Carats Investment Guide 2016 by Carats Investments

Diamonds for your future

SAFE . SECURE . LUCRATIVE

2016

Diamonds for your future

The worldâ&#x20AC;&#x2122;s most beautiful and rare jewels, possessing the greatest potential for financial appreciation.TM

July 15 2016

To our friends, clients and investors,

The future is bright...according to experts, at no time in history has it been more important for you and your family to control and secure your financial destiny. In today’s shaky economic climate, increasingly, global investors are looking for investments with a proven record of protecting wealth from the cyclical ravages of inflation and deflation. As fiat currency eats at money’s purchasing power, the wealthy are exchanging their dollars for hard assets. This seismic movement can be detected in the precious gem industry. Never in modern history, has there been such demand for Natural Fancy Colored Diamonds. Though less heralded in the media than recent gold demand, Natural Fancy Colored Diamond appreciation is equally dramatic and sustained: the savvy investor cannot ignore this trend. Due to their increasing rarity, Natural Fancy Colored Diamonds have never been poised to appreciate more. As we pen this prologue for the 2016 edition of Carats Investments’s Comprehensive Guide to Investing

in Natural Fancy Colored Diamonds, some of the most credible media organizations in the world are now echoing what Carat Investments has been suggesting to its clients for over two decades: namely, that Natural Fancy Colored Diamonds are a desired, safe, secure and lucrative way to store and invest wealth. In recent days, The Wall Street Journal, The New York Times and The Financial Times are just a few of the media organizations reporting that “the wise and the wealthy” are now choosing to diversify their portfolio with rare investment-grade diamonds, in order to safeguard and accumulate wealth. This guide is aimed at helping you understand how to benefit from the world’s fastest growing hard-asset class. With unrivalled experience and expertise in the industry and the world, we at Carats Investments are here to help you take advantage of this opportunity: at a time in history when the potential for appreciation – and therefore the potential for safe, secure and lucrative returns – have never been greater. We hope you will take time to review this guide and contact us directly to learn more about safe, secure and portable wealth preservation and accumulation. We at Carats Investments truly believe the future is bright. We look forward to hearing from you.

Sincerely,

Diamonds for your future

Carats Investments Highlights

THE COMPANY Carats Investments provides direct access to Natural Fancy Colored Diamonds as a strategic, safe and secure hard asset investment to store and accumulate wealth. We recognize you put your future in your hands with every investment you make. Using our 4Cs of Investing - Competence, Credibility, Cost, Commitment - let us guide you every step of the way.

INVESTMENT OPPORTUNITY

CONTENTS Carats Investments Highlights

Executive Summary

Investment into Natural Fancy Colored Diamonds, a commodity that offers appreciating wealth, solidifies financial portfolios and provides a hedge against inflation. In a discussion paper titled “The Returns on Investment Grade Diamonds” dated 16 April 2013, author Luc Renneboog noted that colored diamonds have significantly outperformed the US and European stock markets, US and European real estate, US government bonds, as well as European government and corporate bonds.” 1

INVESTMENT STRATEGY

Aisa - Rise of Diamond Comsumption

Direct acquisition of investment-grade Natural Fancy Colored Diamonds to be insured and held for a suggested and/or specific time frame before liquidation on appreciation.

Our Company

INVESTMENT SECURITY Jeweler’s Board of Trade, GIA (Gemological Institute of America), DTC (Diamond Trading Company), Better Business Bureau.

LIQUIDATION STRATEGY - NFCDE.com is the Natural Fancy Colored Diamond Exchange. The website will go live in the fall of 2017. The worldwide exchange will be launched upon the closure of

3.52 CARAT PINK DIAMOND

2.72 CARAT PURPLE DIAMOND

5.32 CARAT COGNAC DIAMOND

the Argyle diamond mine in 2020. This online venue will provide ab trading platform on which Natural Fancy Colored Diamonds can be acquired or liquidated. - Major auctions held in cities globally (e.g. Sotheby’s and Christie’s) and online. - Sales to dealers and private clients via a network in the diamond industry. - Liquidation opportunities to be determined by market conditions and needs of individual investors. - Carats Investment leads the way in liquidating diamonds through our Directed Retail LiquidationTM (DRL) program. DRL reaches potential buyers through Carats’ partner company Pink Luxury. This online entity has a global reach that ensures a steady market for loose diamonds and financial benefits for savvy investors.

prices are going to increase as consumers compete for an increasingly scarce commodity. With this scenario, the future is positive and exciting for the Natural Fancy Colored Diamond investor.

COMPANY EXPERIENCE Carats Investments was the first firm in the nation to acquire a Natural Fancy Colored Diamond at the Argyle Pink Diamond Tender and to partner with the world famous Argyle mine in Australia. The company currently has expertise at the top procurement levels acquiring from many mines, including long-standing relationships which have included important suppliers such as De Beers, Rio Tinto’s Argyle mine and other mines around the world. The nation’s largest collection of Argyle Tender diamonds is housed in the vaults of Rare Investment.

