Upside Breakout Confirmed November 6, 2013

BlueStar Israel Equity Update November 2013

The BlueStar Israel Global Index booked another solid gain in October as it reached our short-term price target range of between 255 and 260. The BlueStar Israel Global Index reached a two-year high of 259 during the month, coinciding with short-term resistance. For more in depth technical analysis, see pages three and four. It is hard to believe that it was only a few weeks ago that the U.S. government shut down and we were in the midst of debt ceiling debates. Especially notable about Israeli Global Equities in October was their performance throughout the political drama in Washington: While U.S. and many other developed market equity indexes dropped sharply throughout the fiasco, Israeli stocks only saw a couple of major down days. Macro economic fundamentals in Israel continue to suggest a bullish environment for economic activity in Israel and for Israeli Global Equities. The unemployment rate hit a record low back in August. Private domestic consumption remains strong and the outlook for net public expenditures (resulting from a lower-than-targeted Debt-to-GDP ratio) in 2013 and 2014 continued to improve in October. Additionally, and perhaps most importantly, we’re seeing a halt to, and a possible reversal of, the relentless appreciation of the shekel throughout most of 2013 against the currencies of Israel’s major trading partners. U.S. long term interest rates are rising; Israeli government officials seem committed to taking more dramatic shekel-weakening measures if necessary; and, technically, the shekel has hit resistance against both the dollar and the Euro. Any weakening of the shekel could result in the playing out of our thesis: that, moving into 2014, the risk for export forecasts moving higher from where they are now is greater than the risk of export forecasts falling further. The Q3 earnings season has been generally positive for many Israeli Global Equities so far. Many Israeli companies, like Perrigo, Check Point, Amdocs, Stratasys, CaesarStone, EZChip, Orbotech, DSPGroup, and Imperva, among others, reported record or improving financial results. On the other hand, some of those companies lowered Q4 or full year 2013 guidance and other companies, such as Teva, NICE Systems, and SodaStream, were hit hard during October.

BlueStar Israel Global Index Relative Performance Since 2010

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These are not recommendations to buy or sell any security © 2013 BlueStar Global Investors, LLC

This monthly column produced by BlueStar Global Investors discusses Israeli equities traded worldwide. The relevant benchmark for our review is the BlueStar Israel Global Index (“BIGI” or BLS:IND on Bloomberg), which we believe represents the complete opportunity set of Israeli equity investments. Israel has one of the most resilient economies in the world and its technology sector plays an integral part in the global technological revolution. Yet few are aware of the global footprint of Israel’s companies in other sectors, and fewer still know how to make their knowledge of the Israeli economy actionable. This column helps investors gain insight into the macro forces (including the geopolitical environment under which Israel’s economy operates) and the individual company investment opportunities that have contributed to global Israeli equities’ outperformance of U.S. equities by more than five-fold over the past two decades. The opinions expressed in this column are those of BlueStar Global Investors, LLC and should not be interpreted as a recommendation to buy or sell any security. Readers should consult with a financial professional before investing.

Benchmark October Performance

BIGI 2.10%

S&P 500 4.46%

MSCI EAFE 3.26%

MSCI EM 4.17%

Source: BlueStar Global Investors LLC

Global Equity Benchmark Comparison: October 2013

70

80

90

100

110

120

130

140

150

160

170

S&P 500

BIGI

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BIGI September 2013 Gainers and Losers

Source: BlueStar Global Investors LLC; Currency-Adjusted returns in dollar terms

Top Global Israeli Equity Gainers and Losers

Top-Performing Israeli Stocks October 2013

Worst-Performing Israeli Stocks October 2013

Delek US Holdings 21.15% Babylon Ltd. -74.23%

Silicom Limited 20.31% Photomedex Inc -20.50%

Clicksoftware Technologies 18.88% Ceragon Networks -18.05%

Alon Usa Energy 18.32% Ceva Inc -16.93%

Ratio Oil Exploration L.P. 15.15% Oil Refineries Ltd -16.90%

Opko Health Inc 13.73% SodaStream -14.30%

Stratasys Ltd 11.82% Brainsway Ltd. -13.46%

Perrigo Co 11.76% Audiocodes Ltd -13.00%

Israel Discount Bank 0.1 11.40% Jerusalem Economic Corp -10.53%

Syneron Medical Ltd 10.21% Imperva Inc -8.76%

Sector (As Defined by GICS)

