STRATEGIC OVERVIEW

ABOUT THE COMPANY

COMPANY DEVELOPMENTAL HISTORY

1957
Yakutalmaz complex of enterprises was established. Processing plant No.1 produced the first technical-grade diamonds

1960
Aikhal pipe was discovered

1966
Processing plant No. 3 in the town of Mirny produced rough diamonds for the first time

1967
Udachny mine was created, processing plant No. 11 produced rough diamonds for the first time

1975
Yubileynaya pipe was discovered

1976
First priority facilities of Udachny MPD were put in operation

1978
Mirny Exploration Expedition was established

1986
Aikhal Mining and Processing Division was established

1991
Mirny Mining and Processing Division was established

1992
ALROSA Closed Joint Stock Company was established

1997
The plant of Catoca Ltd. Mining Co., a joint mining venture, in the Republic of Angola produced the first diamonds

2003
Putting in operation processing plant No. 16 at Nyurbinskaya pipe. Commencement of operations of Nyurba MPD

2005
PJSC Severalmaz started mining diamonds in the Arkhangelsk Region.

2009
Launch of Mir underground mine. Commencement of stripping works at Karpinskogo-1 pipe in the Arkhangelsk Region

2011
ALROSA Joint Stock Company is reorganized into an Open Joint Stock Company. ALROSA shares began floating in the financial market. An Agreement on Social and Economic Development was concluded with the Republic of Sakha (Yakutia)

2012
ALROSA production develop-ment plan until 2021 was approved. Botuobinskaya kimberlite pipe mining commenced

2013
The third priority facilities of Aikhal underground mine were put in operation. Nizhne-Lenskoe became an enterprise of ALROSA Group. ALROSA shares were placed on the Moscow Stock Exchange

2014
ALROSA commissioned the second priority facilities of the processing plant of PJSC Severalmaz

2015
Commencement of mining Botuobinskaya pipe of Nyurba MPD. Finishing of open pit mining of Udachnaya pipe

BUSINESS MODEL

ALROSA Group operates in a competitive environment and interacts with a big number of counterparties. In accordance with the strategic priorities, the Company mainly directs its efforts to production and sales of rough diamonds, improvement of efficiency, consolidation of leadership and sustainable development.

Competitive advantages of the ALROSA Group business model are:

– leadership in terms of production and reserves;

– developing industry;

– good quality assets;

– stable financial position;

– experienced team.

GROUP STRUCTURE

COMPANY POSITION IN THE INDUSTRY

PRINCIPAL COMPETITORS AND MARKET SHARE

The principal competitors of ALROSA on the global diamond market are De Beers, Rio Tinto, Dominion Diamond and Petra Diamonds, all of whom together, according to Kimberley Process statistics, account for about 70% of the global supply. Diamond production by these companies in 2015 grew by 2% compared to 2014. In 2015, ALROSA Group production increased by 6% compared to 2014 and amounted to 38.3 mn carats. In accordance with its strategy, the Company reasserted its dominant position amongst the world’s leading diamond mining companies.

De Beers is a private diamond mining company, the only company comparable with ALROSA Group in terms of production. De Beers mines diamonds from deposits in Botswana, RSA, Canada and Namibia. In 2015, De Beers produced 28.7 mn carats of rough diamonds.

Rio Tinto is a public diversified mining company engaged in exploration, production and processing of natural resources. In 2015, Rio Tinto produced 17.4 mn carats of rough diamonds.

Dominion Diamond is a public company engaged in rough diamond mining. Diamond production by Dominion Diamond in 2015 from Diavik deposit amounted to 2.6 mn carats.

Petra Diamonds is a public diamond mining company developing diamond deposits in RSA and Tanzania. In 2015, Petra Diamonds produced 3.2 mn carats of rough diamonds.

In 2015, ALROSA Group accounted for approximately 30% of the global rough diamond production in terms of volume.

DIAMOND MINING BY PRINCIPAL COMPETITORS, MN CARATS

Company 2013 2014 2015 % compared to 2014
ALROSA 36.9 36.2 38.3 105.80%
De Beers 31.2 32.6 28.7 88.00%
Rio Tinto 16 13.9 17.4 125.20%
Dominion Diamond (Diavik) 2.9 2.9 2.6 89.70%
Petra Diamonds 3.1 3.1 3.2 103.20%
TOTAL 90.1 88.7 90.1 101.60%

Source: quarterly reports of the companies

MARKET SHARES OF THE LEADING DIAMOND MINING COMPANIES IN CARATS

*Source: quarterly reports of the companies, Kimberley Process statistics

**The evaluation is based on actual data of the main rough diamond mining companies for 2015 and estimated production volumes of other producers

In 2015, the leading diamond mining companies repeatedly reduced the target production figures planned at the beginning of the year due to an unfavourable market situation: De Beers from 31 mn carats down to 29 mn carats; Rio Tinto from 20 mn carats down to 17 mn carats; Dominion Diamond from 6 mn carats down to 5 mn carats. Rough diamond production growth in 2015 by 2% was due to Rio Tinto’s increased production at the Argyle underground mine (from 9 mn carats in 2014 to 13 mn carats in 2015). According to preliminary estimates, in terms of value, global rough diamond production in 2015 amounted to USD 14 bn, which is a 12% decrease compared to 2014 (USD 15 bn in 2014).

EXPORT AND IMPORT STATISTICS OF THE MAIN SALES CENTRES

The largest global trade centres accounting for the major sales of natural rough diamonds are Belgium and India. Analysis of the statistics of foreign trade in rough diamonds in the aforementioned countries is indicative of the nature of global demand for rough diamonds.

Based on results of 2015, Belgian foreign trade in rough diamonds amounted to USD 22,617 mn, which is 26% less than in 2014.

Based on results of 2015, rough diamonds import to India, the dominating global polished diamonds producer, amounted to USD 14 bn, which is 23% less than in 2014. The decrease in rough diamonds consumption by diamond cutting enterprises reflects the decreased market activity. The volume of rough diamond exports from India in 2015 decreased to USD 21 bn, which is 11% less than this figure in 2014. That the rough diamond import rate is exceeding the rough diamond export decrease rate is indicative of selling polished diamonds from the earlier accumulated reserves.

BELGIAN FOREIGN TRADE IN ROUGH DIAMONDS

FOREIGN TRADE TRANSACTIONS IN ROUGH AND POLISHED DIAMONDS IN INDIA

PRICE AND VOLUME DYNAMICS OF THE GLOBAL ROUGH AND POLISHED DIAMOND MARKET

Prices for polished diamonds lowered in 2015 for all the categories. In accordance with Rapaport (RapNet Diamond Index, RAPI) report and based on results of 2015, prices for polished diamonds decreased by 13% for 0.3-carat diamonds and by 15% for 0.5-carat diamonds, whereas prices for larger size diamonds weighing 1.0 and 3.0 carats decreased by 6% and 15%, respectively.

Reduction of demand for polished diamond jewellery led to accumulation of stock by retail companies in China and diamond cutting companies.

Based on results of monitoring of the global diamond market situation, in January-September 2015, ALROSA management took decisions on the gradual lowering of prices of the Company products. As a result, by the end of 2015, rough diamond prices were decreased by 15%, which is similar to the prices effective as of the beginning of 2011.

During 2015, the prices for rough diamonds of other diamond mining companies also showed a negative trend: prices for the diamonds sold by De Beers decreased by 15% by the end of 2015 compared to the beginning of the year, and Petra Diamonds recorded a price decrease in diamonds of 9-10%.

In 2015, the biggest diamond mining companies, which collectively account for over 50% of the global diamond production, in addition to lowering prices, restricted supply of rough diamonds to the market in order to stabilize the diamond market and lower the level of the stock at the disposal of Indian diamond cutting enterprises. In 2015, ALROSA decreased rough diamond sales to 30 mn carats, which is 24% less than in 2014. De Beers’s sales of rough diamonds in 2015 amounted to 19.9 mn carats, which is 39% less than in 2014.

SALES OF DIAMOND JEWELLERY

In 2015, the main tendency on the global diamond jewellery market was the continuous shift of the tourist flow from Hong Kong and Macao to Europe and Japan. It was caused by depreciation of the yen and euro against the Hong Kong dollar (it is linked to the US dollar) and, as a consequence, emergence of a price gap between European and Asian markets. Consumer confidence decrease put additional pressure on demand in China, which led to reduction in sales of luxury commodities, including diamond jewellery.

The leading diamond jewellery consu-ming countries are the USA, China and India, whose share in the world consumption of diamond jewellery is about 60%, while the USA accounts for about 30% of the global consumption.

The main macroeconomic factors that determine the demand for diamond jewellery are the growth in personal disposable income and, mainly for China and India, the number of middle-class households (with the annual income exceeding USD 10,000). These factors are directly connected to the GDP growth rate.

GDP GROWTH RATES OF THE COUNTRIES BEING PRIMARY CONSUMERS OF DIAMOND JEWELLERY IN 2014-2015, %

Company 2014 2015
Global* 2.6 2.4
USA** 2.4 2.4
China*** 7.3 6.9
India**** 7.2 7.6

*Source: The World Bank. January 2016

** Source: U.S. Bureau of Economic Analysis

*** Source: National Bureau of Statistics of China

****Source: The Ministry of Statistics and Programme Implementation (India)

COMPANY MISSION AND STRATEGY

MISSION AND STRATEGIC PRIORITIES OF ALROSA GROUP

MISSION

The global diamond mining industry leader that persistently implements long-term interests of shareholders due to efficient use of the mineral resource base

STRATEGIC PRIORITY

Focus on rough diamond mining, the most profitable component of the value chain

ALROSA intends to focus on the core activities, namely exploration, mining and sale of rough diamonds.

Income from the sale of non-core assets will be used to invest in core activities and reduce the debt of the Company.

Preservation and expansion of the mineral resource base through geological exploration in Russia and Africa

ALROSA continuous investing in prospecting and exploration works. The focus is on Africa and Russia being the two regions that have, in the opinion of the Group, the highest commercial diamond deposit discovery potential. ALROSA will also improve effectiveness of development of the existing producing deposits.

Increasing productivity through innovation and improvement of production processes

ALROSA pays great attention to innovative development and use of new technologies aimed at improvement of the operating efficiency and, as a consequence, profitability of the business. The Company actively optimizes costs at all stages of production. The measures taken by the Group include procurement optimization, use of standards to improve labour productivity, introduction of integrated management reporting and reduction of the inventory turnover rate.

Compliance with high standards of environmental and industrial safety, social responsibility and corporate governance in the regions where the Company operates

ALROSA traditionally carries out a series of activities aimed at supporting the personnel and creating conditions for professional development of specialists, ensuring safe working conditions and compliance with performance environmental standards.

The Company will continue to provide socially orientated services in the regions where it operates by creating jobs, paying taxes, fees and dividends to the budgets of constituent entities of the Russian Federation.

Consolidation of the status of the leader of the diamond industry with a flawless reputation among customers

ALROSA takes successive steps aimed at expanding the loyal and reliable customer base and establishing its reputation as a customer-oriented business partner. The Group will continue its efforts to liberalize and improve the diamond sales regulation regime.

The Company also intends to actively promote the ALROSA brand and encourage the growth of the Company’s influence in the diamond industry.

In the reporting period the Company continued to operate in accordance with the goals and in the areas specified in the Long-Term Development Program of the ALROSA Group until 2023 approved by the Supervisory Board on December 11, 2014 (Minutes No. А01/223-ПР-НС). Successful imple-mentation of the Program will make it possible for the ALROSA Group to consolidate the leading position on the rough diamond market and ensure sustainable long-term production and revenue growth as well as an increase in the shareholder value. No changes in the Long-Term Development Program of ALROSA Group until 2023 were made in the reporting period.

ALROSA GROUP 2015 TARGETS ACHIEVEMENT STATUS

PRIORITY TARGET ACHIEVEMENT STATUS
Consolidating the leading position on the world diamond mining market Rough diamond production by ALROSA Group is 38.26 mn carats.
Botuobinskaya deposit production is 250 thousand tons
Ore production at Mir underground mine is 783 thousand tons
PJSC Severalmaz rough diamond production is 1.95 mn carats.
Preservation and expansion of the raw materials base ALROSA Group reserves growth is 43.57 mn carats.
Increasing productivity through inno-vation and improvement of production processes The actual volume of funding the Innovation Development and Technological Upgrade Program of PJSC ALROSA in 2015 amounted to RUB 2,040.7 mn.
In 2015, PJSC ALROSA introduced 27 scientific and technical developments and received 11 title protection documents for utility models and inventions with expected economic performance of RUB 560 mn.
Improvement of financial and economic efficiency Corporate and exchange bonds amounting to RUB 20 bn were redeemed, a loan amounting to USD 85 mn was repaid ahead of schedule. PJSC ALROSA credit portfolio as of the end of the reporting year totals at USD 3,040 mn.
There was received financing from the budget for maintenance of non-core facilities amounting to RUB 1.23 bn.
In order to improve efficiency of managing cash flows of ALROSA Group, Treasury operations were switched to a Joint Treasury format.
The proportion of contracts concluded with manufacturers and dealers amounted to 93% of the value of the procurement procedures performed.
Improving corporate governance Implementation of the non-core assets disposal program:
– withdrawal from participation in CB MAK-Bank (LLC), Nikonovka LLC, Suntartseolit LLC, ALROSA-VGS LLC;
– liquidation of М&Diamond LLC.
Implementation of the program of reforming the residential development division:
– transfer from balance sheets of PJSC ALROSA divisions to the authorized capital of Mirny Town Housing Enterprise LLC of the property necessary for maintenance of the housing stock;
– establishment of a Management company on the basis of Mirny Town Housing Enterprise LLC, a subsidiary company;
– transfer of PJSC ALROSA participation interest in Mirny Town Housing Enterprise LLC to municipalities of Mirny district including the transfer of the responsibility for maintenance of the housing stock.
Implementation of the program of reforming the housing and utility division:
– consolidation of the public utility division to form ALROSA Heat and Water Supplying Division, a single resources supply division; establishment of Heat and Water Supply LLC, a subsidiary company, on the basis of the heat and power supplying division.
Within the framework of reorganization of the non-state pension fund:
– activities aimed at changing the type of ownership of Almaznaya Osen Non-State Pension Fund were completed.

ALROSA GROUP PLANS FOR 2016

1. Maintenance of production potential:

– Mir underground mine reaching the design capacity of 1 mn tons;

– putting into operation the second start-up section of Udachny underground mine;

– putting into operation the second stage of the fifth start-up section of Internatsionalny underground mine.

2. Improvement of the corporate governance structure:

– implementation of the Non-core Assets Disposal Program;

– reorganization of the residential and public utility division and diamond cutting and polishing division of PJSC ALROSA.

3. Development of the mineral resource base in the most promising regions:

– PJSC ALROSA – to obtain the right for exploration and production of rough diamonds at deposits of the Group.

4. Development of sales and marketing activities:

– introduction of the system of annual adjustment of rough diamonds offering;

– launch of a generic marketing program for polished diamonds;

– approval of a new revision of the Regulations on selection and sale of validation batches of natural rough diamonds.

5. Improvement of economic efficiency:

– update of the Innovation Development and Technological Update Program of PJSC ALROSA.

FULFILING THE KEY PERFORMANCE INDICATORS

As per the instructions of the President and the Government of the Russian Federation, PJSC ALROSA developed and in December 2014 the Supervisory Board approved the list, calculation method and target figures of the key performance indicators (KPIs) of ALROSA Group until 2023.

The main purpose of introducing the KPIs is translating the long-term plans and strategies of ALROSA Group into specific operational management indi-cators. Such indicators make it possible to appraise the current status, form a basis for taking long-term and medium-term managerial decisions, as well as to develop a motivational system linking interests of individual employees and the Group as a whole.

In 2015, the key performance indicators of ALROSA Group were integrated into the effective system of motivation for the management establishing a direct dependence of the amount of remuneration of the sole executive body and members of the collegial executive body of the Company on the level of achieving the KPI targets approved by the shareholders.

The respective additions/amendments to the Regulations on remuneration to the President of PJSC ALROSA and the Regulations on remuneration to members of the Executive Committee of PJSC ALROSA were approved by the Supervisory Board in December 2014. New revision of the documents that takes into account the practice of implementing the KPIs system was approved by the Supervisory Board in November 2015.

KEY PERFORMANCE INDICATORS IN 2013-2015 AND FORECAST FOR 2016

Indicator UoM 2013 2014 2015 % of the plan
plan actual
Financial and economic indicators
Market return per share % 32 46 * -14
Dividend flow growth RUB mn 5,011 2,013 >0 5,450**
Adjusted EBITDA profitability % 41 45 50 53 105.80%
Return on equity (ROE) % 22 -11 24 22 92.50%
Return on equity (ROE) without taking into account the negative impact of the exchange rate differences in 2015 % 22 -11 24 32 132.10%
Net profit RUB bn 32 -17 35 32 92.00%
Net profit without taking into account the negative impact of the exchange rate differences in 2015 RUB bn 32 -17 35 49 138.90%
Industry-specific indicators
Revenue from sales of core products млн долл. США 4,945 5,045 3,400 3,554 104.50%
Rough diamond production млн кар. 36.9 36.2 38.2 38.3 100.20%
Share of the cost of sales in the sales revenue % 49 48 42 42 99.20%

BONUS CANCELLATION REASONS

Indicator UoM 2013 2014 2015
plan actual
Lost Time Injury Frequency Rate (LTIFR) coefficient 0.1 0.07 -≤0.1 0.08
Net debt/adjusted EBITDA coefficient 1.9 1.9 ≤2.0 1.7

Based on results of 2015, all the target values of the key performance indicators of ALROSA Group set by shareholders of PJSC ALROSA were achieved with the exception of the following indicators: market return per share, return on equity and net profit.

A significant slowdown in rough diamond market activity and a drop in the global demand for rough diamonds in 2015 led to a 30% reduction of sales of the main products of the ALROSA Group. Due to the impact of these factors, the Company stock quotes, despite the positive dynamics of +4.2% compared to 2014, turned out to be slightly worse than the market in general (-14.3% compared to Micex Index).

Deviations from the target values of return on equity and net profit indicators is caused by the result of revaluation of the credit portfolio denominated in US dollars as a consequence of the devaluation of the Russian rouble.

The Supervisory Board of PJSC ALROSA based on analysis of the macroeconomic situation made a decision on assessing the status of achievement of the target values of the key performance indicators of ALROSA Group for 2015 excluding the negative impact of the exchange rate differences that occurred due to depreciation of the Russian rouble against the US dollar. No changes in the system of the key performance indicators of PJSC ALROSA were made in 2015.

The KPIs system of ALROSA Group fully meets requirements of the Guidelines on application of key performance indicators by public corporations, state-owned companies, state unitary enterprises and business entities with a share of the registered capital owned by the Russian Federation or a constituent entity of the Russian Federation totalling over fifty percent developed by the Ministry of Economic Development of the Russian Federation.

ACTIVITY OVERVIEW

RESERVES AND GEOLOGICAL EXPLORATION

ALROSA GROUP

Regeneration of the mineral resource base is one of the main strategic objectives of ALROSA Group. In 2015, ALROSA Group balance reserves according to the standards of the State Reserves Committee of the Russian Federation as of 01.01.2016 amounted to 1,107,902.3 thousand carats*.

RESERVES ACCORDING TO THE STANDARDS OF THE STATE RESERVES COMMITTEE OF THE RUSSIAN FEDERATION, THOUSAND TONS

Company 01.01.2014 01.01.2015 01.01.2016
PJSC ALROSA 703,478.2 688,359.6 680,057.5
PJSC ALROSA-Nyurba 172,405.0 166,341.3 179,037.1
JSC Almazy Anabara 35,755.7 33,507.1 32,686.9
JSC Nizhne-Lenskoe 4,862.6 8,694.8 9,471.8
PJSC Severalmaz 210,346.0 208,607.5 206,649.0
TOTAL 1,126,847.5 1,105,510.3 1,107,902.3

Every year the ALROSA Group strives to ensure that the reserves growth should be equal to the production volume. Reserves and prognostic resources growth of the ALROSA Group based on results of the works completed in 2015 amounted to 43.6 mn carats. The reserve replacement ratio of the ALROSA Group in 2015 amounted to 113.9%.

In 2015, geological exploration works were carried out by structural subdivisions of PJSC ALROSA (Amaki-nskaya Exploration Expedition, Botuo-binskaya Exploration Expedition, Mirny Geological Exploration Expe-dition and Geo-Scientific Research Enterprise) and subsidiaries (PJSC ALROSA-Nyurba, PJSC Severalmaz, JSC Almazy Anabara and JSC Nizhne-Lenskoe).

The geological exploration budget of ALROSA Group in 2015 amounted to RUB 6,305.1 mn (RUB 6,042.9 mn in 2014). Expenditures on geological exploration works increased by 4.3% compared to 2014.

The mining and exploration budget in 2015 amounted to RUB 1,213 mn (RUB 1,144.3 mn in 2014). The costs of mining and exploration works increased by 6% compared to 2014.

LICENSES

ALROSA Group owns 178 licenses as of 01.01.2016.

LIST OF ALROSA GROUP LICENSES AS OF 01.01.2016

License Number of licenses
Geological survey 2
Geological survey for common commercial minerals 11
Geological survey, exploration and production of common commercial minerals 1
Geological survey, exploration and production of diamonds 6
Geological survey and production of diamonds 4
Geological survey, exploration and production of iron ore 4
Geological survey and production of raw hydrocarbons 1
Geological survey, exploration and production of raw hydrocarbons 1
Exploration and production of common commercial minerals 76
Exploration and production of diamonds 27
Gas production 1
Gas and gas condensate production 1
Other activities** 26
Geological survey for diamonds 17
TOTAL 178

*CCM – common commercial minerals;

** Other activities: underground water abstraction, waste water injection, drainage brine injection, mineralized industrial water injection, shaft and drainage water and industrial effluents injection, therapeutic mud exploration and production, underground potable water extraction, incidental harvesting of fossil ivory, exploration and production of dolerites, production of underground fresh water, exploration and production of sand, geological survey for evaluating the possibility of industrial effluents injection, exploration and production of sand, exploration and production of peat.

EVENTS IN THE SPHERE OF LICENSING ALROSA GROUP ACTIVITIES IN 2015

Extension of validity and update of 6 licenses for exploration and production of rough diamonds at the main deposits of the Company:

– The obtaining of a ЯКУ 04113 КР license for geological survey, exploration and production of rough diamonds at Eyekitsky prospect for JSC Almazy Anabara.

– JSC Almazy Anabara won two bids for the right to use the subsoil for geological survey, exploration and production of rough diamonds:

at the subsoil Ochuos Creek plot, the right tributary of the Anabar River (license obtained on 13.08.2015); for the Lyaseger-Yuryakh deposit, the left tributary of the Mayat River (obtaining the license is planned for Q2, 2016).

– 3 licenses were obtained, namely ЯКУ 04553 КП, ЯКУ 04554 КП and ЯКУ 04555 КП, for geological survey, prospecting and evaluation of diamond deposits at Syuldyukarsky-1, Syuldyukarsky-2 and Syuldyukarsky-3 prospects for PJSC ALROSA.

PJSC ALROSA

RESERVES ACCORDING TO THE STANDARDS OF THE STATE RESERVES COMMITTEE OF THE RUSSIAN FEDERATION, THOUSAND TONS

Company 01.01.2014 01.01.2015 01.01.2016
Total diamond reserves of the producing deposits 674,712.6 662,128,6 630,359.9
MIRNY MINING AND PROCESSING DIVISION 204,746.2 201,220.9 194,051.6
Mir pipe 142,897.4 141,190.4 138,495.9
Internatsionalnaya pipe 49,725.5 48,886.4 44,679.9
Vodorazdelniye galechniki 4,903.9 4,869.8 4,842.2
Irelyakh River placer deposit 2,364.3 1,786.1 1,673.1
Gorny site 4,855.1 4,488.2 4,360.5
UDACHNY MINING AND PROCESSING DIVISION 271,489.6 270,651.2 254,751.9
Udachnaya pipe 220,071.1 219,409.7 216,974.6
Zarnitsa pipe 51,418.5 51,241.5 36,772.6
Marginal diluvial placer deposit 0 0 109.5
Piropovy Creek placer deposit 0 0 895.2
AIKHAL MINING AND PROCESSING DIVISION 198,476.8 190,256.5 181,556.4
Yubileynaya pipe 152,937.8 146,681.5 139,296.0
Aikhal pipe 43,622.6 41,662.1 40,493.0
Komsomolskaya pipe 1,916.4 1,912.9 1,767.4
Total diamond reserves for primary deposits 662,589.3 650,984.5 618,479.4
Total diamond reserves for placer deposits 12,123.3 11,144.1 11,880.5
Total reserves for deposits in preparation 6,889.6 8,047.0 32,236.7
Solur-Vostochnaya placer deposit 6,889.6 6,889.5 6,889.5
Piropovy Creek placer deposit 0 1,048.0 0
Marginal diluvial placer deposit 0 109.5 0
Dalnyaya pipe 0 0 9,710.5
Maiskaya pipe 0 0 15,338.4
Maiskaya placer deposit 0 0 298.3
Total diamond reserves for technogenic deposits 9,859.8 10,331.5 10,082.7
Tailing dumps of processing plants No. 2, 3 8,541.1 8,541.1 8,541.1
Tailing dump of processing plant No. 5 448,1 236,5 119,2
Dredge dumps 647,6 1,330.9 1,199.4
Tailing dump of processing plant No. 11 223 223 223
Total rough diamond stock reserves 9,367.5 5,363.5 5,100.2
Total rough diamond reserves for special dumps 2,648.7 2,489.0 2,278.0
TOTAL 703,478.2 688,359.6 680,057.5

In 2015, geological exploration works were carried out in 8 districts of the Yakutia diamondiferous province: Sredne-Markhinsky, Muno-Tyungsky, Daldyno-Alakitsky, Morkokinsky, Ygyattinsky, Malo-Botuobinsky, Verkhne-Oleneksky and Nizhne-Oleneksky.

The works aimed at geological survey of the subsoil and financed from its own funds were held under 22 licenses at 47 prospects, including:

– exploration works under 7 licenses at 7 prospects;

– prospecting and prospecting and appraisal works under 15 licenses at 16 prospects;

– comprehensive airborne geophysical surveys and airborne geophysical surveys at 1:10000 and 1:5000 scales of 4 prospects;

– thematic works at 20 prospects.

In the reporting period geological exploration was completed at 10 prospects.

In order to ensure growth of reserves and prognostic resources, exploration was carried out at the producing fields as well as at the fields being prepared for production. In particular:

– works on the exploration of deep horizons of Internatsionalnaya (stage 1 down to 1,050 horizon) and Aikhal kimberlite pipes were continued;

– exploration works at Verkhne-Munskoe diamond deposit and Zarya pipe were completed, a report on the calculation of diamond reserves and a feasibility report on permanent exploration conditions (Feasibility Report on Exploration Conditions) were drawn up, both of which were submitted to the State Reserves Commission for the state expert appraisal;

– a report on calculation of reserves and a feasibility report on permanent exploration conditions for Dalnyaya pipe and Maiskoe deposit was approved by the State Reserves Commission;

– a report on the calculation of diamond reserves and a feasibility report on permanent exploration conditions for the Zarnitsa pipe were approved by the State Reserves Committee.

Implementation of contracted drilling for exploration of deep horizons of Internatsionalnaya and Aikhal deposits as well as for prospecting purposes (Verkhne-Chukusky-2 and Pravoberezhny-2 prospects) continues. The volume of contracted drilling amounted to 15,213 linear meters or 9% of the total drilling volume.

PJSC ALROSA reserves growth in 2015 amounted to 25.35 mn carats.

The following operations were performed within the framework of scientific support of geological exploration works:

– prognostic estimation of the diamondiferous territories in the western part of Yakutia and north-western part of the Russian Federation;

– improvement of the local forecast methods and experimental and methodological testing of modern prospecting technologies (geophysical, drilling, mineral analysis);

– comprehensive study of rough diamonds and kimberlites of the deposits being explored.

For the purpose of increasing the geological exploration effectiveness the Company continues developing and introducing modern diamond deposits prospecting and exploration technologies and methods:

– experimental 3D seismic exploration fieldwork was conducted at prospects of the Nakyn kimberlite field and anomalous zones in which to perform verification drilling were delineated;

– an airborne versatile time domain electromagnetic survey was performed in Malo-Botuobinsky, Ygyattinsky and Sredne-Markhinsky diamondiferous districts, covering 15,163 linear kilometres;

– a project aimed at introducing aeromagnetic gradiometry measurements and georadar sounding technology was implemented.

The following activities were carried out in Africa in 2015:

– work into the zoning of the territories in Angola, Botswana and Zimbabwe continues based on prospecting of work conditions and evaluation of their diamondiferous potential, providing the basis for recommendations on the direction of further geological exploration;

– work on the processing and analysis of satellite images of the West African diamondiferous subprovince as well as the collection and analysis of materials on location such as the characteristics of kimberlite bodies and fields of West African diamondiferous subprovince was completed. Work into the zoning of the West African diamondiferous subprovince territory based on the prospecting of work conditions continues;

– prospecting works for diamond deposits were performed at licensed areas of Sunland Minerals JV (Botswana) and KIMANG JV (Angola);

– results on the works performed by geological exploration and diamond mining companies in Zimbabwe and Namibia were monitored, and new information was gathered on the diamond mining industry of Angola, Botswana and Sierra Leone.