DIAMOND MARKET ANALYSIS -

The Chinese market, which at compound annual growth of 32% since 2005 is the fastest-growing in the world and now the second-largest market for diamonds, with annual sales approaching $9 billion.2

- India’s diamond jewellery segment has been growing at a compounded annual growth rate of 20% over the last five years. 3

“When times are bad, diamonds can hold their value better than real estate and have the advantage of being portable.”

- Rio Tinto expects demand in China and India to continue to grow, and to represent nearly 50% of global diamond consumption by 2020. - Rio Tinto’s Argyle mine in Western Australia, the main source of the world’s supply of Natural Fancy Colored Diamonds, only has 6.5 years of production left. - Given expanding demand and constrained supply, diamond

1.97 CARAT BLUE DIAMOND

1.98 CARAT PURPLE DIAMOND

2.11 CARAT PINK DIAMOND

Diamonds for your future

Executive Summary

1.0

BUSINESS OF THE COMPANY Carats Investments is a company that offers Natural Fancy Colored Diamonds and rare jewels possessing the greatest potential for appreciation financially. Carats Investments offers this emerging hard asset commodity investment to institutional and private investors that seek to solidify their financial portfolio and leverage a hedge against inflation.

“I don’t know any business with such a good supply-demand outlook. The diamond business is the right place to be.” VARDA SHINE | EX EXECUTIVE VICE-PRESIDENT, DE BEERS GLOBAL SIGHTHOLDER SALES

Esteemed global media organizations, including The Wall Street Journal, The New York Times, and The Financial Times, have recently reported on the increasing popularity of investing in Natural Fancy Colored Diamonds among high-net-worth individuals. These reports endorse what Carats Investments has been suggesting to its client for over two decades, namely, that Natural Fancy Colored Diamonds are a desired, safe and secure way to store and accumulate wealth. In its 2012 report on the Global Diamond Industry, Bain & Co noted the continued interest in developing investment vehicles focused on diamonds as one of the major industry developments.

“Diamonds have several appealing characteristics as a potential investment tool. Investors consider them to be a ‘safe haven’ — a portable, physical asset whose value remains stable when the stock market is volatile or declining. Diamonds also offer a way to balance portfolios, since their prices do not correlate with the performance of other investments.” The report also noted that the diamond market held up with strong prices despite a weak global economy, unlike other assets.

2.0

COLORED DIAMONDS AS AN INVESTMENT VEHICLE

Investment-grade Natural Fancy Colored Diamonds continue to provide one of the most secure ‘safe havens’ in the world for investors and show their stability and resilience in uncertain market environments. These ‘Stealth Wealth’ portable hard assets have outperformed many traditional investments in recent years. The discussion paper titled “The Returns on Investment Grade Diamonds,” released in April 2013 states “colored diamonds have significantly outperformed the US and European stock markets, US and European real estate, US government bonds, as well as European government and corporate bonds.” 4

PRIVACY

Natural Fancy Colored Diamonds are at the high end in terms of rarity and value in the gem and jewelry industry. Long been considered by some as one of the investment secrets of the wealthy, Natural Fancy Colored Diamonds have the potential to be valued over a hundred times greater than White diamonds. Natural Fancy Colored Diamonds occur in saturations, hues and tones of color from the entire spectrum of the color wheel.

Countries do not require the ownership of Natural Fancy Colored Diamonds to be disclosed to any government authority. The certificates are in bearer form, there are no names, serial numbers or registration requirements.

STEALTH WEALTH Natural Fancy Colored Diamonds are currently‒ and for centuries have been considered ‒ the ultimate in portable and invisible wealth. In a recent auction, a 5-carat Blue diamond was acquired by an investor for US$10 million.

It is estimated that only

of diamonds mined in the world each year are colored diamonds.

That’s only

1 in 10,000. Diamonds for your future

2.1

ROI – RETURN ON INVESTMENT For a number of objective reasons, never in the impressive history of Natural Fancy Colored Diamond investments has the potential for appreciation (and therefore returns to investors) been greater. In a study titled Hard Assets: The Returns on Rare Diamonds and Gems published in April 2011, authors Luc Renneboog and Christophe Spaenjers noted that between 1999 and 2010, the annualized real returns for colored diamonds outperformed the stock market over the same time 5. Fancy colored diamonds have never decreased in price on a wholesale level in 35 years 6. A follow-up study titled The Returns on Investment Grade Diamonds, published in April 2013, author Luc Renneboog stated: “...in times of crisis, investment in diamonds have shown an attractive risk-return tradeoff. In spite of a small positive correlation between the diamond and the equity markets, adding diamonds to an equity portfolio still have some diversification advantages. 7 ”

3.0

MEDIA COVERAGE The Wall Street Journal article, Collectors Focus on Jewels as Investment, published 9 May 2013 is a powerful endorsement of Natural Fancy Colored Diamonds as great investment alternatives.

“Blue-chip paintings may be getting the most attention in this volatile art market, but jewels are quietly starting to shine. With gold prices down and currency values roiling, some investors and collectors are scouring for creative alternatives where they can store cash—and move it around quickly in a pinch.”

The article quoted experts as saying that “men, as well as some women, are increasingly shifting a portion of their assets into diamonds and colored gems as pure investments, attracted by jewelry’s portability and global appeal.”

