Challenges Facing the Diamond Industry in the Luxury Product Market

1. Challenges Facing the Diamond Industry in the Luxury Product Market Shmuel Schnitzer President, Israel Diamond Exchange President, World Federation of Diamond Bourses BASELWORLD April 1, 2005 1

2. Buyer Entries to Israel 2

3. 2004 Compared to Previous Years In $ terms : Jan-Dec, net values, $US million 15%+ 30%+ Rough Polished 4.5%+ 31%+ DTC930 DTC887 DTC816 DTC831 ‘01 ‘02 ’03 ‘04 ‘01 ‘02 ’03 ‘04 ’01 ‘02 ’03 ‘04 ‘01 ‘02 ’03 ‘04 Polished Export Polished Import Rough Export Rough Import 3

4. Global Sales, DTC Supply and Israel’s Share $US billion Global Rough Sales DTC Worldwide Sales Israel Rough Import 3.37 DTC Direct Supply to Israel 4

5. Bank Debts in Global Industry ($US billions) Israel and the World $US billions Country Comparison 2003 average, % *Rest of Industry – 3 largest centers 5

6. Finance Intensity1997 – 2004, $US million, percent Percent $US million Finance Intensity = Debt (Export+Import) Total 2004 Turnover $18.2 billion 6

7. Conflict Diamonds 7

8. Money Laundering 8

9. Treated and Synthetic Diamonds Detection Disclosure From ‘Wired’ Magazine, Sep. 2003 9

10. Treated and Synthetic Diamonds DETECTION Diamond Sure Photo courtesy of DTC 10

11. Treated and Synthetic Diamonds DETECTION Diamond View Photo courtesy of DTC 11

12. Treated and Synthetic Diamonds DETECTION D-Screen Photo courtesy of Antwerp Facets Magazine, HRD 12

13. Treated and Synthetic DiamondsDisclosure Resolution from 2004 World Diamond Congress, New York: “The WFDB resolves to cooperate fully with any other internationally recognized trade associations and companies to formulate a common standard of disclosures and nomenclature for synthetic diamonds. Furthermore, the WFDB calls upon all the laboratories to refrain from issuing grading reports for synthetic diamonds. This should be clear and unequivocal so that the consumers are fully aware of, and confident in, the nature of the product they are purchasing.” 13

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