Annual Report 2011 Contents

3 25 53 67 Statement of the President of ALROSA Key Financial Results Profit Distribution Appendices

26 Revenue 55 Dividend Policy 68 Diamond Mining by ALROSA Group 5 27 Expenses 69 Financial Statements, Accounting Policy

Information for Shareholders 28 Performance Results 56 70 Balance Sheet (Form No. 1) 29 Purchases Report on Accomplishment 72 Profit and Loss Statement (Form No. 2) of Missions 2011 5 30 Debt Management 74 Auditor’s Report Milestones 2011 31 Taxes 75 Information on State Support 58 76 Information on Major Transactions and Interaction with State Authorities Interested Party Transactions Concluded by 6 32 the Company in the Reporting Year The Company’s Status in the Industry, Social Responsibility 87 Information on Investments with Estimated Main Competitors, Share in the 60 33 Environmental Safety Return of over 10% per Annum Relevant Market Segment, Rough Fulfilment of Instructions of the 88 Information on all Forms of the Company’s and Polished Diamond Sales 33 Occupational Health and Safety President of the Russian Federation Participation in Profit and Non-profit and Pricing Policy 34 Personnel, HR Policy and the Government of the Russian Federation Organisations, Dividends Received in 2011 35 Social Policy 91 Information on Concluded Sale and Purchase 12 36 Regional Policy Agreements for Shares, Stock and Interest 63 Report on the Core Business in Business Partnerships and Companies, Main Risk Factors Related Including Information on Parties, Subject, 13 Mining 37 to the Company’s Activity Price and Other Conditions of Such Agreements 16 Activities of the Main Subdivisions Corporate Management

19 Geological Prospecting and Exploration 38 Shareholders’ Meeting 21 Science and Innovation Development 39 Supervisory Board 22 Investments 44 Supervisory Board Committees 45 Meetings of the Supervisory Board held in 2011 47 Auditing Committee 48 Executive Committee

2 ALROSA • ANNUAL REPORT | www.alrosa.ru Contents derground mine, one of the world’s largest diamond mines, will reach its planned mining capacity in 2017. This year Severalmaz has for the first time reached its break-even level. Diamond mining in the Arkhangelsk Region has ceased to be one of the Com- pany’s optional operations and has become a full-scale project of ALROSA Group. We set a target to ensure an adequate level of social benefits to the Company’s employees and their family members. Good financial and economic results in 2011 allowed us to raise the salary level and continue the implementation of all the corpo- Statement rate programs, i.e. in the fields of housing construction in Yakutia and Orel, mainte- of the President of ALROSA nance and development of our health and resort facilities, retirement benefits, culture and sports development, and occupational health. ALROSA has also launched a pro- Dear Shareholders, gram of mortgage loans for the Company’s A year ago ALROSA set a number of highly important goals. employees. Transferring the remaining por- First of all, to maintain its world leadership in rough diamond mining. tion of the housing facilities to the ownership This task has been fulfilled. Based on 2011 results, ALROSA is the of the municipalities with the Company’s full largest diamond producer, having increased its annual diamond financial support will allow more than three production from 34.3 million carat in 2010 to 34.6 million carat in thousand families to finally resolve the issue We made it our mission to learn how 2011. Moreover, our Company is the only one among world diamond of privatisation of their apartments and their to trade efficiently, establishing a new producers that was able to significantly increase its output during the transfer to personal ownership. sales system within the competitive dia- post-crisis period while improving its profitability. The most important event in 2011 was mond market. I believe that this task has the Company’s ‘opening’ – i.e. its reorgan- also been fulfilled. Based on the annual isation into an open joint stock company. results, the sales of diamond products in We took a very important step on our way ALROSA group totalled USD $ 4,454.8 Based on 2011 results, ALROSA gained struction of our new underground mines, to fulfilling the key task of ensuring the million (including USD $ 4,273.7 million for a net profit of RUB 29,519 million. improve the efficiency of the economics maximum growth of ALROSA’s value. After rough diamonds and USD $ 181.1 million These positions have been reached due through cost management, and keep pro- the shares split and the commencement of for polished diamonds). Therefore, the ex- to the active support of our shareholders, duction performance growing. trading on stock exchange, the Company piring year became a record-breaking one i.e. the Government of the Russian Federa- I believe that these tasks have in general has become one of the most attractive for ALROSA’s entire history as far as rough tion and the Government of the Republic been achieved. investment assets for financial institutions diamond sales are concerned. of Sakha (Yakutia), as well as the efficient The main efforts were focused on the and private investors. Throughout 2011, the amount of ALRO- operation of the companies within the main performance of the program for the con- I am confident that in the immediate fu- SA’s liabilities has been reduced from USD production facilities and sales subdivisions. struction of the Udachny underground ture ALROSA, having preserved its status $ 3.1 billion down to USD $ 2.9 billion. The In 2011, the Company faced a number mine. The Company allocated up to 80 % of a state-owned company, will be able to share of long-term liabilities as at the end of of ambitious production targets. First of of its investments to the implementation of become a company with a high market val- 2011 represented 80.5 % of the total gross all, we had to maintain the existing rates this major project. Much is still to be done, ue and efficient corporate management – a debt. and strictly follow the schedule for the con- but we are convinced that the Udachny un- real leader in the world of diamond mining.

3 ALROSA • ANNUAL REPORT | www.alrosa.ru Statement of the President of ALROSA Dear Shareholders, ment of OJSC ALROSA to be implemented achieving the result, i.e. efficient mining and position in the completely new competitive The upgrade of the Company’s main in the near future. Within the framework of sales of rough diamonds, gaining our fair diamond market. ALROSA’s unique techni- manufacturing assets should become the the manufacturing upgrade policy, in 2011 share in the market as its leader, ensuring cal and manufacturing potential, its working essential task for the next period. In 2011 the Executive Committee passed a reso- growth in revenue and salaries. and engineering staff and the state support ALROSA had an independent technical au- lution to allocate significant funds for the In 2012 the Executive Committee should allow us to believe that the tasks set forth dit for the first time. Its results evaluated the technical facilities upgrade within the geo- consider and propose to the shareholders by the Company’s shareholders for 2012 technical condition of the manufacturing fa- logical exploration operations, which imme- the Company’s Strategy and updated long- will be fulfilled. cilities as conforming in all respects to inter- diately triggered the growth in the efficiency term Development Plan for the ALROSA On behalf of the Executive Committee, I national standards, whereas the Company of prospecting and geological exploration Group till 2021. We need to complete all would like to thank the government of the is honest in seeing the need for technical works. Similar technical upgrade programs the corporate procedures required to pre- Russian Federation and the Republic of upgrade. First of all, it means the upgrade are to be implemented on the main pro- pare the Company for the potential priva- Sakha (Yakutia), members of the Compa- of the machinery and therefore significant duction facilities, and, first of all, in the un- tisation of ALROSA, and propose to the ny’s Supervisory Board and all our business improvement of efficiency at all stages of derground mines. shareholders our vision of the most efficient partners for their trust and support. I wish our operations, i.e. geological exploration, We need to carry on the Company’s implementation of this resolution. ALROSA’s shareholders and its employees HR policy, sales, marketing, forecasts and debt reduction policy and sell the non-core In 2012 ALROSA will celebrate its new professional achievements in 2012! analysis, procurement of material and tech- assets affecting ALROSA’s market value. 20‑year anniversary. The Company, similar nical resources, and administrative man- We will have to resolve the most com- to Russia’s new economy, went through a Fyodor Andreev agement. plicated issues related to iron ore and gas rather turbulent period of start-up, devel- President of ALROSA In 2011, the Executive Committee ap- projects, aviation, and bank and insurance opment and coming-of-age. Currently, the proved the Program for Innovation Develop- activities. Every effort should be focused on Company has managed to secure a leading

4 ALROSA • ANNUAL REPORT | www.alrosa.ru Statement of the President of ALROSA Information for Shareholders Milestones

The Company’s full name Total number of shares Open Joint Stock Company ALROSA 7,364,965,630 (seven billion three hundred 2011 and sixty-four million nine hundred and sixty- Number and date of the certificate five thousand six hundred and thirty shares) of state registration as a legal entity The change of ALROSA’s legal No. 554 of August 13, 1992 Number of ordinary shares 7,364,965,630 (seven billion three hundred Changes in the membership of the Su- status from a closed joint stock Constituent entity of the Russian Federation and sixty-four million nine hundred and sixty- company to an open joint where the Company is registered five thousand six hundred and thirty shares) pervisory Board: Ilya A. Yuzhanov was ap- Republic of Sakha (Yakutia) pointed as the Chairman of the Supervisory stock company has become Par value of ordinary shares Board. one of the milestones in 2011. Location fifty (50) kopecks As a result, the Company Ul. Lenina 6, Mirny, Republic of Sakha Maintaining the world market leadership (Yakutia), Russian Federation State registration number for issue of ordinary in rough diamond production: in the report- obtained an efficient tool for (preference) shares and date of state registration attraction of the less expensive Contact telephone, fax 1‑03‑40046‑N of August 25, 2011 ing year, diamond production by ALROSA (495) 745‑80‑61, Group totalled 34.55 million carats. financial resources required (495) 620‑92‑50, State registration number of additional issue of The Company’s Executive Committee for maintaining its production (495) 662‑36‑26; ordinary (preference) shares operations and further in Mirny – (41136) 3‑04‑51 1‑03‑40046‑N of August 25, 2011 has reviewed the Long-Term Plan of AL- ROSA’s Development Strategy until 2018. development. ALROSA’s E-mail address Par value of preference shares shares were released into free [email protected] — Throughout this period, the Company will complete the construction and commis- circulation on the financial Core activity Number of shares held by the Russian Federation sion of the Mir, Aikhal and Udachny un- market. Diamond mining and processing, wholesale 3,750,650,800 and 17,185 / 50,000 diamond sales derground mines and bring them to their Share of the Russian Federation in the authorised design capacity. ALROSA will significantly Information on putting on the list of strategic capital with the indication of the share by ordinary enterprises and strategic joint stock companies and preference shares increase the scale and speed of geologi- Order No. 1009 of the President of the 50.9256 % cal exploration and prospecting opera- Russian Federation of August 4, 2004 tions, implement the program of the main Conclusion of the Contract for Social (as amended on December 31, 2011) Full name and location of the auditor On Approval of the List of Strategic Enterprises Limited Liability Company Finansoviye i production facilities upgrade, complete the and Economic Development with the Re- and Strategic Joint Stock Companies Bukhgalterskie Konsultanty (Financial and establishment of the client network – based public of Sakha (Yakutia) effective until De- Accounting Advisors), 44 / 1 bldg. 2‑AB, Ul. Full name and location of the registrar Myasnitskaya, 101990 Moscow on the principles of geographic diversifica- cember 31, 2020. Within the framework Open Joint Stock Company Republican tion of sales and long-term contracts with of this Contract, OJSC ALROSA and the Specialised Registrar ‘Yakutsk Stock Centre’; The Company’s shareholders with the share in the the major consumers of rough diamonds – Government of the Republic of Sakha (Ya- 2 / 1, per. Glukhoy, Yakutsk, 677980, Republic authorised capital exceeding 2 per cent of Sakha (Yakutia), Russian Federation Russian Federation (50.9256 %), and ensure performance of the programs kutia) reached an agreement on a one-time for social partnership and environmental transfer in 2011 of the Company’s housing Authorised capital Republic of Sakha (Yakutia) (32.0002 %) protection within the territory of its core and landscaping facilities to the municipal RUB 3,682,482,815 (three billion six hundred and eighty-two million four hundred and business. ownership free of charge, with the liabilities eighty-two thousand eight hundred and fifteen The Program for Innovative Develop- to pay their maintenance expenses remain- roubles) ment and Technological Upgrade of ALRO- ing with the company until 2016. SA for 2011‑2018 has been approved. The Resolution on the implementation of the objective of this program is to improve the iron ore project of Timir mining company cost-effectiveness of the Company’s oper- with the involvement of a strategic investor. The Company’s average headcount: ations through the implementation of new The Company has signed an agreement on production and energy-saving processes – the general principles of co-operation with as at December 31, 2009 as at December 31, 2010 as at December 31, 2011 modern methods of the production envi- the strategic partner, Evraz plc. ronmental safety. A technological audit has ALROSA developed a program for the 33,238 employees 31,291 employees 30,295 employees been carried out. restructuring of the non-core assets.

5 ALROSA • ANNUAL REPORT | www.alrosa.ru KEY EVENTS IN 2011 The Company’s Status in the Industry, Main Competitors, Share in the Relevant Market Segment, Rough and Polished Diamond Sales and Pricing Policy

6 ALROSA • ANNUAL REPORT | www.alrosa.ru to reach USD $ 59.2 billion and the The events in the global economy and In 2011, the sales of jewellery on the US watches segment grew by 12.1 % up to the reduced demand triggered a drop in market – the major consumer market – grew USD $ 9.1 billion. The growth of prices for prices on the rough diamond market as rough diamonds in the first half of 2011 well as on other mineral markets in the by 10.8 % to reach USD $ 59.2 billion. was unprecedented, and was accompa- second half of the year. In the second half The high level of prices for rough diamonds nied by the growth of prices for polished of 2011, the prices for polished diamonds in 2011 was maintained mainly by the diamonds. The rough diamond prices in also started to go down. the first half-year saw a growth of 35 %, Despite the price reduction in the sec- reduction of supply and sales from the stocks. while those of polished diamonds grew ond half-year, the general level of prices for by 32.5 %. rough and polished diamonds remained Aggravated liquidity problems and in- higher than in the beginning of 2011. creased uncertainty related to economic The high level of prices for diamonds in The past year has become one of the past years, and, secondly, 11 % above issues in the world resulted in the reduced 2011 was maintained mainly by the reduc- most successful for the industry over the indices of 2010 in accordance with demand on the rough diamond market in tion of supply resulting from the reduced the recent period. Based on 2011 re- the preliminary data provided by the US the second half-year of 2011. The diagram deliveries from the main diamond produc- sults, the aggregate sale of jewellery and Department of Commerce. The sales also below shows the dynamics in the scope ers and the reduced sales of diamonds watches in the USA – the major consum- broke the 2007 record, when the level of of foreign trade operations with rough dia- from the stocks of trading and cutting cen- er – reached USD $ 68.3 billion, which is, USD $ 65.3 billion was registered. The monds within the main trading and cutting tres, as compared to 2010. firstly, a record-breaking amount over the sales of jewellery in 2011 grew by 10.8 % centres.

Average Monthly Rough Diamond Sales in 2011, million carats

4 9 months of 2011

2 4Q 2011

0 Source: foreign trade statistics for India, Israel and Belgium Rough diamonds Rough diamonds Rough diamonds imported to India imported to Israel exported from Belgium

–15.2 % –41.8 % –25.6 %

7 ALROSA • ANNUAL REPORT | www.alrosa.ru The company’s status in the industry, main competitors World Diamond Mining Structure in 2010‑2011 in volume terms

26.7 % 27.7 %

2010 2011 ALROSA

Source: KP, assessment by ALROSA

In 2011, diamond mining by ALROSA Multidirectional dynamics in production Based on the results of 2011, totalled 34.55 million carats (compared with volume in 2011 resulted in the increase of the aggregate rough diamond 34.34 million carats in 2010). The Compa- ALROSA’s share within the world diamond ny consolidated its leadership with regard production. sales by ALROSA Group totalled to volumes of actual diamond mining, and Based on the results of 2011, the ag- USD $4.45 billion, which is 27.9% became the only major diamond producer gregate rough diamond sales by ALROSA higher than in 2010. that did not reduce its production output in Group totalled USD $ 4.45 billion, which is the last year. 27.9 % higher than in 2010.

In 2011, diamond mining by ALROSA totalled In 2011, ALROSA continued the im- due to the expected market volatility. 34.55 million carats (compared with 34.34 million plementation of its Sales Policy Concept Such a policy was reasonably effective. for 2010‑2012, approved by the Com- Under the conditions of a slump on the carats in 2010). The Company consolidated pany’s Supervisory Board in December market in the second half-year 2011, the its leadership with regard to volumes of actual 2009. The Concept was focused on Company managed to reach its histori- diamond mining. sales of the major portion of rough dia- cal sales maximum based on the year- monds under the long-term agreements, end results.

8 ALROSA • ANNUAL REPORT | www.alrosa.ru The company’s status in the industry, main competitors Geographic Pattern of Rough Diamond Sales by ALROSA in 2009‑2011 (by cost, excluding sales to Gokhran of the Russian Federation)

4.5 % 6.0 % 7.7 % 2.1 % Today ALROSA has 24 long-term contracts 0.8 % 2.1 % for rough diamond supplies concluded with foreign and Russian companies. The share 8.1 % of sales under long-term contracts in the 10.4 % 12.4 % total sales by ALROSA in 2011 was 68%.

8.4 % 7.2 % 8.8 %

Russia

CIS The stable supplies under long-term significant deterioration of the market situ- Belgium agreements allowed ALROSA to operate ation, and the efficiency of auctions de- Israel steadily while maintaining high sales levels clined rapidly. As a result, auctioning was in the second half-year. partly suspended. India Today ALROSA has 24 long-term con- In the second half-year of 2011, consid- tracts for rough diamond supplies con- erable efforts were made to extend the list China (Hong Kong) cluded with foreign and Russian compa- of clients operating under long-term agree- nies. The share of sales under long-term ments. Sales on the spot market were in- Other customers contracts in the total sales by ALROSA in creased to detect the most stable and reli- 2011 was 68 %. able partners. Source: USO ALROSA In order to test the current market Changes of the portions of sales in the branch conditions and ensure access to a wide total rough diamond sales by ALROSA un- 46.4 % 47.4 % Note: other circle of consumers of ALROSA’s rough der long-term contracts, sales based on customers include diamonds, the Company made a decision auctions and sales on the spot market in 1.6 % 1.7 % Almazyuvelirexport (cut- to increase the portion of rough diamonds 2009‑2011 (represented by cost) are given offs), subsidiaries and affiliates sold via auctions. Autumn 2011 faced a in the table below:

62.2 % 2009 2010 Jan - Sept 2011 4Q 2011 0.4 % Long-term agreements 30% 63% 67% 70%

Auctions 8% 14% 21% 12%

Spot market 62% 23% 12% 18% 12.2 % 24.8 % 24.7 %

2009 2010 2011

9 ALROSA • ANNUAL REPORT | www.alrosa.ru The company’s status in the industry, main competitors ALROSA is consistently implementing tal of USD $ 181.1 million, which is 24.2 % the plan for geographic diversification of above the 2010 relevant figure. Due to the Within the last year, more than 30 new sales, which implies the extension of the decline in the rough and polished diamond companies were put on the list of customers list of partners through introduction of the market in the second half-year 2011, pol- companies that represent dynamically de- ished diamond sales decreased by the end of Brillianty ALROSA branch. veloping markets, first of all, in India and of the year. China. Co-operation with the companies Within the last year, more than 30 new in the Republic of Armenia is rapidly de- companies were put on the list of poten- veloping. tial customers of Brillianty ALROSA branch. In 2011, auctions were held to sell certi- polished diamonds. Ten jewellery compa- In 2011, growth of ALROSA’s prices for Today, the customer base of the branch fied diamonds in Hong Kong (March, Sep- nies from Moscow, Yekaterinburg and Bar- rough diamonds totalled 45.5 %. includes more than 100 companies repre- tember) for a total of USD $ 3.6 million and naul purchased the goods of Brillianty AL- In 2011, in addition to rough diamonds, senting the world’s major trading and con- USD $ 3.7 million, and in New York (May- ROSA. ALROSA sold polished diamonds for a to- suming centres. June) for a total of USD $ 4.8 million. The aggregate information on the results In 2011, 55 companies purchased the of rough and polished diamond sales and goods of Brillianty ALROSA. The polished performance against the target parameters diamond sales on the domestic market of of the ALROSA Group in 2009‑2011 is rep- Growth of prices for ALROSA’s rough the Russian Federation totalled USD $ 1.11 resented in the table below: diamonds totalled 45.5%. million, including the retail sales of certified

Sales, USD $million Variance to previous period, %

2009 2010 2011 2010 2011

ALROSA Group, total 2,152.2 3,337.8 4,273.7 +55.1 +28.0

Domestic market 1,044.3 827.8 1,046.6 -20.7 +26.4

incl. GOKHRAN RF 887.0 0.2 0.1 — —

Export 1,121.4 2,510.0 3,227.1 +123.8 +28.6

including:

ALROSA 1,605.4 2,553.9 3,266.4 +59.1 +27.9

Domestic market, 565.3 663.0 814.5 +17.3 +22.9

incl. GOKHRAN RF 454.9 0.3 0.008 — —

Export 1,040.1 1,890.9 2,451.9 +81.8 +29.7

ALROSA-NYURBA 379.9 536.9 726.2 +41.3 +35.3

Domestic market, 344.9 129.3 193.7 -62.5 +49.8

incl. GOKHRAN RF 318.5 0.5 0.2 — —

Export 35.0 407.6 532.5 +1,065.6 +30.6

ALMAZY ANABARA 129.5 208.2 244.6 +60.8 +17.5

Domestic market, 90.1 35.4 38.4 -67.7 +8.5

incl. GOKHRAN RF 89.9 -0.5 0.1 — —

10 ALROSA • ANNUAL REPORT | www.alrosa.ru The company’s status in the industry, main competitors Sales, USD $million Variance to previous period, %

2009 2010 2011 2010 2011

Export 39.4 172.8 206.2 +338.6 +19.3

SEVERALMAZ 37.4 38.9 36.5 +4.0 -6.0

Domestic market, 30.3 0.2 0 -99.3 0

incl. GOKHRAN RF 23.7 — -0.25 —

Export 7.1 38.7 36.5 +460.9 -5.9

In addition

Polished Diamond Sales

Total 60.3 145.8 181.0 300 124

Domestic market, 4.8 2.5 1.1 23 44

Export 55.5 143.2 180.0 324 126

11 ALROSA • ANNUAL REPORT | www.alrosa.ru The company’s status in the industry, main competitors Mining Activities of the Main Geological Prospecting Science and Innovation Investments Subdivisions and Exploration Development

Report on the Core Business

12 ALROSA • ANNUAL REPORT | www.alrosa.ru Mining

In 2011 the Company not only maintained its leadership on the international diamond mining market but consolidated it as well. ALROSA Group produced 34.55 million carats, including 31.46 million carats owned by OJSC ALROSA and OJSC ALROSA-Nyurba.

The Company’s mining subdivisions mine, i.e. 500,000 tons of ore, and in- ore dressing, ore treatment and transpor- processing plants and dredgers have been performed in accordance with the mining crease mining at Mir mine up to 750,000 tation systems, and reconstruction of the created. operations development plan, with the tons. processing plants No. 3 and No. 12. Ac- Utility vehicles cargo turnover totalled mined rock totalling 35,493,700 m3, in- In 2011 the Company proceeded with tion has been taken to upgrade the ‘dry’ 509.1 million ton-kilometres. To facilitate ef- cluding 27,059,900 m3 mined as part of the works involving resolution of the issues treatment process. A trial design of a ra- ficient utilisation of the open-pit vehicles in- development operations and 8,433,800 related to the storage of tailings from the diographic separator has been developed, volved in cargo transportation at the Aikhal m3 ore and sands. In 2012, it is planned processing plants, development and imple- and new types of indicators for the tech- Mining and Processing Division, heavy-load to reach the design capacity of Aikhal mentation of crystal saving technologies in nological process control system for the CAT-785 dump trucks from the Udachny Mining and Processing Division were em- ployed. The utility vehicles from the Mirny Diamond Mining Mining and Processing Division performed (OJSC ALROSA and OJSC ALROSA-Nyurba) Mining Operations contractor works involving filling the airport runway in Mirny. ALROSA’s mining facilities processed 21,171,000 tons of minerals, and the dredgers washed 841,000 m3 of sand. The 2,180.0 2,092.8 2,367.5 11,983.0 8,433.8 yield per ton ore parameter totalled USD 9,451.5 $ 94.8 / ton. General-purpose transport parameters are characterised by the performance of cargo transportation by transit transport totalling 384,600 tons. In 2011, ALROSA’s Transport Monitoring System integrated 20,775.3 24,960.2 27,059.9 with the trunking radio communication sys- 30,960.0 32,411.9 31,460.3 tem was introduced, which ensures op- 2009 2010 2011 eration of transport dispatching system for Lensk – Mirny – Aikhal – Udachny road. 2009 2010 2011 The air transport delivered 13,000 tons of Ore (sand) mining, thousand m3 cargo. USD, million thousand carats The passenger transportation via air- 3 Mine site preparation, thousand m craft totalled 258,048 persons. In 2011

13 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS the Company started introduction of new Gelendzhik by TU-154. AN-38 planes start- ALROSA spent RUB 4,896.4 million on flight paths in the summer period, i.e. No- ed to make Mirny – Nakyn – Mirny flights, overhaul and current repairs of the fixed as- vosibirsk – Ufa – Novosibirsk and Novosi- thus allowing reduction of the time for sets. birsk – Samara – Novosibirsk by TU-134, transportation of shift teams and increased Anapa – Novokuznetsk – Anapa, Anapa – comfort for passengers from ALROSA’s Tomsk – Anapa, and Gelendzhik – Tomsk – structural subdivisions.

