Mr. Joseph Fellus,Partner, Advisory &Hi-Tech PracticeLeader

Mrs. Inbal Spiegel,Israeli MoneyTreeProject Manager

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In the first quarter of 2007,approximately $307 million investedin Israel in high-tech companiesbacked by venture capital firms$89 million invested in initial investments, thehighest amount in five and a half years

The latest Kesselman & Kesselman PricewaterhouseCoopers MoneyTreeTM Reportshows that venture capital-backed hi-tech companies (companies in which oneof the investors in the financing round is a venture capital fund) raised approximately$307 million in Israel during the first quarter of 2007, a decrease of approximately7% in comparison with the previous quarter in which approximately $330 millionwere raised, and a decrease of approximately 3% in comparison with the correspondingquarter last year in which approximately $318 million were raised.

The Report reveals that 81 Israeli hi-tech companies raised capital in the first quarterof the year, as compared to 80 companies raising capital in the previous quarter and90 companies raising capital in the corresponding quarter last year. The averageinvestment per company was $3.8 million this quarter, as compared to $4.1 millionin the previous quarter and $3.5 million in the corresponding quarter last year.

The first quarter of 2007 saw a rise in initial investments, with one particular venturecapital fund making its first investment in a particular company. Venture capital fundsmade initial investments of approximately $89 million in 31 Israeli hi-tech companies,the highest level of initial investments for five and a half years. 14 of these companies,currently in the intermediary or later stages of their development, were the recipientsof approximately 56% of the initial investment funds.

Joseph Fellus, Partner, Advisory & Hi-Tech Practice Leader at Kesselman & KesselmanPricewaterhouseCoopers notes that, the results of the first quarter of 2007 point toa stability in investments level in the Israeli market against a background of growthin the investments level in the United States, where investments surpassed $7 billion.It may be assumed that the venture capital market in Israel, which is marked by astrong affinity with the U.S. market, will continue to demonstrate stability, if notgrowth, during the course of 2007.

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The Q1 Israeli MoneyTreeTM results are in! This special report providessummary results of Q1 2007. More detailed results, including anexpanded version of this report, can be found on our web site atwww.pwc.co.il

Israel VC�s Investment Levels

Israeli VCs

Israeli VCs(%)

Total Investments

Total # of deals

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

176 226 308 343 208 184 167 144 122 112 106

29% 31% 30% 41% 44% 44% 51% 38% 35% 52% 48% 44% 46% 35% 57% 46% 54% 45% 44% 43% 54% 54%

0

200

400

600

800

1000

100

300

500

700

900

1100Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2000 2001 2002 2003 2004

($ in

mill

ions

)

105 129 166 193 132 133 117 106 7 6 7 0 7 2 8 6 6 0 7 0 7 6 7 4 8 2 7 0 7 5 7 8 8 7 7 8

8 8 6 6 8 5 109 88 137 147 152 123 159 153

2005 2007

1 7 8 1 2 8 1 6 1 1 1 8 1 2 6

57% 58% 51% 39% 50%

8 5 7 3 9 0 5 9 6 6 8 0 8 1

Q3 Q4 Q1 Q2 Q3 Q4 Q1

2006

617 735 1034 845 471 415 330 384 344 217 221 200 143 243 190 192 255 326 347 292 292 286 311 221 318 300 253 330 307

1 5 0 1 6 4

45% 53%

Companies receiving grantsfrom the Chief Scientist

Companies receiving grants from theChief Scientist by sector

Communications & Networking 44%

Medical Devices

Other

Software 15%

Biotechnology 4%

Analysis by Leading Technological Sectors

18.5%

18.5%

27 companies, which constitute 33% of the total number ofcompanies that raised capital in the first quarter of 2007, havereceived grants from the Chief Scientist. Approximately $134 millionof the total amount invested has flowed into these companies.

