Carats Investments Business Plan (Confidential Document ) by CaratsInvestment

CARATS INVESTMENTS INC.

The future

bright BusinessPlan

Diamonds sparkle for the "next billion" consumers

CARATS INVESTMENTS INC.

CARATS INVESTMENTS INC. Highlights

Business of the Company

Sales of investment grade diamonds & jewelry to a global clientele.

Place of Business

Head Office in World Trade Center, Vancouver BC

History

Over 25 years in business procuring diamonds and selling to collectors.

Opportunity

Profit from diamonds sales and investment as demand soars while supplies fall. Demand for diamonds may grow at double the pace of supply through 2020, according to Bain & Co .

Business Model

Online website with diamonds, gems and jewelry that undercuts Blue Nile.

Demand is Growing

The CEO of the De Beers Group, Philippe Mellier, stated that diamond jewelry demand grew 7 percent in the U.S. and 18 percent in China in the past year alone. A steady demand in the United States, paired with an ever growing appetite for diamonds in China and India, are some of the factors expected to cause a major gap in global supply and demand, sending diamond prices through the ceiling by 2018.

Major Mines are Closing

At the same time that demand is growing, some of the world’s major 2

diamond mines are closing due to the depletion of diamonds. Only around 30 significant diamond mines are in production, according to Petra Diamonds, and a tier-one mine hasn’t been found since the 1990s, despite billions spent on exploration. De Beers estimates that the success rate for finding an economic diamondiferous mine is around 1pc. Colored Diamonds

White Diamonds

The gem world is on fire. Colored diamonds are the world’s most expensive 3 stones and have shown “significant” gains in 2014 , setting astounding sales records. A 14.82-carat orange diamond sold for $36 million at Christie’s International in Geneva in November 2013, setting a record $2.4 million a carat. The same month, Sotheby’s sold the Pink Dream, a 59.6-carat pink stone, for $83 million. The mainstay of the diamond business, white diamonds can be the front drivers of revenues. Engagement rings, anniversary gifts, are for life’s special moments and sought after for heirlooms, making them a great investment.

Capital Requirement

Phase 1: $3 million – 10 million shares at $0.30

Use of Proceeds

Diamond Fund Set Up, Asia Development/Partnerships, Sales & Marketing, Website/App, Collateral Materials, General & Admin

Bain & Co. is one of the world’s top management consulting firms and publishes annual diamond reports. Rio Tinto has stated that it will close the important Argyle Mine in Australia in 2018. This mine has been one of the main sources of investment grade diamonds including rare pink and champagne colored diamonds. 3 Rapaport is the primary source for diamond pricing and market information. 2

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TABLE OF CONTENTS 1

EXECUTIVE SUMMARY .......................................................................................................................................................................

1.1 BUSINESS PLAN INITIATIVES ..............................................................................................................................

1.2 OVERVIEW OF THE DIAMOND MARKET TODAY .....................................................................................................

1.3 PRICES RISE ...................................................................................................................................................

1.4 EXPLOSIVE GROWTH........................................................................................................................................

1.5 SPENDING POWER ..........................................................................................................................................

1.6 COLORED DIAMONDS ......................................................................................................................................

1.7 COLORED GEMSTONES ....................................................................................................................................

BUSINESS MODEL...............................................................................................................................................................................

2.1 BUSINESS MODEL DEFINED ............................................................................................................................

2.1.1 3

Key Activities........................................................................................................................................ 10

COMPANY DESCRIPTION ....................................................................................................................................................................

3.1 RARE INVESTMENT HEADQUARTERS .................................................................................................................

3.2 COLIN FERGUSON, CHAIRMAN, CEO & FOUNDER...............................................................................................

3.3 KIM HELMAN, CO-PRESIDENT.........................................................................................................................

3.4 JAMIE YASKIW, CO-PRESIDENT........................................................................................................................

3.5 BRYAN KERRISON, SENIOR VICE PRESIDENT .......................................................................................................

3.6 RUI SUN, VICE PRESIDENT ASIA BUSINESS DEVELOPMENT ....................................................................................

3.7 ORGANIZATION STRUCTURE............................................................................................................................

3.8 DIAMOND SIGHT OFFICE STRATEGY..................................................................................................................

3.9 ROLL OUT SUMMARY ....................................................................................................................................

3.10 SECURITY ....................................................................................................................................................

MARKET RESEARCH............................................................................................................................................................................. .21 4.1 COLORED DIAMOND INDUSTRY RATE OF RETURN................................................................................................

4.2 COLORS & TRENDS IN DIAMONDS....................................................................................................................

4.3 ONLINE SALES AT BLUE NILE...........................................................................................................................

4.4 DIAMOND MARKET IN CHINA..........................................................................................................................

4.5 CHINA DIAMOND DEMAND FORECAST..............................................................................................................

4.6 ADOPTION OF WESTERN CONSUMPTION HABITS ................................................................................................

4.7 DIAMONDS IN THE CHINESE WEDDING MARKET .................................................................................................

4.8 CHINA, WORLD’S GREATEST LUXURY MARKET ...................................................................................................

4.9 CHINA LUXURY GIFT GIVING ...........................................................................................................................

4.10 CHINA LUXURY BUYING ON THE INTERNET .........................................................................................................

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4.11 POPULARITY OF ONLINE SHOPPING IN CHINA .....................................................................................................

4.12 DEMOGRAPHIC OF CHINESE LUXURY BUYERS .....................................................................................................

4.13 CHINA’S BIGGEST CITIES OF LUXURY BUYING .....................................................................................................

4.14 COMPETITION ..............................................................................................................................................

4.15 SWOT ANALYSIS .........................................................................................................................................

MARKETING PLAN.............................................................................................................................................................................

5.1 STRATEGY ...................................................................................................................................................

5.2 TACTICS ........................................................................................................................................................

5.3 PROGRAMS .................................................................................................................................................

5.4 BRANDING STRATEGY ....................................................................................................................................

5.4.1

Brand Vision.......................................................................................................................................

5.4.2

Brand & Design Consultant.................................................................................................................. 40

5.4.3

Unique Selling Proposition (USP)......................................................................................................... 40

5.5 MARKETING MIX..........................................................................................................................................

5.6 WEB STRATEGY............................................................................................................................................

5.7 WEB PLAN ..................................................................................................................................................

5.8 INTERNET MARKETING...................................................................................................................................

5.9 SEARCH ENGINE OPTIMIZATION.......................................................................................................................

5.10 SOCIAL MEDIA .............................................................................................................................................

BREAKING NEWS...............................................................................................................................................................................

INVESTMENT SYNOPSIS.....................................................................................................................................................................

FINANCIALS - CORPORATE STRUCTURE & OFFERING..........................................................................................................................

8.1 REVENUE SUMMARY .....................................................................................................................................

8.2 INCOME STATEMENT .....................................................................................................................................

BIBLIOGRAPHY..................................................................................................................................................................................

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1 Executive Summary Carats Investments Inc. (“Carats Investments” or “the Company”) is a brand owned by Carats Investments Inc., a diamond broker that operates from its headquarters in the World Trade Center in Vancouver, BC, Canada. The Company has been in operations for 25 years and was the first diamond broker to recognize the investment value of Natural Fancy Colored Diamonds and offer them to buyers through an online presence or by private appointment at its head office in Vancouver.

1.1 Business Plan Initiatives Carats Investments has plans to expand its operations (www.carats.com): 1. Undercut competition for white diamond prices: o Go after major competitors by adding extensive white diamond inventory and undercut industry leader www.bluenile.com (Blue Nile Inc. NASDAQ: NILE; Market Cap: $338.77M, $28 share price). 2. Increase online internet presence by building out the following domains: o www.carats.com (a high value domain owned by the Company) o www.nfcde.ca (a high value domain owned by the Company) o www.pinkluxury.com (a high value domain owned by the Company) 3. Defend its Diamonds Direct® trademark that is owned in Canada by the Company 4. Pursue strategic relationships with luxury brand partners in Asia 5. Open diamond viewing outlets – Sight Offices for private diamond viewing and trading in major diamond buying centers globally such as Beijing, Shanghai, Dubai and others.

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1.2 Overview of the Diamond Market Today Demand for diamonds and colored diamonds has helped more than double the prices over the past five years.