4.0

WHAT THE EXPERTS AND ANALYSTS REPORT 4.1

BMO CAPITAL “Diamond prices are poised to rise for the next four years, outpacing gold 8, as increased spending on luxury goods in China, India and the Middle East outpaces supplies of these precious stones,” analysts at BMO stated. Analyst Edward Sterck puts it like this – “There’s simply been no significant [mine] discovery since the early 90s really, and that’s despite an awful lot of effort going into exploration”. According to BMO anaylsts 9, in the longer term, a lack of new supply and strong demand growth for diamonds, particularly from developing markets including India and China means that the outlook is “extremely positive.”

4.2

ANTWERP WORLD DIAMOND CENTRE “Diamond consumption is growing rapidly. China may soon surpass the U.S. as the world’s largest market by the end of 2015 as consumption increases by 25% a year in that country alone,” stated the Antwerp World Diamond Centre in February 2012.

4.3

RAPAPORT DIAMOND TRADE INDEX “A decade-long diamond investment outpaced returns in the yen, euro, and Nasdaq or Dow Jones indices,” according to Martin Rapaport’s Diamond Price Statistics Annual Report – 2011, released in February 2012.

4.4

BAIN & CO. Bain & Co is the Boston management-consulting company that conducted De Beers’ strategic review in 1999 and publishes an annual study on the global diamond industry

on behalf of the Antwerp World Diamond Centre. It said: “Diamond prices are poised to rise as demand grows at double the pace of supply through 2020 because of expanding middle class populations in China and India”.10

which are not typically investment-grade, go up in price, then Natural Fancy Colored Diamonds, the pinnacle of the diamond investment world, will most certainly rise significantly in value.

“China and India will increase their share of world diamond demand as middle class populations in the two countries will more than double to 469 million people.” Projected world demand will grow to $23 billion in 10 years from $12 billion in 201011.

5.0

4.5

At Christie’s Hong Kong office on 8 May 2012, the Martian Pink, a very rare 12-carat diamond and the largest round Pink diamond to ever appear in auction history, estimated to achieve $8 million, blew auctioneers away when the beautiful gem achieved a staggering return of $17.4 million after it sold to a private investor.

FINAM INVESTMENT “Global demand for diamonds will probably outstrip supply by 7 million carats in 2016, compared with a shortage of 1 million carats this year,” says Vladimir Sergievskiy, an analyst at Moscow-based Finam Investment. If White diamonds,

RECENT AUCTION RESULTS Colored diamond auction results around the world are poised to obtain and have been obtaining record-setting highs every year.

RECENT AUCTION RESULTS - SOTHEBY’S AND CHRISTIE’S These auction results have been obtained directly from Sotheby’s and Christie’s auctions. Estimate price

Sale price

100.20 CARAT

9.75 CARAT

18.85 CARAT

Emerald Cut White Diamond

Natural Fancy Vivid Blue Diamond

Natural Fancy Intense Yellow Diamond

APRIL 2015

November 2014

$22,090,000

$32,645,000

$997,411

$19,000,000 $10,000,000

$397,936

Diamonds for your future

6.0

7.0

RECESSION-PROOF

ECONOMIES OF RARITY TM

Within 14 months after Lehman Brothers led the largest bankruptcy in American History in September 2008, investment-grade Natural Fancy Colored Diamonds did not lose value and continued to show growth. During the same time period, investors who had invested in traditional assets such as real estate lost 40-50% of their portfolio12.

Worldwide demand for Natural Fancy Colored Diamonds is growing faster than the available supply. The increased demand for colored diamond services at the GIA illustrates the growing appeal of these gems. Senior vice president of Laboratory and Research, Tom Moses noted: “Although colored diamonds have been around for decades, the dramatic increase in their place in the consumer market in the last decade is unprecedented.” Supply, meanwhile, is running low because of maturing mines and the fact that only one out of 10,000 diamonds mined is a Natural Fancy Colored Diamond.

In the past 41 years, the lowest performance investment grade Natural Fancy Colored Diamonds had was 11% growth in a single year13. Natural Fancy Colored Diamonds are considered a low-risk hard asset investment with high upside potential. They also provide investors with a balance of security and performance that cannot be influenced by credit markets. As beautiful as they are, Natural Fancy Colored Diamonds can provide the security and investment potential investors are looking for when many other markets have become less reliable.

“Diamond prices have been less volatile than gold prices, and diamond jewelry may be a better investment avenue for consumers” VARDA SHINE | EX EXECUTIVE VICE-PRESIDENT, DE BEERS GLOBAL SIGHTHOLDER SALES

Economies of RarityTM refers to a structural market condition of ‘high demand to low supply’ moving toward ‘high demand to no supply’, as is the case with Natural Fancy Colored Diamonds. Laws of economics show us that whenever there is such a differential between supply and demand there is only one way for prices to go, and that is up. As the gap between supply and demand widens over the medium to long term, prices will continue to increase substantially.

PRODUCTION DECREASING

MILLIONS OF CARATS

The above graph indicates worldwide reductions in carats of diamonds mined.

