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consist primarily of real estate; the shares were not purchased from a relatedparty. The exemption does not apply to shares in publicly-traded companies.VC Fund managementVC funds typically establish a management company in Israel, and pay an annualmanagement fee of approximately 2.5% of total fund commitments. This fee maydecrease after an investment.VC Fund as Limited PartnershipsVC funds are not regulated and do not require a license. VC funds are usuallylimited partnerships and are subject to securities legislation restricting the offeringof limited partnership units to no more than 35 persons, excluding certainqualified investors consisting primarily of financial institutions.Investor ProtectionThe VC fund’s limited partnership agreement governs the relationship betweeninvestors and the fund. Investors usually seek: confirmation of limited liability;restrictions on the use of proceeds; Employee Retirement Security Act 1974(ERISA) restrictions; restrictions on recourse borrowing; financial reporting; keyman provisions; non-competition restrictions preventing promoters from settingup a competing fund until certain time periods have passed; conflicts of interestprovisions.Investment ObjectivesLong term capital appreciation from high growth, technology companies.VC funds generally have a 7-10-year term with the ability to extend this term by anumber of one-year periods (usually two to three extensions). VC funds usuallyaim to complete their investment period (deploy capital in new portfolioinvestments) within 3-4 years of the fund’s initial closing (while retaining capitalfor management fees and follow-on investments until exit) and to exit most of itsinvestments within 3-5 years of investment. Since 2001, the average periodbetween investment and exit has lengthened. VC funds in Israel now usuallyextend their investment periods (sometimes to 6-7 years).Investments