October 2013

Health Care 1.05%

Financials 0.81%

Energy 0.57%

Industrials 0.07%

Telecommunications Services -0.01%

Information Technology -0.02%

Utilities -0.02%

Consumer Staples -0.05%

Consumer Discretionary -0.15%

Materials -0.16%

Israeli Global Equity Sector Performance

As we’ve stated over the past several months: “The greatest beneficiaries of a broad based economic recovery in Israel have been, and will continue to be, financials stocks. The financials sector includes banking stocks and holding companies (many of which have operating subsidiaries that participate in the bio-tech, energy, industrial, and consumer staples/consumer discretionary sectors). The emerging natural gas industry in Israel is the main source of Shekel strength and, we believe, is likely to be driving the strong growth in the private consumption component of GDP. This, along with a strong housing market, is helping both the banking and holding company stocks within the financials sector to lead Israeli Global Equities higher. We encourage an overweight in the locally-listed Financials, Consumer Staples, and Consumer Discretionary stocks in the near- term as the Israeli Global Equity market continues to rise and catch up to other global equities markets. That said, we suspect that Health Care and Information Technology stocks will emerge as the leaders of Israeli Global Equities in the medium-term as the global economy recovers more strongly in 2014 and Israeli policy makers have a chance to implement pro-export currency and monetary policies.” Since October kicked off the Q3 earnings season, we want to share some of our views on individual stocks within the BlueStar Israel Global Index. We are strongly encouraged by the strength of growth in revenues for CaesarStone (CSTE:NASDAQ), and by its ability to improve generation of cash flows from operations, as demonstrated during Q3. The company, which has been running near full capacity for some time now, is almost ready to bring on line new production facilities in Israel and will be building a U.S.-based facility in early 2014. Though the profitability of these new lines won’t be as great as the existing production lines at first, they will add to the company’s bottom line, eventually helping overall operating and profit margins to get back to current levels. For these reasons, it appears that CaesarStone is on a path for long-term stock price appreciation. Perrigo’s (PRGO:NYSE) recent acquisition of Ireland’s Elan is already beginning to pay off to shareholders, and the company beat revenue estimates for the three months ending September 2013 by $33 million. The company’s revenue rose 21.3% during that period on a year-over-year basis as the global generic drugs market continues to grow. The company also announced a quarterly dividend of $0.09 per share. The stock has had a nice run since breaking out above $130. VeriFone (PAY:NYSE) has not reported earnings yet, but we want to reiterate the following from last month’s column: VeriFone “may also be on the verge of a rebound over the next few quarters as the competitive landscape is becoming clearer and the company is exploring a new direction: it intends to enter the payments processing market in Israel (competing with the major credit card companies there), and its board has appointed the former CEO of Citigroup’s enterprise-payments business as its new CEO.” We view this new direction as a potentially transformative one in the medium to long term. Investors were not shy about showing their disappointment with SodaStream’s (SODA:NASDAQ) Q3 sales growth as the stock was down sharply in October. We think that the reported financials were not terrible and expect to see improvement in the fourth quarter of 2013 and first quarter of 2014. The company’s management reiterated full year 2013 guidance and, though a sharp correction in the stock was warranted, we do not believe it is an indication of a prolonged downtrend.

These are not recommendations to buy or sell any security © 2013 BlueStar Global Investors, LLC

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Market Trends- Technical Analysis

The 2008/2009 lows connect with the lows put in during mid-2012 to form a strong channel of support, guiding BIGI higher over the past year.

