Filed Pursuant to Rule 424(b)(2)
Registration No. 33-51023
PROSPECTUS
4,500,000 Shares
AMPAL-AMERICAN ISRAEL CORPORATION
Class A Stock
-------------------
This Prospectus relates to 4,500,000 shares of Class A
Stock, par value $1.00 per share ("the Class A Stock"), of Ampal-
American Israel Corporation ("Ampal"), that are reserved for
issuance upon exercise of redeemable warrants to purchase
4,500,000 shares of Ampal's Class A Stock at $16.00 per share
(the "Offered Shares").
The Class A Stock is traded on the American Stock Exchange
under the Symbol "AIS.A." The closing price of Ampal's Class A
Stock on May 27, 1994 was $8.375.
The holders of Class A Stock are entitled to one vote per
share on all matters voted upon by shareholders and, voting as a
class, have the right to elect 25% of the Board of Directors of
Ampal. The Class A Stock has certain rights to dividends before
dividends may be paid on Ampal's common stock. The dividend,
voting and certain other rights of the Class A Stock are subject
to certain rights of the holders of Ampal's preferred stock. The
Class A Stock has no conversion, redemption or preemptive rights.
All of Ampal's outstanding common stock and a majority of the
outstanding Class A Stock are owned by Bank Hapoalim B.M.
-------------------------
Investors Should Carefully Consider Certain Special Factors
Relating to the Company.
See "Special Considerations."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
June 3, 1994
<PAGE>
AVAILABLE INFORMATION
Ampal has filed a Registration Statement on Form S-2 under
the Securities Act of 1933, as amended (the "Act"), and certain
amendments thereto (including a post-effective amendment on Form
S-3), with the Securities and Exchange Commission (the
"Commission") with respect to the Offered Shares. As permitted
by the rules and regulations of the Commission, this Prospectus
omits certain of the information contained in the Registration
Statement and the exhibits and schedules thereto. For further
information with respect to Ampal and its consolidated
subsidiaries and the Offered Shares, reference is hereby made to
such Registration Statement, including the exhibits and schedules
filed as part thereof. Statements contained in this Prospectus
concerning the provisions of certain documents filed with, or
incorporated by reference in, the Registration Statement are not
necessarily complete, each such statement being qualified in all
respects by such reference. Copies of all or any part of the
Registration Statement, including the documents incorporated by
reference therein or exhibits thereto, may be obtained upon
payment of the prescribed fees at the offices of the Commission
set forth below.
Ampal is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports can be
inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549; and at the
Regional Offices of the Commission, 500 West Madison Street,
Suite 1400, Chicago, Ill. 60661-2511; and at Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained from the public reference section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such materials also can be inspected and
copied at the offices of the American Stock Exchange, 86 Trinity
Place, New York, N.Y. 10006.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following reports, which were filed by Ampal with the
Commission, are incorporated in this Prospectus by reference
except with respect to those portions of the following reports
responsive to items 402(i), 402(k) and 402(1) of Regulation S-K
promulgated by the Commission:
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993;
Quarterly Report on Form 10-Q for the Quarter ended
March 31, 1994;
The description of Class A Stock contained in Ampal's
registration statement on Form 8-A under the Exchange Act,
filed December 9, 1993.
All documents filed by Ampal with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the
offering covered by this Prospectus will be deemed incorporated
by reference into this Prospectus and to be a part hereof from
the date of filing of such documents.
Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for
all purposes to the extent that a statement contained in this
Prospectus or in any other document filed prior to the date
hereof which is also incorporated by reference modifies or
replaces such statements.
Ampal agrees to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is
delivered, upon the written or oral request of such person, a
copy of any and all documents that has been incorporated by
reference in the Registration Statement (other than exhibits to
such documents unless such exhibits are specifically incorporated
by reference into the information that this Prospectus
incorporates). Such requests may be made to Ampal-American
Israel Corporation, 1177 Avenue of the Americas, New York, New
York 10036, Attention: Secretary (telephone number (212)
782-2100).
-1-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by
the more detailed information appearing elsewhere in this
Prospectus or incorporated by reference herein. Unless
otherwise indicated, all references herein to "Ampal" refer
to Ampal-American Israel Corporation and to "Company"
include Ampal and its consolidated subsidiaries.
