S P R I N G 2014

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Published by the Government of Israel Economic Mission Ministry of Finance

Overview
On January 22, 2014, the State of Israel raised 1.5 billion of euro-denominated bonds, as the government took advantage of its lowest-ever international borrowing costs. The issue was also notable for its high demand which was 5.7 times the amount issued, a sign of confidence in the Israeli economy. The 10-year notes were priced to yield 2.93 percent, reflecting 115-basis points above similar-maturity German bonds. Standard & Poors Ratings Services affirmed Israel sovereign credit ratings at A+/A-1 with a stable outlook. According to the company, the affirmation reflects Israels prosperous and diverse economy as well as the improvement of public finances due to stable growth and the positive impact of natural gas production on the external account. Israels GDP grew at a rate of 3.3 percent in 2013. Indicators point to an improvement in the fourth quarter of 2013 and in the first quarter of 2014. As in previous years, the Israeli economy in 2013 grew faster than the average growth of 1.2 percent of OECD countries. Exports of goods recovered in the fourth quarter of 2013 and were 9.5 percent higher than in the third quarter, with exports of the high tech sector leading the growth. The current account of Israel recorded a large surplus of 2.5 percent of GDP during 2013, with a surplus of 2.9 percent of GDP in the fourth quarter The unemployment rate decreased to 6.2 percent in 2013, compared with 6.9 percent in 2012, placing Israel among the OECD countries with relatively low unemployment rate. In 2013, the government deficit was 3.15 percent of GDP, compared to the 4.65 percent allocated for in the budget. An agreement for partnership in nanotechnology research was signed between the State of New York and the State of Israel. The visionary partnership will significantly expand business, technology, and economic relations, while generating billions of dollars in new investments and helping to create thousands of high-tech jobs in both New York and Israel. The U.S.-Israel Binational Industrial Research and Development Foundation (BIRD) has been supporting technology collaborations for the last 36 years. The REWALK, a BIRD-funded project, is an exoskeleton designed to enable paraplegics to walk. It was named one of TIME magazines 25 top inventions of 2013 and also made the 2013 list of the top 12 most amazing Israeli medical advances.

EDI TORS:

Shirley Strifler Sigalit Siag Beth Belkin

Review of the Israeli Economy in 2013

Amichai Fishler, Department of the Chief Economist, Ministry of Finance
Recent data indicate that the economy is continuing to grow at a stable rate, with some improvement in the fourth quarter of 2013 compared to the third quarter. The slowdown in the third and fourth quarters (relative to the second quarter) has not been reflected in the labor market, which has shown continuous improvement since April 2013.

Israels GDP grew in 2013 by 3.3 percent, similar to the growth rate in 2012 but slower than the rapid growth of 5.7 percent and 4.6 percent in 2010 and 2011, respectively. The growth in Israels GDP was affected by the weakness in exports, which reflected the slow rate of growth of advanced economies. In addition, the growth in investments continued to lag compared to 2010. On the other hand, an adaptive monetary policy in Israel helped boost private consumption. As world trade recovers, exports are expected to rise and positively influence growth rates. Initial signs of this recovery are reflected in a number of real indices, including the industrial production index, with high tech production leading the trend. As in previous years, the Israeli economy in 2013 grew faster than the average growth of 1.2 percent of OECD countries. According to the Bank of Israel, GDP in 2014 and 2015 is expected to grow by 3.1 and 3.0 percent respectively. The GDP growth rate, excluding the effect of natural gas production, is expected to increase in 2014 compared to 2013, led by an increase in the growth rates of exports and investments, with the expected improvement in the global economy. Growth for the second quarter of 2013 was 4.7 percent, boosted by the start of gas production from the Tamar Oil Field. This figure was much higher than the growth of 2.1-2.3 percent in the other
Real GDP Growth
8.0%
6.9%

