ​ 612 ​ ​ ​ ​ ​ 251 ​ ​
Financial liabilities measured at amortized cost ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Trade and other payables (Note 17)
​ ​ ​ ​ 197 ​ ​ ​ ​ ​ 80 ​ ​
Lease liabilities (Note 10)
​ ​ ​ ​ 113 ​ ​ ​ ​ ​ 100 ​ ​
Borrowings (Note 15)
​ ​ ​ ​ 728 ​ ​ ​ ​ ​ 477 ​ ​
Total financial liabilities
​ ​ ​ ​ 1,038 ​ ​ ​ ​ ​ 657 ​ ​
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
19.2 Financial risk management
The Group is exposed to risks that arise from its use of financial instruments. The Group has exposure to the following risks arising from financial instruments: market risk, credit risk and liquidity risk.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods.
19.2.1 Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk, which mostly impacts the Group, comprises two types of risk: interest rate risk and currency risk. Financial instruments affected by market risk include cash and cash equivalents, accounts receivable and trade and other payables.
The Group does not enter into any derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s borrowings with floating interest rates.
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on borrowings affected. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows:
​ ​ ​
Change in
interest rates
​ ​
Effect on profit
before tax
​
Year ended December 31, 2020 ​ ​ ​ ​ ​ ​ ​
Borrowings with floating interest rates
​ ​
+1%/-1%
​ ​
(7) / 7
​
Year ended December 31, 2019 ​ ​ ​ ​ ​ ​ ​
Borrowings with floating interest rates
​ ​
+1%/-1%
​ ​
(5) / 5
​
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates is currently limited because the Group’s operating activities are mainly carried out in Russian Rubles.
19.2.2 Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its cash and cash equivalents held with banks.
Trade receivables
The Group performs an impairment analysis at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due. The calculation reflects the probability-weighted outcome. Generally, accounts receivables are written-off if past due for more than three years.
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix:
​ ​ ​
< 30 days
​ ​
31 – 60 days
​ ​
61 – 90 days
​ ​
> 90 days
​ ​
Total
​
2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Expected credit loss rate
​ ​ ​ ​ 1.1% ​ ​ ​ ​ ​ 5.7% ​ ​ ​ ​ ​ 7.6% ​ ​ ​ ​ ​ 69.4% ​ ​ ​ ​ ​ ​ ​ ​
Total gross carrying amount
​ ​ ​ ​ 128 ​ ​ ​ ​ ​ 17 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6 ​ ​ ​ ​ ​ 151 ​ ​
Expected credit loss
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 6 ​ ​
​ ​ ​
< 30 days
​ ​
31 – 60 days
​ ​
61 – 90 days
​ ​
> 90 days
​ ​
Total
​
2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Expected credit loss rate
​ ​ ​ ​ 1.2% ​ ​ ​ ​ ​ 7.6% ​ ​ ​ ​ ​ 7.9% ​ ​ ​ ​ ​ 62.4% ​ ​ ​ ​ ​ ​ ​ ​
Total gross carrying amount
​ ​ ​ ​ 83 ​ ​ ​ ​ ​ 6 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8 ​ ​ ​ ​ ​ 97 ​ ​
Expected credit loss
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 6 ​ ​
Cash and cash equivalents
The Group held cash and cash equivalents of 449 at December 31, 2020 (2019: 148). The cash and cash equivalents are primarily held with banks, which are rated not less than BBB- to BBB, based on Standard & Poor’s and Fitch ratings. As of December 31, 2020, the Group held 94% of its cash and cash equivalents with banks having external credit ratings of BBB-/BBB (2019: 95%).
Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Group considers that its cash and cash equivalents have low credit risk based on the external credit ratings of the counterparties. No impairment allowance was recognized at December 31, 2020 (2019: nil).
19.2.3 Liquidity risk
Liquidity risk is the risk that the Group will not be able to settle all liabilities as they fall due. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecasts and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:
​ ​ ​
Within 1 year
​ ​
1 to 3 years
​ ​
3 to 5 years
​ ​
> 5 years
​ ​
Total
​
2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Trade and other payables
​ ​ ​ ​ 197 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 197 ​ ​
Borrowings
​ ​ ​ ​ 416 ​ ​ ​ ​ ​ 340 ​ ​ ​ ​ ​ 44 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 800 ​ ​
Lease liabilities
​ ​ ​ ​ 43 ​ ​ ​ ​ ​ 76 ​ ​ ​ ​ ​ 8 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 127 ​ ​
Total financial liabilities
​ ​ ​ ​ 656 ​ ​ ​ ​ ​ 416 ​ ​ ​ ​ ​ 52 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 1,124 ​ ​
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
​ ​ ​
Within 1 year
​ ​
1 to 3 years
​ ​
3 to 5 years
​ ​
> 5 years
​ ​
Total
​
2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Trade and other payables
​ ​ ​ ​ 80 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 80 ​ ​
Borrowings
​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 408 ​ ​ ​ ​ ​ 84 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 581 ​ ​
Lease liabilities
​ ​ ​ ​ 73 ​ ​ ​ ​ ​ 34 ​ ​ ​ ​ ​ — ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 107 ​ ​
Total financial liabilities
​ ​ ​ ​ 242 ​ ​ ​ ​ ​ 442 ​ ​ ​ ​ ​ 84 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 768 ​ ​
19.3 Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statements of cash flows as cash flows from financing activities.
​ ​ ​
January 1,
2020
​ ​
Financing
cash flows
​ ​
Leases
(non-cash)
​ ​
Other
​ ​
December 31,
2020
​
Borrowings
​ ​ ​ ​ 477 ​ ​ ​ ​ ​ 249 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 728 ​ ​
Lease liabilities
​ ​ ​ ​ 100 ​ ​ ​ ​ ​ (67) ​ ​ ​ ​ ​ 80 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 113 ​ ​
​ ​ ​ ​ ​ 577 ​ ​ ​ ​ ​ 182 ​ ​ ​ ​ ​ 80 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 841 ​ ​
​ ​ ​
January 1,
2019
​ ​
Financing
cash flows
​ ​
Leases
(non-cash)
​ ​
Other
​ ​
December 31,
2019
​
Borrowings
​ ​ ​ ​ — ​ ​ ​ ​ ​ 475 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 477 ​ ​
Lease liabilities
​ ​ ​ ​ 153 ​ ​ ​ ​ ​ (53) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 100 ​ ​
​ ​ ​ ​ ​ 153 ​ ​ ​ ​ ​ 422 ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 577 ​ ​
The ‘Other’ column includes the effect of accrued but not yet paid interest on the Group’s borrowings and lease liabilities. The Group classifies interest paid as cash flows from operating activities.
19.4 Capital management
The Group manages its capital to ensure that companies in the Group will be able to continue as a going concern (Note 3) while maximising the return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity (as detailed in the consolidated statements of financial position).
In order to achieve this overall objective, the Group’s capital management, among other things, aims to ensure that it meets financial covenants attached to the borrowings that define capital structure requirements. Breaches in meeting the financial covenants could result in bank immediately calling the borrowings.
No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2020 and 2019.
20. CONTINGENCIES
Legal proceedings
During the periods covered by the Group’s consolidated financial statements and in subsequent period until their approval, the Group has been, and continues to be, subject to legal proceedings and adjudications
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
from time to time, none of which has had, individually or in the aggregate, a material adverse impact on the Group. Management believes that the ultimate liability, if any, arising from such proceedings and adjudications, will not have a material adverse impact on the Group’s financial position or operating results.
Russian Federation tax and regulatory environment
The taxation system in the Russian Federation continues to evolve and is characterised by frequent changes in legislation, official pronouncements and court decisions, which are sometimes contradictory and subject to varying interpretation by different tax authorities. Management’s interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by a number of authorities, which may impose severe fines, penalties and interest charges.
Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive and substance-based position in their interpretation and enforcement of tax legislation and as a result, it is possible that transactions and activities that have not been challenged in the past may be challenged. As such, significant additional taxes, penalties and interest may be assessed. A tax year generally remains open for review by the tax authorities during the three subsequent calendar years, while under certain circumstances reviews may cover longer periods.
The Group estimates that possible exposure in relation to the above mentioned tax risks, that are more than remote, but for which no liability is required to be recognized, could be up to approximately 58.
Operating environment
The Group’s operations are concentrated in the Russian Federation. Consequently, the Group is exposed to the economic and financial environment in the Russian Federation, which display the characteristics of an emerging market. The legal, tax and regulatory frameworks continue to develop and are subject to varying interpretations and frequent changes which combined with other legal and fiscal impediments, aggravate the challenges faced by entities operating in the Russian Federation.
Starting in 2014, the United States of America, the European Union and some other countries have imposed and gradually expanded economic sanctions against a number of Russian individuals and legal entities. The imposition of the sanctions has led to increased economic uncertainty, including more volatile equity markets, a depreciation of the Russian Ruble, a reduction in both local and foreign direct investment inflows and a significant tightening in the availability of credit. As a result, some Russian entities may experience difficulties accessing the international equity and debt markets and may become increasingly dependent on state support for their operations. The long-term effects of the imposed and possible additional sanctions are difficult to determine.
The Group’s consolidated financial statements reflect management’s assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management’s assessment.
COVID-19
In March 2020, the World Health Organization declared the COVID-19 virus a global pandemic. The highly contagious disease has spread to most of the countries including Russia, creating a negative impact on customers, workforces, and suppliers, disrupting economies and financial markets, and potentially leading to a worldwide economic downturn. The Group aimed to adapt to such adverse changes in conditions by exploring new ways of monetization and promotion of its products and services and cost optimization. As a result, the Group avoided any significant adverse impact on revenue or operating loss. However, the full impact of the COVID-19 outbreak continues to evolve as of the date of issuance of these consolidated
 
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CIAN GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Group’s financial condition, liquidity, and future results of operations.
21. EVENTS AFTER THE REPORTING PERIOD
In February 2021, the Group received 2,265 in cash by issuing 281 (5,566,900 after the share split) ordinary shares to the existing and new shareholders for financing the acquisition of the N1.ru Group and its operating activity.
In February 2021, the Group completed an acquisition of 100% of the N1.ru Group, one of the leading regional online real estate classifieds in Russia, from a third party for a total cash consideration of 1,785. The primary reason for the business combination was to enhance the Group’s position in Russia’s regions outside Moscow and Saint-Petersburg. The accounting for this business combination was incomplete at the date of issue of these consolidated financial statements, as far as the valuation of identifiable assets acquired in the business combination was not completed and accepted by management. Therefore, the disclosure of expected goodwill and major classes of acquired assets and liabilities assumed could not be made.
In January and March 2021, the Group granted certain employees 32.1 (635,934 after the share split) share-based compensation awards. All these awards are cash-settled.
Starting from January 1, 2021, due to changes in Russian Tax Law, the Group lost the right to use VAT exemption on listing revenue. The Group assessed that this change would not have a significant negative impact on the Group’s operational and financial results.
In May 2021, the Group obtained a waiver from the bank with respect to the breach of covenants as of December 31, 2020 (Note 15).
Capital reorganization
In August 2021, pursuant to a special resolution at a general meeting of its shareholders, the Company:
•
made a 1-for-2,500 split of its ordinary shares.
​
•
increased the authorized share capital by the creation of additional 121,625,000 ordinary shares of EUR 0.0004 each; and
​
•
issued and allotted 56,797,500 fully paid ordinary shares of EUR 0.0004 each to its existing shareholders on a pro rata basis.
​
All share and per share amounts and related information in these consolidated financial statements have been retroactively adjusted, where applicable, to reflect the impact of the share split and pro rata allotment of ordinary shares issued (collectively, the “share split”).
The consolidated financial statements were revised by the directors of the Company on September 2, 2021, to give a retroactive effect to the share split as effected in August 2021 as described above, and not to reflect any other subsequent events since June 23, 2021.
 
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder of N1.ru LLC
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of N1.ru LLC and subsidiaries (the “Group”) as of December 31, 2020 and 2019 and January 1, 2019, the related consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2020 and 2019 and January 1, 2019, and the results of its operations and its cash flows for the two years in the period ended December 31, 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on the Group’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group 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 and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ AO Deloitte & Touche CIS
Moscow, the Russian Federation
June 23, 2021
We have served as the Group’s auditor since 2021.
 
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N1 GROUP
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
​ ​ ​
Note
​ ​
2020
​ ​
2019
​
Revenue
​ ​
4
​ ​
563
​ ​
645
​
Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Employee-related expenses
​ ​
5
​ ​
(214)
​ ​
(219)
​
Marketing expenses
​ ​
6
​ ​
(171)
​ ​
(109)
​
IT expenses
​ ​ ​ ​ ​
(29)
​ ​
(31)
​
Depreciation and amortization
​ ​ ​ ​ ​
(24)
​ ​
(22)
​
Other operating expenses, net
​ ​ ​ ​ ​
(54)
​ ​
(64)
​
Total operating expenses
​ ​ ​ ​ ​
(492)
​ ​
(445)
​
Operating profit
​ ​ ​ ​ ​
71
​ ​
200
​
Finance income
​ ​ ​ ​ ​
1
​ ​
3
​
Finance costs
​ ​ ​ ​ ​
(3)
​ ​
(4)
​
Foreign currency exchange gain/(loss), net
​ ​ ​ ​ ​
3
​ ​
(7)
​
Profit before income tax
​ ​ ​ ​ ​
72
​ ​
192
​
Income tax expense
​ ​
7
​ ​
(14)
​ ​
(40)
​
Profit for the year
​ ​ ​ ​ ​
58
​ ​
152
​
Total comprehensive income for the year
​ ​ ​ ​ ​
58
​ ​
152
​
The accompanying notes are an integral part of these consolidated financial statements
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N1 GROUP
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31, 2020, DECEMBER 31, 2019 AND JANUARY 1, 2019
(in millions of Russian Rubles)
​ ​ ​
Note
​ ​
December 31,
2020
​ ​
December 31,
2019
​ ​
January 1,
2019
​
Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-current assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Property and equipment
​ ​ ​ ​ ​
8
​ ​
7
​ ​
4
​
Right-of-use assets
​ ​
8
​ ​
23
​ ​
37
​ ​
42
​
Intangible assets
​ ​ ​ ​ ​
3
​ ​
3
​ ​
3
​
Deferred tax assets
​ ​ ​ ​ ​
1
​ ​
1
​ ​
1
​
Total non-current assets
​ ​ ​ ​ ​
35
​ ​
48
​ ​
50
​
Current assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Short-term loans issued
​ ​
13
​ ​
—
​ ​
—
​ ​
90
​
Advances paid and prepaid expenses
​ ​ ​ ​ ​
3
​ ​
11
​ ​
11
​
Trade and other receivables
​ ​
9
​ ​
3
​ ​
11
​ ​
14
​
Prepaid income tax
​ ​ ​ ​ ​
6
​ ​
3
​ ​
1
​
Cash and cash equivalents
​ ​
10
​ ​
132
​ ​
89
​ ​
107
​
Other current assets
​ ​ ​ ​ ​
5
​ ​
5
​ ​
2
​
Total current assets
​ ​ ​ ​ ​
149
​ ​
119
​ ​
225
​
Total assets
​ ​ ​ ​ ​
184
​ ​
167
​ ​
275
​
Equity and liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Share capital*
​ ​
11
​ ​
—
​ ​
—
​ ​
—
​
Retained earnings
​ ​ ​ ​ ​
114
​ ​
80
​ ​
182
​
Total equity
​ ​ ​ ​ ​
114
​ ​
80
​ ​
182
​
Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Lease liabilities
​ ​
8
​ ​
15
​ ​
25
​ ​
32
​
Total non-current liabilities
​ ​ ​ ​ ​
15
​ ​
25
​ ​
32
​
Current liabilities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Contract liabilities
​ ​
4
​ ​
25
​ ​
28
​ ​
27
​
Trade and other payables
​ ​
12
​ ​
13
​ ​
15
​ ​
17
​
Income tax payable
​ ​ ​ ​ ​
1
​ ​
2
​ ​
3
​
Other taxes payable
​ ​ ​ ​ ​
6
​ ​
4
​ ​
4
​
Lease liabilities
​ ​
8
​ ​
10
​ ​
13
​ ​
10
​
Total current liabilities
​ ​ ​ ​ ​
55
​ ​
62
​ ​
61
​
Total liabilities
​ ​ ​ ​ ​
70
​ ​
87
​ ​
93
​
Total liabilities and equity
​ ​ ​ ​ ​
184
​ ​
167
​ ​
275
​
​
*
Share capital is equal to 10,792 RUB. The amount of share capital presented as “—” due to rounding.
​
Approved for issue and signed by Management on June 23, 2021.
/s/ Dmitry Chernov
​
Dmitry Chernov, Chief Executive Officer
The accompanying notes are an integral part of these consolidated financial statements
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N1 GROUP
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles)
​ ​ ​
Note
​ ​
Share
capital*
​ ​
Retained
earnings
​ ​
Total
equity
​
Balance at January 1, 2019
​ ​ ​ ​ ​
—
​ ​
182
​ ​
182
​
Profit and total comprehensive income for the year
​ ​ ​ ​ ​
—
​ ​
152
​ ​
152
​
Dividends declared
​ ​
13
​ ​
—
​ ​
(254)
​ ​
(254)
​
Balance at December 31, 2019
​ ​ ​ ​ ​
—
​ ​
80
​ ​
80
​
Balance at January 1, 2020
​ ​ ​ ​ ​
—
​ ​
80
​ ​
80
​
Profit and total comprehensive income for the year
​ ​ ​ ​ ​
—
​ ​
58
​ ​
58
​
Dividends declared
​ ​
13
​ ​
—
​ ​
(24)
​ ​
(24)
​
Balance at December 31, 2020
​ ​ ​ ​ ​
—
​ ​
114
​ ​
114
​
​
*
Share capital is equal to 10,792 RUB. The amount of share capital presented as “—” due to rounding.
​
The accompanying notes are an integral part of these consolidated financial statements
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N1 GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles)
​ ​ ​
Note
​ ​
2020
​ ​
2019
​
Cash flows from operating activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Profit before income tax
​ ​ ​ ​ ​
72
​ ​
192
​
Adjusted for: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Depreciation and amortization
​ ​ ​ ​ ​
24
​ ​
22
​
Changes in allowances for trade receivables
​ ​
9
​ ​
3
​ ​
—
​
Foreign currency exchange (gain)/loss, net
​ ​ ​ ​ ​
(3)
​ ​
7
​
Finance costs
​ ​ ​ ​ ​
3
​ ​
4
​
Finance income
​ ​ ​ ​ ​
(1)
​ ​
(3)
​
Other non-cash items
​ ​ ​ ​ ​
1
​ ​
—
​
Working capital changes: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Decrease in trade and other receivables
​ ​ ​ ​ ​
5
​ ​
3
​
Decrease in advances paid and prepaid expenses
​ ​ ​ ​ ​
8
​ ​
—
​
Increase in other assets
​ ​ ​ ​ ​
(1)
​ ​
(6)
​
Decrease in trade and other payables
​ ​ ​ ​ ​
(2)
​ ​
(2)
​
(Decrease) / increase in contract liabilities
​ ​ ​ ​ ​
(3)
​ ​
1
​
Increase in other liabilities
​ ​ ​ ​ ​
3
​ ​
1
​
Cash generated from operating activities
​ ​ ​ ​ ​
109
​ ​
219
​
Income tax paid
​ ​ ​ ​ ​
(19)
​ ​
(42)
​
Interest paid
​ ​
8
​ ​
(3)
​ ​
(4)
​
Interest received
​ ​ ​ ​ ​
1
​ ​
3
​
Net cash generated from operating activities
​ ​ ​ ​ ​
88
​ ​
176
​
Cash flows from investing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Purchase of property and equipment
​ ​ ​ ​ ​
(6)
​ ​
(7)
​
Purchase of intangible assets
​ ​ ​ ​ ​
(5)
​ ​
(5)
​
Loans collected
​ ​ ​ ​ ​
—
​ ​
90
​
Net cash (used in /generated from investing activities
​ ​ ​ ​ ​
(11)
​ ​
78
​
Cash flows from financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Dividends paid
​ ​
13
​ ​
(21)
​ ​
(219)
​
Withholding tax on dividends
​ ​
13
​ ​
(3)
​ ​
(35)
​
Payment of principal portion of lease liabilities
​ ​
8
​ ​
(12)
​ ​
(11)
​
Net cash used in financing activities
​ ​ ​ ​ ​
(36)
​ ​
(265)
​
Net increase/(decrease) in cash and cash equivalents
​ ​ ​ ​ ​
41
​ ​
(11)
​
Cash and cash equivalents at the beginning of the year
​ ​ ​ ​ ​
89
​ ​
107
​
Effect of exchange rate changes on cash and cash equivalents
​ ​ ​ ​ ​
2
​ ​
(7)
​
Cash and cash equivalents at the end of the year
​ ​ ​ ​ ​
132
​ ​
89
​
The accompanying notes are an integral part of these consolidated financial statements
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
1.   GENERAL INFORMATION
The consolidated financial statements of N1.ru LLC (hereinafter, “the Company”) and its subsidiaries (collectively, the “N1 Group” or the “Group”) as of and for the years ended December 31, 2020 and December 31, 2019 were authorized for issue by management on June 23, 2021.
N1.ru LLC is a limited liability company incorporated and domiciled in the Russian Federation (“Russia”). Its registered office is at Deputatskaya street 46, premise 2053, 5th floor, Novosibirsk, 630099, Russia.
The Group is principally involved in online real estate classifieds business within the Russian Federation through the Group’s websites and mobile application.
The principal subsidiaries of the Company, all of which have been included in these consolidated financial statements, are as follows:
​
Subsidiary
​ ​
Principal activity
​ ​
% equity interest
​
​
December 31,
2020
​ ​
December 31,
2019
​ ​
January 1,
2019
​
​
MLSN LLC
​ ​
Online real estate classifieds
​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​
​
N1 Technologies LLC
​ ​
IT services and development
​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​
All of the principal subsidiaries of the Company are incorporated in Russia.
The Company’s immediate parent company as of December 31, 2020, December 31, 2019 and January 1, 2019 was Hearst Shkulev Digital Regional Network B.V., a company incorporated and domiciled in the Netherlands. The Company’s ultimate controlling party as of December 31, 2020, December 31, 2019 and January 1, 2019 was HS Holding Digital B.V., a company incorporated and domiciled in the Netherlands.
2.   SIGNIFICANT ACCOUNTING POLICIES
2.1   Basis of preparation
a) Statement of compliance
The Group’s consolidated financial statements and the accompanying notes have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These are the Group’s first consolidated financial statements prepared in accordance with IFRSs and compiled by the Group for the first time, applying IFRS 1, First-time Adoption of International Financial Reporting Standards. The Group’s date of transition is January 1, 2019. At the date of transition, the Group elected not to restate business combinations that occurred before the date of transition. No other exemptions were applied to the financial statements.
The Group has consistently applied the accounting policies set out in Note 2.4 to all periods presented in these consolidated financial statements.
The Group has not previously compiled any consolidated financial statements under Russian Accounting Standards (“RAS”), with reporting being required only on a standalone basis for each of the Group’s subsidiaries under RAS. Therefore, the impact of the Group’s transition to IFRS on the Group’s financial position, financial operations and cash flows is not disclosed.
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
b) Basis of measurement
The consolidated financial statements have been prepared on a historical cost basis.
c) Functional and presentation currency
The national currency of the Russian Federation is the Russian Ruble (“RUB”), which is the Company’s functional currency, the functional currency of all of the Group’s subsidiaries, and the currency in which these consolidated financial statements are presented. All financial information presented in RUB has been rounded to the nearest million, except when otherwise indicated.
2.2   Basis of consolidation
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:
•
power over the investee;
​
•
exposure, or rights, to variable returns from its involvement with the investee; and
​
•
the ability to use its power to affect its returns.
​
The Group reassesses whether or not it controls an investee if any facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control over the subsidiary until the date the Group ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to the transactions between members of the Group are eliminated in full on consolidation.
If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.
2.3   New standards, interpretations and amendments
The Group applied for the first-time all standards, interpretations and amendments, relevant for its operations, which are effective for annual periods beginning on or after January 1, 2020.
The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective. The following amended standards and interpretations are not expected to have a material impact on the Group’s consolidated financial statements:
•
IFRS 17 Insurance Contracts (effective date — January 1, 2023).
​
•
Amendments to IFRS 9, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform. Phase 2 (effective date — January 1, 2021).
​
•
Amendments to IAS 1: Classification of Liabilities as Current or Non-current (effective date — January 1, 2023).
​
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
•
Reference to the Conceptual Framework — Amendments to IFRS 3 (effective date — January 1, 2022);
​
•
Property, Plant and Equipment: Proceeds before Intended Use — Amendments to IAS 16 (effective date — January 1, 2022).
​
•
Onerous Contracts — Costs of Fulfilling a Contract — Amendments to IAS 37 (effective date — January 1, 2022).
​
•
IFRS 1 First-time Adoption of International Financial Reporting Standards — Subsidiary as a first-time adopter (effective date — January 1, 2022).
​
•
IFRS 9 Financial Instruments — Fees in the ‘10 per cent’ test for derecognition of financial liabilities ((effective date — January 1, 2022).
​
•
IAS 41 Agriculture — Taxation in fair value measurements (effective date — January 1, 2022).
​
2.4    Summary of significant accounting policies
a) Foreign currencies
Transactions in foreign currencies are translated to the functional currency at exchange rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into functional currency at exchange rates prevailing at the reporting date. Differences arising on settlement or translation of monetary items are recognized within “Foreign currency exchange gain / (loss), net”, in the consolidated statement of profit or loss and other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
The RUB is not a fully convertible currency outside Russia. Within the Russian Federation, official exchange rates are determined by the Central Bank of the Russian Federation.
b) Revenue from contracts with customers
Revenue from contracts with customers is recognized when control of products or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those products or services.
i. Listing revenue
Listing revenue is derived from offering online listings to real estate professionals on the Group’s websites and mobile app based on a cost per time basis. Payment is received prior to the delivery of online listings. The cash collected from the sale of online listings is initially recorded as contract liability (deferred revenue) in the consolidated statement of financial position and subsequently recognized as revenue over time as customers receive and consume the benefits of the access to online listings over the contractual period. The time period between receipt of payment from the customer and delivery of online listings generally does not exceed twelve months.
ii. Display advertising revenue
The Group’s advertising services allow third parties to place advertisements in particular areas of the Group’s websites and mobile application. Display advertising revenue is recognized over time based on
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
upfront monthly fees agreed in media plans, which also include targeted number of views or clicks during the period of advertisement. Payment is generally due within 30 days from providing advertising services.
c) Operating expenses
Operating expenses consist primarily of employee-related expenses including payroll, advertising and marketing costs, IT expenses including hosting, technical support and telecommunication services, depreciation and amortization expenses and other expenses such as office maintenance, consulting and other general corporate expenses. Operating expenses are expensed as incurred.
d) Income taxes
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Taxable income of the Group’s companies is subject to standard income tax at rate of 20.0% (N1.ru and MLSN) and 16.5% of special tax regime for N1 Technologies. Current tax also includes any tax arising from dividends received from subsidiaries.
e) Property and equipment
Property and equipment are stated at cost, which includes capitalised borrowing costs, less accumulated depreciation and any accumulated impairment losses, if any. The cost of an item of property and equipment is recognized as an asset if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Costs of minor repairs and day-to-day maintenance are expensed when incurred. Cost of replacing major parts or components of property and equipment items that extend the useful lives of assets or increase their revenue-generating capacities are capitalized and the replaced part is retired.
Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over the estimated useful lives of the assets, as follows:
​ ​ ​
Useful lives
in years
​
Office equipment
​ ​ ​ ​ 1 – 5 ​ ​
An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of profit or loss when the asset is derecognized.
Property and equipment are also subject to impairment. Refer to the accounting policies in section (h) Impairment of non-financial assets excluding goodwill.
f) Leases
Right-of-use assets
The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term as follows:
​ ​ ​
Lease term
in years
​
Offices
​ ​ ​ ​ 3 – 5 ​ ​
Right-of use assets are also subject to impairment. Refer to the accounting policies in section (h) Impairment of non-financial assets excluding goodwill.
Lease liabilities
At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the option to terminate the lease is expected to be exercised. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the rate that the Group would expect to borrow at over a similar term with a similar security. The lease liability is measured at amortised cost using the effective interest method. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Presentation in the consolidated statement of cash flows
The Group classifies cash payments for the principal portion of lease liabilities within financing activities and cash payments for the interest portion of the lease liabilities within operating activities.
g) Intangible assets
Intangible assets acquired separately are measured upon initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate:
•
the technical feasibility of completing the intangible asset so that the asset will be available for use or sale;
​
•
its intention to complete and its ability and intention to use or sell the asset;
​
•
how the asset will generate future economic benefits;
​
•
the availability of resources to complete the asset; and
​
•
the ability to measure reliably the expenditure during development.
​
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.
Intangible assets are amortized over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period for an intangible asset is reviewed at least at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
The amortization of intangible assets is recorded in depreciation and amortization within the consolidated statements of profit or loss and other comprehensive income.
Amortization is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:
​ ​ ​
Useful lives
in years
​
Trademarks
​ ​
10
​
Computer software
​ ​
1
​
Other
​ ​
1 – 2
​
An intangible asset is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss.
h) Impairment of non-financial assets excluding goodwill
At each reporting date, the Group reviews the carrying amounts of its property and equipment, right-of-use assets and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Recoverable amount of an asset or a cash-generating unit is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
i) Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of financial position comprise cash at banks and on hand, short-term deposits and amounts receivable under reverse repurchase agreements with a maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts.
j) Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
k) Value added tax
Expenses and assets are recognized net of the amount of value added tax (“VAT”), except when the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the VAT is recognized as part of the cost of acquisition of the asset or as part of the expense item.
The net amount of the VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated statement of financial position.
m) Financial instruments
Recognition and initial measurement
Trade receivables issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.
In accordance with IFRS 9, financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
In accordance with IFRS 9, financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss and financial liabilities at amortized cost, as appropriate.
The Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. A trade receivable without a significant financing
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
component is initially measured at the transaction price. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.
In order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
The Group’s financial assets include cash and cash equivalents, security deposits, trade and other receivables. The Group’s financial liabilities include trade and other payables, lease liabilities and borrowings.
Fair value of financial instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
Fair value of traded financial instruments is determined on each reporting date on the basis of market quotations or dealers’ quotations without transaction costs deduction. For the financial instruments which are not traded on the market, fair value is determined with the use of appropriate valuation methods. These methods include use of market transactions data, use of data on the current fair value of other similar financial instruments, analysis of discounted cash flows or other valuation methods.
The Group uses the following structure for determination and disclosure of valuation methods of fair value of financial instruments:
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
​
•
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
​
•
Level 3 inputs are unobservable inputs for the asset or liability.
​
Subsequent measurement
Financial assets and financial liabilities at amortized cost
This category is the most relevant to the Group. The Group measures financial assets at amortized cost if both of the following conditions are met:
•
the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
​
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
•
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
​
Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in interest expense in the consolidated statement of profit or loss and other comprehensive income.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Group’s consolidated statement of financial position) when:
•
the rights to receive cash flows from the asset have expired; or
​
•
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and
​
•
either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
​
A financial liability is derecognized when the obligation under the liability is discharged or is cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated statement of profit or loss and other comprehensive income.
Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group’s continuing recognition of the assets.
Impairment of financial assets
The Group recognizes an allowance for expected credit losses (ECLs) for all financial assets measured at amortized cost. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive. ECLs are discounted at the effective interest rate of the financial asset in case of long-term assets. The Group measures loss allowances at an amount equal to lifetime ECLs.
The Group applies a simplified approach in calculating lifetime ECLs for accounts receivable. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
For all other financial assets, the Group recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
When determining whether the credit risk of a financial instrument has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.
The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if:
•
the financial instrument has a low risk of default — when the counterparty has an external credit rating of ‘investment grade’ in accordance with the globally understood definition (rating Baa3 or higher, based on Moody’s ratings);
​
•
the debtor has a strong capacity to meet its contractual cash flow obligations in the near term.
​
The Group considers a financial asset in default when contractual payments are 180 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
At each reporting date, the Group assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Allowances for expected credit losses for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
3.   SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Group’s consolidated financial statements requires management to make judgements; estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities; and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Management has determined that there are no significant areas of estimation uncertainty or critical judgements in applying accounting policies that have a significant effect on the amounts recognized in the Group’s consolidated financial statements.
4.   REVENUE FROM CONTRACTS WITH CUSTOMERS
4.1   Disaggregated revenue information
Set out below is the disaggregation of the Group’s revenue from contracts with customers by type and timing of revenue recognition:
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
For the year ended December 31, 2020
​ ​ ​
At a point in
time
​ ​
Over time
​ ​
Total revenue
​
Listing revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 537 ​ ​ ​ ​ ​ 537 ​ ​
Display advertising revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 24 ​ ​
Other revenue
​ ​ ​ ​ 2 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2 ​ ​
Total revenue
​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 561 ​ ​ ​ ​ ​ 563 ​ ​
For the year ended December 31, 2019
​ ​ ​
At a point in
time
​ ​
Over time
​ ​
Total revenue
​
Listing revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 621 ​ ​ ​ ​ ​ 621 ​ ​
Display advertising revenue
​ ​ ​ ​ — ​ ​ ​ ​ ​ 23 ​ ​ ​ ​ ​ 23 ​ ​
Other revenue
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1 ​ ​
Total revenue
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 644 ​ ​ ​ ​ ​ 645 ​ ​
Revenue is generated within the Russian Federation.
4.2 Contract balances
The following table provides information about the Group’s trade receivables and contract liabilities from contracts with customers:
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​ ​
January 1,
2019
​
Trade receivables
​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 10 ​ ​ ​ ​ ​ 13 ​ ​
Contract liabilities
​ ​ ​ ​ (25) ​ ​ ​ ​ ​ (28) ​ ​ ​ ​ ​ (27) ​ ​
Contract liabilities represent the transaction price allocated to unsatisfied performance obligations, advances received from customers before the Group transfers the related products or services. Contract liabilities are recognized as revenue when the Group transfers control over the related products or services to the customer. The total amount of contract liabilities as of each year end has been or will be recognized as revenue in the subsequent year.
5.   EMPLOYEE-RELATED EXPENSES
​ ​ ​
2020
​ ​
2019
​
Wages, salaries and related taxes
​ ​ ​ ​ (211) ​ ​ ​ ​ ​ (210) ​ ​
Other employee-related expenses
​ ​ ​ ​ (3) ​ ​ ​ ​ ​ (9) ​ ​
Total employee-related expenses
​ ​ ​ ​ (214) ​ ​ ​ ​ ​ (219) ​ ​
6.   MARKETING EXPENSES
​ ​ ​
2020
​ ​
2019
​
Online marketing
​ ​ ​ ​ (129) ​ ​ ​ ​ ​ (71) ​ ​
Offline marketing
​ ​ ​ ​ (32) ​ ​ ​ ​ ​ (27) ​ ​
Other marketing expenses
​ ​ ​ ​ (10) ​ ​ ​ ​ ​ (11) ​ ​
Total marketing expenses
​ ​ ​ ​ (171) ​ ​ ​ ​ ​ (109) ​ ​
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Marketing expenses are only purchased advertising exclusive of any employee-related expenses.
7.   INCOME TAX
The major components of income tax expense for the years ended December 31, 2020 and December 31, 2019 are:
​ ​ ​
2020
​ ​
2019
​
Current income tax expense
​ ​ ​ ​ (14) ​ ​ ​ ​ ​ (40) ​ ​
Deferred tax expense
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Income tax expense
​ ​ ​ ​ (14) ​ ​ ​ ​ ​ (40) ​ ​
Below is a reconciliation of theoretical income tax based on the Russian statutory income tax rate of 20% to the actual tax recorded in the consolidated statement of profit or loss and other comprehensive income:
​ ​ ​
2020
​ ​
2019
​
Profit before income tax
​ ​ ​ ​ 72 ​ ​ ​ ​ ​ 192 ​ ​
Income tax expense calculated at Russia’s statutory income tax rate (20%)
​ ​ ​ ​ (14) ​ ​ ​ ​ ​ (38) ​ ​
Other non-deductible expenses
​ ​ ​ ​ — ​ ​ ​ ​ ​ (2) ​ ​
Income tax expense for the year
​ ​ ​
​
(14)
​ ​ ​ ​
​
(40)
​ ​
8.   LEASES
The Group leases several office buildings to provide employees with comfortable working conditions. Set out below are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period:
​ ​ ​
Right-of-use assets
​ ​
Lease liabilities
​
As of January 1, 2019
​ ​ ​ ​ 42 ​ ​ ​ ​ ​ (42) ​ ​
Additions
​ ​ ​ ​ 3 ​ ​ ​ ​ ​ (3) ​ ​
Modification
​ ​ ​ ​ 5 ​ ​ ​ ​ ​ (4) ​ ​
Depreciation expense
​ ​ ​ ​ (13) ​ ​ ​ ​ ​ — ​ ​
Interest expense
​ ​ ​ ​ — ​ ​ ​ ​ ​ (4) ​ ​
Payments
​ ​ ​ ​ — ​ ​ ​ ​ ​ 15 ​ ​
As of December 31, 2019
​ ​ ​ ​ 37 ​ ​ ​ ​ ​ (38) ​ ​
Additions
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ (1) ​ ​
Modification
​ ​ ​ ​ (2) ​ ​ ​ ​ ​ 2 ​ ​
Depreciation expense
​ ​ ​ ​ (13) ​ ​ ​ ​ ​ — ​ ​
Interest expense
​ ​ ​ ​ — ​ ​ ​ ​ ​ (3) ​ ​
Payments
​ ​ ​ ​ — ​ ​ ​ ​ ​ 15 ​ ​
As of December 31, 2020
​ ​ ​ ​ 23 ​ ​ ​ ​ ​ (25) ​ ​
The Group recognized lease payments in the amount of 3 relating to short-term leases as other operating expenses (2019: 4).
The maturity analysis of lease liabilities based on contractual undiscounted payments is disclosed in Note 14.
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
9.   TRADE AND OTHER RECEIVABLES
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​ ​
January 1,
2019
​
Trade receivables from third parties
​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 19 ​ ​ ​ ​ ​ 22 ​ ​
Other receivables from third parties
​ ​ ​ ​ — ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 1 ​ ​
Allowance for expected credit losses (ECL)
​ ​ ​ ​ (12) ​ ​ ​ ​ ​ (9) ​ ​ ​ ​ ​ (9) ​ ​
Total trade and other receivables
​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 14 ​ ​
Trade and other receivables are non-interest bearing and are generally on terms of 30 days.
Set out below is the movement in the allowance for expected credit losses of accounts receivable:
​ ​ ​
2020
​ ​
2019
​
Balance at the beginning of the year
​ ​ ​ ​ (9) ​ ​ ​ ​ ​ (9) ​ ​
Allowance for expected credit losses and impaired receivables
​ ​ ​ ​ (3) ​ ​ ​ ​ ​ — ​ ​
Balance at the end of the year
​ ​ ​ ​ (12) ​ ​ ​ ​ ​ (9) ​ ​
Information about the Group’s exposure to credit risk is presented in Note 14.
10. CASH AND CASH EQUIVALENTS
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​ ​
January 1,
2019
​
Cash at banks and on hand
​ ​ ​ ​ 91 ​ ​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 107 ​ ​
Cash equivalents
​ ​ ​ ​ 41 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total cash and cash equivalents
​ ​ ​ ​ 132 ​ ​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 107 ​ ​
Cash equivalents are represented by the reverse repo agreements. As part of these transactions, the Group provides cash to third parties in exchange for bonds of Derzhava Platforma LLC. These bonds may be sold only to the previous owner at the established date at the price determined at the stage of contract conclusion. The agreement is concluded between the Group and a bank for the period of less than 3 months. Information about the credit risk over cash and cash equivalents is presented in Note 14.
11.   SHARE CAPITAL
As of December 31, 2020, December 31, 2019 and January 1, 2019, the share capital of the company comprised the following shareholders:
•
Hearst Shkulev Digital Regional Network B. V. — 92.66%;
​
•
Individuals — 7.34%.
​
No changes in share capital took place during 2020 and 2019. All above shares are fully paid.
12.   TRADE AND OTHER PAYABLES
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​ ​
January 1,
2019
​
Trade payables
​ ​ ​ ​ 10 ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 14 ​ ​
Unused vacation provision
​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 3 ​ ​
Trade and other payables
​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 17 ​ ​
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Trade payables are non-interest bearing and are normally settled on 60-day terms. The Group’s exposure to liquidity risk related to trade and other payables is disclosed in Note 14.
13.   RELATED PARTIES
Related parties include shareholders, ultimate owners and members of key management personnel as well as companies which are under legal ownership, significant influence or control of shareholders or ultimate owners of the Group.
Transactions with key management personnel
Key management is represented by the Chief Executive Officer.
The remuneration of key management personnel for the years ended December 31, 2020 and December 31, 2019 amounted to:
​ ​ ​
2020
​ ​
2019
​
Short-term employee benefits
​ ​ ​ ​ 10 ​ ​ ​ ​ ​ 5 ​ ​
Total key management remuneration
​ ​ ​ ​ 10 ​ ​ ​ ​ ​ 5 ​ ​
During 2020 and 2019, there were no transactions or outstanding balances with key management personnel. No guarantees have been given or received.
Transactions with shareholders
The aggregate value of transactions with shareholders was as follows:
​ ​ ​
2020
​ ​
2019
​
Dividends declared
​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 254 ​ ​
Dividends paid, net of tax
​ ​ ​ ​ 21 ​ ​ ​ ​ ​ 219 ​ ​
Other related party transactions
The following table provides the total amount of transactions that have been entered into with other related parties for the relevant financial year.
​ ​ ​ ​ ​ ​ ​ ​ ​
Sales
to related
parties
​ ​
Purchases
from related
parties
​ ​
Amounts owed
by related
parties
​ ​
Amounts owed
to related
parties
​
Subsidiaries of the Group’s parent
​ ​ ​ ​ 2020 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 50 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Subsidiaries of the Group’s parent
​ ​ ​ ​ 2019 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 52 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5 ​ ​
Outstanding balances with related parties at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees given or received.
As of January 1, 2019 a loan in the amount of 90 was issued to a related party. The loan was fully repaid in September 2019. No other loans were issued during 2020 and 2019.
14.   FINANCIAL RISK MANAGEMENT
14.1   Financial assets and financial liabilities
The following table shows the carrying amounts of financial assets and financial liabilities. The Group does not hold any financial assets and financial liabilities other than those measured at amortized cost.
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Management assessed that the carrying values of the Group’s financial assets and financial liabilities measured at amortized cost are a reasonable approximation of their fair values on the basis of short-term nature or calculation of amortized cost using market rates.
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​ ​
January 1,
2019
​
Financial assets measured at amortized cost ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash and cash equivalents (Note 10)
​ ​ ​ ​ 132 ​ ​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 107 ​ ​
Trade and other receivables (Note 9)
​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 14 ​ ​
Total financial assets
​ ​ ​ ​ 135 ​ ​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 121 ​ ​
Financial liabilities measured at amortized cost ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Trade and other payables (Note 12)
​ ​ ​ ​ (10) ​ ​ ​ ​ ​ (11) ​ ​ ​ ​ ​ (14) ​ ​
Lease liabilities (Note 8)
​ ​ ​ ​ (25) ​ ​ ​ ​ ​ (38) ​ ​ ​ ​ ​ (42) ​ ​
Total financial liabilities
​ ​ ​ ​ (35) ​ ​ ​ ​ ​ (49) ​ ​ ​ ​ ​ (56) ​ ​
14.2   Financial risk management
The Group is exposed to risks that arise from its use of financial instruments. The Group has exposure to the following risks arising from financial instruments: market risk, credit risk and liquidity risk.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods.
14.2.1 Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk, which mostly impacts the Group, comprises of currency risk. Financial instruments affected by market risk include cash and cash equivalents.
The Group does not enter into any derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s cash and cash equivalents. The Group keeps part of its cash and cash equivalents in EUR to manage against the risk of RUB decline or devaluation.
The table below summarizes the Group’s exposure to foreign currency exchange rate risk at the end of each reporting period:
​ ​ ​
December 31,
2020
​ ​
December 31,
2019
​ ​
January 1,
2019
​
Cash and cash equivalents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
EUR
​ ​ ​ ​ 34 ​ ​ ​ ​ ​ 20 ​ ​ ​ ​ ​ 35 ​ ​
Total ​ ​ ​ ​ 34 ​ ​ ​ ​ ​ 20 ​ ​ ​ ​ ​ 35 ​ ​
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
14.2.2 Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its cash and cash equivalents held with banks.
Trade receivables
The Group performs an impairment analysis at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due. The calculation reflects the probability-weighted outcome.
The following tables provide information about the exposure to expected credit losses for trade receivables as of December 31, 2020, December 31, 2019 and January 1, 2019.
​ ​ ​
Weighted
average loss
rate
​ ​
Gross book
value
​ ​
Estimated
allowance for
impairment
​ ​
Credit-
impaired assets
​
December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Neither past due nor impaired
​ ​ ​ ​ 5% ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ No ​ ​
Past due 0 – 30 days
​ ​ ​ ​ 18% ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ No ​ ​
Past due 31 – 90 days
​ ​ ​ ​ 34% ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ No ​ ​
Past due 91 – 180 days
​ ​ ​ ​ 68% ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ No ​ ​
Past due more than 180 days
​ ​ ​ ​ 97% ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ (12) ​ ​ ​ ​ ​ Yes ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ (12) ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​
Weighted
average loss
rate
​ ​
Gross book
value
​ ​
Estimated
allowance for
impairment
​ ​
Credit-
impaired assets
​
December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Neither past due nor impaired
​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ No ​ ​
Past due 0 – 30 days
​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ No ​ ​
Past due 31 – 90 days
​ ​ ​ ​ 35% ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ No ​ ​
Past due 91 – 180 days
​ ​ ​ ​ 34% ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ No ​ ​
Past due more than 180 days
​ ​ ​ ​ 77% ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ (9) ​ ​ ​ ​ ​ Yes ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 20 ​ ​ ​ ​ ​ (9) ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​
Weighted
average loss
rate
​ ​
Gross book
value
​ ​
Estimated
allowance for
impairment
​ ​
Credit-
impaired assets
​
January 1, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Neither past due nor impaired
​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ No ​ ​
Past due 0 – 30 days
​ ​ ​ ​ 14% ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ No ​ ​
Past due 31 – 90 days
​ ​ ​ ​ 27% ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ No ​ ​
Past due 91 – 180 days
​ ​ ​ ​ 47% ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ (2) ​ ​ ​ ​ ​ No ​ ​
Past due more than 180 days
​ ​ ​ ​ 68% ​ ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ (6) ​ ​ ​ ​ ​ Yes ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 23 ​ ​ ​ ​ ​ (9) ​ ​ ​ ​ ​ ​ ​ ​
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
Cash and cash equivalents
The Group held cash and cash equivalents of 132, 89 and 107 at December 31, 2020, December 31, 2019 and January 1, 2019, respectively. The cash and cash equivalents are primarily held with banks, which are rated not less than Baa3, based on Moody’s ratings. As of December 31, 2020, the Group held 68% of its cash and cash equivalents with banks having external credit ratings not less than Baa3 (December 31, 2019: 99% and January 1, 2019: 66%).
Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Group considers that its cash and cash equivalents have low credit risk based on the external credit ratings of the counterparties. No impairment allowance was recognized at December 31, 2020 (December 31, 2019 and January 1, 2019: nil).
14.2.3 Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include estimated interest payments. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.
​ ​ ​
Carrying
amount
​ ​
Total
​ ​
Within 1
year
​ ​
1 to 3 years
​ ​
3 to 5 years
​ ​
> 5 years
​
December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Lease liabilities
​ ​ ​ ​ (25) ​ ​ ​ ​ ​ (29) ​ ​ ​ ​ ​ (14) ​ ​ ​ ​ ​ (15) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Trade and other payables
​ ​ ​ ​ (10) ​ ​ ​ ​ ​ (10) ​ ​ ​ ​ ​ (10) ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
​
(35)
​ ​ ​ ​
​
(39)
​ ​ ​ ​
​
(24)
​ ​ ​ ​
​
(15)
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​
Carrying
amount
​ ​
Total
​ ​
Within 1
year
​ ​
1 to 3 years
​ ​
3 to 5 years
​ ​
> 5 years
​
December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Lease liabilities
​ ​ ​ ​ (38) ​ ​ ​ ​ ​ (45) ​ ​ ​ ​ ​ (16) ​ ​ ​ ​ ​ (29) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Trade and other payables
​ ​ ​ ​ (11) ​ ​ ​ ​ ​ (11) ​ ​ ​ ​ ​ (11) ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
​
(49)
​ ​ ​ ​
​
(56)
​ ​ ​ ​
​
(27)
​ ​ ​ ​
​
(29)
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​
Carrying
amount
​ ​
Total
​ ​
Within 1
year
​ ​
1 to 3 years
​ ​
3 to 5 years
​ ​
> 5 years
​
January 1, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Lease liabilities
​ ​ ​ ​ (42) ​ ​ ​ ​ ​ (38) ​ ​ ​ ​ ​ (11) ​ ​ ​ ​ ​ (22) ​ ​ ​ ​ ​ (5) ​ ​ ​ ​ ​ — ​ ​
Trade and other payables
​ ​ ​ ​ (14) ​ ​ ​ ​ ​ (14) ​ ​ ​ ​ ​ (14) ​ ​ ​ ​
​
—
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
​
(56)
​ ​ ​ ​
​
(52)
​ ​ ​ ​
​
(25)
​ ​ ​ ​
​
(22)
​ ​ ​ ​
​
(5)
​ ​ ​ ​ ​ — ​ ​
14.3   Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
were, or future cash flows will be, classified in the Group’s consolidated statements of cash flows as cash flows from financing activities.
​ ​ ​
January 1,
2020
​ ​
Financing
cash flows
​ ​
Leases
(non-cash)
​ ​
December 31,
2020
​
Lease liabilities
​ ​ ​ ​ 38 ​ ​ ​ ​ ​ (12) ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ 25 ​ ​
​ ​ ​ ​ ​ 38 ​ ​ ​ ​ ​ (12) ​ ​ ​ ​ ​ (1) ​ ​ ​ ​ ​ 25 ​ ​
​ ​ ​
January 1,
2019
​ ​
Financing
cash flows
​ ​
Leases
(non-cash)
​ ​
December 31,
2019
​
Lease liabilities
​ ​ ​ ​ 42 ​ ​ ​ ​ ​ (11) ​ ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 38 ​ ​
​ ​ ​ ​ ​ 42 ​ ​ ​ ​ ​ (11) ​ ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 38 ​ ​
14.4   Capital management
The Group manages its capital to ensure that companies in the Group will be able to continue as a going concern. This is achieved through effective cash management and continuous monitoring of the Group’s forecasts.
No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2020 and December 31, 2019.
15.   CONTINGENCIES
Legal proceedings
During the periods covered by the Group’s consolidated financial statements and in subsequent period until their approval, the Group has been, and continues to be, subject to legal proceedings and adjudications from time to time, none of which has had, individually or in the aggregate, a material adverse impact on the Group. Management believes that the ultimate liability, if any, arising from such proceedings and adjudications, will not have a material adverse impact on the Group’s financial position or operating results.
Russian Federation tax and regulatory environment
The taxation system in the Russian Federation continues to evolve and is characterised by frequent changes in legislation, official pronouncements and court decisions, which are sometimes contradictory and subject to varying interpretation by different tax authorities. Management’s interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by a number of authorities, which may impose severe fines, penalties and interest charges.
Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive and substance-based position in their interpretation and enforcement of tax legislation and as a result, it is possible that transactions and activities that have not been challenged in the past may be challenged. As such, significant additional taxes, penalties and interest may be assessed. A tax year generally remains open for review by the tax authorities during the three subsequent calendar years, while under certain circumstances reviews may cover longer periods.
Operating environment
The Group’s operations are concentrated in the Russian Federation. Consequently, the Group is exposed to the economic and financial environment in the Russian Federation, which display the characteristics of an emerging market. The legal, tax and regulatory frameworks continue to develop and
 
