Harry Winston Inks Deal With Investment Fund

Harry Winston Diamond Corp., which owns part of the
Diavik mine in Canada’s Northwest Territories as well as the famed retail
chain, has entered into a partnership with Diamond Asset Advisors,
which is establishing a polished diamond investment fund.

The arrangement will be structured as a limited partnership,
of up to $250 million. It calls for Winston’s diamond team to source
high-quality diamonds, including some from its inventory. The fund will then
purchase the diamonds, and consign them to Winston, which will act as their
custodian and use them in the manufacturing of its products. The price paid to
replace polished diamonds sold by Winston in its finished products will be used
by the fund as a basis for determining its market value.

The polished diamonds sourced through this relationship will
increase the diamond jewelry inventory available to Winston, and also reduce
the risk associated with diamond price volatility.

The fund’s first subscription, of approximately $100
million, is expected to be raised later this year, with the remaining $150
million expected to be raised over the following year, subject to market
conditions. Upon initial funding by DAA, Harry Winston expects to sell a
substantial portion of its existing polished diamond inventory to the fund at
market prices.

The fund will be managed by DAA, and there is no ownership
interest between Harry Winston Diamond Corporation, or its affiliates, and DAA.
However, Ray Simpson, currently the executive vice president of Harry Winston
Diamond Corp., will join DAA as a member of its management upon leaving Winston
Winston’s arrangements with the fund are subject to customary closing
conditions and the fund raising a minimum of  $100 million.

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