quarters of 2013. The business sector product grew by only 2.1 percent in the fourth quarter, mainly due to a decline in inventories and an increase in imports. In this quarter, private consumption increased by 3.1 percent, and public consumption grew 2.3 percent. Exports increased by 19.9 percent. Exports (excluding ships, aircraft and diamonds) of goods recovered in the fourth quarter of 2013 and were 9.5 percent higher than in the third quarter. At the same time, imports of goods declined by 1.7 percent. This resulted in a reduction of the trade deficit in the fourth quarter after a sharp increase in the third quarter. The level of the trade deficit in 2013 was 21 percent lower compared to the level in 2012. The appreciation of the shekel continued in the second half of 2013, lowering the prices of imported goods and impacting the profitability and competitiveness of exports, which are also struggling with continued weakness in demand in the global economy. This appreciation might weigh on exports of goods in 2014. The Consumer Price Index increased during 2013 by 1.8 percent, a rate of increase that is below the midpoint of the price stability target range. For most of the year, actual inflation (for the preceding 12 months) was slightly below the midpoint of the price stability target range. The rate of inflation for the preceding 12 months continues to decline, and was 1.2 percent in February, compared with 1.4 percent for the 12 months ending in January. One-year inflation expectations from various sources declined during the reviewed period to about 1.6 percent. During the second half of 2013, the Monetary Committee reduced the interest rate for October by 0.25 percentage points, from 1.25 percent to 1 percent, after lowering the interest rate by
The Surplus in the Current Account Percentage of GDP
10% 8%

6.0%

5.8%

5.7%

6%
4.5% 4.6% 3.4%

4.7% 3.2% 3.0% -0.8% -0.7% -1.3% -1.0% 2.2% 1.2% 1.4%

4%
3.3%

3.8% 3.1% 1.3% 0.3% 2.5%

4.0%

2% 0%

2.0%

1.2%

-2% -4%

0.0%

2006

2007

2008

2009

2010

2011

2012

2013

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201 1 2012 2013

Source: Central Bureau of Statistics

Source: Central Bureau of Statistics D

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SHEKEL: Economic and Financial Trends in Israel

a combined 0.75 percentage points during the first half of the year. The interest rate for March 2014 was further reduced by 0.25 percentage points to 0.75 percent and remains unchanged for April 2014. In September, October, and December, the Bank of Israel purchased foreign exchange in spot transactions as part of its policy of intervention in the foreign exchange market, in addition to foreign exchange purchases as part of the program that the Bank declared in May, which is intended to offset the surplus effects of the start of natural gas production on the exchange rate. Home prices continued to increase, and for the 12 months ending in January, prices increased by 6.3 percent, compared with an increase of 8.0 percent for the 12 months ending in December. The stock of unsold homes remained stable in January. The increase in construction industry activity continued: In 2013, there were 44,300 building starts (an increase of 3.4 percent from 2012), and 42,000 building completions (an increase of 11.8 percent compared with 2012). Further, both the number of transactions and the volume of mortgages stabilized at high levels. In order to reduce the macro prudential risk derived from these developments, in August, the Supervisor of Banks imposed additional restrictions on the provision of housing credit. The current account of Israel recorded a large surplus of 2.5 percent of GDP during 2013, with a surplus of 2.9 percent of GDP in the fourth quarter. The surplus in 2013 is a significant improvement as compared to 2012. The improvement was primarily due to the continued trend of rapid growth in the exports of services (which reflects the rise of the services share in Israeli exports) and the improvement in the income balance.