Repair Operations Budget, RUB million

971.0

1,308.4 260.1 889.9 26.7 % 5.3 % 2,284.3 46.7 % 576.3 Machinery and equipment

Vehicles and other fixed assets 1,043.5 21.3 % 1,678.5 2,776.6 3,925.3 Buildings and constructions

Transfer devices 2009 2010 2011, report

Overhaul Current repairs

14 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS Key performance indicators and financial and economic indicators of OJSC ALROSA

2009, 2010, 2011, % to % to No. Parameter (budget item) UoM report report report 2010 2009 KEY PERFORMANCE INDICATORS OF OJSC ALROSA thousand carats 22,944.5 24,040.5 23,982.7 99.8 104.5 1 Diamond mining USD $million 1,661.3 1,728.9 1,961.6 113.5 118.1 2 Yield per ton of ore USD/ton 87.2 82.5 94.8 114.8 108.7 3 Production cost of rough diamonds sold USD/carat 58.2 51.6 74.2 143.8 127.5 4 Contractual price of gem-quality diamonds USD/carat 135.3 138.6 221.4 159.8 163.6 USD $million 73.1 79.9 119.4 149.5 163.3 5 Deposit prospecting and exploration costs RUB million 2,320.1 2,426.2 3,510.6 144.7 151.3 USD $million 1,665.8 2,699.6 3,447.5 127.7 207.0 6 Revenue from sales of rough and polished diamonds RUB million 50,335.5 81,688.0 101,029.6 123.7 200.7 USD $million 1,605.4 2,553.9 3,266.4 127.9 203.5 6.1 – rough diamonds RUB million 48,488.5 77,270.9 95,697.9 123.8 197.4 USD $million 60.4 145.8 181.1 124.2 299.8 6.2 – polished diamonds RUB million 1,847.0 4,417.1 5,331.7 120.7 288.7 USD $million 74.0 248.4 1,004.4 404.4 1,356.6 7 Net profit RUB million 2,348.4 7,543.5 29,519.0 391.3 1,257.0 8 Net sales margin % 3.7 7.8 25.1 321.7 681.4 USD $million 242.7 206.9 236.2 114.1 97.3 9 Investments in construction of new underground mines RUB million 7,698.2 6,284.7 6,940.8 110.4 90.2 10 Outstanding credits and loans as at the end of the period USD $million 3,496.0 3,130.0 2,865.9 91.6 82.0 RUB thousand/ 11 Integrated productivity index (revenue from sales of goods, works, services per one employee) 1,921.0 3,094.2 3,887.9 125.7 202.4 person 12 Expenses for purchase of goods (works, services) per unit of goods produced 1 RUB/USD — 11.62 10.46 90.0 I IN TERMS OF VOLUME 13 Average annual USD/RUB exchange rate RUB 31.72 30.37 29.39 96.8 92.7 Mined rock (apart from widespread mineral deposits (OPI) open-pit mines) thousand m3 30,226.8 36,943.2 35,493.7 96.1 117.4 14 incl. overburden thousand m3 20,341.0 24,204.0 26,594.0 109.9 130.7 15 Construction and assembly works under general contract of CCD (in 2001 prices) RUB million 1,906.4 1,726.0 1,915.2 111.0 100.5 16 Cargo turnover of mine transport million ton-km 476.1 539.7 509.1 94.3 106.9 17 Cargo transportation by transit transport thousand tons 361.0 381.2 384.6 100.9 106.5 thousand tons 14.6 12.4 13.0 104.8 89.0 18 Air transportation thousand persons 228.7 240.8 258.0 107.1 112.8

1 The Index ‘Expenses for purchase of goods (works, services) per unit of goods produced’ is calculated in actual (adjusted) conditions of 2010 in accordance with Order No. A01/0227-P of October 07, 2011

15 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS Activities of the Main Subdivisions

Diamond mining on the territory of West Yakutia is carried out by four mining and processing divisions of ALROSA, i.e. Mirny, Udachny, Aikhal, and Nyurba Mining and Processing Divisions.

Mining operations are performed at International kimberlite pipes and alluvial Udachnaya, Zarnitsa, Jubilee, Komso- diamond fields, by open-pit and under- molskaya, Aikhal, Nyurbinskaya, and Mir ground mining.

Diamond Mining, USD $million Mined Rock, thousand m3

303.8 405.9 12.8 % 17.1 %

11,773.9 33.2 %

18,217.1 51.3 % 620.4 2,317.0 Aikhal Mining and Processing Division 26.2 % 1,037.4 6.5 % 43.8 % Mirny Mining and Processing Division 3,185.7 9.0 % Udachny Mining and Processing Division

Nyurba Mining and Processing Division

16 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS Aikhal Mining and Processing Division The Company carries out mining opera- opening slope and surveillance drifts. The Parameter 2009 2010 2011 tions on three primary deposits, i.e. open- capital mining operations were carried Diamond mining, USD $million 256.0 291.4 303.8 pit mining at Komsomolskaya and Jubilee out on level +100m, +0.0m and -100m, Mined rock, thousand m3 13,948.1 18,094.8 18,217.1 kimberlite pipes and underground mining at as well as along the vertical and horizon- Aikhal pipe. The mined ore is processed at tal slopes. Ore pass was drilled on level Carriage volume, thousand m3 41,898.7 56,021.0 51,740.1 two processing plants, No. 8 and No. 14. +100m / -118m. Cargo turnover, thousand tons-kilometres 206,477.7 269,441.1 282,073.7 The Aikhal Mining and Processing Division In April 2011 the SEPAIR pneumatic output totals 12.8% with its mining opera- separator was tested during the processing Ore processing, thousand tons 9,389.0 11,464.3 11,165.0 tions accounting for 51.3% of the total vol- of off-balance ore from the Sytykanskaya Yield per ton ore, USD/tons 27.3 25.4 27.2 ume. pipe. The obtained separator performance In the reporting year, action was taken parameters meet the requirements for the to ensure that in 2012 the Aikhal mine will quality of prepared substance for further reach its design capacity of 500,000 tons pneumatic separation, and therefore the per year. The mine site preparation works studies on application of SEPAIR in ‘dry’ were carried out on spiral ramp, slice drift, treatment method will be continued.

Mirny Mining and Processing Division In 2011, open-pit mining at the Interna- technical upgrade were carried out at the Parameter 2009 2010 2011 tional mine was closed and the mine was Processing Plant No. 3, i.e. the implemen- Diamond mining, USD $million 607.7 701.6 1,037.4 prepared for the conservation required for tation of the stage breaking and grinding Mined rock, thousand m3 3,178.7 4,378.5 2,317.0 further construction of the surface water re- method was begun with a high-pressure moval system from the bottom of the closed roller press installed and commissioned, Carriage volume, thousand tons 7,391.6 9,689.6 6,474.9 mine. A clinker line used to prepare stow- and an upgraded treatment method in- Cargo turnover, thousand tons-kilometres 43,124.9 56,381.8 52,067.6 ing mix has been commissioned for the un- cluding classification unit, dense media derground stowing unit of the Mir mine. In treatment unit and some transportation Ore and sands processing, thousand tons 2,480.8 3,240.0 3,184.4 4Q 2011, the main water removal unit was equipment (Flexowell vertical conveyors) Yield per ton ore and sands, USD/tons 245.0 216.5 325.8 temporarily commissioned on level -210m was implemented. Significant increase in at the Mir mine and works have been car- diamond mining and yield per ton ore pa- ried out throughout the year to protect the rameters against past years is explained by mine from flooding. the increased share of ore from the Mir un- Action was taken to improve the level derground mine and ore from open-pit min- of diamond crystals preservation on the ing at the International pipe in the minerals dredgers No. 201 and 203. Works involving for treatment.

17 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS Udachny Mining and Processing Division cessing Division, operates the Mir and Inter- Parameter 2009 2010 2011 This division develops two kimberlite national underground mines, develops the Diamond mining, USD $million 797.7 735.9 620.4 pipes – Udachnaya and Zarnitsa – and pro- Irelyakh, Vodorazdelnye Galechniki, Gor- 3 cesses ore at Processing Plant No. 12 that noye and Levoberezhnaya alluvial mines, Mined rock, thousand m 4,879.2 4,618.4 3,185.7 carried out only second-priority operations and carries out mining operations on the Carriage volume, thousand tons 17,706.4 16,825.4 16,241.5 in the reporting year. In 2011 the Udachny industrial deposit tailings of Plant No. 5 and Cargo turnover, thousand tons-kilometres 155,326.7 146,473.6 87,380.1 Mining and Processing Division accounted dredging processing of bench gravel on for 26.2% of rough diamond production the Irelyakh deposit. The Mirny Mining and Ore processing, thousand tons 7,192.0 6,140.0 6,350.0 out of the total volume of OJSC ALROSA Processing Division accounts for 43.8% of Yield per ton ore, USD/tons 110.9 119.9 97.7 and OJSC ALROSA-Nyurba (cost-wise) the Company’s mined rough diamonds and and 9.0% of mining operations. The de- 6.5% of its mining operations. cline of yield of marketable product per ton Pursuant to the plan aimed at eliminat- ore parameter is explained by the reduced ing the lag in the construction schedule of shafts. Regulation has been prepared and Works on the project of reconstruction diamond content in the processed ore from Udachny mine, works were carried out in feasibility assessment carried out for the ef- of the Processing Plant No. 12 were con- the Udachnaya pipe. the reporting year involving mining of the ficiency of deposit development at the Zar- tinued, and SEMTEK wet autogenous tum- The Company’s oldest mining and pro- west and east crosscuts, piercing between nitsa pipe in accordance with the dry treat- bling mill was commissioned in 1Q. cessing division, the Mirny Mining and Pro- the shafts and sloping runway from the ment method.

Nyurba Mining and Processing Division In 2011, reconstruction of warehouse Parameter 2009 2010 2011 The newest of ALROSA’s mining and for explosives was completed. The ground Diamond mining, USD $million 431.5 451.1 405.9 processing divisions, Nyurba Mining and operations were carried out in order to pre- Mined rock, thousand m3 8,220.8 9,851.5 11,773.9 Processing Division, carries out its opera- pare the site for the construction of an in- tions at Nakyn ore fields while mining dia- ternal water removal system at the tailings Carriage volume, thousand tons 22,063.2 24,467.3 29,645.9 monds from ore and sands of the Nyurba dump of the plant. Cargo turnover, thousand tons-kilometres 71,126.0 67,428.0 87,542.6 pipe. Rough diamonds are extracted from In September and October 2011, af- the mined substance at the Processing ter the tests performed at Processing Ore and sands processing, thousand tons 1,670.0 2,350.0 2,100.0 Plant operating on a seasonal basis, No. Plant No. 16, radiographic separator RGS- Yield per ton ore and sands, USD/tons 258.4 192.0 193.3 15, and Plant No. 16, one of the world’s 1 – manufactured by NPP Burevestnik and best plants as far as the technology and au- complying with the approved technical re- tomation of manufacturing are concerned. quirements – was commissioned. Small In the reporting year, Nyurba Mining and grade diamond mining increased by 11% Processing Division accounted for 17.1% as compared to the parameters reached in of diamond mining cost-wise, and 33.2% 2010. of the total mining operations of ALROSA.

18 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS Geological Prospecting and Exploration

It is impossible to maintain the diamond mining output achieved to date without prompt replenishment of the Company’s mineral resources. Development prospects for ALROSA and the entire diamond mining industry in Russia are supported by the Company’s geological exploration facilities being the largest in Russia in the field of solid minerals prospecting, and comprising four expeditions and one scientific and research enterprise.

Last year, geological exploration opera- cant amounts of prospecting, assessment gory into industrial C1 category, explora- tions were carried out at 65 locations in and exploration works have been carried tion of deep horizons of the International the Republic of Sakha (Yakutia), and minor out, which resulted in the implementation pipe continues. works in the Arkhangelsk region and the of the main objective of the geological ex- • Exploration of the Mayskoe kimberlite Republic of Karelia. Small- and mid-scale ploration facilities and ensured aggregate body has commenced. (regional) prospecting aimed at detection growth of C1, C2 category stock by 29.7 • Gross large-scale testing was carried of new kimberlite fields was carried out in million carats and estimated resources of out at alluvial diamond deposits River the Muno-Tyungsky, Morkokinsky, Ygyat- P1 category by 46.9 million carats, namely Ebelyakh and Ruchey Gusiny, feasibil- tinsky, Prilensky, and Nizhne-Oleneksky the following. ity studies were prepared for continu- diamond-bearing regions. The more de- • The State Committee for Mineral Re- ous exploration conditions and reserves tailed prospecting researches aimed at reserves approved diamond reserves in were calculated. vealing kimberlite bodies were carried out the Nyurba deep lead. • In order to optimise the process for ore in the operation areas of the Company’s • Reserves of the Irelyakh alluvial mine treatment and adjust reserves parame- Mining and Processing Divisions, i.e. in the were re-calculated. ters in 2011–2014, design and estimate Daldyno-Alakitsk, Sredne-Markhinsky, Ma- • The state certificate for opening a new documentation for trial development of lo-Botuobinsky, Anabarsky, and Tsentralno- deposit was obtained for the Zarya pipe, the Verkhny-Munsky diamond deposit Yakutsky diamond-bearing regions. an application was submitted to obtain a was prepared and reviewed by the Ya- Licenses have been obtained for geo- license for its prospecting, and diamond kutia branch of the State Committee for logical study of subsurface resources in reserves up to +300 m level were ap- Mineral Reserves. the Muogdansky and Verkhne-Chukuksky proved by the State Committee for Min- • To ensure exploration of the ore shaft at areas, exploration and mining at primary eral Reserves and included into opera- the Dalnyaya kimberlite pipe up to +100 deposits Verkhne-Munskoe, Mayskoe, the tional state registration. horizon in 2011–2014, design and es- Dalnyaya Pipe and alluvial deposits Ruchey • Diamond reserves and estimated re- timate documentation was developed Gusiny and the River Ebelyakh. sources of high P1 grades at industrial and prepared for review by the Yakutia Funds allocated to geological explora- deposit tailings of Processing Plant No. branch of the State Committee for Min- tion at the expense of ALROSA totalled 12 were calculated. eral Reserves. RUB 4,121.3 million, which is 44.8% • In order to increase the diamond re- • To ensure pilot development at the Mir above the last year level. Last year, signifi- serves and transfer them from C2 cate- pipe diamond deposit, the reserves of

19 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS class -5+2mm garnets, chrysolites and Within the framework of the implemen- 2,762.6 2,845.5 4,121.3 zircons were calculated. tation of this program, it is proposed to • 15 prospective magnetic disturbances carry out prospecting works in the Re- of the pipe type have been certified and public of Sakha and Arkhangelsk region, 2 new kimberlite bodies have been re- and based on their results, it is planned vealed in the area of the Kepinsky-2 fa- to introduce more than 430 million car- cility in the Arkhangelsk region, and dia- ats of diamonds to the balance sheet of mond content of 751a pipe kimberlites ALROSA Group. This will not only allow 610.7 has been proven. the replenishment of the Company’s with- In order to resolve the issue of the Com- drawn mineral resources, but also ensure pany’s long-term sustainable development, additional growth of reserves by more than in 2011 ALROSA approved the Program of 100 million carats. the Main Exploration Fields up to 2018.

242.7 419.3 In order to resolve the issue of the 442.5 Company’s long-term sustainable development, in 2011 ALROSA approved the Program of the Main Exploration Fields up to 2018.

2,077.4 2,426.2 3,510.6

2009 2010 2011

Prospecting Operations Onsite Exploration Investment Projects

20 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS Scientific and Innovation Development

Within the reporting period, ALROSA’s the Udachny mine by open-pit mining RUB 747.9 million, including the works per- facilities, it is expected to take economic scientific and technical activities were instead of underground mining formed using the Company’s own resourc- effect at the rate of RUB 12.3 billion. The aimed at implementing the program for the • reduction of the consumption of explo- es for a total of RUB 373.9 million. Company will implement 20–30 scien- Company’s innovation development and sives, improvement in the quality of rock At all the Company’s sites, the engineer- tific and technical developments per year, the technical upgrade required to improve grinding and seismic safety of explo- ing and geological as well as geodesic sur- which will provide additional impetus for the diamond production efficiency of the sions veys have been performed as provided in the production development. In order to existing companies, develop new process- • enhancement of safety of mining opera- the approved plan. ensure the implementation of the program, es for diamond ore mining and processing, tions and reduction of the costs of exca- Last year, the Program for the Innova- the Innovation and Technology Centre was improve energy efficiency, and industrial vation and excavation support at the Mir tion Development and Technological Up- established within the Yakutniproalmaz In- and environmental safety of the main pro- and International mines grade of OJSC ALROSA for the period stitute. duction facilities. In 2011, performance of • enhancement of control over the ore ex- from 2011–2018 was developed and ap- The costs of the Centre within the re- scientific, research and development works traction parameters at the International proved by the resolution of the Company’s porting period totalled RUB 26.6 million, and technical engineering continued within mine Supervisory Board with a view to improve including the costs of technological audit, the Company’s joint project with SVFU of • increased selectiveness and extraction the Company’s technological level within i.e. RUB 21.6 million. M. K. Ammosov (Yakutsk), with a subsidy of small grade diamonds in the Final the international diamond business and In 2011, the positive results in terms of from the federal budget and the subject Treatment Shop of the Mirny Mining and to systematise the main areas and tasks quality and quantity were reached after the ‘Establishing a Comprehensive Environ- Processing Division in the field of the innovation development, implementation of the activities under the mentally Safe Innovation Process for Mining • improvement of the process and pro- with due consideration of the results of the Program, and all the key performance indi- and Processing of Diamond Bearing Ore in duction parameters of operation at the comprehensive documented analysis. cators were reached. The cost of process Northern Conditions’. processing plants The program passed an expert review innovations, including the investments, to- The scope of scientific and research • reduction of the fuel consumption by ore by the Ministry of Education and Science talled RUB 1,002.7 million, which is 3 times work, engineering and technical services, transportation equipment at the Nyurba of the Russian Federation, the Ministry of as much as in 2010. and operations related to the upgrade of Mining and Processing Division. Economic Development and the Ministry the existing processes and process man- The expected cost saving from the utili- of Finance of the Russian Federation, and agement in ALROSA in 2011 totalled RUB sation of the developments implemented in was supported by the Work Group for the 184.1 million. The Yakutniproalmaz Insti- 2011 will be at least RUB 455.0 million per Development of the Private Public Partner- tute’s editorial schedule provided for scien- annum. ship in the Field of Innovation at the Gov- tific works in 39 subjects. Within the report- In 2011 the Company obtained 14 reso- ernmental Committee for High Technology ing period, 27 development projects were lutions for issuance of the title documents of and Innovations. The Company entered implemented, the utilisation of which will the Russian Federation, including 6 patents the technology platform ‘Solid Mineral Re- allow: for inventions, 6 patents for useful models, sources’ and became a member. • reduction of the costs of overburdened 1 certificate for computer software, and 1 The costs under the program for 2011– rock transportation, through the opti- certificate for a database. 2018 total RUB 8.2 billion. After the imple- misation of waste disposal parameters, The scope of the design and explora- mentation of the innovation projects and and obtaining additional ore volume at tion works performed for ALROSA totalled activities for the upgrade of production

21 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS Investments

RUB million 2009, 2010, 2011, Based on 2011 results, the investments No. Parameter % to 2010 % to 2009 report report report totalled RUB 27,691.9 million. The parameters of the Company’s consolidated in- 1 Investments, total 19,695.7 29,988.1 27,691.9 92.3 140.6 vestment budget structure in 2011 are as including: follows: 1.1. Long-term financial investments 7,253.7 18,692.2 12,547.1 67.1 173.0

1.2. Investments into non-financial assets 11,899.6 11,180.0 14,917.0 133.4 125.4

1.3. Other costs 542.4 115.9 227.8 196.5 42.0

Long-term financial investments Investments in non-financial assets With due consideration of the reclassification of the (Capital Investments) long-term accounts receivable of Escom Mining Inc. into Based on 2011’s year-end results, the investments in the long-term financial investments as at December 31, non-financial assets have been made for the total of RUB 2010, the growth of the long-term investments at the end 14,917.0 million (99.1%) to the planned RUB 15,056.9 of the reporting year totalled RUB 12,547.1 million. million. Due to revaluation of the market value of OJSC AL- The structure of the investments in non-financial assets ROSA-Nyurba’s shares, rescheduling of the closure of the is characterised by the parameters as follows: transaction for the sale of the block of shares in OJSC GMK Timir for 2012 and revision of the deadlines for the repayment of loans issued earlier, the plan for long-term financial investments was exceeded by RUB 13,425.9 million.

RUB million 2009, 2010, 2011, No. Parameter % to 2010 % to 2009 report report report

INVESTMENTS IN NON-FINANCIAL ASSETS (Capital Investments) 11,899.6 11,180.0 14,917.0 133.4 125.4

including:

Investments in capital assets 11,804.4 10,737.3 14,639.9 136.3 124.0

Acquisition of fixed assets, construction in progress 89.6 304.8 224.5 73.7 250.6

Investments in intangible assets 5.6 126.6 42.4 33.5 756.9

Investments in other fixed assets 11.3 10.2 90.3

22 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS Investments in capital assets have been made for the total of RUB 14,639.9 million. As far as the renewal of the capital assets is concerned, investments in the construction total RUB 11,999 million (131.4% to 2010) and investments into the technical upgrade total RUB 2,640.9 million (164.4% to 2010). The structure of the investments into capital assets related to construction is represented by the following parameters:

RUB million 2009, 2010, 2011, No. Parameter % to 2010 % to 2009 report report report

Construction, total 10,365.3 9,130.9 11,999.0 131.4 115.8

1. Core activity (diamond mining) 8,391.0 6,984.0 8,943.9 128.1 106.6

1.1 Creation of new mining facilities 7,711.9 6,300.6 7,028.0 111.5 91.1

Including investments in underground mines 7,698.2 6,284.7 6,940.8 110.4 90.2

Mir underground mine 4,123.8 1,720.1 1,424.7 82.8 34.5

Aikhal underground mine 2,019.9 1,766.8 2,004.1 113.4 99.2

Udachny underground mine 1,554.5 2,797.8 3,512.0 125.5 225.9

1.2 Maintenance and reconstruction of the existing facilities 679.1 683.4 1,915.9 280.3 282.1

International underground mine 295.9 588.8 1,099.4 186.7 371.5

2. Other production construction 948.5 1,147.7 1,447.2 126.1 152.6

3. Non-production construction 1,025.8 999.2 1,607.8 160.9 156.7

Capital construction plan for 2011 pro- the items of the first stage of the second 500,000 tons in 2012, the construction is accordance with the plans aimed at un- vided for the performance of a series of tar- Start-Up Facilities were commissioned for being carried out in accordance with the covering and preparing ore reserves in the get tasks. temporary use. high-level schedule for the construction of lower utilisation blocks for their further de- One of the Company’s key performance 2011’s construction schedule of the Mir the facilities at the Aikhal mine, aimed to velopment. In September 2011, the admin- indicators, i.e. investments in the imple- underground mine was adjusted due to the uncover and prepare the reserves down istrative building for the mine was commis- mentation of the strategic investment proj- revealed geological complications and the to level -100m, and with the construction sioned. ects for the construction of the new under- implementation of the actions for removal schedule for the facilities of the Vertical The 2011 target for the Udachny un- ground mines Mir, Aikhal and Udachny, has and prevention of water-flow through the Cage Shaft complex. derground mine was to perform the ac- been performed at the rate of 99.6%. safety block during mining operations. Due The works involving the reinforcement tivities aimed at covering the lag of 141.2 One of the targets for 2011 was the to this, the mine’s production output in of the vertical cage shaft (VCS) have been running meters against the mine construc- completion of the construction of the sec- 2012 is planned to be 750,000 tons of ore performed and the works involving the tion schedule. As of January 01, 2012, the ond Start-Up Facilities for the Mir under- and it is intended to reach the design ca- re-equipping of the surface complex with lag was eliminated. The eastern ventilation ground mine, aimed to reach the production pacity of 1,000,000 tons in 2013. headgear and hoists have commenced. crosscut was prepared, which enabled capacity of 1 million tons of ore. In Decem- In order to ensure that the Aikhal under- Construction of other facilities within the meeting the planned construction deadlines ber 2011, construction was completed and ground mine reaches its design capacity of underground complex was carried out in and significantly improved safety in carrying

23 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS out underground mining operations with re- is explained by the adjusted amount of construction stage in Bolshoe Sotnikovo gard to safety escapes and ventilation. The capital mining operations at the objects of village have been commissioned. construction of levels –480 m and –580 m the fourth Start-Up Facilities. The objects within the first Start-Up Fa- is continued in accordance with the plan. The investments into construction of cilities involving the reconstruction of the The commissioning of the main ventilation other industrial facilities have been made beach recreational facilities at Prometey and heating plants within the auxiliary ven- for the total of RUB 1,447.2 million. The fol- health resort have been commissioned. tilation shaft (AVS) ensured ventilation of the lowing facilities have been commissioned: In Udachny, the Indoor Hockey Rink has roadways with sustained and sufficient air. reconstruction of ABK MKSM, a Feed Pro- been commissioned. In order to maintain production capaci- cessing Room in Novy Farm, production The investments in the technical up- ties at the International underground mine facilities for the geological exploration ex- grade of ALROSA’s enterprises in 2011 at the rate of 500,000 tons of ore extracted pedition in Zhigansk, etc. were 64.4% higher than in 2010 and to- per year, the construction and commission- The investments in the implementa- talled RUB 2,640.9 million. ing of the items of the first stage of the third tion of the non-production and social proj- Start-Up Facilities have been completed. ects have been made for the total of RUB Construction of the items within the fourth 1,607.8 million. Start-Up Facilities, excavation at decline Within the social program involving con- development on level –690 / 820 m, excava- struction of the housing facilities in Oryol tion of the complex of entries at the backfill and in the Oryol region, a 172‑apartment receipt from wells No. 3 and 4 continues. building in the Zarechensky settlement and The reduced amount of capital investments 15 individual houses within the second

RUB million 2009, 2010, 2011, No. Parameter % to 2010 % to 2009 report report report

Investments in technical upgrade, total: 1,439.1 1,606.4 2,640.9 164.4 183.5

including

1. Replacement of worn-out equipment 1,071.1 819.1 1,352.0 165.1 126.2

2. Technical upgrade 368.0 787.3 1,288.9 163.7 350.2

including:

Projects implemented by the Capital Construction Department 15.2 427.4 867.3 202.9 5,705.9

including:

Technical Upgrade of Processing Plant No. 3, Mirny Mining and Processing Division 15.2 316.8 827.5 261.2 5,444.1

Central Boiler House, Lensk, Almazdortrans Production Division 110.6 39.8 36.0

24 ALROSA • ANNUAL REPORT | www.alrosa.ru REPORT ON THE CORE BUSINESS Revenue Expenses Performance Results Purchases Debt Management Taxes

Key Financial Results

25 ALROSA • ANNUAL REPORT | www.alrosa.ru Revenue

In 2011, revenue from sales of goods, works and services totalled RUB 117,783.6 million, which is 21.7% higher than in 2010.