The Communications & Networking sector maintained itslead this quarter, with 26 companies raising approximately$111 million, representing approximately 36% of totalinvestments for the quarter. This compares to 26 companiesthat attracted approximately $133 million in the previousquarter and 25 companies that attracted approximately $70million in the corresponding quarter last year. Three majortransactions took place this quarter that alone raisedapproximately $45 million, representing 40% of totalinvestments in this sector.

The Semiconductors sector has strengthened, insofar as 5companies raised approximately $54 million, this representingapproximately 18% of total investments for this quarter. Thiscompares to 3 companies that attracted approximately $19million in the previous quarter and 7 companies that attractedapproximately $58 million in the corresponding quarter lastyear.

10 companies in the Life Sciences sector, which includes thefields of Medical Devices and Biotechnology, raisedapproximately $50 million, this representing approximately16% of total investments for this quarter. This compares to15 companies that attracted approximately $46 million in the

previous quarter and 19 companies that attracted approximately$57 million in the corresponding quarter last year. Two majortransactions, one in the field of medical devices and the otherin the field of biotechnology, took place this quarter thattogether raised approximately $34 million, representing 68%of the investments in this sector.

The Software sector has weakened, insofar as 19 companiesraised approximately $39 million, this representing 13% oftotal investments in the current quarter. This compares to 20companies that attracted approximately $74.5 million in theprevious quarter (23% of total investments for that quarter)and 21 companies that attracted approximately $83 million inthe corresponding quarter last year (26% of total investmentsfor that quarter).

The decrease in the level of overall investment in this sectorduring the current quarter may be attributed to the multiplicityof bridge loan transactions or to early investment rounds,which are marked by relatively low levels of investment - 12transactions, which represented 63% of the number oftransactions in this sector, together raised approximately $20million only.

PricewaterhouseCoopers www.pwc.co.il

LifeSciences

Other

20 40 60 80 100 120 1400

($ in millions)

# ofdeals

20 40 60 80 100 120 1400

Q1-07 Q4-06 Q1-06

101519

Communications& Networking

192021

Software

262625

Semiconductors537

211618

111133

70

3974.5

83

5046

57

5419

58

5357.5

50

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Q1 2007 MoneyTreeTM Report

Analysis by Financing Round

Analysis by Company Development Stage

In the current quarter, 32 companies raised approximately$145 million, in Early round investment (the first and thesecond rounds together), representing 47% of total investments.This compares to 38 companies that raised approximately$156 million, representing 47% of total investments in theprevious quarter, and to 39 companies that raised approximately$176 million, representing 55% of total investments in thecorresponding quarter last year.

8 companies raised approximately $30 million in the Third

round, representing 10% of total investments in the currentquarter. This compares to 9 companies that raised approximately$77 million, representing 23% of total investments in theprevious quarter, and 4 companies that raised approximately$22 million, representing 7% of total investments in thecorresponding quarter last year.

Transactions executed in Later Rounds (fourth round tomezzanine) represented approximately 32% of total investmentsin the current quarter, with 13 companies attractingapproximately $97 million. This compares to 11 companiesthat raised approximately $65 million, representing 20% oftotal investments in the previous quarter, and 17 companiesthat raised approximately $79 million, representing 25% oftotal investments in the corresponding quarter last year. Allthe current quarter investments in this round were made incompanies at intermediary or later stages of their development,a situation characterized by the relatively greater amount offunds required.

In the current quarter, 28 companies raised approximately $35million by way of Bridge Loans, as compared to 22 companiesthat raised approximately $32 million in the previous quarterand 30 companies that raised approximately $41 million in thecorresponding quarter last year.

Israeli Start-up companies are recovering, insofar as 20

companies raised approximately $55 million, a sum representing

approximately 18% of total investments for the current quarter.

This is the highest sum raised since the peak of the first quarter

of 2006, when 25 companies raised approximately $96 million,

a sum that represented approximately 30% of the total

investments for that quarter. This compares to 18 companies

that raised approximately $40 million in the previous quarter,

representing 12% of total investments for that quarter.

