MIRA INFORM REPORT

Report Date :

04.07.2011

IDENTIFICATION DETAILS

Name :	SHMILA AZAR & SONS

Registered Office :	54 Bezalel Street, Diamond Exchange, Yahalom Bldg., Ramat Gan52520

Country :	Israel

Year of Establishment :	1966

Legal Form :	Sole Proprietorship

Line of Business :	Dealers, polishers, importers, exporters and marketers of diamonds of half a karat and up.

RATING & COMMENTS

MIRA’s Rating :

RATING		STATUS	PROPOSED CREDIT LINE
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small

Status :	Moderate

Payment Behaviour :	No Complaints

Litigation :	Clear

NOTES :

Any query related to this report can be made on e-mail : infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – March 31^st, 2011

Country Name

Previous Rating

(31.12.2010)

Current Rating

(31.03.2011)

Israel

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

Company name & address Bottom of Form

SHMILA AZAR & SONS

Telephone 972 3 613 19 91

Fax 972 3 613 19 93

54 Bezalel Street

Diamond Exchange, Yahalom Bldg.

RAMAT GAN 52520-ISRAEL

HISTORY & LEGAL FORMATION

A sole proprietorship, established in 1966.

Operating under Licensed Dealer No. 078415817.

The business is registered with the Tax Authorities’ Files under the name of "SHMILA AZAR".

OWNERSHIP

Azar Shmila.

GENERAL MANAGER

Azar Shmila.

BUSINESS

Dealers, polishers, importers, exporters and marketers of diamonds of half a karat and up.

Some 33% of sales are for export.

Operating from office premises, owned by Ezer Shmila, on an area of 80 sq. meters, in 54 Bezalel Street (street name is also referred to as 21 Tuval Street), Diamond Exchange, Yahalom Building (32^nd Floor), Ramat Gan.

Having 12 employees.

MEANS

Owned property in 54 Bezalel Street, Diamond Exchange, Yahalom Building, Ramat Gan (where subject is operating from) is valued at US$ 1,200,000.

Other financial data not forthcoming.

REVENUES

2009 sales claimed to be US$ 32,000,000, 33% were for export.

2010 sales claimed to be US$ 32,000,000, 33% were for export.

We were informed that there is a 30% decrease in sales in 2011.

BANKERS

Union Bank of Israel Ltd., Ramat Gan Branch (No. 062), Ramat Gan.

Israel Discount Bank Ltd., Diamond Exchange Branch (No. 080), Ramat Gan.

CHARACTER AND REPUTATION

Nothing unfavorable learned.

Subject is a veteran business.

During 2010 and 2011 local diamond companies have been recovering from one of the worst depressions in the global diamond sector due to the severe economic crisis in global markets that erupted in September 2008. The diamond sector experienced almost an entire freeze and collapse in sales of about 70% in the peak of the crisis and 2009 export diamonds shrank by some 40%. Only since mid 2009 a mild recovery has been felt (in some markets, such as the American, it is estimated that it will take long time till fully recovering) and continued throughout 2010, into 2011. In 2011 first quarter, a significant improvement was recorded, although still well below 2007 and 2008 first 3 quarters levels.

According to the President of the Israeli Diamonds Association, local diamond sector in general managed to cross the crisis, despite the sheer difficulties, including the fact that local banks contracted credit given to local diamond firms. The President said that trade in the sector rolls annual turnover of US$ 25 billion while total debt to the banks stands on US$ 1.5 billion, down from US$ 2.4 billion in the eve of the crisis. The Ministry for Industry & Trade also assisted the local diamond exporters by providing bank guarantees in total scope of NIS 1 billion.

Overall in 2010, export (net) of polished diamonds was US$ 5,832 million, representing 48% increase from 2009 (when it noted 37% decrease from 2008, also much less than 2007, a record year in polished diamonds export, with sales of US$ 7,076 million). In karat terms, net export of polished diamonds rose by 32%. Rough diamonds export (net) reached US$ 3,060 million, 62% up from 2009 and 36% increase in karat terms.

In the 1^st quarter of 2011, 45.7% increase was noted comparing to the parallel period in 2010 with export of polished diamonds of US$2,123 million. Export of rough diamonds also noted 39.6% rise, reaching US$ 1,158 million.

Import of rough diamonds (net) in 2010 grew by 51% to US$ 3,755 million (30% rise in karat terms) compared with 2009, and by 24.9% in 2011 1^stQ (compared to 2010 1stQ), summing up to US$1,144 million. Import of polished diamonds (net) saw 68% rise in 2010 reaching US$ 4,218 million (39% rise in karat terms), and 48.5% rise in 2011 1^stQ (US$ 1,234 million).

In terms of target export (polished diamonds) countries, overall in 2010 the USA returned to be main destination, with 41% of total export (45% in 2011 1^stQ). This comes after earlier in 2010, for the first time Far East markets became Israel’s diamond industry’s main target, with sales to Hong Kong being close to these of the USA, to whom sales decreased dramatically in view of the severe economic crisis (traditionally sales to the USA comprised some 60%-65% of total export). In 2010 and early 2011, export to Hong Kong comprised around 26% of sales. Other main target countries include Belgium, India, Switzerland and China.

In February 2009, Israel was ranked as the world’s largest exporter of cut diamonds, followed by India, Belgium and South Africa.

SUMMARY

Good for trade engagements.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.44.59
UK Pound	1	Rs.71.75
Euro	1	Rs.64.80

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
----	NB	New Business	----

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

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