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N1 GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(in millions of Russian Rubles, unless otherwise stated)
are subject to varying interpretations and frequent changes which combined with other legal and fiscal impediments aggravate the challenges faced by entities operating in the Russian Federation.
Starting in 2014, the United States of America, the European Union and some other countries have imposed and gradually expanded economic sanctions against a number of Russian individuals and legal entities. The imposition of the sanctions has led to increased economic uncertainty, including more volatile equity markets, a depreciation of the Russian Ruble, a reduction in both local and foreign direct investment inflows and a significant tightening in the availability of credit. As a result, some Russian entities may experience difficulties accessing the international equity and debt markets and may become increasingly dependent on state support for their operations. The long-term effects of the imposed and possible additional sanctions are difficult to determine.
The Group’s consolidated financial statements reflect management’s assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management’s assessment.
COVID-19
In March 2020, the World Health Organization declared the COVID-19 virus a global pandemic. The highly contagious disease has spread to most of the countries including Russia, creating a negative impact on customers, workforces, and suppliers, disrupting economies and financial markets, and potentially leading to a worldwide economic downturn.
Although the Group’s business is inextricably linked to online services, the lockdown measures imposed due to COVID-19 had an adverse effect on the Group’s operating activities: revenue decreased by 13% in 2020 compared to the previous year and operating profit margin decreased from 31% to 13%. However, the Group continues to generate positive cash flow and maintains positive financial result for the reporting period.
The full impact of the COVID-19 outbreak continues to evolve as of the date of issuance of these consolidated financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Group’s financial condition, liquidity, and future results of operations.
16.   EVENTS AFTER THE REPORTING PERIOD
In February 2021, Mimons Investments Limited (part of CIAN Group) acquired 100% of voting shares of the Company. As a result of this transaction, Elbrus Capital Fund II L.P. has become the new ultimate controlling party of the Company.
Starting from January 1, 2021, due to changes in Russian Tax Law, the Group lost the right to use VAT exemption on listing revenue. The Group assessed that this change would not have a significant negative impact on the Group’s operational and financial results.
 
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​
​
 
American Depositary Shares
​
Representing
​ ​
Ordinary Shares
​
[MISSING IMAGE: LG_CIANRU-4C.JPG]
​ Morgan Stanley ​ ​
Goldman Sachs
International
​ ​
J.P. Morgan
​
​ BofA Securities ​ ​
RenCap
​ ​
VTB Capital
​
​ Alfa CIB ​ ​
AO Raiffeisenbank
​ ​
Tinkoff
​
Through and including           , 2021 (25 days after the commencement of this offering), all dealers that buy, sell or trade the ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
​
​
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 6.   Indemnification of Directors and Officers
Our articles of association provide that, subject to certain limitations, we will indemnify our directors and officers against any losses or liabilities which they may sustain or incur in or about the execution of their duties including liability incurred in defending any proceedings whether civil or criminal in which judgment is given in their favor or in which they are acquitted. We expect the service agreements with our independent directors will provide for indemnification of this type.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is theretofore unenforceable.
Item 7.   Recent Sales of Unregistered Securities
During the past three years, we issued securities that were not registered under the Securities Act as set forth below. We believe that each of such issuances was exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act, Rule 701 and/or Regulation S under the Securities Act.
The following is a summary of transactions during the preceding three fiscal years involving sales of our securities that were not registered under the Securities Act.
During 2018, we issued 2,000 ordinary shares of nominal value EUR 1.00 each, which resulted in an increase in the issued share capital of the Company to EUR 3,000 of issued and fully paid share capital as of December 31, 2018.
During February, 2021, we issued 281 ordinary shares of nominal value EUR 1.00 each, which resulted in an increase in the issued share capital to EUR 3,281 of issued and fully paid share capital as of June 15, 2021.
No underwriter or underwriting discount or commission was involved in any of the transactions set forth in Item 7.
Item 8.   Exhibits
(a)
The Exhibit Index is hereby incorporated herein by reference.
​
(b)
Financial Statement Schedules.
​
All schedules have been omitted because they are not required, are not applicable or the information is otherwise set forth in the consolidated financial statements and related notes thereto.
Item 9.   Undertakings
(a)
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
​
(b)
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”) may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by
​
 
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controlling precedent, submit to a court of appropriate jurisdiction, the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(c)
The undersigned registrant hereby further undertakes that:
​
(i)
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
​
(ii)
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
​
 
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EXHIBIT INDEX
​
Exhibit
No.
​ ​
Description
​
​ 1.1 ​ ​ ​
​ 3.1** ​ ​ ​
​ 4.1 ​ ​ Form of Deposit Agreement among the Registrant, The Bank of New York Mellon as depositary and the owners and holders, from time to time, of the American Depositary Shares issued thereunder ​
​ 4.2 ​ ​ ​
​ 4.3 ​ ​ Form of Registration Rights Agreementamong the Registrant and certain shareholders of the Registrant ​
​ 4.4 ​ ​ ​
​ 5.1 ​ ​ ​
​ 10.2+ ​ ​ ​
​ 10.3**++ ​ ​ ​
​ 10.4**++ ​ ​ Agreement for the Sale and Purchase of the Share Capital of LLC “N1.RU” among others, Mimons Investments Limited, Hearst Shkulev Digital Regional Network B.V. and HS Holding B.V., Limited Liability Company “HS Publishing,” Limited Liability Company “Hearst Shkulev Media” and Limited Liability Company “InterMediaGroup,”acting as guarantors, dated December 22, 2020 ​
​ 10.5**++ ​ ​ ​
​ 10.6**++ ​ ​ ​
​ 21.1** ​ ​ ​
​ 23.1 ​ ​ Consent of AO Deloitte & Touche CIS, an independent registered public accounting firm , as independent accountants for Cian PLC ​
​ 23.2 ​ ​ Consent of AO Deloitte & Touche CIS, an independent registered public accounting firm, as independent accountants for N1.RU LLC ​
​ 23.3 ​ ​ ​
​ 23.4** ​ ​ ​
​ 24.1 ​ ​ ​
​ 99.1** ​ ​ ​
​ 99.2** ​ ​ ​
​ 99.3** ​ ​ ​
​ 99.4** ​ ​ ​
​ 99.5 ​ ​ ​
​ 99.6 ​ ​ ​
​
**
Previously filed.
​
+
Indicates management contract or compensatory plan.
​
++
Certain confidential portions (indicated by brackets and asterisks) have been omitted from this exhibit because such information is both (i) non-material and (ii) would be competitively harmful if publicly disclosed.
​
 
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Moscow, Russia on October 28, 2021.
​ ​ ​ ​ Cian PLC
    		​
​ ​ ​ ​ By: ​ ​
/s/ Maksim Melnikov
​
Name: Maksim Melnikov
Title: Chief Executive Officer and
Member of the Board
​
​ ​ ​ ​ By: ​ ​
/s/ Mikhail Lukyanov
​
Name: Mikhail Lukyanov
Title: Chief Financial and Strategy Officer
​
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Maksim Melnikov and Mikhail Lukyanov and each of them, individually, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacities, in connection with this registration statement, including to sign in the name and on behalf of the undersigned, this registration statement and any and all amendments thereto, including post-effective amendments and registrations filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons on October 28, 2021 in the capacities indicated:
​
Name
​ ​
Title
​
​
/s/ Maksim Melnikov
​
Maksim Melnikov
​ ​
Chief Executive Officer and Member of the Board
(principal executive officer)
​
​
/s/ Mikhail Lukyanov
​
Mikhail Lukyanov
​ ​
Chief Financial and Strategy Officer
(principal financial officer and principal accounting
officer)
​
​
/s/ Anastasia Neocleous
​
Anastasia Neocleous
​ ​
Member of the Board
​
​
/s/ Christina Tillyrou
​
Christina Tillyrou
​ ​
Member of the Board
​
​
/s/ Frosoula Savva
​
Frosoula Savva
​ ​
Member of the Board
​
 
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​
Name
​ ​
Title
​
​
/s/ Christina Maria Oxinou
​
Christina Maria Oxinou
​ ​
Member of the Board
​
​
/s/ Dmitry Demin
​
Dmitry Demin
​ ​
Member of the Board
​
 
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SIGNATURE OF AUTHORIZED U.S. REPRESENTATIVE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of Cian PLC has signed this registration statement on October 28, 2021.
​ ​ ​ ​ Authorized U.S. Representative Cogency Global Inc. ​
​ ​ ​ ​ By: ​ ​
/s/ Colleen A. De Vries
​
Name: Colleen A. De Vries
Title: Senior Vice President on behalf of
Cogency Global Inc.
​
 
II-6

 

Exhibit 1.1

  


CIAN PLC

 

[●] American Depositary Shares

 

Representing [●] Ordinary Shares (par value EUR 0.0004)

 

UNDERWRITING AGREEMENT

 

November [●], 2021

 

 

 

November [●], 2021

 

Morgan Stanley & Co. LLC

Goldman Sachs International

J.P. Morgan Securities LLC

 

c/o Morgan Stanley & Co. LLC
1585 Broadway
New York, New York 10036

 

c/o Goldman Sachs International 

Plumtree Court 

25 Shoe Lane 

London EC4A 4AU 

United Kingdom 

 

c/o J.P. Morgan Securities LLC 

383 Madison Avenue 

New York, New York 10179

 

Ladies and Gentlemen:

 

Cian Plc, a company incorporated under the laws of the Republic of Cyprus (the “Company”), proposes to issue and sell to the several Underwriters named in Schedule II hereto (the “Underwriters”), and certain shareholders of the Company (the “Selling Shareholders”) named in Schedule I hereto severally propose to sell to the several Underwriters, an aggregate of [●] American Depositary Shares representing [●] Ordinary Shares (the “Ordinary Shares”) (par value EUR 0.0004) of the Company (the “Firm ADSs”), of which [●] ADSs are to be issued and sold by the Company and [●] ADSs are to be sold by the Selling Shareholders, each Selling Shareholder selling the amount set forth opposite such Selling Shareholder’s name in Schedule I hereto.

 

The Selling Shareholders also propose to sell to the several Underwriters not more than an additional [●] American Depositary Shares representing [●] Ordinary Shares (par value EUR 0.0004) (the “Optional ADSs”) if and to the extent that Morgan Stanley & Co. LLC, Goldman Sachs International and J.P. Morgan Securities LLC, as representatives (collectively, the “Representatives”) of the offering, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such ADSs granted to the Underwriters in Section 3 hereof. The Firm ADSs and the Optional ADSs are hereinafter collectively referred to as the “ADSs.” The Ordinary Shares represented by the ADSs are herein referred to as the “Shares.” The Company and the Selling Shareholders are hereinafter sometimes collectively referred to as the “Sellers.”

 

The ADSs purchased by the Underwriters will be evidenced by American Depositary Receipts (“ADRs”) to be issued pursuant to a Deposit Agreement, dated as of , 2021 (the “Deposit Agreement”), among the Company, The Bank of New York Mellon, as depositary (the “Depositary”), and the owners and holders from time to time of the ADRs.

 

 

 

The Company hereby confirms its engagement of Morgan Stanley & Co. LLC as the “qualified independent underwriter” within the meaning of Rule 5121(f)(12) of the Financial Industry Regulatory Authority, Inc. (“FINRA”) with respect to the offering and sale of the ADSs, and Morgan Stanley & Co. LLC hereby confirms its agreement with the Company to render services as qualified independent underwriter with respect to such offering. Morgan Stanley & Co. LLC, solely in its capacity as the qualified independent underwriter and not otherwise, is referred to herein as the “QIU.”

 

The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form F-1 (File No. 333-260218), including a preliminary prospectus, relating to the Shares represented by the ADSs. The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the “Securities Act”), is hereinafter referred to as the “Registration Statement”; the prospectus in the form first used to confirm sales of ADSs (or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act) is hereinafter referred to as the “Prospectus.” If the Company has filed an abbreviated registration statement to register additional ADSs pursuant to Rule 462(b) under the Securities Act (a “Rule 462 Registration Statement”), then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement.

 

For purposes of this Underwriting Agreement (the “Agreement”), “free writing prospectus” has the meaning set forth in Rule 405 under the Securities Act, “preliminary prospectus” shall mean each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted information pursuant to Rule 430A under the Securities Act that was used after such effectiveness and prior to the execution and delivery of this Agreement, “Time of Sale Prospectus” means the preliminary prospectus contained in the Registration Statement at the time of its effectiveness together with the documents and pricing information set forth in Schedule III hereto, and “broadly available road show” means a “bona fide electronic road show” as defined in Rule 433(h)(5) under the Securities Act that has been made available without restriction to any person. As used herein, the terms “Registration Statement,” “preliminary prospectus,” “Time of Sale Prospectus” and “Prospectus” shall include the documents, if any, incorporated by reference therein as of the date hereof.

 

1.            Representations and Warranties of the Company. The Company represents and warrants to and agrees with each of the Underwriters that:

 

(a)            The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose or pursuant to Section 8A under the Securities Act are pending before or, to the knowledge of the Company, threatened by the Commission;

 

2

 

 

(b)            (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (iii) the Time of Sale Prospectus does not, and at the time of each sale of the ADSs in connection with the offering when the Prospectus is not yet available to prospective purchasers and at the Closing Date (as defined in Section 5), the Time of Sale Prospectus, as then amended or supplemented by the Company, if applicable, will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iv) each broadly available road show, if any, when considered together with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (v) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement, the Time of Sale Prospectus or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein;

 

(c)            The Company is not an “ineligible issuer” in connection with the offering pursuant to Rules 164, 405 and 433 under the Securities Act. Any free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the Company complies or will comply in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Except for the free writing prospectuses, if any, identified in Schedule III hereto, and electronic road shows, if any, each furnished to the Representatives before first use, the Company has not prepared, used or referred to, and will not, without the Representatives’ prior consent, prepare, use or refer to, any free writing prospectus;

 

3

 

 

(d)            The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own or lease its property and to conduct its business as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected, singly or in the aggregate, have a material adverse effect on the Company and its Subsidiaries (as defined below), taken as a whole;

  

(e)            Each subsidiary of the Company listed on Exhibit 21.1 to the Registration Statement (each a “Subsidiary” and together the “Subsidiaries”), which shall be the same as of the date of the Time of Sale Prospectus, the Prospectus and the Closing Date, has been (A) duly incorporated, organized or formed, is validly existing as a corporation or other business entity in good standing under the laws of the jurisdiction of its incorporation, organization or formation, has the corporate or other business entity power and authority to own or lease its property and to conduct its business as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus and (B) duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except, in the case of this clause (B), as disclosed in the Pricing Prospectus, or where the failure to be so qualified or be in good standing would not reasonably be expected to, singly or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole; all of the issued share capital or other equity interests of each Subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims;

 

(f)            The authorized share capital of the Company conforms in all material respects as to legal matters to the description thereof contained in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus.

 

(g)            The Shares (including the Shares underlying the ADSs to be sold by the Selling Shareholders) outstanding prior to the issuance of the ADSs have been duly authorized and are or will be validly issued, fully paid and may be freely deposited by the Sellers with the Depositary against issuance of ADSs and ADRs evidencing ADSs;

 

(h)            The Shares underlying the ADSs to be sold by the Company have been duly authorized and, when issued, delivered and paid for in accordance with the terms of this Agreement and the Deposit Agreement, will be validly issued, fully paid and may be freely deposited by the Company with the Depositary against issuance of ADSs and ADRs evidencing ADSs;

 

4

 

 

(i)            Upon the due issuance by the Depositary of ADRs evidencing ADSs against the deposit of the Shares in accordance with the provisions of the Deposit Agreement, such ADRs evidencing ADSs will be duly and validly issued under the Deposit Agreement and will be freely transferable by the Company to or for the account of the several Underwriters; and except as disclosed in the Registration Statement, the Pricing Prospectus and the Articles of Association, there are no restrictions on subsequent transfers of the Shares or the ADSs; persons in whose names such ADRs evidencing ADSs are registered will be entitled to the rights of registered holders of ADRs evidencing ADSs specified therein and in the Deposit Agreement;

  

(j)            The issue and sale of the Shares, represented by the ADSs, the deposit of the Shares with the Depositary against the issuance of the ADSs and ADRs evidencing the ADSs, the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement and the Deposit Agreement will not contravene (i) Memorandum and the Articles of Association or another constitutional document of the Company or any of its Subsidiaries or, (ii) any agreement or other instrument binding upon the Company or any of its Subsidiaries, or (iii) any provision of applicable law, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any Subsidiary, except in the case of clauses (ii) and (iii) above for such contraventions that would not, individually in the aggregate, have, or reasonably be expected to have, a material adverse effect on the Company and its Subsidiaries, taken as a whole, and no consent, approval, authorization or order of, or qualification with, any governmental body, agency or court is required for the performance by the Company of its obligations for the issue and sale of the Shares, the deposit of the Shares with the Depositary against the issuance of ADSs and ADRs evidencing the ADSs to be delivered or the consummation by the Company of the transactions contemplated by this Agreement or the Deposit Agreement, except such as have been obtained under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) for the registration of the Shares and ADSs, the approval by FINRA of the underwriting terms and arrangements, the approval for listing of the ADSs on the New York Stock Exchange (the “Exchange”) and such consents, approvals, authorizations, orders, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the ADSs by the Underwriters;

 

(k)            There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its Subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus;

 

(l)            There are no legal or governmental proceedings pending or, to the Company’s knowledge, threatened to which the Company or any of its Subsidiaries is a party or to which any of the properties of the Company or any of its Subsidiaries is subject (i) other than proceedings that would not, singly or in the aggregate, have, or reasonably be expected to have, a material adverse effect on the Company and its Subsidiaries, taken as a whole, or on the power or ability of the Company to perform its obligations under this Agreement or the Deposit Agreement or to consummate the transactions contemplated by each of the Registration Statement, the Time of Sale Prospectus and the Prospectus or (ii) that are required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus and are not so described; and there are no statutes, regulations, contracts or other documents that are required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required;

 

5

 

 

(m)            Each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder;

 

(n)            The Company is not, and immediately after giving effect to the sale of the ADSs in accordance with this Agreement and the application of the proceeds thereof as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended;

 

(o)            The Company and each of its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have, or reasonably be expected to have, a material adverse effect on the Company and its Subsidiaries, taken as a whole;

 

(p)            There are no costs or liabilities associated with applicable Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance, in each case associated with applicable Environmental Laws or any permit, license or approval issued thereunder, any related constraints on operating activities resulting from applicable Environmental Laws and any potential liabilities to third parties arising from applicable Environmental Laws) which would, singly or in the aggregate, have, or reasonably be expected to have a material adverse effect on the Company and its Subsidiaries, taken as a whole;

 

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(q)            Except for the Registration Rights Agreement, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the ADSs registered pursuant to the Registration Statement;

 

(r)            The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated by the Deposit Agreement; this Agreement and the Deposit Agreement have been duly and validly authorized, executed and delivered by the Company, and the transactions contemplated hereby and thereby have been duly and validly authorized by the Company; and assuming due authorization, execution and delivery by the Depositary of the Deposit Agreement, the Deposit Agreement will constitute a valid and legally binding agreement of the Company, enforceable in accordance with its terms;

 

(s)            Each of this Agreement and the Deposit Agreement is in proper form to be enforceable against the Company in the Republic of Cyprus in accordance with its terms; to ensure the legality, validity or enforceability in the Republic of Cyprus of this Agreement or the Deposit Agreement, it is not necessary that this Agreement or the Deposit Agreement be filed or recorded with any court or other authority in the Republic of Cyprus or that any stamp, registration, documentary, issuance or transfer or other similar taxes or duties in the Republic of Cyprus be paid on or in respect of this Agreement, the Deposit Agreement or any other documents to be furnished hereunder, unless any of them is presented before any authority in Cyprus or is produced in evidence in a Cyprus court, in which case the stamp duty commissioner in Cyprus should determine the applicability of any stamp duty;

 

(t)            No holder of any of the Shares or the ADSs after the consummation of the transactions contemplated by this Agreement or the Deposit Agreement is or will be subject to any personal liability in respect of any liability of the Company by virtue only of its holding of any such Shares or ADSs; and except as set forth in the Pricing Prospectus, there are no limitations on the rights of holders of the Shares or the ADSs to hold, vote or transfer their securities;

 

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(u)            During the past five years (i) none of the Company or any of its subsidiaries or controlled affiliates, or any director, officer, or, to the knowledge of the Company, employee, agent or representative thereof, has taken or will take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment, giving or receipt of money, property, gifts or anything else of value, directly or indirectly, to any government official (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) (“Government Official”) in order to influence official action, or to any person in violation of any applicable anti-corruption laws; (ii) the Company and each of its subsidiaries and controlled affiliates have conducted their businesses in compliance with applicable anti-corruption laws and have instituted and maintained and will continue to maintain operationalized policies and procedures reasonably designed to promote and achieve compliance with such laws and with the representations and warranties contained herein; and (iii) neither the Company nor any of its subsidiaries will use, directly or indirectly, the proceeds of the offering in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any applicable anti-corruption laws;

  

(v)            During the past five years, the operations of the Company and each of its subsidiaries and, to the knowledge of the Company, any of their respective officers, directors, employees, or agents, representatives are and have been conducted at all times in compliance with all applicable financial recordkeeping and reporting requirements, including those of the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act) and the Russian Federal Law No. 115-FZ “On Combating the Legalization (Laundering) of Criminally Obtained Income and Funding of Terrorism,” and the applicable anti-money laundering statutes of jurisdictions where the Company and each of its subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”). No investigation, action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the best knowledge of the Company, threatened, and the Company has made no voluntary or other disclosure to any court, governmental agency, authority or body or any arbitrator with respect to compliance with Anti-Money Laundering Laws. The Company and each of its subsidiaries and controlled affiliates maintain operationalized policies and controls reasonably designed to ensure compliance with applicable Anti-Money Laundering Laws;

 

(w)            (i) None of the Company, any of its subsidiaries or controlled affiliates, or any of their respective directors, officers, or, to the Company’s knowledge, any employee, agent or representative of the Company or any of its subsidiaries, is an individual, entity, or government agency (“Person”) that is:

 

(A)            the subject of any sanctions administered or enforced by the United States, including the U.S. Department of the Treasury’s Office of Foreign Assets Control and the U.S. Department of State, the United Nations Security Council, the European Union or any EU Member State, the United Kingdom, or other relevant sanctions authority (collectively, “Sanctions”);

 

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(B)            located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Crimea, Cuba, Iran, North Korea and Syria); or

 

(C)            owned or controlled by one or more Persons in (A) or (B) (collectively the Persons referred to in (A)-(C) are referred to as “Sanctioned Persons”).

 

(ii)            The Company will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:

 

(A)            to fund or facilitate any activities or business of or with any Person that, at the time of such funding or facilitation, is a Sanctioned Persons or with any country or territory subject to Sanctions; or

 

(B)            in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).

 

(iii)            For the past five years, the Company and each of its subsidiaries and, to the knowledge of the Company, any of their respective officers, directors, employees, agents, or representatives have complied with applicable Sanctions. For the past five years, the Company and each of its subsidiaries and, to the knowledge of the Company, any of their respective officers, directors, employees, agents, or representatives have not knowingly engaged in, are not now knowingly engaged in, and will not engage in, any dealings or transactions with any Person that at the time of the dealing or transaction is or was a Sanctioned Person or with any country or territory subject to Sanctions, except as disclosed in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus. The Company and each of its subsidiaries and controlled affiliates maintain operationalized policies and controls reasonably designed to promote and achieve compliance with applicable Sanctions.

 

(iv)            No investigation, action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to Sanctions is pending or, to the best knowledge of the Company, threatened, and the Company has made no voluntary or other disclosure to any court, governmental agency, authority or body or any arbitrator with respect to compliance with Sanctions;

 

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(x)        Subsequent to the respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, (i) the Company and its Subsidiaries, taken as a whole, have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction; (ii) the Company has not purchased any of its outstanding share capital, nor declared, paid or otherwise made any dividend or distribution of any kind on its share capital other than ordinary and customary dividends; and (iii) there has not been any material change in the share capital, short-term debt or long-term debt of the Company and its Subsidiaries, taken as a whole;

 

(y)       The Company and each of its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them that is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as described in the Registration Statement or such as would not, individually or in the aggregate, have, or reasonably be expected to have, a material adverse effect on the Company and its Subsidiaries; and any real property and buildings held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases, except as would not, individually or in the aggregate, have or reasonably be expected to have, a material adverse effect on the Company and its Subsidiaries, taken as a whole;

 

(z)        (i) Except as would not reasonably be expected to have material adverse effect, the Company and its Subsidiaries own or have a valid license to all patents, inventions, copyrights, know how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names (collectively, “Intellectual Property Rights”) used in or reasonably necessary to the conduct of their businesses; (ii) the Intellectual Property Rights owned by the Company and its Subsidiaries and, to the Company’s knowledge, the Intellectual Property Rights licensed to the Company and its Subsidiaries, are valid, subsisting and enforceable, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity, scope or enforceability of any such Intellectual Property Rights, which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its Subsidiaries, taken as a whole; (iii) neither the Company nor any of its Subsidiaries has received any notice alleging any infringement, misappropriation or other violation of Intellectual Property Rights which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its Subsidiaries, taken as a whole; (iv) to the Company’s knowledge, no third party is infringing, misappropriating or otherwise violating, or has infringed, misappropriated or otherwise violated, any Intellectual Property Rights owned by the Company, which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its Subsidiaries, taken a s a whole; (v) to the Company’s knowledge, neither the Company nor any of its Subsidiaries infringes, misappropriates or otherwise violates, or has infringed, misappropriated or otherwise violated, any Intellectual Property Rights owned or controlled by third parties which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its Subsidiaries, taken as a whole; (vi) all employees or contractors engaged in the development of Intellectual Property Rights on behalf of the Company or any Subsidiary of the Company have executed an invention assignment agreement whereby such employees or contractors presently assign all of their right, title and interest in and to such Intellectual Property Rights to the Company or the applicable Subsidiary, and to the Company’s knowledge no such agreement has been breached or violated; and (vii) the Company and its Subsidiaries use, and have used, commercially reasonable efforts to appropriately maintain all information intended to be maintained as a trade secret;

 

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(aa)      (i) The Company and its Subsidiaries use and have used any and all software and other materials distributed under a “free,” “open source,” or similar licensing model (including but not limited to the MIT License, Apache License, GNU General Public License, GNU Lesser General Public License and GNU Affero General Public License) (“Open Source Software”) in compliance with all license terms applicable to such Open Source Software; and (ii) neither the Company nor any of its Subsidiaries uses or distributes or has used or distributed any Open Source Software in any manner that requires or has required (A) the Company or any of its Subsidiaries to permit reverse engineering of any software code or other technology owned by the Company or any of its Subsidiaries or (B) any software code or other technology owned by the Company or any of its Subsidiaries to be (1) disclosed or distributed in source code form, (2) licensed for the purpose of making derivative works or (3) redistributed at no charge, except with respect to (i) and (ii), as would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole;

 

(bb)     Except as would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole, (i) the Company and each of its Subsidiaries have complied and are presently in compliance with all internal and external privacy policies, contractual obligations, industry standards, applicable laws, statutes, judgments, orders, rules and regulations of any court or arbitrator or other governmental or regulatory authority and any other legal obligations, in each case, relating to the collection, use, transfer, import, export, storage, protection, disposal and disclosure by the Company or any of its Subsidiaries of personal, personally identifiable, household, sensitive, confidential or regulated data (“Data Security Obligations”, and such data, “Data”); (ii) the Company has not received any notification of or complaint regarding and is unaware of any other facts that, individually or in the aggregate, would reasonably indicate non-compliance with any Data Security Obligation; and (iii) there is no action, suit or proceeding by or before any court or governmental agency, authority or body pending or, to the Company’s knowledge, threatened alleging non-compliance with any Data Security Obligation;

 

(cc)      Except as would not reasonably be expected to have a material adverse effect on the Company and its Subsidiaries, taken as a whole, the Company and each of its Subsidiaries have taken all technical and organizational measures necessary to protect the information technology systems and Data used in connection with the operation of the Company’s and its Subsidiaries’ businesses. Without limiting the foregoing, the Company and its Subsidiaries have used reasonable efforts to establish and maintain business continuity/disaster recovery and security plans, and have established, maintained, implemented and complied with, reasonable information technology, information security, cyber security and data protection controls, policies and procedures, including oversight, access controls, encryption, technological and physical safeguards that are designed to protect against and prevent breach, destruction, loss, unauthorized distribution, use, access, disablement, misappropriation or modification, or other compromise or misuse of or relating to any information technology system or Data used in connection with the operation of the Company’s and its Subsidiaries’ businesses (“Breach”). Except as would not reasonably be expected to have a material adverse effect on the Company and its Subsidiaries taken as a whole, there has been no such Breach, and the Company and its Subsidiaries have not been notified of and have no knowledge of any event or condition that would reasonably be expected to result in, any such Breach;

 

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(dd)     No material labor dispute with the employees of the Company or any of its Subsidiaries exists, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that could reasonably be expected, singly or in the aggregate, to have a material adverse effect on the Company and its Subsidiaries, taken as a whole;

 

(ee)     The Company and each of its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses as currently conducted, except where failure to possess the same would not reasonably be expected to have a material adverse effect on the Company and its Subsidiaries, taken as a whole, and neither the Company nor any of its Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonable be expected to have a material adverse effect on the Company and its Subsidiaries, taken as a whole;

 

(ff)      The financial statements included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, together with the related schedules and notes thereto, comply as to form in all material respects with the applicable accounting requirements of the Securities Act and present fairly the consolidated financial position of the Company and its Subsidiaries as of the dates shown and its results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”) applied on a consistent basis throughout the periods covered thereby except for any normal year-end adjustments in the Company’s quarterly financial statements. The other financial information included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus has been derived from the accounting records of the Company and its consolidated Subsidiaries and presents fairly in all material respects the information shown thereby. The pro forma financial statements and the related notes thereto included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. The statistical, industry-related and market-related data included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate and such data is consistent with the sources from which they are derived, in each case in all material respects;

 

(gg)     AO Deloitte & Touche CIS, who have certified certain financial statements of the Company and its Subsidiaries and delivered its report with respect to the audited consolidated financial statements and schedules filed with the Commission as part of the Registration Statement and included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, is an independent registered public accounting firm with respect to the Company within the meaning of the Securities Act and the applicable rules and regulations thereunder adopted by the Commission and the Public Company Accounting Oversight Board (United States);

 

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(hh)     The laws of the Republic of Cyprus, do not prohibit holders of ADSs and ADRs evidencing ADSs issued pursuant to the Deposit Agreement, subject to the Deposit Agreement, to seek enforcement of their rights through the Depositary or its nominee registered as representative of the holders of the ADRs in a direct suit, action or proceeding against the Company, noting that a Cyprus court may allow a minority shareholder to bring a derivative claim in respect of and on behalf of the company in a limited set of circumstances, which includes: (i) a complaint that the company’s affairs are being conducted in an oppressive manner to some of the company’s shareholders (including the complainant), (ii) the ultra vires and illegal use of control in decision-making by the board of directors or a shareholder majority, (iii) violation of the voting procedures of the company that require a special majority, (iv) violation of personal rights of a shareholder under the company’s constitution and/or the applicable law, and (v) fraud on the minority by the controlling majority;

 

(ii)        Except as disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, since the end of the Company’s most recent audited fiscal year, the Company and each of its Subsidiaries maintains a system of internal accounting controls designed to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since the end of the Company’s most recent audited fiscal year, there has been (i) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (ii) no change in the Company’s internal control over financial reporting that has materially and adversely affected, or is reasonably likely to materially and adversely affect, the Company’s internal control over financial reporting;

 

(jj)     The Company has not sold, issued or distributed any ADSs or Shares during the six-month period preceding the date hereof, including any sales pursuant to Rule 144A under, or Regulation D or S of, the Securities Act, other than shares issued pursuant to employee benefit plans, qualified stock option plans, equity based compensation or other employee compensation plans or pursuant to outstanding options, rights or warrants;

 

(kk)     Except as disclosed in the Pricing Prospectus and the Prospectus in the section titled “Risk Factors— Risks Relating to Russian Taxation—The Group is subject to tax audits by the Russian tax authorities, which may result in additional tax liabilities” and “Risk Factors— Risks Relating to Russian Taxation—The Russian tax authorities may challenge the application of reduced social security contributions, VAT and corporate profits tax rates by one of our companies,” the Company and each of its Subsidiaries have filed all tax returns required to be filed through the date of this Agreement or have requested extensions thereof (except where the failure to file would not, singly or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole) and have paid all taxes required to be paid thereon (except for cases in which the failure to file or pay would not, singly or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole, or, except as currently being contested in good faith and for which reserves required by IFRS have been created in the financial statements of the Company), and no tax deficiency has been determined adversely to the Company or any of its Subsidiaries which, singly or in the aggregate, has had (nor does the Company nor any of its Subsidiaries have any notice or knowledge of any tax deficiency which could reasonably be expected to be determined adversely to the Company or its Subsidiaries and which could reasonably be expected to have) a material adverse effect on the Company and its Subsidiaries, taken as a whole;

 

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(ll)     From the time of initial confidential submission of the Registration Statement to the Commission through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”);

 

(mm)     The Company (i) has not alone engaged in any Testing-the-Waters Communication with any person other than Testing-the-Waters Communications with the consent of the Representatives with entities that are reasonably believed to be qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are reasonably believed to be accredited investors within the meaning of Rule 501 under the Securities Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act other than those listed on Schedule III hereto. “Testing-the-Waters Communication” means any communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act;

 

(nn)     As of the time of each sale of the ADSs in connection with the offering when the Prospectus is not yet available to prospective purchasers, none of (A) the Time of Sale Prospectus, (B) any free writing prospectus, when considered together with the Time of Sale Prospectus, and (C) any individual Testing-the-Waters Communication, when considered together with the Time of Sale Prospectus, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Time of Sale Prospectus and any free writing prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein;

 

(oo)     Under the current laws and regulations of the Republic of Cyprus, all dividends and other distributions declared and payable on the ADSs in cash may be freely remitted out of the Republic of Cyprus and may be paid in, or freely converted into, United States dollars, in each case without there being required any consent, approval, authorization or order of, or qualification with, any court or governmental agency or body in the Republic of Cyprus; and except as disclosed in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, all such dividends and other distributions paid by the Company will not be subject to withholding under the laws and regulations of the Republic of Cyprus;

 

(pp)     Except as disclosed in the Registration Statement, no stamp or other issuance or transfer taxes or duties and no withholding taxes are payable under the laws and regulations of the Republic of Cyprus, by or on behalf of the Underwriters, the Company or any of its Subsidiaries in the Republic of Cyprus or to any taxing authority thereof or therein in connection with (i) the execution, delivery or consummation of this Agreement and the Deposit Agreement, (ii) the creation, allotment and issuance of the ADSs, (iii) the deposit with the Depositary of the Shares by the Company against the issuance of the ADSs and ADRs evidencing the ADSs to be sold by the Company (iv) the issuance and delivery by the Depositary of the ADSs to or for the account of the Underwriters, (v) execution and delivery of this Agreement, the Deposit Agreement or the consummation of the transactions contemplated by this Agreement, or (vi) the initial transfer of, or agreement to transfer, the ADSs (or interests in the ADSs) through the facilities of DTC to purchasers produced by the Underwriters in the manner contemplated by this Agreement, other than the stamp duties due pursuant to Cyprus Stamp Duties Laws, Law No. 19/1963 (as amended);

 

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(qq)     Based on the current and anticipated composition of the Company’s income, assets and operations, the Company believes that it was not a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes for its most recent taxable year and it does not expect to be a PFIC for its current taxable year or in the foreseeable future;

 

(rr)      Any waiver, relief, concession or preferential treatment relating to taxes granted to the Company or any subsidiary by any Cyprus taxing authority is valid and in full force and effect;

 

(ss)      It is not necessary under the laws of the Republic of Cyprus (i) to enable the Underwriters to enforce their rights under this Agreement, provided that they are not otherwise engaged in business in the Republic of Cyprus, or (ii) solely by reason of the execution, delivery or consummation of this Agreement, for any of the Underwriters to be qualified or entitled to carry out business in the Republic of Cyprus;

 

(tt)       This Agreement is in proper form under the laws of the Republic of Cyprus for the enforcement thereof against the Company, and to ensure the legality, validity, enforceability or admissibility into evidence in the Republic of Cyprus of this Agreement;

 

(uu)     The Company is a “foreign private issuer” as defined in Rule 405 of the Securities Act;

 

(vv)     The courts of the Republic of Cyprus would recognize as a valid judgment any final monetary judgment obtained against the Company in the courts of the State of New York, without re-examining the merits of the case under the common law doctrine of obligation;

 

(ww)    Neither the Company nor any of its Subsidiaries nor any of its or their properties or assets has any immunity from the jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution or otherwise) under the laws of the Republic of Cyprus. The irrevocable and unconditional waiver and agreement of the Company contained in Section 12(a) not to plead or claim any such immunity in any legal action, suit or proceeding based on this Agreement is valid and binding under the laws of the Republic of Cyprus; and

 

(xx)      The choice of law of the State of New York as the governing law of this Agreement is a valid choice of law under the laws of the Republic of Cyprus and will be recognized by the courts of the Republic of Cyprus, subject to the conditions and restrictions described under the caption “Enforcement of Civil Liabilities” in the Registration Statement. The Company has the power to submit, and pursuant to Section 12(a) has, to the extent permitted by law, legally, validly, effectively and irrevocably submitted, to the jurisdiction of the Specified Courts (as defined in Section 12(a)), and has the power to designate, appoint and empower, and pursuant to Section 12(b), has legally, validly and effectively designated, appointed and empowered an agent for service of process in any suit or proceeding based on or arising under this Agreement in any of the Specified Courts.

