ANNUAL REPORT 2019 The Report of Public Joint Stock Company ALROSA (PJSC ALROSA, ALROSA, the Company) for 2019 includes operating performance of the Company and its affiliates hereinafter referred to as ALROSA Group.

PJSC ALROSA, ALROSA Group, the Group, ALROSA, and the Company used herein are deemed equivalents and refer to ALROSA Group as a whole, PJSC ALROSA and/or its affiliates as the context may require.

PJSC ALROSA is a parent company of ALROSA Group, and for the purpose of this Report it submits consolidated information of the operations and financial activities of key business units and lines. The Report is based on the operating data of the consolidated IFRS figures (unless otherwise is stated).

IN TERMS OF DISCLOSURE, THE REPORT COMPLIES WITH:

— Federal Law No. 208-FZ “On Joint-Stock Companies” dated December 26, 1995;

— Federal Law No. 39-FZ "On the Securities Market" dated April 22, 1996;

— Regulation of the Bank of Russia No. 454-P “On the Disclosure of Information by Issuers of Securities” dated December 30, 2014;

— Information letter of the Bank of Russia No. IN-06-52/8 dated February 17, 2016 “On Joint Stock Companies Disclosing the Report of Compliance with the Principles and Recommendations of the Corporate Governance Code in the Annual Report”

— Resolution of the Government of the Russian Federation No. 1214 dated December 31, 2010 “On Improving the Management of Joint Stock Companies with Federally-Owned Shares, and Federal Unitary Enterprises”, as it reads now.

The Report of ALROSA for 2019 was approved by the PJSC ALROSA Annual General Meeting of shareholders on June 24, 2020 (Minutes No. 42, dated June 25, 2020) and was pre-approved by the Supervisory Board, Minutes No. 01/311-ПР-НС dated April 22, 2020. The reliability of the data presented in the Report has been confirmed by the Audit Commission. FORWARD- LOOKING STATEMENTS

This report, in addition to actual historical data, presents some forward-looking statements. Such statements include, but are not limited to, statements of future operational performance, plans and/or forward-looking statements about future economic and financial metrics, and the goals and tasks of the Company development plans, including ALROSA’s target KPIs for three years (2020-2022) — Compliance with the key performance indicators subsection of the Development Strategy section of Chapter 2, Strategic Report.

Statements on future performance include, but are not limited to, information related to the forecasted or expected income, profit (loss), and net profit (loss) in relation to shares, dividends, capital structure and other financial matters. The content of such statements is forward-looking and is expressed through the words “expected”, “supposed”, “planned”, “intended”, etc. By nature, forward-looking statements are associated with general and particular risks and uncertainties. There is the risk that future actual performance may differ significantly from the plans, goals, expectations, estimates and intentions expressed in such forward- looking statements, or may fail to be implemented because of a number of factors. MESSAGE FROM THE CHAIRMAN OF THE SUPERVISORY BOARD

DEAR SHAREHOLDERS,

ALROSA is well on track with its strategy and its commitment to solidify a leadership standing in the global diamond market.

The Company's updated Strategy and Long-Term Development Program reflect current trends and focus on digitalization and marketing as the Company’s important areas. ALROSA is working on programs to track the history of polished diamonds and provide guarantees of their origin. To that end, an electronic trading platform has been deployed. The Company is also rolling out digital "Of special note is the gradual improvement in the quality of governance at the Company. solutions for diamond buyers. In 2019, this aspect received the Best Corporate Governance Practices award. Currently, ALROSA is working to replenish its resource base, focusing primarily on Yakutia as the key area five of the fifteen members of the Supervisory Board are independent directors. of operation. The Company is actively developing projects in Africa, with operations now kicking off in Zimbabwe, a new and promising region. The Company is regularly recognised and praised for its exceptional transparency, including in disclosure of social and environmental aspects". Of special note is the gradual improvement in the quality of governance at the Company. In 2019, this aspect received the Best Corporate Governance Practices award. Currently, five of the fifteen members of the Supervisory Board are independent directors. The Company is regularly recognised and praised for its exceptional transparency, including in disclosure of social and environmental aspects.

Despite the difficulties that the global diamond industry faced in 2019, ALROSA acted as a responsible market player. In order to support its customers, the Company relaxed its payment terms so that up to 45% of initially contracted diamond volumes can remain unpurchased. This move helped the cutting sector to stay afloat.

Still, we need to be well prepared for new negative developments and new trends in consumer sentiment going forward. Today, customers want to know everything about the history of the stone, including where it was mined and produced and whether there were any issues involved in the process. They want complete transparency and full digitalization. Strong focus on these areas is needed to maintain consumer trust in the Company's products and, ultimately, help maintain demand for rough diamonds. A. G. Siluanov On behalf of the Supervisory Board, I want to thank the management and all the employees at ALROSA for their professionalism and dedication. CHAIRMAN OF THE SUPERVISORY BOARD PJSC ALROSA

4 5 MESSAGE FROM THE CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE EXECUTIVE COMMITTEE

DEAR SHAREHOLDERS, INVESTORS AND EMPLOYEES OF ALROSA,

The year of 2019 was a major challenge for the entire diamond market. The financing problems faced by the diamond-cutting sector in India, trade wars between the USA and China, slowdown in global economic growth, devaluation of national currencies, protests in Hong Kong, and a number of other negative factors contributed to the deterioration of consumer sentiment and a reduction in the price and demand for diamonds. In turn, this led to overstocking and a serious drop in sales for all the major diamond mining companies. ALROSA Group's revenue for the year fell by 26% to USD 3.3 bln.

In this tough environment, we pursued a flexible sales policy based on the “price over volume” principle. Lower diamond supply caused a decrease in diamond reserves among manufacturers, which resulted in signs of stabilization in demand at the end of the year as the market was gradually recovering its state of balance. designed to boost operational efficiency and financial to individuals, organizations and settlements. Last year, performance in this area of business. ALROSA's social expenditures amounted to RUB 8.6 bln, Alongside this, we concentrated on improving the efficiency of our production processes and automation while and this area of our activity will remain one of the top also focusing on introducing digital technologies. A large-scale project to improve efficiency at the Nyurba Mining ALROSA Group ended the year with positive financial priorities for us going forward. and Processing Division proved successful, helping to increase the Division’s diamond mining by one third over the results. EBITDA amounted to RUB 107.1 bln, net profit came year, which in monetary terms exceeded USD 200 mln. Similar projects were launched at the Udachny and Aikhal in at RUB 62.7 bln, and free cash flow totalled RUB 47.6 bln. I want to thank our shareholders for their support, and our Divisions in the second half of the year. As part of a consistent effort, the Company embarked on introduction The net debt/EBITDA ratio at the end of the year stood at employees for their dedicated work and contribution to the of remote control technologies in the most complex areas of underground mines. In geological exploration, 0.74x, which is in line with the leverage target. In October, success and growth of ALROSA. We will continue our efforts unmanned aeromagnetic systems were tested, delivering good results. The first digital tenders were launched, with the Company used 100% of its free cash flow for 1H 2019 to to drive profitability for the benefit of our shareholders customers now able to decide whether to purchase raw materials after studying a full digital copy of each diamond pay dividends for the period — RUB 28.3 bln, or RUB 3.84 while also honoring our social obligations both to our in the box in the form of a 3D scan. per share. personnel and to society at large.

The rough diamond mining volume of ALROSA Group went up by 5% for the year to 38.5 mln carats. The rise in As before, ALROSA takes a very responsible approach to production is associated with the design capacity reached at the Verkhne-Munskoye deposit and an increase in developing its areas of operation, especially the Republic extraction at the Nyurba Division. At the Aikhal Division, operations at the new Zarya primary deposit began. At the of Sakha (Yakutia), where our main production sites are same time, given the unfavorable market conditions, we were forced to lower our production forecasts for 2020, located. ALROSA remains the largest employer of the S. S. Ivanov mainly due to the restriction on mining at alluvial deposits. republic, providing jobs to more than 3,000 local residents in 2019, and is also the most important source of income An important development of 2019 was the Smolensk-based plant Kristall, the largest diamond producer in Europe, for the budget of Yakutia. We help finance development CHIEF EXECUTIVE OFFICER AND CHAIRMAN becoming part of ALROSA Group. ALROSA’s Supervisory Board approved a three-year general strategy for the programs for diamond producing regions, support OF THE EXECUTIVE COMMITTEE development of the diamond-cutting complex for 2020–2022 and an integration plan for the Kristall plant, both social institutions, and provide free financial assistance PJSC ALROSA

6 7 Vladimir Zuev 60 years with ALROSA

Dear ladies and gentlemen, — PhD in geological and mineralogical sciences. — The discoverer of Nakyn ore field (pipe Nyurba and I'm Vladimir Zuev. As an ALROSA We have been growing together Botuobinsk), and one of the pioneers of the diamond long-service employee, I'm proud with the Company, while acquiring — Started his career in 1959 as geologist in Botuobinsk field Luashe (Angola) – the largest in the world in the that I have the opportunity to new experience and knowledge, geological expedition of the Yakutsk TSU in Mirny. last 50 years. present you with the Annual Report learning to search and never give of the Company I've dedicated my up, going into the matter and — Held senior positions in various divisions of the — Initiator and one of the authors of the project of entire work life to. feeling confident about our future. Company, took an active part in the creation of creation of the Katoka mining society in Angola. The feeling of fellowship and a ALROSA on the basis of Yakutalmaz association, 60 years back, I wrote my first and strong will to overcome obstacles was one of the organizers of ALROSA United Selling — Awarded numerous government awards for many only employment application and that seemed to be impossible have Organization. years of conscientious work. Honored worker of the submitted it to a newly established drawn us all together. Therefore, national economy of YASSR, honored worker of mineral team of Russian diamond miners. I Russia has worked its way up to — Was the head of geological service for 12 years, exploration. was extremely lucky, as I held in my become the largest diamond created modern geological exploration complex of the arms the first diamonds extracted producing country, and the Company. from mines that later became Company — a leader in the industry. legendary and took part in the Now, our traditional practices commission of open pit mines and are carefully handed down from plants, as well as in the construction generation to generation, from of new towns and settlements in the pathfinders to young specialists. severe landscapes of Yakutia. Yet most importantly, I have always felt Today, the ALROSA team continues as a part of a driven and creative to break new ground for the team of professionals, who are fully diamond business, demonstrating involved and dedicated to their its flexibility, boldness, confidence cause. and indissoluble bonds of the "diamond fellowship". With this I can say that new adventures await us, filled with exciting events and a solid performance.

8 9 CONTENTS

CHAPTER 01 CHAPTER 03 CHAPTER 05 CHAPTER 06 ALROSA AT PERFORMANCE FOR INVESTORS CORPORATE A GLANCE RESULTS AND SHAREHOLDERS GOVERNANCE

14 About ALROSA Group 56 Reserves and exploration work 110 ALROSA Key Competitive Strengths 124 Corporate Governance System and Key Principles

15 Key results in 2019 60 Operating results

111 Share Capital 129 General Meeting of Shareholders

16 Key Events in 2019 70 Financial results 113 Stock Market and Capitalization 130 Supervisory Board CHAPTER 02 76 International cooperation 116 Dividend Policy STRATEGIC 152 Executive Bodies REPORT 78 Supply chain management 117 Interaction with investors and shareholders 22 Asset Geography 160 Corporate Secretary CHAPTER 04 24 Business model SUSTAINABLE DEVELOPMENT 162 Control System 26 Market Overview 86 Sustainable development approach 169 Risk management 32 Development Strategy 89 ALROSA's economic contribution 179 Information Disclosure System 43 Investment Activities 90 Occupational health and safety

182 Glossary 46 Improving efficiency 92 Development of human capital

186 Contact Information 96 Development of areas of presence

102 Environmental protection 189 APPENDICES

106 Interaction with investors and shareholders

10 11 CHAPTER 01 ALROSA AT A GLANCE

“People who created a powerful mineral-raw material base in the extreme conditions of the Far North, are not used to back down.

The search for new technologies, new ideas, new solutions, creative and persistent search is what has always allowed us to achieve result”.

Vladimir Zuev

2019 >1.1 bln carats of resources

2019 107.1 RUB bln EBITDA ALROSA ANNUAL REPORT 2019 ALROSA AT A GLANCE

ABOUT ALROSA HIGHLIGHTS IN 2019 GROUP REVENUE INCLUDING SALES OF ROUGH INCOME FROM DIAMONDS AND EBITDA SUBSIDIES POLISHED DIAMONDS ALROSA's mission is to maintain a leading global position in the diamond mining industry and consistently deliver long-term value to the shareholders through efficient utilization of the 107.1 238.2 215.4 production and raw base. RUB bln RUB bln RUB bln

INVESTMENTS1 RESERVES EMPLOYEES

ALROSA share in the global diamond ALROSA is the world's largest diamond mining company. 22.4 1.114 34.5 mining in 2019 RUB bln bln carats thousand

The Company’s main assets are based in Russia — the Republic of Sakha (Yakutia) and 27 % the Arkhangelsk Region, as well as on the African continent. ALROSA has the largest FREE SOCIAL diamond reserves in the world (over 1 bln carats)1. CASH FLOW EXTRACTION EXPENSES

ALROSA is a public company, with its shares traded on the Moscow Stock Exchange. The company has 34% of shares in public float and 66% owned by the Russian 47.6 38.5 8.6 Federation, the Republic of Sakha (Yakutia), and municipal regions of the Republic RUB bln mln carats RUB bln of Sakha (Yakutia). At the end of 2019, the market capitalization of the Company amounted to RUB 621 bln (USD 10 bln).

CAPITALIZATION DIVIDENDS PAID ENVIRONMENTAL The ALROSA Group headcount totals 34,500 employees. ALROSA is committed to COSTS sustainable development standards and international standards of corporate social responsibility. The Company’s achievements are recognized with high positions and presence held in FTSE4Good, MSCI ESG, Sustainalytics and WWF Russia ratings. 7.7 621 57.5 RUB bln RUB bln RUB bln

1 According to the State Commission on Mineral Reserves of the Russian Federation. 1 As per RAS.

14 ALROSA ANNUAL REPORT 2019 ALROSA AT A GLANCE

KEY EVENTS IN 2019

FEBRUARY 12 MARCH 20 APRIL 9 JUNE 24

Moody's increased ALROSA's Fitch Ratings increased ALROSA issued 5-year Amendments were approved rating from Baa3 to Baa2, with ALROSA's long-term issuer Eurobonds for USD 500 mln in ALROSA's Dividend Policy. a "stable" outlook. default rating (IDR) from BB+ to BBB- With a "stable" outlook. The bonds were issued by In particular, the amendments The decision was made ALROSA Finance S.A. under the were related to refining the following a revision of the The agency noted the Company's guarantee of PJSC ALROSA. The methodology for determining sovereign rating of the Russian leading position in the global coupon rate is set at 4.65% per the amount of dividend Federation from Ba1 to Baa3 diamond market, increased annum. payments. and a change in the country financial stability and improved ceiling for foreign currency transparency. obligations from Baa3/P-3 to Baa2/P-2.

I QUARTER II QUARTER

MARCH 18 APRIL 17 JUNE 26

On Investor Day in London, Read more The new diamond mine Zarya 100% of free cash flow for ALROSA presented its http://eng.alrosa. was launched. H2 2018 was allocated for ru/investors/alrosa- strategic priorities until investor-day-2020/ the payment of dividends 2024. The mine is developed by for this period, equivalent Aikhal Mining and Processing to RUB 30.3 bln. Division (AMPD) and is designed for more than 10 years of Total dividends following the production. Design capacity is results of activities for 2018 1.25 mln tons of ore per year amounted to RUB 73.9 bln (from 2021). (RUB 10.04 per share). These are the largest in ALROSA's history.

16 17 ALROSA ANNUAL REPORT 2019 ALROSA AT A GLANCE

SEPTEMBER 5 SEPTEMBER 20 DECEMBER 10 DECEMBER 17 MARCH 13, 2020

ALROSA and the Government ALROSA's IR program was ALROSA's Supervisory Board ALROSA is included in the top The Supervisory Board of of Yakutia concluded an recognized as one of the best in made the decision to sell 10 of WWF's environmental ALROSA re-elected Sergey agreement on the gasification the mining sector, according to shares of NPF Almaznaya openness rating. Ivanov to the position of Chief of the town of Udachny. Institutional Investor. Osen. Executive Officer and Chairman ALROSA was included in the of the Executive Committee for Construction of new gas facilities ALROSA's corporate program for the The sale of this asset, which top 10 companies in terms a term of five years. was scheduled for 2020–2023. investment community interaction is a non-core asset for a of openness in the field of As a result, an additional is among the top three in the mining diamond mining company, to a environmental responsibility source of energy supply will be sector in emerging markets in the professional market participant among Russian mining and created aimed to reduce the EMEA region (Europe, the Middle is designed to contribute to the metallurgical companies. The risk of emergency situations to a East and Africa). ALROSA Chief further development of the fund annual rating is prepared by minimum. Executive Officer Sergey Ivanov came for the benefit of its customers, WWF Russia in conjunction with first in the category of best manager. most of which are employees the European Union and the and veterans of the Company, United Nations Environment and to provide an economic Programme. benefit to the Company.

III QUARTER IV QUARTER 2020

SEPTEMBER 10 OCTOBER DECEMBER 13 DECEMBER 23

The ALROSA Supervisory Board Kristall (Smolensk), the The Development Strategy for the An agreement was signed to create approved the termination of largest polished diamond Diamond-Cutting Entity for 2020– a joint venture with Zimbabwe participation in PJSC ALROSA- producer in Europe, joined 2022 and the Kristall integration Consolidated Diamond Company Nyurba through its voluntary ALROSA Group. plan were approved. (ZCDC). liquidation. The purpose of the The delivery of the Strategy will First and foremost, the joint venture The consolidation of core assets on acquisition is to integrate increase the operational efficiency will involve the geological exploration the balance sheet of PJSC ALROSA the production and of ALROSA Group's consolidated of greenfield mines. The subsequent is designed to improve their marketing processes of diamond-cutting sector, which will goals of the cooperation are the management efficiency. diamond-cutting sites. have a positive impact on the financial extraction and independent sale of results of this area of business. A set of rough diamond in foreign markets. measures is envisaged to improve the efficiency of assortment management, optimize the production cycle, and create a consolidated sales system for polished diamonds.

18 19 CHAPTER 02 STRATEGIC REPORT

“Today the Company plays an active role in international markets, sensitively catching global trends and trying to influence their formation. I am sure: the future of ALROSA and the entire diamond industry is in the development of innovation technologies. Not only in geological exploration. And I am glad that our Сompany pays special attention to this area in its plans”.

Vladimir Zuev

2019 27 % ALROSA's share in global diamond extraction

2019 22.4 RUB bln of capital investments ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

ASSET GEOGRAPHY Aikhal, Moscow, Russia Russia Aikhal Mining • Branch "Single sales entity" and Processing • DIAMONDS ALROSA branch Division

Nakyn, Russia Udachny, Russia Nyurba Mining and Processing Division/ PJSC Udachny Mining ALROSA-Nyurba and Processing Division Arkhangelsk, Russia Smolensk, PJSC Severalmaz Russia Kristall Production Corporation

Barnaul, Russia Yakutsk, Russia Antwerp, DIAMONDS ALROSA • JSC Almazy Anabara Belgium LLC • YAPTA branch ALROSA Belgium NV

Mirny, Russia • Mirny Mining and Processing Division • Vilyuiskaya GRE Vladivostok, Russia • R&PDW Vladivostok branch • ALROSA-Spetsbureniye LLC • Kommeral Enterprise New York, USA ALROSA USA Inc. Hong Kong, PRC ALROSA Hong Kong Ltd.

Geological Exploration

Mumbai, India Extraction and enrichment Representative office in India

Sorting, evaluation, and sale Dubai, UAE ALROSA East DMCC Polished Diamond Production Ramat Gan, Trading Companies Angola Israel • Katoka Ltd. Mining ALROSA Israel Ltd. Branches, representative offices, JV Company • Luashe • Branch in the Republic of Angola

Harare, Zimbabwe ALROSA (Zimbabwe) Limited

22 23 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT BUSINESS MODEL ALROSA GROUP CREATING VALUE FOR ACTIVITIES THE GROUP AND STAKE- HOLDERS** ** Sales and marketing RESOURCES 33.4 million carats — volume Diamond sorting of rough diamonds sold in Cutting NATURAL and evaluation 2019 and Faceting Mineral raw material base for 16 dimensional- USD 3.3 billion — revenue FINANCIAL VALUE Manufacture of — 1,114 million carats volume of weight groups and from sales of rough and diamond reserves unique diamonds with RUB 215.4 billion — revenue over 8,000 positions polished diamonds — 63 — rough diamond extraction a predominance of from sales of rough and polished licenses manual operations diamonds RUB 107.1 billion — EBITDA Rough diamond PRODUCTION mining RUB 47.6 billion — net cash flow ES Production capacity 38.5 million carats ITI IV RUB 62.7 billion — net profit — 6 mining and processing were mined in 2019 CT A complexes G RUB 61.3 billion — tax deductions IN — 10 open pit mines T E and mandatory payments — 3 mines K R — 14 placers A RUB 7.5 billion — interest payments — 3 lapidary enterprises M D RUB 58.6 billion — dividends*** Geological N A OUTPUT exploration and N Sustainable Financial Position: FINANCIAL O evaluation I 0.7 — Net debt /EBITDA T — Jewelry quality diamond Investment projects 2.9 million carats C — RUB 22.4 billion capital increase in reserves U — Polished diamonds investments in 2019 D in 2019* O R — Industrial diamonds

P

INTELLECTUAL Innovative technologies NON-FINANCIAL VALUE — Automated Manufacturing Execution Systems on key MPDs 0.24 — LTIFR — Diamonds' origin identification systems Development RUB 124.0 thousand/month — of areas of presence average salary of an ALROSA Group employee S U — Financing of projects HUMAN S 3.6 % — share of social expenses in T to maintain the social A professional team A I revenue N infrastructure of — 34.5 thousand employees A single-industry towns — More than 11 % of our employees are B 3.2 % — share of environmental Responsible L members of indigenous peoples E and settlements in the expenses in revenue business conduct D regions where we work E V 85.5 % — share of renewable energy E — ­Compliance with L O in energy consumption SOCIAL AND REPUTATIONAL international standards P M for responsible E Over 500 — projects and initiatives Unchallenged International Reputation N — A leading position in the diamond mining business conduct T in support of local communities and industry through active participation in Environmental charities the work of international organizations — Improving corporate responsibility governance and risk Support to local communities management — Conservation and — Cooperation agreements with regional restoration of the natural authorities environment in the — The largest taxpayer in the Republic of regions where we work Sakha (Yakutia) Occupational — Elimination of health and safety Development accumulated of human capital environmental impacts — Ensuring safe working ALROSA's business model is aimed at strengthening the conditions and reducing — Ensuring staff effectiveness leading positions of the world diamond market, maintaining occupational injuries — Enhancing motivation and * Not including depletion of the reserves. Economic a consistent volume of mining and revenues in the long run, remuneration systems feasibility of the development of individual deposits or and increasing the shareholder value. ALROSA does not only sites is assessed on a case-by-case basis and depends on many factors. use existing competitive advantages, but also pays much ** Resources and results indicators presented on attention to developing innovations and utilizing modern December 31, 2019. *** Dividends approved in 2019 according to the results technologies to enhance operational efficiency and business of 2018 (RUB 30.3 billion) and H1 of 2019 (RUB 28.3 profitability. billion). STRATEGY: — Effective management of — Focus on the rough diamond — Maintaining market leadership socially responsible business business

24 25 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

MARKET OVERVIEW

OVERVIEW GEOGRAPHY OF THE WORLD'S LARGEST DIAMOND MINING COMPANIES Russia holds the first place in the world in terms of volume Russia holds and value of mined rough diamonds ALROSA produces about 90% of all diamonds in Russia and is the leader of the the first place global diamond industry. In 2019, ALROSA Group, according in the world to preliminary estimates, made up about 27% of global rough diamond mining in natural units. in terms of Canada volume and Russia value of in the world in terms mined rough №1of diamond extraction diamonds

ALROSA'S MAIN COMPETITORS IN THE GLOBAL DIAMOND MARKET Botswana EW

— De Beers is the only diamond mining company that can be compared with ALROSA Group in terms of mining volume. De Beers mines diamonds in deposits of Botswana, South Africa, Canada and Zimbabwe EW Namibia. Angola

— Rio Tinto is a public diversified mining company engaged in exploration, mining and processing of Namibia extractable resources. The diamond segment of Rio Tinto business includes Argyle deposit in Australia Australia (100% ownership) and Diavik in Canada (60% Tanzania ownership).

— Petra Diamonds is a public diamond mining company that develops diamond deposits in South Africa and Tanzania.

SA

At the end of 2019, The ALROSA Group has produced 38.5 million carats of diamonds and occupies a leading position among the world's leading ALROSA De Beers diamond mining companies in terms of production. Rio Tinto Petra Diamonds

26 27 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

Market volume, mln carat1

MAIN EVENTS OF THE 2019 GLOBAL 2019 142 DIAMOND MINING INDUSTRY NEWSFEED

2018 148 ALROSA began mining ore at the new Zarya pipe of the Aikhal MPD in the Republic of Sakha (Yakutia) with a target production of more than 300 thousand carats of diamonds per year, and also adopted the decision to increase the depth 2017 151 of the Aikhal underground mine by 300 m, which will make it possible to extend its working period by 10 years, to 2044. An agreement was signed to establish a joint venture in Zimbabwe to develop diamond fields in that country. ALROSA has received a positive conclusion from the Glavgosexpertiza of Russia for work on the opening and mining of the Market share of the leading diamond mining companies, %2 reserves of ultra-deep horizons of the International pipe, which were explored in the 1970s to a depth of 1,220 m.

27 22 12 3 36 De Beers completed production at the Victor mine in Canada, which produced approximately 0.9 million carat/yr., began According to the process of selling the Elizabeth Bay coastal mine in Namibia, production — 0.2 million carat/yr., confirmed the start 2019 a preliminary in 2021 of underground mining at the Venetia mine (South Africa) with a volume of 4.5 million carat/yr., announced the estimate, global consolidation of the company's production assets in South Africa and Canada into a single business unit named De Beers Group Managed Operations (DBGMO), and plans to invest USD 10 billion in various business expansion activities in the diamond mining 25 24 12 3 36 in 2019 decreased next 5 years. 2018 by 4.5 % Diamond mining by the largest industry players, mln carats1 relative to 2018 26 22 14 2 35 amid falling demand Company 2017 2018 2019 Change, % for rough diamonds. 2017 ALROSA 39.6 36.7 38.5 5  ALROSA De Beers Rio Tinto Petra Diamonds Other De Beers 33.5 35.3 30.8 13 

Rio Tinto 21.6 18.4 17.0 8 

Petra Diamonds2 3.5 4.0 3.9 2 

Total 98.2 94.5 90.2 4.5  Dominion Diamond began the official process of Lucara Diamond has decided to develop the selling the company. Karowe mine (Botswana) using underground methods. According to a feasibility study, underground mining diamond extraction Stornoway Diamond, in a poor market, failed on Karowe can begin in 2023 in the amount to secure break-even operations of the of about 0.4 million carats per year (at the 2019 TRENDS company and meet debt obligations. Stornoway level of 2019). The period of operation of the Diamond's property and assets, including underground mine is expected to last until The macroeconomic situation on the diamond market in the Renard mine in Canada, which produces 2040. 2019 developed worse than expected and put significant — a deceleration in demand in the jewelry and diamond approximately 1.8 million carat/yr., were pressure on the results of the diamond mining companies. products market in Q4 2018 and subsequent drop in acquired by the company's major creditors The influence of the following external factors caused the demand in the US, China and Hong Kong; through a specially created legal entity. The deterioration of market conditions and, as a result, the — a weakening of the rupee and renminbi to the United States company is delisted from the Toronto Stock formation of a crisis in the global diamond market: dollar; Exchange and will become private. — a tightening of credit conditions for the lapidary sector by Indian banks;

— optimization of the use of retail warehouses through the development of online sales.

1 Data for 2018 – ALROSA assessment. 1 Source: annual reports of the companies. 2 Source: annual reports of the companies, ALROSA assessment. 2 Including the share in Kimberley Ekapa Mining, joint venture, sold in July 2018.

28 29 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

See the The diamond market is one of the components hope of lower reserves, but by December 2019, LONG-TERM FORECAST Product Sales of the jewelry and diamond products (JDP), the Indian lapidary industry maintained high section for details comprising three main stages: rough diamond levels of reserves diamonds with a deficit of The fundamental drivers of the global polished diamond jewelry market remain positive. The mining, polished diamond production (cutting), working capital. developing markets, including China and India, with their citizens making up one third of the and JDP, the implementation of JDP to end- planet's population, are the future of the jewelry industry. In the long term, the consistent growth of users. These three stages are closely related to consumption in the diamond jewelry is forecasted in both developed and developing economies. and highly dependent on one another. Another trend in 2019 was the active development of online trading, leading to 2019 the structural reduction of retail needs in The main factor holding back consumption of natural rough diamonds will be a shift in consumer strengthened According to preliminary estimates,1 sales physical volumes of jewelry. As a result, cutters demand from natural to synthetic raw material, on account of efficient marketing promotion of this of diamond jewelry in 2019 decreased by 2% and jewelry producers are forced to act as category and a considerable price discount vs. natural polished diamonds. At the same time, the a new reality from the all-time record level of sales in 2018. warehouses instead of selling products in large demand for such products remains selective, the level of penetration is relatively small, and prices for in which the Sales of polished diamonds, in monetary terms, batches. In the short term, this trend will reduce products with synthetic diamonds are decreasing. decreased by 10-15%. Reduced production of the demand for stocks of jewelry products in most important polished diamonds amid falling demand for stores (2018–2019); in the medium and long thing for the them and industry funding problems led to a term, it will optimize the reserves levels across ALROSA plans to strengthen marketing campaigns to stimulate demand for natural polished diamond industry's 22% drop in diamond sales (in monetary terms). the value chain. jewelry, in various ways including through the work of the Diamond Producers Association (DPA). leading diamond- Some of the factors of the crisis in 2019 were The market situation normalized in Q4 2019 overproduction of polished diamonds and on the background of improved consumer producing overcrowding of warehouse stock. In 2019, sentiment in the United States during the holiday companies is the key JDP markets experienced a volatile season and a flexible marketing strategy of not to extract economic situation: deterioration of trade extraction companies. However, the outbreak of relations between the United States and China the new coronavirus infection, which began in the maximum (these two countries make up over 60% of the China and spread rapidly throughout the world, possible amount demand for diamond jewelry), the weakening of downplayed the market recovery in Q4 2019 and the Chinese renminbi and Indian rupee to the led to global economic crisis and a sharp drop of rough US dollar, and the consequent decline in the in demand for jewelry, polished diamonds and diamonds, purchasing power of local people and tourists rough diamonds. but rather in terms of products whose value is tied to US dollar. In the end, a large volume of polished the ability to diamonds was not sold, which led to lower market the prices. Moreover, jewelry manufacturers began to demand discounts, and polished diamond entire volume manufacturers provided these discounts in order of natural to maintain trade turnover and generate liquidity diamonds to serve current credits. received at affordable In India, where 90% of the world's cutters are located, there were additional difficulties. prices Indian banks have tightened the requirements for issuing loans, and the weakening of the Indian rupee to the US dollar has reduced credit lines. This has had a negative impact on cutters For more who are dependent on external financing and information on the vulnerable due to high competition and low risks associated profitability. Diamond producers have been with the coronavirus working at reduced capacity for a year in the epidemic, see the Risk Management section.

1 The Global Diamond Report 2019, Bain & Company, Inc.

30 31 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

The strategy is based on the assumption that the natural polished diamond jewelry market will face pressure from synthetic DEVELOPMENT STRATEGY alternatives, as well as from other goods and services that will restrict the growth of rough diamond prices in 2018–2024.

In 2018, ALROSA updated the Development Strategy for 2018–2024.1 The document includes Key Strategic Priorities of ALROSA Successful measurable strategic development goals, a target financial business model and strategic events. strategy Strategy Priority Summary

implementation ALROSA is committed to a mono-product strategy with a focus on the exploration and Focus on the rough diamond extraction of rough diamonds as the most attractive sector of the diamond industry with will make it business possible to the highest operating margin. strengthen the ALROSA will continue investing in exploration and development of new deposits and maintenance of the existing deposits to ensure continuous operations in the long run. Replenishing the disposed leading positions Russia will remain the principal mining region, while African countries are considered production and raw base to ensure forward-looking regions for further growth. ALROSA intends to enhance the efficiency of ALROSA long-term growth of ALROSA of geological survey through improving the existing and implementing new exploration in the rough methods and technologies. diamond market and ensure To enhance the operational efficiency and support profitability both during periods Productivity increase through of stable and falling prices for rough diamonds, ALROSA actively searches for ways to consistent long- continuous improvement of optimize cost structure at all production process stages and regularly monitors new term growth of production processes and mining and processing technologies. ALROSA also intends to improve logistics, rough implementation of new technologies diamond sorting and classification processes, and to ensure improved liquidity through production and minimizing the inventory turnover rate. revenue, and will also increase ALROSA key priorities are occupational health and safety, with its strategic purpose of the shareholder Complying with high standards and completely eliminating injuries and accidents, and 100% engagement of managers shaping a culture of industrial and in resolving safety issues. ALROSA intends to minimize negative impact on the value. environmental safety environment, to implement rational mining and resource saving, and to comply with the requirements of international environmental protection and safety standards.

Stimulating the consumer demand ALROSA's aim is to shape the long-term demand on natural polished diamonds on natural diamonds by means of against changing preferences of the target audience by promoting the natural polished generic marketing diamond as the emotional symbol of the relationship.

KEY POSTULATES OF ALROSA’S STRATEGY Gradually withdrawing from non-core We are focusing on the rough diamond core business through disposing of non-core businesses assets. — maintaining leadership in the global — effective management of the socially diamond market; responsible business in order to ALROSA social policy is based on the principles of socially responsible business implement the long-term interests of and mutually beneficial cooperation with state authorities and local governments in High social responsibility in all areas — focus on the rough diamond business; the shareholders. the regions of the company's presence. Its long-term guiding landmark is retaining where we work investments in regional development, maintaining its own social facilities, and charity and sponsorship.

1 Approved by the Supervisory Board, Minutes No. A01/283-ПР-НС dated November 16, 2018.

32 33 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

LONG-TERM DEVELOPMENT PROGRAM OF ALROSA GROUP

In 2018, ALROSA’s Long-Term Development Program was In order to implement key strategic priorities, ALROSA is Program Event Initiaitve Results of 2019 developed for 2018–20241, which ensures the achievement of implementing the following program activities within the strategic objectives and includes a list of program events and framework of the Long-Term Development Program for expected outputs over the long-term period. 2018–2024: In 2019, almost 3 million carats of diamonds in JSC Almazy Anabara were put on the balance sheet. Reserve growth The results of the exploratory work on several promising areas of the Malo-Botuobinsky diamond bearing area were calculated. Preliminary Program Event Summary estimates of the diamond resources are 17.9 million carats.

We are planning a performance increase for the main types of exploration work A major project on the additional in-mine exploration of deep horizons Geological survey and production through optimizing the management system and implementing new technologies, and of the Yubileynaya pipe has been completed. replenishing the disposed production and raw base. Implementation of plans Geological survey The decision was made to increase the depth of the Aikhal underground for in-mine exploration, and production mine by 300 m, which will allow us to extend its functional life to 2044. We are improving the efficacy of main production and other activities within ALROSA engineering geology and The operational efficiency program Group subdivisions, and implementing digitizing projects in the operations. hydrogeology in support of We have received a positive conclusion from the Glavgosexpertiza of MPDs Russia for work on the opening and mining of the reserves of ultra-deep horizons of the International pipe, which were explored in the 1970s to a We aim to completely eliminate injuries and accidents, and ensure 100% engagement Occupational health and safety depth of 1,220 m. of managers in resolving production safety issues.

Production started on the Commercial recovery of rough diamonds has begun at the Zarya pipe. Procurement and supply We aim to improve procurement and supply efficiency. new Zarya pipe of the Aikhal The pipe will produce about 0.3 million carats of diamonds per year for MPD. over 10 years. Environmental protection We are reducing the environmental impact and maximizing environmental transparency. Construction of a section We are improving sales methods and customer relations policy to ensure consistent for water recycling, cash flow, reaching break-even operations of diamond-cutting facilities, improving their condensation, transportation In 2019, the main construction was completed and the site was Sales, diamond-cutting, marketing competitive ability at the global level, shaping longterm demand on natural polished and storage of dump waste launched. diamonds, establishing new online sales channels, and developing new markets through products on processing plant tracing deployment. No. 12 of the Udachny MPD

We are constantly monitoring of new opportunities to discover promising diamond Operations in Africa In 2019, a project to improve the operational efficiency of the Nyurba deposits. MPD was implemented. The set of implemented initiatives allowed us to achieve the following: We are disposing of all non-core assets, with such disposal being reasonable and Disposal of non-core assets economically feasible. — increase the hourly productivity of PP No. 16 by 10%; The operational — throughout the year, increase the number of quarry trucks in use by We are engaging and retaining the best specialists, ensuring efficiency of personnel 10 per cent (up to 84%) by switching to the “ideal shift.” HR policy efficiency program work, and improving the remuneration and social benefits plan. Increased technical and operational indicators allowed us to increase the diamond production of the Nyurba MPD by more than 2 million We are retaining investments in regional development, maintaining our own social Improving efficiency of Social Responsibility carats relative to 2018 by the end of 2019. facilities, charity and sponsorship. rough diamond mining Within the framework of the project, the implementation of elements of We are ensuring the corporate governance system complies with the world’s best practices, the production system (“idea factory”, 6S, “problem solving board”, etc.) Organizational and Corporate including improving the Corporate Governance Code, reforming the risk management has been started at the Nyurba MPD. Development system and developing the internal audit system. After the first successes at the Nyurba MPD, in the 2nd half of 2019, a project to improve operational efficiency at the Udachny MPD was launched. To support these initiatives and development of the Implementing programmatic strategic activities will allow the ALROSA Group to maintain a leading position in the global production system, the Company has formed a Production System diamond market through efficient use of the production and raw materials base and compliance with high business standards. Development Center.

ALROSA plans to reach the leading performance indicators In 2019, ALROSA implemented these initiatives across all while maintaining social support and investments in program events of the Long-Term Development Program and environmental activities, and ensuring adherence to the achieved the following results: norms of industrial safety.

1 Approved by the Supervisory Board, Minutes No. А01/283-ПР-НС, dated November 16, 2018.

34 35 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

Program Event Initiaitve Results of 2019

In 2019, the oil fleet of the shipping company ALROSA-Lena was upgraded and replenished with two modern non-self-propelled oil barges. In the past 30 years, these are the first new vessels, which will Improvement of replenish the Lena fleet. Procurement and procurement and supply supply Implementation of optimization measures to improve the efficiency efficiency of transport and warehouse logistics and automation of logistics processes continues: the warehouse management system (WMS) is being implemented, and the fleet of vehicles is being equiped with fuel control and positioning sensors.

In 2019, the reduction of mass emissions of greenhouse gases in CO2- Reducing environmental equivalent was 1.07%. impact The share of waste disposed of in 2019 amounted to 19.26%.

In 2019, PJSC ALROSA took 1st place (out of 206) in the industry group “Production of ores and chemical raw materials”, 3rd place in the rating of ecological and energy efficiency of Russia’s 150 largest Environmental companies “Interfax-ERA”, and 42nd place (out of 5,899) in the rating of protection fundamental efficiency of companies in Russia and Kazakhstan (Interfax- Maximum Environmental ERA, 2019). Transparency In the Rating of Openness of Mining and Metallurgical Companies in Program Event Initiaitve Results of 2019 Russia in the Field of Environmental Responsibility, prepared by WWF of Russia together with the European Union and the UN Environmental Implementation of Program, the Company took 8th place out of 41 participants and was The standard of the enterprise “Three-level control of industrial safety industrial safety policies, recognized as the best in the category “For constructive interaction in and health management at PJSC ALROSA facilities” was developed and including optimization calculating the rating”. launched into pilot implementation at the Mirny MPD and Aikhal mine. and development of rules and procedures, and In order to reduce the risks of non-performance of long-term contracts An improved standard of the enterprise “Outfit System” has been development of targeted Improvement of sales on the part of clients, a number of initiatives were implemented in developed. programs methods and customer 2019 aimed at increasing flexibility in the selection and purchase of the relations Company’s products. These initiatives have made it possible to ensure A mechanism for evaluating managers on the fulfillment of a personal the fulfilment of the selection conditions under long-term contracts. plan in the field of industrial safety has been put into operation. This mechanism involves an assessment of each manager’s immediate To increase the efficiency of sales of rough diamonds starting from October Development of the safety work through an evaluation of the adherence to a personal 2019, The Company is conducting, in pilot regime, sales of a variety of motivation system plan that includes the following aspects: quality inspections, quality positions of rough diamonds, based on digital tenders. As part of the digital implementation of standards and programs, quality meetings (including Diamonds sales by digital tenders, each diamond undergoes a scanning process, and the scans committees), and communications (external and internal) on industrial duplicates themselves are published online for examination by customers remotely. safety issues. The sales system through digital tenders allows the Company to increase the number of product views from real interested customers (free market sales Occupational health Our professional internal trainers have launched a previously developed model), leading to faster sales of products. and safety learning concept for employees on occupational health and safety: Sales — training of candidates was provided to 25 people within the program Decreasing works-in- The efficiency program has achieved the goal of reducing the rough “Internal trainer”; progress diamond sorting and aggregation cycle by 7 days. Optimization of the learning — 5 persons were selected and admitted to the staff of the Personnel system The implementation of the plan of introduction of mechanized sorting Training Center; of raw materials is being progressively carried out, fully translated to mechanized sorting of raw materials -9+5 in size (produced by PJSC — methodological materials have been prepared; Automation of sorting and aggregation ALROSA). — training of the Company’s employees by internal trainers on various An experimental copy of a commodity products aggregation machine topics in the field of production safety began on a regular basis. has been developed and successfully tested.

Pilot implementation of the system for automation of health By switching to a completely automated sorting of raw materials -9+5 in size, Automation and management protection processes has been completed at the Mirny it became possible to align the nomenclature positions of these sizes by color digitalization of MPD. The system will enable better accounting and planning in the Optimization of assortment and shape both within one month, and continually, in real time. This allowed occupational health and processes outlined above, which in turn will enable better management us to ensure the stability of the product shown to customers as well as the safety processes of the challenges associated with providing safe working conditions. stability of its discount price.

36 37 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

Program Event Initiaitve Results of 2019 Program Event Initiaitve Results of 2019

Maximizing polished Closing the deal of In 2019, ALROSA Group has strengthened its influence on Angola’s diamond sales prices In 2019, the share of sales through auctions in total sales volume increasing ALROSA’s share largest diamond mining asset, Katoka Mining Company, increasing its through the use of increased by +24%, reaching 36%; sales efficiency increased by 36%; in Katoka Mining Company participation from 32.8% up to 41%. competitive sales channels sales margin increased by USD 4.7 million. from 32.8% up to 41% with a wide buyer reach A joint venture agreement was signed between Alrosa (Zimbabwe) Ltd. Operations in Africa The generic marketing program was implemented in full, agreed on by and Zimbabwe’s state-owned diamond mining company, Zimbabwe the DPA Board of Directors for 2019. Consolidated Diamond Company. Under the terms of the agreement, Search and exploration of ALROSA receives a 70% stake in the development of projects at promising mines in Africa Global broad-based advertising and PR campaigns have been held in the early stage of searching (greenfield), and the Zimbabwean side, Participation of ALROSA major markets: Total Clarity, Diamond Truth, The Diamond Journey, For 30% participation. The subsequent goals of the cooperation are the Group in projects of Me, From Me, New Mom’s, Hands in Love. extraction and independent sale of rough diamond in foreign markets. the Diamond Producers Association (DPA) and According to the results of the research conducted in 2019, there is Under the monitoring of its activities a positive trend in the popularity of jewelry and diamond products Disposing of Non-Core in comparison with other luxury products and the desire to receive Assets Program, the1 polished diamond jewelry as a gift, as well as increased awareness approved registry of non- among respondents about the positive socioeconomic contributions of core assets included the diamond-producing companies. following objects to be disposed of: Work is under way according to the plan to create brands: small, 6 business entities, 272 fluorescent, with “socially responsible” positioning and diamonds of real estate objects, 32 sites Russian origin. Marketing materials packages have been developed. under construction, and 234 Branding residential premises The launch of pilot projects with the world’s largest jewelry retailers is planned for 2020. Detailed information on implementing the Disposing In 2019, ALROSA Group has disposed of 109 non-core assets, including of Non-Core Assets Program the Blue Wave sanatorium, sold for RUB 1.2 billion as a result of a public Attracting non-industry in 2019 can be found in auction. participants to auction sales Appendix 6 Cutting and Sales under Private Banking in 2019 exceeded USD 5 million. in order to maximize sale The actual amount of funds received by ALROSA Group from the sale of marketing In December 2019, the prices non-core assets in 2019 amounted to RUB 1.359 billion. Disposal of non-core Supervisory Board approved assets the Disposing of Non-Core As part of the True Colors auction in Hong Kong in 2019, the range of In 2019, it was decided to terminate participation in NPF Almaznaya Assets Program2 in a new colors was presented on the platform diamonds.alrosa.ru with details on Osen and PJSC ALROSA-Nyurba. edition, which clarified Implementation of a series the origin of each polished diamond. the wording of existing of marketing initiatives to Approved in December 2019, the register of non-core assets includes provisions and introduced promote colored diamonds Marketing campaigns for the different polished diamonds have been the following properties to be disposed of: 6 business entities, 25 real new ones, inter alia, similar prepared and conducted: The Firebird, Deep Purple, The Spirit of the estate objects and 1 residential premises. to the largest companies Rose. with state participation. The value criterion for inclusion The website diamonds.alrosa.ru has been developed and put into of objects in the register of operation with the functionality that demonstrates catalogs of diamond Launch of an online shop non-core assets has been products for current and potential customers, with the division of selling polished diamonds established (more than catalogues for legal and natural persons, and auction participants. It to both B2B and B2C RUB 20 million at cadastral contains information about diamonds with a personalized video story customers value for objects real estate). about the origin of each diamond and electronic passports of polished The perimeter of objects is diamonds. limited to the production sphere, and objects with Together with GIA, the Diamond Origin Report (DOR) project has been “liquidation” as the only way launched: the equipment has been supplied, installed, and is digitizing of alienation are excluded. diamonds in the USO [United Selling Organization]. Research on the formation of a unique identification An agreement has been reached with one of Europe’s most famous code for each crystal jewelry brands (luxury sector) to pilot the project and direct the supply based on the physical of polished diamonds with GIA DOR certificates (first order for direct characteristics of the stone delivery in 2020).

1 Approved by the Supervisory Board (Minutes No. А01/266-ПР-НС dated December 14, 2017, fifth edition) and amended with adjustments approved by the An agreement has been reached with GIA to integrate GIA DOR into the Supervisory Board in 2018, (Minutes No. А01-271-ПР-НС dated May 3, 2018, and Minutes No. А01/273-ПР-НС dated June 25, 2018). Russian polished diamond brand program. 2 Minutes No. А01/305-ПР-НС dated December 30, 2019.

38 39 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

COMPLIANCE WITH THE KEY Program Event Initiaitve Results of 2019 PERFORMANCE INDICATORS ALROSA has employed 1,392 residents of the Republic of Sakha (Yakutia) within the framework of the priority republican project “Local Personnel to Industry”. The program strategic efforts of ALROSA have been incentive system and the amount of remuneration of the translated into the form of certain indicators of the CEO – Chairman and members of the Executive Committee In 2019, more than 13,700 people from among workers, specialists and operational management, or key performance indicators depends directly upon achieving the target values of KPIs managers of the Company received various types of training. (KPIs). The KPIs are integrated into the management approved by the shareholders. Recruitment of personnel Within the Management Faculty of ALROSA’s Corporate University, and corporate programs of a number of educational programs were implemented (“ALROSA training and professional Potential”, “ALROSA Leaders”, “Asset ALROSA”, etc.), which trained nearly Achieving ALROSA’s KPIs development HR policy a thousand people.

ALROSA ranked among the ten best employers of Russia, according to Indicators 2017 2018 2019 Change, % the respected Forbes magazine. The editorial board noted that against the background of harsh climatic conditions in the main region of the Industry Indicators Company’s presence — Yakutia — the company offers an impressive benefits package and a high average salary. Core Product Sales Revenue, USD mln. 4,267 4,507 3,335 26 

Social programs for A housing program, the “Health” program, and the programs entitled Rough diamond production, thousand carats 39,614 36,749 38,485 5  employees and their “Rest and Healing” and “Culture and Sport” were implemented. families Volume of rock mass, thousand meters3 77,737 76,179 82,286 8  In September 2019, at the Eastern Economic Forum, ALROSA and the Government of Yakutia signed an agreement on the gasification of Integral KPI of Innovations, % 100.0 100.0 100.0 – Udachny. Since the existing power grid infrastructure does not provide reliable and uninterrupted power supply to consumers, it has been Financial and economic indicators decided to transfer boiler equipment and a number of Company facilities to natural gas. The additional power supply will minimize the Сost of sale to sale revenue ratio, % –17.1 20.0 –45.3 – risk of accidents and emergencies and reduce the cost of heat supply in the future. Growth of the dividend flow, RUB mln 7,930 34,026 –1 – Maintaining investments The ALROSA Group continues to develop the transport infrastructure Social in social welfare and Adjusted EBITDA, RUB mln 126,890 155,972 107,054 31  of the “diamond province”. In 2019, ALROSA Group has invested RUB Responsibility supporting our own social 150.6 million in the development of draft documentation for the new infrastructure airport complex in Mirny. The new airport will be located 3 km northeast –10 of the existing one. ALROSA Group is investing more than RUB 10 billion Return on Equity (ROE), % 30.0 35.1 25.0 percentage into the project. points

ALROSA Group continues to finance projects to support the social Net profit, RUB mln 78,616 90,404 62,730 31  infrastructure of single-industry towns and settlements of the Company (Mirny, Udachny, Aikhal and others), located on the territory of the Bonus cancellation Republic of Sakha (Yakutia), as well as a number of socially oriented projects in other regions. Productivity, RUB mln /person 12.6 14.7 11.0 25 

ALROSA Group’s long-term development program of for 2020–2024 has Reduction (+)/growth (-) of operating expenses, % – –6.1 –18.8 3 times been updated, the draft of which was approved at the meeting of the Supervisory Board of PJSC ALROSA on December 13, 2019. Net Debt/EBITDA, rate2 0.68 0.43 0.74 72  Enhancing the Corporate The Company’s National Rating of Corporate Governance has been Development Level confirmed at 8, “Best Practices of Corporate Governance”. Organizational and Corporate Fitch’s credit rating has been upgraded to “BBB-” (the rating outlook is Development “Stable”). All ratings of the Company are stabilized at the investment level.

All mining and processing divisions and a number of standalone Implementing the project divisions have switched to service in the SSC, which has enabled us to for construction of a Shared save a significant amount on comparable costs since the beginning of Service Center (SSC) the project in October 2018.

1 The amount of the 2019 dividends will be determined by the decision of the Annual General Meeting of Shareholders of PJSC ALROSA. 2 Including bank deposits.

40 41 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

KPI target values of ALROSA Group for three years1 (subject to forward-looking statements, page 3 of this report) INVESTMENT ACTIVITIES

Indicators 2020 2021 2022

Cumulative Equity Return (assessment period – 2019–2021), % ≥0 ≥0 ≥0

Dividend flow, RUB mln 50,853 47,326 55,965 LONG-TERM INVESTMENT

Return on "Profit before deduction" sales, % 40 39 39 PROGRAM OF ALROSA GROUP

Return on Equity (ROE), % 22 22 22 ALROSA Group’s long-term investment program until ALROSA Group’s investment program for 2018–2024 has been 20241 defines priority areas of investment activity, ensuring developed in accordance with the forecasted rough diamond Core Product Sales Revenue, USD mln. 3,536 3,558 3,563 implementation of the diamond mining plan and achievement of mining and mining operations plans, aimed at maintaining production and financial objectives in accordance with ALROSA the achieved level of rough diamond mining and production Rough diamond production, thousand carats 34,237 34,904 35,955 Group’s investment policy, within the framework of the approved process for other activities. Development Strategy. "Profit before deduction", RUB mln 100,277 100,571 102,229

2 Volume of rock mass, thousand meters3 63,069 69,118 74,550 The structure and dynamics of ALROSA Group’s capital investments in 2018–2024 in the forecast price level (IFRS),3 RUB billion Labor productivity, % ≥5 ≥10 ≥15

Reduction of operating expenses, % –3.8 0.6 –0.7 0.4 3.8 27.8 Integral KPI of Innovations, % >95 >95 >95 2018 LTDP 31.9 Bonus cancellation 1.6 5.3 21.9 Lost Time Injury Frequency Rate 0.3 0.3 0.3 2019 LTDP 28.8 Availability of wage arrears to employees, yes/no No No No 4.2 4.0 18.2 Net debt/"Profit before deduction", rate 0.8 0.8 0.7 2020 LTDP 26.4

7.2 4.6 16.4 2021 LTDP 28.2

2.7 3.3 13.9 2022 LTDP 19.9

0.5 4.0 10.4 Potential projects of the 2023 ALROSA Group LTDP 14.9 Investments in other business areas 3.8 14.2 2024 Diamond segment LTDP 18.0 investment

1 ALROSA Group’s long-term investment program was prepared pursuant to the list of instructions (No. Pr-3086 dated December 27, 2013, item 1, sub-item 32) on the implementation of the Address of the President of the RF to the Federal Assembly of the RF dated December 12, 2013. 2 2018 – plan, 2019–2024 – forecast. 1 ALROSA Group KPI target values for 2020–2022 have been adopted in accordance with the updated Long-Term Development Program of ALROSA Group for 2020–2024 and 3 Here and further, IFRS data are given on accrual excluding capitalized interest. approved by the Supervisory Board of PJSC ALROSA on December 13, 2019, Minutes No. A01/304-ПР-НС.

42 43 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

The main objectives of the Investment Program are the The main investments of ALROSA Group assets will be ALROSA GROUP’S RAS sustainable development of the ALROSA Group and the devoted to the development of the Udachny and Aikhal growth of shareholder value of the Company. MPDs. 73% of funds from the overall investment program CAPITAL INVESTMENTS will be invested in production. According to the nature The total volume of ALROSA Group’s capital investments in of investments, the main volume of capital investments non-financial assets in 2018–2024, according to IFRS NORMS, in 2018–2024 will be devoted to the development of core In 2019, investments (capital investments)1 of ALROSA Group capacities (-69% to RUB 4.5 billion), mainly due to the will amount to RUB 168 billion, including RUB 155.3 billion activities — RUB 69.4 billion, or 41% of total investments. decreased by 28% to RUB 22.4 billion. The decrease in completion of the investment project “Diamond mining which are investments in the Far Eastern Federal District. For more information on the structure and key projects of the volume of capital investments occurred mainly as a result of enterprise in the Verkhne-Munskoye field”. ALROSA Investment Program, see the Company’s 2018 Annual a decrease in investments in the expansion of production Report, page 90

ALROSA Group’s RAS investments, RUB mln.