The Company
The Company acquires interests in businesses located in
the State of Israel or that are Israel-related. An
important objective of Ampal is to make investments in
companies that take advantage of growth in Israel's domestic
economy. The Company has diversified interests in the
following sectors: hotels and leisure-time, real estate,
energy distribution, basic industry and high technology and
communications. The Company generally seeks to acquire and
maintain a sufficient equity interest in a company to permit
it, on its own or with investment partners, to have a
significant influence in the management and operation of
that company. Ampal usually makes investments with or
through affiliated companies.
The Company emphasizes long-term appreciation over
short-term returns and liquidity. The Company often makes
equity investments accompanied by more significant loans or
loan guarantees with the intention that cash flow from
operations of the investee companies will repay these loans.
In determining whether to acquire an interest in a specific
company, the Company considers quality of management,
qualifications of investment partners, potential return on
investment, projected cash flow, market share and growth
potential.
Bank Hapoalim B.M. ("Hapoalim"), the largest bank in
Israel, is Ampal's controlling shareholder and principal
lender. As of May 27, 1994, Hapoalim held 49.7% of the
Class A Stock (assuming conversion in full of Ampal
preferred stock held by Hapoalim) and 100% of the common
stock of Ampal ("Common Stock"). The Company has been, and
may continue to be, a party to joint transactions with
companies affiliated with or related to Hapoalim. Recently-
enacted Israeli legislation may require Hapoalim to
substantially reduce its percentage shareholdings in Ampal.
Ampal and Hapoalim have agreed not to offer, sell or
otherwise dispose of any shares of Class A Stock until July
24, 1994. See "Special Considerations--Concentration of
Ownership; Potential Change in Control."
Special Considerations
The Company's principal holdings are located in Israel.
For a discussion of certain factors concerning the State of
Israel and its economic, political and military situation
and certain other considerations affecting the Company, see
"Special Considerations."
The Offering
Securities Offered.... 4,500,000 shares of Class A Stock
that are reserved for issuance
upon exercise of redeemable warrants
to purchase 4,500,000 shares of
Ampal's Class A Stock at $16.00 per
share.
Class A Stock
Outstanding(1) Prior
to the Offering....... 20,729,546
Assuming issuance of
all of the Offered
Shares.............. 25,229,546
Use of Proceeds....... Working capital and general corporate
purposes, including financing of
future acquisitions and additions to
existing holding. See "Use of
Proceeds."
Listing/Trading....... The Class A Stock trades on the
American Stock Exchage under the
Symbol "AIS.A."
___________________
(1) Assuming no conversion of outstanding Preferred Stock on and
after May 27, 1994. On May 27, 1994, 4,488,790 shares of
Class A Stock were issuable upon conversion of Preferred
Stock outstanding.
-2-
<PAGE>
THE COMPANY
The Company acquires interests in businesses located in the
State of Israel or that are Israel-related. An important
objective of Ampal is to make investments in companies that take
advantage of growth in Israel's domestic economy. The Company
has diversified interests in the following sectors: hotels and
leisure-time, real estate, energy distribution, basic industry
and high technology and communications.
The Company emphasizes long-term appreciation over
short-term returns and liquidity. The Company often makes equity
investments accompanied by more significant loans or loan
guarantees with the intention that cash flow from operations of
the investee companies will repay these loans within a relatively
short period. In determining whether to acquire an interest in a
specific company, the Company considers quality of management,
qualification of investment partners, potential return on
investment, projected cash flow, market share and growth
potential.
The Company generally seeks to acquire and maintain a
sufficient equity interest in a company to permit it, on its own
or with investment partners, to have a significant influence in
the management and operation of that company. The Company often
seeks investment partners who have expertise in the business in
which an investment is being made or whose operations and
associations provide the investee company with additional
markets, sources of supply, financing or other competitive
advantages. Frequently, the Company enters into arrangements
with its investment partners or with the company in which it is
investing in order to ensure board representation or other rights
relating to its investments. Hapoalim, the largest bank in
Israel, is Ampal's controlling shareholder and principal lender.
The Company usually makes investments with or through affiliated
companies. Members of the Hapoalim group of companies, including
Investment Company of Bank Hapoalim Ltd., sometimes invest
jointly with the Company.