 

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2.         Representations and Warranties of the Selling Shareholders. Each Selling Shareholder severally and not jointly (including each of Ronder Investments Limited, Speedtime Trading Limited and Onlypiece Trading Limited      , referred to as the “Elbrus Entities”, severally and not jointly), represents and warrants to and agrees with each of the Underwriters and the Company that:

 

(a)        This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Shareholder;

 

(b)       The execution and delivery by such Selling Shareholder of, and the performance by such Selling Shareholder of its obligations under this Agreement to the extent set forth herein, relating to the transactions contemplated hereby and by the Registration Statement will not contravene (i) any provision of the certificate of incorporation or by-laws of such Selling Shareholder (if such Selling Shareholder is a corporation), (ii) any agreement or other instrument binding upon such Selling Shareholder or (iii) any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Shareholder (except with respect to (ii) and (iii) which would not individually or in the aggregate in any material respect impair the fulfillment of such Selling Shareholder’s obligations under this Agreement, a “Seller Material Adverse Effect”), and no consent, approval, authorization or order of, or qualification with, any governmental body, agency or court is required for the performance by such Selling Shareholder of its obligations under this Agreement, except (1) for the registration under the Securities Act of the Ordinary Shares and the ADSs; and (2) such consents, approvals, authorizations, orders filings, registrations or qualifications under the Exchange Act, or any securities or antifraud or Blue Sky laws of any states or FINRA in connection with the offer and sale and distribution of the Ordinary Shares and the ADSs; and (3) such consents, approvals, authorizations, orders filings, registrations or qualifications that if not obtained, could not individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect;

 

(c)       Such Selling Shareholder has, and on the Closing Date will have, valid title to, or a valid “security entitlement” within the meaning of Section 8-501 of the New York Uniform Commercial Code in respect of, the ADSs to be sold by such Selling Shareholder free and clear of all security interests, claims, liens, equities or other encumbrances and the legal right and power, and all authorization and approval required by law to enter into this Agreement and to sell, transfer and deliver the ADSs to be sold by such Selling Shareholder or a security entitlement in respect of such ADSs;

 

(d)        Upon payment for the ADSs to be sold by such Selling Shareholder pursuant to this Agreement, delivery of such ADSs, as directed by the Underwriters, to Cede & Co. (“Cede”) or such other nominee as may be designated by the Depository Trust Company (“DTC”), registration of such ADSs in the name of Cede or such other nominee and the crediting of such ADSs on the books of DTC to securities accounts of the Underwriters (assuming that neither DTC nor any such Underwriter has notice of any adverse claim (within the meaning of Section 8-105 of the New York Uniform Commercial Code (the “UCC”)) to such ADSs), (A) DTC shall be a “protected purchaser” of such ADSs within the meaning of Section 8-303 of the UCC, (B) under Section 8-501 of the UCC, the Underwriters will acquire a valid security entitlement in respect of such ADSs and (C) no action based on any “adverse claim,” within the meaning of Section 8-102 of the UCC, to such ADSs may be asserted against the Underwriters with respect to such security entitlement; for purposes of this representation, such Selling Shareholder may assume that when such payment, delivery and crediting occur, (x) such ADSs will have been registered in the name of Cede or another nominee designated by DTC, in each case on the Company’s share registry in accordance with its certificate of incorporation, bylaws and applicable law, (y) DTC will be registered as a “clearing corporation” within the meaning of Section 8-102 of the UCC and (z) appropriate entries to the accounts of the several Underwriters on the records of DTC will have been made pursuant to the UCC;

 

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(e)        Such Selling Shareholder has delivered to the Representatives an executed lock-up agreement in substantially the form attached hereto as Exhibit A (the “Lock-up Agreement”);

 

(f)        Such Selling Shareholder is not prompted by any material non-public information concerning the Company or its Subsidiaries which is not set forth in the Registration Statement, the Time of Sale Prospectus or the Prospectus to sell its ADSs pursuant to this Agreement;

 

(g)        (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (iii) the Time of Sale Prospectus does not, and at the time of each sale of the ADSs in connection with the offering when the Prospectus is not yet available to prospective purchasers and at the Closing Date (as defined in Section 5), the Time of Sale Prospectus, as then amended or supplemented by the Company, if applicable, will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iv) each broadly available road show, if any, when considered together with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (v) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement, the Time of Sale Prospectus or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein, and provided that the representation and warranty set forth in this paragraph applies only to misstatements or omissions made in reliance upon and in conformity with such Selling Shareholder’s Selling Shareholder Information. With respect to each Selling Shareholder, “Selling Shareholder Information” means information furnished in writing by or on behalf of such Selling Shareholder expressly for use in the Registration Statement, the Prospectus or the Pricing Disclosure Package, it being understood and agreed that the only information furnished by such Selling Shareholder consists of (i) the legal name of such Selling Shareholder, (ii) the number of Ordinary Shares beneficially owned by such Selling Shareholder before and after the offering, and (iii) the address and other information with respect to such Selling Shareholder (excluding percentages) which appears or is incorporated by reference in the Registration Statement, the Prospectus, or the Pricing Disclosure Package in the table (and corresponding footnote) under section entitled “Selling Shareholders”;

 

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(h)            (i) None of such Selling Shareholder or any of its consolidated subsidiaries, or to the knowledge of such Selling Shareholder, any officers, directors, employees, agents or representatives of such Selling Shareholder is a Sanctioned Person.

 

(ii)            Such Selling Shareholder will not, directly or indirectly, use the proceeds of the offering of the ADSs hereunder sold by it, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:

 

(A)            to fund or facilitate any activities or business of or with any Person that, at the time of such funding or facilitation, is a Sanctioned Person or with any country or territory subject to Sanctions; or

 

(B)            in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise);

 

(iii)            During the past five years, none of such Selling Shareholder or any of its consolidated subsidiaries, or, to the knowledge of such Selling Shareholder, any director, officer, employee, agent (acting in their capacity as such) or representative (acting in their capacity as such) of such Selling Shareholder has taken or will take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment giving or receipt of money, property, gifts or anything else of value, directly or indirectly, to any Government Official in order to influence official action, or to any person in violation of any applicable anti-corruption laws; (b) during the past five years, such Selling Shareholder and each of its consolidated subsidiaries have conducted their businesses in compliance with applicable anti-corruption laws and have instituted and maintained and will continue to maintain operationalized policies and procedures reasonably designed to promote and achieve compliance with such laws and with the representations and warranties contained herein; and (c) neither the Selling Shareholder nor any of its consolidated subsidiaries will use, directly or indirectly, the proceeds of the offering in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any applicable anti-corruption laws.

 

(iv)            During the past five years, the operations of such Selling Shareholder and each of its consolidated subsidiaries and, to the knowledge of the Selling Shareholder, any of the respective officers, directors, employees, agents (acting in their capacity as such) or representatives (acting in their capacity as such) of such Selling Shareholder are and have been conducted at all times in material compliance with all applicable Anti-Money Laundering Laws. The Selling Shareholder and each of its consolidated subsidiaries maintain policies and controls reasonably designed to ensure compliance with applicable Anti-Money Laundering laws.

 

(i)            Such Selling Shareholder is not (i) an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) a plan or account subject to Section 4975 of the Internal Revenue Code of 1986, as amended or (iii) an entity deemed to hold “plan assets” of any such plan or account under Section 3(42) of ERISA, 29 C.F.R. 2510.3-101, or otherwise;

 

(j)            Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, to the knowledge of such Selling Shareholder, no stamp or other issuance or transfer taxes or duties and no withholding taxes are payable by or on behalf of the Underwriters in the Republic of Cyprus or to any taxing authority thereof or therein in connection with (i) the execution, delivery of, or consummation of the transactions contemplated by, this Agreement, (ii) the deposit with the Depositary of the Shares by such Selling Shareholder against the issuance of the ADSs and ADRs evidencing the ADSs to be sold by such Selling Shareholder, (iii) the sale and delivery by such Selling Shareholder of the Shares in the form of ADSs to be sold by such Selling Shareholder, or (iv) the initial transfer of, or agreement to transfer, the ADSs (or interests in the ADSs) through the facilities of the DTC to purchasers produced by the Underwriters in the manner contemplated by this Agreement, other than the stamp duties due pursuant to Cyprus Stamp Duties Laws, Law No. 19/1963 (as amended); and

 

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(k)            Such Selling Shareholder has the power to submit, and pursuant to Section 12(a) has, to the extent permitted by law, legally, validly, effectively and irrevocably submitted, to the jurisdiction of the Specified Courts (as defined in Section 12(a)), and has the power to designate, appoint and empower, and pursuant to Section 12(c), has legally, validly and effectively designated appointed and empowered an agent for service of process in any suit or proceeding based on or arising under this Agreement in any of the Specified Courts.

 

3.            Agreements to Sell and Purchase. Each Seller, severally and not jointly, hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the terms and conditions hereinafter stated, agrees, severally and not jointly, to purchase from such Seller at $[●] per ADS (the “Purchase Price”) the number of Firm ADSs (subject to such adjustments to eliminate fractional ADSs as Representatives may determine) that bears the same proportion to the number of Firm ADSs to be sold by such Seller as the number of Firm ADSs set forth in Schedule II hereto opposite the name of such Underwriter bears to the total number of Firm ADSs.

 

On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Selling Shareholders agree to sell to the Underwriters the Optional ADSs on a pro rata basis, and the Underwriters shall have the right to purchase, severally and not jointly, up to [●] Optional ADSs at the Purchase Price, provided, however, that the amount paid by the Underwriters for any Optional ADSs shall be reduced by an amount per share equal to any dividends declared by the Company and payable on the Firm ADSs but not payable on such Optional ADSs. The Representatives may exercise this right on behalf of the Underwriters in whole or from time to time in part by giving written notice not later than 30 days after the date of this Agreement. Any exercise notice shall specify the number of Optional ADSs to be purchased by the Underwriters and the date on which such ADSs are to be purchased. Each purchase date must be at least one business day after the written notice is given and may not be earlier than the closing date for the Firm ADSs or later than ten business days after the date of such notice. Optional ADSs may be purchased as provided in Section 5 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm ADSs. On each day, if any, that Optional ADSs are to be purchased (an “Option Closing Date”), each Underwriter agrees, severally and not jointly, to purchase the number of Optional ADSs (subject to such adjustments to eliminate fractional ADSs as the Representatives may determine) that bears the same proportion to the total number of Optional ADSs to be purchased on such Option Closing Date as the number of Firm ADSs set forth in Schedule II hereto opposite the name of such Underwriter bears to the total number of Firm ADSs.

 

4.            Terms of Public Offering. The Sellers are advised by the Representatives that the Underwriters propose to make a public offering of their respective portions of the ADSs as soon after the Registration Statement and this Agreement have become effective as in the Representatives’ judgment is advisable. The Sellers are further advised by the Representatives that the ADSs are to be offered to the public initially at $[●] per ADS (the “Public Offering Price”) and to certain dealers selected by the Representatives at a price that represents a concession not in excess of $[●] per ADS under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $[●] per ADS, to any Underwriter or to certain other dealers.

 

5.            Payment and Delivery. Payment for the Firm ADSs to be sold by each Seller shall be made to such Seller in U.S. dollars (“Federal”) or other funds immediately available in New York City against delivery of such Firm ADSs for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on [●], 2021, or at such other time on the same or such other date, not later than [●], 2021, as shall be designated in writing by the Representatives. The time and date of such payment are hereinafter referred to as the “Closing Date.”

 

Payment for any Optional ADSs shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Optional ADSs for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the corresponding notice described in Section 3 or at such other time on the same or on such other date, in any event not later than [●], 2021, as shall be designated in writing by the Representatives.

 

The Firm ADSs and Optional ADSs shall be registered in such names and in such denominations as the Representatives shall request not later than one full business day prior to the Closing Date or the applicable Option Closing Date, as the case may be. The Company will cause the ADRs representing the ADSs to be made available for checking and packaging at least twenty-four hours prior to the Closing Date with respect thereto at the office of DTC or its designated custodian. The Firm ADSs and Optional ADSs shall be delivered to the Representatives on the Closing Date or an Option Closing Date, as the case may be, for the respective accounts of the several Underwriters with any transfer taxes payable in connection with the transfer of the ADSs to the Underwriters duly paid by the Company or the Selling Shareholders, as applicable.

 

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6.            Conditions to the Underwriters’ Obligations. The obligations of the Sellers to sell the ADSs to the Underwriters and the several obligations of the Underwriters to purchase and pay for the ADSs on the Closing Date are subject to the condition that the Registration Statement shall have become effective not later than [●] (New York City time) on the date hereof.

 

The several obligations of the Underwriters are subject to the following further conditions:

 

(a)            Subsequent to the execution and delivery of this Agreement and prior to the Closing Date or Option Closing Date, as applicable:

 

(i)            no order suspending the effectiveness of the Registration Statement shall be in effect, and no proceeding for such purpose or pursuant to Section 8A under the Securities Act shall be pending before or threatened by the Commission;

 

(ii)            there are no debt securities or preferred stock issued, or guaranteed by, the Company or any of its Subsidiaries that are rated by a “nationally recognized statistical ration organization,” as such term is defined in Section 3(a)(62) of the Exchange Act;

 

(iii)            there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its Subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus that, in the Representatives’ judgment, is material and adverse and that makes it, in the Representatives’ judgment, impracticable to market the ADSs on the terms and in the manner contemplated in the Time of Sale Prospectus; and

 

(iv)            there shall not be any litigation, proceedings, investigations, processes for administrative sanctions or other actions initiated or threatened by or before any governmental agency, in each case with due authority, against or involving any party hereto, in the Republic of Cyprus or elsewhere, that seeks to declare non-compliant, unlawful or illegal, under the Republic of Cyprus laws, rules and regulations, the issuance and sales of the Shares and ADSs, the listing and trading of the ADSs on the Exchange or the transactions contemplated by this Agreement and the Deposit Agreement.

 

(b)            The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in Sections 6(a)(i) and 6(a)(ii) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date.

 

The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened.

 

(c)            The Underwriters shall have received on the Closing Date an opinion and negative assurance letter of Latham & Watkins LLP, U.S. counsel for the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.

 

(d)            The Underwriters shall have received on the Closing Date an opinion of Antis Triantafyllides & Sons LLC, Cyprus counsel for the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.

 

(e)            The Underwriters shall have received on the Closing Date, an opinion of outside counsel for each of the Selling Shareholders, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.

 

(f)            The Underwriters shall have received on the Closing Date an opinion and negative assurance letter of Skadden, Arps, Slate, Meagher & Flom (UK) LLP, counsel for the Underwriters, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.

 

With respect to the negative assurance letters to be delivered pursuant to Sections 6(c) and 6(f) above, Latham & Watkins LLP and Skadden, Arps, Slate, Meagher & Flom (UK) LLP may state that their opinions and beliefs are based upon their participation in the preparation of the Registration Statement, the Time of Sale Prospectus and the Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified.

 

(g)            The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from AO Deloitte & Touche CIS, independent public accountants, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus; provided that the letter delivered on the Closing Date shall use a “cut-off date” not earlier than the date hereof.

 

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(h)            The Underwriters shall have received on the Closing Date an opinion of Latham & Watkins LLP, Russian counsel for the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.

 

(i)            The Underwriters shall have received on the Closing Date an opinion of OOO PricewaterhouseCoopers Advisory, Russian tax counsel for the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.

 

(j)            The Underwriters shall have received on the Closing Date an opinion of Chrysses Demetriades & Co. LLC, Cyprus counsel for the Underwriters, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.

 

(k)            The Underwriters shall have received on the Closing Date an opinion of Emmet, Marvin & Martin, LLP, counsel for the Depositary, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.

 

(l)            The Deposit Agreement shall be in full force and effect on the Closing Date.

 

(m)            The Lock-up Agreements of all Selling Shareholders, officers, directors and certain employees of the Company shall be in full force and effect on the Closing Date.

 

(n)            The Underwriters shall have received on the Closing Date a certificate of the Depositary, in form and substance satisfactory to the Underwriters, executed by one of its authorized officers with respect to the deposit with the custodian under the Deposit Agreement of the Shares in the form of ADSs to be purchased against the issuance of the ADRs evidencing such ADSs, the execution, issuance, countersignature and delivery of the ADRs evidencing such ADSs pursuant to the Deposit Agreement and such other matters related thereto as the Representatives may reasonably request.

 

(o)            The Underwriters shall have received on and as of the Closing Date, as the case may be, satisfactory evidence of the good standing of the Company, in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdiction.

 

(p)            The several obligations of the Underwriters to purchase Optional ADSs hereunder are subject to the delivery to the Representatives on the applicable Option Closing Date of the following:

 

(i)            a certificate, dated the Option Closing Date and signed by an executive officer of the Company, confirming that the certificate delivered on the Closing Date pursuant to Section 6(b) hereof remains true and correct as of such Option Closing Date;

 

(ii)            an opinion and negative assurance letter of Latham & Watkins LLP, U.S. counsel for the Company, dated the Option Closing Date, relating to the Optional ADSs to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 6(c) hereof;

 

(iii)            an opinion and negative assurance letter of Antis Triantafyllides & Sons LLC, Cyprus counsel for the Company, dated the Option Closing Date, relating to the Optional ADSs to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 6(c) hereof;

 

(iv)            an opinion of outside counsel for each of the Selling Shareholders, dated the Option Closing Date, relating to the Optional ADSs to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 6(e) hereof;

 

(v)            an opinion and negative assurance letter of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters, dated the Option Closing Date, relating to the Optional ADSs to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 6(f) hereof;

 

(vi)            a letter dated the Option Closing Date, in form and substance satisfactory to the Underwriters, from AO Deloitte & Touche CIS, independent public accountants, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 6(g) hereof; provided that the letter delivered on the Option Closing Date shall use a “cut-off date” not earlier than two business days prior to such Option Closing Date;

 

(vii)            an opinion of Latham & Watkins LLP, Russian counsel for the Company, dated the Option Closing Date and otherwise to the same effect as the opinion required by Section 6(h) hereof.

 

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(viii)            an opinion of OOO PricewaterhouseCoopers Advisory, Russian tax counsel for the Company, dated the Option Closing Date and otherwise to the same effect as the opinion required by Section 6(i) hereof .

 

(ix)            an opinion of Chrysses Demetriades & Co. LLC, Cyprus counsel for the Underwriters, dated the Option Closing Date and otherwise to the same effect as the opinion required by Section 6(j) hereof;

 

(x)            an opinion of Emmet, Marvin & Martin, LLP, counsel for the Depositary, dated the Option Closing Date and otherwise to the same effect as the opinion required by Section 6(k) hereof;

 

(xi)            a certificate of the Depositary, in form and substance satisfactory to the Underwriters, executed by one of its authorized officers with respect to the deposit with the custodian under the Deposit Agreement of the Shares in the form of ADSs to be purchased against the issuance of the ADRs evidencing such ADSs, the execution, issuance, countersignature and delivery of the ADRs evidencing such ADSs pursuant to the Deposit Agreement and such other matters related thereto as the Representatives may reasonably request;

 

(xii)            satisfactory evidence of the good standing of the Company as of the Option Closing Date;

 

(xiii)            such other documents as the Representatives may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Optional ADSs to be sold on such Option Closing Date and other matters related to the issuance of such Optional ADSs.

 

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7.            Covenants of the Company. The Company covenants with each Underwriter as follows:

 

(a)            To furnish to the Representatives, without charge, [●] conformed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to the Representatives in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 7(e) or 7(f) below, as many copies of the Time of Sale Prospectus, the Prospectus and any supplements and amendments thereto or to the Registration Statement as the Representatives may reasonably request.

 

(b)            Before amending or supplementing the Registration Statement, the Time of Sale Prospectus or the Prospectus, to furnish to the Representatives a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which the Representatives reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule.

 

(c)            To furnish to the Representatives a copy of each proposed free writing prospectus to be prepared by or on behalf of, used by, or referred to by the Company and not to use or refer to any proposed free writing prospectus, including without limitation, electronic roadshows, to which the Representatives reasonably object.

 

(d)            Not to take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder.

 

(e)            If the Time of Sale Prospectus is being used to solicit offers to buy the ADSs at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not, in the light of the circumstances when the Time of Sale Prospectus is delivered to a prospective purchaser, be misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law.

 

(f)            If, during such period after the first date of the public offering of the ADSs as in the opinion of counsel for the Underwriters the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses the Representatives will furnish to the Company) to which ADSs may have been sold by the Representatives on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with applicable law.

 

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(g)            To endeavor to qualify the ADSs for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representatives shall reasonably request, provided, however, that nothing contained herein shall require the Company to qualify to do business in any jurisdiction, to execute or file a general consent to service of process in any jurisdiction or to subject itself to taxation in any jurisdiction in which it is not otherwise subject.

 

(h)            To make generally available to the Company’s security holders and to the Representatives as soon as practicable (which may be satisfied by the Company filing its Annual Report on Form 20-F with the Commission’s Electronic Data Gathering, Analysis and Retrieval System) an earnings statement covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the date of this Agreement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder.

 

(i)            The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the ADSs within the meaning of the Securities Act and (ii) completion of the Restricted Period referred to in Section 7.

 

(j)            If at any time following the distribution of any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act there occurred or occurs an event or development as a result of which such Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.

 

(k)            The Company shall indemnify and hold the Underwriters harmless against, any stamp, issue, registration, documentary, sales, transfer, income, capital gains or other similar taxes or duties imposed under the laws of the Republic of Cyprus or any political sub-division or taxing authority thereof or therein that is payable in connection with the creation, issuance sale and delivery of the Shares and ADSs to the Underwriters in the manner contemplated by this Agreement and the execution and delivery of this Agreement and the Deposit Agreement, or the resale and delivery of the ADSs by the Underwriters in the manner contemplated herein.

 

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The Company also covenants with each Underwriter that, without the prior written consent of the Representatives on behalf of the Underwriters, it will not, and will not publicly disclose an intention to, during the period ending 180 days after the date of the Prospectus (the “Restricted Period”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any ADSs, Shares or any securities convertible into or exercisable or exchangeable for Shares or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of ADSs, Shares or such other securities, in cash or otherwise or (3) file any registration statement with the Commission relating to the offering of any ADSs, Shares or any securities convertible into or exercisable or exchangeable for Shares.

 

The restrictions contained in the preceding paragraph shall not apply to (A) the ADSs to be sold hereunder, (B) the issuance by the Company of Shares upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof as described in each of the Time of Sale Prospectus and Prospectus, (C) the grant of awards pursuant to any employee stock option plans, incentive plans or otherwise in equity compensation arrangements existing on, or the issuance of Shares or ADSs upon the exercise, conversion or exchange of options or convertible or exchangeable securities outstanding as of, the date of this Agreement or the Time of Sale, in each case as disclosed in each of the Time of Sale Prospectus and Prospectus; or (D) facilitating the establishment of a trading plan on behalf of a shareholder, officer or director of the Company pursuant to Rule 10b5-1 under the Exchange Act for the transfer of ADSs or Shares, provided that (i) such plan does not provide for the transfer of ADSs or Shares during the Restricted Period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by the Company regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of ADSs or Shares may be made under such plan during the Restricted Period, (E) the filing by the Company of any registration statement on Form S-8 (or any successor form) with the Commission, or (F) the sale or issuance of or entry into an agreement to sell or issue Shares, ADSs or securities convertible into or exercisable for Shares or ADSs in connection with any (i) mergers, (ii) acquisition of securities, businesses, property, technologies or other assets, (iii) joint ventures, (iv) strategic alliances, commercial relationships or other collaborations, or (v) the assumption of employee benefit plans in connection with mergers or acquisitions; provided that the aggregate number of Shares, ADSs or securities convertible into or exercisable for Shares or ADSs (on an as-converted or as-exercised basis, as the case may be) that the Company may sell or issue or agree to sell or issue pursuant to this clause (F) shall not exceed 5% of the total number of Shares, including in the form of ADSs, issued and outstanding immediately following the completion of the transactions contemplated by this agreement (determined on a fully diluted basis and as adjusted for share splits, share dividends and other similar events after the date hereof); and provided further, that each recipient of Shares, ADSs or securities convertible into or exercisable for Shares or ADSs pursuant to this clause (F) shall, on or prior to such issuance, execute a lock-up agreement substantially in the form of Exhibit A hereto with respect to the remaining portion of the Restricted Period.

 

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If the Representatives, in their sole discretion, agree to release or waive the restrictions on the transfer of ADSs or Shares set forth in a Lock-up Agreement for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit B hereto through a major news service at least two business days before the effective date of the release or waiver.

 

8.            Covenants of the Sellers. Each Seller, severally and not jointly, covenants with each Underwriter as follows:

 

(a)            Each Seller will deliver to each Underwriter (or its agent), prior to or at the Closing Date, a properly completed and executed United States Treasury Department Form W-9 or an Form W-8 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof), as appropriate.

 

(b)            Each Seller will deliver to each Underwriter (or its agent), on the date of execution of this Agreement, a properly completed and executed Certification Regarding Beneficial Owners of Legal Entity Customers, together with copies of identifying documentation, and each Seller undertakes to provide such additional supporting documentation as each Underwriter may reasonably request in connection with the verification of the foregoing Certification.

 

(c)            If any sum payable by the Company or a Selling Shareholder under this Agreement is subject to withholding tax levied in a Relevant Taxing Jurisdiction (being any jurisdiction in which the Company or such Selling Shareholder is resident for tax purposes or from or through which payment is made on behalf of the Company or such Selling Shareholder) in the hands of an Underwriter or taken into account as a receipt in computing the taxable income of such Underwriter (excluding net income taxes), the sum payable to such Underwriter under this Agreement shall be increased to such sum as will ensure that such Underwriter shall be left with the sum it would have had in the absence of such tax; except to the extent that such tax was imposed due to (A) an Underwriter having any present or former connection with such jurisdiction other than solely as a result of the execution and delivery of, or performance of, its obligations under this Agreement or receipt of any payments or enforcement of rights hereunder or (B) any taxes that would not have been imposed but for the failure of such Underwriter to provide any form, certificate, document or other information that would have reduced or eliminated the withholding or deduction of such tax. If the Company or the Selling Shareholder pays such additional amounts then, if the relevant Underwriter determines, acting in its discretion (but in good faith), that it has received and utilized a tax credit or refund as a result of the receipt of such additional amounts, it shall without unreasonable delay pay over the amount representing such utilization of credit or refund to the Company or the Selling Shareholder, as applicable (but only to the extent of such additional amounts received under this Section 8(c)).

 

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9.             Expenses. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, (A) the Sellers agree to pay all costs and expenses related to the transfer and delivery of the their respective portion of ADSs to the Underwriters, including any transfer or other similar taxes payable thereon and (B) the Company agrees to pay or cause to be paid all expenses incident to the performance of their obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company’s counsel and the Company’s accountants in connection with the registration and delivery of the ADSs under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the ADSs under state securities laws and all expenses in connection with the qualification of the ADSs for offer and sale under state securities laws as provided in Section 7(g) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (iii) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the ADSs by FINRA, including any counsel fees incurred on behalf of or disbursements by Morgan Stanley & Co. LLC in its capacity as QIU, (provided that the amount payable by the Company with respect to fees and disbursements of counsel for the Underwriters pursuant to subsections (iii) and (iv) shall not exceed $[100,000] in the aggregate), (iv) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Shares and all costs and expenses incident to listing the ADSs on the Exchange and other national securities exchanges and foreign stock exchanges, (v) the cost of printing certificates representing the ADSs, (vi) the costs and charges of any transfer agent, registrar or depositary, (vii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the offering of the ADSs, including, without limitation, expenses associated with the preparation or dissemination of any electronic road show, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants (it being agreed that, notwithstanding anything herein to the contrary, there shall be no aircraft chartered in connection with any such presentation), (viii) the document production charges and expenses associated with printing or producing this Agreement, the Deposit Agreement, closing documents and any other documents in connection with the offering, purchase sale and delivery of the ADSs and (ix) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 11 entitled “Indemnity and Contribution” and the last paragraph of Section 16 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the ADSs by them and any advertising expenses connected with any offers they may make. The provisions of this Section shall not supersede or otherwise affect any agreement that the Sellers may otherwise have for the allocation of such expenses among themselves.

 

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For the avoidance of doubt, it is understood that the Selling Shareholders will pay all of their own counsel fees, underwriting discounts and commissions for their respective portion of the ADS offering.

 

10.           Covenants of the Underwriters. Each Underwriter, severally and not jointly, covenants with the Company not to take any action that would result in the Company being required to file with the Commission under Rule 433(d) a free writing prospectus prepared by or on behalf of such Underwriter that otherwise would not be required to be filed by the Company thereunder, but for the action of the Underwriter.

 

11.           Indemnity and Contribution. (a) The Sellers, severally and not jointly (including each of the Elbrus Entities, severally and not jointly), agree to indemnify and hold harmless each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act and each agent of the Underwriters in connection with this offering from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus or any amendment or supplement thereto, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any “road show” as defined in Rule 433(h) under the Securities Act (a “road show”), the Prospectus or any amendment or supplement thereto, or any Testing-the-Waters Communication or arise out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein, it being understood and agreed that the only such information furnished by the Underwriters through the Representatives consists of the information described as such in paragraph (c) below; provided further that a Selling Shareholder’s obligation to indemnify and hold harmless for any untrue or alleged untrue statement or omission or alleged omission pursuant to this paragraph shall only apply to such Selling Shareholder’s Selling Shareholder Information. The liability of each Selling Shareholder under the indemnity agreement contained in this paragraph shall be limited to an amount equal to the aggregate proceeds, after deducting underwriting commissions and discounts, but before deducting any expenses of the Company or the Selling Shareholders, from the ADSs sold by such Selling Shareholder to the Underwriters. The Company also agrees to indemnify and hold harmless Morgan Stanley & Co. LLC and each person, if any, who controls Morgan Stanley & Co. LLC within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and judgments incurred as a result of Morgan Stanley & Co. LLC’s participation as a QIU within the meaning of Rule 5121 of the FINRA in connection with the offering of the ADSs, except for any losses, claims, damages, liabilities and judgments resulting from Morgan Stanley & Co. LLC’s, or such controlling person’s, willful misconduct. Notwithstanding anything contained herein to the contrary, if indemnity may be sought pursuant to this Section 11 in respect of such action or proceeding, then in addition to such separate firm for the indemnified parties, the indemnifying party shall be liable for the reasonable fees and expenses of not more than one separate firm (in addition to any local counsel) for Morgan Stanley & Co. LLC in its capacity as a QIU and all persons, if any, who control Morgan Stanley & Co. LLC within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act.

 

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(b)           Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, the Selling Shareholders, the directors of the Company, the officers of the Company who sign the Registration Statement and each person, if any, who controls the Company or any Selling Shareholder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus or any amendment or supplement thereto, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any road show or the Prospectus or any amendment or supplement thereto, or arise out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, any issuer free writing prospectus, road show, or the Prospectus or any amendment or supplement thereto, it being understood and agreed upon that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: [●].

 

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(c)            In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 11(a) or 11(b), such person (the “indemnified party”) shall promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing, provided that the failure to notify the indemnifying party shall not relieve it from any liability it may have under the preceding paragraphs of this Section 11 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights and defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under the preceding paragraphs of this Section 11. The indemnifying party upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party, (iii) the indemnified party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the indemnifying party or (iv) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (A) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Underwriters and all persons, if any, who control any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or who are affiliates of any Underwriter within the meaning of Rule 405 under the Securities Act, (B) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (C) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Selling Shareholders and all persons, if any, who control any Selling Shareholder within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Underwriters and such control persons and affiliates of any Underwriters, such firm shall be designated in writing by the Representatives. In the case of any such separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. In the case of any such separate firm for the Selling Shareholders and such control persons of any Selling Shareholders, such firm shall be designated in writing by the persons named as attorneys-in-fact for the Selling Shareholders. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent shall not be unreasonably withheld), but if settled with such consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement or disputed in good faith the indemnified party’s entitlement to such reimbursement prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any indemnified person.

 

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(d)           To the extent the indemnification provided for in Sections 11(a) or 11(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the ADSs or (ii) if the allocation provided by clause 11(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 11(d)(i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Sellers on the one hand and the Underwriters on the other hand in connection with the offering of the ADSs shall be deemed to be in the same respective proportions as the net proceeds from the offering of the ADSs (before deducting expenses) received by each Seller and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the ADSs. The relative fault of the Sellers on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Sellers or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters’ respective obligations to contribute pursuant to this Section 11 are several in proportion to the respective number of ADSs they have purchased hereunder, and not joint.

 

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(e)            The Sellers and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 11 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 11(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in Section 11(d) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 11, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the ADSs underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding any other provisions of this subsection (e), no Selling Shareholder shall be obligated or required to contribute any amount in excess of the amount by which the aggregate proceeds (after deducting any underwriting discounts and commissions received by the Underwriters) from the Shares sold by such Selling Shareholder exceed the amount of any damages which such Selling Shareholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 11 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. Each Selling Shareholder’s obligation in this subsection (e) to contribute is several in proportion to the proceeds from the Shares sold by such Selling Shareholder after deducting any underwriting discounts and commissions received by the Underwriters, but before deducting any expenses of the Company or the Selling Shareholder. The Company, the Selling Shareholders and the Underwriters agree that Morgan Stanley & Co. LLC will not receive any additional benefits hereunder for serving as the QIU in connection with the offering and sale of the ADSs.

 

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(f)            The indemnity and contribution provisions contained in this Section 11 and the representations, warranties and other statements of the Company and the Selling Shareholders contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter, by or on behalf of any Selling Shareholder or any person controlling any Selling Shareholder, or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the ADSs.

 

12.           Submission to Jurisdiction; Appointment of Agents for Service.

 

(a)            The Company and each of the Selling Shareholders irrevocably submits to the non-exclusive jurisdiction of any New York State or United States Federal court sitting in The City of New York (the “Specified Courts”) over any suit, action or proceeding arising out of or relating to this Agreement, the Time of Sale Prospectus, the Prospectus, the Registration Statement or the offering of the ADSs (each, a “Related Proceeding”). The Company and each of the Selling Shareholders irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any Related Proceeding brought in such a court and any claim that any such Related Proceeding brought in such a court has been brought in an inconvenient forum. To the extent that the Company and each of the Selling Shareholders has or hereafter may acquire any immunity (on the grounds of sovereignty or otherwise) from the jurisdiction of any court or from any legal process with respect to itself or its property, the Company and each of the Selling Shareholders irrevocably waives, to the fullest extent permitted by law, such immunity in respect of any such suit, action or proceeding.

 

(b)            The Company hereby irrevocably appoints Cogency Global Inc., with offices at 122 East 42nd Street, 18th Floor New York, NY 10168 as its agent for service of process in any Related Proceeding and agrees that service of process in any such Related Proceeding may be made upon it at the office of such agent. The Company waives, to the fullest extent permitted by law, any other requirements of or objections to personal jurisdiction with respect thereto. The Company represents and warrants that such agent has agreed to act as the Company’s agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect.

 

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(c)            Each of the Selling Shareholders (with exception of the Goldman Sachs Entities (as defined below)) hereby irrevocably appoints Cogency Global Inc., with offices at 122 East 42nd Street, 18th Floor New York, NY 10168 as its agent for service of process in any Related Proceeding and agrees that service of process in any such Related Proceeding may be made upon it at the office of such agent. The Goldman Sachs Entities hereby irrevocably appoint Goldman Sachs & Co. LLC, with offices at 200 West Street New York, NY 10282 as their agent for service of process in any Related Proceeding and agree that service of process in any such Related Proceeding may be made upon them at the office of such agent. Each of the Selling Shareholders waives, to the fullest extent permitted by law, any other requirements of or objections to personal jurisdiction with respect thereto. Each of the Selling Shareholders represents and warrants that such agent has agreed to act as the Selling Shareholders’ agent for service of process, and Each of the Selling Shareholders agrees to take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect.

 

13.           Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder into any currency other than United States dollars, the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Underwriters could purchase United States dollars with such other currency in The City of New York on the business day preceding that on which final judgment is given. The obligation of the Company or any Selling Shareholder with respect to any sum due from it to any Underwriter or any person controlling any Underwriter shall, notwithstanding any judgment in a currency other than United States dollars, not be discharged until the first business day following receipt by such Underwriter or controlling person of any sum in such other currency, and only to the extent that such Underwriter or controlling person may in accordance with normal banking procedures purchase United States dollars with such other currency. If the United States dollars so purchased are less than the sum originally due to such Underwriter or controlling person hereunder, the Company and each of the Selling Shareholders agrees as a separate obligation and notwithstanding any such judgment, to indemnify such Underwriter or controlling person against such loss. If the United States dollars so purchased are greater than the sum originally due to such Underwriter or controlling person hereunder, such Underwriter or controlling person agrees to pay to the Company or the relevant Selling Shareholder(s), as applicable, an amount equal to the excess of the dollars so purchased over the sum originally due to such Underwriter or controlling person hereunder.

 

14.           [Section Omitted]

 

15.           Termination. The Underwriters may terminate this Agreement by notice given by the Representatives to the Company, if after the execution and delivery of this Agreement and prior to or on the Closing Date or any Option Closing Date, as the case may be, (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of the New York Stock Exchange, the NYSE American, the NASDAQ Global Market, the Moscow Exchange or other relevant exchanges, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a material disruption in securities settlement, payment or clearance services in the United States or other relevant jurisdiction shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal or New York State or relevant foreign country authorities or (v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets, currency exchange rates or controls or any calamity or crisis that, in the Representatives’ judgment, is material and adverse and which, singly or together with any other event specified in this clause (v), makes it, in the Representatives’ judgment, impracticable or inadvisable to proceed with the offer, sale or delivery of the ADSs on the terms and in the manner contemplated in the Time of Sale Prospectus or the Prospectus.

 

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16.           Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.

 

If, on the Closing Date or an Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase ADSs that it has or they have agreed to purchase hereunder on such date, and the aggregate number of ADSs which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the ADSs to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm ADSs set forth opposite their respective names in Schedule II bears to the aggregate number of Firm ADSs set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Representatives may specify, to purchase the ADSs which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of ADSs that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 16 by an amount in excess of one-ninth of such number of ADSs without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm ADSs and the aggregate number of Firm ADSs with respect to which such default occurs is more than one-tenth of the aggregate number of Firm ADSs to be purchased on such date, and arrangements satisfactory to the Representatives, the Company and the Selling Shareholders for the purchase of such Firm ADSs are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter, the Company or the Selling Shareholders. In any such case either the Representatives or the relevant Sellers shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, in the Time of Sale Prospectus, in the Prospectus or in any other documents or arrangements may be effected. If, on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Optional ADSs and the aggregate number of Optional ADSs with respect to which such default occurs is more than one-tenth of the aggregate number of Optional ADSs to be purchased on such Option Closing Date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Optional ADSs to be sold on such Option Closing Date or (ii) purchase not less than the number of Optional ADSs that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.

 

35

 

 

If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of any Seller to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason any Seller shall be unable to perform its obligations under this Agreement, the Sellers will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder.

 

17.            Entire Agreement. (a) This Agreement, together with any contemporaneous written agreements and any prior written agreements (to the extent not superseded by this Agreement) that relate to the offering of the ADSs, represents the entire agreement between the Company and the Selling Shareholders, on the one hand, and the Underwriters, on the other, with respect to the preparation of any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, the conduct of the offering, and the purchase and sale of the ADSs.

 

(b)            The Company and each Selling Shareholder acknowledge that in connection with the offering of the ADSs: (i) the Underwriters have acted at arm’s length, are not agents of, and owe no fiduciary duties to, the Company, any of the Selling Shareholders or any other person, (ii) the Underwriters owe the Company and each Selling Shareholder only those duties and obligations set forth in this Agreement, any contemporaneous written agreements and prior written agreements (to the extent not superseded by this Agreement), if any, (iii) the Underwriters may have interests that differ from those of the Company and each Selling Shareholder, and (iv) none of the activities of the Underwriters in connection with the transactions contemplated herein constitutes a recommendation, investment advice, or solicitation of any action by the Underwriters with respect to any entity or natural person. The Company and each Selling Shareholder waive to the full extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the offering of the ADSs.

 

(c)            Each Selling Shareholder further acknowledges and agrees that, although the Underwriters may provide certain Selling Shareholders with certain Regulation Best Interest and Form CRS disclosures or other related documentation in connection with the offering, the Underwriters are not making a recommendation to any Selling Shareholder to participate in the offering or sell any ADSs at the Purchase Price, and nothing set forth in such disclosures or documentation is intended to suggest that any Underwriter is making such a recommendation.

 

36

 

 

18.            Recognition of the U.S. Special Resolution Regimes. (a) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.

 

(b)            In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.

 

(c)            In the event that ELQ Investors II Ltd, Stonebridge 2020 Offshore Holdings II, L.P., Stonebridge 2020, L.P. and/or West Street EMS Partners, SLP (together, “Goldman Sachs Entities” and, each, a “Relevant Shareholder”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of this Agreement (and any interest and obligation in or under, and any property securing, this Agreement) from a Relevant Shareholder will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement (and any such interest, obligation and property) were governed by the laws of the United States or a state of the United States.

 

(d)            In the event a Relevant Shareholder or any of its BHC Act Affiliates becomes subject to a proceeding under a U.S. Special Resolution Regime, any Default Rights under this Agreement that may be exercised against a Relevant Shareholder are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.

 

For purposes of this Section a “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k). “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). “Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable. “U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.

 

37

 

 

19.            Counterparts. This Agreement may be signed in counterparts (which may include counterparts delivered by any standard form of telecommunication), each of which shall be an original and all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

20.            Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.

 

21.            Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.

 

22.            Notices. All communications hereunder shall be in writing and effective only upon receipt and if to the Underwriters shall be delivered, mailed or sent to Morgan Stanley & Co. LLC at 1585 Broadway, New York, New York 10036, Attention: Equity Syndicate Desk, with a copy to the Legal Department; to Goldman Sachs International at 200 Street New York, New York 10282, Attention: [Registration Department] and J.P. Morgan Securities LLC at J.P. Morgan Securities LLC, 383 Madison Avenue New York, New York 10179, Attention: [Equity Syndicate Desk] (fax: (212) 622-8358); and if to the Company shall be delivered, mailed or sent to the address of the Company specified in the Registration Statement, and a copy shall be mailed or sent to: [●] ;and if to the Selling Shareholders shall be delivered, mailed or sent to [●].

 

38

 

 

  Very truly yours,
   
  CIAN PLC
   
  By:  
    Name:  
    Title:  

 

39

 

 

  The Selling Shareholders named in Schedule I hereto, acting severally
   
By:  
    Attorney-in-Fact

 

40

 

 

Accepted as of the date hereof  
   
Morgan Stanley & Co. LLC  
Goldman Sachs International  
J.P. Morgan Securities LLC  

 

Acting severally on behalf of themselves and the several Underwriters named in Schedule II hereto

 

By: Morgan Stanley & Co. LLC  
     
By:    
  Name:    
  Title:    

 

By: Goldman Sachs International  
     
By:    
  Name:    
  Title:    

 

By: J.P. Morgan Securities LLC  
     
By:    
  Name:    
  Title:    

 

41

 

 

Schedule I

 

Selling Shareholder   Number of Firm ADSs To
Be Sold 		 
Ronder Investments Limited      
Speedtime Trading Limited        
Onlypiece Trading Limited        
ELQ Investors II Ltd        
Stonebridge
2020 Offshore Holdings II, L.P 		       
StoneBridge 2020, L.P.        
West Street EMS Partners, SLP        
MPOC Technologies Ltd.        
JOOX Ltd.        
Total:        

 

I-1

 

Schedule II

 

Underwriter   Number of Firm ADSs To
Be Purchased
Morgan Stanley & Co. LLC    
Goldman Sachs International    
J.P. Morgan Securities LLC    
BofA Securities, Inc.    
Renaissance Securities (Cyprus) Limited    
VTB Capital plc    
AO Raiffeisenbank    
Alfa Capital Markets Ltd    
Total:    

 

II-2

 

 

SCHEDULE III

 

Time of Sale Prospectus

 

1. Preliminary Prospectus issued [date]

 

2. [identify all free writing prospectuses filed by the Company under Rule 433(d) of the Securities Act]

 

3. [free writing prospectus containing a description of terms that does not reflect final terms, if the Time of Sale Prospectus does not include a final term sheet]

 

4. [orally communicated pricing information such as price per share and size of offering if a Rule 134 pricing term sheet is used at the time of sale instead of a pricing term sheet filed by the Company under Rule 433(d) as a free writing prospectus]

 

5. [free writing prospectus: Russian retail slides]

 

III-1

 

 

EXHIBIT A

 

FORM OF LOCK-UP AGREEMENT

 

________, 2021

 

Morgan Stanley & Co. LLC

Goldman Sachs International

J.P. Morgan Securities LLC

 

c/o Morgan Stanley & Co. LLC
    1585 Broadway
    New York, New York 10036

 

c/o Goldman Sachs International
    Plumtree Court
    25 Shoe Lane
    London EC4A 4AU
    United Kingdom

 

c/o J.P. Morgan Securities LLC
    383 Madison Avenue
    New York, New York 10179

 

Ladies and Gentlemen:

 

The undersigned understands that Morgan Stanley & Co. LLC, Goldman Sachs International and J.P. Morgan Securities LLC (collectively, the “Representatives”) propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) with Cian Plc, a company incorporated under the laws of the Republic of Cyprus (the “Company”) and each selling shareholder named therein (the "Selling Shareholders") providing for the public offering (the “Public Offering”) by the several Underwriters, including the Representatives (the “Underwriters”), of American Depositary Shares (the “ADSs”) representing Ordinary Shares (the “Ordinary Shares”) of the Company.