Budget 2014 2015 2016 plan
Geological exploration works, mn RUB 4,891.8 4,775.2 4,899.0
Mining and exploration works, mn RUB 1,078.6 881.9 1,078.0

PJSC ALROSA GEOLOGICAL EXPLORATION PLANS

In 2016, PJSC ALROSA will carry out geological exploration works in nine districts of the Yakutia diamondiferous province: Sredne-Markhinsky,Muno-Tyungsky,Daldyno-Alakitsky,Morkokinsky,Ygyattinsky,Malo-Botuobinsky, Nizhne-Oleneksky, Verkhne-Oleneksky and Prilensky.

50.4 million carats of reserves growth is planned for 2016 through the exploration of the Zarya deposit and further exploration of Aikhal and Verkhne-Munskoe deposits.

In 2016, in the Yakutia diamondiferous province, detailed prospecting works to discover diamond deposits in the areas where mining and processing plants operate will be continued, in addition to small and medium scale prospecting works within the underexplored areas to discover new kimberlite fields. The scope of detailed scale works (evaluation works and large-scale prospecting) and regional works (medium and small scale prospecting) will be approximately equal.

The geological exploration budget includes introduction of contact drilling (exploration of deep horizons of Internatsionalnaya and Aikhal deposits and prospecting drilling at Pravoberezhny-2 and Verkhne-Chukusky-2 prospects). Innovative prospecting methods will continue to be introduced in order to improve exploration efficiency.

In 2016, works aimed at evaluating the diamondiferous potential of Angola, Botswana and Zimbabwe will be carried out for the purpose of organization of geological exploration for discovery of primary and placer diamond deposits by joint ventures with ALROSA’s participation.

PJSC ALROSA-NYURBA

RESERVES ACCORDING TO THE STANDARDS OF THE STATE RESERVES COMMITTEE OF THE RUSSIAN FEDERATION, THOUSAND TONS

Company 01.01.2014 01.01.2015 01.01.2016
Total in-situ reserves by deposit 168,158.4 162,919.3 174,431.0
Botuobinskaya pipe 93,021.3 93,021.3 99,796.0
Nyurbinskaya pipe 49,876.7 44,637.6 48,550.6
Botuobinskaya placer 562.8 562.8 456.6
Nyurbinskaya placer 24,697.6 24,697.6 25,627.8
Total stock reserves 4,246.6 3,422.0 4,606.1
TOTAL 172,405.0 166,341.3 179,037.1

In 2015, PJSC ALROSA-Nyurba carried out, at its own expense, geological exploration works at primary diamond deposits within the license areas, namely the Nyurbinskaya and Botuobinskaya pipes and similarly named placer deposits genetically related to them.

The following types of works were carried out in the reporting period:

– monitoring surveys aimed at studying regime, dynamics and resources of underground and surface waters in the area of location of Botuobinskaya and Nyurbinskaya diamondiferous kimberlite pipes and in the adjacent areas to evaluate the condition of the environment exposed to natural and technogenic factors;

– prospecting works for primary and placer diamond deposits and verification that there are no ore bodies within the boundaries of the sites intended for construction of infrastructure facilities of Nakyn diamond mining enterprise;

– a report on the exploration results of the Nyurbinskaya pipe deep horizons in 2007-2013 was prepared accompanied by a calculation of reserves of Botuobinskaya and Nyurbinskaya pipes and the associated similarly named placers. The diamond reserves were approved by the State Reserves Commission (11.26 mn carats);

– evaluation works were carried out on the third phase of Nyurbinskaya buried placer.

Budget 2014 2015 2016 plan
Geological exploration works, mn RUB 393.7 403.1 393

JSC ALMAZY ANABARA

RESERVES ACCORDING TO THE STANDARDS OF THE STATE RESERVES COMMITTEE OF THE RUSSIAN FEDERATION, THOUSAND TONS

Company 01.01.2014 01.01.2015 01.01.2016
Total in-situ reserves by deposit 35,755.7 33,505.4 32,685.2
Mayata flanks placer 114.5 10 10
Morgogor placer 1,240.9 974.2 626.2
Pravoberezhya Morgogora placer 1,241.7 1,165.7 1,067.6
Kholomolokh placer 1,419.9 1,419.9 1,419.9
Istok placer ISTOK 1,367.0 1,154.9 932.9
Ebelyakh River placer 26,826.1 25,759.4 24,016.3
Gusiny Creek placer 3,545.6 2,814.5 2,070.2
Olom Creek placer 0 206.8 206.8
Khara-Mass River placer 0 0 2,335.3
Total stock reserves 0 1.7 1.7
TOTAL 35,755.7 33,507.1 32,686.9

In 2015, JSC Almazy Anabara performed geologic exploration works at its own expense in Anabarsky, Kuonamsky and Prilensky diamondiferous districts.

The following works were carried out in the reporting period:

– the first stage exploration works aimed at revaluation of the terrace placer of the Ebelyakh River deposits (Priustievoi and Nizhny prospects) were completed, a report containing current placer diamond reserves estimation was submitted to the Territorial Committee for Natural Reserves of the State Committee of the Republic of Sakha (Yakutia), the second stage exploration works (Nizhny and Verkhny prospects) commenced;

– based on results of the performed exploration works, a report on calculation of reserves and a feasibility report on permanent exploration conditions for Khara-Maskaya area was approved by the State Reserves Commission (diamond reserves growth amounted to 2.33 mn carats);

– a prospecting and evaluation works program for diamond placers in the basins of the Malaya Kuonamka and Maspaky Rivers for 2015-2017 was developed and approved, geological exploration fieldwork was launched;

– a license for the Ochous prospect (right tributary of the Anabar River) was obtained in Q3 2015, a diamonds prospecting, evaluation and exploration program to be implemented within the subsoil plot including Ochous placer in 2015-2017 was developed and approved, geological exploration fieldwork was launched in Q4 2015;

– a license for Eyekitsky prospect was obtained in Q1 2015, a prospecting and evaluation works program for primary and placer diamond deposits in the basin of the Eyekit River in 2015-2018 was developed and approved, geological exploration fieldwork was launched in Q3 2015.

Mining and exploration works were carried at two deposits, namely Gusiny Creek and Pravoberezhie of the Morgogor River (Khotugu-Balagannakh Creek placer).

Budget 2014 2015 2016 plan
Geological exploration works, mn RUB 333.4 477 423.4
Mining and exploration works, mn RUB 78.9 38.6 96

JSC NIZHNE-LENSKOE

RESERVES ACCORDING TO THE STANDARDS OF THE STATE RESERVES COMMITTEE OF THE RUSSIAN FEDERATION, THOUSAND TONS

Company 01.01.2014 01.01.2015 01.01.2016
Total in-situ reserves by deposit 4,824.4 8,646.3 9,449.4
Molodo placer (Molodo prospect and Verkhnee Molodo prospect) 0 0 392.3
Molodo placer 1,639.6 896.8 2,453.2
Billyakh placer 980.5 0 0
Verkhny Billyakh placer 161.2 621.5 0
Billyakh tributaries placers 1,156.3 915.3 524.5
Khara-Mas placer 60.3 60.3 0
Talakhtakh placer 826.5 866.1 793.1
Bolshaya Kuonamka placer 0 5,286.3 5,286.3
Total stock reserves 38.2 48.5 22.4
TOTAL 4,862.6 8,694.8 9,471.8

In 2015, JSC Nizhne-Lenskoe performed geologic exploration works at its own expense in Anabarsky, Kuonamsky and Prilensky diamondiferous districts.

The following works were carried out in the current period:

– there was completed detailed exploration of Verkhnee Molodo prospect of the Molodo River placer, the geological report was approved by the Territorial Committee for Natural Reserves of the State Committee of the Republic of Sakha (Yakutia);

– in Q3 2015 an exploration works program for the Molodo placer rough diamond deposit in 2015-2018 was developed and approved;

– exploration mining works were started in Q4 2015 within the promising areas;

– there were continued exploration mining works with the processing of bulk samples carried out at the prospects of the Bolshaya Kuonamka placer terraces, in the valley of the Bolshaya Kuonamka River and at its right tributary, the Nebaibyt River;

– there were continued exploration mining works with the processing of bulk samples carried out at the placers of the Billyakh River tributaries, namely Tiglikit, Rogaty, Vetvisty, Meridionalny and Lazurny Creeks.

Mining and exploration works were carried out in the Prilensky diamondiferous area at Verkhnee Molodo prospect, as well as in the Anabarsky diamondiferous area at tributaries of the Billyakh River, to clarify the structure of the placers, quantity and quality of the sands and diamonds contained in the sands, mining conditions and technological properties of mineral raw materials.

Budget 2014 2015 2016 plan
Geological exploration works, mn RUB 371.8 482.8 472.7
Mining and exploration works, mn RUB 85.4 103.2 144

PJSC SEVERALMAZ

RESERVES ACCORDING TO THE STANDARDS OF THE STATE RESERVES COMMITTEE OF THE RUSSIAN FEDERATION, THOUSAND TONS

Company 01.01.2014 01.01.2015 01.01.2016
Total in-situ reserves by deposit 209,572.1 207,462.2 205,131.1
Arkhangelskaya pipe 54,403.5 52,852.5 51,776.1
Karpinskogo-1 pipe 32,579.6 32,020.7 30,766.0
Karpinskogo-2 pipe 16,100.0 16,100.0 16,100.0
Pionerskaya pipe 51,990.0 51,990.0 51,990.0
Lomonosov pipe 52,218.0 52,218.0 52,218.0
Pomorskaya placer 2,281.0 2,281.0 2,281.0
Total stock reserves 773.9 1,145.3 1,517.9
TOTAL 210,346.0 208,607.5 206,649.0

In 2015, PJSC Severalmaz carried out, at its own expense, prospecting, exploration and mining and exploration works in the Arkhangelsk Region.

The following works were carried out in the reporting period:

– prospecting works at Svetlinsky, Otugsky, Brusovitsky and Kodinsky prospects (promising magnetic anomalies were verified with drilling, kimberlite bodies were discovered);

– a report on calculation of diamond reserves and a feasibility report on permanent exploration conditions for the northern group of pipes, namely the Pionerskaya and Pomorskaya of the Lomonosov deposit was approved by the Department of Subsoil Use for the North-western Federal District (diamond reserves growth amounted to 3.04 mn carats).

In 2016, prospecting works will be continued at Svetlinsky prospect. Based on results of the early works, the preparation of design and estimate documentation is planned for the prospecting and evaluation of primary deposits within Chernoozerskaya area, Yuzhny prospect and mining lease of the Lomonosov deposit. Exploration works are also planned at four sand and gravel mixture deposits, which is supposed to increase reserves by 0.3 mn cubic metres.

In 2015, there were continued operational exploration works at Arkhangelskaya and Karpinskogo-1 pipes to update data on the location of commercial ore inter-block contacts, diamond content and composition of kimberlites.

Budget 2014 2015 2016 plan
Geological exploration works, mn RUB 164.8 167 192.4
Mining and exploration works, mn RUB 163.1 189.3 207.5

DIAMOND MINING AND ORE PROCESSING

ROUGH DIAMOND PRODUCTION BY THE ALROSA GROUP

In accordance with the Long-Term Development Program approved in 2014, the ALROSA Group focused on a mono-product business strategy. According to results of 2015, the strategic targets set beforehand contributed to an increase in rough diamond production in volume terms by 5.7% to 38.3 mn carats, despite the difficult macroeconomic situation. In terms of value, the production figure grew by 5.2% compared to 2014 and amounted to USD 3,966.7 mn. The ALROSA Group fully achieved the key targets for 2015, namely in production, marketable products and recovery.

Rough diamond production growth in 2015 was achieved basically due to the general 3.3% growth in ore (sand) processing by the ALROSA Group mainly owing to Mirny MPD, Udachny MPD and PJSC Severalmaz’s performance. The average diamond content in the processed ore remained the same as in 2014 (1.03 carats per ton).

Company UoM 2013 2014 2015
Rough diamond production thousand tons 36,011.5 31,645.1 34,436.5
Rough diamond processing thousand tons 36,042.6 35,921.9 37,114.3
Rough diamond extracted thousand carats 36,913.9 36,212.2 38,260.5
mn USD 3,065.2 3,770.7 3,966.7
Product yield per ton of ore carat/ton 1.02 1.01 1.03

MINING DIVISIONS OF THE ALROSA GROUP

Six mining and processing divisions are responsible for diamond mining in the ALROSA Group. Four of them, namely Udachny, Aikhal, Mirny and Nyurba, are part of PJSC ALROSA.

The other two, namely JSC Almazy Anabara (including production and processing facilities of JSC Nizhne-Lenskoe) and PJSC Severalmaz, are subsidiary companies.

Each mining and processing division comprises one or more deposits, processing facilities and equipment stock.

AIKHAL MINING AND PROCESSING DIVISION

Aikhal MPD accounted for 32% of ALROSA Group production in 2015.

Aikhal Mining and Processing Division mines diamonds at the following prospects:

– Yubileynaya pipe. Open pit mine. Development commenced in 1985. Open pit depth as of the end of 2015 is 370 metres;

– Aikhal pipe. Underground mine. Underground mining commenced in 2005. Open pit depth as of the end of 2015 is 305 metres;

– Komsomolskaya pipe. Open pit mine. Development commenced in 2000. Open pit depth as of the end of 2015 is 337 metres.

Aikhal MPD comprises processing plant No. 8 (capacity of 1.7 mn tons per year) and processing plant No. 14 (capacity of 10.0 mn tons per year).

ROUGH DIAMOND PRODUCTION: AIKHAL MINING AND PROCESSING DIVISION

Company UoM 2013 2014 2015
Rough diamond production thousand tons 8,650.0 7,635.0 7,254.0
Rough diamond processing thousand tons 9,817.0 9,478.0 9,141.0
Rough diamond extracted thousand carats 12,087.7 12,565.3 12,322.2
mn USD 947.3 1,309.9 1,338.6
Product yield per ton of ore carat/ton 1.23 1.33 1.35

In 2015, a scheduled reduction of the ore processing volume was made at Aikhal MPD:

– by 123 thousand tons at the Komsomolskaya pipe;

– by 63 thousand tons at the Aikhal pipe;

– by 151 thousand tons at the Yubileynaya pipe.

Processing plant No. 14 of Aikhal MPD showed growth in the production of main and marketable products compared to 2014 owing to the processing of ore from the Yubileynaya pipe with higher diamond content. In addition, during the reporting year, works on the implementation of dense-medium separation modules with the capacity of 75 tons per hour were continued at processing plant No. 14. The equipment was put into operation in November 2015.

Processing plant No. 8 underwent preventive repairs from January 11, to June 15, 2015.

MIRNY MINING AND PROCESSING DIVISION

Mirny MPD accounted for 18% of ALROSA Group production in 2015.

Mirny MPD mines diamonds at the following prospects:

– Internatsionalnaya pipe. Underground mine. Underground mining commenced in 1999. Open pit depth as of the end of 2015 is 315 metres;

– Mir pipe. Underground mine. Under-ground mining commenced in 2009. Open pit depth as of the end of 2015 is 525 metres;

– Vodorazdelniye Galechniki placer;

– Irelyakh placer;

– Gornoe placer;

– the technogenic deposit Tailing dump of Processing Plant No. 5.

Mirny MPD comprises processing plant No. 3 (capacity of 2 mn tons per year).

ROUGH DIAMOND PRODUCTION: MIRNY MINING AND PROCESSING DIVISION

Company UoM 2013 2014 2015
Rough diamond production thousand tons 5,073.3 4,922.5 5,873.7
Rough diamond processing thousand tons 5,079.4 4,902.8 5,706.2
Rough diamond extracted thousand carats 7,361.1 6,088.5 6,908.3
mn USD 953.4 1,041.3 1,117.6
Product yield per ton of ore carat/ton 1.45 1.24 1.21

In 2015, Mirny MPD increased ore processing:

– by 166.0 thousand tons at Mir pipe;

– by 40.9 thousand tons at Internatsi-onalnaya pipe;

The implementation of automated sorting in sorting unit-2 additionally increased the processing volume by 190 thousand tons.

Ore production at Mir underground mine in 2015 amounted to 783 thousand tons. In 2015, preparation of the production facilities and full analysis of operations at Mir mine were completed, which confirms its readiness to reach the design capacity in terms of ore production of 1 mn tons in 2016.

The works on completion of the third stage of the technical upgrade of processing plant No. 3 continued due to the fact that the required performance targets of the toothed roll crusher were not achieved. The complaint is being discussed with the supplier of the crusher and a set of measures is being developed to achieve the required targets.

Processing plant No. 3 showed growth in production of main and marketable products compared to 2014 owing to changes in the feedstock structure (increased proportion of ore from Mir and Internatsionalnaya pipes and a decrease in feedstock from placers and technogenic deposits).

UDACHNY MINING AND PROCESSING DIVISION

Udachny MPD accounted for 11% of ALROSA Group production in 2015.

Udachny MPD mines diamonds at the following prospects:

– Udachnaya pipe. Open pit mine, under-ground mine. Development commenced in 1971. Open pit depth as of the end of 2015 is 640 metres. Underground mining commenced in 2014;

– Zarnitsa pipe. Open pit mine. Develop-ment commenced in 1999. Open pit depth as of the end of 2015 is 90 metres. Design depth is 200 metres;

– Dellyuvialnaya placer;

– Piropovy Creek placer.

Udachny MPD comprises processing plant No. 12 (capacity of 12 mn tons per year).

ROUGH DIAMOND PRODUCTION: UDACHNY MINING AND PROCESSING

Company UoM 2013 2014 2015
Rough diamond production thousand tons 5,889.0 1,882.3 4,128.0
Rough diamond processing thousand tons 5,825.1 4,814.1 5,377.0
Rough diamond extracted thousand carats 4,891.6 3,679.1 4,297.3
mn USD 391 364.1 417.9
Product yield per ton of ore carat/ton 0.84 0.76 0.8

In 2015, Udachny MPD increased ore processing:

– by 172.9 thousand tons owing to the establishment of the second priority facilities at the Udachny underground mine;

– by 872 thousand tons owing to the establishment of Piropovy Creek, a new placer deposit.

In Q1 2015, sands treatment commenced at Piropovy Creek, a new placer deposit of Udachny MPD. Treatment of the placer deposit sands was not performed in Q3 2015 in accordance with the production plan. Construction of an all-season road to Verkhne-Munskoe ore field commenced on November 1, 2015. In 2015, works on the plant technical re-equipment project continued, which included the introduction of two dense-medium separation modules with the capacity of 110 tons per hour.

NYURBA MINING AND PROCESSING DIVISION

Nyurba MPD accounted for 20% of ALROSA Group production in 2015.

Nyurba MPD mines diamonds at the following prospects:

– Nyurbinskaya pipe, Nyurbinskaya placer. Open pit mine. Development commenced in 2001. Open pit depth as of the end of 2015 is 300 metres. Design depth is 450 metres.

– Botuobinskaya pipe, Botuobinskaya placer. Open pit mine. Development commenced in 2012. Open pit depth as of the end of 2015 is 92 metres. Design depth is 580 metres.

Nyurba MPD comprises processing plant No. 15 (capacity of 0.5 mn tons per year) and processing plant No. 16 (capacity of 1.4 mn tons per year).

ROUGH DIAMOND PRODUCTION: NYURBA MINING AND PROCESSING DIVISION

Company UoM 2013 2014 2015
Rough diamond production thousand tons 1,526.0 1,350.0 1,965.0
Rough diamond processing thousand tons 2,040.0 2,000.0 2,040.0
Rough diamond extracted thousand carats 7,406.8 7,362.9 7,509.6
mn USD 421.1 545 603.3
Product yield per ton of ore carat/ton 3.63 3.68 3.68

In 2015, Nyurba MPD increased rough diamond production through:

– putting the Botuobinskaya pipe and the similarly named placer into operation as well as processing sands from the placer deposits with a higher diamond content (the average diamond content in ore is 2.5 carats more than in the Nyurbinskaya pipe);

– continued works on the expansion of the Nyurbinsky open pit mine.

JSC ALMAZY ANABARA

JSC Almazy Anabara accounted for 9% of ALROSA Group production in 2015. JSC Almazy Anabara mines diamonds at the following prospects:

– Morgogor placer;

– Istok placer;

– Ebelyakh placer;

– Gusinaya placer.

ROUGH DIAMOND PRODUCTION BY JSC ALMAZY ANABARA

Company UoM 2013 2014 2015
Rough diamond production thousand tons 6,951.0 6,015.0 5,082.0
Rough diamond processing thousand tons 6,750.0 5,604.0 5,222.0
Rough diamond extracted thousand carats 2,521.3 3,059.5 3,308.9
mn USD 180.2 195 176.2
Product yield per ton of ore carat/ton 0.75 1.09 1.27

In 2015, JSC Almazy Anabara increased rough diamond production through the replacement of the depleted low diamond content placers at flanks of Mayat placer with more productive sands of Ebelyakh placer.

JSC NIZHNE-LENSKOE

JSC Nizhne-Lenskoe accounted for 5% of ALROSA Group production in 2015. JSC Nizhne-Lenskoe mines diamonds at the following prospects:

– Molodo placer;

– Billyakh placer;

– tributaries of Billyakh placer (Shlikhovoi Creek prospect);

– Talakhtakh placer.

ROUGH DIAMOND PRODUCTION BY JSC NIZHNE-LENSKOE

Company UoM 2013 2014 2015
Rough diamond production thousand tons 6,162.0 6,230.0 5,880.0
Rough diamond processing thousand tons 5,338.0 5,814.0 5,640.0
Rough diamond extracted thousand carats 2,009.8 1,818.0 1,964.0
mn USD 140.2 197.4 185.3
Product yield per ton of ore carat/ton 0.75 0.63 0.7

In 2015, JSC Nizhne-Lenskoe increased rough diamond production owing to a higher average diamond content in the processed sands:

– 0.25 carats per cub. m at tributaries of Billyakh placer;

– 0.07 carats per cub. m at Molodo placer;

– the recently-established Talakhtakh placer.

PJSC SEVERALMAZ

PJSC Severalmaz accounted for 5% of ALROSA Group production in 2015.

PJSC Severalmaz mines diamonds at the following prospects:

– Arkhangelskaya pipe. Open pit mine. Development commenced in 2005. Open pit depth as of the end of 2015 is 135 metres. Design depth is 324 metres.

– Karpinskogo-1 pipe. Open pit mine. Development commenced in 2009. Open pit depth as of the end of 2015 is 98 metres. Design depth is 262 metres.

PJSC Severalmaz comprises processing plant No. 1 module No. 1 (capacity of 1 mn tons per year) and processing module No. 2 (capacity of 3 mn tons per year).

In 2015 PJSC Severalmaz showed growth in ore processing owing to the processing plant reaching the design capacity of 4 mn tons of ore per year, in part due to putting module No. 2 of the processing plant into operation and commencement of production at the Karpinskogo-1 pipe.

ROUGH DIAMOND PRODUCTION BY PJSC SEVERALMAZ

Company UoM 2013 2014 2015
Rough diamond production thousand tons 1,760.2 3,610.3 4,253.8
Rough diamond processing thousand tons 1,193.0 3,309.0 3,988.1
Rough diamond extracted thousand carats 635.7 1,638.9 1,950.2
mn USD 32 118.1 127.7
Product yield per ton of ore carat/ton 0.53 0.5 0.49

SALES OF DIAMOND PRODUCTS AND MARKETING SYSTEM

SORTING AND VALUATION

All the rough diamonds mined from deposits of the Company are sent to Diamond Sorting Centres in the cities of Mirny and Arkhangelsk1, where their preliminary sorting and insurance valuation take place. For final sorting and valuation rough diamonds are sent to the United Selling Organization (the USO of ALROSA) that has sorting centres in three cities, namely Moscow, Mirny and Yakutsk.

Rough diamonds classification stipulates that sorting be based on over 8,000 criteria. Any crystal is characterized based on 4 classification criteria: size, shape, quality and colour. Rough diamonds valuation is based on the effective schedule of prices of the Ministry of Finance of the Russian Federation.

After undergoing initial valuation, rough diamonds proceed to the batching stage. All the sorted rough diamonds (except for the rough diamonds over 10.80 carats) are packaged in boxes and offered up for sale on domestic and external markets. Initial valuation of rough diamonds of over 10.80 carats is based on determining the rough diamond value through expert evaluation of the polished diamonds able to be made from it. Each such diamond is tracked separately in the single integrated rough diamonds tracking system.

Technical-grade diamonds that are considered unfit for jewellery manufacturing fall under separate categories. Some technical-grade diamonds are used for producing diamond powders that are widely used in various industries and in medicine.

In 2015, the Company started introducing a new generation of automated equip-ment for rough diamond sorting based on all the classification criteria, namely size, shape, quality and colour.

The sorting system of PJSC ALROSA is certified by the authorized standardization bodies and meets national and international standards.

SALE OF DIAMOND PRODUCTS

2015 was marked by a decreased demand in the industry, with a high level of rough and polished diamonds stock, a lowering of prices for rough and polished diamond products, a reduction of available credit resources and a load decrease within the diamond cutting sector.

Total sales from rough and polished diamond products of the ALROSA Group in 2015 amounted to USD 3,554.4 mn, which is 29.5% less that sales of 2014 (USD 5,045 mn).

In 2015, the ALROSA Group sold rough diamonds worth USD 3,437.1 mn (-29.9% compared to 2014).

Physical rough diamond sale volumes of ALROSA Group in 2015 decreased by 24.1% compared to 2014 and amounted to 30 mn carats.

ROUGH DIAMOND SALES BY ALROSA GROUP*, MN USD

Weak demand in the rough diamond market in 2015 affected the pricing dynamics of ALROSA Group. The decrease in sale prices for the full diamonds assortment as of the end of 2015 amounted to 15.2%.

In 2015, the ALROSA Group gem and technical-grade diamonds sales structure changed due to changes in market demand. In terms of value, sales in 2015 amounted to USD 3,336.7 mn (-29.8% compared to 2014) for gem quality diamonds and USD 100.4 mn (-31.1% compared to 2014) for technical-grade diamonds.

Changes in the rough diamond sales structure affected the dynamics of average rough diamond sale prices of the ALROSA Group. Compared to 2014, prices decreased by 7.6%.

In the reporting year, the ALROSA Group embarked on direct rough diamond sales in India (Special Notified Zone, Mumbai).

ROUGH DIAMOND SALES STRUCTURE OF ALROSA GROUP IN CARATS, %

GEOGRAPHICALLY SEGMENTED STRUCTURE OF ALROSA GROUP ROUGH DIAMOND SUPPLY BY VALUE*, %

*without taking into account supplies to the State Precious Metals and Gems Repository of the Russian Federation

In 2015, the majority of the products was sold by ALROSA under long-term rough diamond supply contracts (66%). In 2015, ALROSA successfully entered into some long-term contractual agreements with clients for the new contract period of 2016-2018 and continued with its endeavours to attract new customers with testing through spot sales and opportunities for signing new long-term agreements. As of the end of December 2015, the number of customers that entered into long-term agreements for the supply of rough diamonds totals 54, including 3 technical-grade diamonds supply contracts.

MARKETING SYSTEM

In 2015, the ALROSA Group developed ALROSA ALLIANCE, a partnership program for long-term customers, aimed at consolidating the Company’s reputation on international markets. The Program demonstrates compliance of its participants with high business conduct standards, business ethics and governance at all levels of the supply chain. For the purpose of further ALROSA ALLIANCE promotion, the Company participated in the largest international industry exhibitions:

– The JCK Show Las Vegas;

– The Hong Kong International Diamond, Gem & Pearl Show;

– The Hong Kong Jewellery & Gem Fair.

PJSC ALROSA took part in the opening of the Special Notified Zone at Bharat Diamond Bourse aimed at facilitating the procedure for conducting displays, auctions and sales of rough diamonds in India. In December 2015, in order to test the duty free import and export system, the Company held the first exhibition of rough diamonds of ALROSA Group.

In 2015, ALROSA entered into discussion and negotiations with the leading global jewellery product retail networks on the possibility of creating joint programs to promote rough and polished diamond products of Russian origin on the key sales markets.

ROUGH DIAMOND CUTTING AND SALES OF POLISHED DIAMONDS

DIAMOND CUTTING

The diamond cutting and polishing division of ALROSA Group is one of the largest polished diamond producers in Russia.

The cutting and polishing division includes three enterprises: the BRILLIANTY ALROSA branch located in Moscow, Kristall Barnaul LLC and Orel-ALROSA LLC. Enterprises in Barnaul and Orel process rough diamonds of small and medium size.

The BRILLIANTY ALROSA branch proce-sses large rough diamonds including rough diamonds of especially large sizes.

