Internet Banking in Israel An Investment Opportunity T5211 iBank Proprietary and Confidential EFTA00307158

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‘strain Flu Vaccine 2 iBank EFTA00307159

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Internet Bank opportunity LI Israeli consumers and regulators are struggling to find ways to introduce competition to Israel's highly concentrated banking sector UI) Already banking on-line, the Israeli consumers, being price sensitive and quick to switch, are ready for a stand alone Internet Bank; one of cost savings, service and transparency Proprietary and Confidential

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Characteristics of the Israeli banking environment 4 iBank Proprietary and Confidential EFTA00307161

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Rigid cost structure, HR a significant part 5 iBank Proprietary and Confidential EFTA00307162

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ON of Operating Cost with increasing revenues and NO Bed debt Provisions -»- Bad Debt Prov. -» Operating Cost ~*~ Revenues PBT 2001 2002 2003 2004 2005 2006 2007 2008 2009 iBank EFTA00307163

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Israel Retail Banking —the lucrative segment nis) Retail Banking represents 66% of Total Deposits (788B) and only 27% of Total Loans (669B) It represents 27% of Net Interest income (23B) but 81% of the Operational Income (15B) Represents 62% of Operational Costs (24B) Represents 50% of total banking system profit in 2007 (60% in 2004) Source: BOI Total retail banking revenues: approx. NIS 18 B Very profitable & low risk segment Bad debt provisions less than 1/6 of total provisions* Heavy cross subsidy “based on Leumi and Hapoalim data H Including mortgages iBank Proprietary and Confidential

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Israel’s Banking Industry at a snapshot Q) Key facts* Accounts: 4.5M Total Assets (2008/2009)- NIS1,062B / NIS 1,088B Total Loans (2008/2009)— NIS 732B / NIS 722B Total Deposits (2008/2009)- NIS 820B / NIS 837B Total Capital (2008/2009)— NIS 60B / NIS 68B Total Income (2008/2009)— NIS 31B** / NIS 39B out of which (2008/2009)- NIS18B** / NIS 23B net interest income and (2008/2009)- NIS 13B / NIS16B Operating Income (fees & commissions) Operating Expenses (2008/2009)— NIS 25B / NIS 25B,, out of which labor NIS 14.7B / NIS 14.4 Q) Profit — Profit before Tax (2008/2009)— NIS 0.2B / NIS 8.5B — Average Return on Equity (2008/2009)-1% / 8.7% — Return on Assets (2008/2009)- 0.03/0.69 Q) Total income by segments: — Retail (2008/2009)— 39.9% / 36.1% — Private Banking (2008/2009)— 12.7% / 12.0% — Small Businesses (2008/2009)— 13.9% / 12.8% — Medium Business (2008/2009)— 12.7% / 12.3% — Large Business (2008/2009)- 20.8% / 27.0% “Dec, 2008/9 **Net of NIS 5.8B re-evaluation of Bonds iBank Proprietary and Confidential

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Internet banking emerging in the mid ‘90s QJ Initial “hype” around internet banking in the “.com” era (1998-2001), only the focused ones survived, some were acquired by traditional banks. LJ Low Internet penetration rate at that time forced the early players to spend heavy marketing $ on educating consumers for the new user habit of internet banking LL) Since then successful Internet banks were established world wide LO) Some examples: — ING world wide — Tesco Direct — EGG UK NTT DoCoMo Virgin is planning to launch an internet bank iBank Proprietary and Confidential

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Current Account Mutual Funds Health Insurance P&C Insurance Tesco PF First Direct (UK) Sc. Wid. Bank The One Account Sainsbury's Bank Standard Life Bank Direct Line Rescue Cahoot Goldfish Egg Intelligent Finance Source: Celent direct banking case studies The optimal portfolio: concentrate on significant services with clear value added EFTA00307167

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Main success factors for Internet Banks | (Celent 43 case studies research) 14 iBank Proprietary and Confidential EFTA00307168

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wide success story-the first years i1 Ro00g R00 2002 2003 2004 2005 EFTA00307169

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Israelis are already banking over the internet 2002 2003 2004 2005 2006 2007 13 iBank Proprietary and Confidential EFTA00307170

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The Israeli Consumers have proven to be “price sensitive” 14 iBank Proprietary and Confidential EFTA00307171

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The Israeli public is looking for a new banking offering 15 iBank Proprietary and Confidential EFTA00307172

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The time ts right for Internet Banking in Israel Super-competitive Consumer friendly, Simple and Transparent Using multiple points of contacts (Phones, Mobile devices, Internet PCs, TV etc.) Proprietary and Confidential EFTA00307173

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iBank will offer full RETAIL service relationship ) Deposits (Short and long term) LJ Loans — Consumer credit Car loans Mortgages Credit Cards Q) Current accounts QO) Capital markets trading (Brokerage) Set of simple financial products competitively priced and easily understood iBank Proprietary and Confidential