55 Intermediary stage (Early/Expansion Stage) companies

raised approximately $212 million, representing 69% of total

investments in the current quarter, as compared to 57 companies

that raised approximately $254 million, representing 77% of

total investments in the previous quarter, and to 60 companies

that raised approximately $209 million, representing 66% of

total investments in the corresponding quarter last year.

Further analysis of this stage reveals that the early stage is the

leading stage in the current quarter, raising $138 million,

representing 65% of total intermediary stage investments.

6 Later stage companies raised approximately $40 million,

representing 13% of total investments in the current quarter.

This compares to 5 companies that raised approximately $36

million, representing 11% of total investments in the previous

quarter, and to 5 companies that raised approximately $13

million, representing 4% of total investments in the

corresponding quarter last year.($ in millions)

1600

Expansionstage

# ofdeals

Early stage138

126

Later stage

Seed/Startup40

96

201825

14012010080604020

242523

313237

655

55

93

74

16183

40

3613

Q1-07 Q4-06 Q1-06

Third round

Later round

Bridge Loan

Early round

1600# ofdeals

30

22

156176

323839

14012010080604020

131117

894

282230

145

77

9765

79

3532

41Q1-07 Q4-06 Q1-06

180($ in millions)

PricewaterhouseCoopers www.pwc.co.il

The information contained in this report is for general guidance on matters of interest only. As such, it should not be used as a substitute for consultation with professionalaccounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult a PricewaterhouseCoopers professional.

About the Israeli MoneyTreeTM Report

($ in

mill

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Average Deal Size

5.9 5.76.2

4.4

3.6

3.12.8

3.6

4.5

3.1

3.1

2.3 2.4

3.5

2.5 2.6

3.1

4.7 4.6

3.7

3.3

3.7

0

1

2

3

4

5

6

7Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2000 2001 2002 2003 2004 2005 2006

Q3 Q4 Q1 Q2 Q3 Q4

33.5

3.7

5.1

3.84.1

Q 1

3.8

Kesseslman & Kesselman PricewaterhouseCoopers Israel conducts the Israeli MoneyTreeTM

Report quarterly to promote investment in Israeli start-up ventures. We appreciate thesupport of the Venture Capital industry in this endeavor. The Israeli Report, initiated in1997, has become the definitive source for Israeli investment data.

For more information on PricewaterhouseCoopers Israeli MoneyTreeTM Report please

contact Inbal Spiegel, at 972-3-7954718, e-mail: inbal.spiegel@il.pwc.com or visit our

web site: www.pwc.co.il

Participating Venture Capital Funds in the Q1-2007 MoneyTreeTM Report (listed alphabetically)

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Alon Technology VenturesApax PartnersArgoquestAscend Technology VenturesAtara Technology VenturesAviv Venture CapitalBenchmark Israel Venture CapitalBioMedical InnovationsBRM Capital FundCarmel VenturesCatalyst InvestmentsCedar FundConcord VenturesCorex Israeli IndustriesDelta VenturesDenali VenturesEurofundEvergreen Ventures Partners

Formula VenturesGemini Israel FundsGenesis PartnersGilbridge HoldingsGiza Venture CapitalGreylock IsraelIsrael Healthcare Ventures (IHCV)Israel Infinity Venture CapitalIsrael Seed PartnersJerusalem Global Ventures (JGV)Jerusalem Venture Partners (JVP)Kaptech HoldingsMagma Venture CapitalMedica Venture PartnersOfer Hi-TechPeregrine VenturesPitango Venture CapitalPlatinum Neurone Ventures (PNV)

Platinum Venture CapitalPoalim VenturesSequoia Capital IsraelShrem, Fudim, Kelner & Co.StageOne VenturesStar Venture Capital (SVM)Tamar Technology VenturesTamir Fishman VenturesTechnoPlus VenturesTeuza - A Fairchild Technology VentureThe Challenge FundsVally Venture CapitalVeritas Venture PartnersVertex Venture CapitalVitalife Life Sciences VenturesWalden IsraelYozma Group