RUB million 2011, Parameter 2010 % to 2010 report

Revenue from sales 96,820.4 117,783.6 121.7

Industrial Operations 82,997.1 108,873.6 131.2

rough and polished diamonds, grinding powder 75,842.8 101,003.6 133.2

services for OJSC ALROSA-Nyurba 6,945.9 7,632.6 109.9

other types of industrial activity 208.4 237.4 113.9

Other activities 13,823.3 8,910.0 64.5

other activities 12,476.6 7,462.1 59.8

transportation services 4,046.9 4,588.5 113.4

geological exploration operations 443.0 436.1 98.4

construction and assembly activities 641.1 503.3 78.5

agriculture 109.4 92.3 84.4

catering 133.6 150.1 112.3

other industries 7,102.6 1,691.9 23.8

non-industrial activities 1,346.7 1,447.9 107.5

26 ALROSA • ANNUAL REPORT | www.alrosa.ru KEY FINANCIAL RESULTS Expenses Production and Sales Expenses Budget, RUB million

In 2011 the Company’s operations expenses for the purchase of goods, were aimed at maintaining production work and services per unit of goods and product (work, services) sales in or- produced totalled RUB 10.46/USD to der to preserve its leadership in the world the planned RUB 10.55/USD (90% to diamond market and to resolve the fol- 2010). lowing tasks. • Improvement of efficiency of the Com- • Following of the instructions of the pany’s operations through continuous President of the Russian Federation cost control, development and imple- for carrying out a list of actions aimed mentation of organisational and techni- at reduction of the purchase costs cal activities aimed at reduction of the 26,732.5 of goods (work, services) per unit of operational costs. goods produced for at least 10% per • Unconditional fulfilment of the plan for annum within three years in real terms, net profit on the volatile international 23,270.0 calculated based on 2010 prices. market and reduction of revenue from 8,570.4 Based on 2011’s year-end results, the sales of rough and polished diamonds. 19,090.9

8,654.3 8,220.5

Material Expenses

Fixed Assets Depreciation 24,302.7 17,967.5 16,409.2 Labour Costs and Insurance Contributions 2,175.7 2,068.2 Other Expenses 1,985.7 Taxes and Payments 7,330.6 8,438.3 10,836.8 Accepted and Transferred Expenses Balance between the Operational and 2009 2010 1011, Investment Budget report –944.1 –98.9 –636.9

27 ALROSA • ANNUAL REPORT | www.alrosa.ru KEY FINANCIAL RESULTS Performance Results

The analysis of the assets turnover re- Based on 2011 results, net sales prof- Based on the performance results of OJSC vealed acceleration in the turnover of cur- itability grew up to 25.1%, which is 3.2 ALROSA in 2011, sales income totalled rent assets by 42 days against the begin- times higher than in 2010. Profit per share RUB 52,554 million, which is 55% more ning of the year, which signifies improved totalled RUB 4.0, the same parameter in than in 2010. financial solvency. 2010 being RUB 1.19 (under comparable The profitability of assets in the reporting conditions calculated for 7,364,965,630 year grew by 7.38% against the same pa- shares). rameter in the last year. The changes during the year were influenced by: As a result of changes in prices for the • growing profitability of sales (+5.94) sold goods, development and implemen- • growing resource productivity (assets tation of the organisational and technical turnover) (+1.44%). activities aimed at reducing the operational 10.07 kopecks of net profit were gained expenses and activities under the Energy- on each rouble of funds invested in the as- saving program, and also as a result of sets. continuous cost control, the return on sales The profitability of own capital in the was increased compared to 2010, and reporting year grew by 11.98% against reached 44.6%. the same parameter in the last year. The Income before taxes totalled RUB changes in the profitability level were influ- 35,562 million, which is more than 3 times enced by the impact of three main factors: higher than in 2010. • growing profitability of sales in terms of Within the reporting period, the Compa- net profit (+10.61%), ny made a net profit of RUB 29,519 million, • acceleration of asset turnover (resource which is 3.9 times higher than in 2010. productivity) (+2.57%), The efficiency of the Company’s per- • changes in the structure of capital outlay formance is characterised by turnover of (–1.19%). funds and the sources of their generation, 16.77 kopecks of net profit were gained as well as by profitability rates. on one rouble of own capital.

28 ALROSA • ANNUAL REPORT | www.alrosa.ru KEY FINANCIAL RESULTS Purchases

Purchases of material and technical re- RUB 13,982 million (excluding transporta- of imported inventories for a total of RUB Material and Technical Resources (MTR) sources required for the production pro- tion costs). The actual index under the con- 5,756 million, including 44% of contracts stock at the warehouses, which were re- cess in ALROSA is characterised by the tracts for the supply of domestic invento- with manufacturers (with 1.04 index) and duced due to anti-crisis measures, have significant remoteness of the structural ries totalled 1.135. 53% with their representatives and agents been brought down to the standard level. subdivisions from the main transportation Significant impact upon the price index (with 0.95 index). As at January 2012, Material and Technical routes on the territory of the Republic of growth in 2011 was caused by the in- Based on 2011 year-end results, the Resources balances in ALROSA, together Sakha (Yakutia). The major proportion of creased prices for fuel and lubricants, the expenses for the purchase of goods, with the materials in transit and advance the material and technical resources for the share of which in the total value of the con- works, services per unit of goods pro- payments, total RUB 8,880.9 million. The enterprises is supplied during the naviga- cluded contracts is 36%. The actual index duced (under actual / adjusted conditions main balances at the warehouses are rep- tion period (from May to October) by wa- of prices against 2010 totalled 1.188. of 2010) totalled RUB 10.46 / USD against resented by oil products amounting to RUB ter transport along the Lena River, and the During 2011, the Procurement Depart- the planned RUB 10.55 / USD. The reduc- 3,380 million (116,000 tons). supplies have a cyclical nature. ment concluded contracts for the supply tion of 2010 was 10%. The issue of supplies of material and technical resources is resolved using the Company’s transportation and procurement complex, which includes the Pro- Indices of Prices for Material and Technical Resources curement Department, the Almazdortrans Production Division (transit transport), the Parameter 2011/2010 2011/2009 Mirny Aviation Company – with its own Domestic Material and Technical Resources pool of cargo planes and helicopters – and 1. Spare parts for process equipment 1.056 0.97 the river port and warehousing facilities, with the input terminals within the Repub- 2. Car and tractor spare parts 1.035 1.02 lic of Sakha (Yakutia) and beyond (Irkutsk, 3. Metal products 1.166 1.12 Ust-Kut, Moscow). 4. Explosives and chemicals 1.113 1.09 In 2011, the amount of supplied material and technical resources expressed in 5. Fuel and lubricants 1.188 1.18 physical terms totalled 415,600 tons. Navi- 6. Construction materials, protective clothing 1.117 1.12 gation supplies of 2011 have been fulfilled 7. Instrumentation and automated control systems, electrical goods 1.087 1.13 in full. The companies of OJSC ALROSA have been provided with the strategic ma- 8. Equipment 1.067 1.07 terial and technical resources for the period Average weighted index for domestic Material and Technical Resources 1.135 1.11 before the commencement of 2012 naviga- Imported material and technical resources tion. The aggregate budget for the purchas- 1. Spare parts and materials 0.96 0.98 es of material and technical resources by 2. Tyres etc. 1.03 1.09 ALROSA in 2011 totalled RUB 16,253.7 3. Equipment 1.00 1.01 million. During 2011, the Procurement De- partment concluded contracts for the sup- Average weighted index for imported Material and Technical Resources 0.99 1.03 ply of domestic inventories for the total of

29 ALROSA • ANNUAL REPORT | www.alrosa.ru KEY FINANCIAL RESULTS RUB million 2009, 2010, 2011, % to % to Name report report report 2010 2009 Debt I. Short-term credits and loans Beginning balance 33,469.0 90,471.6 8,440.2 9.3 25.2 Management Correction 62,570.5 8,776.2 13,751.1 Beginning balance with correction 96,039.5 99,247.8 22,191.3 22.4 23.1 – in addition – the interest 585.1 571.5 615.1 107.6 105.1 Attraction 74,883.0 71,328.2 27,933.2 39.2 37.3 In 2011 the debt burden decreased – in addition – the interest accrued 16,887.2 8,850.2 7,287.6 82.3 43.2 by RUB 3,121.7 million and totalled including exchange rate differences repayment 4,458.6 2,253.6 2,774.3 RUB 92,272.2 million, which equals Repayment 80,450.9 162,135.9 32,146.4 19.8 40.0 USD $2,865.9 million. The leverage – in addition – the interest paid 16,900.8 8,806.6 7,251.8 82.3 42.9 ratio represented in balance sheet currency decreased from 34.3% Closing balance 90,471.6 8,440.1 17,978.1 213.0 19.9 down to 30.3%. – in addition – the interest 571.5 615.1 650.9 105.8 113.9 Growth (+), reduction (–) 57,002.6 –82,031.5 9,537.9 – in addition – the interest –13.6 43.6 35.8 Growth (+), reduction (–) with the interest 56,989.0 –81,987.9 9,573.7 II. Long-term credits and loans Beginning balance 71,032.6 15,262.1 86,953.8 569.7 122.4 Correction –62,570.5 –8,776.2 –13,751.1 Beginning balance with correction 8,462.1 6,485.9 73,202.7 1,128.6 865.1 Attraction 32,270.3 84,162.7 10,601.2 12.6 32.9 including exchange rate differences 117.4 266.5 1,091.5 Repayment 25,470.3 3,694.8 9,509.8 257.4 37.3 Closing balance 15,262.1 86,953.8 74,294.1 85.4 486.8 Growth (+), reduction (–) –55,770.5 71,691.7 –12,659.7 III. Total – credits and loans (I+II) Beginning balance 104,501.6 105,733.7 95,394.0 90.2 91.3 – in addition – the interest 585.1 571.5 615.1 107.6 105.1 Attraction 107,153.3 155,490.9 38,534.4 24.8 36.0 – in addition – the interest accrued 16,887.2 8,850.2 7,287.6 82.3 43.2 including exchange rate differences 4,576.0 2,520.1 3,865.8 Repayment 105,921.2 165,830.7 41,656.2 25.1 39.3 – in addition – the interest paid 16,900.8 8,806.6 7,251.8 82.3 42.9 Closing balance 105,733.7 95,393.9 92,272.2 96.7 87.3 – in addition – the interest 571.5 615.1 650.9 105.8 13.9 Growth (+), reduction (–) 1,232.1 –10,339.8 –3,121.8 – in addition – the interest –13.6 43.6 35.8 Growth (+), reduction (–) with interest 1,218.5 –10,296.2 –3,086.0 Closing balance (USD $million) 3,496.0 3,130.0 2,865.9 91.6 82.0

30 ALROSA • ANNUAL REPORT | www.alrosa.ru KEY FINANCIAL RESULTS The structure of loan portfolio by loan periods:

December 31, 2010 December 31, 2011 Structure The structure of borrowings did not RUB million share, % RUB million share, % change throughout 2011, with the remain- Long-term credits and loans 86,953.8 91.2 74,294.1 80.5 ing prevalence of foreign currency borrowings over rouble borrowings. Short-term credits and loans 8,440.1 8.8 17,978.1 19.5

Total 95,393.9 100.0 92,272.2 100.0

Taxes

Expenses for the Company’s Expenses for the Company’s accrual of tax liabilities in Payment of the Company’s tax liabilities to budgets and accrual of tax liabilities in 2011 2011 amounted to RUB 25,530.1 million, with the growth non-budgetary funds amounted to RUB 24,125.1 million. of RUB 7,965.9 million to 2010. The total debt for all the taxes, duties and other mandatory amounted to RUB 25,530.1 In 2011 the actual share of the accrued tax liabilities in contributions to budgets and non-budgetary funds as at million, with the growth of 45.4% total production cost increased by 2.8 points as compared January 01, 2012 totalled RUB 3,847.2 million. The debt to 2010. to 2010 and amounted to 15%. The share of all the taxes is regarded as current debt, no overdue debt has been in the sales value totalled 17.7% and increased by 3.3 as recorded. compared to the previous year.

Accrual of taxes and mandatory contributions to budgets and non-budgetary funds RUB million 2009, 2010, 2011, No. Type of tax liability % to 2010 % to 2009 report report report

1. Profits Tax –176.0 3,087.6 8,002.0 259.2

2. Withholding Tax 67.4 103.5 111.7 107.9 165.7

3. Value Added Tax –1,023.9 1,432.1 1,768.4 123.5

4. Diamond mining tax 4,201.4 4,079.9 4,501.5 110.3 107.1

5. Property Tax 2,578.8 2,761.9 2,739.6 99.2 106.2

6. Others 356.7 416.9 366.2 87.8 102.7

7. Non-Budgetary Funds 3,115.0 3,401.0 4,994.8 146.9 160.3

8. Taxes paid out of salaries 2,133.6 2,276.3 3,031.4 133.2 142.1

9. Financial sanctions, state duties 179.7 5.0 14.5 2.9 times 8.1

Total 11,432.7 17,564.2 25,530.1 145.4 2.2 times

31 ALROSA • ANNUAL REPORT | www.alrosa.ru KEY FINANCIAL RESULTS Environmental Safety Occupational Health Personnel, HR Policy Social Policy Regional Policy and Safety

Social Responsibility

32 ALROSA • ANNUAL REPORT | www.alrosa.ru Environmental Safety

The Company’s environmental activities age waste water treatment facilities continue –– RUB 1,406.1 million for protection and are aimed at completion of the tasks relat- in Mirny, Udachny and Lensk. Construction sustainable use of water resources; ed to main production facilities, as well as work was carried out at the following facili- –– RUB 350.6 million for air protection; the issues with regional and republican rel- ties: a man-made safety block with water –– RUB 338.1 million for environmental evance. During the reporting year, the Com- intake devices at the International under- protection; pany’s Executive Committee approved the ground mine, a water pipe for shaft water –– RUB 40.4 for soil remediation; draft Comprehensive Action Plan of OJSC and drainage water recirculation pool for the • RUB 72.7 million for payment for admis- ALROSA for Environmental Protection 2011- Mir underground mine, a pool for burial of sible contaminant emissions (discharges) 2018. In accordance with the Program, in drainage water in the Nyurba mine, and a and those exceeding the standard rates; 2011 RUB 688.9 million were allocated to water pipe for shaft water from the Udachny • RUB 48.4 million represent the cost of the carrying out of the environmental activi- underground mine. overhaul of the main production assets ties, including RUB 468.6 million allocated Environmental costs in 2011 amounted related to environmental protection. to capital investment into construction of to RUB 2,256.3 million, including: environmental facilities. The works involving • RUB 2,135.2 million for current expense reconstruction and construction of the sew- for environmental protection, of which:

Occupational Health and Safety

Occupational health and safety is fo- the Company developed a new corporate from their current jobs and transferred to cused on unconditional compliance with catalogue of overalls made using the new other jobs, and 17 employees dismissed. the laws of the Russian Federation, the materials and finishing, comfortable and 163 employees received financial bonuses Republic of Sakha (Yakutia) and ALROSA’s practical shoes, and other new personal for maintaining safe working conditions. internal documents. In 2011 no violations protection equipment. The funds allocated to occupation- of the laws on occupational health and re- Special attention was focused on the al health and safety measures in 2011 quirements of the Labour Code of the Rus- safe mining operations. In 2011, following amounted to RUB 458 million. sian Federation were registered. the results of monitoring and prevention In 2011, ALROSA’s HR Training Cen- inspections to check compliance with the tre with the state accreditation carried industrial safety requirements in the Com- out training and certification of 1,638 en- pany’s subdivisions, disciplinary and finan- gineers and technical experts in occupa- cial sanctions were issued against 645 em- tional safety. ployees based on orders and resolutions, In order to improve the employees’ pro- including 94 employees sent for unsched- tection from harmful production conditions, uled certification, 26 employees suspended

33 ALROSA • ANNUAL REPORT | www.alrosa.ru SOCIAL RESPONSIBILITY Personnel, Labour Costs Budget

HR Policy 62,893.5

45,932.0 40,213.5 Conventionally, the Company’s strength is out in the HR Training Centre and its training considered to be its HR policy, focused on ef- shops, as well as in ANO Regional Technical ficient and rational use of its manpower. Reach- College. In addition to that, young workers and 3,887.9 ing the goal of ensuring the adequate level of technical specialists were trained at vocational 3,094.2 social welfare of the Company’s employees training colleges No. 28 and No. 30. and their family members is the priority target 5,737 managers and experts received dif- 1,921.0 of the Company’s management. ferent types of training. Workers have been In the reporting year, a number of essential trained in accordance with the program includ- decisions were made that allow, in addition to ing more than 100 professions and special- the annual indexation, for significant increase purpose training courses. 3,903 workers have of the employees’ salaries, consideration of re- been trained or upgraded their skills. gional labour market factors, and increase of In order to perform specific work at the financial support to low-paid categories of em- constructed manufacturing facilities, the Com- 16,039.0 ployees. Based on the achieved financial results, pany engaged highly-qualified workers based 17,247.0 22,864.0 in December 2011 a decision was made to pay on a rotating-shift working schedule, and en- the annual bonus at the rate of two average gaged local people into these operations on a monthly salaries. Based on year-end results, mandatory basis. As of December 31, 2011, the average monthly salary amounted to RUB the Company’s employees working under 62,893.5, which is 36.9% higher than in 2010. open-ended employment contracts are 704 In 2011 the main targets for manning the residents of Anabarsky, Vilyuysky, Verkhne-Vi- Mir, Aikhal and Udachny constructed under- lyuysky, Nyurbinsky, Oleneksky, Suntarsky and ground mines were achieved through training other uluses. workers at the training shops of the HR Training In accordance with the Regulations ‘On Pri- Centre and through the implementation of the vate Pension Provision to Employees of ALRO- Comprehensive Program for Career Guidance SA’, in 2011, 1,159 resolutions were prepared Work in ALROSA. Performance of these tasks regarding allocation of private long-service pen- 33,238 31,291 30,295 will continue in 2012. sions and 12 resolutions on allocation of private At the end of 2011, the payroll number of survival benefits. More than 16,000 Company 2009 2010 2011 the Company’s personnel totalled 30,903 em- employees receive private pensions in the Pri- ployees, the reduction during the year being vate Pension Fund Almzanaya Osen (Diamond 123 employees. Autumn). In 2011, contributions to the Private Average monthly salary, RUB Training, re-training and professional devel- Pension Fund Almzanaya Osen totalled RUB Revenue from sales of goods, works, services per one employee, opment of managers and workers was carried 1,476.3 million. thousand RUB/person

Salary fund, RUB million

Headcount, persons

34 ALROSA • ANNUAL REPORT | www.alrosa.ru SOCIAL RESPONSIBILITY Social Policy The Company’s expenses under this pro- In 2011 the Company purchased 12,813 gram amounted to RUB 150 million. vouchers under the program for employee In February 2011, a resolution of the health promotion (including local holidays Executive Committee of OJSC ALRO- for children and preventive treatment in SA approved the Program for Mortgage health and recreation resorts), for a total of ALROSA’s social policy is focused on SA and the Government of the Republic Credit Lending to Employees of ALROSA RUB 569.7 million. implementation of corporate programs for of Sakha (Yakutia) reached an agreement and Regulations for Reimbursement of the Significant attention is paid to mass the benefit of its employees, and includes to transfer all the Company’s housing and Employees of ALROSA for the expenses recreational, sports and health promo- issues related to establishing favourable recreational facilities to the municipal own- related to payment of the accrued inter- tion work, its main events in 2011 being: working and recreational conditions for its ership at a point in 2011 free of charge. est on mortgage loans obtained in KB the National Republican Holiday Ysyakh employees and their family members. This The value of the housing facilities trans- MAK-Bank (LLC) for purchasing residential Olonkho 2011, the Bluebird Song Contest, covers, when needed, medical examina- ferred to the ownership of Municipal En- premises. In the reporting year, the Com- the XIX Tuoy Khaya Festival, the Republic tion and treatment in the leading clinics and tity Town of Mirny, Municipal Entity Town pany’s employees purchased 85 apart- of Sakha (Yakutia) Chess Championship, medical centres of the Republic of Sakha of Udachny and Municipal Entity Aikhal ments under the Program for Mortgage the Russian Indoor Futsal Championship (Yakutia) and Russian Federation, arrange- Settlement free of charge amounted to Lending. In accordance with the Regula- among the Premier League teams, the ment of recreational, sports and health ac- RUB 3,292.6 million, and the value of pri- tions for Reimbursement of the Employees Russian Futsal competition, the Repub- tivities, operation of housing and utilities vate apartments written off of the balance of ALROSA for expenses related to pay- lic of Sakha (Yakutia) Futsal Competition, companies, and ensuring adequate living sheet totals RUB 1,532.7 million. Thereby ment of the accrued interest on mortgage the Republican Figure Skating Tourna- conditions for the Company’s pensioners the Company retained its obligations of loans obtained in KB MAK-Bank (LLC) for ment, the Republican Motocross Contest, and veterans. paying the expenses related to maintain- purchasing residential premises, the inter- the Republic of Sakha (Yakutia) Boxing In March 2011, the Company conclud- ing and servicing the transferred facilities est reimbursement expenses amounted to Championship, and the Russian Swim- ed the Contract for Social and Economic and the facilities of the municipal housing RUB 10.3 million. ming Contest, etc. RUB 140 million were Development with the Republic of Sakha located in Udachny till January 01, 2014, In 2011, the cost of purchasing residen- allocated for the arrangement and carry- (Yakutia) effective to December 31, 2020. in the Aikhal settlement till January 01, tial facilities, including shared ownership ing out of activities under the Culture and In order to ensure construction of educa- 2015, and in Mirny and its adjacent settle- with the Company employees, amounted Sport Program. tional, health, recreational and sports fa- ments till January 01, 2016. The expenses to RUB 140 million. In 2011, the Company rendered finan- cilities on the territory of the Republic of for financing special-purpose programs Medical services to employees of AL- cial, patronage and sponsor support to Sakha (Yakutia), funds to the amount of (demolition of dilapidated and hazard- ROSA include primary medical and sani- various persons, public, municipal, state RUB 521 million were transferred in 2011 ous houses, relocation of citizens, repair tary assistance rendered at 50 medical aid organisations and institutions and popu- under the Contract to the NO Target Fund of housing facilities, installation of power rooms of the Company’s subdivision, high- lated localities for a total of RUB 1,026 for Future Generations of the Republic of flow meters) in 2011 totalled RUB 343.4 skill medical aid provided in the clinics and million. Special-purpose payments un- Sakha (Yakutia). million. hospitals, including those outside Yakutia, der charitable sponsor support in 2011 Originally this Contract provided for the Over a number of years, ALROSA has and rehabilitation and remedial treatment in included: provision of funds for the con- stage-by stage transfer of utility and hous- been involved with relocating the Compa- sanatoriums. struction of churches in the Vilyuysk and ing facilities in the Mirny district, which are ny’s pensioners and veterans outside the The costs under the Health Program Churapcha settlement, and restoration of currently serviced and owned by OJSC Republic of Sakha (Yakutia) and provides totalled RUB 156 million, including RUB the Archangel Michael’s Church. Sponsor ALROSA, to the services and ownership of them with housing on beneficial terms. In 147.6 million for medical aid to employees support has been rendered for preparing a the municipal entities of the Mirny district. 2011, a 172‑apartment building was com- rendered via insurance company IC ALRO- movie about geologists, financial support However, due to the situation in the rough missioned in the Zarechensky settlement of SA. In 2011, 2,331 persons were examined rendered for carrying out of the Children and polished diamond market, which is Oryol, and 15 individual five-room mansard and treated in the medical centres of the of Asia competition, and sponsor sup- characterised by the growing demand and country houses were commissioned in Bol- Republic of Sakha (Yakutia) and the Rus- port rendered for the 2018 World Football prices for rough diamonds, OJSC ALRO- shoe Sotnikovo village in the Oryol region. sian Federation at the Company’s expense. Championship.