The slackening in growth has not been reflected in the labor market. Despite the slowdown in the second half of 2013, the unemployment rate decreased to 6.2 percent in 2013, compared with 6.9 percent in 2012, reflecting a reduction of 18,700 unemployed persons and an increase of 90,000 workers. The monthly unemployment rate reached 5.8 percent in February 2014, compared to 5.9 percent in December 2013 and January 2014. The participation rate increased to 64.2 percent in January and February 2014 compared to 63.7 in December 2013. Thus, the employment rate rose to 60.3 percent, the highest level in 30 years, with an increase in full-time jobs and in real wages. Recent unemployment data places Israel among the OECD countries with relatively low unemployment rate. The government, which was formed in March 2013, operated without an approved budget until the end of July, when the Knesset approved a budget for 2013 and 2014. The budget included a plan to reduce the deficit by raising (direct and indirect) taxes and cutting expenditures according to government fiscal rules. In 2013, the government deficit was 3.15 percent of GDP, compared to the 4.65 percent allocated in the budget. Direct tax revenues were higher than forecast, and even though indirect tax revenues were lower than projected, total revenue was NIS 5.8 billion greater than expected, mainly a result of one-time factors. Expenses underperformed in the budget by NIS 6.7 billion. Excluding legislative changes and one-time revenues, total tax collection in 2013 increased by 1.9 percent in real terms compared to 2012. VAT receipts on domestic production increased by about 3.2 percent in real terms compared to 2012.

Unemployment Rate and Participation in the Labor Market

Israel Unemployment Rate (left) OECD Unemployment Rate (left)
12% 11% 10% 9% 8% 7% 6% 5% 4%
2007 2008 2009 2010 2011 2012 2013

Central Government Deficit as Percentage of GDP

6%

Israel Participation Rate (right) 64.0% 63.5% 63.0% 62.5% 62.0% 61.5% 61.0% 60.5% 60.0%

4.90% 3.90% 3.50% 3.10% 2.10% 3.15% 3.00%

4%

2%
0.90% 0.0%

0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 Target
Source: Central Bureau of Statistics

Source: Central Bureau of Statistics

SHEKEL: Economic and Financial Trends in Israel

Spring 2014

New York and Israel: Brought Together by Nanotechnology

Alain E. Kaloyeros, Ph.D. Professor, Senior Vice President and Chief Executive Officer SUNY College of Nanoscale Science and Engineering
Nanotechnology is often referred to as the science of the small, as scientists and researchers explore increasingly smaller dimensions down to individual atoms and molecules as a means of enabling exciting innovations, from faster computer chips and technologies for renewable energy and a cleaner environment to medical applications that can more effectively diagnose, treat, prevent and cure a variety of diseases.

Perhaps, then, it is only fitting that nanotechnology is also making the world a smaller place. Look no further than the new partnership between the State of New York and the State of Israel, under the direction of Governor Andrew Cuomo, which will significantly expand business, technology, and economic relations, while generating billions of dollars in new investments and helping to create thousands of hightech jobs in both New York and Israel. The visionary agreement, announced by New York and Israel in March 2013, is truly groundbreaking. It brings together two of the worlds recognized leaders in the emerging field of nanotechnology. The formal establishment of this strong collaboration affords each with new opportunities to forge exciting growth. The advent of this initiative could not be timelier. Nanotechnology is rapidly becoming the key driver in products and applications across nearly every industry in todays society. Just how prevalent is nanotechnology know-how? According to market research firm Lux Research, global sales of products that contain nanotech components will reach $2.4 trillion by 2015. This is no surprise, given that the Project on Emerging Nanotechnologies has developed an inventory of more than 1,600 nanotechnology-based consumer products that have already been introduced and are available in the commercial marketplace. Accordingly, teams from the State University of New York College of Nanoscale Science and Engineering (SUNY CNSE) and MATIMOP, the Israeli Industry Center for Research & Development acting on behalf of the Office of the Chief Scientist in the Ministry of Economy, are moving quickly to take advantage of this growing opportunity. The first steps now underway include the development of a first-of-its-kind roadmap that will guide a host of collaborative projects. Initial efforts are designed to support a variety of industrial research, development and commercialization, and provide for the exchange of technical information and expertise that will serve to promote global development of innovative nanoscale technologies. Already, joint seminars and workshops have been held in both locations to enhance cooperation between corporate and academic entities in New York and Israel, and to identify new prospects to build mutually beneficial partnerships.