Ampal was founded prior to the establishment of the State of
Israel as part of the effort of the Jewish community in Palestine
to provide resources for and benefit from the growth of its
economy. Ampal has participated in the economic development of
Israel by providing capital and management to commercial,
banking, credit, industrial and agricultural enterprises located
in Israel or that are Israel-related. Ampal intends to continue
to adhere to its historical policy of focusing its business
interests primarily on long-term holdings in Israel-related
enterprises.
Prior to 1989, Ampal was primarily engaged in making loans
to businesses in Israel through its industrial banking
subsidiaries and, to a lesser extent, investing in Israeli
companies. In 1989, the Company discontinued this lending
activity, and in 1990 substantially all of the loan portfolios of
its industrial banking subsidiaries were sold to Hapoalim.
-3-
<PAGE>
Listed below by industry segment are the Company's most
significant investees and the principal business of each.
<TABLE>
<S> <C>
INDUSTRY SEGMENT PRINCIPAL BUSINESS
---------------- ------------------
HOTELS AND LEISURE-TIME
Moriah Hotels Ltd.
............................................................. Hotel Chain
Coral World International Limited.......................... Underwater Observatories and Marine Parks
Country Club Kfar Saba Ltd. ............................... Country Club Facilities
REAL ESTATE, FINANCE AND OTHER HOLDINGS
Industrial Buildings Corporation Ltd.
(Mivnei Taasiya Ltd.).................................... Industrial Real Estate
Bay Heart Limited (Lev Hamifratz Limited).................. Shopping Mall Owner/Lessor
Bank Hapoalim (Cayman) Ltd. ............................... Commercial Bank Holding Company
Etz Vanir Ltd. and Yakhin Mataim Ltd. ..................... Citrus Groves
Am-Hal Limited............................................. Senior Citizen Facility
Ampal (Israel) Ltd. ....................................... Holding Company
Ophir Holdings Ltd. ....................................... Holding Company
Ampal Development (Israel) Ltd. ........................... Holding Company
Nir Ltd. .................................................. Holding Company
Ampal Financial Services Ltd. ............................. Holding Company
ENERGY DISTRIBUTION
Granite Hacarmel Investments Ltd. ......................... Distribution of Refined Petroleum Products
BASIC INDUSTRY
Pri Ha'emek (Canned and Frozen Food) 88 Ltd. .............. Frozen and Canned Food
Paradise Mattresses (1992) Ltd. ........................... Mattresses and Fold-out Beds
Carmel Container Systems Limited........................... Packaging Materials and Carton Production
Orlite Engineering Company Ltd. ........................... Composite Material Products
Davidson-Atai Publishers Ltd. ............................. Publications
HIGH TECHNOLOGY AND COMMUNICATIONS
Teledata Communication Ltd. ............................... Telecommunications Systems
Mercury Interactive Corporation............................ Automated Software Quality Products
DSP Group, Inc. ........................................... Digital Signal Processing Technologies
DSP Telecommunications Ltd. ............................... Digital Signal Processing Technologies
Idan Software Industries I.S.I. Ltd. ...................... Telecommunications Services
</TABLE>
1994 Public Offering
On February 1, 1994, Ampal completed a public offering of
4.5 million units consisting of one share of Class A Stock and
one redeemable warrant to purchase one share of Class A Stock at
$16.00 per share. The warrants are exercisable until January 31,
1999 but are callable by Ampal, in whole or in part, from and
after February 1, 1996, without payment to the holder. Net
proceeds from the offering were approximately $50.8 million.
Since February 2, 1994, the Class A Stock and redeemable warrant
components of the units are trading separately.
Certain Pending Transactions
Ophir Holdings Ltd. ("Ophir"), which is 42.5% owned by
Ampal, has recently agreed, subject to the receipt of certain
approvals, to make equity investments and loans totalling
approximately $2.5 million, for a 16.7% interest in each of three
new Israeli companies formed to acquire certain commercial real
estate holdings of a major Israeli cooperative wholesale supply
company. The aggregate purchase price for this commercial real
estate is expected to be approximately $52.5 million and is
expected to be financed principally with mortgage loans which may
be guaranteed in whole or in part by the shareholders.
Development costs of the properties may also be paid or
guaranteed by the shareholders.
-4-
<PAGE>
In May 1994, the Company entered into an agreement with a
subsidiary of Mercury Interactive Corporation and Qronus
Interactive Israel 1994 Ltd. ("Qronus") pursuant to which the
Company agreed to purchase 10.7% of the equity of Qronus for $1
million. Qronus engages in the research, development,
manufacturing and marketing of automated software quality
solutions for non-standard platforms, embedded systems and real
time computer systems.
