On 29 March 2005 the Mirny District Court of the Republic of Sakha (Yakutia) enjoined transfers in shares of ALROSA Company Ltd. (“ALROSA”) held by nominee holder ZAO Depositary and Clearing Company (“DKK”), due to alleged violations and fraud in connection with many share transfers. The affected shares amount to no more than 4% of ALROSA’s total share capital.

The court acted at the request of certain individual ALROSA shareholders. These shareholders alleged that many share transfers were being made to non-shareholders without observance of the preemptive and veto rights of existing shareholders, as required for a closed joint-stock company like ALROSA. Such violations, if confirmed, would result in invalidation and rescission of the transfers concerned and any subsequent transfers. In addition, other suits have alleged fraud in connection with non-payment of the agreed consideration for various transfers.

Non-current shareholders cannot validly purchase ALROSA shares and transferees of non bona-fide shareholders can have their share purchases annulled and rescinded. Investors, especially foreign investors, should be aware of the legal consequences of acquisitions of shares of a state-owned joint-stock company like ALROSA in transactions proposed by various market intermediaries.

ALROSA cannot comment on the length of the period during which the transactions in ALROSA shares through DKK will be enjoined.

The protective measures taken with respect to certain ALROSA shares do not affect:

- Alrosa shares belonging to the Ministry of Property Relations of the Russian Federation (37%), Ministry of Management of State Property of the Republic of Sakha (Yakutia) (32%) and uluses (local districts) of Yakutia (8%);

- cannot lead to any material change in ALROSA’s shareholding structure;

- do not affect ALROSA’s business activities and its ability to fulfill its obligations, including those to its creditors.

ALROSA and its principal shareholders are cooperating fully with the Mirny District Court and the Russian law enforcement authorities in enforcement of legal requirements applicable to transfers of its shares, as a closed joint-stock company.

ALROSA cannot preclude the lawful attempts of its shareholders to exercise their rights with respect to ALROSA shares or to challenge in court fraudulent gift and sale transactions by third parties that would like to become ALROSA shareholders.