The benefits of this alliance are multifold, highlighted by opportunities to promote economic development and growth in both New York and Israel. In building on the multi-billion dollar investments in New Yorks nanotechnology industry under the leadership of Governor Cuomo, this collabora- Professor and CEO tion facilitates and promotes bilater- Alain E. Kaloyeros, Ph.D. al and multilateral research, development and commercialization programs in nanotechnology between both corporations and academic institutions in the U.S. and Israel. Similarly, the Israeli government is to be commended for demonstrating a clear vision for enabling future high-tech growth. This includes allocating funds for Israeli companies and universities to CNSEs state-ofthe-art 300mm wafer and 450mm wafer infrastructure, facilities, resources, and know-how. As we move forward, a strategic publicity and marketing outreach campaign will be deployed to generate further interest and participation from Israels corporate and academic entities. The potential breakthroughs to be enabled by the joint research and development activities are another tangible benefit of this collaboration. Specific technology areas targeted for initial exploration include sub-systems, sensors and accessories for deployment in the nanoscale cleanroom environment; simulation and modeling for next-generation tools and technologies; and a host of tool, process, and testing technologies. These innovations will be critical in accelerating the development and deployment of new technologies in multiple fields fueled by nanotechnology, including nanoelectronics, energy, health care, defense, transportation, and information technology, among many others. And, of similar importance, this partnership is also creating new opportunities for cultural engagement and enrichment in both countries. SUNY CNSE is now partnering with an energized and engaged chapter of the United Jewish Federation in Albany, putting programs and resources in place that will ease the transition of Israeli families into the community. At the same time, CNSE is working to establish new scholarship and fellowship programs that will ensure opportunities for Israeli students to take full advantage of world-class education and training in the nanotechnology disciplines of the 21st century. Further, we continue to receive regular inquiries from schools and synagogues regarding the pending influx of families, expressing excitement about the newest additions to our region and pledging their assistance in meeting the needs of those individuals. Given the growing importance of the nanotechnology research, development and commercialization activities to be undertaken, and the collegial and productive launch of this new partnership, I have no doubt that we will enjoy much success in the years ahead.
SHEKEL: Economic and Financial Trends in Israel

Spring 2014

The BIRD Foundation: Supporting U.S. Israel Collaborations

Andrea Yonah, BIRD East Coast Representative

If you havent heard of the BIRD Foundation, you have certainly heard about many of the companies that this U.S. Israel fund has supported: U.S. companies like GE, IBM, Motorola, and Johnson & Johnson, and Israeli companies such as Compugen, Elbit, NICE and RADCOM.
The U.S.-Israel Binational Industrial Research and Development Foundation (BIRD) has been supporting technology collaborations for the last 36 years. It was founded in 1977 by both governments, with each investing equal amounts of money, to create a $110 million endowment for the purposes of fostering innovative technology cooperation between U.S. and Israeli companies. Since its inception, BIRD has invested over $300 million in more than 800 projects, helping to generate direct and indirect sales of more than $10 billion for the U.S. and Israeli economies. The BIRD program is an example of innovation and a testament to those who conceived of its unique and sustainable funding model. BIRD supports projects between a pair of companies (one U.S. and one Israeli) with a conditional grant of up to 50 percent of a projects joint R&D budget at a maximum of $1 million. The two companies must match this with their own funding. If the project is a commercial success, the financial assistance is repaid as royalties from sales. If the project fails to reach the sales stage, the companies are not required to repay. BIRD does not share in the IP of the technology nor does it take equity in the participating companies. This sustainable model has allowed BIRD to operate and fund an average of 20 projects per year (at its two annual funding rounds) from the interest on the original endowment together with repayments from successful projects (amounting to almost $100 million to date). However, BIRDs success is not defined merely by its sustainable funding model. Perhaps more important is its contribution to the creation of innovative and disruptive technologies. BIRD invests in all technology sectors with the exception of military applications. Therefore, market trends often influence the types of projects submitted, and through the years, BIRD has seen the transformation from innovations in semiconductors in the 70s to software and communications in the 80s, biotechnology in the 90s to todays new breakthroughs in areas such as energy and cybersecurity. There have been many successful BIRD funded projects. One example, the REWALK, an exoskeleton developed to allow paraplegics to walk, was named one of TIME magazines 25 top inventions of 2013 and also made the 2013 list of the top 12 most amazing Israeli medical advances. Two other BIRD funded projects were also featured in the same list. One, an MRI-guided focused ultrasound that destroys tumors without surgery was developed by a recent BIRD grantee, InSightec (Israel), which is working with U.S. partner, Focused Ultrasound Surgery Foundation. The other is the NanoRetina, an artificial retinal implant for the blind, a joint venture between Rainbow Medical (Israel) and U.S. company Zyvex Labs. In 2007, as a result of the U.S.-Israel Cooperation in Energy Independence and Security Act, funding was approved for a third yearly round, BIRD ENERGY, focusing solely on renewable energy and energy efficiency projects. The process for applying is the same, with the only difference
SHEKEL: Economic and Financial Trends in Israel