Within the framework of the Long-Term Development Program of the ALROSA Group and for the purpose of optimizing the non-core assets, a decision was taken to focus only on large size gems and to develop the accompanying marketing elements.

For optimization purposes, ALROSA is carrying out the works aimed at separating the diamond cutting and polishing division to make it a subsidiary while also developing direct supplies of polished diamonds via long-term contracts to global producers of polished diamond jewellery.

Following the development trend of world diamond mining companies, the ALROSA Group settled on a development strategy, namely the focus on rough diamond mining, it being the most profitable element in the production and sales chain of the diamond mining industry.

SHARES OF THE ENTERPRISES ENGAGED IN THE PRODUCTION OF POLISHED DIAMONDS IN 2014-2015 BY VALUE, %

SALES OF POLISHED DIAMONDS

In 2015, PJSC ALROSA sold polished diamonds worth USD 117.34 mn, which is 18.8% less than the same figure in 2014. Foreign currency efficiency (in excess of the contract price of polished diamonds over the selling price of the rough diamonds) amounted to 1.02 (1.03 in 2014).

In 2015, 46 companies representing major world diamond trading centres purchased products of the BRILLIANTY ALROSA branch. The majority of polished diamonds is sold on the international market. Polished diamond sales in the Russian market based on results of 2015 amounted to USD 570 thousand (including retail sales of certified polished diamonds). During the same period in 2014, the sales on the domestic market amounted to USD 1.55 mn.

The products offered by the branch were purchased on the Russian Federation domestic market by 14 jewellery companies from three cities: Moscow, Yekaterinburg and Barnaul.

GEOGRAPHICALLY SEGMENTED POLISHED DIAMOND SALES BY ALROSA GROUP IN 2014-2015 BY VALUE, %

INTERNATIONAL ACTIVITIES

In May 2015, on the initiative of PJSC ALROSA, De Beers and Rio Tinto Diamonds, the seven biggest diamond mining companies of the world established the Diamond Producers Association (DPA) in order to unite efforts to resolve issues faced by the diamond mining industry. ALROSA became the first company in the history of the global diamond industry to unite rough diamond producers. ALROSA also interacted with partners within the framework of the World Diamond Council (WDC), a unified representative structure of the global rough and polished diamonds industry, occupying a supervisory role in the Kimberley Process, which is an intergovernmental initiative aimed at preventing conflict diamonds from entering international trade channels.

The Company actively contributed to finalizing the internal structure and governing mechanisms as well as building the strategy of further development of the WDC after its reform to make it meet the current industry-specific circumstances and new challenges. In October 2015, ALROSA hosted an annual General meeting of WDC participants in Moscow.

In 2015, the Company signed a Memorandum of Understanding with the Israel Diamond Exchange that stipulates, among other things, the free exchange of information and joint efforts to prevent synthetic gems from appearing on the natural diamond market, as well as cooperation in the sphere of creation of transparent rough and polished diamond supply chains.

In line with the aim of strengthening cooperation in the rough and polished diamonds industry and bilateral interstate cooperation, ALROSA participated in the work of intergovernmental commissions composed of representatives from the Russian Federation, Angola, Armenia, Zimbabwe, Israel, India, Namibia, UAE and RSA.

FURTHER ACTIVITIES

ALROSA Group activities not involving diamond mining fall into 4 main categories:

transport enterprises: airline services, transportation services, services in transport terminals, ports, airports;

socially oriented enterprises in the regions in which the Company operates, namely residential buildings, sport and cultural facilities, cinema theatres, theatres and other social infrastructure facilities;

gas enterprises: the sale and production of gas;

other companies: trading companies and companies that provide printing services.

In 2015, ALROSA systematically continued the disposal of non-core assets in accordance with the Program (second revision) approved by the Supervisory Board of the Company on December 11, 2014 (Minutes No. А01/223-ПР-НС dated 16.12.2014).

The Program defines objectives and tasks concerning the disposal of non-core assets, criteria of classifying assets as non-core, requirements to the Register of Non-Core Assets, key events (actions) that can be implemented by the Company with regard to non-core assets and the procedure for monitoring implementation of the Program.

The main areas of the Program comprise reduction of the costs associated with funding of non-core and ineffective assets, termination of participation in non-core subsidiaries, optimization of the production technology infrastructure of the Company, which contributes to the Company capitalization growth in general.

The Program includes a detailed description of methods for the sale of non-core assets; it specifies the sequence of sales actions. It outlines the criteria of granting the applicants a permission to participate in the sales, procedure for determining the winners, time frame of certain sales stages. It includes articles describing in detail the information support of sales and requirements to the documents to be provided by sales participants. The amendments are based on provisions of Federal Law No. 178-ФЗ On Privatization of State and Municipal Property dated 21.12.2001.

In 2015, the total revenue of the Group from non-core activities (for all the segments except for the rough diamond segment) amounted to RUB 23.3 bn or 10.4% of the total revenue.

PROCUREMENT, INVESTMENTS AND INNOVATIONS

PJSC ALROSA IN THE SPHERE OF PROCUREMENT COMPANY PROCUREMENT PRIORITIES

1. Ensuring transparency of procurement procedures.

2. Increase in the proportion of publicly competitive procurement procedures.

3. Participation in the Russian Fede-ration Government programmes aimed at expanding the access of small and medium-sized businesses to Company procurement initiatives.

4. E-procurement development. Creation of the Company’s own electronic procurement platform, automation of procurement processes.

ACTUAL PROCUREMENT ACTIVITIES

The main feature in supplying production facilities of PJSC ALROSA with materials and equipment is their remoteness from the main transportation routes in the territory of the Republic of Sakha (Yakutia). The major part of materials and equipment is delivered by water transport during the navigation period of the Lena River (May to October).

In order to ensure the timely delivery of materials and equipment, enterprises of the Company are supplied using the Company’s own transportation and procurement facilities comprising the Materials and Equipment Supply Division, Almazdortrans division (transit motor transport), an airline with its own fleet of planes and helicopters, river port in the town of Lensk and storage facilities with terminals.

In volume terms, materials and equipment delivery in 2015 amounted to 431.8 thousand tons. The cost of materials and equipment amounted to RUB 31,583 mn.

The major part of procurement activities in 2015 (97% of the total value of the agreements concluded) took place between manufacturers and their official dealers.

Warehouse stock of materials and equipment as of the end of the reporting period (including the materials being transported and advance payments) amounted to RUB 16,821.5 mn (based on supplier prices).

PROCUREMENT STRUCTURE

In the reporting year, the Company made significant progress in improving transparency and effectiveness of procurement activities. The consolidated economic impact amounted to RUB 5,400 mn or 9% of the total procurement amount. The proportion of public procurement procedures, including e-procurement, amounted to 82% of the total volume of procurement procedures performed.

In 2015, the Company devoted significant attention to developing partnership relations with small and medium-sized businesses and increasing their proportion in the total number of procurement procedure participants. By the end of the reporting period the proportion of purchases from small and medium-sized businesses in the total number of contracts secured by the Company reached 53%, three times greater than the planned target. Based on results of 2HY 2015, the proportion of preferential purchases from small and medium-sized businesses amounted to 7.8% against the target figure of 5%.

The Company developed and introduced its own electronic procurement platform (ALROSA EPP) providing the full range of procurement activities management tools from purchase request to delivery of the product. Today all the structural and separate subdivisions of the Company use ALROSA EPP for their procurement activities. The development plan includes the connection of the subsidiaries and affiliates to ALROSA EPP. In addition, in order to facilitate access for procurement activity participants, including small and medium-sized businesses, to procurement activities of the Company, from 2015 onwards ALROSA EPP will be integrated with the two leading electronic trading facilities, namely fabrikant.ru and United electronic market place JSC.

PJSC ALROSA PROCUREMENT STRUCTURE IN 2013-2015

Activity Number, pcs. Cost, mn RUB Share in the total volume of purchases, %
Year 2013 2014 2015
Open invitation to tender 1,294 23,087 56 1,347 28,945 59 1,782 36,673 67
E-Procurement 2,259 4,885 12 2,834 6,244 13 3,569 8,617 16
Open invitation to tender 480 4,106 9 196 3,207 7 22 510 0.9
Non-public request for proposals from the sole supplier 728 9,372 22 627 10,304 20 350 9,130 16
Small purchases (invoice) 8,073 558.8 1 7,715 491 1 6,136 294.8 0.1
Non-competitive without procurement procedures* 1,252 29,530 1,327 10,837 1,618 7,918

*these contracts are concluded without conducting procurement procedures or the resolution of a procurement management department (contracts with subsidiaries and affiliates based on fixed prices, loan agreements, credit facility agreements, agreements concluded)

IMPORT SUBSTITUTION PROGRAM

The Company systematically implements an import substitution strategy for procurement activities. 121 nomenclature items of imported equipment worth RUB 1,397 mn were actually replaced in 2015 with their substitutes manufactured in Russia and member countries of the Customs Union. The major part of the replaced products included loading machinery, pumping equipment, dump trucks.

IMPORT SUBSTITUTION PROGRAM OF PJSC ALROSA FOR 2013-2015

Country of origin Cost, bn RUB Share in the total volume of purchases, %
Year 2013 2014 2015
Russian equipment and technology 5.49 60 6.19 58 7.79 76
Foreign equipment and technology 3.69 40 4.36 42 2.5* 24
Average US dollar to Russian rouble exchange rate 31.84 38.4 60.98

*without taking into account the exchange rate differences

Procurement activities of PJSC ALROSA are regulated by the Federal Law 223-ФЗ On the purchase of goods, works and services by certain types of legal entities dated 18.07.2011, regulations of the Government of the Russian Federation, the Regulations on procurement activities of PJSC ALROSA and other internal regulatory documents of the Company. (Regulations on procurement activities of PJSC ALROSA)

ALROSA GROUP INVESTMENTS

The long-term Investment Program of ALROSA Group defines the priority areas of activities that contribute to accomplishment of the rough diamond production plan and achievement of production and financial goals in accordance with the approved development strategy.

The main goals of the Investment Program are sustainable development and shareholder value growth. The main areas of the investment program are construction of underground mines including replenishment of production assets and capacities, development of new open pits and maintenance of capacity of the existing open pits, technical upgrade and replacement of worn-out equipment, construction and renovation of the regional infrastructure facilities, investments in the R&D, technology related works and geological exploration.

In total in 2015, investments (capital investments) in non-financial assets of ALROSA Group* totalled RUB 36,854.2 mn (RUB 38,621.1 mn in 2014) including RUB 25,668.0 mn of investments in construction (RUB 27,216.0 mn in 2014), RUB 8,653.4 mn of investments in technical upgrade and replacement of worn-out equipment (RUB 8,846.3 mn in 2014) and RUB 2,532.9 mn of other capital investments (RUB 2,558.8 mn in 2014).

CAPITAL INVESTMENTS OF ALROSA GROUP* BASED ON RAS, MN RUB

Company 2013 2014 2015 % compared to 2014
Construction: 29,335.7 27,216.0 25,668.0 94.3%
Investments in underground mines 10,708.2 14,058.8 12,150.7 86.4%
Other core production facilities 13,522.2 7,362.9 6,089.2 82.7%
Ancillary production facilities 4,627.3 4,993.9 6,744.7 135.1%
Facilities for social purposes 478 800.5 683.4 85.4%
Technical upgrade and replacement of worn-out equipment 8,756.4 8,846.3 8,653.4 97.8%
Other capital expenditures: 4,542.8 2,558.8 2,532.9 99.0%
Prospecting assets (geological exploration) 801 2,185.7 2,014.3 92.2%
R&D 258.4 170.9 242.4 141.8%
Other non-current assets (acquisition of fixed assets, construction work currently in progress, housing construction) 3,483.5 202.2 276.2 136.6%
TOTAL capital investments of ALROSA Group 42,634.9 38,621.1 36,854.2 95.4%

*For the purpose of this section, the ALROSA Group comprises PJSC ALROSA and 37 subsidiaries and affiliates of the Company in accordance with the list approved by the Order On preparation of the Annual Report of PJSC ALROSA and ALROSA Group for 2015 dated 11.12.2015.

PJSC ALROSA INVESTMENTS

Construction: 2013 2014 2015 % compared to 2014
Construction: 18,042.6 19,738.6 20,288.0 102.8%
Investments in underground mines 10,708.2 14,058.8 12,150.7 86.4%
newly created facilities 8,865.3 11,538.0 6,782.8 58.8%
maintenance of current facilities 1,842.9 2,520.8 5,367.9 212.9%
Other core production facilities 3,548.6 1,546.3 2,327.9 150.5%
Ancillary production facilities 3,308.1 3,333.7 5,127.1 153.8%
Facilities for social purposes 477.7 799.8 682.3 85.3%
Technical upgrade and replacement of worn-out equipment 7,125.9 7,200.1 6,644.7 92.3%
Other expenditures of capital nature: 3,782.5 1,110.4 966.7 87.1%
Prospecting assets (geological exploration) 546.3 975.6 664.5 68.%
R&D 153.7 126.8 198.1 156.2%
Other non-current assets (acquisition of fixed assets, construction work currently in progress, housing construction) 3,082.5 8 104.2 1302.5%
TOTAL capital investments of PJSC ALROSA 28,951.0 28,049.1 27,899.4 99.5%

The key 2015 investments in core production comprised:

– the construction of the Udachny underground mine (capital investments amounted to RUB 6,782.8 mn);

– maintenance of the existing capacities of Mir, Internatsionalny and Aikhal underground mines (capital investments amounted to RUB 5,367.9 mn).

Investments in other production related facilities include construction of a biological treatment unit in the town of Lensk and sewage treatment facilities in the settlement of Aikhal and city of Udachny. In 2015, a water purification plant was installed at the Aikhal settlement as well as a wash water pumping station with tanks in the town of Mirny, while renovation of the sewage pumping station was also completed at Mirny airport. In addition, in the reporting year an ionizing radiation sources storage facility was established in the town of Mirny.

The major part of the funds appropriated for construction of the facilities not used for production purposes was allocated for construction of housing facilities for 340 people and completion of the construction and opening in Q3 2015 of a kindergarten for 240 children in the town of Mirny.

The major part of the capital investments in technical upgrade and replacement of worn-out equipment was allocated accordingly: RUB 3,938.4 mn to mining and processing divisions (59.3% of the total investments), RUB 843.1 mn to procurement enterprises (12.7%) and RUB 696.0 mn to transport enterprises (10.5%).

In implementing the technical upgrade and replacement of worn-out equipment plan in 2015, the following tasks were accomplished:

– worn-out utility vehicles were replaced and the basic mining machinery used for open pit mining in Aikhal and Nyurba MPDs was updated;

– self-propelled mining machinery for underground mines of Aikhal and Mirny MPDs was updated;

– installation of the mill was completed and it was subsequently put into operation; the process flow of processing plant No. 12 of Udachny MPD was upgraded;

– the installation and launch of two medium dense separation modules at processing plant No. 14 of Aikhal MPD was completed;

– 35 X-ray fluorescence separators and 4 X-ray separators were put into operation;

– a crushing and sorting unit for supplying crushed rock to Mirny production site was put into operation;

– washing plant No. 2 at Vodorazdelniye Galechniki mine of Irelyakhskaya placer was put into operation.

INVESTMENTS OF SUBSIDIARIES AND AFFILIATES

Based on results of 2015, subsidiaries and affiliates of ALROSA Group account for about 24% of the total capital investments in non-financial assets, which totalled RUB 8,954.9 mn (RUB 10,572 mn in 2014) including RUB 5,380 mn of investments in construction (RUB 7,477 mn in 2014), RUB 2,008.7 mn of investments in the technical upgrade and replacement of worn-out equipment (RUB 1,646.2 mn in 2014) and RUB 1,566.2 mn worth of other capital investments (RUB 1,448.4 mn in 2014).

CAPITAL INVESTMENTS OF ALROSA GROUP SUBSIDIARIES AND AFFILIATES BASED ON RAS, MN RUB

Company 2013 2014 2015 % compared to 2014
Construction: 11,293.1 7,477.4 5,380 72.0%
Core production facilities 9,973.6 5,816.6 3,761.3 64.7%
Ancillary production facilities 1,319.2 1,660.2 1,617.6 97.4%
Facilities for social purposes 0.3 0.7 1.1 157.1%
Technical upgrade and replacement of worn-out equipment 1,630.5 1,646.2 2,008.7 122.0%
Other capital expenditure: 760.3 1,448.4 1,566.2 108.1%
Prospecting assets (geological exploration) 254.7 1,210.1 1,349.8 111.5%
R&D 104.7 44.1 44.3 100.5%
Other non-current assets (acquisition of fixed assets, construction work currently in progress, housing construction) 401 194.2 172.1 88.6%
TOTAL capital investments of all subsidiaries and affiliates of the Group 13,683.9 10,572 8,954.9 84.7%

In 2015, the diamond mining companies’ share in the total capital investments of the Group amounted to 15%. Investments of JSC Almazy Anabara, JSC Nizhne-Lenskoe, PJSC ALROSA-Nyurba and PJSC Severalmaz based on results of 2015 totalled RUB 5,523.7 mn (RUB 8,543.0 mn in 2014).

Capital investments in gas assets (OJSC ALROSA-Gas, CJSC Geotransgaz, LLC Urengoy Gas Company) in the reporting year amounted to RUB 2,224.4 mn (RUB 1,189.7 mn in 2014). In 2015, the share of investments by gas producing companies in the total capital investments of the Group amounted to 6%.

Investments in non-financial assets by the remaining enterprises and other companies of the Group amounted to RUB 1,189.6 mn (RUB 838.6 mn in 2014) or 3% of the total capital investments.

INNOVATIVE DEVELOPMENT

The Program of Innovation Development and Technological Upgrade for 2011-2018 was approved by the Supervisory Board of the Company (Minutes No. 212 dated 24.04.2014). Currently, an updated version for 2016-2023 is being developed.

An optimal option for the Group under the existing circumstances is the one that includes leadership in those segments of diamond mining industry where competitive advantages lie or can be gained quickly through the implementation of Russian inventions and developments.

Significant attention is given annually to the development of inventions and rationalization activity. In 2015, PJSC ALROSA introduced 27 scientific and technical developments and received 11 title documents for utility models and inventions.

The strategic areas of the Innovation Development and Technological Update Program are:

– improvement of enterprise operational activity efficiency;

– development of new rough diamond mining technologies;

– creation and implementation of cost-effective development technologies for low-grade and technogenic deposits and the deposits in remote areas away from the centres with a developed infrastructure;

– improvement of geological exploration efficiency;

– energy saving and energy efficiency;

– ecology and environmental protection;

– introduction of integrated information and communication systems;

– automation of technological processes;

– introduction of new materials and technologies in design and construction.

Main projects of the Innovative Development Program:

– introduction of innovative methods of airborne geophysical prospecting for diamonds;

– introduction of the X-ray separation of diamonds;

– carrying out research on determining the content of low luminescent, non-luminescent and undetectable diamonds in diamondiferous products falling under -50+5 mm size category;

– testing of an experimental electric pulse kimberlite disintegration unit;

– the technology surrounding the enri-ching of the poor content ore using the method of comparative spectral analysis of the intensity of the carbon characteristic radiation line;

– detection of rough diamonds inside a piece of rock applying the method of dual-energy X-ray absorptiometry using high energy electromagnetic quanta;

– development and manufacturing of a fully-fledged separator prototype for automatic separation and one-by-one extraction of rough diamonds from concentrates of diamondiferous minerals with dimensions of (-5+1);

– introduction of unique rough diamond sorting machines.

FUNDING OF THE INNOVATION DEVELOPMENT PROGRAM

The actual volume of funding the Innovation Development and Tech-nological Upgrade Program of PJSC ALROSA in 2015 amounted to RUB 2,100.4 mn (RUB 2,040.7 mn in 2014). The funding was reduced compared to the previous year mainly due to a transition to the stage of introduction/implementation of the key innovation projects, which entails a reduction in capital expenditure.

FUNDING OF THE INNOVATION DEVELOPMENT PROGRAM, MN RUB

Company 2014 2015
Funding of research and development 673.76 874.3
Capital investments 1,334.13 748.29
Other investments for the purchase of materials, software and services with a view to implementing technological innovations 519.8 298.77
Cost of targeted training at the premises of HEIs* 22.66 36.44
Expenses associated with marketing and organizational innovations, international cooperation 143.56 143.56
TOTAL 2,693.91 2,040.72

*HEI – higher education institutions

KEY PERFORMANCE INDICATORS OF THE INNOVATION DEVELOPMENT PROGRAM

As a result of the innovation program implementation, the planned figures of the key performance indicators of PJSC ALROSA for 2015 were achieved.

Indicator 2014 2015
1. Research funding and goal achievement indicators
R&D funding, % of the revenue 0.36 0.40 (1)
Number of R&D projects developed and integrated into production process, pcs. 28 27
2. Technological leadership indicators
The number of patents and other intellectual property protection documents for the year, pcs. (received by PJSC ALROSA) 13 11 (2)
The number of patents and other intellectual property protection documents for the year, pcs. (OJSC Research and Production Enterprise Bourevestnik) 23 13
3. Innovation efficiency indicators
Innovation efficiency indicator, RUB/RUB 0.48 1.17
R&D introduction effectiveness indicator, RUB/RUB 1.4 1.94 (3)
4. Environmental friendliness indicators
CO emissions from stationary sources, thousand kg 3,007 2,790
CO emissions from mobile sources, thousand kg 1,247 n/a (4)
Water extraction from the storage reservoir for needs of PJSC ALROSA, thousand cub. M 24,350 24,606
5. Energy efficiency indicator
Energy consumption in GJ per carat of mined products 0.334 0.323
6. Labour productivity indicator
Revenue per employee involved in core activities, mn RUB 12.21 11.22

1 Only PJSC ALROSA own funds amounting to RUB 740.19 mn, which is 0.40% of the actual revenue and 0.42% of the target revenue, were taken into account when calculating the R&D funding/results ratio;

2 Currently 3 patent applications and 2 applications for obtaining other intellectual property protection documents have been submitted for approval, on which preparation commenced in 2015;

3 Predicted figure. It is calculated based on information about the expected economic impact from introduction of innovations;

4 Due to the absence of methods for determining CO emissions from mobile sources approved at the statutory level in the Russian Federation, pursuant to letter of the Ministry of Natural Resources and Environment of the Russian Federation No. 12-47/5413 On payment for the adverse effect from mobile sources dated March 10, 2015, no monitoring of CO emissions from mobile sources was performed in 2015.

The Company won several awards for its innovative solutions:

– Science and Technology Prize awarded by the Government of the Russian Federation to a specialist group of the Company for the creation and large-scale commercial introduction of the systems of underground diamond deposits development under the extreme conditions of the cryolithic zone of Yakutia;

– Diploma of Merit awarded by the National Association of Design Engineers and Surveyors in the most innovative project contest for the category The Best Design in the Education Sector for the design of a kindergarten with an innovative natural lighting system for 240 children in the town of Mirny;

– Diploma of Merit and the title of The Best Research Institution in Russia 2015 awarded to the Yakutniproalmaz Institute based on results of the National Contest, 100 Best Enterprises and Organizations of Russia.

In the coming years, the technological segment of the innovation program will evolve in the following directions:

– a gradual shift of the Company focus from local issues solved through the use of standard materials and technical means (modernization, introduction of foreign machinery and equipment) to specific long-term issues that require an individual innovative approach and possess high economic potential;

– gradual growth in trust of the innovative corporate system, increase in intensity of the innovation processes;

– increased expenditure on funding research that will open the door for innovative development and ensure the Company’s ability to compete in rough diamond mining on a global level.

FINANCIAL RESULTS FOR 2015

FINANCIAL PERFORMANCE FOR 2015

The current review of the financial results is based on the consolidated financial statements of the ALROSA Group prepared in accordance with IFRS for 2015. In 2015, the Company demonstrated better financial results compared to 2014 despite a lower demand for rough diamond products and the consequent reduced sales in carats. The favourable foreign currency market conditions contributed to increased profitability of the Company in the reporting year. The total debt burden of the Company denominated in US Dollars decreased by the end of 2015 and, consequently, the net debt to EBITDA ratio remained in a comfortable position.

CONSOLIDATED KEY FINANCIAL INDICATORS

The consolidated revenue increased by 8.4% per annum and amounted to RUB 224.5 bn compared to RUB 207.2 bn in 2014.

EBITDA increased by 26% compared to 2014 amounting to RUB 118.5 bn, the EBITDA margin increased from 45.3% to 52.8%. The net profit amounted to RUB 32.2 bn compared to the net loss of RUB 16.8 bn in 2014. The reasons for the indicators’ growth included foreign currency market conditions that positively impacted sales and the Company controls on expenditure.

The net cash flow decreased by 2% compared to 2014 and reached RUB 41.3 bn as a result of the decreased cash flow from operating activities of the Company. Net debt/EBITDA indicator decreased from 1.9 as of the end of 2014 to 1.7 as of December 31, 2015.

Indicator 2014 2015 % compared to 2014
Sales revenue, mn RUB 207,159 224,524 108.4%
Cost of sales, mn RUB - 99,334 - 93,240 93,9%
EBITDA, mn RUB 93,857 118,498 126.3%
EBITDA margin, % 45.3 52.8 7.5 pp
Net profit, mn RUB - 16,832 32,192
Net income margin, % -8.1 14.3 22.4 pp
Net cash flow, mn RUB 42,059 41,300 98.2%
Net debt/EBITDA, times 1.9 1.7 -20,0%

CONSOLIDATED REVENUE STRUCTURE

The consolidated Group revenue growth by 8% in 2015 compared to 2014 was achieved mainly due to the increased income from export rough diamond sales. Reduction of physical sale volumes in carats and lowering of prices for rough diamonds was compensated by the foreign currency market conditions that were favourable toward export sales. The annual average exchange rate of the US dollar to the Russian rouble grew from 38.4 in 2014 to 61.0 in 2015.

US DOLLAR TO RUSSIAN ROUBLE EXCHANGE RATE CHANGES IN 2014-2015*

*Source: the Central Bank of the Russian Federation, not including weekends and public holidays

CONSOLIDATED REVENUE STRUCTURE, MN RUB

Indicator 2014 2015 % compared to 2014
Sales of diamonds 184,065 201,242 109.3%
Sales of gas 6,797 6,343 93.3%
Transport 4,884 5,671 116.1%
Social infrastructure 4,995 4,014 80.4%
Other 6,418 7,254 113.0%
TOTAL 207,159 224,524 108.4%

Rough diamonds sales share in the consolidated revenue grew insufficiently to 90% in the reporting year compared to 89% in 2014. In terms of value, gem-quality diamonds accounted in 2015 for 92% of sales, which is the same as in 2014.

COST PRICE

The cost of sales based on results of 2015 decreased by 6.1% compared to 2014 and reached RUB 93.2 bn. Prime cost of production grew by 22.6% compared to 2014 mainly due to increased MET and increased payroll, fuel, power and materials expenditures.

PRIME COST BY COST ELEMENT, MN RUB

Indicator 2014 2015 % compared to 2014
Salary, payroll taxes and other payments to employees 34,279 40,253 117.4%
Amortization 18,452 19,096 103.5%
Mineral Extraction Tax 14,697 23,323 158.7%
Fuel and power 13,686 17,610 128.7%
Materials 9,569 12,098 126.4%
Services 5,138 5,748 111.9%
Transport 2,474 2,118 85.6%
Other 1,058 1,568 148.2%
TOTAL production cost 99,353 121,814 122.6%
Changes in rough diamond, ore and sand reserves -898 -29,832 3322.0%
Prime cost of diamonds for resale 879 1,258 143.1%
TOTAL cost of sales 99,334 93,240 93.9%

Mineral Extraction Tax expenses grew by RUB 8.6 bn compared to 2014 mainly due to depreciation of the Russian rouble against the US dollar and rough diamond production growth.

Payroll expenditures in 2015 grew almost by RUB 6 bn compared to 2014 mostly due to salary indexation within inflation limits as well as due to the work scope increase caused by commencement of mining at the Karpinskogo-1 pipe and Udachnaya pipe underground mine.

The cost of fuel and power grew by about RUB 3.9 bn compared to 2014 mainly due to commencement of production at the underground mine of Udachnaya pipe and at Botuobinskaya and Karpinskogo-1 pipes.

Expenses on materials grew by RUB 2.5 bn compared to 2014 mainly due to scheduled maintenance at processing plant No. 8 as well as due to increased production at Karpinskogo-1 pipe and placer deposits.

EBITDA

General and administrative expenses, business expenses and other operating income/expenditures changed insigni-ficantly in 2015 compared to 2014. The total general and administrative and commercial expenses against the revenue decreased from 6.1% in 2014 down to 5.8% in 2015.

EBITDA increased by 26% compared to 2014 amounting to RUB 118.5 bn in 2015. The main factor that affected the indicator growth was increased gross profit. EBITDA profitability increased by 7.5 pp from 45.3% in 2014 to 52.8% in 2015.