Philippe Mellier, CEO of the De Beers Group, said that diamond jewelry demand grew 7 percent in the U.S. and 18 percent in China in the past year alone. Diamond prices are projected to increase as demand for diamonds will grow at a rate of 5.9%, while mining companies will be able to increase their rough supply by only 2.7%. That is when existing diamond mines will begin to tap out and producers wonâ&#x20AC;&#x2122;t be able to fully replace the loss of supply. The fundamentals of demand growth, meanwhile, remain firmly in place. As a result, there could be steep increases in diamond prices starting in 2018, new analysis by Bain & Company projects. Diamond mines will churn out the stones at an estimated average annual growth rate of 4.8% from 2012 through 2018. But starting in 2019, depleted mine inventories around the world, combined with the small number of new mines under development, will cause production to decline by 1.9% annually over the 4 following five years . Diamonds are becoming technically harder to find and extract.

Diamond Demand and Supply

Global demand for diamonds is anticipated to grow at a compound annual rate of 5.1% from now through 2023. Thatâ&#x20AC;&#x2122;s more than twice the anticipated growth rate of supplyâ&#x20AC;&#x201D;implying higher prices at every stage of the value chain.

2013, Bain & Company, a global business consulting firm. Written by Olya Linde and Yury Spektorov.

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Buy That Engagement Ring Now: The Coming Supply Squeeze in Diamonds A surge in rough diamond consumption by the growing middle classes in China and India will push global rough consumption to $26.1 billion in value, from its 2011 level of $15.6 billion while production will offer only $18.4 billion of diamonds available— this according to the Global Diamond Industry Report, released today by Bain & Company, the global business consulting firm. Rough-diamond demand will be fueled by China and India and will reach approximately $26 billion in 2023.

The U.S. is far and away the world’s largest diamond market. Its $27 billion in revenues are more than three times the revenues of No. 2 market China or No. 3 market India—and twice those of the U.S. mobile phone market. The U.S. imported nearly $23 billion of polished diamonds in 2013, up more than 16% from 2012, according to the Rapaport Group, a market research firm that maintains its own index for diamond prices. The 5 wedding market in the US is $54 Billion . In the U.S. about 80 to 85 percent of engagements are formalized with a diamond. The Exchange witnessed a diamond trade volume of 80 million carats in 2013, which is an increase of 6.8% when compared to the year before, according to the exchange. China has grown rapidly into the world’s second-largest market for diamonds, with annual sales approaching $9 billion. Rising wealth, popular fascination with Western culture and the fast-expanding 5

2013 Wedding Statistics Summary for United States, the Wedding Report Inc.

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middle class have powered the market’s growth, with a boost from lower taxes and tariffs. Approximately 90 percent of affluent households (those with annual incomes of $15,000 or more) own at least one piece of diamond jewelry, and most own multiple diamonds. Market penetration among lower-income Chinese, who make up half the country’s 1.34 billion population, is much lower, representing a large growth opportunity for diamond retailers. Some 20 percent of households making less than $15,000 per year own at least one diamond and as GDP grows, this number rises exponentially. In 2012, China became the biggest destination for polished diamond exports from Antwerp, surpassing the US, (states the AWDC) and has become the new driving force of the industry. China is the leading importer of polished diamonds from Antwerp. In 2012, 31.3 percent of Antwerp's polished diamonds headed to China. China will account for over 30 percent of the global rough-diamond market's growth through to 2023 according to the Antwerp World Diamond Center. Current projections suggest that the middle class will almost triple in size by 2023, and rough-diamond demand will more than double to about $5 billion. In China, the middle class continues to expand and more of these families have been adopting the Western practice of giving diamond jewelry to celebrate engagements, weddings and anniversaries. The wedding market in China is $57 Billion6 with analysts predicting growth to 7 $120 Billion . 8

There are more than 13 million brides per year in China with the demand for diamonds growing as the most popular sign of commitment. With China’s one-child policy, affluent parents will do anything for their one and only child, and a wedding is a once-in-a-lifetime occasion, so people are willing to spend big when tying the knot. According to Stephane Lafay, Tiffany’s head of Asia Pacific and Japan, the number of urban people in China buying diamond engagement rings has risen from less than 1% to over 50% in the last 20 years and 80% of grooms gave diamonds to their brides. There are approximately 400 million Chinese residents between the ages of 20 and 30, representing great potential for bridal jewelry sales and branding.

Diamond prices bounce back in 2014 and worldwide diamond consumption to surge by more than 60% by end of decade. 6

2013, China Wedding Industry Development Report. 2013, China Wedding Industry Development Report. 8 2014, Reuters, All that glitters: Diamonds outshine gold for Chinese brides. 7

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1.3 Prices Rise The price for that traditional one-carat engagement ring will go up considerably. According to the Rapaport index, the average price of diamonds increased almost 14% to $1,855 per carat in 2013. U.S. jewellery store sales rose by more than 5 percent for the first two months of 2014. Chow Tai Fook, the world's largest jeweler by market capitalization, posted a 14-percent jump in samestore sales of gem-set jewellery in the first quarter of 2014 year on year. Analysts at Citigroup have stated that a significant decline in the rate at which kimberlites (the host rock for most diamonds) are being discovered, and the drying up of a diamond stockpile once kept by the industry leader, De Beers signal a rise in the price outlook. For investors, diamonds might be the new gold.

1.4 Explosive growth Demand for engagement rings in China is helping to drive prices up. Gold prices have fallen. The current gold price doesnâ&#x20AC;&#x2122;t reflect the underlying supply and demand fundamentals,â&#x20AC;? Rob Henderson, chief economist at National Australia Bank Ltd., stated. It much more reflects an artificial demand for gold as a hedge and as a store of value against inflation. That means the market is prone to a pretty substantial correction sometime in the future.

1.5 Spending Power Gold contrasts with the diamond industry, where prices have not been inflated by artificial demand to the same degree as metals. As countries like China and India keep growing and the size of the middle-class population rises, more people will be able to afford diamonds at a time when suppliers are not finding new sources. There has not been a major new diamond lode discovered for many years. Demand requirements are anticipated to grow around 6% per annum for the course of this decade according to Alan Davies, head of the diamond unit for Rio Tinto, the world's third-largest diamond producer. Without further discoveries, world diamond supply could peak in 2018, according to a Bain & Company report. In the first half of 2014 alone, rough diamond prices charged by major mining companies rose 7% on average, according to a report by the New York-based Rapaport Group, the industry's main market information source. These are significant raises in price.

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These charts show projected supply and demand side-by-side. Historically, such an imbalance indicates 9 firm prices for the diamond industry .

Only around 30 significant diamond mines are in production, according to Petra Diamonds, and a tier-one mine hasn’t been found since the 1990s, despite billions spent on exploration.

Diamonds might be a girl’s best friend but for the next decade they could also be an investor’s best friend thanks to a global decline in the production of quality gems from mines in Russia and Canada, and rising demand, particularly in China.

Bain & Company

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1.6 Colored Diamonds Colored diamonds are the world’s most expensive stones. A 14.82-carat orange diamond sold for $36 million at Christie’s International in Geneva in November 2013, setting a record $2.4 million a carat. Rio Tinto, the world’s primary mine for pink diamonds says tastes in diamond jewellery have changed from an emphasis on large white gems to colored stones. The Argyle mine, owned by Rio Tinto, is projected to close in 2020, drying up the source and escalating demand and prices exponentially. Rapaport said in October 2013 that colored diamonds had shown “significant” gains since the beginning of 2013, setting sales records at auctions and tenders and generally running rings around their white counterparts. Diamonds still dominate the $21 billion precious stone market, accounting for 90 percent of all sales, according to BMO Capital Markets. However, colored gemstones such as rubies, emeralds and sapphires are seeing a return in appreciation.

1.7 Colored Gemstones Prices for high-quality emeralds have soared more than tenfold in the past three years, according to 10 Gemfields company filings. Cut rubies have risen in value 63 percent since 2005 and sapphires by 45 percent, according to Gemval, an online gem appraisal site. An appreciation for color and variety have helped precious gems to enjoy a resurgence in popularity. There is a huge demand for exotic stones right now; people are more aware that some of these stones are 1,000 times rarer than white diamonds. This demand for color means other gemstones have attracted attention and the likes of Ruby, emerald, sapphire, paraiba tourmalines, spinels, rubellites, kunzite, pink sapphires and topaz are now increasingly sought after.

Gemfields is a Gemfields PLC is an AIM-listed multinational natural resources company headquartered in London, United Kingdom, specializing in the mining, processing and sale of colored gemstones, in particular emeralds and rubies.