being the U.S. and Israeli government agencies involved (for BIRD Energy, the U.S. Department of Energy and the Israeli Ministry of Energy and Water Resources; for the traditional fund , the Department of Commerce, National Institute of Standards & Technology and the Israeli Ministry of the Economy, Office of the Chief Scientist). The funding for BIRD Energy is also dependent on a yearly appropriation, unlike the endow- Andrea Yonah, BIRD East Coast Representative ment model of the traditional fund. In addition to funding projects, BIRD assists by facilitating introductions between companies and working with its partners in Israel and the U.S. to organize conferences and delegations focusing on specific topics of interest. A few of BIRDs recent events in 2013 include: A delegation of 11 Israeli cybersecurity companies to Washington, D.C., Virginia and Maryland; the BrainTech Israel 2013 conference in October (based on the vision of Israels President Shimon Peres) to promote Israel as a world leader in Neurotechnology; and a seminar in Nazareth for entrepreneurs in the ArabIsraeli sector and in northern Israel focusing on how to raise capital and create partnerships to assist them in bringing their innovations to market.
BIRD to Invest $9 Million in 1 1 New Projects Bonus BioGroup Ltd. (Haifa, Israel) and Cellora LLC (Boston, MA) will develop personalized regenerative medicine technologies. CliniWorks (Israel) Ltd. (Ramat HaSharon, Israel) and Pfizer, Inc. (New York, NY): Healthcare quality analytics and patient engagement portal. Eyesight Mobile Technologies Ltd. (Herzliya, Israel) and TriLumina, Inc. (Albuquerque, NM): Combined smart light sources for touchless gesture and sensing applications. Gilat Satellite Networks Ltd. (Petach Tikva, Israel) and Kymeta (Redmond, WA): Portable satellite terminal. Lingacom Ltd. (Tel Aviv, Israel) and Rapiscan Laboratories Inc. (Sunnyvale, CA): Secondary detection system. MeMed Diagnostics Ltd. (Tirat Carmel, Israel) and Diagnostic Consulting Network (Carlsbad, CA): Point-of-care device to diagnose bacterial vs. viral infections. New NI Medical 2011 Ltd. (Kfar Mallal, Israel) and Athena GTX (Des Moines, IA): Telemedicine system for use in the emerging home health care monitoring market. PetPace Ltd. (Kibbutz Shefayim, Israel) and BluePearl Management LLC (Tampa, FL): Integrated in-hospital and outpatient pet remote monitoring system. RADiFlow Ltd. (Tel Aviv, Israel) and Patriot Technologies, Inc. (Frederick, MD): Secure smart-grid solution. Rescuedose Ltd. (Haifa, Israel) and ec2 Software Solutions (Las Vegas, NV): Robotic dispensing device integrated with a nuclear pharmacy management system. WeldObot Ltd. (Kadima, Israel) and Heller Industries Inc. (Florham Park, NJ): Innovative new welding device.
Spring 2014 5