There is no assurance that these pending transactions or
other prospective ventures will be completed or that the proposed
terms of investment will not be modified.
Recent Transactions
-
In February 1994, the Company, together with an affiliate of
Hapoalim, established a venture capital fund which will make
investments in high-technology ventures, including investments
in start-up entities. The Company and the Hapoalim affiliate
are each expected to invest up to $2.5 million in this fund.
As of June 1, 1994, the fund had made an investment of $300,000
for 2% of Peptor Ltd., a high-tech pharmaceutical company which
uses technology for synthesizing peptides with fixed
conformations, and agreed to invest up to $1.5 million for up
to 66% of Imagenet, Ltd., a company which is developing and
marketing software systems for computer-aided engineering.
-
In January 1994, the Company invested approximately $66,000 for
50% of the equity of, and made a loan of $1 million to, M.D.F.
Boards Industry Ltd. ("MDF"). MDF is a joint venture between
the Company and a subsidiary of Etz Lavud Ltd., a
publicly-owned Israeli lumber manufacturer. MDF intends to
establish a plant in Israel to manufacture medium density fiber
products for the construction and furniture industries.
-
In March 1994, Pri Ha'emek (Canned and Frozen Food) '88 Ltd.
("Pri Ha'emek") conducted a public offering in Israel on the
Tel Aviv Stock Exchange. In the offering, Pri Ha'emek sold
23.1% of its shares to the public together with options and
convertible debentures and received gross proceeds of
approximately $11.4 million. Ampal recorded a gain on issuance
in connection with the offering of approximately $2.3 million
(approximately $1.5 million after taxes). As a result of the
Pri Ha'emek public offering and a private placement to another
shareholder made by Pri Ha'emek prior thereto, Ampal's
ownership of Pri Ha'emek was diluted from 74.9% to 51.2%. Upon
exercise of all options and convertible debentures, Ampal's
interest may be diluted to 35.3%. If the Company's interest in
Pri Ha'emek decreases below 50%, Pri Ha'emek's results will no
longer be consolidated with the Company's but will be recorded
by the equity method of accounting.
-5-
<PAGE>
SPECIAL CONSIDERATIONS
In addition to the other information in this Prospectus or
incorporated by reference herein, the following factors should be
carefully considered by prospective investors in evaluating the
Company before purchasing any of the Offered Shares. All figures
and percentages are approximate. A substantial portion of the
information with respect to Israel presented hereunder has been
taken from Annual Reports of the Bank of Israel, the Israeli
Central Bureau of Statistics and from economic reports of
Hapoalim. No independent verification has been made of such
information.
Operations in Israel
Most of the companies in which Ampal directly or indirectly
invests, conduct their principal operations in Israel and are
directly affected by the economic, political, military, social
and demographic conditions there. The following information is
included in order to describe certain of these conditions in
Israel. Accordingly, the results of operations of the Company
and its investees could be adversely affected if hostilities
involving Israel should occur or if trade between Israel and its
present trading partners should be interrupted.
A state of hostility has existed, varying as to degree and
intensity, between Israel and the Arab countries. In addition,
Israel, and companies doing business with Israel, have been the
subject of an economic boycott by the Arab countries since
Israel's establishment. Following the Six-Day War in 1967,
Israel has administered the territories of the West Bank and the
Gaza Strip. A peace agreement between Israel and Egypt was
signed in 1979 under which full political relations have been
established, but economic relations have been very limited.
Beginning in December 1987, increased civil unrest has existed in
the administered territories. To date, the ongoing civil unrest
has not had a material adverse impact on the financial condition
or operations of the Company's investees. No prediction can be
made whether a resolution of these problems will be achieved or
the nature thereof, or whether the continuation of the civil
unrest in these territories may have a material adverse impact on
the operations of the investees in the future.
The Persian Gulf crisis, which took place in 1990 and 1991,
had an adverse effect on the Israeli economy as a whole and on
the operations of the Company. A decline in tourism during this
period decreased revenues for Moriah Hotels Ltd. and Coral World
International Limited. In January 1991, a direct hit by an Iraqi
scud missile caused damage to a shopping mall under construction
by Bay Heart Limited. Pri Ha'emek, a food processing company,
also experienced a downturn in business as a result of this
crisis.