 

To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of the Representatives on behalf of the Underwriters, it will not and will not cause any direct or indirect affiliate to, and will not publicly disclose an intention to, during the period commencing on the date hereof and ending 180 days after the date of the final prospectus (the “Restricted Period”) relating to the Public Offering (the “Prospectus”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any ADSs or Ordinary Shares beneficially owned (as such term is used in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), by the undersigned or any other securities so owned convertible into or exercisable or exchangeable for ADSs or Ordinary Shares or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of ADSs or Ordinary Shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of ADSs, Ordinary Shares or such other securities, in cash or otherwise.

 

A-1

 

 

The foregoing sentence shall not apply to (i) the registration of the offer and sale of the ADSs and the sale of such ADSs to the Underwriters, in each case, as contemplated by the Underwriting Agreement or (ii) the deposit of Ordinary Shares with the Depositary (as defined in the Underwriting Agreement), in exchange for the issuance of ADSs, or the cancellation of ADSs in exchange for the issuance of Ordinary Shares, provided that such ADSs or Ordinary Shares issued pursuant to this clause (ii) held by the undersigned shall remain subject to the terms of this agreement.

 

In addition, the foregoing restrictions shall not apply to:

 

(a) transfers pursuant to a will, other testamentary document or intestate succession to the legal representatives, heirs, beneficiaries or immediate family members of the undersigned, or to any immediate family member or other dependent of the undersigned;

 

(b) transfers to any trust, partnership, limited liability company or other entity for the direct or indirect benefit of the undersigned or the immediate family of the undersigned;

 

(c) distributions to limited partners or stockholders of the undersigned;

 

(d) transfers to the undersigned’s affiliates, subsidiaries, partners, members, shareholders or to any investment fund or other entity controlled or managed by the undersigned;

 

(e) transfers to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (a) through (d) above;

 

(f) transfers which occur by operation of law or pursuant to an order of a court, including pursuant to a domestic relations order or in connection with a divorce settlement, or to comply with any regulations related to the undersigned’s ownership of Ordinary Shares or ADSs;

 

(g) transfers to the Company or its affiliates upon death, disability or termination of employment, in each case, of the undersigned pursuant to an employee benefit plan, in connection with any contractual arrangement in effect on the date of this agreement that provides for the repurchase of Ordinary Shares or ADSs by the Company, or in connection with the termination of employment with the Company;

 

(h) exercise of outstanding options and distributions or transfers to settle restricted stock or other equity awards pursuant to plans disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus; provided that any securities received upon such exercise, vesting or settlement shall be bound in writing by the restrictions set forth herein;

 

(i) transfers to the Company or its subsidiaries in connection with the vesting, settlement, or exercise of restricted stock units, options, or other rights to purchase shares of Common Stock or ADSs (including, in each case, by way of “net” or “cashless” exercise), including for the payment of exercise price and tax and remittance payments due as a result of the vesting, settlement, or exercise of such restricted stock units, options, warrants or rights; provided that any such shares of Common Stock or ADSs received upon such exercise, vesting or settlement shall be bound in writing by the restrictions set forth herein, and provided further that any such restricted stock units, options, or rights are held by the undersigned pursuant to an agreement or equity award granted under a stock incentive plan or other equity award plan, each such agreement or plan which is disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus;

 

A-2

 

 

(j) sales, transfers or other dispositions (one or multiple) pursuant to a bona fide third-party tender offer, merger, strategic sale, consolidation or other similar transaction involving a change of control of the Company in which the acquiring party, or a group of parties, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of more than 50% of the total voting power of the voting stock of the Company following such transaction; provided that all of the undersigned’s Ordinary Shares or ADSs subject to this agreement that are not so transferred, sold, tendered or otherwise disposed of remain subject to this agreement; provided, further, that in the event that such tender offer, merger, consolidation or other similar transaction is not completed, the undersigned’s Ordinary Shares or ADSs shall remain subject to the provisions of this agreement;

 

(k) transfers to the Company in connection with the repurchase of Ordinary Shares or ADSs issued pursuant to an employee benefit plan, in connection with any contractual arrangement in effect on the date of this agreement that provides for the repurchase of Ordinary Shares or ADSs by the Company, or in connection with the termination of employment with the Company;

 

(l) transactions relating to securities acquired in open market transactions after the completion of the public offering;

 

(m) the establishment of a trading plan on behalf of a shareholder, officer or director of the Company pursuant to Rule 10b5-1 under the Exchange Act for the transfer of ADSs or Ordinary Shares, provided that such plan does not provide for the transfer of ADSs or Ordinary Shares during the Restricted Period;

 

(n) transfers made with the prior written consent of the Representatives, on behalf of the Underwriters;

 

(o) a bona fide gift or gifts; and

 

(p) any demands or requests for, or exercise of any right with respect to, or taking of any action in preparation of, the registration by the Company under the Securities Act of 1933, as amended (the “Securities Act”) of the undersigned’s Ordinary Shares or ADSs, in each case pursuant to the Registration Rights Agreement with the Company to which the undersigned is a party; provided that (i) no such demand, request, exercise of right or action shall be publicly disclosed by the undersigned, (ii) no transfer of the undersigned’s Ordinary Shares or ADSs registered pursuant to the exercise of any such right shall occur, and (iii) no registration statement shall be confidentially submitted or publicly filed with respect to any Ordinary Shares or ADSs, in each case, during the Restricted Period,

 

A-3

 

 

provided that in the case of each transfer or distribution pursuant to clauses (a) through (e) and (o) above, each donee, trustee, distributee or transferee, as the case may be, agrees to be bound in writing by the restrictions set forth herein. In addition, (1) with respect to clauses (a) through (e) above, it shall be a condition to such transfer that such transfer shall not involve a disposition for value and (2) with respect to clauses (a) through (e) and (l) above, no filing by the undersigned or any other party under the Exchange Act or other public announcement shall be required or shall be made voluntarily during the Restricted Period. For purposes of this agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. The undersigned now has, and, except as contemplated by clauses (a) through (p) above, for the duration of this agreement will have, good and marketable title to the undersigned’s Ordinary Shares, free and clear of all liens, encumbrances, and claims whatsoever.

 

The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s ADSs or Ordinary Shares except in compliance with the foregoing restrictions.

 

[Notwithstanding anything herein to the contrary, Goldman Sachs & Co. LLC and its affiliates, other than the undersigned, may engage in brokerage, investment advisory, financial advisory, anti-raid advisory, merger advisory, financing, asset management, trading, market making, arbitrage, principal investing and other similar activities conducted in the ordinary course of their affiliates’ business.]1

 

If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing restrictions shall be equally applicable to any issuer-directed ADSs the undersigned may purchase in the offering.

 

If the undersigned is an officer or director of the Company, (i) the Representatives agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of ADSs or Ordinary Shares, the Representatives will notify the Company of the impending release or waiver, and (ii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by the Representatives hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.

 

The undersigned understands that the Company and the Underwriters are relying upon this agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns. 

 

 

1 To be included with respect to the lock-up agreement for ELQ Investors II Ltd, Stonebridge 2020 Offshore Holdings II, L.P., Stonebridge 2020, L.P. and West Street EMS Partners, SLP.

 

A-4

 

 

The undersigned acknowledges and agrees that none of the Underwriters has provided any recommendation or investment or other advice to the undersigned with respect to this agreement or the subject matter hereof, nor have the Underwriters solicited any action from the undersigned with respect to the Public Offering of the ADSs and the undersigned has consulted their own legal, accounting, financial, regulatory and tax advisors with respect to this agreement and the subject matter hereof to the extent the undersigned has deemed appropriate. The undersigned further acknowledges and agrees that, although the Underwriters may provide certain Regulation Best Interest and Form CRS disclosures or other related documentation to you in connection with the Public Offering, the Underwriters are not making a recommendation to you to participate in the Public Offering or sell any ADSs at the price determined in the Public Offering or with respect to this agreement or the subject matter hereof, and nothing set forth in such disclosures or documentation is intended to suggest that any Underwriter is making such a recommendation.

 

This agreement shall be terminated and the undersigned shall be released from its obligations hereunder upon the earlier of: (i) the date the Registration Statement filed with the U.S. Securities and Exchange Commission with respect to the Public Offering is withdrawn if prior to the execution of the Underwriting Agreement, (ii) the date on which for any reason the Underwriting Agreement is terminated (other than the provisions thereof that survive termination) prior to payment for and delivery of the ADSs to be sold thereunder (other than pursuant to the Underwriters’ over-allotment option), (iii) the Company notifies the Representatives in writing prior to the execution of the Underwriting Agreement that it does not intend to proceed with the offering or (iv) December 31, 2021, if the offering is not completed by such date.

 

Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.

 

This agreement may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com or www.echosign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

This agreement, and any claim, controversy or dispute arising under or related to this agreement, shall be governed by and construed in accordance with the laws of the State of New York.

 

A-5

 

 

  Very truly yours,
   
   
    (Name)
   
   
    (Address)

 

A-6

 

 

EXHIBIT B

 

FORM OF WAIVER OF LOCK-UP

 

_____________, 20__

 

[Name and Address of
Officer or Director
Requesting Waiver]

 

Dear Mr./Ms. [Name]:

 

This letter is being delivered to Morgan Stanley & Co. LLC, Goldman Sachs International and J.P. Morgan Securities LLC (collectively, the “Representatives”) in connection with the offering by Cian Plc, a company incorporated under the laws of the Republic of Cyprus (the “Company”), of [●] American Depositary Shares (the “ADSs”) representing [●] Ordinary Shares (the “Ordinary Shares”) (par value [●]) of the Company and the lock-up agreement dated [●], 2021 (the “Lock-up Agreement”), executed by you in connection with such offering, and your request for a [waiver][release] dated ____, 20__, with respect to ____ Ordinary Shares.

 

The Representatives hereby agree to [waive][release] the transfer restrictions set forth in the Lock-up Agreement, but only with respect to Shares, effective _____, 20__; provided, however, that such [waiver][release] is conditioned on the Company announcing the impending [waiver][release] by press release through a major news service at least two business days before effectiveness of such [waiver][release].. This letter will serve as notice to the Company of the impending [waiver][release].

 

Except as expressly [waived][released] hereby, the Lock-up Agreement shall remain in full force and effect.

 

[Signature page follows]

 

7

 

 

Very truly yours,

 

  Morgan Stanley & Co. LLC
Goldman Sachs International
  J.P. Morgan Securities LLC
   
  Acting severally on behalf of themselves
and the several Underwriters named in Schedule II hereto
   
  By: Morgan Stanley & Co. LLC
   
  By:  
    Name:
    Title:
   
  By: Goldman Sachs International
   
  By:  
    Name:
    Title:
   
  By: J.P. Morgan Securities LLC
   
  By:  
    Name:
    Title:

 

cc: Company

 

8

 

 

 

FORM OF PRESS RELEASE

 

CIAN PLC

 

[Date]

 

Cian Plc (the “Company”) announced today that Morgan Stanley & Co. LLC, Goldman Sachs International and J.P. Morgan Securities LLC, the lead book-running managers in the Company’s recent public sale of _____ American Depositary Shares (“ADSs”) is [waiving][releasing] a lock-up restriction with respect to ____ ADSs held by [certain officers or directors][an officer or director] of the Company. The [waiver][release] will take effect on ____, 20__ , and the ADSs may be sold on or after such date.

 

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

 

9

 

 

Exhibit 4.1

 

 

 

CIAN PLC

 

AND

 

THE BANK OF NEW YORK MELLON

 

As Depositary

 

AND

 

OWNERS AND HOLDERS OF AMERICAN DEPOSITARY SHARES

 

Deposit Agreement

 

__________, 2021

 

 

 

 

 

 

TABLE OF CONTENTS

 

ARTICLE 1. DEFINITIONS 1

SECTION 1.1. American Depositary Shares 1
SECTION 1.2. Commission 2
SECTION 1.3. Company 2
SECTION 1.4. Custodian 2
SECTION 1.5. Deliver; Surrender 2
SECTION 1.6. Deposit Agreement 3
SECTION 1.7. Depositary; Depositary’s Office 3
SECTION 1.8. Deposited Securities 3
SECTION 1.9. Disseminate 3
SECTION 1.10. Dollars 3
SECTION 1.11. DTC 4
SECTION 1.12. Foreign Registrar 4
SECTION 1.13. Holder 4
SECTION 1.14. Owner 4
SECTION 1.15. Receipts 4
SECTION 1.16. Registrar 4
SECTION 1.17. Replacement 4
SECTION 1.18. Restricted Securities 5
SECTION 1.19. Securities Act of 1933 5
SECTION 1.20. Shares 5
SECTION 1.21. SWIFT 5
SECTION 1.22. Termination Option Event 5

 

ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, DELIVERY, TRANSFER AND SURRENDER OF AMERICAN DEPOSITARY SHARES 6

SECTION 2.1. Form of Receipts; Registration and Transferability of American Depositary Shares 6
SECTION 2.2. Deposit of Shares 7
SECTION 2.3. Delivery of American Depositary Shares 8
SECTION 2.4. Registration of Transfer of American Depositary Shares; Combination and Split-up of Receipts; Interchange of Certificated and Uncertificated American Depositary Shares 9
SECTION 2.5. Surrender of American Depositary Shares and Withdrawal of Deposited Securities 9
SECTION 2.6. Limitations on Delivery, Registration of Transfer and Surrender of American Depositary Shares 10
SECTION 2.7. Lost Receipts, etc. 11

 

-i-

 

 

SECTION 2.8. Cancellation and Destruction of Surrendered Receipts 11
SECTION 2.9. DTC Direct Registration System and Profile Modification System. 12

 

ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS AND HOLDERS OF AMERICAN DEPOSITARY SHARES 12

SECTION 3.1. Filing Proofs, Certificates and Other Information 12
SECTION 3.2. Liability of Owner for Taxes 13
SECTION 3.3. Warranties on Deposit of Shares 13
SECTION 3.4. Disclosure of Interests 14

 

ARTICLE 4. THE DEPOSITED SECURITIES 14

SECTION 4.1. Cash Distributions 14
SECTION 4.2. Distributions Other Than Cash, Shares or Rights 15
SECTION 4.3. Distributions in Shares 16
SECTION 4.4. Rights 16
SECTION 4.5. Conversion of Foreign Currency 18
SECTION 4.6. Fixing of Record Date 19
SECTION 4.7. Voting of Deposited Shares 20
SECTION 4.8. Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities 20
SECTION 4.9. Reports 22
SECTION 4.10. Lists of Owners 22
SECTION 4.11. Withholding 22

 

ARTICLE 5. THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY 23

SECTION 5.1. Maintenance of Office and Register by the Depositary 23
SECTION 5.2. Prevention or Delay of Performance by the Company or the Depositary 24
SECTION 5.3. Obligations of the Depositary and the Company 25
SECTION 5.4. Resignation and Removal of the Depositary 26
SECTION 5.5. The Custodians 27
SECTION 5.6. Notices and Reports 27
SECTION 5.7. Distribution of Additional Shares, Rights, etc. 28
SECTION 5.8. Indemnification 28
SECTION 5.9. Charges of Depositary 29
SECTION 5.10. Retention of Depositary Documents 30
SECTION 5.11. Exclusivity 30
SECTION 5.12. Information for Regulatory Compliance 30

 

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ARTICLE 6. AMENDMENT AND TERMINATION 31

SECTION 6.1. Amendment 31
SECTION 6.2. Termination 31

 

ARTICLE 7. MISCELLANEOUS 32

SECTION 7.1. Counterparts; Signatures; Delivery 32
SECTION 7.2. No Third Party Beneficiaries 33
SECTION 7.3. Severability 33
SECTION 7.4. Owners and Holders as Parties; Binding Effect 33
SECTION 7.5. Notices 33
SECTION 7.6. Appointment of Agent for Service of Process; Submission to Jurisdiction; Jury Trial Waiver 34
SECTION 7.7. Waiver of Immunities 35
SECTION 7.8. Governing Law 36

 

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DEPOSIT AGREEMENT

 

DEPOSIT AGREEMENT dated as of __________, 2021 among CIAN PLC, a company incorporated under the laws of Cyprus (herein called the Company), THE BANK OF NEW YORK MELLON, a New York banking corporation (herein called the Depositary), and all Owners and Holders (each as hereinafter defined) from time to time of American Depositary Shares issued hereunder.

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to provide, as set forth in this Deposit Agreement, for the deposit of Shares (as hereinafter defined) of the Company from time to time with the Depositary or with the Custodian (as hereinafter defined) under this Deposit Agreement, for the creation of American Depositary Shares representing the Shares so deposited and for the execution and delivery of American Depositary Receipts evidencing the American Depositary Shares; and

 

WHEREAS, the American Depositary Receipts are to be substantially in the form of Exhibit A annexed to this Deposit Agreement, with appropriate insertions, modifications and omissions, as set forth in this Deposit Agreement;

 

NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties hereto as follows:

 

ARTICLE 1.     DEFINITIONS

 

The following definitions shall for all purposes, unless otherwise clearly indicated, apply to the respective terms used in this Deposit Agreement:

 

SECTION 1.1.     American Depositary Shares.

 

The term “American Depositary Shares” shall mean the securities created under this Deposit Agreement representing rights with respect to the Deposited Securities. American Depositary Shares may be certificated securities evidenced by Receipts or uncertificated securities. The form of Receipt annexed as Exhibit A to this Deposit Agreement shall be the prospectus required under the Securities Act of 1933 for sales of both certificated and uncertificated American Depositary Shares. Except for those provisions of this Deposit Agreement that refer specifically to Receipts, all the provisions of this Deposit Agreement shall apply to both certificated and uncertificated American Depositary Shares.

  

Each American Depositary Share shall represent the number of Shares specified in Exhibit A to this Deposit Agreement, except that, if there is a distribution upon Deposited Securities covered by Section 4.3, a change in Deposited Securities covered by Section 4.8 with respect to which additional American Depositary Shares are not delivered or a sale of Deposited Securities under Section 3.2 or 4.8, each American Depositary Share shall thereafter represent the amount of Shares or other Deposited Securities that are then on deposit per American Depositary Share after giving effect to that distribution, change or sale.

 

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SECTION 1.2.     Commission.

 

The term “Commission” shall mean the Securities and Exchange Commission of the United States or any successor governmental agency in the United States.

 

SECTION 1.3.     Company.

 

The term “Company” shall mean Cian plc, a company incorporated under the laws of Cyprus, and its successors.

 

SECTION 1.4.     Custodian.

 

The term “Custodian” shall mean The Bank of New York Mellon, acting through an office located in the United Kingdom, as custodian for the Depositary for the purposes of this Deposit Agreement, and any other firm or corporation the Depositary appoints under Section 5.5 as a substitute or additional custodian under this Deposit Agreement, and shall also mean all of them collectively.

  

SECTION 1.5.     Deliver; Surrender.

  

(a)            The term “deliver”, or its noun form, when used with respect to Shares or other Deposited Securities, shall mean (i) book-entry transfer of those Shares or other Deposited Securities to an account maintained by an institution authorized under applicable law to effect transfers of such securities designated by the person entitled to that delivery or (ii) physical transfer of certificates evidencing those Shares or other Deposited Securities registered in the name of, or duly endorsed or accompanied by proper instruments of transfer to, the person entitled to that delivery.

  

(b)            The term “deliver”, or its noun form, when used with respect to American Depositary Shares, shall mean (i) registration of those American Depositary Shares in the name of DTC or its nominee and book-entry transfer of those American Depositary Shares to an account at DTC designated by the person entitled to that delivery, (ii) registration of those American Depositary Shares not evidenced by a Receipt on the books of the Depositary in the name requested by the person entitled to that delivery and mailing to that person of a statement confirming that registration or (iii) if requested by the person entitled to that delivery, execution and delivery at the Depositary’s Office to the person entitled to that delivery of one or more Receipts evidencing those American Depositary Shares registered in the name requested by that person.

 

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(c)            The term “surrender”, when used with respect to American Depositary Shares, shall mean (i) one or more book-entry transfers of American Depositary Shares to the DTC account of the Depositary, (ii) delivery to the Depositary at its Office of an instruction to surrender American Depositary Shares not evidenced by a Receipt or (iii) surrender to the Depositary at its Office of one or more Receipts evidencing American Depositary Shares.

 

SECTION 1.6.     Deposit Agreement.

 

The term “Deposit Agreement” shall mean this Deposit Agreement, as it may be amended from time to time in accordance with the provisions of this Deposit Agreement.

 

SECTION 1.7.     Depositary; Depositary’s Office.

 

The term “Depositary” shall mean The Bank of New York Mellon, a New York banking corporation, and any successor as depositary under this Deposit Agreement. The term “Office”, when used with respect to the Depositary, shall mean the office at which its depositary receipts business is administered, which, at the date of this Deposit Agreement, is located at 240 Greenwich Street, New York, New York 10286.

  

SECTION 1.8.     Deposited Securities.

 

The term “Deposited Securities” as of any time shall mean Shares at such time deposited or deemed to be deposited under this Deposit Agreement, including without limitation, Shares that have not been successfully delivered upon surrender of American Depositary Shares, and any and all other securities, property and cash received by the Depositary or the Custodian in respect of Deposited Securities and at that time held under this Deposit Agreement.

  

SECTION 1.9.     Disseminate.

  

The term “Disseminate,” when referring to a notice or other information to be sent by the Depositary to Owners, shall mean (i) sending that information to Owners in paper form by mail or another means or (ii) with the consent of Owners, another procedure that has the effect of making the information available to Owners, which may include (A) sending the information by electronic mail or electronic messaging or (B) sending in paper form or by electronic mail or messaging a statement that the information is available and may be accessed by the Owner on an Internet website and that it will be sent in paper form upon request by the Owner, when that information is so available and is sent in paper form as promptly as practicable upon request.

 

SECTION 1.10.   Dollars.

 

The term “Dollars” shall mean United States dollars.

 

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SECTION 1.11.   DTC.

 

The term “DTC” shall mean The Depository Trust Company or its successor.

 

SECTION 1.12.   Foreign Registrar.

 

The term “Foreign Registrar” shall mean the entity that carries out the duties of registrar for the Shares and any other agent of the Company for the transfer and registration of Shares, including, without limitation, any securities depository for the Shares.

  

SECTION 1.13.   Holder.

 

The term “Holder” shall mean any person holding a Receipt or a security entitlement or other interest in American Depositary Shares, whether for its own account or for the account of another person, but that is not the Owner of that Receipt or those American Depositary Shares.

  

SECTION 1.14.   Owner.

  

The term “Owner” shall mean the person in whose name American Depositary Shares are registered on the books of the Depositary maintained for that purpose.

  

SECTION 1.15.   Receipts.

 

The term “Receipts” shall mean the American Depositary Receipts issued under this Deposit Agreement evidencing certificated American Depositary Shares, as the same may be amended from time to time in accordance with the provisions of this Deposit Agreement.

 

SECTION 1.16.   Registrar.

 

The term “Registrar” shall mean any corporation or other entity that is appointed by the Depositary to register American Depositary Shares and transfers of American Depositary Shares as provided in this Deposit Agreement.

  

SECTION 1.17.   Replacement.

  

The term “Replacement” shall have the meaning assigned to it in Section 4.8.

  

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SECTION 1.18.   Restricted Securities.

 

The term “Restricted Securities” shall mean Shares that (i) are “restricted securities,” as defined in Rule 144 under the Securities Act of 1933, except for Shares that could be resold in reliance on Rule 144 without any conditions, (ii) are beneficially owned by an officer, director (or person performing similar functions) or other affiliate of the Company, (iii) otherwise would require registration under the Securities Act of 1933 in connection with the public offer and sale thereof in the United States or (iv) are subject to other restrictions on sale or deposit under the laws of Cyprus, a shareholder agreement or the articles of association or similar document of the Company.

  

SECTION 1.19.   Securities Act of 1933.

 

The term “Securities Act of 1933” shall mean the United States Securities Act of 1933, as from time to time amended.

 

SECTION 1.20.   Shares.

  

The term “Shares” shall mean ordinary shares of the Company that are validly issued and outstanding, fully paid and nonassessable and that were not issued in violation of any pre-emptive or similar rights of the holders of outstanding securities of the Company; provided, however, that, if there shall occur any change in nominal or par value, a split-up or consolidation or any other reclassification or, upon the occurrence of an event described in Section 4.8, an exchange or conversion in respect of the Shares of the Company, the term “Shares” shall thereafter also mean the successor securities resulting from such change in nominal value, split-up or consolidation or such other reclassification or such exchange or conversion.

  

SECTION 1.21.   SWIFT.

  

The term “SWIFT” shall mean the financial messaging network operated by the Society for Worldwide Interbank Financial Telecommunication, or its successor.

 

SECTION 1.22.   Termination Option Event.

  

The term “Termination Option Event” shall mean any of the following events or conditions:

 

(i)          the Company institutes proceedings to be adjudicated as bankrupt or insolvent, consents to the institution of bankruptcy or insolvency proceedings against it, files a petition or answer or consent seeking reorganization or relief under any applicable law in respect of bankruptcy or insolvency, consents to the filing of any petition of that kind or to the appointment of a receiver, liquidator, assignee, trustee, custodian or sequestrator (or other similar official) of it or any substantial part of its property or makes an assignment for the benefit of creditors, or if information becomes publicly available indicating that unsecured claims against the Company are not expected to be paid;

 

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(ii)         the American Depositary Shares are delisted from a stock exchange in the United States on which the American Depositary Shares were listed and, 30 calendar days after that delisting, the American Depositary Shares have not been listed on another stock exchange in the United States and the Company has not applied to list the American Depositary Shares on any other stock exchange, nor is there a symbol available for over-the-counter trading of the American Depositary Shares in the United States;

  

(iii)        the Depositary has received notice of facts that indicate, or otherwise has reason to believe, that the American Depositary Shares have become, or with the passage of time will become, ineligible for registration on Form F-6 under the Securities Act of 1933; or

  

(iv)        an event or condition that is defined as a Termination Option Event in Section 4.1, 4.2 or 4.8.

 

  ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, DELIVERY, TRANSFER AND SURRENDER OF AMERICAN DEPOSITARY SHARES

 

SECTION 2.1.     Form of Receipts; Registration and Transferability of American Depositary Shares.

 

Definitive Receipts shall be substantially in the form set forth in Exhibit A to this Deposit Agreement, with appropriate insertions, modifications and omissions, as permitted under this Deposit Agreement. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose, unless that Receipt has been (i) executed by the Depositary by the manual signature of a duly authorized officer of the Depositary or (ii) executed by the facsimile signature of a duly authorized officer of the Depositary and countersigned by the manual signature of a duly authorized signatory of the Depositary or the Registrar or a co-registrar. The Depositary shall maintain books on which (x) each Receipt so executed and delivered as provided in this Deposit Agreement and each transfer of that Receipt and (y) all American Depositary Shares delivered as provided in this Deposit Agreement and all registrations of transfer of American Depositary Shares, shall be registered. A Receipt bearing the facsimile signature of a person that was at any time a proper officer of the Depositary shall, subject to the other provisions of this paragraph, bind the Depositary, even if that person was not a proper officer of the Depositary on the date of issuance of that Receipt.

 

The Receipts and statements confirming registration of American Depositary Shares may have incorporated in or attached to them such legends or recitals or modifications not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary or required to comply with any applicable law or regulations thereunder or with the rules and regulations of any securities exchange upon which American Depositary Shares may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts and American Depositary Shares are subject by reason of the date of issuance of the underlying Deposited Securities or otherwise.

 

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American Depositary Shares evidenced by a Receipt, when the Receipt is properly endorsed or accompanied by proper instruments of transfer, shall be transferable as certificated registered securities under the laws of the State of New York. American Depositary Shares not evidenced by Receipts shall be transferable as uncertificated registered securities under the laws of the State of New York. The Depositary, notwithstanding any notice to the contrary, may treat the Owner of American Depositary Shares as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all other purposes, and neither the Depositary nor the Company shall have any obligation or be subject to any liability under this Deposit Agreement to any Holder of American Depositary Shares (but only to the Owner of those American Depositary Shares).

  

SECTION 2.2.     Deposit of Shares.

 

Subject to the terms and conditions of this Deposit Agreement, Shares or evidence of rights to receive Shares may be deposited under this Deposit Agreement by delivery thereof to any Custodian, accompanied by any appropriate instruments or instructions for transfer, or endorsement, in form satisfactory to the Custodian.

 

As conditions of accepting Shares for deposit, the Depositary may require (i) any certification required by the Depositary or the Custodian in accordance with the provisions of this Deposit Agreement, (ii) a written order directing the Depositary to deliver to, or upon the written order of, the person or persons stated in that order American Depositary Shares representing those deposited Shares, (iii) evidence satisfactory to the Depositary that those Shares have been re-registered in the books of the Company or the Foreign Registrar in the name of the Depositary, a Custodian or a nominee of the Depositary or a Custodian, (iv) evidence satisfactory to the Depositary that any necessary approval for the transfer or deposit has been granted by any governmental body in each applicable jurisdiction and (v) an agreement or assignment, or other instrument satisfactory to the Depositary, that provides for the prompt transfer to the Custodian of any dividend, or right to subscribe for additional Shares or to receive other property, that any person in whose name those Shares are or have been recorded may thereafter receive upon or in respect of those Shares, or, in lieu thereof, such agreement of indemnity or other agreement as shall be satisfactory to the Depositary.

  

The Depositary shall refuse, and shall instruct the Custodian to refuse, to accept Shares for deposit if the Depositary has received written notice from the Company that the Company has restricted transfer of those Shares under the Company’s memorandum and articles of association, any agreement, or any applicable laws or that the deposit would result in any violation of the Company’s memorandum and articles of association, any agreement, or any applicable laws.

 

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At the request and risk and expense of a person proposing to deposit Shares, and for the account of that person, the Depositary may receive certificates for Shares to be deposited, together with the other instruments specified in this Section, for the purpose of forwarding those Share certificates to the Custodian for deposit under this Deposit Agreement.

 

The Depositary shall instruct each Custodian that, upon each delivery to a Custodian of a certificate or certificates for Shares to be deposited under this Deposit Agreement, together with the other documents specified in this Section, that Custodian shall, as soon as transfer and recordation can be accomplished, present that certificate or those certificates to the Company or the Foreign Registrar, if applicable, for transfer and recordation of the Shares being deposited in the name of the Depositary or its nominee or that Custodian or its nominee.

 

Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of the Depositary or at such other place or places as the Depositary shall determine.

 

SECTION 2.3.     Delivery of American Depositary Shares.

  

The Depositary shall instruct each Custodian that, upon receipt by that Custodian of any deposit pursuant to Section 2.2, together with the other documents or evidence required under that Section, that Custodian shall notify the Depositary of that deposit and the person or persons to whom or upon whose written order American Depositary Shares are deliverable in respect thereof. Upon receiving a notice of a deposit from a Custodian, or upon the receipt of Shares or evidence of the right to receive Shares by the Depositary, the Depositary, subject to the terms and conditions of this Deposit Agreement, shall deliver, to or upon the order of the person or persons entitled thereto, the number of American Depositary Shares issuable in respect of that deposit, but only upon payment to the Depositary of the fees and expenses of the Depositary for the delivery of those American Depositary Shares as provided in Section 5.9, and of all taxes and governmental charges and fees payable in connection with that deposit and the transfer of the deposited Shares. However, the Depositary shall deliver only whole numbers of American Depositary Shares.

 

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SECTION 2.4.     Registration of Transfer of American Depositary Shares; Combination and Split-up of Receipts; Interchange of Certificated and Uncertificated American Depositary Shares.

 

The Depositary, subject to the terms and conditions of this Deposit Agreement, shall register a transfer of American Depositary Shares on its transfer books upon (i) in the case of certificated American Depositary Shares, surrender of the Receipt evidencing those American Depositary Shares, by the Owner or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer or (ii) in the case of uncertificated American Depositary Shares, receipt from the Owner of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in Section 2.9), and, in either case, duly stamped as may be required by the laws of the State of New York and of the United States of America. Upon registration of a transfer, the Depositary shall deliver the transferred American Depositary Shares to or upon the order of the person entitled thereto.

  

The Depositary, subject to the terms and conditions of this Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of American Depositary Shares requested, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered.

  

The Depositary, upon surrender of certificated American Depositary Shares for the purpose of exchanging for uncertificated American Depositary Shares, shall cancel the Receipt evidencing those certificated American Depositary Shares and send the Owner a statement confirming that the Owner is the owner of the same number of uncertificated American Depositary Shares. The Depositary, upon receipt of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in Section 2.9) from the Owner of uncertificated American Depositary Shares for the purpose of exchanging for certificated American Depositary Shares, shall cancel those uncertificated American Depositary Shares and register and deliver to the Owner a Receipt evidencing the same number of certificated American Depositary Shares.

 

The Depositary may appoint one or more co-transfer agents for the purpose of effecting registration of transfers of American Depositary Shares and combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Owners or persons entitled to American Depositary Shares and will be entitled to protection and indemnity to the same extent as the Depositary.

  

SECTION 2.5.     Surrender of American Depositary Shares and Withdrawal of Deposited Securities.

  

Upon surrender of American Depositary Shares for the purpose of withdrawal of the Deposited Securities represented thereby and payment of the fee of the Depositary for the surrender of American Depositary Shares as provided in Section 5.9 and payment of all taxes and governmental charges payable in connection with that surrender and withdrawal of the Deposited Securities, and subject to the terms and conditions of this Deposit Agreement, the Owner of those American Depositary Shares shall be entitled to delivery (to the extent delivery can then be lawfully and practicably made), to or as instructed by that Owner, of the amount of Deposited Securities at the time represented by those American Depositary Shares, but not any money or other property as to which a record date for distribution to Owners has passed (since money or other property of that kind will be delivered or paid on the scheduled payment date to the Owner as of that record date), and except that the Depositary shall not be required to accept surrender of American Depositary Shares for the purpose of withdrawal to the extent it would require delivery of a fraction of a Deposited Security. That delivery shall be made, as provided in this Section, without unreasonable delay.

 

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As a condition of accepting a surrender of American Depositary Shares for the purpose of withdrawal of Deposited Securities, the Depositary may require (i) that each surrendered Receipt be properly endorsed in blank or accompanied by proper instruments of transfer in blank and (ii) that the surrendering Owner execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be delivered to or upon the written order of a person or persons designated in that order.

 

Thereupon, the Depositary shall direct the Custodian to deliver, subject to Sections 2.6, 3.1 and 3.2, the other terms and conditions of this Deposit Agreement and local market rules and practices, to the surrendering Owner or to or upon the written order of the person or persons designated in the order delivered to the Depositary as above provided, the amount of Deposited Securities represented by the surrendered American Depositary Shares, and the Depositary may charge the surrendering Owner a fee and its expenses for giving that direction by cable (including SWIFT) or facsimile transmission.

 

If Deposited Securities are delivered physically upon surrender of American Depositary Shares for the purpose of withdrawal, that delivery will be made at the Custodian’s office, except that, at the request, risk and expense of an Owner surrendering American Depositary Shares for withdrawal of Deposited Securities, and for the account of that Owner, the Depositary shall direct the Custodian to forward any cash or other property comprising, and forward a certificate or certificates, if applicable, and other proper documents of title, if any, for, the Deposited Securities represented by the surrendered American Depositary Shares to the Depositary for delivery at the Depositary’s Office or to another address specified in the order received from the surrendering Owner.

 

SECTION 2.6.     Limitations on Delivery, Registration of Transfer and Surrender of American Depositary Shares.

 

As a condition precedent to the delivery, registration of transfer or surrender of any American Depositary Shares or split-up or combination of any Receipt or withdrawal of any Deposited Securities, the Depositary, Custodian or Registrar may require payment from the depositor of Shares or the presenter of the Receipt or instruction for registration of transfer or surrender of American Depositary Shares not evidenced by a Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in this Deposit Agreement, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of this Deposit Agreement, including, without limitation, this Section 2.6.

 

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The Depositary may refuse to accept deposits of Shares for delivery of American Depositary Shares or to register transfers of American Depositary Shares in particular instances, or may suspend deposits of Shares or registration of transfer generally, whenever, acting in good faith, it or the Company considers it necessary or advisable to do so. The Depositary may refuse surrenders of American Depositary Shares for the purpose of withdrawal of Deposited Securities in particular instances, or may suspend surrenders for the purpose of withdrawal generally, but, notwithstanding anything to the contrary in this Deposit Agreement, only for (i) temporary delays caused by closing of the Depositary’s register or the register of holders of Shares maintained by the Company or the Foreign Registrar, or the deposit of Shares, in connection with voting at a shareholders’ meeting or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the American Depositary Shares or to the withdrawal of the Deposited Securities or (iv) any other reason that, at the time, is permitted under paragraph I(A)(1) of the General Instructions to Form F-6 under the Securities Act of 1933 or any successor to that provision.

 

The Depositary shall not knowingly accept for deposit under this Deposit Agreement any Shares that, at the time of deposit, are Restricted Securities.

 

SECTION 2.7.     Lost Receipts, etc.

  

If a Receipt is mutilated, destroyed, lost or stolen, the Depositary shall deliver to the Owner the American Depositary Shares evidenced by that Receipt in uncertificated form or, if requested by the Owner, execute and deliver a new Receipt of like tenor in exchange and substitution for such mutilated Receipt, upon surrender and cancellation of that mutilated Receipt, or in lieu of and in substitution for that destroyed, lost or stolen Receipt. However, before the Depositary will deliver American Depositary Shares in uncertificated form or execute and deliver a new Receipt, in substitution for a destroyed, lost or stolen Receipt, the Owner must (a) file with the Depositary (i) a request for that replacement before the Depositary has notice that the Receipt has been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond and (b) satisfy any other reasonable requirements imposed by the Depositary.

  

SECTION 2.8.     Cancellation and Destruction of Surrendered Receipts.

  

The Depositary shall cancel all Receipts surrendered to it and is authorized to destroy Receipts so cancelled.

  

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SECTION 2.9.     DTC Direct Registration System and Profile Modification System.

 

(a)            Notwithstanding the provisions of Section 2.4, the parties acknowledge that DTC’s Direct Registration System (“DRS”) and Profile Modification System (“Profile”) apply to the American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC that facilitates interchange between registered holding of uncertificated securities and holding of security entitlements in those securities through DTC and a DTC participant. Profile is a required feature of DRS that allows a DTC participant, claiming to act on behalf of an Owner of American Depositary Shares, to direct the Depositary to register a transfer of those American Depositary Shares to DTC or its nominee and to deliver those American Depositary Shares to the DTC account of that DTC participant without receipt by the Depositary of prior authorization from the Owner to register that transfer.

 

(b)            In connection with DRS/Profile, the parties acknowledge that the Depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an Owner in requesting a registration of transfer and delivery as described in paragraph (a) above has the actual authority to act on behalf of that Owner (notwithstanding any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections 5.3 and 5.8 apply to the matters arising from the use of the DRS/Profile. The parties agree that the Depositary’s reliance on and compliance with instructions received by the Depositary through the DRS/Profile system and otherwise in accordance with this Deposit Agreement shall not constitute negligence or bad faith on the part of the Depositary.

 

ARTICLE 3.     CERTAIN OBLIGATIONS OF OWNERS AND HOLDERS OF AMERICAN DEPOSITARY SHARES

 

SECTION 3.1.     Filing Proofs, Certificates and Other Information.

 

Any person presenting Shares for deposit or any Owner or Holder may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may deem necessary or proper, or as the Company may reasonably require by written request to the Depositary. The Depositary may withhold the delivery or registration of transfer of American Depositary Shares, the distribution of any dividend or other distribution or of the proceeds thereof or the delivery of any Deposited Securities until that proof or other information is filed or those certificates are executed or those representations and warranties are made. If requested in writing by the Company, the Depositary will provide the Company in a timely manner and at the Company’s expense with copies of such proofs, certificates and other information that it receives pursuant to this Section 3.1, to the extent that disclosure is permitted under applicable law.

 

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SECTION 3.2.     Liability of Owner for Taxes.

 

If any tax or other governmental charge shall become payable by the Custodian or the Depositary with respect to or in connection with any American Depositary Shares or any Deposited Securities represented by any American Depositary Shares or in connection with a transaction to which Section 4.8 applies, that tax or other governmental charge shall be payable by the Owner of those American Depositary Shares to the Depositary. The Depositary may refuse to register any transfer of those American Depositary Shares or any withdrawal of Deposited Securities represented by those American Depositary Shares until that payment is made, and may withhold any dividends or other distributions or the proceeds thereof, or may sell for the account of the Owner any part or all of the Deposited Securities represented by those American Depositary Shares and apply those dividends or other distributions or the net proceeds of any sale of that kind in payment of that tax or other governmental charge but, even after a sale of that kind, the Owner of those American Depositary Shares shall remain liable for any deficiency. The Depositary shall distribute any net proceeds of a sale made under this Section that are not used to pay taxes or governmental charges to the Owners entitled to them in accordance with Section 4.1. If the number of Shares represented by each American Depositary Share decreases as a result of a sale of Deposited Securities under this Section, the Depositary may call for surrender of the American Depositary Shares to be exchanged on a mandatory basis for a lesser number of American Depositary Shares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions of American Depositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled to them.

 

SECTION 3.3.     Warranties on Deposit of Shares.

 

Every person depositing Shares under this Deposit Agreement shall be deemed thereby to represent and warrant that those Shares and each certificate therefor, if applicable, are validly issued, fully paid and nonassessable and were not issued in violation of any preemptive or similar rights of the holders of outstanding securities of the Company and that the person making that deposit is duly authorized so to do. Every depositing person shall also be deemed to represent that the Shares, at the time of deposit, are not Restricted Securities. All representations and warranties deemed made under this Section shall survive the deposit of Shares and delivery of American Depositary Shares.

 

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SECTION 3.4.     Disclosure of Interests.

 

When required in order to comply with applicable laws and regulations or the articles of association or similar document of the Company, the Company may from time to time request each Owner and Holder to provide to the Depositary information relating to: (a) the capacity in which it holds American Depositary Shares, (b) the identity of any Holders or other persons or entities then or previously interested in those American Depositary Shares and the nature of those interests and (c) any other matter where disclosure of such matter is required for that compliance.   Each Owner and Holder agrees to provide all information known to it in response to a request made pursuant to this Section.  Each Holder consents to the disclosure by the Depositary and the Owner or any other Holder through which it holds American Depositary Shares, directly or indirectly, of all information responsive to a request made pursuant to this Section relating to that Holder that is known to that Owner or other Holder.  The Depositary agrees to use reasonable efforts to comply with written instructions requesting that the Depositary forward any request authorized under this Section to the Owners and to forward to the Company any responses it receives in response to that request. The Depositary may charge the Company a fee and its expenses for complying with requests under this Section 3.4.

 

ARTICLE 4.     THE DEPOSITED SECURITIES

 

SECTION 4.1.     Cash Distributions.

  

Whenever the Depositary receives any cash dividend or other cash distribution on Deposited Securities, the Depositary shall, subject to the provisions of Section 4.5, convert that dividend or other distribution into Dollars and distribute the amount thus received (net of the fees and expenses of the Depositary as provided in Section 5.9) to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing those Deposited Securities held by them respectively; provided, however, that if the Custodian or the Depositary shall be required to withhold and does withhold from that cash dividend or other cash distribution an amount on account of taxes or other governmental charges, the amount distributed to the Owners of the American Depositary Shares representing those Deposited Securities shall be reduced accordingly. However, the Depositary will not pay any Owner a fraction of one cent, but will round each Owner’s entitlement to the nearest whole cent.

  

The Company or its agent will remit to the appropriate governmental agency in each applicable jurisdiction all amounts withheld and owing to such agency.

  

If a cash distribution would represent a return of all or substantially all the value of the Deposited Securities underlying American Depositary Shares, the Depositary may:

  

(i)  require payment of or deduct the fee for surrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition of making that cash distribution; or

  

(ii) sell all Deposited Securities other than the subject cash distribution and add any net cash proceeds of that sale to the cash distribution, call for surrender of all those American Depositary Shares and require that surrender as a condition of making that cash distribution.

  

If the Depositary acts under this paragraph, that action shall also be a Termination Option Event.

  

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SECTION 4.2.     Distributions Other Than Cash, Shares or Rights.