EBITDA ANALYSIS

Indicator 2014 2015 % compared to 2014
Operating profit, mn RUB 74,376 97,169 130.6%
Amortization, mn RUB 18,883 19,268 102.0%
Positive exchange rate differences pertaining to operating activities, mn RUB - 3,011 - 2,007 66.7%
Loss from the fixed assets retirement and write-off, mn RUB 3,472 3,848 110.8%
Result from subsidiary divestiture, mn RUB 137 220 160.6%
EBITDA, mn RUB 93,857 118,498 126.3%
EBITDA margin, % 45.3 52.8 7.5 pp

EBITDA CHANGES ANALYSIS, MN RUB

NET PROFIT

Financial expenditures based on results of 2015 decreased by 30.2% compared to 2014 and amounted to RUB 58.5 bn. The main reason for the financial expenditures reduction was the decrease in losses from the exchange rate differences from RUB 73.8 bn in 2014 down to RUB 48.9 bn in the reporting year.

The consolidated net profit amounted to RUB 32.2 bn in 2015 compared to the net loss of RUB 16.8 bn in 2014.

NET PROFIT CHANGES ANALYSIS, MN RUB

CASH FLOW

Indicator 2014 2015 % compared to 2014
Net cash flow from operating activities before changes in working capital and tax payments, mn RUB 94,840 119,980 126.5%
Investments in working capital, mn RUB -4,346 -34,094 784.5%
Income tax paid, mn RUB -12,379 -10,345 83.6%
Net receipts from the core activities, mn RUB 78,115 75,541 96.7%
Acquisition of fixed assets, mn RUB -36,056 -34,241 95.0%
Net cash flow, mn RUB 42,059 41,300 98.2%

The net cash flow in the reporting year almost did not change compared to 2014 due to the fact that the working capital growth was compensated for by the increased operating income. Working capital growth in 2015 was achieved mainly due to the increased rough diamond stock in connection with slowdown of activities on the global rough diamond market.

NET CASH FLOW CHANGES ANALYSIS, MN RUB

CAPITAL EXPENDITURES (CAPEX)

In 2015, total capital expenditure decreased by 5% compared to 2014 and amounted to RUB 34.2 bn.

CAPITAL EXPENDITURES CHANGES ANALYSIS, MN RUB

CAPITAL EXPENDITURES

2015 16,934 9,491 2,013 5,041 762 TOTAL 34,241
2016 16,884 14,122 1,068 3,284 698 TOTAL 36,056

A reduction of investments in expansion of production capacities compared to 2014 was due to the launching of the production facilities at the Botuobinskaya pipe, Udachny underground mine and PJSC Severalmaz.

CAPITAL INVESTMENTS IN EXPANSION OF MINING FACILITIES, MN RUB

Indicator 2014 2015 % compared to 2014
Mir underground mine 1,356
Aikhal underground mine 767
Udachny underground mine 7,852 6,537 83.3%
Botuobinskaya pipe 1,512
PJSC Severalmaz 2,634 1,547 58.7%
Verkhne-Munskoe deposit and Zarya pipe 1,407
TOTAL 14,122 9,491 67.2%

LIQUIDITY AND FINANCIAL STABILITY

The total debt as of December 31, 2015 grew by 13.2% compared to last year and amounted to RUB 223.2 bn. Increase of the total debt in roubles occurred due to depreciation of the Russian rouble against the US dollar in the reporting year. The total debt denominated in foreign currency decreased by 12.6% compared to the end of 2014 and amounted to USD 3,062 mn.

In 2015, the Company redeemed corporate and exchange bonds worth RUB 20 bn and repaid part of the credit portfolio worth USD 85 mn ahead of schedule. Thus, as of December 31, 2015, practically 100% of the Group liabilities comprised the debts denominated in US dollars, while as of December 31, 2014 the foreign currency borrowings to rouble borrowings ratio was 90% to 10%.

CONSOLIDATED DEBT PORTFOLIO ANALYSIS

Company 31.12.2014 31.12.2015 % compared to 2014
Long-term part, mn RUB 176,358 197,467 112.0%
Short-term part, mn RUB 20,802 25,692 123.5%
Total debt, mn RUB 197,160 223,159 113.2%
% of the long-term part 89% 88% -1 pp
Total debt, mn USD 3,504 3,062 87.4%
Net debt, mn RUB 175,467 202,656 115.5%
Total debt/EBITDA, times 2.1 1.9 -0.2
Net debt/EBITDA, times 1.9 1.7 -0.2

The debt portfolio structure did not change significantly in terms of the principle liabilities repayment schedule. The long-term borrowing share decreased slightly to 88% as of December 31, 2015 (compared to 89% as of December 31, 2014).

LOANS AND LIABILITIES REPAYMENT SCHEDULE, MN USD

Floating and fixed interest rate borrowings ratio altered from 17% to 83% as of December 31, 2014 and from 20% to 80% as of December 31, 2015.

The weighted average interest rate on the received credits and loans as of December 31, 2015 amounted to 5.8% (compared to 6.1% as of December 31, 2014).

RISK MANAGEMENT

RISK MANAGEMENT SYSTEM

The risk management system is a process comprising continuous identification, monitoring, analysis and consideration of risks in the current operating activities and investment projects planning. The risks that can affect the achievement of strategic and operational goals of the Company are taken into consideration first and foremost.

In 2015, the Supervisory Board adopted a resolution approving a new revision of the Regulations on risk management of PJSC ALROSA and the Risk management policy of PJSC ALROSA.

The aforementioned documents determine the structure and procedure for organization of the risk management system of the Company including its principles, goals and tasks in the area of risk management, unified terminology, key elements of the risk management system, functions and roles of participants in the risk management process, key stages of the risk management process and tasks of the participants.

The main goal of the risk management system of ALROSA Group is minimizing impact of adverse internal and external factors on results of activities. The Company manages the following types of risks:

Risk groups Major risk factors Possible consequences Main risk management mechanisms
Country-specific
and region-specific
Business activities of ALROSA in the Russian Federation, on which sanctions were imposed
The majority of assets of the Group are located in the Republic of Sakha (Yakutia), a geographically remote region with severe climatic conditions.
The sales companies and Catoca Ltd. Mining Co., an associated diamond mining company, operate under foreign jurisdictions
Decrease in foreign investments
Complexity of the transport scheme for delivering materials and equipment and supplying energy to key the production facilities
Reduction of profitability of investments in foreign assets. Restrictions on activities on international markets
Interaction with governmental agencies of the Russian Federation
Establishment of a reliable transport scheme to deliver materials and equipment in Yakutia
Ensuring availability of backup power and heat supply sources
Monitoring of changes in legislation and the political regime of foreign states
Regulatory and legal Law compliance obligations
Changes in foreign exchange, tax, customs and other legislation
Monopolistic position in the rough diamond market of Russia
Deterioration in the financial condition of the Group Political and economic costs Monitoring and strict compliance with the legislation in all areas of activity of the Group
Constructive dialogue with regulators on issues concerning interpretation of legislation
Development and obtaining approval from the Federal Anti-Monopoly Service (FAS) of public procedures for working with buyers
Social Working conditions, including natural and climatic conditions
Specifics of the mining industry
Insufficient production staff and qualified personnel Implementation of HR policy aimed at attracting and retaining qualified personnel, timely and high-quality training, development, adaptation of the personnel, formation of a pool of qualified candidates.
Following social partnership principles based on a collective agreement
Meetings of the management with the Company labour collectives.
Macroeconomic Macroeconomic changes affecting consumers’ welfare
Fluctuations in demand for the product
Changes in prices for products of the Company
Changes in foreign currency exchange rates
Production volume decrease
Reduction of demand for diamond jewellery
Loss of profit
Price regulation based on analysis and monitoring
Formation of the sales system on the basis of long-term contracts
Interaction with governmental agencies of the Russian Federation
Interaction with international industry-specific organizations
Political Changes in the politics of the country Restricted access to foreign capital State support in obtaining loans
Natural Seasonal flood and flooding Forest fires Production process stoppage Activities aimed at floodwater diversion
Blaster teams and explosive materials, motor vehicles and aircrafts
Equipping all the machinery operating in forests with spark arresting devices and fire extinguishing appliances
Establishing a firefighting reserve for extinguishing forest fires
Conclusion of an agreement with the Forestry Department of the Republic of Sakha (Yakutia) for the lease of automotive, tractor and bulldozer machinery
Industry-specific Limited global rough diamond stock
Emergence of cost-effective methods of producing synthetic gem-quality diamonds
Production volume decrease
Reduction of demand for diamond jewellery
Actual product price increase rates lagging behind anticipated rates
Loss of profit
Implementation of a comprehensive set of measures in the following areas:
– Exploration and prospecting works
– Development of deposits with a lower diamond content
– Construction, establishment and refinement of the performance of the underground mines meet the planned figures
Financial US dollar to Russian rouble exchange rate fluctuations
Credit risk
Liquidity risk
Lower profits in roubles Development of mechanisms for hedging exchange rate risks using financial instruments
Corporate governance risks Plans concerning privatization, share capital restructuring
Range and areas of activities of the Group
Complex projects requiring investments
The materialization of these risks may cause a wide range of negative effects, from failure of individual production programs to complete business ineffectiveness Implementation of corporate governance mechanisms to avoid a conflict of interest
Ensuring equal access for shareholders to information on the Company operations
Preliminary analysis, discussion and preparation at the Supervisory Board meeting of the agenda items for an annual General Meeting of Shareholders
Interaction with governmental agencies
System processes for improving the organizational structure
Development and improvement of business processes, intercorporate regulatory system
Production-specific Mining and geological features of deposits
Open-pit mining and underground mining
High level of equipment wear and tear
Hazardous production facilities of the Group
Failure of production programs in the current period and in the long run
Failure to comply with the planned diamond production parameters, loss of profit
Harm caused to life and health
Reparable and irreparable harm to the environment, local ecosystems
Technical upgrade and replacement of worn-out equipment
Servicing of equipment and machinery in accordance with the timetable of the scheduled preventative repair works and quality assurance
Implementation of environmental policy measures
Corporate environmental monitoring system
Preliminary evaluation of the possible consequences and development of environment protection measures at the design stage
Comprehensive system of occupational safety and labour protection management, including public liability insurance for damage caused to the environment
Technogenic Flooding at underground production facilities
Collapse of open pit walls and mine openings
Fires
Production process stoppage Double reserve capacity of the main water removal unit against the maximum inflow as well as additional tanks for accumulating water in mine workings
Systems of permanent monitoring of the rock massif condition. Continuous enhancement of mine workings using modern methods and means. Emergency Response Plans
Preventive maintenance, replacement of obsolete fire detection and suppression units with modern ones, testing of internal and external water supply

CORPORATE GOVERNANCE AND SECURITIES

CORPORATE GOVERNANCE ROLE AND PRINCIPLES

STATEMENT OF THE SUPERVISORY BOARD ON COMPLIANCE WITH THE PRINCIPLES AND RECOMMENDATIONS OF THE CORPORATE GOVERNANCE CODE

The Supervisory Board of PJSC ALROSA hereby reaffirms the commitment of the Company to follow the corporate governance principles specified in the Corporate Governance Code recommended in the Bank of Russia letter dated 10.04.2014. PJSC ALROSA intends to continue its efforts to introduce the key principles and recommendations from the Corporate Governance Code in activities of the Company.

CORPORATE GOVERNANCE ROLE

Adherence to high corporate governance standards is one of the strategic priorities of the Company. Ensuring shareholder value growth in the long-term perspective is impossible without comprehensive protection of rights and interests of all shareholders. Thus, the management of PJSC ALROSA pays a lot of attention to the corporate governance: it takes into account best international practices, legislative requirements and peculiarities of its shareholding structure.

In April 2015, based on resolution of the Supervisory Board, the Company adopted a new revision of the Corporate Governance Code that ensures:
– entitlement of shareholders to exercise their rights;
– the protection of shareholder interests;
– management processes transparency;
– professional and ethical responsibility of managers at all levels;
– control of financial and economic activities.

The Code was developed in accordance with recommendations from the Bank of Russia.

Moreover, PJSC ALROSA voluntarily assumed obligations in the sphere of corporate relations additional to the ones required by the effective legislation. The Company reaffirms:
– the intention to adhere to the standards and requirements of Russian legislation and of the applicable foreign and international legislation, including in the sphere of corporate laws, anti-corruption laws, and security market laws, as well as to adhere to the main principles of the Russian Corporate Governance Code and international standards and recommendations;
– commitment to ensuring compliance with standards and requirements of the effective legislation and best corporate governance practices and business ethics in operations of its subsidiaries and affiliates;
– requirement for employees and members of governing bodies to be well aware of and strictly adhere to provisions of the Code.

An agreement with the Russian Institute of Directors was concluded for independent assessment of the Company in the sphere of corporate governance. On March 31, 2015, the Company was given a National Corporate Governance rating of 7 out of 10 for Developed corporate governance practice. On October 12, 2015, the rating was increased to 7+, Developed Corporate Governance Practice.

The rating reflects the opinion of experts on the degree of compliance of the Company corporate governance practices with the Corporate Governance Code approved by the Government of the Russian Federation and the Bank of Russia. The rating is also an indicator of the Company reliability, as well as a tool for improving the corporate governance practice and contributes to increasing the confidence of shareholders and investors.

“ROAD MAP”

For the purpose of introducing provisions of the Corporate Governance Code, the Supervisory Board of PJSC ALROSA approved the Action Plan (Road Map) on March 20, 2015.

Within the framework of implementation of the Action Plan (Road Map) the following were approved:
– New revision of the Corporate Governance Code of PJSC ALROSA;
– Charter of PJSC ALROSA;
– Regulations on the General Meeting of Shareholders of PJSC ALROSA;
– Regulations on the Supervisory Board of PJSC ALROSA;
– Regulations on the Executive Committee of PJSC ALROSA.

CORPORATE GOVERNANCE PRINCIPLES

In the sphere of safeguarding rights of shareholders and equal conditions for shareholders:
– right of shareholders to take part in management of the Company via decision making on the most important issues concerning activities of the Company;
– giving all shareholders an equal and fair opportunity to participate in the profit of the Company through receipt of dividends;
– ensuring equal conditions for all shareholders and their fair treatment by the Company;
– ensuring that shareholders have the possibility of unhindered and easy disposal of their shares;
– ensuring that all shareholders of the Company receive effective protection if their rights are violated.

In the sphere of organization and support of the work of the Supervisory Board:
– performance by the Supervisory Board of strategic management of the Company, determination of the main principles of and approaches to organization of a risk management and internal control system in the Company, control of activities of executive bodies of the Company as well as performance by the Supervisory Board of other key functions;
– accountability of the Supervisory Board to shareholders of the Company;
– effectiveness and professional competence of the Supervisory Board as a governing body of the Company, the ability of the Supervisory Board to make objective independent judgements and take decisions that meet the interests of the Company and its shareholders;
– having a sufficient number of Independent Directors on the Supervisory Board;
– ensuring an effective functioning of the Supervisory Board in the process of its convocation and conduct of meetings (voting in absentia), preparation for them and participation in them of members of the Supervisory Board;
– establishment by the Supervisory Board of committees for preliminary consideration of the most important issues concerning activities of the Company.

In the sphere of organization and support of the work of the Corporate Secretary:
– the ensuring by the Corporate Secretary of an effective on-going interaction with the shareholders, coordination of the Company activities on protection of rights and interests of the shareholders and support of effective work of the Supervisory Board.

In the sphere of development and implementation of the system of remuneration of members of the Supervisory Board and executive bodies:
– ensuring a fair level of remuneration paid by the Company to attract, motivate and retain the persons with the competence and expertise that the Company requires;
– integration into the system of remuneration of executive bodies and other key managers of the Company of the principle that remuneration depends on the Company performance results and their personal contribution to achieving these results.

In the sphere of organization and functioning of the risk management and internal control system:
– establishment in the Company of a wellfunctioning system of risk management and internal control aimed at ensuring a reasonable confidence in achieving the goals set for the Company;
– carrying out a Company internal audit to ensure systematic independent evaluation of reliability and effectiveness of the risk management and internal control system and corporate governance practices.

In the sphere of disclosure of information on the Company:
– transparency of the Company and its activities for shareholders, investors and other stakeholders;
– timely disclosure of complete, up-todate and reliable information on the Company to provide the grounds for taking reasonable decisions by shareholders and investors;
– provision by the Company of infor-mation and documents upon request of shareholders in accordance with the principle of equal and unhindered access.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The report on compliance with principles and recommendations of the Corporate Governance Code was developed and prepared in accordance with recommendations of the Bank of Russia No. ИН-06-52/8 On Disclosure in the Annual Report of a Public Joint Stock Company Report on Compliance with Principles and Recommendations of the Corporate Governance Code dated 17.02.2016.

SELF-EVALUATION OF THE CORPORATE GOVERNANCE QUALITY

No. Components Number of issues Weight of the co mponent in the total score, % Actual points Maximum points Compliance level
1 Rights of shareholders 22 14 72 79 91.1
2 Board of Directors 56 37 157.5 202 78.0
3 Executive management 5 7 28 38 73.7
4 Transparency and disclosure of information 15 25 103 135 76.3
5 Risk management, internal control and internal audit 16 11 44 63 69.8
6 Corporate social responsibility, business ethics 6 6 19 31 61.3
7 TOTAL 120 100 423.5 548 77.3

MAJOR TRANSACTIONS AND INTERESTED PARTIES TRANSACTIONS

Resolutions on approval of major transactions and interested party transactions are adopted in PJSC ALROSA in accordance with the Federal Law On Joint Stock Companies:
– 287 interested party transactions were approved in the reporting period;
– no major transactions whose value amounts to 25 and more percent of the book value of the Company assets, determined based on the data contained in accounting statements as of 31.12.2015, were entered into by the Company.

CORPORATE GOVERNANCE STRUCTURE

The corporate governance system of the Company is an elaborate organizational structure of governing and control bodies with a clear interaction mechanism.

General Meeting of Shareholders is the supreme governing body of the Company. The Supervisory Board exercises strategic management and controls activities of the Executive Committee that allow for the day-to-day management of the Company. The President of the Company (sole executive body) is the Chairman of the Executive Committee.

The Supervisory Board has three committees: the Strategic Planning Com-mittee, the HR and Remunerations Committee and the Audit Committee. Activities of the committees are aimed at improvement of the efficiency and quality of work of the Supervisory Board.

The Company has in place an effective internal and external control system: two independent auditors, the Auditing Committee and the Internal Audit Department.

GOVERNING BODIES’ COMPETENCE

Governing body Competence
General Meeting of Shareholders Issues on the agenda, resolutions on which were adopted by a three-quarter majority of shareholders voters:
– amendments and additions to the Charter of PJSC ALROSA;
– Company reorganization;
– Company liquidation;
– determination of the number, nominal value, category (type) of authorized shares and rights associated with these shares;
– increase in the Company authorized capital through the placement of additional shares;
– approval of major transactions;
– request for delisting of shares and (or) issuable securities converted into shares.

Issues on the agenda, resolutions on which were adopted by a simple majority of shareholder voters:
– election of members of the Supervisory Board of the Company;
– early termination of powers of members of the Supervisory Board of the Company;
– election of members of the Company Auditing Committee;
– early termination of Company Auditing Committee member powers;
– approval of the Company auditor;
– approval of annual reports of the Company;
– approval of the annual accounting reporting;
– distribution of profit and loss of the Company based on results of the financial year;
– payment (announcement) of dividends;
– determination of the procedure for conducting a General Meeting of Shareholders;
– share splitting and consolidation;
– increase and decrease in the authorized capital of the Company;
– participation in financial and industrial groups, associations;
– approval of interested party transactions;
– the conducting by the Auditing Committee of an audit of financial and economic activities of the Company;
– approval of internal documents that regulate activities of the Company bodies;
– determination of remuneration and (or) compensation for the expenses to members of the Supervisory Board of the Company;
– remuneration or compensation for the expenses of members of the Auditing Committee of the Company;
– other issues concerning the General Meeting of Shareholders pertaining to the Federal Law On Joint Stock Companies.
Supervisory Board Resolutions adopted by a voting majority of members of the Supervisory Board:
– determination of priority areas of the activities of the Company including the attraction of long-term investments;
– convocation of annual and extraordinary General Meetings of Shareholders of the Company;
– approval of the agenda of the annual General Meeting of Shareholders;
– determining the date by which the list of persons entitled to participate in the General Meeting of Shareholders is to be finalized;
– formation of the executive bodies of the Company, determination of the term of office of the sole executive body (President) and members of the collegial executive body (Executive Committee), early termination of their powers, determination of the amount of remuneration and compensation to the President and members of the Executive Committee of the Company;
– determination of the amount of payment for services of the auditor;
– recommendations on the amount of remuneration or compensation payable to members of the Auditing Committee;
– recommendations on the amount of dividends on the shares as well as determination of the date on which the persons eligible for dividends will be defined;
– use of the reserve fund and other funds of the Company;
– approval of internal documents of the Company except for the internal documents that fall within the competence of the General Meeting of Shareholders;
– establishment of divisions and opening of representative offices of the Company;
– approval of the Registrar of the Company and the terms and conditions of the agreement with the Registrar as well as termination of the agreement;
– approval of reports on results of emissions (additional emissions) of the Company securities;
– election and termination of powers of the Corporate Secretary;
– other issues stipulated by the Federal Law On Joint-Stock Companies.

Resolutions that are adopted by a three-quarter voting majority of members of the Supervisory Board:
– election of the Chairman of the Supervisory Board;
– establishment of committees of the Supervisory Board of the Company, election of members to committees of the Supervisory Board of the Company;
– recommendations to executive bodies of the Company on any issues concerning activities of the Company.
Audit Committee The main goal of establishing the Committee is the improvement of efficiency and quality of the Supervisory Board work in terms of controlling financial and economic activities of the Company through provisional consideration and development of recommendations for the Supervisory Board in relation to the issues falling within the competence of the Committee in the following areas:
– financial statements;
– risk management and internal control procedures;
– external independent audit, internal audit;
– zero tolerance for unscrupulous actions of the Company employees and third parties;
– risks associated with the full disclosure and transparency of information.
Human Resources and Remunerations Committee The main goals of the Committee are:
– improvement of efficiency and quality of the Supervisory Board work and resolutions adopted by it through provisional consideration of the issues concerning formation of effective and transparent remuneration practices and development of recommendations for the Supervisory Board;
– preparation and submission of recommendations to the Supervisory Board of the Company for adopting resolutions within key areas of the human resources policy of the Company with a view to consolidating the composition and improving the effectiveness of the Supervisory Board and remuneration to the Supervisory Board and the Executive Committee members, the President of the Company and other Company officials, whose list is specified by the Supervisory Board.
Strategic Planning Committee The main reason for establishing the Committee is the improvement of the efficiency and quality of the Supervisory Board work through provisional consideration of certain issues falling within the competence of the Supervisory Board and development of recommendations for the Supervisory Board in relation to the issues falling within the competence of the Committee:
– determination of the Company priority areas of activities;
– adoption of resolutions for entering into major transactions;
– management of securities, shares owned by the Company;
– management of the Company property;
– use of the reserve fund and other funds of the Company.
Executive Committee All the issues concerning the current operations management except for the issues falling within the competence of the General Meeting of Shareholders and the Supervisory Board.

GENERAL MEETING OF SHAREHOLDERS

The General Meeting of Shareholders is the supreme governing body of PJSC ALROSA operating under Russian law, the Charter and the Regulations on the General Meeting of Shareholders of PJSC ALROSA.

In accordance with provisions of the Federal Law On Joint Stock Companies and the Charter of the Company, the annual General Meeting of Shareholders of the Company is held no earlier than two months and no later than six months after the end of the financial year. At the annual General Meeting of Shareholders the annual report of the Company, annual financial statements and distribution of profit including payment (announcement) of dividends and losses for the financial year are approved, the Supervisory Board and the Auditing Committee members are elected, the auditor of the Company is approved and other issues falling within the competence of the General Meeting of Shareholders can be addressed.

In addition to the annual General Meeting of Shareholders, an extraordinary General Meeting of Shareholders can be held.

A General Meeting of Shareholders of PJSC ALROSA on the results of 2014 was held on June 25, 2015 in the town of Mirny, Minutes No. 33 (General Meeting of Shareholders of PJSC ALROSA dated June 25, 2015).

Agenda of the annual General Meeting of Shareholders of PJSC ALROSA:
1) Approval of the Annual Report of PJSC ALROSA.
2) Approval of the annual accounting reporting including the Financial Perfor-mance Report of PJSC ALROSA.
3) Approval of the distribution of PJSC ALROSA profit based on results of 2014.
4) On the amount of dividends, time frame and form of their payment based on the 2014 performance results and determination of the date on which the persons eligible for dividends will be outlined.
5) On remuneration of the Supervisory Board members who are non-state employees for their work on the Supervisory Board for the amount specified by internal documents of PJSC ALROSA.
6) Election of members of the Supervisory Board of PJSC ALROSA.
7) Election of members of the Auditing Committee of PJSC ALROSA.
8) Approval of auditors of PJSC ALROSA.
9) On approval of an interested party transaction, namely a contract for insurance of the liability of members of the Supervisory Board and Executive Committee of PJSC ALROSA.
10) On approval of an interested party transaction, namely a supplemental agreement to the effective USD 350 mn loan agreement entered into by PJSC ALROSA and JSC VTB Bank.
11) On approval of an interested party transaction, namely a supplemental agreement to the effective USD 250 mn loan agreement entered into by PJSC ALROSA and JSC VTB Bank.
12) On participation of PJSC ALROSA in the Diamond Producers Association.
13) On approval of a new revision of the Charter of PJSC ALROSA.
14) On approval of the Regulations on the General Meeting of Shareholders of PJSC ALROSA.
15) On approval of the Regulations on the Supervisory Board of PJSC ALROSA.
16) On approval of the Regulations on the Executive Committee of PJSC ALROSA.
17) On approval of the Regulations on the Auditing Committee of PJSC ALROSA.
18) On approval of the Regulations on remuneration to members of the Supervisory Board of PJSC ALROSA.
19) On approval of the Regulations on remuneration and compensation to members of the Auditing Committee of PJSC ALROSA.

No General Meetings of Shareholders of PJSC ALROSA were held in 2015.

SUPERVISORY BOARD

Members of the Supervisory Board of PJSC ALROSA are elected by the General Meeting of Shareholders in accordance with the procedure established by the Federal Law On Joint Stock Companies and the Charter of PJSC ALROSA up until the next annual General Meeting of Shareholders.

The Supervisory Board of the Company operates under Russian law, the Charter and the Regulations on the Supervisory Board of PJSC ALROSA dated June 25, 2015 (Minutes No. 33).

The competence of the Supervisory Board includes resolutions on the issues pertaining to the general management of the Company except for resolutions on the issues that in accordance with the Federal Law On Joint Stock Companies and the Charter of the Company fall within the competence of the General Meeting of Shareholders.

In accordance with the Charter of the Company, 15 members are elected to the Supervisory Board.

The Chairman of the Supervisory Board is elected by fellow members of the Supervisory Board owing to a three-quarter voting majority of the members of the Supervisory Board participating in the meeting.

The Regulations on the Supervisory Board of PJSC ALROSA were approved by the annual General Meeting of Shareholders of the Company held on June 25, 2015.

SUPERVISORY BOARD COMPOSITION AND PARTICIPATION IN CORPORATE EVENTS

The Supervisory Board of the Company as of December 31, 2015 was composed of 15 members:
– 14 Non-Executive Directors, including 3 Independent Directors;
– 1 Executive Director.