35 ALROSA • ANNUAL REPORT | www.alrosa.ru SOCIAL RESPONSIBILITY Regional Policy

The Company implements large- and traditional trade activities, and charita- • funds for arranging the Ysyakh festival; scale and diverse regional policy based on ble events are arranged for children in the • funds for repair of general education the principles of high responsibility for so- sponsored uluses. schools in uluses and the Nikolskaya cial and economic situation and maintaining The costs under the regional develop- church in the Verkhnevilyuysky ulus; employment and growth of living standards ment program in 2011 totalled RUB 72.5 • purchase of equipment for processing in the Republic of Sakha (Yakutia) and other million, with the funds being allocated to: agricultural products; medical, musical regions where ALROSA is operating. • arrangement of holidays for children, equipment, construction materials for Significant attention is paid to support of with 228 children from uluses in the dia- uluses. reindeer herders and fishermen clans in the mond province having visited children’s most northern regions of the Republic, fi- camps of ALROSA; nancial support is rendered to uluses in the • transfer of children to holiday locations; diamond province in performing agricultural • new year presents for children;

36 ALROSA • ANNUAL REPORT | www.alrosa.ru SOCIAL RESPONSIBILITY Shareholders’ Meeting Supervisory Board Supervisory Board Meetings of the Auditing Committee Executive Committee Committees Supervisory Board held in 2011

Corporate Management

37 ALROSA • ANNUAL REPORT | www.alrosa.ru Shareholders’ Meeting

In 2011, two general shareholders’ Date of the Annual General Meeting: 9. Approval of the auditor of OJSC AL- meetings and one absentee voting were June 30, 2011. Minutes No. 27. Date of ROSA. held. the minutes: July 05, 2011. 10. On splitting the outstanding shares The date of the Extraordinary GSM to be The agenda of the annual general meet- of OJSC ALROSA. held in by absentee voting: April 05, 2011. ing of shareholders of OJSC ALROSA 11. On amendment of the Charter of Minutes No. 26. Date of the minutes: April 1. Approval of the annual report of OJSC OJSC ALROSA. 06, 2011. ALROSA. 12. On participation of OJSC ALROSA The agenda of the extraordinary general 2. Approval of the annual financial state- in the International Industry Association of meeting of shareholders of ALROSA Co. ments, including the income statements Rough and Polished Diamond Complex Ltd. (profit and loss accounts) of OJSC ALRO- Employers. 1. On approval of the new version of the SA. Date of the Extraordinary General Meet- Charter of OJSC ALROSA 3. Approval of the distribution of profit ing: June 30, 2011. Minutes No. 28. Date 2. On approval of the new version of the of OJSC ALROSA based on 2010 results. of the minutes: July 05, 2011. Regulations on General Meeting of Share- 4. On the amount of dividend and the The agenda of the extraordinary general holders of OJSC ALROSA. period and form of dividend pay-out based meeting of shareholders of OJSC ALROSA 3. On approval of the new version of the on 2010 results. 1. On early termination of authority of Regulations on Supervisory Board of OJSC 5. Approval of the Regulations on Re- the Members of the Supervisory Board of ALROSA. muneration of the Members of the Supervi- OJSC ALROSA. 4. On approval of the new version of the sory Board of OJSC ALROSA. 2. On election of members to the Super- Regulations on the Executive Committee of 6. On payment of remuneration for work visory Board of OJSC ALROSA. OJSC ALROSA. in the Supervisory Board to members of 5. On approval of the new version of the Supervisory Board who are not state the Regulations on Auditing Committee of officials, in the amount established by the OJSC ALROSA. internal documents of OJSC ALROSA. 6. On approval of the interested party 7. Election of members to the Supervi- transaction involving acquisition by ALRO- sory Board of OJSC ALROSA. SA Co Ltd. of additional issue of shares in 8. Election of members to the Auditing OJSC Severalmaz. Committee of OJSC ALROSA.

38 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management In accordance with the Charter of OJSC ALROSA, 15 annual general meeting of shareholders held on June 30, Supervisory members are elected to the Company’s Supervisory Board. 2011, minutes No. 27. The Company’s Supervisory Board operates based on The scope of the Supervisory Board includes resolu- Board the Russian laws, the Charter and the Regulations on the tion of the issues related to general management of the Supervisory Board of Open Joint Stock Company ALRO- Company’s operations, apart from resolution of the issues SA. The Regulations on the Supervisory Board of OJSC referred to in the scope of the general meeting of share- ALROSA are approved by a resolution of the Company’s holders by the Federal Law On Joint Stock Companies and extraordinary general meeting of shareholders held on April the Company’s Charter. 05, 2011, minutes No. 26. The Regulations on Remunera- As at December 31, 2011, the Company’s Supervisory tion to the Members of the Supervisory Board of OJSC Board includes 15 members: ALROSA are approved by a resolution of the Company’s

1. Gennady Fyodorovich ALEKSEEV 2. Fyodor Borisovich ANDREEV 3. Alexander Alikhanovich AKHPOLOV Born on February 1, 1957, in the Zarya settlement of the Born on August 16, 1966, in Voronezh. Born on May 29, 1956, in Ardon of the Ardonsky district Sorokinsky district of the Altay Region. In 1989 graduated from the Leningrad State University in the North Ossetia ASSR. In 1981 graduated from the Moscow Mining Institut,e with a qualification in Political Economy; in 2007 had pro- In 1983 graduated from the Leningrad State University specialising in Technology and Comprehensive Mechanisa- fessional training in CJSC Prioritet, i.e. cascade studies with a qualification in Political Economy. tion of Open-Pit Mining of Mineral Resource Deposits; in and defence of functional project for improvement of qual- Work Experience in the recent years: 1999 he graduated from the Academy of National Econo- ity, and achieving the competence required for the level of 2004 till the present: Director of the Administrative De- my under the Government of the Russian Federation, spe- Quality Ideologist in OJSC RZhD. partment of the Ministry of Finance of the Russian Federa- cialising in Management in Market Conditions. He has a Work Experience in the recent years: tion. PhD in Technical Sciences, graduating in 2001 from the 2003–2009: Vice President, Senior Vice President of Does not hold any shares in OJSC ALROSA. Coal and Coal Chemicals Institute of the Siberian Division OJSC RZhD; of the Russian Academy of Science. 2009 till the present: President of OJSC ALROSA. Work Experience in the recent years: The share of ordinary shares of OJSC ALROSA held – 2004–2011: First Deputy Chairman of the Government 0.11%. of the Republic of Sakha (Yakutia); 2011 till the present: Director General of OJSC «The Far East and the Baikal Region Development Fund». Does not hold any shares in OJSC ALROSA.

39 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management 4. Sergey Vladimirovich BARSUKOV 5. Yegor Afanasyevich BORISOV 6. Evgenia Vasilyevna GRIGORIEVA Born on September 2, 1971, in Kalinin. Born on August 15, 1954, in the Churapcha settlement Born on August 19, 1965, in the Nyurba settlement, Ya- Education – university degree, in 1993 graduated from of the Churapchinsky district in the Yakutskaya ASSR. kutskaya ASSR. Mozhaisky Military Space Academy with a qualification in In 1979 graduated from the Novosibirsk Agricultural In- In 1988 graduated from the Riga Civil Aviation Institute, Mathematical Support to Automated Systems for Data Col- stitute, Mechanical Engineer, Doctor of Economics. Systems Engineer; in 1998 graduated from the Ammosov lection and Processing; in 2005 graduated from the Saint Work Experience in the recent years: Yakutsk State University, Lawyer. Petersburg State University with a qualification in State and 2003–2010: Chairman of the Government of the Repub- Work Experience in the recent years: Municipal Management. lic of Sakha (Yakutia); 2003–2005: First Deputy Chairman of the Institution of Work Experience in the recent years: 2010 till the present: President of the Republic of Sakha Justice for State Registration of Title to Real Estate and 2004–2005: Deputy Head of the Federal Roads Agency (Yakutia). Transactions Therewith in the territory of the Republic of in the Ministry of Transport of the Russian Federation; Does not hold any shares in OJSC ALROSA. Sakha (Yakutia); 2005–2007: Managing Director of OJSC KIT Finance 2005–2006: Director of State Institution Republican Investment Bank; Centre for Technical Record-Keeping and Technical Inven- 2007–2008: First Deputy Director General of OJSC tory (GU ‘RCTI’); AIZhK; 2006–2007: Director General of State Unitary Enterprise 2008–2010: Assistant Deputy Chairman of the Govern- Republican Centre for Technical Record-Keeping and Tech- ment of the Russian Federation / Minister of Finance of the nical Inventory (GUP ‘RCTI’); Russian Federation; 2007–2011: First Deputy Chairman of the Ministry of 2010 till the present: Director of the Financial Policy De- Property Relations of the Republic of Sakha (Yakutia); partment of the Ministry of Finance of the Russian Federa- 2011 till the present: Minister of Property and Land Re- tion. lations of the Republic of Sakha (Yakutia). Does not hold any shares in OJSC ALROSA. Does not hold any shares in OJSC ALROSA.

40 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management 7. Galina Innokentyevna DANCHIKOVA 8. Ivan Kirillovich DEMYANOV 9. Lyubov Konstantinovna DZHABRAILOVA Born on August 13, 1954. Born on June 05, 1942, in the Ilovka settlement of the Born on March 20, 1966, in Saskylakh, the Anabarsky In 1972 graduated from the Yakutsk Financial Techni- Alekseevsky district, Belgorod region. district, Yakutskaya ASSR. cal School, Financial Expert; in 1985 graduated from the In 1982 graduated from the Khabarovsk Higher CPSU In 1985 graduated from the Irkutsk Energy Construction Moscow Law Institute, Lawyer; in 2001 graduated from School. Technical School, Construction Process Engineer; in 2005 the Russian Academy of Public Administration under the Work Experience in the recent years: graduated from the Academy of Labour and Social Rela- President of the Russian Federation, Public and Regional 1995 till the present: Vice President of OJSC ALROSA. tions in Yakutsk, Economist. Administration. The share of ordinary shares of OJSC ALROSA held – Work Experience in the recent years: Work Experience in the recent years: 0.0007%. 2005–2008: representative of OJSC Almazy Anabara in 2007–2010: Deputy Chairman of the Government of the Saskylakh; Republic of Sakha (Yakutia); 2008 till the present: Head of the Municipal District Ana- 2010 till the present: Chairman of the Government of the barsky National (Dolgano-Evenkiysky) Ulus (District) of the Republic of Sakha (Yakutia). Republic of Sakha (Yakutia). Does not hold any shares in OJSC ALROSA. Does not hold any shares in OJSC ALROSA.

41 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management 10. Sergey Konstantinovich DUBININ 11. Victor Petrovich EFIMOV 12. Vladimir Borisovich RYBKIN Born on December 10, 1950, in Moscow. Born on January 18, 1956, in Druzhina, the Abyysky Born on January 19, 1947, in Oryol. In 1973 graduated from the Lomonosov Moscow State district, Yakutskaya ASSR. In 1972 graduated from the Moscow Institute of Steel University with a qualification as Economist, Political Econ- In 1980 graduated from the Yakutsk State University and Alloys, Metallurgic Engineer. omy Teacher, Doctor of Economic Science (1990). with a Diploma in Civil Engineering; in 1990 graduated from Work Experience in the recent years: Work Experience in the recent years: the Khabarovsk Higher CPSU School with a Diploma in 2002 till the present: Head of the Federal Public Entity 2005–2008: member of the Executive Committee, Chief Politology; in 1997 graduated from the Russian Academy State Institution for Formation of the State Fund of Pre- Financial Officer of OAO RAO UES of Russia; of Public Administration under the President of the Russian cious Metals and Precious Stones of the Russian Federa- 2008 till the present: member of the Board of Directors Federation, Economist Manager. tion, storage, issue and utilisation of precious metals and of CJSC VTB Capital; Work Experience in the recent years: precious stones (Gokhran of Russia) under the Ministry of 2009 till the present: member of the Supervisory Board 2007–2011: Minister of Property Relations of the Re- Finance of the Russian Federation. of OJSC ALROSA; public of Sakha (Yakutia); Does not hold any shares in OJSC ALROSA. 2010 till the present: Chairman of the Supervisory Board 2011 till the present: Head of the Administration of the of OJSC VTB Bank. President and Government of the Republic of Sakha (Ya- Does not hold any shares in OJSC ALROSA. kutia). Does not hold any shares in OJSC ALROSA.

42 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management 13. Anatoly Vladimirovich TIKHONOV 14. Yakov Moiseevich URINSON 15. Ilya Arturovich YUZHANOV Born on June 13, 1969, in Moscow. Born on September 12, 1944, in Moscow. Born on February 7, 1960, in Leningrad. In 1995 graduated from the Moscow State University In 1966 graduated from the Plekhanov Moscow Institute In 1982 graduated from the Economics Department of with a Diploma in Law. of the National Economy with a Diploma in Economic Cy- the Leningrad State University with a PhD in Economics. Work Experience in the recent years: bernetics, PhD in Economics (1970), Doctor of Economic Work Experience in the recent years: 2003–2008: Deputy Governor of the Krasnoyarsk Re- Science (1980), Professor. 2000–2008: member of the Board of Directors of OJSC gion, Head of Permanent Representation of the Adminis- Work Experience in the recent years: RAO UES of Russia; tration of the Territory with the Government of the Russian 2000–2008: Deputy Chairman of the Executive Com- 2006–2010: member of the Board of Directors of OJSC Federation, Deputy Chairman of the Government of the mittee, Head of Corporate Centre of OAO RAO UES of Uralkali; Krasnoyarsk Region; Russia; 2006–2009: member of the Board of Directors of OJSC 2008 till the present: First Deputy Chairman of 2008–2008: Head of the Project Centre for Finalisa- NOVATEK; Vnesheconombank, member of the Supervisory Board. tion of Restructuring of OJSC RAO UES of Russia, OJSC 2007–2009: member of the Board of Directors, Deputy Does not hold any shares in OJSC ALROSA. MRSK Holding; Chairman of the Board of Directors OJSC Kirovsky Zavod; 2008–2011: Deputy Director General of State Corpora- 2008 till the present: Chairman of the Board of Directors tion Russian Corporation of Nanotechnologies; of OJSC Polymetal; 2011 till the present: Deputy Chairman of the Executive 2004 till the present: Chairman of the Supervisory Board, Committee of OJSC Rusnano. member of the Supervisory Board of OJSC NOMOS BANK; Does not hold any shares in OJSC ALROSA. 2009–2011: member of the Supervisory Board of OJSC ALROSA; 2011 till the present: Chairman of the Supervisory Board of OJSC ALROSA. Does not hold any shares in OJSC ALROSA.

43 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management Supervisory Board Committees

The resolution of the Supervisory Board of April 20, Strategic Planning Committee HR and Remunerations Committee 2010 (minutes No. 159) approved the Regulations on the The Strategic Planning Committee has been established The HR and Remunerations Committee has been es- Audit Committee, on Strategic Planning Committee and on by the resolution of the Supervisory Board of April 20, 2010, tablished based on the resolution of the Supervisory Board HR and Remunerations Committee under the Supervisory minutes No. 159. The Committee facilitates the improve- of April 20, 2010, minutes No. 159. The Committee fa- Board; the Resolution of the Supervisory Board of June 2, ment of the efficiency of the Company’s operations in the cilitates engagement of high-skilled experts to the Com- 2011 (minutes No. 172) amended the regulations. long-term prospects, plays a major part in determining the pany’s management and establishing motivation for their Company’s strategic goals, developing priority areas of its successful work. The Committee is formed of the members Audit Committee operations, preparing recommendations for the Company’s of the Supervisory Board who have professional experience The Audit Committee was established based on the res- dividend, credit, investment and integration policy, evaluat- in internal control, audit, finance, accounting and financial olution of the Supervisory Board of April 20, 2010 (minutes ing the Company’s operations in long-term prospects. institute management. No. 159) in order to analyse and support the procedures The members of the Strategic Planning Committee have The members of the Compensations and Appointments for internal control, audit, financial reports and risks associ- been elected based on the resolution of the Supervisory Committee have been elected based on the resolution of ated with complete disclosure of information. The Commit- Board of July 25, 2011. the Supervisory Board of July 25, 2011. tee is formed out of the members of the Supervisory Board Members of the Strategic Planning Committee: Members of the HR ad Remunerations Committee: who have professional experience in internal control, audit, Chairman of the Committee: Chairman of the Committee: finance, accounting and financial institute management. Alexander Alikhanovich Akhpolov; Yakov Moiseevich Urinson; The members of the Audit Committee have been elect- Members of the Committee: Members of the Committee: ed based on the resolution of the Supervisory Board of July Fyodor Borisovich Andreev Alexander Alikhanovich Akhpolov; 25, 2011. Yegor Afanasyevich Borisov; Sergey Vladimirovich Barsukov; Members of the Audit Committee: Galina Innokentyevna Danchikova; Viktor Petrovich Efimov; Committee Chairman: Sergey Konstantinovich Dubinin. Evgeniya Vasilyevna Grigoryeva. Anatoly Vladimirovich Tikhonov; Members of the Committee: Gennady Fyodorovich Alekseev; Sergey Vladimirovich Barsukov; Lyubov Konstantinovna Dzhabrailova; Vladimir Borisovich Rybkin.

44 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management Meetings of the Supervisory Board held in 2011

In 2011, 11 corporate events have been and Auditing Committee at the Company’s SA in the lists of candidates to be voted at held, including three meetings and eight annual general meeting of shareholders in the extraordinary general meeting of share- absentee votings of the Supervisory Board. 2011. holders of OJSC ALROSA for election to In particular, the following issues have 8. On the status of the implementation the Supervisory Board of OJSC ALROSA been considered: of the activities under the Plan for transfer and on approval of the format and wording 1. On approval of the Contract for Social of housing and recreational facilities that are of the ballots for voting at the extraordinary and Economic Development of the Repub- currently serviced and owned by ALROSA general meeting of shareholders of OJSC lic of Sakha (Yakutia). Co. Ltd. to the services and ownership of ALROSA. 2. On approval of the new draft version the municipal entities of the Republic of 15. On approval of the draft Regula- of the Company’s Charter and on propos- Sakha (Yakutia). tions On Reimbursement to the Members als for the extraordinary general meeting of 9. On convocation of the extraordinary of the Supervisory Board of OJSC ALRO- shareholders of ALROSA Co. Ltd. related to general meeting of shareholders of OJSC SA and on proposals to the annual gen- the approval of the new versions of the regu- ALROSA. eral meeting of shareholders of OJSC AL- lations on management and control bodies. 10. On introduction of items in the agen- ROSA regarding the approval of this draft 3. On convocation of the extraordinary da of the annual general meeting of share- Regulations. general meeting of shareholders of ALRO- holders of OJSC ALROSA and on proposal 16. On amendment of the Company’s SA Co. Ltd. to the annual general meeting of sharehold- regulatory documents due to the changed 4. On approval of the program for the in- ers of OJSC ALROSA to pass a resolution type of the joint stock company and novation development of ALROSA Co. Ltd. for splitting the outstanding shares. changed name of the Company. for the period of 2011–2018. 11. On convocation of the annual gen- 17. On election of the Chairman, First 5. On enhancement of informational eral meeting of shareholders of OJSC AL- Deputy and Deputy Chairman of the Su- transparency of the purchasing activities of ROSA. pervisory Board of OJSC ALROSA. ALROSA Co. Ltd. 12. On preliminary approval of the an- 18. On the committees under the Su- 6. On introduction, as proposed by nual report of OJSC ALROSA. pervisory Board of OJSC ALROSA. shareholders of ALROSA Co. Ltd., of the 13. On approval of the additional agree- 19. On approval of the Resolution for issues into the agenda of the annual gen- ment to the Contract between the Com- issue of shares of the Open Joint Stock eral meeting of shareholders of ALROSA pany and the Government of the Republic Company ALROSA. Co. Ltd. in 2011. of Sakha (Yakutia) for social and econom- 20. On approval of the Emission Pro- 7. On introduction of the candidates ic development of the Republic of Sakha spectus of OJSC ALROSA. proposed by shareholders of ALROSA Co. (Yakutia). 21. On approval of the regulations on Ltd. in the lists of candidates to be voted 14. On introduction of the candidates branches and representative offices of on for the election to the Supervisory Board proposed by shareholders of OJSC ALRO- OJSC ALROSA.

45 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management 22. On approval of the adjusted consoli- with justification of the calculation of the 37. On approval of the Regulations for The amount of remunerations paid in dated budget of OJSC ALROSA for 2011. primary (maximum) price. Dividend Policy in OJSC ALROSA. 2011 to members of the Company’s Su- 23. On innovation development and 30. On approval of the Regulations for 38. On approval of the donation agree- pervisory Board totals RUB 8,336,000. (In technical upgrade of OJSC ALROSA. Representation of Interests of OJSC AL- ment concluded in 2011 between OJSC 2010, no remunerations were paid to the 24. On reports on the results of pur- ROSA with the Management and Control ALROSA and non-profit organisation (fund) Company’s Supervisory Board). chasing activity in OJSC ALROSA (quar- Bodies of the Business Companies OJSC Target Fund for Future Generations of the The Company did not bear any expense terly). ALROSA Holds Shares / Interest In. Republic of Sakha (Yakutia). (personnel recruitment, charitable support, 25. On engagement of a strategic inves- 31. On approval of the Regulations for 39. On approval of the interested party transportation expenses, etc.) upon the ini- tor to OJSC GMK Timir. Disclosure of Information by OJSC AL- transactions. tiative of the members of the Supervisory 26. On approval of the Regulations for ROSA. 40. On changes in membership of the Board. Measures Aimed to Prevent Using Insider 32. On approval of the Regulations for Executive Committee of OJSC ALROSA. The Company did not extend any loans Information and / or Manipulating the Market Information Co-operation between OJSC The annual general meeting of share- to members of the Supervisory Board. in OJSC ALROSA. ALROSA and other users of the Cross- holders of OJSC ALROSA of June 30, 27. On approval of the mutual co-oper- Industry Portal for State Property Manage- 2011, minutes No. 27, passed a reso- ation agreement between OJSC ALROSA ment (MV Portal) with regard to exchange lution for payment of the remuneration and municipal entity Kobyaysky ulus (dis- of information and legally relevant docu- for work in the Supervisory Board within trict) in the Republic of Sakha (Yakutia). ments. corporate periods (years) from June 20, 28. On carrying out the measures aimed 33. On approval of the Regulations for 2009 to June 25, 2010 and from June to reduce the costs of purchasing goods Current Incentives to the President of OJSC 26, 2010 to June 25, 2011 to members (works, services) per unit of product. ALROSA. of the Supervisory Board of OJSC ALRO- 29. On approval of the primary (maxi- 34. On approval of the consolidated SA who are not state or municipal offi- mum) price for auditor services required to budget of OJSC ALROSA for 2012. cers, sole executive body or a member of hold an open tender For the Right to Con- 35. On priority areas of activity, on en- a plural executive body of OJSC ALROSA clude the Contract for Mandatory Annual hancement of the investment appeal of the in the amount determined in accordance Audit of the Accounting / Financial state- shares of OJSC ALROSA. with the Regulations On Remuneration ments of OJSC ALROSA for 2012 pre- 36. On approval of the Regulations for to Members of the Supervisory Board of pared in accordance with Russian laws, Purchasing in OJSC ALROSA. OJSC ALROSA.

46 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management Auditing Committee

In accordance with the Charter of OJSC ALROSA, five 4. Alexander Vladimirovich MASLENNIKOV – Head, members shall be elected to the Company’s Auditing Com- Section for the Development of Traditional Sectors and mittee. Markets, the Department for the Development of Economic Members of the Auditing Committee of OJSC ALROSA Sectors, the Ministry of Economic Development of the Rus- elected by the annual general meeting of shareholders of sian Federation; OJSC ALROSA on June 30, 2011: 5. Sargylana Nikolaevna YAKOVLEVA – First Deputy 1. Andrey Vladimirovich GLINOV–Deputy Director of the Minister of Property and Land Relations of the Republic of Administrative Department of the Ministry of Finance of the Sakha (Yakutia). Russian Federation, Chairman of the Auditing Committee; 2. Evgeny Sergeevich BORISOVSKY – Lead Specialist- The amount of the remunerations received by the Expert in the Section of Infrastructure Branches and Military members of the Auditing Committee and Industrial Complex Organisations Management, the In 2011, the annual general meeting of shareholders of Federal Agency for the State Property Management; OJSC ALROSA did not pass any resolution on payment 3. Alexey Valeryevich KUKLIN – First Deputy Minister of of remuneration to members of the Auditing Committee Finance of the Republic of Sakha (Yakutia); and compensation of their expenses related to their performance of the functions of the members of the Auditing Committee.

