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COLORED diamonds HISTORY OF DIAMONDS The Greek word "Adamas" meaning unconquerable and indestructible is the root word of diamond. Diamonds have been searched the world over, fought over, worshipped and used to cast love spells. The first river-bed (alluvial) diamonds were discovered in India, in around 800 B.C. The volcanic source of these diamonds was never discovered, but the alluvial deposits were rich enough to supply most of the world’s diamonds. For centuries, rough diamonds were kept as talismans, and often not worn at all. A Hungarian queen’s crown set with uncut diamonds, dating from approximately l074, is perhaps the earliest example of diamond jewelry. We know that the royalty of France and England wore diamonds by the late 1300’s. In 1477, the Archduke of Austria gave a diamond ring to Mary of Burgundy, thus, starting the tradition of diamond engagement rings. The reason a woman wears it on the third finger of her left hand dates back to the Egyptian belief that the vena amoris (vein of love) ran directly from the heart to the top of that finger. The earliest producing diamond mines were in the Golconda region of India. Mining was established by the mid-seventeenth century and a single mine employed 60,000 people. By 1867, a 21 carat stone discovered on the banks of the Orange River, South Africa, started a great diamond rush. Between 1870 and 1891, no less than six kimberlite pipes were discovered in Kimberley. As the 1950’s came, Yakutia, a region of the Soviet Union, began to develop newly discovered diamond resources. This Siberian diamond field would make their nation one of the greatest diamond producers of all time. In the 1960’s, diamond fields were discovered in Botswana. The three diamond mines - Orapa, Letlhakane and Jwaneng - make Botswana the world’s second-largest producer of diamonds and the largest producer of gem diamonds by both value and number. And, in 1991, a diamond-bearing kimberlite pipe was drilled in Canada to begin the largest land staking rush in Canadian mining history. Work to date indicates concentrations and valuations as rich as diamond mines in Africa.

GEMOLOGICAL INSTITUTE OF AMERICA Established in 1931, the Gemological Institute of America (GIA) is the world’s foremost authority on diamonds, colored stones, and pearls. GIA exists to protect all purchasers of gemstones, by providing the education, laboratory services, research, and instruments needed to accurately and objectively determine gemstone quality. They are a nonprofit institute and it is GIA's mission is to ensure the public trust in gems and jewelry by upholding the highest standards of integrity, academics, science, and professionalism through education, research, laboratory services, and instrument development. Using sophisticated technology, Institute researchers analyze thousands of samples each year. When new synthetic gems and artificial enhancement processes enter the marketplace, GIA is there to detect them. GIA manufactures gemological instruments used by gem and jewelry professionals everywhere. GIA Instruments’ precision microscope and many other products help them buy, grade, and appraise with confidence. They are also the world’s most respected gemological laboratory, entrusted with grading and identifying more gems than any other lab including the Hope, Taylor-Burton, De Beers Millennium Star, and the Incomparable. Located in major gem and jewelry centers around the world, GIA laboratories are staffed by expert diamond graders and gemologists, whose work sets the standard for grading practices worldwide. Since the 1930s, GIA researchers have made numerous breakthrough contributions to our understanding of gems. These milestones include: building the first gemological microscope with dark field illumination (1938) ♦ creating the D-to-Z color scale and Flawless-toI3clarity scale for diamonds (1953) ♦ detecting irradiated yellow diamonds (1956) ♦ the first study of a new gem, tanzanite (1968) ♦ the 1st report on faceted synthetic diamonds (1971) ♦ detecting fracture-filled diamonds (1989, 1994) ♦ distinguishing natural from synthetic diamonds (1995) ♦ detecting synthetic moissanite (1997) ♦ identifying the effect of fluorescence on diamond appearance (1997) ♦ detecting diamonds decolorized by high pressure/high temperature (HPHT) treatment (1999) ♦ detecting chemical vapor deposition (CVD) synthetic diamonds (2003) ♦ creating a system for grading diamond cut quality (2004)