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iBank is designed to operate in a low risk environment iBank Proprietary and Confidential EFTA00307175

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/[Bank: marketing strategy Q) Dramatic price reduction — Financial Margins & Commissions — reduction of at least 50% — Cancellation of numerous Fees & Commissions QO) Significant improvement in the quality of service — Providing access to advanced expert systems free of charge — Full transparency as a leading motto L) Empowering the retail customer — Providing data for managing customers accounts in all banks — Minimizing switching costs Proprietary and Confidential

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iBank - Competitive Concept of the Business Opportunity iBank Hayashir Harishon . _ The Large Banks 20 iBank Proprietary and Confidential EFTA00307177

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iBank: A variety of Interfaces with the customer Internet 24/7 call center Video conference technology (PC to Call Center) Services available on all ATMs Mobile handset alerts and activities Courier delivers to your door (opening an account, receive credit card etc.) Postal Bank services (e.g. depositing checks) Lean cost structure supports heavy marketing oriented presence iBank Proprietary and Confidential

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iBank: Advertising and customer acquisition channels Q) Internet QO) Television QO) Radio LJ Newspapers LJ Public Relations channels Q) Strategic partnerships (Retail, Cellular, Insurance, Unions, etc.) Aggressive acquisition budget with multiple channels strategy Proprietary and Confidential

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The Traditional Banks have a Limited Ability to Respond (Possible responses) : The bank has a limited ability to respond (cost structure) 23 ea Difficulty in creating barriers iBank _ An answer needed to a media attack Proprietary and Confidential EFTA00307180

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Who Is iBank’s Target customer? 2. Looking for 1. No. Barriers an Alternative (“financially frustrated”) 24 iBank 3. Profitability Potential Proprietary and Confidential EFTA00307181

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iBank: Variety of target segments oe gm hn “dee 25 iBank Proprietary and Confidential EFTA00307182

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iBank: The Closed End Banking System H HOME BANK — <a 26 iBank Proprietary and Confidential EFTA00307183

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ont in IT (‘000 $) -Sotieale Products 830° 2,1 7130 Hardware || 60] 840 fotrer SSC Total investment $4,180 $5,120 iBank has received replies to its RFP from: - I-Flex (Oracle) - SAP - Accenture - InfoSys - IBM - Temanos

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iBank: financial model — highlights Q) Investment: Set up period: 12-18 months Set up costs: $20 million — $10 million by the Controlling Shareholders Capital required: $100 million, including set up costs ($80 million upon launch) Maximum accumulated loss: $32 million (E.O.Y 2) including $20 M Set up costs Move towards Profitability as of Q3 of second year of operation () Operations: Net profit on year 5: $23 million after tax, growing yearly approx. 50% Fifth year personnel: 162 (FTE) Average Number of customers: 18,000 on year 1, growing to 180,000 on year 5 Provisions for bad debt: 0.7% compared to less than 0.4% industry average Proprietary and Confidential

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Capital — Shareholders Equity + General Reserves for bad condary Capital Third Tier Capital Hybrid Capital Total Eligible Capital - 215% of Primary Capital iBank will commence operations with $80 million Primary Capital

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EFTA00307187

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‘ment of the entrepreneurs LU) Shlomo intends to be a pro-rata part of the Control Group Upon signing term sheet, Entrepreneurs will get an option to buy 20% of iBank for 10 years at the actual cost of the investment (i.e. 20% of the upside) The Control Group will have full and direct control on all decision- making process during the set up phase and thereafter through the Board of Directors of iBank

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iBank: Requlator’s demands from Control Investors Integrity Net worth of 2-3 times of their investment amount No leveraging or pledging of the investment (all equity) PE or VC Funds can not be more than 40% of the Control Stake ($20M) Investors are committed to 5 years, unless if iBank will go public earlier Divestment is allowed only to approved Investors (or by an IPO) Investors are not allowed to control other Israeli competing companies Investors are not subject_to additional financial commitment beyond their investment Proprietary and Confidential

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iBank: timetable, capital and licensing procedure 33 iBank Proprietary and Confidential EFTA00307190

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iBank: summary of the opportunity The Israeli retail banking industry offers a unique window of opportunity in 2011 -2012 for the emergence of a stand alone Internet Bank An Internet based bank could be a formidable alternative to the current industry structure, offering attractive low prices and friendly approach The entrepreneurs intend to set up the internet bank within 12-18 months with an investment of approximately $ 20 million (total capital requirement of $100 million) The bank is projected to break even in the second half of second year and is projected to generate 30% IRR assuming Israel is the only market Worldwide strategy: Going International in third year of operation Proprietary and Confidential

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Thank You Proprietary and Confidential