The Board of Directors of Ararat Cement Issues a Statement

In light of the ongoing discussions surrounding the Ararat Cement factory, we find it necessary to once again address the current situation. We are compelled to respond once more to the allegations made by MP Hayk Gevorgyan from the 'My Step' faction.

Recently, during the discussion on amendments to the law on state duties in the National Assembly, his remarks had no correlation with reality. Hayk Gevorgyan claimed, referring to the Government's decision No. 1465-A dated September 12, 2002, that Gagik Tsarukyan allegedly acquired the factory for USD 200,000.

First, we advise Hayk Gevorgyan and those reading and interpreting such decisions to read them as they are written, rather than interpreting them at their discretion. The decision he constantly references, No. 1465-A dated 12.09.2002, includes 9 points (the decision is attached). The first point presents the formulation related to nominal value and privatization. The second point establishes the share price as USD 200,000 and the payment term as 3 days. The third point specifies that:

• a) the buyer is obliged within the next 3 years to ensure the production volumes of cement by Ararat Cement OJSC, at least equivalent to the production volumes of 2001.
• b) the buyer is obliged, within 3 days from the date of signing the privatization contract, to release the closed joint-stock company Hayrusgasard from the USD 9.7 million debt for commodity supply to the International Energy Corporation Itera, in the amount of USD 6,866 million, by entering into a corresponding debt release agreement.
• c) the buyer is prohibited, until the fulfillment of the above third point and the fulfillment of this point's b sub-point, from registering ownership rights to the shares of Ararat Cement OJSC in the shareholder register.

The 4th, 5th, and 6th points of the decision officially relate to the real estate belonging to Ararat Cement OJSC, land leases, water use, drainage, emissions, and other restrictions. Upon reading the 7th point of the decision with all its sub-points and the 8th point, it becomes clear that the buyer of the shares of Ararat Cement OJSC, the Belgian company Roberto (Belgium is not an offshore zone), paid USD 6.866 million through direct payment within 3 days, thereby releasing the Republic of Armenia from the following debts, specifically:

• A debt of AMD 788,977 equivalent to damages incurred from supplying natural gas at a regulated price of 50% from July 1, 1999, to December 31, 2001, to individual consumers of the Republic of Armenia.
• A debt of AMD 6,077,023 equivalent incurred for electricity, water supply, and drainage consumed by budgetary institutions under the state subordination of the Republic of Armenia.

As a result, even with elementary arithmetic, it becomes clear that the Roberto company paid USD 7,066,000 for the shares of Ararat Cement OJSC. We believe that this should be sufficient for Hayk Gevorgyan to at least apologize for the rumors he propagated.

Let us also address the claim that the Swiss company Holcim was ready to invest USD 35 million in Ararat Cement but canceled the investments for unclear reasons.

The reality is as follows: Holcim conducted a thorough investigation of the situation at the factory and, seeing the additional debts and deplorable condition of the factory while prioritizing its business interests, decided to withdraw from any investment project, as repeatedly stated by company shareholder Thomas Schmidhein.

Concerning Gagik Tsarukyan's acquisition of shares in Ararat Cement, we should note that on 24.12.2002, Mr. Tsarukyan acquired 25% of the shares, which were handed over to Multi Group Concern on 25.12.2002.

At the same time, Ararat Cement OJSC was also handed over for management to Multi Group Concern. On 03.04.2006, Mr. Tsarukyan acquired 75% of the shares from the company Roberto, which is also reflected in his 2006 public declaration of assets and income (on page 5, line II.5 of the table of bonds, shares, and other investments), which is publicly available to everyone. As of 25.12.2002, the factory had debts totaling AMD 1.4 billion, the repayment of which would only allow for the operation of the factory. The aforementioned debts have already been settled by Mr. Tsarukyan personally. Since 25.12.2002, investments of AMD 6.2 billion have been made in the factory, which is reflected in the company's balance sheets.

This amount does not include the costs incurred in bringing project designers and professionals to Armenia for consultancy purposes from January to April 2003 and acquiring new equipment aimed at ensuring high quality. This is how, in a short period, the reputation of our produced cement began to spread throughout the Caucasus region, and numerous professional assessments highlighted its exceptional quality.

Regarding the decrease in cement prices by Ararat Cement, which some link to the Velvet Revolution in our country, we inform you that on March 30, 2018, an agreement was signed for the utilization of a patented invention protected by the Republic of Armenia, registered publicly on April 23, 2018, No. 2070 (attached).

The decrease in the production cost of cement starting from the second half of 2018 is due to the utilization of this aforementioned invention, which reflects a decrease in sales prices. Concerning the price and quantity of the cement exported to Georgia, we inform you that in 2017, 265,707 tons of cement were sold, of which 265,040 tons in the Republic of Armenia, and 666 tons were exported to Georgia (0.25% of total sales, the average price being around AMD 25,000). The exports were conducted without VAT. In 2018, 392,504 tons were sold, of which 389,713 tons in the Republic of Armenia, and 2,791 tons exported to Georgia (0.7% of sales, priced around AMD 25,000). The exports were conducted without VAT. The purpose of exporting to Georgia was to ensure our presence and prevent Georgian cement from entering the Republic of Armenia.

We also inform that since 2009, Georgian cement plants have operated with their own local coal and Azerbaijani gas. As early as 2003, when cement was sold in the Republic of Armenia at AMD 21,000, we began exporting to Georgia at a price of USD 25, including transportation costs, which was unprofitable, but the goal was to get them to try our product. After selling around 12,000 tons of cement, within a few months and gradually increasing the price, the price of cement in Georgia became USD 100, with monthly sales of 15-20 thousand tons of cement. Since 2009, once coal mines were opened in Georgia and Azerbaijani gas was supplied, and a cement plant opened in the Azerbaijani city of Kazakh near the Georgian border with our factory’s capacity and technology, we exited the Georgian market, providing only symbolic presence of our product.

Regarding the taxes paid, contrary to the unfounded statements that taxes paid in 2018 are not comparable to those paid in 2017, we inform that in 2018, more than 125,000 tons were sold compared to 2017, which means an additional VAT of AMD 1,041,875,000 (125,000×8335). Incidentally, in 2018, there was a salary increase for factory employees, resulting in income tax and stamp duties increasing by more than AMD 83 million. Increased production volumes also caused the nature utilization fee to increase by around AMD 31 million. Since 2003, Ararat Cement has never participated in state tenders and has supplied cement to public enterprises very rarely. It has never been a supplier of cement to the Ministry of Defense. Throughout, state tenders and cement supplies to the Ministry of Defense have been carried out by Mika Cement Company.

In contrast to Mika Cement, Ararat Cement has never benefited from any tax exemptions and has not been freed from any tax obligations, as mistakenly stated by the chairman of the National Assembly Committee on Economic Affairs, Babken Tunyan. Only after the bankruptcy of Mika Cement and during attempts to revive it did Ararat Cement's sales volumes begin to grow.

MP Hayk Gevorgyan and some others express surprise at how construction in the Republic of Armenia has grown by 4.5%, while cement sales have increased more. We too share this confusion and advise them to find out what cement was used by construction organizations and who is actually concealing anything.

The Ararat Cement factory has always operated openly and transparently, and any interested party can confirm this if they wish.

Board of Directors of Ararat Cement LLC