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Carats Investments is a gem broker of rarified luxury diamonds. Since the Company opened its doors, they have seen an increase of several hundred times the value of these rare stones. Each colored diamond is of exceptional quality and can be acquired as an investment strategy to increase personal portfolio wealth.

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2 Business Model

Business Model for Carats Investments Key Activities Sight Office Sales Online Sales

Value Propositions

Customer Segment

Largest Variety &

In Person Clients

New Online Initiatives

Lowest price Whites

Online Clients

New Locations â&#x20AC;&#x201C; Diamond Sight Offices

Best selection colored

Engagement Rings

Other Gemstones

Investment Clients

Acquisitions of High Value Stones to Hold As an Investment

Jewelry Clients

Key Partners

Channels

Relationships

Suppliers

In Store

Build Trust

Investors

Online

Memberships

Mobile

Personal Assistance

Automation Where

Possible

Cost Structure

Revenue Streams

Cost of Goods

In Store / Online Sales

Channel Costs

Memberships Increase in Value of Holdings

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2.1 Business Model Defined 2.1.1

Key Activities

Online Sales Carats Investments has developed and will further develop its online presence through several quality domain names that it owns. All websites will be available in multiple languages.  www.carats.com  www.diamondsdirect.ca  www.pinkluxury.com  www.nfcde.com New Online Inventory – The Introduction of White Diamonds Carats Investments plans to increase the number and type of goods on its websites. The Company has strategic alliances with major industry suppliers that have the world’s largest collection of white diamonds, and white diamond jewelry in digital format. Carats Investments is able to place this substantial inventory on its website. The number and variety of pieces will place the company in the top tier of online diamond etailers. At the same time that Carats Investments will present this enormous selection of white diamonds and jewelry, it will deliberately keep the prices lower than its major competitor Blue Nile. It will advertise and operate a substantial marketing campaign to let consumers know that the Company will beat the price of Blue Nile and other competitors. Carats Investments’sphilosophy is to keep customers coming in to the online store by wowing them with low prices. The Company will look to see how much of a gulf it can create between them and the competition. This will drive consumers to spread the word about the great prices for valuable diamonds they paid at the Carats Investments site. Online Strategy – Colored Diamonds & Gems Colored diamonds, the Rembrandts and Picassos of the diamond world, will continue to be visible on the website as well and the company is well known to have the best in class in these rare and coveted assets. The Company will also develop an inventory of colored gem such as rubies, emeralds, sapphires, tanzanite and other semi-precious stones to offer to consumers and collectors. New Online Strategy – Membership As Carats Investments will host one of the largest inventories of white diamonds and diamond jewelry available online, the company will adopt the consumer-as-wholesale-buyer strategy of Costco and offer its enormous inventory at low prices. Customers can browse the online store and make a choice. Before they buy, they become a member. Customers can purchase both small jewelry and major investment pieces at competitive prices. The Company’s business model is to generate high sales volumes and rapid inventory turnover by offering members best prices on a large selection of diamonds and diamond jewelry in a wide range of merchandise categories. Management believes that rapid inventory turnover—when combined with the

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operating efficiencies achieved by volume purchasing, efficient distribution, and reduced handling of merchandise online—will enable the Company to operate profitably at significantly lower gross margins than other diamond merchants and regularly priced etailers. Sight Office Sales Carats Investments operates from its head office in Vancouver BC. The company sells diamonds to a list of private buyers that have purchased stones or jewelry for important occasions, as gifts or to hold for investment purposes. The Company deliberately chose an office in an upper floor of a Class A building as it is more secure than a store front location and is able to receive better insurance. Additionally, there is a long history in the diamond trade of having small ‘diamond sight offices’ in secure locations. New Locations – Diamond Sight Offices Those high end customers that seek investment grade stones can buy them online or view them before purchase at Diamond Sight Offices. Currently, the Company operates one long established Diamond Sight Office at its premises in the World Trade Center in Vancouver. The Company is in talks to establish several Sight Offices in China and SE Asia under a joint venture agreement with Asian operating partners. The Company plans to launch small Diamond Sight Offices in other cities such as Dubai and other cities in China with large populations and solid economic growth. Each of these offices will be joint ventures with the investing partner absorbing the cost of installation and operation and Carats Investments retaining a percentage of the proceeds as the chief supplier. The Company will supply the Sight Offices with a small amount of inventory. Larger stones can be flown in for appointment-only viewing by prospective buyers. Collectors of investment grade stones such as larger white or colored diamonds like to view the gems before making a final purchase decision. Diamond Sight Offices offer the perfect solution for buyers who want to touch and feel the inventory before purchasing.

Carats Investments has a long history of offering serious investment grade diamonds at excellent prices. Clients consider their Natural Fancy Colored Diamonds or high value white diamonds to be an investment in their future and to date, no client has ever lost money on a diamond purchased from Rare Investment.

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The Company plans to launch new ‘Diamond Sight Offices’ in target areas of High Net Worth Individuals internationally.

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Customer Service Carats Investments has enjoyed a 25 year relationship with an A list of clients due to its standards of excellence in customer service. The new business model will continue this tradition by providing top level customer service to all clients.

Better Business Bureau Carats Investments enjoys a 15 year history in the highest rating offered by the Better Business Bureau. As the Company moves forward, it will continue with its tradition of excellent customer service and the best in quality diamonds. Call support – when customers go on PayPal or GoDaddy, they can reach a live, trained person on the phone number on the website 24/7. There is always someone there and they are always personable, helpful and knowledgeable. In order to support its online growth, Rare Investment will engage with a top tier live answer service where they train personnel and have strong management to oversee operations. There are many company that do this and Carats Investments has been in talks with several to date in order to assess the best candidate. Customers will always have the best experience at the Rare Investment online store. Fulfillment – In the case of online white diamonds and jewelry, Carats Investments will adopt the “Amazon.com” business model. The Company will not own the inventory nor hold it in a warehouse. The merchandise will be drop shipped from the supplier on an order by order basis for maximum efficiency and cost savings to the end buyer and the Company.

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3 Company Description Established since 1989, Carats Investments enjoys a twenty five year history as a broker of luxury diamonds sought by a client base that spans the globe. The Company operates from its head trading office in Vancouver, Canada with associate offices in Antwerp, Belgium and other primary global diamond procurement areas. Carats Investments and its group of companies, Carats Investments Inc. and Diamonds Direct have brokered thousands of diamonds worth millions of dollars that have been defined by their beauty and return on investment. Carats Investments has access to one of the largest inventories of natural fancy colored diamonds in the world and is the only Canadian firm that has been invited to the exclusive annual pink diamonds auction from Rio Tintoâ&#x20AC;&#x2122;s Argyle mine. In 2008, it was the second largest purchaser of pink diamonds in the world from the legendary Argyle mine at its prestigious and private annual auction. In addition to the very rare colored diamonds, the Company is a broker of white diamonds and jewelry such as engagement rings and gifts. Carats Investments plans to expand its line of white diamonds to take a position as a leader in the diamond field.

3.1 Carats Investments Headquarters Carats Investments is a well-known diamond broker that manages its portfolio of precious gems from its head office in the World Trade Centre in Vancouver, Canada. For over 25 years, the Company has built its reputation for procuring the finest diamonds in the world and offering them to a list of discerning clients.

Head Office in the World Trade Centre, Vancouver, Canada The nationâ&#x20AC;&#x2122;s leading source of investment-grade Natural Fancy Colored Diamonds. We guarantee unparalleled service, industry expertise, and impeccable quality.

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3.2 Colin Ferguson, Chairman, CEO & Founder Colin Ferguson is an internationally established diamond and rare gem broker with more than a quarter of a century experience in the diamond industry. Mr. Ferguson founded Diamonds Direct® in 1989, Carats Investments Inc. in 1999. These brands are operated from the head office located at the World Trade Centre in Vancouver, B.C. Through established contacts and distribution channels, Colin Ferguson is one of the few mine-to-market traders of Natural Fancy Colored Diamonds. He is a leading authority in the rare gem field and his longstanding relationships in the industry gives investors’ unfettered access to exceedingly rare jewels, not attainable by outsiders. Clients include a global list of celebrities and investors. Under his leadership, Colin Ferguson’s firm was the first Canadian company invited to attend the world renowned Argyle Pink Diamond Tender, to successfully bid at the event and was the first to become an Authorized Partner with the Argyle mine. Prior to launching his own firm, Colin began his career as a sales consultant for one of the nation’s largest diamond retailers, and rose to a senior management position. He was then headhunted by a diamond brokerage arm Gryspeerdt & Sons, based in Antwerp, Belgium, the center of the diamond universe for the last 450 years, and became its National Distribution Manager for North America. During this period, Mr. Ferguson was trained and mentored by a world renowned diamond expert and a sight holder for DeBeers, the last of a 3rd generation Belgium family based in offices on London’s renowned Charterhouse Street. Over the years Colin Ferguson has contributed to over 100 charitable organizations across the country. He received the “Most Venerable Order of the Hospital of St. John of Jerusalem” medal for his continued and ongoing service to that institution.