47 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management Executive Committee

The Company’s Executive Committee consists of 19 Executive Committee ing of Mineral Deposits, with a Diploma in Civil Engineering members. of OJSC ALROSA and Mining Engineering. The members of the Executive Committee are entitled 1. Igor Vitalyevich Sobolev From 1980 to 1981 worked as apprentice mine shaft to salaries, bonuses, voluntary medical insurance, compen- First Vice President – Executive Director sinker, mine shaft sinker in Gorlovka Mine Construction Di- sations for their performance of the responsibilities of the vision. From 1982 to 1992 he worked as shift foreman in members of the Board of Directors in individual companies Assumed the office on January 1, 2012. Norilsk Specialised Mine Construction Division within the of ALROSA Group. Salaries and bonuses paid to members Born on November 16, 1969, in Kimovsk, Tula region. structure of the Shakhtspetsstroy Specialised Mine Con- of the Company’s Executive Committee are determined in In 1993 graduated from the Tula State Technical Uni- struction Trust, from 1992 to 1997: Supervising foreman accordance with the conditions of employment contracts. versity with a Diploma in Mining Engineering Construction, of the skip shaft in Norilsk Specialised Mine Construc- The total amount of remuneration paid to members of the specialising in Mine and Underground Construction. tion Division within the structure of the Shakhtspetsstroy Company’s Executive Committee totalled RUB 617 million From 1987 to 1992 worked at coal mines in the Tula Specialised Mine Construction Trust, Chief Engineer of the and RUB 308 million in 2011 and 2010 respectively. region (Novomoskovsk). Management Department of the Norilsk Specialised Mine From 1993 to 2000, worked as shot firer at Norilsk Min- Construction Division within the structure of the Shakht- Sole Executive Body ing and Metallurgical Company, Deputy Chief Engineer at spetsstroy Specialised Mine Construction Trust. President of OJSC ALROSA – the Norilsk Mine Constructing Division. From 1997 has been working in ALROSA. First two Chairman of the Executive Committee In 2000 he was appointed Head of the Capital Con- years worked as Deputy Chief Engineer for Specialised Fyodor Borisovich Andreev struction Division in the Mining and Metallurgical Directorate Works in the Mirny specialised Mine Construction Division, President of OJSC ALROSA – Chairman of the of the Transpolar Branch of OJSC MMC Norilsk Nickel. Chief Engineer of the International Underground Mine of the Executive Committee From 2007 was Head of the Capital Construction Divi- Mirny Mining and Processing Division. sion (CCD) in ALROSA. From 1999 to 2001: Head of the Mirny specialised Mine Assumed the office on July 15, 2009. From January 01, 2012 – First Vice President – Execu- Construction Division of ALROSA, from 2001 to 2003: Born on August 16, 1966 in Voronezh. tive Director of OJSC ALROSA. Managing Director of the Mirny specialised Mine Construc- In 1989 graduated from the Leningrad State University Period of authority under the employment contract: till tion Trust. with a Diploma in Political Economy. December 31, 2016. In June 2003 was appointed Chief Engineer of the Mirny 2002–2003: First Vice President of ALROSA, was in Does not hold any shares in OJSC ALROSA. Mining and Processing Division. charge of economics and finance From 2007 to 2010: Chief Engineer – First Deputy Direc- 2003–2005: Vice President of OJSC RZhD 2. Andrey Vasilyevich Pismenny tor of Yakutniproalmaz Institute in ALROSA. 2005–2009: Senior Vice President of OJSC RZhD, was In December 2010 appointed Chief Engineer of ALRO- Chief Engineer responsible for the company’s economic and financial pol- SA. icy Assumed the office on December 2, 2010. Period of authority under the employment contract: till From July 15, 2009 – President of ALROSA. Born on February 8, 1960, in Nizhny Tagil, Sverdlovsk December 01, 2014. Period of authority under the employment contract: till region. Does not hold any shares in OJSC ALROSA. July 14, 2014. In 1982 graduated from the Plekhanov Leningrad Min- The share of ordinary shares of OJSC ALROSA held – ing Institute with a Diploma in Construction of Underground 0.11%. Structures and Mines; in 2005 graduated from the Irkutsk Plural Executive Body State Technical University, specialising in Underground Min-

48 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management 3. Yuri Andreevich Doynikov 1976 to 1982: Secretary of the CPSU Committee of From 2002 to 2007: Director of the Supplies and Logis- Vice President the Mirny Motor Transport Division, Secretary of the CPSU tics Division of ALROSA. Assumed the office on January 1, 2012. Committee of the Mir mine within the Yakutalmaz Group. From 2007 to 2008: Director of CJSC ALROSA Hotels. Born on September 27, 1955, in Dymok, Nyurba district 1982 to 1984: Head of the Mirny Motor Roads Division From July 1, 2008 appointed Vice President of ALROSA. YaASSR. within the Yakutalmaz Group. Period of authority under the employment contract: till In 1981 graduated from Irkutsk Polytechnic Institute with 1984 to 1991: Head of the Administrative and Planning January 31, 2013. a qualification in Methods and Integrated Mechanisation of Section, Second Secretary, First Secretary of the Mirny City The share of ordinary shares of OJSC ALROSA held – Surface Mining, Mining Engineer. Committee of the Communist Party of the Soviet Union. 0.0004%. Later on graduated from the Academy of National Econ- 1991 to 1993: Deputy Head of Social Issues and Con- omy under the Government of the Russian Federation with sumer Services within PNO Yakutalmaz. 6. Yury Konstantinovich Okoyomov a qualification in Economic Management. 1993 to 1995: Director, HR and Social Policies, JSC Vice President From 1986 worked as Chief Engineer, Chief of Capital Almazy Rossii – Sakha Mining Operations Department in the Aikhal Construction From 1995 till the present: Vice President of ALROSA. Assumed the office on August 6, 2009. and Assembly Division, Head of the Jubilee open-pit mine In charge of the issues related to the Company’s social and Born on January 1, 1962, in Kazachye, Verkhoyansky at the Aikhal Mining and Processing Division of ALROSA, HR policy. district, Yakutia ASSR. In 1979 graduated from the Spe- Deputy Director for Production at the Aikhal Mining and Period of authority under the employment contract: for cialised Physics and Mathematics School in Verkhnevily- Processing Division. an indefinite period. uisk, YaASSR. In 1985 graduated from the Moscow State In February 2000 was appointed Director of the Aikhal The share of ordinary shares of OJSC ALROSA held – Institute of Steel and Alloys with a qualification in Physics Mining and Processing Division. 0.0007%. of Metals, in 1996 graduated from the Academy of National From 2002 worked as Director of the Mirny Mining and Economy under the Government of the Russian Federation Processing Division. 5. Vladimir Pavlovich Tkachenko with a qualification as Executive Manager. From March 01, 2007 – First Vice President – Executive Started his career in 1985 as a senior laboratory as- Vice President Director of ALROSA. sistant in the Institute of Physics and Technology Problems From January 01, 2012 – Vice President, supervises Assumed the office on July 1, 2008. of the North, the Yakut branch of the Siberian Division of construction of underground mines. Born on January 1, 1956, in Ulyanovka, Bogodukhov the Academy of Sciences of the USSR, where he worked Period of authority under the employment contract: till district, Kharkov region. till 1992. September 27, 2015. In 1980 graduated from the Odessa Tehnical School of From 1992: expert, senior expert in the Diamond Instru- The share of ordinary shares of OJSC ALROSA held – Metrology, in 1987 graduated from the Plekhanov Mos- ments Section of JSC Tuimaada Diamond. 0.0018%. cow Institute of National Economy with a qualification as 1992 to 1993: Head of Monocrystal Instrument Section, Planner; in 2002 graduated from the Academy of National Technical Director of JSC Sakha Diamond. 4. Ivan Kirillovich Demyanov Economy under the Government of the Russian Federation 1993 to 2000: First Deputy – Director of Yakutsk Dia- (the Business Economics and Management Program). mond Trading Enterprise (YaPTA) of ALROSA. Vice President From 1980 to 1993 worked on different positions, from 2000 to 2009: Director General of the Unified Selling Assumed the office on October 26, 1995. shaft sinker to head of machinery repair and maintenance Organisation of ALROSA. Born on June 5, 1942, in Ilovka, Belgorod region. shop within the Yakutsk Geological Division. From August 6, 2009 – Vice President of ALROSA. In Graduated from the Vilyui Energy Construction Technical From 1993 to 1997: Head of Ancillary Operations and charge of the Company’s sales policy. School in 1971 with a qualification as Mechanical Techni- Procurement in Aikhal Construction and Assembly Division Period of authority under the employment contract: till cian and Khabarovsk Higher CPSU School in 1982. of ALROSA. August 6, 2012. In 1964 to 1976 worked in the Mirny Motor Transport From 1997 to 2002: Head of the Mirny unit within the The share of ordinary shares of OJSC ALROSA held – Division, Yakutalmaz Group, where worked his way from a Supplies and Logistics Division of ALROSA, Deputy Head 0.0073%. driver up to deputy chief engineer for production. of Director of the Supplies and Logistics Division of AL- ROSA.

49 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management 7. Igor Mikhaylovich Kulichik From 1996 to 1997: Deputy Head, Regional Banks From 1998 to January 2002 worked as First Depu- Vice President – Financial Director Methodology and Control Department, ONEXIMBank. ty Head of Mirny District Administration, the Republic of Assumed the office on August 10, 2009. From 1997 to 2001: Chairman of the Board of Directors Sakha (Yakutia). Born on April 5, 1967, in Brest. In 1990 graduated from of OJSC Komiregionbank Ukhtabank (Komi Republic). From 2002 to 2007: Deputy Chairman of the Govern- the Ordzhonikidze Moscow Aviation Institute with a qualifi- From 2001 to August 2002 worked as Vice President in ment of the Republic of Sakha (Yakutia). cation as Mechanical Engineer; in 1992 graduated from the charge of regional development in OJSC Bank Petrocom- From March 15, 2007 to December 19, 2009: First Vice Zhukovsky Air Force Engineering Academy with a qualifica- merce Chairman of the Government of the Republic of Sakha (Ya- tion as Engineer-Mathematician. 2003 to 2004: Head of Treasury Department in OJSC kutia). In 1992 – junior research assistant in the Civil Defence RZhD. From December 22, 2009 appointed Vice President of Institute within the structure of the RF Ministry for Civil De- From 2004 to 2009: President of OJSC TransCredit- ALROSA. In charge of the issues related to liaising with fence, Emergency Situations and Disaster Relief. Bank. governmental authorities and licensing activities. 1992 to 1996: economist, Interbank Payments, head, From January 25, 2010 – Vice President of ALROSA in Period of authority under the employment contract: till Bank Resources, Head, Treasury, Deputy CEO of MF Joint charge of the issues related to operations of subsidiaries December 30, 2012. Stock Commercial Bank Tveruniversalbank. and affiliates, development of the Company’s projects in Does not hold any shares in OJSC ALROSA. 1996 to 1998: Deputy Chairman of the Board of Direc- Africa. tors of Commercial Bank Reserve Funds Corporation Bank. Period of authority under the employment contract: till 10. Elena Leonidovna Timonina 1998 to 2002: CEO-Chairman of the Board of Directors, January 24, 2015. Chief Accountant Commercial Bank Reserve Funds Corporation Bank. The share of ordinary shares of OJSC ALROSA held – 2002 to 2006: Head of Treasury in ALROSA. 0.0563%. Assumed the office on January 17, 2011. 2006 to 2009: Chief Treasurer – Financial Director of In 1983 graduated from the Economics Department of ALROSA. 9. Vasily Borisovich Grabtsevich the Lomonosov Moscow State University with a qualifica- From August 10, 2009: Vice President – Chief Financial tion as Economist. Vice President Officer of ALROSA. From 1993 to 1994: Deputy Chief Accountant in JSFC Period of authority under the employment contract: till Assumed the office on December 22, 2009. Sistema. August 11, 2012. Born on May 9, 1950, in Nedoika, Buda-Koshelevsky From 1994 to 2002: Chief Expert in Accounting Services Does not hold any shares in OJSC ALROSA. district, Gomel region. Department of Arthur Andersen International B. V. In 1972, graduated from the Tomsk Institute of Civil From 2002 to 2011: Manager in the Accounting Ser- 8. Sergey Nikolaevich Pushkin Engineering with a qualification as Civil Engineer, in 1998 vices Department of Ernst and Young (CIS) B. V. (Moscow). graduated from the Academy of National Economy under From 1998 is a Member of Professional Accountants Vice President the Government of the Russian Federation. Executive Man- Institute, from 2010 is a member of the Audit Chamber of Assumed the office on January 25, 2010. ager. Russia. Born in 1967. From 1976 to 1998 worked in Vilyuygesstroy Construc- Period of authority under the employment contract: till In 1990 graduated from the Moscow Institute of Physics tion Division and Yakutalmaz Production Association as January 16, 2015. and Technology (Aerodynamics and Flying Engineering De- senior engineer, chief engineer of the Vilyuygesstroy Con- Does not hold any shares in OJSC ALROSA. partment); in 1992 – the Zhukovsky Air Force Engineering struction Division, deputy head of Mirnyenegropromstroy Academy, Aircraft and Engines department. Construction Division, Deputy General Manager and Chief From 1992 to 1996 worked in Tveruniversalbank as Engineer of the Mirny Construction and Assembly Unit Head of Interbank Payments of the Moscow Branch of within the Capital Construction Division of ALROSA. Tveruniversalbank, Director of Interbank Payments Centre, From 1986 to 1990, Mr. Grabtsevich worked in Cuba, Director of Accounts and Trading Department. building energy generating facilities there.

50 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management 11. Valery Petrovich Serov From 1998 to 2003: Deputy Managing Director for 14. Igor Anatolyevich Uvarov Chief Geologist Economy of Almaztekhmontazh Trust, Capital Construction Director of Nyurba Mining and Processing Assumed the office on February 01, 2011. Division of ALROSA, Deputy Head of Labour and Salary, Division Born on July 18, 1957, in Kalush, Ivano-Frankovsk re- ALROSA. Assumed the office on May 16, 2011. gion, Ukraine. From 2003 to 2011: Head of Economic Planning De- Born on July 24, 1966, in Almalyk, Tashkent region. In 1980 graduated from the Moscow Geological Explo- partment in ALROSA. In 1991 graduated from the Irkutsk Polytechnical Insti- ration Institute with a qualification in Geological Surveying, From April 2011 – Head of Strategic Planning and Bud- tute; in 2004 graduated from the Saint Petersburg Insti- Mineral Prospecting and Exploration. geting Department of ALROSA. tute of Accelerated Education for Top Executives; in 2010 From 1974 to 1975: collector in Chief Geologist’s De- Period of authority under the employment contract: for graduated from the Irkutsk State Technical University with partment of the Kalush Chemical and Metallurgic Plant. an indefinite period. Diplomas in Mining and Economic Management. From 1980 to 1993: geologist, senior geologist, chief Does not hold any shares in OJSC ALROSA. From 1981 to 1984: worker at Geochemical Group of geologist in Upper-Akakit prospecting team of the Aikhal PO Yakutskgeologiya, apprentice electrician, NPO Sibtsvet- Exploration Expedition. 13. Leonid Fyodorovich Tolpezhnikov metalavtomatika. From 1993 to 1994: chief geologist at Jubilee open pit From 1989 to 1991: assistant shovelman, Aikhal Mining Head of Analytical Department within the structure of Aikhal Mining and Processing Divi- and Processing Division. sion. Assumed the office on August 30, 2010. From 1991 to 2001: mining foreman at Jubilee open-pit From 1994, chief geologist at Amakinskaya Exploration Born on November 19, 1960, in Drezna, Orekhovo-Zu- mine, Aikhal Mining and Processing Division. Expedition. evo district, Moscow region. From 2001 to 2007 worked as chief engineer at Jubi- In February 2011 appointed chief geologist of the AL- In 1983, graduated from the Bauman Moscow Higher lee and Komsomolskaya open-pit mines, Aikhal Mining and ROSA Co. Ltd. Technical School with a qualification in Aerospace Engi- Processing Division. Period of authority under the employment contract: till neering, qualified as Mechanical Engineer. In 2007 appointed head of the Jubilee open-pit mine. January 31, 2014. From 1983 to 1989: design engineer in NPO Energia. From 2008 to 2010: Depute Executive Director for pro- Does not hold any shares in OJSC ALROSA. From 1989 to 1993: senior engineer, engineer, lead en- duction, ALROSA; Deputy Chief Engineer, ALROSA. gineer, deputy head of a section within the structure of the From 2010 to 2011: Deputy Chief Engineer for produc- 12. Dmitry Arturovich Voyan Committee for Precious Metals and Gems of the Ministry tion, ALROSA. of Finance of the Russian Federation. From May 2011 – Director of Nyurba Mining and Pro- Head of Strategic Planning and Budgeting From 1993 to 1994: Deputy Director of the Diamond cessing Division, ALROSA. Department Centre in JSC Almazy Rossii – Sakha. Period of authority under the employment contract: for Assumed the office on April 18, 2011. From 1994 to 2000: Director of the Analytical Centre of an indefinite period. Born on July 2, 1961, in Skovorodino, Amur region. the joint stock company ALROSA. Does not hold any shares in OJSC ALROSA. Graduated from the Krasnoyarsk Institute of Soviet From 2000 to 2004: Head of the Precious Metals and Trade, the Academy of National Economy under the Gov- Gems Department in the Ministry of Finance of the Russian ernment of the Russian Federation. Economist. PhD in Federation. Economics. From 2004 to 2010: Deputy Director of the Adminis- From 1980 to 1982: worker at S. Ordzhonikidze Baltic trative Department within the structure of the Ministry of Factory (Leningrad), soldier of the Soviet Army. Finance of the Russian Federation. From 1989 to 1996 worked as Head of Economic Plan- In August 2010 appointed Head of Analytical Depart- ning Division, Vostoktekhmontazh Mirny Administration of ment of ALROSA. Montazhspetsstroy Corporation, Deputy General Director PhD in Economics. for Finance and Investments Economy, Chief Accountant Period of authority under the employment contract: for of OSJC Vostoktekhmontazh (Mirny). an indefinite period. From 1996 to 1998: Financial Director of OJSC Vostok- Does not hold any shares in OJSC ALROSA. tekhmontazh.

51 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management 15. Dmitry Vladimirovich Mostovov Mine; head of dredge, chief engineer of the Irelyakh open 18. Alexander Sergeevich Chaadaev Director of Mirny Mining and Processing Division pit mine; head of the Irelyakh alluvial mine within the struc- Director of Yakutniproalmaz Institute Assumed the office on September 1, 2007. ture of the Mirny Mining & Processing Division. Assumed the office on April 5, 2007. Born on June 28, 1957, in Yuzhny, Nagabaisky district, In 2007 appointed Director of Aikhal Mining and Con- Born on September 8, 1960, in Yakutsk (Republic of Chelyabinsk region. centration Division of ALROSA. Sakha (Yakutia)). In 1979 graduated from the Magnitogorsk Mining and Period of authority under the employment contract: for In 1982 graduated the Tyumen Construction Engineer- Metallurgical Institute with a qualification in Methods and an indefinite period. ing Institute with a qualification as Construction Engineer Integrated Mechanisation of Surface Mining. Does not hold any shares in OJSC ALROSA. specialising in Industrial and Civil Construction Engineering; From 1982 to 2000 worked at Udachny Mining and in 2001 graduated from the Financial Academy under the Processing Division at various positions: road maker, mine 17. Alexander Fyodorovich Makhrachev Government of the Russian Federation with a qualification foreman, deputy head of Udachnaya open-pit mine, head in Finance and Credit. Director of Udachny Mining and Processing of drill site. From 1985 to 1998 worked in Udachny Mining and Pro- Division In 2000 appointed Chief Engineer of Jubilee open-pit cessing Division PNO Yakutalmaz and ALROSA as senior mine, Aikhal Mining and Processing Division of ALROSA, Assumed the office on March 18, 2008. mechanical engineer and deputy head, production depart- then Head of Jubilee open-pit mine, Deputy Head for Pro- Born on October 31, 1956, in Aleysk state farm, Aleysk ment of the Jubilee Alluvial Mine Management, chief engi- duction at Komsomolsky open-pit mine. district, Altay region. neer of the of the Jubilee Alluvial Mine Management. From 2006 has been working in Mirny Mining and Pro- In 1979 graduated from the Moscow Institute of Steel From 1998 to 2007: Deputy Director in Capital Con- cessing Division as Deputy Chief Engineer for Underground and Alloys with a qualification as Metallurgical Engineer. struction Division (CCS) for Economics; Chief Engineer of Mine Construction, Deputy Director for Production. In 1996 he took a refresher training course under the this Division, then Director of CCD in ALROSA. From September 1, 2007 – Director of Mirny Mining and program General Management of a Mining Enterprise in From 2007 Director of Yakutniproalmaz Institute. Processing Division of ALROSA. Free Market Conditions in the Academy of National Econ- PhD in Economics. Period of authority under the employment contract: for omy under the RF Government. In 2007 he received his Period of authority under the employment contract: for an indefinite period. second higher education at the Moscow State Mining Uni- an indefinite period. Does not hold any shares in OJSC ALROSA. versity, qualifying as Mining Engineer. The share of ordinary shares of OJSC ALROSA held – In 1979–1997 he started his career with the Udachny 0.0004%. 16. Ravil Shamilyevich Sanatulov Mining & Processing Division as a mechanical engineer, section foreman, process engineer and head process en- The amount of remuneration paid to members of the Director of Aikhal Mining and Processing Division gineer of the Division. Company’s Executive Committee in 2011 totalled RUB Assumed the office on September 27, 2007. From 1997 to 2005: Deputy Chief Ore Dressing Engi- 627,128,000. Born on May 22, 1963, in Chulman, Neryungrinsky dis- neer, Chief Ore Dressing Engineer of ALROSA. trict, YaASSR. In 2005 appointed Deputy Executive Director for pro- The amount of remuneration paid to the members of In 1986 he qualified as mining engineer with the Irkutsk duction of ALROSA. the Supervisory Board and members of the Company’s Polytechnic Institute with a diploma in Methods and Inte- From 2008 till the present: Director of Udachny Mining Executive Committee in 2011 is disclosed on the Com- grated Mechanisation of Mineral Development. and Processing Division of ALROSA. pany’s official web site as part of the quarterly report In 1986 he held different positions with PNO «Ya- Period of authority under the employment contract: for of OJSC ALROSA, the issuer, for 4Q 2011. kutalmaz», later ALROSA, as mining machinery mainte- an indefinite period. nance engineer, the Irelyakh open pit mine of the Mirny The share of ordinary shares of OJSC ALROSA held – 0.0029%.

52 ALROSA • ANNUAL REPORT | www.alrosa.ru Corporate Management Dividend Policy

Profit Distribution

53 ALROSA • ANNUAL REPORT | www.alrosa.ru In accordance with the current legislation, the Charter, The profit shall be used in accordance with the distribu- the Regulations on Dividend Policy of OJSC ALROSA, the tion approved by the shareholders’ meeting. Regulations on Remuneration to Members of the Supervi- It is proposed to distribute the net profit of OJSC AL- sory Board of OJSC ALROSA, net profit may be allocated ROSA in the amount of RUB 29,519 million based on 2011 to payment of dividends on shares, establishing a reserve results in the following way: fund, payment of remuneration to members of the Super- • RUB 7,438.6 million for payment of dividend on shares; visory Board. • RUB 22,080.4 million represent the profit remaining in The resolution of the general meeting of shareholders the Company (before payment of remuneration to mem- of June 30, 2011 approved the following distribution of net bers of the Supervisory Board). profit received based on 2010 results and amounting to RUB 8,777.2 million: • RUB 1,833.2 million for payment of dividend on shares; • RUB 8.3 million for payment of remuneration to members of the Supervisory Board; • RUB 6,935.7 million represent the profit remaining in the Company;

Dividend History of ALROSA

Amount of dividend, RUB 2 Share of net profit Year 1 Accrued, RUB million Paid , RUB million (calculated per 1 ordinary share) allocated to dividends, %

for 2006 0.30 2,240.0 2,240.0 14.4

for 2007 0.30 2,240.0 2,240.0 15.8

for 2008 0 0 0 0

for 2009 0.03 249.9 249.5 10.6

for 2010 0.25 1,833.2 1,828.2 20.9

for 2011 (recommended amount) 1.01 7,438.6 25.2

1 Under comparable conditions, based on 7,364,965,630 ordinary shares with a par value of 50 kopecks. 2 Dividends have not been paid in full due to shareholders’ failure to provide accurate and complete information required for receipt of dividends (wrong bank details, missing bank details, wrong postal addresses, return of postal transfers).

54 ALROSA • ANNUAL REPORT | www.alrosa.ru PROFIT DISTRIBUTION Dividend Policy

The resolution of the Supervisory Board of OJSC ALROSA of December 20, 2011 (minutes No. 177) approved the Regulations On Dividend Policy of OJSC ALROSA. passing resolutions on payment of dividend. In accordance with the Regulations on ALROSA based its dividend policy on • enhanced Company’s investment ap- Dividend Policy, the amount of dividend rec- the following principles: peal and capitalisation; ommended by the Company’s Supervisory • balance of the Company’s and share- • compliance with the shareholder rights Board to the Company’s General Meeting holders’ interest in determining the provided for in the current legislation of of Shareholders is determined based on the amount of dividends as well as balance the Russian Federation, the Company’s fact that the amount of funds allocated to between the short-term interests of the Charter and its internal documents; payment of dividend may not be less than shareholders (gaining profit) and long- • transparency of dividend calculation 10% of the Company’s net profit calculated term interest (Company development and payment mechanisms the Com- based on accounting reports prepared in and capitalisation growth); pany’s Supervisory Board and General accordance with the norms of Russian leg- • maintenance of the required financial Meeting of Shareholders consider in islation. status, ensuring the Company’s devel- preparing recommendations for de- opment prospects; termining the amount of dividend and

Accrual and payment of dividend to main shareholders RUB million Russian Federation Republic of Sakha (Yakutia) Administration of Uluses of SR (Ya) Other shareholders Total year accrued paid out accrued paid out accrued paid out accrued paid out accrued paid out

2006 828.8 828.8 716.8 716.8 179.2 179.2 515.2 515.2 2,240.0 2,240.0

2007 828.8 828.8 716.8 716.8 179.2 179.2 515.2 515.2 2,240.0 2,240.0

2008 based on 2008 results, dividends were not accrued and not paid

2009 127.2 127.2 80.0 80.0 20.0 20.0 22.7 22.3 249.9 249.5

2010 933.5 933.5 586.6 586.6 146.7 146.7 166.3 161.4 1,833.2 1,828.2

55 ALROSA • ANNUAL REPORT | www.alrosa.ru PROFIT DISTRIBUTION Report on Accomplishment of Missions 2011

56 ALROSA • ANNUAL REPORT | www.alrosa.ru Mission Accomplishment Comments

ALROSA consolidated its leadership in diamond mining achieved in 2010 and became the only large diamond produc- Maintain leadership in the world diamond market accomplished er not to reduce its production volume.