THE FOUR C’s COLOR Diamond color is a Fancy Colored Diamond’s most significant characteristic. In fact, unlike a colorless diamond where the 4C's (carat weight, clarity, color, and cut) are all equally important to the overall value, the color characteristic plays the most important role in the value of the diamond. With white diamonds the absence of color is what makes the diamonds so precious. However, in the case of fancy colored diamonds, the presence of color and the intensity of how it shines is specifically what increase the value of the stones. Most of the natural fancy color diamonds found are not a single or pure color. Some diamonds have a combination of two, three, and sometimes even four colors within the composition of the stone. Using controlled viewing conditions and color comparators, the grader determines the diamond’s color. Rarity of color also plays a role in grading a stone. For example, pink diamonds are much rarer than yellow diamonds, and as a result are accorded more value even if it happens to be smaller in size. There are twelve different main fancy colors: The 12 different main colors from left to right - Yellow, Pink, Blue, Green, Orange, Brown, Violet, Grey, Purple, Red, Fancy Black and Fancy White.

The intensity of the diamond is also relevant with regards to the value of the stone:

THE FOUR C’s (cont.) CLARITY This describes the diamond's overall appearance in relation to the number of both internal and external imperfections in the stone. Each stone is assessed and then graded according to a standardized grading scale. Internal impurities are known as “inclusions” while surface impurities are known as “blemishes”. The final clarity grade is usually determined by how easy the inclusions and blemishes are for the grader to see. Below is a simplified set of definitions of various clarity grades set by the Gemological Institute of America (GIA). FL - Flawless : A stone that is completely flawless. This is an extremely rare find. IF - Internally flawless : No internal inclusions visible under 10× magnification to a trained eye. VVS1/VVS2 - Very, very slight inclusions : Tiny inclusions can barely be seen with 10× magnification, even by a trained diamond grader. VS1/VS2 - Very slight inclusions : Very small crystals, clouds, cracks or pinpoints characterize this grade. These inclusions are not very visible and have no impact on the sparkle of the diamond. SI1/SI2 - Small inclusions : Impurities can be seen with 10× magnification and may be visible to the naked eye. I1/I2/I3 (P1/P2/P3) - Inclusion or Pique : A stone that has inclusions most often visible with the naked eye. Diamonds are the strongest element known to man. After having traveled to depths through volcanic eruptions, and having been created in unimaginable conditions deep below the surface of the earth, one can imagine that various imperfections within the stones can occur. They are broken into two categories, ‘Internal’ inclusions and ‘External’ inclusions. Depending on the type, the size, and where in the stones they are located they might not necessarily affect the appearance of the stone.

THE FOUR C’s (cont.) CARAT It is a given that most people would prefer a large diamond. However, there are a few factors that play into how large it appears against how heavy the stones carat weight might be. As one of the basic 4C's of assessing a diamond, it is important to understand exactly what carat weight entails in order to select the perfect stone. The weight significantly affects the cost of the stone since the cost is increased considerably per carat. For example, a 1.00 carat diamond is not exactly half the price of a 2.00 carat diamond. If the weight drops, the price of the stone will be significantly lowered. A carat refers to the unit measurement used to describe the weight of the diamond. Many years ago, because of their size, the seeds of the Carob were used on precision scales as units of weight for small quantities of precious stones. This tradition continued through time, hence we refer to the unit measurement as carat. Diamonds that come with a grading report will indicate the exact weight to the nearest hundredth of a carat weight. Each carat is divided into 100 points, so if a diamond weighs 3/4 of a carat, meaning 75 points, its weight would be recorded as 0.75 ct. In the industry, the price of a diamond is often referred to by the price per carat (price per unit of 1.00) and is written as P/C (per carat) as opposed to the overall cost of the stone.

CUT One might assume that the cut of a diamond would mean the shape, but in actual fact, the term “cut” is used interchangeably between proportion, grade, and shape. When it comes to assessing a diamond “cut” refers to the polish, proportion and symmetry of a stone. For example, a well cut diamond possesses brilliance, sparkle, and allure and it is the cutter’s job to bring out the best qualities of the stone. With colored diamonds the cutter’s aim is to bring out the strongest color while maintaining the most size, brilliance and allure possible. Cut may also refer to shape as well. For example an oval shaped diamond will be called an oval cut. A diamond’s value is as good or poor as its cut. Since cut is so important in selecting a diamond, several grading methods have been developed to help consumers determine the cut of a particular diamond.