3.3 Kim Helman, Co-President Kim Helman brings an impressive 15 year history in the acquisition and marketing of rare diamonds and jewelry to the Company. As Co-President of Rare Investment, Ms. Helman has administered a multi-million dollar buying power that includes colored diamond purchases for a discerning list of global clients. Kim leads the development of an internet presence for carats.com as it became positioned in the competitive world of online jewelry and gem stones. Her work in this area resulted in positioning Carats Investments at the top of wholesale Canadian diamond merchants. Kim has the ability to work in all aspects of the company, including sales, customer support, and diamond buying & valuation, and ring design. Ms. Helman is the top international diamond buyer on the Carats Investments team and has extensive GIA (Gemological Institute of America) certification. Kim’s knowledge of colored diamonds and competence is recognized in the industry. She is able to work with a network around the world to source strategic investment grade diamonds for Rare Investment clients.

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3.4 Jamie Yaskiw, Co-President Mr. Jamie Yaskiw brings over 15 years of financial markets experience to the Carats Investments team. As President & CEO of Singapore based Typhoon Alpha Capital, a management consultant company that serves select companies worldwide, Mr. Yaskiw offers Rare Investment a unique view and access to foreign markets and partnerships. Mr. Yaskiw was formerly a Sr. VP and Portfolio Manager at a fully licensed Canadian Investment Dealer. Before that he was one of the top investment advisors at a NYSE (New York Stock Exchange) listed North American investment dealer servicing clients throughout North America, Asia, and Europe. Having advised local and international clients in investing in over 200 structured deals in his 15 year career, Mr. Yaskiw brings a strong understanding of corporate finance and corporate governance to his position at Carats Investments. With over 8 years’ experience in dealings in Asia (Singapore, Hong Kong, Japan, Malaysia, and Indonesia) including having operated a Singapore based natural resource hedge fund, Mr. Yaskiw is well positioned to help Carats Investments grow globally.

3.5 Bryan Kerrison, Senior Vice President Mr. Bryan Kerrison leads the Carats Investments team in international diamond procurement and the sourcing of rare stones direct from key diamond mines and leading De Beers Sight Offices globally. Prior to working with Carats Investments, Mr. Kerrison had a 20 year career with De Beers, the world’s leading diamond. He began in London, England when he joined DTC (Diamond Trading Company), the rough diamond sales and distribution arm of the world renowned De Beers Group. De Beers provides leading edge training leading to expertise that is unrivalled by any other company in the diamond investment industry. His success and talent working with diamonds was soon recognized by De Beers’ management and within 5 years of joining the firm, he began representing De Beers in Southern Africa (South Africa, Namibia and Botswana). Bryan held key positions there, performing mine valuations, carrying out local staff training, and assisting government diamond valuators. After 18 months, Bryan returned to London and then moved on to Antwerp, Belgium where he learned the intricate technical skill of Rough to Polished valuations on +10.8ct diamonds and Natural Fancy Colored Diamonds. Bryan was promoted to a position in the De Beers Sales and Purchasing team. Dealing directly with Alrosa, Russia’s largest diamond company, his role was to represent De Beers in Moscow for one month every quarter, negotiating diamond shipments valued up to $30 million. Having moved to Vancouver, Canada, Bryan accepted the position as Senior Vice President at Carats Investments where, for the past five years, he has overseen the buying of rare and very valuable stones from around the world. With his credibility, history and depth of industry knowledge, Mr. Kerrison is an invaluable asset to the company.

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3.6 Rui Sun, Vice President Asia Business Development As the Vice President of Asia Business Development, Rui Sun overlooks and develops Carats Investments â&#x20AC;&#x2DC;s client base at Asian market in both mainland China and Vancouver. Her understanding of Chinese culture and the Chinese economic behavior has brought in multi-million dollar in sales for the company in 6 months; meanwhile she also transformed the company into a stronger international player with her solid translation works. She managed to establish relationships with billionaires and investors on behalf of the company in mega cities including Beijing, Dalian, Shanghai, Hangzhou, Shenzhen and in Seoul, Korea. Rui began her journey with Carats Investments in 2012 as the Executive Assistant to the CEO. Since then she was put in the position of Assistant Art Director with her background in graphic design, helping to create advertising materials, produce gem product images and plan corporate events and private diamond viewing. Ms. Sun was then promoted to the Vice President of Asia Development as she has created proven sales records towards the Asian market. Rui is currently completing her GIA certification to further her knowledge on precious gems, meanwhile she holds a Bachelor of Commerce degree with a major in International Business.

3.7 Organization Structure Carats Investmentsâ&#x20AC;&#x2122;s organization structure is shown below.

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3.8 Diamond Sight Office Strategy Carats Investments currently operates as a diamond broker from its Diamond Sight Office headquarters in Vancouver. The Company plans to launch additional Diamond Sight Offices in key areas around the world beginning in China. The Company has established procurement channels for the worldâ&#x20AC;&#x2122;s most luxurious diamonds and specializes in Natural Fancy Colored Diamonds, the most valuable in the sector. Gems may be viewed online, and appointments made for viewing at a sight office.

Carats

Sight Office

Investments

Procurement

Online

Diamonds

The management team procures the finest diamonds available in the world. In keeping with Carats Investments mission of being a luxury brand, the quality of the diamonds is critical to sustaining customer retention. Carats Investments is committed to building long term partnerships with its customers and will always put the needs of its customer at the forefront of its business model. If there are any developments in the product line, or any additional products can be beneficial to its customers, Rare Investment will always be the first to offer these to its clients. Carats Investments will continue with its tradition of offering the best diamonds in the world its clients internationally.

CARATS INVESTMENTS INC.

3.9 Roll Out Summary Carats Investments is an established diamond broker with a 25 year history of procuring the finest diamonds in the world from its head trading office in Vancouver. The Company plans to launch new locations called ‘Diamond Sight Offices’ in target areas of High Net Worth Individuals (HNWI’s) internationally. Due to its connections, the Company has chosen Beijing, China and Singapore as the sites for its initial international trading offices.

Vancouver 25 Year History Investment Grade Acquisitions

Online Colored & White Diamonds

Asia Sight Offices

CARATS INVESTMENTS INC.

3.10 Security Gem Brokers trading offices typically have the highest level of security and Carats Investments is no exception. The Company has advanced security available to protect its assets and those of its clients. The Company does not have a street level presence but operates from a Grade A luxury building with a doorman and elevator to its floor. The entrance to Diamond Sight Office premises is protected by security including cameras for viewing people before buzzing them in the door. Then, visitors enter another small secured space and the first door is locked before entrance to the showroom is opened. This is strictly monitored by onsite staff at all times.

Showroom Area

Entrance Hall & Lobby Secured Office Area

Double Door Holding Area With Secure Cameras Envisioned Sight Office Design

Projected Sight Office Floor Plan

The Carats Investments business model captures the High Net Worth Individual luxury buyers as well as those who want white diamonds for special occasions such as engagements or anniversaries.

CARATS INVESTMENTS INC.

4 Market Research 4.1 Colored Diamond Industry Rate of Return 11

The demand and price for natural fancy colored diamonds has risen dramatically worldwide . The graph below displays a 1,800% rise in the per carat price for Fancy Light Pink diamonds at auction in a short year period. These rare stones are becoming more expensive and harder to find as the worldâ&#x20AC;&#x2122;s only major mine is closing in 6 years. The rise in value of colored diamonds has been nothing less than phenomenal with investors making unprecedented profits.

