Israel from the perspective of foreign investors

Israel from the perspective of foreign investors

Are the foreign investors here? Ø Saban-Apax-Arkin Ø Cerberus Ø Orascom Institutional Investors Ø Capital Group Ø Templeton Ø Fidelity Ø Boston Company Ø Pioneer Investment management Ø T Rowe Price Ø Schroders page 2

Top down drivers of emerging markets Level YTD (%) Oil (WTI) US$/b 60. 9 40. 0 Gold spot price $/oz 507 15. 5 Copper 3 M fwd $/mt 4, 356 38. 3 EM $ Bond Yield 5. 4 5. 3 EM Local Bond Yield 6. 7 -3. 0 EMBI+ Spread (bp) 233 -32. 9 EM Volatility 13. 9 30. 1 VIX 10. 5 -21. 1 $/ Euro 1. 20 -11. 3 Yen/ $ 117 -12. 4 $/ Asia (MSCI) 98 -1. 1 $/ EMEA (MSCI) 81 -7. 2 $/ Lat. Am (MSCI) 79 11. 5 $/ EM Currency 91 -0. 2 Commodities Yields Risks Currency movements vs the US$ Fund Flows as a % of assets under management Equity Fund Flows into GEMs - Bond Fund Flows into GEMs - page 3 9. 8% 17. 0%

Flow of funds into emerging markets in 2005 (1) page 4

Flow of funds into emerging markets in 2005 (2) – 10% of flows into equity funds allocated to emerging markets in 2005 – 17% of flows into bond funds allocated to emerging markets page 5

Emerging vs developed market performance Israel vs emerging markets Emerging market bond yields page 6

Valuations in emerging markets still lower, though gap closing page 7

Israel in a global context PE Country EPS Growth PBV ROE Div Yld 06 (x) 05 $(%) 06 $(%) 05 (x) 06 (x) 05 $(%) 06 (x) China 11 10 28% 7% 2. 4 2. 1 24% 22% 4. 3% India 16 14 20% 13% 3. 6 3. 0 25% 24% 1. 8% Indonesia 12 9 4% 33% 3. 0 2. 5 26% 30% 4. 0% Korea 13 11 -19% 16% 2. 1 1. 8 18% 1. 3% Malaysia 15 14 -6% 13% 2. 2 2. 1 15% 16% 3. 8% Taiwan 15 13 -8% 17% 2. 7 2. 4 18% 19% 3. 7% Thailand 11 10 1% 4% 2. 1 1. 9 21% 20% 4. 7% Hungary 10 11 21% -7% 2. 6 2. 1 28% 22% 3. 5% Israel 21 17 12% 27% 3. 5 2. 9 18% 19% 4. 8% Poland 11 9 35% 21% 1. 8 1. 5 18% 4. 2% Russia 8 11 46% -30% 1. 8 1. 6 26% 16% 2. 1% South Africa 11 11 38% 35% 2. 5 2. 8 23% 28% 3. 3% Turkey 15 12 27% 43% 2. 4 2. 3 15% 19% 1. 4% Brazil 8 7 77% 22% 2. 4 1. 8 35% 30% 3. 4% Chile 24 18 -26% 34% 2. 2 2. 0 10% 12% 0. 3% Mexico 17 14 26% 17% 4. 2 3. 8 26% 27% 0. 5% ASIA 14 12 -2% 15% 2. 5 2. 2 20% 2. 8% EMEA 12 12 34% 17% 2. 4 22% 2. 6% LATAM 13 10 50% 21% 2. 9 2. 5 30% 27% 2. 1% EM 13 11 18% 17% 2. 6 2. 3 22% 2. 6% US 16. 4 15. 3 15 8 2. 8 17 Japan page 8 05 (x) 15. 5 17. 4 18 16 1. 6 10 Europe 13. 9 13. 0 18 13 2. 3 17

Performance of MSCI Israel equity market in global context page 9

Deutsche Bank’s recommended weighting versus benchmark index page 10 Foreign investors weighting versus benchmark index

Currency value as % of 2005 PPP fair value page 11

Country and currency volatility 60 Day annualized Vol Beta to emerging markets 5 YR YTD Currncy 5 YR YTD Vol Avg chg (%) Israel 11. 0 24. 9 -25. 2 5. 0 5. 9 12. 3 ASIA 14. 4 19. 6 1. 7 3. 6 4. 2 -26. 5 EMEA 18. 4 17. 5 43. 5 8. 0 11. 4 -8. 0 LATAM 22. 3 20. 9 51. 4 9. 8 11. 3 13. 3 EM 13. 9 15. 0 30. 1 6. 0 7. 5 -9. 7 US 11. 1 17. 5 13. 0 nm nm nm Japan 17. 5 21. 3 8. 9 6. 8 9. 4 -26. 1 Europe 11. 2 17. 4 7. 3 8. 6 10. 1 7. 4 If we are not EM, what are we? page 12 1 Y Beta 5 YR Equity Current Avg Israel 0. 4 0. 7 Turkey 1. 3 Argentina 1. 3 0. 8 Brazil 1. 5 1. 2 Chile 0. 7 0. 6 Mexico 1. 0 0. 8 ASIA 0. 9 1. 1 EMEA 1. 1 0. 8 LATAM 1. 3 0. 9 EM 1. 0

Key Deutsche Bank global forecasts Current level 2006 F US inflation (core PCE) % 1. 8% 2. 0% Fed Funds rate (YE) % 4. 3% 5. 0% US real GDP growth % 3. 7% 4. 0% 8. 4% 61 50 4, 372 2, 976 524 500 14, 165 12, 566 $/ EUR end period 1. 19 1. 25 Yen/ $ end period 120 114 China real GDP growth % WTI US$/b end period Copper 3 M fwd $/mt end period Gold price US$/oz end period Nickel US$/mt page 13

Deutsche Bank’s Israel forecasts page 14

What can we do next? ü Move to nominal reporting ü Increase liquidity û Easy access to stock borrowing û Standardize OTC documentation û Netting û Free float page 15