These grades are : Ideal cut, Premium Cut, Very Good (or Fine) cut, Good Cut, Fair Cut and Poor Cut.

FEATURED DIAMONDS LOOSE YELLOW DIAMONDS Natural fancy-colored Yellow diamonds are the most popular of all natural fancy colored diamonds. They are the second most plentiful in nature after colorless diamonds. An estimated 60% of all natural fancy-colored diamonds are of the Yellow category. Natural fancy-colored Yellow diamonds often contain a light secondary tone of Green, Brown or Orange. The majority of natural fancy-colored Yellow diamonds are in the mid-range in terms of value, on the fancy-colored diamond spectrum. At the upper end of the spectrum are exquisite Yellow Vivid diamonds that can sell for over $100,000 per carat. The demand and popularity of Yellow diamonds affords investors the greatest potential for appreciation. It also makes them easier to liquidate. In 1983, the Tiffany Diamond was valued at around $12 million. Today it holds an estimated value of $250 million.

LOOSE PINK DIAMONDS Natural fancy-colored pink diamonds are beyond rare. In fact, for every million carats of rough white diamonds mined, only one carat will be a fancy pink. Put another way, it will take the world’s largest producer of natural fancy-colored pink diamonds an entire year to discover just over one half carat of pink diamond. The Argyle Diamond Mine in Western Australia produces more than 90 percent of the World’s natural fancy-colored pink diamonds. The Argyle Diamond Mine was commissioned in 1985. This mine is the World’s primary source for natural fancy colored pink diamonds. On average, natural fancy-colored pink diamonds convey 20 times the price of an equivalent colorless diamond. Stones mined from the Argyle mine are usually pinker in tone than those mined in India, Brazil or Africa. And pinker means more valuable.

LOOSE BLUE DIAMONDS Natural blue color is one of the rarest of the colors in diamonds. Because of their rarity, natural fancy-colored blue diamonds are among the most sought after for collectors and investors. The Premier Mine in South Africa is known as the most productive mine in the world for fancy-colored blue diamonds. Natural fancy-colored blue diamonds typically display shades of steely grey, so when saturations of blue are more prominent, the aspects of rarity and value are instantly extraordinary. Vivid blues are so rare, typically reaching values of over 7 figures per carat. The Wittelsbach Diamond, with its rare deep blue-sky color, was sold in 2008 at Christie’s London for $24 million. The diamond weighs approximately 35.56 carats and holds an internally flawless clarity rate.

FEATURED DIAMONDS (cont.) LOOSE ORANGE DIAMONDS Natural fancy-colored orange diamonds are so rare that most jewelers have never seen one. Those few natural orange diamonds that are discovered come primarily from South Africa and the Argyle Mine in Australia. As with other natural fancy-color diamonds, natural fancy-colored orange diamonds are graded on a scale ranging from Faint Orange to Fancy Vivid Orange. Larger orange diamonds with natural vivid color command very high prices at auction. A perfect example is the 4.19 carat Fancy Vivid Orange Diamond that sold in October, 2011 for a record $2.95 million. The most well known Natural Orange Diamond is the Pumpkin Diamond. So named because it was sold on Halloween, the Pumpkin Diamond was mined in Central Africa and is the world’s largest Fancy Vivid Orange Diamond. Despite weighing just 5.54 carats, the Pumpkin Diamond is valued at $3 million.

LOOSE GREEN DIAMONDS Natural fancy-colored green diamonds containing no other secondary hues or modifiers can command astronomical prices depending on their intensity and purity of color. Most available Green diamonds have grey, blue or yellow modifiers. These rare stones can be found in mines in Australia, Brazil, Venezuela and Zimbabwe. Green diamonds are highly valued and greatly admired, especially pure green colored diamonds that show no trace of any secondary color modifiers. Very few pure green diamonds have been seen or reported by gemologists and researchers. The most globally recognized green diamond is the Dresden Green. It holds a documented history that extends back to several centuries (as early as 1726). The 41-carat rarity is currently on display at the Smithsonian Natural History Museum.