Investment Sense

With more buyers around and diminishing supply, prices have continued to increase. At the Rio Tinto Argyle Pink Diamond Tender prices for pink diamonds were up about 35 percent in 2013 from a year ago, and fancy intense vivid yellow goods were also up around 35 percent, with lower-quality yellow diamonds up approximately 10 percent. Prices of fancy blue diamonds increased by about 35 percent in the past two years as well.

http://www.forbes.com/sites/kathryntully/2013/01/31/are-fancy-colored-diamonds-an-asset-class-now/

CARATS INVESTMENTS INC.

Amazing Blues have risen as much as 174% since 2005.

Elegant Yellow Diamonds are expected to rise by a total of 350% by the end of a decade of spectacular growth.

CARATS INVESTMENTS INC.

4.2 Colors & Trends in Diamonds There are trends in colored diamonds. For a time it was pink diamonds that were the envy of the red carpet. Now it has turned from yellow to champagne colors. Trends in diamonds are unlike trends in jewellery. The value of a diamond lies in the stone and not the setting therefore, it is the investment that is primary. However, in addition to an investment, diamonds are an emotional purchase to celebrate important life occasions. There are trends in the cuts and shapes of diamonds as well as in the settings and Rare Investment is known for its style and flair as well as its ability to source the best and brightest of diamonds. A focus will remain on high value fashionable settings.

4.3 Online Sales at Blue Nile For the full year of 2013, the Seattle-based company Blue Nile, reported in February 2014, that net sales increased by 12.5 percent to $450 million. Operating income for the full year was $14.3 million, compared to $12.3 million in the prior year. Net income for the year was $8.4 million and earnings per diluted share totaled $0.63. Non-GAAP adjusted EBITDA for 2012 was $20.6 million. Net cash provided by operating activities totaled $23.4 million for the year while non-GAAP free cash flow for the year was $17.9. Management stated: â&#x20AC;&#x153;"Looking back at 2013, we are pleased with the continued momentum in the business and confident in our strategy to build long term growth. We launched important initiatives that drove sales and improved the consumer experience. This year, we will continue to enhance the experience across all platforms, expand exclusive product offers, elevate levels of customer service, and increase our global reach. In 2012, we set a three year goal to re-energize the business.â&#x20AC;? Conclusion: With its strong industry contacts, Rare Investment has the ability to offer a larger selection with better pricing than Blue Nile.

CARATS INVESTMENTS INC.

4.4 Diamond Market in China It is advantageous to Carats Investments to open a trading office in Beijing, China. Vancouver has long had strong community ties to China and many Chinese are already clients of the Company. China's rising taste for luxury, weddings and the economic rise of the wealthy and middle class has changed Antwerp and the diamond industry over the past decade. In 2012, China became the biggest destination for polished 12 diamond exports from Antwerp, surpassing the US, (states the AWDC ) and the country has now become the new driving force of the industry. China is the leading importer of polished diamonds from Antwerp. In 2012, 31.3 percent of Antwerp's polished diamonds headed to China. An AWDC research report in 2013 says China accounted for approximately 30 percent of the global roughdiamond market's growth through to 2023. Current projections suggest that the middle class will almost triple in size by 2023, and rough-diamond demand will more than double to about $5 billion. Diamond demand could accelerate if middle-class affluence grows faster, with more spending power, some consumers will likely buy more expensive diamond pieces. Diamond ownership is the most in China over any other country with over 90% of households in the high income bracket owning at least one diamond.

Antwerp World Diamond Center

CARATS INVESTMENTS INC.

4.5 China Diamond Demand Forecast China will account for an estimated 29% of the global rough-diamond marketâ&#x20AC;&#x2122;s growth through 2023, as the middle class expands and the rural population moves into cities. Current projections suggest that the middle class will triple in size by 2023, and rough-diamond demand will more than double, to about $5 billion in that year. Middle-class households currently make up only 19% of Chinaâ&#x20AC;&#x2122;s population, but consensus forecasts call for that percentage to grow to up to 44% in 2023. Diamond demand could accelerate if middle-class affluence grows faster than the forecasted 6% compound annual rate. With more spending power at their disposal, some consumers will likely buy more expensive diamond pieces.

Rough Diamond demand will be fueled by China and will reach approximately $26 billion in 2023.

CARATS INVESTMENTS INC.

4.6 Adoption of Western Consumption Habits In India and China, different forces influence the growth of demand for diamondsâ&#x20AC;&#x201D;namely, the urbanization of the population and the growth of the middle class. Additional factors include the adoption rate of Western consumption habits, which would tend to increase the share of diamonds in consumersâ&#x20AC;&#x2122; discretionary spending, and the concerted push by growth-minded retailers into second-, third- and fourth-tier cities, as well as online channels. The push into new regions and channels will stimulate diamond jewelry purchases by retailers to fill inventory.

CARATS INVESTMENTS INC.

4.7 Diamonds in the Chinese Wedding Market China’s modern wedding industry is roughly a decade and half old and has already grown to become the world’s largest. Each year in China more than 10 million couples marry, creating an industry estimated at 13 $80 billion annually with strong ties to retail, fashion, jewelry, travel and tourism, financial planning, real estate and household purchases. Until a decade ago, traditional yellow gold and jade were popular, but young women today largely prefer platinum gold, white gold and silver with diamonds being in high demand. The gifting of engagement and wedding rings is a relatively new custom in China, but the practice has spread far and wide, and since 1990, a steadily growing number of Chinese brides-to-be have received a diamond ring from their betrothed or his family. Their rings tend to be relatively large and expensive, in part because of China’s historical one-child population policy, which spurs families to give very generous wedding gifts, having only one child to buy for.

4.8 China, World’s Greatest Luxury Market The global luxury goods industry should exceed $307 billion by 2015, according to research from private firm Global Industry Analysts, with China leading the way. The number of luxury consumers worldwide has more than tripled over the past twenty years, from roughly 90 million consumers in 1995 to 330 million at the end of 2013; this according to Bain & Company in a report released January 2014. According to the report, a net total of 10 million additional consumers yearly enter the luxury market to reach an estimated 400 million luxury consumers worldwide by 2020, and an estimated 500 million luxury consumers by 2030. Middle-class households currently make up only 19 percent of China's population, but most forecasts say that percentage will rise to 44 percent by 2023.

http://www.bbc.co.uk/news/business-14208448

CARATS INVESTMENTS INC.

China is the country with the world’s largest number of luxury buyers, accounting for some 29% of the global market rising to 44 percent of luxury goods sold in the world by 2020, according to a report released by Hong Kong-based investment bank CLSA Asia-Pacific Markets.

This growth momentum means a compound annual growth rate of 23 percent in the current decade. The country’s one million millionaires and more than 120 billionaires are part of a vibrant culture of spending and they are currently buying more luxury jewelry and Rolls-Royces than any other nation. The demand forecast for rough diamonds hinges on consumer demand for diamond jewelry. The Bain’s forecast therefore factors in data on the forces that historically have shaped demand for diamond jewelry, including growth in gross domestic product (GDP), the size and growth of the middle class and urban population, personal disposable income and diamonds’ share—especially diamond engagement rings’ share—of the overall jewelry market. We then identified the indicators that we found to best explain the differences in consumption of diamond jewelry in each region and forecasted demand based on those indicators, factoring in the historical correlation between the indicators and final demand.

Both Economic and Social Factors Will Drive Demand

CARATS INVESTMENTS INC.

4.9 China Luxury Gift Giving According to the Bain report of January 2014, China is the most generous in giving luxury items as gifts. While globally, 40% of luxury purchases are for gifting, the Chinese gift 50%.

CARATS INVESTMENTS INC.

Consumers in China prefer to receive gifts of jewelry more than any other item according to a Bainâ&#x20AC;&#x2122;s 14 report . The chart below shows the preference for various types of gifts by top ranking country. What Kind of Gifts are Preferred

http://www.bain.com/publications/articles/global-diamond-industry-portrait-of-growth.aspx

CARATS INVESTMENTS INC.

4.10 China Luxury Buying on the Internet Carats Investments will have a website where its catalogue of precious colored diamonds will be displayed in password protected areas. Therefore it is important to assess the penetration of e-commerce in the Chinese market place. Marketing and sales channels are quickly shifting as well. In a Bain’s study in 2013, 73 percent of Chinese consumers use the Internet (company websites, news websites, microblogs, mobile apps, etc.) to get information about luxury goods purchases before they buy.

Chinese shoppers are extremely well informed. In addition, nearly 60 percent of consumers have made at least some luxury purchases through parallel channels known as “DaiGou” (via overseas contacts, via Taobao, or via other professional buyer agencies and websites) rather than from brands or department stores. Half of those who have not purchased this way would consider it in the future.

