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Annual Report 2О2о I ANNUAL REPORT 2О2О | ANNUAL REPORT 2020 COMPANY STRATEGIC PERFORMANCE SUSTAINABILITY FOR SHAREHOLDERS CORPORATE APPENDICES II PROFILE REPORT AND INVESTORS GOVERNANCE 1 This report of the public joint stock company PJSC ALROSA ( the Company) for 2020 covers the results of the operations of the Company and its subsidiaries, together referred to as the ALROSA Group. The terms “ALROSA”, “the ALROSA Group”, “the Group”, and “the Company” used in the report are considered equivalent and refer to the ALROSA Group as a whole, PJSC ALROSA, and/or its subsidiaries, depending on context. PJSC ALROSA is the parent company of the ALROSA Group, provides consoli- dated information for this report on the operating and financial activities of key business units and lines of business. This report has been prepared based on an analysis of the operating data of the consolidated IFRS indicators (unless speci- fied otherwise). In terms of information disclosures, this Report complies with: − Federal Law No. 208-FZ dated 26 December 1995 “On Joint Stock Companies”; − Federal Law No. 39-FZ dated 22 April 1996 “On the Securities Market”; − Bank of Russia Regulation No. 454-P dated 30 December 2014 “On Information Disclosure by Issuers of Marketable Securities”; − Bank of Russia Informational Letter No. IN-06-52/8 dated 17 February 2016 “On the Disclosure in the Annual Report of a Public Joint Stock Company of a Report on Compliance with the Principles and Recommendations of the Code of Corporate Governance”; − Russian Government Resolution No. 1214 dated 31 December 2010 “On Improving the Governance of Joint Stock Companies, Shares in Which Are Held in Federal Ownership, and of Federal Unitary Enterprises”, as currently amended. This 2020 Report of the public joint stock company PJSC ALROSA has been ap- proved by the PJSC ALROSA Annual General Meeting of shareholders, Minutes No. 43 dated 17 June 2021, and has been given preliminary approval by the Supervisory Board of PJSC ALROSA, Minutes No. 01/332-PR-NS dated 28 April 2021. The accuracy of the data provided in the report has been con- firmed by the Audit Commission. | ANNUAL REPORT 2020 COMPANY STRATEGIC PERFORMANCE SUSTAINABILITY FOR SHAREHOLDERS CORPORATE APPENDICES 2 PROFILE REPORT AND INVESTORS GOVERNANCE 3 FORWARD-LOOKING STATEMENTS In addition to factual data for past periods, this report makes certain forward-looking statements. In particular, these include statements on the future results of production activity, plans and/or forecasts relating to future economic and financial indicators, goals and objectives of the Company regarding development plans, including target values for the KPI of the ALROSA Group for the next three years (2021–2023) – in the sub-section “Achievement of Key Performance Indicators” of the section “Development Strategy” of Chapter “Strategic Report”. Statements about future results may include information on forecast or expected income, earnings (losses), net profit (losses) in respect of shares, dividends, capital structure, and other financial matters. The content of such statements is anticipatory in nature, and is generally accompanied by words such as “expected”, “presumed”, “planned”, “intended”, and so on. Forward-looking statements are inherently as- sociated with risks and uncertainty, both in general and in particular aspects. There is a risk that actual future results may differ substantially from the plans, goals, expectations and intentions expressed in such statements, or may not be achieved by virtue of a number of different factors. | ANNUAL REPORT 2020 COMPANY STRATEGIC PERFORMANCE SUSTAINABILITY FOR SHAREHOLDERS CORPORATE APPENDICES 4 PROFILE REPORT AND INVESTORS GOVERNANCE 5 TABLE OF CONTENTS A MESSAGE FROM THE CHAIRMAN OF THE FOR SHAREHOLDERS AND INVESTORS 94 SUPERVISORY BOARD 6 Factors in the investment appeal of ALROSA, 96 Share capital and dividend policy, 97 A MESSAGE FROM THE CHIEF EXECUTIVE Shareholder and investor relations, 100 OFFICER – CHAIRMAN OF THE MANAGEMENT BOARD 8 CORPORATE GOVERNANCE 104 Structure and results of the activity of corporate governance bodies, 106 COMPANY PROFILE 10 General Meeting of Shareholders, 108 About the Company, 12 Supervisory Board, 109 Key results of 2020, 13 Executive management bodies, 133 Contribution to fighting the spread of the COVID-19, 16 Corporate Secretary, 138 Sustainability, 18 Risk management system, 139 Corporate governance, 20 Control system, 150 Where we operate, 22 Information disclosure system, 157 Business model , 24 Glossary, 158 Contact information, 162 STRATEGIC REPORT 26 Market overview, 28 Appendices 164 Development strategy, 33 Financial statements (IFRS) of PJSC ALROSA for 2020, 166 Investing activity, 40 Subsidiaries and associates, 176 Increasing