Comperative BALANCE SHEETS-Horizontal ANALIYIS

(expressed in thousands of United States dollars)

As at January 31, 2011 2010

Assets
CURRENT ASSETS
Cash and cash equivalents (note 3)
Accounts receivable
Inventory and supplies (note 4)
Prepaid expenses and other current
assets
Mining capital assets (note 5)
Luxury brand capital assets (note 5)

$108,693

$62,969

22,723

23,520

403,212

311,188

45,681

44,220

580,309

441,897

777,807

802,984

61,019

62,277

127,894

129,213

Other assets (note 8)

16,626

15,629

Future income tax asset (note 10)

53,857

42,805

$1,617,512

$1,494,805

Intangible assets, net (note 7)

Liabilities and shareholders equity

CURRENT LIABILITIES
Accounts payable and accrued
liabilities
Income taxes payable

$142,339

$87,448

6,660

46,297

22,902

22,485

Promissory note (note 9)

Current portion of long-term debt
(note 9)

70,000

1,313

1,154

243,214

157,384

Long-term debt (note 9)

237,450

161,538

Future income tax liability (note 10)

355,531

271,822

3,001

2,201

43,390

41,275

502,129

426,593

16,233

17,730

176,620

210,001

39,678

28,445

734,660

682,769

266

177,816

734,926

860,585

Future site restoration costs (note 11)

SHAREHOLDERS EQUITY
Share capital (note 12)
Contributed surplus
Retained earnings
Accumulated other comprehensive
income
Non-controlling interest

$1,461
$138,412
($25,177)
($1,258)
($1,319)
$997
$11,052
$122,707
$0
$0

Bank advances (note 9(d))

Other long-term liability

$45,724
($797)
$92,024

Commitments and guarantees (note

14)
$1,617,512

$1,494,805

$54,891
($39,637)
$417
#VALUE!
$159
$85,830
$75,912
$83,709
$800
$2,115
$0
$75,536
($1,497)
($33,381)
$11,233
$51,891
($177,550)
($125,659)
$0
$122,707

73%
-3%
30%
3%
31%
-3%
-2%
-1%
6%
26%
8%
#DIV/0!
#DIV/0!
63%
-86%
2%
#VALUE!
14%
55%
47%
31%
36%
5%
#DIV/0!
18%
-8%
-16%
39%
8%
-100%
-15%
#DIV/0!
8%

33

CONSOLIDATED STATEMENTS OF EARNINGS

(expressed in thousands of United States dollars, except per share amounts)
Years ended January 31, 2011 2010

$623,963

$412,901

$211,062

51%

Cost of sales

391,562

291,722

$99,840

34%

Gross margin

232,401

121,179

$111,222

92%

Selling, general and administrative

expenses

167,950

143,150

$24,800

17%

$86,422

-393%

Sales

Earnings (loss) from operations

64,451

-21,971

Interest and financing expenses

-11,527

-11,541

486

592

Insurance settlement

3,350

Dilution loss (note 19)

-34,761

Foreign exchange loss

Earnings (loss) before income
taxes
Income tax expense (recovery)
Current (note 10)
Income tax expense (recovery)
Future (note 10)

-14,406

-31,493

$14
0%
($106)
-18%
#VALUE!
#VALUE!
#VALUE!
#VALUE!
$17,087
-54%

39,004

-95,824

$134,828

-141%

-8,737

4,586

($13,323)

-291%

21,121

-23,389

Net earnings (loss)

$26,620

($77,021)

Attributable to shareholders
Attributable to non-controlling
interest
Earnings (loss) per share (note
13)
Basic

$21,669

($73,176)

$44,510
$103,641
$94,845

-190%
-135%
-130%

$4,951

($3,845)

$8,796

-229%

$0.27

($0.99)

$0.27

($0.99)

$0
$1
$1

#DIV/0!
-127%
-127%

79,858,018

74,048,981

$5,809,037
$0
Harry Winston
Diamond
Corporation
Annual Report
See accompanying
notes
to consolidated
financial| 2011
statements.
$0
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME $0
(expressed in thousands of United States dollars)
$0
Years ended January 31, 2011 2010
$0
Net earnings (loss)
($77,021)
$26,620
$103,641

8%
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-135%

10,879

6,757

Other income

Fully diluted
Weighted average number of
shares outstanding

Other comprehensive income

(loss)
Net gain on translation of net
foreign operations (net of tax of
$nil)

$4,122
$0

61%
#DIV/0!

Termination of derivative
financial instruments designated
as cash flow hedges (net of tax
of
$0.2 million; 2009 net of tax of
$nil)
Total comprehensive income
(loss)

$0

#DIV/0!