CARATS INVESTMENTS INC.

4.11 Popularity of Online Shopping in China

CARATS INVESTMENTS INC.

4.12 Demographic of Chinese Luxury Buyers Wealthy individuals in China are relatively younger than their foreign counterparts. In general, Chinese luxury consumers are younger than their overseas peers. According to the Roland Berger market research firm, 60% of the Chinese luxury consumers are aged between 20 and 39 and 80 percent are under 45, while only 38% of the western European consumers belong to that age group. In western European countries, 21% of the luxury consumers are 60 years of age or above, while only 7% of the Chinese luxury goods buyers are over 60 years of age. Hurun Wealthy Report 2012 also showed that the average age of individuals who possess assets of more than 10 million yuan in China is 39, and the average age of individuals with assets more than 100 million yuan is 41.

CARATS INVESTMENTS INC.

4.13 Chinaâ&#x20AC;&#x2122;s Biggest Cities of Luxury Buying Carats Investmentsâ&#x20AC;&#x2122;s first entry into the China market will be in Beijing, the largest and wealthiest city. It follows that the concentration of wealth in China goes by population. The chart below examines the top cities by population and wealth. Carats Investments uses this information to determine the best locations for its rollout of future Diamond Sight Offices.

CARATS INVESTMENTS INC.

4.14 Competition Carats Investments plans to open new Diamond Sight Offices in China and other prime areas. The logic of the business model of Rare Investment is itemized in the chart below. The Business Model of Carats Investments is to open an Online Store and Diamond Sight Offices which are not retail stores. Customers must make an appointment or be permitted to enter by prior invitation. The value of the client communication is considerably higher in this communication rich environment and the value of the client to the brand is longer lasting

Carats Investments Business Model Advantages Carats Investments Sight Offices

Competitors

Online Store

Retail Stores

Cost of Location

Low

High

Cost of Security

Low

High

Cost of Staffing

Low

High

Chance of Theft

Low

High

More Funds for Advertising

Yes

Sell by Appointment

Yes

Higher Customer Relationship

Yes

Term of Customer Relationship

Repeat

One time

Number of Referrals

High

Low

Reliability of Referrals

High

Low

Ability to Show Quality Diamonds

High

Low

Adjustable Hours

Yes

Quality of Reputation

High

Average

CARATS INVESTMENTS INC.

4.15 SWOT Analysis Of the major factors in the diamond market the three most important are the melting of the De Beers stockpile, the development of a diamond-ring buying habit by engaged couples in China, and the failure of the mining industry to discover big new deposits of gem-quality stones. About 230 million people moved to Chinese cities between 2000 and 2011, the greatest urbanization in history, according to the Chinese Academy of Social Sciences. These city dwellersâ&#x20AC;&#x2122; average disposable income rose 13 percent last year according to the statistics bureau. Sales of discretionary goods in China will grow by a compounded annual rate of 13 percent until 2020, as shoppers in the worldâ&#x20AC;&#x2122;s largest economy after the U.S. become richer, McKinsey & Co. Most of the 13 million brides a year desire a diamond ring.

Strength - Founders 25 year track record of success - Diamonds as an investment - Diamonds as a fashion accessory - Sources of Diamonds - Ability to undercut Whites

Opportunity - New interest in diamonds - Post recession buyers looking for value investment - China offers the largest market growth globally - Opportunities for JV Sight Offices

Weakness - Unknown Brand Name - Training of new sales staff

Threat - Brand loyalty of existing players - Too little marketing - Economic slowdown

CARATS INVESTMENTS INC.

5 Marketing Plan

5.1 Strategy The strategy for Rare Investment will cover the following aspects:  Being synonymous with high value luxury     

Best diamonds available in the market High levels of customization Quality of cut Integrity of value Most exceptional brilliance and sparkle

 Create brand awareness of its Unique Selling Proposition  Interactive retail/online experience  Private ‘by appointment only’ showrooms (Diamond Sight Office)  Building an emotional connect with the product  Customer creating a design of their own (online and in Sight Offices)  Create an user experience that relates to building a partnership between the customer and itself  Business model catered towards working with the customer as a partner, rather than as a retail buyer  Creating an online platform where customers can see existing Rare Investment diamonds

CARATS INVESTMENTS INC.

5.2 Tactics This section will define the key themes that need to be transmitted across all marketing and branding platforms. The points below define the strategy to be implemented. The key messages will include: 

High value for money proposition i.e. luxury at affordable prices

     

Celebrity endorsements Customers’ ability to customize their own products Quality of diamonds Trend setters in terms of color, cut and style Availability of products, online and through the website Experience of visiting the Rare Investment private Diamond Sight Office

CARATS INVESTMENTS INC.

5.3 Programs To increase brand awareness and market its service the Company will undertake the following: 

Host an information filled website



Reach out to the community with hosted events and sponsorship plus attendance at significant local events. The management team will attend key events in the target market. It is estimated that the Company will attend at least 3 events per month. Brochures and marketing literature will be posted to specific customers. These brochures will be of the highest quality and will display the range of products. It will also give a preview around trends and forthcoming products. Advertisements in lifestyle magazines will begin with local magazines. The Company will give two adverts a year for the first year and increase the number depending on the benefits achieved. Advertise through the electronic media and social networks. This will be done on an ongoing basis by setting up information links on sites such as Twitter, Face book, Pinterest, Instagram etc.



 

CARATS INVESTMENTS INC.

5.4 Branding Strategy A brand is conveyed through every interaction with customers and stakeholders both online and in the Diamond Sight Offices. Each point of contact is an opportunity to convey an aspect of a product or service and what the Company stands for. Carats Investments will create all the materials related to a business-toconsumer brand. The brand strategy will also be extended to environments -in the showrooms and online. When an environment is a physical embodiment of a brand and culture, a compelling, recognizable experience is created. The Diamond Sight Offices will draw people to them because they offer the opportunity for customers to see, touch and feel a prospective high-end purchase. A well-designed environment will communicate the brand story to employees and visitors. It will engage them with messages, images, textures, colors and the unique harmony or tension among elements in the space. This entire experience will create deep and meaningful connection with the Rare Investment brand to build loyalty.

5.4.1

Brand Vision

The Carats Investments creative director and designers are creating a common understanding of the project vision and goals. The Company draws from both in house staff and engagements with brand consultants to create images, packaging, environments and web media with powerful capabilities.

5.4.2

Brand & Design Consultant

In order to establish and maximize the potential of the brand, Carats Investments will work with external firms that bring in strong retail branding and marketing skills.

5.4.3   

Unique Selling Proposition (USP) Price – All diamonds are competitively priced at affordable luxury rates. This gives the buyer confidence in Carats Investments as a reliable mine to market source for their gem stone purchases. Design- Each diamond is unique in its own right. The creative director in conjunction with designers works on products that appeal to the high net worth buyers of luxury diamonds. Customer Engagement – Carats Investments offers the ultimate one-on-one service to its customers. Every customer is given the opportunity to create their own design if they wish to have a setting for their diamond.

CARATS INVESTMENTS INC.

5.5 Marketing Mix

High End Diamonds

Broker Prices

Product

Online + Sight Locations

Place

Price

Best Diamond Source

Position

5.6 Web Strategy Carats Investments will enhance its ecommerce website, and increase its product offerings.

5.7 Web Plan ď&#x201A;ˇ

ď&#x201A;ˇ

Interface Design o

Attractive, Appealing and user-friendly design

Navigable & high usability

High degree of user experience

Bug free environment

Target Market Oriented o

At par with the target market

Continuous improvement

Feedback loop from customers

CARATS INVESTMENTS INC.



Robust Back-End o

Adequate server capacity

Disaster recovery site (alternate site)

Multiple servers with load balancing

Security o

Secured policy in operations

Use of security enhanced technology

Initiatives taken to ensure secured development of the platform as well as operations with regular monitoring and enhancements

5.8 Internet Marketing The marketing strategy for the website will be based on inclusion of the internet address in all business material and products that Carats Investments releases and as a submission to popular websites. As submission’s to search engines is complex given that each one works differently, a customised submission is the most effective way to improving traction. Carats Investments will use paid placements and advertise on popular sites to gain traction. Top Chinese Search Engines include:

Most Popular Search Engines in China Name of Search Engine

Market Share

Baidu.com

85.7%

360 Search

7.8%

Google

2.4%

Others

4.1%

5.9 Search Engine Optimization 

Intensive Content Creation, blogs, emails, downloads, G+ authority



Link building



Search Engine Submission Set Up



Initial Search Engine Submission



Ongoing maintenance of website and social media

CARATS INVESTMENTS INC.