Since 1991, negotiations have taken place between Israel,
its Arab neighbors and the Palestinians to end the state of
hostility in the region. In September 1993, a breakthrough
occurred in Israeli-Palestinian relations. A joint
Israeli-Palestinian Declaration of Principles was signed by
Israel and the Palestine Liberation Organization ("PLO") in
Washington, D.C., outlining interim Palestinian self-government
arrangements. These arrangements include implementation of
Palestinian self-rule in the Gaza Strip and Jericho, proposed
elections of a Palestinian council and plans for extensive
economic cooperation. In addition, PLO Chairman Arafat sent a
letter to Israeli Prime Minister Rabin in which the PLO
recognized Israel's right to exist in peace and security,
renounced terrorism and violence and affirmed that the clauses of
the PLO Covenant denying Israel's right to exist are no longer
valid. In reply, Israel recognized the PLO as the representative
of the Palestinians in the peace negotiations. In Cairo, Egypt,
in May 1994, Israel and the PLO entered into an agreement
pursuant to which Israeli forces withdrew from the Arab populated
areas of the Gaza Strip and Jericho. Under this agreement, these
areas came under control of the PLO.
All male adult permanent residents of Israel under the age
of 54 are, unless exempt, obligated to perform up to 44 days of
military reserve duty annually. Additionally, all such residents
are subject to being called to active duty at any time under
emergency circumstances. Some of the employees of the Company
and its investees are currently obligated to perform annual
reserve duty. While the Company and its investees have
-6-
<PAGE>
operated effectively under these and similar requirements, no
assessment can be made of the full impact of such requirements
on the Company or its investees.
Industrial Buildings Corporation Ltd. ("Industrial
Buildings"), a major owner/lessor of industrial properties in
Israel, owns approximately 1.0 million square feet of industrial
buildings in the administered territories (approximately 10% of
its total holdings). The future status of buildings owned and
property leased by Industrial Buildings in the administered
territories is uncertain, but historically the Government of
Israel has compensated property owners for forfeitures resulting
from government actions.
Economy of Israel
Israel's economy has been subject to numerous destabilizing
factors, including a period of rampant inflation in the early to
mid-1980's, low foreign exchange reserves, fluctuations in world
commodity prices, military conflicts and civil unrest. In
response to these problems, the Israeli Government has intervened
in all sectors of the economy, employing, among other means,
fiscal and monetary policies, import duties, foreign currency
restrictions and controls of wages, prices and foreign currency
exchange rates. The Israeli Government has frequently changed
its policies in all these areas.
The results of operations of certain of the Company's
investees have been favorably affected by their participation in
Israeli Government business incentive programs, some of which
have been reduced in recent years. Their operating results could
be adversely affected if these programs were further reduced or
eliminated and not replaced with equivalent programs or if the
Company's investees' ability to participate in these programs
were significantly reduced.
Over the past four years, Israel's economy has experienced
very high rates of growth, exceeding 6% in 1990-92 (an average of
7.5% a year in the business sector) and amounting to 3.5% in
1993. The lower growth rate of 1993 was due to an anticipated
27% drop in investment in residential construction. Economic
growth in Israel over the past two years has been fueled by the
export sector. Exports of goods and services rose by 14.4% in
1992 and amounted to 20.8 billion dollars and increased by an
additional 11.8% in 1993 to reach an estimated 22 billion
dollars. The Israeli Government's monetary policy contributed to
relative price and exchange rate stability during most of the
year despite fluctuating rates of economic growth during the year
and a high rate of unemployment. There can be no assurance that
the Israeli Government will be successful in keeping prices and
exchange rates stable. Price and exchange rate instability may
have a material adverse impact on the Company and its investees.
Demographics
Since the beginning of 1990, Israel has been experiencing a
new wave of immigration, primarily from the former Soviet Union.
Approximately 77,000 new immigrants arrived through the end of
1993. During the period 1990 through 1993, Israel's population
increased by approximately 16.7%. Although the increased
immigration from the former Soviet Union may benefit Israel and
its economy in the long-term by providing highly educated, cost
competitive labor and by stimulating its economic growth, it has
placed an increased strain on government services and national
resources. A sustained decrease in immigration would alleviate
some of the strain, but a decrease may also have a negative
effect on those investees whose revenue is derived mainly from
the sale of products and services in Israel. The impact of a
significant change in the flow of immigration on the operations
of the investees is unclear.