Indicator 2017 2018 2019 Change, %

Construction 19,530 18,896 9,413 50 

Investing in underground mines 5,805 3,306 1,971 40 

Other main production facilities 11,509 13,525 6,753 50 

Auxiliary production facilities 1,744 1,774 659 63 

Social objects 472 292 31 90 

Technical upgrades and replacement of worn equipment 8,139 10,190 10,666 5 

Other capital expenditures 2,558 2,176 2,364 9 

Search assets (geological exploration) 1,957 1,914 1,988 4 

R&D 221 172 163 5 

Other non-current assets (acquisition of fixed assets, sites under 380 91 213 135  construction, housing)

Change in excess equipment — 0.1 81 —

Total 30,228 31,263 22,361 28 

Structure of the capital investments of ALROSA Group in 2018–2024 PRINCIPAL INVESTMENTS OF 2019: according to IFRS norms, RUB billion

Verkhne-Munskoye deposit– RUB 1 bln Zarya pipe mine – RUB 1.8 bln 16.5 Within the framework of completion of the investment In 2019, mining and capital works were carried out Group’s potential project “Diamond mining enterprises in the Verkhne- with the aim of opening up the reserves of the new investment projects Indicator RUB billion Munsky field” in 2019, mining equipment was delivered indigenous deposit of the Zarya pipe and ensuring we Investments in diamond mining 122.9 and work on the construction of auxiliary production reach the design capacity for ore mining by 2021 (1.25 28.7 infrastructure facilities was completed, which ensured the million tons of ore per year). The mine is operational Investments in other business enterprise’s reaching its design capacity of 3 million tons and, already in 2020, will provide production of 1 million Investments in other 28.7 of ore. tons of ore. business areas areas Group’s potential investment 122.9 16.5 projects Investments in diamond mining

1 ALROSA Group’s capital investment data is presented according to national standards.

44 45 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

Information on investments with an expected return of over 10% per year RESULTS AND ACHIEVEMENTS

Mastering new production technologies System, MES) for the Nyurba, Udachny, and Mirny Subsidiary / affiliate (S&A) Financial investments Dividends accrued Return on Investment pur- MPDs, previously successfully implemented at the — Experimental and industrial tests (EIT) of road in the authorized in 2019, RUB investments pose Aikhal MPD, has been accelerated. capital of S&A as of thousand for 2019, surfaces have been conducted on the basis of December 31, 2019, % per year geogrids at Internatsionalnaya and Udachny pipes, Enrichment as well as on the basis of concrete mixtures in RUB thousand — At processing plant No. 16 of the Nyurba Mining underground mountain production at the Udachny and Processing Division, the separators of the new pipe. Quality road surface is an important element in generation of RGS-OD-3 have been successfully Profit the construction of mining operations infrastructure JSC Almazy Anabara 1,710,438 4,064,849 238 tested, which are unparalleled anywhere in generation for further implementation of autonomous/remote the world and allow for the treatment of dry technology projects. According to the results of the concentrates containing diamonds -3+1 mm in Profit EITs, both technologies are recognized as promising PJSC ALROSA-Nyurba 38,683,139 8,107,081 21 size. The device now uses a unique X-ray laser generation and technically feasible. registration system capable of detecting all varieties — EITs have been done on the introduction of safety of diamonds, regardless of their X-ray luminescent Profit JSC IC Bourevestnik 129,728 13,018 10 formulations of the emulsion explosives (EV) being or hydrophilic properties, which allows us to generation studied, namely NPGM-PR-III. Work on the selection increase separation and extraction of diamonds of explosive characteristics and parameters of drilling from empty rock to 98.4%. operations of the technology of implementing EV Profit — At factory No. 14, the technological scheme has JSC ALROSA-Torg 23,300 2,389 10 safety formulations has been carried out as well. generation been installed, as well as the modernization of — The Volvo, Scania and Tonar road trains are in use fluorescent absorption mode for the separator Sociedade Mineira de Catoca, Profit at Zarnitsa open pit mine and Verkhne-Munskoye LS-20-05N (2H), which allowed us to extract an 34,080 2,738,297 8,035 Limitada generation deposit, which will reduce operating costs by additional 39 diamonds with a total weight of 296.05 reducing specific fuel consumption (1.5–2 thousand carats, from which six anomalous type IIa diamonds tons annually). The use of road trains only at the were extracted, only in the month of December (25 Profit ALROSA Hong Kong Ltd. 8,527 44,603 523 Zarnitsa open pit mine will reduce operating costs working days). generation by RUB 3.5 billion over 10 years. Energy efficiency and eco-friendliness of production — EITs of a paired mine electric locomotive equipped — The Company’s vehicles are being switched to gas- with lithium ion batteries are being carried out at engine fuel (compressed natural gas, CNG): 71 100% Internatsionalnaya pipe. The electric locomotive gas-powered vehicles were purchased during the is designed for transportation car strings, and whole period, and 203 vehicles were transferred to delivery of materials, equipment and other dual-fuel vehicle system. The total amount of fuel cost transport operations with mine roadways. savings received during the implementation of the Introducing innovative diamond search and project amounted to RUB 121.2 million. exploration techniques IMPROVING EFFICIENCY — Conducting EITs on recycling of used motor oils in — Tests of an unmanned aerial device produced by the Aikhal MPD. the Russian company Geoscan were carried out on — Experimental and industrial tests BelAza-75476 are three kimberlite fields. A high degree of efficiency being carried out on gas fuel (liquefied natural gas, The strategic development challenges ALROSA faces, the being implemented in such key areas as innovation, operational in the specification of aeromagnetic anomalies has LNG) in the Lomonosov MPD in order to determine provisions of the directives and documents that guide the efficiency, information technology, industrial automation and been proven. Company’s managers, involve systematic work to improve communication. Good procurement policies are also a critical the feasibility of using dump trucks at ALROSA’s efficiency. The Company’s efficiency improvement system is area for improving efficiency. — A software product has been put into industrial northern sites and, accordingly, the construction of operation that allows us to identify the mine from a gas (methane) liquefaction plant. which rough diamonds are derived or predict Sales and marketing of rough and polished the presence of unknown mines, based on their diamonds – development of sales channels measured physical properties. — The company held digital tenders for the first Implementing integrated information systems time, where boxes of diamonds were exhibited, 1. INNOVATIVE ACTIVITY — The distribution of the software complex of an each of which had a scan with a 3D model (digital automated information system for managing duplicates). production processes (Manufacturing Execution

KEY INDICATORS STRATEGIC BENCHMARKS

— Mastering new production technologies — Implementing integrated information systems % bln 0.46 35 3.5 — Introducing innovative diamond search and — Enrichment Share of R&D costs in revenue projects of use of innovative savings over 10 years as a result of exploration work developments in production in 2019 road trains at Zarnitsa pipe — Energy efficiency and eco-friendliness of production

46 47 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

CASE 1. CENTRALIZATION OF HOURLY ROAD TRANSPORT RESULTS AND ACHIEVEMENTS

Key directions and initiatives — Within the framework of the project “Improving — Distribution of the project to improve operational operational efficiency of PJSC ALROSA’s Nyurba efficiency of the Nyurba MPD at the Udachny and MPD”, the plan for core products (carat) has Aikhal MPDs (for more information see Case 2). — Process and financial audits, identification of priority — Determination and development of a targeted been fulfilled 113%, the measurement and areas for optimization business model control equipment of quarry trucks increased by — Expansion of the functionality of the General — Introduction and standardization of new business — Drilling ot the efficiency improvement system in day- 2 percentage points (up to 84%), and the daily Service Center in Novosibirsk in terms of processes to-day operations productivity of quarry trucks at the Nyurba MPD procurement activities for the purpose of has increased by 6.7%. removing non-core procurement loads and other — Cutting costs of the operation of vehicles by PJSC administrative functions from production S&A. ALROSA — The beginning of the implementation of the production system at the Nyurba MPD

Number of road Headcount ea., STRATEGIC BENCHMARKS transport ea. full-time

— Increasing the output of commodity products due — Optimizing construction and repairs, including –38 %  –21 %  Cumulative effect of cost reduction to increased productivity of the processing plant through optimization within the Company’s Expenses for transport, procurement activities RUB mln — Savings of fuel and energy resources — Improving the efficiency of supply functions 1,240 1,719 — Optimization of mine laying, fixing and ventilation 769 1,364 technology — Optimizing drilling operations and rock mass excavation and transportation processes — Optimizing the number of staff RUB 736 mln 2018 2019 2018 2019 –17 % 

Effective load factor, % CASE 2. IMPROVING THE OPERATION EFFICIENCY OF NYURBA MPD (This Fuel, ton 4,409 project will be scaled up in other MPDs)

 3,673 +21 p.p.  –32 % Key directions and initiatives

— Introduction of a system of short interval control — Optimization of maintenance and repair processes 59 9,469 (SIC) to improve the efficiency of production control will contribute to better operation of equipment and 38 6,453 of mining equipment the whole plant 1,376 684 2018 2019 8,093 5,769 — Reducing organizational down time due to the — Increasing the plant’s hourly throughput due to the optimization of processes that do not create any value optimization of ore blending processes 2018 2019 2018 2019

Gasoline Diesel

Rock mass, Total equipment Ore processing, Diamond production, mln carat 3 mln m efficiency, % thousand t +33 %  2. OPERATIONAL EFFICIENCY 10.3 +11 %  +12 p.p.  +14 %  KEY INDICATORS 1.8 7.7 0.7 19 51 63 RUB bln* RUB bln** mln carats 17 2.1 2.5 8.5 8.9 15.5 >2 7.0 Sold reduction in operating costs reduction in operating costs in to the fact of 2018,, for 2017—2019 2017—2019 2018 2019 2018 2019 2018 2019 2018 2019 or 33% growth of rough diamond The production growth was supported by high * Basic POECC program (approved by the Supervisory Board in December 2016). mining at the Nyurba MPD demand for rough diamonds of Nyurba MPD in 2019, which allowed for boosting sales by 19% ** Updated POECC program (approved by the Supervisory Board in April 2019).

48 49 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

3. AUTOMATION OF BUSINESS APPLICATIONS AND INFORMATION SYSTEMS STRATEGIC BENCHMARKS

— Monitoring of the road trains on the Udachny – — Warning about irregular temperature conditions of Verkhne-Munskoye road. Providing drivers with the soils of the base and mouth of the skip shaft of emergency communications the Udachny mine  — Improving the efficiency of management of — Safety at the hazardous production facilities of KEY INDICATORS 6 90 underground mining operations at the Udachny UMPD IT requirements IT requirements mine at the start of 2019 at the end of 2019 — Technical upgrade of the main processing equipment of the Company’s factories

RESULTS AND ACHIEVEMENTS 5. PROCUREMENT

— The medium-term automation program “Intelligent Also within the framework of the agreed strategy in the Production” has been developed and approved. organizational structure of the Company:

— The pilot perimeter of the system “Automation of — an IT Project Office has been allocated, and an labor protection processes at the Mirny MPD” was Institute of Project Managers, IT Business Partners RUB bln, introduced and put into operation; the replication and Corporate Architects has been formed; 2.4 options are being considered. % — Cross-regional Competency Centers for key IT KEY INDICATORS 8.1 or — At the NMPD, the Manufacturing Execution System systems (SAP, Boss Kadrovik, DocsVision) have total amount of procurement has been replicated and its implementation has been established; procedures given over begun at the Udachny and Mirny MPDs. to the General Service Center — as part of the service model, a catalogue of IT 5.6 % — Design work on the migration of the divisions of services for major enterprise information systems savings on purchases PJSC ALROSA into the unified system of personnel has been developed, as well as a standard SLA administration and payroll calculation has been for IT support services. Such unification in the from the initial completed. construction of IT processes has allowed us to use maximum price a common methodology for providing IT services — As part of the development of the General Service support and development of corporate information Center’s customer service approaches, kiosks for systems. electronic lines were preliminarily installed RESULTS AND ACHIEVEMENTS STRATEGIC BENCHMARKS — Removal of the non-core load from production — The transition to external ETFs has been assets by transferring support of small completed: CJSC “Sberbank — Automated Trading — Development of project management — Development of Competency Centers and decentralized procurement of the Company’s System” (ETF “Sberbank-ATS”) and JSC “Unified organization of support for the Company’s critical structural units (SUs) to the employees of the Electronic Trading Ground” (UETG). — Corporate IT architecture function development intellectual property with our own resources General Service Center. For more information about procurement, see Supply Chain — Implementation of IT projects approved in the — Implementation of a service model — An internal automated procurement system on the Management Company and development of key IT initiatives SAP SRM platform was integrated with external — Development of a digital laboratory ETFs.

4. INDUSTRIAL AUTOMATION AND TECHNICAL COMMUNICATIONS STRATEGIC BENCHMARKS

— Centralization of procurement — Import phase-out RESULTS AND ACHIEVEMENTS — Automation of procurement — Procurement from small and medium-sized businesses — Improving the safety of work at the underground — Commissioning of a local notification system — Interaction with electronic trading platforms mining operations of the Udachny mine as a result designed to alert personnel to danger or the of the introduction of the underground production occurrence of an emergency at the industrial operational radio communication system. mining assets facilities of the Verkhne-Munskoye mine. — Control of the geometrical mode of soils and increase in the bearing capacity of pile foundations — Replacement of worn-out XRL separators in the during operation of a vertical shaft by means of processing plants and dredges of the Mirny, an automated system of thermal monitoring of Udachny, Nyurba and Aikhal MPDs. soil bases and the mouth of the skip shaft of the Udachny mine.

50 51 ALROSA ANNUAL REPORT 2019 STRATEGIC REPORT

KEY INDICATORS OF ALROSA’S INNOVATIONS

In the reporting year, 11 of the 12 KPIs of the Innovation The integral key performance indicator of innovations (IKPII) of Development and Retrofitting Program, approved by the PJSC ALROSA, developed and approved pursuant to Directive Company’s Supervisory Board1 pursuant to Directive No. No. 1472p-P13 dated March 3, 2016, has been implemented. 1471p-P13 dated March 3, 2016, were implemented. The composition and target values of PJSC ALROSA’s IKPII for 2019 have been approved by the Interdepartmental Commission on Technological Development under the Government Commission for Economic Modernization and innovative development of Russia2.

Key indicators of ALROSA’s innovations

2018 2019 Digression

Integral key performance indicator (IKPI) Development/procurement and implementation, 30% 2018 2019 Digression

Ratio of R&D costs to revenue, % 0.35 0.46 0.11 Share of energy costs in the structure of the total cost of production, % 12.0 14.9 2.9

Share of innovative product (goods, works, services) procurement in the total 1.4 1.4 – Refusal to use obsolete and inefficient technologies, implementing modern procurement volume, % production technology and management practices

3 Commercialization (efficiency of use of innovative technologies), 40% Number of cases of implementation/use of the results of R&D projects, new machinery, technology, and production and labor organization at production 29 35 6 Underground mining. Productivity, volume of production per employee of the – 1.5 – facilities, number of cases main activity, thousand tons per person Improving energy efficiency and environmental friendliness of production Open mining. Productivity, volume of rock mass per employee 3 – 39.2 – of the main activity, thousand m per person Specific energy consumption for extraction of one carat for mining and 0.352 0.355 0.003 processing, GJ/carat Design (update)/performance quality of the Innovation Development and Retrofitting Program, 30% Fresh water intake, thousand m 3 2,834 4,412 1,578

Design (update)/performance quality of the Innovation Development and Greenhouse gas emissions in equiv. СО by mobile and stationary sources, 95.9 94.1 –1.8 2 550.8 646.1 95.3 Retrofitting Program thousand tons

Key performance indicators (KPI) of the Innovation Development Specific greenhouse gas emissions in equiv. СО by mobile and stationary sources 2 0.015 0.017 0.002 and Retrofitting Program per unit of production, tons/carat

Increase of labor productivity, creation of highly productive jobs Specific greenhouse gas emissions in equiv. СО by mobile and stationary sources per 2 0.003 0.004 0.001 unit of recycled mountain mass, tons/m³ Volume of processed raw materials (ore and sand) per employee engaged 2.16 2.19 in the main activity, thousand tons per person Number of patents and other security documents as results of intellectual 22 21 –1 property, units Number of created/upgraded highly productive jobs, % 1.5 1.5 Economic effect from the implementation of R&D and technological works, RUB mln 653.0 608.1 –44.9 Improvement of production efficiency processes, reducing the production cost Output of innovative products by JSC Bourevestnik Research and Production Enterprise

Share of innovative products in the total sales of Bourevestnik Research and 12 18.6 6.6 1 Minutes No. А01/249-ПР-НС dated November 11, 2016. Production Enterprise (JSC), % 2 Minutes No. 10-D01 dated March 19, 2019. 3 IKPIs changed in 2018 following the results of a technical audit. Composition and values have been approved by the Interdepartmental Commission (Minutes No. 10-D01 dated March 19, 2019)

52 53 CHAPTER 03

“The diamond mining industry has experienced different times, but the Company PERFORMANCE has persevered through all the tests. It is easy to give up, more difficult is to find an effective solution. I am sure: the new generation of ALROSA’s employees will carry the best traditions of diamond miners, persistently working for victory and RESULTS maintaining leadership in the industry”.

Vladimir Zuev

2019 38.5 mln carats — volume of diamond extraction

2019 33.4 mln of carats — sales of diamond products ALROSA ANNUAL REPORT 2019 Performance results

PERFORMANCE Diamond reserves, thousand carats

Company January 1, January 1, January 1, Change, % RESULTS 2018 2019 2020 PJSC ALROSA 770,188 751,196 732,905 2 

PJSC ALROSA-Nyurba 172,415 164,551 154,147 6 

JSC Almazy Anabara 36,710 32,681 32,137 2  More information PJSC Severalmaz 202,735 199,195 195,086 2  on ALROSA Group reserves is available on the company website Total 1,182,048 1,147,623 1,114,275 3  http://eng.alrosa.ru/ RESERVES investors/reserves- and-resources/ AND EXPLORATION WORK

RESERVES EXPLORATION WORKS Maintaining and expanding the resource base is one of Diamond reserves in subsurfaces by operated ALROSA’s key strategic priorities. The economic feasibility of the mines as of January 1, 2020, thousand carats development of a particular mine or site is determined on a case- ALROSA carries out exploration works (EW) in ALROSA Group strives to ensure reserve growth by-case basis, based on technical solutions that are developed two priority regions in Russia — Sakha Republic at the very least at the level that corresponds taking into account the international market demand for rough (Yakutia) and Arkhangelsk Region, as well as on to the average mining level. In 2019, ALROSA According to diamonds. As of January 1, 2020, mine reserves on the balance 86,740.5 the African continent, in the Republic of Angola. Group ensured reserve growth to the amount sheet of ALROSA Group amounted to 1,114,275 thousand carats, Placer The prospects for discovering new diamond of 2.9 mln carats (not accounting for depletion the results of according to the State Commission on Mineral Reserves of the deposits in these areas remain high. of the reserves). The reserve replacement factor the exploration Russian Federation. in 2019 amounted to 7%. In 2017–2019, ALROSA reserves saw a total increase of 62.9 mln carats, work conducted, with an extraction volume of 114.8 mln carats. ALROSA has The replacement factor amounted to 55%. Top 3 deposits by average diamond content been provided (for proved reserves), carat/ton with a production Work budget, RUB mln 1,027,534.6 and raw base of 6.5 Immense proven diamond 5.3 5.0 5,687 1,824 reserves in category C1+C2 2019 for over 15 years. Indicator thousand carats 5,973 1,694 2018 Internatsionalnaya Botuobinskaya Aikhal Placer 86,740.5 pipe pipe pipe Immense 1,027,534.6 6,522 1,469

2017

Exploration works Onsite exploration

56 57 ALROSA ANNUAL REPORT 2019 Performance results

KEY EVENTS OF ALROSA GROUP IN TERMS LAUNCH OF ZARYA PIPE OF EXPLORATION WORK AND ONSITE EXPLORATION IN 2019

In spring 2019, commercial recovery of rough diamonds 1973 commenced at the kimberlite pipe at Zarya pipe in Discovered by Igor Rogatykh, a geoscientist of the Yakutia. The pipe is located within walking distance Amakinskaya Exloration Expedition from the facilities of the Aikhal Mining and Processing Ensuring long-term competitive advantage: Development and investments: Division. The new mine will compensate for the depleted reserves of the Komsomolskaya open pit mine, 2007–2015 — ALROSA Group’s Exploration Work Long-Term — Growth in associated gold and platinum mining at and in the future will support stable production for the Exploration works for a depth of up to 500 meters Development Program was updated for 2019–2035 JSC Almazy Anabara mines: division. with a focus on 2020–2024; — Gold (76.5 kg); NOVEMBER 2013 ALROSA received the right to exploit — The Program for the next stage of reforming the 11 years ​ the deposit exploration complex was developed and presented — Platinum (1.1 kg); scheduled period for extraction to the Executive Committee of the Company: — The operational growth of reserves in the 4th stage 300 meters JANUARY 2014 — Creating the Production and Raw Base Division of the Nyurbinskaya placer deposit was noted — 1.728 design depth of open pit mine A license was obtained to explore and mine rough with the aim of strengthening the forecast and million carats; diamonds at a depth of 510 meters expert component of the work, improving In 3 km the planning and operational management — The main work to explore the deep horizons of from Aikhal village mechanisms for EW, and effectively formulating the Yubileynaya pipe was completed (in 2020, 2016 and implementing a single functional budget for the approval of the diamond reserves at the State RUB 12 billion Yakutniproalmaz Institute developed the design exploration work of ALROSA Group companies; Commission on Mineral Reserves is planned); ​total investment documentation for an open pit construction — Unifying the geological services of Vilyuiskaya — Exploration and appraisal work was carried out 2021 GRE of PJSC ALROSA and Pomorskaya GRE on common minerals to maintain pavement of the planned deadline for reaching design capacity JUNE 10, 2016 of PJSC Severalmaz in view of territorial “Udachny — Verkhne-Munskoye deposit” temporary The first industrial explosion. Surface works began diversification; technological way; aimed to release the ore body from the layer of waste 1.25 mln tons sedimentary rocks. 14 mln m3 were removed for three of ore per year — design capacity years — Exploration in the depths of the Mir and Udachnaya — A new system was developed for pricing EW: pipes commenced; 2019 — Price registers for NGIP laboratory works were ​the first 100,000 tons of kimberlite ore were mined APRIL 2019 — Five exploration licenses were obtained for approved; Start of the dimond ore production diamonds: Mir pipe, Udachnaya pipe, Dyakha, The ore is enriched at No. 14 plant of Aikhal Mining Zagadochny, Kieng-Yuryakhsky and two for gold — Software was developed for calculating the cost and Processing Division (Khaptysynakh, Borosky-Unguokhtakh sections), EW of drilling work; design is underway; — Work continues to formulate rates at — Resources in new territories in Yakutia were tested; current prices of Vilyuiskaya GRE and LLC ALROSA-Spetsbureniye. — Work was conducted to create a bank of geophysical anomalies and a phased access and verification Cooperation agreement between ALROSA and program in 2019–2022; Rusgeology

— Production targets for planned exploration across In 2019, ALROSA and Rusgeology signed a Cooperation central key diamondiferous areas covered by MEPs Agreement, according to which the partners intend to create operations were achieved; a joint collegial body - the Geological and Technical Council of JSC Rusgeology and PJSC ALROSA. The main goal of — Monitoring was conducted, and information on cooperation is to identify new areas with placer diamond the prospective diamondiferous areas and the deposits. In addition, prospects for cooperation in the sphere prospective assessment and exploration objects in of implementing innovative exploration and search methods African countries (Angola, Zimbabwe) and the world will be discussed. was systematized.

58 59 ALROSA ANNUAL REPORT 2019 Performance results

OPERATING RESULTS Structure of ALROSA Group rough diamond mining by subdivisions in 2019, % 11 Lomonosov Mining and Processing Division Subdivisions %  2 % on 2018 EXTRACTION AND ENRICHMENT 26 Aikhal Mining Aikhal Mining 13 26 and Processing Division and Processing Division JSC Almazy Anabara 41.3 ALROSA Group mines Capacity of processing plants mln tons at ALROSA Group MPDs, mln tons/year Mirny Mining diamonds in Russia: 8 in the Republic of and Processing Division Ore and sand Sakha (Yakutia) and the Udachny Mining processed Arkhangelsk Region. 11.7 8 15 According to the results 10.5 Mirny Mining and Processing Division of 2019, the volume of and Processing Division 27 Nyurba Mining and rough diamond mining 27 Nyurba Mining and Processing Division amounted to 38.5 mln Processing Division 15 carats. Udachny Mining JSC Almazy Anabara 13  5 % on 2018 and Processing Division 4.0 Lomonosov Mining and 11 Processing Division 38.5 2.0 1.9 ALROSA Group production results mln carats

Diamonds mined Aikhal Mining Udachny Mining Lomonosov Mining Mirny Mining Nyurba Mining Indicator Unit of 2017 2018 2019 Change, % and Processing and Processing and Processing and Processing and Processing measurement Division Division Division Division Division Ore and sand mining mln tons 35.6 38.6 40.6  5 Structure of rough diamond mining in ALROSA Group in 2019, mln carats Ore and sand processing mln tons 39.1 40.5 41.3  2

4.2 Rough diamond mining mln carats 39.6 36.7 38.5  5 Arkhangelsk Region Rough diamond mining USD mln 3,908.0 3,502.0 3,537.0  1

Indicator mln carats Diamond content carat/ton 1.01 0.91 0.93  3

Republic of Sakha (Yakutia) 34.3

Arkhangelsk Region 4.2 Compared to 2018, ALROSA Group increased rough diamond mining in 2019 to 5% and 1% in physical and monetary terms respectively. This growth was related to the increase in ore processing and mining volumes of Udachnaya pipe, Botuobinskaya pipe, and open pit mine Zapolyarny. 34.3 Republic of Sakha (Yakutia) BIGGEST FINDS IN 2019

Structure of ALROSA Group rough diamond mining in 2019, % In 2019, several unique diamonds were discovered at ALROSA Group mines.

20 Placer deposits 232.4 191.46 190.77 Indicator % carats carats carats

Surface mining 60 In October 2019, a diamond weighing In January 2019, a large In December 2019, a large 232.4 carats was mined at the Udachny diamond of jewelry diamond weighing 190.77 Underground mining 20 Mining and Processing Division quality weighing 191.46 carats with high quality (Udachnaya pipe). This is the largest carats was mined at the characteristics was discovered Placer deposits 20 specimen of jewelry quality discovered same deposit. at the Nyurba Mining 20 by ALROSA in more than three years. and Processing Division Underground mining The gem has a yellowish tint. (Botuobinskaya pipe). 60 Surface mining

60 61 ALROSA ANNUAL REPORT 2019 Performance results

In October, Smolensk plant Kristall, the largest polished SALES OF ROUGH AND POLISHED Ore Mining and Processing in 2019 diamond producer in Europe, joined ALROSA Group. In December, the ALROSA Supervisory Board approved the DIAMOND PRODUCTS three-year general development strategy for the diamond- Ore and sand Ore and sand Rough diamond Rough diamond Diamond cutting entity for 2020–2022 and the Kristall plant integration mining, mln processing, mining, USD mining, content, carat/ plan. A set of measures is envisaged to improve the efficiency ALROSA Group’s consolidated sales of rough and polished of assortment management, optimize the production diamond products1 in 2019 amounted to USD 3,335.0 mln, tons (change on mln tons mln (change in mln carats ton (change on cycle, and create a consolidated sales system for polished which is 26% lower than sales in 2018 (USD 4,507.1 mln). 2018) (change on 2018) (change on 2018) diamonds. The implementation of the Strategy will increase 2018) 2018) the operational efficiency of ALROSA Group’s entire diamond- cutting sector and improve the financial results of this area of Rough diamonds Aikhal Mining and 6.2 9.2 989.9 10.1 1.11 business. Processing Division (18 % ) (3 % ) (20 % ) (14 % ) (11,9 % ) Sales of rough diamonds amounted to USD 3,247.4 mln in the reporting period (–26% Y-O-Y). In physical terms, sales for Mirny Mining and 4.8 5.0 546.4 3.0 0.6 2019 dropped by 12% and amounted to 33.4 mln carats. Processing Division (1 % ) (1 % ) (25 % ) (28 % ) (29 % ) Among other things, the dynamics of diamond sales were influenced by seasonal factors, as before. So, in Q1 the Udachny Mining and 9.6 8.8 543.7 5.7 0.65 volume of sales was traditionally higher, since diamond Processing Division (45 % ) (28 % ) (42 % ) (46 % ) (13 % ) cutters actively replenished their reserves.

2 Nyurba Mining and 2.8 2.5 848.6 10.3 4.18 ALROSA Group sales of rough diamonds Processing Division (24 % ) (16 % ) (45 % ) (33 % ) (14 % )

13.6 12.2 366.3 5.2 0.42 5,000 4,794.8 4,900.6 60 JSC Almazy Anabara (1 % ) (11 % ) (0 % ) (4 % ) (7 % ) 4,273.7 4,450.2 4,392.1 4,169.9 4,411.7 3,437.1 3,337.8 3,247.4 3.6 3.6 242.0 4.2 1.17 PJSC Severalmaz 3,000 40 (10 % ) (5 % ) (17 % ) (16 % ) (11 % ) 41.2 39.5 38.0 39.6 40.0 38.1 32.9 33.2 USD mln 40.6 41.53 3 536.8 38.5 0.93 30.1 33.4 Total (5 % ) (2 % ) (1 % ) (5 % ) (3 % ) 1,000 20 mln carat

–1,000 0 The decrease in rough diamond mining in Aikhal Mining Khara-Mas placer due to the increased content of the heavy 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 and Processing Division is associated with a limitation in the fraction, which led to a decrease in the recovery rate of the productivity of processing plant No. 8 due to repairs in Q1 diamondiferous concentrate. At the same time, the average 2019, a decrease in the processing volume of the balance ore diamond content in the processed sands increased by an of the Yubileynaya pipe, and a decrease in the volume of ore average of 5% over 9 months due to the waste of contents in processing of the Komsomolskaya pipe due to the completion the Bolshaya Kuonamka placer, Kholomolokh placer, Ebelyakh of the open pit mine operation. pipe and Pravoberezhie Morgora placer. Structure of rough diamond sales in ALROSA Group by ownership3, carats

The decrease in rough diamond mining at Mirny Mining The increase in rough diamond mining at the Lomonosovsky and Processing Division in 2019 is linked to a decrease in MPD is due to an increase in the average rough diamond the contents in the ore of the Internatsionalnaya pipe and content in the ore of the Arkhangelskaya and Karpinsky-1 sands of placer deposits, as well as a drop in ore production pipes and a rise in the processing volume due to an increase 16,613 4,349 8,379 4,026 of the Internatsionalnaya pipe due to complications in the in the plant’s productivity. The latter was a result of the 2019 geological conditions of mining operations. implementation of the program to bring the processing plant to a design capacity of 4 million tons/year. The increase in rough diamond mining for the Udachny 22,286 5,833 7,028 2,852 Mining and Processing Division is associated with an increase in mining and processing ore from the Udachny 2018 underground mine, and with the fact that ore and sand ROUGH DIAMOND CUTTING production at the Verkhne-Munskoye deposit reached design 24,589 5,860 7,784 2,668 capacity. The key diamond-cutting assets of ALROSA in 2019 remained 2017 For the Nyurba Mining and Processing Division, the the ALROSA BRILLIANTS branch (Moscow) and DIAMONDS increase in rough diamond mining is due to the increased ALROSA LLC (Barnaul). Over the year, they produced a total volume of extraction and processing of rich ore from the of 38,400 carats of polished diamonds. Botuobinskaya pipe while selecting the optimal charge PJSC ALROSA JSC Almazy Anabara PJSC ALROSA-Nyurba PJSC Severalmaz for increasing the productivity of factory No. 16 as part of In 2019, the polished diamond production continued to be the implementation of a program to optimize operating adapted to the requirements of the sales system. Work was activities. carried out to build up competencies in planning and marking up large, especially large and colored diamonds in Moscow. In 1 In connection with the acquisition of JSC Kristall Production Corporation in October 2019, the results of ALROSA Group sales as of Q4 2019 take into account the consolidation At JSC Almazy Anabara, the main factor in the 5% reduction Barnaul, the technological process for processing diamonds of the Kristall Group with regard to the acquisition of unprocessed diamonds and sales of polished diamonds. The data in the press release on the disclosure of operating results of rough diamond mining was the 11% decrease in the was improved, the remuneration system for cutters was for the Q4 and 12M of 2019, published on January 23, 2020, do not take into account the consolidation of the Kristall Group from Q4 2019 for comparability with the previously processing volume. The latter was due to a decrease in modified, and work was carried out to train employees on the published monthly sales results. productivity during the enrichment of sands from the “marking” operation. 2 Since 2016, data according to IFRS, previously data according to RAS. 3 Not taking into account sales by ALROSA entities abroad. The JSC Nizhne-Lenskoe sales are included in the data for JSC Almazy Anabara sales for 2017.

62 63 ALROSA ANNUAL REPORT 2019 Performance results

Dynamics of average monthly sales of ALROSA Group diamonds, USD mln International auctions for ALROSA jewelry rough diamonds +10.8 carats in 2019

527.4 436.5 377.4 352.5 367.6 329.3 316.2 347.5 265.4 282.5 293.6 274.6 287.3 270.6 37 4 4 6 200.4 auctions: Antwerpen New York Israel

Q1 Q2 Q3 Q4 for the year

2017 2018 2019 4 11 3 5 Vladivostok Moscow Hong Kong Dubai

The average sales price of jewelry rough diamonds in 2019 The decrease in the average annual value of the price index The share of rough diamond sales in the external market in the structure and dynamics of market demand. These factors decreased by 19% to USD 132/carat, both due to a decrease in for comparable boxes for 12M of 2019 compared to 12M of 2019 grew slightly and amounted to 89% in monetary terms led to a growth in volume of diamond reserves. the price index and due to an increase in the share of sales of 2018 was –6%. and 95% in terms of weight. small-sized gems. Sales of diamonds of special size (+10.8 carats) in auctions For ALROSA, Belgium and India remain the key sales markets In 2019, the ALROSA Group’s range of sales of rough in major international diamond trading centers in 2019 for diamond products, which together account for over 60% diamonds and powders changed, mainly due to changes in amounted to USD 390.3 mln (–16%). of sales. Price dynamics for rough diamonds of jewelry quality

25 % 200 Average 169.5 163.5 costs of 147.3 134.5 132.1 gem-quality ALROSA Group sales of rough diamonds 15 % 150 diamonds sale, USD/carat 3 % 5 % 3% 100 in physical terms, mln carat in monetary terms, USD mln Average costs of –5 % 50 gem-quality –5 % –6 % diamonds 24.1 9.3 3,185.6 61.8 –8 % sale, –15 % 0 USD/carat 2019 2019 2015 2016 2017 2018 2019

26.5 11.6 4,324.6 87.1 Geographical structure of rough diamond sales of ALROSA Group by value, %1

2018 2018 11 47 18 7 11 4 2 30.4 10.8 4,087.0 82.9 2019 2017 2017 12 47 15 10 10 4 2

2018 Jewelry diamonds Industrial diamonds 10 51 16 10 7 4 2

2017

Russia Belgium India Israel UAE PRC (incl. Hong Kong) Other

1 Other sales markets include the USA, Botswana, Great Britain, Switz Data for 2018 – ALROSA assessment.

64 65 ALROSA ANNUAL REPORT 2019 Performance results

Sales formats of ALROSA Group’s products, % APPROACH TO PRODUCT POSITIONING AND MARKETING 5 Spot market Traditionally, ALROSA pays great attention to marketing — B2C segment: participation in the implementation of 19 initiatives aimed at stimulating sales and maintaining long- a large-scale diamond marketing program to support Indicator % term demand for the Company’s products. sustainable global demand for natural polished Competitive diamonds as a product; development of programs procurement Long-term contracts 76 ALROSA’s marketing initiatives are aimed at the following aimed at supporting demand for jewelry/polished Competitive procurement 19 tasks: diamond products made using ALROSA rough diamonds along the entire value chain, including In 2019, 117 Spot market 5 — B2B segment: development and promotion of partner increasing demand for specific categories of product programs aimed at increasing demand for specific ranges. companies product line groups. representing the 76 world’s largest Long-term contracts polished diamond trading centers Trends affecting ALROSA marketing activity

purchased In 2019, The Company continued to attract The sales of polished diamonds via the offices of new customers with spot sales testing with the ALROSA entities abroad and of the Kristall Group Trend Description products of prospect of signing new long-term agreements. amounted to a total of USD 14.6 mln. As part of ALROSA Group’s As of the end of the year, the total number of six auctions in Hong Kong, the United States and long-term diamond supply contracts concluded Israel, USD 23.5 mln worth of diamonds were High competition Consumers are offered an extremely wide choice of products and services to purchase or diamond-cutting was 66 (including nine contracts for the supply of sold in 2019. in the luxury segment give as a gift in the same pricing segments as polished diamond jewelry. entity on the industrial diamonds; one long-term buyer carries out contractual purchases of both jewelry rough In the domestic market of Russia, the volume of There are a number of synthetic polished diamonds and other substitutes on the market diamonds and industrial diamonds). polished diamond sales in 2019, including retail which seem attractive to the consumer thanks to widespread advertising and low pricing. foreign market Influence of synthetic products sales of certified polished diamonds, amounted At the same time, consumers do not always understand the difference between products, to USD 6.3 mln. The increase of USD 4.4 mln and sometimes even become victims of fraud. Polished diamonds compared to 2018 was the results of sales carried out by ALROSA DIAMONDS EXCLUSIVE (Private Millenials, which are now entering the phase of active consumption, prefer brands that In 2019, the total sales volume of polished Banking). The products were purchased by 53 interact with them; they want an individual approach and customized products, and diamonds produced by the diamond-cutting jewelry companies from Moscow, Kostroma Changes in consumer preferences entity of ALROSA Group, including sales of Region, Barnaul, and Smolensk, as well as are also inclined to choose goods that were manufactured responsibly and that are Kristall Group polished diamonds in Q4 2019, by individuals purchasing certified polished environmentally friendly. amounted to USD 87.6 mln. diamonds.

Main projects and initiatives of 2019 Volume of polished diamonds sales in ALROSA Group, USD mln Generic marketing Branding

ALROSA is the initiator and participant of the Diamond ALROSA carries out marketing programs aimed at creating 6.9 Producers Association (DPA), which was established in 2015 to and boosting demand for specific product groups. Domestic market implement large-scale diamond marketing programs. The work of the DPA is intended to boost consumer demand for polished Fluorescent diamonds diamonds, mostly among the younger generation in the main polished diamond consumer markets: USA, China and India. — The brand positioning of fluorescent diamonds is based Indicator USD mln In addition to conducting advertising campaigns that position on the unique property of these gems — a colored glow diamonds as a desirable item, in 2019 the DPA launched in ultraviolet light. The Company is implementing this Export 80.7 a large-scale study of rough diamond mining’s positive project in partnership with major jewelry retailers in the Domestic market 6.9 contribution to the environment. In addition, the Association is USA and China. taking measures to distinguish between the synthetic diamond market and the natural diamond market, by explaining the Colored diamonds difference between these products to consumers and retail, 80.7 and analyzing the effectiveness of gem detection devices. — Colored diamonds are a prospective niche for the Export For more information, see the chapter on Sustainable Development and the Company. Thanks to their rarity (on average 1 in every section on International Cooperation. 10,000 diamonds), the price and demand for these diamonds are high. The Company’s goal is to become the largest manufacturer of colored diamonds by promoting these products in the B2B and B2C segments. Each year, the Company holds an auction for the sale of True Colours fantasy stones, which is usually held in fall in Hong Kong.

66 67 ALROSA ANNUAL REPORT 2019 Performance results

Unique diamonds Diamonds as an investment

— Particularly large diamonds with unique Certain categories of natural diamonds have a characteristics are given their own high investment potential. These include colored name and are combined into thematic diamonds, as well as large-sized white gems with collections. In spring 2019, ALROSA the highest quality and color characteristics. As sold the Deep Purple diamond, and in an asset, diamonds have attractive properties; fall presented The Spectacle collection. they are less volatile in price than many other One of the diamonds in this collection, investment objects, they are compact, do not the yellow Firebird, was sold to Graff require special storage conditions, can be easily Diamonds, a premium producer of transferred into ownership, and at the same time jewelry products. have sentimental value.

Diamonds of Russian origin In 2019, ALROSA began a joint project to sell such diamonds to customers of Private Banking — ALROSA also initiates programs in divisions in several major Russian banks. the direction of branding of jewelry According products that feature diamonds of Online store Russian origin and other projects that, in to ALROSA the initial stages, will be implemented in ALROSA’s online diamond store is targeted forecasts, the partnership with long-term clients and at both the B2B and B2C segments. The retailers in key markets. store catalog offers a wide product range of volume of online transparent and colored diamonds of different Guarantees of diamond origin shapes and quality that meet the demand of sales will reach a wide range of customers. The site allows 25% of the total The modern consumer wants to know the history customers to familiarize themselves with the behind the diamond’s origin. According to the Company’s offers remotely. Retail customers can trading volume results of a study by GfK, more than half of those purchase diamonds online wholesale — create an surveyed in the USA and China mentioned this application for positions of interest using both of jewelry aspect. Diamond-producing companies are also the regular and auction catalogs. products in the interested in making sure that every gem comes with information about its origin, thus helping to Remote sales of jewelry products and precious whole world fight against fakes and illegal synthetics. stones to individuals in Russia were previously restricted. Together with the Ministry of Finance ALROSA’s unique structure, which combines of Russia, ALROSA prepared a draft amendment CUSTOMER SATISFACTION extraction, cutting and production of jewelry to the normative document1 that stipulates the products, allows the Company to present the permission of online trading, and on November In October 2019, the SSE ALROSA branch conducted a survey in 2018. The survey included questions on satisfaction with full set of information on the polished diamonds 30, 2019, Prime Minister Dmitry Medvedev among all long-term clients of PJSC ALROSA on the topic of products, organization and trading sessions, the ease of use of produced. This information is available to signed the corresponding government decree. customer satisfaction with the Company’s products and services the trading site and the client’s personal account. consumers at www.diamonds.alrosa.ru in the form of an extended datasheet containing the According to ALROSA forecasts, the volume of full data on the gem plus a personalized video. online sales will reach 25% of the total trading volume of jewelry products in the whole world. ALROSA is also active in researching the existing Export clients — 1.95 solutions on the market in the sphere of tracing — tracking the diamond’s journey from mine Domestic market clients — 2.09 to store — and takes part in pilot projects with blockchain platform Tracr, the Gemological Institute of America (GIA), and technology company Everledger.

I II III IV V

Based on the results of the survey:

— Work is underway to prepare a balanced range of — When approving the schedules of trading sessions, diamond products; all non-working days (religious days, holidays, state and memorable days) in the countries in which the — Time frames were reduced for compiling contracts customers are residents are taken into account; ALROSA online store based on the results of selecting diamonds as part of https://diamonds. ongoing trading sessions; — The decision was made to reorganize the service alrosa.ru/ responsible for interacting with customers with the introduction of the Key Account Manager position 1 Decree No. 179 of the President of the Russian Federation “On Types of Products (Works, Services) and Production Wastes whose Free Sale (assigning specialists to all clients in the main regions to is Prohibited”, dated February 22, 1992. be able to quickly contact and resolve customer issues).

68 69 ALROSA ANNUAL REPORT 2019 Performance results

FINANCIAL RESULTS REVENUE

The revenue of the diamond segment amounted to 93% of the quality decreased by 9% in terms of carats. Revenue fell due total revenue of ALROSA Group in 2019 and decreased by 23% to a 12% decrease in sales volumes amid falling demand in the compared to 2018 to RUB 215.4 bln. diamond market (mainly in the 1st half of 2019), a decrease in the average price index (–6%) and changes in the sales structure CONSOLIDATED KEY Sales of jewelry rough diamonds account for the vast majority due to increased demand for small-sized diamond-cutting. 238.2 FINANCIAL INDICATORS1 of the revenue of the diamond segment (96%). Revenue from RUB bln sales of rough diamonds of jewelry quality in 2019 dropped by Revenue from non-core activity rose by 11% compared to 2018, 22% compared to 2018, and sales of rough diamonds of jewelry mainly due to changes in the electricity sales scheme. Revenue The consolidated revenue of ALROSA Group (taking into taking into account income from subsidies in Net cash flow decreased by 48% in 2019 to account income 2019 decreased by 21% and amounted to RUB RUB 47.6 bln, which was due to a decrease in from state subsidies) 238.2 bln. profitability and an increase in working capital in 2019. This was partially offset by a revision of ALROSA revenue structure EBITDA dropped by 31% to RUB 107.1 bln, and investments from RUB 27.8 bln to RUB 20.0 bln. the EBITDA margin decreased from 52% to 45%. Indicator, RUB bln 2017 2018 2019 Change, % ALROSA Group’s net profit decreased by 31% to The Net Debt/EBITDA indicator rose to 0.7x at 107.1 RUB 62.7 bln. the end of 2019 (compared to 0.4x in 2018). Diamond segment 248.3 278.1 215.4 23  RUB bln Non-core activity 21.4 15.8 17.5 11 

EBITDA Transport 7.2 8.4 8.5 1 Key consolidated financial indicators Social infrastructure 2.6 2.3 2.1 9 

Gas sales 6.5 1.0 0.1 90  47.6 Indicator 2017 2018 2019 Change, % RUB bln Other activity 5.2 4.1 6.8 66  Revenue from sales,2 RUB bln 275.4 299.6 238.2 21  Net cash flow Total 269.7 293.9 232.9 21  Cost of sales, RUB bln (133.9) (126.5) (119.1) 6 

EBITDA, RUB bln 126.9 156.0 107.1 31 

EBITDA margin, % 46 52 45 7  p.p. COST Net profit, RUB bln 78.6 90.4 62.7 31  Expenses under the item “Salaries, payroll taxes and a change in the electricity sale scheme (+ RUB 1.2 bln), an Net profit margin, % 29 30 26 4  p.p. other payments to employees” for 2019 increased by 11% increase in electricity prices by 18% (+ RUB 0.5 bln), as well compared to 2018, while the indexation of wages in 2019 as the accession of new consumers of YAGK (+ RUB 0.2 bln). Free cash flow, RUB bln 73.5 92.3 47.6 48  amounted to 4% (+ RUB 2.1 bln), growth due to an increase The following factors led to a reduction in fuel and energy in the volume of work (UGOK, NGOK, Severalmaz) amounted expenses in 2019: optimization measures (RUB –0.8 bln), Net debt/EBITDA 0.7 0.4 0.7 – to RUB 1.6 bln, and the change in the structure of personnel changes in the transportation structure, etc. (RUB –0.8 bln), a and the volume and structure of construction work (UKS, reduction in airline traffic (RUB 0.2 bln). MUAD) increased expenses by RUB 1.1 bln. Expenses under the “Materials” item rose by 11% due to Expenses under the item “Depreciation” increased by 13% in growth in work volume (+ RUB 1.2 bln) and increase in prices 2019, mostly due to the application of IFRS 16 Leases, which (+ RUB 0.6 bln), however, with optimization activities, the involves recognizing expenses for depreciation of the right Company managed to reduce expenses on materials by RUB of use arising when concluding lease agreements. 0.4 bln.

Expenses on mineral extraction tax in 2019 rose by RUB Expenses under the items “Services” and “Transport” 1.3 bln (+6%) due to an increase in the volume of rough decreased by 27% and 16% due to the influence of IFRS diamonds that underwent initial evaluation, and also due to 16 Leases (reclassification of lease expenses, repair and the weakening of the ruble in relation to the US dollar. maintenance of aircraft — RUB 1.9 bln), a decrease in costs of energy transfer and capacity (– RUB 0.7 bln), a reduction The 30% increase in expenses under the item “Fuel and in airline company transport expenses (– RUB 0.2 bln), energy” is due to the growth in freight transportation volumes optimization measures (– RUB 0.1 bln), however, the rise in (+ RUB 2.6 bln), increase in fuel prices by 13% (+ RUB 1.4 bln), prices had a negative impact (+ RUB 0.2 bln).

1 On the basis of ALROSA Group’s consolidated financial statements as per IFRS for 2018. 2 Taking into account income from subsidies.

70 71 ALROSA ANNUAL REPORT 2019 Performance results

Cost of sales by item, RUB bln

Indicator 2017 2018 2019 Change, % Indicator 2017 2018 2019 Change, % Impairment of fixed assets – – 2.5 – Salaries and other payments 43.6 43.7 48.5 11  Recovery of the provision for the impairment of fixed assets – (0.1) – – Depreciation 23.8 21.4 24.1 13  (Income)/losses from disposal of subsidiaries – 1.8 (0.2) – Mineral production tax 21.8 20.6 21.9 6  Change in fair value of financial assets measured through profit and loss – 0.6 0.2 65  Fuel and energy 12.7 13.5 17.6 30  (Income)/losses from foreign exchange related to operating activity, net 1.9 (3.3) 2.1 – Materials 13.3 12.3 13.7 11  Derecognition of financial guarantees – – (1.5) – Services 8.0 8.7 6.4 27  Losses from goodwill impairment for acquisition of Kristall Group – – 0.9 – Transport 2.2 1.7 1.4 16  Expenses related to the termination of operation of processing plant – – 3.4 – Other 1.3 1.4 1.3 9  No. 8 at Aikhal Mining and Processing Division

Total production cost 126.5 123.3 134.8 9  Result from change in pension plan terms (3.5) – – –

Movement of diamond reserves, ore and sands 7.3 3.2 (18.5) – Accrual of insurance compensation from SOGAZ (10.5) – – –

Cost of diamonds for resale 0.0 0.0 2.8 75 times  EBITDA 126.9 156.0 107.1 31 

Total cost of sales 133.9 126.5 119.1 6  EBITDA margin 46 % 52 % 45 % –

EBITDA NET PROFIT

EBITDA in 2019 amounted to RUB 107.1 bln, having decreased by 31% on 2018 mainly due to the change in sales structure and price Net profit for 2019 amounted to RUB 62.7 bln, decreasing by 31% compared to 2018, mostly due to a reduction in revenue, with drop of diamonds. EBITDA profitability dropped from 52% in 2018 to 45% in 2019. an increase in financial gains from foreign exchange due to the weakening of the national currency.

EBITDA calculation, RUB bln Net profit for 2018, RUB bln 90.4

EBITDA reduction (48.9) Indicator 2017 2018 2019 Change, % Growth in foreign exchange gains 15.3 Profit for the period 78.6 90.4 62.7 31 

Reduction in tax income expenses 5.5 Income tax expenses 22.1 24.2 18.7 23 

Financial (income)/expenses, net 1.3 15.9 (2.8) 118  Growth in interest expenses (1.8)

Share of associate organizations and joint ventures in net profit (3.0) (3.4) (3.5) 2  Growth in depreciation expenses (2.9)

Depreciation 24.0 21.6 24.5 13  Decrease in expenses from disposal and impairment of fixed assets 2.4

Income from disposal of fixed assets – – (2.0) – Growth in income from associates 0.1

Losses from disposal of fixed assets 1.7 0.4 2.0 5 times  Other 2.6

Losses from writing off fixed assets lost as a result of the accident at 8.5 7.8 – – Mir mine Net profit for 2019 62.7

72 73 ALROSA ANNUAL REPORT 2019 Performance results

CASH FLOWS Main areas of financing for investments in expansion of mining capacities in 2019

The Group’s net cash flow is positive and sufficient to ensure falling sales and increased working capital in 2019, which was Financing area, RUB bln 2019 the Group’s liquidity and solvency. partially offset by a revision of the investment programme from RUB 27.8 bln to RUB 20.0 bln. The decrease in cash flow for 2019 compared to 2018 is a Verkhne-Munskoye deposit 1.0 result of a decrease in business profitability as a result of Zarya open pit mine 1.6

Udachny underground mine 0.6

Analysis of net cash flow, RUB bln. Other 1.1

Total 4.3 Indicator 2017 2018 2019 Change, %

Cash flow from operating activity to a change in working 127.6 156.7 107.2 32  capital and tax payments LIQUIDITY AND FINANCIAL STABILITY Investments in working capital (4.6) (6.7) (22.9) 240 

1 Income tax paid (22.5) (29.8) (16.7) 44  ALROSA Group’s net debt (including lease obligations ) The debt portfolio at the end of 2019 is represented by two for 2019 rose to RUB 79.6 bln (+18% Y-O-Y) mainly due to a issues of Eurobonds (52% of the total debt) in the amount decrease in the volume of free cash flow in view of a drop in of USD 494.4 mln and USD 500.0 mln, as well as bank loans  Net cash inflow from operating activities 100.5 120.1 67.6 44 sales and the consolidation of Kristall Group debt. totaling USD 750.0 mln (40% of the total debt) with repayment in 2021. Purchase of property, plant and equipment (26.9) (27.8) (20.0) 28  During 2019, the revaluation of the dollar portion of the portfolio as a result of changes in the ruble exchange rate The debt portfolio (not taking into account lease obligations) Free Cash Flow 73.5 92.3 47.6 48  resulted in an economic effect of around RUB 12.5 bln at the end of 2019 consisted of obligations denominated in US (income). dollars (93%) and rubles (7%). The amount of funds and their equivalents, as well as deposits, consisted of US dollars (57%) and rubles (43%).

CAPITAL INVESTMENT (CAPEX) Analysis of the consolidated debt portfolio

In 2019, the total amount of capital expenses decreased by 28% to RUB 20.0 bln. The decrease in investments was mainly due to Indicator Dec 31, 2017 Dec 31, 2018 Dec 31, 2019 Change, % reduced investments in the expansion of mining capacities.

Long-term portion, RUB bln 58.7 65.0 84.2 30 

Financing of capital investments, RUB bln Short-term portion, RUB bln 34.7 41.7 33.1 21 

Total debt, RUB bln 93.4 106.7 117.3 10  Indicator 2017 2018 2019 Change, % % of long-term portion 63 61 72 18  Maintenance and refurbishment of existing 13.2 11.9 12.5 5  mining facilities Total debt, USD bln 1.6 1.5 1.9 23 

Expansion of mining capacities 8.5 13.7 4.3 68  Net debt, RUB bln 86.0 67.4 79.6 18 

Gas assets 2.3 0.1 0.1 9  Total debt/EBITDA 0.7 0.7 1.1 60 

Non-extractive activities 2.5 1.8 3.0 63  Net debt/EBITDA 0.7 0.4 0.7 72 

Social infrastructure 0.5 0.3 0.1 95  EBITDA/Accrued interest 12.2 24.6 13.2 46 

Total 26.9 27.8 20.0 28 

1 IFRS 16 Leases.

74 75 ALROSA ANNUAL REPORT 2019 Performance results

CREDIT RATINGS

The Company has been assigned credit ratings from three major global rating agencies — Fitch, Moody’s and Standard & Poor’s (S&P).