Sales of rough and polished diamonds on the terms of transparency and Focus on sales of the major portion of rough diamonds based on long-term agreements and suspension of tenders long-term agreements; increase in sales through special auctions and accomplished due to sharp decline in market activity in the 2nd half-year of 2011 allowed to retain the prices and reach historic maxi- tenders mum in sales.

Investments planned for the implementation of the projects involving construction of the Mir, Aikhal and Udachny un- The implementation of strategic investment projects for construction of derground mines in 2011 total 99.6% of the plan. the Aikhal and Udachny underground mines so that the Company could accomplished In December 2011, construction of the facilities within Stage 1 of Start-Up Complex II at the Mir underground mine has maintain its diamond mining output been completed; the lag against the Udachny underground mine construction schedule has been eliminated; construction of the Aikhal underground mine is carried out in accordance with the schedule.

The resolution of the extraordinary general meeting of shareholders of ALROSA Co. Ltd. of April 5, 2011 (minutes No. Implementation of corporate measures aimed at changing the type of AL- accomplished 26) approved the new version of the Charter of OJSC ALROSA that provides for changing the type of the joint stock ROSA from a closed joint stock company to an open joint stock company company (from a closed joint stock company to an open joint stock company).

Cost control, enhancement of economic efficiency of ALROSA through Development and implementation of organisational and technical measures for reduction of operational costs under the the implementation of an energy-saving program, increased productivity accomplished Energy-saving program, continuous control over production costs allowed to increase the sales profitability parameter and sale of non-core assets by 9.6% to 2010 (1.8% to the planned level).

An agreement on general principles for co-operation with strategic partner Evraz has been signed; approval from the Engaging external investor for iron ore project of GMK Timir in order to Federal Anti-Monopoly Service of Russia, Anti-Monopoly Committee of the Ukraine and European Commission has accomplished improve the efficiency of ALROSA’s business been obtained; and market value of the asset assessed. The transaction will be closed in 1st half-year 2012.

In 2011, licenses were obtained for exploration of subsurface resources in the Muogdansky and Verkhne-Chukuksky Participation in auctions for obtaining new licences for prospecting and areas, exploration and mining of primary deposits Verkhne-Munskoe, Mayskoe, the Dalnyaya Pipe and alluvial deposits development of new deposits that allow to replenish the Company’s min- accomplished Ruchey Gusiny and the River Ebelyakh; the state certificate for opening new deposit of the Zarya pipe was received. eral resource The aggregate growth of reserves amounted to 29.7 million carats and the estimated P1 category reserves totalled 46.9 million carats.

The long-term development plan for ALROSA for 2012 to 2021 has been developed. Approval of ALROSA’s long-term plan up to 2021 not accomplished The date of its review by the Company’ Executive Committee has been rescheduled to 1Q 2012.

Development of social programs for mortgage loan provision to employ- The resolution of the Executive Committee of OJSC ALROSA approved the Program for Mortgage Credit Lending to ees and compensation of the bank interest rates, support to mothers and accomplished Employees of ALROSA and Regulations for Reimbursement of the Employees of ALROSA for expenses related to pay- children through purchasing specialised equipment for health institutions ment of the accrued interest on mortgage loans obtained in KB MAK-Bank (LLC) for purchasing residential premises.

ALROSA’ debt in 2011 has been reduced from USD $3,130.0 million down to USD $2,865.9 million, i.e. by USD Optimisation of debt liabilities within the framework of the Company’s $264.1 million. accomplished corporate policy aimed to reduce loan debts Consolidated debt has been reduced by USD $339.9 million from USD $3,224.2 million in early 2011 down to USD $2,884.3 million as at the end of 2011.

An agreement has been reached between OJSC ALROSA and the Government of the Republic of Sakha (Yakutia) regarding the transfer in 2011 of all the Company’s housing and recreational facilities at a time to municipal ownership free of charge. The value of housing facilities transferred to the ownership of the Municipal Entity City of Mirny, Munici- Settlement of relationship between the Government of the Republic of pal Entity City of Udachny and Municipal Entity Aikhal Settlement free of charge amounted to RUB 3,292.6 million, and Sakha (Yakutia) and the Company in transferring the housing and residen- accomplished the value of private apartments written off of the balance sheet totals RUB 1,532.7 million tial facilities to the ownership of municipal entities in 2011 Whereby the Company retained its obligations for paying the expenses related to maintaining and servicing the transferred facilities and the facilities of the municipal housing located in Udachny till January 1, 2014, in the Aikhal settlement till January 1, 2015 and in Mirny and its adjacent settlements till January 1, 2016.

57 ALROSA • ANNUAL REPORT | www.alrosa.ru Report on Accomplishment of Missions 2011 Interaction with State Authorities

58 ALROSA • ANNUAL REPORT | www.alrosa.ru islative Assembly of the Republic of Sakha Active work with State Committee for Reserves of the (Yakutia) the regulations for amendment and The results of the Ministry of Natural Resource of the Russian Federation supplementation of legal standards govern- exploration, assessment ing the procedure for extraction, production regarding the methodological support to the geological and circulation of natural rough diamonds and calculation of exploration complex in terms of assessment, registration, and gems in the Russian Federation. Inter- diamond reserves in efficient use and replenishment of mineral reserves. action covered the following areas: Nyurba alluvial deposit • amendment and supplementation of the legislation of the Russian Federation re- (II stage) have been lated to subsurface resource use; defended. The alluvial • amendment and supplementation of the deposit has been In 2011, the Cross-Industry Work Group PO Crystal, etc. The proposals reviewed at Tax Code of the Russian Federation; for Optimisation of the Legal Base for Op- the meeting included those relating to legis- • introduction of proposals and comments recognised as ready for eration of Russia’s Rough and Polished lation on circulation of precious metals and regarding the adjustment of regulatory industrial utilisation. Diamond Complex held a meeting with the precious stones, upgrade of tax legislation and tax basis with due consideration Deputy Chairman of the Federation Coun- in the field of geological survey, exploration of the forecasts for development of the cil V. A. Shtyrov and representatives of the and development of precious metals and Russian rough and polished diamond Government of the Republic of Sakha (Ya- precious stones deposits. complex in terms of reduction of the • methodology for separation of off- kutia), the Ministry of Finance of the Russian The Company, together with the Ministry governmental control functions over specs variations included in the ore Federation, the Gokhran of Russia, deputies of Finance of the Republic of Sakha (Yakutia), storage, registration, sorting and as- of the crater area of the Arkhangelsk of the State Duma, the Customs Service of continued its work involving preparing and sessment of rough diamonds. pipe has been developed and ap- the Russian Federation, OJSC ALROSA, submitting for the consideration by the dep- Active work with State Committee for Re- proved by the State Committee for the Association of Russian Diamond Pro- uties of the Federal Council, the Ministry of serves of the Ministry of Natural Resource of Reserves of the Ministry of Natural ducers, the Russian Miners Union, OJSC Finance of the Russian Federation, the Leg- the Russian Federation regarding the meth- Resource of the Russian Federation, odological support of the geological explora- which allowed the Company’s sub- tion complex in terms of assessment, reg- sidiary, OJSC Severalmaz, to increase istration, efficient use and replenishment of diamond content in the ore supplied mineral reserves, as a result of which: to production and fulfil its annual plan • the results of the assessment of the for diamond mining. Zarya pipe reserves have been defend- The work involving approval by the Min- ed, which enables it to recognise AL- istry of Finance of the Russian Federation, ROSA as discoverer of this deposit and the Federal Anti-Monopoly Service (FAS), issue a license for its exploration and committees of the State Duma and the development without any tender; Federation Council of ALROSA’s propos- • the results of the exploration, assessment als on the draft Regulations on Procedure and calculation of diamond reserves in the and Terms of Sales of Rough Diamonds by Nyurba alluvial deposit (II stage) have been OJSC ALROSA. defended. At these facilities, the drilling With due consideration of the comments method without confirmation by heaving by the Ministry of Finance of the Russian mining has been applied for the first time Federation, the Program for Innovation De- as the basic method for exploration of velopment and Technological Upgrade of deep alluvial deposits, which significantly OJSC ALROSA for 2011–2018 has been reduced the cost and time of exploration updated and approved by the administra- work. The alluvial deposit has been recog- tive department of the Ministry of Finance nised as ready for industrial utilisation; of the Russian Federation.

59 ALROSA • ANNUAL REPORT | www.alrosa.ru Interaction with State Authorities Fulfilment of Instructions of the President of the Russian Federation and the Government of the Russian Federation

60 ALROSA • ANNUAL REPORT | www.alrosa.ru In accordance with the instructions of Department — headed by the Head of On February 23, 2011, the Supervisory the Government of the Russian Federation the Department – Corporate Secretary — Board of ALROSA Co. Ltd. passed a res- regarding establishment of special commit- has been established in OJSC ALROSA olution to approve these Regulations and tees under the Board of Directors (Super- in 2011. The Corporate Management De- instruction the Company’s Executive Com- visory Board), approval of the KPI system, partment operates in accordance with the mittee to ensure that: development and enactment of regulations Regulations on Corporate Management • the share of purchasing by an open on remuneration to the Company manage- Department of OJSC ALROSA approved method through electronic trade sites ment and members of the Board of Direc- by the Company. is brought up to 15% in 2011, 20% in tors (Supervisory Board), by the resolution In accordance with the Instructions 2012, 25% in 2013, and 30% in 2014; of the Supervisory Board of OJSC ALROSA of the President of the Russian Federation • the report on results of purchasing op- of April 20, 2010 the committees of stra- and the Government of the Russian Fed- erations is provided to the Supervisory tegic planning, HR and remunerations and eration regarding the strategy in the field Board on a quarterly basis; audit have been established in the Com- of energy-saving and energy efficiency, in • the report on results of purchasing op- pany. The relevant Company regulations 2008 ALROSA Co. Ltd. prepared the Pro- erations for half-year is provided to the governing activities of these committees gram for Energy-Saving in the Company’s Ministry of Economic Development of have been developed and approved. The Entities, Structural Divisions and Subsidiar- the Russian Federation and the Federal information regarding the members of the ies for 2009-2011 and had it approved by Antimonopoly Service of Russia. committees can be obtained from the the Company’s Supervisory Board. Due to changes in requirements of the Company’s website. This program was prepared based on legislation of the Russian Federation, in In 2011, contracts have been conclud- the Methodological Recommendations for December 2011 the Supervisory Board of ed between the Company and members Development of Energy-Saving Programs OJSC ALROSA approved the new Regula- of the Supervisory Board, which govern in Business Entities with State Ownership tions on Purchases in OJSC ALROSA. the relationship related to the execution approved by the Ministry of Energy of the During 2011, 1,298 lots have been of the authority of a member of the Com- Russian Federation. placed with electronic trade sites for a total pany’s Supervisory Board. The information The energy-saving activities performed in of RUB 2,851 million, which is 14% of the on members of the Supervisory Board of the Company lead to a gradual reduction of total sum of material and technical resourc- OJSC ALROSA is available on the Com- the consumer energy resources. The main es purchased and 84.7% of their quantity. pany’s website. efficiency indicators of the energy-saving As compared to 1Q, the share of purchas- On June 30, 2011, the Company’s an- activities performed are annual reduction ing through ETS grew from 7% up to 20% nual general meeting of shareholders ap- of specific consumption of fuel equivalent in 2Q and 3Q and up to 24.8% in 4Q. proved the Regulations on Remuneration per unit of product manufactured by OJSC The information on purchasing activities to Members of the Supervisory Board of ALROSA, total reduction of the consumed of OJSC ALROSA is available on the Com- OJSC ALROSA worked out in accordance energy, boiler fuel and water against grow- pany’s website. with the recommendations of the Ministry ing production output. In accordance with the instructions of Economic Development of the Russian Pursuant to the instructions of the of the President of the Russian Federation Federation. ALROSA’s KPI system has been President of the Russian Federation and the and Government of the Russian Federation approved. The system of remuneration to Government of the Russian Federation with in respect of implementation of the mea- the Company management and members regard to the implementation of measures sures aimed to accelerate technological of the Supervisory Board is divided into the aimed to ensure information transparency upgrade and innovation development of fixed and variable part, where the variable in purchasing operations and transition to natural monopoly facilities and joint stock part of remuneration is based on the Com- electronic purchasing, on December 24, companies with state ownership, on Feb- pany’s performance results. 2010 the Company’s Executive Committee ruary 23, 2011 the Company’s Supervisory In order to improve efficiency of opera- approved the Regulations on Purchasing of Board approved the Program for Innovation tion and upgrade the corporate manage- Goods, Works (Services) in ALROSA Co. Development of ALROSA Co. Ltd. for the ment system, the Corporate Management Ltd. period from 2011 to 2018.

61 ALROSA • ANNUAL REPORT | www.alrosa.ru Fulfilment of Instructions of the President of the Russian Federation and the Government of the Russian Federation The Recommendations for Preparing In- of Subsidiaries and Affiliates of OJSC AL- In order to fulfil paragraph “e” of In order to fulfil subparagraph “л” par. novation Development Programs approved ROSA has been developed and approved the List of Instructions by the President 1 of the List of Instructions by the Presi- by the resolution of the Governmental by the resolution of the Company’ Execu- of the Russian Federation of April 2, 2011 dent of the Russian Federation regarding Committee for High Technologies and In- tive Committee of February 3, 2012. No. Pr-846 for the performance of prior- the proposals and recommendations aimed novations of August 3, 2010, have been Information on sales of non-core assets ity measures aimed to improve the invest- to facilitate development of environmental considered in preparing the program. of OJSC ALROSA is available on the Com- ment climate in the Russian Federation, on responsibility mechanisms based on inter- On September 26, 2011, the Supervi- pany’s website. October 07, 2011, the President of OJSC national standards, in 2011 the Company sory Board listened to the information on Within the framework of the imple- ALROSA issued the order On Application developed the Social and Environmental the performance status of the program for mentation of measures aimed at perfor- of the Method for Calculation of Costs of Report of OJSC ALROSA in accordance 2011 to 2018. mance of the recommendations issued by Purchasing Goods, Works and Services with GRI (Global Reporting Initiatives) inter- With due consideration and the results the Federal Property Management Agency per Unit of Product Manufactured by OJSC national standard for 2010. The information of the technological audit and taking into in relation to upgrade of compensations ALROSA in real (adjusted) environment of on this report has been heard during the account the recommendations of the Work system in state-owned companies (Letter 2010. On December 16, 2011, the Super- meeting of the Company’s Executive Com- Group for Development of Private-Public of the Federal Property Management Agen- visory Board of OJSC ALROSA approved mittee. Partnership in the Field of Innovation un- cy No. RN-13/3102 of February 15, 2011), this Method, having paid specific attention der the Governmental Committee for High the following activities have been carried to prevention of deterioration of quality and Technologies and Innovations of July 11, out in the reporting year. safety of manufacturing processes. The 2011 (minutes No. 23-AK), a new version • the system of targets (KPI) for members Company’s Supervisory Board instructed of the Program for Innovation Development of the Executive Committee, top man- the Audit Committee to monitor the dynam- and Technical Upgrade of OJSC ALROSA agers and functional departments of the ics of purchasing cost of goods (works, for the period of 2011 to 2018 has been Company’s Administrative Office have services), as well as monitor the progress approved. been prepared and approved, quarter- in achieving the targets for the reduction of The main objective of the Company’s ly reports on target performance have purchasing cost of goods (works, services) Innovation Development Program is to in- been maintained; per unit of product by at least 10% per an- crease the capitalisation and investment • the Supervisory Board approved the num during three years in actual terms in appeal of OJSC ALROSA through the in- Regulations on Remuneration to mem- 2010 prices. creased economic efficiency, energy effi- bers of the Supervisory Board (minutes In accordance with the instructions of ciency, industrial and environmental safety No. 27 of June 30, 2011); the Government of the Russian Federation of production facilities and sustainable so- It is planned to develop a series of Com- regarding the insurance of liability of inde- cial and economic development. pany regulations governing the system of pendent directors and representatives of In accordance with the instructions of remuneration to members of the Compa- the governmental interests with the man- the Government of the Russian Federation ny’s Executive Committee and Company agement bodies of a joint stock company, regarding the measures aimed at restruc- President and have it approved by the OJSC ALROSA implements the measures turing assets owned by joint stock compa- Supervisory Board (after the prior review aimed at the implementation of practice nies with state ownership, the Program of by the Committee for Appointments and of insuring the liability of members of the Measures for Optimisation of the Structure Compensations) in 2012. Company’s management bodies.

62 ALROSA • ANNUAL REPORT | www.alrosa.ru Fulfilment of Instructions of the President of the Russian Federation and the Government of the Russian Federation Main Risk Factors Related to the Company’s Activity

63 ALROSA • ANNUAL REPORT | www.alrosa.ru The Company continuously monitors diamonds in natural terms (by mass) and appear on the market, as well as consid- crystals with synthetic analogues are esti- the risks within the framework of its current in terms of cost is not expected in the ering the possibility to maintain the current mated to be insignificant in the mid-term. operational activity and implementation of mid-term prospects. extraction volumes, this risk is considered 2. On Domestic Market investment projects, and makes maximum Reduction of diamond jewellery con- to be insignificant. Remaining high import duties for pro- effort for their prevention and the mitigation sumption. This is one of the key risks in the Currency Fluctuations. The object of the cess equipment manufacture outside Rus- of adverse consequences resulting from rough and polished diamond industry, and currency risk is represented by the Compa- sia. However, the scope of these risks their occurrence. In the future, the Com- it is unlikely on a short-term horizon. ny’s own funds and profit. In order to miti- cannot significantly affect the results of the pany’s policy in respect of the risks will be Increased industry competition and, gate the negative impact of the currency Company’s operations. Whereas it is not based on the same principles. consequently, potential sales and profit risk, the Company plans and performs its excluded that the duties for import of high- reduction. Today the Company is a major operations with due consideration of the technology equipment may be reduced Industry Risks player on the international rough and pol- actual (estimated) currency fluctuations. due to Russia’s accession to the WTO. 1. On the International Market ished diamond market, with its extraction Growth of market for goods replacing Significant risks are associated with de- Financial Crisis. The impact of the finan- volumes representing 97% of the Russian natural diamonds (synthetic diamonds). faults on payments. As the Company sells cial crisis on the rough and polished dia- extraction and around 26% of the world’s At the moment, the markets for synthetic its goods on terms of pre-payment, the risk mond market is reflected through genera- extraction volumes. Due to the unlikely dis- gems and natural diamonds almost never associated with defaults in payments is ab- tion of liquidity shortage of its players which covery of large new deposits in the mid- intersect. Therefore, the risks associated sent. triggers the reduction of demand for the term and no possibility that new players will with replacement of high-quality natural Risks associated with changes in cur- products of the industry. This risk is currency regulations are currently estimated rently estimated as medium. by the Company as minimal. Reduction in extraction volumes and The risks associated with changes in the supply of rough diamonds to the market. tax legislation. In the case of changes in the Due to the depletion of the prolific min- tax legislation, the Company shall be gov- eral resources available for open-pit min- Reduction of diamond jewellery erned by the new legislation. In the case of ing of diamond deposits, the Company consumption. This is one of the key risks Russia’s accession to the WTO, the Com- extensively utilises the deposits with lower pany expects mitigation of tax legislation. diamond content and constructs four un- in rough and polished diamond industry Risks associated with potential changes derground mines aimed at compensat- and it is unlikely on a short-term horizon. in prices of raw materials and services used ing for the withdrawn extraction volumes. by the Company in its operations. These Considering the above, the reduction of risks may affect the Company’s operations. the current volume of extraction of rough The Company carries out its operations

64 ALROSA • ANNUAL REPORT | www.alrosa.ru Main Risk Factors Related to the Company’s Activity fore the regional risks are limited to the Financial Risks In case of changes in the tax legislation, risks attributable to this constituent entity In the course of carrying out its regu- the Company shall be governed by of the Russian Federation. The Republic lar business operations, the Company, as of Sakha (Yakutia) is considered to be one with the majority of exporting companies in the new legislation. In case of Russia’s of the politically, economically and socially the Russia’s base materials sector of the accession to the WTO, the Company stable regions. The Credit Ratings Ser- economy whose revenue is nominated in expects mitigation of tax legislation. vice of Standard & Poor’s has reviewed US dollars, is subject to the currency risks its forecast for the ratings of the Republic associated with the changes in USD / RUB of Sakha (Yakutia) from ‘stable’ to ‘posi- exchange rate. The currency risk may affect tive’, and confirmed the long-term rating the amount of the Company’s profit and of BB- and national rating of ruAA-. The its key financial performance indicators. In with due consideration of the forecasted Federation were seen as having positive Fitch Ratings agency confirmed its ‘posi- 2006 after the significant weakening of the growth of prices for the consumed mate- dynamics. On the other hand, the Russian tive’ forecast for long-term ratings of the US dollar against the RF rouble, a five-year rial and technical resources and purchased economy is not protected against market Republic of Sakha (Yakutia) in foreign and program for hedging the currency risks has equipment. downturns and slowdown of the economic national currency and confirmed these rat- been developed and implemented in order Risks associated with potential chang- development in other countries of the world. ings at the level of BB+. Other ratings of to reduce the currency risks and compen- es in prices of the Company’s goods. The As has already happened in the past, the the Republic have also been confirmed, sate the losses from re-valuation of foreign main Company’s risk related to produc- financial problems and acute perception of the short-term rating in foreign currency of currency revenue in US dollars. A series of tion and sales of rough and polished dia- investment risks in a developing country B and national long-term rating of AA (rus) forward contracts has been concluded for monds is the reduction of prices for rough may reduce the amount of foreign invest- stable. the sale of US dollars for Russian roubles in diamonds, which may result in reduction of ments in Russia and have a negative im- The Company carries out its core op- the amounts comparable to major portion profit. ALROSA sells its goods on the in- pact on the Russian economy. Substantial erations, i.e. diamond mining, in the Far of the Company’s foreign currency earn- ternational and domestic markets at world Russian gold and foreign currency reserves North (Western Yakutia) regions, involving ings. The program provided for monthly prices. In order to alleviate the adverse im- accumulated during the recent years signifi- extreme weather and climate conditions and quarterly performance of the transac- pact of this risk, the Company develops the cantly mitigate the country’s losses from the and complicated transportation patterns for tions with equal amounts before 3Q 2011. plans and implements the programs aimed sale of energy products on the international supply of material and technical resources. At the moment OJSC ALROSA monitors at mitigating the impact of the reduced market, and provide a possibility to support Despite that, the risks associated with po- the currency risks in order to control the prices for rough and polished diamonds on domestic producers during the crisis period tential negative impact of these adverse emergence of adverse consequences of its operations. so that they could implement their planned factors on the Company’s core operations potential weakening of the US dollar ex- investment programs. For that purpose, the are minimal. change rate against the Russian rouble Country and Regional Risks governmental committee established a list In general, the Company estimates the and the impact of this process upon the 1. Country Risks of core companies that are guaranteed to political and economic situation in the Rus- Company’s financial results, and is hold- (Russian Federation) have the state support in obtaining state sian Federation to be rather stable and pre- ing negotiations with world’s and Russia’s The Company carries out its business loans. The Company is included in the list dictable. leading banks for the potential conclusion operations on the territory of the Russian of 295 such companies. Therefore, consid- Federation, therefore its activity is poten- ering the existing risks and the uncertainty tially subject to the risks associated with in loan provision, a proportion of such risks changes in general economic situation in has been taken by the state. the country. The Russian economy at the 2. Regional Risks moment is in a transitional period, business (Republic of Sakha (Yakutia)) In general, the Company estimates the political infrastructure and legislative basis are being The regional risks to the Company’s and economic situation in the Russian Federation developed, the reforms aimed at establish- operations are estimated as less signifi- ing banking, judicial, tax and legislative sys- cant than the country risks. The major to be rather stable and predictable. tems have not been completed yet. Until portion of the Company’ assets is located recently, international ratings of the Russian in the Republic of Sakha (Yakutia), there-