The Israeli Government has found it necessary to raise
additional revenue and to dedicate substantial funds to support
programs, including housing, education and job training, designed
to assist in the absorption of the new immigrants. No prediction
can be made as to the policies that will be adopted in the future
or the effect thereof on these and other government spending
programs.
-7-
<PAGE>
Dependence on Assistance from the United States
The State of Israel receives approximately $3 billion of
annual grants for economic and military assistance from the
United States and has received approximately $10 billion of
United States Government loan guarantees, subject to reduction in
certain circumstances. The Government loan guarantees were
granted over a period of five years ($2 billion per annum)
commencing in 1993. The Israeli economy could suffer material
adverse consequences were such aid or guarantees to be
significantly reduced. There is no assurance that foreign aid
from the United States will continue at or near amounts received
in the past.
Competition for Investments
The growth of the Israeli economy, the recent success of a
number of Israeli-based companies, particularly in the area of
high technology, the privatization of government-owned companies
and the recent acceleration of the peace process, have prompted
numerous potential investors to search for investment
opportunities in Israel and have made it possible for certain of
such companies to gain direct access to Israeli and foreign
public securities markets. The Company competes for investment
opportunities with other established and well-capitalized
investing entities. There can be no assurance that opportunities
will continue to be available to the Company at valuations and on
terms which are favorable.
S.E.C. Exemptive Order
In 1947, the Commission granted Ampal an exemption from the
Investment Company Act of 1940, as amended (the "1940 Act")
pursuant to an Exemptive Order. The Exemptive Order was granted
based upon the nature of Ampal's operations, the purposes for
which it was organized, which have not changed, and the interest
of purchasers of Ampal's securities in the economic development
of Israel. There can be no assurance that the Commission will
not reexamine the Exemptive Order and revoke, suspend or modify
it. A revocation, suspension or material modification of the
Exemptive Order would materially and adversely affect the
Company. In the event that Ampal becomes subject to the
provisions of the 1940 Act, it could be required, among other
matters, to make material changes to its management, capital
structure and methods of operation, including its dealings with
Hapoalim and related companies.
Early Stage Investments; Limited Investment Liquidity
The Company acquires interests in businesses that it
believes have long-term growth potential. In certain cases, the
Company makes an initial investment at an early stage of a
company's development in the form of risk capital and such
investment may not be readily marketable. In some instances,
disposition of a particular holding may be the only or principal
way of realizing the economic benefit of that holding. The
Company's shares in most investees are subject to various
restrictions on transfer, including, in certain circumstances,
rights of first refusal in favor of the investee and other
shareholders. Accordingly, these investments are relatively
illiquid and have a higher degree of risk than investments in
established, publicly traded companies.
Concentration of Ownership; Potential Change in Control
As of May 27, 1994, Hapoalim owned beneficially
approximately 49.7% of the outstanding Class A Stock, assuming
conversion of all shares of the Ampal's preferred stock owned by
it. Assuming conversion of all shares of Ampal's preferred stock
owned by Hapoalim and the full exercise of the redeemable
warrants to purchase 4,500,000 shares of Class A Stock, Hapoalim
would own 41% of the outstanding Class A Stock. Hapoalim also
beneficially owns 100% of the outstanding Common Stock of Ampal.
On all matters other than the election of 25% of the directors of
Ampal by the holders of Class A Stock voting as a class, the
holders of the Common Stock are entitled to cast as many votes as
shall equal the number of votes to which the holders of Class A
Stock are entitled, but in no event more than ten votes per share
of Common Stock. Hapoalim, so long
-8-
<PAGE>
as it continues to beneficially own a majority of each of the
Common Stock and at least one share of Class A Stock, will be
able to elect a majority of Ampal's directors. Recently-enacted
Israeli legislation may require Hapoalim to substantially reduce its
percentage shareholdings in Ampal, which potentially could result
in a change of control of Ampal. See "Israeli Banking
Regulations." In the event that Ampal's 4% Cumulative
Convertible Preferred Stock (the "4% Preferred Stock") or Ampal's
6 1/2% Cumulative Convertible Preferred Stock (the "6 1/2%
Preferred Stock," and together with the 4% Preferred Stock, the
"Preferred Stock") dividends are in arrears for three successive
years, the holders of all outstanding series of Preferred Stock
as to which dividends are in arrears shall have the exclusive
right to vote for the election of directors until all cumulative
dividend arrearages are paid.