International Credit rating Outlook Date assigned/ rating agency confirmed

S&P BBB– Stable July 27, 2018

Moody's Baa2 Stable February 11, 2020

Fitch BBB– Stable January 21, 2020

On March 20, 2019, the Company’s long-term On January 21, 2020, Fitch Ratings confirmed credit rating was raised by international rating the Company’s long-term default rating at the agency Fitch Ratings to the level BBB-, with BBB- level. a “stable” forecast. The agency noted the Company’s leading position in the global On February 11, 2020, Moody’s confirmed the diamond market, increased financial stability Company’s long-term credit rating at the Baa2 and improved transparency. The rating level, with a stable outlook. The history upgrade reflects ALROSA’s increased financial As part of ALROSA’s work at the World Diamond Council — Introducing more stringent obligations to respect of changes to credit flexibility, as well as the clarity regarding its The confirmation of the ratings reflects ALROSA’s (WDC), which represents the global diamond industry in the human rights in accordance with the UN Guiding ratings is given on the Company website future dividend payments and positive free strong business profile as a leading global Kimberley Process (KP), an interstate forum aimed at preventing Principles on Business and Human Rights; http://eng.alrosa.ru/ cash flow (FCF). The agency also noted that diamond-producing company, with a large conflict diamonds from entering international trade channels, investors/ratings/ the Company management takes into account reserve base, low costs and flexibility in terms of important industry initiatives have been taken to ensure the — Introducing more stringent requirements in the the requirements for financial stability criteria capital expenditures, which allows the Company responsible origin of rough and polished diamonds. On behalf sphere of environmental management. imposed on investment-grade companies. to cope when market conditions are weakening. of the WDC, ALROSA coordinated the KP’s work to create a The Company’s financial position is stable. permanent secretariat in order to increase the efficiency and In 2019, ALROSA also paid significant attention to strengthening professionalization of the organization’s activities. Based on bilateral cooperation with leading countries and national the results of the KP reform cycle, which ended in 2019, the organizations in the global diamond industry. For the purpose main modalities for the functioning of the future structure of strengthening cooperation with Angola through the business were agreed, a request for submission of applications for the community, including in the area of implementing joint diamond secretariat was published, and the process of considering the mining projects, the Russia-Angola Business Council (BCRA) was submitted candidates was launched. established at the Russian CCI in March 2019. The Chief Executive INTERNATIONAL Officer and Chairman of the Executive Committee of ALROSA, S.S. ALROSA also chaired the Diamond Expert Working Group Ivanov, was elected as its Chairman. In April 2019, with the support as part of the Kimberley Process. In this area, the Company of the BCRA, a Russia-Angola business forum was held with the COOPERATION facilitated the introduction of special commodity subheadings participation of the President of Angola. for synthetic diamonds and polished diamonds in the new code of the Harmonized Commodity Description and Coding In April 2019, ALROSA and Endiama, Angola’s national diamond System of the World Customs Organization, which will enter company, concluded a memorandum of understanding. The into force in 2022. ALROSA also contributed to the effective memorandum involves cooperation in the field of rough diamond ALROSA has been actively working to increase the Diamond Terminology Guidelines (DTG) implementation of the expert review mechanism in KP by mining, taking into account best practices in the sphere of the effectiveness of international regulatory were adopted, which formed the basis of new participating in KP review visits to Canada and Switzerland. sustainable development and transparency. mechanisms and the system of industry national regulation in Belgium and industry self-regulation, promote high standards of standards in Great Britain and the UAE. In the ALROSA continued to promote responsible business In October 2019, as part of the Economic Forum held at the Russia- responsible business and supply of rough/ EAEU, EU and India, special customs codes for standards in the diamond industry by participating in the Africa Summit, ALROSA organized a session on cooperation issues polished diamonds, helping to strengthen synthetic diamonds and polished diamonds were Responsible Jewellery Council (RJC), an international non- between Russia and African countries in the diamond industry, consumer trust and the sustainable development introduced. An independent study initiated by profit organization created to strengthen consumer trust in the with participation from heads of relevant ministries and national of the diamond industry, including in the context DPA of the economic and socio-environmental jewelry supply chain, enhance corporate social responsibility diamond mining companies in Angola, Botswana, Zimbabwe, of achieving the UN Sustainable Development aspects of the companies participating in the and promote ethical business conduct, and which provides Namibia, Russia and South Africa, as well as the leaders of the Goals. association was also published. The results of the certification for participants that meet their standards. With the WDC, DPA and RJC. The participants discussed the fundamental study demonstrated that the DPA’s contribution to Company’s participation as Vice Chairman of the RJC in 2019, factors leading to the evolution of the entire diamond industry, and In 2019, as part of the work conducted by socio-economic and environmental development the main standard of the organization, the Code of Responsible identified possible joint solutions for facilitating the sustainable the Diamond Producers Association (DPA), amounts to more than USD 16 bln and is mostly Practice, was updated, including: development of the diamond industry and strengthening which unites major global diamond-producing generated through local communities in the consumer trust. companies, a series of important global programs mining regions by creating jobs, purchasing — Bringing due diligence requirements in line with was implemented to further delimit the market for goods and services, paying taxes and royalties, the OECD Due Diligence Guidance for Responsible As part of the interstate cooperation, the Company took part in the natural rough diamonds and polished diamonds and implementing social programs and Mineral Supply Chains from Conflict-Affected and work of intergovernmental commissions with Armenia, Zimbabwe, and the market for synthetic diamonds, and infrastructure investments. High Risk Areas; Namibia and the UAE. increase industrial safety and environmental protection. Thus, with the DPA’s participation,

76 77 ALROSA ANNUAL REPORT 2019 Performance results

SUPPLY CHAIN ACTUAL PROCUREMENT Number of procurement procedures, ea.

In 2019, the Company carried out 7,825 procurement MANAGEMENT procedures for goods, work and services, as a result of which 11,435 a total of RUB 67.6 bln in contracts were concluded. 9,280 7,825 In 2019, most purchases were made from product manufacturers and authorized dealers, accounting for 97%, as in the previous year. Procurement management is aimed at ensuring the timely, efficient and transparent provision of goods, works and services of appropriate quality in the required quantity and on the most favorable conditions for Based on the results of procurement procedures in 2019, a Thanks to the the Company. consolidated economic effect was achieved in the amount of RUB 2.4 bln, or 5.6% of the initial maximum price of purchases. work carried out ALROSA’s procurement activity is regulated by Federal Law No. 223-FZ “On Procurement of Goods, Work, 2017 2018 2019 since January Services by Certain Types of Legal Entities” dated July 18, 2011 (Law No. 223-FZ), as well as regulatory legal One of the key issues during the procurement process is acts of the Government of the Russian Federation issued in the development of this law, the Regulations on ensuring openness and competitiveness of procurement, 1, 2019, the procurement activities1, and other internal documents of the Company. which is achieved through:

procurement — Carrying out procurements via external electronic processes of the trading facilities; Contract price, RUB bln Company were ADAPTING TO NEW LEGAL CENTRALIZATION — Striving to increase the number of participants in the procurement; fully adapted to 70.8 REQUIREMENTS OF PROCUREMENT 69.5 the requirements — Releasing preliminary announcements of upcoming 67.6 procurements; of the new In 2018, significant amendments were made to In 2019, the Company continued to centralize version of Law the procurement legislation2, which required the the procurement function. On the basis of the — Posting a procurement plan on the Unified development of a new version of the Regulations Shared Service Centre (SSC) in Novosibirsk, Information System state information portal. No. 223-FZ. on procurement activities of PJSC ALROSA, a project was launched to support medium- as well as the transition to procurement on sized decentralized procurement of the All this allows us to ensure a level of competitiveness above external electronic trading facilities. In 2019, Company’s standalone divisions. The main the national average according to reports from relevant the Company carried out large-scale work on objective of this project is to remove non-core government agencies. setting up the procurement process to meet the load from production assets, improve the requirements of the amended legislation: quality of procurement and competitiveness 2017 2018 2019 in procurement. During the reporting period, — A new version of the Regulations on the Office for the Support of Procurement procurement activities was approved, Procedures of the SSC carried out 630 purchases and new procurement documentation in the amount of RUB 330 mln. forms were developed; PJSC ALROSA procurement structure in 2019, %

— Training events for employees, as well as seminars with small and medium- sized businesses; 3 Other — The transition to external electronic trading facilities (ETF) was completed: Indicator % CJSC Sberbank — Automated Trading 43 Authorized System and JSC United Electronic Authorized dealers 43 Trading Platform; dealers 54 Manufacturers 54 — An internal automated procurement Manufacturers system on the SAP SRM platform was Other 3 integrated with external ETFs.

Thanks to the work carried out since January 1, 2019, the procurement processes of the Company were fully adapted to the requirements of the new version of Law No. 223-FZ.

1 Approved by the Supervisory Board (Minutes No. A01/247-ПР-НС dated September 29, 2016), a new version of the Regulations on Procurement Activities was approved on November 15, 2018 (Minutes No. A01/283-ПР-НС). 2 Changes were made to the Federal Law No. 223-FZ “On Procurement of Goods, Work, Services by Certain Types of Legal Entities”.

78 79 ALROSA ANNUAL REPORT 2019 Performance results

PROCUREMENT AND SMEs IMPORT PHASE-OUT PROGRAM

ALROSA is implementing measures aimed at small and medium-sized businesses. Six new SMEs An important task for the Company is to reduce its were made on ten issues regarding the actual replacement facilitating access to small and medium-sized were added in 2019, with a total of 41 SMEs on the dependence on foreign equipment. ALROSA systematically of imported products with counterparts made in Russia. The total enterprises (SMEs) to procurements conducted by program register by the end of the year. In April implements an import phase-out strategy1. The Regulations Main procurement of products as part of import phase-out the Company and increasing the share of contracts 2019, a seminar on ensuring access for SMEs to on procurement activities establish that goods and services in 2019, RUB mln volume of concluded with SMEs. The Company has been the procurement of major customers was held in of Russian origin take priority in accordance with Decree ALROSA operating a partnership program with SMEs for Yakutsk with the participation of representatives No. 925 of the Government of the Russian Federation dated In 2019, import phase-out work was continued with several years now, aimed at creating a network of of the Ministry of Industry and Trade of the Sakha September 16, 2016. Since 2014, the Company has been regard to software. The software licenses already in use procurements qualified and responsible partners from among Republic (Yakutia). operating a Commission focused on resolving import phase- at the Company (AREOPAD, Boss-Kadrovik, DocsVision, out issues, which makes decisions on substituting imported Consultant, etc.) were renewed and licenses were from SMEs products with domestic counterparts based on the principle purchased for the following domestic software: warehouse totaled RUB 10.7 of economic feasibility and technological feasibility. In 2019, management system AXELOT WMS X5, and analytical bln in 2019. six meetings of the Commission were held and decisions platform Visiology. Structure of procurement from SMEs in 2019, RUB mln

Main procurement of products as part of import phase-out in 2019, RUB mln 2,198.6 2,117.3 Indicator RUB mln Other Provision of services Provision of 2,117.3 services 115.0 27.0 Passenger Lift and transport Equipment 1,898.0 886.3 buses equipment Construction and Spare parts 1,427.8 189.0 installation works Ore processing Materials 1,185.8 1,898.0 equipment Tires 1,033.9 1,033.9 Equipment Construction and Tires 886.3 installation works 1,185.8 1,427.8 Other 2,198.6 Materials Spare parts 459.0 Lubricants

PJSC ALROSA procurements from SMEs in the Far Eastern Federal District in 2019, RUB mln

755.9 965.8 332.2 1,700.0 Quarry machinery procurement (total) 2,053.9 (tip trucks) 386.3 287.9 140.2 incl. preferential 814.4 Indicator млн руб.

Mirny Disctrict Other districts, Sakha (Yakutia) Other districts, Far Eastern Quarry machinery (tip trucks) 1,700.0 Federal District Lubricants 459.0

Ore processing equipment 189.0

Passenger buses 115.0

Lift and transport equipment 27.0

1 In compliance with the instructions of the Government of the Russian Federation, Directive No. 7850п-П13 of the Government of the Russian Federation dated November 24, 2014.

80 81 ALROSA ANNUAL REPORT 2019 Performance results

MANAGEMENT OF MTR MODERNIZATION OF THE OIL FLEET

For the purpose of improving the management efficiency of — An integrated planning process for production Due to geographical remoteness, the bulk of the The process of modernizing the ALROSA-Lena Material and Technical Resources (MTR) in 2019: support was organized: meetings on supply issues MTR needed by the Company are delivered by oil fleet has been underway for the past three were held regularly with the heads of mining and water along the Lena river during the navigation years. In this time, in addition to the construction — A comprehensive program for the automation of processing enterprises; period from May to October. In 2019, two non- of two new barges, two existing barges were also production support processes was implemented; self-propelled oil barges were added to the fleet converted and the motor ship Aleksey Pakhomov — Company reserves were classified; of the shipping company ALROSA-Lena, which was modernized. — The process of actively involving current stocks was implemented; — The MTR Reserve Management Policy was will be used to transport fuel for the enterprises developed. within the ALROSA Group. Report by Almazny Krai media company https://yadi.sk/i/ vccuIMTRBaSyCQ

Measures to enhance the quality of reserve management in 2019 SETTLEMENT OF LESS THAN Event Effect

— Growth in the level of provision using own transport capabilities m t Construction of two oil barges <2 40,000 2020 — Compliance with current environmental safety requirements ability to work along total volume of fuel start of operation with the shallowing transportation Commissioning of 91 units of tank semi-trailers for the of the river — Compliance with axle load requirements when driving on transportation of oil products on land with a lower carrying public roads without paying additional fees capacity of 23 tons each

— Growth of reserve processing and storage level Construction of two heated warehouses at Nyurba Mining and 2 Processing Division with a total area of 1,512 m — Reduction in time frames for acceptance and issuance of MTR DOUBLE to production t HOUSING — Reduction in time frames for processing incoming MTR 2 000 Launch of project for automation and implementation of the loading capacity environmental warehouse management system WMS X5 safety — Increase in MTR issuance efficiency

82 83 CHAPTER 04 “Some time ago our enthusiasts paved roads and power lines through the untrodden taiga, built cities and airports. As talented organizers they showed SUSTAINABLE a worthy example of organization of the work and life of people in extreme conditions. Today, the Company continues to develop the social sphere, education, healthcare, culture and sports, takes care of the environment in all DEVELOPMENT regions of presence”.

Vladimir Zuev

2019 34.5 thousand of employees

2019 100 RUB bln of taxes and dividends paid to budgets ALROSA ANNUAL REPORT 2019 Sustainable Development

KEY AREAS OF ALROSA ACTIVITIES IN THE SPHERE OF SUSTAINABLE DEVELOPMENT SUSTAINABLE DEVELOPMENT Key areas Highlights in 2019 Related SDG 1. Responsible business conduct 9, 12, 17 — Interacting with key international industry — 100% of operations with organizations diamond products comply with — Ensuring compliance with international standards for the WDC guarantee system responsible business conduct and their promotion — No confirmed cases of — Improving corporate governance and risk corruption management — NRCG rating 81 Best — Improving operating efficiency and implementing Corporate Governance innovation development programs Practices

2. Occupational health and safety 3, 8 — Ensuring safe working conditions — 0.24 — LTIFR — Complete elimination of accidents and emergencies — 60% reduction in the number of — Staff participation in OHS management fatal and severe injuries — Staff training in OHS — 3,298 managers and specialists — Risk assessment, control and monitoring certified in accordance with — Liability insurance Rostechnadzor requirements

3. Development of human capital 5, 8, 10 — Ensuring equal and decent working conditions for — 34,500 employees employees — The average salary of ALROSA — Respecting human rights and preventing all forms of employees exceeds 3 times discrimination the national average — Ensuring decent remuneration for work and improving — 32% of employees at ALROSA the quality of life for employees are women — one of the best — Promoting professional development, training and industry indicators in the world skills development SUSTAINABLE — Implementing social support programs for employees DEVELOPMENT APPROACH 4. Environmental protection 6, 7, 13, 15

— Ensuring compliance with legislative and — CO2 emissions decreased by international requirements and standards 50% between 2014 and 2019 ALROSA is committed to creating a sustainable future, The principles of sustainable development are integral — Reducing negative environmental impact — 85.5% of electricity consumed responsibly pursuing a balance between commercial and elements of ALROSA’s activities, integrated into the — Ensuring efficient use of energy resources and using by PJSC ALROSA comes from public interests. The Company has consistently maintained Company’s mission and strategy for the period up to 2024, energy from renewable sources renewable sources its commitment to further developing its areas of presence, as well as other internal normative documents. — Ensuring effective waste management and safety of — 3.2% of revenue is allocated creating jobs and improving the living conditions of the tailings dams to environmental protection local population while providing substantial tax revenues at In determining the approach and key areas of activity in the field — Carrying out land reclamation and biodiversity measures various levels, building social infrastructure and protecting of sustainable development, ALROSA is guided by the norms conservation in areas of presence the environment, including contributing to the achievement of applicable Russian and international law, the principles of of the UN Sustainable Development Goals. the UN Global Compact and the UN Sustainable Development 5. Development of areas of presence Goals for the period until 2030, as well as the provisions of other international standards and initiatives in this field. — Economic development of areas of presence through — RUB 100 bln in taxes and 8, 10, 11, 17 job creation, tax and dividend contributions dividends was paid to the — Development of infrastructure in areas of presence federal budget and regional (including single-industry towns) budgets — Support for indigenous peoples and national — 3.6% of consolidated revenue KEY DOCUMENTS communities goes to social expenses2 — Implementation of charitable projects and initiatives — Over 500 projects and initiatives to support local — Strategy for the period 2018–2024 — Sustainable Development and Corporate Social communities and charities Responsibility Policy — Corporate Ethics Code — ALROSA ALLIANCE principles of responsible — Corporate Governance Code business conduct 1 According to the National Rating of Corporate Governance (NRCG), conducted by the Russian Institute of Directors. 2 Industry leadership for this indicator according to PwC report “Sustainability benchmark report, 2016–2018” http://eng.alrosa.ru/alrosa-remains-the-industry-leader-in-social- investments/

86 87 ALROSA ANNUAL REPORT 2019 Sustainable Development

KEY ESG RATINGS ALROSA’S ECONOMIC FTSE4Good MSCI ESG CONTRIBUTION Index member since 2016 BB

Rough diamond mining has been successfully carried out in ALROSA contributes significantly to the social and economic the Republic of Sakha (Yakutia) for over 50 years, and over development and well-being of the areas of its presence and 15 years in the Arkhangelsk Region. Knowing that the long- the country as a whole by paying taxes to federal and regional term success of the business depends on the well-being of budgets, employing local residents, purchasing and using its employees and their quality of life, ALROSA has strived to the services of local and regional suppliers, and accelerating RobecoSAM Sustainalytics develop and maintain mutually beneficial partnerships with the development of related industries. This contributes to representatives of state and municipal authorities, to improve improving the living conditions of the local population and 30 out of 100 59 out of 100 the living conditions of employees and their families, and stimulating economic growth. to maintain the social and economic stability of the single- industry towns and areas of Company presence.

Key indicators of ALROSA’s economic contribution to the development of areas of presence ISS ESG Bloomberg

5 out of 10 55 out of 100 Indicator 2017 2018 2019

Taxes and mandatory payments paid, RUB bln 69.4 69.7 61.3

including World Wildlife Fund (WWF) RAEX-Europe To the federal budget, RUB bln 2.2 1.8 –1.0 Top 10 ranking of environmental 8th place responsibility among mining To regional budgets, RUB bln 53.6 54.9 48.3 companies in Russia To extrabudgetary funds, RUB bln 13.6 13.0 14.0

Dividends paid, RUB bln 67.4 80.7 57.5

including AWARDS AND CERTIFICATES To the federal budget, RUB bln 21.7 27.2 19.3

— ALROSA is a certified member of the — PJSC Severalmaz came in first place To regional budgets, RUB bln 23.1 27.1 19.3 Responsible Jewellery Council (RJC), according to the results of the which is proof of its compliance with Labor Productivity: Russian Industry high standards in the field of responsible Leaders 2019 All-Russia Award in Share of tax and dividend deductions of ALROSA Group in tax and business practices the Labor Productivity: Leaders of non-tax income of the consolidated budget of the Republic of Sakha 51.8 46.7 40.2 Russian Regions-2019 category in the (Yakutia), % — ALROSA received the Diamond Arkhangelsk Region. More Empowerment Fund (DEF) Award for New jobs created in the areas of presence 3,897 4,309 3,044 information on the the implementation of social projects — PJSC Severalmaz was named winner Company’s approach for residents in its areas of presence of the regional stage of the All-Russian to sustainable Average salary of PJSC ALROSA employees, RUB thousand/month 124.3 126.7 136.4 development is (Community Stewardship) competition Russian Organization of disclosed in its annual High Social Efficiency in the For the Best socio-environmental Ratio of the average salary of PJSC ALROSA thousand to the average — ALROSA was ranked in the top 10 best Conditions Provided to Employees with 2.0 1.8 1.9 reports: http://eng. salary in the Republic of Sakha (Yakutia) alrosa.ru/documents/ employers in Russia according to Forbes Family Responsibilities in Production social-reports/ magazine (7th place) Sector Companies category. Ratio of the average salary of PJSC ALROSA employees to the average 3.2 2.9 2.9 salary in the Russian Federation

Social expenses and investments, RUB mln 8,698 9,530 8,626

Share of social expenses in revenue, % 3.2 3.2 3.6

1 Including dividends paid to non-controlling shareholders by subsidiaries of the Group.

88 89 ALROSA ANNUAL REPORT 2019 Sustainable Development

OCCUPATIONAL HEALTH KEY PROJECTS AND RESULTS AND SAFETY Ensuring safe working conditions In 2019, as part of further implementation of In 2019, the total expenses on implementing the program of activities to improve the OHS various activities in the field of OHS amounted management system, the following tasks were to RUB 777.2 mln (or RUB 35,500 per solved: employee).

MANAGEMENT APPROACHES — In order to improve the goal setting A year earlier, this figure was RUB 814.4 mln and system (KPIs) for managers at all levels, RUB 33,300 respectively. personal plans were developed in the Preventing accidents and emergencies at work is one of — The central committee meets quarterly under the area of OHS, including conducting their ALROSA’s strategic priorities. The wide-reaching geography CEO / Chairman of the Executive Committee and own audits and communicating with Exception of accidents of the Company’s production assets in the territory of the determines the strategic areas of development in the staff at production facilities, holding and emergencies Republic of Sakha (Yakutia), difficult climatic conditions, field of industrial safety; general meetings with their teams on as well as the presence of work areas with hazardous OHS issues, speaking to the media, and In 2019, 74 production-related accidents In 2019, the total production factors require a comprehensive approach to — The committee under the Executive Director meets organizing and holding committees on occurred in the ALROSA Group, resulting the management of occupational health and safety issues monthly and determines ways to solve the problems industrial safety; in injuries to 74 people, including 62 men expenses on (hereinafter referred to as OHS). encountered in the implementation of the Strategy; and 12 women. Thanks to the consistent implementing — A system was implemented for implementation of measures to improve the ALROSA conducts consistent work and directs significant — Committees under the heads of enterprises meet collecting and analyzing statistics based OHS management system, the number of fatal various activities resources to timely identification and minimization of monthly and analyze the reasons for violations of on the results of internal investigation and severe injuries decreased significantly (by in the field of risks associated with OHS, implementation of modern industrial safety rules at the enterprise and measures of any unusual production events, 60%) against 2018. management standards and technologies in the field, as well for their elimination. accidents or incidents affecting OHS amounted as training and certification of staff. occupational safety; The LTIFR indicator for ALROSA Group remained An important focus of ALROSA’s work is also to fully involve at the previous year’s level of 0.24. to RUB 777.2 The following standing committees operate as part of the managers in monitoring and addressing OHS issues on a — The “Internal investigation of the causes mln (or RUB OHS management system at PJSC ALROSA: daily basis. Only with the involvement of each employee and of incidents” standard was developed constant control of risk factors can injuries and occupational based on the results of 2018 testing 35,500 per illnesses be brought to a minimum. of investigative methods aimed at LTIFR identifying root causes of emergency employee). situations;

— Personal plans were introduced in the 0.24 field of OHS (including undergoing 0.23 and organizing training sessions, 0.18 participation in scheduled and unscheduled audits, etc.), and for line personnel — various types of financial and non-financial incentives in the KEY DOCUMENTS field of OHS (competitions for the best division, the Safety Leader title, etc.). 2017 2018 2019

— Development strategy for the OHS management — Regulation on industrial control over compliance system with industrial safety requirements at hazardous production facilities — Occupational Health and Safety Policy — Priority Action Plan (approved on an annual basis) Total number of recorded injuries (injured people) — Regulation on the OHS management system across ALROSA Group

2 4 68 2019 74 3 13 49 2018 65 9 5 39 2017 53

Fatal Heavy Light

90 91 ALROSA ANNUAL REPORT 2019 Sustainable Development

Staff participation in OHS management Staff training in OHS PERSONNEL STRUCTURE

Control over the OHS system and the performance At the Personnel Training Center of PJSC ALROSA, 3,928 of the Company’s obligations is also carried out by managers and specialists were certified in accordance with The headcount of ALROSA Group in 2019 amounted to 34,500 Actual headcount in authorized persons of the trade union Profalmaz, whose Rostechnadzor requirements, and 1,391 employees passed people, of which 63% are PJSC ALROSA employees. PJSC ALROSA decisions on occupational safety issues are mandatory for background checks on occupational safety issues. consideration by the Company. In 2019, the occupational The headcount of PJSC ALROSA in 2019 amounted to 21,900 safety committees consisted of 64 union representatives people, of which 94% were working in the Republic of Sakha 25,653 (0.3% of the actual number of Company employees). Risk assessment, control and monitoring (Yakutia). The 10.5% decrease in the number of staff compared 22,768 21,866 to 2018 is due to structural changes in the Company and the In addition, an institute of occupational safety The company is considering the possibility of developing reorganization of several subsidiaries. commissioners operates at the Company: and implementing a system for assessing critical controls in production according to the International Council on Mining The average age of PJSC ALROSA employees was 41.5 years. — 384 occupational safety commissioners; and Metals (ICMM). More information about production risks is given in the Risk The staff turnover rate in 2019 was 6.0%, down 1 p.p. — Around 2,700 inspections were conducted by Management section compared to 2018. occupational safety commissioners in 2019.

Any Company employee and employees of contracting Social support standard 2017 2018 2019 organizations can report violations detected by them on the production site, ask a question or share their proposals to The Supervisory Board of PJSC ALROSA approved the ensure safe working conditions by sending an anonymous social support standard for workers in industrial accidents. message to [email protected]. According to the provisions of the standard, employee death and temporary incapacity insurance will replace PJSC ALROSA personnel structure the Company’s salary-based payments. The new payment in 2019. mechanism will allow families of affected workers to receive compensation in a shorter time than when carried out by an insurance company. The Company’s annual budget for social 3,165 support will increase significantly under the new standard. Managers 13,500 Workers Indicator people

Workers 13,500

4,472 Employees 214 Experts DEVELOPMENT Experts 4,472 OF HUMAN CAPITAL Managers 3,165 214 Employees

HR POLICY HUMAN RIGHTS AND EQUAL OPPORTUNITIES

ALROSA’s HR policy is aimed at increasing labor productivity, improving the social protection of workers and creating a favorable social and psychological environment. ALROSA strives to provide its employees with fair and decent well as other qualities of the employee not related to business. working conditions, ensuring the protection of human The process of recruiting and hiring employees at ALROSA is rights and freedoms and recognizing their importance and guided solely by the professional qualities of candidates and universality. also does not permit any form of discrimination.

ALROSA is guided by applicable international and national Despite the traditionally male-dominated personnel structure KEY DOCUMENTS law, as well as the UN Guiding Principles on Business and of extractive companies, ALROSA strives to create conditions Human Rights, based on the International Bill of Human Rights for increasing the number of women among the Company and the International Labour Organization Declaration on specialists and management. In 2019, the number of women — Social Policy — Collective agreement between PJSC ALROSA Fundamental Principles and Rights at Work. employed at PJSC ALROSA totaled 32%, which is quite high and Profalmaz Interregional Trade Union of PJSC for the industry. — Internal Labor Rules ALROSA employees for 2020–2022 ALROSA strives to provide its employees with equal opportunities and equal working conditions regardless of sex, ALROSA also plans to conduct a regular assessment of the — Local internal regulations race, nationality, language, origin, property, social and official risks of human rights violations against the Groups’s staff, status, age, place of residence, religion, political opinion, conduct industry-specific training and improve feedback membership or non-membership to public associations, as mechanisms.

92 93 ALROSA ANNUAL REPORT 2019 Sustainable Development

ALROSA runs a Corporate University in order to create a Number of young specialists recruited to work at PJSC ALROSA, SALARIES continuous education system for employees. The Corporate people University program offers more than 70 educational programs, including ALROSA Wealth, ALROSA Potential, In 2019, the average salary of PJSC ALROSA Average salary in PJSC ALROSA, ALROSA Leaders, ALROSA Asset, TOP 25, and ALROSA Indicator 2017 2018 2019 employees rose by 7.7% against the previous year to RUB thousand Talent Pool. RUB 136,400 per month. In 2019, 480 people took part in the management programs From higher education 49 75 42 Since July 2019, ALROSA has introduced a new and activities held by the Corporate University. institutions graded system for basic pay. Under the new system, the categories were changed to grades In addition, ALROSA actively engages young promising 136.4 From technical and and tariff rates were changed to new salary ranges specialists in cooperation with higher and secondary 72 65 63 vocational schools developed for each grade, which are based on specialized educational institutions. the current level of payment in the Company and 126.7 market data on the level of remuneration. A new 124.3 bonus system has also been introduced, in which the bonus earned by employees directly depends on the performance of both the entire structural SOCIAL PROGRAMS FOR STAFF unit and each employee individually. In the new system, it is possible to differentiate the size of the bonus between shops and services, as well as between employees depending on their work ALROSA strives to provide its employees with an attractive social package and a performance. high level of social guarantees.

2017 2018 2019 Key areas of ALROSA social programs for employees and veterans

Program Key results in 2019 STAFF TRAINING Number of PJSC ALROSA managers and experts The Company has had a non-state employee pension program in place for more than 20 years1. AND DEVELOPMENT trained in 2019, pers. Since 2017, the principle of parity financing for the corporate pension has been introduced — the Company makes equal contributions along with the employee, so the total contribution is doubled. Non-state pension In order to ensure effective staff training and provision AlROSA Group’s contributions to NPF Almaznaya Osen for non-state pension provision amounted to development, ALROSA organizes professional In 2019, 480 (including additional professional) training, 13,734 more than RUB 4 bln in 2019. corporate management programs, and also At the end of 2019, the total amount paid out to pensioners of the fund amounted to RUB 1.4 bln. people took conducts career guidance activities for young part in the people and potential employees. 8,710 6,528 In 2019, the Group allocated RUB 367.5 mln to healthcare for workers, their families and pensioners/ management In 2019, more than 13,700 Company employees veterans. underwent training programs, which amounts Health care programs and Over the course of the year, 1,600 people received check-ups and treatment at leading medical and to over 60% of the total headcount. The number activities held by of staff trained increased by 57.7% compared to scientific institutions at the Group’s expense. 2018. the Corporate Around 11,000 employees spent time at health resorts and summer children’s camps using 2017 2018 2019 Health resorts and subsidized passes and vouchers. University. recreation The Group’s expenses in this area amounted to RUB 809.9 mln.

Educational background of PJSC ALROSA employees in 2019, % ALROSA actively supports the development of corporate sports and healthy lifestyles for employees and their families. 3 ALROSA’s sports facilities have more than 175 sections and club associations for adults and Culture and sports children. Several thousand cultural, sports and physical and recreational events are organized Elementary each year. 19 Indicator % 39 In 2019, the Group’s companies allocated RUB 1,470.6 mln to finance cultural and sports Secondary Higher Higher 39 programs.

Secondary vocational 20 ALROSA finances a mortgage loan program, which provides preferential terms for setting the Initial vocational 20 interest rate and the possibility of compensating employees’ interest costs. In 2019: Housing 20 Secondary 19 — Over 400 people took part in the program; Initial vocational Elementary 3 — Expenses on compensation amounted to RUB 57.1 mln.

20 Secondary vocational 1 The program is implemented through NPF Almaznaya Osen http://npfao.ru/

94 95 ALROSA ANNUAL REPORT 2019 Sustainable Development

In 2019, thanks to ALROSA’s financing, the Fund of Future Generations carried out several significant projects for the DEVELOPMENT OF AREAS development of social infrastructure: OF PRESENCE Project Summary Total amount of project financing by ALROSA

New school building in Abyy School for 90 pupils, with sports hall and necessary modern RUB 322.0 mln One of the most important directions in ALROSA’s operating in the region in 1954, and aims to village equipment social policy is to promote the integrated social provide employees with decent pay and working and economic development of the Company’s conditions, and residents of the territories with Hall for adapted physical The first multifunctional sports hall in the republic. The 7th RUB 130.0 mln areas of presence. The Company has supported access to social infrastructure and a comfortable education Betyuntsy village Yakutia Sports Games were held there in July the social development of Yakutia since it began urban environment. Construction of a water treatment plant in Horo village fully Implementation of the clean covers the local population's need for clean and good-quality water Program for residents of water; acquisition of 25 units of water equipment for the RUB 191.4 mln the Vilyuysky uluses and the Vilyuysky uluses; financing scientific research in ecology for the scientific research Program KEY DOCUMENTS Vilyuysky uluses

Student accomodation, — Agreement on mutual cooperation — Cooperation agreement in the field Construction of the residence will provide 500 university to implement the Local Workforce of social and economic development Ammosov north-eastern federal RUB 23.9 mln students with accomodation into Industry priority project of the of the Nyurbinsky District of the University in Yakutsk Republic of Sakha (Yakutia) in 2018– Republic of Sakha (Yakutia) for 2022 2019–2021 — The Resource Center was established to assist municipal regions in the improvement of territories in settlements as — The For the Future Fund target — Agreement on social and economic part of the Creating a Comfortable Urban Environment priority program for 2016–2020 cooperation with the municipal Urban environment project district Oleneksky Evenki National resource center; RUB 68.0 mln District in the Republic of Sakha future generations park (Yakutia) for 2019–2023 — Future Generations Park is a modern educational center with a focus on urban development projects in areas with harsh climate conditions

The center includes an auditorium with 212 seats, a bandstand, Cultural and sports complex a choreography hall, and a library. Being the only one of its kind RUB 90.8 mln Zyryanka village in Zyryanka, the facility is of great importance for the district and meets all modern requirements CONTRIBUTION TO DEVELOPMENT OF REGION- Therapy and children’s ward with 30 beds, with a polyclinic for Hospital Batagai village RUB 236.1 mln AL INFRASTRUCTURE AND ECONOMY 180 consultations per shift

Khodulov cultural and leisure Multifunctional cultural and leisure complex named after D.F. Most ALROSA employees work in single-industry ALROSA is currently implementing a targeted RUB 54.0 mln towns: Mirny, Udachny, and Aikhal, which are program of the Fund “For the Future” for complex Maya village Khodulov in Maya village in Megino-Kangalassky ulus located at a significant distance from large the period 2016–2020, which consists of Ct scanner for district hospital, Due to the lack of modern X-ray equipment in Mirninsky district, settlements and for which ALROSA is the key two subprograms: “Assistance” (funding RUB 40.0 mln enterprise. Therefore, one of the Company’s the construction of social facilities) and Mirny in Mirninsky district ALROSA took the decision to donate a CT scanner to the hospital objectives is to provide its employees, their “Development” (implementation of social families and other residents of cities and areas projects). Under the program, the Company of Company presence with developed modern helps to develop cultural activities, provide urban infrastructure. decent education to children from remote ALROSA also cooperates with federal and state authorities to develop transport and engineering infrastructure in its areas of communities, and give young people access to presence. In accordance with the agreement on social and education. In 2019, the Company sent RUB 931.4 economic development of the Republic of Sakha mln to the trust fund. Learn more information on the (Yakutia), ALROSA sends substantial funds to Fund’s activities on the non-profit organization Trust Fund of Future In 2019, the Company started repairing the Anabar route, the Eastern Economic Forum in 2019. The implementation their website http:// Generations in the Republic of Sakha (Yakutia) on the only road connecting ALROSA’s northern sites with the of the agreement will ensure stable electricity supply to fondyakutia.ru/english/ an annual basis. The Fund distributes targeted towns of Mirny and Lensk. The route is of great importance for the local population and socially significant facilities, as funding for the implementation of socially ensuring the normal functioning of Udachny and Aikhal MPDs, well as the possibility of developing the districts of Yakutia significant projects and programs in the region. as products and materials are delivered via this route to the by attracting investments. To this end, it is planned to towns of Udachny and Aikhal. modernize the power line that has reached the end of its service life, which will allow it to be connected to new In addition, ALROSA and the Republic of Sakha (Yakutia) housing stock, facilities of social and cultural significance signed a cooperation agreement in the field of electricity at and new production facilities.

96 97 ALROSA ANNUAL REPORT 2019 Sustainable Development

CONSTRUCTION OF A NEW AIRPORT CREATION OF JOBS IN REGIONS IN MIRNY In 2019, 3,044 residents of Yakutia regions Technopark, Mirny Polytechnic Lyceum, the were hired under fixed-term and indefinite- Center for Children’s Additional Education, term employment contracts, including 2,510 and the Almazik Preschool Educational people from uluses in the “diamond province” Establishment, the Company conducts activities One of the most important (Anabarsky, Oleneksky, Vilyuysky, Verkhne- to provide career guidance support to students. infrastructure projects Vilyuysky, Nyurbinsky, Suntarsky, Mirninsky implemented by ALROSA is the and Lensky). In total, 2,481 representatives of In order to reduce the time needed for the local construction of a new airport in indigenous communities and small-numbered workforce to adapt and integrate smoothly the town of Mirny. The project is peoples of Yakutia were working in the into production processes, ALROSA launched About 11.6% of RUB included in the comprehensive plan Company’s divisions at the end of 2019. the Argys project for local workers in 2019. It ALROSA’s staff 22.4 44 meters to modernize and expand the main is intended to help workers from the uluses of bln wide infrastructure for the period up to The company also carries out comprehensive Yakutia to more quickly find their feet at the are indigenous, total investment 2024 approved by the Government work in the field of career guidance aimed Company’s production sites and create a basis of the Russian Federation and will at attracting the local workforce. Together for their professional growth. and this be financed from both budgetary with the District Education Administration, proportion has and extrabudgetary sources. The 18 new modern gateway will appear in been increasing RUB 10.4 aircraft aprons Mirny by the end of 2023. steadily over the bln Dynamics of involvement of experts from past few years expenses of ALROSA regions of Yakutia, pers.

2,860 meters 4,309 long 3,897 RUB 10.4 bln 300 3,044 expenses for account passengers of the RF budget 150 people for arrival/150 people for departure km 3 Foort traffic per hour 1,392 to the north-east 950 of the operating airport RUB 1.6 bln

expenses for 2 2017 2018 2019 account of the State jet bridges Corporation for the and a fixed bridge for passenger Organization of Air Total Local Human Resources project 2020–2023 handling Traffic budget planned term of construction

LOCAL WORKFORCE INTO INDUSTRY

The priority republic project “Local Within the framework of the Agreement, Workforce into Industry” has been various employment activities are carried underway since 2018 in accordance with out, which are targeted at unemployed the Agreement on Mutual Cooperation on citizens of the Republic of Sakha (Yakutia), ONE TERMINAL the Implementation of the Priority Project of including from rural areas. Together with the Republic of Sakha (Yakutia) for 2018– the State Employment Committee and for arriving and departing passengers with comfortable 2022. The agreement establishes quotas Employment Center, representatives of baggage reclaim and arrivals areas according to which ALROSA conducts joint ALROSA held job fairs throughout 2019. work with employment centers, and local They took place in Vilyuysk, Verkhnevilyuysk, The design documentation, residents receive referrals to work at the and Mirny, and attracted more than 2,000 m2 developed by general Company. locals. 8 000 constructor LenAeroProekt, was terminal area. positively reviewed by the FAI As part of this project, 1,392 residents About 11.6% of ALROSA’s staff are indigenous, Almost twice as big as the Glavgosexpertiza of Russia in of the Republic of Sakha (Yakutia) were and this proportion has been increasing operating airport December 2019 employed to work for the Company in 2019. steadily over the past few years.

98 99 ALROSA ANNUAL REPORT 2019 Sustainable Development

SUPPORT FOR INDIGENOUS AND As part of the festival, “star” athletes and coaches, cultural and artistic figures give open lessons, master classes and demonstration performances for free in each city to anyone who wants to attend. The main aim of the festival is to promote and maintain a healthy SMALL-NUMBERED PEOPLES lifestyle among adults and children, to find talents and promote children’s development, and ensure a positive future.

The activities of ALROSA and its subsidiaries affect the Under mutual cooperation agreements with the nine districts interests of the population of the Sadynsky national nasleg in the “diamond province”, ALROSA finances its development MOOD FESTIVAL IN 2019: of the Mirninsky district, and the national Anabarsky and programs on an annual basis. In 2019, the Company allocated Oleneksky uluses, where Dolgans, Evenks, Evens and other RUB 83.3 mln for this purpose. indigenous communities of the North live. — Mirny, Udachny, Aikhal and Yakutsk — 3 areas: basketball, acrobatic rock and roll, and In July 2019, ALROSA and the Federal Agency for Ethnic Affairs martial arts ALROSA strives to strike a balance between the interests of (FAEA of Russia) signed a cooperation agreement in the field — 5th festival the state, business and indigenous small-numbered peoples of preserving the traditional way of life of indigenous small- — 191 master classes in order to achieve sustainable economic development in the numbered peoples in the North, Siberia and Far East of Russia. — November 17 – December 15 region, improve quality of life and develop national culture. The main area of work will be to develop cooperation between — 10,000 participants Priority areas of support are the economic development of indigenous small-numbered peoples associations and local the Arctic uluses, creation of favorable conditions for solving governments and industrial companies. Moreover, FAEA of basic social problems, compliance with environmental Russia and ALROSA agreed to participate jointly in the public requirements, and retraining and employment of the local discussion of draft normative legal acts in the field of protecting population. the rights of indigenous small-numbered peoples.

The Company’s enterprises support ancestral communities At the end of December 2019, JSC Anabara Diamonds and of reindeer herders and fishermen, providing them each year the Arctic uluses of Yakutia signed a cooperation agreement with financial assistance for agricultural activities, support and for 2020, according to which the ALROSA Group subsidiary development of traditional species of fishing and hunting, will allocate RUB 109.5 mln for the social and economic acquisition of all-terrain equipment, fishing gear and hunting development of Bulunsky, Anabarsky, Oleneksky, Zhigansky equipment. and Eveno-Bytantaisky uluses.

In December 2019, the Ilkit modern ethno-cultural to preserve the intangible cultural heritage of the center was opened in the village of Olenek. ALROSA Evenky people. The main objective of the center is to allocated RUB 211.6 mln for its construction. This is preserve the traditional culture, language and arts of the the next step for the Company in creating conditions indigenous peoples of the North.

OLENEK EVENKI NATIONAL DISTRICT:

— Northwest of Yakutia behind the Arctic Circle — Center of the district — Olenek village

— 10% of the Republic of Sakha (Yakutia) — 4,000 Evenks

CHARITY PROJECTS AND SPONSORSHIP

Intellectual volunteering Federal social projects Eastern Economic Forum, the Russian Hockey Federation, the Russian Wrestling Federation, the Russian Union of Martial In 2019, ALROSA became a partner of the Friends foundation. This foundation creates links between non-profit organizations ALROSA has sponsored a number of federal-scale Arts, the Kiokushinkai Association of Russia, the VTB United and businesses. The Friends foundation created the ProCharity platform, through which specialists of various fields transfer their organizations and major events in the fields of culture, Basketball League and the Federation of DanceSport and skills and professional experience to charitable foundations instead of money. ALROSA staff can now take part in this work. education, health and sports. In 2019, the Company allocated Acrobatic Rock’n’Roll. Together with its partners, ALROSA has RUB 835.9 mln for this purpose. The Company supports the been holding the Mood festival in Yakutia since 2017.

100 101 ALROSA ANNUAL REPORT 2019 Sustainable Development

Structure of ALROSA Group environmental expenses, RUB mln ENVIRONMENTAL 116.7 Indicator RUB mln Air protection and mitigation PROTECTION of climate change 142.5 Capital expenditures 2,224.8 Other 818.9 2,224.8 Waste management 3,413.3 Wastewater collection and treatment Capital expenditures Protection and rehabilitation of 952.5 land, surface water, and ground MANAGEMENT APPROACH 952.5 Wastewater collection and Since 2019, Protection and 818.9 rehabilitation of land, treatment ALROSA’s priority is to ensure the careful and rational use of natural PJSC ALROSA surface water, and ground Air protection and mitigation of resources in order to minimize environmental risks and prevent and reduce 116.7 has operated a the negative environmental impact that the Company’s activity might have climate change new long-term in its areas of presence. Other 142.5 comprehensive 3,413.3 program for Waste management environmental protection and KEY DOCUMENTS

environmental — PJSC ALROSA’s comprehensive — PJSC ALROSA’s program for safety for program for environmental protection innovative development and ENVIRONMENTAL and environmental safety for 2019— technological modernization for 2019–2023. The 2023; 2016–2023; IMPACT planned amount — PJSC ALROSA’s Sustainable — PJSC ALROSA’s concept for energy of financing for Development and Corporate Social saving and increasing energy ALROSA pays great attention to environmental safety and Energy efficiency and power consumption Responsibility Policy; efficiency until 2021. climate change, consistently reduces its environmental the next 5 years impact, introduces new innovative energy and resource- PJSC ALROSA’s program to save energy and fuel resources — PJSC ALROSA’s Environmental Policy; saving developments and technologies, and improves was fulfilled to a level of 123.6% according to the results of will amount to the environmental training system for the Company’s energy-saving measures. RUB 29.4 bln. employees in line with developments in the production process and changing requirements of the external The total savings of fuel and energy resources as a result of environment. the program’s energy-saving measures under PJSC ALROSA in 2019 amounted to RUB 827.5 mln. The specific power consumption remained at the 2018 level and amounted to 0.355 GJ per carat of produced products. ALROSA’s strategic goal in the field of ALROSA Group environmental expenses, environmental protection is to ensure RUB mln environmentally balanced and safe production activity by reducing environmental impact. Implementation of the Program on Saving Fuel and Energy In June 2019, ALROSA passed the annual Resources in 2019, RUB mln Energy intensity, GJ/carat inspection of its environmental management 7,668.7 system, confirming compliance with the requirements of the international standard ISO 14001:2015, as well as the national standard 5,111.9 5,220.1 827.5 0.352 0.355 GOST R ISO 14001—2016. 669.5 0.327 Since 2019, PJSC ALROSA has operated a new long-term comprehensive program for environmental protection and environmental safety for 2019–2023. The planned amount of financing for the next 5 years will amount to RUB 29.4 bln.

ALROSA Group allocated RUB 7,668.7 mln to 2017 2018 2019 Target Actual 2017 2018 2019 the implementation of environmental protection measures in 2019, RUB 6,658.8 mln of which were expenses of PJSC ALROSA. The share of environmental expenses in the Group’s consolidated revenue amounted to 3.2%, compared to 1.7% in 2018.

102 103 ALROSA ANNUAL REPORT 2019 Sustainable Development

Energy consumption of PJSC ALROSA in 2019

The actual volume of wastewater discharge of PJSC ALROSA Greenhouse gas emissions by PJSC ALROSA in CO2 in 2019 amounted to 975,000 m3. ALROSA does not use equivalent, thousand tons Type Unit Consumption Consumption, aggressive chemical reagents and materials or radioactive of energy resource of measurement in natural units RUB mln (excl. VAT) substances in the mining and enrichment of diamond ore. This means that the wastewater does not contain 465.1 any contaminants with toxic, carcinogenic or radioactive 459.6 Diesel fuel tons 113,497.0 6,135.1 properties. The amount of pollutants discharged with 454.7 wastewater by PJSC ALROSA amounted to 228.8 tons in Electricity thousand kW*h 1,075,628.3 4,230.6 2019.

Heat energy Gcal 452,425.6 1,276.3 Emissions of greenhouse gases and other harmful substances Natural gas thousand cubic meters 27,026.8 138.0 The Company continues to reduce greenhouse gas Kerosene tons 4,849.0 199.0 emissions through the implementation of its Innovative 2017 2018 2019 Development and Technical Modernization Program Oil tons 4,160.9 94.3 and the Energy Saving and Energy Efficiency Concept.

The total amount of greenhouse gas emissions in CO2 equivalent amounted to 454,700 tons for 2019, of which Motor gasoline tons 952.0 45.1 65.3% are emissions from mobile sources. Structure of emissions of pollutants by PJSC ALROSA into the Coke tons 17.8 0.5 In 2019, the total amount of emissions of pollutants into atmosphere, thousand tons the atmosphere by Aviation fuel tons 8.0 0.8 PJSC ALROSA decreased by 18% to 8,000 tons. Pollutants Other fuel tons 6.0 2.2 of Class I and II (extremely hazardous and highly 5.3 2.7 hazardous) amounted to 0.07% of the total mass of emissions. 2019 Total - 12,121.9 8.0 7.0 2.8 Production and consumption waste 2018 9.8 Water and rational use — Status control and elimination of leaks from domestic As a result of the Company’s production activities, of water resources water supply and heating pipelines. production and consumption waste is generated. The 5.2 2.3 process of handling each type of waste is strictly regulated The Company highlights the following areas that reduce the The actual water intake from natural sources in 2019 was almost based on its hazard class, aggregate state and chemical 2017 7.5 impact on water bodies: half the permissible level and amounted to 3,535.4 thousand characteristics. In 2019, the total mass of waste generated m3. This was due to the modernization of processing plants by by PJSC ALROSA amounted to 81.8 mln tons. The bulk — Reduction in water intake from natural sources introducing a system that circulates (recycles) water for technical of the generated waste comes from the mining complex Gas and liquid substances Solid substances for production needs based on the application of needs. The total volume of circulating recycled water in the (99.99%) — hazardous class V waste (diamond mining waste processing plants with a circulating water supply process cycle amounted to 190.7 mln m3 in 2019. resulting from extraction and processing of rock mass scheme and organization of dredges in closed pits; (stripping empty rock and waste (tailings) from enrichment of diamond-bearing ores).

Land resource protection Total area of disturbed and reclaimed land in PJSC ALROSA, Water withdrawal from natural sources Water discharge in PJSC ALROSA, 3 3 ha in PJSC ALROSA, thousand m thousand m ALROSA carries out mining, exploration and construction activities related to land disturbance in six districts of Yakutia. 6,274.9 1,567.7 2,727.3 In 2019, the area of land disturbed by PJSC ALROSA 1,297.2 amounted to 2,727.3 hectares. The total area of 4,618.7 1,179.2 recultivated land increased by 68% by 2018 and amounted to 833.4 hectares. The Company costs on restoration and 1,691.2 975.0 reclamation of disturbed lands amounted to RUB 68.2 mln 3,535.4 in 2019. 2,627.2 2,644.3 624.3 2,061.7 569.1 893.4 833.4 570.7 496.4

2017 2018 2019 2017 2018 2019 2017 2018 2019

Disturbed Reclaimed Permitted Actual Permitted Actual

104 105 ALROSA ANNUAL REPORT 2019 Sustainable Development

Stakeholders Stakeholder Key interaction STAKEHOLDER interests formats

Local communities — Organization of jobs — Corporate programs, projects and ENGAGEMENT cooperation agreements — Development of transport, energy and social infrastructure of regions — Community liaison offices — Charitable assistance to schools, kindergartens, — Tours to production facilities health, science and educational institutions and other — Joint on-site surveys Knowing that effective dialogue with stakeholders is essential for the Company’s sustainable development, ALROSA strives to non-profit organizations — Parallel laboratory control establish open, respectful and mutually beneficial relations with its stakeholders, as well as to inform them on the Company’s — Industrial and environmental safety activities in a timely manner. Business partners — Equal conditions for participation in competitive — Meetings and negotiations bidding ALROSA key stakeholder groups — Exhibitions and conferences — Timely fulfillment of mutual obligations — Competitive bidding — Anti-corruption activities

Stakeholders Stakeholder Key interaction — Compliance with business ethics interests formats Russian and international — Maintaining and enhancing the consumer value of — Participating in compiling the agenda industry community polished diamonds and work of industry organizations Shareholders and — High shareholder return — Disclosure of information on the investors company website — Building consumer trust in diamond products — Cooperation with national and — Information transparency and timely information international industry and other disclosure — Investor days — Developing and promoting standards for responsible relevant organizations business conduct, including ensuring responsible — Improving the corporate governance system — Road show rough/polished diamond supply chains, social — Organizing and participating in — Conference calls and economic development of areas of presence, sectoral agenda and sustainable environmental protection, respect for human and development activities — One-on-one meetings labor rights, and occupational safety — Developing and promoting standards — Visits to production sites — Implementing and improving the effectiveness of for responsible business conduct — Provision of GSM materials by international regulatory mechanisms and sectoral — Conducting research Company location (Moscow, Mirny) self-regulation systems, including ensuring the “conflict-free” origin of rough/polished diamonds in — Improving corporate procedures and the global market control mechanisms Employees and the — Decent and safe working conditions — Communicating with employees — Demarcating the markets for natural diamonds, profalmaz inter-regional through immediate supervisors and — Respect for human rights and non-discrimination synthetic diamonds and polished diamonds trade Union of ALROSA management — Social programs — Product quality and price, as well as supply and — Consultation with the union and — Satisfaction surveys payment conditions — Fulfillment of the terms of the collective agreement collective bargaining Clients — Meetings and negotiations — Guarantees of conformity of rough diamond mining — Fulfillment of obligations to the trade union — Corporate portal with Russian and international legislation — Exhibitions and conferences organization — Corporate sporting and cultural events, professional competitions — Minimizing negative industrial impact on the — Conferences, seminars, round tables Public environmental environment — Khozaktiv annual forum — Participation in environmental ratings organizations — Compliance with international environmental — Corporate media, brochures, standards — Responses to queries and suggestions information screens — Information transparency and timely disclosure of key — Conferences, seminars, round tables — Confidential feedback boxes Analysts, expert information — Participation in ratings community State authorities — Compliance with regulatory requirements and — Working and expert groups, — Compliance with norms and requirements recommendations commissions, committees — Responses to queries and suggestions — Amendments to the legal and regulatory framework — Official requests — Publication of press releases on the in order to ensure effective development and — Information transparency and timely disclosure website — Public events maintenance of the Company’s resource base of key information — Responses to information requests — Cooperation agreements with regional Media — Timely receipt of tax and dividend payments — Regular interaction and information authorities — Interviews with management exchange — Environmental protection — Press tours

106 107 CHAPTER 05 FOR INVESTORS AND SHAREHOLDERS

2019 +43 % 1 TSR

2019 57.5 RUB bln of dividends paid

1 From October 2013 to March 2020 (as of the date of the Report preparation). ALROSA ANNUAL REPORT 2019 For Investors and Shareholders

Responsible ALROSA is committed to sustainable development standards and international standards of corporate business social responsibility. The Company features in the rankings by FTSE4Good, MSCI ESG, Sustainalytics, FOR INVESTORS WWF Russia.