65 ALROSA • ANNUAL REPORT | www.alrosa.ru Main Risk Factors Related to the Company’s Activity of hedging transactions. In addition to growth above 40% per year (critical level) the framework of the liquidity risk manage- by Federal Law No. 227‑FZ of July 18, that, the Company arranges long-term and may result in the sharp growth of interest ment, maintains sufficient amount of cash 2011 On Amendment of Individual Regula- short-term borrowings mainly in US dollars, rates on available financial resources, which available, retains flexibility of financing en- tory Acts of the Russian Federation due to i.e. in the currency in which its earnings are may render unprofitable the investments suring availability of credit facilities and ex- the Adjustment of the Principles for Deter- generated. made out of the borrowed funds arranged pected cash-flows from operations. The mining Prices for the Taxation Purposes are The risks of changes in interest rates are through the issue of debt securities and management monitors current forecasts in related to tax control of transfer prices, i.e. not significant for the Company, as the ma- through bank loans. respect of liquid assets reserve (consisting the prices used between the interrelated jor portion of ALROSA’s debt is represented The Company’s credit risk is related to of unused portion of borrowings, cash and parties (within a group of entities). The new by long-term rouble bonds and Eurobond cash and cash equivalents, including out- cash equivalents) depending on the ex- section devoted to this issue has been in- loans, the interest rates of which are fixed standing trade receivables, issued loans pected cash-flow. The monitoring is carried troduced to the Tax Code of the Russian and not subject to changes until the final and other financial assets. Cash and cash out on a monthly and annual basis. Federation. The Federal Law No. 223‑FZ repayment of debt. Therefore, the Compa- equivalents shall be deposited only in those of July 18, 2011 On Purchasing Goods, ny does not hedge its risks arising from the banks that at the moment of their deposi- Legal Risks Works, Services by Specific Types of Legal changes of interest rates. ALROSA has a tion are assessed by the management of The legal risks significant for the Com- Entities is aimed at governing the purchas- positive credit history which allows it to ar- ALROSA as having minimal default risk. pany include changes in tax, customs, for- ing of goods, works and services, among range promptly for the borrowings on ben- Since most of the Company’s contrac- estry and land legislation, rules of currency others, by the business entities where eficial terms, where necessary. tors do not have an individual international regulation, conditions for use of subsurface the participatory interest in the authorised Inflation risks in general are estimated credit rating, OJSC ALROSA has some resources, regulatory documents for licens- capital held by Russian Federation, a con- by the Company as medium. Changes in procedures developed ensuring that sales ing, environmental regulations and rules. stituent entity of the Russian Federation or the consumer price index influence in a of goods, rendering of services as well as In order to prevent any adverse impact municipal entity, is more than 50% in aggre- certain way upon the Company’s profitabil- extension of loans is carried out only for the on stability of the business and perfor- gate. The Company has already approved ity level and, therefore, its financial status, contracts with positive credit history. These mance of its obligations to stakeholders, the internal regulations aimed at the imple- without having direct correlation. The criti- procedures include the evaluation of finan- the Company continuously monitors leg- mentation of the requirements contained in cal inflation figures are significantly above cial status, experience in the past years and islation in all fields of its operation, which the said legal acts. the inflation level forecasted by the Ministry other factors. In order to secure accounts enables it to react promptly to its changes Today the Company is not participating, of Economic Development of the Russian receivable from some customers of the dia- and, when necessary, to adjust the proce- and does not foresee any participation, in Federation and amount to 40% and more. mond products, the Company may apply a dure of business operations. any legal proceedings that may significantly If this level is reached, the actions will be pledge system, and demand provision of a In 2012, the Company’s operations will affect its operations. taken aimed at reducing accounts receiv- bank guarantee or surety from third parties. be affected by the significant changes in able as well as to reduce production costs Due to a dynamic nature of the busi- regulatory acts that have been enacted. and accounts payable. Significant inflation ness, the Company’s management, within For example, the amendments introduced

66 ALROSA • ANNUAL REPORT | www.alrosa.ru Main Risk Factors Related to the Company’s Activity Appendices

67 ALROSA • ANNUAL REPORT | www.alrosa.ru Appendix 1 Diamond Mining by ALROSA Group

2009, 2010, 2011, Parameter UoM % to 2010 % to 2009 report report report

ALROSA

Aikhal Mining and Processing Division

Diamond mining thousand carats 4,014.2 4,902.5 5,261.9 107.3 131.1

USD $million 256.0 291.4 303.8 104.3 118.7

Mirny Mining and Processing Division

Diamond mining thousand carats 4,864.4 5,832.3 8,137.9 139.5 167.3

USD $million 607.7 701.6 1,037.4 147.9 170.7

Udachny Mining and Processing Division

Diamond mining thousand carats 14,065.9 13,305.7 10,582.9 79.5 75.2

USD $million 797.7 735.9 620.4 84.3 77.8

ALROSA, total

Diamond mining thousand carats 22,944.5 24,040.5 23,982.7 99.8 104.5

USD $million 1,661.3 1,728.9 1,961.6 113.5 118.1

OJSC ALROSA-Nyurba

Nyurba Mining and Processing Division

Diamond mining thousand carats 8,015.5 8,371.4 7,477.6 89.3 93.3

USD $million 431.5 451.1 405.9 90.0 94.1

OJSC Almazy Anabara

Diamond mining thousand carats 1,337.0 1,415.3 2,534.4 179.1 189.6

USD $million 152.1 136.3 175.4 128.7 115.3

OJSC Severalmaz

Diamond mining thousand carats 494.4 504.2 556.8 110.4 112.6

USD $million 23.3 21.8 24.6 113.0 105.7

ALROSA Group, total

Diamond mining thousand carats 32,791.4 34,331.4 34,551.4 100.6 105.4

USD $million 2,268.2 2,338.1 2,567.5 109.8 113.2

Abrasive powders production USD $million 1.5 2.0 1.7 84.7 108.7

Polished diamond production USD $million 63.9 137.8 174.0 126.3 272.3

68 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Appendix 2

Financial Statements, Accounting Policy

Due to the enactment – starting from 2011 reports – formed by structural subdivisions for the benefit of other Company’s internal accounting standard (hereinafter, of specific regulations that govern the accounting opera- subdivisions shall be transferred to the structural sub- the standard) ‘Accounting for Expenses of the Core tions, as well as due to the resolution of the extraordinary divisions that received these products, works, services Production’ has been changed as follows: production general meeting of shareholders of ALROSA Co. Ltd. that in full within the period established by the Company’s expenses related to preparing and developing core provides for changing the type of the joint stock company order for preparing the annual financial statement; production facilities, i.e. costs of overburden, utilisation (from a closed joint stock company to an open joint stock • the Chapter ‘Main Provisions for Implementation of Ac- and exploration works, mining and preparation works company) and changing the full and abbreviated company counting for Property and Liabilities of OJSC ALROSA’ for underground deposit mining, start-up costs, design name from ALROSA Company Limited to Open Joint Stock has been supplemented by: and survey costs shall be accounted for in the auxiliary Company ALROSA, and from ALROSA Co. Ltd. to OJSC ––enclosed forms for accounting (financial) statements of production accounts; ALROSA respectively, the following changes have been in- OJSC ALROSA; ––the procedure recording the revaluation of fixed as- troduced to the 2011 accounting policy as compared to ––subsection ‘Accounting for Operational Loss Resulting sets in Accounting for Operations with Fixed Assets the 2010 accounting policy: from Normal Wastage’; standard has been changed as follows: revaluation • in accordance with minutes No. 26 of the extraordinary ––procedure for recording the amount of profit (loss) re- of fixed assets shall be carried out at the end of general meeting of shareholders of ALROSA Co. Ltd. of sulting from operations related to correction of major the year, the amount of additional value of a fixed April 05, 2011, the Company name ALROSA Co. Ltd. mistakes of the past years revealed after the approval asset after the revaluation shall be included in the has been changed to OJSC ALROSA in the entire text of the financial statement for that year; Company’s added capital, the amount of additional of the Company’s Accounting Policy for accounting pur- ––procedure for defining the amounts of the Company’s value of a fixed asset equal to its devaluation car- poses; estimated liabilities; ried out in the past reporting periods and included • the procedure for transfer of variance of the actual pro- ––the adjusted – starting from January 01, 2011 – defi- in the financial result as other expense shall be in- duction cost from the planned calculated cost of own nition of assets having the value of RUB 40,000 and cluded in the financial result as other income. The product, services rendered and work performed by less per unit than meet the mandatory requirements amount of devaluation of a fixed asset resulting from structural subdivisions for the benefit of other subdivi- provided for in paragraph 4 of the Accounting Regu- its revaluation shall be included in the financial re- sions has been changed in the following way: the vari- lations ‘Accounting for Fixed Assets’ (PBU 6 / 01) (as sult as other expenses, the amount of devaluation of ance of the actual production cost from the planned amended by Order No. 186n of the Ministry of Finance a fixed asset shall be recorded as reduction of the calculated cost of own products, services rendered and of the Russian Federation of December 24, 2010) rec- Company’s added capital resulting from the amount work performed by structural subdivisions for the benefit ognised in accounting and financial statements of the of re-valuation of this fixed asset carried out in the of other subdivisions shall be transferred directly to the Company’s branches, representative offices, structural past reporting period, the excess of the devaluation structural subdivision that received the products, works, subdivisions as inventories and not recognised as fixed amount of a fixed asset over the amount of its re- services as a separate letter of advice in the month fol- assets; valuation included in the Company’s added capital lowing the reporting one. The variance of the actual ––subsection that defines the level of significance in rec- due to revaluation carried out in the past reporting production cost from the planned calculated cost of ognition of specific business operations; period shall be included in the financial result as own products, services rendered and work performed ––subsection that defines the procedure for recognition other expense; by structural subdivisions for the benefit of other Com- of income and expense related to obtaining the state ––the procedure for recording revaluation of intangible pany subdivisions that has not been transferred during support; assets in Accounting for Operations with Intangible the year shall be recorded as production-in-progress ––amendments introduced to the Working Accounts Assets standard has been changed: revaluation of in- expense until it is transferred to the structural subdivi- Chart for Accounting for Business Operations of OJSC tangible assets shall be performed as at the end of the sions. At the end of the reporting period, the variance of ALROSA; year, the amount of devaluation of an intangible asset the actual production cost from the planned calculated ––the procedure for accounting for expenses related to resulting from its revaluation shall be recorded in the cost of own products, services rendered and work per- preparing and developing production facilities in the financial result as other expense;

69 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES ––the procedure for writing-off the long-term use materi- BALANCE SHEET als and the procedure for writing-off special equipment as at December 31, 2011 Codes

have been excluded from Accounting for Operations OKUD form 0710001 with Material and Production Inventories standard; ––the procedure for reviewing financial investments as to Date (DD MM YYYY) their impairment and establishing provision for impair- Organisation Open Joint Stock Company ALROSA OKPO 23308410 ment of financial investments in Accounting for Finan- Taxpayer Identification Number INN 1433000147 cial Investments standard have been adjusted; Type of Operations Diamond Mining OKVED 14.50.22 ––in Accounting for Credits and Loans standard, the REPO contract concept has been defined and the Legal form/form of ownership 47 43 procedure for accounting for operations with REPO open joint stock company/mixed OKOPF/OKFS transactions has been established; Unit of Measurement: RUB thousand/RUB million (strike out as applicable) OKEI 384 ––the procedure for establishing provisions for doubt- ful debts in Accounting for Sales of Products (Goods, Address: 6 Ul.Lenina, Mirny, Republic of Sakha (Yakutia) 678174 Works, Services) standard has been changed.

as at December as at December as at December Parameter Code 31, 2011 31, 2010 31, 2009 1 2 3 4 5 ASSETS I. CAPITAL ASSETS Intangible assets 1110 111,433 29,367 2,267 Exploration and development results 1120 31,159 12,841 7,569 Fixed assets 1130 160,901,517 162,780,179 162,905,556 Fixed assets 1131 133,905,583 137,561,083 140,343,282 Construction in progress 1132 26,995,934 25,219,096 22,562,274 Profitable investments in tangible assets 1140 777,506 795,127 814,330 Financial investments (long-term) 1150 87,644,288 75,097,178 56,375,506 Deferred tax assets 1160 510,812 61,922 1,274,919 Other capital assets 1170 2,485,034 42,616 51,783 Section I, subtotal 1100 252,461,749 238,819,230 221,431,930 II. CURRENT ASSETS Inventories 1210 30,963,134 26,794,925 32,988,946 Value added tax for the purchased assets 1220 140,882 188,829 324,860 Accounts receivable 1230 10,472,317 11,149,373 23,603,634 Financial investments (short-term) 1240 5,073,984 1,450,968 2,374,978 Cash 1250 7,670,954 1,237,716 2,266,095 Other current assets 1260 61,561 26,561 22,531 Section II, subtotal 1200 54,382,832 40,848,372 61,581,044 BALANCE 1600 306,844,581 279,667,602 283,012,974

70 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES as at December as at December as at December Parameter Code 31, 2011 31, 2010 31, 2009

1 2 3 4 5

LIABILITIES

III. CAPITAL AND PROVISIONS

Authorised capital (joint stock, authorised 1310 3,682,483 3,682,483 3,682,483 fund, contributions of partners)

Revaluation of capital assets 1340 8,586,976 10,466,431 10,979,101

Added capital (excluding revaluation) 1350 50,038,802 50,039,138 50,039,138

Reserve capital 1360 736,500 736,500 618,800

provisions established in accordance with 1361 184,125 184,125 184,125 legislation

provisions established in accordance with 1362 552,375 552,375 434,675 constituent documents

Retained profit (retained loss) 1370 123,160,546 93,556,028 85,930,543

Retained profit of the past periods 1371 93,641,545 93,556,028 85,930,543

Retained profit in the reporting year 1372 29,519,001 0 0

Section III, subtotal 1300 186,205,307 158,480,580 151,250,065

IV. LONG-TERM LIABILITIES

Borrowings 1410 74,294,150 86,953,800 15,262,100

Deferred tax liabilities 1420 13,363,376 14,992,951 15,413,970

Other liabilities 1450 0 0 518,117

Section IV, subtotal 1400 87,657,526 101,946,751 31,194,187

V. SHORT-TERM LIABILITIES

Borrowings 1510 18,628,965 9,055,228 91,043,125

Accounts payable 1520 10,126,583 6,952,603 7,204,017

Deferred income 1530 89,012 23,807 2,794

Reserves for future expenses 1540 4,039,004 3,203,455 2,314,779

Other liabilities 1550 98,184 5,178 4,007

Section V, subtotal 1500 32,981,748 19,240,271 100,568,722

BALANCE 1700 306,844,581 279,667,602 283,012,974

71 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES PROFIT AND LOSS STATEMENT for 2011 Codes

OKUD form 0710002

Date (DD MM YYYY)

Organisation Open Joint Stock Company ALROSA OKPO 23308410

Taxpayer Identification Number INN 1433000147

Type of Operations Diamond Mining OKVED 14.50.22

Legal form/form of ownership 47 43 open joint stock company/mixed OKOPF/OKFS

Unit of Measurement: RUB thousand/RUB million (strike out as applicable) OKEI 384

Address: 6 Ul.Lenina, Mirny, Republic of Sakha (Yakutia) 678174

Parameter Code for 2011 for 2010

1 2 3 4

Revenue 2110 117,783,576 96,820,391

Cost of sales 2120 (48,031,506) (50,099,091)

Gross profit (loss) 2100 69,752,070 46,721,300

Business expense 2210 (5,324,046) (4,266,433)

Administrative expense 2220 (11,874,077) (8,548,619)

Sales revenue (loss) 2200 52,553,947 33,906,248

Income from participation in other companies 2310 5,568,444 2,157,226

Interest receivable 2320 534,450 262,672

Interest payable 2330 (7,107,875) (8,732,219)

Other income 2340 9,252,682 7,574,202

Other expense 2350 (25,239,232) (23,535,700)

Profit (loss) before taxes 2300 35,562,416 11,632,429

Current profits tax 2410 (8,105,149) (3,190,542)

including permanent tax liabilities (assets) 2421 (10,027) 1,650,211

Changes in deferred tax liabilities 2430 1,576,115 421,030

Changes in deferred tax assets 2450 448,890 (1,212,997)

Other 2460 36,729 (106,434)

Net profit (loss) 2400 29,519,001 7,543,486

72 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Parameter Code for 2011 for 2010

REFERENCE

The result from revaluation of capital assets not in- 2510 1,879,455 512,670 cluded into net profit (loss) of the period

The result from other operations not included into net 2520 — — profit (loss) of the period

Consolidated financial result of the period 2500 31,398,456 8,056,156

Basic earnings (loss) per share 2900 0.012 0.003

Diluted earnings (loss) per share 2910 — —

73 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Auditor’s Report Auditee responsibility for the accounting statements The management of the auditee is responsible for the preparation and accuracy of the said accounting statements in accordance with the preparation of accounting statements regulations and for the internal control system required for the preparation of the to Shareholders accounting statements free from material misstatements that may result from fraud or errors. of Open Joint Stock Company ALROSA Auditor responsibility Our responsibility is to express an opinion with respect to the accuracy of the accounting statements based on the conducted audit. We conducted the audit in compliance with the federal audit standards. These standards require complying with the applicable code of ethics, as well as Audited Entity planning and conducting the audit so as to obtain the reasonable assurance that the accounting Name: statements are free from any material misstatements. Open Joint Stock Company ALROSA, hereinafter OJSC ALROSA The audit included revision of auditing procedures aimed at obtaining the auditor’s evidences supporting the amounts in the accounting statements and disclosing the information thereof. Location: The choice of the audit procedures is a subject of our opinion based on risk assessment of con- 6 Ul.Lenina, Mirny, Republic of Sakha (Yakutia) 678170 siderable misstatements made due to fraudulent practices and errors. In the process of the said risk assessment, we reviewed the system of internal control, which provides for the preparation State Registration: and accuracy of the accounting statements in order to choose the adequate audit procedures without judging the efficiency of the internal control system. The audit also included an assess- Registered by the Mirny District (Ulus) Administration, Republic of Sakha (Yakutia) on August 13, ment of the adequacy of the applied accounting policy and the relevance of estimated param- 1992 Certificate Ser. 14 No. 000724010. Recorded in the Unified State Register of Legal Entities eters obtained by the management of the auditee as well as an assessment of the presentation on July 17, 2002, under the Main State Registration No. 1021400967092. of accounting statements in general. Auditor We believe that the evidence obtained during the audit provides a reasonable basis for our opinion as to the accuracy of the accounting statements. Name: Opinion Limited Liability Company “Finansovye i Bukhgalterskie Konsultanti” (OOO FBK). In our opinion, the accounting statements present fairly, in all material respects, the financial sta- Location: tus of OJSC ALROSA as of December 31, 2011, the results of its financial and business operations 44/1, Ul. Myasnitskaya, Bldg. 2AB, Moscow, 101990, Russia. and cashflow for 2011 in accordance with the Russian rules for preparing accounting statements. State Registration: Registered by the Moscow Registration Chamber on November 15, 1993, Registration Certifi- cate: Series YuZ 3 No. 484.583 RP. Recorded in the Unified State Register of Legal Entities on July S. M. Shapiguzov 24, 2002, under the Main State Registration No. 1027700058286. President, OOO FBK (acting under the Company’s Charter) Membership in the self-regulatory organisation of auditors: Non-profit partnership “Audit Chamber of Russia” The self-regulatory organisation of auditors’ number in the audit organisation Register: Date of the Auditor’s Report Certificate on Membership in Non-profit partnership ‘Audit Chamber of Russia’ No. 5353, ORNZ – March 12, 2012 Round seal of OOO FBK 10201039470. We have audited the attached accounting statements of OJSC ALROSA comprised of a balance sheet as of December 31, 2011, the profit and loss statement, statement of changes in equity and cashflow statement for the year 2011, and the explanatory note.

Open Joint Stock Company ALROSA Open Joint Stock Company ALROSA Auditor’s Report page 1 of 2 Auditor’s Report page 2 of 2

74 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Appendix 3

Information on State Support

In 2011 the Company obtained RUB 233,536,000 from the budget to cover the following expense:

Parameter 2011 2010

Received from the budget, total: 233,536 470,984

including for operational expense: 168,536 450,984

to cover the losses resulting from the operations involving rendering public utility services due to the application of state regulated prices approved by the Regional Energy 93,202 342,143 Commission under the State Pricing Committee of the Republic of Sakha (Yakutia) and the cost of utilities based on pubic tariffs.

for compensation of the difference in power tariffs 8,035 1,063

for arrangement of public (temporary) works 1,854 35,758

for arrangement of trainings 1,730 2,926

for air transportation of passengers from the Far East to the European part of the country and back based on special tariffs 58,183 62,522

for compensation of losses related to state regulation of tariffs for air passenger transportation along socially important air routes 5,532 6,572

for investments into capital assets, performance of research and development activities 65,000 20,000

75 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Appendix 4

Information on Major Transactions and Interested Party Transactions Concluded by the Company in the Reporting Year

Within the reporting period, the Company concluded no In 2011 the Company concluded 154 interested party transactions that meet the requirements to major transac- transactions that were approved by the Company’s Super- tions pursuant to art. 79 of the Federal Law ‘On Joint Stock visory Board or the materials for which have been submit- Companies’. ted for subsequent approval by the Company’s Supervisory Board for the total of RUB 9,860,397,929.09.

The list of the Interested Party Transactions Concluded by OJSC ALROSA in 2011 2011

Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Supervisory Board OJSC Almazny Mir Lease of Non-Residential Premises RUB 4,922,898.62 4,922,898.62 Minutes No. 176 of December 16, 2011

Lease of Premises Supervisory Board OJSC Severalmaz Lease of Premises No. 208 (second floor) with a total area of 16.6 m2 located at: 15, 1‑st RUB 498,443.00 498,443.00 Minutes No. 169 of March 22, 2011 Kazachy per., Moscow 119017, to be used as office space

Provision of paid-for services Supervisory Board OOO ALMAZ okhrana Services involving technical maintenance of the equipment at integrated security systems in RUB 2,252,000.00 2,252,000.00 Minutes No. 179 of March 19, 2012 the Company’s facilities

Security Services Supervisory Board OOO ALMAZ okhrana RUB 3,969,000.00 3,969,000.00 Protection of the facilities and property at ALROSA Transsnab Minutes No. 179 of March 19, 2012

Security Services Supervisory Board OOO ALMAZ okhrana RUB 20,793,000.00 20,793,000.00 Security services for the Company’s property Minutes No. 179 of March 19, 2012

Pledge of goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal 746,883.00 $ 22,888,080.16 Pledge agreement Minutes No. 176 of December 16, 2011

Pledge of goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal 187,309.00 $ 5,740,046.84 Pledge agreement Minutes No. 176 of December 16, 2011

Pledge of goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal 755,317.00 $ 23,146,538.40 Pledge agreement Minutes No. 176 of December 16, 2011

76 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Pledge of goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal 755,806.00 $ 23,161,523.71 pledge agreement Minutes No. 176 of December 16, 2011

Pledge of goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal USD $ 315,779.00 9,676,984.30 Pledge agreement Minutes No. 176 of December 16, 2011

Creation, transfer and use of Science and Technical Products OJSC NPP Supervisory Board Development and manufacture of a test sample of diamond size sorting unit in accordance RUB 7,975,578.00 7,975,578.00 Burevestnik Minutes No. 176 of December 16, 2011 with the work schedule

CJSC Golubaya Volna Shares with the issuer Supervisory Board RUB 75,000,000.00 75,000,000.00 Resort Contract for purchasing additional shares in CJSC Golubaya Volna Resort, 75,000 shares Minutes No. 176 of December 16, 2011

Special-purpose contribution for ensuring statutory activity The following wording of the agreement of June 10, 2011 for transfer of the special-purpose Private Pension Fund Supervisory Board contribution shall be deemed valid: ALROSA shall transfer to the Fund in 3Q 2011 a special- RUB 26,310,000.00 26,310,000.00 Almaznaya Osen Minutes No. 172 of June 2, 2011 purpose contribution in the amount of RUB 26,310,000 to the Fund’s settlement account for generation of property to secure its statutory activity

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal USD $ 251,861.00 7,718,229.97 Agreement for pledge of goods for sale Minutes No. 176 of December 16, 2011

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal USD $ 695,027.00 21,298,963.41 Agreement for pledge of goods for sale Minutes No. 176 of December 16, 2011

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal USD $ 740,502.00 22,692,535.69 Agreement for pledge of goods for sale Minutes No. 176 of December 16, 2011

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2421 / 2011‑1 for the sale and purchase of rough USD $ 276,319.00 8,557,406.01 Minutes No. 176 of December 16, 2011 diamonds of November 15, 2011)

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 12422 / 2011‑1 for the sale and purchase of rough USD $ 713,013.00 22,081,513.50 Minutes No. 176 of December 16, 2011 diamonds of November 15, 2011)

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2423 / 2011‑1 for the supply of rough diamonds of USD $ 534,248.00 16,545,286.59 Minutes No. 176 of December 16, 2011 November 15, 2011)

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2425 / 2011‑1 for the supply of rough diamonds of USD $ 690,431.00 21,382,164.77 Minutes No. 176 of December 16, 2011 November 15, 2011)

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2426 / 2011‑1 for the supply of rough diamonds of USD $ 499,782.00 15,477,898.69 Minutes No. 176 of December 16, 2011 November 15, 2011)

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2634 / 2011‑1 for the supply of rough diamonds of USD $ 107,195.00 3,435,803.42 Minutes No. 176 of December 16, 2011 November 15, 2011)

77 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2628 / 2011‑1 for the supply of rough diamonds of USD $ 432,475.00 13,861,645.45 Minutes No. 176 of December 16, 2011 December 13, 2011)

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2629 / 2011‑1 for the supply of rough diamonds of USD $ 32,329.00 1,036,205.88 Minutes No. 176 of December 16, 2011 December 13, 2011)

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2630 / 2011‑1 for the supply of rough diamonds of RUB 23,304,862.04 23,304,862.04 Minutes No. 176 of December 16, 2011 December 13, 2011)

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2631 / 2011‑1 for the supply of rough diamonds of USD $ 750,956.00 24,069,566.62 Minutes No. 176 of December 16, 2011 December 13, 2011)

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2632 / 2011‑1 for the supply of rough diamonds of USD $ 730,884.00 23,426,220.88 Minutes No. 176 of December 16, 2011 December 13, 2011)

Goods for sale (polished diamonds) Supervisory Board OJSC PO Crystal Pledge of goods for sale (contract No. 2633 / 2011‑1 for the supply of rough diamonds of RUB 22,866,972.48 22,866,972.48 Minutes No. 176 of December 16, 2011 December 13, 2011)

Special-purpose cash loan 1.2. The loan is extended for the purpose of financing the operations involving improvement of the zeolite deposit. 1.3. The loan is provided with the interest rate of 0.5 % per annum. OOO Supervisory Board 2.1. The Lender shall transfer in 1Q 2011 to the Borrower’s account the amount of the loan RUB 5,000,000.00 5,000,000.00 SUNTARTSEOLIT Minutes No. 169 of March 22, 2011 (par. 1.1. hereof) upon the receipt from the Borrower of an application for financing and the documents (contracts, acts, invoices etc.) supporting the proposed allocation of the funds. par. 2.2. The Borrower shall repay the loan on a quarterly basis by RUB 500,000 instalments from 2Q 2011 till 4Q 2013.