Early Stage Venture Fund With an Eye on Israel: Profile of KEC Ventures
Brian Laung Aoaeh, Partner, KEC Ventures

KEC Ventures is an early stage venture capital fund. We invest in technology-enabled startups that are capable of transforming the markets in which they operate. Managing partner, founder and chairman of the board, Jeffrey Citron, has built a track record of being an agent of disruption. He started his professional career in the mailroom at Datek Securities. He founded and built two disruptive financial technology startups, The Island ECN and Datek Online. The Island ECN was a pioneer in eliminating the problems associated with trade-order execution. Instinet Group acquired Island ECN for a reported $508 million in stock. Datek Online disrupted the brokerage industry and was acquired by Ameritrade for a reported $1.29 billion. Following his previous success, he founded Vonage in 2000. It pioneered the commercialization of VoIP technology, and raised $531 million in an IPO on the NYSE in 2006.

Brian Laung Aoaeh, Partner, KEC Ventures

KEC Ventures started to turn its attention to early stage startups in 2011, but we did not consciously seek startups from Israel. At the outset we were looking for great startups, no matter where they were located. Our rationale was that we should first find great entrepreneurs who are solving big problems. We would worry about how to structure an investment once we found them. We quickly realized that there are many startups from Israel with products that have global appeal, and which are seeking investors from abroad. I set about educating myself about Israel and the startup ecosystem there. I learned about the Israel Defense Forces (IDF) and the role that it has played in Israels success in fostering startup innovation. The Israeli startups in which we invest demonstrate the same qualities we look for in startups from other parts of the world. They have developed a unique way to solve an acute problem that affects a large and growing market. As they grow, their business model will benefit from network effects and economies of scale. Each founding team includes a technical co-founder. Each team is passionate and focused on building a great product. Finally, the founders vision is to build a big company.

However, I believe in the importance of screening the entrepreneurs in which KEC invests for qualities that cannot be easily taught. These qualities include teamwork, resilience, courage, creativity and resourcefulness, conflict management and resolution, discipline, and a willingness to assume responsibility. I also seek men and women who can identify what they do not know, and then find a way to acquire the knowledge necessary in order to succeed. Military training has ways of imparting these hard to teach skills to people. The fact that every Israeli entrepreneur we have met has gone through the IDF is an invaluable advantage.

The Israeli startups in which we invest demonstrate the same qualities we look for in startups from other parts of the world. They have developed a unique way to solve an acute problem that affects a large and growing market. As they grow, their business model will benefit from network effects and economies of scale.
I also learned about the national research and development infrastructure that has developed from the work of Israels Office of the Chief Scientist (OCS) in the Ministry of Economy. I believe that the creation of the OCS was a visionary policy decision, and that it is an example countries in the developing world need to emulate. At KEC Ventures, we are continually

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SHEKEL: Economic and Financial Trends in Israel

impressed by the R&D maturity that we find in the Israeli startups we have encountered. Thanks to the work of the OCS, whenever we meet an Israeli startup, it is at the stage where the capital we would be providing would go largely to activities that are repeatable and scalable, international sales and marketing, as well as finding the right people to add to the team to support revenue growth. Since we began, two of our largest investments have been in Fireblade and Giraffic (nearly $2 million each), both based in Tel Aviv, and we expect to add other Israeli startups to our portfolio very soon. We invested in Fireblade because we believe that the problem of securing digital assets will become more significant as people everywhere transact a majority of their business through digital channels, and live more of their lives online. We invested in Giraffic, because the problems associated with distributing and delivering video content will only become more acute as the consumption of video content on computing devices outpaces advances in the infrastructure that exists to support the distribution and delivery of that content. We typically work with one or more local partners when we invest in international startups. So far, we have not had any difficulty finding partners who are Israeli venture capitalists, Israeli angel investors, or early stage investors from abroad with a local presence. Though we have only co-invested with a small minority of the investors with whom we now have a relationship, these connections strengthen our ability to discover and invest in additional Israeli startups. Last year, I had the opportunity to study several dozen startups from Israel, and expect that number to increase as KEC Ventures continues to grow and deploy significantly more capital. Some areas of interest for us currently are software solutions for connected devices, mobile computing, software-as-a-service, and multi-sided markets that benefit from network effects.