Participation in corporate events
No. Surname and initials TOTAL meetings voting in absentia
Members of the Supervisory Board that left the Supervisory Board on 25.06.2015:
1 F. B. Andreev (until 30.01.2015) 1 - 1
2 I. K. Demyanov (until 25.06.2015) 8 2 6
3 S. K. Dubinin (until 25.06.2015) 8 2 of them 1 is EiW* 6
4 D. P. Zakharov (until 25.06.2015) 8 2 6
5 S. G. Illarionov (until 25.06.2015) 8 2 6
6 N. E. Kononova (until 25.06.2015) 8 2 6
7 I. A. Lozhevsky (until 25.06.2015) 8 2 6
8 S. V. Mestnikov (until 25.06.2015) 8 2 6
9 D. S. Morozov (until 25.06.2015) 8 2 of them 2 are EiWs 6
10 N. A. Osipova (until 25.06.2015) 8 2 6
11 A. V. Sharonov (until 25.06.2015) 7 2 of them 2 are EiWs 5
12 I. A. Yuzhanov (until 25.06.2015) 8 2 6
Members of the Supervisory Board that were members of the Supervisory Board throughout 2015
13 S. V. Barsukov 15 6 9
14 O. R. Fedorov 15 6 9
15 V. I. Kondratyeva 15 6 9
Members of the Supervisory Board that were elected to the Supervisory Board on 25.06.2015:
16 P. V. Alekseev (since 25.06.2015) 7 4 3
17 E. A. Borisov (since 25.06.2015) 7 4 3
18 A. S. Galushka (since 25.06.2015) 4 3 of them 2 are EiWs 1
19 M. V. Gordon (Independent Director) (since 25.06.2015) 7 2 3
20 E. V. Grigorieva (since 25.06.2015) 7 2 3
21 O. V. Grinko (Independent Director) (since 25.06.2015) 7 2 3
22 G. I. Danchikova (since 25.06.2015) 7 2 3
23 A. V. Zharkov (Executive Director) (since 25.06.2015) 7 2 3
24 V. I. Nikiforov (since 25.06.2015) 7 4 of them 1 is EiW 3
25 A. G. Siluanov (since 25.06.2015) 6 2 3
26 P. V. Ulyanov (Independent Director) (since 25.06.2015) 7 4 of them 1 is EiW 3
27 A. O. Chekunkov (since 25.06.2015) 7 2 3
*EiW – expressed in writing

MEETINGS (VOTING IN ABSENTIA) OF THE SUPERVISORY BOARD

In 2015, a total of 15 corporate events of the Supervisory Board took place, including 6 meetings and 9 instances of voting in absentia:
1. 28.01.2015, Minutes No. А01/225-ПР-НС (voting in absentia);
2. 20.03.2015, Minutes No. А01/226-ПР-НС (voting in absentia);
3. 24.03.2015, Minutes No. А01/227-ПР-НС (meeting);
4. 08.04.2015, Minutes No. А01/228-ПР-НС (voting in absentia);
5. 23.04.2015, Minutes No. А01/229-ПР-НС (meeting);
6. 15.05.2015, Minutes No. А01/230-ПР-НС (voting in absentia);
7. 25.05.2015, Minutes No. А01/231-ПР-НС (voting in absentia);
8. 24.06.2015, Minutes No. А01/232-ПР-НС (voting in absentia);
9. 14.07.2015, Minutes No. А01/233-ПР-НС (meeting);
10. 10.02.2015, Minutes No. А01/234-ПР-НС (voting in absentia);
11. 06.10.2015, Minutes No. А01/235-ПР-НС (meeting);
12. 10.11.2015, Minutes No. А01/236-ПР-НС (voting in absentia);
13. 19.11.2015, Minutes No. А01/237-ПР-НС (meeting);
14. 22.12.2015, Minutes No. А01/238-ПР-НС (meeting);
15. 23.12.2015, Minutes No. А01/239-ПР-НС (voting in absentia);

A total of 117 agenda items were examined in 2015, of which the following were key:
1. Election of the President of PJSC ALROSA.
2. Approval of the Registrar of PJSC ALROSA and terms and conditions of the agreement with the Registrar.
3. On termination of the agreement for comprehensive servicing of the register of holders of inscribed securities entered into by PJSC ALROSA and OJSC Republican Special Registrar Yakutia Fund Centre.
4. On submission of reports on imple-mentation of the Long-Term Development Program of ALROSA Group until 2023 and on meeting the approved target values of the Key Performance Indicators.
5. On approval of the Report on imple-mentation of the Innovation Development and Technological Upgrade Program of PJSC ALROSA for 2014.
6. On approval of the Action Plan (Road Map) for introduction of the Corporate Governance Code.
7. On the national rating of corporate governance of PJSC ALROSA.
8. On approval of a new revision of the Corporate Governance Code of PJSC ALROSA.
9. On amendments to the Long-Term Development Program of PJSC ALROSA.
10. On application of instructional guidelines concerning development of internal regulatory documents governing activities of PJSC ALROSA.
11. On approval of the Information Policy of PJSC ALROSA.
12. On approval of the auditor of PJSC ALROSA in line with Russian Accounting Standards.
13. On approval of the auditor of PJSC ALROSA to conduct mandatory audit of consolidated financial statements of ALROSA Group in accordance with the International Financial Reporting Standards.
14. On participation of PJSC ALROSA in the Diamond Producers Association.
15. On approval of a new revision of the Regulations on procurement activities of PJSC ALROSA.
16. On the procedure for preparation of materials for a meeting (voting in absentia) of the Supervisory Board of PJSC ALROSA on approval of interested party transactions.
17. On approval of the Work Plan of the Internal Audit Department of PJSC ALROSA for 2015.
18. On inclusion on the agenda of the annual General Meeting of Shareholders of PJSC ALROSA items relating to PJSC ALROSA shareholder proposals.
19. On inclusion of the persons nominated by shareholders of PJSC ALROSA on the list of nominees for election to the Supervisory Board and the Auditing Committee of PJSC ALROSA.
20. On proposals to the annual General Meeting of Shareholders of PJSC ALROSA to adopt a resolution on approval of the Charter of PJSC ALROSA, the Regulations on the General Meeting of Shareholders of PJSC ALROSA, the Regulations on the Supervisory Board of PJSC ALROSA and the Regulations on the Executive Committee of PJSC ALROSA.
21. On inclusion on the agenda of the annual General Meeting of Shareholders of proposals to the annual General Meeting of Shareholders of PJSC ALROSA to adopt a resolution on approval of the Charter of PJSC ALROSA, the Regulations on the General Meeting of Shareholders of PJSC ALROSA, the Regulations on the Supervisory Board of PJSC ALROSA and the Regulations on the Executive Committee of PJSC ALROSA.
22. On inclusion on the agenda of the General Meeting of Shareholders of PJSC ALROSA of the item On approval of amendments to the Regulations on remuneration to members of the PJSC ALROSA Supervisory Board.
23. On inclusion on the agenda of the General Meeting of Shareholders of PJSC ALROSA of the item On approval of the Regulations on remunerations and compensations payable to members of the Auditing Committee of PJSC ALROSA.
24. On preliminary approval of the Annual Report of PJSC ALROSA for 2014.
25. On the annual accounting (financial) reporting including the Financial Performance Report of PJSC ALROSA for 2014.
26. On inclusion on the agenda of the General Meeting of Shareholders of PJSC ALROSA of the item: On approval of an interested party transaction, namely a contract for insurance of the liability of members of the Supervisory Board and Executive Committee of PJSC ALROSA and proposals to the General Meeting of Shareholders concerning the adoption of a resolution.
27. On inclusion on the agenda of the General Meeting of Shareholders of PJSC ALROSA of the item On approval of an interested party transaction, namely a supplemental agreement to the effective USD 350 mn loan agreement entered into by PJSC ALROSA and JSC VTB Bank”and proposals to the General Meeting of Shareholders concerning adoption of the resolution.
28. On inclusion on the agenda of the General Meeting of Shareholders of PJSC ALROSA of the item On approval of an interested party transaction, namely a supplemental agreement to the effective USD 250 mn loan agreement entered into by PJSC ALROSA and JSC VTB Bank and proposals to the General Meeting of Shareholders concerning adoption of the resolution.
29. Recommendations to the General Meeting of Shareholders of PJSC ALROSA on distribution of profits based on results of 2014 including the amount of dividends on shares of PJSC ALROSA and the procedure for their payment.
30. On approval of the agenda of the annual General Meeting of Shareholders of PJSC ALROSA.
31. On the convocation of the annual General Meeting of Shareholders of PJSC ALROSA.
32. On approval of the Consolidated Budget of ALROSA Group for 2015.
33. On results of PJSC ALROSA procur-ement activities for 2014.
34. On the taking of positions within governing bodies of other organizations by members of the Executive Committee of PJSC ALROSA.
35. On changing the structure of the Annual Report of PJSC ALROSA.
36. On conducting the annual analysis on the results of establishing a Joint Treasury of PJSC ALROSA and its subsidiaries.
37. On reduction of operating expe-nditures (expenses) by not less than 2-3 percent annually.
38. On approval of the Induction Program for the newly elected members of the Supervisory Board of PJSC ALROSA.
39. On the election of the Chairman, the First Deputy Chairman and the Vice Chairman of the Supervisory Board of PJSC ALROSA.
40. On the Strategic Planning, Auditing, HR and Remunerations Committees of the Supervisory Board of PJSC ALROSA.
41. On approval of the Work Plan of the Supervisory Board of PJSC ALROSA for the 2015-2016 corporate year.
42. Review of the Report on the work of the Internal Audit Department of PJSC ALROSA for 2014.
43. On payments in roubles under new export contracts of PJSC ALROSA.
44. On results of PJSC ALROSA procu-rement activities for 2014.
45. On the initial (maximum) price of audit services in the framework of an open tender for a contract to conduct a mandatory audit of accounting (financial) statements of PJSC ALROSA prepared in accordance with Russian legislation on results of 2016-2018 and substantiation of the initial (maximum) price of audit services in the framework of this open tender.
46. On the initial (maximum) price of audit services in the framework of an open tender for a contract to conduct a mandatory audit of consolidated financial statements of ALROSA Group prepared in accordance with the International Financial Reporting Standards based on results of 2016-2018 and substantiation of the initial (maximum) price of audit services in the framework of this open tender.
47. On approval of the structure and composition of the Annual Report of PJSC ALROSA.
48. On optimization and improvement of expenditure efficiency on charity and sponsorship.
49. On amendments to the Regulations on the Corporate Secretary of PJSC ALROSA.
50. On making amendments to regula-tory documents of PJSC ALROSA due to changing of the Company name.
51. On reforming the residential deve-lopment division of PJSC ALROSA.
52. On reforming the public utility division of PJSC ALROSA.
53. On approval of a new revision of the Regulations on remuneration to the President of PJSC ALROSA.
54. On approval of a new revision of the Regulations on remuneration to members of the Executive Committee of PJSC ALROSA.
55. On approval of internal documents of PJSC ALROSA: the Regulations on internal auditing and the Regulations on risk management of PJSC ALROSA.
56. On the terms and conditions of insurance of the liability of members of the Supervisory Board and Executive Committee of PJSC ALROSA.
57. On approval of the adjusted Consolidated Budget of PJSC ALROSA for 2015.
58. On approval of the Adjusted target values of the Key Performance Indicators of ALROSA Group for 2015.
59. On approval of the Regulations on the quality management system of PJSC ALROSA.
60. On approval of the Regulations on the procedure for development and implementation of the Innovation Development and Technological Upgrade Program of PJSC ALROSA.
61. On approval of the Regulation on increase of investing and operating efficiency and decrease of expenses of PJSC ALROSA.
62. On the gas assets of PJSC ALROSA, namely the 100% stake in CJSC Geotransgaz and 100% interest in the authorized capital of Urengoy Gas Company LLC.
63. On approval of a new revision of the Program for disposal of non-core assets of PJSC ALROSA.
64. On approval of an interested party transaction, namely the agreement on termination of Contract No. 01–04/399 between PJSC ALROSA and the Russian Federation On joint consolidated sale of shares of OJSC Almazny Mir at an auction dated October 14, 2014.
65. On determining the position of PJSC ALROSA on the agenda item of the General Meeting of Shareholders of PJSC Severalmaz On election of the General Director of PJSC Severalmaz.
66. On attraction of a strategic investor in HIDROCHICAPA S.A.R.L.
67. On the General Director of Catoca Ltd. Mining Co. (Republic of Angola), an associated company of PJSC ALROSA.
68. On approval of a donation by PJSC ALROSA to non-profit organization Eastern Economic Forum Fund for the organization and running of the Eastern Economic Forum.
69. On approval of an interested party transaction entered into by PJSC ALROSA and the Republic of Sakha (Yakutia), namely an agreement for donation of real estate.
70. On approval of donation of property to municipal ownership of Oleneksky Evenki National District, Municipal District of Republic of Sakha (Yakutia).
71. On results of procurement activities of PJSC ALROSA (quarterly).
72. On termination of PJSC ALROSA parti-cipation in some organizations.
73. On approval of interested party tran-sactions.

BIOGRAPHICAL DATA OF THE MEMBERS OF THE SUPERVISORY BOARD (AS OF DECEMBER 2015)

ALEKSEEV
Petr Vyacheslavovich

Member of the Supervisory Board since June 2015
Chairman of the Audit Committee of the Supervisory Board since August 31, 2015
Born on May 27, 1981 in Yakutsk.

In 2004, graduated from the Far East Academy of Public Service in Khabarovsk, with a degree in Law, in 2013, the Russian Academy of National Economy and Public Administration under the President of the Russian Federation, with a degree in Public and Municipal Administration.

Previous work experience:
2009-2010 – Head of Section, Depa-rtment for Public and Legal Matters, Administration of the President and the Government of the Republic of Sakha (Yakutia);
2010-2013 – Deputy Head, Head, Depa-rtment for Public and Legal Matters, Administration of the President and the Government of the Republic of Sakha (Yakutia);
2013 – present - General Director of Repu-blican Investment Company OJSC.

Participation in the executive bodies of other organizations:
2012-2013 – Chairman of the Board of Directors of Republican Investment Company OJSC;
2012-2013 – Member of the Board of Directors of Neryuginskaya Poultry Farm;
2012-2014 – Member of the Board of Directors of Almazergienbank (JSC);
2013-2014 – Member of the Board of Directors Yakutsk Airport JSC;
2013 – present – Member of the Board of Directors of Republican Investment Company OJSC;
2014 – present – Chairman of the Board of Directors of Tekhnologiya Bazaltovykh Materialov LLC;
2014 – present – Chairman of the Board of Directors Zavod Bazaltovykh Materialov LLC;
2015 – present – Member of the Board of Directors Optogan CJSC;
2015 – present – Member of the Board of Directors Zheleznye Dorogi Yakutia JSC;
2015 – present – Member of the Board of Directors Yakutia CJSC;

He has no participation interest in PJSC ALROSA.

BARSUKOV
Sergey Vladimirovich

Member of the Supervisory Board since June 2011
Chairman of the Strategic Planning Committee under the Supervisory Board since October 7, 2015
Born on September 02, 1971 in Kaliningrad.

Graduated from the Mozhaysky Red Banner Military Space Engineering Academy in 1993 where he specialized in Mathematical Support for Automated Systems for the Collection and Processing of Information, from the St. Petersburg State University in 2005, with a degree in Public and Municipal Administration.

Previous work experience:
2008-2010 – Assistant to Vice Chairman of the Russian Federation Government – Russian Federation Minister of Finance;
2010 – present – Director of the Financial Policy Department at the Ministry of Finance of the Russian Federation.

Participation in the executive bodies of other organizations:
2012 – present – Member of the Board of Directors of ASB;
2013-2014 – Member of the Supervisory Board of VEB Capital LLC;
2014 – present – Member of the Board of Directors of OJSC NDKO AKG;
2014 – present – Member of the Board of Directors National Payment Card System JSC.

He has no participation interest in PJSC ALROSA.

BORISOV Yegor Afanasyevich
Member of the Supervisory Board since June 2015
First Deputy Chairman of the Supervisory Board of PJSC ALROSA since July 2015
Born on August 15, 1954, in Churapcha village, Churapchinsky District, Yakut ASSR

In 1979, graduated from the Novosibirsk Agricultural Institute, Mechanical Engi-neer. Doctor of Economics.

Previous work experience:
2003-2010 – Chairman of the Government of the Republic of Sakha (Yakutia);
2010-2014 – President of the Republic of Sakha (Yakutia);
2014-present – Head of the Republic of Sakha (Yakutia).

Participation in the executive bodies of other organizations:
2002-2011 – Member of the Board of Directors of OJSC Nizhne-Lenskoe;
2002-2011 – Member of the Supervisory Board of OJSC Almazenergiebank;
2002-2012 – Member of the Supervisory Board of PJSC ALROSA
2006-2011 – Member of the Board of Directors of OJSC Sterkh;
2007-2011 – Member of the Board of Directors of Republican Investment Company.

He has no participation interest in PJSC ALROSA.

GALUSHKA
Alexander Sergeevich

Member of the Supervisory Board since June 2015
Deputy Chairman of the Supervisory Board since July 2015
Born on December 1, 1975 in Klin, Moscow region.

In 1997, graduated from the Moscow State Social University, with a degree in Economics and Labour Sociology, in 1999, graduated from the Intersectoral Institute of Advance Training of the Plekhanov Russian Academy of Economics, in 2001, graduated from the Intersectoral Institute of Advance Training of the Plekhanov Russian Academy of Economics with a degree in Professional Evaluation and Expert Inspection of Proprietary Objects and Rights , in 2011, the Russian Presidential Academy of National Economy and Public Administration, High-Potential Management Personnel Reserve Training Program. Completed an internship at the University of Edinburgh (UK); defended a thesis on Strategy for the Development of Human Resources in the Russian Federation.

Previous work experience:
2001-2011 – Director of the Company, Director, Assessment Expert, Head of the Department of Senior Scientific Consultants and Experts at LLC IOC Center;
2011-2013 – Managing Partner at LLC Key Partner;
2013-2013 – Professor at the Department of Theory and Practice of Public administration of the National Research University – Higher School of Economics;
2013-present – Minister for the Development of the Russian Far East

Participation in the executive bodies of other organizations:
2011-2013 – Member of the Supervisory Board of the Agency for Strategic Initiatives

He has no participation interest in PJSC ALROSA.

GORDON
Maria Vladimirovna

Member of the Supervisory Board since June 2015
Independent Director
Born on February 13, 1974 in Vladikavkaz, Republic of North Ossetia.

From 1991 to 1994, she studied at the Lomonosov Moscow State University at the Faculty of Journalism. In 1994-1995, studied in the University of Wisconsin (USA), Bachelor in Political Science, in 1996-1998, in the Fletcher School of Law and Diplomacy at the TUFTS University (USA), Master of Arts degree in Law and Diplomacy.

Previous work experience:
1998-2010 – Managing Director, Port-folio Manager, Head of Emerging Markets Equity Team, Goldman Sachs, Investments;
2010-2014 – Chief Emerging Markets Equity Portfolio Manager at Pacific Investment Management Co. (PIMCO) for Developing Countries’ Shares, Investments.

She has no participation interest in PJSC ALROSA.

GRIGORIEVA
Evgenia Vassilievna

Member of the Supervisory Board since June 2015
Born on August 19, 1965, in Nyurba village, Leninsky District, Yakut ASSR.

In 1988, graduated from the Riga Civil Aviation Engineers Institute, with a degree in Electronic Computers – Systems Engineer, in 1998, Ammosov Yakutsk State University, with a degree in Law, in 2001, completed Vocational Retraining course at the Far East Academy of Public Service, with a degree in Public and Regional Administration.

Previous work experience:
2007-2011 – First Deputy Minister of Property Relations of the Republic of Sakha (Yakutia);
2011 – present – Minister of Property and Land Relations of the Republic of Sakha (Yakutia).

Participation in the executive bodies of other organizations:
2007-2011 – Member of the Board of Directors of OJSC YakutTISiZ;
2007-2012 – Member of the Board of Directors of OJSC Sakhagiprozem;
2007-2012 – Member of the Board of Directors of OJSC Sakhabult;
2007-2012 – Member of the Board of Directors OJSC Air Company Yakutia;
2010-2011 – Member of the Board of Directors of OJSC Saysary;
2010-2012 – Member of the Board of Directors of OJSC Sakhaneftegazsbyt;
2011-2012 – Member of the Board of Directors of OJSC Polar Airlines;
2011-2012 – Member of the Board of Directors of OJSC Yakutsk Airport;
2011-2012 – Member of the Supervisory Board of PJSC ALROSA

She has no participation interest in PJSC ALROSA.

GRINKO
Oleg Viktorovich

Member of the Supervisory Board since June 2015,
Independent Director
Born on August 13, 1968 in Kherson, Ukraine (USSR).

In 1987, graduated from the Kherson Shipbuilding Technical School, in 1994, the Higher School of KGB – FSB Academy, Russian Federation, Lawyer, with a degree in Germany (Philology and Regional Geography).

Previous work experience:
2001-2014 – Adviser to Director of Federal State Unitary Enterprise Foreign Trade Association Vneshtechnika;
2002 – present – Managing Partner at CJSC Corporation of Technology and Investment;
2004 – present – General Director of LLC SCN;
2006 – present – Advisor to Investment and External Relations Director at PERESVET Invest Group;
2007-2013 – General Director of LLC Public Relations Agency Kitai.ru;
2015 – present – Advisor to General Director of LLC Public Relations Agency Kitai.ru;
2015 – present – Director for Strategic Communications at CJSC Savings and Investments Management Company;
2015 – present – Director of LLC T – Sistema.

Participation in the executive bodies of other organizations:
2004-2015 – Chairman of the Board of Directors of CJSC Savings and Investments Management Company;
2011 – present – Member of the Board of Directors of LLC New Plasma Technologies;
2013 – present – Member of the Board of Directors of OJSC Malaya Energetika;
2014-2015 – Chairman of the Board of Directors at OJSC NIPIGORMASH;
2014-2015 – Member of the Board of Directors of OJSC NTs VOSTNII;
2014-2015 – Member of the Board of Directors of OJSC MNIIEKO TEK;
2014-2015 – Member of the Board of Directors of OJSC NIIGD;
2014-2015 – Member of the Board of Directors of OJSC TSNIIugol;
2014-2015 – Member of the Board of Directors of OJSC IOTT;
2014-2015 – Member of the Board of Directors at OJSC National Mining Research Center – Skochinsky Institute of Mining;
2014-2015 – Member of the Board of Directors of OJSC VNIMI.

He has no participation interest in PJSC ALROSA.

DANCHIKOVA
Galina Innokentievna

Member of the Supervisory Board since June 2015
Born on August 13, 1954, in Khairyuzovka village Balagansk district Irkutsk region.

In 1972, graduated from the Yakutsk Financial Technical School of the Ministry of Finance of the RSFSR, (qualification Financier), in 1985, the All-Union Extra-Mural Law Institute, (qualification Lawyer). In 2001, defended the doctoral thesis Reforming Intergovernmental Fiscal Relations in the Russian Federation (Regional Aspect) at the Russian Academy of National Economy and Public Administration under the President of the Russian Federation. PhD in Economics.

Previous work experience:
2007-2010 – Vice Chair of the Government of the Republic of Sakha (Yakutia);
2010 – present – Chair of the Government of the Republic of Sakha (Yakutia).

Participation in the executive bodies of other organizations:
2009-2012 – Member of the Board of Directors of Sterkh OJSC;
2009-2012 – Member of the Supervisory Board of OJSC Almazenergobank;
2010-2013 – Member of the Board of Directors of OJSC Republican Investment Company.

She has no participation interest in PJSC ALROSA.

ZHARKOV
Andrey Vyacheslavovich

Member of the Supervisory Board since June 2015
Born on February 11, 1973 in Geneva (Switzerland).

In 1995, graduated from the Moscow State Linguistic University, with a degree in Foreign Languages; in 1998, the Moscow State University of Commerce, with a degree in Accounting and Auditing. PhD in Economics.

Previous work experience:
2009-2010 – Chief Commercial Officer, Prioksky Non-Ferrous Metals Plant;
2010-2015 – Deputy Head of Gokhran under the Russian Ministry of Finance of the Russian Federation;
2015 – present – President of PJSC ALROSA.

Participation in the executive bodies of other organizations:
2009-2010 – Member of the Board of Directors of Novosibirsk Refinery Plant;
2010-2015 – Chairman of the Board of Directors at OJSC PO Kristall;
2015 – present – Member of the Board of Directors at OJSC PO Kristall.

He has no participation interest in PJSC ALROSA.

KONDRATYEVA
Valentina Ilyinichna

Member of the Supervisory Board since December 2013
Chairman of the HR and Remunerations Committee under the Supervisory Board since September 8, 2015
Born on March 03, 1955 in Sinsk, Ordzhonikidze District, Yakut ASSR.

She is a graduate of the Ammosov Yakutsk State University with a degree in Mathematics, Mathematician-Lecturer (1977), and of the Far East Institute of Social and Political Science with a degree in Theory of Socio-Political Relations, Political Scientist, Lecturer (1992), as well as the Khabarovsk Institute of National Economy with a degree in Economic and Social Planning, Economist (1994). PhD in Economics.

Previous work experience:
2003-2013 – First Deputy Minister for Economic Development of the Republic of Sakha (Yakutia);
2013 – present – Head, State Autonomous Agency Centre for Strategic Research of the Republic of Sakha (Yakutia).

Participation in the executive bodies of other organizations:
2004-2013 – Member of the Board of Directors OJSC Air Company Yakutia;
2009-2013 – Member of the Board of Directors of OJSC Media Holding Yakutia;
2011-2014 – Member of the Board of Directors of OJSC Republican Investment Company;
2012-2013 – Member of the Board of Directors of OJSC Vodokanal;
2012 – present – Member of the Board of Directors of OJSC South Yakutia Development Corporation;
2012-2013 – Member of the Board of Directors of OJSC Polar Airlines;
2012-2014 – Member of the Board of Directors of OJSC Construction Directorate Berkakit-Tommot-Yakutsk;
2014 – present – Member of the Board of Directors of OJSC Republic of Sakha (Yakutia) Development Corporation.

She has no participation interest in PJSC ALROSA.

NIKIFOROV
Valentin Ivanovich

Member of the Supervisory Board since June 2015
Born on March 14, 1957 in Khorula, Leninsky District, Yakut ASSR.

He is a graduate of the Omsk State Vete-rinary Institute with a degree in Veterinary Science (1979), and the Novosibirsk State Academy of Economy and Management with a degree in Finance and Credit (1999).

Previous work experience:
2009-2012 – Head, Representative Office of Nyurba District in Yakutsk;
2012-2014 – Deputy Head, Municipal Public Institution Administrative Department of Local Self-Government Authorities of the Municipal District ‘Nyurba District’, Republic of Sakha (Yakutia);
2014 – present – Deputy General Dire-ctor, Municipal Budget Institution Business Incubator in Nyurba.

He has no participation interest in PJSC ALROSA.

SILUANOV
Anton Germanovich

Member of the Supervisory Board since June 2015
Chairman of the Supervisory Board of PJSC ALROSA since July 2015
Born on April 12, 1963 in Moscow.

He is a graduate of the Moscow Finance Institute with a degree in Finance and Credit (1985). Doctor of Economics.

Previous work experience:
2005 – present – Deputy Finance Minister of the Russian Federation;
2012 – present – Russian representative in the International Monetary Fund;
2012 – present – Russian representative at the International Bank for Recon-struction and Development;
2012 – present – Russian representative for the Multilateral Investment Guarantee Agency;
2012 – present – Russian plenipotentiary representative on the Board of the Eurasian Development Bank;
2013 – present – Chairman of the Board of Guardians; Research Advisor – Dean of the Finance and Economics Department of the Financial University under the Government of the Russian Federation;
2013 – present – Chairman of the National Financial Council of the Bank of Russia;
2015 – present – Russian representative at the New Development Bank.

Participation in the executive bodies of other organizations:
2012 – present – Member of the Supervisory Board of Autonomous Non-profit Organization Organizing Committee Russia-2018
2012 – present – Member of the Board of Guardians of the Charity Fund for Reconstruction of the Resurrection New Jerusalem Monastery;
2013 – present – Member of the Board of Guardians of the Non-profit Organization of the Development Fund of the Centre for Development and Commercialization of New Technologies;
2014 – present – Member of the Super-visory Board of State Corporation for Assistance to Development, Production and Export of Advanced Technology Industrial Product Rostec;
2015 – present – Member (Executive Director) of the Supervisory Board of PJSC Sberbank of Russia;
2015 – present – Chairman of the Board of Directors of the State Corporation Deposit Insurance Agency.

He has no participation interest in PJSC ALROSA.

ULYANOV
Pavel Vasilievich

Member of the Supervisory Board since June 2015
Independent Director
Born on April 21, 1972 in Moscow.

He is a graduate of the State Academy of Management (1994), IMD Business School (Lausanne, Switzerland), Program for Executive Development (PED) (2004-2005).

Previous work experience:
2007 – present – Director for Energy Business, RUSAL Global Management B.V.

Participation in the executive bodies of other organizations:
2006 – present – Member of the Board of Directors of OJSC Nizhnee Priangarye Development Corporation;
2006 – present – Member of the Board of Directors of Boges Limited and Balp Limited;
2010 – present – Chairman of the Board of Directors – Director B of Forum Muider B.V;
2011 – present – Member of the Board of Directors – Director B of Mega Business & Alliances B.V.;
2013 – present – Member of the Board of Directors – Director B of Mega Business & Partners B.V.

He has no participation interest in PJSC ALROSA.

FEDOROV
Oleg Romanovich

Member of the Supervisory Board since June 2013
Born on April 30, 1968 in Moscow.

He is a graduate of the Lomonosov Moscow State University with a degree in Mathematics, Applied Mathematics (1992).

Previous work experience:
2009-2012 – Head, Department for cooperation with public authorities and companies with public ownership, Department of Investment and Banking on Global Markets, CJSC VTB Capital;
2012-2014 – Adviser to the Head of the Federal Agency for State Property Management.

Participation in the executive bodies of other organizations:
2003-2010 – Member of the Board of Directors of OJSC Volgatelecom;
2004-2010 – Member of the Board of Directors of the Investor Protection Association;
2009-2011 – Member of the Board of Directors of OJSC MOEK;
2013-2015 – Member of the Board of Directors of International Airport Irkutsk;
2013 – present – Member of the Board of Directors of OJSC International Airport Vnukovo;
2013 – present – Member of the Board of Directors of OJSC Vnukovo Airport;
2014 – present – Member of the Board of Directors of OJSC Rosinfocominvest;
2015 – present – Member of the Board of Directors of PJSC Rosseti;

He has no participation interest in PJSC ALROSA.