Transparent Focus on the core business of the Company only. Investments into modernization of existing capacities AND SHAREHOLDERS use-of-capital and in projects with return of 20% and higher. Regular dividend payments from free cash flow. strategy

High return for The world leader among the global companies in the rough diamond mining sector by the growth of shareholders the total shareholder return from 2013 on. In 2019, the dividend yield amounted to 4.6%. “Cooperating with shareholders and representatives of the investment community, the Company adheres to the important task of increasing investment attractiveness, SHARE CAPITAL including by increasing the information transparency, implementing stable dividend policy and increasing liquidity of securities”. AUTHORIZED CAPITAL

ALROSA authorized capital is divided into 7,364,965,630 The authorized capital of the company amounts to RUB (seven bln three hundred and sixty-four mln nine hundred 3,682,482,815 (three bln six hundred and eighty two mln four sixty-five thd six hundred thirty) ordinary registered book- hundred eighty-two thd eight hundred and fifteen). entry shares with par value of 50 kopecks (0.50 RUB) each. ALROSA KEY COMPETITIVE STRENGTHS OWNERSHIP STRUCTURE

Ownership structure, % Global leadership ALROSA is one of the largest diamond-producing companies in the in resources and world. Limited global diamond resource base, given the resource mining level of ALROSA, is sufficient for over 30 years of production.

33.03 Indicator % Profitability Business profitability exceeds the average for the industry more than 33.97 Russian Federation twofold. The Company consistently generates positive free cash flow. Learn more about Free float Russian Federation 33.03 the Institutional Investor study on the Company’s website Republic of Sakha (Yakutia) 25.00 in the section Press High managerial and industrial competence of the management Releases & Updates Strong team and members of the management bodies of ALROSA, ongoing Administration of the districts management 8.00 investment in the development of the personnel, operating assets of (uluses) of the Republic of Sakha team the Company in the regions of its operation. In 2019, Sergey Ivanov, Chief Executive Officer, Chairman of the Executive Committee, was Free float 33.97 recognized as the best director of the company in the mining sector. 8.00 Administration of the districts (uluses) of the Republic of Sakha 25.00 Corporate High standards and quality of corporate governance. In November Republic of Sakha (Yakutia) governance 2019, the Russian Institute of Directors confirmed ALROSA on the rating scale in the National Rating of Corporate Governance at Level 8 — “Best More on rating on the Company’s website practices of corporate governance”. in the section Press Releases & Updates

110 111 ALROSA ANNUAL REPORT 2019 For Investors and Shareholders

The Company’s main shareholders are the The analysis of a study on identification of security Russian Federation (33%) and the Republic of holders carried out in 2019 showed no changes STOCK MARKET AND CAPITALIZATION Sakha (Yakutia) (25% stake). As of December 31, in the structure of shareholders by investment 2019, ALROSA’s shares in free float make 34%, style. There is little growth of dividend-focused of which 29% is held by institutional investors, shareholders. represented by over 300 minority shareholders- investment funds. 16% of the Company’s shares The bulk of the free float of ALROSA is held by the is owned by 10 funds. investors from the United States. THE COMPANY’S SHARE TRADING DYNAMICS

The Company’s shares are traded on the Moscow Stock Exchange from 2011. As of the end of 2019, ALROSA stock is included in the quotation list of the first level. Free-float structure, %

Class of shares Ordinary registered book-entry shares 64 14 10 12 Volume, pcs. 7,364,965,630 The bulk of the 2019 free float of Issue number 1-03-40046-N 67 13 8 12 ALROSA is held Nominal value, RUB 0.50 by the investors 2018 Identification codes ALRS from the United 70 13 9 8 States Traded from November 29, 2011 2017

Investment funds with Index funds Dividend focused Other long-term investment funds strategy Average daily trading volume and dynamics

Indicator 2017 2018 2019 Break-down of free float by geography, % Average daily trading volume, USD mln 21.6 18.0 16.0

Minimal share price, RUB 72.5 74.8 68.9 33 22 3 14 27

2019 Maximum share price, RUB 108.6 107.9 104.6

31 28 10 18 13 End-of-year share price, RUB 75.1 98.6 84.3

2018 Shares in free float, pcs. 2,502,161,810 2,502,161,810 2,502,161,810

43 33 11 10 3 Shares in free float, % 33.9739 33.9739 33.9739

2017 End-of-year market capitalization, USD mln1 9,597 10,455 10,011

USA Europe and Middle East Russia Other the United countries Kingdom

1 Market capitalization of the Company at the end of each reporting period, data from Moscow Exchange at CBR exchange rate on the last trading day.

112 113 ALROSA ANNUAL REPORT 2019 For Investors and Shareholders

ALROSA share price dynamics in 2019, RUB As of December 31, 2019 the shares of ALROSA are included in the calculation base of major Russian and foreign indexes: 110 3 200 105 +29 % 3 000 100 95 2 800 Index Ticker Symbol Weight in the index, % 90 85 2 600 –15 % 80 International indexes 2 400 75 70 2 200 65 MSCI Russia Index MSCI Russia 1.47 60 2 000 Dec. ‘18 Jan. ‘19 Feb. ‘19 Mar. ‘19 Apr. ‘19 May ‘19 June ‘19 July ‘19 Aug. ‘19 Sept. ‘19 Oct. ‘19 Nov. ‘19 Dec. ‘19 MSCI Russia 10/40 MSCI Russia 10/40 4.35

PJSC ALROSA MICEX index Moscow Stock Exchange indexes

Blue-chip index RTSSTD 2.11 Decline in quotations for shares and average daily trading Despite the decline in the Company’s share price in 2019, volumes in 2019 is connected with the unique situation on the PJSC ALROSA shows exceptional results on total shareholder diamond market which we characterize as a “perfect storm”. In return (TSR), which includes both the change in shares value Moscow Exchange Index and RTS Index MICEXINDEXCF, RTSI 1.72 2019, there was a combination of such factors as the decrease and the dividends paid to shareholders. From October 2013 in diamond sales due to difficulties in attracting affordable to March 20201, the Company’s TSR amounted to +43% financing by the Indian diamond-cutting business, as well as in USD, while at foreign diversified mining companies this Index of metallurgy MICEX M&M, 15.56 the high level of diamond jewelry stocks at retailers at the indicator demonstrated negative dynamics of -16% for the and mining industries RTS mm beginning of the year. same period. Moscow Stock Exchange index in USD also Learn more in the section Market Review decreased to 11%. Broad market index MICEXBMI 1.44

ALROSA TSR compared to the world counterparts2 (USD) MICEX 10 index MICEX10INDEX 9.86

220 %

190 %

160 %

42.7 %

130 %

100 % (16.3 % (11.3 %

70 % Индекс общей акционерной доходности

40 %

10 % Oct. ‘13 Nov. ‘14 Dec. ‘15 Dec. ‘16 Jan. ‘18 Feb. ‘19 Mar. ‘20

PJSC ALROSA Index Diversified mining companies, Moscow Exchange including other diamond manufacturers

1 As of the date of the report preparation — March 5, 2020. 2 Diversified mining companies include Anglo American, Rio Tinto, BHP, Glencore, Vale, Gem Diamonds, Petra Diamonds, Lucara, Firestone Diamonds, Mountain Province Diamonds, Stornoway Diamond.

114 115 ALROSA ANNUAL REPORT 2019 For Investors and Shareholders

DIVIDEND INTERACTION WITH INVESTORS POLICY AND SHAREHOLDERS

In accordance with the Regulations on the Dividend payments, the management takes into account the Cooperating with shareholders and representatives of liquidity of securities. The Company’s management Policy of the Company1, the minimum dividend pay- level of the Company’s debt load. the investment community, the Company adheres to the actively participates in all IR-events and maintains a regular out amounts to 50% of net profit according to IFRS. important task of increasing investment attractiveness, dialogue with representatives of the investment community, Dividends are paid semiannually. The calculation of On September 30, 2019, the Extraordinary including by increasing the information transparency, implementing one of the priority tasks of the ALROSA’s dividend is to be based on free cash flow, deemed Annual General Meeting of Shareholders of the implementing stable dividend policy and increasing approved development strategy. to be the cash flow from operating activities Company adopted a decision on payment of net of cash flow to finance capital investments. dividend by the results of H1 2019 in the amount Regulation When preparing recommendations on dividend of RUB 28,281 mln, or 100% of free cash flow. on the Dividend Policy is posted on the website in the section Investors EVALUATION OF ALROSA’S MANAGEMENT PERFORMANCE BY INTERNATIONAL INVESTORS The history of dividend payments of PJSC ALROSA

ALROSA’s IR program was recognized as one of the best in the mining sector, according to Institutional Dividend The share in net profit of Dividend Accrued Including payout for Investor period ALROSA Group related payout total, the specified divi- to the shareholders of per share, RUB mln dend period As per the results of the rating prepared in 2019 by the PJSC ALROSA % RUB in the reporting authoritative publishing house Institutional Investor, “I think they have a good period,2 RUB mln ALROSA’s investment community cooperation program was among the top three in mining sector in EMEA management team. I would H1 2019 76.2 3.84 28,281 emerging markets (Europe, the Middle East and Africa) among more than 30 companies. ALROSA Chief rate them nine out of ten.” 58,493 Executive Officer Sergey Ivanov won in the Best CEO 3 2018 94.9 4.11 30,270 category. An International Investor quote from an anonymous survey of the H1 2018 76.2 5.93 43,674 ALROSA has become a leader in improving the quality Company’s perception by investors, 82,238 of investor relations: Most Improved IR category — No. 2 December 2019 2017 50.1 5.24 38,592 among Russian and international companies according to investors. 2016 50.1 8.93 65,769 65,688 The Company’s rating increased by 21 and 11 positions among mining and metallurgical companies 2015 50.2 2.09 15,393 15,381 and Russian companies.

2014 0.04 1.47 10,826 10,824 The Company entered into the top ten best companies in investor relations according to international investors. 2013 35.0 1.47 10,826 10,828

By the end of 2019, the net profit of ALROSA Group under IFRS amounted to RUB 62.7 bln, free cash flow was RUB 47.6 bln, indicator “Net debt/EBITDA” amounted to 0.7x.

1 A new version approved by the Supervisory Board on June 24, 2019. 2 As per the accounting (financial) statements of PJSC ALROSA. 3 The amount of dividends paid by the results of 2018 excluding the dividends paid by the results of H1 2018. Total dividends paid by the results of 2018 amounted to RUB mln 73,944. 4 In 2014, according to IFRS, there was a loss but the dividends were accrued and paid.

116 117 ALROSA ANNUAL REPORT 2019 For Investors and Shareholders

MAJOR EVENTS history of Yakutia, the cities they visit, as well as the history of Although a number of banks decided to cut analyst jobs the diamond discovery in Yakutia. due to the reorganization (acc. to Credit Suisse), in 2019, the number of financial institutions analyzing the Company’s The Company’s investment community interaction activities — Roadshows for shareholders and potential investors activities grew from 13 to 17. Our IR team is working to further generally conform to the best international practices and (non-deal road-show, hereinafter — NDR); Participation in conferences and NDR — expanding expand the number of financial institutions that carry out include the following: investor geography fundamental analysis of the sector and the Company. — study visits of shareholders and potential investors to — holding Investor Days; the production sites; In 2019, the management actively participated in meetings There is a change in the quality of understanding of the with investors (the number of meetings involving CEO and/ Company’s business, which led to positive dynamics as — meetings with shareholders, potential investors and — preparation of analytical presentation materials or CFO increased by 41% to 185, or 52% of the total number per analysts’ recommendations — increase in quantity and analysts, investment banks and companies; on the Company’s operating activities, timely of meetings). During the year, the number of meetings in improvement of the quality of interaction with analysts information on material events in the sector and the the USA where about 30% of potential investors operate (collection of feedback and detailed materials). Company. increased. Furthermore, for the first time the Asian direction was added to the meeting schedule — a series of meetings was held in Singapore. Number of analysts who perform fundamental review of shares and/or debt instruments of companies INTERACTION WITH THE SELL-SIDE The Company’s investor and shareholder interaction events AND EXPANDING THE ANALYTICAL COVERAGE OF THE COMPANY 17 Event ALROSA ALROSA World practice 13 14 (number of (number of (number of ALROSA conducts information-analytical interaction with events events activities analysts from investment banks and regularly provides the in 2018) in 2019) per year) information on the Company’s operating and financing activities. Investor Day — 1 1

Meetings with shareholders and investors 236 358 325 ALROSA Average ALROSA Jan 1, 2018 in the industry Dec 31, 2019 Participation in conferences and NDR 27 17 24

Study visits to the production sites (site-visits) 2 2 4 Change in analysts’ recommendations on ALROSA shares, % Webcast and audio-conferences following the results of the financial 4 4 4 statement publication 47 47 6

Jan 1, 2020

29 64 47

Jan 1, 2019 Investor Day including improvement in information disclosure quality and accessibility of the management for meetings. Since the IPO launch in 2013, the management regularly 23 54 23 holds Investor Day where the Company’s strategy, its Jan 1, 2018 implementation, the management’s vision regarding Visits to the production sites the development of diamond market, positioning of the Company, and strategies for the use of the Company’s capital The Company’s management regularly arranges visits to are discussed. production facilities in Yakutia and the Arkhangelsk region. Hold Buy Sell

In March 2019, ALROSA conducted the Investor Day headed In 2019, production facilities in the Arkhangelsk region were by CEO — Chairman of the Board Sergey Ivanov and with visited by analysts and portfolio managers of six largest the participation of the Company’s top-management. The Russian and international investment funds and investment main stage of Investor Day was organized in London (UK), banks. one of the world’s financial centers. ALROSA management also held a series of individual and group meetings with In July 2019, the production assets in Yakutia were visited the Company’s key minority shareholders in London (UK), by the analysts and portfolio managers of Goldman Sachs, Stockholm (Sweden) and Frankfurt (Germany). In March Millennium Asset Management, Amundi Asset Management, 2019, 195 people took part in Investor Day presentations Bain & Company. and meetings (in person, by phone and via webcast). On the day of the event, the Company’s capitalization increased The feedback received from the participants proves that the by RUB 10 bln. In general, investors are positive about the Company should continue holding such events. In addition Company and note positive changes in many business areas, to production processes, participants are interested in the

118 119 ALROSA ANNUAL REPORT 2019 For Investors and Shareholders

Analysts of investment banks, conducting fundamental equity analysis of ALROSA

Investment bank Analyst Contact information

ALFA BANK Boris Krasnozhenov [email protected]

ATON Andrey Lobazov [email protected]

Bank of America Merrill Lynch Anton Fedotov [email protected]

Barclay’s Ian Rossouw [email protected]

BCS Oleg Petropavlovskiy [email protected]

Citi Barry Ehrlich [email protected]

Gazprombank Natalia Sheveleva [email protected]

Goldman Sachs Nina Dergunova [email protected]

J.P. Morgan Dominic O'Kane [email protected]

Morgan Stanley Dan Shaw [email protected]

Renaissance Capital Johann Pretorius [email protected]

Sberbank CIB Irina Lapshina [email protected]

Societe Generale Sergey Donskoy [email protected]

SOVA Capital Yuriy Vlasov [email protected]

UBS Daniel Major [email protected]

UniCredit Sergey Bolshakov [email protected]

VTB Capital Dmitry Glushakov [email protected]

IR-calendar for 2020:

— Investor Day on March 10, 2020, with the participation of the Company’s senior — arranging visits to the Company’s management and divisional managers; production assets;

— participation in conferences of — publishing information about the investment banks; Company and the sector;

— arranging a series of meetings between — voluntary and statutory disclosure of The investor the Company management and information in accordance with the calendar for 2020 investors in Europe, UK and the United requirements of Russian regulators and is available on the Company’s website in States; the best Russian and international IR the section Investors practices.

120 121 SECTION 06

“The ability to set a clean-cut goal, to persuade everyone in its attainability, to work for a long run and think strategically is the Company’s established CORPORATE management style – our generic trait”. GOVERNANCE Vladimir Zuev

2019 8 “Best Corporate Governance Practice” in the National Rating of Corporate Governance ALROSA ANNUAL REPORT 2019 Corporate governance

CORPORATE GOVERNANCE CORPORATE PRINCIPLES

The Company sticks to the following principles in the area of In terms of organization and maintenance of the GOVERNANCE corporate governance. Corporate Secretary’s work: In terms of shareholders’ rights and equality of — providing effective interaction with shareholders, conditions: coordinating the Company’s activities in the field of shareholders’ rights and interests protection, — granting all shareholders the right to participate in supporting the effective work of the Supervisory management of the Company’s activities by making Board by the Corporate Secretary. decisions on the most important issues; In terms of development and implementation of the — granting all shareholders an equal and fair remuneration system for members of the Supervisory opportunity to participate in distribution of the Board and executive bodies: Company’s profits through dividends; — ensuring a sufficient level of remuneration — ensuring equality of conditions for and equal paid by the Company to attract, motivate, and treatment of all shareholders; retain persons who have the required skills and qualifications; — ensuring that all shareholders have the opportunity to get effective protection. — incorporating the principle of dependence of remuneration on the Company’s performance In terms of the Supervisory Board’s activities: results and employees’ personal contributions to the achievement thereof in the remuneration — implementation by the Supervisory Board of the system for the Company’s executive bodies and strategic management of the Company, definition other key managers. of general principles of and approaches to the risk management and internal control system, control In terms of organization and maintenance of the risk The adherence over activities of the Company’s executive bodies, management and internal control system functioning: and implementation of other key functions; to high — developing an effective risk management and CORPORATE — accountability of the Supervisory Board to the internal control system in the Company; standards Company’s shareholders; — organization of internal audits in the Company for of corporate GOVERNANCE SYSTEM — the efficiency and expertise of the Supervisory Board, regular independent assessment of the management the ability to remain objective and independent in system’s reliability and effectiveness. governance AND KEY PRINCIPLES judgements and make decisions in the interests of is one of our the Company and its shareholders; In terms of disclosure of information about the Company: — the presence of a sufficient number of independent — ensuring transparency of the Company and its Company’s director on the Supervisory Board; activities to shareholders, investors, and other stakeholders; strategic — ensuring the effective performance of the Supervisory Board’s members when convening, — timely and complete disclosure of current and priorities PJSC ALROSA corporate governance system The main regulatory document that sets the holding, preparing for and participating in meetings reliable information about the Company to facilitate guarantees protection of the rights and interests priorities of corporate governance is the Corporate (votes in absentia); informed decision-making by shareholders and of its shareholders as well as helps to establish Governance Code of PJSC ALROSA. investors; and maintain trust-based relationships between Information transparency is an important element — establishment of committees by the Supervisory the Company, investors and stakeholders. The of corporate governance and a significant factor Board for preliminary consideration of the most — provision of information and documentation upon Company implements its corporate governance affecting the Company’s investment attractiveness. important issues. shareholders’ requests, adhering to the principles of system in full compliance with the standards and equal and unencumbered access. requirements of Russian legislation, including ALROSA aims to comply with the principles in the field of corporate, anti-corruption and of corporate governance established in the securities market laws, and in accordance with Corporate Governance Code recommended by international standards, recommendations and the Bank of Russia1 and expresses the intention best practice. to continue the introduction of key principles and recommendations in the Company’s The adherence to high standards of corporate activities. governance is one of our Company’s strategic Detailed information on compliance with the priorities. principles and recommendations of the Corporate Governance Code is given in Appendix No. 9

1 The Corporate Governance Code recommended for use by joint stock companies, whose securities are admitted to on-exchange trading, Letter of the Bank of Russia No. 06–52/2463 dated April 10, 2014.

124 125 ALROSA ANNUAL REPORT 2019 Corporate governance

CORPORATE GOVERNANCE STRUCTURE

PJSC ALROSA’s supreme governing body is the General Three committees have been established under the Meeting of Shareholders. Supervisory Board: the Audit Committee, the HR and Remuneration Committee, and the Strategic Planning General management of the Company’s activities is carried Committee. These committees operate to improve the out by the Supervisory Board, whose responsibilities and efficiency and quality of the Supervisory Board’s work. areas of competence include ensuring the Company’s sustainable development and shaping the strategy, The Supervisory Board oversees activities of the Executive monitoring the compliance with corporate governance Committee that is responsible for in-process control. principles such as protection of the interests of all shareholders, irrespective of their stake in the Company’s Functions of the sole executive body are performed by the authorized capital, and of Company employees and partners, CEO – Chairman of the Company’s Executive Committee. timely and complete information disclosure, and business transparency. The Company has in place an effective system of external and internal control: the Audit Commission and the independent auditor, the Financial Controlling and Risk Management Department, and the Internal Audit Department.

Structure of ALROSA Corporate Governance System

External control bodies Development of strategy, MAJOR AND RELATED IMPROVING CORPORATE control over Executive bodies PARTY TRANSACTIONS GOVERNANCE

Audit Commission General meeting of shareholders Decisions on the approval of the Company’s Since 2018, the holders of ALROSA shares have major and related party transactions are made in been given the opportunity to vote at General Executive bodies accordance with the Federal Law “On Joint-Stock Meeting of Shareholders remotely. In June Companies”. 2019, the General Meeting of Shareholders was streamed on the Internet in real time, Supervisory board Chief Executive As of December 31, 2019, there were no major where the Company’s shareholders were able External Independent Officer — ​Chairman transactions worth 25% or more of the Company to ask questions in their personal shareholder assets’ balance sheet value determined in accounts on the registrar’s website during and Auditor of the Board accordance with the accounting statements. after the meeting. Following the results of the Documents regulating Extraordinary General Meeting of Shareholders the Company’s Committees In 2019, neither the Company nor ALROSA held on September 30, 2019, the number of corporate governance Group’s legal entities provided loans to the ballot papers reached 90% of those who voted. are available on the under the Supervisory website: http://eng. Board CEO – Chairman of the Executive Committee, alrosa.ru/documents/ The Board the members of the Executive Committee or the An automated information system of the charterdocuments/ Supervisory Board. Company’s collegial bodies titled AREOPAD was introduced. Now, thanks to this system, Strategic Planning 24 transactions with related parties took members of the Supervisory Board have remote Committee place in 2019, with 14 of them approved by access to agenda item materials and the voting the Supervisory Board; and 10 transactions procedure prior to meetings. Since January were entered into in compliance with the 2019, all corporate events have been held using procedure for notifying members of the the AREOPAD system. Corporate Executive Committee and the Supervisory HR and Remunerations Secretary Body. Approval of the transactions was not At the end of 2018, the Company approved a Committee requested. Regulation on the Performance Assessment of For more detailed information about the related party the Supervisory Board and its Committees, the transactions see Appendix No. 8 Chairman of the Supervisory Board, Members of the Supervisory Board and the Corporate Head of Internal Audit Secretary. In 2019, the Supervisory Board and Department its committees conducted a self-assessment in Audit Committee accordance with the adopted regulation.

Internal control system

126 127 ALROSA ANNUAL REPORT 2019 Corporate governance

GENERAL MEETING OF SHAREHOLDERS

NATIONAL RATING INFORMATION ABOUT OF CORPORATE HOLDING THE GENERAL GOVERNANCE (NRCG) MEETING OF SHAREHOLDERS

Starting from 2015, the Russian Institute of The General Meeting of Shareholders is the Company’s 8. Election of members to the Supervisory Board of PJSC For more details visit http:// Directors annually analyzes the Company’s highest governing body, which operates on the basis of ALROSA; eng.alrosa.ru/ corporate governance practices, assessing Russian legislation, the Company’s Articles of Association, and about-us/corporate- them by four main components, within which the Regulation on the General Meeting of Shareholders. 9. Election of members to the Audit Commission of PJSC management/#tab-565 both positive aspects and points of growth are ALROSA; determined for further development: In 2019, two General Meetings of Shareholders of PJSC ALROSA were held: annual and extraordinary. 10. Approval of the auditor of PJSC ALROSA; — shareholders’ rights; The General Meeting of Shareholders of PJSC ALROSA took 11. Approval of the revised Articles of Association of PJSC — management and control bodies’ place on June 26, 20191. ALROSA; activities; Agenda of the Annual General Meeting of Shareholders of 12. Approval of the revised Regulation on the General — disclosure; PJSC ALROSA: Meeting of Shareholders of PJSC ALROSA;

— activities in the interests of other 1. Approval of the PJSC ALROSA Annual Report; 13. Approval of the revised Regulation on the Supervisory stakeholders and corporate social Board of PJSC ALROSA; responsibility. 2. Approval of the annual financial (accounting) statements of PJSC ALROSA; 14. Approval of the revised Regulation on the Executive On November 1, 2019, based on the corporate Committee of PJSC ALROSA; governance monitoring results, the Russian 3. Approval of the distribution of PJSC ALROSA’s profits for Institute of Directors confirmed the Company 2018; 15. Approval of the revised Regulation on Remuneration of last year’s rating at NRKU 8 “Best Practices in Members of the Supervisory Board of PJSC ALROSA. Corporate Governance”, following the National 4. Approval of the distribution of retained earnings of Rating of Corporate Governance’s (NRCG) previous years; The Extraordinary General Meeting of Shareholders of methodology. PJSC ALROSA in the form of absentee voting was held on 5. The amount of dividends, timing and form of their payment September 30, 20192. according to the results of 2018 and establishment of the date on which persons entitled to receive the dividends are to be Agenda of the Extraordinary General Meeting of Shareholders identified; of PJSC ALROSA:

The 2018 ALROSA Annual Report 6. Payment of remuneration for wok on the Supervisory Board 1. Payment of dividends according to the results for H1 2019; was recognized as the winner of the to members of the Supervisory Board (non-government the amount of dividends, timing, form of their payment and XXII annual contest of annual reports, employees) in the amount established by internal documents the date on which persons entitled to receive the dividends organized by the Moscow Exchange of PJSC ALROSA; are to be identified. together with the Central Bank of Russia, in the category “Best Annual Report in 7. Payment of remuneration for work on the Audit Commission the Mining Sector of the Economy” and to members of the Audit Commission (non-government as the silver-prize winner in the category employees) in the amount established by internal documents “Best Annual Report of a Company with a of PJSC ALROSA; Capitalization of Over RUB 200 Bln”.

1 Minutes No. 40. 2 Minutes No. 41.

128 129 ALROSA ANNUAL REPORT 2019 Corporate governance

SUPERVISORY BOARD Membership in the Supervisory Board in 2019

January 1, 2019–June 26, 2019 June 26, 2019–December 31, 20191

A. G. Siluanov A. G. Siluanov Chairman Chairman

GENERAL INFORMATION ABOUT to include, at its discretion, additional candidates in the A. S. Nikolaeyev A. S. Nikolayev list of candidates for election to the Supervisory Board First Deputy Chairman First Deputy Chairman THE SUPERVISORY BOARD and the Audit Commission, to secure the role, rights and responsibilities of the senior independent director, and to S. S. Ivanov S. S. Ivanov ensure the right of the head of the internal audit to request Deputy Chairman Deputy Chairman Members of the Supervisory Board are elected by the General the convening of the Supervisory Board, as well as to address Meeting of Shareholders for the period until the next Annual inconsistencies with the Articles of Association and the General Meeting of Shareholders. Regulation on the General Meeting of Shareholders of the N. P. Alexandrov A. V. Karkhu Company. The Supervisory Board acts on the basis of Russian legislation, M. V. Gordon (independent member) M. V. Gordon (independent member) the Company’s Articles of Association, and the Regulation on the Supervisory Board of PJSC ALROSA. MEMBERS OF THE E. V. Grigoryeva E. V. Grigoryeva The competence of the Supervisory Board is to decide on general management of the Company’s activities, with the SUPERVISORY BOARD K. A. Dmitriev K. A. Dmitriev exception of matters referred by the Federal Law “On Joint- Stock Companies” and the Company’s Articles of Association I. E. Yelizarov A. I. Donets to the competence of the General Meeting of Shareholders On June 26, 2019, due to the election by the Annual General and the executive bodies. Meeting of Shareholders of new members and the termination D. V. Konov (independent member) D. V. Konov (independent member) of powers of the former Supervisory Board, the following According to the Company’s Articles of Association, 15 changes occurred. G. M. Makarova (independent member) G. M. Makarova (independent member) persons are elected to the Supervisory Board.

The Chairman of the Supervisory Board is elected from S. V. Mestnikov S. V. Mestnikov among and by members of the Supervisory Board with a Three members withdrew from the Supervisory Board: majority of 3/4 votes of the members in attendance at the A. V. Moiseev A. V. Moiseev meeting. Nikolay Pavlovich Alexandrov V. V. Solodov V. V. Solodov The First Deputy and the Deputy Chairman of the Supervisory Board are elected by majority vote of the Supervisory Board’s Ilya Yelizarovich Yelizarov members. O. R. Fedorov (independent member) O. R. Fedorov (independent member) Alexey Olegovich Chekunkov A. O. Chekunkov S. E. Donskoy REGULATION ON THE SUPERVISORY BOARD Three new members were elected to the Supervisory Board: Members of the ALROSA Supervisory Board as of December 31, 2019 The new edition of the Regulation on the Supervisory Board of Andrey Ivanovich Donets PJSC ALROSA was approved by the Annual General Meeting of Shareholders of the Company on June 26, 20191. Sergey Efimovich Donskoy 1 Executive The revised regulation was prepared to bring it in compliance Andrey Vilyevich Karkhu with the adjusted law “On joint-Stock Companies”, in Indicator particular to ensure the right of the Supervisory Board 4 Non-executive 10 Independent 15 Independent 4 persons 10 Executive 1 Non-executive

1 The background of the Supervisory Board’s members who were on the board as of December 31, 2018 and excluded from the membership as of December 31, 2019 is presented in 1 Minutes No. 40. the 2018 annual report.

130 131 ALROSA ANNUAL REPORT 2019 Corporate governance

Key competencies of the Supervisory Board’s members

Membership Key competencies in committees under the SB 1

Share in Date of election the au- No. Full name Status, independence to the Supervisory thorized Board capital, % 2 Strategic Planning Strategic Audit HR and Remuneration Strategy Finance and Audit Diamond Mining Governance risk management GR/IR/PR CSR Human Resources

1 Anton Germanovich Siluanov Chairman, non-executive June 25, 2015 + + + + + + No

2 Maria Vladimirovna Gordon Independent member of the SB + C + June 25, 2015 + + + + No

3 Evgenia Vasilievna Grigorieva Non-executive + June 25, 2015 + + + + + No

4 Kirill Alexandrovich Dmitriyev Non-executive + June 30, 2017 + + + + No

5 Andrey Ivanovich Donets Non-executive + June 26, 2019 + + + + + No

6 Sergey Efimovich Donskoy Non-executive + June 26, 2019 + + + + + No

7 Sergey Sergeyevich Ivanov Deputy Chairman, executive + June 30, 2017 + + + + + + + 0.0083

8 Andrey Vilyevich Karkhu Non-executive + June 26, 2019 + + + + No

9 Dmitry Vladimirovich Konov Independent member of the SB + + June 30, 2017 + + + + + No

10 Galina Maratovna Makarova Independent member of the SB + C October 22, 2018 + + + No

11 Sergey Vasilyevich Mestnikov Non-executive + + June 30, 2017 + + + + No

12 Alexey Vladimirovich Moiseev Non-executive C June 26, 2018 + + + No

13 Aisen Sergeyevich Nikolayev First Deputy Chairman, non-executive + October 22, 2018 + + + + + No

14 Vladimir Viktorovich Solodov Non-executive + + October 22, 2018 + + + + + No

15 Oleg Romanovich Fedorov Independent member of the SB + + + June 29, 2013 + + + + + + No

1 C — Chairman of the committee under the Supervisory Board. 2 As of December 31, 2019.

132 133 ALROSA ANNUAL REPORT 2019 Corporate governance

BACKGROUND OF MEMBERS Maria Vladimirovna Gordon 1 OF THE COMPANY’S SUPERVISORY BOARD Senior independent Director

Information about the date of election to the Supervisory Board and participation in the committees under the Supervisory Board, as well as Date and place of birth about equity holdings is available in the Key Competencies of Members of the Supervisory Board table. February 13, 1974, Vladikavkaz, Republic of North Ossetia — Alania

Education

In 1994, she graduated from the Moscow State University with Anton Germanovich Siluanov a degree in Journalism.

Chairman of the Supervisory Board In 1995, she graduated from the University of Wisconsin (USA), Bachelor of Political Science.

In 1998, she graduated from the Fletcher School of Law Date and place of birth and Diplomacy, TAFTS University (USA), Master of Law and Diplomacy. April 12, 1963, Moscow Information on primary employment: Education

In 1985, he graduated from the Moscow Financial Institute Period Position with a degree in Finance and Credit. Chief Portfolio Manager with Pacific Investment Management Co. (PIMCO) on Shares of 2010–2014 Advanced training Developing Countries, investment activities

In 2007, he graduated from the All-Russian State Tax Academy of the Ministry of Finance of the Russian Federation. Has no ownership interest in PJSC ALROSA’s authorized capital. In 2010, he graduated from the Financial University under the Government of the Russian Federation.

Doctor of Economics (November 8, 2012). Evgenia Vasilievna Grigorieva Information on primary employment: Date and place of birth

Period Position August 19, 1965, the village of Nyurba, Leninsky District of the Yakut ASSR 2011–present Minister of Finance of the Russian Federation Education First Deputy Prime Minister of the Russian Federation — Minister of Finance 2018–January 21, 2020 In 1988 she graduated from the Lenin Komsomol Institute of of the Russian Federation Civil Aviation of Riga with a degree in Electronic Computers - Systems Engineering. Has no ownership interest in PJSC ALROSA’s authorized capital. In 1998, she graduated from the Yakutsk State University named after M. K. Ammosov with a degree in Law.

In 2001, she underwent professional retraining at the Far Eastern Academy of Public Service with a degree in State and Municipal Management.

Information on primary employment:

Period Position

2011–present Minister of Property and Land Relations of the Republic of Sakha (Yakutia)

Has no ownership interest in PJSC ALROSA’s authorized capital.

1 As of December 31, 2019.

134 135 ALROSA ANNUAL REPORT 2019 Corporate governance

Kirill Alexandrovich Dmitriyev Sergey Efimovich Donskoy

Date and place of birth Date and place of birth

April 12, 1975, Kiev October 13, 1968, Elektrostal, the Moscow Region

Education Education

In 1996 he graduated from Stanford University (California, In 1922, he graduated from Gubkin Oil and Gas State USA). Academy with a degree in Automation and Telemetry.

In 2000, he received an MBA degree from Harvard Business Ph.D. in Economics. Class 2 Active State Advisor of the School (Massachusetts, USA). Russian Federation.

Information on primary employment: Information on primary employment:

Period Position Period Position

2011–present Chief Executive Officer of JSC MC RDIF Adviser to the CEO of Irkutsk Oil Company LLC; member of the Board 2018–present of Directors with JSC INK-Capital. 2012–present Chairman of the Management Board of JSC MC RDIF Has no ownership interest in PJSC ALROSA’s authorized Has no ownership interest in PJSC ALROSA’s capital. authorized capital.

Andrey Ivanovich Donets Sergey Sergeyevich Ivanov

Date and place of birth Deputy Chairman of the Supervisory Board

February 11, 1967, the village of Yekaterinoslavka in Date and place of birth Oktyabrsky District of the Amur Region October 23, 1980, Moscow Education Education In 1989, he graduated from Blagoveshchensk State Pedagogical University with a degree in History and a He graduated from the Moscow State Institute of International secondary degree in Soviet Law. Relations: in 2001 — with a degree in Economics, in 2002 — with a degree in Finance and Credit. Information on primary employment: Candidate of Economics, 2011 (Russian Economic University named after G.V. Plekhanov). Period Position Information on primary employment: Deputy Chief Executive Officer, First Deputy Chief Executive Officer of Autonomous Nonprofit 2018–present Organization Far East Investment and Export Agency Period Position

Has no ownership interest in PJSC ALROSA’s 2017–present PJSC ALROSA's CEO and Chairman of the Executive Committee authorized capital.

Information on acquisitions or dispositions of PJSC ALROSA ordinary shares for 2019

As of December 31, 2018, S. S. Ivanov held 2,000,000 On May 21, 2019, S. S. Ivanov purchased 111,310 shares, and ordinary shares of PJSC ALROSA (0.0272% of the Company’s after that he held 611,310 shares (0.0083%). authorized capital). As of December 31, 2019, S. S. Ivanov held 611,310 ordinary On January 11, 2019, S. S. Ivanov alienated 1,500,000 shares, shares of PJSC ALROSA (0.0083% of the Company’s and after that he held 500,000 shares (0.0068%). authorized capital).

136 137 ALROSA ANNUAL REPORT 2019 Corporate governance

Andrey Vilyevich Karkhu Galina Maratovna Makarova Date and place of birth Date and place of birth June 21, 1960, Yakutsk. June 17, 1956, Kostroma Education Education In 1983, he graduated from Yakutsk State University with a degree in Mining Engineering – Geology. In 1980, she graduated from the Irkutsk Institute of National Economy with a degree in Industrial Planning. Information on primary employment: Information on primary employment:

Period Position

2017–present Chief Engineer of Arctic Capital LLC Has no ownership interest in PJSC ALROSA’s authorized capital.

Has no ownership interest in PJSC ALROSA’s authorized capital.

Dmitry Vladimirovich Konov Sergey Vasilyevich Mestnikov

Date and place of birth Date and place of birth

September 2, 1970, Moscow July 22, 1981, the village of Borogontsy, Ust-Aldan District of the Yakut ASSR Education Education In 1994, he graduated from the Moscow State Institute of International Relations of the Ministry of Foreign Affairs of the In 2003, he graduated from the Yakutsk State University Russian Federation with a degree in International Economic named after M.K. Ammosov with a degree in Law. Relations. In 2013, he graduated from the Russian Academy of National In 2000, he received an MBA degree from the International Economy and Public Administration under the President of the Institute for Development and Management. Russian Federation with a degree in Anti-Crisis Management of Enterprises, Regions and Industries. Information on primary employment: Information on primary employment:

Period Position

Period Position Chairman of the Management Board, Chief Executive Officer (from 2011 to 2016), LLC 2009–present SIBUR 2012–2016 First Deputy Minister of Property and Land Relations of the Republic of Sakha (Yakutia) Member of the Board of Directors, Chairman of the Management Board of PJSC SIBUR 2007–present Chief Executive Officer of NGO Trust Fund for Future Generations of the Republic of Holding 2016–present Sakha (Yakutia)

Has no ownership interest in PJSC ALROSA’s Has no ownership interest in PJSC ALROSA’s authorized capital. authorized capital.

138 139 ALROSA ANNUAL REPORT 2019 Corporate governance

Alexey Vladimirovich Moiseev Vladimir Viktorovich Solodov

Date and place of birth Date and place of birth

March 6, 1973, Moscow July 26, 1982, Moscow

Education Education

In 1995, he graduated from the Moscow Institute of In 2004, he graduated from the Moscow State University with Management named after Sergo Ordzhonikidze with a degree a degree in Public Administration. in World Economy. Candidate of Political Sciences. In 1998, he graduated from the University of Rochester in the US (master’s degree, MBA). Information on primary employment:

Advanced training Period Position In 2013, he graduated from the Financial University under the Government of the Russian Federation. 2018–present Chairman of the Government of the Republic of Sakha (Yakutia)

In 2016, he graduated from the Russian Academy of Public Administration under the President of the Russian Federation. Has no ownership interest in PJSC ALROSA’s authorized capital. Information on primary employment:

Period Position

2012–present Deputy Minister of Finance of the Russian Federation

Has no ownership interest in PJSC ALROSA’s authorized capital.

Aisen Sergeyevich Nikolayev Oleg Romanovich Fedorov

First Deputy Chairman of the Supervisory Board Date and place of birth

Date and place of birth March 30, 1968, Moscow

January 22, 1972, Leningrad Education

Education In 1992, he graduated from the Moscow State University with a degree in Mathematics, Applied Mathematics. In 1994, he graduated from the Moscow State University with a degree in Physics, and the Academy of National Economy Information on primary employment: under the Government of the Russian Federation with a degree in Financial Management.

Information on primary employment:

Has no ownership interest in PJSC ALROSA’s authorized Period Position capital.

2018–present Head of the Republic of Sakha (Yakutia)

Has no ownership interest in PJSC ALROSA’s authorized capital.

140 141 ALROSA ANNUAL REPORT 2019 Corporate governance

MEETINGS OF THE 109 items were considered by the Supervisory Board in the reporting year. SUPERVISORY BOARD Agenda of the items considered by the Supervisory Board in 2019, number of items In 2019, the Supervisory Board held 18 meetings (3 in person, 15 in the form of absentee voting), where decisions were made on various areas of the Company’s activities. 6 Indicator Participation of the Company 16 Participation of the Company in in other organizations 6 Transactions other organizations Participation of the Supervisory Board’s members in meetings held in 2019 14 Strategy and priority areas Strategy and priority areas 14 16 Corporate governance 28 No. Full name Participation in corporate events held in 2019 Review or reports 109 Control and risks 6 total meetings absentee issues Human resources and 8 voting remuneration 28 Approval of amendment of 15 Members of the Supervisory Board who resigned from the board on June 26, 2019 Corporate internal documents 15 governance Approval of amendment of Review or reports 16 1 N. P. Alexandrov 9 1 8 internal documents 8 6 Human resources Control and risks Transactions 16 2 I. E. Yelizarov 9 1 8 and remuneration

3 A. O. Chekunkov 9 1 written consent1 8 The list of meetings and items considered is provided in Appendix 13 Membership of the Supervisory Board throughout 2019

4 M. V. Gordon 18 3 15

5 E. V. Grigoryeva 18 3 15 DUTIES OF THE SUPERVISORY BOARD RELATED TO ITS ROLE 6 K. A. Dmitriev 18 3, incl. 1 written consent 15 IN THE ORGANIZATION OF THE EFFECTIVE RISK MANAGEMENT

7 S. S. Ivanov 18 3 15 AND INTERNAL CONTROL SYSTEM

8 D. V. Konov 18 3, incl. 1 written consent 15

9 G. M. Makarova 18 3 15 In 2019, the Supervisory Board reviewed and approved the In the reporting year, the Supervisory Board also reviewed Critical Risks Annual Report for 2018, and approved the and approved new versions of the Risk Management Policy Action Plan for Critical Risks Mitigation for 2019. of PJSC ALROSA and the Regulation on Risk Management of 10 S. V. Mestnikov 18 3 15 PJSC ALROSA. These documents were preliminary reviewed The Critical Risks Annual Report includes the following by the Audit Committee. 11 A. V. Moiseev 17 2 15 information: The Company’s revised its internal documents that define the 12 A. S. Nikolayev 18 3 15 — a list of critical risks; risk management policy in order to ensure their compliance with the established approaches to risk management. 13 A. G. Siluanov 18 3 15 — a map of critical risks;

14 V. V. Solodov 18 3, incl. 2 written consents 15 — a report for implementation of the Action Plan for Critical Risks Mitigation; 15 O. R. Fedorov 17 3, incl. 2 written consents 14 — progress of the implementation of measures for Members of the Supervisory Board elected to the board on June 26, 2019 critical risk mitigation and the impact of such measures. 16 A. I. Donets 9 2, incl. 1 written consent 7

17 S. E. Donskoy 9 2 7

18 A. V. Karkhu 9 2 7

1 Written consent.

142 143 ALROSA ANNUAL REPORT 2019 Corporate governance

REPORT OF THE SUPERVISORY BOARD In accordance with the recommendations of the Company’s — the assessment confirms the efficiency of the Corporate Governance Code and with a view to implementing Supervisory Board’s activities in 2019, as well as ON THE RESULTS OF THE COMPANY’S the resolution of the Supervisory Board,1 a self-assessment of demonstrates positive changes as compared to the DEVELOPMENT IN PRIORITY AREAS the Supervisory Board and its committees’ performance was external assessment that took place in 2018. conducted in December 20192. For this purpose, all members of the Supervisory Board were given special questionnaires. Recommendations for further improvement of the Supervisory Board’s work were submitted for review to In 2019, the Supervisory Board made decisions on issues — the Report for Implementation of the Innovation Based on the results of gathered data: the HR and Remuneration Committee and the Supervisory related to priority areas, in particular: Development and Technological Upgrade Program Board. of PJSC ALROSA for 2018 was approved; — the majority of the Supervisory Board’s members — the Regulation on the Key Performance Indicators consider the board’s performance as high; was approved; — the 2018 Implementation Report and the updated Program for Operational Efficiency Improvement and — the Long-term Development Program and the Cost Reduction for 2017–2019 were approved; Long-term Investment Program of ALROSA Group for 2020–2024 were updated; — the Report on the Company’s Quality Management COMMITTEES UNDER THE SUPERVISORY BOARD System Performance for 2018 was approved; — a Program for Improving the Procurement Management Quality was developed; — documents of the Company’s Internal Audit The Regulations on the Strategic Planning Committee, the — financial statements; Department were approved: the Performance Report Audit Committee and the HR and Remuneration Committee — issues related to the preparation to the Annual and for 2018 and the Plan of Activities for 2019; under the Supervisory Board of PJSC ALROSA were approved — risk management and internal control procedures; Extraordinary General Meetings of Shareholders; by the resolution of the Supervisory Board on June 22, 20183. — the Action Plan for Improvement of the Corporate Amendments to the Regulation on the HR and Remuneration — external independent audits and internal audits; — amendments to the internal documents were Governance System and the Supervisory Board’s Committee under the Supervisory Board of PJSC ALROSA approved/made; Performance was approved; were made by the resolution of the Supervisory Board on — response to unfair behaviour on the part of Company November 9, 2018, and July 9, 20194. employees or third parties, — the Development Strategy of the Company’s — the Consolidated Budget of PJSC ALROSA for 2020, Diamond-Cutting Entity for 2020–2022 and the target KPI values of ALROSA Group and social — risks associated with the completeness of disclosure. Action Plan for Integration of JSC Kristall into expences limits of ALROSA Group were approved; Audit Committee ALROSA Group were approved; The committee is comprised of only independent members — the Standard of Social Support of Company The Audit Committee was established on April 20, 2010 to of the Supervisory Board and shall include three persons. Employees in Case of Workplace Accidents improve the efficiency and quality of the Supervisory Board’s If it is impossible to form a committee only from among (workplace injury/fatality) was approved. control over the Company’s financial and business activities, independent members of the Supervisory Board for objective to ensure open communication with Company’s auditors, reasons, such independent members should constitute a Audit Commission, branches, representative offices and majority of the committee members, while others can be non- services through preliminary consideration and development executive members of the Supervisory Board. of recommendations to the Supervisory Board on issues within the committee’s competence in the following areas: KEY FINDINGS OF THE SUPERVISORY BOARD’S SELF-ASSESSMENT

Members of the Audit Committee in 2019 To maintain shareholders’ trust and investors’ interest in the — to intensify the Supervisory Board’s efforts; Company, the Supervisory Board develops a transparent system of performance assessment based on the corporate — to identify areas of improvement for the Supervisory Full name Position Independence governance principles and best practices. Board and its committees, as well as factors hindering the effective performance. Every year, PJSC ALROSA conducts the assessment of the Maria Vladimirovna Gordon Chairman of the Committee Independent member of the Supervisory Board Supervisory Board and its committees’ performance (in the form of self-assessment), while external assessment is carried Galina Maratovna Makarova Member of the Committee Independent member of the Supervisory Board out at least once in three years. Total average result of the Supervisory Board’s efficiency Oleg Romanovich Fedorov Member of the Committee Independent member of the Supervisory Board Objectives of the assessment are as follows: — to accumulate reasonable information on the 3.65 efficiency of the Supervisory Board and its 3.61 committees, along with their compliance with the Company’s developmental needs;

— to improve the Supervisory Board’s practice and to develop the Company’s corporate governance system; 1 Minutes No. 01/303-ПР-НС dated December 10, 2019. — to strengthen shareholders’ and potential investors’ 2 Based on the Regulation on Performance Assessment of the Supervisory Board of PJSC ALROSA approved by minutes No. A01/285-ПР-НС dated December 14, 2018. 2018 2019 trust in the Company; 3 Minutes No. A01/273-ПР-НС dated June 22, 2018, amendments to the specified provisions were introduced by the resolution of the Supervisory Board dated July 10, 2018 (minutes No. A01/275-ПР-НС). 4 Minutes No. A01/282-ПР-НС dated November 9, 2018, and Minutes No. 01/297-ПР-НС dated July 9, 2019.

144 145 ALROSA ANNUAL REPORT 2019 Corporate governance

Activities of the Audit Committee Membership of the HR and Remuneration Committee in 2019

In 2019, 7 corporate events were organized by the Audit Committee (5 meetings and 2 meetings in absentia), where 40 items were brought into consideration. The list of meetings and items considered is provided in Appendix 13 January 1, 2019–June 26, 2019 July 7, 2019–December 31, 2019

G. M. Makarova G. M. Makarova Participation of Audit Committee members in meetings held in 2019 Chairman of the Committee, Independent Member of the Chairman of the Committee, Independent Member of the Supervisory Board Supervisory Board

Full name Participation in the Committee’s work in 2019 D. V. Konov (Independent Member of the Supervisory Board) D. V. Konov (Independent Member of the Supervisory Board)

total meetings absentee voting S. V. Mestnikov S. V. Mestnikov

M. V. Gordon 7 5 2 O. R. Fedorov (Independent Member of the Supervisory Board) O. R. Fedorov (Independent Member of the Supervisory Board)

G. M. Makarova 7 5 2 M. V. Gordon (Independent Member of the Supervisory – Board) O. R. Fedorov 7 5 2 – V. V. Solodov

The Audit Committee plays a key role in ensuring the effective In terms of risk management: Activities of the HR and Remuneration Committee performance of the Internal Audit Department, the Financial Controlling and Risk Management Department and the Recommendations for the Supervisory Board on the approval external auditor, and in monitoring their independency and of risk management documents were drafted; the Critical In 2019, 12 events were organized by the HR and objectiveness, as well as the quality of their work. Risks Annual Report for 2018 and the Action Plan for Critical Remuneration Committee (7 meetings and 5 meetings in the Risks Mitigation for 2019 were reviewed. form of absentee voting), where 37 items were brought into Thus, at the committee’s meetings in 2019, the following items consideration. were reviewed: The list of meetings and items considered is provided HR and Remuneration Committee in Appendix 13 In terms of internal audit management The HR and Remuneration Committee was established on April The plan and performance of the Internal Audit Department; 20, 2010 in order to improve the efficiency and quality of the reformation of the internal audit service and approaches to Supervisory Board’s work and its decisions through preliminary the implementation of the resource model of the internal consideration and recommendation to the Supervisory Board Participation of HR and Remuneration Committee members in meetings held in 2019 audit in PJSC ALROSA; recommendations on a step-by-step to develop an effective and transparent remuneration practice, improvement of the internal audit at the Company, prepared formulate general directions of the Company’s HR policy to by an independent consultant upon the results of preliminary strengthen the professional composition and effectiveness of the No. Full name Participation in the Committee’s work in 2019 assessment of the internal audit performance; and the action Supervisory Board, as well as pay remuneration to members of plan for improving the performance of the Internal Audit the Supervisory Board and the Executive Committee, the Chief Department of PJSC ALROSA. Executive Officer — Chairman of the Executive Committee, and total meetings absentee voting other officers of the Company, the list of which is determined by In terms of external audit management the Supervisory Board. Membership of the Supervisory Board’s members in the HR and Remuneration Committee throughout 2019

Assessment of independency, objectiveness and absence of The Committee is comprised of at least three members and 1 D. V. Konov 12 7, incl. 6 written consents1 5 conflicts of interest with the external auditor of the Company, of independent members of the Supervisory Board only. If it is including preparation of recommendations/proposals for impossible to form a committee only from among independent 2 S. V. Mestnikov 12 7, incl. 1 written consent 5 the General Meeting of Shareholders on approval of the members of the Supervisory Board for objective reasons, candidate. such independent members should constitute a majority of the committee members, while others can be non-executive 3 G. M. Makarova 12 7 5 The Committee supervises the external audit process members of the Supervisory Board. and evaluates the quality of its performance, as well as 4 O. R. Fedorov 12 7 5 the auditor’s report confirming the validity of the financial In 2019, new members were elected to the Company’s statements. Supervisory Board by decision of the Annual General Meeting of Members of the Supervisory Board elected to the HR and Remuneration Committee on July 9, 2019 Shareholders, and the composition of the HR and Remuneration On April 17, 2020, the committee considered the Committee was renewed accordingly. external audit process to be effective and assessed JSC 5 M. V. Gordon 5 2 3 PricewaterhouseCoopers Audit’s process as favorable, as it As of December 31, 2019, the HR and Remuneration Committee takes into account all accumulated knowledge and specific was comprised of six members, four of whom were independent 6 V. V. Solodov 5 2 3 risks of all material companies in ALROSA Group, as well as members of the Supervisory Board. confirmed the external auditor’s independency.