8.0

SUPPLY-MINES The world’s biggest and mature diamond mines still producing are near the end of their life cycle. Consequently, according to sources, new supplies may only come via underground mining at these mature mines, an operation that may cost more than it’s worth for most diamond companies. BHP Billiton and Rio Tinto, two of the largest mining companies in the world, are divesting their diamond companies. In early 2013, BHP Billiton received regulatory approval completing the sale of its Ekati diamond mine in Canada to Harry Winston Diamond Corp, now known as Dominion Diamond Corp, Forbes reported. And on 3 June 2013, news that Rio Tinto, the world’s third-largest diamond producer, could float its diamond division on the London Stock Exchange as early as fall of 2013 was all over the media. As mining conglomerates get out of the diamond business, retailers rush to secure supplies. Harry Winston wasn’t the only retailer to strategically secure their mid-term supply of rough diamonds. That same week, Chinese retailer Chow Tai Fook signed a two-year deal with Alrosa, Russia’s legendary diamond mining company to supply rough diamonds and ultimately secure their rank in the marketplace. Diminishing supply from the mines and increasing demand from the entire world will boost prices of Natural Fancy Colored Diamonds - making for an attractive, long-term investment target.

The Argyle mine, scheduled to close in 2020, produces 90% of the world’s pink diamonds and an undisclosed number of champagnes.

“If you scratch the surface of diamond supply and demand you can get very optimistic very quickly about it. And that’s why we see this demand for diamonds as an investment class.” MATT MANSON, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF STORNOWAY DIAMOND CORP.

9.0

NATURAL FANCY Colored DIAMONDS Natural Fancy Colored Diamonds are the most concentrated form of wealth on the planet - nothing is smaller and more valuable. Natural Fancy Colored Diamonds can be traded globally for currency and at values that appear to continue to appreciate with no end in sight.

9.1

PINK AND CHAMPAGNE DIAMONDS Mines around the world are seeing diminished resources before ultimately closing. The Argyle mine in Australia is the largest producing mine in the world by volume and is the only reliable source for Pink and Champagne diamonds on the planet. Owner Rio Tinto extended the mine’s life to at least 2020. Its closure means the only reliable and consistent source of Pink and Champagne diamonds on the planet will also disappear. Exactly a decade ago, Carats Investments pioneered the way to investing in Pink diamonds, always maintaining to investors that due to their rarity and beauty, coupled with high demand, these precious diamonds are poised for great appreciation. Today, Carats Investments predictions have been confirmed in The Wall Street Journal, when a Rio Tinto executive declared Pink diamond prices at Argyle’s Annual Pink Diamonds Tender have reached an unprecedented level.

9.2

GOLDEN DIAMONDS

As supplies continue to diminish, it is anticipated that the prices for rare Yellow and Golden diamonds and Yellow variations will continue to increase.

9.3

HAZEL DIAMONDS

Carats Investments created the Hazel DiamondTM category after our industry-leading diamond advisors and valuators would occasionally stumble upon a variation of Champagne diamonds that didn’t fit the typical grading structure. Hazel DiamondsTM often resemble the color amber, producing a hue that is Champagne to Golden near the centre of the diamond and brown or dark green on the outer part of the diamond (or vice versa). As supply declines over the next decade, we foresee the values of Hazel Diamonds rising dramatically. Because all Brown variations are still currently priced below White diamonds, they remain for the moment an affordable alternative for many investors.

9.4

Beautiful Yellow diamonds, Golden diamonds and other variations are also facing the same supply-demand imbalance With the same rising price trend as Pink diamonds, Yellow variations and Golden Diamonds are seeing auction results that are two or three times above estimates.

2.93 CARAT PURPLE DIAMOND

Meanwhile, at a Christie’s auction on 17 April 2012, a 7.33-carat Yellow diamond with an estimate of $300,000, achieved a hammer price of $965,946. Another example, the Gem Diamond’s Ellendale mine achieved an average price of $5,153 per carat for rough fancy Yellow diamonds during the period; compared to $2,791 per carat in Q3 2010, an increase of 84% in just one year14.

FLAWLESS DIAMONDS Flawless diamonds are simply perfection perfected. But while clarity is an important factor in determining the value of a White diamond, the presence of

7.31 CARAT CHAMPAGNE DIAMOND

3.51 CARAT GOLDEN DIAMOND

inclusions or blemishes is not critical in Natural Fancy Colored Diamonds because color often conceals them or sometimes even enhances the diamond’s beauty. Nonetheless, diamonds with higher clarity grades are more valuable, with the exceedingly rare Flawless-graded diamonds fetching the highest price. In March 2013, Mouawad’s 637-carat L’Incomparable diamond necklace ‒ featuring a 407.48-carat “Incomparable” diamond as centre stone - sold for US$55 million, earning it the Guinness World Record title as the world’s most expensive necklace. The iconic modified shield step-cut Natural Fancy Yellow Diamond is the largest internally flawless diamond ever graded by the Gemological Institute of America, reported Forbes.