Since we began, two of our largest investments have been in Fireblade and Giraffic (nearly $2 million each), both based in Tel Aviv, and we expect to add other Israeli startups to our portfolio very soon. We invested in Fireblade because we believe that the problem of securing digital assets will become more significant as people everywhere transact a majority of their business through digital channels, and live more of their lives online.
Meeting entrepreneurs from outside the United States is always exciting for me. I suspect it is because I recognize in them the same subdued anxiety I felt when I left my home in Ghana in 1997 to embark on a journey that seemed fraught with uncertainty. I think that my familiarity with that feeling helps me to be a more empathetic listener when I meet with them and hear about their vision for the future. At KEC Ventures, we will continue to seek great entrepreneurs and great startups wherever they are based. I expect Israel to continue to factor more and more into our activities as we make a name for ourselves as the kind of partner that great entrepreneurs can count on as they grow their startups. We believe that many more great ideas will germinate from the minds of Israeli technologists and entrepreneurs in the future. We want to be the first foreign investors to hear about the solutions Israeli entrepreneurs are developing to solve the worlds problems.

SHEKEL: Economic and Financial Trends in Israel

Spring 2014

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SHEKEL: Economic and Financial Trends in Israel

Growth Rates of GDP and its Components

Compared to the Previous Period

2010 GDP Business GDP Private Expenditure on Consumption Public Expenditure on Consumption Gross Domestic Investment Goods and Services Exports Goods and Services Imports GDP per Capita
Central Bureau of Statistics

2011 4.6% 4.7% 3.8% 2.5% 15.3% 7.3% 10.5% 2.7%

2012 3.4% 3.4% 3.2% 3.2% 6.3% 0.9% 2.3% 1.5%

2013 3.3% 3.6% 3.7% 3.2% 0.8% 0.7% 0.3% 1.4%

1Q 2013 2.2% 2.1% 3.9% -3.3% -12.9% 11.9% 4.9% 0.2%

2Q 2013 4.7% 5.7% 5.9% 7.5% 6.5% 6.8% 6.3% 2.8%

3Q

4Q

2013 1.8% 1.3% 4.5% 4.8% 16.7% -15.2% 8.0% 0.2%

2013 2.7% 2.1% 3.1% 2.3% -11.3% 19.9% 6.6% 0.2%

5.7% 6.4% 5.0% 3.3% 1 1.2% 14.2% 15.1% 3.7%

Web Sites of Interest

Israel Ministry of Finance: http://www.mof.gov.il/mainpage_eng.asp Government Debt Management Unit http://ozar.mof.gov.il/debt/gen/mainpage.asp Bank of Israel: http://www.bankisrael.gov.il/firsteng.htm Central Bureau of Statistics: http://www.cbs.gov.il/engindex.htm Dun & Bradstreets Israel: http://www.dundb.co.il/english/index.asp Equities Israel: http://www.equities.co.il Investment Promotion Center: http://www.investinisrael.gov.il Israel Economic Mission: http://www.israeleconomicmission.com Israel Government Portal: http://www.israel.gov.il/firstgov/english Israel Ministry of Foreign Affairs: www.mfa.gov.il/mfa Israel Ministry of Industry, Trade & Labor: http://www.moit.gov.il Israel Ministry of Tourism: http://www.goisrael.com Israel Science and Technology Home Page: http://www.science.co.il Israel Venture Association: http://www.iva.co.il Israel Venture Capital Research Center: http://www.ivc-online.com MATIMOP: Israeli Industry Center for R&D: http://www.matimop.org.il State of Israel Bonds Organization: http://www.israelbonds.com Tel Aviv Stock Exchange: http://www.tase.co.il/taseeng/homepage.htm

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