 

Subject to the provisions of Sections 4.11 and 5.9, whenever the Depositary receives any distribution other than a distribution described in Section 4.1, 4.3 or 4.4 on Deposited Securities (but not in exchange for or in conversion or in lieu of Deposited Securities), the Depositary shall cause the securities or property received by it to be distributed to the Owners entitled thereto, after deduction or upon payment of any fees and expenses of the Depositary and any taxes or other governmental charges, in proportion to the number of American Depositary Shares representing such Deposited Securities held by them respectively, in any manner that the Depositary deems equitable and practicable for accomplishing that distribution (which may be a distribution of depositary shares representing the securities received); provided, however, that if in the reasonable opinion of the Depositary such distribution cannot be made proportionately among the Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Company or the Depositary withhold an amount on account of taxes or other governmental charges or that securities received must be registered under the Securities Act of 1933 in order to be distributed to Owners or Holders) the Depositary deems such distribution not to be lawful and feasible, the Depositary may adopt such other method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and distribution of the net proceeds of any such sale (net of the fees and expenses of the Depositary as provided in Section 5.9) to the Owners entitled thereto, all in the manner and subject to the conditions set forth in Section 4.1. The Depositary may withhold any distribution of securities under this Section 4.2 if it has not received reasonably satisfactory assurances from the Company that the distribution does not require registration under the Securities Act of 1933. The Depositary may sell, by public or private sale, an amount of securities or other property it would otherwise distribute under this Section 4.2 that is sufficient to pay its fees and expenses in respect of that distribution.

 

If a distribution to be made under this Section 4.2 would represent a return of all or substantially all the value of the Deposited Securities underlying American Depositary Shares, the Depositary may:

 

(i)  require payment of or deduct the fee for surrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition of making that distribution; or

 

(ii) sell all Deposited Securities other than the subject distribution and add any net cash proceeds of that sale to the distribution, call for surrender of all those American Depositary Shares and require that surrender as a condition of making that distribution.

 

If the Depositary acts under this paragraph, that action shall also be a Termination Option Event.

 

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SECTION 4.3.     Distributions in Shares.

 

Whenever the Depositary receives any distribution on Deposited Securities consisting of a dividend in, or free distribution of, Shares, the Depositary may, and shall if the Company shall so request in writing, deliver to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing those Deposited Securities held by them respectively, an aggregate number of American Depositary Shares representing the amount of Shares received as that dividend or free distribution, subject to the terms and conditions of this Deposit Agreement with respect to the deposit of Shares and issuance of American Depositary Shares, including withholding of any tax or governmental charge as provided in Section 4.11 and payment of the fees and expenses of the Depositary as provided in Section 5.9 (and the Depositary may sell, by public or private sale, an amount of the Shares received (or American Depositary Shares representing those Shares) sufficient to pay its fees and expenses in respect of that distribution). In lieu of delivering fractional American Depositary Shares, the Depositary may sell the amount of Shares represented by the aggregate of those fractions (or American Depositary Shares representing those Shares) and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.1. If and to the extent that additional American Depositary Shares are not delivered and Shares or American Depositary Shares are not sold, each American Depositary Share shall thenceforth also represent the additional Shares distributed on the Deposited Securities represented thereby.

  

If the Company declares a distribution in which holders of Deposited Securities have a right to elect whether to receive cash, Shares or other securities or a combination of those things, or a right to elect to have a distribution sold on their behalf, the Depositary may, after consultation with the Company, make that right of election available for exercise by Owners in any manner the Depositary considers to be lawful and practical. As a condition of making a distribution election right available to Owners, the Depositary may require reasonably satisfactory assurances from the Company that doing so does not require registration of any securities under the Securities Act of 1933 that has not been effected.

  

SECTION 4.4.     Rights.

 

(a)             If rights are granted to the Depositary in respect of deposited Shares to purchase additional Shares or other securities, the Company and the Depositary shall endeavor to consult as to the actions, if any, the Depositary should take in connection with that grant of rights. The Depositary may, to the extent deemed by it to be lawful and practical (i) if requested in writing by the Company, grant to all or certain Owners rights to instruct the Depositary to purchase the securities to which the rights relate and deliver those securities or American Depositary Shares representing those securities to Owners, (ii) if requested in writing by the Company, deliver the rights to or to the order of certain Owners, or (iii) sell the rights to the extent practicable and distribute the net proceeds of that sale to Owners entitled to those proceeds. To the extent rights are not exercised, delivered or disposed of under (i), (ii) or (iii) above, the Depositary shall permit the rights to lapse unexercised.

 

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(b)             If the Depositary will act under (a)(i) above, the Company and the Depositary will enter into a separate agreement setting forth the conditions and procedures applicable to the particular offering. Upon instruction from an applicable Owner in the form the Depositary specified and upon payment by that Owner to the Depositary of an amount equal to the purchase price of the securities to be received upon the exercise of the rights, the Depositary shall, on behalf of that Owner, exercise the rights and purchase the securities. The purchased securities shall be delivered to, or as instructed by, the Depositary. The Depositary shall (i) deposit the purchased Shares under this Deposit Agreement and deliver American Depositary Shares representing those Shares to that Owner or (ii) deliver or cause the purchased Shares or other securities to be delivered to or to the order of that Owner. The Depositary will not act under (a)(i) above unless the offer and sale of the securities to which the rights relate are registered under the Securities Act of 1933 or the Depositary has received an opinion of United States counsel that is reasonably satisfactory to it to the effect that those securities may be sold and delivered to the applicable Owners without registration under the Securities Act of 1933. For the avoidance of doubt, nothing in this Deposit Agreement shall create any obligation on the part of the Company to file a registration statement with respect to rights or the underlying securities or to endeavor to have such a registration statement declared effective.

 

(c)             If the Depositary will act under (a)(ii) above, the Company and the Depositary will enter into a separate agreement setting forth the conditions and procedures applicable to the particular offering. Upon (i) the request of an applicable Owner to deliver the rights allocable to the American Depositary Shares of that Owner to an account specified by that Owner to which the rights can be delivered and (ii) receipt of such documents as the Company and the Depositary agreed to require to comply with applicable law, the Depositary will deliver those rights as requested by that Owner.

 

(d)            If the Depositary will act under (a)(iii) above, the Depositary will use reasonable efforts to sell the rights in proportion to the number of American Depositary Shares held by the applicable Owners and pay the net proceeds to the Owners otherwise entitled to the rights that were sold, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any American Depositary Shares or otherwise.

 

(e)             Payment or deduction of the fees of the Depositary as provided in Section 5.9 and payment or deduction of the expenses of the Depositary and any applicable taxes or other governmental charges shall be conditions of any delivery of securities or payment of cash proceeds under this Section 4.4.

 

(f)             The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make rights available to or exercise rights on behalf of Owners in general or any Owner in particular, or to sell rights.

 

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SECTION 4.5.     Conversion of Foreign Currency.

 

Whenever the Depositary or the Custodian receives foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary or one of its agents or affiliates or the Custodian shall convert or cause to be converted by sale or in any other manner that it may determine that foreign currency into Dollars, and those Dollars shall be distributed, as promptly as practicable, to the Owners entitled thereto.  A cash distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners based on exchange restrictions, the date of delivery of any American Depositary Shares or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.9.

 

If a conversion of foreign currency or the repatriation or distribution of Dollars can be effected only with the approval or license of any government or agency thereof, the Depositary may, but will not be required to, file an application for that approval or license.

 

If the Depositary determines that in its judgment any foreign currency received by the Depositary or the Custodian is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof that is required for such conversion is not filed or sought by the Depositary or is not obtained within a reasonable period as determined by the Depositary, the Depositary may distribute the foreign currency received by the Depositary to, or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.

 

If any conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make that conversion and distribution in Dollars to the extent practicable and permissible to the Owners entitled thereto and may distribute the balance of the foreign currency received by the Depositary to, or hold that balance uninvested and without liability for interest thereon for the account of, the Owners entitled thereto.

 

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The Depositary may convert currency itself or through any of its affiliates, or the Custodian or the Company may convert currency and pay Dollars to the Depositary. Where the Depositary converts currency itself or through any of its affiliates, the Depositary acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.  The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under this Deposit Agreement and the rate that the Depositary or its affiliate receives when buying or selling foreign currency for its own account.  The Depositary makes no representation that the exchange rate used or obtained by it or its affiliate in any currency conversion under this Deposit Agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to Owners, subject to the Depositary’s obligations under Section 5.3.  The methodology used to determine exchange rates used in currency conversions made by the Depositary is available upon request. Where the Custodian converts currency, the Custodian has no obligation to obtain the most favorable rate that could be obtained at the time or to ensure that the method by which that rate will be determined will be the most favorable to Owners, and the Depositary makes no representation that the rate is the most favorable rate and will not be liable for any direct or indirect losses associated with the rate.  In certain instances, the Depositary may receive dividends or other distributions from the Company in Dollars that represent the proceeds of a conversion of foreign currency or translation from foreign currency at a rate that was obtained or determined by or on behalf of the Company and, in such cases, the Depositary will not engage in, or be responsible for, any foreign currency transactions and neither it nor the Company makes any representation that the rate obtained or determined by the Company is the most favorable rate and neither it nor the Company will be liable for any direct or indirect losses associated with the rate.

 

SECTION 4.6.     Fixing of Record Date.

 

Whenever a cash dividend, cash distribution or any other distribution is made on Deposited Securities or rights to purchase Shares or other securities are issued with respect to Deposited Securities (which rights will be delivered to or exercised or sold on behalf of Owners in accordance with Section 4.4) or the Depositary receives notice that a distribution or issuance of that kind will be made, or whenever the Depositary receives notice that a meeting of holders of Shares will be held in respect of which the Company has requested the Depositary to send a notice under Section 4.7, or whenever the Depositary will assess a fee or charge against the Owners, or whenever the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary otherwise finds it necessary or convenient, the Depositary shall fix a record date, which shall be the same as, or as near as practicable to, any corresponding record date set by the Company with respect to Shares, (a) for the determination of the Owners (i) who shall be entitled to receive the benefit of that dividend or other distribution or those rights, (ii) who shall be entitled to give instructions for the exercise of voting rights at that meeting, (iii) who shall be responsible for that fee or charge or (iv) for any other purpose for which the record date was set, or (b) on or after which each American Depositary Share will represent the changed number of Shares. Subject to the provisions of Sections 4.1 through 4.5 and to the other terms and conditions of this Deposit Agreement, the Owners on a record date fixed by the Depositary shall be entitled to receive the amount distributable by the Depositary with respect to that dividend or other distribution or those rights or the net proceeds of sale thereof in proportion to the number of American Depositary Shares held by them respectively, to give voting instructions or to act in respect of the other matter for which that record date was fixed, or be responsible for that fee or charge, as the case may be.

 

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SECTION 4.7.     Voting of Deposited Shares.

 

(a)            Upon receipt of notice of any meeting of holders of Shares at which holders of Shares will be entitled to vote, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, Disseminate to the Owners a notice, the form of which shall be determined by the Depositary, in consultation with the Company to the extent practicable, that shall contain (i) the information contained in the notice of meeting received by the Depositary, (ii) a statement that the Owners as of the close of business on a specified record date will be entitled, subject to any applicable provision of Cyprus law and of the articles of association or similar documents of the Company, to instruct the Depositary as to the exercise of the voting rights pertaining to the amount of Shares represented by their respective American Depositary Shares, (iii) a statement as to the manner in which those instructions may be given and (iv) the last date on which the Depositary will accept instructions (the “Instruction Cutoff Date”).

 

(b)            Upon the written request of an Owner of American Depositary Shares, as of the date of the request or, if a record date was specified by the Depositary, as of that record date, received on or before any Instruction Cutoff Date established by the Depositary, the Depositary may, and if the Depositary sent a notice under the preceding paragraph shall, endeavor, in so far as practicable, to vote or cause to be voted the amount of deposited Shares represented by those American Depositary Shares in accordance with the instructions set forth in that request. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the deposited Shares other than in accordance with instructions given by Owners and received by the Depositary.

 

(c)            There can be no assurance that Owners generally or any Owner in particular will receive the notice described in paragraph (a) above in time to enable Owners to give instructions to the Depositary prior to the Instruction Cutoff Date.

 

(d)            In order to give Owners a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Shares, if the Company will request the Depositary to Disseminate a notice under paragraph (a) above, the Company shall give the Depositary notice of the meeting, details concerning the matters to be voted upon and copies of materials to be made available to holders of Shares in connection with the meeting not less than 40calendar days prior to the meeting date.

 

SECTION 4.8.     Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities.

 

(a)            The Depositary shall not tender any Deposited Securities in response to any voluntary cash tender offer, exchange offer or similar offer made to holders of Deposited Securities (a “Voluntary Offer”), except when instructed in writing to do so by an Owner surrendering American Depositary Shares and subject to any conditions or procedures the Depositary may require.

 

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(b)            If the Depositary receives a written notice that Deposited Securities have been redeemed for cash or otherwise purchased for cash in a transaction that is mandatory and binding on the Depositary as a holder of those Deposited Securities (a “Redemption”), the Depositary, at the expense of the Company, shall (i) if required, surrender Deposited Securities that have been redeemed to the issuer of those securities or its agent on the redemption date, (ii) Disseminate a notice to Owners (A) notifying them of that Redemption, (B) calling for surrender of a corresponding number of American Depositary Shares and (C) notifying them that the called American Depositary Shares have been converted into a right only to receive the money received by the Depositary upon that Redemption and those net proceeds shall be the Deposited Securities to which Owners of those converted American Depositary Shares shall be entitled upon surrenders of those American Depositary Shares in accordance with Section 2.5 or 6.2 and (iii) distribute the money received upon that Redemption to the Owners entitled to it upon surrender by them of called American Depositary Shares in accordance with Section 2.5 (and, for the avoidance of doubt, Owners shall not be entitled to receive that money under Section 4.1). If the Redemption affects less than all the Deposited Securities, the Depositary shall call for surrender a corresponding portion of the outstanding American Depositary Shares and only those American Depositary Shares will automatically be converted into a right to receive the net proceeds of the Redemption. The Depositary shall allocate the American Depositary Shares converted under the preceding sentence among the Owners pro-rata to their respective holdings of American Depositary Shares immediately prior to the Redemption, except that the allocations may be adjusted so that no fraction of a converted American Depositary Share is allocated to any Owner. A Redemption of all or substantially all of the Deposited Securities shall be a Termination Option Event.

 

(c)            If the Depositary is notified of or there occurs any change in nominal value or any subdivision, combination or any other reclassification of the Deposited Securities or any recapitalization, reorganization, sale of assets substantially as an entirety, merger or consolidation affecting the issuer of the Deposited Securities or to which it is a party that is mandatory and binding on the Depositary as a holder of Deposited Securities and, as a result, securities or other property have been or will be delivered in exchange, conversion, replacement or in lieu of, Deposited Securities (a “Replacement”), the Depositary shall, if required, surrender the old Deposited Securities affected by that Replacement of Shares and hold, as new Deposited Securities under this Deposit Agreement, the new securities or other property delivered to it in that Replacement. However, the Depositary may elect to sell those new Deposited Securities if in the reasonable opinion of the Depositary it is not lawful or not practical for it to hold those new Deposited Securities under this Deposit Agreement because those new Deposited Securities may not be distributed to Owners without registration under the Securities Act of 1933 or for any other reason, at public or private sale, at such places and on such terms as it deems proper and proceed as if those new Deposited Securities had been Redeemed under paragraph (b) above. A Replacement shall be a Termination Option Event.

 

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(d)            In the case of a Replacement where the new Deposited Securities will continue to be held under this Deposit Agreement, the Depositary may call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing the new Deposited Securities and the number of those new Deposited Securities represented by each American Depositary Share. If the number of Shares represented by each American Depositary Share decreases as a result of a Replacement, the Depositary may call for surrender of the American Depositary Shares to be exchanged on a mandatory basis for a lesser number of American Depositary Shares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions of American Depositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled to them.

 

(e)            If there are no Deposited Securities with respect to American Depositary Shares, including if the Deposited Securities are cancelled, or the Deposited Securities with respect to American Depositary Shares have become apparently worthless, the Depositary may call for surrender of those American Depositary Shares or may cancel those American Depositary Shares, upon notice to Owners, and that condition shall be a Termination Option Event.

 

SECTION 4.9.     Reports.

 

The Depositary shall make available for inspection by Owners at its Office any reports and communications, including any proxy solicitation material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of those Deposited Securities by the Company. The Company shall furnish reports and communications, including any proxy soliciting material to which this Section applies, to the Depositary in English, to the extent those materials are required to be translated into English pursuant to any regulations of the Commission.

 

SECTION 4.10.     Lists of Owners.

 

As promptly as practicable upon written request by the Company, the Depositary shall, at the expense of the Company, furnish to it a list, as of a recent date, of the names, addresses and American Depositary Share holdings of all Owners.

 

SECTION 4.11.     Withholding.

 

If the Depositary determines that any distribution received or to be made by the Depositary (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge that the Depositary is obligated to withhold, the Depositary may sell, by public or private sale, all or a portion of the distributed property (including Shares and rights to subscribe therefor) in the amounts and manner the Depositary deems necessary and practicable to pay those taxes or charges, and the Depositary shall distribute the net proceeds of that sale, after deduction of those taxes or charges, to the Owners entitled thereto in proportion to the number of American Depositary Shares held by them respectively.

 

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Services for Owners and Holders that may permit them to obtain reduced rates of tax withholding at source or reclaim excess tax withheld, and the fees and costs associated with using services of that kind, are not provided under, and are outside the scope of, this Deposit Agreement.

 

Each Owner and Holder agrees to indemnify the Company, the Depositary, the Custodian and their respective directors, officers, employees, agents and affiliates for, and hold each of them harmless against, any claim by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced withholding at source or other tax benefit received by it.

 

ARTICLE 5.     THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY

 

SECTION 5.1.     Maintenance of Office and Register by the Depositary.

 

Until termination of this Deposit Agreement in accordance with its terms, the Depositary shall maintain facilities for the delivery, registration of transfers and surrender of American Depositary Shares in accordance with the provisions of this Deposit Agreement.

 

The Depositary shall keep a register of all Owners and all outstanding American Depositary Shares, which shall be open for inspection by the Owners at the Depositary’s Office during regular business hours, but only for the purpose of communicating with Owners regarding the business of the Company or a matter related to this Deposit Agreement or the American Depositary Shares.

 

The Depositary may close the register for delivery, registration of transfer or surrender for the purpose of withdrawal from time to time as provided in Section 2.6 or upon the Company’s reasonable written request.

 

If any American Depositary Shares are listed on one or more stock exchanges, the Depositary shall act as Registrar or appoint a Registrar or one or more co-registrars for registration of those American Depositary Shares in accordance with any requirements of that exchange or those exchanges.

 

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SECTION 5.2.     Prevention or Delay of Performance by the Company or the Depositary.

 

Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Holder:

 

(i) if by reason of (A) any provision of any present or future law or regulation or other act of the government of the United States, Republic of Cyprus, any State of the United States or any other state or jurisdiction, or of any governmental or regulatory authority or stock exchange; (B) (in the case of the Depositary only) any provision, present or future, of the articles of association or similar document of the Company, or any provision of any securities issued or distributed by the Company, or any offering or distribution thereof; or (C) any event or circumstance, whether natural or caused by a person or persons, that is beyond the ability of the Depositary or the Company, as the case may be, to prevent or counteract by reasonable care or effort (including, but not limited to, earthquakes, floods, severe storms, fires, explosions, war, terrorism, civil unrest, labor disputes, criminal acts or outbreaks of infectious disease; interruptions or malfunctions of utility services, Internet or other communications lines or systems; unauthorized access to or attacks on computer systems or websites; or other failures or malfunctions of computer hardware or software or other systems or equipment), the Depositary or the Company is, directly or indirectly, prevented from, forbidden to or delayed in, or could be subject to any civil or criminal penalty on account of doing or performing and therefore does not do or perform, any act or thing that, by the terms of this Deposit Agreement or the Deposited Securities, it is provided shall be done or performed;

 

(ii) for any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement (including any determination by the Depositary or the Company to take, or not take, any action that this Deposit Agreement provides the Depositary or the Company, as the case may be, may take);

 

(iii) for the inability of any Owner or Holder to benefit from any distribution, offering, right or other benefit that is made available to holders of Deposited Securities but is not, under the terms of this Deposit Agreement, made available to Owners or Holders; or

 

(iv) for any special, consequential or punitive damages for any breach of the terms of this Deposit Agreement.

 

Where, by the terms of a distribution to which Section 4.1, 4.2 or 4.3 applies, or an offering to which Section 4.4 applies, or for any other reason, that distribution or offering may not be made available to Owners, and the Depositary may not dispose of that distribution or offering on behalf of Owners and make the net proceeds available to Owners, then the Depositary shall not make that distribution or offering available to Owners, and shall allow any rights, if applicable, to lapse.

 

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SECTION 5.3.     Obligations of the Depositary and the Company.

 

Neither the Company nor any of its directors, officers, employees, agents or affiliates assumes any obligation nor shall any of them be subject to any liability under this Deposit Agreement to any Owner or Holder, except that the Company agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.

 

Neither the Depositary nor any of its directors, officers, employees, agents or affiliates assumes any obligation nor shall any of them be subject to any liability under this Deposit Agreement to any Owner or Holder (including, without limitation, liability with respect to the validity or worth of the Deposited Securities), except that the Depositary agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith, and the Depositary shall not be a fiduciary or have any fiduciary duty to Owners or Holders.

 

None of the Depositary, the Company or any of their respective directors, officers, employees, agents or affiliates shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the American Depositary Shares on behalf of any Owner or Holder or any other person.

 

Each of the Depositary and the Company and their directors, officers, employees, agents or affiliates may rely, and shall be protected in relying upon, any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.

 

None of the Depositary, the Company or any of their respective directors, officers, employees, agents or affiliates shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or any other person believed by it in good faith to be competent to give such advice or information.

 

The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.

 

The Depositary shall not be liable for the acts or omissions of any securities depository, clearing agency or settlement system in connection with or arising out of book-entry settlement of American Depositary Shares or Deposited Securities or otherwise.

 

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In the absence of bad faith on its part, the Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote.

 

The Depositary shall have no duty to make any determination or provide any information as to the tax status of the Company. Neither the Depositary nor the Company shall have any liability for any tax consequences that may be incurred by Owners or Holders as a result of owning or holding American Depositary Shares. Neither the Depositary nor the Company shall be liable for the inability or failure of an Owner or Holder to obtain the benefit of a foreign tax credit, reduced rate of withholding or refund of amounts withheld in respect of tax or any other tax benefit.

 

SECTION 5.4.     Resignation and Removal of the Depositary.

 

The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Company, to become effective upon the appointment of a successor depositary and its acceptance of that appointment as provided in this Section. The effect of resignation if a successor depositary is not appointed is provided for in Section 6.2.

 

The Depositary may at any time be removed by the Company by 90 calendar days’ prior written notice of that removal, to become effective upon the later of (i) the 90th calendar day after delivery of the notice to the Depositary and (ii) the appointment of a successor depositary and its acceptance of its appointment as provided in this Section.

 

If the Depositary resigns or is removed, the Company shall use commercially reasonable efforts to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, The City of New York. Every successor depositary shall execute and deliver to the Company an instrument in writing accepting its appointment under this Deposit Agreement. If the Depositary receives notice from the Company that a successor depositary has been appointed following its resignation or removal, the Depositary, upon payment of all sums due it from the Company, shall deliver to its successor a register listing all the Owners and their respective holdings of outstanding American Depositary Shares and shall deliver the Deposited Securities to or to the order of its successor. When the Depositary has taken the actions specified in the preceding sentence (i) the successor shall become the Depositary and shall have all the rights and shall assume all the duties of the Depositary under this Deposit Agreement and (ii) the predecessor depositary shall cease to be the Depositary and shall be discharged and released from all obligations under this Deposit Agreement, except for its duties under Section 5.8 with respect to the time before that discharge. A successor Depositary shall notify the Owners of its appointment as soon as practical after assuming the duties of Depositary.

 

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Any corporation or other entity into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.

 

SECTION 5.5.     The Custodians.

 

The Custodian shall be subject at all times and in all respects to the directions of the Depositary and shall be responsible solely to it. The Depositary in its discretion may at any time appoint a substitute or additional custodian or custodians, each of which shall thereafter be one of the Custodians under this Deposit Agreement. If the Depositary receives notice that a Custodian is resigning and, upon the effectiveness of that resignation there would be no Custodian acting under this Deposit Agreement, the Depositary shall, as promptly as practicable after receiving that notice, appoint a substitute custodian or custodians, each of which shall thereafter be a Custodian under this Deposit Agreement. The Depositary shall require any Custodian that resigns or is removed to deliver all Deposited Securities held by it to another Custodian. The Depositary shall notify the Company as soon as practicable of any change in Custodian.

 

SECTION 5.6.     Notices and Reports.

 

If the Company takes or decides to take any corporate action of a kind that is addressed in Sections 4.1 to 4.4, or 4.6 to 4.8, or that effects or will effect a change of the name or legal structure of the Company, or that effects or will effect a change to the Shares, the Company shall notify the Depositary and the Custodian of that action or decision as soon as it is lawful and practical to give that notice.  The notice shall be in English and shall include all details that the Company is required to include in any notice to any governmental or regulatory authority or securities exchange or is required to make available generally to holders of Shares by publication or otherwise.

 

The Company will arrange for the translation into English, if not already in English, to the extent required pursuant to any regulations of the Commission, and the prompt transmittal by the Company to the Depositary and the Custodian of all notices and any other reports and communications which are made generally available by the Company to holders of its Shares. If requested in writing by the Company, the Depositary will Disseminate, at the Company’s expense, those notices, reports and communications to all Owners or otherwise make them available to Owners in a manner that the Company specifies as substantially equivalent to the manner in which those communications are made available to holders of Shares and compliant with the requirements of any securities exchange on which the American Depositary Shares are listed. The Company will timely provide the Depositary with the quantity of such notices, reports, and communications, as requested by the Depositary from time to time, in order for the Depositary to effect that Dissemination.

 

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The Company represents, as of the date hereof, that the statements in Article 11 of the form of Receipt appearing as Exhibit A to this Deposit Agreement or, if applicable, most recently filed with the Commission pursuant to Rule 424(b) under the Securities Act of 1933 with respect to the Company’s obligation to file periodic reports under the United States Securities Exchange Act of 1934, as amended, or its qualification for exemption from registration under that Act pursuant to Rule 12g3-2(b) under that Act, as the case may be, are true and correct. The Company agrees to promptly notify the Depositary upon becoming aware of any change in the truth of any of those statements or if there is any change in the Company’s status regarding those reporting obligations or that qualification.

 

SECTION 5.7.     Distribution of Additional Shares, Rights, etc.

 

If the Company or any affiliate of the Company determines to make any issuance or distribution of (1) additional Shares, (2) rights to subscribe for Shares, (3) securities convertible into Shares, or (4) rights to subscribe for such securities (each a “Distribution”), the Company shall notify the Depositary in writing in English as promptly as practicable and in any event before the Distribution starts and, if requested in writing by the Depositary, the Company shall promptly furnish to the Depositary either (i) evidence reasonably satisfactory to the Depositary that the Distribution is registered under the Securities Act of 1933 or (ii) a written opinion from U.S. counsel for the Company that is reasonably satisfactory to the Depositary, stating that the Distribution does not require, or, if made in the United States, would not require, registration under the Securities Act of 1933.

 

The Company agrees with the Depositary that neither the Company nor any company controlled by, controlling or under common control with the Company will at any time deposit any Shares that, at the time of deposit, are Restricted Securities.

 

SECTION 5.8.     Indemnification.

 

The Company agrees to indemnify the Depositary, its directors, officers, employees, agents and affiliates and each Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to any documented fees and expenses incurred in seeking, enforcing or collecting such indemnity and the reasonable fees and expenses of counsel (“Losses”)) that may arise out of or in connection with (a) any registration with the Commission of American Depositary Shares or Deposited Securities or the offer or sale thereof or (b) acts performed or omitted, pursuant to the provisions of or in connection with this Deposit Agreement and the American Depositary Shares, as the same may be amended, modified or supplemented from time to time, (i) by either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Company or any of its directors, officers, employees, agents and affiliates.

 

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The indemnities contained in the preceding paragraph shall not extend to any Losses arising out of information relating to the Depositary or any Custodian, as the case may be, furnished in writing by the Depositary to the Company expressly for use in any registration statement, proxy statement, prospectus or preliminary prospectus or any other offering documents relating to the American Depositary Shares, the Shares or any other Deposited Securities (it being acknowledged that, as of the date of this Deposit Agreement, the Depositary has not furnished any information of that kind).

 

The Depositary agrees to indemnify the Company, its directors, officers, employees, agents and affiliates and hold each of them harmless from any liability or expense (including, but not limited to any documented fees and expenses incurred in seeking, enforcing or collecting such indemnity and the reasonable fees and expenses of counsel) that may arise out of acts performed or omitted by the Depositary or any Custodian or their respective directors, officers, employees, agents and affiliates due to their negligence or bad faith.

 

SECTION 5.9.     Charges of Depositary.

 

The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering American Depositary Shares or to whom American Depositary Shares are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary Shares pursuant to Section 4.3), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to or from the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable (including SWIFT) and facsimile transmission fees and expenses as are expressly provided in this Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.5, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery of American Depositary Shares pursuant to Section 2.3, 4.3 or 4.4 and the surrender of American Depositary Shares pursuant to Section 2.5 or 6.2, (6) a fee of $.05 or less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to this Deposit Agreement, including, but not limited to Sections 4.1 through 4.4 and Section 4.8, (7) a fee for the distribution of securities pursuant to Section 4.2 or of rights pursuant to Section 4.4 (where the Depositary will not exercise or sell those rights on behalf of Owners), such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities under this Deposit Agreement (for purposes of this item 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners, (8) in addition to any fee charged under item 6 above, a fee of $.05 or less per American Depositary Share (or portion thereof) per annum for depositary services, which will be payable as provided in item 9 below, and (9) any other charges payable by the Depositary or the Custodian, any of the Depositary's or Custodian’s agents or the agents of the Depositary's or Custodian’s agents, in connection with the servicing of Shares or other Deposited Securities (which charges shall be assessed against Owners as of the date or dates set by the Depositary in accordance with Section 4.6 and shall be payable at the sole discretion of the Depositary by billing those Owners for those charges or by deducting those charges from one or more cash dividends or other cash distributions).

 

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The Depositary may collect any of its fees by deduction from any cash distribution payable, or by selling a portion of any securities to be distributed, to Owners that are obligated to pay those fees.

 

In performing its duties under this Deposit Agreement, the Depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the Depositary and that may earn or share fees, spreads or commissions.

 

The Depositary may own and deal in any class of securities of the Company and its affiliates and in American Depositary Shares.

 

SECTION 5.10.     Retention of Depositary Documents.

 

The Depositary is authorized to destroy those documents, records, bills and other data compiled during the term of this Deposit Agreement at the times permitted by the laws or regulations governing the Depositary.

 

SECTION 5.11.     Exclusivity.

 

Without prejudice to the Company’s rights under Section 5.4, the Company agrees not to appoint any other depositary for issuance of depositary shares, depositary receipts or any similar securities or instruments so long as The Bank of New York Mellon is acting as Depositary under this Deposit Agreement.

 

SECTION 5.12.     Information for Regulatory Compliance.

 

Each of the Company and the Depositary shall provide to the other, as promptly as practicable, information from its records or otherwise available to it that is reasonably requested by the other to permit the other to comply with applicable law or requirements of governmental or regulatory authorities.

 

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ARTICLE 6.     AMENDMENT AND TERMINATION

 

SECTION 6.1.     Amendment.

 

The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to time be amended by the written agreement between the Company and the Depositary without the consent of Owners or Holders in any respect that they may deem necessary or desirable. Any amendment that would impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable (including SWIFT) or facsimile transmission costs, delivery costs or other such expenses), or that would otherwise prejudice any substantial existing right of Owners, shall, however, not become effective as to outstanding American Depositary Shares until the expiration of 30 calendar days after notice of that amendment has been Disseminated to the Owners of outstanding American Depositary Shares. Every Owner and Holder, at the time any amendment so becomes effective, shall be deemed, by continuing to hold American Depositary Shares or any interest therein, to consent and agree to that amendment and to be bound by this Deposit Agreement as amended thereby. Upon the effectiveness of an amendment to the form of Receipt, including a change in the number of Shares represented by each American Depositary Share, the Depositary may call for surrender of Receipts to be replaced with new Receipts in the amended form or call for surrender of American Depositary Shares to effect that change of ratio. In no event shall any amendment impair the right of the Owner to surrender American Depositary Shares and receive delivery of the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.

 

SECTION 6.2.     Termination.

 

(a)            The Company may initiate termination of this Deposit Agreement by notice to the Depositary. The Depositary may initiate termination of this Deposit Agreement if (i) at any time 60 calendar days shall have expired after the Depositary delivered to the Company a written resignation notice and a successor depositary has not been appointed and accepted its appointment as provided in Section 5.4 or (ii) a Termination Option Event has occurred or will occur. If termination of this Deposit Agreement is initiated, the Depositary shall Disseminate a notice of termination to the Owners of all American Depositary Shares then outstanding setting a date for termination (the “Termination Date”), which shall be at least 90 calendar days after the date of that notice, and this Deposit Agreement shall terminate on that Termination Date.

 

(b)            After the Termination Date, the Company shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary under Sections 5.8 and 5.9.

 

(c)            At any time after the Termination Date, the Depositary may sell the Deposited Securities then held under this Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of American Depositary Shares that remain outstanding, and those Owners will be general creditors of the Depositary with respect to those net proceeds and that other cash. After making that sale, the Depositary shall be discharged from all obligations under this Deposit Agreement, except (i) to account for the net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of American Depositary Shares, any expenses for the account of the Owner of such American Depositary Shares in accordance with the terms and conditions of this Deposit Agreement and any applicable taxes or governmental charges) and (ii) for its obligations under Section 5.8 and (iii) to act as provided in paragraph (d) below.

 

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(d)            After the Termination Date, the Depositary shall continue to receive dividends and other distributions pertaining to Deposited Securities (that have not been sold), may sell rights and other property as provided in this Deposit Agreement and shall deliver Deposited Securities (or sale proceeds) upon surrender of American Depositary Shares (after payment or upon deduction, in each case, of the fee of the Depositary for the surrender of American Depositary Shares, any expenses for the account of the Owner of those American Depositary Shares in accordance with the terms and conditions of this Deposit Agreement and any applicable taxes or governmental charges). After the Termination Date, the Depositary shall not accept deposits of Shares or deliver American Depositary Shares. After the Termination Date, (i) the Depositary may refuse to accept surrenders of American Depositary Shares for the purpose of withdrawal of Deposited Securities (that have not been sold) or reverse previously accepted surrenders of that kind that have not settled if in its judgment the requested withdrawal would interfere with its efforts to sell the Deposited Securities, (ii) the Depositary will not be required to deliver cash proceeds of the sale of Deposited Securities until all Deposited Securities have been sold and (iii) the Depositary may discontinue the registration of transfers of American Depositary Shares and suspend the distribution of dividends and other distributions on Deposited Securities to the Owners and need not give any further notices or perform any further acts under this Deposit Agreement except as provided in this Section.

 

ARTICLE 7.     MISCELLANEOUS

 

SECTION 7.1.     Counterparts; Signatures; Delivery.

 

This Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of those counterparts shall constitute one and the same instrument. Copies of this Deposit Agreement shall be filed with the Depositary and the Custodians and shall be open to inspection by any Owner or Holder during regular business hours.

 

The exchange of copies of this Deposit Agreement and manually-signed signature pages by facsimile, or email attaching a pdf or similar bit-mapped image, shall constitute effective execution and delivery of this Deposit Agreement as to the parties to it; copies and signature pages so exchanged may be used in lieu of the original Deposit Agreement and signature pages for all purposes and shall have the same validity, legal effect and admissibility in evidence as an original manual signature; the parties to this Deposit Agreement hereby agree not to argue to the contrary.

 

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SECTION 7.2.     No Third Party Beneficiaries.

 

This Deposit Agreement is for the exclusive benefit of the Company, the Depositary, the Owners and the Holders and their respective successors and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person.

 

SECTION 7.3.     Severability.

 

In case any one or more of the provisions contained in this Deposit Agreement or in a Receipt should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Deposit Agreement or that Receipt shall in no way be affected, prejudiced or disturbed thereby.

 

SECTION 7.4.     Owners and Holders as Parties; Binding Effect.

 

The Owners and Holders from time to time shall be parties to this Deposit Agreement and shall be bound by all of the terms and conditions of this Deposit Agreement and of the Receipts by acceptance of American Depositary Shares or any interest therein.

 

SECTION 7.5.     Notices.

 

Any and all notices to be given to the Company shall be in writing and shall be deemed to have been duly given if personally delivered or sent by domestic first class or international air mail or air courier or sent by facsimile transmission or email attaching a pdf or similar bit-mapped image of a signed writing, addressed to Cian plc, 64 Agiou Georgiou Makri, Anna Maria Lena Court, Flat 201, 6037, Larnaca, Cyprus, Attention: Directors and Corporate Secretary of Cian PLC with a copy to the General Director of LLC Irealtor at Elektrozavodskaya Ulitsa, 27, Building 8 Moscow, 107023, Russia, or any other place to which the Company may have transferred its principal office with notice to the Depositary.

 

Any and all notices to be given to the Depositary shall be in writing and shall be deemed to have been duly given if in English and personally delivered or sent by first class domestic or international air mail or air courier or sent by facsimile transmission or email attaching a pdf or similar bit-mapped image of a signed writing, addressed to The Bank of New York Mellon, 240 Greenwich Street, New York, New York 10286, Attention: Depositary Receipt Administration, or any other place to which the Depositary may have transferred its Office with notice to the Company.

 

Delivery of a notice to the Company or Depositary by mail or air courier shall be deemed effected when deposited, postage prepaid, in a post-office letter box or received by an air courier service. Delivery of a notice to the Company or Depositary sent by facsimile transmission or email shall be deemed effected when the recipient acknowledges receipt of that notice.

 

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A notice to be given to an Owner shall be deemed to have been duly given when Disseminated to that Owner. Dissemination in paper form will be effective when personally delivered or sent by first class domestic or international air mail or air courier, addressed to that Owner at the address of that Owner as it appears on the transfer books for American Depositary Shares of the Depositary, or, if that Owner has filed with the Depositary a written request that notices intended for that Owner be mailed to some other address, at the address designated in that request. Dissemination in electronic form will be effective when sent in the manner consented to by the Owner to the electronic address most recently provided by the Owner for that purpose.

 

SECTION 7.6.     Arbitration; Settlement of Disputes.

 

Any controversy, claim or cause of action brought by any party hereto against the Company arising out of or relating to the Shares or other Deposited Securities, the American Depositary Shares, the Receipts or this Deposit Agreement, or the breach hereof or thereof, if so elected by the claimant, shall be settled by arbitration in accordance with the International Arbitration Rules of the American Arbitration Association. The award rendered by the arbitrators shall be final and binding on the parties, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

 

The place of the arbitration shall be the Borough of Manhattan, The City of New York, State of New York, United States of America, and the language of the arbitration shall be English.

 

The number of arbitrators shall be three, each of whom shall be disinterested in the dispute or controversy, shall have no connection with any party thereto, and shall be an attorney experienced in international securities transactions. Each party shall appoint one arbitrator and the two arbitrators shall select a third arbitrator who shall serve as chairperson of the tribunal. If a dispute, controversy or cause of action shall involve more than two parties, the parties shall attempt to align themselves in two sides (i.e., claimant(s) and respondent(s)), each of which shall appoint one arbitrator as if there were only two parties to such dispute, controversy or cause of action. If such alignment and appointment shall not have occurred within thirty (30) calendar days after the initiating party serves the arbitration demand, the American Arbitration Association shall appoint the three arbitrators, each of whom shall have the qualifications described above. The parties and the American Arbitration Association may appoint from among the nationals of any country, whether or not a party is a national of that country.

 

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The arbitral tribunal shall have no authority to award any consequential, special or punitive damages or other damages not measured by the prevailing party’s actual damages and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of this Deposit Agreement.

 

SECTION 7.7.     Appointment of Agent for Service of Process; Submission to Jurisdiction; Jury Trial Waiver.

 

The Company hereby (i) designates and appoints the person named in Exhibit A to this Deposit Agreement as the Company's authorized agent in the United States upon which process may be served in any suit or proceeding (including any arbitration proceeding) arising out of or relating to the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Deposit Agreement (a “Proceeding”), (ii) consents and submits to the jurisdiction of any state or federal court in the State of New York in which any Proceeding may be instituted and (iii) agrees that service of process upon said authorized agent shall be deemed in every respect effective service of process upon the Company in any Proceeding. The Company agrees to deliver to the Depositary, upon the execution and delivery of this Deposit Agreement, a written acceptance by the agent named in Exhibit A to this Deposit Agreement of its appointment as process agent. The Company further agrees to take any and all action, including the filing of any and all such documents and instruments, as may be necessary to continue that designation and appointment in full force and effect, or to appoint and maintain the appointment of another process agent located in the United States as required above, and to deliver to the Depositary a written acceptance by that agent of that appointment, for so long as any American Depositary Shares or Receipts remain outstanding or this Deposit Agreement remains in force. In the event the Company fails to maintain the designation and appointment of a process agent in the United States in full force and effect, the Company hereby waives personal service of process upon it and consents that a service of process in connection with a Proceeding may be made by certified or registered mail, return receipt requested, directed to the Company at its address last specified for notices under this Deposit Agreement, and service so made shall be deemed completed five (5) calendar days after the same shall have been so mailed.

 

EACH PARTY TO THIS DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT, EACH OWNER AND HOLDER) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY AND/OR THE DEPOSITARY DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE SHARES OR OTHER DEPOSITED SECURITIES, THE AMERICAN DEPOSITARY SHARES OR THE RECEIPTS, THIS DEPOSIT AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN OR THEREIN, OR THE BREACH HEREOF OR THEREOF, INCLUDING, WITHOUT LIMITATION, ANY QUESTION REGARDING EXISTENCE, VALIDITY OR TERMINATION (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY) ) AND ANY CLAIM BASED ON U.S. FEDERAL SECURITIES LAWS.

 

-35-

 

 

No disclaimer of liability under the United States federal securities laws or the rules and regulations thereunder is intended by any provision of this Deposit Agreement, inasmuch as no person is able to effectively waive the duty of any other person to comply with its obligations under those laws, rules and regulations.

 

SECTION 7.8.     Waiver of Immunities.

 

To the extent that the Company or any of its properties, assets or revenues may have or may hereafter become entitled to, or have attributed to it, any right of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any respect thereof, from setoff or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution or judgment, or from execution of judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in which proceedings may at any time be commenced, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Deposit Agreement, the Company, to the fullest extent permitted by law, hereby irrevocably and unconditionally waives, and agrees not to plead or claim, any immunity of that kind and consents to relief and enforcement as provided above.

 

SECTION 7.9.     Governing Law.

 

This Deposit Agreement and the Receipts shall be interpreted in accordance with and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the laws of the State of New York.

 

-36-

 

 

IN WITNESS WHEREOF, CIAN PLC and THE BANK OF NEW YORK MELLON have duly executed this Deposit Agreement as of the day and year first set forth above and all Owners and Holders shall become parties hereto upon acceptance by them of American Depositary Shares or any interest therein.

 

  CIAN PLC

 

  By:   
    Name:
    Title:

 

               THE BANK OF NEW YORK MELLON,
  as Depositary

 

  By:  
    Name:
    Title:

 

-37-

 

 

 

EXHIBIT A

 

AMERICAN DEPOSITARY SHARES

(Each American Depositary Share represents

one deposited Share)

 

THE BANK OF NEW YORK MELLON

AMERICAN DEPOSITARY RECEIPT

FOR ORDINARY SHARES OF

CIAN PLC

(INCORPORATED UNDER THE LAWS OF CYPRUS)

 

The Bank of New York Mellon, as depositary (hereinafter called the “Depositary”), hereby certifies that_________________________________________, or registered assigns IS THE OWNER OF _____________________________

 

AMERICAN DEPOSITARY SHARES

 

representing deposited ordinary shares (herein called “Shares”) of Cian plc, incorporated under the laws of Cyprus (herein called the “Company”). At the date hereof, each American Depositary Share represents one Share deposited or subject to deposit under the Deposit Agreement (as such term is hereinafter defined) with a custodian for the Depositary (herein called the “Custodian”) that, as of the date of the Deposit Agreement, was The Bank of New York Mellon, acting through an office located in the United Kingdom. The Depositary's Office and its principal executive office are located at 240 Greenwich Street, New York, N.Y. 10286.

