1. SWOT Analysis of the Israeli Capital Market February 2008

2. Strengths Human capital Human capital “ Jewish Profession ” “ Jewish Profession ” Positive momentum due to progress in the capital market Positive momentum due to progress in the capital market

3. Strengths - continuation Culture of entrepreneurship in a wide range of fields Culture of entrepreneurship in a wide range of fields Varied spoken languages in Israel Varied spoken languages in Israel Close proximity to East and Central Europe (between East and West) Close proximity to East and Central Europe (between East and West) Trade on Sundays Trade on Sundays

4. Weaknesses Geopolitical situation (perception and reality) Geopolitical situation (perception and reality) Governmental instability Governmental instability High bureaucracy High bureaucracy Decentralized regulatory system Decentralized regulatory system Concentrated financial market Concentrated financial market

5. Weaknesses – continuation High National Debt (530 Billion) High National Debt (530 Billion) High burden of mandatory pension High burden of mandatory pension Not enough use of English (financial statements, etc.) Not enough use of English (financial statements, etc.) Lack of financial education Lack of financial education

6. Opportunities Proximity to developing markets in East Europe and Asia Proximity to developing markets in East Europe and Asia Jewish money that ’ s looking for investment Jewish money that ’ s looking for investment Jewish and ex-Israeli human resources – attraction to Israel Jewish and ex-Israeli human resources – attraction to Israel Existing mechanisms of raising capital of the Bonds, Keren Kayemet, the Jewish Agency, Keren Haysod, etc. Existing mechanisms of raising capital of the Bonds, Keren Kayemet, the Jewish Agency, Keren Haysod, etc.

7. Threats Geopolitical situation Geopolitical situation The sub-prime crisis The sub-prime crisis Non-harmonious regulation Non-harmonious regulation Strong workers unions (mostly banks) Strong workers unions (mostly banks)

8. Necessary conditions for a global financial center Growing and stable economy Growing and stable economy Professional and high-quality manpower Professional and high-quality manpower Advanced and stable regulation Advanced and stable regulation Simple and certain taxation Simple and certain taxation Advanced technological infrastructure Advanced technological infrastructure Advanced leagal system Advanced leagal system

9. Financial Sector Data Number of people employed – Number of people employed – 83 thousand hired which is 3% of the labor force Average salary: 16.7 thousand NIS a month, which is more than double the average wage (7,600) Average salary: 16.7 thousand NIS a month, which is more than double the average wage (7,600) 30 Billion NIS contribution of the financial sector, 30 Billion NIS contribution of the financial sector, which is 5% of the GDP

10. The Main Issues Development of the financial industry Development of the financial industry Development and advancement of financial tools to enhance competition in the capital market Development and advancement of financial tools to enhance competition in the capital market Accessibility of household, small and medium sized business to the capital market and currency Accessibility of household, small and medium sized business to the capital market and currency Harmonization and equalization of infrastructure of regulatory bodies Harmonization and equalization of infrastructure of regulatory bodies Human capital Human capital

11. Summary Agenda for the capital market for the next 10 years Agenda for the capital market for the next 10 years Balance between: Balance between: oEnhancing the competition: piece of the pie oDeveloping the capital market and production of financial services: increase the pie The goal: looking for opportunities and utilizing potential for a financial center The goal: looking for opportunities and utilizing potential for a financial center