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LJ International Inc. (NASDAQ/NMS: JADE)

LJ International Inc. (NASDAQ/NMS: JADE). 17 th Annual Roth Conference Investor Presentation February 2005. Forward Looking Statements.

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LJ International Inc. (NASDAQ/NMS: JADE)

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  1. LJ International Inc.(NASDAQ/NMS: JADE) 17th Annual Roth Conference Investor Presentation February 2005

  2. Forward Looking Statements Our discussion of the Company’s financial and operational outlook contains predictions, estimates and other forward-looking statements. Use of words like estimate, projection, expect, and similar expressions is intended to identify these statements. While these forward-looking statements represent our best current judgment on what the future holds, they are subject to risks and uncertainties that could cause the actual results to differ materially. By making these forward-looking statements, we undertake no obligation to update these statements for revisions or changes after the date of this presentation. In addition to the factors we will discuss later, important factors relating to our business are described in our most recent filings with the Securities and Exchange Commission.

  3. Color me BeautifulColor me LORENZO

  4. Snapshot Symbol (NASDAQ/NMS): JADE Recent price (31 Jan 05): $2.79 Forward Looking P/E Ratio: 8.30 52-week high: $5.60 Avg. Daily Vol.: 137,181 Shares outstanding: 12.2 million Market Capitalization: $34.3 million InsiderOwnership: 37.3% Analysts: 2 Source: Company Filings, Hoover’s Online and Taglich Brother’s Research Report

  5. Company Overview • Based in China and selling to primarily the U.S., LJ Intl. designs, brands, markets, retails and distributes a full range of fine jewelry • Founded on its “mine to market” strategy and commitment to quality and service, Lorenzo now sells globally • LJ Intl. offers a full range of fine jewelry in yellow or white gold, platinum or sterling silver, diamonds, and variety of rare and exotic gems, pearls and colored gemstones such as amethyst, topaz, garnet, citrine, aquamarine and peridot • LJ Intl. distributes to fine jewelers, department stores, national jewelry chains and electronic and specialty retailers throughout North America, Western Europe, Japan, Hong Kong and China • Company built initially for home shopping channels; now sells to three largest in U.S. • Growth enabled Company to add two-thirds of the top 40 retail chains in the U.S. to customer base • LJ Intl. seeking to duplicate and enhance U.S. model into China

  6. Stunning Product Lines LJI has over 40,000 different models of rings, bracelets, necklaces, earrings and pendants • Colored Gemstones • Silver Level (basic line) • Mass Market • Retail price from $29.99 to $99.99 • Gold Level (premium line) • Higher end • Big, prominent stones from 9x7 or above • Retail price from $99.99 to $299.99 • Platinum Level (platinum line) • Top quality, used by Tiffany, Cartier, Chanel, etc. • Aquamarine, Tourmaline, Imperial Topaz, etc. • Retail price from: $299.99 to $499.99 (up to $5,000) • Diamonds and Precious Stones • Fashion diamond • Ruby, sapphire, emerald

  7. In-house Creative Design Team LJI has over 20 designers in China, Hong Kong, USA and Brazil producing over 18,000 designs annually Competitions and awards: 2003 • Tahitian Pearl Trophy Asia, organized by Perles de Tahiti GIE China Branch 2002 • Final, Brooch Group • The Buyers' Favorite Diamond Jewelry Design Competition, organized by Hong Kong Jewelry Manufacturers’ Association 1999 • Gold prize, Necklace Group • The Buyers' Favorite Diamond Jewelry Design Competition, organized by Hong Kong Jewelry Manufacturers’ Association

  8. Total Vertical Integration Market • Opened own retail shops in China - ENZO • Sell directly to customers globally • No middleman Wholesaling Ensure impeccable Quality & Complete control of production lead time • Produce directly in our own factory in China • Best craftsmanship • Cost efficient Manufacturing • Direct sourcing miners from (Brazil, Africa, India, China) • Creates Economies of Scale, more favorable cost Mine

  9. Large Production Facilities With Capacity Annual Production • More than 2 million pieces of fine jewelry and 3 million carats of cut stones Size • 6 floors, spanning over 100,000 square feet in tax-free zone in Shenzhen, PRC Production Team • Over 2,500 craftsmen Production Lines • Colored Jewelry • More traditional manufacturing plant • Diamond and Precious Stones • High-tech • CAD/CAM, wax-set technology

  10. QVC Macy’s Blue-Chip Customer Base

  11. Sales & Marketing Strategies • Solid Blue Chip Customers • 1. Top 50 Retail Chain Stores /$100 million Supersellers • Zales, Sterling, Fred Myers, JC Penny, Walmart, etc. • Focus on Product Development by “push” strategy • 2. TV Shopping Channels • USA : ALL top three TV shopping channels • The top three shopping channels accounted for more that $1.8 billion in jewelry sales in the U.S. and had an approximate 5% share of the estimated $42 billion U.S. jewelry market(1) • International Network: Germany, England, Australia and Japan • “Push” sales strategy • Product development together with the Customers • No Inventory Risk (1) Source: National Jewelers Association.