Special-purpose cash loan Sakha (Yakutskaya) 1.2. The loan is provided for financing the exploration work and the Borrower’s current transportation Supervisory Board expense. RUB 70,960,000.00 70,960,000.00 company Limited Minutes No. 169 of March 22, 2011 1.3. The loan shall be extended until December 25, 2013 with the interest rate of 9 % per Liability Company annum.

Sakha (Yakutskaya) transportation Special-purpose cash loan Supervisory Board RUB 27,890,840.00 27,890,840.00 company Limited Paragraph 1.3. The loan is extended for the period till December 25, 2013. Minutes No. 169 of March 22, 2011 Liability Company

Special-purpose cash loan 1.2. The loan is extended for the purpose of the implementation of the investment program for the reconstruction of Golubaya Volna Resort for the period from 2011 to 2018, par. 1.3. The loan is provided with the interest rate of 0.5 % per annum. 2.1. The Lender shall transfer CJSC Golubaya Volna Supervisory Board to the Borrower's account the amount of the loan in accordance with the following schedule: RUB 80,000,000.00 80,000,000.00 Resort Minutes No. 169 of March 22, 2011 RUB 20,000,000 in 1Q 2011; RUB 20,000,000 in 2Q 2011; RUB 20,000,000 in 3Q 2011; RUB 20,000,000 in 4Q 2011.

78 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Special-purpose cash loan par. 1.3.c. The parties agree to consider the debt indicated in par. 1.1.c. hereof as the Supervisory Board Hydrochicapa Sarl USD $ 3,842,495.82 123,713,379.67 loan for the amount of USD $ 4,800,000. The total amount of the loan hereunder (with due Minutes No. 169 of March 22, 2011 consideration of paragraphs 1.3., 1.3.a., 1.3.b. и 1.3.c.) shall be USD $ 38,242,495.82

Special-purpose cash loan par. 1.3.d. The parties agree to consider the debt indicated in par. 1.1.d. hereof as the loan for the amount of USD $ 4,800,000 (four million eight hundred thousand US dollars). Supervisory Board Hydrochicapa Sarl USD $ 4,800,000.00 136,877,760.00 The total amount of the loan hereunder (with due consideration of paragraphs 1.3., 1.3.a., Minutes No. 169 of March 22, 2011 1.3.b., 1.3.c. and 1.3.d) shall be USD $ 43,042,495.82 (forty-three million forty-two thousand four hundred and ninety-five US dollars and 82 cents) (hereinafter, the Loan).

Special-purpose cash loan par. 1.3.e. The parties agree to consider the debt indicated in par. 1.1.e. hereof as the loan for the amount of USD $ 4,800,000 (four million eight hundred thousand US dollars). Supervisory Board Hydrochicapa Sarl The total amount of the loan hereunder (with due consideration of paragraphs 1.3., 1.3.a., USD $ 4,800,000.00 135,528,960.00 Minutes No. 169 of March 22, 2011 1.3.b., 1.3.c., 1.3.d and 1.3.e.) shall be USD $ 47,842,495 (forty-seven million eight hundred and forty-two thousand four hundred and ninety-five US dollars and 82 cents) (hereinafter, the Loan).

Special-purpose cash loan 3. Supplement the Agreement with paragraph 1.3.f. to read as follows: «1.3.f. The parties agree to consider the debt indicated in par. 1.1.f. hereof as the loan for Supervisory Board Hydrochicapa Sarl RUB the amount of USD $ 4,800,000 (four million eight hundred thousand US dollars). Minutes No. 169 of March 22, 2011 The total amount of the loan hereunder (with due consideration of paragraphs 1.3., 1.3.a., 1.3.b., 1.3.c., 1.3.d., 1.3.d. and 1.3.f.) shall be USD $ 52,642,495.82.

Special-purpose cash loan RUB Supervisory Board OJSC Almazy Anabara Paragraph 1.3. The loan shall be extended for the period till December 26, 2011 at the 1,500,000,000.00 1,500,000,000.00 Minutes No. 169 of March 22, 2011 interest rate of 0.5 per cent per annum.

Special-purpose cash loan 1.2. The loan shall be extended for the following purposes: RUB 58,000,000 – to finance current operations; OJSC Timir Mining RUB 959,520,000 – to finance the investment activity based on the Program for Priority RUB Supervisory Board and Metallurgic 2,007,520,000.00 Measures Aimed to Develop Iron Ore Deposits Taezhnoe, Dyosovskoe, Gorkitskoe, 2,007,520,000.00 Minutes No. 169 of March 22, 2011 Company Tarynnakhskoe in South Yakutia for the period from 2011 to 2012; RUB 990,000,000 – to take part in the auction for the right to use subsoil iron deposits. 1.3. The loan is provided at the interest rate of 0.5 % per annum.

Special-purpose cash loan 1.2. The loan is provided for financing the Borrower’s current and investment operations. par. 1.3. The loan is provided at the interest rate of 0.5 % per annum. 2.1. The Lender shall transfer to the Borrower’s bank account the amount of the loan indicated in par. 1.1. hereof in accordance with the following schedule: Supervisory Board OJSC Severalmaz for investment operations: 3,077,800,000.00 Minutes No. 169 of March 22, 2011 RUB 390,000,000.00 in 1Q 2011; RUB 1,608,400,000.00 in 2Q 2011; for current operations: RUB 595,000,000.00 in 1Q 2011; RUB 484,400,000.00 in 2Q 2011.

79 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Special-purpose cash loan 1.2. The loan shall be extended for the repayment of the Borrower’s credits obtained from OJSC VTB Bank. 1.3. The loan is provided with the interest rate of 0.5 % per annum. RUB Supervisory Board OJSC Almazy Anabara 2.3. The Lender shall transfer to the Borrower's bank account the amount of the loan 1,557,200,000.00 1,557,200,000.00 Minutes No. 169 of March 22, 2011 indicated in par. 1.1. hereof in accordance with the following schedule: RUB 657,200,000 in 1Q 2011; RUB 700,000,000 in 2Q 2011; RUB 200,000,000 in 3Q 2011.

Lease of premises for the office Supervisory Board OJSC Severalmaz RUB 498,443.00 498,443.00 Lease of premises fitted with furniture and located at: 15, 1‑st Kazachy Minutes No. 169 of March 22, 2011

Diamond exhibition Supervisory Board Arcos Hong Kong Ltd RUB Rendering of organisational and technical services for diamond exhibition Minutes No. 173 of July 25, 2011

Supervisory Board Arcos Hong Kong Ltd Diamond exhibition RUB Minutes No. 173 of July 25, 2011

Diamond exhibition Services involving resolution of organisational issues related to diamond exhibition in Hong Supervisory Board Arcos Hong Kong Ltd RUB Kong from February 28, 2011 to March 11, 2011. The Company shall pay the contractor’s Minutes No. 173 of July 25, 2011 expense for resolving the technical issues in the amount of USD $ 42,393.86.

Supervisory Board Arcos Hong Kong Ltd Diamond exhibition USD $ 40,012.62 1,176,915.20 Minutes No. 173 of July 25, 2011

Diamond exhibition Supervisory Board Arcos Hong Kong Ltd Upwards adjustment of the cost of technical services related to diamond exhibition (for a USD $ 34,027.66 1,068,471.93 Minutes No. 173 of July 25, 2011 total of USD $ 28,837, plus 18 % VAT of RUB 5,190.66 applicable in the Russian Federation)

Diamond exhibition in New York Supervisory Board Arcos USA Inc. Rendering of organisational and technical services for diamond exhibition in the period from USD $ 41,497.06 1,159,419.56 Minutes No. 173 of July 25, 2011 May 23, 2011 to June 3, 2011 in New York.

Diamond exhibition services Supervisory Board Arcos Belgium N. V. USD Rendering of organisational and technical services for diamond exhibition Minutes No. 173 of June 25, 2011

Diamond exhibition services Supervisory Board Arcos Belgium N. V. USD Rendering of organisational and technical services for diamond exhibition Minutes No. 173 of July 25, 2011

Supply of rough diamonds Supervisory Board OJSC PO Crystal Amendment of the preamble of the contract due to the Company’s changing its type of joint RUB Minutes No. 176 of December 16, 2011 stock company

Private Pension Fund On transition from pension obligations with the guaranteed profit of 9 % to pension Supervisory Board RUB 0 Almaznaya Osen obligations with the guaranteed profit of 6 %. Minutes No. 176 of December 16, 2011

Lease of Buildings (structures, premises) OJSC Severalmaz RUB 77,158.32 77,158.32 Lease of Non-Residential Premises Minutes No. 72 of February 25, 2011

Lease of Property Supervisory Board OJSC Severalmaz RUB 35,594.45 35,594.45 Lease of apartments in Arkhangelsk Minutes No. 72 of February 25, 2011

80 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Supervisory Board OJSC Severalmaz Real Estate RUB 55,502,400.00 55,502,400 Minutes No. 169 of March 22, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 7,763.00 7,763 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 11,678.00 11,678 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 32,515.00 32,515 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 17,200.00 17,200 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 32,515.00 32,515 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 3,514.00 3,514 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 32,515.00 32,515 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 11,720.00 11,720 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 7,763.00 7,763 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 8,274.00 8,274 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 32,515.00 32,515 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 6,690.00 6,690 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 7,763.00 7,763 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 13,595.00 13,595 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 7,763.00 7,763 IC ALROSA LLC Minutes No. 176 of December 16, 2011

81 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 31,316.00 31,316 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 315,000.00 315,000 IC ALROSA LLC Insurance of employees against accidents Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 7,269,960.00 7,269,960 IC ALROSA LLC Insurance of civil liability of air carriers before passengers Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners and air carriers, compensation for the losses Supervisory Board RUB 12,938.00 12,938 IC ALROSA LLC in case of accidents Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 5,761.00 5,761 IC ALROSA LLC Insurance compensation of losses in case of insured events Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 11,083.00 11,083 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 463,758.00 463,758 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 1,794,840.00 1,794,840 IC ALROSA LLC Insurance aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 1,789,838.00 1,789,838 IC ALROSA LLC insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 673,990.00 673,990 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 17,200.00 17,200 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 527,730.00 527,730 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 5,540.00 5,540 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 12,991.00 12,991 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 1,085,536.00 1,085,536 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 975,797.00 975,797 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 6,925.00 6,925 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 731,159.00 731,159 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

82 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 672,608.00 672,608 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 660,268.00 660,268 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 7,763.00 7,763 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 927,565.00 927,565 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Supervisory Board Insurance of civil liability of the aircraft owners RUB 7,057.00 7,057 IC ALROSA LLC Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 12,007.00 12,007 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 682,543.00 682,543 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 12,991.00 12,991 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 941,502.00 941,502 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 935,311.00 935,311 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 605,349.00 605,349 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 15,240.00 15,240 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 13,981.00 13,981 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 752,391.00 752,391 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 780,823.00 780,823 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 1,061,124.00 1,061,124 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 856,937.00 856,937 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 2,798,165.00 2,798,165 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

83 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 700,627.00 700,627 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 239,554.00 239,554 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 610,784.00 610,784 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 12,991.00 12,991 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 1,571,953.00 1,571,953 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 14,162.00 14,162 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 2,529,583.00 2,529,583 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 679,784.00 679,784 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 906,814.00 906,814 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 811,432.00 811,432 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 952,074.00 952,074 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 858,036.00 858,036 IC ALROSA LLC Insurance of aircraft Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 3,514.00 3,514 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 11,720.00 11,720 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 237,500.91 237,500.91 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Insurance of civil liability of the aircraft owners Supervisory Board RUB 17,200.00 17,200 IC ALROSA LLC and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 37,065.00 37,065 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

84 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 17,200.00 17,200 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 31,916.00 31,916 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 32,515.00 32,515 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 7,763.00 7,763 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 672,608.00 672,608 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 8,274.00 8,274 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 11,017.00 11,017 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

Insurance Company Insurance of civil liability of the aircraft owners Supervisory Board RUB 7,057.00 7,057 IC ALROSA LLC Insurance of civil liability of the aircraft owners and air carriers. Minutes No. 176 of December 16, 2011

85 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Value Rouble Contractor Subject, Material Conditions of the Contract Notes / Information on approval of the Contract Equivalent

Lease of movable property Supervisory Board CJSC ALROSA Hotels RUB 6,500,000.00 6,500,000 Equipment and other movable property Minutes No. 173 of July 25, 2011

Supervisory Board OJSC Severalmaz Inventories RUB 14,004,674.26 14,004,674.26 Minutes No. 169 of March 22, 2011

Supervisory Board OJSC Severalmaz Movable Property RUB 47,400,564.13 47,400,564.13 Minutes No. 169 of March 22, 2011

Supervisory Board OJSC Severalmaz Movable Property RUB 43,985,383.35 43,985,383.35 Minutes No. 169 of March 22, 2011

Supervisory Board OJSC Severalmaz Movable Property RUB 17,817,597.86 17,817,597.86 Minutes No. 169 of March 22, 2011

Movable property for ownership. Property ‘Dom piketchika in Beregovoy settlement’ located Supervisory Board OJSC Almazy Anabara in the Olenek district of the Republic of Sakha (Yakutia) on winter road Olenek-Anabar, 70 RUB 1,541,061.00 1,541,061 Minutes No. 175 of November 03, 2011 km to north-west from Olenek settlement on the right side of Malaya Kuonamka River.

Supervisory Board OJSC Severalmaz Information Report on the Results of Subsoil Geological Survey Operations RUB 434,214,040.00 434,214,040 Minutes No. 169 of March 22, 2011

Total 659,914,372.3

86 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Appendix 5

Information on Investments with Estimated Return of over 10% per annum

Parameters considered in project justification Implementa- Investments in No. Project Project Objective tion dead- Investments in Project Note 2011, RUB million lines, year (target prices), RUB Project KPI million

Extension of open pit of the Ny- Optimisation of technical and eco- Maintain current volumes of NPV(10) =RUB 1 urbinskaya pipe (purchase of ma- 2011-2014 20,799.1 361.3 nomic parameters in developing the diamond mining by ALROSA 29,996.2 million chinery and equipment) reserves of the Nakyn ore field (2008)

Feasibility study of the exploration Deepening of the open pit of the Maintain current volumes of NPV(10) = RUB 25,752 conditions for calculation of diamond 2 Jubilee pipe down to level -100m 2011-2017 20,734 48.7 diamond mining by ALROSA million; reserves of the Jubilee pipe down to (engineering structures) the explored depth (2010)

Development of the Udachny open- Udachny open-pit mine. Cleaning pit mine down to level -320m and Maintain current volumes of NPV(12) = RUB 3 of the Eastern blocks (purchasing of 2011-2013 662 152.5 cleaning of the ore blocks. Economi- diamond mining by ALROSA 14,080.7 million; the equipment) cal assessment of the investment efficiency (2011)

87 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Appendix 6

Information on all Forms of the Company’s Participation in Profit and Non-Profit Organisations, Dividends Received in 2011

Long-term financial investments in Share in the authorised Dividend received, No. Company authorised capital of subsidiaries and capital, % RUB thousand affiliates, RUB thousand

Investments in Subsidiaries

1 Alrosa Finance B.V. 119 100.00

2 Arcos Belgium N.V. 3,193 99.60 12,978

3 Arcos East DMCC 2,935 100.00

4 Arcos Hong Kong Ltd 8,527 100.00 5,042

5 Arcos LIMITED 17,396 78.28 6,461

6 Arcos USA Inc. 26,726 100.00

7 Sunland Holding S.A. 4,538 100.00

8 Hydrochicapa Sarl 1,568 55.00

9 CJSC ALROSA Africa 2 100.00 165

10 CJSC ALROSA Torg 23,300 100.00 163

11 CJSC BRINT-M 314,116 100.00

12 CJSC ALROSA Hotels 225,642 100.00

13 CJSC Irelyakhneft 20,300 100.00

14 CJSC Golubaya Volna Resort 602,603 100.00

15 LLC Mirny Commercial Bank MAK-Bank 220,453 84.66 2,371

16 Private Pension Fund Almaznaya Osen 99,700 99.70

17 OJSC Almazy Anabara 2,303,589 100.00

18 OJSC ALROS- Gaz 1,409,652 100.00

19 OJSC ALROSA-Lenskstroy 14,944 98.23 493

20 OJSC ALROSA-Lesprom 85,000 82.52

21 OJSC ALROSA-Nyurba 23,870,157 87.49 4,593,107

22 OJSC ALROSA-Yakutia 2,542 50.85

23 OJSC Vilyui GES-3 5,510,353 99.73

24 OJSC GMK Timir 9,705,541 100.00

25 OJSC Lensk Wholesale Trading Company 51,962 99.88

88 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Long-term financial investments in Share in the authorised Dividend received, No. Company authorised capital of subsidiaries and capital, % RUB thousand affiliates, RUB thousand

26 OJSC NPP Burevestnik 129,728 90.65 4,261

27 OJSC National Oil and Gas Company Sakhaneftegaz 184,616 50.40

28 OJSC Severalmaz 19,183,488 99.62

29 OJSC Northern Mining and Geological Company Terra 32,233 92.00

30 OJSC Udachny Complex of Food Companies 11,398 99.48

31 OJSC Shipping Company ALROSA Lena 78,987 99.23

32 OJSC Udachny ORS 13,060 98.64

33 OOO Almaz-Antareks 13 100.00 8

34 LLC ALROSA-Avto 8,888 100.00

35 LLC ALROSA-VGS 613,238 100.00 890

36 LLC ALROSA-Okhrana 31,394 100.00 6

37 LLC ALROSA-Spetsburenie 950 51.00 12,389

38 LLC Barnaul Kristall Factory 56,389 100.00

39 LLC Lensk Enterprise of Housing Services 22,971 100.00

40 LLC Lensk PTES 150,000 100.00

41 LLC Mediagroup Sitim 39,104 100.00

42 LLC Mirny City Printing House 5,749 57.27

43 LLC Mirny ORS 7,676 99.99

44 LLC Mirny Enterprise of Housing Services 46,208 100.00 1,800

45 LLC Nikonovka 10,550 100.00 714

46 LLC Oryol ALROSA 20,534 51.00

47 LLC Insurance Company IC ALROSA 623,333 99.74 1,728

65,795,365 4,642,576

Investments in Affiliates

48 CATOCA Ltd Mining Co. 34,080 32.80 922,898

49 CJSC PIK Oryol Almaz 4,080 34.00

50 OJSC Almazny Mir 157,433 47.37 1,056

51 OJSC ALROSA Yakutsnab 1,518 43.38 1,406

52 OJSC Republican Investment Company Sakha Capital 2,500 25.00

53 LLC Suntartseolit 1,628 35.40

54 Joint Mongolian Russian company M-Diamond 240 49.00

89 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Long-term financial investments in Share in the authorised Dividend received, No. Company authorised capital of subsidiaries and capital, % RUB thousand affiliates, RUB thousand

201,479 925,360

Investments in other companies

55 Arcos Diamonds Israel Ltd 2,546 2.29

56 AB Sir (OJSC) 243 0.69

57 Joint Stock Commercial Savings Bank of the Russian Federation (OJSC) 8,071 0.01 129

58 Inter-Municipal Company Eygevest (OJSC) 4,000 20.00

59 OJSC Sakha Diamond 11 3.90

60 LLC Financial Investment Company Interfinance 19,900 19.90 381

34,771 510

Investment Projects

61 Consortium established by DARK OIL COMPANY LTD and OJSC ALROSA 820,244 51.00

62 OPO plant for ore processing (FGUP Mining and Chemicals Plant) 19,950 35.60

840,194

Total: 66,871,810 х 5,568,444

90 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Appendix 7

Information on Concluded Sale and Purchase Agreements for Shares, Stock and Interest in Business Partnerships and Companies, Including Information on the Parties, Subject, Price and Other Conditions of Such Agreements

Information on the No. Company Contract details Subject of the Contract Parties

1 Rosan Mining and In- Contract No. 423 of 1.1 THE SELLER shall within the procedure and on the terms provided for herein transfer to the ownership of the BUYER and the Buyer: vestments Company, November 14, 2011 BUYER shall accept and pay for the share representing ninety (90) % in the authorised capital of Rosan Mining and investiments Global Gold Mining Limitada company, Limitada (hereinafter, the Company) located at: Rua I, Futungu di Belach, Ngangula, Augusto complex, Luanda, regis- Limited tered with the registration chamber of Luanda for commercial registration under number 992‑06. Seller: 1.2. The said share having a par value of 9,360,000.00 (nine million three hundred and sixty thousand) kwanza in the Company’s ALROSA authorised capital is owned by the SELLER, which is confirmed by the Registration Certificate issued by the Registration Chamber of Luanda for Commercial Registration on October 19, 2006. 1.3. The total amount payable by the BUYER to the SELLER for the said share shall be RUB 3,200,000 (three million two hundred thousand roubles). 1.4. The SELLER confirms that prior to the conclusion of this contract the said share in the authorised capital has neither been alienated to anyone, nor pledged and is free from any dispute, prohibition (arrest) or rights of third parties. 1.5. The Parties to this contract guarantee that both parties have complied with all the procedures provided for in the constituent documents of the relevant party and / or legislation and required for the performance of this transaction. 1.6. The sold share in the Company’s authorised capital shall be transferred to the BUYER upon the conclusion of this contract. At the same time, any rights and obligations of the Company’s member arisen before the conclusion of this contract, apart from the additional rights and obligations of the SELLER, if any, shall be transferred to the BUYER.

2 ALROSA Vnesh- Contract No. 183 of 1.1. Pursuant to this Contract, the Seller shall transfer to the ownership of the Buyer and the Buyer shall on the terms defined Buyer: stroy Ltd. May 24, 2011 herein accept and pay for the share in the authorised capital of Construction Company ALROSA Vneshstroy Ltd. (Registered ad- Open Joint Stock dress: 1 Coronel Aires de Ornelas, Luanda, Angola) representing 90 % in the authorised capital of Construction Company ALROSA Company Almazzoloto- Vneshstroy Ltd. and owned by the Seller (hereinafter, the share). komplekt 1.2. The par value of the share is equivalent to 90,000 (ninety thousand) US dollars and is equal to the amount nominated in the Seller: national currency of kwanza at the exchange rate established by the National Bank of Angola as at the date of the contract. ALROSA 1.3. The value of the share under this Contract shall be 50,300,000 (fifty million three hundred thousand) Russian roubles. 1.4. The payment for the share shall be effected via a bank transfer of funds to the buyer’s settlement account in accordance with the following procedure: – 25,300,000 (twenty-five million three hundred thousand) roubles within three (3) days upon signing this contract; – 25,000,000 (twenty-five million) roubles before July 1, 2012. 1.5. The procedure for the transfer of the title to the share shall be defined in accordance with laws of the Republic of Angola and the Russian Federation. 1.6. The Buyer confirms that it has no claims against the Seller both related to the transfer of the share and / or financial and economic condition of the Construction Company ALROSA Vneshstroy Ltd., or any other claims.

91 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES Information on the No. Company Contract details Subject of the Contract Parties

3 CJSC Almaz-Neva Contract No. 165 of 1.1. The object of the sale and purchase under this contract represents shares having the following characteristics: Issuer: Buyer: May 17, 2011 Closed Joint Stock Company Almaz-Neva Global Gold Mining Issuer’s location: 128 liter A, Nevsky pr., Saint Petersburg, 191036 Limited Type of securities: Share Seller: Category: Ordinary Registered Form of the issue: Undocumented ALROSA Par value of each share: 500 (five hundred) roubles. State Registration Number of the issue of securities: 1‑01‑10333‑J Number of shares in the issue: 100 (one hundred) shares Number of shares for sale: 100 (one hundred) shares Holder of Register: Issuer 1.2. The shares indicated in par. 1.1. hereof have neither been alienated to anyone, nor pledged and are free from any dispute or prohibition, trust management and rights of third parties. 1.3. The shares indicated in par. 1.2. hereof are owned by the Seller, which is confirmed by the extract from the Register of Share- holders of CJSC Almaz-Neva. 1.4. The total amount payable by the Buyer to the Seller for 100 shares shall be: 326,000 (three hundred and twenty-six thousand) roubles. 1.5. The Seller guarantees that at the time of the Buyer’s conclusion of this contract and preparing the deed of transfer, the shares indicated in par. 1.1 hereof have not been alienated to anyone or pledged and are free from any dispute or prohibition, trust management and any rights of third parties. 1.6. The Parties to this contract guarantee that both parties have complied with all the procedures provided for in the constituent documents of the relevant party and / or legislation and required for the performance of this transaction.

92 ALROSA • ANNUAL REPORT | www.alrosa.ru APPENDICES