Certain Israeli Real Estate Tax Matters
Under Israeli law, a lease of real property with a term of
more than 10 years is required to be reported to the Israeli
Appreciation Tax Authorities and is subject to a land
appreciation tax or an income tax and an acquisition tax. The
Israeli Tax Commissioner has recently taken the position that
certain arrangements for the lease of real property, including
multiple leases, leases with renewal options and leases or
options to lease between affiliated companies, which in the
aggregate provide a term exceeding 10 years, are subject to the
above reporting and taxes.
Certain of the investees, including Ophir, Industrial
Buildings and Carmel Container Systems Ltd., are parties (mostly
as lessors) to lease transactions which, under the Commissioner's
interpretation, may be deemed leases for terms in excess of 10
years. These investees have all reported their lease income as
taxable income and have recently reported such transactions to
the tax authorities. Should the tax authorities decide to
enforce their position and prevail, these investees would be in
breach of Israeli law, and could be subject to material taxes and
to civil and criminal penalties. An assessment made against Bay
Heart in this regard by the tax authorities has been abandoned.
The Company's investees have taken the position, which the
Company believes is shared by many of the other affected
taxpayers in Israel, that the Commissioner's position in this
matter is incorrect. The Company cannot predict whether the
Commissioner's position will be upheld or, if upheld, the effect
on the Company and its investees.
Israeli Banking Regulations
In October 1993, the Banks' Shares Under Settlement Act
(Temporary Provisions) 1993 (the "Banks' Shares Act") was enacted
by the Knesset, the Israeli parliament. Under the Banks' Shares
Act, in October 1993, the shares of the major Israeli banks,
including a majority of the shares of Hapoalim, were transferred
to the State of Israel. The purpose of the Banks' Shares Act is
to facilitate the sale by the Government of Israel of shares in
Israeli banks. In addition, the Banks' Shares Act is intended to
limit the Government's interference in the day-to-day operations
of the banks. Control over such shares of each bank will be
exercised by a supervisory committee appointed for that bank by a
public advisory committee which is in turn approved by the
Israeli Government. These supervisory committees will appoint
directors for each of the banks.
In May 1993, the Government of Israel sold a total of
approximately 7.5% of the shares of Hapoalim in a public offering
and to its employees also sold options to purchase an additional
approximately 10.4% of the shares of Hapoalim. In November 1993,
the Government of Israel sold an additional 5.4% of the shares of
Hapoalim in a public offering and an additional 1% of Hapoalim's
shares in an offering to its employees.
A provision of the Banking (Licensing) Law, 1981 (the
"Banking Law") imposes limitations on the purchase and holding of
means of control of non-banking corporations by Israeli banks.
Additionally, not more than 25% of the capital of Hapoalim may be
invested in non-banking corporations. In view of these
limitations, Hapoalim is unable to acquire additional means of
control in Ampal. Under the Banking Law, Hapoalim may not
directly
-9-
<PAGE>
or indirectly finance acquisitions by the Company of means of
control in non-banking corporations which Hapoalim itself may not
acquire. Hapoalim may not extend credit to the Company except in
the ordinary course of business and on terms similar to those on
which credit is extended to other customers of the same class.
In March, 1994, an amendment to the Banking Law was enacted
by the Knesset. Under the amendment, banks, including Hapoalim,
are required to reduce their holdings of individual non-banking
business corporations, including Ampal, to 25% or less by and not
later than December 31, 1996. In addition, it has been proposed
by the Government, that the Minister of Finance form a committee
to examine the overall economic implications of a further
reduction in the permitted holdings of banking corporations in
non-banking business corporations.
From time to time, the Company engages in transactions with
Hapoalim and its affiliates. Currently, the Company maintains
substantial deposits with Hapoalim and its subsidiaries.
Market Considerations
As of May 27, 1994, approximately 50.1% of the Class A Stock
was owned by non-affiliated shareholders (assuming conversion in
full of all of Ampal's Preferred Stock held by Hapoalim). As a
result, relatively small changes in the volume of purchases and
sales of these shares have resulted in significant fluctuations
in the market price of the Class A Stock. The possible sale of a
large portion of the Class A Stock by Hapoalim could have a
material adverse effect on the market price of the Class A Stock.