1 Written consent.

146 147 ALROSA ANNUAL REPORT 2019 Corporate governance

Over the course of the reporting year, the committee continued — approval of long-term, medium-term and short-term January 1, 2019–June 26, 2019 July 7, 2019–December 31, 2019 its work on significant areas of personnel management, plans on financial and economic activities: including on the management incentive system. The committee strives to achieve compliance of the Company’s remuneration investment policy; E. V. Grigoryeva E. V. Grigoryeva system with the best practices. In relation to this, in the reporting period, a range of initiatives aimed at improving the personnel loan policy; K. A. Dmitriev K. A. Dmitriev incentive system were implemented, which was reflected in the Company’s internal documents regulating the management integration policy; I. E. Yelizarov A. I. Donets renumeration procedure. dividend policy; For the purpose of improving efficiency and labor productivity, S. S. Ivanov S. S. Ivanov stimulating active participation of the personnel in operational — improvement of corporate relations, including and strategic tasks of ALROSA Group, and boosting operational proposals aimed at improving corporate governance D. V. Konov (Independent Member of the Supervisory Board) D. V. Konov (Independent Member of the Supervisory Board) and economic indicators, the committee intensely takes part in practices (based on the results of an assessment the development of approaches to building a unified incentive of corporate governance practices), and proposals S. V. Mestnikov S. V. Mestnikov system of ALROSA Group, that would ensure higher material on making relevant amendments to the Articles of engagement of its employees in improving work efficiency, in Association and internal documents of the Company, A. S. Nikolayev A. S. Nikolayev fulfilling their objectives in time and in the best way possible, as well as proposals1 on relevant personnel decisions and would allow to align the interests of employees and ALROSA for the executive bodies of the Company; Group. V. V. Solodov V. V. Solodov — approval of the Company’s internal documents To make effective decisions, the committee reviewed the related to the Committee’s functions, including the O. R. Fedorov (Independent Member of the Supervisory Board) O. R. Fedorov (Independent Member of the Supervisory Board) comparative analysis of the current level of the Company’s Procurement Regulations; management renumeration with the data from the labor A. O. Chekunkov S. E. Donskoy remuneration market across its peers. — analysis and forecast of scientific and technical development and assessment of the degree of The committee keeps under review and summarizes the modernization and optimization of the technologies achievement of ALROSA Group’s key performance indicators, used in the Company. as well as gives recommendations for the management performance assessment to the Chairman of the Supervisory A number of members of the Strategic Planning Committee is Participation of Strategic Planning Committee members in its meetings in 2019 Board and the Supervisory Board itself. determined by a decision of the Supervisory Board and may not be less than three members of the Supervisory Board. No. Full name Participation in the Committee’s work in 2019 Strategic Planning Committee In 2019, a new composition of the Company’s Supervisory Board was elected by decision of the Annual General Meeting The Strategic Planning Committee was established on of Shareholders, and the composition of the Strategic total meetings absentee voting April 20, 2010, to improve the efficiency and quality of the Planning Committee was renewed accordingly. Supervisory Board’s work through preliminary consideration Members of the Supervisory Board, who served on the Strategic Planning Committee untill June 26, 2019 and making recommendations to the Supervisory Board on As of December 31, 2019, the Strategic Planning Committee issues, related to priority areas of the Company’s activities, consisted of 13 members of the Supervisory Board, 3 of whom 1 N. P. Alexandrov 3 2, incl. 1 written consent 1 which are the following: were independent. 2 I. E. Yelizarov 3 2 1 — definition of strategic goals and strategic risks of Events of the Strategic Planning Committee the Company’s activities (including assessment of financial and non-financial risks of the Company, In 2019, there were 6 events held by the Strategic Planning 3 A. O. Chekunkov 3 2 written consents 1 including operational, social, ethical, environmental Committee (including 5 meetings and 1 meeting by absentee and other non-financial risks, and setting acceptable voting), at which they considered 49 issues. Members of the Supervisory Board, participating in the Strategic Planning Committee throughout 2019 risk levels), approval of the Group’s development The list of meetings and issues considered is given in Appendix 13 strategy (long-term program), and attraction of long- 4 A. V. Moiseev 6 52 1 term investments;

5 M. V. Gordon 6 5, incl. 2 written consents 1

6 E. V. Grigoryeva 6 5 1

7 K. A. Dmitriev 6 5 written consents 1 Members of the Strategic Planning Committee in 2019 8 S. S. Ivanov 6 5 1

January 1, 2019–June 26, 2019 July 7, 2019–December 31, 2019 9 D. V. Konov 6 5 written consents 1

A. V. Moiseev A. V. Moiseev 10 S. V. Mestnikov 6 5 1 Chairman of the Committee Chairman of the Committee 11 A. S. Nikolayev 4 3, incl. 1 written consent 1 N. P. Alexandrov A. V. Karkhu

M. V. Gordon M. V. Gordon 1 In cooperation with the Human Resources and Remuneration Committee. (Independent Member of the Supervisory Board) (Independent Member of the Supervisory Board) 2 Written consent.

148 149 ALROSA ANNUAL REPORT 2019 Corporate governance

Remuneration for the members of the Supervisory Board shall Report on the Practices of Applying the Remuneration No. Full name Participation in the Committee’s work in 2019 be paid based on the results of work for the period from the Policy to Members of the Supervisory Board election of the candidate to the members of the Supervisory total meetings absentee voting Board until the election of the Supervisory Board in a new On June 26, 2019, the annual General Meeting of composition. In case of re-election of the members of the Shareholders of PJSC ALROSA1 decided to pay remuneration 12 V. V. Solodov 5 4 1 Supervisory Board at an extraordinary General Meeting of to members of the Company’s Supervisory Board — non- Shareholders, the amount of remuneration of the newly elected state employees for their work as part of the Supervisory 13 O. R. Fedorov 6 5, incl. 1 written consent 1 (retired) member of the Supervisory Board shall be determined Board in the 2017–2018 corporate year in the amount and in proportion to the time worked in the corporate year. manner, determined in accordance with the Regulations on Remuneration of Members of the Supervisory Board. Members of the Supervisory Board, elected to the Strategic Planning Committee on July 9, 2019 The amount of the basic part of the basic remuneration S(base) is determined based on revenue calculated on the basis of Total expenses for the payment of remuneration to members 14 A. I. Donets 3 3 0 consolidated financial statements prepared in accordance with of the Supervisory Board at the end of the corporate year IFRS: amounted to RUB 53,436,316. Remuneration was paid in full 15 S. E. Donskoy 3 3 0 by the due date.

16 A. V. Karkhu 3 3 0 Amount of revenue S(base)

Over RUB 200 billion RUB 6 million

Over RUB 30 billion RUB 4 million REMUNERATION OF THE SUPERVISORY BOARD MEMBERS Over RUB 10 billion RUB 2 million

The size, terms and procedure for paying remuneration to Information on remuneration paid to the members of the members of the Supervisory Board of the Company are Supervisory Board is disclosed by the Company in cases determined in the Regulations on Remuneration of Members stipulated by the legislation of the Russian Federation. of the Supervisory Board of PJSC ALROSA. According to the Regulations, Members of the Supervisory Remuneration for members of the Supervisory Board for the results of 2018–2019 corporate year The Regulations were approved by the decision of the Board may be remunerated for the following: General Meeting of Shareholders on June 26, 2019. No. Full name Basic part, Amount of remune- Allowance for additional obligations Total The basis for remuneration payment is the decision of RUB (S ) ration for partici- (for chairmanship over committees remuneration, the General Meeting of Shareholders of the Company. If base pation in the work or the Supervisory Board) RUB the Company has no net profit (profit for distribution), the of the Supervisory S(2) (S ) = remuneration of the members of the Supervisory Board is not Total determined and is not paid. Board, RU S(1) + S(2) S(1)

% RUB Basic remuneration — participation in the work of the Supervisory Board. 1 E. A. Borisov 6,000,000 2,210,526 20 110,527 2,321,053 — performance of duties of the Chairman of the Supervisory Board, Senior Independent Director; 2 M. V. Gordon 6,000,000 6,000,000 50 2,850,000 8,850,000 Additional remuneration — the chairmanship and (or) membership in committees under the Supervisory Board. 3 K. A. Dmitriev 6,000,000 5,684,211 20 710,526 6,394,737

4 D. V. Konov 6,000,000 6,000,000 40 1,710,000 7,710,000 — of transport costs; 5 V. I. Lemesheva 6,000,000 2,210,526 40 1,105,263 3,315,789 — living expenses; Compensation 6 G. M. Makarova 6,000,000 3,789,474 50 1,705,263 5,494,737 — expenses for services to ensure technical conditions of participation in meetings of the Supervisory Board and/or committees of the Supervisory Board held via videoconferencing 7 S. V. Mestnikov 6,000,000 6,000,000 40 2,400,000 8,400,000 and/or other technical means of communication.

8 O. R. Fedorov 6,000,000 6,000,000 60 3,600,000 9,600,000

Remuneration (basic and additional) and compensation are — Chairman and members of the Supervisory Board, 9 E. A. Chekin 6,000,000 631,579 - - 631,579 not paid in the following cases: with regards to which the law provides for a restriction or prohibition on receiving any payments 10 A. O. Chekunkov 6,000,000 5,842,105 20 876,316 6,718,421 — To the Chairman and members of the Supervisory from commercial organizations, Board, who have the status of a state or municipal employee, in accordance with the current legislation — Members of the Supervisory Board who are of the Russian Federation; simultaneously a sole executive body or a member of the Company’s collegial executive body. 1 Minutes No. 40.

150 151 ALROSA ANNUAL REPORT 2019 Corporate governance

EXECUTIVE BRIEF BIOGRAPHICAL BACKGROUND BODIES Sergey Sergeyevich Ivanov Сhief Executive Officer — Chairman of the Executive Committee

Date of entry into office: March 14, 2017 The Company’s current activities are governed by the On August 23, 2019, by the decision of the Supervisory Board2 Chief Executive Officer — Chairman of the Board 100 (sole the number of members of the Board was determined to Brief Biographical Background executive body) and the Board (collegial executive body). The reach six people. As of December 31, 2019, the Executive competence of the Company’s executive bodies covers all Committee of PJSC ALROSA included six members. Born on October 23, 1980, in Moscow. issues of managing current activities, with the exception of issues falling within the competence of the General Meeting He graduated from the Moscow State Institute of International of Shareholders and the Supervisory Board. Term of the Supervisory Board members on the Executive Relations: in 2001 — with a degree in Economics, in 2002 — with a degree in Finance and Credit. Chief Executive Officer — Chairman of the Executive Committee Committee and the Executive Committee arrange the In 2011 he graduated from the Russian Economic University implementation of decisions of the General Meeting of named after G.V. Plekhanov, Candidate of Economics. Shareholders and the Supervisory Board, and report to them. Term Number of people Information on the primary employment The Board is composed as determined by the Supervisory > 7 years - Board. Period Position On September 23, 2017, by the decision of the Supervisory 1—7 years 1 Board1 the number of members of the Board was determined 2016–2017 Senior Vice President — Head of Wealth Management PJSC Sberbank to be nine people. As of January 1, 2019, the Board had eight < 1 year - members. 2017–present Chief Executive Officer (by January 11, 2018) — Chairman of the Board of PJSC ALROSA

Information on transactions involving the acquisition or alienation Issues considered by the Board in 2019, number of issues of shares is disclosed on the Company’s website in the format of a material fact statement, and is also contained in Information about Members of the Supervisory Board section. 13 Items that should be reviewed prior 3 to the submission to the Supervisory Indicator Risk Board, except for transactions management Items that should be reviewed prior 9 to the submission to the Supervisory 13 Review of the Company’s Board, except for transactions internal documents Preliminary review of transactions (including those related to charity and 11 66 11 sponsorship) issues Preliminary review of Setting the course for the Company’s transactions (including goals, strategies and programs 13 17 those related to charity and implementation sponsorship) Personnel and social issues Personnel and social issues 17 Review of the Company’s internal 13 9 Setting the course for the documents Company’s goals, strategies and Risk management 3 programs implementation

1 Minutes No. A01/262-ПР-НС. 2 Minutes No. 01/298-ПР-НС.

152 153 ALROSA ANNUAL REPORT 2019 Corporate governance

Evgeny Yuryevich Agureev Sergey Vladimirovich Barsukov Deputy Chief Executive Officer Deputy CEO, Member of the Board Director of USO ALROSA, Member of the Board Date of entry into office: August 14, 2017.

Date of entry into office: August 3, 2017. Brief Biographical Background

Brief Biographical Background Born on September 2, 1971, in Kalinin.

Born on January 31, 1978 in Vienna (Austria). In 1993 he graduated from the Military Space Engineering Academy of the Red Banner named A. F. Mozhaisky with a degree In 1999, he graduated from Moscow State University with a in Mathematical Support of Automated Information Processing degree in Economics, in 2001 – Management. Systems; in 2005 – St. Petersburg State University with a degree Public and Regional Administration. Information on the primary employment Information on the primary employment

Period Position Period Position Head of the International Reporting Division, Deputy Head of the Planning and Reporting Department of the Finance Department, Head of the Planning and Reporting Department, Senior 2010–2017 Director of the Financial Policy Department of the Ministry of Finance of the Russian Federation 2009–2017 Managing Director of the Finance Department, Vice President-Director of the Finance Department with PJSC Sberbank Vice-President (until November 9, 2018), Deputy Chief Executive Officer of PJSC ALROSA (manages the Company’s activities in representing its interests when interacting with government Director of PJSC ALROSA’s branch USO ALROSA (manages and is responsible for the Company’s authorities and administrations, public organizations, developing external relations, implementing 2017–present activities on the implementation of rough diamonds sales plans, also ensures the timely receipt of RUB the Company’s policy for international activities, and representing the Company’s interests when 2017–present and foreign exchange earnings for the products sold (diamonds) and implements the Company’s sales interacting with international industry organizations of the world’s diamond complex, licensing all policy with regards to rough diamonds) types of activities of Russian companies and affiliates)

Holds no shares of PJSC ALROSA. In 2019, he committed no Holds no shares of PJSC ALROSA. In 2019, he committed no transactions for the acquisition/alienation of shares. transactions for the acquisition/alienation of shares.

Igor Vitalyevich Sobolev First Deputy Chief Executive Officer — Executive Director, Member of the Board

Date of entry into office: January 1, 2012.

Brief Biographical Background

Born on November 16, 1969, in Kimovsk, Tula Region.

In 1993, he graduated from Tula State Technical University with a degree in Mining Engineering and Construction.

Information on the primary employment

Period Position

First Vice President — Executive Director (until November 9, 2018), First Deputy Chief Executive Officer — 2012–present Executive Director of PJSC ALROSA (manages and is responsible for the Company's main production and related activities in the regions where the Company operates, including in the Republic of Sakha (Yakutia)

Holds no shares of PJSC ALROSA. In 2019, he committed no transactions for the acquisition/alienation of shares.

154 155 ALROSA ANNUAL REPORT 2019 Corporate governance

Alexey Nikolayevich Filippovsky Alexander Grigorievich Matveev Deputy CEO, Member of the Board Head of the Legal Affairs Department, Member of the Board Date of entry into office: September 1, 2017.

Brief Biographical Background Termination date: August 26, 2019

Born on December 28, 1972, in Yekaterinburg. Brief Biographical Background

In 2002, he graduated from the University of California in Los Angeles Born on August 3, 1976, in Omsk. with a degree in Master of Business Administration; in 2015, he graduated from the Maxwell School of Public Administration (New In 1998, he graduated from the Omsk State University with a York, USA) with a Master degree in Public Administration. degree in Law.

Information on the primary employment Information on the primary employment

Period Position Period Position

2015–2017 Chief Financial Officer of LLC Siberian Generating Company Head of Legal Affairs with PJSC ALROSA (manages and is responsible for the activities, related to 2009 — August 2019 Vice President for Economics and Finance (until November 9, 2018), Deputy Chief Executive Officer the Company’s legal protection) of PJSC ALROSA (manages and is responsible for the Company’s accounting and reporting, finance 2017–present and treasury, planning and economic analysis, rationing of labor resources, and coordinates risk Holds no shares of PJSC ALROSA. In 2019, he committed no management) transactions for the acquisition/alienation of shares.

Holds no shares of PJSC ALROSA. In 2019, he committed no transactions for the acquisition/alienation of shares.

Yuri Konstantinovich Okoemov Deputy CEO, Member of the Board Andrey Nikolayevich Cherepnov Termination date: August 26, 2019 Chief Engineer, Member of the Board Brief Biographical Background Date of entry into office: July 29, 2015 Born on January 1, 1962, in the village of Kazachye, Verkhoyansk Brief Biographical Background Region of the Yakut Autonomous Soviet Socialist Republic.

Born on January 4, 1966, in Irkutsk. In 1985, he graduated from the Moscow State Institute of Steel and Alloys with a degree in Physics of Metals; in 1996 — from the Academy In 1988, he graduated from the Irkutsk Polytechnic Institute with a of National Economy under the Government of the Russian Federation degree in Mine Surveying. with the qualification of Manager of the Highest Category.

Information on the primary employment Information on the primary employment

Period Position Period Position 2001–2012 Deputy Chief Surveyor, Chief Surveyor of PJSC ALROSA Vice President (until November 9, 2018), Deputy Chief Executive Officer of PJSC ALROSA 2012–2015 Deputy Chief Engineer for Production, PJSC ALROSA (manages and is responsible for the Company’s activities on matters related to plans for the production and sale of rough and polished diamonds in subordinate divisions, ensures the efficient operation of the Company’s cutting and polishing complex and timely receipt Chief Engineer of PJSC ALROSA (manages and is responsible for the Company’s unified technical policy, the 2009 — August 2019 Company’s compliance with technological requirements of regulations on the protection of mineral resources of revenues for the products sold, participates in the formation and implementation of the 2015 – to date and preservation of mineral raw materials at all stages of their extraction and enrichment, improving the Company’s sales policy on rough and polished diamonds (in the Company’s subordinate efficiency of maintaining open and underground mining, construction, environmental safety, improving the divisions), provides methodological support for technological processes in terms of sorting quality of products, works and services, as well as development and examination of feasibility studies) and evaluation of rough diamonds)

Share of owned ordinary shares of PJSC ALROSA: 0.0004% In 2019, he committed no transactions for the acquisition/alienation of shares. Share of owned ordinary shares of PJSC ALROSA: 0.0073% In 2019, he committed no transactions for the acquisition/alienation of shares.

Powers of Alexander Grigorievich Matveev and Yuri Konstantinovich Okoemov, members of the Board, were terminated by the decision of the Supervisory Board on August 26, 2019.1

1 Minutes No. 01/298-ПР-НС.

156 157 ALROSA ANNUAL REPORT 2019 Corporate governance

REMUNERATION OF THE CEO — CHAIRMAN OF THE assigned to each KPI and KPI performance ratios determined In connection with the approval of the Regulations on the based on established parameters of deviation of actual Key Performance Indicators System of PJSC ALROSA on EXECUTIVE COMMITTEE AND MEMBERS OF THE EXECUTIVE values of the respective KPIs from the targets. December 27, 2019, The Supervisory Board approved new COMMITTEE AND ITS RELATIONSHIP TO THE SYSTEM OF KEY versions of the Regulations on Remuneration of the Chief Pursuant to the Directives of the Government of the Russian Executive Officer — Chairman of the Executive Committee PERFORMANCE INDICATORS OF THE COMPANY Federation No. 9054p-P13 dated October 2, 2019 and of PJSC ALROSA and Regulations on Remuneration of the the instruction of the Supervisory Board dated October Executive Committee Members of PJSC ALROSA. 28, 2019, the Company analyzed the internal documents regulating the formation of key performance indicators and The Regulations contain a procedure for calculating annual Remuneration to the Chief Executive Officer — Chairman of — remuneration (annual bonus) is a form of remuneration of PJSC ALROSA’s management team. and quarterly remuneration for short-term and operational the Executive Committee and members of the Executive remuneration for performance of annual plans of KPIs actually achieved during the year and ensure a direct Committee is paid in accordance with the Regulations on production and business activities of ALROSA Group Based on the results of the analysis, the Regulations on PJSC correlation between the achievement of target values of KPI Remuneration of the Chief Executive Officer — Chairman of the and is paid to the Chief Executive Officer — Chairman ALROSA’s Key Performance Indicators (KPIs) (approved on and the remuneration level of the Chief Executive Officer — Executive Committee and the Regulations on Remuneration of the Executive Committee for performance of December 10, 2019) was developed in accordance with the Chairman of the Executive Committee and the remuneration of the Executive Committee Members approved in the annual key performance indicators of ALROSA requirements of the Methodical Recommendations approved level of each member of the Executive Committee. The new versions by the Supervisory Board on June 24, 2019. Group; members of the Executive Committee are by the Russian Government Decree No. 1388-r dated June provisions will apply from 2020 onwards. Adoption of provisions in the new editions is conditioned by paid for performance of annual key performance 27, 2019 and submitted for approval to the Company’s improvement of the Company’s personnel motivation system, indicators of ALROSA Group, for performance Supervisory Board. The Regulations define the list of KPIs of in particular, construction of a unified system of personnel of approved individual targets for the respective ALROSA Group, calculation methods and specifics of their motivation ensuring increased material interest of employees year, as well as taking into account individual labor application. The main purpose of introducing the KPI system in improving their work efficiency, timely and qualitative performance evaluation of each member of ALROSA is to convert ALROSA Group’s Long-Term Development performance of set tasks and making it possible to link the Group by the Supervisory Board of the Company. Program into the form of specific performance indicators for interests of employees and ALROSA Group. the short-term (1 year) and medium-term (3 years) periods The planned KPI values are approved by the Company’s and to form a relationship between the achievement of According to the Regulations: Supervisory Board. performance indicators and the remuneration received by the Company’s management team. — remuneration (quarterly bonus) is paid to the Chief Performance of quarterly and annual KPIs is assessed Executive Officer — Chairman of the Executive on an accrual basis on the ground of management and Committee and members of the Executive consolidated financial statements under international Committee for performance of quarterly key standards or other reports, taking into account the weight performance indicators (KPIs) of production and economic activity, taking into account individual assessment of labor activity in the reporting period (quarter);

KPI for the Chief Executive Officer — Chairman of the Executive Committee and members of the Executive The amount of Remuneration paid to the Members of the Executive Committee, RUB thousand Committee, established in the Regulations on remuneration of the Chief Executive Officer — Chairman of the Executive Committee Indicators 2017 2018 2019

Quarterly KPIs Annual KPIs Short-term remuneration — amounts payable 863,999 327,719 859,237 during the reporting period and 12 months after the reporting date, including: revenue from core product sales, USD mln; market yield of share, %; remuneration for the reporting period, annual paid vacation for work diamond mining, thousand carats; growth of the dividend flow, RUB mln; in the reporting period, payment for treatment, medical care, utilities, 752,877 281,000 738,053 etc. payments to core management staff net profit, RUB mln. return on equity (ROE), %; accrued taxes and other obligatory payments to relevant budgets and EBITDA adjusted for irregular components 111,122 46,719 121,184 (adjusted revenue before tax, interest and extrabudgetary funds depreciation), RUB bln;

revenue from core product sales, USD mln;

diamond mining, thousand carats;

volume of rock mass, thousand cu. m;

integral KPI of innovative activities, %.

158 159 ALROSA ANNUAL REPORT 2019 Corporate governance

CORPORATE SECRETARY Maxim Viktorovich Razdolkin Head of Corporate Governance Department — Corporate Secretary

Date of entry into office: September 28, 2018

Brief Biographical Background Rights and obligations of the Corporate Secretary are — ensuring compliance with the requirements of the enshrined in the Company’s Articles of Association and legislation of the Russian Federation on countering Born on May 19, 1976 in the city of Maikop of the Republic of detailed in the Regulations on the Corporate Secretary1. the misuse of insider information and market Adygea. Regulations on the Corporate Secretary are posted on the website manipulation; of PJSC ALROSA. In 2000, he graduated from the Peoples’ Friendship University — monitoring compliance with the requirements of the of Russia with a degree in Law. The Corporate Governance Department was established in legislation of the Russian Federation on countering the Company to ensure effective performance of the duties by the misuse of insider information and market Candidate of Laws (Peoples’ Friendship University of Russia, the Corporate Secretary. manipulation; 2003).

The Corporate Secretary is accountable to the Supervisory — interacting with the registrar, trade organizers, and Additional education Board of the Company, is appointed to the position and other professional participants of the securities dismissed on the basis of the relevant resolution of the market within the authority vested to the Corporate 2010 – Manchester Business School, Compliance Program Supervisory Board. Secretary. 2011 – INSEAD Business School, Building a World-Class Key functions of the Corporate Secretary: Since September 2018, Maxim Viktorovich Razdolkin, Head Company Program. of Corporate Governance Department, performs functions of — improving Corporate Governance; the Corporate Secretary of PJSC ALROSA2. Work experience in recent years

— assisting in preparation and holding of the General Meeting of Shareholders; Period Position — ensuring operation of the Supervisory Board, its committees, as well as acting as the Secretary of the Board; 2007–2010 Corporate Secretary of OJSC TNK-BP Management

— preventing corporate conflicts; 2010–2013 Chief of Staff of the President of OJSC TNK-BP Management

— ensuring exercising shareholders’ rights; 2013 – August 2018 Corporate Secretary of X5 Retail Group N.V. — implementing the disclosure policy; August–September 2018 Assistant to Chief Executive Officer of PJSC ALROSA

September 2018 – to date Head of Corporate Governance Department – Corporate Secretary of PJSC ALROSA

He has no family ties with persons who are members of the Company’s governing and supervisory bodies for financial and economic activities. Holds no shares of PJSC ALROSA.

REMUNERATION TO THE CORPORATE SECRETARY

In 2019, the Corporate Secretary received remuneration under the Regulations on the Corporate Secretary, the Company’s internal regulatory documents governing the remuneration and material incentives system for the Company’s employees, including those in senior positions.

1 Approved by the Supervisory Board on December 11, 2014 (Minutes No.A01/223-ПР-НС) with amendments, approved by the Supervisory Board on October 2, 2015 (Minutes No. A01/234-ПР-НС). 2 Resolution of the Supervisory Board of September 26, 2018, Minutes No. A01/281-ПР-НС.

160 161 ALROSA ANNUAL REPORT 2019 Corporate governance

CONTROL SYSTEM The composition of the Audit Commission, valid as of December 31, 20191

Full name Position

Chairman

Alexander Alexeyevich Pshenichnikov Deputy Director for State Regulation in Production, Processing and Circulation of AUDIT COMMISSION Precious Metals and Gems and Currency Control of the Ministry of Finance of the Russian Federation

In accordance with the legislation of the Russian Federation The Audit Commission is elected to consist of 5 people. Its Deputy Chairman and the Company’s Articles of Association, the Audit term of office extends to the period until the next annual Viktor Nikolayevich Pushmin Commission is elected by the annual General Meeting General Meeting of Shareholders. Deputy Minister of Finance of the Republic of Sakha (Yakutia) of Shareholders to oversee the Company’s financial and economic activities and compliance with legal acts of the Russian Federation. Alexander Sergeyevich Vasilchenko Head of the Department for Interaction with Public Bodies of Russian Post JSC

Chief Specialist of the Department of Industry, Transport, Communications and Nikolay Petrovich Ivanov Finance of the Ministry of Property and Land Relations of the Republic of Sakha (Yakutia) The composition of the Audit Commission was valid until June 26, 20191

Associate Professor of the Management Department, Deputy Head of the Basic Konstantin Konstantinovich Pozdnyakov PricewaterhouseCoopers Department of the Financial University under the Full name Position Government of the Russian Federation

Chairman Alexander Alexeyevich Pshenichnikov Deputy Director for State Regulation in Production, Processing and Circulation of Precious Metals and Gems and Currency Control of the Ministry of Finance of the Russian Federation Events run by the Audit Commission in 2019 — Analysis of operating, non-operating and management expenses of PJSC ALROSA. Deputy Chairman In 2019, the Audit Commission conducted an annual audit of Viktor Nikolayevich Pushmin the Company’s financial and economic activities for 2018. The — Analysis of the information on implementation of the Deputy Minister of Finance of the Republic of Sakha (Yakutia) audit was conducted from April 2 to April 12, 2019 investment program of PJSC ALROSA. The following planned activities were included: — Review and analysis of the information on Head of the Department of the Rough and Polished Diamond Complex Property, Financial implementation of the Non-Core Asset Alienation Anna Ivanovna Vasilyeva and Insurance Organizations, Ministry of Property and Land Relations of the Republic of — Analysis and audit of the financial and economic Program of PJSC ALROSA. Sakha (Yakutia) activities of PJSC ALROSA and its annual financial statements for 2018. — Audit of execution of the instructions and directives Alexander Sergeyevich Deputy Director of the Corporate Governance Department, Ministry of Economic of the President of the Russian Federation and the Vasilchenko Development of the Russian Federation — Audit of net profit spending; Government of the Russian Federation.

— Audit of the order of calculation of the amount, as — Audit and elimination by PJSC ALROSA of Chairman of the International Tourism, Sport and Hospitality Department, Associate well as correctness of calculation, accrual and pay-out deficiencies/ compliance with recommendations Konstantin Konstantinovich Professor of the Corporate Finance and Corporate Governance Department, Associate of dividends of PJSC ALROSA. reflected in previous acts/reports of the Audit Pozdnyakov Professor of the Management Department of the Financial University under the Government Commission. of the Russian Federation — Analysis of the results of implementation of the system of key performance indicators of PJSC — Analysis of implementation by PJSC ALROSA of the ALROSA and senior management, as well as linking prescriptions of the audit bodies (Federal Tax Service implementation of approved KPIs with remuneration of Russia, the Accounts Chamber of the Russian of members of the Supervisory Board and Federation, the Prosecutor General’s Office of the Management of PJSC ALROSA. Russian Federation and others).

— Selective audit of procurement activities carried out — Report of the Audit Commission on the results of by PJSC ALROSA in 2018. the audit of financial and economic activities of PJSC ALROSA for 2018, including recommendations to — Analysis of results of the Company’s sales policy on eliminate deficiencies. domestic and foreign markets in 2018.

1 Elected by the Annual General Meeting of Shareholders on June 26, 2018, Minutes No. 37. 1 Elected by the Annual General Meeting of Shareholders on June 26, 2019, Minutes No. 40.

162 163 ALROSA ANNUAL REPORT 2019 Corporate governance

The Audit Commission’s report on the audit of the Company’s — coordination of work with the Company’s external financial and economic activities for 2018 was presented to auditor, as well as parties providing consulting KEY TARGETS the annual General Meeting of Shareholders1. services in the risk management, internal control and corporate governance; (KEY PERFORMANCE INDICATORS)

Amount of remuneration for members — conducting internal audit of structural divisions of OF THE INTERNAL AUDIT DEPARTMENT FOR 2019 of the Audit Commission the Company in accordance with the established procedure; — Number of agreed recommendations on the audit — Analysis of corporate interaction of the Company’s In accordance with the Regulations on Remuneration and results services to determine the scope of responsibility Compensation of Members of the Audit Commission, — preparation and presentation of the report with respect to the coverage of key risks with remuneration to members of the Audit Commission on internal audit activity and findings to the — Evaluation of corporate requirements for the control functions (“guarantee map” project) may be paid for participating in the Audit Commission’s Supervisory Board (Audit Committee) and Chief organization of internal audit related to legislative activities and for performing additional duties related to Executive Officer — Chairman of the Executive changes in 2018. Preparation of the action plan for the chairmanship in the Audit Commission. Remuneration Committee. the organization of internal audits in the Company’s shall not be paid to the Chairman and members of the Audit key controlled legal entities Commission who have the status of a public or municipal The main activity directions of the Internal Audit servant in accordance with the current legislation of the Department are: Russian Federation. — assessment of the efficiency of the internal control For the 2018–2019 corporate year, one member of the Audit system; Commission — Konstantin Konstantinovich Pozdnyakov — assessment of the efficiency of the risk management — was not a public servant. The Annual General Meeting system, Key Events in 2019 — Audit of the Company’s charitable and sponsorship of Shareholders of PJSC ALROSA1 decided to pay K.K. — assessment of corporate governance. expenses. Pozdnyakov a remuneration for participation in the work of Learn more on the Internal Audit Department functions in Plan of Activities of the Internal Audit Department for 2019 the Audit Commission in the 2018—2019 corporate year in the the PJSC ALROSA annual report 2018, page 193 included specific audits and other monitoring activities. In — Audit of procedures of identification and disposal amount of RUB 1,297,725. 2019, in accordance with the Plan of Activities and targets of of the non-core assets of PJSC ALROSA for To ensure systematic control and evaluation of the quality of the Department, the following audit and organizational and construction-in-progress facilities and housing stock. the internal audit, the Company developed and approved methodical activities were carried out: an internal normative document defining the Internal Audit — Audits of key business processes of the subsidiary INTERNAL AUDIT Assessment and Quality Enhancement Program, as well as Audits: JSC SK ALROSA-Lena main activities including water the criteria and procedure of internal audit assessment and transport management and logistics, repairs and preparation of the Internal Audit Enhancement Plan. — Audits of specific foreign trading companies of water transport operation, investments and technical Key purpose of the PJSC ALROSA’s internal audit activities the ALROSA network and the Company’s branch upgrade, procurement, asset management, keeping is to assist the Supervisory Board and the Company’s In accordance with the Internal Audit Assessment and Quality in Vladivostok in terms of product presentations, and accounting goods and materials. executive bodies in increasing efficiency of the Company’s Enhancement Program, the IAD staff performs continuous operating expenses, organization of monitoring management, improving its performance involving a systemic monitoring and quality control. Internal quality assessment is functions and execution of tasks. Other activities: and gradual approach to the analysis and assessment of the conducted on an annual basis, external quality assessment is risk management, internal control and corporate governance carried out by an external expert or group of experts at least — Audit of procurement procedures of the subsidiary — Implementation of measures to eliminate deficiencies system. once every five years or more often on the resolution of the JSC Almazy Anabara, where three or less applications detected during the audits of the Zhukovskoye Supervisory Board (Audit Committee). were submitted. Material Supplies & Logistics Division (MSLD) of PJSC PJSC ALROSA has the Regulation on Internal Audit2 which ALROSA was monitored. defines general principles and approaches to the internal — Analysis of implementation of one of the production audit system. Enhancement of the Internal Audit Department investment projects including analysis of planning — Assessment of the efficiency of the internal control performance and investment project implementation procedures; and risk management system at the macro level and As per the Regulation, the internal audit in the Company procurement procedures for selection of suppliers audit of corporate governance were conducted. is implemented by establishing a separate division — In the reporting year, as part of the improvement of the and providers, proper monitoring of execution of the Internal Audit Department, the head of which is Company’s IAD activities to comply with the International contract obligations, audit of construction control by — In accordance with the legislation requirements, administratively subordinated to the Chief Executive Officer Standards for the Professional Practice of Internal Auditing the customer and the contractor, as well as designer annual audits of financial and economic activities — Chairman of the Executive Committee of the Company and best practices of international and Russian companies, supervision. of 15 controlled and affiliated legal entities of the and functionally subordinated to the Supervisory Board the Internal Audit Department has developed the following Company were organized and conducted to confirm (through the Audit Committee under the Supervisory documents: the accuracy of the reporting of controlled and Board). affiliated legal entities and verify the actual status — a map (scheme) of interaction of the risk management of the main control functions of their key business The Internal Audit Department (IAD) consists of 13 members and internal control system entities monitoring and processes. and includes two divisions: Division of Operating Audit and assessing risk management and internal control Division of Methodology and Monitoring. system in specific areas (guarantee map);

Internal Audit Department tasks are: — planning order of the Internal Audit Department activities and the audit model with risk factor analysis — assistance to the executive bodies and employees and ranking of the audited entities were upgraded. of the Company in developing and monitoring execution of procedures and activities to improve In 2019, monitoring of the IAD Activities Enhancement risk management and internal control systems and Plan developed on the results of the preliminary external corporate governance of the Company; assessment was carried out. 30 events were implemented of 40 in the plan, and 10 are not yet due.

1 Minutes No. 40 of June 26, 2019. 2 Approved by the resolution of the Supervisory Board of December 14, 2017, Minutes No. A01/266-ПР-НС. 1 Approved by the resolution of the Supervisory Board of December 14, 2018, Minutes No. A01/285-ПР-НС.

164 165 ALROSA ANNUAL REPORT 2019 Corporate governance

— In the context of standardization and In 2019, the Internal Audit Department (the auditor’s executives) with the Company (Company municipal needs” of November 28, 2013 and regulatory documents improvement of the quality of the audit conducted 63 audit and organizational and executives). of the Company. In 2019, the in controlled and affiliated legal entities, methodical events, including 49 planned guidelines/requirements of PJSC events. The number of unscheduled audits as Up to 2012, the service of mandatory annual audit of The tender documentation is agreed with the Federal Agency for Internal Audit ALROSA on conducting the audit were a percentage of the total number of audit and consolidated financial statements prepared as per IFRS at the State Property Management (as it is the main shareholder). developed (updated) for the members other events amounted to 22%. end of the year was procured on a non-competitive basis. Department of the audit committees. They include Publication and posting of a notice on the tender and samples of standardized documents Upon instruction of the Company management, Starting from 2012, the service of mandatory audit of tender documentation conducted of the Audit Commission, standard the results of activities undertaken were summed consolidated financial statements prepared as per IFRS at the audit program, as well as current up, conclusions were drawn, shortcomings end of the year is procured through public tender. In 2019, the notice on conducting a public tender and tender 63 audit and legislation and Company requirements. and risks were identified and documents were documentation were published on the official website of the Compliance of reports and acts of the prepared; audit based recommendations Starting from 2019, the service of mandatory audit of Unified Informational System for Procurement at www.zakupki. organizational audit commissions of 22 companies were developed to address shortcomings accounting (financial) reports prepared in accordance with gov.ru and on the Sberbank-AST platform for electronic with the specified Methodical and improve (optimize) the existing business Russian law and consolidated financial statements prepared competitive procedures. and Recommendations was analyzed. It was processes. in accordance with the International Financial Reporting confirmed that the reports and acts Standards at the end of the year is procured through public Winning bidder methodical generally complied with the Company’s Analysis of the key performance indicator tender in electronic form. requirements. During the year, activities (effectiveness) of the audits revealed that An audit organization that scores the best number of points were carried out to maintain and the percentage of agreed recommendations Tender arranger wins the tender. The Supervisory Board of the Company seeks events, update the database of the Company’s accepted for implementation and included in the approval of the winner from the Annual General Meeting specialists, current members and organizational and administrative documents, The Company’s executive body. of Shareholders. including 49 candidates for election to the audit according to the audit results, amounted to commissions, proposals were prepared more than 70% which corresponds to the Tender subject The audit comprises procedures for the purpose of obtaining planned events on the formation of audit commissions planned task. auditor proof with respect to numeric data and information of controlled and affiliated legal entities, The right to conduct a mandatory audit of the Company’s contained in the financial statements. The selection of specialists of the Company’s divisions The targets and the Plan of Activities of the accounting (financial) statements prepared in accordance with procedures is based on the auditor’s judgment, including — members of the audit commissions of Internal Audit Department for 2019 have been Russian law and the right to conduct a mandatory audit of the professional assessment of risks of material misstatement controlled and affiliated legal entities implemented in full. ALROSA Group’s consolidated financial statements prepared in the financial statements, whether due to fraud or error. were advised on the audit procedure. as per IFRS at the end of the year. In the process of assessing the above-mentioned risks, the auditor considers the internal control system associated with Tender objective the preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in Identification of an audit organization offering the best terms the circumstances, but not for the purpose of expressing of mandatory audits of the Company’s accounting (financial) an opinion on the effectiveness of the internal control statements prepared in accordance with Russian law and system. Additionally, the audit includes an assessment of ALROSA Group’s consolidated financial statements prepared the appropriateness of the accounting policies used and as per IFRS. the reasonableness of accounting estimates made by the management, as well as the overall presentation of financial Tel.: +7 (495) 967-60-00 Tender Commission statements. EXTERNAL AUDITOR Fax: +7 (495) 967-60-01 For the purpose of an open tender, the Company instituted The auditor’s remuneration, payable for the last completed a tender commission. The commission is composed financial year for which the auditor conducted an independent Joint-Stock Company Procedures used in the selection of external of managers and specialists of the Company, and audit, is determined by agreement between the auditor PricewaterhouseCoopers Audit auditors and for ensuring their independence representatives of the Federal Agency for State Property and the Company, and, following the results of the audits of (JSC PwC Audit) and objectivity, along with information on Management, the Ministry of Property and Land Relations for the Company’s accounting/financial statements, prepared the remuneration of external auditors for the Republic of Sakha (Yakutia), and the Ministry of Finance of in accordance with Russian law, and ALROSA Group’s INN 7705051102 , OGRN 1027700148431 audit and non-audit services the Russian Federation. consolidated financial statements, prepared as per IFRS, totalled RUB 35.0 mln, net of VAT. Address: 10 Butyrsky Val Street, 125047 Moscow In 2019, there were no factors that could influence Development and approval of the tender documentation the auditor’s independence from the Company, In 2019, JSC PwC Audit also provided: including significant interests linking the auditor To conduct an open tender in electronic form, in 2019, the Company developed the tender documentation in accordance with — consulting services in respect of accounting for leases the requirements of Federal Law No. 44-FZ “On the contract system of PJSC ALROSA and its subsidiaries in accordance in the procurement of goods, works and services to support state with the entry into force of International Financial and municipal needs” of April 5, 2013, Decree of the Government Reporting Standard (IFRS) 16 Leases on January 1, INFORMATION ON THE MEMBERSHIP of the Russian Federation No. 1085 “On approval of rules for 2019 for the purposes of preparing consolidated evaluation of applications, final proposals of participants in the financial statements of ALROSA Group in the amount IN SELF-REGULATORY ORGANIZATIONS procurement of goods, works and services to support state and of RUB 1.8 million. (including VAT). OF AUDITORS

Self-regulatory organization “Russian From September 21, 2009 to October 19, Union of Auditors” (Association) 2016, it was a member of the Self-regulatory organization of auditors Non-commercial JSC PwC Audit is included in the Register Partnership “Audit chamber of Russia”, of Auditors and Audit Organizations ORNZ 10201003683. of the Self-regulated organization of auditors “Russian Union of Auditors” under primary registration entry number (ORNZ) 11603050547.

166 167 ALROSA ANNUAL REPORT 2019 Corporate governance

No payments for services rendered by the No loans are extended to the auditor (the RISK MANAGEMENT auditor are deferred or overdue. auditor’s executives) by the Company.

The decision to approve the auditor There are no close business relations to conduct a mandatory audit of (participation in the promotion of PJSC ALROSA’s accounting (financial) products (services), participation in statements, prepared in accordance with joint business activities, etc.), or family Russian law, and the auditor to conduct relations. a mandatory audit of ALROSA Group’s RISK MANAGEMENT APPROACHES consolidated financial statements, No information about the Company’s prepared as per IFRS for 2019, was executives being executives of the Auditor passed by the Annual General Meeting of is available. ALROSA Group strives to ensure effective risk management and response, including systematic planning of risk mitigation Shareholders. ensuring the Company’s sustainable development under measures and ensuring control over their implementation. conditions of uncertainty and changes in the external There are no participation shares of the environment. Internal regulatory documents define the structure and Since 2013, auditor (the auditor’s executives) in the organization of the risk management system (RMS), in authorized (charter) capital (Unit trust) of Risk management is a continuous and systematic process particular, principles, goals and objectives, common PJSC the Company. that runs at all levels of the Company, integrated with key terminology, key elements, functions and roles of the business processes and aimed at improving the quality of participants in the risk management process, as well as the decisions made by the management. ALROSA continuously main stages of the risk management process and tasks of the ALROSA performs risk identification, monitoring, analysis, assessment participants. participates in the Anti- ANTI-CORRUPTION corruption In all areas of its activities, ALROSA adheres and third parties can report (including Charter of to the principle of rejection of any forms anonymously) cases of abuse or other negative and manifestations of corruption. ALROSA is events. KEY INTERNAL REGULATORY DOCUMENTS the Russian committed to high legal, business and ethical standards of work and develops a culture of Since 2013, PJSC ALROSA participates in REGULATING THE RISK MANAGEMENT Business countering misuse of office. The Company has the Anti-corruption Charter of the Russian a Line of Trust, through which its employees Business. PROCESSES IN ALROSA:

— the risk management policy1 — The risk assessment methodology, risk classifier, risk passport template3 — the Regulation on Risk Management2

— the Regulation on the Office of Financial KEY DOCUMENTS Controlling and Risk Management; OF THE COMPANY TO COUNTERACT BRIBERY AND CORRUPTION

— the anti-bribery and anti-corruption — the Corporate Ethics Code. policy; All the documents have been approved — the ALROSA ALLIANCE principles for by the Supervisory Board. In 2019, ALROSA implemented a number of measures aimed — identification and risk assessment of the airline and responsible business conduct, which at improving the RMS: the airport in Mirny in accordance with international provide for standards to counteract safety standards were carried out; corruption (cl. 2.2); — the list of critical risks of the Company was updated; — risk management mechanisms were integrated into — identification and assessment of production risks the project management system; Details was carried out, and measures to mitigate risks were are available on the corporate website developed; — information on inherent risks was collected and an at http://eng.alrosa. annual report on the Company’s risks was prepared. ru/about-us/anti- — possible environmental risks were analyzed for corruption/, http://eng. alrosa.ru/operations/ hydraulic structures; sales-policy/alrosa- alliance/, as well as in the Company’s social reports

1 According to the decision of the Supervisory Board of March, 21, 2019, Minutes No. 01/293-ПР-НС. 2 According to the decision of the Supervisory Board of March, 21, 2019, Minutes No. 01/293-ПР-НС. 3 Order No. A01/131-P of May 5, 2017 “On approval of internal regulatory documents in risk management of the Company”.

168 169 ALROSA ANNUAL REPORT 2019 Corporate governance

Risk managment principles PARTICIPANTS, FUNCTIONS AND AREAS OF RESPONSIBILITY

Principle Description In 2019, the participants of the risk management process were involved in the identification, monitoring, analysis and consideration of risks on an ongoing basis, guided by certain approaches and principles. Management of risks is an important component of corporate governance and an integral part of the Company’s overall management system. Risk management Integration processes should be integrated into key business processes, including business planning and goal setting. Risk management affects all business functions and structural units. Organizational structure of the ALROSA risk management system

Risk management is consistent in nature and is a continuous process, made up of Consistency and continuity regular and consistent procedures for risk management, adaptable to the changing Supervisory Board conditions of the internal and external environment. Audit Commission

Individual risk management and various risk management processes shall be carried Integrity out within the overall risk management system. Audit Committee

The risk management system should be consistent with the Company’s size, Annual report organizational structure, strategy, and objectives. The risk management process on risks shall take into account a reasonable balance of risk management costs and a External Auditor Internal Economic expediency cumulative impact of risks on the Company, taking into account the likelihood of Audit Department risks (cumulative risk level). Financial and other resources are allocated to address risks, taking into account the significance of a risk for the Company, as well as the expected effect of a corrective measure.

Risk management is the responsibility of all departments, bodies, officers, and Responsibility employees of the Company. Financial Controlling Chief Executive Officer and Risk Management and Chairman of the Department Executive Committee

Risk Owners Executive Committee

Participants of the risk management process:

Management Decision-making Risk owners Risk Information Employees and control Center (owners Aggregation of standalone bodies of the risk and RMS divisions and management Management functional services process) Center

Administrative subordination

Functional and administrative subordination

Functional subordination

170 171 ALROSA ANNUAL REPORT 2019 Corporate governance

Core functions and tasks of specialized bodies under the RMS

RMS participants Objectives Functions RMS participants Objectives Functions

— plays a strategic and oversight — organize the identification and assessment of critical risks, as — approves internal regulatory documents: the Risk Management role in the risk management well as discussions with the Company’s management and, if Policy, the Regulation on Risk Management process necessary, subsidiaries — approves the critical risks annual report, approves the annual — defines risk management goals — provides methodological support and coordination of risk Action Plan for Critical Risks Mitigation and objectives, as well as the management activities in structural units and subsidiaries Supervisory Board principles of organization and — approves the level of preferred risk (risk appetite) on an annual operation of the RMS — collects, aggregates and analyzes risk information provided by basis risk owners — monitors the effectiveness of — approves the report of the Internal Audit Department on the RMS risk management methods and — compile and update the List of Critical Risks and the Map of performance assessment measures taken by the Company Critical Risks, the Risk Register, prepares the critical risks annual report Risk management — ensures coordination of the risk division — management process — approves the critical risks annual report and the annual Action — makes sound proposals on the level of preferred risk (risk — monitors risks Plan for Critical Risks Mitigation; appetite) Financial — aggregates information by risk Controlling and Audit Committee — provides control over the — approves the level of preferred risk (risk appetite); — draws up a consolidated annual Action Plan for Critical Risks Risk Management — facilitates the regular exchange of reliability and efficiency of the Mitigation based on information received from risk owners RMS — approves the report of the Internal Audit Department on the RMS Department risk information performance assessment. — monitors the implementation of approved procedures, internal — is the RMS control center regulatory and methodological documents in the field of risk management in the Company — responsible for ensuring the — regularly monitor the Company’s overall exposure to risks continuity of the RMS and for (aggregate risk level), as well as monitor critical risks and new — develops draft risk management documents and reporting implementing decisions of the risks templates Supervisory Board in the area of Executive Bodies risk management — make decisions on critical risk management measures, designate — provides risk information to structural divisions and functional (Chief Executive persons responsible for implementation of activities and services responsible for shareholder, investor and public Officer — Chairman — responsible for timely and effective monitoring of their implementation relations of the Executive identification, assessment and Committee and response to the Company’s risks — approve regulatory and methodological documents in the field — conducts self-assessments of the RMS’ effectiveness members of of risk assessment and management the Executive — allocate resources necessary to — organizes training activities in risk management Committee) ensure the functioning of the risk — review and develop recommendations to the Audit Committee management system on the approval of internal regulatory documents on risk management (the Risk Management Policy, the Regulation on — evaluates the effectiveness of key elements of the RMS — make decisions to achieve risk Risk Management), approval of the report of the Internal Audit management goals and objectives Department based on the RMS performance assessment results — participates in the identification of risks, violations and cases of non-compliance with regulatory documents in the area of risk management, analyzes information on the implemented risks as — monitor risks on a regular basis, including ongoing monitoring part of the audit Internal Audit of critical risks, and analysis of risk information provided by risk Department Risk owners, in — responsible for the prompt daily owners and aggregated by the risk management division — conducts RMS performance assessments at least once every particular the management of risks within their three years, prepares reports on the RMS performance CEO, Deputy competence, determining the — perform control over the continuous operation of the RMS assessment and submits them for consideration to the Chief CEOs and heads methods of responding to risks, and compliance with internal regulatory, and regulatory and Executive Officer — Chairman of the Executive Committee and of departments/ developing and implementing methodological documents in the field of risk management the Audit Committee. The report is approved by the Supervisory functional services risk mitigation measures, as well Board or functional as identifying and assessing risks — monitor and control the risk management division. review of the services in their respective functional areas results of the RMS self-assessment by risk management division

— risk management division performance assessment

172 173 ALROSA ANNUAL REPORT 2019 Corporate governance

RISK MANAGEMENT METHODS KEY RISK GROUPS

ALROSA applies certain management methods to each identified risk, taking into account characteristics and results of the risk The Company pays special attention to the management effectiveness of critical risk management is carried out by assessment, as well as the degree of risk controllability based on an expert approach1. of critical risks, i.e. risks that, if materialized, could the Audit Committee under the Supervisory Board and significantly affect the achievement of the Company’s by the Supervisory Board itself. Management of other goals. The Company strives to take the most economically risks that may cause less damage, if materialized, does feasible and effective measures to mitigate such risks. not require the involvement of the Executive Committee Consideration of critical risks, their assessment, and under the established procedure and is implemented in Risk mitigation Risk acceptance Risk transfer Risk rejection discussion of ways to mitigate them are carried out at a the course of operational activities. In 2019, the list of the (lower risk level) (risk retention) (risk reassigning) meeting of the Executive Committee. Assessment of the Company’s critical risks was updated.

Impact on risk through preventive Includes measures, as well as risk and/or termination damage mitigation measures in case Includes such tools as of activities, Critical Risk Map as of 31 December 2019 Includes predominantly risk of a materialized risk. It includes transferring risk to a third party, within the level monitoring mandatory development of risk risk insurance, etc. framework of mitigation measures and introduction which a risk Risk probability Risk impact Total risks of additional control procedures appears low (1) medium (2) high (3) It is mandatory to develop risk The risk level and effectiveness mitigation measures, introduce of existing control procedures Risk exposure is transferred to high (3) 2 1 additional control procedures, as are monitored as part of a third party, for example, to a 3 well as a formalized procedure for relevant business processes. counterparty. Such risks are also preparing regular risk reports (with Such risks are included in the included in the consolidated risk the approved format, content and consolidated risk reporting for reporting medium (2) 1 3 7 11 frequency of its submission) risk monitoring

Applicable to risks of any level. low (1) 2 2 The choice of this method is stipulated by a possibility of Applicable to risks of any level. transferring the performance of Applicable predominantly It is recommended for risks with a function (business process) to a to risks with a low level of medium, high and critical materiality third-party organization without materiality levels compromising the effectiveness of the Company’s function and Critical Risk Management in 2019 reputation or the conclusion of an insurance contract Risk The level of Risk management description risk materiality, activities Depending on the value of a weighted risk assessment (risk level), the most appropriate risks mitigation and control measures are dynamics determined. for the year

— Implementation of a set of measures to increase customer focus.

— Launch of own brands, creation of an Internet platform for 1.1. Changes in the balance of supply positioning and promoting ALROSA diamonds and polished and demand for rough diamonds   diamonds.

— Implementation of the developed sales policy, including the Price Over Volume policy

1.2. Geopolitical risks, negative impact of sanctions and restrictive — Sanctions threats monitoring. measures on the Company’s operations (ban on the use of US — Opening accounts in alternative banks. dollars or other key global currencies during settlements through the   — Updating the database of “reserve” buyers in additional state banks; ban on trade in the jurisdictions. US, international trade; restrictive measures on the importation of — Periodic testing of “reserve” buyers (test sales) technological equipment and 1 Risk controllability refers to a measure of the Company’s ability to influence the risk consequences factors. Individual risk controllability is determined by risk owners in software) conjunction with specialists of the Financial Controlling and Risk Management Department by the expert method and/or on the basis of available statistics and is used to determine the risk management method.

174 175 ALROSA ANNUAL REPORT 2019 Corporate governance

Risk The level of Risk management Risk The level of Risk management description risk materiality, activities description risk materiality, activities dynamics dynamics for the year for the year

— The program of measures aimed at mitigating the risks that — Developing a unified methodology for evaluation of investment may result in a loss of brand reputation (in the field of industrial projects. safety, ecology, air transport, etc.). 1.10. Risk of failure to achieve planned indicators of investment,   — Implementation of new project risk assessment tools. — Formalization of internal crisis response processes using PR organizational and innovative projects tools, maintenance of working contacts in departments and — System control of project implementation by the Investment mass media involved in responding to emergency situations. Committee 1.3. Brand reputation loss   2.1. Risk of prolonged production — Assessing critical operational (production) risks involving — Development and testing of anti-crisis response measures in shutdown due to accidents at the external experts. case of the following scenarios/ events: environmental disaster, underground mine, accidents during large-scale industrial accident, air accident, and sanction threat. open-cut mining, fires, impact of   — Developing and implementating Risk Mitigation Action Plans at natural factors, accidents at hydraulic production facilities — Preventive monitoring of events in the region, the country and structures, etc. the world for negative trend analysis — Construction of two new non-self-propelled oil barges. 1.4. Cyber attacks on information — Implementation of a set of measures to enhance protection of systems. Violation of data integrity — Conclusion of contracts with external carriers for the delivery   information systems (taking into account current legislation) and suspension of production of goods that are not provided with their own transportation 2.2. Risk of non-delivery of materials capabilities. — Implementating the Company’s social policy. and resources, fuel and other energy   1.5. Shortage of managers and materials due to disruption of — Scheduled fulfillment of high-quality ship repair during the specialists with the necessary   — Developing and implementing a set of programs aimed at logistics processes navigational off-season. competencies / unique expertise creating a personnel reserve and succession on the basis of the Company’s HR Training Center. — Repair of port cranes in the Ust-Kutsk branch.

