Invent in Israel

1

State of Israel Ministry of Industry, Trade
Labor - Foreign Trade Administration Investment
Promotion Center
Invest In IsraelWhere Breakthroughs Happen
2
Overview

• Macro-economic indicators
• Why Israel?
• Profit driving innovation

3
Main Indicators
2005F
2001
2002
2003
2004
Inflation ()
1 - 3
1.4
6.5
-1.9
1.2
Unemployment ()
9.1
9.3
10.5
10.9
10.0
Imports ( billion)
45.8
33.3
33.1
34.2
41.1
Exports ( billion)
43.1
29.0
29.3
31.8
38.5
GDP ( billions)
121
109.5
102.7
109.1
117.2
GDP/Cap ()
17.7
17,180
15,468
16,312
17,200
June 2005
4
Central Bank Interest Rates Israel vs. USA
Bank of Israel Rate
Federal Reserve Rate
Source Bank of Israel and Federal Reserve
5
Unemployment Rate (as a percentage of total
labor force)
Source CBS
6
General Government Expenditure ( as a of GDP)
Source Ministry of Finance, 2005.
7
Gross Tax Burden ( as a of GDP)
Source Ministry of Finance, 2005.
8
Net Foreign Debt (as of GDP)
Source Bank of Israel
9
Israels credit rating 1992 - 2005
A1/A
A2/A
A3/A-
Baa1 /BBB
Baa2 /BBB
Baa3 /BBB-
SP, 2005
Moodys, 2004
The solid investment grade ratings on Israel
reflect its advanced, prosperous, export-oriented
economy with few balance-of-payments pressures,
underpinned by structural reforms.
In economic terms, the current Israeli
government is the most pro-market government in
50 years.
Source Credit Rating Agencies
10
Telecommunication Infrastructure

• 2.9 million telephone lines - equivalent to 95
  of households
• 6.5 million mobile phone a 95 penetration rate
• 1.4 million multi channels TV - equivalent to 75
  of households
• 860,000 Broadband Internet connections equivalent
  to 43 of households

Source Ministry of Communications
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WHY ISRAEL?
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Supportive Business Environment

• A large volume of high-tech and science based
  industry
• Highly educated workforce and multilingual
  population
• World renowned research and educational
  institutions
• Worldwide taxation and customs treaties
• Protection of trademarks, patents and
  intellectual property of all kinds
• Comprehensive legal protection of foreign
  companies
• State of the art telecommunications
• A highly advanced banking and financial sector

13
Innovation climate in Israel Scientists
Technicians per 10,000 Workers
The level of entrepreneurship and innovation in
Israel is amazing Promod Haque, Managing
Partner, Norwest Venture Partners, November 2004
14
The World's Rising Innovation Hot Spots"
India
China
Russia
Israel
Singapore
Taiwan
S. Korea
RD Spending
1 OF GDP
1.2 OF GDP
1.2 OF GDP
4.7 OF GDP
2.2 OF GDP
2.3 OF GDP
2.9 OF GDP
U.S Patents
5,300
3,952
1,188
764
366
438
306
268
354
39
62
60
30
62
Israel's strengths Optical and wireless
communications, chips, software, sensors
BusinessWeek, October 11, 2004
15
Innovation climate in Israel Patents

• Number of patents (per 10,000) registered in the
  U.S. during 2003

Israel - An annual increase of 20
Source BDI - Business Data Israel
16
Innovation climate in Israel Wall Street Journal
- 2004 Technology Innovation Awards

• The Wall Street Journal received 585 applications
  from around the world for the 2004 Technology
  Innovation Awards.

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Innovation climate in IsraelEntrepreneurship
Source IMD World Competitiveness Yearbook, 2002
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IMD World Report 2004
Country Rank ?
1st
4th
2nd
3rd
Source IMD World Competitiveness Yearbook- 2004
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WEF Competitiveness Report 2004 2005
Country Rank ?
1st
4th
2nd
3rd
WEF The Global Competitiveness Report 2004
2005
20

Israel is a small country with a tiny population,
and yet it has many significant high-tech success
stories.

• Sven Lingjaerarde Co-Founder General Partner
• Vision Capital September 2003

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Technology Start-ups

• Israel is one of the largest world centers for
  start-up enterprises, with 800 (year 2003)
  active start-ups.
• Innovative, technology-intensive activity,
  representing several technology breakthroughs.
• Major international activity
• Strategic alliances and joint ventures.
• Raising capital - venture, seed risk
  investments.

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International Centers for RD

• About 60 foreign RD centers are located in Israel

AND MORE
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Government Support

• Competitive grant program
• Tax exemption path for manufacturing facilities
• Special Tax benefits for rd centers
• Tax exemption for venture capital investment
• Support workers training
• And more..