9.5

THE RISE OF CHAMPAGNE DIAMONDS

“Global diamond demand is forecasted to grow at a pace we have never seen before, driven by growth in Asia and coupled with tighter supplies in the absence of any new big diamond mines. When we look at the next 10 years, there’s no doubt demand is going to outweigh supply.” VARDA SHINE | EX EXECUTIVE VICEPRESIDENT, DE BEERS GLOBAL SIGHTHOLDER SALES

Today, in our view, the color that possesses the greatest potential for appreciation of all the Natural Fancy Colors available are what were formerly known as Brown diamonds. In the mid-80s, Rio Tinto branded them as “Champagne,” “Cognac” and “Chocolate” diamonds, cleverly creating a new category of goods now highly sought after by luxury jewellers. Currently Champagne diamonds are one of the few remaining classifications of Natural Fancy Colored Diamonds that are valued less than White diamonds. Due to their growing popularity and demand - from the jewelry marketplace and savvy collectors to the Hollywood red carpet - these unique and versatile shades of color are predicted to not only meet but quickly exceed the value of White diamonds. Significant is the fact that all color classifications of Natural Fancy Colored Diamonds began their investment values below that of the White diamond baseline for value.

9.6

DIAMONDS IN THE ROUGH Carats Investments is a highly respected international diamond company with global contacts and direct access to rough and polished diamonds. Rough diamonds come directly from mines around the world and can be purchased and held in the rough form or cut and polished to exact specifications. For more information on investing in rough, contact Carats Investments. Diamonds for your future

Not rocket science

just simple economics.

Diamonds for your future

Asia

10.0

RISE OF CONSUMPTION IN ASIA Asia including China and SE Asia has a population of over 2 billion people and is quickly becoming the #1 diamond and jewelry market in the world.

“While the supply of new diamonds is not expected to rise, demand from India and China is expected to increase steadily.”

The number of high net worth individuals (HNW) in Asia is growing at the fastest pace in the history of the world and they have an insatiable appetite for luxury goods, and the #1 luxury good available is diamonds – which is the most concentrated form of wealth on the globe. Diamonds are quickly becoming recognized as an asset class by the Asian market. As the real estate markets in China and SE Asia stall out, the Asian investor is realizing that diamonds – which are often called ‘real estate in your pocket’, have the potential to continue to outperform all other asset classes, and offer a safe and secure method of diversification. Sotheby’s and Christy’s hold several diamond auctions throughout the year in Hong Kong and Singapore, and record prices are being set for natural fancy colored diamonds as well as white diamonds. Individuals and institutional investors are bidding much higher than estimated values at auctions leading to new records – the sky is the limit!

10.1

SINGAPORE - CARAT’S GATEWAY IN TO ASIA Singapore is recognized as the #1 country in the world to do business and the natural choice for Carat’s to open it’s international headquarters as the company expands in to Asia. With a population of over 5 million people that predominantly speak English, it is easy to navigate the Singaporean business world. The corporate governance, as well as the safety and security of the country, are rated as high as any other country in the world – the perfect place to work and to sell diamonds! Within a 5 hour flight of Singapore are located over 2 billion individuals in several different countries. The GDP per person of these countries is all increasing and they are looking for luxury goods, with diamonds and diamond jewelry being on the forefront. With $100’s of billions of dollars being managed for private and institutional investors, and over 300 banks and financial institutions being located within Singapore, diamonds as an asset class are quickly gaining traction, considering other assets do not show the same potential for return.

Carats is very proud to be a part of the Singapore business landscape, and as we expand across ALL of Asia, the opportunities to bring the #1 luxury item, the #1 asset class, to the #1 market in the world, are endless!

“The investment De Beers has put into India has been rewarded over the last five years with over 20 to 30% percent growth.” STEPHEN LUSSIER | CEO FOREVERMARK

11.0

THE DIAMOND DECADE We are in the midst of the “Diamond Decade”- the years 2010-2020 De Beers sees as very good for diamonds due to projections of demand outpacing supply. Combine this with the fact that world economies will experience massive growth over the next decade, more people will accumulate more wealth than ever in the history of mankind. Millions of new middle and high-class consumers in China, India and Russia will create unprecedented demand for Natural Fancy Colored Diamonds. As supplies become limited, prices will rise.

12.0

RISE OF ENGAGEMENT RINGS AS AN INDICATOR Engagement rings have been the mainstay of the diamond industry and are an accurate barometer of a country’s wealth and disposable income.

“If there is a problem, people want to feel like they can escape. You can’t do that with a Rodin tucked under your arm, but think about how a tiny a jewel is— you can slip it in your pocket and walk away.” JUDITH PRICE | PRESIDENT, NATIONAL JEWELRY INSTITUTE

2.03 CARAT GOLDEN YELLOW DIAMOND RING

For example, from 1940 to 1990, the number of American brides receiving diamond rings went from 10% to 80%, and in Japan, brides receiving diamond rings went from 6% to 80% over a period of 30 years. These years also had the most significant rise in the GDP and economic growth. Now, the world’s most populous country 20, China, is adopting the diamond ring as a symbol of love and marriage. “Chinese couples are rapidly adopting modern Western traditions which also include white lace gown and tuxedo as wedding attire and diamond jewelry as gifts,” said Principal of Bain & Co’s Moscow Office, Olya Linde. “By some estimates, already 30% of the brides in China buy a diamond engagement ring.” Asian countries are not only choosing to continue to invest in Natural Fancy Colored Diamonds as they have done for centuries, but with the new popularity of Natural Fancy Colored Diamonds and engagement rings, they are choosing to wear their investments.