— Construction of two warm warehouses in Nakyn — Forging relationships with government representatives and shareholders. 1.6. Failure to meet the planned — Diagnostics of heating grids condition and measures for technical upgrade (replacement) of the main technological and scenario in Africa   2.3. Risk of freezing residential, social — Monitoring the implementation of budget and performance   pumping equipment. indicators and production facilities in winter. — Acquisition of backup equipment — Equipping protected facilities with modern engineering and 1.7. Causing intentional damage to technical protection means. — Constant monitoring of the state of flight safety and assets as a result of terrorist attacks,   development of corrective actions. sabotage — Implementing the ongoing monitoring and anti-terrorist 2.4. Risk of stopping flights with the — Audit of the airline according to IOSA international standard, measures Company’s enterprises as a result development and implementation of measures to eliminate of accidents involving JSC ALROSA   auditors’ comments. — Developing the Regulations on the Financial Policy of PJSC Air Company’s aircraft and / or flight ALROSA, implementing a set of measures as part of the restrictions imposed. — Audit of the Mirny Air Enterprise (Mirny airport) according to 1.8. Liquidity risk approved Regulations, including: providing access to various   ISAGO international standard, as well as development and sources of liquidity, minimizing the weighted average cost of implementation of measures to eliminate auditors’ comments capital, etc. — Constant monitoring (field observations) of the state of hydraulic — Quarterly disclosure of the results of financial and production structures (HS). activities and publication of analytical materials. 2.5. Risk of destruction of the — Equipping responsible pressure hydraulic structures with an — Carrying out audio conferences with participation of top right-bank stone and earth dam of   automated remote control system. 1.9. Decreasing investment management. Svetlinskaya HPP (JSC Vilyui HPP-3) attractiveness   — Scheduled surveys of the inlet and outlet channels of an — Holding Investor Day, regular meetings with investors and HPP (echo-sounding survey) after flood passage close to the analysts, participation in conferences of investment banks estimated

— Conducting information visits to production facilities — Development of monitoring systems. 2.6. Environmental risk   — Implementation of the project on assessment of the environmental risks of hydraulic structures

Risk materiality level Change in probability Without changes  (assessment)   throughout the year 

176 177 ALROSA ANNUAL REPORT 2019 Corporate governance

Risks materialized in 2019 Production risks Event after the reporting period

Work on production risks is carried out as a separate project, In 2020, the outbreak of a new coronavirus affected various Risk Risk factors Measures taken to minimize the impact for which in 2019 one of the largest international insurance industries, including the activities of the Company. broker companies with professionals in identifying scenarios leading to insurance cases was engaged — Willis Towers The lockdown measures taken and drop in demand for jewelry — The falling demand on JDP against the Watson. In the reporting period, the WTW team visited sites, in mainland China and Hong Kong, which account for 14% backdrop of the global macro-economic ran a diagnostic of the production assets, generated scenarios of the global demand, led to decrease in sales of certain uncertainty. that can potentially lead to destruction or trauma, calculated polished diamond categories, which is reflected in the sales of possible damages for the realization of each risk and suggested diamond raw materials. — Consolidation of the jewelry retail sector measures to mitigate them. Site production workers decide and increase in the share of online sales of whether the suggested adjustments are required, and the final At the same time, the global diamond industry entered jewelery products in the USA decision is made by the management committee, headed by the year 2020 being much more sustainable and prepared — Implementation of the sales policy’s Price the executive director of ALROSA. to handle the shocks than before the industry crisis of the Over Volume concept in the falling market Changes in the supply — Reduction of polished diamonds reserves in previous year; and the sales policy of diamond-producing and demand balance retail due to the introduction of more effective Following the results of the work, risk passports were drawn up companies has already adapted to the market volatility. — Implementation of sales support and for rough diamonds, reserve management practices, and decline for each site that include any potential risk, the percentage of ALROSA is commited to proceed with its flexible sales policy promotion programs possibility of its realization, the number of potential victims, and to support Company customers. resulting in a 26% decline in purchases of rough diamonds by diamond- the costs of risk and potential damage reduction. This will allow in the sales volume y-o-y cutting companies — Analysis of customer needs and shaping for assessing risks at different sites in a single and consistent The Company also implements a range of measures to (to USD 3.338 bln) of proposals (based on the availability of system. prevent the coronavirus from spreading among its employees: — Ongoing problems with the availability of relevant products) the number of business trips is cut, employees are provided loan proceeds in the diamond-cutting sector with information on preventive measures, premises are as the result of stricter requirements of Indian equipped with disinfectants, the body temperature of banks for loan security and repayment employees is measured at the entrance, as well as employees are recommended to stay at home in case of the first signs of — Fall in the output of diamond-cutting the virus. companies in India aimed at reducing the excessive stock

Measures taken to improve the control system:

— improved security at the checkpoints, initiation of a personal inspection regime, random inspections, full inspections of carry- on baggage, increase in the number of CCTV cameras, implementation of the new control — Intentional and coordinated actions of INFORMATION and access control system. Detection of diamond employees and third parties aimed at gaining products theft by a Single unlawful advantage — Complete reshaping of the organizational Sales Entity employee DISCLOSURE SYSTEM structure of sorting and packaging — Poor efficiency of the control system workshops, reorganization of the monitoring and control service of the Security Service, job rotation. INFORMATION POLICY — Adjustment of the procedure for accounting and control of diamond products, straightening out of the production chain. ALROSA pays great attention to raising its information activity audience thoroughly and strives to timely disclose important and maintaining a high level of openness and transparency. information. The Company analyzes the information needs of its target

Principles of the information policy of ALROSA

Reasonable balance Regularity and Comprehensiveness between openness timeliness Accessability and validity and protection of commercial interests

178 179 ALROSA ANNUAL REPORT 2019 Corporate governance

INFORMATION DISCLOSURE CHANNELS PROTECTION OF INSIDER INFORMATION

One of the key communication channels is the Company’s In addition to the corporate site, the Company uses the To prevent abuses in the form of misuse of insider In accordance with the Federal Law “On Counteracting official website at www.alrosa.ru, containing not only Interfax’s Center for Disclosing Corporate Information site for information, the Company has enacted the Regulation on Misuse of Insider Information and Market Manipulation and information and financial statements, but also detailed mandatory disclosures. Measures to Prevent the Use of Insider Information and on Amendments to Some Legislative Acts of the Russian information about production, marketing, financing activities (or) Manipulation of the Market. In accordance with the Federation”,1 persons with access to insider information of ALROSA, corporate social responsibility, the global regulation, Company insiders are obliged to do their best of ALROSA, specified in the List of Information Related to diamond market and industry organizations. Concurrently, to protect and prevent the misuse and dissemination of Insider Information are required to notify of their transactions information is posted on the English version of the website at insider information. undertaken with securities of the Company and on signing eng.alrosa.ru. contracts being derivative financial instruments where prices depend on the Company’s securities, in the manner prescribed by Russian the legislation. The regulation, the list of insider information and forms, as well as comments and explanations to complete the forms and notify the Company and the regulator are available on the website in the Disclosure channel Info/audience Shareholders and Investors section

Corporate site — The Articles of Association and general internal documents of the Company http://www.alrosa.ru — information about material facts, affiliated parties

— information about securities issued by the Company, payment of dividends

— quarterly, annual and CSR reports (sustainable development reports)

— annual and interim financial statements

— materials to the General Meetings of Shareholders and decisions taken at the meetings, as well as decisions taken at meetings of the Supervisory Board

— press releases

The newsfeed and Company page on the — Mandatory information disclosure Interfax’s Center for Disclosing Corporate Information site — disclosure of information to analysts, shareholders and representatives of the investment community in Russian and English in respect of the http://www.e-disclosure.ru/portal/ Company’s performance, financial statements, implementation of major company.aspx?id=199 investment projects and strategic priorities

Corporate site, Information Disclosure — information in English for representatives of the investment community subsection — disclosure of information to analysts of investment banks http://www.alrosa.ru/documents/раскрытие- информации/

Corporate site, Investors and Shareholders subsection (versions in Russian and English)

http://www.alrosa.ru/инвесторам-и-акционерам/ и http://eng.alrosa.ru/investors

1 No. 224-FZ dated July 27, 2010

180 181 ALROSA ANNUAL REPORT 2019 Glossary

Abbreviation/ Expansion GLOSSARY Term

KP Kimberley process

KPI Key performance indicators

CSR Corporate Social Responsibility

Abbreviation/ Expansion MMPD Mirny Mining and Processing Division Term MICEX Moscow Interbank Currency Exchange AMPD Aikhal Mining and Processing Division SME Small and Medium Enterprises SC Stock Company IFRS International Financial Reporting Standards INO Independent non-profit organization MTR Material and Technical Resources JSC Joint-Stock Company NMPD Nyurba Mining and Processing Division AREOPAD Collegial Body Information System VAT Value Added Tax SCMR State Commission on Mineral Reserves CIP Construction in Progress MEP Mining and enrichment plant R&PDW Research & Production Development Works MC Mining Company R&D Research, Development and Experimental Design Activities EW Exploration works NCA Non-core assets EE Exploration expedition RPE Research and Production Enterprise HPP Hydroelectric Power Plant NPF Non-state pension fund S&A Subsidiaries and Associates CGNR National Corporate Governance Rating PEE Preschool Educational Establishment SB Supervisory Board LDP Long-term Development Program OJSC Open Joint-Stock Company BCRA Business Council Russia–Angola UAE United Arab Emirates EEU Eurasian Economic Union UN United Nations Organization EU European Union LLC Limited Liability Company SSE Single sales entity PT Pilot testing CJSC Closed Joint-Stock Company OHS Occupational health and safety IKPI Integral Key Performance Indicator SSC Shared Service Centre An index that allows estimating changes in average diamond prices within a comparable sales structure Price Index (the index does not include diamonds weighing more than 10.8 ct) OECD Organization for Economic Co-operation and Development

IT Information technology PJSC Public Joint-Stock Company

IM Indigenous Minorities IDRP Innovation Development and Retrofitting Program

182 183 ALROSA ANNUAL REPORT 2019 Glossary

Abbreviation/ Expansion Abbreviation/ Expansion Term Term

SW Software DEF Diamond Empowerment Fund

RIA Results of intellectual activity (intellectual deliverables or product) DOR Diamond Origin Report

RAS Russian Accounting Standards DPA Diamond Producers Association

RF Russian Federation DTG Diamond Terminology Guideline

SMJ Securities Market Journal EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization

JV Joint venture EMEA Europe, the Middle East and Africa

Average sales price Revenue from sales in US dollars divided by sales volume in carats ESG Environmental, Social and Governance

RMS Risk management system FCF Free cash flow

RCCI Russian Chamber of Commerce and Industry Free-float Shares in free float

FS Feasibility Study FTSE4Good Series of ethical investment stock indices issued by the FTSE Group in 2001

IAD Internal Audit Department GfK Market Research Organization

UMPD Udachny Mining and Processing Division GIA Gemological Institute of America

Ulus District, unit of administrative and territorial division of the Sakha Republic (Yakutia) IDR Issuer Default Rating

FAEA of Russia Federal Agency for Ethnic Affairs IPO Initial Public Offering

FBA Federal Budget Agency IR Investor Relations

SDG UN Sustainable Development Goals untill 2030 MBA Master of business administration

EE Emulsion explosive MSCI ESG MSCI index in ESG

ETF Electronic Trading Facility NDR Non-deal road-show — roadshows for shareholders and potential investors

RSA The Republic of South Africa RJC Responsible Jewellery Council

DJ Diamond jewelry An element of practical expertise of an issuing company employed when issuing its securities (bonds, Road Show shares, etc.), including during initial public offering, a series of meetings with potential investors and B2B Business-to-Business analysts in the key cities of the world

Return on Equity, i.e. profitability of owned capital, a ratio of net profit for the period to the weighted B2C Business-to-Consumer ROE average own capital (equity) C1 (category) Reserves of explored mines of complex geological structure and poorly explored mineral resources Short Interval Control — structured process of continuous search for ways to improve production SIC C2 (category) Prospective, unexplored reserves efficiency

CAPEX Capital expenditure TSR Total Shareholder Return

CEO Chief Executive Officer WDC World Diamond Council ct carat WWF World Wildlife Fund

184 185 ALROSA ANNUAL REPORT 2019 Contact Information

Total number of shares 7,364,965,630 (seven billion three hundred sixty-four million nine hundred CONTACT sixty-five thousand six hundred thirty) pieces

Number of ordinary shares 7,364,965,630 (seven billion three hundred sixty-four million nine hundred INFORMATION sixty-five thousand six hundred thirty) pieces Nominal value of ordinary shares RUB 3,682,482,815 (three billion six hundred and eighty two million four hundred eighty-two thousand eight hundred and fifteen)

State registration number of the issue of No.1-03-40046 dated August 25, 2011 ordinary (preference) shares and the date of Head Office of ALROSA (Moscow) their state registration

24 Ozerkovskaya Naberezhnaya, Moscow, 115184 State registration number of additional issue No of ordinary (preference) shares and the date Phone: (495) +7 620-92-50 +7 (495) 411-75-25 of their state registration (if on the date of pre-approval of the Annual Report by the Fax: +7 (495) 411-75-15 Supervisory Board the registering body failed to cancel the individual number (code) of Telex: 113258 “Almaz” RU the additional issue of ordinary (preference) [email protected] shares)

Quantity of (preference) shares No Head Office of ALROSA (Mirny) Nominal value of preference shares No 6 Lenin Street, Mirny, Republic of Sakha (Yakutia), 678174 Existence of a special right of the Russian No Phone: +7 (41136) 3-00-30 Federation to participate in the Company Fax: +7 (41136) 3-04-51 management (golden share) [email protected] Full name of the Company Auditor Joint-Stock Company PricewaterhouseCoopers Audit (JSC PwC Audit)

INN 7705051102 , OGRN 1027700148431

About the Company Auditor address Registered/postal address

Full name of the Company PJSC ALROSA — Public Joint-Stock Company ALROSA Address: 10 Butyrsky Val Street, Moscow, 125047

Telephone: +7 (495) 967-60-00, +7 (495) 411-75-25 Number and date of issue of the certificate of Certificate No. 1 dated August 13, 1992 issued by the Administration of Mirny state registration as a legal entity district of the Republic of Sakha (Yakutia) (Regulation No. 554 dated August 13, Fax: +7 (495) 967-60-01 1992)

Dividend amount paid to the federal budget Dividends paid to the federal budget in 2018 and H1 2019 amount Subject of the Russian Federation, where the The Republic of Sakha (Yakutia) in the reporting period to RUB 19,336,959.5 thousand Company is registered

Dividends in arrears to the federal budget in There are no dividends in arrears to the federal budget Principal type of activity According to the presentation on the types of economic activities under the the reporting period as of December 31, 2019 Russian Classification of Economic Activities (OKVED OK 029-2001 KDES, ver. 1) the principal type of activity is diamond mining, code 14.50.22 (OKVED OK 029-2014 (KDES ver. 2) — 08.99.32) Allocation to the Company’s reserve fund (RUB, No allocations to reserve capital were made % of net profit) Information on inclusion in the list of ALROSA is included in the list of strategically important enterprises strategically important enterprises and and strategically important joint-stock companies subject Allocations to other funds of the Company No allocations to other funds were made strategically important joint-stock companies to Order of the President of the Russian Federation (RUB, % of net profit) No.1009 dated August 4, 2004. Full Name of the Registrar Joint Stock Company VTB Registrar Authorized capital RUB 3,682,482,815 (three billion six hundred and eighty two million four hundred eighty-two thousand eight hundred and fifteen) Address of the Registrar 23 Pravdy Street, Moscow, Russia, 127015

186 187 ALROSA ANNUAL REPORT 2019

Information on the Company’s placement Shareholders of the Company whose share in the authorized capital exceeds 5 of additional shares and capital movements percent (as of December 31, 2019): for the year (changes in the composition APPENDICES of persons entitled to directly or indirectly — Russian Federation represented by the Federal Agency for State dispose of at least five percent of the votes Property Management — 33.0256% of the authorized capital attributable to voting shares of the Company) (2,432,321,953,17185/50000 ordinary shares);

— the Sakha Republic represented by the Ministry of Property and Land Relations for the Republic of Sakha (Yakutia) — 25.0002% of the authorized capital (1,841,259,772 ordinary shares);

— National Settlement Depository — 32.3661% of the authorized capital 1. Financial statements (IFRS) of PJSC ALROSA for 2019 190 (2,383,753,588 ordinary shares). 1.1. Consolidated Statement of Financial Position 196 In the reporting period, there were no changes in the composition of persons 1.2. Consolidated Statement of Profit or Loss who have the right to directly or indirectly dispose of at least five percent of and Other Comprehensive Income 197 the votes attributable to the Company’s voting shares, except: 1.3. Consolidated Statement of Cash Flows 198

— increase in the share of National Settlement Depository from 32.3474% of 1.4. Consolidated Statement of Changes in Equity 199 the authorized capital (2,382,375,064 shares) as of December 31, 2018 to 32.3661% of the authorized capital (2,383,753,588 ordinary shares) as of 2. Subsidiaries and Associates 200 December 31, 2019 3. Local regulations 204

Information on the number of shares held There are no shares held by the Company and shares of the Company held by 4. Resolution of the Independent Auditor on the Implementation by the Company, as well as the number of legal entities controlled by the Company of Long-term Development Program 205 shares in the Company held by legal entities controlled by the Company 5. Statistics on sales of rough and polished diamonds 207

Number of shares owned by the Russian 2,432,321,953 17185/50000 of ordinary shares 6. Non-core asset disposal 210 Federation (as of December 31, 2019) 7. Information about execution of the orders of the President Share of the Russian Federation in the 33.0256% of PJSC ALROSA’s authorized capital (ordinary shares, no preference and the Government of the Russian Federation 214 authorized capital with indication of shares) participation on ordinary and preference 8. Information about major transactions shares (as of December 31, 2019) and related party transactions 216 9. Report on compliance with the principles Shareholders of the Company whose share in — the Russian Federation represented by the Federal Agency for State Property and recommendations of the Corporate Governance Code 230 the authorized capital exceeds 2 percent (as of Management; December 31, 2019): 10. Report of the Audit Commission 258 — the Republic of Sakha (Yakutia) represented by the Ministry of Property and Land Relations for the Republic of Sakha (Yakutia); 11. Pending court proceedings 261

— Non-Bank Lending Institution Stock Company National Settlement 12. Information on State Support 262 Depository 13. Information about meetings of the Supervisory Board and the committees 265

188 ALROSA ANNUAL REPORT 2019 APPENDICES

1. FINANCIAL STATEMENTS (IFRS) Explanations and notes to the financial statements are fully disclosed on the website of PJSC ALROSA. Explanations and comments are an integral part of the ALROSA Group consolidated financial statements http://www.alrosa.ru/wp-content/ OF PJSC ALROSA FOR 2019 uploads/2020/03/ALROSA-IFRS-2019-RUS.pdf

Independent Auditor’s Report Our audit approach Overview

To the Shareholders and Supervisory Council of Public Joint Stock Company ALROSA: Materiality Overall Group materiality: Russian Roubles (“RUB”) 4,900 million, Our opinion which represents 5% of average profit before tax for the last three years. In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Public Joint Stock Company ALROSA (the “Company” or PJSC Group scoping ALROSA) and its subsidiaries (together – the “Group”) as at 31 December 2019, and its consolidated Materiality financial performance and its consolidated cash flows for the year then ended in accordance with • We conducted audit work at the parent company of the Group – International Financial Reporting Standards (IFRS). PJSC ALROSA. In respect of the other Group entities, we performed audit procedures over significant financial statements What we have audited Group scoping line items and analytical procedures. The Group’s consolidated financial statements comprise: • The Group engagement team visited the divisions of the • the consolidated statement of financial position as at 31 December 2019; companies of the Group in Moscow, Mirny (Republic of Sakha Key audit (Yakutia)) and Smolensk. • the consolidated statement of profit or loss and other comprehensive income for the year then matters ended; • Our audit scope addressed 90% of the Group’s revenues and 97% of the Group’s absolute value of underlying profit before tax and • the consolidated statement of cash flows for the year then ended; elimination adjustments for intragroup operations. • the consolidated statement of changes in equity for the year then ended; and • the notes to the consolidated financial statements, which include significant accounting policies Key audit matter and other explanatory information. • Acquisition of Kristall group. Basis for opinion As part of designing our audit, we determined materiality and assessed the risks of material We conducted our audit in accordance with International Standards on Auditing (ISAs). Our misstatement in the consolidated financial statements. In particular, we considered where responsibilities under those standards are further described in the Auditor’s responsibilities for the management made subjective judgements; for example, in respect of significant accounting estimates audit of the consolidated financial statements section of our report. that involved making assumptions and considering future events that are inherently uncertain. As in all We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our audits, we also addressed the risk of management override of internal controls, including among for our opinion. other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Independence Materiality We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the ethical requirements The scope of our audit was influenced by our application of materiality. An audit is designed to obtain of the Auditor’s Professional Ethics Code and Auditor’s Independence Rules that are relevant to our reasonable assurance whether the consolidated financial statements are free from material audit of the consolidated financial statements in the Russian Federation. We have fulfilled our other misstatement. Misstatements may arise due to fraud or error. They are considered material if ethical responsibilities in accordance with these requirements and the IESBA Code. individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually and in aggregate on the consolidated financial statements as a whole.

AO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, Russian Federation, 125047 T: +7 (495) 967 6000, F:+7 (495) 967 6001, www.pwc.ru 2

190 191 ALROSA ANNUAL REPORT 2019 APPENDICES

Overall Group materiality RUB 4,900 million • the value of gems was reconciled to external sources, taking into account How we determined it 5% of average profit before tax for the last three years discounts for quality characteristics; • property, plant and equipment items were Rationale for the materiality We chose profit before tax as the benchmark because, in our reconciled on the sample basis with the view, it is the benchmark against which the performance of the benchmark applied accounting records of Kristall group and the Group is most commonly measured by users, and is a generally stock-count results; accepted benchmark. We chose 5% which is consistent with quantitative materiality thresholds used for profit-oriented • loans and cash were confirmed by companies in this sector. Since the pre-tax profit demonstrates circularisation of the respective financial significant volatility from period to period, we decided to average institutions and reconciling received this benchmark over the last three years. responses with data in the valuation model; • at acquisition date accounts payable were Key audit matters mainly represented by the balance payable Key audit matters are those matters that, in our professional judgment, were of most significance in due to PJSC ALROSA and were tested by our audit of the consolidated financial statements of the current period. These matters were addressed the reconciliation with the relevant in the context of our audit of the consolidated financial statements as a whole, and in forming our accounting records of the Company. opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter We tested the calculation of goodwill arising in connection with the acquisition of Kristall group, The acquisition of Kristall group which is the difference between the consideration Our audit procedures included: paid to the former owner and the fair value of the Refer to Note 5 to the consolidated financial net identifiable assets and liabilities. statements. We reviewed the acquisition contract and reconciled the consideration paid to the former We reviewed the presentation and disclosure of information about the business combination In October 2019, the Company acquired 100% owner to the contract. transaction in Note 5 to the consolidated financial shares of JSC “Production Corporation We received the fair value calculation of identifiable statements for compliance with the requirements of “Kristall”, the parent company of Kristall group. assets and liabilities prepared by management with IFRS 3, Business Combinations, and the adequacy the involvement of an independent appraiser for the of corresponding disclosures in the context of the The Group’s management classified this acquisition of Kristall group and reviewed it for consolidated financial statements as a whole. transaction as a business combination based compliance with the requirements of IFRS 13, Fair on the definition in IFRS 3, Business Value Measurement. How we tailored our Group audit scope Combinations, and recognised it using the We tailored the scope of our audit in order to perform sufficient work to enable us to provide an acquisition method. We engaged our valuation specialists to audit the opinion on the consolidated financial statements as a whole, taking into account the structure of the purchase price allocation between the acquired Group, the accounting processes and controls, and the industry in which the Group operates. A consideration of RUB 1,886 million was paid assets and liabilities and to review the methodology to the former owner of Kristall group in cash. and mathematical accuracy of the management’s Based on our risk assessment, analysis of materiality of the Group entities’ financial statements line calculations. items, we determined PJSC ALROSA as a material component of the Group and audited the financial We focused on the recognition of this information using ISA 600 “Special Considerations – Audits Of Group Financial Statements (Including transaction in the consolidated financial We tested the fair value of the acquired assets and The Work Of Component Auditors)”. statements of the Group due to its overall undertaken liabilities and performed a sample- We determined the other entities of the Group as immaterial components, in respect of which we materiality, complexity of the calculations and based comparison of major assets and liabilities of performed audit procedures over significant financial statements line items, and analytical procedures. certain accounting estimates applied by Kristall group as at the acquisition date with the management. supporting documents: Other information

• the volume of gems was reconciled with the Management is responsible for the other information. The other information comprises PJSC stock-count results (taking into account the ALROSA’s Annual Report for 2019 and Issuer’s Report for the first quarter of 2020 (but does not stock movement in the period between the include the consolidated financial statements and our auditor’s report thereon), which are expected to valuation and the stock-count date); be made available to us after the date of this auditor’s report. Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

3 4

192 193 ALROSA ANNUAL REPORT 2019 APPENDICES

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read PJSC ALROSA’s Annual Report for 2019 and Issuer’s Report for the first quarter of 2020, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

5

194 195 ALROSA ANNUAL REPORT 2019 APPENDICES

1.1. CONSOLIDATED STATEMENT 1.2. CONSOLIDATED STATEMENT OF PROFIT OR LOSS OF FINANCIAL POSITION AND OTHER COMPREHENSIVE INCOME

PJSC ALROSA IFRS consolidated financial statements for the year ended 31 December 2019 (in millions of Russian roubles, unless otherwise stated)

Consolidated Statement of Profit or Loss and Other Comprehensive Income

Year ended Year ended Notes 31 December 2019 31 December 2018 Revenue 20 232,856 293,870 Income from government grants 16 5,330 5,775 Cost of sales 21 (119,071) (126,541) Royalty 19 (1,209) (1,209) Gross profit 117,906 171,895 General and administrative expenses 22 (12,830) (11,735) Selling and marketing expenses 23 (2,794) (4,606) Other operating income 24 6,734 5,383 Other operating expenses 25 (33,873) (33,842) Operating profit 75,143 127,095 Finance (costs) / income, net 26 2,828 (15,901) Share of results of associates and joint ventures 5.2 3,485 3,418 Profit before income tax 81,456 114,612 Income tax 19 (18,726) (24,208) Profit for the year 62,730 90,404 Other comprehensive income: Items that will not be reclassified to profit or loss: Remeasurement provision of pension obligations, net of deferred tax 17, 19 1,417 (1,115) Total items that will not be reclassified to profit or loss 1,417 (1,115) Items that may be reclassified subsequently to profit or loss: Currency translation differences, net of tax (236) 177 Total items that may be reclassified subsequently to profit or loss (236) 177 Total other comprehensive income / (loss) for the year 1,181 (938) Total comprehensive income for the year 63,911 89,466 Profit attributable to: Owners of PJSC ALROSA 62,026 89,217 Non-controlling interest 30 704 1,187 Profit for the year 62,730 90,404 Total comprehensive income attributable to: Owners of PJSC ALROSA 63,072 88,279 Non-controlling interest 839 1,187 Total comprehensive income for the year 63,911 89,466

Basic and diluted earnings per share for profit attributable to the owners of PJSC ALROSA (in Roubles) 12 8.60 12.29

The accompanying notes on pages 5 to 61 are an integral part of these consolidated financial statements. 2

196 197 ALROSA ANNUAL REPORT 2019 APPENDICES

1.3. CONSOLIDATED STATEMENT 1.4. CONSOLIDATED STATEMENT OF CASH FLOWS OF CHANGES IN EQUITY

PJSC ALROSA PJSC ALROSA IFRS consolidated financial statements for the year ended 31 December 2019 IFRS consolidated financial statements for the year ended 31 December 2019 (in millions of Russian roubles, unless otherwise stated) (in millions of Russian roubles, unless otherwise stated)

Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity

Year ended Year ended Attributable to owners of PJSC ALROSA Notes 31 December 2019 31 December 2018 Number of Net Cash Inflow from Operating Activities 27 67,560 120,122 shares Other Non- Cash Flows from Investing Activities outstanding Share Share Treasury reserves Retained controlling Total Purchase of property, plant and equipment (19,974) (27,816) (units) capital premium shares (note 12) earnings Total interest equity Proceeds from sales of property, plant and equipment 2,011 903 Balance at Sale of financial assets at fair value through profit or loss 385 1,433 1 January 2018 7,364,965,630 12,473 10,431 - (19,348) 261,663 265,219 (338) 264,881 Interest received 1,969 1,912 Comprehensive income / (loss) Proceeds from disposal of subsidiaries, net of cash disposed of 1,566 30,801 Profit for the year - - - - - 89,217 89,217 1,187 90,404 Cash transfer to deposit accounts (76,944) (17,053) Other comprehensive loss - - - - (718) - (718) (220) (938) Cash transfer from deposit accounts 62,231 5,455 Total comprehensive income / Acquisition of Kristall group, net of cash acquired 5.4 (1,286) - (loss) for the year - - - - (718) 89,217 88,499 967 89,466 Dividends received from associates 5,739 1,124 Transactions with owners Insurance settlement from SOGAZ - 10,490 Dividends (note 12) - - - - - (80,736) (80,736) (9) (80,745) Purchase of shares of PJSC ALROSA-Nyurba 5.3 - (12,000) Purchase of treasury shares Government grants 693 2,938 (note 12) (156,059,800) - - (264) - (13,813) (14,077) - (14,077) Net Cash Outflow used in Investing Activities (23,610) (1,813) Change in ownership in Cash Flows from Financing Activities subsidiaries (note 12) - - - - (11,289) - (11,289) (659) (11,948) Repayments of loans (53,324) (41,221) Total transactions with Loans received 63,692 41,871 owners (156,059,800) - - (264) (11,289) (94,549) (106,102) (668) (106,770) Interest paid (7,465) (5,995) Balance at Purchase of treasury shares 12 - (14,077) 31 December 2018 7,208,905,830 12,473 10,431 (264) (31,355) 256,331 247,616 (39) 247,577 Dividends paid to non-controlling shareholders (215) (9) Dividends paid (57,246) (80,739) Repayment of lease obligations (1,361) - Net Cash Outflow used in Financing Activities 13 (55,919) (100,170) Net (Decrease) / Increase in Cash and Cash Equivalents (11,969) 18,139 Balance at Cash and cash equivalents at the beginning of the year 27,437 7,381 1 January 2019 7,208,905,830 12,473 10,431 (264) (31,355) 256,331 247,616 (39) 247,577 Effect of exchange rate changes on cash and cash equivalents (2,153) 1,917 Comprehensive income Cash and Cash Equivalents at the End of the Year 7 13,315 27,437 Profit for the year - - - - - 62,026 62,026 704 62,730 Other comprehensive income - - - - 1,046 - 1,046 135 1,181 Total comprehensive income for the year - - - - 1,046 62,026 63,072 839 63,911 Transactions with owners Dividends (note 12) - - - - - (57,311) (57,311) (213) (57,524) Change in ownership in subsidiaries ------2 2 Total transactions with owners - - - - - (57,311) (57,311) (211) (57,522) Balance at 31 December 2019 7,208,905,830 12,473 10,431 (264) (30,309) 261,046 253,377 589 253,966

The accompanying notes on pages 5 to 61 are an integral part of these consolidated financial statements. The accompanying notes on pages 5 to 61 are an integral part of these consolidated financial statements. 3 4

198 199 ALROSA ANNUAL REPORT 2019 APPENDICES

2. SUBSIDIARIES Full corporate name Country of registra- Relationship tion/location AND ASSOCIATES Almazdortrans LLC Russia Subsidiary (100%)

ALROSA-Okhrana LLC Russia Subsidiary (100%)

Information about Subsidiaries and Associates of PJSC ALROSA as of December 31, 2019 ALROSA-Spetsbureniye LLC Russia Subsidiary (100%)

Full corporate name Country of registra- Relationship Mirny Airport LLC Russia Subsidiary (100%) tion/location

DIAMONDS ALROSA LLC Russia Subsidiary (100%) Direct participation

Vedomstvennaya Okhrana ALROSA LLC Russia Subsidiary (100%) Hidrochicapa S.A. Angola Subsidiary (55%)

Lensk Town Heat and Electric Networks Enterprise LLC Russia Subsidiary (100%) ALROSA Belgium NV Belgium Subsidiary (99.6%)

LLC Prometey Recreation Complex Russia Subsidiary (100%) ALROSA Hong Kong Ltd. Hong Kong Subsidiary (100%)

Heat Supply Enterprise LLC Russia Subsidiary (100%) ALROSA East DMCC UAE Subsidiary (100%)

PJSC ALROSA-Nyurba Russia Subsidiary (97.4847%) ALROSA USA Inc. USA Subsidiary (100%)

PJSC Severalmaz Russia Subsidiary (99.66%) ALROSA OVERSEAS SA Switzerland Subsidiary (100%)

CJSC MMC Timir Russia Associate (49%) JSC ALROSA Air Company Russia Subsidiary (100%)

OJSC Almazny Mir Russia Associate (47.3677%) JSC Almazy Anabara Russia Subsidiary (99.9999%)

Sociedade Mineira de Catoca Limitad) (CATOCA Limited) Angola Subsidiary (32.8003%) JSC ALROSA-Gaz Russia Subsidiary (99.9995%)

Indirect participation JSC ALROSA-Torg Russia Subsidiary (100%)

Controlled by ALROSA OVERSEAS SA, Kimang LDA Angola OJSC Vilyuiskaya HPP-3 Russia Subsidiary (99.7313%) Holding company 50%

JSC IC Bourevestnik Russia Subsidiary (92.0764%) Controlled by ALROSA OVERSEAS SA, ALROSA ISRAEL LTD. Israel Holding company 100%

JSC Non-State Pension Fund Russia Subsidiary (99.75%) Almaznaya Osen 50% (via Smolensk Diamonds Jewelry Kristall Jewellery Center Limited Liability Company Armenia Group LLC)

JSC Kristall Production Corporation Russia Subsidiary (100%) 99.89% (via JSC Kristall Production Smolensk Diamonds Belgium Corporation) JSC ALROSA-Lena Shipping Company Russia Subsidiary (99.5617%)

200 201 ALROSA ANNUAL REPORT 2019 APPENDICES

Full corporate name Country of registra- Relationship Full corporate name Country of registra- Relationship tion/location tion/location

100% (via JSC Kristall Production Controlled by JSC Terra Northern Smolensk Diamonds Asia Limited Hong Kong Corporation) Aikhaltransgaz LLC Russia Mining and Geological Company, Holding company 100%

Controlled by ALROSA OVERSEAS SA, ALROSA (ZIMBABWE) LIMITED Zimbabwe Holding company 100% Controlled by LLC ALROSA Business Zarnitsa LLC Russia Service, Holding company 100%

1.46% (via JSC Kristall Production Smolensk Diamonds Israel LTD Israel Corporation) Controlled by JSC Kristall Production Gagarin LLC Russia Corporation, Holding Company 67.57%

COLLADE MANAGEMENT LIMITED Cyprus 78.54% (via Smolensk Diamonds) Controlled by DIAMONDS ALROSA LLC ALROSA Business Service Russia LLC, Holding company 99% Controlled by ALROSA OVERSEAS SA, WARGAN HOLDINGS LIMITED Cyprus Holding company 100% Controlled by PJSC Severalmaz, JSC Terra Northern Mining and Geological Company Russia Holding company 99% Controlled by ALROSA OVERSEAS SA, ALROSA FINANCE S.A. Luxembourg Holding company 100% Controlled by LLC ALROSA-Okhrana Almaz Private Security Company LLC Russia Center, Holding company 99% Controlled by ALROSA OVERSEAS SA, Sunland Trading S. A. Switzerland Holding company 100% Controlled by JSC Kristall Production Smolensk Diamonds Jewelry Group LLC Russia Corporation, Holding Company 100% (via JSC Kristall Production Kristall (Middle East) DMCC UAE 99.9949% Corporation)

Controlled by OJSC Vilyuiskaya HPP-3, Yakutskaya Grid Company LLC Russia Smolensk Diamonds USA, Inc. USA 99.89% (via Smolensk Diamonds) Holding company 100%

Controlled by CJSC MMC Timir, Controlled by JSC Almazy Anabara, JSC South Yakutia Development Corporation Russia Yakutskaya Generating Company LLC Russia Holding company 14.7% Holding company 100%

Controlled by LLC ALROSA-Okhrana, ALMAZ-Okhrana Center LLC Russia Holding company 99%

Controlled by JSC Kristall Production ALMAZ SERVICE LLC Russia Corporation, Holding Company 99.86%

Controlled by LLC ALROSA Business Rough Diamond Scientific and Technological Center LLC Russia Service, Holding company 100%

Controlled by JSC Almazy Anabara, ALMAS LLC Russia Holding company 99.9989%

Controlled by JSC Terra Northern ALROSA Information Technologies LLC Russia Mining and Geological Company, Holding company 100%

202 203 ALROSA ANNUAL REPORT 2019 APPENDICES

3. LOCAL 4. RESOLUTION OF THE INDEPENDENT REGULATIONS AUDITOR ON THE IMPLEMENTATION OF LONG-TERM DEVELOPMENT PROGRAM

The following local (internal) regulatory documents of PJSC — Regulation on Remuneration of the Chief Executive ALROSA serve as a basis for this annual report: Officer — Chairman of the Executive Committee of the Company; — Articles of Association of PJSC ALROSA (as amended on June 26, 2019)1; — Regulations on Remuneration of the Members of the Executive Committee of the Company; — Corporate Governance Code of PJSC ALROSA; — Regulations on the Corporate Secretary of the — Code of Corporate Ethics of the Company; Company; he ractitioners summary in respect of validity

— Regulation on the General Meeting of Shareholders — Information Policy of the Company; of the actual indicators for presented in of PJSC ALROSA (as amended onJune 26, 2019); RO Groups onerm evelopment — Regulation on the Measures for Preventing Use of — Regulations on the Supervisory Board of PJSC Insider Information and/or Market Manipulation in the roram ALROSA (as amended June 26, 2019); Company; We believe that the evidence obtained during the audit (Appendix, Section 5 3) provides sufficient grounds — Regulations on the Audit Committee at the — Dividend Policy Regulations; for expressing the opinion presented in the current section in the $ regarding the validity of the actual values Supervisory Board of PJSC ALROSA; of key performance indicators given in the ALROSA Group's Long-Term Development Programme for the period 2018-2024, for 2019. — Regulations on the Company’s Disclosure; — Regulations on the HR and Remuneration Committee The actual values of ALROSA Group's key performance indicators for 2019 and the extent to which the at the Supervisory Board of the Company; — The Company’s Policy for Countering Corruption and target values are achieved are shown in the table below. Bribery; Table 1. ALROSA Group's key performance indicators in 2019

— Regulations on the Strategic Planning Committee at K aret ctual pp K the Supervisory Board of PJSC ALROSA; — Regulations on Internal Audit of the Company; to taret achievement inancial and economic K — Regulations on Remuneration of the Members of the — Risk Management Policy of the Company; Market return per share > ∆ MOEX -45.3 p.p. no Supervisory Board of the Company; index4

— Environmental Policy of the Company; Growth of the dividend flow, RUB mln 13,667 na - - — Regulations on the Executive Committee of PJSC Return on equity (ROE) 29% -4.0 p.p. no ALROSA; — Regulations on Risk Management; Adjusted EBITDA, RUB bln 124 86.4% no — Regulations on the Audit Commission of the — Regulation on the OHS Management System of the ndustry Ks Company; Company; Core product sales revenue, USD mln 4,002 83.3% no Rough diamond production, thousand carats 37,320 103.1% yes — Regulations on Remuneration and Compensations — Sustainable Development and Corporate Social 3 to the Members of the Audit Commission of the Responsibility Policy of the Company. Volume of rock mass, thousand m 80,941 101.7% yes Company; Integral KPI of innovative activities >95% - yes onus cancellation

Net debt/Adjusted EBITDA ≤ 0.7 - no Productivity, RUB mln /pers. 11.45 96.4% no Reduction (+)/growth (-) of operating expenses -3.8% -15.0 p.p. no

Based on the validation of actual KPIs indicated in the 2019 Report on Implementation of ALROSA Group's Long-term Development Program 2018–2024, no significant errors were brought into focus.

1 Practitioner — FBK LLC (audit company who performs the task that ensures the reliance other than the audit and review of financial information for the previous periods). 2 This document is an extract from the 2019 Audit Report on Implementation of ALROSA Group's Long-term Development Program 2018–2024 dated April 9, 2020 (the Report) (Appendix, Section 6). In this extract, the references to the Report's Appendix and sections, as well as abbreviated terminology, have not been changed in any way compared to the original text of the Report. The extract has been provided for consideration at the meeting of the Strategic Planning Committee under the Supervisory Board of PJSC ALROSA and subsequent publication in ALROSA's Annual Report 2019. 3 Appendix to the 2019 Audit Report on Implementation of ALROSA Group's Long-term Development Program 2018–2024. 4 Relative change of the market return per share ratio is more than relative growth of MOEX index for year (in case of the MOEX index growth) and less then relative reduction of MOEX index for year (in case the MOEX index falls down). 5 No conclusions can be drawn regarding this matter, as the decision on dividend payment for Q2 2019 has not been made at the time of the Report preparation. If PJSC ALROSA pays 100% dividends for 2019, the FCF indicator will be negative.

PJSC ALROSA Extract from the 2019 Audit Report on Implementation of ALROSA Group's Long-term Development Program 2018–2024

1 Internal documents that were approved (updated) by the Company’s management bodies in the reporting year are posted on the corporate website.

204 205 ALROSA ANNUAL REPORT 2019 APPENDICES

5. STATISTICS ON SALES OF ROUGH AND POLISHED DIAMONDS

Summary data on the sales of rough and polished diamonds by ALROSA Group

Contractual value, USD mln 1 Change, %

2017 2018 2019 In the end of 2019, ALROSA Group achieved the targets values of 3 out of 11 KPIs approved by the Supervisory Board of PJSC ALROSA as part of ALROSA Group's Long-Term Development Program 2018– Sales of rough diamonds 2024 (Minutes No. A01/283-ПР-НС dated November 16, 2018): "Rough Diamond Production, Thousand Carats", "Volume of Rock Mass, Thousand M3", and "Integral KPI of Innovations".

Other target KPIs were not achieved by ALROSA Group. The failure to achieve KPI targets is due to the PJSC ALROSA 2,945.1 3,107.8 2,024.3 35  global diamond market crisis, which has led to a significant drop in sales and lower average prices for rough and polished diamonds. Domestic market 364.8 477.5 285.8 40  We believe the evidence obtained during the audit (Appendix, sections 4 and 5 6) provides sufficient grounds for expressing the opinion:

• According to the review, no significant errors have been found in the actual performance indicators including Gokhran 2.9 – 1.7 – presented by ALROSA Group in ALROSA Group's Long-term Development Program 2018–2024 in all (the State Depository for Precious Metals of Russia) material respects; • Funds were used properly in accordance with budgets provided for by the investment and innovation programs during the audited period in all material respects; Export 2,580.4 2,630.4 1,738.4 34  • Key activities scheduled for 2019, aimed at the achievement of goals of ALROSA Group's Long-term Development Program 2018–2024, were carried out in all material respects. PJSC ALROSA-Nyurba 678.8 690.7 759.2 10 

Domestic market 36.5 43.7 73.0 67  I. O. Livkin Executive Director of FBK LLC including Gokhran Auditor's qualification certificate dated – – – – March 31, 2016 No. 06-000361 ORNZ (the State Depository for Precious Metals of Russia) Task Manager 21606020201

Extract date: April 9, 2020 Export 642.3 647.0 686.2 6 

JSC Almazy Anabara 2 402.2 459.5 304.1 34 

Domestic market 1.8 1.7 6.2 271 

including Gokhran – – – – (the State Depository for Precious Metals of Russia)

Export 400.4 457.8 297.9 35 

PJSC Severalmaz 125.2 152.0 158.2 4 

Domestic market 0.2 1.6 0.7 55 

including Gokhran – 0.4 0.4 10  (the State Depository for Precious Metals of Russia)

6 Appendix to the 2019 Audit Report on Implementation of ALROSA Group's Long-term Development Program 2018–2024. Export 124.9 150.4 157.5 5 

PJSC ALROSA Extract from the 2019 Audit Report on Implementation of ALROSA Group's Long-term Development Program 2018–2024

1 Herein and hereafter the data for 2017–2019 are presented in accordance with IFRS (net of intra-group turnover). 2 Data for 2017 are given as total sales of JSC Almazy Anabara and JSC Nizhne-Lenskoe, at the end of 2017, JSC Nizhne-Lenskoe’s licence was reissued to JSC Almazy Anabara.

206 207 ALROSA ANNUAL REPORT 2019 APPENDICES

Sales of diamonds and diamond powders of ALROSA Group by countries Contractual value, USD mln 1 Change, %

2017 2018 2019 2017 2018 2019

ALROSA entities abroad 18.6 1.7 1.7 3  Mass, Realizable % Mass, Realizable % Mass, Realizable % thousand value, USD thousand value, thousand value, USD carats mln carats USD mln carats mln Domestic market – – – –

Enterprises in Belgium 23,466.1 2,120.7 51 22,486.2 2,084.5 47 19,542.5 1,542.1 47 Export 18.6 1.7 1.7 3  Enterprises in India 7,389.9 679.9 16 4,766.6 662.1 15 3,815.7 578.3 18 Total 4,169.9 4,411.7 3,247.4 26  Enterprises in Russia 2,296.6 403.3 10 2,102.7 524.5 12 1,587.1 365.8 11 Domestic market 403.3 524.5 365.8 30  Enterprises in the UAE 4,221.5 311.8 7 4,453.1 441.0 10 4,245.8 342.7 11

including Gokhran 2.9 0.4 2.2 475  Enterprises in Israel 922.2 406.4 10 986.1 444.7 10 509.6 235.8 7 (the State Depository for Precious Metals of Russia)

Enterprises in Hong 1,336.5 179.5 4 961.3 177.9 4 1,198.1 128.4 4 Export 3,766.6 3,887.3 2,881.7 26  Kong

Sales of polished diamonds Enterprises in 20.9 3.5 0 47.5 7.5 0 217.1 16.5 1 Switzerland Total 96.9 95.3 87.6 8  Enterprises in the 15.6 18.1 0 13.9 17.8 0 41.2 11.9 0 Republic of Botswana Export 2 95.4 93.4 81.3 13  Enterprises in the 40.2 13.3 0 71.9 27.8 1 9.1 11.3 0 Domestic market 1.5 1.9 6.3 332  Republic of Belarus

Enterprises in the UK 1,377.4 10.1 0 1,921.2 9.4 0 1,982.3 8.2 0

Enterprises in the USA 0.7 4.9 0 0.7 5.2 0 1.3 5.2 0 Sales of rough diamonds for ALROSA Group Enterprises in the 139.7 15.7 0 262.7 9.2 0 235.9 1.0 0 Republic of Armenia Contractual value, USD mln Change, % Enterprises in Japan 0.0 0.0 0 0.0 0.0 0 0.0 0.2 0 2017 2018 2019 Enterprises in China 7.27 2.9 0 0.25 0.1 0 0.36 0.1 0 Total 4,169.9 4,411.7 3,247.4 26  Total 41,234.5 4,169.9 100 38,074.1 4,411.7 100 33,386.2 3,247.4 100 Jewelry diamonds 4,087.0 4,324.6 3,185.6 26 

Industrial diamonds 3 82.9 87.1 61.8 29 

1 Herein and hereafter the data for 2017–2019 are presented in accordance with IFRS (net of intra-group turnover). 2 Data for Q4 2019 are presented including the sale of polished diamonds by JSC Kristall Production Corporation. 3 Herein and hereafter — including microgrit.

208 209 ALROSA ANNUAL REPORT 2019 APPENDICES

Negative difference of the actual value of disposals from the — remote location (Far North); 6. NON-CORE book value amounted to RUB 196.8 mln. — special purpose of the assets; Part 4 of NCA Register ASSET DISPOSAL — functional specifics (industrial facilities located in a 46 housing facilities were disposed of with a book value of single-industry town); RUB 150.4 mln, including: — low market value of the facilities as per the — 36 facilities were sold (book value of RUB 88.3 mln); independent appraisers;

The sale of non-core assets (NCA) has been carried out in — and by including JSC NPF Almaznaya Osen in the — 9 facilities were disposed of through barter (book — complete lack of demand or bids at depressed prices PJSC ALROSA (hereinafter — the Company) since 2010. The number of non-core assets proposed for disposal value of RUB 57.7 mln); (below the appraised value of the facility); main principles of the Non-Core Asset Disposal Program (Section I, Part 1 of the Register) through the sale (hereinafter — the Program) together with the NCA Register with simultaneous exclusion from non-core assets — 1 facility was transferred gratis (book value of RUB 4.5 — low entrepreneurial activity in the region. were approved by the Supervisory Board in 2013. In proposed for preservation (Section II, Part 1) (Minutes mln). 2014–2017, the Program was revised taking into account the No. 01/303-ПР-НС of December 11, 2019). This results in a significant number of sales below residual or recommendations and the Guidelines of the Federal Agency Negative difference of the actual value of disposals from the market value. for State Property Management for Identification and Disposal Taking into account the amendments, the planned number book value amounted to RUB 20.5 mln. of Non-Core Assets. In December 2019, the Supervisory of facilities to be disposed until 2022 (inclusive) amounted to Total in 2019, the Company disposed of 109 NCA, their book Board approved a new version of the Program (including the 545 units; the book value of the property amounted to RUB The quality and result of the NCA disposals are determined value totaling RUB 2,550.3 mln, including sale of 64 facilities NCA Register) and the Action Plan for the sale of non-core 19,357.8 million. by objective difficulties affecting disposal period, prices and (book value of RUB 1,695.9 mln), barter of 9 facilities (book assets of PJSC ALROSA for 2020 (Minutes No. A01/305-ПР-НС financial result of disposals, including: value of RUB 57.7 mln), and donation of 28 facilities (book of December 30, 2019). The action plan for the sale of non-core assets for 2019 value of RUB 592.4 mln); 8 facilities were liquidated (book (hereinafter — the Plan) included 90 non-core assets with a — high degree of physical deterioration (in cold value of RUB 204.3 mln). Revenues from sales of non-core Disposal of non-core assets (NCA) is conducted in the total book value of RUB 6,023.1 mln, taking into consideration conservation physical deterioration accelerates); assets of PJSC ALROSA for 2019 amounted to RUB 1,358.6 mln Company in accordance with the principles and procedure expansion of the list of facilities under construction in March excluding VAT. of sale of NCA, set out in the Program. Key objectives of the 2019 (Minutes of the Supervisory Board No. 01/292-ПР-НС of non-core asset disposal in the Company are: March 20, 2019).

— Optimizing the property composition owned by the In 2019, non-core asset disposal resulted in: Company; Part 1 of NCA Register — Increasing the efficiency of using the Company’s assets; participation discontinued in the authorized capital of two companies: JSC Golubaya Volna Resort (book value of financial — Increasing the Company’s capitalization. investments in the authorized capital of RUB 1,143.2 mln, sales price — RUB 1,210.0 mln) and Alrosa Finance B.V. (book value of Achieving the objectives of the Company’s non-core asset financial investments in the authorized capital of RUB 0.1 mln, disposal is intended to solve the following main tasks: voluntary liquidation of the Company).

— receiving additional income; Part 2 of NCA Register

— reducing costs; 55 real estate facilities were disposed of with a book value of RUB 1,059.4 mln, including: — increasing investment attractiveness of the Company; — 26 facilities were sold (book value of RUB 378.0 mln); — improving the organizational and managerial structure; — 27 facilities were transferred gratis (book value of RUB 587.9 mln); — optimizing the Company’s technological and production infrastructure. — 2 facilities were liquidated (book value of RUB 93.5 mln). During 2019, non-core asset disposal was carried out in accordance with the version of the Program approved by Negative difference of the actual value of disposals from the the Supervisory Board on December 14, 2018 (Minutes book value amounted to RUB 1,041.1 mln. No. A01/285-ПР-НС of December 17, 2018). At the same time, in the reporting year, the Company’s Supervisory Board Part 3 of NCA Register amended the Program, supplementing Part 2 of the NCA Register (hereinafter — the Register): 6 facilities under construction were disposed of with a book value of RUB 197.2 mln, including: — in June — with two real estate facilities (Minutes No. 01/296-ПР-НС of June 25, 2019); — 5 facilities were liquidated (book value of RUB 110.8 mln); — in October — with eight real estate facilities (Minutes No. 01/301-ПР-НС of October 17, 2019); — 1 facility was sold below the book value following the results of the trades (book value of RUB 86.4 mln).

210 211 ALROSA ANNUAL REPORT 2019 APPENDICES

Information on the disposal of non-core assets of PJSC ALROSA for 2019

No. No. Asset description Share Account line where Bookkeeping accounts Asset book Net realizable Difference of the actual realizable Cause of the difference in the of the the asset was (considering analytics) value, value**, value and the asset book value, Register Company recognized as at reflecting income RUB thd RUB thd RUB thd in the the accounting date and expense on authorized preceding sale of the the asset disposal capital, % asset (91.1ххх/91.2ххх)

Part 1. NCA Register in the form of controlled entities (shares/participation interest in the authorized capital) of economic entities

JSC Golubaya Sale through a public auction at 1 100 % 1 240 9113421000/9123424000 1,143,182 1,210,000 66,818 Volna Resort a price above the book value

Derecognized from the balance sheet by residual value 2 Alrosa Finance B.V. 100 % 1 170 9127905000 119 – –119 following the results of voluntary liquidation of the company

Q1 Total 1,143,301 1,210,000 66,699

Q2 Total 0 0 0

Q3 Total 0 0 0

Q4 Total 0 0 0

Part 1 Total 1,143,301 1,210,000 66,699

Part 2. NCA Register in the form of real estate facilities

Part 2 Total 1,059,389 18,322 –1,041,066

Part 3. NCA Register in the form of facilities under construction

Part 3 Total 197,218 417 –196,801

Part 4. NCA Register in the form of housing facilities

Part 4 Total 150,439 129,901 –20,538

301 12-month Total (Part 1, 2, 3, 4)* 2,550,347 1,358,640 –1,191,707

*For the purposes of this Table, the total for actual realizable value includes the value of housing facilities received by ALROSA in exchange for non-core assets.