Long-Term Support: 195

Mid-Term Support: 225

Mid-Term Target: 270

Long-Term Target: 310

Both the 50 and 200 day moving averages display a clear upward trajectory for the index. The index has remained above its 200 day moving average for nearly 49 weeks, testing it only once in mid-2013. Additionally, due to recent pullbacks in the index, it looks as if the 50 day moving average has some room to run away from the 200 day average in the short- to medium- terms.

Maximum divergence between 50 and 200 day SMA since Nov. 2012 was 17.5. Current divergence is 9.75

These are not recommendations to buy or sell any security © 2013 BlueStar Global Investors, LLC

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Resistance was broken in June/July 2013, but the index subsequently dipped below this line upon the rumor that the U.S. would conduct military strikes in Syria. As with most geopolitical-driven pull backs, BIGI recovered from this pull back quickly and made new two-year highs in September.

Short-Term Support: 240

Short-Term Target Met: 255-260

Market Trends- Technical Analysis

Strong support

area

These are not recommendations to buy or sell any security © 2013 BlueStar Global Investors, LLC

Israeli Economy and Geopolitics

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These are not recommendations to buy or sell any security © 2013 BlueStar Global Investors, LLC

Overall, we maintain our medium- and long-term bullish outlook for Israeli Global Equities, especially after recent technical breakouts coupled with healthy corrections to support areas along the way. Positive sector-driven, geopolitical, and macroeconomic developments, along with our technical analysis view of the global Israeli equity market, lead us to remain bullish on global Israeli equities in the medium-long term. We see a positive risk-reward relationship despite the ever-present geopolitical currents in the Middle East. We assign a high probability of Israeli Global Equities continuing to rise in both the short- and medium- terms, though volatility will continue to be present in equities markets around the world until the timing and pace of the tapering of global monetary expansion is clear.

• The government budget deficit fell to NIS 14.1 billon for the nine-month period ending September 2013 compared to NIS 20.2 billion over the same period a year earlier.

• The government budget deficit for the 12-month period ending September 2013 was just 3.2% of GDP, well below the target for 2013: there is now the possibility of increases in government expenditures and a halt to tax increases.

• Israel’s high courts ruled in favor of allowing 40% of Israel’s natural gas reserves to be exported but the government is delaying the export of natural gas in other ways.

• Turkey is showing signs of interest in purchasing natural gas from Israel for domestic use. • The unemployment rate fell to 6.1% in August while the labor market participation rate and the proportion of full-time workers to part-

time workers rose; nominal wages grew 1.4% between May and July. • Private consumption grew by 6.5% in Q2 2013 on a year-over-year basis. • Private consumption is expected to grow by 4% in 2013 compared to growth of 1.4% in 2012. • Private consumption of durable goods is expected to be 3% in 2103 compared to 1.7% in 2012.

• Karnit Flug was appointed the new governor of the Bank of Israel. She, along with Finance Minister Lapid, are expected to take a tougher stance against the strengthening of the shekel.

• The Bank of Israel kept its policy benchmark rate for November at 1.00%, the lowest rate on record. Reasons for the decision include: • Moderate to low inflation and inflation expectations; • Recent appreciation of the shekel against the currencies of major trade partners; • The continued rise in housing prices despite a decline in the number of housing transactions.

• 2013 GDP growth estimates in Israel were lowered from 3.9% to 3.6% in September. • Export growth was revised from 3% to 0% recently. • Industrial exports fell by $400 million between July and August 2013 compared to the same period a year earlier.

• High-tech exports led the downturn. • Flows of capital into Tel Aviv equity funds was approximately NIS 880 million in October, compared to the monthly average in the first

half of 2013 of just NIS 160. Trading volumes on the TASE are also picking up.

October Economic Highlights

Israeli Equities Since 1997