13.0

FOCUS ON DIAMONDS AS INVESTMENTS In its 2012 report on the Global Diamond Industry, Bain & Co noted the continued interest in developing investment vehicles focused on diamonds as one of the major industry developments. “Diamonds have several appealing characteristics as a potential investment tool. Investors consider them to be a ‘safe haven’ – a portable, physical asset whose value remains stable when the stock market is volatile or declining. Diamonds also offer a way to balance portfolios, since their prices do not correlate with the performance of other investments,” said the report. It also noted that the diamond market held up with strong prices despite a weak global economy, unlike other assets. “Some investors are looking for innovative new ways to capitalize on this trend.”

3.71 CARAT PINK DIAMOND RING

1.98 CARAT PURPLE DIAMOND RING

Diamonds for your future

Carats Investments Our Tradition of Excellence Offering you the worldâ&#x20AC;&#x2122;s most beautiful and rare jewels, possessing the greatest potential for financial appreciation.TM

Carats Investments clients have come to rely on the Company to provide investors with Natural Fancy Colored Diamonds and rare jewels of unrivalled beauty and investment potential. We provide our clients with our coveted collection of rare jewels at values that continue to defy comparison generation after generation.

14.0

14.3

HISTORY

ABOUT THE COMPANY

Carats Investments is an international diamond house operating from its head office located at the World Trade Centre in beautiful Vancouver, British Columbia, Canada. The parent company, Carats Investments Inc., has been established in the diamond business since 1989, and maintains the highest credit rating with the Better Business Bureau and Jewelers Board of Trade. The group of companies has brokered thousands of diamonds worth hundreds of millions of dollars to discerning clients around the globe.

Carats Investments is a division of Carats Investments Inc., and provides a strong commitment to its clients, significant personal vested interests, high innovation, close personal ties to company suppliers and customers and the ability to respond and adjust rapidly to market changes.

14.4

MANAGEMENT TEAM Carats Investments would like to introduce you to its stellar management team with collectively more than 50 years in the diamond business and over 20 years at De Beers. The credibility, history and depth of industry knowledge that Carats Investments brings to this sector will ensure the position of the Company as it leads its stakeholders towards a greater accumulation of important

14.1

BUSINESS MODEL With our privileged connection to the industry’s principal mines and polishing companies, we are able to supply certified, conflict-free Natural Fancy Colored Diamonds direct to investors at the most desirable acquisition values in the marketplace today.

assets.

Carats Investments houses the nation’s largest collection and inventory of Natural Fancy Colored Diamonds for its investors and clients.

14.2

MISSION STATEMENT Our mission and commitment to our clients is our steadfast pursuit on their behalf, of the world’s most beautiful and rare jewels, possessing the greatest potential for financial appreciation.

14.0 14.5

mines and polishing companies, we are able to supply 14.8

STRATEGIC RELATIONSHIPS HISTORY WITH SIGHTHOLDERS Carats Investments is an international diamond house

certified, conflict-free Natural Fancy Colored Diamonds INVESTOR PROTECTION PACKAGE

operating from its head office locatedstrategic at the World Trade Carats Investments enjoys long-term relationships Centre in beautiful Vancouver, British Columbia, Canada. with sightholders all over the world that enhance the ability The parent company, Carats Inc., has been of the Company to source theInvestments finest investment-quality established in Colored the diamond business since 1989,our andclients Natural Fancy Diamonds. This benefits maintains the highest credit rating with the Better as these relationships enable the Company to offer the Business Bureau and Jewelers at Board of Trade. wisest investment opportunity the best value.The group of companies has brokered thousands of diamonds worth hundreds of millions of dollars to discerning clients 14.6 around the globe.

ASSOCIATIONS OF THE COMPANY

Management is in charge of brokering diamonds worth 14.1 millions of dollars to the public annually. As a result they BUSINESS MODEL are members of the following associations where they With our the privileged maintain highestconnection ratings: to the industry’s principal

direct to investors at the most desirable acquisition values in Carats Investments offers the world’s leading investor the marketplace today. protection package offered in the industry today. As part Carats Investments houses philosophy the nation’sand largest collection of the company’s operating commitment anditsinventory of Natural Fancy Colored for its to clients, Carats Investments offers a Diamonds 30-day no-fault investors and clients. satisfaction policy. ‘Quality 14.2 Assurance’ is also a part of the company’s investor protection program, which is why Carats Investments maintains MISSION STATEMENT an ongoing association with the Gemological Institute of America, the and world’s leading gemtograding laboratories and Our mission commitment our clients is our steadfast educational facilities. pursuit on their behalf, of the world’s most beautiful and rare jewels, possessing the greatest potential for financial With the input, assistance, documentation and certification appreciation. from the Gemological Institute of America, Carats Investments clients can be assured that their investment is backed by the 14.3 world’s leading laboratory and educational facility. This is one ABOUT THE COMPANY more step in ensuring Carats Investments’s commitment to providing the finest investment-quality Natural Fancy Colored Carats Investments is a division of Carats Investments Inc., Certified Diamonds possessing the greatest potential for and provides a strong commitment to its clients, significant appreciation.