354

-354

$708

-200%

$37,853

($70,618)

$32,902

($66,773)

$108,471
$99,675

-154%
-149%

$4,951

($3,845)

2,835

502,129

426,593

17,730

16,079

1,338

1,651

Transfer from contributed surplus

on exercise of options

-2,835

Balance at end of year

16,233

17,730

210,001

283,177

21,669

-73,176

Reacquisition of partnership units

(including transaction costs)

-55,050

Balance at end of year

176,620

210,001

Attributable to shareholders
Attributable to non-controlling
interest

$8,796
-229%
$0 #DIV/0!
See accompanying notes to consolidated financial statements.
$0 #DIV/0!
$0 #DIV/0!
Harry Winston Diamond Corporation | 2011 Annual Report #VALUE!
#VALUE!
$0 EQUITY
#DIV/0!
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
(expressed in thousands of United States dollars)
$0 #DIV/0!
Years ended January 31, 2011 2010
$0 #DIV/0!
Common shares:
$0 #DIV/0!
Balance at beginning of year
$426,593
$381,541
$45,052
12%
Issued during the year
72,701
45,052
$27,649
61%
Transfer from contributed surplus
on exercise of options
Balance at end of year
Contributed surplus:
Balance at beginning of year
Stock option expense

Retained earnings:
Balance at beginning of year
Net earnings (loss)

Accumulated other
comprehensive income:
Balance at beginning of year

28,445

22,042

10,879

6,757

Other comprehensive income

Net gain on translation of net
foreign operations (net of tax of
$nil)
34
Termination
of derivative
financial instruments designated
as cash flow hedges (net of tax
of
$0.2 million; 2009 net of tax of
$nil)
Balance at end of year

#VALUE!
#VALUE!
($1,497)
-8%
$0 #DIV/0!
($73,176)
-26%
$94,845
-130%
#VALUE!
#VALUE!
($33,381)
-16%
$0
$6,403
$0

#DIV/0!
29%
#DIV/0!

$4,122

61%

$0
354

-354

39,678

28,445

177,816

280

Non-controlling interest:
Balance at beginning of year

#VALUE!
#VALUE!
$75,536
18%
$0 #DIV/0!
$1,651
10%
($313)
-19%

$708
$11,233
$0
$177,536

#DIV/0!
-200%
39%
#DIV/0!
63406%

Arising on investment by Kinross

Non-controlling interest
Distribution to Kinross
Reacquisition of Kinross interest

191,056

4,951

-3,845

-9,900

-9,675

-172,601

266

177,816

$734,926

$860,585

Balance at end of year

Total shareholders equity

See accompanying notes to consolidated financial statements.

35

CONSOLIDATED STATEMENTS OF CASH FLOWS

(expressed in thousands of United States dollars)
Years ended January 31, 2011 2010

Cash provided by (used in):

OPERATING
Net earnings (loss) Items not
involving cash
Depreciation and amortization
Future income tax expense
(recovery)
Stock-based compensation

#VALUE!
$8,796
($225)
#VALUE!
($177,550)
($125,659)
$0
$0
$0
$35
$0
$0
$0
$103,641
$0

#VALUE!
-229%
2%
#VALUE!
-100%
-15%
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-135%
#DIV/0!

$0
$16,791

#DIV/0!
26%

$26,620

($77,021)

80,903

64,112

21,121

-23,389

1,338

1,651

16,564

31,454

237

1,633

255

34,761

-74,728

12,386

73,688

44,209

-628

-404

76,645

-64,497

-74,160

-9,900

-9,675

2,964

44,740

69,081

-103,996

Subscription
of partnership
units
Harry Winston
Diamond Corporation
| 2011 Annual Report

125,095

#VALUE!

#VALUE!

#VALUE!

#VALUE!

Foreign exchange loss

Loss on disposal of assets
Other non-cash items
Dilution loss
Change in non-cash operating
working capital
FINANCING
Decrease in long-term debt
Increase (decrease) in revolving
credit
Repayment of mining segment
senior secured term and
revolving credit facilities
Distribution to Kinross
Issue of common shares, net of
issue costs
INVESTING

Reacquisition of partnership units

-51,450

Cash collateral and cash reserves

30,145

-42,343

-50,856

Luxury brand capital assets

-6,751

-3,033

Other assets

-3,230

-992

-103,774

100,359

Mining capital assets

$44,510
-190%
($313)
-19%
($14,890)
-47%
#VALUE!
#VALUE!
$1,378
540%
#VALUE!
#VALUE!
($87,114)
-703%
$29,479
67%
$0 #DIV/0!
($224)
55%
$141,142

-219%

#VALUE!
#VALUE!
($225)
2%
($41,776)
-93%
$173,077
-166%
$0 #DIV/0!

#VALUE!
#VALUE!
$8,513
-17%
($3,718)
123%
($2,238)
226%
($204,133)
-203%

Foreign exchange effect on cash

balances
Increase in cash and cash
equivalents
Cash and cash equivalents,
beginning of year
Cash and cash equivalents, end of
year
Change in non-cash operating
working capital
Accounts receivable
Prepaid expenses and other
current assets
Inventory and supplies
Accounts payable and accrued
liabilities
Income taxes payable
Supplemental cash flow
information
Cash taxes paid
Cash interest paid

6,729

5,662

45,724

46,234

62,969

16,735

$46,234

276%

$108,693

$62,969

$45,724

73%

$1,029

$43,720

-1,945

1,823

-87,066

38,974

54,596

-33,277

-41,342

-38,854

-74,728

12,386

31,651

43,925

8,958

10,827

$1,067
($510)

19%
-1%

$0 #DIV/0!
($42,691)
-98%
($3,768)
($126,040)

-207%
-323%

$87,873
($2,488)
($87,114)

-264%
6%
-703%

$0 #DIV/0!
($12,274)
-28%
($1,869)
-17%