CHEKUNKOV
Alexey Olegovich

Member of the Supervisory Board since June 2015
Born on October 3, 1980 in Minsk.

He is a graduate of the Moscow State Insti-tute of International Relations, department of International Economic Relations (2001), Bachelor in Economics.

Previous work experience:
2006-2009 – Founder and Managing Director, United Gold Company (Alfa Group);
2011-2013 – Director, Member of Executive Board and Investment Committee, Russian Direct Investment Fund LLC RDIF;
2014 – present – Director General, Far East and Baikal Region Development Fund.

Participation in the executive bodies of other organizations:
2015-2015 – Member of the Board of Directors of OJSC Republic of Khabarovsk Krai Development Corporation;
2015 – present – Member of the Supervisory Board of Non-Commercial Organization Far East Development Fund;
2015 – present – Member of the Supervisory Board of Autonomous Non-profit Organization Far East Human Resource Development Agency.

He has no participation interest in PJSC ALROSA.

COMMITTEES UNDER THE SUPERVISORY BOARD

The Regulations on the Audit Committee, the Strategic Planning Committee and the Human Resources and Remunerations Committee under the Supervisory Board of PJSC ALROSA are approved in the new version by decision of the Supervisory Board on July 14, 2015 (Minutes No. А01/233-ПР-НС) (Regulations on the Committees). Any Member of the Committee, including the Chairman, can be elected a member of more than two committees under the Supervisory Board.

AUDIT COMMITTEE

The Audit Committee was established on April 20, 2010 to improve the efficiency and quality of work of the Supervisory Board through the fostering of open communication with the Company’s auditors, Auditing Committee, divisions, representative offices and services by way of preliminary consideration and development of recommendations for the Supervisory Board relating to the Committee’s competence in the following areas:
– risks relating to the completeness of the information disclosed
– financial statements;
– external independent audit, internal audit;
– internal control procedures.

The Committee is comprised of the members of the Supervisory Board, who are Independent Directors and have professional experience in the fields of internal control, audit, finance, accounting and management of financial institutions. In accordance with the Regulations on the Audit Committee under the Supervisory Board of PJSC ALROSA, there are 5 members of the established Committee.

As of December 31, 2015; five members of the Supervisory Board were members of the Audit Committee one of whom is an Independent Director.

Participation in the work of the Audit Committee
No. Surname and initials TOTAL meetings voting in absentia
Members of the Supervisory Board that left the Supervisory Board on 25.06.2015:
1 S. K. Dubinin (until 25.06.2015) 4 1 3
2 N. E. Kononova (until 25.06.2015) 4 1 3
3 I. A. Lozhevsky (until 25.06.2015) 4 1 3
4 D. S. Morozov (until 25.06.2015) 4 1 of them 1 is EiW* 3
Members of the Supervisory Board that were members of the Supervisory Board throughout 2015
5 S. V. Barsukov 7 4 of them 1 is EiW* 3
Members of the Supervisory Board that were elected to the Supervisory Board on 25.06.2015:
6 P. V. Alekseev (since 25.06.2015) 3 3 0
7 M. V. Gordon (Independent Director) (since 25.06.2015) 3 3 0
8 V. I. Nikiforov (since 25.06.2015) 3 3 0
9 A. O. Chekunkov (since 25.06.2015) 3 3 of them 3 are EiWs 0
*EiW – expressed in writing

MEETINGS (ABSENT VOTING) OF THE AUDIT COMMITTEE

In 2015, there were 4 meetings and 3 absent voters from the Audit Committee:
1. 19.02.2015, minutes No. 35 (absent from voting);
2. 06.03.2015, minutes No. 36 (absent from voting);
3. 19.03.2015, minutes No. 37 (absent from voting);
4. 22.04.2015, minutes No. 38 (meeting);
5. 31.08.2015, minutes No. 39 (meeting);
6. 19.10.2015, minutes No. 40 (meeting);
7. 21.12.2015, minutes No. 41 (meeting).

In 2015, the Audit Committee under the Supervisory Board of the Company examined 44 issues, of which the following are outlined as key:
1. The issue relating to the approval of the Work Plan of the Internal Audit Department of PJSC ALROSA for 2015.
2. The Work Plan of the Audit Committee under the Supervisory Board of PJSC ALROSA for 2014-2015 corporate year.
3. Assessment of the Report into the work of the Internal Audit Department of PJSC ALROSA for 2014.
4. The procedure for preparation of materials for a meeting (of those absent from voting) of the Supervisory Board of PJSC ALROSA on approval of related-party transactions.
5. Ensuring Russian Accounting standards are fully met by the auditor of PJSC ALROSA.
6. Ensuring the auditor of PJSC ALROSA conducts a mandatory audit of consolidated financial statements of the ALROSA Group in accordance with the International Financial Reporting Standards.
7. The preliminary approval of the Annual Report of PJSC ALROSA for 2014.
8. The annual accounting (financial) reporting including the Financial Performance Report of PJSC ALROSA for 2014.
9. On the consolidated financial reporting of PJSC ALROSA prepared in accordance with IFRS for 2014.
10. Recommendations to the General Meeting of Shareholders of PJSC ALROSA on distribution of profits based on results of 2014 including the amount of dividends on shares of PJSC ALROSA and the procedure for their payment.
11. Approval of the Consolidated Budget of the ALROSA Group for 2015.
12. Election of Chairman of the Audit Committee of the Supervisory Board of PJSC ALROSA.
13. Approval of the Work Plan of the Audit Committee under the Supervisory Board of PJSC ALROSA for 2015-2016 corporate year.
14. The initial (maximum) price of audit services in the framework of an open tender for a contract to conduct a mandatory audit of accounting (financial) statements of PJSC ALROSA prepared in accordance with the Russian legislation on results of 2016-2018 and substantiation of the initial (maximum) price of audit services in the framework of this open tender.
15. The initial (maximum) price of audit services in the framework of an open tender for a contract to conduct a mandatory audit of consolidated financial statements of ALROSA Group prepared in accordance with the International Financial Reporting Standards based on results of 2016-2018 and substantiation of the initial (maximum) price of audit services in the framework of this open tender.
16. The approval of internal documents of PJSC ALROSA.
17. The information on the procurement list, including those performed not on a competitive basis and information on the use of PJSC ALROSA’s own electronic trading platform.
18. Approval of the Work Plan of the Internal Audit Department of PJSC ALROSA for 2016.
19. Approval of amendments to the Regulations for the procedure of disbursement of loans by PJSC ALROSA and acquisition of financial instruments of the legal entities.
20. Approval of an interested party transaction, namely the agreement on termination of Contract No. 01-04/399 between PJSC ALROSA and the Russian Federation On joint consolidated sale of shares of OJSC Almazny Mir at auction dated October 14, 2014.
21. The plan for auditing of the consolidated financial reporting of PJSC ALROSA prepared in accordance with IFRS for 2015.
22. Approval of interested party tran-sactions.

RESULTS OF THE ASSESSMENT BY THE AUDIT COMMITTEE OF THE EFFICIENCY OF THE EXTERNAL AUDIT PROCESS

In 2015, the audit committee addressed the following issues relating to the external audit of the company:

Issue Outcome Fulfilment
The approval of the auditor of PJSC ALROSA according to the Russian Accounting Standards - 19.03.2015, Minutes No. 37 The Audit Committee approved the proposal on the recommendation by the Supervisory Board to the General Meeting of Shareholders to approve Limited Liability Company Financial and Accounting Advisors as the Company’s auditor to conduct mandatory annual audit of accounting (financial) reports prepared in acco-rdance with the Russian laws based on the results of 2015. On 25.06.2015, the General Meeting of Shareholders of the Company approved Limited Liability Company Financial and Accounting Advisors as an auditor to conduct mandatory annual audit of accounting (financial) reports prepared in accordance with the Russian laws based on the results of 2015 in Minutes No. 33.
The approval of the PJSC ALROSA auditor to conduct a mandatory audit of consolidated financial statements of the ALROSA Group in accordance with the International Financial Reporting Standards - 19.03.2015, Minutes No. 37. The Audit Committee approved the proposal on the recommendation by the Supervisory Board to the General Meeting of Shareholders to approve Closed Joint-Stock Company PriceWaterhouseCoopers Audit as the Company’s auditor to conduct mandatory audit of consolidated financial reports of ALROSA Group prepared in accordance with the International Financial Reporting Stan-dards on the results of 2015. The appointment on 25.06.2015, at the Annual General Meeting of Shareholders, (Minutes No. 33), of Closed Joint-Stock Company Price-WaterhouseCoopers Audit as the Company’s auditor to conduct the mandatory audit of consolidated financial reports of the ALROSA Group prepared in accordance with the International Financial Reporting Standards on the results of 2015.
The annual accounting (financial) reporting including the Financial Performance Report of PJSC ALROSA for 2014 - 22.04.2015, Minutes No. 38 After having reviewed the supplied documentation, including an independent auditor’s report, the Audit Committee assured the Supervisory Board that it was possible to submit the annual accounting reports for approval, including the report on the financial results of PJSC ALROSA to the General Meeting of Shareholders for review, inviting the General Meeting of Shareholders to approve it. On 25.06.2015, the Company’s Annual General Meeting of Shareholders approved the accounting reports, including the profit and loss account of PJSC ALROSA for 2014 in Minutes No. 33.
On consolidation of financial reporting of PJSC ALROSA prepared in accordance with IFRS for 2014 - 22.04.2015, Minutes No. 38. Based on the review of the submitted materials, including the independent auditor’s report, the Audit Committee took note of the results of the Company’s consolidated financial reports for 2014, prepared in accordance with the International Financial Reporting Stan-dards into account.
On the plan for the audit of consolidated financial reporting of PJSC ALROSA, prepared in accordance with IFRS for 2015 - 21.12.2015, Minutes No. 41. After having considered the materials provided by the independent auditor, the Audit Committee approved the Plan for the Audit of the Consolidated Financial Reports of PJSC ALROSA for 2015, prepared in accordance with the International Financial Reporting Standards.

HUMAN RESOURCES AND REMUNERATIONS COMMITTEE

The Human Resources and Remunerations Committee was established on April 20, 2010 to improve the efficiency and quality of the Supervisory Board’s work through preliminary consideration and development of recommendations for the Supervisory Board in relation to the following issues:
– determination of key areas of the Company’s HR policy;
– attraction of skilled experts to the Company management and creation of the required incentives for their successful work;
– determination of the number and composition of the Company’s Executive Committee.

The Committee is comprised of 5 members of the Supervisory Board, which are independent (non-executive) directors.

As of December 31, 2015, five non-executive members of the Supervisory Board were members of the HR and Remunerations Committee, including two Independent Directors.

Participation in the work of the Human Resources and Remunerations Committee
No. Surname and initials TOTAL meetings voting in absentia
Members of the Supervisory Board that left the Supervisory Board on 25.06.2015:
1 D. P. Zakharov (until 25.06.2015) 5 4 of them 1 is EiW* 1
2 I. A. Lozhevsky (until 25.06.2015) 5 4 1
3 D. S. Morozov (until 25.06.2015) 5 4 of them 1 is EiW* 1
Members of the Supervisory Board that were members of the Supervisory Board throughout 2015
4 V. I. Kondratyeva (Chairman) 8 6 2
5 O. R. Fedorov 9 7 of them 1 is EiW 2
Members of the Supervisory Board that were elected to the Supervisory Board on 25.06.2015:
6 P. V. Ulyanov (Independent Director) (since 25.06.2015) 4 3 1
7 O. V. Grinko (Independent Director) (since 25.06.2015) 4 3 1
8 E. V. Grigorieva (since 25.06.2015) 4 3 1
*EiW – expressed in writing

MEETINGS (ABSENT VOTING) OF THE HUMAN RESOURCES AND REMUNERATIONS COMMITTEE

In 2015, 7 meetings and 2 absent voting of the Human Resources and Remunerations Committee were held:
1. - 15.01.2015, minutes No. 20 (meeting);
2. - 18.03.2015, minutes No. 21 (meeting);
3. - 14.04.2015, minutes No. 22 (meeting);
4. - 22.05.2015, minutes No. 23 (meeting);
5. - 22.06.2015, minutes No. 24 (absent voting);
6. - 08.09.2015, minutes No. 25 (meeting);
7. - 09.10.2015, minutes No. 26 (absent voting);
8. - 22.10.2015, minutes No. 27 (meeting);
9. - 04.12.2015, minutes No. 28 (meeting);

In 2015, the Human Resources and Remunerations Committee under the Supervisory Board of the Company considered 37 matters, including following key matters:
1. On election of the President of PJSC ALROSA.
2. On compliance of PJSC ALROSA with the listing rules.
3. The plan for implementation of the corporate governance code within the competence of the Human Resources and Remunerations Committee under the Supervisory Board of PJSC ALROSA.
4. On overlapping positions of members of the Board of PJSC ALROSA in other organizations’ executive bodies.
5. On liability insurance of the members of managing bodies of PJSC ALROSA.
6. On assessment of the work of Members of the Supervisory Board of PJSC ALROSA in 2014-2015 corporate year and proposal to the General Meeting of Shareholders to pay remuneration for the above period.
7. On assessment of the work of Members of the Auditing Committee of PJSC ALROSA in 2014-2015 corporate year and proposal to the General Meeting of Shareholders to pay remuneration for the above period.
8. On inclusion on the agenda of the General Meeting of Shareholders of PJSC ALROSA of the item On approval of Regulations on Remunerations and Compensations Payable to Members of the PJSC ALROSA Auditing Committee.
9. On approval of a voting bulletin on the annual General Meeting of Shareholders of PJSC ALROSA for the agenda item of the annual General Meeting of Shareholders of PJSC ALROSA On Payment of Remuneration for the Work as Part of the Supervisory Board to the Members of the Supervisory Board, Except for Governmental Officials, in the Amount Established in the Internal Documents of PJSC ALROSA.
10. On the fulfilment of instructions and decisions of the Supervisory Board of PJSC ALROSA for 2014-2015 corporate year relating to the matters concerning the key tasks of the HR and Remunerations Committee under the Supervisory Board of PJSC ALROSA.
11. Determination of the Company’s position in relation to the agenda items of the General Meeting of Shareholders of PJSC Severalmaz.
12. On the General Director of Catoca Ltd. Mining Co. (Republic of Angola) controlled by PJSC ALROSA.
13. On the Work plan of the HR and Remunerations Committee under the Supervisory Board of PJSC ALROSA for 2014-2015 corporate year.
14. On approval of the Induction Program for newly elected members of the Supervisory Board of PJSC ALROSA.
15. On election of Chairman of the HR and Remunerations Committee of the Supervisory Board of PJSC ALROSA.
16. On approval of the Work plan of the HR and Remunerations Committee under the Supervisory Board of PJSC ALROSA for 2015-2016 corporate year.
17. On approval of the Regulation on Remuneration to the President of PJSC ALROSA.
18. On approval of the Regulation on Remuneration to the Members of the Executive Committee of PJSC ALROSA.
19. On amendments to the Regulations on the Corporate Secretary of PJSC ALROSA.
20. On the review of the reports on achievement of quarterly key indicators on the efficiency of PJSC ALROSA activities for 1HY 2015.
21. On the nomination of candidates to the Supervisory Board and Auditing Committee of PJSC ALROSA for 2016-2017 corporate year.
22. On approval of the amended Regu-lations on remuneration to the President of PJSC ALROSA.
23. On approval of the amended Regu-lations on remuneration to Members of the PJSC ALROSA Executive Committee.
24. On confirmation of the compliance of independent Members of the Supervisory Board of PJSC ALROSA with the independent criteria established by the Listing Rules of CJSC FB MMVB.
25. On the terms and conditions of liability insurance for members of the Supervisory Board and Executive Committee of PJSC ALROSA.
26. On assess ment of the level of fulfilment of target tasks and on assessment of the level of fulfilment of functional responsibilities by the Corporate Secretary of PJSC ALROSA (quarterly).
27. On changes in the composition of the Board of PJSC ALROSA.
28. On the reports on the achievement of quarterly key indicators of the efficiency of PJSC ALROSA activities over 9 months in 2015.
29. On amendments to the Regulations on remuneration to members of the Supervisory Board of PJSC ALROSA.

STRATEGIC PLANNING COMMITTEE

The Strategic Planning Committee was established on April 20, 2010, to improve the efficiency and quality of the Supervisory Board’s work through preliminary consideration and development of recommendations for the Supervisory Board in relation to the following issues:
– determination of priority areas of the Company’s activities;
– adoption of resolutions for submission to the General Meeting of Shareholders by the Supervisory Board relating to approval of major transactions and related party transactions;
– adoption of decisions for submission by the Supervisory Board to the General Meeting of Shareholders on issues relating to participation of the Company in holding companies, financial and industrial groups, associations and other unions of commercial organizations;
– management of securities, shares owned by the Company;
– management of the Company’s property;
– establishing of the Company’s divisions, opening of representative offices and their liquidation.

As of 31.12.2015, the Members of the Strategic Planning Committee include nine Members of the Supervisory Board.

Participation in the work of the Strategic Planning Committee
No. Surname and initials TOTAL meetings voting in absentia
Members of the Supervisory Board that were members of the Supervisory Board in 2015
1 S. V. Barsukov (Chairman) 7 5 2
2 Ye. A. Borisov * 4 3 of them 1 are EiWs** 1
3 G. I. Danchikova * 7 5 2
4 E. V. Grigorieva * 7 5 2
5 O. R. Fedorov 7 5 of them 1 are EiWs** 2
6 V. I. Kondratyeva 4 4 0
Members of the Supervisory Board that were elected to the Supervisory Board on 25.06.2015:
7 P. V. Alekseev (since 25.06.2015) 4 4 0
8 O. V. Grinko (Independent Director) (since 25.06.2015) 4 4 of them 1 are EiWs**
9 A. V. Zharkov (Executive Director) (since 25.06.2015) 4 4 0
10 M. V. Gordon (Independent Director) (since 25.06.2015) 3 3 of them 1 are EiWs** 0
* Ye. A. Borisov, G. I. Danchikova and E. V. Grigorieva were Members of the Strategic Planning Committee in 2014-2015 while being Non-Members of the Supervisory Board.
** EiW – expressed in writing

MEETINGS (ABSENTEE VOTING) OF THE STRATEGIC PLANNING COMMITTEE

In 2015, 5 meetings and 2 absentee votes of the Strategic Planning Committee were held:
1. - 20.03.2015, minutes No. 20 (meeting);
2. - 13.04.2015, minutes No. 21 (absentee voting);
3. - 22.05.2015, minutes No. 22 (absentee voting);
4. - 07.09.2015, minutes No. 23 (meeting);
5. - 09.11.2015, minutes No. 24 (meeting);
6. - 18.11.2015, minutes No. 25 (meeting);
7. - 18.12.2015, minutes No. 26 (meeting);

In 2015, the Strategic Planning Committee under the Supervisory Board examined 31 issues, of which the following were key:
1. The inclusion onto the agenda of the General Meeting of Shareholders of PJSC ALROSA of the item On the approval of an interested party transaction, namely a supplemental agreement to the effective USD 350 million loan agreement entered into by PJSC ALROSA and JSC VTB and of proposals to the General Meeting of Shareholders on which a decision is required.
2. The inclusion onto the agenda of the General Meeting of Shareholders of PJSC ALROSA of the item On the approval of an interested party transaction, namely a supplemental agreement to the effective USD 250 million loan agreement entered into by PJSC ALROSA and JSC VTB Bank and of proposals to the General Meeting of Shareholders on which a decision is required.
3. On approval of a new version of the Regulations on Procurement of PJSC ALROSA.
4. Approval of the Registrar of the conditions of his agreement with PJSC ALROSA.
5. On termination of the comprehensive servicing agreement for the register of holders of inscribed securities entered into by PJSC ALROSA and OJSC Republican Special Registrar Yakutia Fund Centre.
6. The inclusion onto the agenda of the General Meeting of Shareholders of PJSC ALROSA of the item On approval of Regulations on Remunerations and Compensations Payable to Members of the PJSC ALROSA Auditing Committee.
7. Inclusion on the agenda of the Annual General Meeting of Shareholders of PJSC ALROSA of the item On approval of Regulations on the Auditing Committee of PJSC ALROSA.
8. On participation of PJSC ALROSA in the Diamond Producers Association.
9. On proposals to the annual General Meeting of Shareholders of PJSC ALROSA to adopt a resolution on approval of the Charter of PJSC ALROSA, the Regulations on the General Meeting of Shareholders of PJSC ALROSA, the Regulations on the Supervisory Board of PJSC ALROSA and the Regulations on the Executive Committee of PJSC ALROSA.
10. On election of Chairman, Deputy Chairman of the Strategic Planning Committee under the Supervisory Board of PJSC ALROSA.
11. On approval of the Work Plan of the Strategic Planning Committee of the Supervisory Board of PJSC ALROSA for 2015-2016.
12. On approval of proposals based on the 2014 audit results for implementation of the PJSC ALROSA Program for Long-Term Development up to 2023.
13. On reforming the residential deve-lopment division of PJSC ALROSA.
14. On reforming the public utility division of PJSC ALROSA.
15. On approval of the Regulations on the quality management system of PJSC ALROSA.
16. On approval of the Regulations on the quality management system of PJSC ALROSA.
17. On approval of the Regulations on the planning and execution of the Innovative Development and Technological Modernization Program of PJSC ALROSA.
18. On approval of the clarified consolidated budget of PJSC ALROSA and clarified key performance indicators for 2015.
19. On approval of the adjusted Consolidated Budget of PJSC ALROSA for 2015.
20. On approval of Clarified target values of KPIs of ALROSA Group for 2015.
21. On approval of the Order for an increase in investing and operating efficiency and a decrease in the expenses of PJSC ALROSA.
22. On approval of the Information Policy of PJSC ALROSA.
23. On approval of the Consolidated Budget of PJSC ALROSA for 2016.
24. On amendments to the Program for Alienation of non-core assets of PJSC ALROSA.
25. On approval of transactions with interested parties.
26. On termination of participation in other entities.

ROLE OF THE SUPERVISORY BOARD IN THE ORGANIZATION OF THE EFFICIENT RISK

In 2015, the Supervisory Board developed and approved regulatory documents relating to corporate governance:
– Regulations on internal audit of PJSC ALROSA;
– Regulations on risk management of PJSC ALROSA.

The Regulations on the internal audit of the Company defines the goal, tasks, authorities and responsibilities of the internal audit management, governs stakeholder engagement and assessment procedure of activities relating to the internal audit.

The new edition of the Provisions for risk management clarifies the procedure for preparation and approval of documents, terminology, introduces the concept of a preferred risk, reflects the assessment of the efficiency of the risk management system, and clarifies the function and nature of interaction between participants in the risk management process.

REMUNERATION TO THE MEMBERS OF THE SUPERVISORY BOARD

In accordance with the decision taken at the annual General Meeting of Shareholders of PJSC ALROSA, remuneration to the Members of the Supervisory Board was accrued and paid based on the results of the 2014-2015 corporate year, calculated in accordance with the Regulations on the Remuneration to the Members of the Supervisory Board of PJSC ALROSA dated June 25, 2015 (Minutes No. 33).

No. Surname and initials Basic component roubles Remuneration for participa tion in the work of the Supervisory Board, Premium for the Chairmanship in the Committees or Chairmanship in the Supervisory Board Total amount of the remuneration, roubles
% RUB
1 F. B. Andreev 4,000,000 3,272,727 20% 654,545 3,927,273
2 S. K. Dubinin 4,000,000 3,636,364 20% 727,273 4,363,636
3 D. P. Zakharov 4,000,000 4,000,000 4,000,000
4 V. I. Kondratyeva 4,000,000 4,000,000 4,000,000
5 N. E. Kononova 4,000,000 3,818,182 3,818,182
6 I. A. Lozhevsky 4,000,000 4,000,000 4,000,000
7 O. R. Fedorov 4,000,000 2,909,091 20% 581,818 3,490,909
8 D. S. Morozov 4,000,000 3,636,364 3,636,364
9 I. A. Yuzhanov 4,000,000 4,000,000 50% 2,000,000 6,000,000
10 A. V. Sharonov 4,000,000 3,454,545 3,454,545
TOTAL 40,690,909

In 2015, the total Company remuneration to the Members of the Company’s Supervisory Board was 40,690,909 RUB (in 2014 – 28,300,000 RUB). The above remunerations are paid to the members of the Supervisory Board of the Company in full.

In 2015, the Company and legal entities from the ALROSA Group did not grant any loans to Members of the Supervisory Board.

Remunerations to the Members of the Supervisory Board are paid out of the Company’s net profit. If there is no Company net profit, the remuneration to the Members of the Supervisory Board is nether determined, nor paid.

The remuneration (basic and premium) is not paid to:
– The Chairman or members of the Supervisory Board who hold state or municipal employee status, in accordance with the current legislation of the Russian Federation;
– The Chairman or members of the Supervisory Board, for which the legislation stipulates the restriction or prohibition of receiving any payments from commercial organizations;
– Members of the Supervisory Board, who are at the same time the sole executive body or a member of the collegial executive body of the Company.

The amount of the remuneration for the participation in the work of the Supervisory Board payable to each Member of the Supervisory Board is calculated based on the total number of meetings of the Supervisory Board for the past corporate year held as of March 31 of the current year and the number of meetings attended by the Member of the Supervisory Board.

The basic component amount of remuneration is determined based on the Company’s revenue for the relevant financial year. In 2015, the basic component totalled to 4,000,000 RUB.

Amount of the revenue, RUB bn Basic component, RUB
more than 200 6,000,000
more than 30 4,000,000
more than 10 2,000,000

In addition to the basic remuneration to the members of the Supervisory Board, there are premiums for the fulfilment of additional responsibilities associated with the chairmanship of the Supervisory Board and Committees hereunder as follows:
– 50% of the basic remuneration for chairmanship of the Supervisory Board;
– 20% of the basic remuneration for the chairmanship of committees under the Supervisory Board.

The above premiums shall not be paid if:
– during the corporate year, less than three meetings of a Committee under the Supervisory Board were held;
– a Member of the Supervisory Board participated in less than 50% meetings (in presentia and in absentia voting) of a committee under the Supervisory Board held in a corporate year or during working hours in a corporate year (for newly elected (out-going) Members of the Supervisory Board).

Travel expenses and accommodation relating to the fulfilment by the Members of the Supervisory Board of the duties required of them are also compensated.

PRESIDENT AND EXECUTIVE COMMITTEE

Management of the Company is carried out by the President (sole executive body) and the Executive Committee (collegial executive body).

The scope of duties of the Company’s executive bodies includes all current activity management issues, except for the issues within the exclusive competence of the General Meeting of Shareholders and the Supervisory Board.

The President and Executive Committee coordinate the decision-making of the General Meeting of Shareholders and Supervisory Board and reporting on it hereafter. As of 31.12.2015, the Executive Committee of the Company consisted of 13 people.

BIOGRAPHICAL DATA OF THE MEMBERS OF THE EXECUTIVE COMMITTEE (AS OF DECEMBER 31, 2015)

ZHARKOV
Andrey Vyacheslavovich

President of PJSC ALROSA Chairman of the Board of the Company
Date of appointment: April 24, 2015

Born on February 11, 1973 in Geneva (Switzerland).

In 1995, he graduated from the Moscow State Linguistic University, with a degree in Foreign Languages; in 1998, he obtained a degree in Accounting and Auditing from the Moscow State University of Commerce. PhD in Economics.

Labour activities over the last 5 years:
2010-2015 - Deputy Head of Gokhran under the Ministry of Finance of the Russian Federation;
2015 - present - President of PJSC ALROSA.

Employment contract expires on: 23.04.2018

He has no participation interest in PJSC ALROSA.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

DEMYANOV
Ivan Kirillovich

Vice President of PJSC ALROSA. Supervises social and personnel policies of the Company.
Date of appointment: October 26, 1995

Born on June 5, 1942 in Ilovka, Belgorod Region.

In 1982, he graduated from the Higher Party School of Khabarovsk.

Labour activities over the last 5 years:
1995 – present – Vice President of PJSC ALROSA.

Participation interest in PJSC ALROSA – 0.0007%.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

KULICHIK
Igor Mikhailovich

Vice President and CFO of PJSC ALROSA
Date of appointment: August 10, 2009

Born in Brest, Belorussia, on April 5, 1967.

In 1990, graduated from Ordzhonikidze Moscow Aviation Institute with a degree in Mechanical Engineering, in 1992, from the Zhukovsky Air Force Engineering Academy with the title of Engineer Mathematician.

Labour activities over the last 5 years:
2009 – present – Vice President and CFO of PJSC ALROSA

Employment contract expires on: 09.08.2017

He has no participation interest in PJSC ALROSA.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

MATVEEV
Alexander Grigoryevich

Head of Legal Department of PJSC ALROSA.
Date of appointment: November 23, 2009

Born on August 3, 1976 in Omsk.

In 1998 graduated from Omsk State University with a degree in Jurisprudence.

Labour activities over the last 5 years:
2009 – present – Head of PJSC ALROSA Legal Department.