efficiency, 43 List of local internal regulations, 182 Report of the independent auditor on implementation of the Long-Term Development Program, 183 PERFORMANCE 50 Statistics on sales of rough and polished diamonds, 185 Information on disposal of non-core assets, 186 Reserves and exploration, 52 Information on the execution of the orders of the President and Government of the Russian Federation, 188 Operating performance, 55 Information on major transactions and interested-party transactions, 190 Financial performance, 65 Report on compliance with the principles and recommendations of the Corporate Governance Code, 198 International industry cooperation, 71 Report of the Audit Commission, 220 Procurement management, 72 Pending court proceedings, 227 Government support, 228 SUSTAINABILITY 76 Information on the meetings of the Supervisory Board and committees, 230 ESG ratings and awards, 79 Sustainability management, 80 People, 81 Occupational health and safety, 85 Community Engagement, 87 Environment, 90 | ANNUAL REPORT 2020 COMPANY STRATEGIC PERFORMANCE SUSTAINABILITY FOR SHAREHOLDERS CORPORATE APPENDICES 6 PROFILE REPORT AND INVESTORS GOVERNANCE 7 A MESSAGE FROM THE CHAIRMAN OF THE SUPERVISORY BOARD Dear Shareholders, 2020 proved ALROSA’s ability to maintain efficient operations in the face of major challenges. The Company implemented a set of anti-crisis measures that ensured its continued financial resilience and support for the personnel. A focus on digitaliza- tion enabled a prompt transition of many business processes to online. Despite the fall in demand for diamonds and jewelry during the pandemic, ALROSA was able to not just maintain, but also reinforce its positions. This is borne out by the fact that the Company retained investment-grade ratings from three inter- national agencies, and the bond offering in the middle of 2020 went down in history as the most successful in the sector in the past five years. ALROSA’s own online jewelry store, where consumers can purchase diamonds and jewelry with a Company-guaranteed provenance, opened its virtual doors in 2020. This was another important step on the road to improving the transparency of the supply chain. I would like to highlight the Company’s active efforts to inte- grate ESG principles into its operations. During the reporting year, we created a Working Group on Sustainability, and at the start of 2021 the Supervisory Board made the decision to add sustainability to the remit of the committee responsible for strategic planning. All of these served as appropriate and time- 2020 proved ALROSA’s ability to maintain efficient ly measures to improve the governance system and to address operations in the face of major challenges. The Company the growing demands for transparency from clients, share- implemented a set of anti-crisis measures that ensured holders, and investors. ALROSA maintains its leading position on the world diamond its continued financial resilience and support for the market while remaining true to the principles of responsible personnel. business. On behalf of the Supervisory Board, I would like to thank the management and all employees of ALROSA for contributing to the Group’s development and for their professionalism. Anton Siluanov CHAIRMAN OF THE SUPERVISORY BOARD, PJSC ALROSA | ANNUAL REPORT 2020 COMPANY STRATEGIC PERFORMANCE SUSTAINABILITY FOR SHAREHOLDERS CORPORATE APPENDICES 8 PROFILE REPORT AND INVESTORS GOVERNANCE 9 A MESSAGE FROM THE CHIEF EXECUTIVE OFFICER – CHAIRMAN OF THE MANAGEMENT BOARD Dear ALROSA shareholders, investors, and employees, This reporting year was a difficult one for the entire world – Despite the drop in production, ALROSA retained its the COVID-19 pandemic was a serious test for all countries, leadership on the global diamond production market. all companies, and for every individual. The restrictions as- A milestone for the year was the creation of the ALROSA sociated with coronavirus led to lockdowns, economic cri- Jewelry Group. ses, and a reduction in demand on the global market for ALROSA continues to refine and reform its internal pro- diamonds and diamond products. cesses. In the reporting year, the Company launched a Digital Production program dedicated to transforming the Company’s production segment with the help of digital Measures against the COVID-19 pandemic and its solutions. ALROSA launched a large-scale upgrade of the consequences equipment maintenance and repair system and continued From the very beginning of the pandemic, ALROSA took automating various production processes. The pandemic a responsible approach and implemented the necessary was in many ways instrumental in accelerating the imple- measures to fight COVID-19. Total expenses in this area ex- mentation of new solutions. For example, due to
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