Ampal and Hapoalim have agreed not to offer, sell or otherwise
dispose of any shares of Class A Stock until July 24, 1994. See
"Israeli Banking Regulations."
The shares of certain of the Company's investees are
publicly traded in Israel or the United States. Fluctuations in
the market prices of such companies could result in fluctuations
in the market price of the Class A Stock. Due to a relatively
small equity market capitalization and the small number of
company listings in comparison to the United States securities
markets, and due to the concentration of ownership of public
companies in the hands of a few institutions, the Tel Aviv Stock
Exchange is subject to relatively high short-term price
volatility and has a less liquid secondary trading environment.
Accordingly, this market could be affected to a greater extent
than the United States markets by adverse events generally and
trades of significant blocks of securities.
United States Banking Regulations
Due to its status as a subsidiary of Hapoalim which is
subject, through the United States International Banking Act of
1978 ("IBA"), to the provisions of the United States Bank Holding
Company Act of 1956 ("BHC"), there may be limitations upon the
direct or indirect investment activities of Ampal in the United
States. While Ampal itself is a "grandfathered" investment of
Hapoalim under the IBA for purposes of the BHC, Ampal may not
invest in more than 5% of the voting shares or 25% of the equity
of United States corporations or non-United States corporations
which have a majority of their assets in or revenues derived from
the United States, subject to certain exceptions. Management of
the Company does not believe that these limitations contained in
the BHC and the regulations of the Board of Governors of the
Federal Reserve System thereunder have had or will have any
material adverse impact upon the Company or its operations.
Israeli Foreign Exchange Regulations
Foreign exchange regulations are in effect in Israel. The
regulations are administered by the Controller of Foreign
Currency, an official of the Bank of Israel, who is appointed by
the Minister of Finance. The Company's capital investments in
Israeli enterprises and the payment in U.S. dollars of dividends
on such investments do not require prior approval by the
Controller. Under Israeli law, foreign investors who make
-10-
<PAGE>
foreign currency investments in Israeli companies are entitled to
receive payments of dividends and proceeds upon resale of the
investment in that foreign currency.
To the extent that loans or investments have been or will be
made by Ampal or any of its subsidiaries in or to Israeli
enterprises, substantially all such loans or investments have
been, and will be, made in such manner as to permit the payment
of dividends, interest and principal and proceeds of resale
thereon in U.S. dollars.
USE OF PROCEEDS
The exercise of the outstanding warrants to purchase the
Offered Shares will in large respect be dependant on the market
price of Ampal's Class A Stock. There can be no assurance that
any of the warrants will be exercised or as to the timing of such
exercise. Assuming that the outstanding warrants are exercised
in full, the net proceeds to be received by Ampal from the sale
of the Offered Shares are estimated to be approximately $72
million. Ampal currently expects that proceeds, if any, from the
sale of the Offered Shares will be used for working capital and
general corporate purposes including financing of future
acquisitions and additions to existing holdings.
Pending use of the net proceeds from the sale of Offered
Shares as described above, Ampal intends to invest such proceeds
in short-term United States government securities, short-term
time deposits and money market funds (including those offered by
Hapoalim), short-term interest bearing investments and other cash
equivalents.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
The ratio of earnings to combined fixed charges and
preferred stock dividends for the years 1989, 1990, 1991, 1992
and 1993 were 1.02:1, 1.12:1, 1.08:1, 2.18:1 and 1.20:1,
respectively.
PLAN OF DISTRIBUTION
The Offered Shares are being offered to holders of Ampal's
redeemable warrants and will be delivered to such holders or
their designated assignees upon receipt of a completed election
to purchase form and payment of the exercise price.
LEGAL MATTERS
The legality of the issuance of the Offered Shares will be
passed on for Ampal by Kronish, Lieb, Weiner & Hellman, New York,
New York.
EXPERTS
The Consolidated Financial Statements and schedules of the
Company incorporated by reference in this Prospectus and
elsewhere in the Registration Statement, to the extent and for
the periods indicated in their reports with respect thereto, have
been audited by Arthur Andersen & Co. and the Company's previous
auditors, each independent public accountants. In those reports,
these firms state that with respect to certain of the investees,
their opinions are based on the reports of other independent
public accountants. The Consolidated Financial Statements and
schedules referred to above have been included herein in reliance
upon the authority of those firms as experts in giving said
reports.
-11-