14.9 Better Business Bureau

Jeweler’s Board of Trade

14.7

CONFLICT FREE - OUR GUARANTEE TO YOU Carats Investments only offers diamonds that have been certified by the Kimberley Process as conflict-free. Every investment-grade diamond comes with a Kimberley Process certificate.

GIA REPORT CHECK Established in 1931, the Gemological Institute of America is the world’s foremost authority on diamonds, colored stones, and pearls. The GIA exists to protect all purchasers of gemstones, by providing the laboratory services, education, research, and instruments needed to accurately and objectively determine gemstone quality. GIA’s mission is to ensure the public trust in gems and jewelry by upholding the highest standards of integrity, academics, science, and professionalism. The investment-quality Natural Fancy Colored Diamonds offered by Rare Investment are graded by gemological laboratories recognized and respected by the GIA. Every Carats Investments diamond is numbered and authenticated and comes with a GIA Certificate in a tamper-proof package.

14.10

LASER INSCRIPTION SERVICES For authentication and identification purposes, Carats Investments-quality diamonds are microscopically branded with a GIA number on the girdle of the diamond. The laser inscription is invisible to the naked eye and ensures the diamond is natural, untreated, conflict-free and responsibly sourced and manufactured. This is a valuable feature because investors can immediately verify quality, credibility and the authenticity of their diamond in seconds by inserting the certificate number and carat weight in the following field http://www.gia.edu/reportcheck.

14.11

TAMPER-PROOF SERVICE Carats Investments, in association with the Gemological Institute of America, provides each investor with tamperproof packaging that, when an owner takes possession of their investment, permits the diamond to be seen next to its description in a hard plastic case that is sealed and cannot be compromised.

15.0

LIQUIDATION STRATEGY Liquidity in Natural Fancy Colored Diamonds can be achieved by liquidating the diamonds through various channels. It is recommended that, in order to realize a maximum return on investment on Natural Fancy Colored Diamonds, the investment is held for a period of five to 10 years or longer, with most recommendations centreing around the closure of the Argyle Diamond mine in 2020 and beyond when in many respects the world supply of Natural Fancy Colored Diamonds from the mine will be gone.

15.1

INTERNATIONAL AUCTION HOUSES The best known and most reliable channels to liquidate diamonds are the large international auctions held in major cities. Auction houses such as Sotheby’s, Christie’s, Bonham’s, Doyle or Waddington’s handle much of the global sales of investment-grade diamonds. It is not just the large auctions houses that feature colored diamonds. Smaller auctions welcome colored diamonds of

all sizes and quality and are always on the lookout for them. In October 2010, a small Canadian auctioneer auctioned off a Pink diamond for $2.3 million, setting a Canadian record. As there is a growing interest in colored diamonds in Asia, investment-grade diamonds are achieving very high valuations at auctions there. Sotheby’s and Christie’s host auctions reguarly in those markets.

15.2

PRIVATE AND ONLINE SALES Private and online sales are a third option when an investor wishes to liquidate a diamond. They can sell to private clientele or jewelers who are always interested in purchasing rare Natural Fancy Colored Diamonds. Online sales can also be an excellent way to liquidate. People have successfully realized a strong Return on Investment (ROI) when listing colored diamonds on eBay, Amazon and others.

15.3

NFCDE.COM Carats Investments will launch the Natural Fancy Colored Diamond Exchange (NFCDE.com) in Autumn 2017. This online venue will provide a global platform for acquiring and liquidating Natural Fancy Colored Diamonds upon the closure of the Argyle diamond mine.

15.4

DIRECTED RETAIL LIQUIDATION If unforeseen circumstances put a client in a position of personal misfortune that require them to move their assets into a cash position, Carats Investments could help facilitate the sale for a minimal fee via our Directed Retail LiquidationTM (DRL) program. DRL reaches potential buyers through Carats Investments partner companies Carats and Pink Luxury. These online entities have a global reach that ensures a steady market for loose diamonds and financial benefits for savvy investors.

Diamonds for your future

15.5

DIRECTED RETAIL LIQUIDATION

Directed Retail LiquidationTM (DRL) reaches potential buyers through Carats Investments partner company Pink Luxury. This online entity offer magnificent ready-made and bespoke jewels created with Natural Fancy Colored Diamonds. Their international reach ensures a steady market for loose diamonds and financial benefits for savvy investors.

15.6

it becomes a personal item that brings increased value to its owner. For generations, wealthy families have placed emphasis on heirloom-quality family jewels as a form of inheritance for the next generation and as “stealth wealth.” During times of economic and political unrest, small portable forms of wealth are an undetectable hard asset that can be traded internationally and exchanged for currency the world over. In recent times, Elizabeth Taylor’s amazing collection of rare and precious set gems achieved a total value of $137.2 million for her heirs.

