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

Buyer Entries to Israel 2

‘01 ‘02 ’03 ‘04 ’01 ‘02 ’03 ‘04‘01 ‘02 ’03 ‘04 4.5%+ 31%+ 30%+ 15% Compared to Previous Years In $ terms : Jan-Dec, net values, $US million Polished ExportPolished ImportRough ExportRough Import DTC 816 DTC 831 DTC 887 DTC 930 3

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

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

Finance Intensity 1997 – 2004, $US million, percent $US million 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 Detection Disclosure 9

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

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

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

Treated and Synthetic Diamonds Disclosure 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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