 

THE DEPOSITARY'S OFFICE ADDRESS IS

240 GREENWICH STREET, NEW YORK, N.Y. 10286

 

A-1

 

 

1.     THE DEPOSIT AGREEMENT.

 

This American Depositary Receipt is one of an issue (herein called “Receipts”), all issued and to be issued upon the terms and conditions set forth in the Deposit Agreement dated as of __________, 2021 (herein called the “Deposit Agreement”) among the Company, the Depositary, and all Owners and Holders from time to time of American Depositary Shares issued thereunder, each of whom by accepting American Depositary Shares agrees to become a party thereto and become bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of Owners and Holders and the rights and duties of the Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash from time to time received in respect of those Shares and held thereunder (those Shares, securities, property, and cash are herein called “Deposited Securities”). Copies of the Deposit Agreement are on file at the Depositary's Office in New York City and at the office of the Custodian.

 

The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to which reference is hereby made. Capitalized terms defined in the Deposit Agreement and not defined herein shall have the meanings set forth in the Deposit Agreement.

 

2.     SURRENDER OF AMERICAN DEPOSITARY SHARES AND WITHDRAWAL OF SHARES.

 

Upon surrender of American Depositary Shares for the purpose of withdrawal of the Deposited Securities represented thereby and payment of the fee of the Depositary for the surrender of American Depositary Shares as provided in Section 5.9 of the Deposit Agreement and payment of all taxes and governmental charges payable in connection with that surrender and withdrawal of the Deposited Securities, and subject to the terms and conditions of the Deposit Agreement, the Owner of those American Depositary Shares shall be entitled to delivery (to the extent delivery can then be lawfully and practicably made), to or as instructed by that Owner, of the amount of Deposited Securities at the time represented by those American Depositary Shares, but not any money or other property as to which a record date for distribution to Owners has passed (since money or other property of that kind will be delivered or paid on the scheduled payment date to the Owner as of that record date), and except that the Depositary shall not be required to accept surrender of American Depositary Shares for the purpose of withdrawal to the extent it would require delivery of a fraction of a Deposited Security. The Depositary shall direct the Custodian with respect to delivery of Deposited Securities and may charge the surrendering Owner a fee and its expenses for giving that direction by cable (including SWIFT) or facsimile transmission. If Deposited Securities are delivered physically upon surrender of American Depositary Shares for the purpose of withdrawal, that delivery will be made at the Custodian’s office, except that, at the request, risk and expense of the surrendering Owner, and for the account of that Owner, the Depositary shall direct the Custodian to forward any cash or other property comprising, and forward a certificate or certificates, if applicable, and other proper documents of title, if any, for, the Deposited Securities represented by the surrendered American Depositary Shares to the Depositary for delivery at the Depositary’s Office or to another address specified in the order received from the surrendering Owner.

 

A-2

 

 

3.     REGISTRATION OF TRANSFER OF AMERICAN DEPOSITARY SHARES; COMBINATION AND SPLIT-UP OF RECEIPTS; INTERCHANGE OF CERTIFICATED AND UNCERTIFICATED AMERICAN DEPOSITARY SHARES.

 

The Depositary, subject to the terms and conditions of the Deposit Agreement, shall register a transfer of American Depositary Shares on its transfer books upon (i) in the case of certificated American Depositary Shares, surrender of the Receipt evidencing those American Depositary Shares, by the Owner or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer or (ii) in the case of uncertificated American Depositary Shares, receipt from the Owner of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in Section 2.9 of that Agreement), and, in either case, duly stamped as may be required by the laws of the State of New York and of the United States of America. Upon registration of a transfer, the Depositary shall deliver the transferred American Depositary Shares to or upon the order of the person entitled thereto.

 

The Depositary, subject to the terms and conditions of the Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of American Depositary Shares requested, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered.

 

The Depositary, upon surrender of certificated American Depositary Shares for the purpose of exchanging for uncertificated American Depositary Shares, shall cancel the Receipt evidencing those certificated American Depositary Shares and send the Owner a statement confirming that the Owner is the owner of the same number of uncertificated American Depositary Shares. The Depositary, upon receipt of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in Section 2.9 of the Deposit Agreement) from the Owner of uncertificated American Depositary Shares for the purpose of exchanging for certificated American Depositary Shares, shall cancel those uncertificated American Depositary Shares and register and deliver to the Owner a Receipt evidencing the same number of certificated American Depositary Shares.

 

As a condition precedent to the delivery, registration of transfer, or surrender of any American Depositary Shares or split-up or combination of any Receipt or withdrawal of any Deposited Securities, the Depositary, the Custodian, or Registrar may require payment from the depositor of the Shares or the presenter of the Receipt or instruction for registration of transfer or surrender of American Depositary Shares not evidenced by a Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in the Deposit Agreement, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of the Deposit Agreement.

 

A-3

 

 

The Depositary may refuse to accept deposits of Shares for delivery of American Depositary Shares or to register transfers of American Depositary Shares in particular instances, or may suspend deposits of Shares or registration of transfer generally, whenever it or the Company considers it necessary or advisable to do so. The Depositary may refuse surrenders of American Depositary Shares for the purpose of withdrawal of Deposited Securities in particular instances, or may suspend surrenders for the purpose of withdrawal generally, but, notwithstanding anything to the contrary in the Deposit Agreement, only for (i) temporary delays caused by closing of the Depositary’s register or the register of holders of Shares maintained by the Company or the Foreign Registrar, or the deposit of Shares, in connection with voting at a shareholders’ meeting or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the American Depositary Shares or to the withdrawal of the Deposited Securities or (iv) any other reason that, at the time, is permitted under paragraph I(A)(1) of the General Instructions to Form F-6 under the Securities Act of 1933 or any successor to that provision.

 

The Depositary shall not knowingly accept for deposit under the Deposit Agreement any Shares that, at the time of deposit, are Restricted Securities.

 

4.     LIABILITY OF OWNER FOR TAXES.

 

If any tax or other governmental charge shall become payable by the Custodian or the Depositary with respect to or in connection with any American Depositary Shares or any Deposited Securities represented by any American Depositary Shares or in connection with a transaction to which Section 4.8 of the Deposit Agreement applies, that tax or other governmental charge shall be payable by the Owner of those American Depositary Shares to the Depositary. The Depositary may refuse to register any transfer of those American Depositary Shares or any withdrawal of Deposited Securities represented by those American Depositary Shares until that payment is made, and may withhold any dividends or other distributions or the proceeds thereof, or may sell for the account of the Owner any part or all of the Deposited Securities represented by those American Depositary Shares, and may apply those dividends or other distributions or the net proceeds of any sale of that kind in payment of that tax or other governmental charge but, even after a sale of that kind, the Owner shall remain liable for any deficiency. The Depositary shall distribute any net proceeds of a sale made under Section 3.2 of the Deposit Agreement that are not used to pay taxes or governmental charges to the Owners entitled to them in accordance with Section 4.1 of the Deposit Agreement. If the number of Shares represented by each American Depositary Share decreases as a result of a sale of Deposited Securities under Section 3.2 of the Deposit Agreement, the Depositary may call for surrender of the American Depositary Shares to be exchanged on a mandatory basis for a lesser number of American Depositary Shares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions of American Depositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled to them.

 

A-4

 

 

5.     WARRANTIES ON DEPOSIT OF SHARES.

 

Every person depositing Shares under the Deposit Agreement shall be deemed thereby to represent and warrant that those Shares and each certificate therefor, if applicable, are validly issued, fully paid and nonassessable and were not issued in violation of any preemptive or similar rights of the holders of outstanding securities of the Company and that the person making that deposit is duly authorized so to do. Every depositing person shall also be deemed to represent that the Shares, at the time of deposit, are not Restricted Securities. All representations and warranties deemed made under Section 3.3 of the Deposit Agreement shall survive the deposit of Shares and delivery of American Depositary Shares.

 

6.     FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION.

 

Any person presenting Shares for deposit or any Owner or Holder may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may deem necessary or proper, or as the Company may reasonably require by written request to the Depositary. The Depositary may withhold the delivery or registration of transfer of any American Depositary Shares, the distribution of any dividend or other distribution or of the proceeds thereof or the delivery of any Deposited Securities until that proof or other information is filed or those certificates are executed or those representations and warranties are made. If requested in writing by the Company, the Depositary will provide the Company in a timely manner and at the Company’s expense with copies of such proofs, certificates and other information that it receives pursuant to Section 3.1 of the Deposit Agreement, to the extent that disclosure is permitted under applicable law. As conditions of accepting Shares for deposit, the Depositary may require (i) any certification required by the Depositary or the Custodian in accordance with the provisions of the Deposit Agreement, (ii) a written order directing the Depositary to deliver to, or upon the written order of, the person or persons stated in that order, the number of American Depositary Shares representing those Deposited Shares, (iii) evidence satisfactory to the Depositary that those Shares have been re-registered in the books of the Company or the Foreign Registrar in the name of the Depositary, a Custodian or a nominee of the Depositary or a Custodian, (iv) evidence satisfactory to the Depositary that any necessary approval has been granted by any governmental body in each applicable jurisdiction and (v) an agreement or assignment, or other instrument satisfactory to the Depositary, that provides for the prompt transfer to the Custodian of any dividend, or right to subscribe for additional Shares or to receive other property, that any person in whose name those Shares are or have been recorded may thereafter receive upon or in respect of those Shares, or, in lieu thereof, such agreement of indemnity or other agreement as shall be satisfactory to the Depositary. The Depositary shall refuse, and shall instruct the Custodian to refuse, to accept Shares for deposit if the Depositary has received written notice from the Company that the Company has restricted transfer of those Shares under the Company’s articles of association or any applicable laws.

 

A-5

 

 

7.     CHARGES OF DEPOSITARY.

 

The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering American Depositary Shares or to whom American Depositary Shares are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary Shares pursuant to Section 4.3 of the Deposit Agreement), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to or from the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable (including SWIFT) and facsimile transmission fees and expenses as are expressly provided in the Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.5 of the Deposit Agreement, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery of American Depositary Shares pursuant to Section 2.3, 4.3 or 4.4 of the Deposit Agreement and the surrender of American Depositary Shares pursuant to Section 2.5 or 6.2 of the Deposit Agreement, (6) a fee of $.05 or less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to the Deposit Agreement, including, but not limited to Sections 4.1 through 4.4 and 4.8 of the Deposit Agreement, (7) a fee for the distribution of securities pursuant to Section 4.2 of the Deposit Agreement or of rights pursuant to Section 4.4 of that Agreement (where the Depositary will not exercise or sell those rights on behalf of Owners), such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities under the Deposit Agreement (for purposes of this item 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners, (8) in addition to any fee charged under item 6, a fee of $.05 or less per American Depositary Share (or portion thereof) per annum for depositary services, which will be payable as provided in item 9 below, and (9) any other charges payable by the Depositary or the Custodian, any of the Depositary's or Custodian’s agents or the agents of the Depositary's or Custodian’s agents, in connection with the servicing of Shares or other Deposited Securities (which charges shall be assessed against Owners as of the date or dates set by the Depositary in accordance with Section 4.6 of the Deposit Agreement and shall be payable at the sole discretion of the Depositary by billing those Owners for those charges or by deducting those charges from one or more cash dividends or other cash distributions).

 

A-6

 

 

The Depositary may collect any of its fees by deduction from any cash distribution payable, or by selling a portion of any securities to be distributed, to Owners that are obligated to pay those fees.

 

The Depositary may own and deal in any class of securities of the Company and its affiliates and in American Depositary Shares.

 

From time to time, the Depositary may make payments to the Company to reimburse the Company for costs and expenses generally arising out of establishment and maintenance of the American Depositary Shares program, waive fees and expenses for services provided by the Depositary or share revenue from the fees collected from Owners or Holders. In performing its duties under the Deposit Agreement, the Depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the Depositary and that may earn or share fees, spreads or commissions.

 

8.     DISCLOSURE OF INTERESTS.

 

When required in order to comply with applicable laws and regulations or the articles of association or similar document of the Company, the Company may from time to time request each Owner and Holder to provide to the Depositary information relating to: (a) the capacity in which it holds American Depositary Shares, (b) the identity of any Holders or other persons or entities then or previously interested in those American Depositary Shares and the nature of those interests and (c) any other matter where disclosure of such matter is required for that compliance.   Each Owner and Holder agrees to provide all information known to it in response to a request made pursuant to Section 3.4 of the Deposit Agreement.  Each Holder consents to the disclosure by the Depositary and the Owner or other Holder through which it holds American Depositary Shares, directly or indirectly, of all information responsive to a request made pursuant to that Section relating to that Holder that is known to that Owner or other Holder. 

 

9.     TITLE TO AMERICAN DEPOSITARY SHARES.

 

It is a condition of the American Depositary Shares, and every successive Owner and Holder of American Depositary Shares, by accepting or holding the same, consents and agrees that American Depositary Shares evidenced by a Receipt, when the Receipt is properly endorsed or accompanied by proper instruments of transfer, shall be transferable as certificated registered securities under the laws of the State of New York, and that American Depositary Shares not evidenced by Receipts shall be transferable as uncertificated registered securities under the laws of the State of New York. The Depositary, notwithstanding any notice to the contrary, may treat the Owner of American Depositary Shares as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Deposit Agreement and for all other purposes, and neither the Depositary nor the Company shall have any obligation or be subject to any liability under the Deposit Agreement to any Holder of American Depositary Shares, but only to the Owner.

 

A-7

 

 

10. VALIDITY OF RECEIPT.

 

This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for any purpose, unless this Receipt shall have been (i) executed by the Depositary by the manual signature of a duly authorized officer of the Depositary or (ii) executed by the facsimile signature of a duly authorized officer of the Depositary and countersigned by the manual signature of a duly authorized signatory of the Depositary or the Registrar or a co-registrar.

 

11. REPORTS; INSPECTION OF TRANSFER BOOKS.

 

The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and, accordingly, files certain reports with the Securities and Exchange Commission. Those reports will be available for inspection and copying through the Commission's EDGAR system or at public reference facilities maintained by the Commission in Washington, D.C.

 

The Depositary will make available for inspection by Owners at its Office any reports, notices and other communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of those Deposited Securities by the Company. The Company shall furnish reports and communications, including any proxy soliciting material to which Section 4.9 of the Deposit Agreement applies, to the Depositary in English, to the extent such materials are required to be translated into English pursuant to any regulations of the Commission.

 

The Depositary will maintain a register of American Depositary Shares and transfers of American Depositary Shares, which shall be open for inspection by the Owners at the Depositary’s Office during regular business hours, but only for the purpose of communicating with Owners regarding the business of the Company or a matter related to the Deposit Agreement or the American Depositary Shares.

 

12. DIVIDENDS AND DISTRIBUTIONS.

 

Whenever the Depositary receives any cash dividend or other cash distribution on Deposited Securities, the Depositary will, if at the time of receipt thereof any amounts received in a foreign currency can in the judgment of the Depositary be converted on a reasonable basis into Dollars transferable to the United States, and subject to the Deposit Agreement, convert that dividend or other cash distribution into Dollars and distribute the amount thus received (net of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.9 of the Deposit Agreement) to the Owners entitled thereto; provided, however, that if the Custodian or the Depositary is required to withhold and does withhold from that cash dividend or other cash distribution an amount on account of taxes or other governmental charges, the amount distributed to the Owners of the American Depositary Shares representing those Deposited Securities shall be reduced accordingly.

 

A-8

 

 

If a cash distribution would represent a return of all or substantially all the value of the Deposited Securities underlying American Depositary Shares, the Depositary may:

 

(i) require payment of or deduct the fee for surrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition of making that cash distribution; or

 

(ii) sell all Deposited Securities other than the subject cash distribution and add any net cash proceeds of that sale to the cash distribution, call for surrender of all those American Depositary Shares and require that surrender as a condition of making that cash distribution.

 

If the Depositary acts under this paragraph, that action shall also be a Termination Option Event.

 

Subject to the provisions of Section 4.11 and 5.9 of the Deposit Agreement, whenever the Depositary receives any distribution other than a distribution described in Section 4.1, 4.3 or 4.4 of the Deposit Agreement on Deposited Securities (but not in exchange for or in conversion or in lieu of Deposited Securities), the Depositary will cause the securities or property received by it to be distributed to the Owners entitled thereto, after deduction or upon payment of any fees and expenses of the Depositary and any taxes or other governmental charges, in any manner that the Depositary deems equitable and practicable for accomplishing that distribution (which may be a distribution of depositary shares representing the securities received); provided, however, that if in the reasonable opinion of the Depositary such distribution cannot be made proportionately among the Owners entitled thereto, or if for any other reason the Depositary deems such distribution not to be lawful and feasible, the Depositary may adopt such other method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and distribution of the net proceeds of any such sale (net of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.9 of the Deposit Agreement) to the Owners entitled thereto all in the manner and subject to the conditions set forth in Section 4.1 of the Deposit Agreement. The Depositary may withhold any distribution of securities under Section 4.2 of the Deposit Agreement if it has not received reasonably satisfactory assurances from the Company that the distribution does not require registration under the Securities Act of 1933. The Depositary may sell, by public or private sale, an amount of securities or other property it would otherwise distribute under this Article that is sufficient to pay its fees and expenses in respect of that distribution.

 

A-9

 

 

If a distribution to be made under Section 4.2 of the Deposit Agreement would represent a return of all or substantially all the value of the Deposited Securities underlying American Depositary Shares, the Depositary may:

 

(i) require payment of or deduct the fee for surrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition of making that distribution; or

 

(ii) sell all Deposited Securities other than the subject distribution and add any net cash proceeds of that sale to the distribution, call for surrender of all those American Depositary Shares and require that surrender as a condition of making that distribution.

 

If the Depositary acts under this paragraph, that action shall also be a Termination Option Event.

 

Whenever the Depositary receives any distribution consisting of a dividend in, or free distribution of, Shares, the Depositary may, and shall if the Company shall so request in writing, deliver to the Owners entitled thereto, an aggregate number of American Depositary Shares representing the amount of Shares received as that dividend or free distribution, subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and issuance of American Depositary Shares, including the withholding of any tax or other governmental charge as provided in Section 4.11 of the Deposit Agreement and the payment of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.9 of the Deposit Agreement (and the Depositary may sell, by public or private sale, an amount of Shares received (or American Depositary Shares representing those Shares) sufficient to pay its fees and expenses in respect of that distribution). In lieu of delivering fractional American Depositary Shares, the Depositary may sell the amount of Shares represented by the aggregate of those fractions (or American Depositary Shares representing those Shares) and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.1 of the Deposit Agreement. If and to the extent that additional American Depositary Shares are not delivered and Shares or American Depositary Shares are not sold, each American Depositary Share shall thenceforth also represent the additional Shares distributed on the Deposited Securities represented thereby.

 

If the Company declares a distribution in which holders of Deposited Securities have a right to elect whether to receive cash, Shares or other securities or a combination of those things, or a right to elect to have a distribution sold on their behalf, the Depositary may, after consultation with the Company, make that right of election available for exercise by Owners in any manner the Depositary considers to be lawful and practical. As a condition of making a distribution election right available to Owners, the Depositary may require reasonably satisfactory assurances from the Company that doing so does not require registration of any securities under the Securities Act of 1933 that has not been effected.

 

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If the Depositary determines that any distribution received or to be made by the Depositary (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge that the Depositary is obligated to withhold, the Depositary may sell, by public or private sale, all or a portion of the distributed property (including Shares and rights to subscribe therefor) in the amounts and manner the Depositary deems necessary and practicable to pay those taxes or charges, and the Depositary shall distribute the net proceeds of that sale, after deduction of those taxes or charges, to the Owners entitled thereto in proportion to the number of American Depositary Shares held by them respectively.

 

Each Owner and Holder agrees to indemnify the Company, the Depositary, the Custodian and their respective directors, officers, employees, agents and affiliates for, and hold each of them harmless against, any claim by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced withholding at source or other tax benefit received by it. Services for Owners and Holders that may permit them to obtain reduced rates of tax withholding at source or reclaim excess tax withheld, and the fees and costs associated with using services of that kind, are not provided under, and are outside the scope of, the Deposit Agreement.

 

13. RIGHTS.

 

(a)       If rights are granted to the Depositary in respect of deposited Shares to purchase additional Shares or other securities, the Company and the Depositary shall endeavor to consult as to the actions, if any, the Depositary should take in connection with that grant of rights. The Depositary may, to the extent deemed by it to be lawful and practical (i) if requested in writing by the Company, grant to all or certain Owners rights to instruct the Depositary to purchase the securities to which the rights relate and deliver those securities or American Depositary Shares representing those securities to Owners, (ii) if requested in writing by the Company, deliver the rights to or to the order of certain Owners, or (iii) sell the rights to the extent practicable and distribute the net proceeds of that sale to Owners entitled to those proceeds. To the extent rights are not exercised, delivered or disposed of under (i), (ii) or (iii) above, the Depositary shall permit the rights to lapse unexercised.

 

(b)       If the Depositary will act under (a)(i) above, the Company and the Depositary will enter into a separate agreement setting forth the conditions and procedures applicable to the particular offering. Upon instruction from an applicable Owner in the form the Depositary specified and upon payment by that Owner to the Depositary of an amount equal to the purchase price of the securities to be received upon the exercise of the rights, the Depositary shall, on behalf of that Owner, exercise the rights and purchase the securities. The purchased securities shall be delivered to, or as instructed by, the Depositary. The Depositary shall (i) deposit the purchased Shares under the Deposit Agreement and deliver American Depositary Shares representing those Shares to that Owner or (ii) deliver or cause the purchased Shares or other securities to be delivered to or to the order of that Owner. The Depositary will not act under (a)(i) above unless the offer and sale of the securities to which the rights relate are registered under the Securities Act of 1933 or the Depositary has received an opinion of United States counsel that is reasonably satisfactory to it to the effect that those securities may be sold and delivered to the applicable Owners without registration under the Securities Act of 1933. For the avoidance of doubt, nothing in the Deposit Agreement shall create any obligation on the part of the Company to file a registration statement with respect to rights or the underlying securities or to endeavor to have such a registration statement declared effective.

 

(c)       If the Depositary will act under (a)(ii) above, the Company and the Depositary will enter into a separate agreement setting forth the conditions and procedures applicable to the particular offering. Upon (i) the request of an applicable Owner to deliver the rights allocable to the American Depositary Shares of that Owner to an account specified by that Owner to which the rights can be delivered and (ii) receipt of such documents as the Company and the Depositary agreed to require to comply with applicable law, the Depositary will deliver those rights as requested by that Owner.

 

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(d)       If the Depositary will act under (a)(iii) above, the Depositary will use reasonable efforts to sell the rights in proportion to the number of American Depositary Shares held by the applicable Owners and pay the net proceeds to the Owners otherwise entitled to the rights that were sold, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any American Depositary Shares or otherwise.

 

(e)       Payment or deduction of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement and payment or deduction of the expenses of the Depositary and any applicable taxes or other governmental charges shall be conditions of any delivery of securities or payment of cash proceeds under Section 4.4 of the Deposit Agreement.

 

(f)       The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make rights available to or exercise rights on behalf of Owners in general or any Owner in particular , or to sell rights.

 

14. CONVERSION OF FOREIGN CURRENCY.

 

Whenever the Depositary or the Custodian receives foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary or one of its agents or affiliates or the Custodian shall convert or cause to be converted by sale or in any other manner that it may determine that foreign currency into Dollars, and those Dollars shall be distributed, as promptly as practicable, to the Owners entitled thereto.  A cash distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners based on exchange restrictions, the date of delivery of any American Depositary Shares or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.9 of the Deposit Agreement.

 

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If a conversion of foreign currency or the repatriation or distribution of Dollars can be effected only with the approval or license of any government or agency thereof, the Depositary may, but will not be required to, file an application for that approval or license.

 

If the Depositary determines that in its judgment any foreign currency received by the Depositary or the Custodian is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof that is required for such conversion is not filed or sought by the Depositary or is not obtained within a reasonable period as determined by the Depositary, the Depositary may distribute the foreign currency received by the Depositary to, or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.

 

If any conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make that conversion and distribution in Dollars to the extent practicable and permissible to the Owners entitled thereto and may distribute the balance of the foreign currency received by the Depositary to, or hold that balance uninvested and without liability for interest thereon for the account of, the Owners entitled thereto.

 

The Depositary may convert currency itself or through any of its affiliates, or the Custodian or the Company may convert currency and pay Dollars to the Depositary. Where the Depositary converts currency itself or through any of its affiliates, the Depositary acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.  The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the Deposit Agreement and the rate that the Depositary or its affiliate receives when buying or selling foreign currency for its own account.  The Depositary makes no representation that the exchange rate used or obtained by it or its affiliate in any currency conversion under the Deposit Agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to Owners, subject to the Depositary’s obligations under Section 5.3 of that Agreement.  The methodology used to determine exchange rates used in currency conversions made by the Depositary is available upon request. Where the Custodian converts currency, the Custodian has no obligation to obtain the most favorable rate that could be obtained at the time or to ensure that the method by which that rate will be determined will be the most favorable to Owners, and the Depositary makes no representation that the rate is the most favorable rate and will not be liable for any direct or indirect losses associated with the rate.  In certain instances, the Depositary may receive dividends or other distributions from the Company in Dollars that represent the proceeds of a conversion of foreign currency or translation from foreign currency at a rate that was obtained or determined by or on behalf of the Company and, in such cases, the Depositary will not engage in, or be responsible for, any foreign currency transactions and neither it nor the Company makes any representation that the rate obtained or determined by the Company is the most favorable rate and neither it nor the Company will be liable for any direct or indirect losses associated with the rate.

 

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15. RECORD DATES.

 

Whenever a cash dividend, cash distribution or any other distribution is made on Deposited Securities or rights to purchase Shares or other securities are issued with respect to Deposited Securities (which rights will be delivered to or exercised or sold on behalf of Owners in accordance with Section 4.4 of the Deposit Agreement) or the Depositary receives notice that a distribution or issuance of that kind will be made, or whenever the Depositary receives notice that a meeting of holders of Shares will be held in respect of which the Company has requested the Depositary to send a notice under Section 4.7 of the Deposit Agreement, or whenever the Depositary will assess a fee or charge against the Owners, or whenever the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary otherwise finds it necessary or convenient, the Depositary shall fix a record date, which shall be the same as, or as near as practicable to, any corresponding record date set by the Company with respect to Shares, (a) for the determination of the Owners (i) who shall be entitled to receive the benefit of that dividend or other distribution or those rights, (ii) who shall be entitled to give instructions for the exercise of voting rights at that meeting, (iii) who shall be responsible for that fee or charge or (iv) for any other purpose for which the record date was set, or (b) on or after which each American Depositary Share will represent the changed number of Shares. Subject to the provisions of Sections 4.1 through 4.5 of the Deposit Agreement and to the other terms and conditions of the Deposit Agreement, the Owners on a record date fixed by the Depositary shall be entitled to receive the amount distributable by the Depositary with respect to that dividend or other distribution or those rights or the net proceeds of sale thereof in proportion to the number of American Depositary Shares held by them respectively, to give voting instructions or to act in respect of the other matter for which that record date was fixed, or be responsible for that fee or charge, as the case may be.

 

16. VOTING OF DEPOSITED SHARES.

 

(a)       Upon receipt of notice of any meeting of holders of Shares at which holders of Shares will be entitled to vote, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, Disseminate to the Owners a notice, the form of which shall be determined by the Depositary in consultation with the Company to the extent practicable, that shall contain (i) the information contained in the notice of meeting received by the Depositary, (ii) a statement that the Owners as of the close of business on a specified record date will be entitled, subject to any applicable provision of Cyprus law and of the articles of association or similar documents of the Company, to instruct the Depositary as to the exercise of the voting rights pertaining to the amount of Shares represented by their respective American Depositary Shares, (iii) a statement as to the manner in which those instructions may be given and (iv) the last date on which the Depositary will accept instructions (the “Instruction Cutoff Date”).

 

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(b)       Upon the written request of an Owner of American Depositary Shares, as of the date of the request or, if a record date was specified by the Depositary, as of that record date, received on or before any Instruction Cutoff Date established by the Depositary, the Depositary may, and if the Depositary sent a notice under the preceding paragraph shall, endeavor, in so far as practicable, to vote or cause to be voted the amount of deposited Shares represented by those American Depositary Shares in accordance with the instructions set forth in that request. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the deposited Shares other than in accordance with instructions given by Owners and received by the Depositary.

 

(c)       There can be no assurance that Owners generally or any Owner in particular will receive the notice described in paragraph (a) above in time to enable Owners to give instructions to the Depositary prior to the Instruction Cutoff Date.

 

(d)       In order to give Owners a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Shares, if the Company will request the Depositary to Disseminate a notice under paragraph (a) above, the Company shall give the Depositary notice of the meeting, details concerning the matters to be voted upon and copies of materials to be made available to holders of Shares in connection with the meeting not less than 40 calendar days prior to the meeting date.

 

17.      TENDER AND EXCHANGE OFFERS; REDEMPTION, REPLACEMENT OR CANCELLATION OF DEPOSITED SECURITIES.

 

(a)       The Depositary shall not tender any Deposited Securities in response to any voluntary cash tender offer, exchange offer or similar offer made to holders of Deposited Securities (a “Voluntary Offer”), except when instructed in writing to do so by an Owner surrendering American Depositary Shares and subject to any conditions or procedures the Depositary may require.

 

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(b)       If the Depositary receives a written notice that Deposited Securities have been redeemed for cash or otherwise purchased for cash in a transaction that is mandatory and binding on the Depositary as a holder of those Deposited Securities (a “Redemption”), the Depositary, at the expense of the Company, shall (i) if required, surrender Deposited Securities that have been redeemed to the issuer of those securities or its agent on the redemption date, (ii) Disseminate a notice to Owners (A) notifying them of that Redemption, (B) calling for surrender of a corresponding number of American Depositary Shares and (C) notifying them that the called American Depositary Shares have been converted into a right only to receive the money received by the Depositary upon that Redemption and those net proceeds shall be the Deposited Securities to which Owners of those converted American Depositary Shares shall be entitled upon surrenders of those American Depositary Shares in accordance with Section 2.5 or 6.2 of the Deposit Agreement and (iii) distribute the money received upon that Redemption to the Owners entitled to it upon surrender by them of called American Depositary Shares in accordance with Section 2.5 of that Agreement (and, for the avoidance of doubt, Owners shall not be entitled to receive that money under Section 4.1 of that Agreement). If the Redemption affects less than all the Deposited Securities, the Depositary shall call for surrender a corresponding portion of the outstanding American Depositary Shares and only those American Depositary Shares will automatically be converted into a right to receive the net proceeds of the Redemption. The Depositary shall allocate the American Depositary Shares converted under the preceding sentence among the Owners pro-rata to their respective holdings of American Depositary Shares immediately prior to the Redemption, except that the allocations may be adjusted so that no fraction of a converted American Depositary Share is allocated to any Owner. A Redemption of all or substantially all of the Deposited Securities shall be a Termination Option Event.

 

(c)       If the Depositary is notified of or there occurs any change in nominal value or any subdivision, combination or any other reclassification of the Deposited Securities or any recapitalization, reorganization, sale of assets substantially as an entirety, merger or consolidation affecting the issuer of the Deposited Securities or to which it is a party that is mandatory and binding on the Depositary as a holder of Deposited Securities and, as a result, securities or other property have been or will be delivered in exchange, conversion, replacement or in lieu of, Deposited Securities (a “Replacement”), the Depositary shall, if required, surrender the old Deposited Securities affected by that Replacement of Shares and hold, as new Deposited Securities under the Deposit Agreement, the new securities or other property delivered to it in that Replacement. However, the Depositary may elect to sell those new Deposited Securities if in the reasonable opinion of the Depositary it is not lawful or not practical for it to hold those new Deposited Securities under the Deposit Agreement because those new Deposited Securities may not be distributed to Owners without registration under the Securities Act of 1933 or for any other reason, at public or private sale, at such places and on such terms as it deems proper and proceed as if those new Deposited Securities had been Redeemed under paragraph (b) above. A Replacement shall be a Termination Option Event.

 

(d)       In the case of a Replacement where the new Deposited Securities will continue to be held under the Deposit Agreement, the Depositary may call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing the new Deposited Securities and the number of those new Deposited Securities represented by each American Depositary Share. If the number of Shares represented by each American Depositary Share decreases as a result of a Replacement, the Depositary may call for surrender of the American Depositary Shares to be exchanged on a mandatory basis for a lesser number of American Depositary Shares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions of American Depositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled to them.

 

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(e)       If there are no Deposited Securities with respect to American Depositary Shares, including if the Deposited Securities are cancelled, or the Deposited Securities with respect to American Depositary Shares become apparently worthless, the Depositary may call for surrender of those American Depositary Shares or may cancel those American Depositary Shares, upon notice to Owners, and that condition shall be a Termination Option Event.

 

18. LIABILITY OF THE COMPANY AND DEPOSITARY.

 

Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Holder:

 

(i) if by reason of (A) any provision of any present or future law or regulation or other act of the government of the United States, any State of the United States or any other state or jurisdiction, or of any governmental or regulatory authority or stock exchange; (B) (in the case of the Depositary only) any provision, present or future, of the articles of association or similar document of the Company, or by reason of any provision of any securities issued or distributed by the Company, or any offering or distribution thereof; or (C) any event or circumstance, whether natural or caused by a person or persons, that is beyond the ability of the Depositary or the Company, as the case may be, to prevent or counteract by reasonable care or effort (including, but not limited to earthquakes, floods, severe storms, fires, explosions, war, terrorism, civil unrest, labor disputes, criminal acts or outbreaks of infectious disease; interruptions or malfunctions of utility services, Internet or other communications lines or systems; unauthorized access to or attacks on computer systems or websites; or other failures or malfunctions of computer hardware or software or other systems or equipment), the Depositary or the Company is, directly or indirectly, prevented from, forbidden to or delayed in, or could be subject to any civil or criminal penalty on account of doing or performing and therefore does not do or perform, any act or thing that, by the terms of the Deposit Agreement or the Deposited Securities, it is provided shall be done or performed;

 

(ii) for any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement (including any determination by the Depositary to take, or not take, any action that the Deposit Agreement provides the Depositary may take);

 

(iii) for the inability of any Owner or Holder to benefit from any distribution, offering, right or other benefit that is made available to holders of Deposited Securities but is not, under the terms of the Deposit Agreement, made available to Owners or Holders; or

 

(iv) for any special, consequential or punitive damages for any breach of the terms of the Deposit Agreement.

 

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Where, by the terms of a distribution to which Section 4.1, 4.2 or 4.3 of the Deposit Agreement applies, or an offering to which Section 4.4 of that Agreement applies, or for any other reason, that distribution or offering may not be made available to Owners, and the Depositary may not dispose of that distribution or offering on behalf of Owners and make the net proceeds available to Owners, then the Depositary shall not make that distribution or offering available to Owners, and shall allow any rights, if applicable, to lapse.

 

None of the Company, the Depositary or any of their affiliates, directors, officers, employees, agents or affiliates assumes any obligation nor shall any of them be subject to any liability under the Deposit Agreement to Owners or Holders, except that they agree to perform their obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositary shall not be a fiduciary or have any fiduciary duty to Owners or Holders. The Depositary shall not be subject to any liability with respect to the validity or worth of the Deposited Securities. None of the Depositary, the Company or any of their respective directors, officers, employees, agents or affiliates shall be under any obligation to appear in, prosecute or defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of the American Depositary Shares, on behalf of any Owner or Holder or other person. None of the Depositary, the Company or any of their respective directors, officers, employees, agents or affiliates shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or Holder, or any other person believed by it in good faith to be competent to give such advice or information. Each of the Depositary and the Company and their directors, officers, employees, agents or affiliates may rely, and shall be protected in relying upon, any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with a matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises, the Depositary performed its obligations without negligence or bad faith while it acted as Depositary. The Depositary shall not be liable for the acts or omissions of any securities depository, clearing agency or settlement system in connection with or arising out of book-entry settlement of American Depositary Shares or Deposited Securities or otherwise. In the absence of bad faith on its part, the Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities or for the manner in which any such vote is cast or the effect of any such vote. The Depositary shall have no duty to make any determination or provide any information as to the tax status of the Company. Neither the Depositary nor the Company shall have any liability for any tax consequences that may be incurred by Owners or Holders as a result of owning or holding American Depositary Shares. Neither the Depositary nor the Company shall be liable for the inability or failure of an Owner or Holder to obtain the benefit of a foreign tax credit, reduced rate of withholding or refund of amounts withheld in respect of tax or any other tax benefit.

 

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19. RESIGNATION AND REMOVAL OF THE DEPOSITARY; APPOINTMENT OF SUCCESSOR CUSTODIAN.

 

The Depositary may at any time resign as Depositary under the Deposit Agreement by written notice of its election so to do delivered to the Company, to become effective upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at any time be removed by the Company by 90 calendar days’ prior written notice of that removal, to become effective upon the later of (i) the 90th calendar day after delivery of the notice to the Depositary and (ii) the appointment of a successor depositary and its acceptance of its appointment as provided in the Deposit Agreement. The Depositary in its discretion may at any time appoint a substitute or additional custodian or custodians.

 

20. AMENDMENT.

 

The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to time be amended by the written agreement between the Company and the Depositary without the consent of Owners or Holders in any respect which they may deem necessary or desirable. Any amendment that would impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable (including SWIFT) or facsimile transmission costs, delivery costs or other such expenses), or that would otherwise prejudice any substantial existing right of Owners, shall, however, not become effective as to outstanding American Depositary Shares until the expiration of 30 calendar days after notice of that amendment has been Disseminated to the Owners of outstanding American Depositary Shares. Every Owner and Holder, at the time any amendment so becomes effective, shall be deemed, by continuing to hold American Depositary Shares or any interest therein, to consent and agree to that amendment and to be bound by the Deposit Agreement as amended thereby. Upon the effectiveness of an amendment to the form of Receipt, including a change in the number of Shares represented by each American Depositary Share, the Depositary may call for surrender of Receipts to be replaced with new Receipts in the amended form or call for surrender of American Depositary Shares to effect that change of ratio. In no event shall any amendment impair the right of the Owner to surrender American Depositary Shares and receive delivery of the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.

 

21. TERMINATION OF DEPOSIT AGREEMENT.

 

(a)       The Company may initiate termination of the Deposit Agreement by notice to the Depositary. The Depositary may initiate termination of the Deposit Agreement if (i) at any time 60 calendar days shall have expired after the Depositary delivered to the Company a written resignation notice and a successor depositary has not been appointed and accepted its appointment as provided in Section 5.4 of that Agreement or (ii) a Termination Option Event has occurred. If termination of the Deposit Agreement is initiated, the Depositary shall Disseminate a notice of termination to the Owners of all American Depositary Shares then outstanding setting a date for termination (the “Termination Date”), which shall be at least 90 calendar days after the date of that notice, and the Deposit Agreement shall terminate on that Termination Date.

 

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(b)       After the Termination Date, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary under Sections 5.8 and 5.9 of that Agreement.

 

(c)       At any time after the Termination Date, the Depositary may sell the Deposited Securities then held under the Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of American Depositary Shares that remain outstanding, and those Owners will be general creditors of the Depositary with respect to those net proceeds and that other cash. After making that sale, the Depositary shall be discharged from all obligations under the Deposit Agreement, except (i) to account for the net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of American Depositary Shares, any expenses for the account of the Owner of such American Depositary Shares in accordance with the terms and conditions of the Deposit Agreement and any applicable taxes or governmental charges), (ii) for its obligations under Section 5.8 of that Agreement and (iii) to act as provided in paragraph (d) below.

 

(d)       After the Termination Date, the Depositary shall continue to receive dividends and other distributions pertaining to Deposited Securities (that have not been sold), may sell rights and other property as provided in the Deposit Agreement and shall deliver Deposited Securities (or sale proceeds) upon surrender of American Depositary Shares (after payment or upon deduction, in each case, of the fee of the Depositary for the surrender of American Depositary Shares, any expenses for the account of the Owner of those American Depositary Shares in accordance with the terms and conditions of the Deposit Agreement and any applicable taxes or governmental charges). After the Termination Date, the Depositary shall not accept deposits of Shares or deliver American Depositary Shares. After the Termination Date, (i) the Depositary may refuse to accept surrenders of American Depositary Shares for the purpose of withdrawal of Deposited Securities (that have not been sold) or reverse previously accepted surrenders of that kind that have not settled if in its judgment the requested withdrawal would interfere with its efforts to sell the Deposited Securities, (ii) the Depositary will not be required to deliver cash proceeds of the sale of Deposited Securities until all Deposited Securities have been sold and (iii) the Depositary may discontinue the registration of transfers of American Depositary Shares and suspend the distribution of dividends and other distributions on Deposited Securities to the Owners and need not give any further notices or perform any further acts under the Deposit Agreement except as provided in Section 6.2 of that Agreement.

 

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22. DTC DIRECT REGISTRATION SYSTEM AND PROFILE MODIFICATION SYSTEM.

 

(a)       Notwithstanding the provisions of Section 2.4 of the Deposit Agreement, the parties acknowledge that DTC’s Direct Registration System (“DRS”) and Profile Modification System (“Profile”) apply to the American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC that facilitates interchange between registered holding of uncertificated securities and holding of security entitlements in those securities through DTC and a DTC participant. Profile is a required feature of DRS that allows a DTC participant, claiming to act on behalf of an Owner of American Depositary Shares, to direct the Depositary to register a transfer of those American Depositary Shares to DTC or its nominee and to deliver those American Depositary Shares to the DTC account of that DTC participant without receipt by the Depositary of prior authorization from the Owner to register that transfer.

 

(b)       In connection with DRS/Profile, the parties acknowledge that the Depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an Owner in requesting registration of transfer and delivery as described in paragraph (a) above has the actual authority to act on behalf of that Owner (notwithstanding any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections 5.3 and 5.8 of the Deposit Agreement apply to the matters arising from the use of the DRS/Profile. The parties agree that the Depositary’s reliance on and compliance with instructions received by the Depositary through the DRS/Profile system and otherwise in accordance with the Deposit Agreement, shall not constitute negligence or bad faith on the part of the Depositary.

 

23.      ARBITRATION; SETTLEMENT OF DISPUTES.

 

Any controversy, claim or cause of action brought by any party hereto against the Company arising out of or relating to the Shares or other Deposited Securities, the American Depositary Shares, the Receipts or the Deposit Agreement, or the breach hereof or thereof, if so elected by the claimant, shall be settled by arbitration in accordance with the International Arbitration Rules of the American Arbitration Association. The award rendered by the arbitrators shall be final and binding on the parties, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

 

The place of the arbitration shall be the Borough of Manhattan, The City of New York, State of New York, United States of America, and the language of the arbitration shall be English.

 

The number of arbitrators shall be three, each of whom shall be disinterested in the dispute or controversy, shall have no connection with any party thereto, and shall be an attorney experienced in international securities transactions. Each party shall appoint one arbitrator and the two arbitrators shall select a third arbitrator who shall serve as chairperson of the tribunal. If a dispute, controversy or cause of action shall involve more than two parties, the parties shall attempt to align themselves in two sides (i.e., claimant(s) and respondent(s)), each of which shall appoint one arbitrator as if there were only two parties to such dispute, controversy or cause of action. If such alignment and appointment shall not have occurred within thirty (30) calendar days after the initiating party serves the arbitration demand, the American Arbitration Association shall appoint the three arbitrators, each of whom shall have the qualifications described above. The parties and the American Arbitration Association may appoint from among the nationals of any country, whether or not a party is a national of that country.

 

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The arbitral tribunal shall have no authority to award any consequential, special or punitive damages or other damages not measured by the prevailing party’s actual damages and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of the Deposit Agreement.

 

24. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS; SUBMISSION TO JURISDICTION; JURY TRIAL WAIVER; WAIVER OF IMMUNITIES.

 

The Company has (i) appointed Cogency Global Inc. located at 122 East 42nd Street, 18th Floor, New York, NY 10168 as the Company's authorized agent in the United States upon which process may be served in any suit or proceeding (including any arbitration proceeding) arising out of or relating to the Shares or Deposited Securities, the American Depositary Shares, the Receipts or the Deposit Agreement, (ii) consented and submitted to the jurisdiction of any state or federal court in the State of New York in which any such suit or proceeding may be instituted, and (iii) agreed that service of process upon said authorized agent shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding.

 

EACH PARTY TO THE DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT, EACH OWNER AND HOLDER) THEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY AND/OR THE DEPOSITARY DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE SHARES OR OTHER DEPOSITED SECURITIES, THE AMERICAN DEPOSITARY SHARES OR THE RECEIPTS, THE DEPOSIT AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN OR THEREIN, OR THE BREACH HEREOF OR THEREOF, INCLUDING, WITHOUT LIMITATION, ANY QUESTION REGARDING EXISTENCE, VALIDITY OR TERMINATION (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY) AND ANY CLAIM BASED ON U.S. FEDERAL SECURITIES LAWS.

 

No disclaimer of liability under the United States federal securities laws or the rules and regulations thereunder is intended by any provision of the Deposit Agreement, inasmuch as no person is able to effectively waive the duty of any other person to comply with its obligations under those laws, rules and regulations.