5.10 Social Media The marketing team will distribute informative content about diamonds and colored diamonds on its accounts across major social networks. These will include Facebook, Twitter and LinkedIn. Continual whitepapers, photos and information about the precious diamond market will keep clients and potential clients informed about the choices of diamonds available from Carats Investments.

CARATS INVESTMENTS INC.

6 Breaking news October 7, 2014

Pink Diamond Sold by Sotheby’s Asia for Record $17.7 Million

The “flawless fancy vivid pink diamond” is so special it needs four adjectives to describe it – and over $17 million to buy it. The pear-shaped, 8.41-carat stone had been expected to fetch $15.5 million, but ended up selling for $17.77 million in Hong Kong, reports Agence France-Presse. The combination of the pink diamond’s internally flawless clarity, which is extremely rare in pink diamonds, with its “fancy vivid” color grade, a category designating the diamond as having the highest concentration of color, made the stone rare and hence, valuable. Quek Chin Yeow, deputy chairman of Sotheby’s Asia, said that the diamond "attracted keen competition before fetching a wonderful price of HK$137.88 million (US$17.77 million) and setting a world auction record for a fancy vivid pink diamond." According to the auction house, the flawless fancy vivid pink diamond is “amongst the rarest and most desirable of colored diamonds ever seen at auction.”

CARATS INVESTMENTS INC.

7 Investment Synopsis The emergence of interest in diamonds in China has come about simultaneously to diminishing supply and increased demand, further raising the price. Diamonds have now become an investment commodity and offer high liquidity and stronger retail value than other investments that have recently shown to be less reliable.

Carats Investments has a 25 year history to leverage and sell diamonds to the growing numbers of tomorrowâ&#x20AC;&#x2122;s buyers.

1. Colored diamonds becoming increasingly rare

2. Growth of Demand

3. Price Increases

Carats Investments anticipates that opening a greater online presence and Diamond Sight Offices in China and other targeted areas, will generate strong revenues and offer profits and a strong return-oninvestment for its partners and stakeholders.

CARATS INVESTMENTS INC.

8 Financials - Corporate Structure & Offering Existing Common Shares 80,000,000 (Founders Shares) Current Offering 10,000,000 shares @ $0.30 = $3,000,000

Use of Proceeds Use of Proceeds Website/App

Phase 1 200,000

Diamond Fund Set Up

300,000

Asia Development/Partnerships

800,000

Marketing

1,000,000

Collateral Materials

200,000

General & Admin

500,000

Total Proceeds

3,000,000

The company intends to list on one of the major stock exchanges in late 2015/early 2016 (to be determined at the time of listing). Anticipated IPO Offering 10,000,000 shares - Price to be determined at the time of the IPO â&#x20AC;&#x201C; (late 2015/early 2016).

CARATS INVESTMENTS INC.

8.1 Revenue Summary Projected Revenue 2015

2016

2017

2018

2019

White Diamond Jewelry

13,500,000

19,500,000

28,500,000

40,500,000

58,500,000

Colored Gems & Jewelry

6,750,000

9,750,000

14,250,000

20,250,000

29,250,000

Other Jewelry

2,250,000

3,250,000

4,750,000

6,750,000

9,750,000

Revenue Summary

Total Revenues EBITDA: Total

22,500,000 1,695,000

32,500,000 4,717,550

47,500,000 7,323,838

67,500,000

97,500,000

10,812,871

16,073,475

Actual Historical Figures Sales Profit Net Income before tax Taxable Income

2011 2012 2013 2014 3,068,808 6,139,424 10,862,786 4,681,102 808,708 1,942,509 4,264,575 1,995,389 -360,551 662,746 2,315,643 -16,425 2,153,545 856,110

Average 6,188,030 2,252,795 650,353 1,504,828

CARATS INVESTMENTS INC.

8.2 Income Statement Projected Income Statement 2015

2016

2017

2018

2019

Revenue White Diamond Jewelry Colored Gems & Jewelry Other Jewelry Total Revenue

60% 30% 10%

13,500,000 6,750,000 2,250,000 22,500,000

19,500,000 9,750,000 3,250,000 32,500,000

28,500,000 14,250,000 4,750,000 47,500,000

40,500,000 20,250,000 6,750,000 67,500,000

58,500,000 29,250,000 9,750,000 97,500,000

Cost of Goods Sold White Diamond Jewelry Colored Gems & Jewelry Other Jewelry Total Cost of Goods Sold

92% 50% 100%

12,420,000 3,375,000 2,250,000 18,045,000

17,940,000 4,875,000 3,250,000 26,065,000

26,220,000 7,125,000 4,750,000 38,095,000

37,260,000 10,125,000 6,750,000 54,135,000

53,820,000 14,625,000 9,750,000 78,195,000

4,455,000 20%

6,435,000 20%

9,405,000 20%

13,365,000 20%

19,305,000 20%

Gross Profit Administrative Expenses Advertising & Promotion Commissions Insurance Office & Administrative Professional Fees Property - Lease Salaries, wages and benefits Travel Collateral Materials

1,300,000 450,000 44,000 121,000 40,000 130,000 362,000 113,000 200,000

650,000 46,200 127,050 42,000 136,500 380,100 135,600 200,000

950,000 48,510 133,403 44,100 143,325 399,105 162,720 200,000

1,350,000 50,936 140,073 46,305 150,491 419,060 195,264 200,000

1,950,000 53,482 147,076 48,620 158,016 440,013 234,317 200,000

Total Administrative Expenses

2,760,000

1,717,450

2,552,129 10,812,871

3,231,525 16,073,475

4,217,020

6,268,655

Operating Income / (Loss) Provision for Income Tax Net Income

1,695,000

4,717,550

2,081,163 7,323,838

661,050

1,839,845

2,856,297

1,033,950

2,877,706

4,467,541

6,595,852

9,804,820

CARATS INVESTMENTS INC.

9 Bibliography Most of the information in this business plan came from the Rare Investment Company. Additional information was sought from the resources below: Rappaport: http://www.diamonds.net/ IDEX - International Diamond Exchange: https://www.idexonline.com/index.asp GIA â&#x20AC;&#x201C; Gemological Institute of America: https://www.gia.edu/ http://adage.com/article/global-news/love-china-navigating-80-billion-wedding-market/239136/ http://africa.chinadaily.com.cn/weekly/2013-09/06/content_16949467.htm http://au.blouinartinfo.com/news/story/986210/orange-diamond-sets-355-mn-record-at-christies http://au.blouinartinfo.com/news/story/986214/832mn-pink-diamond-sets-record-at-sothebys http://business.time.com/2013/12/12/nordstrom-wants-you-to-browse-in-store-then-buy-somewhereelse/ http://diamondinvestingnews.com/8133-diamond-market-outlook-2013-price-china-india.html http://en.wikipedia.org/wiki/Blue_Nile_(company) http://files.shareholder.com/downloads/NILE/3429238173x0x652316/2091AF5B-7E71-4414-82BB510180E7E152/Annual_Report_2012_FINAL.pdf http://igotyoursilverlining.com/natural-colored-diamonds/ http://news.msn.com/pop-culture/shunning-tradition-chinese-brides-say-i-do-to-diamonds http://online.wsj.com/articles/diamonds-regain-their-sparkle-for-miners-on-rising-demand-and-prices1404826159 http://online.wsj.com/news/articles/SB10001424052702303289904579197323800179090 http://prosperitysaskatchewan.wordpress.com/2013/01/24/bain-and-company-global-diamondindustry-portrait-of-growth/ http://recursos.anuncios.com/files/598/20.pdf http://red-luxury.com/trends/demand-for-diamonds-in-china-rises-18-percent-23481 http://resourceclips.com/2014/06/12/de-beers-forecasts-2014-polished-diamonds-growth-at-4-5/ http://rough-polished.com/en/expertise/71541.html http://thestudyofvalue.org/wp-content/uploads/2014/05/WP4-Bracking-Sharife-Rough-and-polished15May.pdf http://usa.chinadaily.com.cn/epaper/2014-01/27/content_17261290.htm http://www.bain.com/about/press/press-releases/bain-2012-global-diamond-report.aspx http://www.bain.com/about/press/press-releases/global-diamond-supply-faces-cliff-in-2018.aspx http://www.bain.com/about/press/press-releases/heterogeneous-mix-of-330-million-consumerspurchasing-217-billion-in-luxury-goods-globally.aspx http://www.bain.com/publications/articles/getting-ready-to-profit-from-the-next-billionconsumers.aspx http://www.bain.com/publications/articles/global-diamond-industry-portrait-of-growth.aspx http://www.bain.com/publications/more/metals-and-mining.aspx http://www.bbc.co.uk/news/business-14208448 http://www.bloomberg.com/news/2013-04-30/china-affair-with-cheap-diamonds-heats-mass-marketcommodities.html http://www.bloomberg.com/news/2014-08-12/blue-diamond-worth-25-6-million-hints-at-earth-sorigins.html http://www.businessoffashion.com/2013/08/inside-indias-big-fat-38-billion-wedding-market-part-1rohit-bal-sabyasachi-mukherjee-alex-kuruvilla-vijay-singh-india-bridal-fashion-week.html http://www.businessoffashion.com/2014/05/coloured-gemstones-got-sparkle-back.html

