MIRA INFORM REPORT

Report Date :

11.03.2011

IDENTIFICATION DETAILS

Correct Name :	LLD DIAMONDS LTD.
Registered Office :	23 Tuval Street, Diamond Exchange, Noam Bldg., Ramat Gan 52522
Country :	Israel
Date of Incorporation :	12.10.1997
Legal Form :	Private Limited Company
Line of Business :	Miners, International Manufacturers and Traders in diamonds

RATING & COMMENTS

MIRA’s Rating :

Ba

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Status :	Satisfactory
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 – December 31, 2010

Country Name	Previous Rating (30.09.2010)	Current Rating (31.12.2010)
Israel	a2	a2

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

Company name & address

LLD DIAMONDS LTD.

Telephone 972 3 755 11 11

Fax 972 3 612 27 15

23 Tuval Street

Diamond Exchange, Noam Bldg.

RAMAT GAN 52522 -ISRAEL

HISTORY & LEGAL FORMATION

A private limited company, incorporated as per file No. 51-254128-5 on the 12.10.1997, continuing activities founded years earlier.

SHARE CAPITAL

Authorized share capital NIS 34,300.00, divided into -

34,300 ordinary shares of NIS 1.00 each,

of which 104 shares amounting to NIS 104.00 were issued.

SHAREHOLDERS

1. Lev Leviev, 99.04%,

2. Moshe Leviev, 0.96%.

DIRECTORS

1. Moshe Leviev, General Manager (brother of Lev),

2. Zevulun Leviev.

BUSINESS

Miners, international manufacturers and traders in diamonds, dealing as cutters, polishers, importers, exporters and marketers of diamonds for fine jewellery.

LEVIEV Group operates in all stages of the diamonds chain – from mining and production to sales and marketing. Dealing in cut and rough diamonds.

LEVIEV Group controls its own diamond mines, some of which are located in Namibia and Angola. Most manufacturing and processing is abroad, imported to Israel either as rough for sale to other dealers or as cut diamonds for sale and export.

Diamonds and jewellery are sold also via the Group’s chain of fancy stores around the world.

Operating from owned premises, in 23 Tuval Street (also referred to as 52 Bezalel Street), Noam Building (12^thFloor – subject owns and occupies the entire floor), Diamond Exchange, Ramat Gan.

Group also operating from mines, plants and offices in South Africa, Namibia and Angola, polishing plants in India and Far East and branches in Antwerp, New York, London, Moscow, Rome, China/ Hong Kong, India and Dubai/ UAE.

Having 100 employees in Israel, as well as hundreds of employees serving the LLD Group worldwide (couple of hundreds in Israel).

MEANS

Financial data not forthcoming. Subject has been hit by the severe depression in the diamond industry which erupted in the last third of 2008, however it is still considered to be financially strong and solid (see also CHARACTER).

According to media reports, following the crisis subject’s bankers asked in the beginning of 2009 from subject to lower its credit exposure and Mr. Leviev fueled NIS 400 million and subject was left with US$ 800 million debt to its banks.

Sources in the branch estimated Lebiev’s diamond business at US$ 2 – 4 billion.

There are 8 charges for unlimited amounts registered on the company's assets, in favor of Union Bank of Israel Ltd., Israel Discount Bank Ltd., Bank Leumi Le’Israel Ltd. and Mizrahi Tefahot Bank Ltd.

ANNUAL SALES

Sales for export (net) of polished diamonds as published by the Israeli Ministry of Industry & Trade:

2005 sales were US$ 601,000,000.

2006 sales were US$ 553,000,000.

2007 sales were US$ 522,000,000.

2008 sales were US$ 417,000,000.

2009 sales were US$ 241,000,000.

LEVIEV Group whole diamond and jewelry business estimated at US$ 3 billion per year.

OTHER COMPANIES

AFRICA ISRAEL INVESTMENTS LTD., a large holding company with numerous holdings in Israel and overseas in various fields (see more CHARACTER).

MEMORAND HOLDINGS & INVESTMENTS LTD., holding company via which Lev Lebiev holds AFRICA ISRAEL Group.

AURAMINE, owns and develops gold mines in Russia (extracted 2 million tons of gold in 2008)

SAMICOR, diamond extracting from the Angola’s Sea.

NAMCO, diamond mines in Namibia.

MIUZ, Russia, design, manufacture and sale of jewelries, operating via 160 chain stores, mainly in Russia, CIS and Eastern Europe countries, estimated annual sales US$ 150 million.

OPEN JOINT STOCK COMPANY MOSCOW JEWELRY FACTORY, Russia.

BANKERS

Main branches:

Union Bank of Israel Ltd., Ramat Gan Branch (062), Ramat Gan.

Bank Hapoalim Ltd., Yahalom Branch (No. 537), Ramat Gan.

Also working with:

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

Mizrahi Tefahot Bank Ltd., Diamond Exchange Business Center Branch
(No. 466), Ramat Gan.

CHARACTER AND REPUTATION

Nothing unfavorable learned, besides the business aspect of the global economic and financial crisis that hurt subject and Lev Leviev’s diamonds and other businesses (as also described below).