 

A-22

 

 

To the extent that the Company or any of its properties, assets or revenues may have or hereafter become entitled to, or have attributed to it, any right of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any respect thereof, from setoff or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution or judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in which proceedings may at any time be commenced, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with the Shares or Deposited Securities, the American Depositary Shares, the Receipts or the Deposit Agreement, the Company, to the fullest extent permitted by law, hereby irrevocably and unconditionally waives, and agrees not to plead or claim, any such immunity of that kind and consents to such relief and enforcement as provided above.

 

A-23

 

 

Exhibit 4.3

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is dated as of this ___ day of ________2021, by and among Cian PLC, a Cyprus public limited company (together with any successor thereof resulting from any reorganization, merger, acquisition or otherwise, the “Company”), and the persons identified on the signature pages hereto (collectively, the “Investors,” and each individually, the “Investor”).

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto covenant and agree with each other as follows:

 

1.            Certain Definitions.

 

As used in this Agreement, the following terms shall have the following respective meanings:

 

“ADSs” means American depositary shares, each representing one Ordinary Share.

 

“Affiliate” means with respect to any Person, (a) any other Person that controls, is controlled by, or is under common control with such Person and (b) any investment company, limited partnership, fund, other collective investment vehicle or managed account that is (or any assets of which are) managed or advised by such Person or Affiliate of such Person. The term “control” as used with respect to any Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. For the avoidance of doubt, each GS Shareholder is Affiliated with each other GS Shareholder and each Elbrus Shareholder is Affiliated with each other Elbrus Shareholder.

 

Without limiting the foregoing:

 

(a) in the case of each member of the GS Group, “Affiliate” includes each other member of the GS Group; and

 

(b) in the case of each Elbrus Shareholder, “Affiliate” includes:

 

i. any other entity directly or indirectly Controlled by, or Controlling of, or under common Control with, Speedtime Trading Limited, Onlypiece Trading Limited, Ronder Investments Limited;

 

ii. Elbrus Capital Fund II L.P., Elbrus Capital Fund II B L.P., Elbrus Capital Fund III A S.C.Sp., Elbrus Capital Fund III B S.C.Sp or any collective investment scheme or managed account which raises capital from one or more investors, in each case including investment compartments, subsidiaries, parallel or co-investing vehicles, general partners, investment managers and/or investment advisors thereof and which is or will be Controlled, managed or advised by entities under the Control of one or more of the same ultimate beneficial owners as the entities which currently Control, manage or advise Elbrus Capital Fund II L.P., Elbrus Capital Fund II B L.P., Elbrus Capital Fund III A S.C.Sp. or Elbrus Capital Fund III B S.C.Sp.

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which banks in New York City (United States), Moscow (Russia), Nicosia (Cyprus), Tortola (British Virgin Islands), George Town (Cayman Islands), Luxembourg or London (England) are authorized or obligated by law or executive order to close or would customarily close.

 

“Articles” means the articles of association of the Company.

 

“Commission” means the United States Securities and Exchange Commission, or any other federal agency administering the Securities Act and the Exchange Act at the time.

 

“Convertible Securities” means all then outstanding options, warrants, rights, convertible notes, Preferred Stock or other securities of the Company directly or indirectly convertible into or exercisable for Ordinary Shares.

 

“Coordination Agreement” means the coordination agreement dated on or around the date hereof among (i) Speedtime Trading Limited, Onlypiece Trading Limited and Ronder Investments Limited (together, the “Elbrus Shareholders”), (ii) Maksim Melnikov, (iii) MPOC Technologies Ltd, and (iv) ELQ Investors II Ltd, Stonebridge 2020 Offshore Holdings II, L.P., Stonebridge 2020, L.P. and West Street EMS Partners, SLP (together, the “GS Shareholders”).

 

“Coordinated Shareholders” means the Elbrus Shareholders, Maksim Melnikov, MPOC Technologies Ltd and the GS Shareholders, for as long as their respective Ownership Percentage (together with their Affiliates or, in case of the GS Shareholders, any Affiliate(s) who is a direct or indirect transferee of a GS Shareholder) is three percent (3%) or more.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

 

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“GS Affiliated Fund” means any investment company, limited partnership, fund, other collective investment vehicle or managed account that is (or any assets of which are) managed or advised by GS or an Affiliate of GS;

 

“GS Group” means The Goldman Sachs Group, Inc. (“GS”) and its Affiliates and any GS Affiliated Fund (and “member of the GS Group” shall be construed accordingly) and includes at the date of this Agreement, for the avoidance of doubt, ELQ Investors II Ltd, Stonebridge 2020, L.P., Stonebridge 2020 Offshore Holdings II, L.P. and West Street EMS Partners, SLP.

 

“IPO” means the underwritten initial public offering of the ADSs pursuant to an effective registration statement under the Securities Act.

 

“IPO Anniversary” means the date that falls one calendar year after the date of the final prospectus relating to the IPO.

 

“Ordinary Shares” means the ordinary shares of the Company of nominal value EUR 0.0004 per share.

 

“Ownership Percentage” means, in respect of an Investor, the percentage obtained by dividing (a) the number of Ordinary Shares (whether directly or as ADSs) held by such Investor and (b) the total number of Ordinary Shares (whether directly or as ADSs) outstanding.

 

“Permitted Transferee” means any Affiliate of any Investor.

 

“Person” means an individual, a corporation, a partnership, a joint venture, a trust, an unincorporated organization, a limited liability company or partnership, a government and any agency or political subdivision thereof.

 

“Preferred Stock” means any shares issued with such preferred, deferred or other special rights or with such restrictions, whether in regard to dividend, voting, return of capital or otherwise issued by the Company pursuant to the Articles.

 

“Registrable Securities” means (i) any Ordinary Shares held by the Investors at any time, (ii) any Ordinary Shares issued or issuable pursuant to the conversion of (x) the Preferred Stock or (y) any other Convertible Securities held by the Investors at any time, (iii) any other securities issued or issuable with respect to any such shares described in clauses (i) and (ii) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization and (iv) any ADSs issued in respect of any securities described in clause (i), (ii), or (iii). A Person will be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected.

 

“Registration Expenses” means the expenses so described in Section 8 hereof.

 

“Restricted Period” means the period commencing on the date of this Agreement and ending 180 days after such date.

 

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“Securities Act” means the Securities Act of 1933, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

 

“WKSI” means a “well-known seasoned issuer” as defined under Rule 405.

 

2.            Coordination Committee

 

A.            Formation of Coordination Committee

 

(a)            The Coordinated Shareholders shall create a coordination committee (the “Coordination Committee”), which shall not be a committee of the board of directors of the Company, and such committee will be maintained by the Shareholders (and each Shareholder shall participate) in accordance with the terms herein.

 

(b)            Each Coordinated Shareholder's right to designate, remove and replace the representatives of the Coordination Committee (who may, but need not be, a director of the Company) is as follows:

 

i. The Elbrus Shareholders shall have the right to designate, remove and replace two (2) representatives for as long as their Ownership Percentage (together with their Affiliates) is in aggregate ten (10) or more percent. Otherwise, the Elbrus Shareholders shall have the right to designate, remove and replace one (1) representative;

 

ii. the GS Shareholders shall have the right to designate, remove and replace one (1) representative;

 

iii. Maksim Melnikov shall have the right to designate, remove and replace one (1) representative; and

 

iv. MPOC Technologies Ltd, for as long as it is an Affiliate of Dmitry Demin, shall have the right to designate, remove and replace one (1) representative.

 

(c)            For the avoidance of doubt, a representative of a Coordinated Shareholder shall be automatically removed from the Coordination Committee once the Coordinated Shareholder that appointed him ceases to be a Coordinated Shareholder or a party to this Agreement.

 

B.            Proceedings

 

Each Coordinated Shareholder's representative may request a meeting of the Coordination Committee. Notice of such meeting must be given at least one Business Day in advance or at such earlier time as the representatives may separately agree.

 

C.            Quorum

 

(a)            Except as provided by sub-Sections (b) and (c) below, the quorum for transacting business at any meeting of the Coordination Committee shall be all of the Coordinated Shareholders’ representatives being present when the relevant business is transacted. A representative shall be regarded as present for the purposes of a quorum if represented by an alternate. Nothing in this clause shall be interpreted as prohibiting meetings of the Coordination Committee being held by telephone or other electronic communication.

 

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(b)            If a quorum is not present within 30 minutes from the time appointed for the meeting or if during the meeting a quorum ceases to be present, the meeting shall be adjourned to the date that is 48 hours after the date of the meeting at the same time and place. The quorum at such adjourned meeting shall be all of the Coordinated Shareholders’ representatives less the one(s) who failed to turn up to the original meeting.

 

(c)            If a quorum of the adjourned meeting is not present within 30 minutes from the time appointed for the meeting or if during the meeting a quorum ceases to be present, the meeting shall be adjourned further to the date that is 24 hours after the date of the adjourned meeting at the same time and place. The quorum at such further adjourned meeting shall be the representatives present at it.

 

D.            Vote of Coordination Committee

 

Any and all decisions of Coordination Committee shall be taken by the vote of a majority of the Coordination Committee (each representative having one vote) in attendance at a meeting of the Coordination Committee. If at any vote the Coordination Committee is deadlocked then the Coordinated Shareholder representative representing the largest Ownership Percentage (having regard to the Ownership Percentage of Affiliates) shall have the casting vote.

 

3.            Demand Registration

 

A.            General Provisions

 

(a)            Subject to the terms and conditions of this Agreement:

 

i. at any time between the termination of the Restricted Period and the IPO Anniversary, any Investor (together with its Affiliates) holding 5% of more of the Registrable Securities shall have the right to require the Company to file registration statements on Form F-1 covering all or any part of its and its Affiliates’ Registrable Securities; and

 

ii. as from the IPO Anniversary, any Investor (together with its Affiliates) holding 1% or more of the Registrable Securities shall have the right to require the Company to file registration statements on Form F-3 covering all or any part of its and its Affiliates’ Registrable Securities,

 

by delivering a written request (“Registration Request”) to the Company stating the number of Registrable Securities to be registered.

 

For the avoidance of doubt, the rights set out in this Section 3A(a) may be exercised by multiple Investors that reach the requisite holding thresholds, but such thresholds shall be assessed on the basis of each individual Investor together with its Affiliates.

 

(b)            The Company shall as promptly as reasonably practicable (but in no event later than ten (10) days after receipt of the Registration Request) give notice of the receipt of a Registration Request to all other Investors and such Investors shall then have ten (10) days to notify the Company in writing of their intention to participate in the registration.

 

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(c)            The Company shall use its reasonable commercial efforts to: (i) file a registration statement under the Securities Act for all Registrable Securities whose holders request participation in such registration (but in any event no later than sixty (60) days after such request) and (ii) have that registration statement declared effective as soon as practicable after the filing thereof, but no later than ten (10) Business Days after the Company is notified (orally or in writing, whichever is earlier) by the Commission that the Registration Statement will not be “reviewed” or will not be subject to further review; provided however, that the Company shall not be required to effect registration pursuant to a request under this Section 3.A more than a total of four (4) times in any twelve- (12-) month period.

 

(d)            Notwithstanding anything to the contrary contained herein, no request may be made under this Section 3.A within ninety (90) days after the effective date of a registration statement filed by the Company covering an underwritten public offering in which the holders of Registrable Securities shall have been entitled to join pursuant to Section 5 and in which there shall have been effectively registered all Registrable Securities as to which registration shall have been requested. A registration will not count as a requested registration under this Section 3.A(d) unless and until the registration statement relating to such registration has been declared effective by the Commission; provided however, that the participating Investors holding a majority of the Registrable Securities being registered by all participating Investors (a “Participating Majority”) may request, in writing, that the Company withdraw a registration statement which has been filed under this Section 3.A but has not yet been declared effective, and a Participating Majority may thereafter request the Company to reinstate such registration statement, if permitted under the Securities Act, or the holders of Registrable Securities may request that the Company file another registration statement, in accordance with the procedures set forth herein and without reduction in the number of demand registrations permitted under this Section 3.A(d).

 

(e)            The Company may not cause any other registration of securities for sale for its own account (other than a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Securities Act is applicable) to become effective within one hundred twenty (120) days following the effective date of any registration required pursuant to this Agreement.

 

B.            Additional Provisions Specific to Form F-3

 

(a)            The Company shall use its best efforts to keep any registration statement on Form F-3 effective until the earlier of 90 days or until such holders have completed the distribution described in such registration statement. Notwithstanding the foregoing, to the extent that registration on Form F-3 is not available to a holder that has requested registration, the Company shall use its best efforts to effect such registration on Form F-1.

 

(b)            Investors requesting registration of Registrable Securities under Form F-3 may request that the registration be made pursuant to Rule 415 under the Securities Act (a “Shelf Registration”) and, if the Company is a WKSI at the time any such request is submitted to the Company, that such Shelf Registration be an automatic shelf registration statement (as defined in Rule 405 under the Securities Act) (an “Automatic Shelf Registration Statement”).

 

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4.            Offerings Pursuant to Demand Registration

 

A.            General Provisions

 

(a)            Subject to the terms and conditions of this Agreement and, with respect to any Coordinated Shareholder (for so long as the Coordination Agreement is in force), subject to first complying with the procedure set out in Clause 4.2 of the Coordination Agreement:

 

i. at any time between the termination of the Restricted Period and the IPO Anniversary, any Investor (together with its Affiliates) holding 5% of more of the Registrable Securities shall have the right at any time to elect to sell all or part of its Registrable Securities that are available for sale pursuant a registration statement on Form F-1; and

 

ii. as from the IPO Anniversary, any Investor (together with its Affiliates) holding Registrable Securities anticipated to have an aggregate sale price (net underwriting discounts and commissions, if any) in excess of $20,000,000 shall have the right at any time to elect to sell all or part of its Registrable Securities that are available for sale pursuant a registration statement on Form F-3,

 

by delivering a written notice (“Offering Notice”) to the Company stating the number of Registrable Securities to be offered.

 

For the avoidance of doubt, the rights set out in this Section 4A(a) may be exercised by multiple Investors that reach the requisite holding thresholds, but such thresholds shall be assessed on the basis of each individual Investor together with its Affiliates.

 

(b)            The Company shall as promptly as reasonably practicable (but in no event later than ten (10) days after receipt of the Offering Notice) give notice of the receipt of an Offering Notice to all Investors and such Investors shall then have ten (10) days to notify the Company in writing of their intention to participate in the offering.

 

(c)            The Company shall use its best efforts to facilitate such offering to the extent requested by such holders.

 

(d)            Each Investor agrees that such Investor shall treat as confidential the receipt of the notice relating to the Offering Notice and shall not disclose or use the information contained in such notice without the prior written consent of the Company or until such time as the information contained therein is or becomes available to the public generally, other than as a result of disclosure by the Investor in breach of the terms of this Agreement.

 

(e)            With respect to any offering pursuant to an underwritten public offering:

 

i. If the Coordination Committee decides that the supply of Registrable Securities is more than demand then the Coordination Committee shall at the same time determine the maximum number of Registrable Securities that may be offered, and the number of Registered Securities sought to be included by the holders thereof shall be reduced on a pro rata basis (based on the Ownership Percentage of such holders together with their Affiliates and, in case of the GS Shareholders, together with any Affiliate(s) who is a direct or indirect transferee of a GS Shareholder).

 

ii. The managing underwriter shall be chosen by the Coordination Committee.

 

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B.            Additional Provisions Specific to Offerings under Form F-3

 

(a)            Notwithstanding the foregoing and, with respect to any Coordinated Shareholder (for so long as the Coordination Agreement is in force), subject to first complying with the procedure set out in Clause 4.3 of the Coordination Agreement, if any Investor desires to effect a sale of Registrable Securities available for sale pursuant to a registration statement under the Securities Act for Shelf Registration (a “Shelf Registration Statement”) other than by way of an underwritten offering, such Investor shall deliver the Offering Notice to the Company no later than two Business Days prior to the expected date of such sale, and without prejudice to any limitations set forth herein, the Company shall file and effect an amendment or supplement to its Shelf Registration Statement for such purpose as soon as reasonably practicable.

 

(b)            The Company shall, at the request of Investors representing a majority of the Registrable Securities covered by a Shelf Registration Statement, file any prospectus supplement or, if the applicable Shelf Registration Statement is an Automatic Shelf Registration Statement, any post-effective amendments and otherwise take any action necessary to include therein all disclosure and language deemed necessary or advisable by such Investors to effect an offering thereunder.

 

5.            Piggyback Registration.

 

If the Company at any time proposes to register any of its securities under the Securities Act for sale to the public (except with respect to registration statements on Forms F-4, S-8 or another form not available for registering the Registrable Securities for sale to the public), each such time it will give written notice at the applicable address of record to each holder of Registrable Securities of its intention to do so. Upon the written request of any of such holders of the Registrable Securities, given within ten (10) days after receipt by such Person of such notice, the Company will, subject to the limits contained in this Section 5, use its best efforts to cause all such Registrable Securities of said requesting holders to be registered under the Securities Act and qualified for sale under any state blue sky law, all to the extent required to permit such sale or other disposition of said Registrable Securities; provided, however, that if the Company is advised in writing in good faith by any managing underwriter of the Company’s securities being offered in a public offering pursuant to such registration statement that the amount to be sold by persons other than the Company (collectively, “Selling Shareholders”) is greater than the amount which can be offered without adversely affecting the offering, the Company may reduce the amount offered for the accounts of Selling Shareholders (including such holders of shares of Registrable Securities) to a number deemed satisfactory by such managing underwriter; and provided further, that (a) in no event shall the amount of Registrable Securities of selling Investors (together with their Affiliates) be reduced below fifty percent (50%) of the total amount of securities included in such offering; and (b) any shares to be excluded shall be determined in the following order of priority: (i) securities held by any Persons not having any such contractual, incidental registration rights, (ii) securities held by any Persons having contractual, incidental registration rights pursuant to an agreement which is not this Agreement, and (iii) the Registrable Securities sought to be included by the holders thereof as determined on a pro rata basis (based upon the aggregate number of Registrable Securities held by such holders).

 

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6.            Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to use its best efforts to promptly effect the registration and/or sale of any of its securities under the Securities Act, the Company will:

 

(a)            use its best efforts diligently to prepare and file with the Commission a registration statement on the appropriate form under the Securities Act with respect to such securities, which form shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith;

 

(b)            use its best efforts to diligently prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the distribution described in such registration statement has been completed and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the seller or sellers of such securities shall desire to sell or otherwise dispose of the same, but only to the extent provided in this Agreement;

 

(c)            furnish to each selling holder and the underwriters, if any, such number of copies of such registration statement, any amendments thereto, any documents incorporated by reference therein, the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as such selling holder may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such selling holder;

 

(d)            use its best efforts to register or qualify the securities covered by such registration statement under such other securities or state blue sky laws of such jurisdictions as each selling holder shall request, and do any and all other acts and things which may be necessary under such securities or blue sky laws to enable such selling holder to consummate the public sale or other disposition in such jurisdictions of the securities owned by such selling holder, except that the Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified;

 

(e)            within a reasonable time before each filing of the registration statement or prospectus or amendments or supplements thereto with the Commission, furnish to counsel selected by the holders of Registrable Securities copies of such documents proposed to be filed, which documents shall be subject to the approval of such counsel;

 

(f)            immediately notify each selling holder of Registrable Securities, such selling holder’s counsel and any underwriter and (if requested by any such Person) confirm such notice in writing, of the happening of any event which makes any statement made in the registration statement or related prospectus untrue or which requires the making of any changes in such registration statement or prospectus so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading; and, as promptly as practicable thereafter, prepare and file with the Commission and furnish a supplement or amendment to such prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(g)            use its best efforts to prevent the issuance of any order suspending the effectiveness of a registration statement, and if one is issued use its best efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement at the earliest possible moment;

 

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(h)            if requested by the managing underwriter or underwriters (if any), any selling holder, or such selling holder’s counsel, promptly incorporate in a prospectus supplement or post-effective amendment such information as such Person requests to be included therein, including, without limitation, with respect to the securities being sold by such selling holder to such underwriter or underwriters, the purchase price being paid therefor by such underwriter or underwriters and with respect to any other terms of an underwritten offering of the securities to be sold in such offering, and promptly make all required filings of such prospectus supplement or post-effective amendment;

 

(i)            make available to each selling holder, any underwriter participating in any disposition pursuant to a registration statement, and any attorney, accountant or other agent or representative retained by any such selling holder or underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information requested by any such Inspector in connection with such registration statement;

 

(j)            enter into any reasonable underwriting agreement required by the proposed underwriter(s) for the selling holders, if any, and use its best efforts to facilitate the public offering of the securities;

 

(k)            furnish to each prospective selling holder a signed counterpart, addressed to the prospective selling holder, of (A) an opinion of counsel for the Company, dated the effective date of the registration statement, and (B) a “comfort” letter signed by the independent public accountants who have certified the Company’s financial statements included in the registration statement, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in the case of the accountants’ letter) with respect to events subsequent to the date of the financial statements, as are customarily covered (at the time of such registration) in opinions of the Company’s counsel and in accountants’ letters delivered to the underwriters in underwritten public offerings of securities;

 

(l)            cause the securities covered by such registration statement to be listed on the securities exchange or quoted on the quotation system on which similar securities issued by the Company are then listed or quoted;

 

(m)            otherwise use its best efforts to comply with all applicable rules and regulations of the Commission and make generally available to its security holders, in each case as soon as practicable, but not later than 30 days after the close of the period covered thereby, an earnings statement of the Company which will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any comparable successor provisions);

 

(n)            otherwise cooperate with the underwriter(s), the Commission and other regulatory agencies and take all actions and execute and deliver or cause to be executed and delivered all documents necessary to effect the registration of any securities under this Agreement;

 

(o)            during the period when the prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act;

 

(p)            if the Company files an Automatic Shelf Registration Statement covering any Registrable Securities, use its reasonable best efforts to remain a WKSI (and not become an ineligible issuer (as defined in Rule 405 under the Securities Act)) during the period during which such Automatic Shelf Registration Statement is required to remain effective;

 

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(q)            if the Company does not pay the filing fee covering the Registrable Securities at the time an Automatic Shelf Registration Statement is filed, pay such fee at such time or times as the Registrable Securities are to be sold; and

 

(r)            if the Automatic Shelf Registration Statement has been outstanding for at least three (3) years, at the end of the third year, file a new Automatic Shelf Registration Statement covering the Registrable Securities, and, if at any time when the Company is required to re-evaluate its WKSI status the Company determines that it is not a WKSI, use its reasonable efforts to refile the Shelf Registration Statement on Form F-3 and, if such form is not available, Form F-1 and keep such registration statement effective during the period during which such registration statement is required to be kept effective.

 

7.            Deemed Underwriter. The Company agrees that, if an Investor or any of its Affiliates (each an “Investor Entity”) could reasonably be deemed to be an “underwriter,” as defined in Section 2(a)(11) of the Securities Act, in connection with any registration of the Company’s securities pursuant to this Agreement, and any amendment or supplement thereof (any such registration statement or amendment or supplement a “Investor Underwriter Registration Statement”), then the Company will cooperate with such Investor Entity in allowing such Investor Entity to conduct customary “underwriter’s due diligence” with respect to the Company and satisfy its obligations in respect thereof. In addition, at such Investor’s request, the Company will furnish to such Investor, on the date of the effectiveness of any Investor Underwriter Registration Statement and thereafter from time to time on such dates as such Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to such Investor, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Investor Underwriter Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, including, without limitation, a standard “10b-5” statement for such offering, addressed to such Investor. The Company will also permit legal counsel to such investor to review and comment upon any such Investor Underwriter Registration Statement at least five Business Days prior to its filing with the SEC and all amendments and supplements to any such Investor Underwriter Registration Statement within a reasonable number of days prior to their filing with the SEC and not file any Investor Underwriter Registration Statement or amendment or supplement thereto in a form to which such Investor’s legal counsel reasonably objects.

 

8.            Expenses. All expenses incurred by the Company or the Investors in effecting the registrations or sales provided for in Section 2, Section 4 and Section 5, including, without limitation, all registration and filing fees, printing expenses, reasonable fees and disbursements of counsel for the Company, reasonable fees and disbursements of (no more than) one counsel for the Investors participating in such registration or sale as a group (selected by the holders of a majority of the Registrable Securities that are being registered or sold), underwriting expenses (other than fees, commissions or discounts), expenses of any audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdictions (all of such expenses referred to as “Registration Expenses”), shall be paid by the Company, provided, however, that (i) counsel for the Investors and the fee estimate for the engagement of such counsel must be approved by the Company in writing prior to the engagement of, or the incurrence of any fees by, such counsel (such consent not to be withheld unreasonably) and (ii) the selling Holders must bear all Registration Expenses for any registration or sale request made pursuant to Section 2, Section 4 or Section 5 and subsequently withdrawn by the Holders.

 

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9.            Indemnification.

 

(a)            The Company shall indemnify and hold harmless each Investor that is a selling holder of Registrable Securities (including its partners (including partners of partners and shareholders of such partners)), each underwriter (as defined in the Securities Act), and directors, officers, employees and agents of any of them, and each other Person who participates in the offering of such securities and each other Person, if any, who controls (within the meaning of the Securities Act) such seller, underwriter or participating Person (individually and collectively, the “Indemnified Person”) against any losses, claims, damages or liabilities (collectively, the “liability”), joint or several, to which such Indemnified Person may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or any free writing prospectus used in connection with any offering, including but not limited to, any free writing prospectus used by the Company, the underwriters or the Investors, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation by the Company of the Securities Act, any state securities or “blue sky” laws or any sale or regulation thereunder in connection with such registration, or (iv) any information provided by the Company or at the instruction of the Company to any Person participating in the offer at the point of sale containing any untrue statement or alleged untrue statement of any material fact or omitting or allegedly omitting any material fact required to be included in such information or necessary to make the statements therein not misleading. Except as otherwise provided in Section 9(d), the Company shall reimburse each such Indemnified Person in connection with investigating or defending any such liability; provided, however, that the Company shall not be liable to any Indemnified Person in any such case to the extent that any such liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary or final prospectus, or amendment or supplement thereto, free writing prospectus, or other information, in reliance upon and in conformity with information furnished in writing to the Company by such Person specifically for use therein; and provided further, that the Company shall not be required to indemnify any Person against any liability arising from any untrue or misleading statement or omission contained in any preliminary prospectus if such deficiency is corrected in the final prospectus or for any liability which arises out of the failure of any Person to deliver a prospectus as required by the Securities Act regardless of any investigation made by or on behalf of such Indemnified Person and shall survive transfer of such securities by such seller; and provided further that, the indemnity agreement contained in this Section 9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld).

 

(b)            Each Investor holding any securities included in such registration being effected shall indemnify and hold harmless each other selling holder of any securities, the Company, its directors and officers, employees and agents, each underwriter and each other Person, if any, who controls (within the meaning of the Securities Act) the Company or such underwriter (individually and collectively also the “Indemnified Person”), against any liability, joint or several, to which any such Indemnified Person may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or actions in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which securities were registered under the Securities Act at the request of such selling Investor, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or any free writing prospectus used in connection with such offering, including but not limited to, any free writing prospectus used by the Company, the underwriters, the Investors, or (ii) any omission or alleged omission by such selling Investor to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any information provided at the instruction of the Company to any Person participating in the offer at the point of sale containing any untrue statement or alleged untrue statement of any material fact or omitting or allegedly omitting any material fact required to be included in such information or necessary to make the statements therein not misleading, in the case of (i), (ii) and (iii) to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or final prospectus, amendment or supplement thereto, free writing prospectus, or other information, in reliance upon and in conformity with information furnished in writing to the Company by such selling Investor specifically for use therein. Such selling Investor shall reimburse any Indemnified Person for any legal fees incurred in investigating or defending any such liability; provided, however, that in no event shall the liability of any Investor for indemnification under this Section 9 in its capacity as a seller of Registrable Securities exceed the lesser of (i) that proportion of the total of such losses, claims, damages, expenses or liabilities indemnified against equal to the proportion of the total securities sold under such registration statement which is being held by such Investor, or (ii) the amount equal to the proceeds to such Investor of the securities sold in any such registration; and provided further, however, that no selling Investor shall be required to indemnify any Person against any liability arising from any untrue or misleading statement or omission contained in any preliminary prospectus if such deficiency is corrected in the final prospectus or for any liability which arises out of the failure of any Person to deliver a prospectus as required by the Securities Act.

 

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(c)            Indemnification similar to that specified in Sections 9(a) and (b) shall be given by the Company and each selling holder (with such modifications as may be appropriate) with respect to any required registration or other qualification of their securities under any federal or state law or regulation of governmental authority other than the Securities Act.

 

(d)            In the event the Company, any selling holder or other Person receives a complaint, claim or other notice of any liability or action, giving rise to a claim for indemnification under Sections 9(a), (b) or (c) above, the Person claiming indemnification under such paragraphs shall promptly notify the Person against whom indemnification is sought of such complaint, notice, claim or action, and such indemnifying Person shall have the right to investigate and defend any such loss, claim, damage, liability or action.

 

(e)            If the indemnification provided for in this Section 9 for any reason is held by a court of competent jurisdiction to be unavailable to an Indemnified Person in respect of any losses, claims, damages expenses or liabilities referred to therein, then each indemnifying party under this Section 9, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, expenses or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, the Investor or Investors and the underwriters from the offering of Registrable Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, the other Investors and the underwriters in connection with the statements or omissions which resulted in such losses, claims, damages expenses or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, the Investors and the underwriters shall be deemed to be in the same respective proportions that the net proceeds from the offering (before deducting expenses) received by the Company, the Investors, and the underwriting discount received by the underwriters, in each case as set forth in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the Registrable Securities. The relative fault of the Company, the Investors and the underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Investors, or the underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

12

 

 

The Company, the Investors and the Underwriters agree that it would not be just and equitable if contribution to this Section 9 were determined by pro rata or per capita allocation or by any other method of allocation which does not take account the equitable considerations referred to in the immediately preceding paragraph. In no event, however, shall an Investor be required to contribute under this Section 9(e) in excess of the lesser of (i) that proportion of the total of such losses, claims, damages expenses or liabilities indemnified against equal to the proportion of the total Registrable Securities sold under such registration statement which are being sold by such Investor or (ii) the net proceeds received by such Investor from its sale of Registrable Securities under such registration statement. No Person found guilty of fraudulent representation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.

 

(f)            The amount paid by an indemnifying party or payable to an Indemnified Person as a result of the losses, claims, damages, expenses and liabilities referred to in this Section 9 shall be deemed to include, subject to limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim, payable as the same are incurred. The indemnification and contribution provided for in this Section 9 will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified parties or any other officer, director, employee, agent or controlling person of the indemnified parties. No indemnifying party, in the defense of any such claim or litigation, shall enter into a consent or entry of any judgment or enter into a settlement without the consent of the Indemnified Person, which consent will not be unreasonably withheld or delayed.

 

10.            Compliance with Rule 144. For so long as the Company (i) has a class of securities registered under Section 12 of the Exchange Act or (ii) files reports under Section 13 or 15(d) of the Exchange Act, the Company will use its best efforts to file with the Commission such information as is required under the Exchange Act for so long as there are holders of Registrable Securities; and in such event, the Company shall use its best efforts to take all action as may be required as a condition to the availability of Rule 144 under the Securities Act (or any comparable successor rules). The Company shall furnish to any holder of Registrable Securities upon request a written statement executed by the Company as to the steps it has taken to comply with the current public information requirement of Rule 144 (or such comparable successor rules). Subject to the limitations on transfers imposed by this Agreement, the Company shall use its best efforts to facilitate and expedite transfers of Registrable Securities pursuant to Rule 144 under the Securities Act, which efforts shall include timely notice to its transfer agent to expedite such transfers of Registrable Securities.

 

11.            Rule 144A Information. The Company shall, upon written request of any Investor, provide to such Investor and to any prospective institutional transferee of the Ordinary Shares designated by such Investor, such financial and other information as is available to the Company or can be obtained by the Company without material expense and as such Investor may reasonably determine is required to permit such transfer to comply with the requirements of Rule 144A promulgated under the Securities Act.

 

12.            Amendments. The provisions of this Agreement may be amended, and the Company may take any action herein prohibited or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of (i) holders of at least 75% of the Registrable Securities and (ii) every Coordinated Shareholder. For the purposes of this Agreement and all agreements executed pursuant hereto, no course of dealing between or among any of the parties hereto and no delay on the part of any party hereto in exercising any rights hereunder or thereunder shall operate as a waiver of the rights hereof and thereof.

 

13

 

 

13.            Postponement. The Company may postpone the filing of any registration statement required hereunder for a reasonable period of time, not to exceed ninety (90) days in the aggregate during any twelve (12) month period, if the Company has been advised by legal counsel that such filing would require a special audit or the disclosure of a material impending transaction or other matter and the Company’s Board of Directors determines reasonably and in good faith that such disclosure would have a material adverse effect on the Company (a “Black Out Period”). Upon notice of the existence of a Black Out Period from the Company to any Investor or Investors with respect to any registration statement already effective, such Investor or Investors shall refrain from selling their Registrable Securities under such registration statement until such Black Out Period has ended; provided, however, that the Company shall not impose a Black Out Period with respect to any registration statement that is already effective more than once during any period of twelve (12) consecutive months and in no event shall such Black Out Period exceed sixty (60) days.

 

14.            Market Stand-Off.

 

(a)            Each Investor agrees, if requested by the Company and an underwriter of Registrable Securities of the Company in connection with any public offering by the Company in which such Investor is not participating, not to directly or indirectly offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any shares held by it for such period, not to exceed ninety (90) days following the effective date of the relevant registration statement in connection with any public offering of Registrable Securities, as such underwriter shall specify reasonably and in good faith, provided, however, that all officers and directors of the Company and all 1% or greater shareholders of the Company enter into similar agreements. Notwithstanding anything in this Agreement, (i) none of the provisions of this Agreement shall in any way limit any Investor from engaging in any brokerage, investment advisory, financial advisory, anti-raid advisory, principaling, merger advisory, financing, asset management, trading, market making, arbitrage, investment activity and other similar activities conducted in the ordinary course of their business, and (ii) the restrictions contained in this Agreement shall not apply to Registrable Securities acquired by any Investor Entity following the effective date of the first registration statement of the Company covering Registrable Securities to be sold on behalf of the Company in an underwritten public offering.

 

(b)            The Company will obtain agreements in writing from each holder of equity or options of the Company, as a condition to any issuance of equity or grant of options, agreeing not to directly or indirectly offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any shares of equity without the consent of the Company’s underwriters, in connection with any public offering of the Company’s equity, consistent with the provisions of Section 14(a) hereof.

 

15.            Transferability of Registration Rights. The registration rights set forth in this Agreement are transferable to each Permitted Transferee of Registrable Securities (each such transfer, a “Permitted Transfer”). Each subsequent holder of Registrable Securities must consent in writing to be bound by the terms and conditions of this Agreement in order to acquire the rights granted pursuant to this Agreement.

 

14

 

 

16.            Rights Which May Be Granted to Subsequent Investors. Other than Permitted Transfers of Registrable Securities under Section 15, the Company shall not, without the prior written consent of (i) holders of at least 75% of the Registrable Securities and (ii) every Coordinated Shareholder (a) allow purchasers of the Company’s securities to become a party to this Agreement or (b) grant any other registration rights other than any incidental or so called piggyback registration rights to any third parties that are not inconsistent with the terms of this Agreement.

 

17.            Damages. The Company recognizes and agrees that each holder of Registrable Securities will not have an adequate remedy if the Company fails to comply with the terms and provisions of this Agreement and that damages will not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by any holder of Registrable Securities or any other Person entitled to the benefits of this Agreement requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach of this Agreement.

 

18.            Miscellaneous.

 

(a)            Notices. All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed (by first class registered or certified mail, postage prepaid), sent by express overnight courier service, or delivered to the applicable party at the addresses indicated below:

 

If to the Company:

 

Cian PLC 

64 Agiou Georgiou Makri 

Anna Maria Lena Court, Flat 201 

Larnaca 6037 

Cyprus 

Attention: Varvara Kiseleva, Director for Capital Markets 

Tel: +7 916 612 94 94

 

With a copy to:

 

Latham & Watkins LLP
Ul. Gasheka 6, Ducat III, Office 510
Moscow 125047
Russia
Attention: J. David Stewart 

Tel: +7 495 785 1234

 

If to the Investors:

 

At the address noted below their signature lines on the signature pages hereto.

 

If to any other holder of Registrable Securities:

 

At such Person’s address for notice as set forth in the books and records of the Company or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to other parties complying as to delivery with the terms of this subsection (a). All such notices, requests, demands and other communications shall, when mailed, telegraphed or sent, respectively, be effective (i) two days after being deposited in the mails or (ii) one day after being deposited with the express overnight courier service transmission, respectively, addressed as aforesaid.

 

15

 

 

(b)            Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, excluding any rule of law that would cause the application of the laws of any jurisdiction other than the laws of the State of New York. Each of the parties hereto irrevocably and unconditionally submits to the exclusive jurisdiction of any state or federal court of competent jurisdiction in NEW YORK COUNTY, NEW YORK FOR ANY DISPUTE NOT OTHERWISE ADJUDICATED PURSUANT TO THE PROVISIONS OF SECTION 18(c) HEREOF.

 

(c)            Arbitration. Any dispute, controversy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, or the transactions contemplated herein, or the breach, termination or validity thereof may be referred to and finally resolved by arbitration under the Arbitration Rules of the London Court of International Arbitration (“LCIA”) (the “Rules”), which Rules are deemed to be incorporated by reference in this Section 18(c). The number of arbitrators shall be three (3), and the parties in such arbitration shall each nominate one (1) arbitrator. The third arbitrator, who will act as chairman of the arbitral tribunal, will be appointed by the President of the LCIA having taken into account any agreement on the arbitrator to be appointed as chairman of the arbitral tribunal reached by the two Party-nominated or appointed arbitrators, such agreement to be within fourteen (14) days of the appointment of the last party nominated or appointed arbitrator. The legal place of arbitration shall be London and the language of arbitration shall be English. This arbitration agreement, including its validity and scope, shall be governed by New York law. For the avoidance of doubt, the parties acknowledge and agree that the party bringing any dispute, controversy or claim may bring (i) arbitration under this Section 18(c) or (ii) a dispute under Section 18(b) hereof.

 

(d)           Consolidation of Arbitrations. If two or more arbitrations are commenced under this Agreement and/or under the Coordination Agreement, any party named as claimant or respondent in any of these arbitrations may petition any arbitral tribunal appointed in these arbitrations for an order that the several arbitrations be consolidated in a single arbitration before that arbitral tribunal. The parties hereto hereby consent to such consolidation of arbitrations.

 

(e)            Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

(f)            Counterparts. This Agreement may be executed in one or more counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which together shall be deemed to constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including .pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and to be valid and effective for all purposes.

 

16

 

 

(g)            Severability. If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.

 

(h)            Integration. This Agreement, including the exhibits, documents and instruments referred to herein or therein, constitutes the entire agreement among the parties with respect to the subject matter.

 

[SIGNATURE PAGES FOLLOW]

 

17

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the date first set forth above.

 

  COMPANY:
     
  CIAN PLC
   
  By:  
    Name:
    Title:

 

 

 

 

   

INVESTORS:

     

Signed by

)
SPEEDTIME TRADING LIMITED    
     
     

Address for notice:

   

 

 

 

 

Signed by

)
ONLYPIECE TRADING LIMITED    
     
     

Address for notice:

   

 

 

 

 

Signed by

)
RONDER INVESTMENTS LIMITED    
     
     

Address for notice:

   

 

 

 

 

Signed by

)
MAXIM MELNIKOV    
     
     

Address for notice:

   

 

 

 

 

Signed by

)
MPOC TECHNOLOGIES LTD    
     
     

Address for notice:

   

 

 

 

 

 

Signed by )
JOOX LIMITED    
     
     
Address for notice:    

 

 

 

 

Signed by  )
OTAGA LIMITED    
     
     
Address for notice:          

 

 

 

 

Signed by )
ELQ INVESTORS II LTD    
     
     
Address for notice:          
     

Address: Plumtree Court

25 Shoe Lane

London, EC4A 4AU

United Kingdom

Email: Jim.Wiltshire@gs.com

mbd-mo-london@gs.com

gs-mbd-emea-fme@gs.com

Attention: Jim Wiltshire

 

with a copy to:

 

Address: c/o OOO Goldman Sachs

14th Floor, Ducat III, 6 Gasheka Street
Moscow 125047, Russian Federation

Email: maxim.klimov@gs.com

Dmitry.Kurilo@gs.com

Attention: Max Klimov and Dmitry Kurilo

   

 

 

 

 

Signed by )
STONEBRIDGE 2020 OFFSHORE HOLDINGS II, L.P    
Acting by:  Bridge Street Opportunity Advisors, L.L.C., its General Partner    
     
     
Address for notice:          
     

Address: Ugland House

PO Box 309, South Church Street

George Town, Cayman Islands, KY1-1104

Email: gs-pia-dallas@gs.com

19726466373@tls.ldsprod.com

gs-mbd-mo@gs.com

Attention: Andrew Bain

 

with a copy to:

 

Address: c/o OOO Goldman Sachs

14th Floor, Ducat III, 6 Gasheka Street

Moscow 125047, Russian Federation

Email: maxim.klimov@gs.com

Dmitry.Kurilo@gs.com

Attention: Max Klimov and Dmitry Kurilo

   

 

 

 

 

Signed by )
STONEBRIDGE 2020, L.P.    
Acting by: Bridge Street Opportunity Advisors, L.L.C., its General Partner    
     
     
Address for notice:          
     

Address: Corporation Trust Center

1209 Orange Street

Wilmington, Delaware, DE-19801

Email: gs-pia-dallas@gs.com

19726466373@tls.ldsprod.com

gs-mbd-mo@gs.com

Attention: Andrew Bain

 

with a copy to:

 

Address: c/o OOO Goldman Sachs

14th Floor, Ducat III, 6 Gasheka Street

Moscow 125047, Russian Federation

Email: maxim.klimov@gs.com

Dmitry.Kurilo@gs.com

Attention: Max Klimov and Dmitry Kurilo

   

 

 

 

 

Signed by )
WEST STREET EMS PARTNERS, SLP    
Acting by: WEST STREET EMS PARTNERS GP, S.A.R.L., its General Partner    
     
     
Address for notice:          
     

Address: 2 Rue du Fosse, L-1536

Luxembourg

Email: Marielle.STIJGER@broadstreet.lu GSLMSBanksandAgents@broadstreet.lu

Attention: Marielle Stijger

 

with a copy to:

 

Address: c/o OOO Goldman Sachs

14th Floor, Ducat III, 6 Gasheka Street

Moscow 125047, Russian Federation

Email: maxim.klimov@gs.com

Dmitry.Kurilo@gs.com

Attention: Max Klimov and Dmitry Kurilo 

   

 

 

 

 

 

Exhibit 4.4

 

COORDINATION AGREEMENT

 

This Agreement is dated __ ______________ 2021.

 

Speedtime Trading Limited, a private limited liability by shares company with registered number 359694 and having its registered office at 6 Ioanni Stylianou, Floor: 2nd, Flat: 202, Nicosia, 2003, Cyprus (“Speedtime”);

 

Onlypiece Trading Limited, a company incorporated under the laws of the Republic of Cyprus with registered number 415137 and whose registered office is at Katalanou 1, 1st floor, flat/office 101, Aglantzia 2121, Nicosia, Cyprus (“Onlypiece”);

 

Ronder Investments Limited, a private limited liability by shares company with registered number 1846514 and having its registered office at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (“Ronder”, together with Speedtime and Onlypiece, the “Elbrus Shareholders” and each an “Elbrus Shareholder”);

 

Maksim Melnikov, a citizen of the Russian Federation with registered and actual address at 15 Akademika Tupoleva Emb., Flat: 8, Moscow, 105005, Russian Federation, and with Russian internal passport number 46 03 134258;

 

MPOC Technologies Ltd, a limited liability company with registered number 1697700 and having its registered office at Vistra Corporate Service Centre, Wickhams Cay II, Road Town, Tortola, British Virgin Islands (“MPOC”);

 

ELQ Investors II LTD, a company incorporated under the laws of England with registered number 6375035 and whose registered office is at Plumtree Court, 25 Shoe Lane, London, United Kingdom, EC4A 4AU (“ELQ”);

 

Stonebridge 2020 Offshore Holdings II, L.P., a limited partnership registered under the laws of the Cayman Islands whose registered office is at P.O. Box 309, Ugland House, South Church Street, George Town, Cayman Islands, KY1-1104 and whose principal place of business is at 200 West Street, New York, New York, United States of America, 10282 (“Stonebridge 2020 Offshore”);

 

Stonebridge 2020, L.P., a limited partnership registered under the laws of Delaware whose registered office is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware, United States of America, 19801 (“Stonebridge 2020”); and

 

West Street EMS Partners, SLP, a Luxembourg special limited partnership (société en commandite spéciale) (registered no. B251975), whose registered office is at 2 rue du Fossé, 1536 Luxembourg; (“West Street”, together with ELQ, Stonebridge 2020 Offshore and Stonebridge 2020 the “GS Shareholders” and each a “GS Shareholder”),

 

each a "Shareholder" and, collectively, the "Shareholders".