CARATS INVESTMENTS INC.

http://www.businessweek.com/articles/2013-09-06/those-big-fat-chinese-weddings http://www.businessweek.com/news/2012-01-04/diamonds-to-outpace-gold-as-spending-in-asia-risescommodities.html http://www.businessweek.com/videos/2014-01-20/from-0-to-40b-how-dubai-became-a-diamondplayer http://www.canadianjeweller.com/2014-to-bring-growth-in-polished-diamond-sales/ http://www.chinadaily.com.cn/hkedition/2011-02/11/content_11980217.htm http://www.chinapost.com.tw/business/global-markets/2012/10/23/358625/Rare-pink.htm http://www.dailymail.co.uk/news/article-2292727/Absolute-perfection-Worlds-largest-flawlessdiamond-sell-20million.html http://www.diamonds.net/News/NewsItem.aspx?ArticleID=45711&ArticleTitle=2014%3A+Growth+Pote ntial http://www.diamonds.net/News/NewsItem.aspx?ArticleID=46710&ArticleTitle=Analysts+View+Chinese +Demand+as+Strong+Opportunity+for+Tiffany++ http://www.diamonds.net/News/NewsItem.aspx?ArticleID=47786&ArticleTitle=Market%2bComments% 2b8%252f21%252f2014 http://www.economist.com/node/21528623 http://www.forbes.com/sites/baininsights/2013/02/07/diamonds-sparkle-for-the-next-billionconsumers/ http://www.forbes.com/sites/baininsights/2013/10/28/buy-that-engagement-ring-now-the-comingsupply-squeeze-in-diamonds/ http://www.forbes.com/sites/jackperkowski/2012/05/30/wedding-bells-and-cash-registers-ring-inchina/ http://www.forbes.com/sites/timtreadgold/2013/10/24/diamonds-could-soon-be-an-investors-bestfriend-as-demand-rises-and-supply-falls/ http://www.gemewizard.com/newsletters/view_article.php?id=228 http://www.gia.edu/gems-gemology/spring-2014-lucas-chinese-gem-industry http://www.gjepc.org/news_details.php?id=10 http://www.ibtimes.com/asians-will-buy-more-diamonds-americans-2020-report-938098 http://www.jckonline.com/2014/05/31/industry-must-embrace-brands-de-beers-execs-say http://www.kennadydiamonds.com/media/bain_report_the_global_diamond_report_2013.pdf http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/commodity-insightsbulletin/Documents/diamond-q2-q3-2013.pdf http://www.minelife.com.au/SamplePDF/2/ML_Daily_Bulletin_Jan13_14.pdf http://www.mining.com/de-beers-changing-its-diamond-sales-model-60892/ http://www.mining.com/diamond-industry-recovers-place-in-miners-hearts-on-climbing-demandprices-39744/ http://www.mining.com/global-diamond-supply-in-a-single-chart-62839/ http://www.mining.com/rough-diamond-prices-to-skyrocket-in-2018/ http://www.mining.com/this-2-million-red-diamond-is-the-hero-in-rios-annual-tender-97899/ http://www.nytimes.com/2013/11/18/business/international/a-rising-appetite-to-invest-in-coloreddiamonds.html?pagewanted=all http://www.nytimes.com/2013/11/18/business/international/a-rising-appetite-to-invest-in-coloreddiamonds.html?pagewanted=all&_r=0 http://www.pdiam.com/i/pdf/2014-03-04_Peregrine_PDAC_Presentation.pdf http://www.private-diamond-club.com/the-club-advantages http://www.prnewswire.com/news-releases/diamond-investments-in-the-pink-223272891.html http://www.rareinvestment.com/investing/invest-in-diamonds/

CARATS INVESTMENTS INC.

http://www.reportlinker.com/ci02177/Luxury-Goods.html http://www.reportlinker.com/n075069545/Rough-diamond-prices-to-rise-till-2018.html http://www.reportlinker.com/n082435506/China-s-diamond-trade-recovers-in-2013.html http://www.reportlinker.com/n086451079/Stellar-Diamonds-up-on-high-grades-at-Tongo.html http://www.reuters.com/article/2013/09/16/us-china-diamonds-idUSBRE98F0YU20130916 http://www.rubyfair.com/blog/2014/01/investing-in-coloured-gemstones/ http://www.scmonline.com/analytics/rdsmdocs/2014_com_Diamonds_Presentation-Richard_WakeWalker.pdf http://www.telegraph.co.uk/finance/commodities/10772835/Shortage-of-supply-means-diamondprices-wont-be-staying-at-todays-levels-forever.html http://www.theglobeandmail.com/globeinvestor/article18913856.ece/BINARY/Diamond052714initiation.pdf http://www.theweddingreport.com/wmdb/index.cfm?action=db.viewdetail&t=s&lc=00&setloc=y http://www.zimtu.com/i/pdf/Diamond-Exploration-in-Canada.pdf https://www.google.ca/search?q=bain+report+2014+diamond&ie=utf-8&oe=utf8&aq=t&rls=org.mozilla:en-US:official&client=firefoxa&channel=fflb&gfe_rd=cr&ei=HW_5U438HanP8geS_4DYCA https://www.google.ca/search?q=global+rough+diamond+demand+2013&ie=utf-8&oe=utf8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=fflb&gfe_rd=cr&ei=AJL5U4vpFKfP8gePoDIBw https://www.google.ca/search?q=precious+stone+market+worth&ie=utf-8&oe=utf8&aq=t&rls=org.mozilla:en-US:official&client=firefoxa&channel=fflb&gfe_rd=cr&ei=wpD5U9rbLarP8gf39oHwBg#channel=fflb&q=precious+stone+market+va lue+billion+bmo&rls=org.mozilla:en-US:official&safe=off https://www.google.ca/webhp?gws_rd=cr,ssl&ei=qpD5UDREObFigK52YC4BA#q=Diamonds+still+dominate+the+%2421+billion+precious+stone+market%2C+acco unting+for+90+percent+of+all+sales%2C+according+to+BMO+Capital+Markets+(BMO&safe=off https://www.google.ca/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF8#q=NASDAQ:NILE&safe=off

CARATS INVESTMENTS INC.

Carats Investments Inc.

The information presented in this document is highly sensitive and confidential and is to be used by authorized parties for the purpose of determining a preliminary indication of interest in Carats Investments Inc. (â&#x20AC;&#x153;the Companyâ&#x20AC;?). The recipient of the Business Plan agrees by its receipt not to reproduce, duplicate, or reveal, in whole or in part, information presented herein without the written permission of the Company. The information contained in the Business Plan was provided by the Company and other sources. It has been reviewed, approved, and released by the Company, who assumes responsibility for its contents. Estimates and projections contained herein have been prepared by the management of the Company and involve significant elements of subjective judgment and analysis and are based on certain assumptions. Actual results may vary from estimates and projections and these variations may be material. No representation or warranty, expressed or implied, is made as to the accuracy or completeness of the information contained in this overview, and nothing contained herein is, or shall be relied upon as, a promise or representation, whether as to the past or the future. The Business Plan does not purport to contain all of the information that may be required to fully evaluate the Company for a potential business relationship, and any recipient thereof should conduct its own independent analysis and due diligence process. THIS PRESENTATION IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITY.

Carats In