Ma’ariv Conference Joel Maryles Citigroup / Salomon Smith Barney

2 Fundraising by Public and Private Israeli Companies Private Israeli Company Fundraising Source: IVC High Tech Survey Sep 2001 Public Israeli Company Fundraising

3 How does this compare to the US experience?  2000 Financing by US Technology Companies$272.3 Billion  2001 YTD Financing by US Technology Companies$84.7 Billion  Percentage decline in %  2000 Financing by Israeli Companies on NASDAQ$4.0 Billion  2001 YTD Financing by Israeli Companies on NASDAQ$1.7 Billion  Comparable percentage decline in %

Its always darkest before the dawn…….

Stock markets generally anticipate events six months in advance. We predict an economic rebound in the second half of 2002.

6 Global Economic Downturn Y/Y Percent Change Percent Change from Preceding Quarter (SAAR) HistoryForecastHistoryForecast Source: Salomon Smith Barney Economic & Market Analysis

7 Dow Jones and S&P 500 Declines 1)12/13/196106/26/1962(27.11)%134 2)02/09/196610/07/1966(25.21)%167 3)12/03/196805/26/1970(35.93)%367 4)01/11/197312/06/1974(45.07)%481 5)09/21/197602/28/1978(26.87)%363 6)04/27/198108/12/1982(24.13)%333 7)10/02/198710/19/1987(34.16)%12 8)07/16/199010/11/1990(21.16)%62 9)07/17/199808/31/1998(19.26)%32 10)01/14/200009/21/2001(29.75)%422 Average (excluding current period) (28.77)%217 PeakTrough % Decline # of Trading Days Significant Dow Jones Industrial Average DeclinesSignificant S&P 500 Industrial Average Declines 1)12/13/196106/26/1962(27.97)%135 2)02/09/196610/07/1966(22.18)%167 3)11/29/196805/26/1970(36.06)%369 4)01/11/197310/03/1974(48.20)%436 5)09/21/197603/06/1978(19.41)%366 6)11/28/198008/12/1982(27.11)%430 7)08/25/198712/04/1987(33.51)%71 8)07/16/199010/11/1990(19.92)%62 9)07/17/199808/31/1998(19.34)%32 10)03/24/200009/21/2001(36.77)%373 Average (excluding current period)(28.19)%230 PeakTrough % Decline # of Trading Days Source: Salomon Smith Barney

8 How have Israeli stocks held up?

Don’t Worry, Be Prepared Because……….

10 What Initially Attracted Foreign Investors to Israel?  Israel’s natural resource is brainpower  Foundation for Israel’s intellectual capital is the country’s military & academic institutions and the wave of immigration in the 90s that brought it to Israel an influx of scientists and engineers  Israeli entrepreneurial spirit  Israeli companies are consistently on the leading edge of technological innovation NONE OF THIS HAS CHANGED……..

Companies should focus on:

12 Upcoming Opportunities  The need for technology Is not going away  Productivity in global economy driven by adoption of new technologies  Although the weaker are disappearing, the leaders are also getting weaker  Inevitable consolidation will create gaps which will present opportunities  BE PREPARED!  Make sure you are ready when the market rebounds  Use the current downturn to add depth to your management team

13 Alternatives to Capital Market Fundraising  Various kinds of foreign investment - increasing trend towards Mergers & Acquisitions (corporate-to-corporate)  Cash-rich corporations are taking advantage of lower valuations  Industry Consolidation –Israeli companies acquiring international companies in order to increase market share and distribution channels –International companies acquiring Israeli technology as a source of revenue-generating solutions  Examples of Israeli M&A activity in Israel in 2001:  Marvell’s acquisition of Galileo Technology  BreezeCom / Floware - Merger-of-Equals  Amdocs announces acquisition of Clarify  Hewlett Packard announces acquisition of Indigo NV