 

RECITALS

 

WHEREAS, Cian PLC (“Company”) is a public limited company incorporated under the laws of the Republic of Cyprus;

 

WHEREAS, the Company is undertaking an underwritten initial public offering (the “IPO”) of ADSs representing its Ordinary Shares (as defined below);

 

 

 

 

WHEREAS, in connection with the consummation by the Company of the IPO, the parties hereto desire to enter into this agreement (this “Agreement”) to govern certain of their rights, duties and obligations with respect to their ownership of Shares (as defined below) after consummation of the IPO.

 

NOW, THEREFORE, in consideration of the foregoing, and the mutual rights and obligations set forth below, the Shareholders agree as follows:

 

1. Definitions

 

As used in this Agreement, the following terms shall have the following meanings:

 

“ADSs” means American depositary shares, each representing one Ordinary Share.

 

“Affiliate” means with respect to any Person, (a) any other Person that controls, is controlled by, or is under common control with such Person and (b) any investment company, limited partnership, fund, other collective investment vehicle or managed account that is (or any assets of which are) managed or advised by such Person or Affiliate of such Person. The term “control” as used with respect to any Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. For the avoidance of doubt, each GS Shareholder is Affiliated with each other GS Shareholder and each Elbrus Shareholder is Affiliated with each other Elbrus Shareholder. Without limiting the foregoing:

 

(A) in the case of each member of the GS Group, "Affiliate" includes each other member of the GS Group; and

 

(B) in the case of each Elbrus Shareholder, "Affiliate" includes:

 

(i) any other entity directly or indirectly Controlled by, or Controlling of, or under common Control with, Speedtime Trading Limited, Onlypiece Trading Limited, Ronder Investments Limited;

 

(ii) Elbrus Capital Fund II L.P., Elbrus Capital Fund II B L.P.  Elbrus Capital Fund III A S.C.Sp., Elbrus Capital Fund III B S.C.Sp or any collective investment scheme or managed account which raises capital from one or more investors, in each case including investment compartments, subsidiaries, parallel or co-investing vehicles, general partners, investment managers and/or investment advisors thereof and which is or will be Controlled, managed or advised by entities under the Control of one or more of the same ultimate beneficial owners as the entities which currently Control, manage or advise Elbrus Capital Fund II L.P., Elbrus Capital Fund II B L.P.  Elbrus Capital Fund III A S.C.Sp. or Elbrus Capital Fund III B S.C.Sp.

 

“Agreement” has the meaning set forth in the recitals.

 

“Articles” means the Articles of Association of the Company, as in effect from time to time.

 

“Board” means the board of directors of the Company.

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which banks in New York City (United States), Moscow (Russia), Nicosia (Cyprus), Tortola (British Virgin Islands), George Town (Cayman Islands), Luxembourg or London (England) are authorized or obligated by Law or executive order to close or would customarily close.

 

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“Company” has the meaning set forth in the recitals.

 

“Coordination Committee” has the meaning set forth in clause 3.1(a).

 

"GS Affiliated Fund" means any investment company, limited partnership, fund, other collective investment vehicle or managed account that is (or any assets of which are) managed or advised by GS or an Affiliate of GS.

 

"GS Group" means The Goldman Sachs Group, Inc. (“GS”) and its Affiliates and any GS Affiliated Fund (and “member of the GS Group” shall be construed accordingly) and includes at the date of this Agreement, for the avoidance of doubt, ELQ Investors II Ltd, Stonebridge 2020, L.P., Stonebridge 2020 Offshore Holdings II, L.P. and West Street EMS Partners, SLP.

 

“IPO” has the meaning set forth in the recitals.

 

“Law” with respect to any Person, means (a) all provisions of all laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any governmental authority applicable to such Person or any of its assets or property or to which such Person or any of its assets or property is subject and (b) all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which it or any of its assets or properties is or may be bound or subject.

 

“Opinion” has the meaning given to it in clause 4.2(b)(i).

 

“Ordinary Shares” means the ordinary shares of the Company, nominal value EUR 0.0004 per share.

 

“Organizational Documents” means the organizational documents of any entity.

 

“Ownership Percentage” means, in respect of a Shareholder, the percentage obtained by dividing (a) the number of Shares held by such Shareholder and (b) the total number of Shares outstanding.

 

“Permitted Transferee” means an Affiliate of any Shareholder.

 

“Person” means an individual, a company, a partnership, an association, a limited liability company, a government entity, a trust or other entity or organization.

 

“Registered Offering” has the meaning given to it in clause 4.2(a).

 

“Registered Offering Notice” has the meaning given to it in clause 4.2(a).

 

“Registration Rights Agreement” means the Registration Rights Agreement entered into on or around the date of this Agreement by, amongst others, the Shareholders and the Company.

 

“Selling Shareholder” has the meaning given to it in clause 4.2(a).

 

“Shares” means the issued and outstanding Ordinary Shares of the Company from time to time (or ADSs representing interests in the ordinary shares of the Company).

 

“Transfer” means any direct or indirect transfer, sale, exchange, assignment, distribution, pledge, encumbrance, hypothecation or other disposition of Shares, or any legal or beneficial interest therein, in whole or in part, including the grant of an option or other right or the grant of any interest that would result in the transferor no longer having the economic consequences of ownership in, or the power to vote, or cause to be voted, in whole or in part, any Shares, whether voluntarily or involuntarily, including by gift, by contract, by way of merger (forward or reverse) or similar transaction, by operation of Law or otherwise.

 

“Transfer Notice” has the meaning given to in clause 4.3(b)(ii).

 

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2. Term

 

This Agreement shall continue for three years following the date of the final prospectus relating to the IPO, provided that if the aggregate Ownership Percentage of a Shareholder (together with its Affiliates or, in case of the GS Shareholders, any Affiliate(s) who is a direct or indirect transferee of a GS Shareholder) falls below three percent this Agreement (and all rights set out herein) shall automatically terminate in respect of such Shareholder. For the purposes of this clause 2, (a) the Shares of each GS Shareholder shall be aggregated with each other GS Shareholder and (b) the Shares of each Elbrus Shareholder shall be aggregated with each other Elbrus Shareholder.

 

3. Coordination Committee

 

3.1 Formation of Coordination Committee

 

(a) The Shareholders shall create a coordination committee (the “Coordination Committee”), which shall not be a committee of the Board, such committee will be maintained by the Shareholders (and each Shareholder shall participate) in accordance with the terms herein.

 

(b) Each Shareholder's right to designate, remove and replace the representatives of the Coordination Committee (who may, but need not be, a director of the Company) is as follows:

 

(i) the Elbrus Shareholders shall have the right to designate, remove and replace two (2) representatives for as long as their Ownership Percentage (together with their Affiliates) is in aggregate ten (10) or more percent. Otherwise, the Elbrus Shareholders shall have the right to designate, remove and replace one (1) representative;

 

(ii) the GS Shareholders shall have the right to designate, remove and replace one (1) representative;

 

(iii) Maksim Melnikov shall have the right to designate, remove and replace one (1) representative; and

 

(iv) MPOC, for as long as it is an Affiliate of Dmitry Demin, shall have the right to designate, remove and replace one (1) representative.

 

For the avoidance of doubt, a representative of a Shareholder shall be automatically removed from the Coordination Committee once a Shareholder is not a party to this Agreement.

 

3.2 Proceedings

 

Each Shareholder's representative may request a meeting of the Coordination Committee. Notice of such meeting must be given at least one Business Day in advance or at such earlier time as the representatives may separately agree.

 

3.3 Quorum

 

(a) Except as provided by clauses 3.3(b) and 3.3(c), the quorum for transacting business at any meeting of the Coordination Committee shall be all of the Shareholders’ representatives being present when the relevant business is transacted. A representative shall be regarded as present for the purposes of a quorum if represented by an alternate. Nothing in this clause shall be interpreted as prohibiting meetings of the Coordination Committee being held by telephone or other electronic communication.

 

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(b) If a quorum is not present within 30 minutes from the time appointed for the meeting or if during the meeting a quorum ceases to be present, the meeting shall be adjourned to the date that is 48 hours after the date of the meeting at the same time and place. The quorum at such adjourned meeting shall be all of the Shareholders’ representatives less the one(s) who failed to turn up to the original meeting.

 

(c) If a quorum of the adjourned meeting is not present within 30 minutes from the time appointed for the meeting or if during the meeting a quorum ceases to be present, the meeting shall be adjourned further to the date that is 24 hours after the date of the adjourned meeting at the same time and place. The quorum at such further adjourned meeting shall be the representatives present at it.

 

3.4 Vote of Coordination Committee

 

Any and all decisions of Coordination Committee shall be taken by the vote of a majority of the Coordination Committee (each representative having one vote) in attendance at a meeting of the Coordination Committee. If at any vote the Coordination Committee is deadlocked then the Shareholder representative representing the largest Ownership Percentage (having regard to the Ownership Percentage of Affiliates) shall have the casting vote.

 

4. Transfers of Shares

 

4.1 Permitted Transferees

 

Notwithstanding any other provision of this Agreement, the provisions of this clause 4 (including, but not limited to, those regarding approval of the Coordination Committee and tag-along rights) do not apply with respect to any Transfer from a Shareholder to any one or more of its Permitted Transferees in circumstances in which such Permitted Transferee(s) adhere(s) to this Agreement.

 

4.2 Transfers of Shares by way of a Registered Offering

 

(a) If a Shareholder ("Selling Shareholder") has the right to sell shares under a registered offering under the Registration Rights Agreement ("Registered Offering") and wants to make such a sale, then it must first notify this to the members of the Coordination Committee with such notice including the number of Shares to be sold and the intended plan of distribution ("Registered Offering Notice").

 

(b) Upon receiving a Registered Offering Notice:

 

(i) The Coordination Committee shall as soon as practicable in the circumstances, meet and discuss with one or more underwriters for such Registered Offering and, if practicable, seek its/their opinion (an “Opinion”) regarding the appropriate/inappropriate time to sell, the consequences of such sale for capitalization, how much market capacity/demand there is and any other matters that the Coordination Committee deems reasonable. The Coordination Committee may seek the opinions of multiple underwriters if the Coordination Committee deems it necessary. The Coordination Committee shall provide its recommendation whether or not to sell (which recommendation is not binding on any Selling Shareholder) within 7 Business Days from the receipt of the Registered Offering Notice;

 

(ii) upon receiving a recommendation (regardless of whether or not it is positive to sell and regardless of any Opinion) from the Coordination Committee, the Selling Shareholder will be permitted, but not obligated, to commence the process for such Transfer, in accordance with the terms described in the Registered Offering Notice, by commencing the execution of the Selling Shareholder’s registration rights under the Registration Rights Agreement within thirty (30) days of receipt of the recommendation;

 

5

 

 

(iii) if the Selling Shareholder utilizes its right under sub-clause (b)(ii) above, the other Shareholders who are party to the Registration Rights Agreement shall, to the extent permitted under the Registration Rights Agreement, have the right to effect a Registered Offering (on the same terms as the Selling Shareholder and pursuant to the Registration Rights Agreement); and

 

(iv) if the Coordination Committee decides that the supply of Shares is more than demand then the Coordination Committee shall at the same time determine the maximum number of Shares that may be Transferred under the Registered Offering and the number of Shares sought to be included by the holders thereof shall be reduced on a pro rata basis (based on the Ownership Percentage of such Shareholders together with their Affiliates and, in case of the GS Shareholders, together with any Affiliate(s) who is a direct or indirect transferee of a GS Shareholder).

 

(c) To the extent not provided for under the Registration Rights Agreement, the Shareholders agree and undertake not to Transfer any Shares during any lock-up period to be determined by the Coordination Committee for the particular Registered Offering whether or not such Shareholder is selling as part of that Registered Offering provided that:

 

(i) the lock-up period may not be longer than 90 calendar days following the effective date of the relevant registration statement without the approval of every Coordination Committee member; and

 

(ii) the lock-up undertaking shall be given to the underwriters and not to the Company or any Shareholder.

 

4.3 Transfers of Shares other than by way of a Registered Offering

 

(a) The provisions of this clause 4.3 shall only apply in respect of a Transfer of Shares other than by way of a Registered Offering.

 

(b) Rule 144 Transfers

 

(i) The Shareholders note that Rule 144 under the US Securities Act, 1933, as amended (“Rule 144”) provides that affiliates of the Company are permitted to sell, subject to the applicable conditions of Rule 144, the Shares without registration under the US Securities Act of 1933.

 

(ii) Prior to effecting any Transfer of Shares pursuant to Rule 144, a Shareholder shall give written notice to the Coordination Committee of its intent to Transfer Shares, including the number of Shares ("Rule 144 Transfer Notice").

 

(iii) When a Shareholder proposes a Transfer pursuant to this Section 4.3, the other Shareholders will, within 5 Business Days of receipt of the Rule 144 Transfer Notice, have the right to participate in, and coordinate in relation to, such Proposed Transfer on a pro rata basis with such proposing Shareholder, so long as each such Shareholder is eligible to rely on Rule 144 in connection with such Transfer.

 

(c) Transfers outside the U.S.

 

(i) If an Elbrus Shareholder intends to Transfer Shares directly to a non-U.S. purchaser and not via a stock exchange transaction:

 

(A) it must first give the other Shareholders a Transfer Notice (a “Non-U.S. Transfer Notice”);

 

6

 

 

(B) any other Shareholder may within 5 Business Days of receiving a Non-U.S. Transfer Notice notify the addressor of the Non-U.S. Transfer Notice that it wishes to participate in such Transfer pro rata and such notice shall include the number of Shares to be Transferred; and

 

(C) if the notification(s) to the addressor of the Non-U.S. Transfer Notice result(s) in more Shares to be Transferred than such purchaser is willing to purchase, the number of Shares to be Transferred shall be reduced pro rata; provided that if the Elbrus Shareholders’ aggregate number of Shares to be Transferred to such purchaser is less than fifty (50) percent of the final number of Shares, the Shares of all the other Shareholders shall be reduced pro rata until the Elbrus Shareholders have at least fifty (50) percent of the final number of Shares to be Transferred to such purchaser.

 

(ii) If any Shareholder (other than an Elbrus Shareholder) intends to Transfer Shares directly to a non-U.S. purchaser and not via a stock exchange transaction:

 

(A) it must first give the other Shareholders a Non-U.S. Transfer Notice;

 

(B) the Elbrus Shareholders and, in circumstances where the Elbrus Shareholders exercise their rights under this sub-clause (B) and will sell at least 50 percent of their Shares as part of that transaction, the other Shareholders may within 5 Business Days of receipt of the Non-U.S. Transfer Notice notify the addressor of the Non-U.S. Transfer Notice that it wishes/they wish to participate in such Transfer pro rata and such notice shall include the number of Shares to be Transferred; and

 

(C) if the notification(s) to the addressor of the Non-U.S. Transfer Notice result(s) in more Shares to be Transferred than such purchaser is willing to purchase, the number of Shares to be Transferred shall be reduced pro rata; provided that if the original addressor’s aggregate number of Shares to be Transferred to such purchaser is less than fifty (50) percent of the final number of Shares, the Shares of all the other Shareholders shall be reduced pro rata until the original addressor has at least fifty (50) percent of the final number to be Transferred to such purchaser.

 

(d) Other Transfers

 

Prior to any Shareholder effecting any Transfer of Shares other than pursuant to Clauses 4.1, 4.2 or 4.3(a) to (c), such Shareholder shall give written notice to the Coordination Committee of its intent to Transfer Shares, including the number of Shares and the intended plan of distribution. Upon receiving notice that a Shareholder intends to effect a Transfer of Shares, the Elbrus Shareholders will have the right to effect a Transfer on the same terms as such proposed Transfer on a pro rata basis with such Shareholder. (and if a sale by any Elbrus Shareholders requires a Registered Offering then the provisions of clause 4.2(b)(iii) and (iv) shall apply mutatis mutandis).

 

5. Representations and warranties

 

Each Shareholder, severally and not jointly, hereby represents and warrants to each other Shareholder that on the date hereof:

 

(a) Such Shareholder has full power and authority to execute and deliver this Agreement and perform its obligations under this Agreement.

 

7

 

 

(b) This Agreement has been duly authorized, executed and delivered by such Shareholder and constitutes a valid and legally binding agreement of such Shareholder, enforceable according to its terms, subject as to enforceability, to bankruptcy, insolvency, reorganization and similar Laws of general applicability relating to or affecting creditors’ rights and to general equity principles where applicable.

 

(c) Neither the execution and delivery of this Agreement by such Shareholder nor the performance by such Shareholder of its obligations under this Agreement, will (a) violate the Organizational Documents of such Shareholder or (b) violate or result in a breach of or constitute a default under any Law to which such Shareholder is subject.

 

6. Miscellaneous

 

(a) Notices. All notices and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and must be delivered or sent by email or reputable international courier to the recipient to whom it is to be given at its address stated in this clause 6 (or at any such other address of which it shall have given notice for this purpose to the other parties under this clause 6). Any notice, or other communication shall be deemed to have been given if delivered by email or courier, on the date of delivery, provided that if a notice or other communication delivered by courier after 5 p.m. on a Business Day or on a day which is not a Business Day, such notice or communication shall be deemed to have been given at 9 a.m. on the next Business Day. In this clause 6, a reference to time is to local time in the place in which the recipient of the notice or communication is located.

 

(i) in the case of Speedtime, as follows:

 

Address: Katalanou 1, 1st floor, flat/office 101, Aglantzia 2121, Nicosia, Cyprus
Email: ytitarenko@strongboardservices.com
  Attention: the Directors

 

with a copy to richard.cowie@dentons.com;

 

(ii) in the case of Onlypiece, as follows:

 

Address: Katalanou 1, 1st floor, flat/office 101, Aglantzia 2121, Nicosia, Cyprus
Email: ytitarenko@strongboardservices.com
Attention: the Directors

 

with a copy to richard.cowie@dentons.com;

 

(iii) in the case of Ronder, as follows:

 

Address: Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands
Email: ytitarenko@strongboardservices.com
Attention: the Directors

 

with a copy to richard.cowie@dentons.com;

 

(iv) in the case of Maksim Melnikov, as follows:

 

  Address: 105005 Moscow, Akademika Tupoleva emb. 15, apt. 8
  Email: melnikov@cian.org
  Attention: Maksim Melnikov

 

8

 

 

(v) in the case of MPOC, as follows:

 

Address: Vistra Corporate Services Centre, Wickhams Cay, II, Road Town, Tortola, VG1110, British Virgin Islands
  Email: mpoc.corp@gmail.com
  Attention: Juliette Michel Clarisse

 

(vi) in the case of ELQ, as follows:

 

  Address: Plumtree Court, 25 Shoe Lane, London, EC4A 4AU, United Kingdom
  Email: Jim.Wiltshire@gs.com; mbd-mo-london@gs.com;
    gs-mbd-emea-fme@gs.com
  Attention: Jim Wiltshire

 

with a copy to:

 

Address: c/o OOO Goldman Sachs, 14th Floor, Ducat III, 6 Gasheka Street, Moscow 125047, Russian Federation;
  Email: maxim.klimov@gs.com; Dmitry.Kurilo@gs.com
  Attention: Max Klimov and Dmitry Kurilo

 

(vii) in the case of Stonebridge 2020 Offshore, as follows:

 

Address: Ugland House, PO Box 309, South Church Street, George Town, Cayman Islands, KY1-1104
  Email: gs-pia-dallas@gs.com; 19726466373@tls.ldsprod.com;
    gs-mbd-mo@gs.com
  Attention: Andrew Bain

 

with a copy to:

 

Address: c/o OOO Goldman Sachs, 14th Floor, Ducat III, 6 Gasheka Street, Moscow 125047, Russian Federation;
  Email: maxim.klimov@gs.com; Dmitry.Kurilo@gs.com
  Attention: Max Klimov and Dmitry Kurilo;
     
(viii) in the case of Stonebridge 2020, as follows:

 

Address: Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, DE-19801
  Email:  gs-pia-dallas@gs.com; 19726466373@tls.ldsprod.com; gs-mbd-mo@gs.com
  Attention:  Andrew Bain

 

with a copy to:

 

  Address:  c/o OOO Goldman Sachs, 14th Floor, Ducat III, 6 Gasheka Street, Moscow 125047, Russian Federation;
  Email:   maxim.klimov@gs.com; Dmitry.Kurilo@gs.com
  Attention:  Max Klimov and Dmitry Kurilo

 

(ix) in the case of West Street, as follows:

 

  Address: 2 Rue du Fosse, L-1536 Luxembourg
  Email : Marielle.STIJGER@broadstreet.lu;
GSLMSBanksandAgents@broadstreet.lu
Attention: Marielle Stijger

 

with a copy to:

 

Address: c/o OOO Goldman Sachs, 14th Floor, Ducat III, 6 Gasheka Street, Moscow 125047, Russian Federation;
Email: maxim.klimov@gs.com; Dmitry.Kurilo@gs.com
Attention: Max Klimov and Dmitry Kurilo.

 

9

 

 

(b) Amendment. No amendment of any provision of this Agreement shall be effective unless made in writing and signed by a duly authorized representative of each of the parties hereto at the time of such amendment.

 

(c) No Assignment or Benefit to Third Parties. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, legal representatives and permitted assigns. Except as permitted in clauses 4.1, in which case the party may assign all rights and delegate all obligations hereunder to such Permitted Transferee, no party may assign any of its rights or delegate any of its obligations under this Agreement, by operation of Law or otherwise, without the prior written consent of the other parties.

 

(d) Third party rights. No Person who is not a party to this Agreement has any right to enforce or to enjoy the benefit of any terms of this Agreement by virtue of the Contracts (Rights of Third Parties) Act of 1999 or otherwise; provided that, any Person who holds Shares and is a party to the Registration Rights Agreement may enforce the provisions of clause 4.2(b)(iii) as if they were a party to this Agreement; and provided further that such persons comply with the provisions of clauses 4.2(b)(iv) and 4.2(c).

 

(e) No Partnership or Agency. Nothing in this Agreement is intended to, or shall be deemed to, establish any partnership or joint venture between any of the parties, constitute any party the agent of another party, nor authorize any party to make or enter into any commitments for or on behalf of any other party.

 

(f) Further Assurance. Each of the parties shall, at their own expense from time to time on request, do or procure the doing, of all acts and/or the execution of all documents in a form satisfactory to each other party which each other party may reasonably consider necessary for the giving full effect to this Agreement.

 

(g) Remedies and Waivers. No failure on the part of a party to exercise and no delay in exercising, and no course of dealing with respect to, any right or remedy under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right or remedy under this Agreement prevent any other or further exercise or the exercise of any other right or remedy. The rights or remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

 

(h) Costs. Each party shall pay its own costs in connection with the negotiation, preparation, execution and performance of this Agreement.

 

(i) Entire Agreement. This Agreement and the Registration Rights Agreement constitute the entire agreement among the parties and contain all of the agreements among the parties with respect to the subject matter hereof as of the date of this Agreement and supersede all prior agreements, undertakings and negotiations (in each case, both oral and written) among the parties concerning the subject matter hereof. Failure by any party hereto to enforce any covenant, duty, agreement, term or condition of this Agreement, or to exercise any right hereunder, shall not be construed as thereafter waiving such covenant, duty, term, condition or right; and in no event shall any course of dealing, custom or usage of trade modify, alter or supplement any term of this Agreement.

 

(j) Conflict With Articles. If, in connection with the relationship between the parties, a conflict exists between the interpretation of the Articles and this Agreement, this Agreement shall prevail.

 

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(k) Conflict With IPO Lock-Ups. If, in connection with the relationship between the parties, a conflict exists between the interpretation of a lock-up obligation assumed by any Shareholder in connection with the IPO and this Agreement, the provisions of such lock-up obligation shall prevail over the provisions of this Agreement with respect to such Shareholder.

 

(l) Governing Law. This Agreement, and all claims or causes of action including any non-contractual claims or causes of action (whether in contract, tort or statute) that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement), shall be governed by, and enforced in accordance with, the Laws of England and Wales.

 

(m) Arbitration. Any dispute, controversy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, or the transactions contemplated herein, or the breach, termination or validity thereof may be referred to and finally resolved by arbitration under the Arbitration Rules of the London Court of International Arbitration (“LCIA”) (the “Rules”), which Rules are deemed to be incorporated by reference in this clause 6. The number of arbitrators shall be three (3), and the parties in such arbitration shall each nominate one (1) arbitrator. The third arbitrator, who will act as chairman of the arbitral tribunal, will be appointed by the President of the LCIA having taken into account any agreement on the arbitrator to be appointed as chairman of the arbitral tribunal reached by the two party-nominated or appointed arbitrators, such agreement to be within fourteen (14) days of the appointment of the last party nominated or appointed arbitrator. The legal place of arbitration shall be London and the language of arbitration shall be English. This arbitration agreement, including its validity and scope, shall be governed by English law.
     
  (n) Consolidation of Arbitrations. If two or more arbitrations are commenced under this Agreement and/or under the Registration Rights Agreement, any party named as claimant or respondent in any of these arbitrations may petition any arbitral tribunal appointed in these arbitrations for an order that the several arbitrations be consolidated in a single arbitration before that arbitral tribunal. The parties hereto hereby consent to such consolidation of arbitrations.

 

(o) Specific Performance. Each of the parties acknowledges that the other parties may have no adequate remedy at Law if such party fails to perform its respective obligations under this Agreement. In such event, each of the parties shall have the right, in addition to any other rights each party may have, to seek specific performance of the obligation of each other party. Each party agrees that it will not take any action to impede the other parties’ efforts to enforce such right of specific performance.

 

(p) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same instrument.

 

(q) Severability. Each provision of this Agreement shall be considered separable, and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future Law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Agreement that are valid, enforceable and legal.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written.

 

Signed by

SPEEDTIME TRADING LIMITED

)  
     
     
     

Signed by

ONLYPIECE TRADING LIMITED

)  
     
     
     

Signed by

RONDER INVESTMENTS LIMITED

)  
     
     
     

Signed by

MAKSIM MELNIKOV

)  
     
     
     

Signed by

MPOC TECHNOLOGIES LTD

)  
     
     
     

Signed by

ELQ INVESTORS II LTD

)  
     
     
     

Signed by

STONEBRIDGE 2020 OFFSHORE HOLDINGS II, L.P.

)  
Acting by:  Bridge Street Opportunity Advisors, L.L.C., its General Partner    
     
     
     

Signed by

STONEBRIDGE 2020, L.P.

)  
Acting by: Bridge Street Opportunity Advisors, L.L.C., its General Partner    
     
     
     

Signed by

WEST STREET EMS PARTNERS, SLP

)  
Acting by: WEST STREET EMS PARTNERS GP, S.A.R.L., its General Partner    

 

12

 

Exhibit 5.1

 

28 October 2021

 

Cian PLC

Agiou Georgiou Makri, 64

Anna Maria Lena Court

Flat/Office 201,

6037 Larnaca, Cyprus

 

Ladies and Gentlemen,

 

We are acting as Cyprus counsel to Cian PLC (the “Company”) in connection with the initial public offering on the New York Stock Exchange of American Depositary Shares (the “ADSs”), representing ordinary shares with a nominal value of EUR 0.0004 per share, in the capital of the Company (the “Shares”).

 

This legal opinion on certain matters of Cyprus law (the “Opinion”) is furnished to you in order for it to be filed as an exhibit to the Registration Statement on Form F-1 under the Securities Act of 1933 (the “Act”) originally filed with the U.S. Securities and Exchange Commission (the “Commission”) dated October 13, 2021 (as amended, the “Registration Statement”).

 

We have reviewed a certificate of incumbency issued by the secretary of the Company dated 28 October 2021 together with the documents referred to therein, resolutions of the Board of Directors of the Company, a certified copy of the register of members of the Company as at the date 28 October 2021 (the “Register of Members”) and such documents as we have deemed necessary for the purposes of rendering this opinion (the “Inspected Documents”).

 

1. Assumptions:

 

In giving this opinion we have assumed:

 

(a) that no provision of the laws of any jurisdiction other than Cyprus affects the conclusions in this Opinion; for example, we have assumed that, in so far as any obligation is to be performed in any jurisdiction outside Cyprus its performance will not be illegal or ineffective by virtue of any law of, or contrary to public policy in, that jurisdiction;

 

(b) the accuracy and completeness of all factual representations made in the Inspected Documents;

 

(c) that those of the Inspected Documents submitted to us as copies conform to the original documents and such original documents are authentic and complete; and

 

(d) that the Register of Members is accurate and up to date.

 

 

 

 

2. Opinion:

 

Subject to the qualification and considerations set out below, our opinion on Cyprus law is set out below:

 

1. All the outstanding share capital of the Company (including the Shares represented by the ADSs) has been duly and validly authorized and issued and is fully paid and non-assessable.

 

2. The Company is duly organized, validly registered and existing in good standing under the laws of Cyprus.

 

3. Qualification:

 

This Opinion is confined solely to the laws of Cyprus in force at the date of this Opinion and we have made no investigation and no opinion is expressed or implied as to the laws of any other jurisdiction.

 

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption “Legal Matters” and to the discussion of the opinion in the prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules or regulations of the Commission promulgated thereunder.

 

Yours truly,

 

/s/ Stelios Triantafyllides  

 

Stelios Triantafyllides

Antis Triantafyllides & Sons LLC

 

 

 

 

Exhibit 10.2

 

Cian PLC

 

2021 Restricted Stock Units Plan

 

(hereinafter referred to as the 2021 Plan or the Plan)

 

XX October, 2021
Larnaca, Cyprus

 

1. Certain Definitions

 

The capitalized terms set forth below shall have the meaning prescribed hereunder for purposes of the 2021 Plan:

 

The Company   Cian PLC, a public company limited by shares established under the Laws of Cyprus with the registered address at: 64 Agiou Georgiou Makri, Anna Maria Lena Court, Flat 201, 6037, Larnaca, Cyprus, registration number 371331.
     
Beneficial Owner   A Beneficial Owner of a security includes any individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (1) voting power which includes the power to vote, or to direct the voting of, such security; and/or (2) investment power which includes the power to dispose, or to direct the disposition of, such security.
     
Change of Control   A transaction or series of related transactions whereby any person (or related group of persons) other than the Company, its Subsidiaries or the depositary of the Company's American depositary receipts that, as of the date of this Plan, directly or indirectly acquires beneficial ownership of securities of the Company entitling such person (or related group of persons) upon consummation of such acquisition to exercise more than fifty (50) percent of the total voting rights exercisable at general meetings of the shareholders of the Company.
     
Control   in relation to a corporation, partnership or other entity:
     
   

(i)                  the ability to appoint or remove directors having a majority of the voting rights exercisable at meetings or in respect of resolutions of the board of such corporation, partnership or other entity; or

 

(ii)                the possession, directly or indirectly, of the power to direct or cause the direction of the policies of such corporation, partnership other entity, whether through the ownership or possession (other than through customary pledge arrangements) of voting securities, the right to nominate the majority of the senior executive management, by contract or otherwise and the expression "Controlled" shall be interpreted accordingly.

 

Group   means the Company and the Subsidiaries.

 

Expiration Date   31 December, 2031.

 

Person   means any individual, partnership, company, legal person, unincorporated organization, trust (including the trustees in their aforesaid capacity) or other entity.

 

 

 

 

Shares   means ordinary shares, par value EUR 0.0004 each, in the Company that confers upon its holder the right to one (1) vote at a general meeting of the Company and in other respects ranking pari passu with other ordinary shares in the Company.
     
Subsidiary   means in relation to an undertaking (the holding undertaking), any other undertaking which the holding undertaking Controls and any undertaking which is a Subsidiary of another undertaking is also a Subsidiary of any undertaking of which that other is a Subsidiary.

 

2. Objectives

 

The Company has adopted the 2021 Plan in respect of its Shares to achieve the following goals:

 

2.1 Align the interests of the shareholders with those of the management, employees and directors of the Company by providing to the key employees and service providers of the Company and its Subsidiaries (the Group) an opportunity to participate in a long-term growth of the Company's value.

 

2.2 Increase investment attractiveness of the Company.

 

2.3 Provide competitive remuneration and retain key employees of Cian.

 

2.4 Alignment with practice of public companies.

 

3. Terms and conditions of the 2021 Plan

 

3.1 Available Shares. Subject to the provisions of this Section 3 and to adjustment under Section 4 (Adjustment), grants of the Restricted Stock Units (the RSU) or other share-based awards may be made under the Plan for up to a maximum number of Shares equal to six and a half (6,5) percent of the aggregate number of ordinary Shares issued and outstanding (by number) as of the date of adoption of this Plan (the Pool). Each RSU carries the right to receive one (1) Share upon satisfaction of the applicable vesting conditions.

Subject to Section 3.3, awards in the form of RSU or any other share-based awards issued under the Plan, shall reduce the available Pool by one (1) Share for each RSU granted.

 

Eligibility. The Administrator shall select recipients of RSU hereunder (the Participants) from among those employees, officers, directors and contractors of the Company who are in a position to make a significant contribution to the success of the Company. While selecting the Participants, the Administrator shall apply including but not limited to the following criteria:

 

-   high-level efficiency of the employee’s work performance ;

 

-   adherence to corporate values and strategy ;

 

-   worth of the employee for Cian’s success.

 

Members of the Board are eligible to receive the RSU under the Plan subject to stockholders approval to the extent, if any, such approval is required by the applicable law or the Memorandum and Articles of Association of the Company (the Articles).

 

3.2 Administration. The Compensation, Governance and Nominating Committee of the Board, acting as administrator of the Plan (the Administrator) under the decision of the Board to delegate such powers to the Administrator, shall have the authority to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it deems advisable. The Administrator may construe and interpret the terms of the Plan and any RSU granted under the Plan. The Administrator may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any RSU in the manner and to the extent it shall deem expedient to carry the Plan into effect. The Administrator may approve the amendment of any RSU in accordance with the terms of the Plan. All decisions by the Administrator shall be made in its sole discretion, and shall be final and binding on all persons having or claiming any interest in the Plan or in any RSUs, provided that the decision of the Administrator shall not contradict Clause 14 of the Plan.

 

 

 

 

3.3 Forfeitures. If any RSU granted under this Plan expires, terminates or is canceled for any reason without any Shares being delivered pursuant to an award, the number of Shares underlying such expired, terminated or cancelled RSU shall again be available for the purpose of awards under the Plan.

 

3.4 Terms and Conditions. The Administrator shall determine the terms of all RSUs, subject to the limitations provided herein, and shall furnish to each Participant an agreement (the Award Agreement) setting forth the terms applicable to the Participant’s RSU. By accepting an Award Agreement, the Participant agrees to the terms of the RSU (as set forth in the Award Agreement) and of the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of the Award Agreement, the terms and conditions of the Plan shall prevail. Such terms and conditions may include, without limitation, an obligation of the Participant to agree to a lock-up arrangement with respect to Shares acquired pursuant to the RSU. Terms and conditions of RSUs may differ amongst different Participants and different grants of RSUs.

 

The Administrator shall determine the terms of all other share-based awards granted pursuant to the Plan, which authority shall be exercised consistent with the authorities authorized by the Plan with respect to RSUs.

 

3.5 Tax and currency control. Each Participant undertakes to the Company (for itself and as trustee for each Group company) to make all tax and currency control filings and pay all the taxes that such Participant has to make or pay as a result of the entry into and performance of this Plan. To the extent that a Participant breaches this obligation, such Participant shall indemnify the Company (for itself and as trustee for each Group company) in an amount equal to any and all losses, costs and expenses incurred by any Group company as a result of such breach.

 

The Company may, in its absolute discretion, elect to make a deduction from any payment from it to a Participant on account of tax (including an amount equal to any tax or social security contributions payable by any of the Group Companies) and pay such amount to any applicable tax authority.

Each Participant agrees that any payment to be made by the Company to such Participant shall be conditional upon it being made in strict compliance with all applicable laws (including taxation and currency control laws).

 

Each Participant shall from time to time upon the written request of the Company provide to the Company in a timely manner such information as it reasonably requests in order to evidence his tax and currency control residency and the compliance by the Participant with applicable laws (including taxation and currency laws) regarding this Plan.

 

3.6 Vesting. Unless otherwise determined by the Administrator and provided in the Award Agreement the RSU shall vest in four (4) equal installments, subject to the Participant's continued employment with the Company or a Subsidiary, with one-fourth (1/4) of the RSU vesting on the first anniversary of the grant and an additional one-fourth (1/4) of the RSU vesting on the second and third anniversary of the grant and the last one-fourth (1/4) of the RSU vesting on the fourth anniversary of the grant. RSU, which have not become vested as of the date of termination of the Participant's employment or service shall be forfeited upon such termination.
   
3.7 Change of Control. The Administrator may, in its sole and absolute discretion, at any time as long as any of the RSU under the Plan remain outstanding, amend the Plan and any respective Award Agreements to implement provisions regarding a change of Control over the Company as may be reasonably necessary to grant Participants reasonable protection from any materially adverse changes which may result from a change of Control over the Company.

 

3.8 Clawback. In the event that (i) the Company’s financial results are materially restated or (ii) there is a significant adverse legal finding by a court or regulator against the Company in which any Participant is found to have culpability, the Administrator may review the circumstances surrounding the restatement or adverse legal finding and determine whether to (a) cancel any outstanding RSU granted to any Participant, in whole or in part, whether or not vested and/or (b) require any Participant to repay to the Company any gain realized or value received upon the receipt of any RSU during the Lookback Period (as defined below) determined by the Administrator to have been inappropriately received by the Participant (with such gain or value received valued as of the date of receipt). The “Lookback Period” is defined as the five (5) completed fiscal years immediately preceding the date on which the Company files such restatement or the date of the adverse legal finding.

 

 

 

 

Cancellation and repayment obligations will be effective as of the date specified by the Administrator. Any repayment obligation may be satisfied in Shares or cash or a combination thereof (based upon the Fair Market Value of Shares on the day of payment), and the Administrator may provide for an offset to any future payments owed by the Company or any affiliate to the Participant if necessary to satisfy the repayment obligation. The determination regarding cancellation of an RSU or a repayment obligation shall be within the sole discretion of the Administrator and shall be binding upon the Participant and the Company.

 

3.9 Delivery of Shares. As the RSU vest, the Participant shall receive Shares free of all restrictions hereunder. In no event shall awards be settled (i.e., Shares received) later than 31 March of the year following the year in which the RSU vest.

 

3.10 No Rights as Shareholder. Until such time as a Participant has been issued Shares, no Participant shall acquire any rights in respect of such Shares, including any rights to any dividends or other distributions thereon.

 

3.11 Expiration Date. Each then outstanding RSU shall terminate upon the Expiration Date.

 

4. Adjustment

 

4.1 In the event of any stock split or combination of shares (including a reverse stock split), reorganization, recapitalization, merger, exchange of stock, redemption, repurchase, consolidation, other change in the capital structure of the Company, sale of assets or other similar event which requires adjustment in the good faith determination of the Board or Administrator in order to avoid the enlargement or dilution of rights hereunder, Administrator shall make adjustments to the maximum number Shares that may be delivered under the Plan and also make such changes in the number and kind of shares of stock, securities or other property (including cash) covered by outstanding RSUs, and the terms thereof, as the Board or the Compensation, Governance and Nominating Committee determines to be appropriate. References in the Plan to Shares shall be construed to include any stock or securities resulting from an adjustment pursuant to this Section

 

5. No assignment

 

Except for any transfer of RSU pursuant to Section 10 resulting from the laws of descent and distribution, no RSU granted under this Plan may be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner (other than pursuant to the laws of descent and distribution), nor may a Participant enter into any derivative agreement or other similar hedging arrangement relating to any RSU without prior written consent of the Company provided that the Exercise of the RSU shall not be considered to be any type of disposal. The terms of an award shall be final, binding and conclusive upon any transferee permitted under this Section 5.

 

6. Governing law

 

This Plan shall be governed by, and be construed in accordance with, the Laws of England and Wales.

 

 

 

 

7. Confidentiality

 

Participants shall be required, as a condition to the receipt and retention of any RSU hereunder, to keep strictly confidential the terms of such Participant's participation in this Plan and shall agree not to discuss the terms of such participation with any other employee or consultant of the Company or any other third party; provided that nothing herein shall prevent the disclosure of these terms to the Participant's legal or tax advisors or as may be required to be disclosed in any prospectus prepared in connection with any offering of securities or as required by law.

 

8. Share capital

 

Nothing herein shall restrict the ability of the Company to increase its issued share capital (with the consequent dilution of the Participant's percentage shareholding in the Company or the Participant's potential shareholding in the Company as the case may be) or issue preference shares or other shares ranking in priority to the Shares that may be purchased pursuant to each RSU.

 

Rights and obligations associated with the Shares

 

Any Shares acquired pursuant to the RSU shall be subject to any and all the rights associated with the Shares of the Company in accordance with the provisions set out in the Articles.

 

9. Death or incapacity of the RSU holder

 

If a Participant (or, in the case of a Participant that is an entity providing services to the Company which has an individual Beneficial Owner, its Beneficial Owner) dies or is determined to be incapacitated by court while employed by or providing services to the Company or any Subsidiary, the RSU may (subject to any vesting and termination provisions as set out in this Plan) be exercised at any time within twelve (12) months following the date of death or incapacitation by the applicable individual's personal representatives or by a person who acquired the right to exercise the RSU by bequest or inheritance. If the RSU are not so exercised within the time specified herein, the RSU shall terminate.

 

10. Shareholder notices

 

Prior to the exercise of any RSU, the Company shall not be obliged pursuant to the provisions of this Plan to provide the Participant with copies of any notices, circulars or other documents sent to shareholders of the Company in respect of Shares subject to the RSU.

 

11. Amendment; Term

 

Notwithstanding any other provision of the Plan, the Administrator, in its sole and absolute discretion, may at any time or times amend or alter the Plan or any outstanding RSU and may at any time terminate or discontinue the Plan as to any future grants of RSU; provided, that, without limitation of the provisions of Section 4, the Administrator may not, without the Participant's consent, amend, alter or terminate the terms of an RSU or the Plan so as to affect adversely the Participants' or a Participant's existing rights under a RSU or the Plan. Any amendments to the Plan shall be conditioned upon stockholder approval only to the extent, if any, such approval is required by the applicable law or regulation (including listing rules), as determined by the Administrator. The Plan shall become effective as of December 1st, 2021, subject to approval by the stockholders of the Company and shall expire on the Expiration Date (unless terminated earlier by the Administrator); provided that outstanding RSU granted prior to such expiration (if any) shall remain outstanding in accordance with their terms following such expiration.

 

12. Legal Requirements

 

The Company may require, as a condition to the delivery of Shares pursuant to the Plan or removing any restriction from Shares previously delivered under the Plan, that all legal matters in connection with the issuance and delivery of such Shares have been addressed and resolved. The Company may require, as a condition to exercise of the RSU, such representations or agreements as counsel for the Company may recommend. The Company may require that certificates evidencing Shares issued under the Plan bear an appropriate legend reflecting any restriction on transfer applicable to such Shares, and the Company may hold the certificates pending lapse of the applicable restrictions.

 

 

 

 

Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the use in this Registration Statement on Form F-1 of our report dated June 23, 2021 (September 2, 2021, as to the effects of the share split arising from the capital reorganization as described within Note 21; October 12, 2021, as to the effects of the restatement discussed in Note 5), relating to the consolidated financial statements of Cian PLC (formerly, Solaredge Holdings Limited) and subsidiaries. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

 

/s/ AO Deloitte & Touche CIS

 

Moscow, the Russian Federation

 

October 28, 2021

 

 

 

 

 

 

 

 

 

 

Exhibit 23.2

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the use in this Registration Statement on Form F-1 of our report dated June 23, 2021, relating to the consolidated financial statements of N1.ru LLC and subsidiaries. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

 

/s/ AO Deloitte & Touche CIS

 

Moscow, the Russian Federation

 

October 28, 2021

 

 

 

 

 

 

 

 

 

Exhibit 99.5

 

Consent of Director Nominee

 

Cian PLC is filing a Registration Statement on Form F-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), in connection with the initial public offering of American Depositary Shares representing ordinary shares of Cian PLC. In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of Cian PLC in the Registration Statement, as may be amended from time to time. I also consent to the filing of this consent as an exhibit to such Registration Statement and any amendments thereto.

 

Date: October 28, 2021   /s/ Chloe Harford
    Name: Chloe Harford

 

 

 

Exhibit 99.6

 

Consent of Director Nominee

  

Cian PLC is filing a Registration Statement on Form F-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), in connection with the initial public offering of American Depositary Shares representing ordinary shares of Cian PLC. In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of Cian PLC in the Registration Statement, as may be amended from time to time. I also consent to the filing of this consent as an exhibit to such Registration Statement and any amendments thereto.

 

Date: October 28, 2021   /s/ Gilles Blanchard
    Name: Gilles Blanchard