Note:

Amounts recognized as contributions 0 0 0 to authorized capital

Disposals through barter transaction 57,651 37,727 –19,924

Total, net of barter transactions and authorized 2,492,695 1,320,913 –1,171,782 capital contributions

212 213 ALROSA ANNUAL REPORT 2019 APPENDICES

7. INFORMATION ABOUT EXECUTION ON THE PROGRAM FOR ON SOFTWARE IMPORT IMPROVING THE PROCUREMENT PHASE-OUT OF THE ORDERS OF THE PRESIDENT MANAGEMENT QUALITY Pursuant to the Directives of the Government of the Russian Pursuant to the requirements of the Directives of the Federation No. 10068p-P13 of November 6, 2018 on the AND THE GOVERNMENT Government of the Russian Federation No. 1519p-P13 dated transition to domestic software, the Action Plan (hereinafter February 20, 2019 on developing programs for improving referred to as the Plan) for PJSC ALROSA transition to domestic the procurement management quality and the relevant software for the period 2019–2021 was developed and OF THE RUSSIAN FEDERATION instructions of the Supervisory Board, the Company has approved in June 2019 by the Supervisory Board. The plan developed the Program for Improving the Procurement provides, in particular, organizational and technical measures, Management Quality. financial assessment reserves for software, performance indicators for the transition to domestic software, etc. The ON UPDATING OF THE ALROSA 2. Annual updating of the Long-Term Development Program The program contains the assessment procedure and Plan takes into account the proposals of the Ministry of Digital and Long-Term Investment Program of ALROSA Group. performance indicators of the program, taking into account Development, Communications and Mass Media of the Russian GROUP LONG-TERM DEVELOPMENT the competition level in procurement, measures aimed at Federation, agreed with the Autonomous Non-Commercial In accordance with the Directives of the Government of assessing and improving the skills of not only the personnel Organization Center of Competence for Import Phase-out in PROGRAM AND THE ALROSA the Russian Federation No. 4955p-P13 dated July 17, 2014, that is directly involved in procurement but also the personnel the Field of Information and Communication Technologies. LONG-TERM INVESTMENT the Long-Term Development Program of ALROSA Group is responsible for the formation of the customer’s specific needs, subject to annual updating. as well as contract execution and its payment. PROGRAM ON PROCUREMENT In 2019, an update was made to the Long-Term Development Program and Long-Term Investment Program of ALROSA ON KEY PERFORMANCE 1. During 2019, as part of the requirements of the Directives of 1. Execution of the requirements of the Directives of the Group for the period 2020–2024, including an analysis INDICATORS OF ALROSA GROUP the Government of the Russian Federation No. 4111p-P13 dated Government of the Russian Federation No. 276p-P13 dated of the current state of the world diamond market, the May 8, 2019 and No. 9984p-P13 dated November 1, 2019, the January 17, 2019. current situation and strategic directions of the Company’s Regulation on Procurement was amended regarding as follows: development, the Company’s goals and objectives, as well as Directives of the Government of the Russian Federation In compliance with the requirements of the Directives of the long-term financial indicators and key performance indicators. No. 9054p-P13 of October 2, 2019 prescribed an analysis — possibility of applying the assignment of the right of Government of the Russian Federation No. 276p-P13 of January of internal documents governing the formation of key claim (factoring) in the execution of contracts for the 17, 2019, pursuant to the Decree of the President of the Russian In addition, in compliance with the Directives of the performance indicators (hereinafter – KPIs) of activities supply of goods (works, services) concluded by the Federation No. 204 of May 7, 2018 “On National Goals and Government of the Russian Federation No. 10068p-P13 dated and remuneration of the management team of a joint Customer with small and medium-sized enterprises, Strategic Objectives of the Russian Federation through to December 6, 2018 LTD of ALROSA Group was supplemented stock company for compliance with the methodological based on the results of procurement by trades in 2024” ( hereinafter — Decree No. 204) and the instruction of the by measures that envisage the transition of ALROSA Group to recommendations approved by the Order of the Government accordance with the civil legislation of the Russian Government of the Russian Federation No. DM-P13-4513 of July the predominant use of domestic software as part of import of the Russian Federation No. 1388-r of June 27, 2019 Federation; 21, 2018 to accelerate the growth rates of investments in fixed phase-out. (hereinafter –Methodological Recommendations), and the assets and increase their share in the gross domestic product development (updating) of internal documents governing — procurement of domestic products used to implement of the Company to 25 percent, it was necessary to ensure the Pursuant to the Directives of the Government of the Russian the formation of the Company’s key performance indicators national projects and a comprehensive plan for updating of the Long-Term Development Program of ALROSA Federation No. 276p-P13 dated January 17, 2019, LTD of and management remuneration in accordance with the modernization and expansion of the backbone Group (hereinafter — LTD), as well as to submit an audit report ALROSA Group takes into account the following: Methodological Recommendations. infrastructure. on LTD to the federal executive bodies that coordinate the Company’s activities. — sectoral section of the action plan to accelerate As a result of the analysis of the current KPI system, which 2. Directives of the Government of the Russian Federation No. the growth rates of investment in fixed assets and showed partial compliance with the requirements of the new 10464p-P13 of November 18, 2019 prescribed amendments Execution. The analysis of the ALROSA Group Long-Term increase to 25% their share in gross domestic Methodological Recommendations, the decision was made to to procurement documentation governing the competitive Development Program for the period 2018–2024 was carried product, including targets by types of economic update the list of KPIs: procedures. out in order to actualize it. It takes into account the industry activity; section of the action plan to accelerate the growth rates of — add an annual indicator Presence (Absence) of Wage In order to comply with the requirements of the directives, investment in fixed assets and to increase their share in gross — compliance with the goals stipulated by Decree Arrears to Employees that deprives of bonuses; on December 27, 2019 the Supervisory Board instructed the domestic product to 25%, including target indicators by types of of the President of the Russian Federation No. 204 Management of the Company to amend the procurement economic activity, as well as the need to increase the efficiency “On National Goals and Strategic Objectives of the — add an annual indicator Profitability of Sales by Pretax documentation governing the competitive procedures of investments in fixed assets and implementation of the Long- Russian Federation through to 2024” dated May 7, Profit; regarding establishing the possibility of using guarantees of Term Development Program of ALROSA Group for the period 2018. persons affiliated with the following organisations and who 2018–2024 in accordance with the goals stipulated by Decree — add LTIFR indicator in accordance with the participate in procurement as the security of obligations No. 204. Implementation of LTD of ALROSA Group will ensure requirements of the Supervisory Board; under the contracts with organisations against which foreign sustainable financial performance of the Company, will countries have imposed restrictive measures and with regard In June 2019, the Supervisory Board, having considered contribute to economic growth in the areas of presence, and — eliminate duplication of annual and quarterly key to beneficial owners (the total share of direct and/or indirect the results of the analysis and taking into account the will also ensure environmentally friendly functioning in the performance indicators (core product sales revenue participation in such organisation is at least 25 percent) of recommendations of the Strategic Planning Committee, found areas of the Company’s production activities. and rough diamond production); which restrictive measures have been imposed by foreign no need to update LTD of ALROSA Group for the period counties. 2018–2024 in terms of its compliance with the sectoral section of December 13, 2019 The Supervisory Board approved the — eliminate duplication of option program indicators the action plan to accelerate the growth rates of investment in projects of the updated LTD and LTIP of ALROSA Group for and annual key performance indicators (total fixed assets and increase their share in gross domestic product 2020–2024. shareholder return (TSR), market return per share and to 25%, including targets by types of economic activity and growth of the dividend flow). goals, provided for by Decree No. 204. These programs were sent to the Ministry of Finance of the Russian Federation, the Ministry of Economic Development of Based on the results of suggested updating and the the Russian Federation, the Federal Agency for State Property provisions of the Methodological Recommendations, the Management, and the Ministry for the Development of the Regulation on System of Key Performance Indicators of PJSC Russian Far East and Arctic. ALROSA was developed and approved by the Supervisory Board.

214 215 ALROSA ANNUAL REPORT 2019 APPENDICES

8. INFORMATION ABOUT MAJOR TRANSACTIONS AND RELATED PARTY TRANSACTIONS

INFORMATION ABOUT MAJOR mortgage, surety, acquisition of such number of shares or other issuance securities convertible to shares of a public TRANSACTIONS company, which will lead to the emergence of a corporate obligation to make a binding offer following Chapter XI.1 No major transactions (in accordance with Federal Law of the federal law), where the price or book value makes 25 No. 208-FZ dated December 26, 1995 “On Joint-Stock per cent or more of the book value of the Company’s assets, Companies” (ed. of November 4, 2019) involving acquisition, determined according to the accounting (financial) statements alienation or the possibility of disposition of the property as of the last reporting date — December 31, 2019, were either directly or indirectly (including through a loan, carried out by the Company.

INFORMATION ABOUT RELATED PARTY TRANSACTIONS

List of PJSC ALROSA transactions in 2019, recognized as related party transactions in accordance with the Federal Law “On Joint-Stock Companies”:

Counterparty Contract Terms and conditions Contract amount Persons recognized Management body of the transaction in ruble equivalent, RUB as related (parties) to the transaction authorizing the transaction/notice

Provision, for a fee, of airport services and ground handling of aircraft at Mirny Airport by PJSC ALROSA’s Contract for comprehensive aviation enterprise in Mirny; provision, for a fee, of I. V. Sobolev, member of the Company’s Executive JSC ALROSA Air Company Supervisory Board No. A01/285-ПР-НС ground handling of aircraft at refueling services and services related to takeoff and 758,809,141.00 Committee and member of the counterparty’s (Customer) of December 14, 2018 Mirny Airport landing at the Nakyn aircraft site. Term of rendering Board of Directors services under the contract: from January 1, 2019 to December 31, 2019

Performance of mining and drilling works, A. N. Cherepnov, member of the Company’s ALROSA-Spetsbureniye LLC Supervisory Board No. A01/285-ПР-НС Work contract hydrogeological surveys and other related activities from 2,226,712,612.00 Executive Committee and member of the (Contractor) of December 14, 2018 January 1, 2019 to December 31, 2019 counterparty’s Board of Directors

Notice No. KP01-SI-1070-10/1 of February Changes in the volume of works performed and their cost A. N. Cherepnov, member of the Company’s 15, 2019 ALROSA-Spetsbureniye LLC Additional agreement to the within the term of the contract — drilling of exploration wells 102,705,162.00 Executive Committee and member of the (Contractor) work contract and confirmatory boreholes at the Alakit-Markhinsky-2 counterparty’s Board of Directors There was no requirement to obtain facility in the amount of 11,332 p. m. consent (approval) for the transaction

— services for sorting, primary classification and primary assessment, storage, and pre-sale preparation of natural rough diamonds produced by PJSC ALROSA- Nyurba, as well as producing polished diamonds from A. N. Cherepnov, member of the Company’s the rough stones by order of PJSC ALROSA-Nyurba; Executive Committee and member of the counterparty’s Board of Directors; — on behalf and at the expense of PJSC ALROSA- PJSC ALROSA-Nyurba Supervisory Board No. A01/285-ПР-НС Service contract Nyurba, selection and transfer of representative lots of 920,000,000.00 (Customer) S. S. Ivanov, CEO – Chairman of the Executive of December 14, 2018 diamonds to FSUE “FTA “Almazjuvelirexport”; Committee, member of the Company’s Supervisory Board, and also member of the — on behalf of the Company but at the expense of PJSC counterparty’s Board of Directors ALROSA-Nyurba, entering into transactions for the sale of rough and polished diamonds to third parties;

Service period: from January 1, 2019 to December 31, 2019

216 217 ALROSA ANNUAL REPORT 2019 APPENDICES

Counterparty Contract Terms and conditions Contract amount Persons recognized Management body of the transaction in ruble equivalent, RUB as related (parties) to the transaction authorizing the transaction/notice

A. N. Cherepnov, member of the Company’s Executive Committee and member of the counterparty’s Board of Directors;

S. S. Ivanov, CEO – Chairman of the Executive Committee, member of the Company’s Supervisory Board, and also member of the counterparty’s

Board of Directors PJSC ALROSA-Nyurba Mining operations in accordance with the conditions of Supervisory Board No. A01/285-ПР-НС Contractor’s contract 17,652,869,610.00 According to the information available to PJSC (Customer) subsoil use from January 1, 2019 to December 31, 2019 of December 14, 2018 ALROSA, as of the date of the transaction the share of interest of A. N. Cherepnov, a related party, in PJSC ALROSA’s authorized capital amounted to 0.0004%, and in the authorized capital of the legal entity that was a party to the transaction — 0%;

the share of interest of S. S. Ivanov in PJSC ALROSA’s authorized capital amounted to 0.0068%, and in the authorized capital of the legal entity that was a party to the transaction — 0%

K. A. Dmitriev, member of the Company’s Supervisory Board, and also member of the Bank’s Ensuring the fulfillment of obligations of Almazdortrans Notice No. 01-AF-490/18 of January 22, Board of Directors; LLC (a Company subsidiary) to the Bank for 2019. JSC Gazprombank Contract of surety reimbursement of amounts paid by the Bank under the 800,000,000.00 (Bank) S. S. Ivanov, CEO – Chairman of the Executive bank guarantees issued under the general agreement on There was no requirement to obtain Committee, member of the Company’s Supervisory issuance of guarantees for the period up to June 1, 2028 consent (approval) for the transaction Board, and also member of the Bank’s Board of Directors

Provision of a USD 150,000,000 target loan until December ALROSA EAST DMCC 28, 2021. Yu. K. Okomoev, the Company’s Board member Supervisory Board No. A01/285-ПР-НС ALROSA East DMCC Limited Loan contract 9,782,490,000.00 and member of the Board of Directors of the of December 14, 2018 Liability Company (Borrower) The interest rate for the use of the loan is set at USD LIBOR counterparty (12 months) + 4% per annum

Notice No. KP01-AF-461/22 of June 6, A. N. Cherepnov, member of the Company’s 2019 ALROSA-Spetsbureniye LLC Additional agreement Raising the debt ceiling under the loan contract 850,000,000.00 Executive Committee and member of the (Borrower) to the loan contract by RUB 850,000,000.00. counterparty’s Board of Directors There was no requirement to obtain consent (approval)

Notice No. KP01-AF-461/22 of June 6, A. N. Cherepnov, member of the Company’s 2019 ALROSA-Spetsbureniye LLC Additional agreement Raising the debt ceiling under the loan contract 850,000,000.00 Executive Committee and member of the (Lender) to the loan contract by RUB 850,000,000.00. counterparty’s Board of Directors There was no requirement to obtain consent (approval) for the transaction

218 219 ALROSA ANNUAL REPORT 2019 APPENDICES

Counterparty Contract Terms and conditions Contract amount Persons recognized Management body of the transaction in ruble equivalent, RUB as related (parties) to the transaction authorizing the transaction/notice

A. N. Cherepnov, member of the Company’s Executive Committee and member of the counterparty’s Board of Directors;

S. S. Ivanov, CEO – Chairman of the Executive Committee, member of the Company’s Supervisory Board, and also member of the counterparty’s Board of Directors

Raising the debt ceiling under the loan contract by RUB According to the information available to PJSC PJSC ALROSA-Nyurba Additional agreement Supervisory Board No. A01/285-ПР-НС 11,000,000,000.00 and extension of the maturity period 11,000,000,000.00 ALROSA, as of the date of the transaction the (Lender) to the loan contract of December 14, 2018 of each tranche (from 180 to 270 days) share of interest of A. N. Cherepnov, a related party, in PJSC ALROSA’s authorized capital amounted to 0.0004%, and in the authorized capital of the legal entity that was a party to the transaction — 0%;

the share of interest of S. S. Ivanov in PJSC ALROSA’s authorized capital amounted to 0.0068%, and in the authorized capital of the legal entity that was a party to the transaction — 0%

A. N. Cherepnov, member of the Company’s Executive Committee and member of the counterparty’s Board of Directors;

S. S. Ivanov, CEO – Chairman of the Executive Committee, member of the Company’s Supervisory Board, and also member of the counterparty’s Board of Directors.

Raising the debt ceiling under the loan contract by RUB According to the information available to PJSC PJSC ALROSA-Nyurba Additional agreement Supervisory Board No. A01/285-ПР-НС 11,000,000,000.00 and extension of the maturity period 11,000,000,000.00 ALROSA, as of the date of the transaction the (Borrower) to the loan contract of December 14, 2018 of each tranche (from 180 to 270 days) share of interest of A. N. Cherepnov, a related party, in PJSC ALROSA’s authorized capital amounted to 0.0004%, and in the authorized capital of the legal entity that was a party to the transaction — 0%;

the share of interest of S. S. Ivanov in PJSC ALROSA’s authorized capital amounted to 0.0068%, and in the authorized capital of the legal entity that was a party to the transaction — 0%

Notice No. KP01-SI-181/4 of July 2, ALROSA EAST DMCC Yu. K. Okomoev, the Company’s Board member 2019 ALROSA East DMCC Limited Diamond Sales Contract Purchase of diamonds listed on the specification. 1,538,241,651.61 and member of the Board of Directors of the Liability Company (Vendor) counterparty There was no requirement to obtain consent (approval) for the transaction

220 221 ALROSA ANNUAL REPORT 2019 APPENDICES

Counterparty Contract Terms and conditions Contract amount Persons recognized Management body of the transaction in ruble equivalent, RUB as related (parties) to the transaction authorizing the transaction/notice

Debt limit under the Agreement: S. S. Ivanov, CEO – Chairman of the Executive 300,000,000.00 Committee, member of the Company’s Supervisory Board, and also member of the (Three hundred million) USD or counterparty’s Board of Directors equivalent in RUB or EUR at the exchange rate of the Bank of K. A. Dmitriev, member of the Supervisory Russia on the date of the loan. Board of PJSC ALROSA and also member of the Subject of the Agreement: The Lender opens a credit line counterparty’s Board of Directors to the Borrower for 3 years from the date of the signing Interest rate: Maximum possible of the Agreement, issuing a loan amounts in USD, and/or fixed interest rate on loans in Agreement on a revolving EUR, and/or RUB. RUB: 15% per annum; in USD JSC Gazprombank Supervisory Board No. 01-296-ПР-НС of framework credit line and EUR — 10% per annum; (Lender) According to the information available to PJSC June 24, 2019 (uncommitted) Credit currency: RUB, USD, EUR; ALROSA, as of the date of the transaction the Payment of fees: share of interest of K. A. Dmitriev, a related party, The bank may claim the loan early in the circumstances in PJSC ALROSA’s authorized capital, and in the stipulated in the Agreement Fees for the issuance of credit authorized capital of the legal entity that was a funds is 0.3% (Zero point three party to the transaction — 0%; tenths of a percent) of the amount of the loan. the share of interest of S. S. Ivanov in PJSC ALROSA’s authorized capital amounted to Early repayment fee is 0.3% 0.0083%, and in the authorized capital of the legal (Zero point three tenths of a entity that was a party to the transaction — 0% percent) of the amount of the early repayment part of the loan.

In accordance with the Agreement, the Parties conclude the transactions on granting the Loan by the Lender S. S. Ivanov, CEO – Chairman of the Executive to the Borrower in USD, EUR and/or RUB (Credit Committee, member of the Company’s Transaction). Supervisory Board, and also member of the counterparty’s Board of Directors Debt limit under the Agreement: The maximum term of a particular Credit Transaction may RUB 18,000,000,000.00 not exceed 90 (ninety) calendar days from the date of K. A. Dmitriev, member of the Company’s (Eighteen billion) or equivalent credit granting; Supervisory Board, and also member of the in USD or EUR at the exchange counterparty’s Board of Directors; Agreement on procedures rate of the Bank of Russia on the the number of credit transactions is not limited if the debt for entering into credit date of the loan. JSC Gazprombank limit under the Agreement is observed. According to the information available to PJSC Supervisory Board No. 01-296-ПР-НС of transactions using (Lender) ALROSA, as of the date of the transaction the June 24, 2019 remote banking systems Interest rate: Period of credit transactions - during the term of the share of interest of K. A. Dmitriev, a related party, (uncommitted) Agreement in PJSC ALROSA’s authorized capital, and in the Maximum possible interest authorized capital of the legal entity that was a rate on loans in RUB: 15% per The Borrower has the right to repay the loan early on party to the transaction — 0%; annum; in USD and EUR — 10% notice; per annum the share of interest of S. S. Ivanov in PJSC The bank may claim the loan early in the circumstances ALROSA’s authorized capital amounted to stipulated in the Agreement; 0.0083%, and in the authorized capital of the legal entity that was a party to the transaction — 0% Payment of fees: not provided

222 223 ALROSA ANNUAL REPORT 2019 APPENDICES

Counterparty Contract Terms and conditions Contract amount Persons recognized Management body of the transaction in ruble equivalent, RUB as related (parties) to the transaction authorizing the transaction/notice

Debt limit under the Agreement: 300,000,000.00 (Three hundred million) USD or equivalent in RUB or EUR at the exchange rate of the Bank of Russia on the date of the loan.

Interest rate: maximum possible interest rate on loans in RUB: fixed — 15% per annum; floating — MosPrime Rate 3M + 6.45% A. G. Siluanov, Chairman of the Company’s per annum; The Lender opens a revolving credit line to the Borrower Supervisory Board and Chairman of the in USD, EUR and/or RUB. Supervisory Board of the counterparty. Agreement on a Differentiated the maximum possible interest PJSC VTB Bank Interest Rate Revolving rate on loans in USD: fixed — Supervisory Board No. 01-296-ПР-НС of Credit currency: RUB, USD, EUR. According to the information available to PJSC (Lender) Framework Credit Line 10% per annum; floating — USD June 24, 2019 ALROSA, the interested party’s share in the (uncommitted) LIBOR 3M + 7.25% per annum; Term of the agreement: 1,095 (One thousand ninety-five) authorized capital of PJSC ALROSA and the legal calendar days from the date of signing entity which was a party to the transaction, as of the maximum possible interest the transaction date — 0%. rate on loans in EUR:

fixed — 10% per annum; floating — EURIBOR 3M rate + 10.0% per annum;

payments of fees: the fee for early repayment of the loan is 0.1% (zero point zero one tenth) of the early repayment amount of the loan

Debt limit under the Agreement: RUB 18,000,000,000.00 (Eighteen billion) or equivalent in USD or EUR at the exchange A. G. Siluanov, Chairman of the Company’s The Lender opens a revolving credit line to the Borrower rate of the Bank of Russia on the Supervisory Board and Chairman of the issuing loan amounts in USD, and/or EUR, and/or RUB; Agreement on Opening a date of the loan. Supervisory Board of the counterparty. Revolving Framework Credit PJSC VTB Bank Term of the agreement: 1,095 (One thousand ninety-five) Supervisory Board No. 01-296-ПР-НС of Line with Differentiated Interest Interest rate: According to the information available to PJSC (Lender) calendar days from the date of signing June 24, 2019 Rates (uncommitted) using ALROSA, the interested party’s share in the remote banking systems Maximum possible fixed interest authorized capital of PJSC ALROSA and the legal maximum loan term under the agreement: 90 (ninety) rate on loans in RUB — 15% per entity which was a party to the transaction, as of calendar days annum; in USD and EUR — 10% the transaction date — 0%. per annum;

Payment of fees: not provided

224 225 ALROSA ANNUAL REPORT 2019 APPENDICES

Counterparty Contract Terms and conditions Contract amount Persons recognized Management body of the transaction in ruble equivalent, RUB as related (parties) to the transaction authorizing the transaction/notice

A. N. Cherepnov, member of the Company’s Executive Committee and member of the Notice No. KP01-SI-06/7 of October 18, counterparty’s Board of Directors; Additional Agreement to 2019. PJSC ALROSA-Nyurba Increase in total cost under the Contract due to changes Agreement No. 6432 of 1,645,513,384.00 (Customer) in volumes by quarters and total cost of works performed S. S. Ivanov, CEO – Chairman of the Executive January 29, 2019 There was no requirement to obtain Committee, member of the Company’s consent (approval) for the transaction Supervisory Board, and also member of the counterparty’s Board of Directors.

A. N. Cherepnov, member of the Company’s Performance of mining and enrichment works, Executive Committee and member of the Notice No. KP01-AF-06/27 of October provision of services for the processing of counterparty’s Board of Directors; 15, 2019 PJSC ALROSA-Nyurba diamond-containing concentrates for the deposit Contract 4,666,350,951.50 (Customer) of Botuobinskaya and Nyurbinskaya pipes, and S. S. Ivanov, CEO – Chairman of the Executive There was no requirement to obtain Botuobinskaya and Nyurbinskaya placer deposits in Q1 Committee, member of the Company’s consent (approval) for the transaction 2020. Supervisory Board, and also member of the counterparty’s Board of Directors

The Guarantor assures:

- Execution by the Lessee of all its obligations under the lease contract, as well as payment by the Guarantor of all amounts not paid by the Lessee under the Provision by the Guarantor (PJSC ALROSA) to the Lessor lease contract to the Lessor on RISE Aviation 1 (Ireland) Limited Guarantee of performance (RISE Aviation 1 (Ireland) Limited) of the guarantee request. I. V. Sobolev, member of the Company’s Executive (Lessor) of the obligations and (surety) that the Lessee (JSC ALROSA Airline) will perform Supervisory Board No. 01-303-ПР-НС of Committee and member of the beneficiary’s compensation of losses under its obligations and compensate for damages under the - Compensation to the Lessor for December 10, 2019 Board of Directors JSC ALROSA Airline (Beneficiary) the aircraft leasing contract contract for leasing of Boeing 737-800 with serial number all losses and expenses incurred of the manufacturer 32659 or imputed in connection with the failure of the Lessee to pay and/or act in accordance with the lease contract (excluding any damages and expenses arising from the Lessor’s own gross negligence or willful misconduct).

Additional agreement to the The commission period is extended from one to three contract of surety No. DP1- calendar months. GSG17/YABR/0290 of January 23, 2017, concluded between The period of validity of the bank guarantee within the Guarantee limit is the Company and PJSC framework of the general agreement is extended from 800,000,000.00 (excluding Notice No. 01-AF-490/166 of November VTB Bank under the general 340 to 1,095 days. remuneration for issuance, A. G. Siluanov, Chairman of the Company’s 11, 2019. PJSC VTB Bank agreement on issuance of increase, and extension of Supervisory Board and Chairman of the (Bank) bank guarantees No GSG17/ The minimum fee for the provision of bank guarantee is the guarantee in line with Supervisory Board of the counterparty There was no requirement to obtain YABR/0290 dated January 23, reduced from USD 250 to RUB 6, 000 per commission the agreement’s terms and consent (approval) for the transaction 2017, concluded between period. conditions) Heat Supply Enterprise LLC (a Company subsidiary) and PJSC One-time reward for the adjustment of guarantee terms is VTB Bank changed from USD 100 to RUB 6,000 per adjustment

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Counterparty Contract Terms and conditions Contract amount Persons recognized Management body of the transaction in ruble equivalent, RUB as related (parties) to the transaction authorizing the transaction/notice

PJSC Sberbank Ensuring by the Guarantor (the Company) of the (Bank) performance of obligations undertaken by the Principal— Notice No. KP01-AF-462/28 of who is a Guarantor subsidiary and beneficiary under the I. V. Sobolev, member of the Company’s Executive November 18, 2019. JSC ALROSA Air Company Contract of surety transaction—to the Bank under the agreement concluded 1,000,000,000.00 Committee and member of the beneficiary’s (Principal) between the Bank and the Principal, in full. The surety is Board of Directors There was no requirement to obtain valid until December 31, 2027. The Agreement expires on consent (approval) for the transaction December 31, 2024

I. V. Sobolev, member of the Company’s Executive Ensuring by the Guarantor (the Company) of the Committee and member of the beneficiary’s PJSC Sberbank performance of obligations undertaken by the Principal— Notice No. KP01-AF-462/28 of Board of Directors (Bank) who is a Guarantor subsidiary and beneficiary under the November 18, 2019. Contract of surety transaction—to the Bank under the agreement concluded 1,000,000,000.00 S. S. Ivanov, CEO – Chairman of the Executive JSC Almazy Anabara between the Bank and the Principal, in full. The surety is There was no requirement to obtain Committee, member of the Company’s (Principal) valid until December 31, 2027. The Agreement expires on consent (approval) for the transaction Supervisory Board, and also member of the December 31, 2024 beneficiary’sBoard of Directors

JSC Bourevestnik Additional Agreement No. 3 A. N. Cherepnov, member of the Company’s Supervisory Board No. 01-301-ПР-НС of Innovation Center to Loan Contract No. 79 dated Loan term extension to December 25, 2024 766,000,000.00 Executive Committee and member of the December 27, 2019 (Borrower) March 2, 2016 counterparty’s Board of Directors

Additional Agreement No. 1 to A. N. Filippovsky, member of the Company’s ALROSA OVERSEAS S.A. Supervisory Board No. 01-301-ПР-НС of Loan Contract No. 540 dated Loan term extension to December 28, 2021 4,550,000,000.00 Executive Committee and member of the (Borrower) December 27, 2019 November 16, 2017 counterparty’s Board of Directors

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9. REPORT ON COMPLIANCE WITH THE PRINCIPLES AND RECOMMENDATIONS OF THE CORPORATE GOVERNANCE CODE

Report of PJSC ALROSA on Compliance with the Corporate Governance Code Principles and Guidelines in 20191

No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

The company should ensure equal and fair treatment of all its shareholders in the course of exercise 1.1 by them of their rights to participate in the management of the company

1. The internal document of the Company approved by the general meeting of shareholders and governing the procedures of holding the general meeting is publicly available. The company should create most favourable conditions for its shareholders enabling them to participate in 2. The Company provides an easy way of communication 1.1.1 the general meeting and develop informed positions on issues on its agenda, as well as provide them with the therewith, such as the hotline, email or Forum on the Internet compliant opportunity to coordinate their actions and express their opinions on issues being discussed. that allows shareholders to express their views and to send questions on the agenda in preparation for the general meeting. These actions were taken by the Company prior to each general meeting held in the reporting period.

1. The notice of the general meeting of shareholders is posted (published) on the website at least 30 days prior to the date of the general meeting. Procedures for notification of the general meeting and provision of materials for it should enable the shareholders to 2. The notice on the general meeting specified the venue and 1.1.2 compliant get properly prepared for participation therein. documents required to access the premises. 3. The shareholders could access the information on who suggested the agenda and proposed nominees to the Board of Directors and the Audit Commission of the Company.

1. In the reporting period the shareholders were provided an opportunity of putting questions to the members of the executive bodies and the Board of Directors of the Company both before and in the course of the annual general meeting. 2. The position of the Board of Directors (including special When preparing for and holding the General Meeting, the shareholders could freely and timely receive information opinions recorded in the minutes) on each issue of the 1.1.3 and materials thereon, put questions to the executive bodies and members of the Board of Directors of the Company agenda of the general meetings held in the reporting period compliant and to communicate with each other. was included in the materials to the general meeting of shareholders. 3. In the reporting period, when holding general meetings of shareholders the Company invariably provided access to the list of persons entitled to participate in the general meeting, starting from the date of its receipt by the Company, to all shareholders having the respective right.

1 The form of the report is established by the Bank Russia (the Letter No. IN-06-52/8 of February 17, 2016).

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

1. In the reporting period, the shareholders could make proposals for inclusion in the agenda of the annual general meeting for a period of not less than 60 days after the end of There were no unjustified difficulties in the exercise of the shareholders’ right to demand that a general meeting the calendar year. 1.1.4 be convened, nominate candidates to the governance bodies or to place proposals on the agenda of the general compliant 2. In the reporting period, no request for proposal on the meeting. agenda or nomination to the bodies of the Company was turned down due to misprints or other minor deficiencies in the shareholders’ proposals.

The Company’s internal document (internal policy) contains the provisions, whereby before the respective meeting is 1.1.5 Each shareholder could freely exercise the right to vote, in the easiest and most convenient way. closed, every attendee of the general meeting may request a compliant copy of the casting ballot filled in by him/her and certified by the counting board.

1. In the reporting period, sufficient time to make reports on the agenda items and discuss these issues was provided at the general meeting of shareholders in the form of a meeting (the joint presence of shareholders). 2. Nominees to the governing and controlling bodies of the Company were available for questions at the shareholders The procedure of holding the general meeting, established by the Company, ensures an equal opportunity for all 1.1.6 meeting, where their nominations were put to vote. compliant persons attending the meeting to voice their opinion and put their questions. 3. When making decisions related to preparation and holding of general meetings of shareholders, the issue of using telecommunications to provide remote access to the shareholders to participate in general meetings was considered by the Board of Directors In the reporting period.

Shareholders should have equal and fair opportunities to participate 1.2 in the profits of the company by means of receiving dividends.

1. The Company has developed and disclosed the dividend policy, approved by the Board of Directors. 2. Where the dividend policy of the Company determines The Company has developed and put in place a transparent and understandable mechanism for determining the 1.2.1 the amount of the dividend by reference to the financial compliant amount of dividends and their payment. statements of the Company, it is the Group’s consolidated financial statements that shall be taken into account in the relevant provisions of the dividend policy.

Dividend policy of the Company provides clear guidance The Company does not decide on payment of dividend, where such a decision, even formally not breaching the limits 1.2.2 on financial/economic circumstances in which the Company compliant set by the law, would be economically unfeasible or lead to false perception of the performance of the Company. shall not pay dividend.

In the reporting period, there were no actions taken by the 1.2.3 The Company does not allow deterioration of the dividend rights of the existing shareholders. Company that would deteriorate the dividend rights of the compliant existing shareholders.

To prevent other ways of generating profit (gain) by shareholders at the expense of the Company other than dividend and liquidation value distribution, internal documents of the Company have set up controls that ensure timely The Company tries to rule out any other ways of obtaining profit (gain) at the expense of the Company by 1.2.4 identification and procedure for approval of transactions with compliant shareholders other than dividends and liquidation value distribution. parties affiliated (associated) with substantial shareholders (persons entitled to administer voting with voting shares), in cases where the law does not formally recognize such transactions as transactions with interest.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

The system and practices of corporate governance should ensure equal terms and conditions 1.3 for all shareholders owning shares of the same class (category) in a company, including minority and foreign shareholders as well as their equal treatment by the company.

In the reporting period, the procedures for managing The Company has created conditions for fair treatment to each shareholder by the Governance bodies and controlling potential conflicts of interest of major shareholders have 1.3.1 compliant persons, including inadmissibility of any abuse of the rights of minority shareholders by major shareholders. proven to be effective, the Board of Directors paid proper attention to the conflicts between shareholders, if any.

In the reporting period, there have been no quasi-treasury 1.3.2 The Company does not perform any acts which will or might result in artificial reallocation of corporate control therein. compliant shares, nor their participation in voting procedures.

The shareholders should be provided with reliable and efficient means of recording their rights 1.4 in shares as well as with the opportunity to freely dispose of such shares in a non-onerous manner.

Quality and reliability of the Company Registrar’s operations The shareholders should be provided with reliable and efficient means of recording their rights in shares as well as of keeping the registry of security holders conform to the compliant with the opportunity to freely dispose of such shares in a non-onerous manner. requirements of the Company and its shareholders.

The Board of Directors shall be in charge of strategic management of the company, determine 2.1 major principles of and approaches to creation of a risk management and internal control system within the company, monitor the activity of the company’s executive bodies, and carry out other key functions

1. The Board of Directors has the authority stipulated by the Charter of appointment, dismissal and determining The Board of Directors is responsible for decisions related to appointment of members of executive bodies and their the terms of contracts with the members of the executive dismissal from their posts, including in connection with their failure to properly perform their duties. The Board of 2.1.1 bodies. compliant Directors also exercises control over the Company’s executive bodies procuring that they act in accordance with the 2. The Board of Directors has considered the report(s) of the approved development strategy and the main directions of the Company’s activity. sole executive body and members of the collective executive body on implementation of the Company’s strategy.

In the period under review, issues were considered at the meetings of the Board of Directors related to the The Board of Directors determine the key long-term targets of the Company’s activity, evaluates and approves key implementation and update of the strategy, approval of 2.1.2 performance indicators and principal business goals of the Company, evaluates and approves the strategy and the financial and economic plan (budget) of the Company, compliant business-plans in respect of its principal areas of operations. criteria and indicators (including intermediate ones) of implementation of the strategy and business plans of the Company.

1. The Board of Directors has determined the principles and approaches to the set-up of the risk management and The Board of Directors determines the principles and approaches to the set-up of the risk management and internal 2.1.3 internal control system of the Company. compliant control system of the Company. 2. The Board of Directors has made assessment of the risk management and internal control system of the Company.

1. The Company has developed and implemented the remuneration and/or compensation policy of the Company concerning the members of the Board of Directors, The board of directors should determine the company’s policy on remuneration due to and/or reimbursement of executive bodies and other top managers of the Company, 2.1.4 compliant costs incurred by its board members, members of its executive bodies and other key managers. approved by the Board of Directors. 2. In the reporting period, issues related to the above mentioned policy(ies) were considered at the meetings of the Board of Directors.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

1. The Board of Directors plays a key role in preventing, identifying and eliminating internal conflicts between the The board of directors should play a key role in prevention, detection and resolution of internal conflicts between the Company’s bodies, shareholders and employees. 2.1.5 compliant company’s bodies, shareholders and employees. 2. The company has developed a system for identification of transactions involving conflict of interest, and a system of measures aimed at resolving such conflicts.

1. The Board of Directors approved regulations on The board of directors should play a key role in procuring that the company is transparent, discloses information in full information (disclosure) policy. 2.1.6 compliant and in due time, and provides its shareholders with unhindered access to its documents. 2. Persons responsible for the implementation of information policy of the Company have been defined.

The Board of Directors controls the practice of corporate governance in the Company and plays a key role in the In the reporting period the Board of Directors considered an 2.1.7 compliant major corporate events of the Company. issue of the corporate governance practice in the Company.

2.2 The board of directors should be accountable to the company’s shareholders

The Annual Report of the Company for the period under review includes information on attendance at meetings of the Board of Directors and committees by individual 2.2.1 Information on the activities of the Board of Directors is disclosed and accessible to the shareholders. directors. compliant 2. The Annual Report of the Company for the reporting period includes information on assessment of the work done by the Board of Directors in the period.

A transparent procedure in the Company is in place that 2.2.2 The Chairman of the Board of Directors is accessible for communication with the shareholders of the Company. enables shareholders to put questions to the Chairman of compliant the Board of Directors and express their position thereon.

The board of directors should be an efficient and professional governing body of the company 2.3 which is able to make objective and independent judgements and pass resolutions in the best interests of the company and its shareholders.

1. The procedure, accepted by the Company for assessing efficiency of the work of the Board of Directors, also includes assessment of the professional qualification of the members Only persons with impeccable business and personal reputation should be elected to the board of directors; of the Board of Directors. partially 2.3.1 such persons should also have knowledge, skills, and experience necessary to make decisions that fall within the 2. In the reporting period, the Board of Directors (or its compliant jurisdiction of the board of directors and to perform its functions efficiently Nomination Committee) assessed candidates to the Board of Directors from the viewpoint of the required experience, knowledge, business reputation, absence of conflict of interest, etc.

When arranging the general meetings of shareholders in the reporting period under review, where agenda included issues on election of the Board of Directors, the Company always submitted to the shareholders curriculum vitae of all nominees for the Board of Directors, the results of Members of the Board of Directors are elected through transparent procedure allowing shareholders to receive partially 2.3.2 their assessment, conducted by the Board of Directors information about the candidates, sufficient to get perception of their personal and professional qualities. compliant (or the Nomination Committee), as well as information on conforming to the criteria for independence, in accordance with recommendations 102–107 of the Code and the written consent of the nominees for election to the Board of Directors.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

In the context of the procedure for assessing the work of The Board of Directors is well balanced, including the qualifications of its members, their experience, knowledge and the Board of Directors in the reporting period, the Board 2.3.3 compliant competencies, and enjoys the trust of shareholders. of Directors examined their own needs in the area of professional qualifications, experience and business skills.

In the assessment of the Board of Directors, held during The quantitative composition of the Board of Directors of the Company enables the most efficient organization of the period under review, the Board of Directors considered the activity of the Board of Directors, including manning the committees of the Board of Directors, it also ensures 2.3.4 correspondence of the quantitative composition of the compliant the possibility for significant minority shareholders of the Company to elect a candidate they vote for to the Board of Board of Directors and the needs of the Company and Directors. interests of shareholders.

2.4 The board of directors should include a sufficient number of independent directors.

An independent director should mean any person who has required professional skills and expertise and is sufficiently In the assessment of the Board of Directors, held during able to have his/her own position and make objective and bona fide judgments, free from the influence of the the period under review, the Board of Directors considered company’s executive bodies, any individual group of its shareholders or other stakeholders. At this point it should 2.4.1 correspondence of the quantitative composition of the compliant be noted, that ordinarily a nominee (an elected member of the Board of Directors) related to the Company, major Board of Directors and the needs of the Company and shareholder thereof, major counterparty or competitor of the Company or associated with the State cannot be interests of shareholders. regarded as independent.

1. In the reporting period, the Board of Directors (or its Nomination Committee) formed an opinion on independence of each nominee to the Board of Directors and presented the respective conclusion to the shareholders. 2. In the period under review, the Board of Directors (or Candidates to the Board of Directors are assessed for meeting the independence criteria. Besides, the Company its Nomination Committee) had at least one review of 2.4.2 conducts a regular analysis of conformity of the independent members of the Board of Directors to the independence compliant independence of the current members of the Board of criteria. When carrying out such evaluation, substance should take precedence over form. Directors indicated by the Company as independent directors in the Annual Report. 3. The Company has developed procedures determining the required actions of a member of the Board of Directors in case of changing ”independent” status, including obligation to duly notify the Board of Directors thereof.

Candidates to the Supervisory Board of the Company are offered by the Company’s shareholders. The Annual General Meeting of Shareholders of the Company (June 26, 2019) elected 4 independent directors. Taking into account the number of members of the Supervisory Board defined by the General Meeting of Shareholders as Independent directors make no less than one third of the partially 2.4.3 Independent directors shall make at least one third of the elected members of the Board of Directors. 15, shareholders are advised to elect Board of Directors. compliant at least 5 independent directors. Every year, when nominating candidates to the Supervisory Board, the Company works with the major shareholders — the Russian Federation, the Republic of Sakha (Yakutia) — to nominate more independent directors to the Supervisory Board for election to the General Meeting of Shareholders.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

Independent directors (with no conflict of interests) conduct Independent directors should play a key role in prevention of internal conflicts in the company and performance by a pre-assessment of any major corporate actions bearing 2.4.4 compliant the latter of material corporate actions. any possibility of the conflict of interests, the results of such assessment are presented to the Board of Directors.

The Chairman of the Board of Directors contributes to the most efficient implementation 2.5 of the functions assigned to the Board.

The appointment of a senior 1. The Chairman of the Board of Directors is an independent independent director chosen among director or a senior independent director appointed from An independent director is elected as the Chairman of the Board of Directors or a senior independent director is independent directors is compliant among the elected independent directors. 2.5.1 appointed from among the elected independent directors to coordinate the work of independent directors and compliant with the one of the two alternative 2. The role, rights and obligations of the Chairman of the interact with the Chairman of the Board of Directors. approaches in accordance with the Board (and, if applicable, of the senior independent director) principle of the Company. The choice of are duly defined in the Company’s internal documents. the approach, in the Company’s opinion, fully corresponds to the structure of the Company’s equity.

The Chairman of the Board of Directors ensures productive environment in the holding meetings, free discussion of The efficiency of the Chairman’s work was assessed as part 2.5.2 the items included in the agenda of the meetings, and control over the implementation of the decisions made by the of the procedure of efficiency assessment of the Board in the compliant Board. reporting period.

The obligation of the Chairman of the Board to take The Chairman of the Board of Directors takes required measures to timely provide the Board members with the measures to ensure timely submission of the materials to the 2.5.3 compliant information necessary for making decisions on agenda items. Board members on agenda items of the Board of Directors meeting is stipulated in the Company’s internal documents.

The Board members act in good faith and reasonably in the interests of the Company and its shareholders 2.6 on the basis of sufficient awareness with due care and discretion.

1. The Company’s internal documents stipulate that members of the Board are obliged to notify the Board of Directors if they have a conflict of interest in relation to any agenda item of a meeting of the Board or the Committee of the Board of Directors before the discussion of the agenda The Board members make decisions considering all available information in the absence of a conflict of interest, item begins. 2.6.1 compliant taking into account equal treatment for the Company’s shareholders within the framework of ordinary business risk. 2. The Company’s internal documents provide that members of the Board shall abstain from voting on any item if they have a conflict of interest. 3. The Company has established a procedure that allows the Board to receive professional advice on matters within its competence at the expense of the Company.

The Company has adopted and published the internal Rights and obligations of the Board members are clearly stated and documented in the Company’s internal 2.6.2 document clearly defining the rights and obligations of the compliant documents. members of the Board of Directors.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

1. The individual attendance of the meetings of the Board of Directors and its committees, as well as the time spent to prepare for participation in the meetings were considered in the procedure of assessment of the Board in the reporting period. 2. The Company’s internal documents stipulate that the Board 2.6.3 The Board members have sufficient time to perform their duties. compliant members are obliged to notify the Board of Directors of their intent to join governing bodies of other entities (except controlled and associated entities of the Company), and of such appointment.

1. The Company’s internal documents stipulate that the Board members are entitled to access documents and make All Board members have equal opportunity to access the Company’s documents and information. Newly elected inquiries related to the Company and its controlled entities, 2.6.4 Board members should be provided with sufficient information about the Company and the work of its Board of while the Executive Bodies of the Company are obliged to compliant Directors as soon as possible. provide the respective information and documents. 2. The Company has in place a formalized program of orientation activities for newly elected Board members.

The Board meetings, preparation for them and participation 2.7 of the Board members therein ensure efficient work of the Board.

Meetings of the Board of Directors are held when necessary, taking into account the scale of the activity and the The Board of Directors were held at least six meetings in the 2.7.1 compliant Company’s tasks in a certain period of time. reporting year.

The Company adopted an internal document defining the procedure for preparing for and holding meetings of The Company’s internal documents stipulate the procedure for preparing for and holding meetings of the Board 2.7.2 the Board of Directors and also stipulating that a notice of compliant which allows the Board members to prepare for meetings properly. holding the meeting shall be sent usually not less than 5 days before its date.

The Company’s Charter or the internal document stipulate The format of the Board meeting is defined according to the importance of the agenda items. Most important items that the most important items (listed in the recommendation 2.7.3 compliant shall be discussed at the meetings held in person. 168 of the Code) are considered at the meetings held in person.

The Company’s Charter stipulates that decisions on the most important items listed in recommendation 170 of the Code Decisions on the most important items related to the Company’s activity shall be made at a meeting of the Board of 2.7.4 are adopted at a meeting of the Board of Directors by a compliant Directors by a qualified majority or by majority of votes of all elected Board members. qualified majority of no less than three quarters of the votes or by the majority of votes of all elected members of the Board.

The Board of Directors established committees for preliminary consideration 2.8 of the most important items of the Company’s activity.

1. The Audit Committee consisting of independent directors was set up by the Board of Directors. 2. The Company’s internal documents determine the Audit Committee’s objectives, including those listed in recommendation 172 of the Code. For preliminary consideration of matters related to the control over the Company’s financial and economic activities, 2.8.1 3. At least one Audit Committee member, who is an compliant the Audit Committee consisting of independent directors was created. independent director, shall have experience and expertise in preparation, analysis, assessment and audit of the accounting (financial) statements. 4. The Audit Committee meetings were held at least once a quarter in the reporting year.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

In order to perform the functions properly, the HR and Remuneration Committee consists of 6 people. All available independent directors (4) and two non-executive directors were elected to the HR and Remuneration Committee. The Chairman of the Committee is an independent director.

The election to the committee of the 1. The Board of Directors set up the Remuneration Committee directors that are not members of the comprising of independent directors only. Company’s executive bodies Sergey For preliminary consideration of any matters related to the development of efficient and transparent remuneration 2. The Chairman of the Remuneration Committee is an Vasilievich Mestnikov and Vladimir partially 2.8.2 practices the Remuneration Committee comprised of independent directors and headed by an independent director, independent director who is not the Chairman of the Board. Viktorovich Solodov, who have compliant who is not the Chairman of the Board, was set up. 3. The Company’s internal documents define the extensive professional experience, as Remuneration Committee’s objectives, including those listed in well as the competencies gained by recommendation 180 of the Code. them in the process of long-term work in the Boards of Directors in companies such as the NGO Trust Fund for Future Generations of the Republic of Sakha (Yakutia), OJSC Republican Investment Company, Agency for the Development of Human Capital in the Far East, makes a significant contribution to the work of the HR and Remuneration Committee for the competence of the Supervisory Board of the Company.

1. The Board of Directors set up the Nomination Committee (or its objectives stipulated by the recommendation 186 of the Code are implemented within another committee), The objectives of the Nomination For preliminary consideration of any matters related to human resources planning (succession planning), professional mainly comprising of independent directors. Committee are implemented within 2.8.3 composition and efficiency of the Board activity, the Nomination Committee (committee on appointments and human compliant 2. The Company’s internal documents define the objectives Human Resources and Remuneration resources) mostly comprising of independent directors was set up. of the Nomination Committee (or of the corresponding Committee. committee with similar functions), including those listed in recommendation 186 of the Code.

In the reporting period, the Board of Directors considered Taking into account the scale of activity and the level of risk, the Board of Directors of the Company made sure that the consistency of the composition of its committees with The Strategic Planning Committee the composition of its committees fully meets the objectives of the company. Additional committees were either 2.8.4 the Board tasks and objectives of the Company activity. compliant was additionally established within the formed or were not deemed necessary (Strategy Committee, Corporate Governance Committee, Ethics Committee, Additional committees were either formed or were not Supervisory Board. Risk Management Committee, Budget Committee, Health Committee, Safety and Environment Committee etc.). deemed necessary.

1. The Board committees are chaired by independent directors. 2. The Company’s internal documents (policies) stipulate The composition of the committees is determined in a way to allow comprehensive discussion of previously partially The Chairman of the Strategic Planning 2.8.5 that non-members of the Audit Committee, the Nomination considered issues, taking into account of differing opinions. compliant Committee is a non-executive director. Committee and the Remuneration Committee are allowed to attend the meetings of the committees only at the invitation of the Chairman of the respective committee.

In the reporting period, the Chairmen of the Committees The Chairmen of the Committees shall inform the Board of Directors and its Chairman about the work of their 2.8.6 reported the work of their Committees to the Board of compliant committees on a regular basis. Directors on a regular basis.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

The board of directors should ensure the assessment of the quality 2.9 of its work and that of its committees and members.

1. Self-assessment or third-party assessment of the performance of the Board of Directors, conducted in the period under review, Assessment of the quality of the board of directors’ performance should be aimed at determining how efficiently the included the assessment of the committees, some members of 2.9.1 board of directors, its committees and members work and whether their work meets the company’s needs, as well as the Board of Directors and the Board of Directors in general. compliant at making their activities more intensive and identifying areas of improvement. 2. The results of self-assessment or third-party assessment of the Board of Directors, conducted in the period under review, were reviewed at the in-person meeting of the Board of Directors.

The quality of work of the board of directors, its committees and members should be assessed on a regular basis and A third party was engaged at least once to conduct 2.9.2 at least once a year. To carry out an independent assessment of the quality of the board of directors’ performance, a independent assessment of the quality of work of the Board compliant third party (consultant) is engaged at least once every three years. of Directors in the three preceding years.

The company’s corporate secretary shall be responsible for effective interaction with shareholders, 3.1 coordination of the company’s actions designed to protect the rights and interests of its shareholders, and support of efficient work of its board of directors.

1. The Company has adopted and made public an internal document — Regulation on the Corporate Secretary. The corporate secretary should have knowledge, experience, and qualifications sufficient for performance of his/her 2. The biographical information on the Corporate Secretary 3.1.1 compliant duties, as well as an impeccable reputation, and should enjoy the trust of shareholders. (CV) is made available on the Company’s website and in its annual report, with the same level of detail as the members of the Board of Directors and executives.

In accordance with the Regulation on the Corporate Secretary (hereinafter referred to as the Regulation), in part of remuneration, the Chairman of the Supervisory Board— following the recommendations of the HR and Remuneration Committee under the Supervisory Board—assesses the effectiveness of the Corporate Secretary by approving reports on the achievement of targets and determines the assessment of the level of performance of functional The corporate secretary should be sufficiently independent of the company’s executive bodies and be vested with The Board of Directors approves appointment, dismissal and partially duties on a quarterly basis. Based on the 3.1.2 powers and resources required to perform his/her tasks. additional remuneration of the Corporate Secretary. compliant ratios approved by the Chairman of the Supervisory Board, the ratio of the final assessment for the quarter and the amount of the quarterly remuneration is calculated in accordance with the current local regulatory documents of the Company. The Supervisory Board, through the approval of the Regulation, has delegated the authority to determine the part of additional remuneration for the HR and Remuneration Committee and for the Chairman of the Supervisory Board.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

The level of remuneration paid by the company should be sufficient to enable it to attract, motivate, and retain persons having required skills and qualifications. Remuneration due to board members, 4.1 executive bodies, and other key managers of the company should be paid in accordance with the remuneration policy approved by the company.

The level of remuneration paid by the company to its board members, executive bodies, and other key managers The Company has in place an internal document(s), i.e. a should be sufficient to motivate them to work effectively and enable the company to attract and retain experienced, policy(ies) on remuneration of members of the Board of 4.1.1 skilled, and duly qualified persons. The company should avoid setting the level of remuneration any higher than Directors, executive bodies and other top managers, which compliant necessary, as well as an excessively large gap between the level of remuneration of any of the above persons and that clearly states the procedure for remunerating the above of the company’s employees. mentioned parties.

The remuneration policy of the company has been developed by the the remuneration committee and approved In the reporting period, the Remuneration Committee by the board of directors. With the support of the remuneration committee, the board of directors oversees the considered the remuneration policy(ies) and practice of its 4.1.2 compliant implementation and practice of the company’s policy on remuneration and, if necessary, revises and makes relevant implementation and, where necessary, presented respective adjustments. recommendations to the Board of Directors.

The Company’s remuneration policy(s) comprises The company’s remuneration policy should provide for transparent mechanisms to be used to determine the transparent mechanisms for determining the amount amount of remuneration due to members of the board of directors, executive bodies, and other key managers of the of remuneration of members of the Board of Directors, 4.1.3 compliant company, as well as to regulate any and all types of payments, benefits, and privileges provided to any of the above executive bodies and other top managers of the Company; mentioned persons. it regulates all types of compensations, benefits and privileges provided to the above mentioned persons.

The remuneration policy(ies) or other internal documents of The company is recommended to develop a policy on reimbursement of expenses which would contain a list of the Company define the rules of compensation of expenses 4.1.4 reimbursable expenses and specify service levels provided to members of the board of directors, executive bodies, compliant of members of the Board of Directors, executive bodies and and other key managers of the company. Such policy can form part of the company’s policy on compensations. other top managers of the Company.

The system of remuneration of board members should ensure harmonization of financial interests 4.2 of the directors with long-term financial interests of the shareholders.

The company pays a fixed annual remuneration to members of the board of directors. The fixed annual remuneration was the only monetary form 4.2.1 The company does not pay a fee for participation in individual meetings of the board of directors or its committees. of remuneration of members of the Board of Directors for compliant The Company does not use any form of short-term incentives or additional financial incentives in respect of board their work on the Board of Directors in the reporting period. members.

Where the internal document(s), i.e. remuneration policy(ies) Long-term ownership of shares in the company contributes most to aligning financial interests of board members of the Company, stipulates allocation of the Company shares with long-term interests of the company’s shareholders. However, the company does not make the right to dispose of to members of the Board of Directors, clear rules of holding 4.2.2 compliant shares dependent on the achievement by the company of certain performance results; nor should board members the shares by the members of the Board of Directors must take part in the company’s option plans. be laid out aimed at promoting long-term holding of such shares.

The company does not provide for any additional allowance The company does not provide for any additional allowance or compensation in the event of early dismissal of board or compensation in the event of early dismissal of board 4.2.3 compliant members in connection with a change of control over the company or other circumstances. members in connection with a change of control over the company or other circumstances.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

The system of remuneration due to executive bodies and other key managers of the company should 4.3 provide that their remuneration is dependent on the company’s performance results and their personal contributions to the achievement thereof.

