1. abcd Where Have They Gone? October 2001 Stephen Levey

2. abcd 1 Foreign Investors in israel  Who are they?  When did they go?  What’s left?  Are they coming back?

3. abcd 2 Who are the Foreign Investors?  Global Emerging Market Pension Funds (Schroders, Gartmore)  Global Emerging Market Mutual Funds (Fidelity, Capital)  Technology Funds (Seligman)  Hedge Funds (Moore Capital)

4. abcd 3 MSCI GEM Benchmark Country Weightings  Israel accounts for 5% of the MSCI GEM benchmark  If foreign investors followed this benchmark strictly, it would mean US$4bn in Israeli equities!

5. abcd 4 Double Whammy! How and When the Foreigners Left  Today, the average GEM Fund has only a HALF weighting in Israel  This number started to fall as the Intifada got going…  …and fell further as Nasdaq declined

6. abcd 5 MSCI Constituents - Weights  Checkpoint and Teva make up almost 50% of the MSCI Israel, or 2.5% of the whole MSCI GEM Index  A zero holding in these stocks is VERY high risk due to their high weightings  Most funds own only these stocks

7. abcd 6 Technology Funds  The “Big Five” are the only ones that really count to global PMs today - CHKP, CMVT, MERQ, DOX and ORBK  There are a group of stocks that global tech funds may occasionally review - NICE, PRSE, RDWR, DSPG, ZRAN  Going forward, small cap IPOs of Israeli tech companies will be FAR HARDER than the last bull market…  …although Given Imaging proves that all hope is not lost!  (We assume investors DO have memories!)

8. abcd 7 Hedge Funds  Lack of shorting capabilities often deters hedge funds from the TASE  This is not the case for Nasdaq, where many hedge funds have been “short” the more liquid stocks during the downturn  Expect hedge funds to remain active in the Israeli technology names, for better or worse!

9. abcd 8 Conclusion  Foreign investors DO NOT have to be in Israel and ARE NOT coming back to the TASE while the geo-political situation remains as it is.  Emerging markets investors will continue to own Checkpoint and Teva due to the large weightings in the Index.  Hedge funds will continue to trade the technology stocks aggressively  Technology investors will focus on the “Big Five” for now  All foreign investors will be far more selective about the quality of IPOs they will consider investing in going forward

10. abcd 9