JEWELRY SETTINGS FOR RARE DIAMONDS Carats Investments has created beautiful jewelry settings for some of its colored diamond clients. When set in a piece of jewelry, the diamond becomes more than investment;

“Although colored diamonds have been around for decades, the dramatic increase in their place in the consumer market in the last decade is unprecedented.”

“The value of rarity is the most priceless factor in the world of jewerly today and as supply tightens, price will be driven up.” VIVENNE BECKER | BRITISH JEWELRY HISTORIAN

6.05 CARAT BLACK DIAMOND RING

TOM MOSES | SENIOR VICE PRESIDENT OF GIA LABORATORY AND RESEARCH

0.25 CARAT PINK DIAMOND RING

16.0

THE OPPORTUNITY Many of the large players in the diamond industry have begun to treat diamonds as a commodity. Prices and market fluctuations have been tracked for years and regulators feel that diamonds are ready to enter the investment stage as a recognized and quantifiable investment vehicle.

these have become the gems that everyone covets.” Carats Investments has an advantage in the market due to its long history of relationships with some of the world’s major mines as well as sightholders the world over. Our reputation and ability to discern top investment-grade diamonds has been earned from over a quarter of a century in the business.

As discussed, Natural Fancy Colored Diamonds are becoming increasingly rare and it is anticipated that prices will rise, not in small increments but in astounding leaps as sources dry up and supplies become virtually non-existent. Investments into Natural Fancy Colored Diamonds are becoming more sought after than gold or oil and gas for their high returns and lack of a downturn. In a discussion paper titled “The Returns on Investment Grade Diamonds” dated 16 April 2013, author Luc Renneboog noted that colored diamonds have significantly outperformed the US and European stock markets, US and European real estate, US government bonds, as well as European government and corporate bonds.” 22 Gary Schuler Senior Vice-President and Head of Jewelry at Sotheby’s, said: “Whether it’s their visual appeal, the prospect of seeing a big jump in value, or just the desire to own something that almost nobody else in the world possesses,

“Collectors in China have also catapulted asking prices for colored diamonds— particularly in rare shades of pink and blue. Christie’s says the last time its $39 million ‘Princie’ pink diamond came up for auction in 1960, it sold for $1.3 million.”

Diamonds for your future

Renneboog, Luc. 16 April 2013. “The Returns on Investment Grade Diamonds.” Discussion paper series. No. 2013-025. Tilburg University

Linde, O. and Wetli, P. “Diamonds Sparkle for the Next Billion Consumers.” Forbes, 7 February 2013

The Times of India, 22 August 1212

Renneboog, Luc. 16 April 2013. “The Returns on Investment Grade Diamonds.” Discussion paper series. No. 2013-025. Tilburg University

Tilburg University–Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Centre (TILEC) http://papers.ssrn.com/sol3

/papers.cfm?abstract_id=1845446 6 Rapaport–http://www.diamonds.net/news/NewsItem.aspx?ArticleID=25357 7

Renneboog, Luc. 16 April 2013. “The Returns on Investment Grade Diamonds.” Discussion paper series. No. 2013-025. Tilburg University

BMO Capital Markets, Edward Sterck, Research Analyst, Diamond Demand in India, China to Stay Robust: Study

10 Diamond Industry Report, 2011. Bain & Co. Inc 11 http://www.bloomberg.com/news/2011-12-09/diamonds-to-rise-as-demand-expands-at-double-supply-bain-says.html 12 CNN http://money.cnn.com/2009/02/12/real_estate/Latest_median_prices/index.htm National Association of Realtors 13 http://www.prweb.com/releases/elite-diams/rock-solid-investments/prweb9082710.html 14 http://www.israelidiamond.co.il/english/News.aspx?boneId=918&objid=10131&cat=4. Gem Diamonds is a leading global producer of high value diamonds. The Company

owns two production mines, the Letšeng mine in Lesotho and the Ellendale mine in Australia, as well as the Ghaghoo mine, currently in development in Botswana

15 RBC Wealth Management/Capgemini 16th Annual World Health Report 2012 16 Roberts, F. 2012. Luxury Remains Resilient in the Face of Economic Turbulence. http://blog.euromonitor.com/2012/10/luxury-remains-resilient-in-the-face-of-

economic-turbulence.html (1 October 2012)

17 Roberts, F. 2012. Luxury Remains Resilient in the Face of Economic Turbulence. http://blog.euromonitor.com/2012/10/luxury-remains-resilient-in-the-face-of-

economic-turbulence.html (1 October 2012)

18 Linde, O. and Wetli, P. “Diamonds Sparkle for the Next Billion Consumers.” Forbes, 7 February 2013 19 Rio Tinto Annual Report 2012 20 China’s population was 1,347,350,000 as of 31 December 2011 or 19.17% of the global population according to official government estimates 21

As of 2010, the world’s largest diamond company, De Beers had a 40% market share in the global diamond industry

22 Renneboog, Luc. 16 April 2013. “The Returns on Investment Grade Diamonds.” Discussion paper series. No. 2013-025. Tilburg University

Diamonds for your future