He has no participation interest in PJSC ALROSA.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

MAKHRACHEV
Alexander Fedorovich

Director of Udachny MPD of PJSC ALROSA
Date of appointment: March 18, 2008

Born at the Aleisk State farm, the Aleisk District of the Altai Region, on October 31, 1956.

A graduate of the Moscow Steel & Alloys Institute (graduated in 1979) where he qualified as a metallurgical engineer. In 1996, he took a refresher training course under the program General management of a mining enterprise in free market conditions, at the Russian Federation State Academy of National Economy. In 2007, he graduated from the Moscow State University of Mining, where he qualified as a mining engineer.

Labour activities over the last 5 years:
2008 – present – Director of Udachny MPD of PJSC ALROSA.

Participation interest in PJSC ALROSA – 0.0029%.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

OKOEMOV
Yury Konstantinovich

Vice President of PJSC ALROSA. Supervises sales policies of the Company.
Date of appointment: August 6, 2009

Brief biographical data:

Born on January 1, 1962, in the village of Kazachye, Verkhoyansk Region, Yakutia.

Graduated from a physics and mathematical school in the village of Verkhneviluisk in the Yakut ASSR in 1979. In 1985, he graduated from the Moscow State Institute of Steel and Alloys, with a degree in Metal Physics, in 1996, from the Russian Presidential Academy of National Economy and Public Administration with the qualification of Executive Manager.

Labour activities over the last 5 years:
2009 – present – Vice President of PJSC ALROSA.

Employment contract expires on: 05.08.2017

Participation interest in PJSC ALROSA – 0.0073%.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

PUSHKIN
Sergey Nikolaevich

Vice President of PJSC ALROSA. Oversees the activities of subsidiaries and affiliates, as well as the development of the Company’s projects in Africa.
Date of appointment: January 25, 2010

Born on February 26, 1967, in Bolshoe Mamleevo village, Gorky region. He is a graduate of the Moscow Institute of Physics and Technology (Aerodynamics & Flying Engineering Department) (graduation year 1990), and of the Air Force Engineering Academy (Aircraft and Engines Department) (graduation year 1992).

Labour activities over the last 5 years:
2010 – present – Vice President of PJSC ALROSA.

Employment contract expires on: 24.01.2018

He has no participation interest in PJSC ALROSA.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

RYASHCHIN
Ilya Petrovich

First Vice President of PJSC ALROSA. Oversees the financial and economic affairs of the Company.
Date of appointment: June 9, 2012

Born on May 23, 1973 in Gorky.

In 1996, graduated from the Lobachevsky State University of Nizhny Novgorod, with a degree in Credit and Finance.

Labour activities over the last 5 years:
2003-2012 - Deputy Head and First Deputy Head of the Financial Management Department and the Corporate Finance Department and Head of the Planning and Budgeting Department at OJSC Russian Railways.
2012 – present – First Vice President of PJSC ALROSA;

From 24.10.2014 to 23.04.2015, he was President of PJSC ALROSA.

Employment contract expires on: 08.06.2016

He has no participation interest in PJSC ALROSA.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

SANATULOV
Ravil Shamilyevich

Director of Aikhal MPD of PJSC ALROSA.
Date of appointment: September 27, 2007

Born in Chulman, the Neryungri District, Yakutia, on May 22, 1963.

He graduated from the Irkutsk Polytechnic Institute in 1986 with a degree in mining engineering, and specialized in the technology and integrated mechanized development of mineral fields.

Labour activities over the last 5 years:
2007 – present – Appointed Director of ALROSA’s Aikhal Mining and Processing Division.

He has no participation interest in PJSC ALROSA.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

SEROV
Valery Petrovich

Chief Geologist of PJSC ALROSA.
Date of appointment: February 1, 2011

Born in Kalush, the Ivano-Frankovsk Region of Ukraine, on July 18, 1957.

He graduated from the Moscow Geological Prospecting Institute in 1980 with a degree in geological surveying, prospecting and exploration of mineral fields.

Labour activities over the last 5 years:
2011 – present – Chief Geologist of PJSC ALROSA.

Employment contract expires on: 31.07.2016

He has no participation interest in PJSC ALROSA.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

SOBOLEV
Igor Vitalyevich

First Vice President and Executive Director of PJSC ALROSA
Date of appointment: January 1, 2012

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

He graduated from the Tula State Technical University in 1993 with a degree in mining construction engineering, specialized in Mine and underground construction.

Labour activities over the last 5 years:
2007-2011 - Director of Capital Construction Division of PJSC ALROSA;
2012 - present - First Vice President and Executive Director of PJSC ALROSA

Employment contract expires on: 31.12.2016

Participation interest in PJSC ALROSA – 0.002%.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

CHAADAEV
Alexander Sergeevich

Vice President for Innovation, director of Yakutniproalmaz institute
Date of appointment: May 28, 2012

Born in Yakutsk, Republic of Sakha (Yakutia), on September 8, 1960.

He graduated from the Tyumen Civil Engineering Institute with a degree in Civil Engineering in 1982, and specialized in Industrial and Civil Construction Engineering. In 2001, he graduated from the Russian Federation State Finance Academy with a degree in Credit and Finance. PhD in Economics.

Labour activities over the last 5 years:
2007-2012 - Director of the ALROSA YakutNiproAlmaz Research Institute of PJSC ALROSA;
2012 – present – Vice President for Innovation and Director of Yakutniproalmaz Research Institute of PJSC ALROSA.

Employment contract expires on: 27.05.2017

Participation interest in PJSC ALROSA – 0.0004%.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

CHEREPNOV
Andrey Nikolaevich

Chief Engineer of PJSC ALROSA.
Date of appointment: June 29, 2015

He is a graduate of the Irkutsk Polytechnic Institute with a degree in Mine Surveying, Mining Engineer-Surveyor (1988).

Labour activities over the last 5 years:
2001-2012 - Deputy Chief Surveyor, Chief Surveyor of PJSC ALROSA;
2012-2015 - Deputy Chief Engineer for Production of PJSC ALROSA;
2015 – present – Acting Chief Engineer, Chief Engineer of PJSC ALROSA.

Employment contract expires on: 08.06.2016

He has no participation interest in PJSC ALROSA.

Did not enter into transactions relating to purchase/disposal of shares in 2015.

REMUNERATION PAID TO THE EXECUTIVE COMMITTEE

The Members of the Executive Committee are entitled to a salary, premiums, voluntary medical insurance, compensation for the fulfilment of their responsibilities as Members of the Board of Directors of ALROSA Group individual enterprises. Salary and premiums payable to Members of the Executive Committee of the Company shall be determined in their employment contracts.

On November 10, 2015, the Supervisory Board of the Company approved a new version of the Regulations on Remuneration to President of PJSC ALROSA and Regulations on Remuneration to Members of the Executive Committee of PJSC ALROSA (Minutes A01/236-НС).

The annual remuneration is paid to the President and the Members of the Executive Committee for the achievement of KPIs relating to production and business activities.

The KPIs system for the executive bodies implemented by the Company requires the senior management to ensure the goals of the Long-term Program for ALROSA Group Development up to 2023 are achieved.

The structure of the annual income of the members of the Company’s executive bodies includes payments based on the timely and full achievement of the ALROSA Group KPIs and more than 78% of individual KPIs.

In 2015, the Company and legal entities from ALROSA Group did not grant any loans to the President or Members of the Executive Committee.

REMUNERATION PAID TO THE EXECUTIVE COMMITTEE

Indicator Amount of payment, in thousands of roubles
Remuneration for participation in the governing body 0
Salary 229,111
Premiums 396,323
Commissions 0
Privileges 0
Other remunerations 103,740
TOTAL 729,174

CORPORATE SECRETARY

Rights and obligations of the Corporate Secretary of the Company are set forth in the Charter of the Company and detailed in the Regulations on the Corporate Secretary of PJSC ALROSA (Regulations on the Corporate Secretary of PJSC ALROSA).

In accordance with the Regulations on the Corporate Secretary, the Corporate Secretary’s objectives are:
– to ensure compliance by the executive bodies and employees of the Company with the legislative requirements, the Charter and internal documents of the Company that guarantee rights and legal interests of shareholders;
– to ensure compliance with property interests of shareholders in execution of their rights, to maintain the balance of interests between the participants of corporate legal relations;
– to support the activities of the General Meeting of Shareholders, Supervisory Board, Committees under the Supervisory Board, Executive Committee and Auditing Committee;
– to support the members of the Supervisory Board, when they fulfil their functions, including initiation of newly elected members of the Supervisory Board;
– to develop the corporate governance system of the Company in line with the interests of all shareholders and Company;
– to ensure the growth of investment attractiveness of the Company, to promote its sustainable development.

The Corporate Secretary is a Company official functionally subordinate and accountable to the Supervisory Board, and administratively subordinate to the President of the Company.

CORPORATE SECRETARY’S BIOGRAPHICAL DATA AS OF DECEMBER 31, 2015

LEKAREV
Andrey Grigoryevich

Head of the Directorate for Corporate Support, Corporate Secretary of PJSC ALROSA

Born on May 7, 1981, in Kuybyshev.
He graduated from the Moscow State Law Academy in 2003 with a degree in Law and from the International Business School (Financial University under the Government of the Russian Federation) in 2011 with an MBA in International Banking Management.
He also holds a PhD in Law from the Moscow State Law Academy (2006).

Previous work experience:
2010 - present - Secretary of the Supervisory Board, Head of the Directorate for Corporate Support, Corporate Secretary of PJSC ALROSA;
2007-2010 - Chief Legal Advisor in PJSC VTB Bank’s Legal Department.
Before 2007, he worked in the administrative office of the Council of the Federation and the State Duma of the Federal Assembly of the Russian Federation.
Member of the All-Russian Public Organization National Association of Corporate Secretaries.
From 2012 through 2015, Mr. Lekarev has been amongst the Top 25 Directors for Corporate Governance / Corporate Secretaries, in an annual national ranking compiled by the Independent Directors Association (IDA), the Russian Union of Industrialists and Entrepreneurs (RSPP) in partnership with PwC and the Moscow Exchange for the ‘Director of the Year’ National Award category.
For achievements in the area of corporate management, he was awarded the Director of the Year (winner in the Corporate Management Director - Corporate Secretary category, 2013).
He is also the winner of the XIII annual Top 1,000 Russian Managers 2015 prize, in the Best Corporate Governance Director category.
He is a Class 3 Advisor to the State Civil Service.
He has no family ties with any members of PJSC ALROSA’s executive or executive and bodies responsible for the control in the area of financial and business activities of PJSC ALROSA.

Information on A. G. Lekarev’s transactions, involving purchase or alienation of PJSC ALROSA’s ordinary shares for 2015:
As of 01.01.2015, A. G. Lekarev held 27,005 ordinary shares (0.00037%).
On 10.02.2015, A. G. Lekarev alienated 2,800 shares and after the change A.G. Lekarev held 24,205 shares (0.00033%).
On 11.02.2015, A. G. Lekarev alienated 5,800 shares and after the change A.G. Lekarev held 18,405 shares (0.00025%).
On 24.02.2015, A. G. Lekarev alienated 6,200 shares and after the change A.G. Lekarev held 12,205 shares (0.00017%).
On 13.08.2015, A. G. Lekarev alienated 4,500 shares and after the change A.G. Lekarev held 7,705 shares (0.0001%).
As of December 31, 2015, A. G. Lekarev holds 7,705 ordinary shares (0.0001%) of PJSC ALROSA.

INTERNAL CONTROL SYSTEM

AUDITING COMMITTEE

The Auditing Committee was elected at the annual General Meeting of Shareholders to oversee the finance and economic activities of PJSC ALROSA and compliance with Russian Federation legal legislation. The Auditing Committee of 5 members is elected for the period until the next annual General Meeting of Shareholders.

THE AUDITING COMMITTEE OF PJSC ALROSA ELECTED BY THE ANNUAL GENERAL SHAREHOLDERS MEETING OF PJSC ALROSA ON JUNE 25, 2015, AND DECEMBER 31, 2015 COMPRISES THE FOLLOWING MEMBERS:

No. Surname and initials Position
1 A. V. Glinov Deputy Director of the Administrative Department at the Ministry of Finance of the Russian Federation; Chairman of the Auditing Committee.
2 A. I. Vasilyeva Head of the Department of the Rough and Polished Diamond Complex Property, Financial and Insurance Organizations, Ministry of Property and Land Relations, Republic of Sakha (Yakutia).
3 D. P. Kim Assistant Officer of the Major Organization Management Division of the Corporate Governance Department at the Ministry of Economic Development of the Russian Federation.
4 M. V. Mikhina Adviser to the Head of the Federal Agency for State Property Management;
5 V. N. Pushmin Deputy Finance Minister of the Republic of Sakha (Yakutia).

In 2015, the Auditing Committee conducted an annual audit of financial activities of PJSC ALROSA for 2014. The audit was conducted during the period of March 16, 2015, to March 25, 2015.

The plan for the audit conducted by the Auditing Committee included the following items:
1. Analysis of accounting (financial) statements.
2. Analysis of the implementation of the basic production indicators and planned economic indicators, including the analysis of actually achieved financial results.
3. Analysis of net profit spending.
4. Analysis of accuracy of calculation and payment of dividends.
5. On the fulfilment of the non-core asset disposal programme, including agricultural assets, in 2014.
6. Analysis of the results of innovative implementations in 2014.
7. On the implementation process of the “road map” for privatization of shares of PJSC ALROSA.
8. Analysis of the results of PJSC ALROSA’s sales policy in domestic and foreign markets in 2014.
9. Assessment of the results (status) of instructions from the President of the Russian Federation and Government of the Russian Federation.
10. Analysis of PJSC ALROSA purchasing performance in 2014.
11. Analysis of the corrective actions following the previous internal audit.

The Auditing Committee feedback, based on the results of the revision of PJSC ALROSA for 2014, was submitted at the annual General Meeting of Shareholders of the Company that took place on June 25, 2015.

In 2015, the members of the Auditing Committee of the Company were not remunerated for the performance of their duties.

INTERNAL AUDIT

The Internal Audit Department is functionally subordinate to the Supervisory Board and administratively subordinate to the President of the Company. The work plan of the Internal Audit Department of the Company is approved by the Supervisory Board of the Company.

The work of the Internal Audit Department in 2015 was performed in accordance with the Regulations on the Internal Audit Department, Regulations on Internal Auditing in PJSC ALROSA based on the approved Work Plans targets (KPIs) and budget of the Department.

The structure of the Department in line with the Regulations on the Internal Audit Department, was not modified and included the following departments:
– internal audit and audit work section;
– PJSC ALROSA’s internal control orga-nization section;
– corporate controlling section.

Targets (key performance indicators) of the Department in the reference year:
– Fulfilment of the approved annual audit plan with the established quantitative indicator.
– The number of the agreed recommen-dations based on the results of the audit is more than 50%.
– The development and submission of a set of documents on the improvement of corporate governance for approval by the management of the Company.
– Development of methodological recom-mendations for auditing committees of subsidiaries (controlled companies) of the Company relating to the procedure of audits.

The work plan of the Internal Audit Department for 2015 was fulfilled in the main stipulated areas and in terms of targets achieved.

EXTERNAL AUDITORS

Auditor LLC FBK PricewaterhouseCoopers Audit
Scope of the competition mandatory annual audit in accordance with the RAS mandatory consolidated financial reporting of ALROSA Group prepared in accordance with IFRS
Procedure for election open competition
Organizer of the competition executive body represented by the President
Composition of the competition committee heads and specialists of the Company, representatives of the Federal Agency for State Property Management, Ministry of Property and Land Relations of the Republic of Sakha (Yakutia), the Russian Federation Ministry of Finance.
Decision on approval annual General Meeting of Shareholders
Auditor’s remuneration RUB 8.0 mn without VAT RUB 24.75 mn without VAT
Additional Services — audit in 2014 into implementation of the Program for Long-term Development of PJSC ALROSA up to 2023, with RUB 2.9 mn without VAT worth of funds allotted to it; — consulting services relating to the independent actuarial valuation of pensions and other long-term social liabilities of the Company, of RUB 3.4 mn in value.

DISCLOSURE OF INFORMATION. PROTECTION OF INSIDER INFORMATION

INFORMATION POLICY

The information policy of PJSC ALROSA is based on the following principles:
– regularity and efficiency;
– availability;
– completeness and reliability;
– reasonable balance between the tran-sparency of the Company and protection of its commercial interests.

Maintaining its status as a recognized leader in the diamond mining sector with a flawless reputation is one of ALROSA’s priorities.

Apart from the obligation for mandatory disclosure of information in accordance with the requirements of the regulatory bodies, the Company rigorously analyses the information requirements of its target audiences and strives to disclose important information in a timely manner.

In 2015, the Supervisory Board approved the Information Policy that took Russian and international best practices into account.

DISCLOSURE CHANNELS

The main channel for disclosure of information is the Company’s corporate site http://www.alrosa.ru/ where important information on the Company and results of its activities for the reporting period are available. The information is also simultaneously disclosed on the English version of the website http://eng.alrosa.ru/.

In addition to its corporate website, the Company uses the website of Interfax for mandatory disclosure of information as well as print media: Rossiyskaya Gazeta, Mirninsky Rabochiy, Lenskiy Vestnik, Yakutia, Sakha Sire.

Status of the Company Regulatory compliance Disclosure channel Disclosed information / Audience
Public Joint Stock Company Federal Law On Joint-Stock Companies No. 208-ФЗ dated December 26, 1995 Corporate website: http://www.alrosa.ru/ – Charter and internal documents of the Company
– Information on important facts, affiliates
– Information about securities of the Company, payment of dividends
– Quarterly, annual and social reports
– Annual and interim financial statements
– Material on the General Meetings of Shareholders and the subsequent resolutions adopted in the meetings, and resolutions adopted in meetings of the Supervisory Board
– News releases
– Mandatory disclosure of information
– Disclosure of information to analysts, shareholders and representatives of the investment community in Russian and English relating to the results of the Company’s activities, financial statements, implementation of major investment projects, implementation of strategic priorities
– Information in English for representatives of the investment community
– Disclosure of information to analysts of investment banks, representatives of investment funds, shareholders in various aspects of the Company’s activities
Issuer of equity securities Federal Law On Securities Market No. 39-ФЗ dd. April 22, 1995
Regulation On disclosure of information by issuers of equity securities (approved by the Bank of Russia on 30.12.2014 No. 454-П)
Federal Law On counteracting misuse of insider information and market manipulation No. 224-ФЗ dd. July 27, 2010
Requirements of the Moscow Stock Exchange to the issuers of shares traded in the A quotation list of the Stock Exchange
– Newsfeed and website of the Company on the website of the authorized Interfax agency: (http://www.e-disclosure.ru/portal/company.aspx?id=199 )
– Corporate website subsection http://www.alrosa.ru/documents/раскрытие-информации/
– Printed media used: Rossiyskaya Gazeta, Mirninsky Rabochiy, Lenskiy Vestnik, Yakutia, Sakha Sire
– Corporate website, sub-section http://www.alrosa.ru/инвесторам-и-акционерам/ and
– http://eng.alrosa.ru/investors Bloomberg
– IR activities (conference phone calls, management meetings with representatives of investment community, participation in investment conferences)

PROTECTION OF INSIDER INFORMATION

In order to prevent abuse in a form of illicit use of insider information, the Company adopted Regulations on the measures to prevent the use of insider information and (or) market manipulation in PJSC ALROSA (Regulations on the measures to prevent the use of insider information and(or) market manipulation in PJSC ALROSA). The Regulations were developed in accordance with the Federal Law dated 27.07.2010 No. 224-ФЗ On combatting the misuse of insider information and market manipulation, and on the amendment of individual legislative bills of the Russian Federation, as well as with the Company regulations, Charter and other internal documents.

In accordance with the Regulations, the Company’s insiders must make their best efforts to protect and prevent misuse and distribution of insider information.

The Company shall maintain, regularly update and submit the Insider List to the trade organization and regulators. The Company must also notify the person included in the insider list or excluded from the list no later than one working day from the date of his inclusion in the insider list or his exclusion from such a list correspondingly.

FOR SHAREHOLDERS AND INVESTORS

SHARES

The Company’s shares have been traded at the MICEX since 2011, ticker ALRS, and currently the shares are included in the 1 tier quotation list. The Company quarterly submits a report on compliance with the corporate governance standards for its shares to remain in the level one listing on the Moscow Stock Exchange.

In 2015, the Company’s share quotation showed dynamics close to zero (average prices for December 2014 and December 2015 were RUB 54.26 and RUB 53.89 per share correspondingly), and were a little worse than the market: the MICEX index for the same period was 18.61%.

Events in 2015:
– The average price of ALROSA’s share in 2015 was RUB 64.84 per share, which is by 59.64% higher than the same period in 2014.
– The average annual MSCI index Russia decreased by 26.75%, the growth of the average annual MICEX index was 17.94% for the same period.
– As of 31.12.2015, the number of free float shares is 23.07%.
– Based on the results of 2014, RUB mn 10.826 shall be paid out as dividends, i.e. RUB 1.47 per ordinary share.

KEY INDICATORS OF TRADE IN THE COMPANY’S SHARES FOR 2013-2015

Indicator UoM 2013 2014 2015
Average daily trading volume USD mn 2.01 5.72 8.24
Minimum price RUB 29.10 31.90 48.96
Maximum price RUB 38.79 63.00 82.80
Price at the end of the year RUB 35.00 63.00 55.94
Free-float volume pcs. 518,047,815 1,699,380,556 1,699,380,556
Free-float share % 7.03 23.07 23.07
Capitalization at the end of the year USD mn 7,813 8,327 5,611

AUTHORIZED CAPITAL

The authorized capital of PJSC ALROSA is RUB 3,682,482,815. The authorized capital is divided into 7,364,965,630 ordinary registered shares of 50 kopeks each.

SHARE CAPITAL STRUCTURE

During the public offering of shares of PJSC ALROSA on the Moscow Stock Exchange in October 2013, 14% of shares owned equally by the Russian Federation and the Republic of Sakha (Yakutia) were placed. In addition, the market was offered 2% of quasi treasury shares held by the Cypriot company Wargan Holdings. The Russian Federation share in the company’s equity decreased from 50.9256% to 43.9256%, and in Yakutia from 32.0002% to 25.0002% respectively. The volume of the company’s shares in free circulation after the placement has increased from 7% to 23.07%.

ALROSA’s major minority shareholders are: Oppenheimer Funds, Lazard Asset Management, Genesis, and Capital Group investment funds.

MAJOR SHAREHOLDERS WHOSE SHARE EXCEEDS 1% IN THE AUTHORIZED CAPITAL AS OF 31.12.2015

Shareholder Share %
Federal Agency for State Property Management 43.93
Ministry of Property and Land Relations of the Republic of Sakha (Yakutia) 25.00
8 uluses (districts) of the Republic of Sakha (Yakutia) 8.00
Other legal entities and individuals 23.07
TOTAL 100.00

INDEXES

In March 2015, the Company’s shares were included in FTSE Emerging Index and Market Vectors Russia. As of the date of the listing, the weight of shares in FTSE Emerging Index was 0.06%, and in 1.92% in Market Vectors Russia. In September, the weight of ALROSA’s share in FTSE Emerging Index was lowered to 0.05%. The weight of shares in Market Vectors Russia in 2015 changed as follows: in June the weight was decreased to 1.74%, in September to 1.35%, and in December the weight increased up to 1.61%.

In September 2015, ALROSA’s shares were also included in the Index of State-owned companies with a weight of 4.66% as of the date of listing. As of December 31, 2015, ALROSA’s shares in this index were weighted at 3.28%.

A range of investment funds invests in the shares issued by the companies included in one or another index proportionate to their weight therein. Therefore, inclusion of the Company’s shares in the above indices increases liquidity of the Company’s securities.

As of December 31, 2015, the Company’s shares were present in the following lists:

Name of the list Weight in the index, % Index currency
MICEX Index 1.06 RUR
MSCI Russia 1.10 USD
FTSE Emerging 0.05 USD
Market Vectors Russia 1.61 USD
Metals and Mining Index (MICEX) 15.00 RUR
Broad Market Index (MICEX) 1.04 USD
RTS 1.06 USD
State owned companies index (MICEX) 3.28 RUR

DYNAMICS OF THE COMPANY’S SHARES COMPARED WITH THE DYNAMICS OF INDICES, %

BONDS

In 2015, the Company redeemed bonds in roubles:
– On June 18, and 23, 2015, ALROSA redeemed commercial bond issues series 20-23, totalling RUB bn 10, listed at MICEX in June 2010;
– On October 30, 2015, ALROSA redeemed exchange traded bond issues series БO-01 and БO-02, totalling RUB bn 10, listed at MICEX in October 2012.

Indicator Value
Number ALROSA, 2020
Currency US dollars
Amount 1,000,000,000
Rate 7.75%
Date of placement November 10
Maturity date 4Q 2020
Stock Exchange Irish Stock Exchange
Issuer Alrosa Finance S.A.
Guarantor PJSC ALROSA

CREDIT RATINGS

The Company was rated by the three world’s major rating agencies Fitch, Moody`s and Standard & Poor’s (S&P).

In April 21, 2015, Moody’s increased ALROSA’s credit rating up to Ba2. The decision was made against a backdrop of stability in the diamond marker, depreciation in the value of the rouble and sales of diamonds from reserves, which positively affected ALROSA’s financial results, improving the Company’s liquidity indicators in 2015 and aiding the Company’s plans for further decreasing of its debt.

CURRENT CREDIT RATINGS

Rating agency Rating Rating assignment date/Rating confirmation date
Fitch BB / stable 16.10.2015
Moody's Ва2 / stable 21.04.2015
S&P BB- / positive 29.05.2015

CURRENT HISTORICAL CREDIT RATINGS

INTERACTION WITH THE INVESTMENT COMMUNITY

In 2015, the Company’s interaction with the investment community was as follows:

Activity 2013 2014 2015
Planned Actual Planned Actual Planned Actual
Financial Performance Publication by IFRS 4 4 4 4 4 4
Conference phone calls relating to the IFRS results 3 3 4 4 4 4
Publication of reviews relating to the industrial activities 2 2 4 4 4 4
Investor’s Day in London 0 0 0 0 1 1
Participation in international investment banking conferences 0 0 4 4 3 5
Visiting industrial facilities in the territory of Yakutia and Arkhangelsk region 1 1 2 2 2 2

In 2015, over the course of all the meetings and activities, more than 200 interactions with representatives of the investment community took place.

Based on the results of the XVIIIth annual report competition conducted annually by MICEX, ALROSA’s annual report was awarded the Best annual report of a metallurgical and mining sector of the economy and winner of the Best presentation of a strategy and investment attractiveness of the company in an annual report, as well as winner of the Best disclosure of information on corporate governance in an annual report category.

ANALYTICAL COVERAGE

As at the end of 2015, the analytical review of ALROSA’s shares was made by 25 investment banks and companies, 13 of which recommended buying ALROSA’s shares.

Due to the unstable situation in the diamond market in 2015, some analysts negatively altered their recommendations relating to ALROSA’s shares. The majority of the analysts lowered the forecast prices for diamonds in 2015-2016.

However, many analysts continue to view the Company’s fundamental characteristics as attractive, owing to low capital expenditure, decreasing debt and the positive effects of a weakening rouble against the US Dollar.

Recommendation 2013 2014 2015
To buy 16 19 13
To keep 3 1 9
To sell 2 3
The number of investment banks engaged in analytical coverage 19 22 25

KEY AREAS OF WORK WITH INVESTORS IN 2016

The Department for interaction with the Company’s investors in 2016 continues to implement complex measures to increase investment attractiveness and the informational transparency of the Company. The investor interaction plan for 2016 incorporates the following activities:
– 4 conference phone calls with parti-cipation of the Company’s senior managers based on the results of the report on the financial results of ALROSA in accordance with IFRS for the reporting period;
– preparation and publication of 4 reports on the financial results of ALROSA Group in accordance with IFRS for the reporting period.
– preparation and publication of 4 reports on production results of the ALROSA Group for the reporting period.
– organization and carrying out of the Investor’s Day for shareholders and potential investors in shares and debt securities based on the report on the financial results of ALROSA Group in accordance with the IFRS for 2015;
– organization and carrying out of personal meetings, particularly, with participation of the Company’s senior managers, representatives of shareholders, potential investors in shares and debt securities;
– organization and carrying out of personal and group visiting meetings, particularly, with participation of the Company’s senior managers and representatives of shareholders, potential investors in shares and debt securities in the course of conferences organized by Russian and foreign investment banks;
– organization and conducting of a visit from a group of shareholders and investors’ representatives to the Company’s production facilities in Yakutia and Arkhangelsk region.

COMPANY DIVIDEND POLICY

The dividend policy of PJSC ALROSA is based on the following principles:
– Balancing the Company’s and shareholders’ interests in determining the amount of dividends as well as a balance between the shareholders’ short-term (gaining profit) and long-term (Company development and capitalization growth) interests
– Maintaining the Company’s required financial status and ensuring its development prospects
– Enhancing the Company’s investment appeal and its capitalization
– Compliance with the shareholder rights provided for in the current legislation of the Russian Federation, the Company’s Charter and its internal documents
– Transparency of dividend calculation and dividend payment mechanisms, which the Supervisory Board and Annual General Meeting are guided by.