LOOSE BLACK DIAMONDS Black Diamonds have made a dramatic presence on bodies of the most rich and famous walking the red carpet. With its extremely unique and captivating look, Fancy Black Diamonds have taken over Hollywood. Black diamonds, also known as carbon diamonds, owe their color to minute inclusions and random clustering throughout the stone rather than trace elements like nitrogen. Black diamonds are usually opaque and as a result, cut parameters are of little importance since light does not reflect or refract which produces the brilliance in conventional diamonds. Two of the most famous black diamonds are the 202.00 carat Black Star of Africa and the 67.50 carat Black Orfloff.

12 REASONS TO INVEST NOW #1 - If there was ever a reason to be invested in natural fancy colored diamonds, it is price stability. After several decades and several boom and bust cycles, colored diamonds have never decreased in value. In fact, over the last 30 years, prices for these gems have risen consistently. Even today when global markets seem at their most fragile, colored diamonds continue to experience price increases. Any investor seeking security and consistency should look into owning a natural fancy diamonds as a store of wealth. #2 - Fancy color diamonds are a class that demonstrates many unique characteristics that other assets do not. They are affordable, durable, easy to conceal, and transportable. There is no shelf life, they never lose their luster or shine and will look as good as new 100 years from the time they are originally polished. They have well established valuation methods, and can be appreciated and utilized on a daily basis. #3 - Perhaps one of the most interesting characteristics of fancy color diamonds is their price resilience in the face of adversity and long-term price growth. Currency debasement around the world has led to the “smart money� seeking hard assets – assets which cannot be created by a printing press or the tap of a keyboard. #4 - A buy and hold strategy in the stock market may not always bear fruit, however it seems that by looking back over the past three decades, that such a strategy in the fancy color diamond market promises to show a rewarding outcome. The reason for this is because every stone is unique. Buy a Ferrari and you can order the color of the paint and the upholstery; buy a fancy color diamond and you purchase a one-off, something exquisite that no one else currently possesses. #5 - There may be occasional price fluctuations caused by financial crises, seasonal factors in the diamond market, or world tragedies (9/11, tsunami, etc.); after all, the price of fancy color diamonds is also subject to human factors. However, gram for gram, millimeter for millimeter, fancy color diamonds hold more value than possibly any other element known to mankind. #6 - Based on growing global demand, especially from China and India, De Beers expects demand for rough diamonds to hit a new record in 2012. As the middle class continues to grow within emerging nations, De Beers expects China, India and the Middle East to account for 40% of global diamond demand by 2015. #7 - The portability of diamonds is more favorable than that of gold or silver. A diamond investor can carry a million dollar portfolio in his shirt pocket, whereas the same amount of gold can be a challenge to transport. Try boarding an airplane with a million dollars of gold or silver!

12 REASONS TO INVEST NOW #8 - Diamond prices have increased an average of 15% per year since 1959, and the values of these precious stones are not directly linked to the stock or bond markets. Therefore, diamonds are a good hedge for investors looking to protect against inflation risk and interest rate risk. #9 - Emerging nations, such as India and China, will drive the demand for diamonds in the upcoming years. On the supply side, the commissioning of new mines should be largely offset by depletion of matured ones that are seeing production taper off or at least stay flat. Global demand for diamonds will probably outstrip supply by 7 million carats by 2016, compared with a shortage of only 1 million carats this year. #10 - Diamonds appeal to many investors due its estate tax benefits. #11 - Diamonds are private #12 IndexIQ, exchange traded fund provider of alternative investment strategies, has filed with the Securities and Exchange Commission to launch a physically backed diamond fund. According to the filing, the IQ Physical Diamond Trust will hold physical diamonds, dividing diamonds into subcategories with characteristic variations. The diamonds used will be certified by the G.I.A. This could send investment demand much higher if approved by the SEC. Since there are no diamond futures being trading on the commodities exchange, a diamond ETF would most likely be backed by physical holdings, another factor that will push demand higher. Being properly positioned in physical investment grade diamonds ahead of a paper ETF investment could prove to be a very wise investment. This is especially true when you consider what happened to gold and silver prices after precious metals ETFs became popular with investors. Although the diamond market does not have all the same characteristics of gold and silver, we expect a similar trend to occur if the SEC approves the pending diamond ETF.



Diamond Report