1. In the reporting period, annual performance indicators were approved by the Board of Directors and used in determining the variable part of the remuneration of members of the executive bodies and other key managers of the Company. 2. In the latest examination of the system of remuneration of Remuneration of members of the executive bodies and other key managers of the Company is defined in such a way members of the executive bodies and other top managers 4.3.1 as to ensure a reasonable and justified ratio of the fixed and variable part of the remuneration, depending on the compliant of the Company, the Board of Directors (the Remuneration performance of the Company and personal (individual) employee’s contribution to the final result. Committee) ascertained that the Company applied an efficient ratio of fixed and variable parts of the remuneration. 3. The Company has in place a procedure ensuring return to the Company of bonuses improperly received by members of the executive bodies and other top managers of the Company.

1. The Company has introduced a program for long-term motivation of members of the executive bodies and other top managers of the Company by the Company’s shares (options or other derivatives on the Company shares as the underlying asset). The company has introduced a program for long-term motivation of members of executive bodies and other top 2. The program for long-term motivation of members

4.3.2 managers of the company by the company’s shares (options or other derivatives on the company shares as the basis of the executive bodies and other top managers of the compliant asset). Company stipulates that the right of sale of shares and other financial instruments allocated within such program becomes exercisable not earlier than after three years from their allocation. Besides, the right to sell is conditional on achievement of certain performance indicators by the Company.

Compensation amount of (the “golden parachute”) payable by the Company in the case of early termination of office of The amount of severance pay (a so-called “golden parachute”) payable by the company in the event of early dismissal members of the executive bodies or key manager on the 4.3.3 of an executive body or other key manager at the initiative of the company, provided that there have been no bad compliant initiative of the Company and in the absence of improper faith actions on the part of such person, should not exceed two times the fixed portion of his/her annual remuneration. conduct on their part does not exceeds twice the fixed part of the annual remuneration.

The Company should have in place an efficient risk management and internal control system designed 5.1 to provide reasonable confidence that the company’s goals will be achieved.

Functions of management bodies and business units of the Company within the risk management and internal control The Board of Directors determines the principles of and approaches to creation of the risk management and internal 5.1.1 system are clearly defined in the internal documents / the compliant control system in the Company. respective policy of the Company approved by the Board of Directors.

The Company’s executive bodies have ensured allocation The Company’s executive bodies ensure the establishment and continuing operation of the efficient risk management of functions and powers in relation to risk management and 5.1.2 compliant and internal control system in the Company. internal control among the managers (heads) of business units and departments accountable to them.

1. The Company has approved the anti-corruption policy. The Company’s risk management and internal control system should enable one to obtain an objective, fair and clear 2. The Company provides an accessible way of informing 5.1.3 view of the current condition and prospects of the company, integrity and transparency of its accounts and reports, the Board of Directors or the Audit Committee of the Board compliant and reasonableness and acceptability of risks being assumed by the Company. of Directors of any violations of the legislation, internal procedures or Code of Ethics of the Company.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

In the reporting period, the Board of Directors made The Board of Directors of the Company takes the required measures to ascertain that the risk management and assessment of the risk management and internal control 5.1.4 internal control system of the Company conforms to the principles and methods of its organization defined by the compliant system of the Company. Information on the key results of the Board of Directors and efficiently operates. assessment are included in the Annual Report of the Company.

To independently evaluate, on a regular basis, reliability and efficiency of the risk management 5.2 and internal control system and corporate governance practices, the company arranges for internal audits.

To conduct internal audit, the Company established Internal audits are carried out by a separate structural division (IAD) created by the company or through engaging an a specialized internal audit department, functionally 5.2.1 independent third-party entity. The functional and administrative subordination of the internal audit department are accountable to the Board of Directors or the Audit compliant segregated. Functionally the internal audit department reports to the Board of Directors. Committee, or an independent third party is engaged on the same accountability principle.

1. In the reporting period, within the internal audit The internal audit department evaluates efficiency of the internal control and risk management system as well as procedure, efficiency of the internal control and risk 5.2.2 corporate governance system. management system was assessed. compliant The Company applies generally accepted standards of internal audit. 2. The Company applies generally accepted standards of internal control and risk management.

6.1 The Company and its activities should be transparent to its shareholders, investors, and other stakeholders.

The Company’s information policy was approved by the Supervisory Board on December 23, 2015, and complies with the recommendations of the Code. There 1. The Company’s Board of Directors approved the were no considerations of issues related Company’s information policy developed taking into to the compliance with the information account recommendations of the Code. The Company has developed and implemented an information policy enabling the Company to efficiently exchange partially policy of the Company due to the 6.1.1 2. The Board of Directors (or one of its Committees) information with its shareholders, investors, and other stakeholders. compliant adequate efficiency and coherence of the considered issues related to the Company’s compliance process, transparency of its regulation with its information policy at least once within the reporting and implementation for the Supervisory period. Board members. Consideration of an issue related to the Company’s compliance with the information policy is scheduled for 2020.

1. The Company discloses information on the corporate governance system in the Company and general principles of corporate governance adopted in the Company, including on its website. 2. The Company discloses information on the composition of the executive bodies and the Board of Directors, The Company discloses information on the corporate governance system and practices in the Company, including 6.1.2 independence of the members of the Board and their compliant detailed information on compliance with the principles and recommendations of the Code. membership in the Committees of the Board of Directors (as defined in the Code). 3. If there is a person controlling the Company, the Company shall publish a memorandum of the controlling person concerning such person’s plans on corporate governance in the Company.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

The company should disclose, on a timely basis, full, updated and reliable information 6.2 about itself so as to enable its shareholders and investors to make informed decisions.

1. The Company’s information policy defines methods and criteria for identifying information that could have considerable impact on evaluation of the Company and the value of its securities and procedures, ensuring due disclosure of such information. 2. If the Company’s securities are traded on any foreign The Company discloses information following the principles of regularity, consistency and timeliness, as well as 6.2.1 regulated market, disclosure of any material information in compliant accessibility, accuracy, completeness and comparability of the disclosed data. the Russian Federation and in such markets is concurrent and equivalent throughout the accounting year. 3. If non-resident shareholders hold a substantial stake of the Company’s shares, throughout the accounting year information is disclosed not only in Russian but also in one of the most used foreign languages.

1. In the reporting period, the Company disclosed its annual and semi-annual IFRS financial statements. The Annual Report of the Company for the reporting period includes IFRS annual The Company is against using a formalistic approach to information disclosure; it discloses material information on its 6.2.2 financial statements along with the auditor’s report. compliant activities, even if disclosure of such information is not required by law. 2. The Company discloses full information on the Company’s capital structure in accordance with Recommendation 290 of the Code in its Annual Report and on the Company’s website.

The Company should provide information and documents requested by its shareholders 6.3 in accordance with the principles of equal and unhindered accessibility.

The Company’s information policy stipulates an unhindered The Company provides information and documentation upon shareholders’ requests in accordance with the principle procedure of shareholders’ access to information, including 6.3.1 compliant of equal and unhindered accessibility. information on the entities controlled by the Company, on their request.

1. In the reporting period there were no rejects of shareholders’ information requests, or the rejects were motivated by the When providing information to its shareholders, the Company should maintain a reasonable balance between the Company. 6.3.2 interests of individual shareholders and its own interests related to the fact that the Company is interested in keeping compliant 2. In cases specified in the Company’s information policy, confidential sensitive business information that might have a material impact on its competitiveness. shareholders are informed of the confidential nature of information and undertake to keep it confidential.

Any actions which will or may materially affect the company’s share capital structure and its financial position and, 7.1 accordingly, the position of its shareholders (“material corporate actions”) should be taken on fair terms and conditions ensuring that the rights and interests of the shareholders and other stakeholders are observed.

1. The Company’s Articles of Association define a list of transactions or other actions being material corporate actions, as well as criteria for their identification. Decisions on material corporate actions are referred to the remit of Material corporate actions include reorganization of the Company, purchase of 30 or more percent of the voting the Board of Directors. Where the taking of these corporate shares of the Company (take-over), material transactions of the Company, increase or decrease of the Company’s actions is directly referred by law to the remit of the General authorized capital, listing or delisting of the Company’s stock, as well as other actions that can lead to considerable Meeting of Shareholders, the Board of Directors makes the 7.1.1 compliant change of the shareholders’ rights or infringement on their interests. The Company’s Articles of Association include a relevant recommendations to shareholders. list of (criteria of identifying) transactions or other actions falling within material corporate actions, providing therein 2. As per the Company’s Articles of Association, material that decisions on any such actions fall within the jurisdiction of the Company’s Board of Directors. corporate actions, as a minimum, include: reorganization of the Company, purchase of 30 or more percent of the voting shares of the Company (take-over), material transactions of the Company, increase or decrease of the authorized capital of the Company, listing or delisting of the Company’s stock.

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No. Corporate Governance Principles Criteria of assessment of compliance with the corporate Status Explanation of any deviation governance principles of compliance from the criteria of assessment of with Corporate Go- compliance with the corporate go- vernance Principles vernance principles

The Company has in place a procedure for independent The Board of Directors plays a key role in making decisions and developing recommendations in relation to material 7.1.2 directors to state their position on material corporate actions compliant corporate actions; the Board of Directors relies on the position of the independent directors of the Company. before their approval.

When taking any material corporate actions which would affect rights or legitimate interests of the Company’s 1. Considering the specifics of the Company’s activities, shareholders, equal terms and conditions should be ensured for all of the shareholders; if statutory mechanisms the minimal criteria of referring its transactions to material designed to protect the shareholder rights prove to be insufficient for that purpose, additional measures should corporate actions as determined by the Company’s Articles 7.1.3 compliant be taken with a view to protecting the rights and legitimate interests of the Company’s shareholders. In such cases, of Association are lower than those statutorily stipulated. the Company should not only seek to comply with the formal requirements of law but should also be guided by the 2. In the reporting period all material corporate actions were principles of corporate governance set out in this Code. subject to pre-approval procedure.

The Company should have in place such a procedure for taking any material corporate actions that would enable its shareholders to receive full information about such actions in due time enabling them to have 7.2 influence on taking such actions, and that would also guarantee that the shareholder rights are observed and duly protected in the course of taking such actions.

In the reporting period, the Company duly and in detail Information about material corporate actions is disclosed with explanations concerning reasons for, conditions and 7.2.1 disclosed information on material corporate actions, compliant consequences of such actions. including reasons and terms of taking such actions.

1. The Company’s internal documents provide for the procedure of engaging an independent appraiser to determine the value of the property disposed of or acquired under a large transaction or a transaction with interested party. 2. Internal documents of the Company provide for the Rules and procedures in relation to material corporate actions taken by the Company should be set out in its internal procedure of engaging an independent appraiser to 7.2.2 compliant documents. determine the value of the purchase or sale of the Company shares. 3. Internal documents of the Company provide an extended list of grounds for recognizing members of the Board of Directors of the Company and other statutorily legitimate persons as interested parties in the framework of Company transactions.

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10. REPORT OF THE AUDIT COMMISSION

REPORT of the Audit Commission on the results of the audit of financial and economic activities of PJSC ALROSA for 2019 3. The auditor’s report on the accounting (financial) statement for 2019. Moscow April 10, 2020 4. The order on the accounting policy for 2019 for accounting purposes (on an electronic medium), the order on the accounting policy for 2019 for taxation purposes (on an electronic medium). The Audit Commission of PJSC ALROSA elected by the General Meeting of Shareholders of PJSC ALROSA on June 26, 5. Accounting (financial) statements of the Company for 2019: 2019 in the following composition: - balance sheet considered by the tax authority; Alexander Alekseevich Pshchenichnikov — Chairman of the Audit Commission; - report on financial results; Viktor Nikolaevich Pushmin — Deputy Chairman of the Audit Commission; - report on capital changes; Alexander Sergeevich Vasilchenko — Member of the Audit Commission; - report on cash flows; Nikolay Petrovich Ivanov — Member of the Audit Commission; Konstantin Konstantinovich Pozdnyakov — Member of the Audit Commission, - explanatory notes for accounting statements. conducted an annual audit (hereinafter, the audit) of the financial and economic activities of PJSC ALROSA (hereinafter, 6. Information on accrued and paid dividends for 2019. the Company) for 2019. 7. Table “Analysis of PJSC ALROSA Indicators for 2019.” The audit was conducted in compliance with the requirements of Federal Law No. 208-FZ “On Joint-Stock 8. Statement on eliminating flaws identified by the previous audit. Companies” dated December 26, 1995, Company’s Articles of Association, Regulations on the Audit Commission of the 9. Results of the Company’s sales policy on domestic and foreign markets in 2019. Company, as well as the effective Russian regulations on accounting and reporting. 10. Consolidated information on Company’s import/export of unpolished and polished diamonds (in physical and The audit was conducted in compliance with the Program for Conducting An Audit on the Financial and Economic monetary indicators), including export under agency agreements. Activities of PJSC ALROSA approved by the Audit Commission: 11. Report on rough diamond mining by ALROSA Group for 2018–2019 (by enterprises, MPDs, mines). 1. Analysis and audit of the financial and economic activities of PJSC ALROSA and its annual financial 12. Report on diamond mining for SSE evaluation across ALROSA Group for 2018–2019 under OKPD nomenclature statements for 2019. 14.50.21.120 and 14.50.22.110 (in per month terms, by license holders, in carats and USD). 2. Analysis of the achievement of the key performance indicators, target economic indicators, including the 13. Consolidated balance sheet of labor costs across the Company for 2018–2019 by structural divisions (detailed analysis of the actually achieved financial indicators. breakdown of headcount, payroll, average salary). 14. Results of implementation of the system of key performance indicators of PJSC ALROSA and senior management, 3. Audit of net profit spending; as well as linking implementation of approved KPIs with remuneration of members of the Supervisory Board and Management 4. Audit of the order of calculation of the amount, as well as correctness of calculation, accrual and pay-out of PJSC ALROSA. of dividends of PJSC ALROSA. 15. Report on implementation of PJSC ALROSA’s investment program for 2019. 5. Analysis of results of the Company’s sales policy on domestic and foreign markets in 2019. 16. Information on implementation by PJSC ALROSA of the prescriptions of the audit bodies (Federal Tax Service 6. Analysis of the results of implementation of the system of key performance indicators of PJSC ALROSA and of Russia, the Prosecutor General’s Office of the Russian Federation and others). senior management, as well as linking implementation of approved KPIs with remuneration of members of the Supervisory In compliance with the operational program of PJSC ALROSA, in 2019, the Company’s mining divisions opened Board and Management of PJSC ALROSA. 38,672.0 thousand sq. m. (106.5% on 2018), volume of rock mass totalled 51,549.9 thousand sq. m. (108.4% on 2018). 7. Analysis of the information on implementation of the investment program of PJSC ALROSA. In the reporting year, the Company’s divisions mined 17,220.0 thousand tons of ore (115.2% on 2018). Extraction 8. Analysis of procurement activities of PJSC ALROSA for 2019. of rough diamonds amounted to 18,827.5 thousand carats (94.3% on 2018) and USD 2,079.9 million (88.7% on 2018). Decrease in indicators of rough diamond extraction was due to the changes of the structure of the processed raw materials 9. Analysis of implementation by PJSC ALROSA of the prescriptions of the audit bodies (Federal Tax Service — mainly due to the disposal of the enrichment of ore at Mir pipe, reduction in the average content in the ore of the of Russia, the Prosecutor General’s Office of the Russian Federation and others). Udachnaya pipe, a reduction of the share of ore at Internatsionalnaya pipe in relation to complications in mining and 10. Audit of execution of the instructions and directives of the President of the Russian Federation and the geological conditions and a significant increase in the share of placer and non-natural deposits. Government of the Russian Federation. PJSC ALROSA’s revenue from product, work and service sales for 2019 amounted to RUB 160,258.00 million 11. Audit of compliance of PJSC ALROSA with the recommendations reflected in the previous Report of the (72.91% on 2018), including sales of core products (polished and unpolished diamonds, diamond powders) in the amount Audit Commission (section 13 of the Report of the Audit Commission for 2018). of RUB 131,842.27 million which comprises 67.11% year-on-year (on RUB 196,465.43 million). This change is due to the 12. Recommendations of the Audit Commission on eliminating flaws/violations within the framework of the decrease in the volume of diamond sales in the amount of RUB 62,824.0 million, diamond powders in the amount of audit of the financial and economic activities for 2019 RUB 24.2 million and polished diamonds in the amount of RUB 1,775.9 million, as well as strengthening of the US dollar Within the audit, the Audit Commission considered and analyzed the following documents provided by the against Russian rouble. Company: PJSC ALROSA’s net profit in 2019 amounted to RUB 26,664.46 million which comprises 90.98% year-on-year. 1. The draft of the Annual Report of PJSC ALROSA (hereinafter, the Company) for 2019. Tax payments to budgetary and extrabudgetary funds in 2019 were made in full in compliance with the actual 2. The Report on generation, distribution and use of net profit of the Company for 2019. charges and amounted to RUB 40,284.73 million which is less by 21.6% or RUB 11,133.17 million year-on-year.

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11. PENDING COURT PROCEEDINGS

INFORMATION ON PENDING In 2019, two General Meeting of Shareholders were held at which decisions were made on net profit distribution, COURT PROCEEDINGS OF PJSC ALROSA IN 2019 including the payment of dividends:

1. General Meeting of Shareholders — June 26, 2019, Minutes No. 40 — dividend payments for 2018; As of December 31, 2019, 14 pending cases for debt claims As of December 31, 2019, 22 pending cases for debt claims 2. Extraordinary General Meeting of Shareholders — September 30, 2019, Minutes No. 41 — dividend payments were under consideration of arbitration courts and general were under consideration of arbitration courts and general for 1H 2019. jurisdiction courts of various instances, where the Company jurisdiction courts of various instances, where the Company Thus, in the reporting year, the dividend payments were made for two dividend periods: 2018 and 1H 2019. acts as a respondent, in the amount of RUB 47,068,983.3. acts as a claimant, in the amount of RUB 40,233,278.0.

Conclusion of the Audit Commission per the results of the audit of financial and economic activities of PJSC ALROSA for 2019.

The Company’s Annual Report for 2019 was prepared in compliance with the current legislation of the Russian Federation.

The annual audit of the Company per the results of 2019, in compliance with the Russian Accounting Standards, was conducted by the Company’s auditor, Joint-Stock Company PricewaterhouseCoopers Audit approved by the Annual General Meeting of Shareholders of the Company on June 26, 2019, Minutes No. 40. The Company’s auditor confirms the validity of the accounting (financial) statements of the Company as of December 31, 2019, as well as financial results and cash flows for 2019.

The Audit Commission, based on the analysis of documents submitted by PJSC ALROSA and random audits, affirms that the data presented in the Annual Accounting (Financial) Statements for 2019, the 2019 Annual Report, and the Report on Related Party Transactions in 2019 are reliable and complete, as well as finds it appropriate to recommend for the General Meeting of Shareholders to approve the Annual Report, the Annual Accounting (Financial) Statements and distribution of PJSC ALROSA profit for 2019.

No violations of legal acts of the Russian Federation when performing financing and economic activities by PJSC ALROSA were recorded in 2019.

In the reporting year, the Audit Commission sent no requests to convene meetings of the Supervisory Board or the Extraordinary Meeting of PJSC ALROSA Shareholders.

Chairman of the Audit A. A. Pshenichnikov Commission

Members of the Audit V. N. Pushmin Commission:

A. S. Vasilchenko

N. P. Ivanov

K. K. Pozdnyakov

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Brief project description/ Actual state of Utilization of funds as of subsidy allocation subsidy receival the end of the reporting 12. INFORMATION period, RUB mln ON STATE SUPPORT LLC PTVS Agreement on subsidies for reimbursement of lost Currently, subsidies have not been 1,542.4 earnings due to reduced utility tariffs received in full due to financing being postponed to 2020 in compliance with the agreements Information about subsidies, their purpose, information on the use of funds as at the end of 2019 signed in 2019. In addition, due to the enforcement of paragraph 2.8.11.7 of the Subsidy Provision Brief project description/ Actual state of Utilization of funds as of Procedure No. 450-P of September subsidy allocation subsidy receival the end of the reporting 27, 2017, financing was not provided period, RUB mln in full from July 2019 due to a discrepancy in technical indicators of data uploading to regional GIS. PJSC ALROSA To date, all discrepancies have been resolved and will be taken into Provision of a subsidy to encourage employers allocating Funds received and used in full 3.0 account in financing the remaining and (or) generating jobs for individuals who have amount for 2019. difficulties finding a job, at training events for young specialists in demand on the labor market LLC Lenskoye PTES

Provision of a subsidy to preserve breeding stock of cattle Funds received and used in full 39.0 Agreement on subsidies for reimbursement of lost An agreement with the State 579.4 (cows); partial reimbursement of the costs in the provision earnings due to reduced utility tariffs Organization of the Republic of Sakha of commodity loans to the population for purchasing (Yakutia) “Agency for Subsidies” cattle No.137-Y dated April 30, 2019 on subsidies for reimbursement of lost Provision of a subsidy for services under the CHI A part of the subsidy for December 24.0 earnings due to reduced utility tariffs programme 2019 in the amount of RUB 1,981,320 to the organizations providing utility was paid in January–February 2020. services to the population.

Provision of a subsidy for servicing flights of the Armed Funds received and used in full 11.0 JSC ALROSA Air Company Forces of the Ministry of Emergency Situations Provision of a subsidy from the federal budget to The subsidy for December amounted 198.5 Provision of a subsidy for construction of passage to 694.0 reimburse lost earnings in revenue received for air to 17,129,500.00 was paid in Verkhne-Munskoye field transportation of passengers in economy class cabins at a February 2020. special fare (FAAT) JSC VGES-3 Provision from the state budget of the Republic of 25.3 Reimbursement of income lost due to bringing prices RUB 2,725.68 mln 2,725.7 Sakha (Yakutia) for the purpose of financial support (tariffs) for electricity (energy) to those planned for the (reimbursement) of costs associated with the state next period of regulation of basic levels of prices (tariffs) regulation of tariffs for air transportation of passengers for electricity (energy) in the the territories of the Far East on socially important routes of the Republic of Sakha Federal District for 2019. (Yakutia) (Ministry of Transport and Road Economy of the Republic of Sakha (Yakutia)) Reimbursement of income lost due to bringing prices RUB 100.9 million 100.9 (tariffs) for electricity (energy) to those planned for the JSC IC Bourevestnik next period of regulation of basic levels of prices (tariffs) for electricity (energy) in the the territories of the Far East Provision of subsidy to cover part of the cost of Funds were received and used for 0.8 Federal District for 2018. participation in international exhibitions and fairs ongoing activities

Provision of subsidy for the purpose of reimbursement Funds were received and used for 6.2 of a part of expenses for the purchase of technological ongoing activities equipment on lease

Provision of a subsidy to recover part of the cost of Funds were received and used for 0.2 certification of management systems to national and ongoing activities international standards

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Brief project description/ Actual state of Utilization of funds as of subsidy allocation subsidy receival the end of the reporting period, RUB mln 13. INFORMATION ABOUT MEETINGS OF

Provision of a subsidy to reimburse a portion of the Funds were received and used for 0.4 costs associated with meeting the requirements of the ongoing activities THE SUPERVISORY BOARD legislation of the importing country required for the export of goods (works, services) AND THE COMMITTEES

Subsidy for partial compensation of interest expense Funds were received and used for 26.8 on the Recipient’s loans related to the interest payment ongoing activities from Russian credit organizations in 2014–2016 for The list of meetings of the Supervisory Board, the committees under the Supervisory Board and items reviewed in 2019 implementation of the complex investment project of construction of the research-and-production complex for development and production of equipment for the Supervisory Board enrichment of diamond-bearing ores and production of analysis instruments. Meetings 3. Termination of participation of PJSC ALROSA in PJSC ALROSA- Nyurba. Providing subsidy as partial compensation of expenses on Funds were received and used for 0.8 1. January 29, 2019, minutes No. A01/288-ПР-НС (absentee voting) training, retraining and upgrading professional skill of the ongoing activities 4. Participation of PJSC ALROSA in JSC PA Kristall. personnel. 2. February 13, 2019, minutes No. A01/289-ПР-НС (absentee voting) 5. Termination of participation of PJSC ALROSA in JSC NPF Provision of subsidy to reimburse part of costs related to Funds were received and used for 0.3 3. February 26, 2019, minutes No. A01/290-ПР-НС (absentee voting) Almaznaya Osen. energy inspection and acquisition within the framework ongoing activities of implementation of energy saving and energy efficiency 4. February 28, 2019, minutes No. A01/291-ПР-НС (absentee voting) 6. Termination of participation of PJSC ALROSA in Lensk Town measures Heat and Electric Networks Enterprise LLC. 5. March 19, 2019, minutes No. A01/292-ПР-НС (absentee voting) Strategy and priority areas 6. March 21, 2019, minutes No. A01/293-ПР-НС (absentee voting) 1. Purchase of a multi-purpose office complex for ALROSA’s 7. April 23, 2019, minutes No. A01/294-ПР-НС (meeting) United Selling Organization branch.

8. April 30, 2019, minutes No. A01/295-ПР-НС (absentee voting) 2. Development of the Program for Improving the Procurement Management Quality of PJSC ALROSA. 9. June 24, 2019, minutes No. A01/296-ПР-НС (absentee voting) 3. Approval of the revised Action Plan for the Sale of Non-Core 10. July 9, 2019, minutes No. A01/297-ПР-НС (absentee voting) Assets of PJSC ALROSA for 2019.

11. August 26, 2019, minutes No. A01/298-ПР-НС (absentee voting) 4. Update of the Long-term Development Program of ALROSA Group for 2018–2024 and submission of auditor reports on 12. September 10, 2019, minutes No. A01/299-ПР-НС the Long-term Development Program of ALROSA Group for (absentee voting) 2018–2024 to Russia’s Ministry of Economic Development and Federal Agency for Property Management. 13. September 24, 2019, minutes No. A01/300-ПР-НС (meeting) 5. Implementation of the Russian Government’s directive on 14. October 15, 2019, minutes No. A01/301-ПР-НС (absentee voting) software import substitution.

15. October 24, 2019, minutes No. A01/302-ПР-НС (absentee voting) 6. Approval of the Action Plant for the Transition of PJSC ALROSA to Preferential Use of Domestic Software, Including Domestic 16. December 10, 2019, minutes No. A01/303-ПР-НС Office Software, for 2019–2021. (absentee voting) 7. Review of results of the analysis of the Long-term Development 17. December 13, 2019, minutes No. A01/304-ПР-НС (meeting) Program of ALROSA Group for 2018–2024 with a view to update it. 18. December 27, 2019, minutes No. A01/305-ПР-НС (absentee voting) 8. Development (update) of internal documents regulating the formation of key performance indicators of PJSC ALROSA and Items reviewed remuneration of its executive members.

Participation of the Company in other organizations 9. Approval of the Regulation on the System of Key Performance Indicators of PJSC ALROSA. 1. Participation of PJSC ALROSA in ALROSA-Okhrana LLC. 10. Approval of the Consolidated Budget of PJSC ALROSA and KPI 2. Participation of PJSC ALROSA in Aeroport Mirny LLC. targets for 2020.

264 265 ALROSA ANNUAL REPORT 2019 APPENDICES

11. Update of the Long-term Development Program and the Long- 12. Convocation of the Annual General Meeting of Shareholders of 3. The annual financial (accounting) statements of PJSC ALROSA. 4. Approval of amendments to the Regulation on Procurement of term Investment Program of ALROSA Group for 2020–2024. PJSC ALROSA. PJSC ALROSA. The current state of the synthetic diamond market. 4. Reports on the achievement of quarterly key performance 13. Recognition of Maria Vladimirovna Gordon, a candidate to the indicators of ALROSA Group for Q1 and Q2 2019. 5. Approval of the revised Regulation on the Dividend Policy of 12. The development strategy of the PJSC ALROSA diamond- Supervisory Board of PJSC ALROSA, as independent. PJSC ALROSA. cutting entity and the action plan for the integration of JSC PA 5. Approval of the Plan of Activities of the Internal Audit Kristall into ALROSA Group. 14. Dissolution of ALROSA’s representative office in Yakutsk. Department of PJSC ALROSA for 2020. 6. Approval of the Methodology for Calculating the Reduction in Operating Costs of ALROSA Group. 13. Approval of the Action Plan for the Sale of Non-core Assets of 15. Election of the Chairman of the Supervisory Board of PJSC 6. The Report on the Achievement of Annual Key Performance PJSC ALROSA for 2020. ALROSA. Indicators of ALROSA Group for 2018. 7. Amendments to the Non-Core Assets Disposal Program of PJSC ALROSA. 14. Possibility of PJSC ALROSA’s integration into the activities of 16. Election of the First Deputy Chairman of the Supervisory Board Human resources and remuneration the International Cooperation and Export national project of PJSC ALROSA. 8. Approval of amendments to the Regulation on Procurement of (program). 1. Holding of concurrent positions by the CEO – Chairman of the PJSC ALROSA. 17. Election of the Deputy Chairman of the Supervisory Board of Executive Committee of PJSC ALROSA and by members of the Corporate governance PJSC ALROSA. Executive Committee of PJSC ALROSA in management bodies 9. Approval of amendments to the Regulation on Procurement of of other organizations. PJSC ALROSA. 1. Inclusion of items proposed by shareholders of PJSC ALROSA 18. The HR and Remuneration Committee under the Supervisory in the agenda of PJSC ALROSA’s Annual General Meeting of Board of PJSC ALROSA. 2. Approval of the Standard of Social Support of PJSC ALROSA 10. Approval of the Regulation on the Procedure of Provision of Shareholders. Employees in Case of Workplace Accidents. Loans to PJSC ALROSA. 19. The Audit Committee under the Supervisory Board of PJSC 2. Inclusion of candidates proposed by shareholders of PJSC ALROSA. 3. Personal efficiency rating ratio of the Corporate Secretary of 11. Amendments to the Non-Core Assets Disposal Program of PJSC ALROSA in the list of candidates for voting on elections to the PJSC ALROSA for 2018. ALROSA. Supervisory Board of PJSC ALROSA. 20. The Strategic Planning Committee under the Supervisory Board of PJSC ALROSA. 4. Recommendation to the Annual General Meeting of 12. Procurement of domestic products in the implementation of 3. Inclusion of candidates proposed by shareholders of PJSC Shareholders of PJSC ALROSA regarding the payment of national projects and a comprehensive plan for modernization ALROSA in the list of candidates for voting on elections to the 21. Recommendations to the Extraordinary General Meeting of remuneration for work in the Supervisory Board of PJSC and expansion of the backbone infrastructure. Audit Commission of PJSC ALROSA. Shareholders of PJSC ALROSA on the amount of dividends ALROSA to members of the Supervisory Board — non-public paid in the 1st half of 2019, the terms and form of their employees — in the amount established by internal documents 13. Amendments to the Non-Core Assets Disposal Program of PJSC 4. Approval of amendments to the Regulation on the Corporate payment and the date on which persons entitled to dividends of PJSC ALROSA. ALROSA. Secretary of PJSC ALROSA. are determined. 5. Recommendation to the Annual General Meeting of 14. Approval of the revised Non-Core Assets Disposal Program of 5. Preliminary approval of the Annual Report of PJSC ALROSA for 22. Approval of the agenda of the Extraordinary General Meeting Shareholders of PJSC ALROSA regarding the payment of PJSC ALROSA. 2018. of Shareholders of PJSC ALROSA. remuneration for work in the Audit Commission of PJSC ALROSA to members of the Audit Commission — non-public 15. Amendments to the procurement documentation of PJSC 6. Recommendations to the Annual General Meeting of 23. Convocation of the Extraordinary General Meeting of employees — in the amount established by internal documents ALROSA that regulates competitive procedures. Shareholders of PJSC ALROSA regarding profit distribution in Shareholders of PJSC ALROSA. of PJSC ALROSA. 2018, as well as retained profit of the previous years, including Review of reports the amount of dividends on PJSC ALROSA’s shares and the 24. Changes in the quantitative and personal composition of the 6. Approval of the revised Regulation on Remuneration of the payment procedure. Executive Committee of PJSC ALROSA. CEO – Chairman of the Executive Committee of PJSC ALROSA 1. The Report on the Implementation of the Non-Core Assets and the revised Regulation on Remuneration of Members of the Disposition Program for Q4 2018. 7. Approval of the Action Plan for Improvement of the Corporate 25. Approval of the Plan of Activities of the Supervisory Board of Executive Committee of PJSC ALROSA. Governance System and the Supervisory Board’s Performance PJSC ALROSA for the 2019—2020 corporate year. 2. Approval of reports on the performance of the committees of PJSC ALROSA. 7. Approval of an additional agreement to the employment under the Supervisory Board of PJSC ALROSA. 26. Approval of the revised Regulation on the Corporate Secretary contract with the CEO – Chairman of the Board of PJSC 8. Inclusion of items in the agenda of the Annual General Meeting of PJSC ALROSA. ALROSA. 3. Results of PJSC ALROSA’s procurement activities for 2018. of Shareholders of PJSC ALROSA. 27. Assessment of activities of the Supervisory Board of PJSC 8. Approval of the revised Regulation on Remuneration of the 4. Approval of the Report on the Implementation of the Program 9. Proposals to the Annual General Meeting of Shareholders of ALROSA and the committees under the Supervisory Board. CEO – Chairman of the Executive Committee of PJSC ALROSA for Operational Efficiency Improvement and Cost Reduction of PJSC ALROSA. and the revised Regulation on Remuneration of Members of the PJSC ALROSA for 2017—2019 and the proposal for adjustment 28. Determination of the position of PJSC ALROSA (representatives Executive Committee of PJSC ALROSA. of the Program for Operational Efficiency Improvement and 10. Proposal for the Annual General Meeting of Shareholders of of PJSC ALROSA) in respect of agenda items of PJSC Cost Reduction of PJSC ALROSA. PJSC ALROSA to approve the auditor, the winner of the open Severalmaz governing bodies. Approval/amendment of internal documents bid “For the Right to Conclude the Contract for Mandatory 5. Approval of the Report on the Implementation of the Innovation Audit of Accounting (Financial) Statements of PJSC ALROSA, Control and risks 1. Amendment of the Regulation on Charity and Sponsorship of Development and Technological Upgrade Program of PJSC Prepared in accordance with Russian Legislation, and PJSC ALROSA. ALROSA for 2018. Consolidated Financial Statements of ALROSA Group, Prepared 1. Approval of the 2018 Critical Risks Annual Report, approval of as per IFRS, for 2019–2021”, according to the results of 2019. the 2019 Action Plan for Critical Risks Mitigation. 2. Amendment of the Regulation on the Procedure and 6. The Report on the Performance of the Internal Audit Conditions of Gratuitous Transactions. Department of PJSC ALROSA for 2018. 11. Approval of the agenda of the Annual General Meeting of 2. Approval of internal documents of the Company that define the Shareholders of PJSC ALROSA. policy in the area of risk management. 3. Approval of the Regulation on Insider Information of PJSC 7. The Report on the Implementation of the Non-Core Assets ALROSA. Disposition Program for Q1 2018.

266 267 ALROSA ANNUAL REPORT 2019 APPENDICES

8. Results of PJSC ALROSA’s procurement activities for Q1 2019. 5. Consent to the transactions between PJSC ALROSA and PJSC Sberbank. 9. Performance of the Quality Management System of PJSC ALROSA on the basis of the consolidated report on its 6. Consent to gratuitous transactions. 4. Approval of the 2018 Critical Risks Annual Report, approval of Mandatory Audit of Accounting (Financial) Statements of PJSC functioning. the 2019 Action Plan for Critical Risks Mitigation. ALROSA, Prepared in accordance with Russian Legislation, and 7. Consent to the sponsorship. Consolidated Financial Statements of ALROSA Group, Prepared 10. Introduction of professional standards in the activities of PJSC 5. Existing insurance programs of ALROSA Group, including as per IFRS, for 2019–2021”, according to the results of 2019. ALROSA. 8. Approval of material conditions of the procedure liability insurance for members of the Supervisory Board, the (documentation) for selling an asset of PJSC ALROSA. CEO — Chairman of the Executive Committee and members of 21. The Report and the Act of the Audit Commission of PJSC 11. The Report on the Implementation of the Non-Core Assets the Executive Committee. ALROSA based on results of the assessment of financial and Disposition Program in Q2 2019. 9. Consent to the transaction between PJSC ALROSA and the economic activities of PJSC ALROSA for 2018. Republic of Sakha (Yakutia), represented by the Ministry of 6. Preliminary results of the independent audit of PJSC ALROSA’s 12. Results of PJSC ALROSA’s procurement activities for H1 2019. Property and Land Relations for the Republic of Sakha (Yakutia) accounting statements for 2018. 22. The consolidated interim financial statements of PJSC on disposal of non-core property. ALROSA, prepared in accordance with the International 13. The Report on the Implementation of the Non-Core Assets 7. Implementation of recommendations for phased improvement Financial Reporting Standards, following the results of H1 Disposition Program in Q3 2019. 10. Approval of the transaction between PJSC ALROSA and the of the Company’s internal audit, prepared by an independent 2019. Administration of the Chuoninsky Nasleg Municipal Settlement consultant on the results of preliminary assessment of internal 14. The Report on the Implementation of Activities as part of on disposal of non-core property. audit activities. 23. Recommendations to the Extraordinary General Meeting of the Program for the Improvement of the Industrial Safety Shareholders of PJSC ALROSA on the amount of dividends Management System of PJSC ALROSA. 11. Approval of the transactions between PJSC ALROSA and 8. Consideration of the resource model of internal audit of PJSC paid in the 1st half of 2019, the terms and form of their the Botuobuyinsky Nasleg Municipal Settlement of the Mirny ALROSA and its controlled and affiliated entities. payment and the date on which persons entitled to dividends 15. Results of PJSC ALROSA’s procurement activities for 9M 2019. District of the Republic of Sakha (Yakutia) on disposal of non- are determined. core property. 9. Approval of the Regulation on Insider Information of PJSC 16. The progress of introduction of professional standards in the ALROSA. 24. Information on the mechanism of procurement control in PJSC activities of PJSC ALROSA. 12. Approval of a related party transaction: guaranteeing the ALROSA. performance of obligations and compensation of losses under 10. The policy and efficiency of management of PJSC ALROSA’s Transactions the aircraft leasing contract. office premises, including the expediency and timing of sale. 25. Organization of transactions in PJSC ALROSA.

1. Consent to the transaction. 13. Consent to the gratuitous transaction. 11. Implementation of recommendations for phased improvement 26. Approval of a related party transaction: guaranteeing the of the Company’s internal audit, prepared by an independent performance of obligations and compensation of losses under 2. Approval of the report on related party transactions of PJSC 14. Consent to gratuitous transaction between PJSC ALROSA consultant on the results of preliminary assessment of internal the aircraft leasing contract. ALROSA in 2018. and the Republic of Sakha (Yakutia), represented by the audit activities. Ministry of Property and Land Relations for the Republic of 27. ALROSA Group’s liquidity, debt and dividend payments 3. Consent to the related party transactions between PJSC Sakha (Yakutia). 12. Consideration of the resource model of internal audit of PJSC forecast for 2019—2023. ALROSA and PJSC VTB Bank, as well as in accordance with sub- ALROSA and its controlled and affiliated entities. cl. 4v, cl. 12.1.4 of the Articles of Association PJSC of ALROSA. 15. Consent to conclude gratuitous transactions and signing of 28. Approval of the resource model of internal audit of PJSC sponsorship contracts provided for in the Consolidated Budget 13. The policy and efficiency of management of PJSC ALROSA’s ALROSA. 4. Consent to the related party transactions between PJSC of PJSC ALROSA for 2020. office premises, including the expediency and timing of sale. ALROSA and Gazprombank (joint-stock company). 29. The report on results of audits of the controlled and affiliated 16. Consent to conclude related party transactions. 14. Preliminary approval of the Annual Report of PJSC ALROSA for legal entities of PJSC ALROSA, to which the staff of the Internal 2018. Audit Department were elected in 2019 (resources, process, result, materiality). 15. The Annual Financial (Accounting) Statements of PJSC ALROSA. 30. Feasibility of phasing out audit commissions of the subsidiaries Audit Committee and introduction of an internal audit system in subsidiary 16. The annual consolidated financial statements of PJSC ALROSA companies essential for PJSC ALROSA. Meetings Items reviewed as per IFRS for 2018. 31. Information and status on the following insurance programs: 1. March 5, 2019, minutes No. 64 (meeting) 1. A comprehensive procurement analysis containing cost, 17. Recommendations to the Annual General Meeting of technical and performance indicators of various manufacturers Shareholders of PJSC ALROSA regarding profit distribution in — losses due to the realization of cyber risks; 2. March 12, 2019, minutes No. 65 (meeting) of equipment of significant value, explaining the selection of 2018, as well as retained profit of the previous years, including specific brands, taking as an example the selection of BelAZ the amount of dividends on PJSC ALROSA’s shares and the — loss of profit due to the realization of the risk of interruption in 3. April 16, 2019, minutes No. 66 (meeting) and Caterpillar brands for procurement of dump trucks or other payment procedure. production; equipment. 4. April 24, 2019, minutes No. 67 (absentee voting) 18. Approval of the report on related party transactions of PJSC — civil liability to third parties for pollution of the natural 2. Competitive procurements: dynamics by year, measures for ALROSA in 2018. environment, including in comparison with the practice of 5. August 19, 2019, minutes No. 68 (absentee voting) improvement. insurance of such risks in other companies. 19. The Report on the Performance of the Internal Audit 6. September 11, 2019, minutes No. 69 (meeting) 3. Approval of internal documents of the Company that define the Department of PJSC ALROSA for 2018. 32. Approval of the Plan of Activities of the Audit Committee under policy in the area of risk management. the Supervisory Board of PJSC ALROSA for the 2019—2020 7. December 18, 2019, minutes No. 70 (meeting) 20. Proposal for the Annual General Meeting of Shareholders corporate year. of PJSC ALROSA to approve the auditor, the winner of the open bid “For the Right to Conclude the Contract for 33. Results of PJSC ALROSA’s procurement activities for 9M 2019.

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34. Measures of response to critical remarks following results of the 37. The concept of IT development in PJSC ALROSA until 2021. 16. Recommendations to the Supervisory Board of PJSC ALROSA 27. Recommendations to the Supervisory Board of PJSC ALROSA audit commissions’ work. concerning the Report on the Implementation of Annual Key on Approval of an Additional Agreement to the Labor Contract 38. Approval of the Plan of Activities of the Internal Audit Performance Indicators of ALROSA Group for 2018. with Chief Executive Officer — Chairman of the Executive 35. Agreement of the Plant for Auditing the Consolidated Financial Department of PJSC ALROSA for 2020. Committee of PJSC ALROSA. Statements of PJSC ALROSA and its subsidiaries, prepared 17. Independance Assessment of the Candidates to the as per IFRS, and the individual statements of PJSC ALROSA, 39. Consideration of interim results of critical risk management. Supervisory Board of PJSC ALROSA. 28. Assessment of the Supervisory Board’s composition of PJSC prepared as per RAS, for 2019. ALROSA in Terms of Independence. 40. Information on the internal control system and interaction with 18. The Development and Implementation of a New Wage System, 36. The report on the status of implementation of the project on the risk management system. Taking into Account Grades for White Collar Staff and Variable 29. Approval of the Plan of Activities of the HR and Remuneration creation of a shared service center — the ALROSA Business Remuneration System for MPDs’ Employees. Committee under the Supervisory Board of PJSC ALROSA for Service LLC. the 2019—2020 corporate year. 19. Recommendations to the Supervisory Board of PJSC ALROSA concerning the Approval of the Regulation on Remuneration 30. Appointment of Andrey Viljevich Karkhu, Member of the of the Chief Executive Officer — Chairman of the Executive Supervisory Board of PJSC ALROSA, as independent director. Committee of PJSC ALROSA in new edition and Approval of HR and Remuneration Committee the Regulations on Remuneration of Members of the Executive 31. The Assessment of the Level of Performance of Target Tasks Committee of PJSC ALROSA as amended. and the Assessment of the Level of Performance of Functional Meetings 6. Recommendations to the Supervisory Board of PJSC ALROSA Responsibilities by the Corporate Secretary of PJSC ALROSA for on the Approval of Amendments to the Regulation on the 20. Recommendations to the Supervisory Board of PJSC ALROSA Q3 2019 (on an accrual basis). 1. February 24, 2019, minutes No. 64 (absentee voting) Corporate Secretary of PJSC ALROSA. concerning the Implementation of Professional Standards into the PJSC ALROSA’s activity. 32. Recommendations to the Supervisory Board of PJSC ALROSA 2. March 4, 2019, minutes No. 65 (meeting) 7. Recommendations to the Supervisory Board of PJSC ALROSA on Approval of the Regulations on the Corporate Secretary of on the Personal Efficiency Rating Ratio of the Corporate 21. The Assessment of the Level of Performance of Target Tasks PJSC ALROSA in new edition. 3. March 18, 2019, minutes No. 66 (absentee voting) Secretary of PJSC ALROSA for 2018. and the Assessment of the Level of Performance of Functional Responsibilities by the Corporate Secretary of PJSC ALROSA for 33. Recommendations to the Chairman of the Supervisory Board 4. March 26, 2019, minutes No. 67 (meeting) 8. Inclusion of additional items in the Plan of Activities of the HR Q1 2019 (on an accrual basis). of PJSC ALROSA on the Report on the Implementation of and Remuneration Committee under the Supervisory Board of Quarterly Key Performance Indicators of ALROSA Group for Q3 5. April 15, 2019, minutes No. 68 (meeting) PJSC ALROSA for H1 2019. 22. The Report on the Achievement of Key Performance Indicators 2019. of ALROSA Group for Q1 2019. 6. May 30, 2019, minutes No. 69 (meeting) 9. Confirmation of compliance of persons nominated as 34. Proposals to Update Internal Documents Regulating the candidates to the Supervisory Board of PJSC ALROSA with the 23. Recommendations to the Supervisory Board of PJSC ALROSA Formation of KPI System of PJSC ALROSA, Including LTIFR. 7. June 19, 2019, minutes No. 70 (meeting) requirements of cl. 5.3 of the Corporate Governance Code of concerning Approval of the Regulation on Remuneration of the PJSC ALROSA. Chief Executive Officer — Chairman of the Executive Committee 35. Recommendations to the Supervisory Board of PJSC ALROSA 8. July 30, 2019, minutes No. 71 (absentee voting) of PJSC ALROSA in new edition and the Regulations on concerning Assessment of Activity of the Supervisory Board of 10. Recommendations to the Supervisory Board of PJSC ALROSA Remuneration of Members of the Executive Committee of PJSC PJSC ALROSA and Its Committees. 9. August 15, 2019, minutes No. 72 (meeting) on the Approval of the Action Plan for Improvement of the ALROSA as amended. Corporate Governance System and the Supervisory Board’s 36. Information (market benchmarks) to Determine the Target 10. October 15, 2019, minutes No. 73 (absentee voting) Performance of PJSC ALROSA. 24. The Assessment of the Level of Performance of Target Tasks Amount of the Total Annual Remuneration for Chief Executive and the Assessment of the Level of Performance of Functional Officer — Chairman of the Executive Committee and Members 11. November 19, 2019, minutes No. 74 (meeting) 11. The Report on the Achievement of Quarterly Key Performance Responsibilities by the Corporate Secretary of PJSC ALROSA for of the Executive Committee of PJSC ALROSA. Indicators of ALROSA Group for Q4 2018. Q2 2019 (on an accrual basis). 12. December 5, 2019, minutes No. 75 (absentee voting) 37. Recommendations to the Supervisory Board of PJSC ALROSA 12. Recommendations to the Supervisory Board of PJSC ALROSA 25. Recommendations to the Supervisory Board of PJSC ALROSA on Approval of Regulations on the System of Key Performance Items reviewed on the Approval of the Revised Regulation on Remuneration concerning the Reports on the Implementation of Annual Key Indicators of PJSC ALROSA of Members of the Executive Committee of PJSC ALROSA. Performance Indicators of ALROSA Group for Q1 and Q2 2019. 1. Assessment of the Supervisory Board’s composition of PJSC ALROSA in Terms of Independence. 13. Recommendations to the Supervisory Board of PJSC ALROSA 26. Recommendations to the Supervisory Board of PJSC ALROSA on the Approval of the Revised Regulation on Remuneration on Changing the Quantitative and Personal Composition of the 2. Assessment of the level of achievement of targets and of the CEO – Chairman of the Executive Committee of PJSC Executive Committee of PJSC ALROSA. assessment of the level of performance of functional ALROSA. responsibilities by the Corporate Secretary of PJSC ALROSA for Q4 2018 (on an accrual basis). 14. Recommendations to the Supervisory Board of PJSC ALROSA on the Recommendation to the Annual General Meeting 3. Recommendations to the Supervisory Board of PJSC ALROSA of Shareholders of PJSC ALROSA regarding the payment Strategic Planning Committee on the Approval of the Revised Regulation on Remuneration of of remuneration for work in the Supervisory Board of PJSC Members of the Supervisory Board of PJSC ALROSA. ALROSA to members of the Supervisory Board — non-public employees — in the amount established by internal documents Meetings 3. June 14, 2019, minutes No. 48 (absentee voting) 4. Recommendations to the Supervisory Board of PJSC ALROSA of PJSC ALROSA. on the Holding of Concurrent Positions by the CEO – Chairman 1. March 12, 2019, minutes No. 46 (meeting) 4. September 11, 2019, minutes No. 49 (meeting) of the Executive Committee of PJSC ALROSA and by Members 15. Recommendation to the Supervisory Board of PJSC ALROSA of the Executive Committee of PJSC ALROSA in Management on the Recommendation to the Annual General Meeting 2. April 15, 2019, minutes No. 47 (meeting) 5. November 12, 2019, minutes No. 50 (meeting) Bodies of Other Organizations. of Shareholders of PJSC ALROSA regarding the payment of remuneration for work in the Audit Commission of PJSC 5. Recommendations to the Supervisory Board of PJSC ALROSA ALROSA to members of the Audit Commission — non-public on the Approval of the Standard of Social Support of PJSC employees — in the amount established by internal documents ALROSA Employees in Case of Workplace Accidents. of PJSC ALROSA.

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6. December 10, 2019, minutes No. 51 (meeting) 18. Approval of the revised Regulation on Remuneration of 37. Approval of amendments to the Regulation on Procurement of 44. Consent to conclude gratuitous transactions and signing of Members of the Executive Committee of PJSC ALROSA. PJSC ALROSA. sponsorship contracts provided for in the Consolidated Budget Items reviewed of PJSC ALROSA for 2020. 19. Approval of the revised Regulation on Remuneration of Chief 38. Performance of the Quality Management System of PJSC 1. Consent to the transaction. Executive Officer — Chairman of the Executive Committee of ALROSA on the basis of the consolidated report on its 45. Consent to conclude related party transactions. PJSC ALROSA. functioning. 2. The Company’s Marketing Strategy. 46. Update of the Long-term Development Program and the Long- 20. Approval of the Action Plan for Improvement of the Corporate 39. Dissolution of ALROSA’s representative office in Yakutsk. term Investment Program of ALROSA Group for 2020–2024. 3. Approval of the 2018 Critical Risks Annual Report, approval of Governance System and the Supervisory Board’s Performance The current state of the synthetic diamond market. the 2019 Action Plan for Critical Risks Mitigation. of PJSC ALROSA. 40. Participation of PJSC ALROSA in JSC PA Kristall. 47. The Report on the Implementation of Activities as part of 4. Approval of the Action Plan for the Period 2019–2021 for 21. Inclusion of items in the agenda of the Annual General Meeting 41. Plan of Activities and Results of the Company’s Management the Program for the Improvement of the Industrial Safety Transition of PJSC ALROSA to Preferential Use of Domestic of Shareholders of PJSC ALROSA. Interaction with Investors. Management System of PJSC ALROSA. Software. 22. Proposals to the Annual General Meeting of Shareholders of 42. The development strategy of the PJSC ALROSA diamond- 48. Approval of the revised Non-Core Assets Disposal Program of 5. Approval of the Plan of Actions for Improvement of PJSC PJSC ALROSA. cutting entity and the action plan for the integration of JSC PA PJSC ALROSA. ALROSA’s Supervisory Board and the Company’s Corporate Kristall into ALROSA Group. Governance System. 23. Approval of the agenda of the Annual General Meeting of 49. Approval of the Action Plan for the Sale of Non-core Assets of Shareholders of PJSC ALROSA. 43. Approval of the Consolidated Budget of PJSC ALROSA and KPI PJSC ALROSA for 2020. 6. The Report on the Implementation of the Non-Core Assets targets for 2020. Disposition Program for Q4 2018. 24. Convocation of the Annual General Meeting of Shareholders of PJSC ALROSA. 7. Approval of the revised Action Plan for the Sale of Non-Core Assets of PJSC ALROSA for 2019. 25. Approval of reports on the performance of the committees under the Supervisory Board of PJSC ALROSA. 8. Preliminary approval of the Annual Report of PJSC ALROSA for 2018. 26. Approval of the revised Regulation on the Dividend Policy of PJSC ALROSA. 9. The Annual Financial (Accounting) Statements of PJSC ALROSA. 27. Consent to the related party transactions between PJSC 10. The Report on the Achievement of Annual Key Performance ALROSA and PJSC VTB Bank, as well as in accordance with sub- Indicators of ALROSA Group for 2018. cl. 4v, cl. 12.1.4 of the Articles of Association PJSC of ALROSA.

11. Recommendations to the Annual General Meeting of 28. Consent to the related party transactions between PJSC Shareholders of PJSC ALROSA regarding profit distribution in ALROSA and Gazprombank (joint-stock company). 2018, as well as retained profit of the previous years, including the amount of dividends on PJSC ALROSA’s shares and the 29. Consent to the transactions between PJSC ALROSA and PJSC payment procedure. Sberbank.

12. Termination of participation of PJSC ALROSA in JSC NPF 30. Approval of the Action Plant for the Transition of PJSC ALROSA Almaznaya Osen. to Preferential Use of Domestic Software, Including Domestic Office Software, for 2019–2021. 13. Review of the Report on the Implementation of the Program for Operational Efficiency Improvement and Cost Reduction of 31. Review of results of the analysis of the Long-term Development PJSC ALROSA for 2017—2019 and the proposal for adjustment Program of ALROSA Group for 2018–2024 with a view to of the Program for Operational Efficiency Improvement and update it. Cost Reduction of PJSC ALROSA. 32. Approval of the Methodology for Calculating the Reduction in 14. Approval of the Report on the Implementation of the Innovation Operating Costs of ALROSA Group. Development and Technological Upgrade Program of PJSC ALROSA for 2018. 33. The Report on the Implementation of the Non-Core Assets Disposition Program for Q1 2018. 15. Approval of Proposals on the Results of the Implementation Audit in 2018. ALROSA Group’s LDP for 2018–2024. 34. Amendments to the Non-Core Assets Disposal Program of PJSC ALROSA. 16. Results of PJSC ALROSA’s procurement activities for 2018. 35. Consent to gratuitous transactions. 17. Implementation of the directive on software import substitution. 36. Results of PJSC ALROSA’s procurement activities for Q1 2019.

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