  12. Sales by Product 4% 6% Others Diamond Colored Stones 90% 2003 Sales Breakdown Sales by Category Sales by Region 5% 14% 3% 17% 12% Europe Other 27% USA 48% 74% Earrings Pendants Rings Others Giftware

  13. Limited Competition • Based on pricing, quality, service and established customer relationships • LJ Intl.’s strategy is to provide competitively priced, high-quality products to high-volume retail jewelry market • United States competitors include E.E.A.C. Inc. and Fabrikant • International competitors include Pranda International and STS

  14. Competitive Advantages • Mine to market • Short production lead time • Full quality control • Niche Market • Colored Gemstones • Vs. Diamond LORENZO = Color • Cost Efficiency • China production facilities • Brazilian Background • Brazilian Mines • US Markets • China Retail

  15. Manufacturing to Retailing March 2004 - First retail shop in HK November 2004 - Flagship store in Shanghai Now - 3 stores in China Long Term strategy – 100 stores

  16. The Jewelry Market Worldwide Market size is Approximately $150 billion USA (steady) China (robust growth) • Approximately $42 billion in 2002 and expected to grow at approximately 6-7% annually • The concept of jewelry has evolved from a traditionally expensive investment to becoming a casual daily fashion • The China jewelry market has grown from $2.5 billion in 1991 to approximately $14.8 billion in 2002 • Jewelry sales in China increased 19% in 2002 • China is: • the largest consumer for platinum and jade in the world over the last 3 years • the largest consumer of diamonds in Asia • fourth largest consumer of gold in the world

  17. CHINA…We See Significant Potential • Consumer • Price range for best selling jewelry: US$250 - $500 • Average monthly salary: US$500-600 • Gold: 18K is the most popular followed by 24K • Diamond: most popular from 0.21 carat to 0.49 carat • Purchasing Power : Shanghai, Beijing, Guangzhou, Shenzhen • Buying Pattern: over 80% of surveyed consumers purchase jewelry every year • Regulatory • Strong reduction in tariffs after China entered WTO: • Zero tariffs on color gems • 20% on gold, silver and pearls (down from 31%) • CEPA • Closer Economic Partnership Arrangement (CEPA) between China & Hong Kong • Free trade agreement under WTO rules • Provides preferential access to Mainland market for Hong-Kong-based manufacturers • Exceeds China’s WTO entry commitments • Benefits only those companies registered and having manufacturing facilities in HK • The establishment of Shanghai gold, silver and diamond exchanges • Deregulation on setting up retail distribution channel, easing the process of obtaining government license

  18. What is ENZO? •    European/Foreign •    Trend Setter •   Avant-garde • Sexy……… • Target customers: • 80% female, 20% male (the gift shoppers), age 20 - 40 • Middle-class and above, working women, affluent homemakers • Monthly income of RMB4,000 (US$500) or above • Looking for high-quality and trendy jewelry • Distrustful of local jewelers and tired of going to the same jewelry chain stores such as TSL, Chow Tai Fook, etc. • Enthusiastic about imported jewelry brands

  19. ENZO appears in…

  20. Western Management Team • Lorenzo Yih, Chairman • More than 20 years of experience in the jewelry industry, including hands-on expertise in production engineering and gemstone cutting • Former President of the Hong Kong Gemological Institute of America (GIA) • Ringo Ng, CFO • Joined LJI as CFO in 1997 • former senior accountant with Moores Rowland C.A. • Betty Ho, Vice President, Corporate Development • Former senior vice president of the Strategic Capital Group (SCG) Inc., an e-commerce conglomerate in Asia • Has held various management positions with UOB Asia, SSAL and Arthur Andersen & Co. respectively • Certified Public Accountant and a member of the Hong Kong Society of Accountants and American Institute of Certified Public Accountants

  21. Annual Historical and Projected Revenue and Earnings Growth $90.0 $0.35 $80.0 $0.30 $70.0 $0.25 $60.0 (in millions) $0.20 $50.0 Revenue EPS FD $40.0 $0.15 $30.0 $0.10 $20.0 $0.05 $10.0 $0.0 $0.00 2002A 2003A 2004E 2005E Note: 2002 financial information is annualized based on 8 month audited numbers 2004 & 2005 estimates per Taglich Brothers.

  22. Strong Historical and Projected Revenue Growth (in millions) Note: 2004 & 2005 estimates per Taglich Brothers

  23. Strong Historical and Projected Earnings Growth (in thousands) Note: 4Q04 & 2005 estimates per Taglich Brothers

  24. Unaudited Audited As of As of 30 Sept 2004 31 December 2003 (in US$ million) (in US$ million) Cash 11.6 8.6 Working Capital 22.9 17.1 Total Assets 75.9 60.7 Long Term Obligation - - Shareholder's Equity 33.4 27.9 * Restricted cash of $6.3M Debt-Free Balance Sheet

  25. Significantly Undervalued vs. Sector * Pro-rated numbers or analyst forecast Source : Extracted from Yahoo! Finance

  26. Why Invest Now? • Growing Rapidly into $150 Billion Global Jewelry Market • No Significant Competition Because of “Mine-to-Market” Strategy • Significant Expansion Opportunities in both U.S. and China • Bright Macro Economic Picture in China • Chinese Company with Western Management Team • 20% Plus Historical CAGR in Revenues Since 1999 • Revenues and Earnings expected to Accelerate Going Forward • Cash-rich Balance Sheet with Zero Long-Term Debt • Trading at only 8.3x 2005 Earnings Expectations, Lowest in Sector • “Orphan Stock” Beginning to Generate Wall Street Interest

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