In March 2009 it was reported that the Group’s polishing plant in Namibia will fire 77 employees due to the situation and be left with 30 employees.

Mr. Lev Leviev is a well-known veteran diamond dealer and is considered the world’s largest private diamond dealer with worldwide reputation. His own personal wealth is estimated in 2009 at NIS 6.5 billion, making him among the richest in the country. In Israel, Mr. Leviev has been one of the leading and most influential business figures, via his AFRICA ISRAEL Group (though see below on its entanglement!). Despite the hit in the real estate and diamond businesses due to the severe crisis, thanks to its reputation and the fact it deals in all the diamond sector chain, LEVIEV Group managed to cross over the crisis (according to sources in the diamond branch subject met all liabilities promptly, enjoying the fact that both customers and suppliers want to work with subject). As the markets recovered (in the diamond sector and generally) in 2010, Group’s financial status improved also.

In the past Mr. Leviev was a DE BEERS sightholder, however following continuous conflicts he departed and became the largest independent cutter and processor of diamonds in the world, and the main source of rough diamonds, challenging the long standing hegemony of DE BEERS and revolutionized the sector. Mr. Leviev controls many other international companies in the diamond sector, among them are ASCORP, RUIS DIAMONDS, WELOX LTD., etc. He is involved in mining and manufacturing in Africa, in particular Angola, where he is very well connected to the regime (although in 2003 he lost the exclusivity for diamond export from Angola).

During 2004 and 2005 Mr. Leviev opened, jointly with the local authorities, 2 major plants for diamonds polishing in Namibia and in Angola. The one in Luanda, Angola, is the largest of its kind in Africa.

Born in Tashkent, Uzbekistan, Mr. Leviev is also strongly involved in the Russian diamond industry and trade.

For many years, subject has been the leading largest diamond company in Israel, most of the years by far largest than others. To-date it is still the largest although in recent years the LEO SCHACHTER Group is closing the gap (in 2008 US$ 50 million less than subject and in 2009 US$ 25 million less), though both are still way ahead all others.

In 1996 Mr. Leviev took over control in AFRICA ISRAEL INVESTMENTS LTD., publicly traded on the Tel Aviv Stock Exchange, land developers, building contractors, and also managing and dealing, through subsidiaries, yielding properties, hotels and resorts, industries, commerce and agencies. The AFRICA ISRAEL Group (AFI) has been one of the largest concerns in Israel. Other public companies in the AFI Group are also traded on stock exchanges in Israel and abroad. AFI has been adversely hit by the deep crisis in world financial and real estate markets, mainly due to its real estate holdings in Russia and the USA, accumulating huge losses -current debt in total of NIS 8 billion to the bonds holders and banks. The huge leverage AFI used to finance the purchasing, mainly by raising bonds through the public, led to its announcement by the end of August 2009 that it seeks arrangement with its bonds holders. After objections of bond holders, in December 2009 an agreement was signed between AFI and its the Institutional Investors (who hold most of the bonds) and bond holders in volume of NIS 7.45 billion, according to which some of the debt were erased, a re-schedule for payments set, Mr. Leviev fuel his own capital (NIS 750 million) and his controlling share was decreased (from 75% to 47% currently).

On 21.12.09 the Tel Aviv District Court judge approved the debt deal, clearing the way for its implementation.

During 2010 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 in sales and collapse of about 70% in sales later. 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). Further improvement witnessed during the first half of 2010.

Overall in 2009, export diamonds shrank by 40%. Export of cut diamonds (net) were US$ 3,922.6 million, representing 37% decrease compared to 2008. The depression in the diamond sector comes after year 2007 marked a record in the export of cut diamonds from Israel, with net sales for export of US$ 7.076 billion, while 2008 witnessed a decrease of 11.8% to US$ 6.240 billion.

Export of cut diamonds (net) in 2010 first half increased by 92% to US$ 3,002 million, and export of rough diamonds (net) reached US$ 1,624 million, representing 104% rise compared to the parallel period in 2009. Yet, in comparison to 2008 first half, export of cut diamonds in 2010 is 21% lower.

Import of rough diamonds (net) in 2010 first half grew by 113% to US$ 1,817 million, compared with the parallel period in 2009, while import of cut diamonds (net) saw a 105% rise reaching US$ 1,881 million.

The USA is still the main market for Israel’s export of cut diamonds, although its portion decreased significantly in view of the economic situation where the U.S. suffered the biggest hit – some 40% of total the export from Israel in 2010, comparing to 60%-65% in past years. In order to face the situation many companies have increased their marketing to Far Eastern markets. Secondary markets are Hong Kong (27%), Belgium (9%), India (4%) and China (3%).

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

According to the President of the Israeli Diamonds Association, local banks contracted credit given to local diamond firms in view of the global financial crisis, however, he believes the local diamond sector is healthy: 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. Israel Ministry for Industry & Trade also committed to support local diamond exporters by providing bank guarantees in total scope of NIS 1 billion.

SUMMARY

Good for trade engagements.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.45.11
UK Pound	1	Rs.72.91
Euro	1	Rs.62.56

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

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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This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.