Summary

• US market weak but Asian markets providing some positive momentum
• Prices stabilizing at lower levels with emergence of more value buying opportunities
• Reduction in rough diamond production set to tighten price elasticity for investment diamonds

Trading Notes

Dealer market sentiment conitued to decline during February with more major U.S. reatilers filing for bankruptcy. U.S. trading market very soft adding continued pressure on prices. Recent Hong Kong trade show showed some signs of improved buying activity with asian demand remaining steady. Prices stabilizing at lower levels with some signs of improvement particularly for two caraters. Reduction in rough diamond production further enhances long-term forecast of continued price robustness for investment diamonds. We envisage further price reductions during March and are looking towards upcoming Basel trade show for market sentiment indicators. Further solid buying opportunities emerging and some dealers become more desparate to move their inventory.

Market News

Canada launches its first diamond exchange establishing trading market infrastructure in important mining and manufacturing hub. Dubai Multi Commodities Center (DMCC) consilidates its diamond, pearls and gemstone exchanges into single unit. Major diamond producers expected to reduce in output in 2009 as they become more bullish on overall demand pull- Graff sells 30 carat square diamond at Dutch collectors fair and reports high-end sales remain steady. Increased level of polished diamond auctions and tenders – US treasury auctioning 605 diamonds in NY on March 20. US specialty jewellery sales decline 9% in January compared to January 2008, however this was up on previous two months where double-digit declines were posted.

Comparative Indices and Annual Returns

Comparitive Indices and Returns