Challenges Facing the Diamond Challenges Facing the Diamond Industry in the Industry in the

Luxury Product MarketLuxury Product Market

BASELWORLDBASELWORLD April 1, 2005April 1, 2005

Shmuel SchnitzerShmuel SchnitzerPresident, Israel Diamond ExchangePresident, Israel Diamond Exchange

President, World Federation of President, World Federation of Diamond BoursesDiamond Bourses

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Buyer Entries to Israel

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1996 1997 1998 1999 2000 2001 2002 2003 20042

3,375

1,017

1,782

4,529

1,622

4,395

2,389

5,2095,509

3,955

2,234

3,407

5,150

2,920

3,562

6,333

3,375

1,017

1,782

4,529

1,622

4,395

2,389

5,2095,509

3,955

2,234

3,407

5,150

2,920

3,562

6,333

‘01 ‘02 ’03 ‘04 ’01 ‘02 ’03 ‘04 ‘01‘ 02’ 03‘ 04 ‘01 ‘02 ’03 ‘04

4.5%+

31%+

30%+

15%+

2004 Compared to Previous YearsIn $ terms : Jan-Dec, net values, $US million

Polished Export Polished Import Rough Export Rough Import

DTC816

DTC831

DTC887

DTC930

3

0.930.891.070.71

1.19 1.180.82 0.84

5.15

4.003.80

2.72

3.87 4.16 4.40

5.695.50

4.64

3.35

5.245.67

4.455.10

9.509.00

6.906.60

8.448.80 8.50

6.85

0.00

2.00

4.00

6.00

8.00

10.00

12.00

1997 1998 1999 2000 2001 2002 2003 2004

DTC Direct Supply to Israel

Israel Rough Import

DTC Worldwide Sales

Global Rough Sales

Global Sales, DTC Supply and Israel’s ShareGlobal Sales, DTC Supply and Israel’s Share

$$US billionUS billion

3.37

4

USA21%

India31%

Israel20%

Belgium28%

Bank Debts in Global Industry$(US billions )

2.4

0.52.9

0.71

3.1

0.82

3.6

0.88

3.6

1.04

3.6

1.06

4.4

1.15

4.6

1.43

4.9

1.47

5.5

1.5

6.9

1.6

7.7

1.8

0

1

2

3

4

5

6

7

8

9

10

93 94 95 96 97 98 99 '00 '01 '02 '03 '04

Rest of Industry Israel

Israel and the World

$US billions

Country Comparison

2003 average% ,

*Rest of Industry – 3 largest centers5

Finance Intensity1997 – 2004, $US million, percent

$US million

1,7821,5961,4961,4701,430

1,1501,0601,040

10.7%

13.2%

10.6%11.1%

13.7%

9.8%11.0%

10.4%

0

500

1,000

1,500

2,000

2,500

3,000

1997 1998 1999 2000 2001 2002 2003 2004

0%

3%

6%

9%

12%

15%

average annual debt

finance intensity

Percent

Finance Intensity =

Debt(Export+Import)

Total 2004 Turnover

$18.2 billion

6

Conflict Diamonds

7

Money Laundering

8

Treated and Synthetic Diamonds

From ‘Wired’ Magazine, Sep. 2003

Detection

Disclosure

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Treated and Synthetic Diamonds

Diamond Sure

Photo courtesy of DTC

DETECTIONDETECTION

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Treated and Synthetic Diamonds

DETECTIONDETECTION

Diamond View

Photo courtesy of DTC

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Treated and Synthetic Diamonds

DETECTIONDETECTION

D-Screen

Photo courtesy of Antwerp Facets Magazine, HRD

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Treated and Synthetic DiamondsDisclosure

Resolution from 2004 World Diamond Congress, Resolution from 2004 World Diamond Congress, New York: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.”

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