Recommendations of the Team on Management of the Sovereign Fund that will
Manage Revenues from Natural Resources were Presented to the Cabinet
(Communicated by the Prime Minister's Media Adviser)

The Cabinet today (Sunday), 19.2.12, was presented with the recommendations
of the inter-ministerial steering committee that examined the management of
state revenues from natural gas resources, pursuant to the 2011 Taxation of
Oil and Gas Revenues Law (the "Sheshinski
Law")http://www.financeisrael.mof.gov.il/FinanceIsrael/Docs/En/pressReleases/20110330.pdf

According to the law, the state will establish a sovereign fund to manage
revenue from natural gas resources, with the fund's profits being invested
in strategic projects for the State of Israel. This is in order to ensure
the efficient and wise utilization of natural resources without harming jobs
and competitiveness in the economy, while taking a long-range strategic view
and in order to provide lasting economic security for the State of Israel.

The team was appointed by Prime Minister, Benjamin Netanyahu, Finance
Minister, Yuval Steinitz and Bank of Israel Governor, Stanley Fischer. The
team was chaired by National Economic Council Chairman – and economic
advisor to the Prime Minister – Prof. Eugene Kandel and included Bank of
Israel Deputy Governor, Dr. Karnit Flug, Finance Ministry Budget Director,
Gal Hershkovitz, Bank of Israel Senior Adviser, Barry Topf, Finance Ministry
Accountant General, Michal Abadi-Boiangiu and Deputy Attorney General, Avi
Licht.

According to the team's recommendations, approximately half of state
revenues from oil and gas resources (incomes from the tax on excess profits)
will be deposited in a fund that will invest abroad and will constitute a
"security cushion" for dealing with national events with extraordinary
economic implications such as wars, natural disasters, economic crises, etc.
Pursuant to a decision by Prime Minister Netanyahu, the fund's profits will
be devoted to designated projects in the fields of education and security,
which will be approved by the Cabinet. Should an extraordinary event take
place, it will be possible to borrow from the fund. The fund's assets will
be managed, in accordance with rules that have yet to be determined, by the
Bank of Israel under a supervision and oversight mechanism – to be led by
the Finance Ministry – that will ensure maximum public transparency.

Detailed draft legislation on the management of the fund will be submitted
to the Ministerial Committee on Legislation in the coming weeks.

Prime Minister Netanyahu said, "We began to deal with gas royalties with the
Sheshinski Committee. Today, we will begin the discussion that will lead to
the creation of a sovereign capital fund, the fruits of which will be
allocated to Israel's vital needs, especially education and security."