In 2013, to increase the investment attractiveness of PJSC ALROSA, the changes to the Regulations on dividend policy were approved. As a result, the minimum level of dividend has been increased to 35% of the net profit distributed based on the consolidated reports made in accordance with the IFRS.

On June 25, 2015, an annual General Meeting of Shareholders of PJSC ALROSA was held in the town of Mirny. In the course of voting, the shareholders adopted a resolution on payment of dividends based on the results of 2014. It was resolved to allocate RUB bn 10.826 for payment of dividends, which amounts to RUB 1.47 per one ordinary share with a par value of 50 kopecks and is similar to the amount of payments made in the previous year.

THE COMPANY’S DIVIDEND HISTORY FOR THE PERIOD FROM 2011 TO 2014

Dividend and payout ratio 2011 2012 2013 2014
Amount of dividend announced per 1 ordinary share, RUB 1.01 1.11 1.47 1.47
Total amount of announced dividends, mn RUB 7,439 8,175 10,826 10,826
Payout ratio (share in net profit) 28.09% 25.05% 35.02% 35.02%

CORPORATE SOCIAL RESPONSIBILITY

SUSTAINABLE DEVELOPMENT AND RELATIONS WITH INTERESTED PARTIES

COMMITMENT TO SUSTAINABLE DEVELOPMENT

The key to effectiveness of the Company activities is the level of credibility gained in the eyes of the community. Being aware of its social responsibility, ALROSA Group keeps a balance between commercial and public interests, seeks to make a significant contribution to the development of the Russian economy and the well-being of the population in the regions of its presence. That is why activities of ALROSA Group are based on the principles of sustainable development, fair treatment and respect for all parties whose interests are affected by its activities.

The sustainable development strategy integrated into the activities of ALROSA Group includes three main components:
– maintaining sustainability of the global diamond market, Russian economy, balance of reasonable expectations and interests of stakeholders;
– minimizing the negative industrial impact on the environment, rational use of mineral resources, resource conservation, compliance with international environmental protection standards
– safety, health and professional development of the personnel, responsibility for the social and economic well-being of the population in the regions of the Company operation, support of local communities and charity.

STAKEHOLDER ENGAGEMENT

ALROSA maintains sustainable dialogue with stakeholders and continues to work towards improving social responsibility based on international standards and the best world practice. In December 2014, the Supervisory Board approved the Policy in the area of sustainable development and corporate social responsibility of PJSC ALROSA.

The document determines objectives, tasks and principles of the company’s activities in the sphere of sustainable development, as well as its voluntary commitments to the stakeholders: the company’s shareholders, staff, clients, the state, local and industry communities.

The Company strives to build efficient relations with all stakeholders. The key task of the regular work with stakeholders is exercising of each party’s right to be heard. The Company distinguishes the following representatives among the stakeholders:
– shareholders and investors;
– governmental authorities of the Russian Federation and presence regions;
– employees, Profalmaz international trade union of PJSC ALROSA’s employees;
– customers;
– suppliers of goods and services;
– international and Russian industrial community*;
– local communities;
– scientific and expert communities;
– mass media.

INTERACTION WITH THE STAKEHOLDERS

Stakeholders Form of interaction
Shareholders and investors General Meeting of Shareholders
Meetings with investors
Conference calls
Investment conferences
Corporate financial and non-financial reporting
Governmental authorities of the Russian Federation and presence regions Legislative activities relating to the industry
Partnerships relating to the social and economic development programs
Joint working groups for the issues relating to subsoil use
Employees, Profalmaz international trade union of PJSC ALROSA’s employees Meeting of the ALROSA Group’s business core group
Meetings with the representatives of trade unions and labour collectives.
Customers Company’s trading website
Exhibition activity
International auctions
Annual meeting with long-term customers in a working breakfast format
Suppliers of goods and services Displaying of information on procurement procedures on the official website of the Russian Federation http://zakupki.gov.ru, business meetings, exhibitions, round tables
International and Russian industrial community Participation in working groups, summits, meetings, and round tables together with the World Diamond Council, Antwerp World Diamond Centre (AWDC), Indian Gem & Jewellery Export Promotion Council (GJEPC), World Federation of Diamond Bourses (WFDB)
Associated membership in the World Jewellery Confederation. Participation in the work of Russian diamond producers, National Association for Subsoil Use Auditing, Russian Jewellers Guild, etc.
Local community The Financial and Sponsor Aid program, including the Regional Development subprogram
The commission for provision of the financial aid upon requests submitted by individuals and legal entities
Scientific and expert community Participation in practical conferences, exhibitions, round tables. Consultations, cooperation with the organizations of the Russian Academy of Science in R&D, cooperation with leading specialized universities, SMEs, technological clusters and other representatives from the academic community
Participation in international alliances, consortium, strategic partnerships in the innovation sphere
Mass media Interviews, press-conferences, press releases, Company’s website (www.alrosa.ru), Vestnik ALROSA corporate newspaper

HR AND HR POLICY

PJSC ALROSA does not permit any kind of discrimination; each employee has equal entitlement to exercise his or her employment rights, regardless of sex, race, nationality, language, origin, property, social status and position, age, location, attitude to religion, political views, participation or non-participation in public associations and any other obligations that are not related to an employee’s professional qualities.

The ALROSA Group aims to be an attractive employer. The relationships between the companies of the Group and employees in the social and professional sphere are based on the principles of social partnership. PJSC ALROSA and its employees through the agency of Profalmaz labour union entered into a Collective agreement, which provides for a number of additional guarantees, benefits and compensations specified in the agreement documentation.

ALROSA Group’s main tasks in the area of HR policy are:
– ensuring employment of the local population;
– creating a favourable social climate in the regions in which the company operates;
– providing qualified human resources;
– creation of human resource reserves;
– the minimizing of costs relating to the engagement of human resources from other regions;
– optimization of the age structure of the personnel, the attracting and retention of young people.

In 2015, the main areas of HR management work were:
– to provide staff for Mir, Aikhal and Udachny underground mines, currently under construction by way of training workers in the HR Training Centres.
– non-exceeding of the planned number of employees in ALROSA Group’s structural subdivisions;
– implementation of the Complex Program for Professional Orientation in PJSC ALROSA.

The majority of ALROSA Group personnel work in Western Yakutia. The average headcount in the Group was 39,508 employees in 2015 (40,227 in 2014). The number changed due to structural changes, changes in physical volume and structure of works and activities aimed at lowering costs.

The staff turnover rate decreased from 12.0% in 2014 and to 10.8% in 2015.

In 2015, in PJSC ALROSA the ratio of workers/employees to managers/specialists was 65.4% to 34.6% (in 2014: 66.9% to 33.1%).

EDUCATIONAL LEVEL OF PERSONNEL IN PJSC ALROSA IN 2014-2015, %

The gender composition of the Company personnel is determined by the specifics of the mining industry and in 2015 the male/female ratio in PJSC ALROSA was 64.9% to 35.1% (in 2014 it was 64.7% and 35.3% respectively).

EMPLOYEE AGE STRUCTURE OF PJSC ALROSA IN 2014-2015:

Age 2014 2015
Actual number, persons Share of total actual number, % Actual number, persons Share of total actual number, %
30 6,462 21.52% 5,865 19.95%
30-40 8,331 27.73% 8,071 27.45%
40-50 7,857 26.15% 7,916 26.93%
50-60 6,302 20.97% 6,324 21.51%
>60 1,091 3.63% 1,224 4.16%
TOTAL 30,043 100% 29,400 100%

ALROSA strives to optimize the composition of its personnel in terms of age, and the engagement and retention of young people. In line with this aim, in 2015 the following activities were performed:

ALROSA PROFESSIONAL ORIENTATION

– A specialized engineering class based on the Municipal Budget Educational Institution Polytechnical Lyceum in Mirny was created.
– Laboratory equipment for the science classroom of the Municipal Budget Educational Institution Polytechnical Lyceum in Mirny was purchased for 727 thousand roubles.
– The Engineering projects based on LEGO EV-3, Design devices with electronic components programs were developed and approved and 24 hours of lectures were given in the engineering classroom.
– The Alternative sources of energy and their use in the Extreme North regions special course programs were developed and approved and 13 hours of lectures were given in the engineering classroom.
– Meetings of young specialists of the Company with 10th - 11th grade pupils of Mirny were organized, and a film on young specialists was shown.

PRE-UNIVERSITY TRAINING

– In 2014-2015, 172 people participated in the Pre-university training program with lectures presented at the industrial sites in Mirny (82 attendees), Udachny (44 attendees), Lensk (32 attendees) and Aikhal village (14 attendees).
– 172 people participated in regional olympiads annually held by the HR Training Centre based on the agreement with the Siberian Federal University.
– Based on the results of the unified state exams and all-Russian schoolchildren olympiads, 15 people were admitted to the departments, with a degree in key areas of the Company’s activities.
– In 2015, 765.3 thousand roubles were spent on the olympiads.

WORK WITH YOUNG SPECIALISTS

– In 2015, 140 students of higher and secondary vocational educational institutions were employed by PJSC ALROSA (in 2014, 220 students), including 83 people with higher vocational education (in 2014, 118 people) and 57 people with secondary vocational education (in 2014, 102 people). The industrial training at the Company’s subdivisions was undertaken by 656 students (in 2014, 715).

ENGAGEMENT OF HUMAN RESOURCES

In order to perform temporary works at the production facilities under construction, the Company invites qualified workers on a rotational shift basis, which involves mandatory engagement of the local workforce. The Company outsources shift workers from other regions of the Russian Federation and CIS countries when there are no professionals with the required qualifications and skills available in Yakutia or when it is economically feasible. In 2015, 870 people from regions of the Russian Federation were contracted to work rotating shifts (640 people in 2014).

In 2015, in accordance with the order On procedure for inviting workers to fill jobs (positions) where there is a shortage of candidates, 125 people were invited to take up positions in subdivisions of PJSC ALROSA (in 2014, 125 people too).

HR TRAINING

Professional development of the Company personnel and personnel turnover was based on the approved 2015 plans of training, retraining and advanced training of managers, specialists and employees in the HR Training Centre and at the premises of its training schools.

In the reference year, 6,689 employees, including managers and specialists, underwent various types of training (in 2014, 6,494 employees).

EMPLOYEE TRAINING IN PJSC ALROSA IN 2014-2015

Subdivision 2014 2015
Executive bodies 80 30
Mining enterprises 3,530 4,054
Geology 180 175
Science 310 280
Construction enterprises 360 350
Transport enterprises 390 360
Automation 1,340 1,137
Other 304 303
TOTAL 6,494 6,689

Training to workers was provided at the premises of Aikhal, Lensk, Mirny and Udachny HR Training Centre training schools. A complete list of the programs on which training is provided includes more than 100 vocational and specialist training courses. The Plan of training staff to fill employee positions in 2015 provided for training in basic professions and the granting of various work permits to 5,292 workers as well as an instructional briefing for 3,931 workers. 5,534 people actually completed the training and 3,988 people were given the instructional briefing.

HSE

Preservation of life and health of the employees and creation of the safest possible working environment are the key priorities of ALROSA Group. To ensure industrial safety at the workplace, the Company implemented the HSE management system (Occupational Health and Safety Management System (OHSMS)) based on the following principles:
– priority of life and health of the employees over the results of production activities;
– commitment of the management of the Company to establishing a safe working environment;
– building of sustained motivation to foster safe behavioural practices of personnel undertaking production.

The key documents of the OHSMS are the existing HSE Regulations on management system of PJSC ALROSA and HSE Policy of PJSC ALROSA. The Company accepts the obligations to introduce modern safety equipment preventing workplace injuries and to ensure sanitary conditions preventing the occurrence of occupational diseases. A set of organizational and technical activities is aimed at preventing and decreasing occupational traumatism, minimizing the risk of accidents, fires, traffic accidents, promoting organization of safe work performance techniques.

In 2015, in order to improve the OHSMS, the following organizational and technical activities were performed:
– Changes were made to the information and listing of dangerous industrial facilities used by structural subdivisions and broadcast to the relevant Company service personnel.
– The analysis of OHSMS functionality is performed, decisions are adopted on the procedure of audits and corrective measures in 2016.
– Additions are made to the Regulations to account for the auxiliary mine rescue teams working as part of the mine rescue teams at the dangerous industrial facilities.
– Revision took place of local docu-mentation relating to the Company’s subdivisions in accordance with the valid Interdisciplinary regulations for labour protection, such as loading and unloading works and placement of cargos, when working with tools and devices, using heat networks, using heating power plants, when performing electric welding and gas welding works, working at height, in construction.
– The special assessment of labour conditions on workplaces has been completed in the subdivisions of PJSC ALROSA.

In 2015, PJSC ALROSA could not keep the occupational injuries indicator at the level of 2014. The increase in the number of injuries is related to the number of group accidents that occurred during traffic accidents where victims are not only vehicle drivers but also workers of the subdivisions (passengers). At the primary production subdivisions, the cases of injuries with severe consequences and fatal injuries occurred when performing works, involving organizational safety breaches and the carrying out of mining equipment repairs, and the non-compliance with industrial regulations on loading and unloading at mining works.

In 2015, the number of occupational injuries in ALROSA Group’s subsidiaries and controlled companies totalled 6 cases of mild severity, which is less than half of the number of similar cases in 2014.

There were no cases of severe or fatal consequences in 2015.

NUMBER OF INSTANCES OF OCCUPATIONAL INJURY AT PJSC ALROSA

Type of injuries 2013 2014 2015
light 13 9 9
severe 7 1 6
fatal 4 2 2
TOTAL 24 12 17

NUMBER OF OCCUPATIONAL INJURIES IN ALROSA GROUP’S SUBSIDIARIES

Type of injuries 2013 2014 2015
light 9 13 6
severe 0 2 0
fatal 3 1 0
Subsidiaries
JSC Almazy Anabara 3 3 0
PJSC Severalmaz 0 2 0
JSC NPP Bourevestnik 0 0 1
OJSC ALROSA-Gas 4 0 0
LLC ALROSA-Spetsbureniye 0 1 0
OJSC Vilyuiskaya HPP-3 0 0 1
JSC Shipping company ALROSA-Lena 1 0 1
ALROSA Air Company Limited 0 1 1
LLC ALROSA-Okhrana 3 6 1
Lensk Town Heat and Electric Networks Enterprise LLC 0 1 0
OJSC Almas 1 2 1
TOTAL 12 16 6

KEY EVENTS IN 2015

In the reporting year, the HR Training Centre, based on the state certification, conducted pre-attestation training on industrial safety for managers and specialists who use the Company’s dangerous industrial facilities in the following supervision areas:
– use of mining operation and production facilities - 550 people (in 2014, 350 employees);
– use of a dangerous industrial facility for production, storage and use of explosives – 105 employees (in 2014, 60 employees);
– use of lifting structures - 451 employee (in 2014, 476 employees);
– use of pressure equipment - 80 employees (in 2014, 55 employees);
– use of a dangerous industrial facility for gas distribution and gas consumption - 45 employees (in 2014, 25 employees);
– energy safety - 250 employees (in 2014, 271 employees).

A total of 1,481 subdivision managers and employees were certified in accordance with the requirements of Rostekhnadzor HR Training Centre (in 2014, 1,237 employees).

Based on the accreditation of the Health Ministry of the Russian Federation, the Company’s HR Training Centre provides training in labour protection in accordance with the relevant programs. In 2015, 810 employees underwent training in this area (in 2014, 1,029 employees).

To meet the statutory requirements in the area of the industrial safety, in 2015, the Company’s subdivisions created auxiliary mine rescue teams at open pit mines Yubileyny, Komsomolsky, Aikhal MPD, open pit mines Udachny, Zarya, Piropovy Spring, Udachny MPD and Aikhal, Udachny, Mir and Internatsionalny underground mines that underwent primary certification. The total headcount of services is 253 employees who are certified to perform mine rescue operations. The teams are formed of worker subdivisions for the minimizing and containment of emergencies at dangerous industrial facilities during the initial period of their occurrence.

In 2015, special assessment of working conditions at all the Company’s workplaces was conducted. The assessment of labour conditions in the workplace subdivisions was conducted by commissions created in the structural subdivisions and representatives from the Profalmaz labour union. Based on the results of the assessment, the relevant materials for the improvement of labour conditions at the Company’s workplaces were obtained to minimize the impact of hazardous factors on workers.

PLANS FOR 2016

The OHSMS is mainly focused on training, professional development and competence development of the specialists in the field of industrial safety and production control.

In 2016, based on the results of the assessment of labour conditions on workplaces, the development of a complex program for the improvement of labour conditions in the Company’s subdivisions is planned.

The plan in the area of professional safety and labour protection for 2016 includes the following activities:
– preparation of the reporting for 2015 for the Executive Bodies in the area of industrial safety, subsoil protection and labour protection;
– unscheduled special assessment of labour conditions at newly implemented workplaces and workplaces where there are grounds for its implementation;
– HSE management system audit and development of recommendations for the improvement of the OHSMS by the external third party consultant;
– carrying out of a range of training workshops with managers and specialists of PJSC ALROSA;
– amendment of local regulations of the Company in accordance with the amendments made to the laws of the Russian Federation in the area of HSE.

CHARITY AND SOCIAL PROGRAMS

ALROSA upholds a tradition of philanthropic initiatives, striving to create a comfortable internal and external social environment. The social investments are aimed at providing gratuitous aid to children and childcare facilities, scientific, educational, cultural, arts and sports institutions as well as social infrastructure facilities in the regions where the Company operates and to other socially important non-profit projects.

Charity and support of local communities is implemented subject to compliance with the following principles:
– high social value of the sponsored projects;
– target orientation of financial assistance and sponsorship;
– collegial decision making with regard to financial assistance and sponsorship issues;
– charity beneficiary interests are of top priority;
– transparency, accountability and intended purpose of the funds spent.

Gratuitous aid provision by the PJSC ALROSA is regulated by the Financial Assistance and Sponsorship program included in the Social Policy of PJSC ALROSA approved in March 2013 by the Executive Committee. The social policy is also focused on the engagement and development of qualified specialists and development of corporate culture. Implementation of the Social policy of the Company is carried out in accordance with the principles of social partnership with Profalmaz trade union, government authorities and local self-government bodies in the regions where ALROSA Group operates. The Company annually spends approximately 6 bn roubles on the implementation of target corporate programs Health, Housing, Rest and Rehabilitation, Charity, Patronage, Material and Sponsor Support, Culture and Sports.

“HEALTH” PROGRAM

The main goal of this program is to provide the Company’s employees and their family members with qualified medical assistance. This program is implemented based on the structural subdivision Medical Centre and leading healthcare and scientific medical institutions at the regional and federal level.

In 2015, the expenses for the “Health” program of ALROSA Group amounted to 245.4 mn roubles.

Annually 2,200 people undergo medical examinations and treatment at the expense of ALROSA Group, using VHI, including 250 retired pensioners, 100 employees’ children. 21,000 employees undergo periodical medical examination.

“REST AND REHABILITATION” PROGRAM

Owing to the harmful and hazardous health impact due to conditions at the main production facilities, special attention is devoted to ALROSA’s employees where the prevention of illnesses and organization of rehabilitative treatment is concerned. Over many years, the Company has run the “Rest and Rehabilitation Program” with direct participation of the Profalmaz labour union. In 2015, 876.1 mn roubles were spent on implementation of this program.

Recreation of ALROSA’s employees, their family members and retired pensioners in ensured mainly, via their own modern preventative health treatments and retreats to third party recreation complexes. The Company spent 360.4 mn roubles on the recreational preventive treatments at local recreation and rest facilities in the Medical Centre. In 2015, 5,567 underwent the treatment.

A total 876.1 mn roubles were spent by ALROSA in 2015 on rest and recreational activities for employees, their family members and retired pensioners, including at the expense of the profit 717.1 mn roubles.

In the reporting year, ALROSA continued to pursue its recreational program for children with many taken on a trip to coastal resorts on the Black Sea. In addition, 206 children on went on a retreat to the Niva holiday camp in the Gelendzhik urban resort.

IN 2015, EXPENSES FOR THE “REST AND REHABILITATION” PROGRAM AMOUNTED TO MN ROUBLES

“HOUSING” PROGRAM

The Company’s “Housing” program aims to attract and retain qualified personnel at the Company and expand opportunities for employees to improve their housing conditions with their own personal means using corporate tools. In 2015, total 1,121.9 mn roubles were spent on the implementation of this program.

In Orel, ALROSA continues the work on the resettlement of retired veterans of the Company in more favourable places and a veteran concessional housing scheme. In 2015, the Company spent 23.4 mn roubles on resettlement of veterans.

Mortgage program that provides favourable conditions via fixed interest rates and opportunity to compensate expenses for payment of interest to ALROSA’s workers continues. In 2015, interests on mortgages compensated to ALROSA’s workers amounted to RUB 40.4 mn. Approximately 300 people participate in this program. Moreover, the work on provision of corporate support to ALROSA’s workers who buy housing, using their own means, continues. The financing of expenses in this area amounted to RUB 71.4 mn in 2015.

It should be also noted, that in 2015, the four years’ work within the framework of the agreement made with the Republic of Sakha (Yakutia) on the transfer of ownership to the residential fund to the municipal entities was completed. ALROSA financed expenses for maintaining and servicing of the residential fund, carried out current and capital repairs, ensured demolition of substandard and worn housing, compensated losses for the demolished housing, installed metering devices, replaced elevator equipment. In 2012-2015, ALROSA spent almost RUB 3 bn on the implementation of this program, including RUB 598 mn in 2015.

Within the program for demolition of substandard and worn residential houses for the resettlement, in 2013-2015, ALROSA financed construction of four residential houses in Mirny with the expenses for construction thereof amounting to 400 mn roubles, one wooden residential house with the expenses for construction amounting to RUB 46 mn. The Company keeps financing construction of one multi-apartment house (to be commissioned in 2016) with the expenses for construction amounting to approximately RUB 200 mn. Over the period of the program for demolition of substandard and worn residential housing, ALROSA also financed construction of two residential houses in the settlement of Aikhal. In these houses ALROSA’s worker will get approximately 80% of the apartments.

Since 2013, ALROSA has been engaged in the construction of workers’ dormitories with 450 beds in the settlement of Aikhal and 320 beds in the town of Mirny. In 2013-2015, the expenses of the Company for these purposes amounted to RUB 841 mn and RUB 422.5 mn respectively. The dormitory in Aikhal was commissioned in December 2014, and the dormitory in Mirny is to be completed in 2016.

“CHARITY, PATRONAGE, MATERIAL AND SPONSOR SUPPORT”

This program is an effective tool of social interaction with the personnel, population and authorities of the regions where ALROSA operates.

The charitable activities are closely connected with participation of ALROSA in the programs for social and economic development of uluses of the Republic of Sakha (Yakutia). In accordance with the Agreement On social and economic development of the Republic of Sakha (Yakutia) for the period from 2011 to 2020, charitable transfers to the republican budget are provided under the targeted donation agreement for construction of education, healthcare, culture and sports facilities.

In 2015, ALROSA provided free material, patronage, sponsor and targeted support to individuals, public, municipal, governmental organizations, establishments, populated areas in the amount of RUB 2,573.9 mn.

Under the regional development program, in 2015 financial assistance was provided to nine uluses (districts) of the Republic of Sakha (Yakutia) amounting to RUB 81.7 mn.

“CULTURE AND SPORTS” PROGRAM

Development of corporate culture and corporate spirit is an important aspect in the improvement of performance. Creation of conditions for the organization of comprehensive leisure for workers and the population promotes healthy lifestyle and is an indirect but efficient method for decreasing the crime rate. To this end, ALROSA runs the “Culture and sports” program. The functions relating to the organization and coordination of mass cultural and sports and recreation activities are entrusted to the ALROSA’s Cultural and sports complex.

The expenses for the “Culture and Sports” program amount to RUB 208.5 mn, 536 sports and recreation, mass sport events and 3,650 cultural events were arranged.

In 2015, ALROSA participated in anniversary activities: 50th anniversary of Mirny district, 60th anniversary of Mirny and diamond mining sector and 70th Victory Day. More than 1 bn roubles was spent on the organization of these activities by ALROSA in 2014-2015.

The Cultural and Sports Complex has 175 classes and clubs operating on a permanent basis that are attended by over 10,000 people.

ENVIRONMENTAL PROTECTION

Our strategic goal in the field of environmental protection is to ensure environmentally sustainable development in the territories of ALROSA Group productive activity.

The Company is well aware of its social responsibility and the responsibility to future generations, and it tends to ensure a necessary level of environmental safety as well as to prevent possible negative effects.

In 2015, we continued to integrate the principles of environmental responsibility, as set out in the Policy for sustainable development and corporate social responsibility of PJSC ALROSA, in the Company’s activities. In accordance with international standards and best practices ALROSA pledges itself to use natural resources carefully and rationally, to reduce environmental impact and environmental risks and to rehabilitate the damaged ecosystems.

In 2015, the key projects in the area of the environmental protection were:
– scientific and technical support of environmental activities;
– vocational retraining of 325 peoples admitted to treating I-IV hazardous class waste;
– technical equipment of the laboratories;
– inspections at 7 accredited analytical laboratories;
– environmental monitoring;
– work on recultivation of exhausted and disturbed soils;
– investments in the wildlife resource replenishment;
– capital investments in the construction of deflection, transportation and deposition of drainage and shaft waters from underground mines;
– renovation and construction of sewage treatment facilities.

EXPENSES FOR THE ENVIRONMENTAL PROTECTION AND OTHER ENVIRONMENTAL PROGRAMS

Type of expenses Funds allocated, mn roubles
Capital investments in construction of environmental protection facilities 1,637.9
Renovation and construction of sewage treatment facilities 1,209.4
Scientific and technical support of environmental activities 204.6
Comprehensive environmental monitoring 46.3
Mined land reclamation 271.6
Improvement of the environmental protection management system 2.2
Compensatory measures 22.8
Training, professional development 6.5
Participation in the forums, congresses, hearings, conferences, provision of information to the public 0.7
Other ecological expenses 47.3
TOTAL 3,449.5

ENERGY EFFICIENT TECHNOLOGIES AND ENERGY CONSERVATION

The program for energy conservation and increasing energy efficiency of PJSC ALROSA for 2014-2016 is part of a long-term program for the development of ALROSA Group up to 2023. The key goals of the program in the area of energy conservation and energy efficiency are rational subsoil use and resource conservation.

The successful implementation of complex measures in the reporting period allowed for the decreasing of electricity consumption for generation of one carat of the product up to 0.323 GJouls (in 2014, 0.334 GJouls).

The total volume of thermal energy, gas and diesel fuel in 2015 compared to 2014 decreases mainly at the expense of the optimization of the industrial processes and higher average statistical ambient temperature.

The consumption of thermal energy supplied by third party organizations decreases at the expense of reorganization of cultural sports complex (four large facilities were transferred to the administration of the town of Lensk municipal entity). The diesel fuel is saved, particularly, by the optimization of the time for boiler ignition in operating and training mode (accident prevention trainings). The volume of oil consumption in 2015 compared to 2014 was decreased due to transfer of the airport facilities in Lensk to Federal Treasury Enterprise Airports of the North.

In 2015, RUB 141,695.3 thousand (in 2014, RUB 72,537.9 thousand) were spent on the activities relating to energy saving and increasing energy efficiency, including the arrangement of organizational activities – RUB 12,273 thousand (in 2014, RUB 9,931 thousand) technical activities - RUB 129,422.3 thousand (in 2014, RUB 62,606.9 thousand).

ECONOMY OF FUEL AND ENERGY RESOURCES DUE TO ENERGY EFFICIENCY MEASURES IN 2013-2015

Type of resource UoM 2013 2014 2015
Electrical energy mn kWh 16,8 17,2 10,3
mn roubles 74,4 77,4 55,6
Thermal energy GCal 703 5 307,0 3 247,7
mn roubles * 13,2** *
Gas thousand cub. m 1 760,0 1 720,0 5 935,7
mn roubles 8,4 8,8 30,1
Other (diesel fuel and oil to produce electricity and heat) thousand tons 961,4 634,4 404,9
mn roubles 21,3 17,9 8,2
Water supply thousand cub. m 390,0 254,3 151,0
mn roubles 98,2 88,9 55,4

* It is impossible to calculate the amounts in cash as the economy is stipulated in primary energy resources (electricity, gas, oil, diesel fuel, coal);

** In 2014, the economy in cash is calculated based on the tariff provided by third party thermal energy producers.

ENERGY COSTS FOR 2013-2015, MN ROUBLES

Type of resource 2013 2014 2015
Thermal energy from third-party organizations 258,6 258,7 250,6
Electrical energy purchased 7 685,0 8 864,7 9 413,6
Oil (crude) for heat generation 84,9 99,0 81,3
Gas (natural) for heat generation, total 1 044,5 1 236,6 1 045,3
Diesel fuel: 737,7 783,3 766,7
for electric energy generation 599,0 648,2 648,1
for heat generation 138,7 135,1 118,6
Coal for heat generation 21,4 25,8 23,6
TOTAL 9 832,0 11 268,1 11 581,1

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