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Grant Benefit Path
Fixed asset benefit level pending zone
Grant Rates for Fixed Asset
Priority Zone A
Priority Zone B
Central Israel
Industrial Projects (Up to 140M NIS)
24
10
Not Applicable
Industrial Projects (Above 140M NIS)
20
10
Tax Benefit
Grant Program
Priority Zone A
Priority Zone B
Priority Zone C
Tax Exemption
2 Years
Not Applicable
Not Applicable
Reduced Company Tax
Israeli Investors
5 Years
7 Years
Not Applicable
Foreign Inventors
8 Years
10 Years
Not Applicable
25
Tax Exemption Path
Tax Program
Priority Zone A
Priority Zone B
Priority Zone C
Tax Exemption
10 Years
6 Years
2 Years
Reduced Company Tax
Israeli Investors
Not Applicable
1 Year
5 Years
Foreign Inventors
Not Applicable
4 Years
8 Years
26
Tax Benefits Table ( in )
Tax Benefit Example
Not an Approved Enterprise
Approved Enterprise
Percent of Enterprise owned by Foreign Investors
0-49
49-74
74-90
90-100
Taxable Income
100
100
100
100
100
Company Tax
34
25
20
15
10
Balance
66
75
80
85
90
Dividend Tax Percentage
25
25
20
15
10
Dividend Tax
16.5
11.25
12
12.75
13.5
Total Tax on Distributed income
50.5
36.25
32
27.75
23.5
27
PROFIT DRIVING INNOVATION
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Venture Capital

• Capital raised by Israeli VCs Surges to 724m in
  2004
• Capital available for investment now at 1
  billion
• 1.5 billion projected to be raised by VCs in
  2005

Source IVC Research Center (2004)
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Investment climate in IsraelCapital Raised by
Israeli High-Tech Companies
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Investment climate in Israel Foreign Direct
Investment in Israel
Millions USD
Source Bank of Israel
Not including traded securities
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Investment in Technologies
According to foreign investors, following the
Silicon Valley and Boston, Israel is the main
center to search for new technologies High Tech
Investments Q1-Q3 2004
Ernst and Young, October 2004
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Land of Tech Promise - Again

After years of a long slump, Israel is seeing a
slew of IPOs, mergers and new startups

BusinessWeek, September 20, 2004
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Number of companies traded over NASDAQ selected
countries
Israel enjoys the highest concentration of
high-tech companies in the world, out side of
Silicon Valley Robert Greifeld, President CEO
Nasdaq, November 2004
Compiled from NASDAQ data
34
Foreign Companies From the U.S. Invested in
IsraelSome Examples
35
American Companies Invested in Israeli companies
- Some Examples
36
American Companies Invested in Israeli companies
- Some Examples
37
American Companies Invested in Israeli companies
- Some Examples
38
Sources of Foreign Investment -2003
Outside the US, we invest in only one other
country. Thats Israel. Julien Nguyen, Managing
Partner, Applied Materials Ventures September 2003
Source Israel Venture Association ,
March 2003
39
Investments in High Tech Companies 2004
To invest in Israel is to profit in the long
term Alan Hevesi, New York State Comptroller,
October 2004
Source IVC
40

In two days here I saw more opportunities then I
saw in a year in the entire world

Paul Smith, Senior Vice President. Philips
Medical, July 2004
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Recent trends and developments Recent MA
Technology
Acquirer
Sum
Time
Israeli Company
Internet
eBay
620M
06/2005
Shopping.com
healthcare
Johnson Johnson
80M
05/2005
Impulse Dynamics
semiconductors fabless
Broadcom
85M
05/2005
Siliquent
software
UGS Corp
228M
04/2005
Tecnomatix
Voiceover Internet
Juniper Networks
68M
03/2005
Kagoor
biopharmaceutical
Ferring Holding SA
80M
03/2005
Savient
Medical equipment
Kodak
51M
03/2005
OREX Radiography
Communication
Alcatel
50M
03/2005
Native Networks
processors for digital display devices
Intel
100M
03/2005
Oplus Technologies
semiconductors fabless
Agere Systems
150M
02/2005
Modem-Art
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Recent trends and developments Recent MA
Technology
Acquirer
Sum
Time
Israeli Company
Pharmaceutical
Perrigo
900M
11/2004
Agis
Speech Applications
Scansoft
100M
11/2004
ART Technologies Phonetic Systems
Traffic Management
CISCO
200M
8/2004
P-CUBE
Wireless infrastructure
INTEL
40M
3/2004
ENVARA
Chips for Mobile-device applications
ZORAN
54M
6/2004
EMBLAZE
Enterprise software
CISCO
100M
6/2004
ACTONA TECHNOLOGIES
Content management software
SAP
10M
7/2004
A2I
Web security
WATCHFIRE
45M
7/2004
SANCTUME
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Success Story - Intel

• 1974 1st development center. Investment -
  300,000. five workers.
• 1985 1st facility for the manufacture of
  microprocessors and memory outside the US.
  Investment - 1.8b.

Over the last five years, Intel's Israeli
plants exported nearly US 8 billion and its
design center developed Intel's Centrino mobile
technology.
Intel Capital has invested over 100 million in
35 Israeli start-ups
44
State of Israel
Ministry of Industry, Trade Labor Foreign Trade
Administration Investment Promotion Center
5 Bank Israel St., Kiryat Ben-Gurion Jerusalem,
Israel www.investinisrael.gov.il
infoipc_at_moital.gov.il Tel [phone]
Fax[phone]