AMPAL AMERICAN ISRAEL CORP /NY/, S-2/A, 1994-01-24

AMPAL AMERICAN ISRAEL CORP /NY/
S-2/A, 1994-01-24
MISCELLANEOUS BUSINESS CREDIT INSTITUTION

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FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 1994

REGISTRATION STATEMENT NO. 33-51023
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMPAL-AMERICAN ISRAEL CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
NEW YORK 612 13-0435685
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 782-2100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

LAWRENCE LEFKOWITZ
PRESIDENT
AMPAL-AMERICAN ISRAEL CORPORATION
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 782-2100
(Name, address, including zip code, and telephone number,
including area code, of agent for service of process)
------------------------
COPIES TO:

HERBERT KRONISH, ESQ. RICHARD H. GILDEN, ESQ.
KRONISH, LIEB, WEINER & HELLMAN FULBRIGHT & JAWORSKI L.L.P.
1114 AVENUE OF THE AMERICAS 666 FIFTH AVENUE
NEW YORK, NEW YORK 10036-7798 NEW YORK, NEW YORK 10103-3198

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/

If the registrant elects to deliver its latest annual report to
security-holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION

CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS IN PART I OF FORM S-2

ITEM OF FORM S-2 LOCATION IN PROSPECTUS
--------------------------------- ---------------------------------
Item 1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus....... Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus
Item 2. Inside Front and Outside Back
Cover Pages of Prospectus...... Inside Front and Outside Back
Cover Pages of Prospectus;
Available Information;
Incorporation by Reference
Item 3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges........................ Prospectus Summary; The Company;
Special Considerations;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Conditions in Israel
Item 4. Use of Proceeds.................. Use of Proceeds; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations
Item 5. Determination of Offering
Price.......................... Underwriting
Item 6. Dilution......................... *
Item 7. Selling Security Holders......... *
Item 8. Plan of Distribution............. Underwriting
Item 9. Description of Securities to be
Registered..................... Outside Front Cover Page of
Prospectus; Description of
Securities
Item 10. Interests of Named Experts and
Counsel........................ Legal Matters; Experts
Item 11. Information with Respect to
Registrant..................... Prospectus Summary; The Company;
Special Considerations; Use of
Proceeds; Capitalization; Price
Range of Class A Stock;
Dividend Policy; Selected
Consolidated Financial Data;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Business; Conditions in Israel;
Tax Information; Management;
Certain Transactions;
Description of Securities;
Index to Financial Statements
Item 12. Incorporation of Certain
Information by Reference....... Incorporation by Reference
Item 13. Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities..... *

- ---------------

* Not applicable or answer is in the negative.
<PAGE>
EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: one to be
used in connection with a United States offering (the "U.S. Prospectus") and one
to be used in connection with the concurrent international offering (the
"International Prospectus"). The U.S. Prospectus and the International
Prospectus will be identical in all respects except for the front and back cover
pages. The U.S. Prospectus is included herein and is followed by those pages to
be used in the International Prospectus which differ from those in the U.S.
Prospectus. Each of the pages for the International Prospectus included herein
has been labelled "Alternate Page for International Prospectus." Final forms of
each Prospectus, if required, will be filed with the Securities and Exchange
Commission under Rule 424(b).
<PAGE>

Subject to Completion, dated January 24, 1994

PROSPECTUS
4,000,000 UNITS
AMPAL-AMERICAN ISRAEL CORPORATION

4,000,000 SHARES OF CLASS A STOCK WITH
4,000,000 REDEEMABLE CLASS A STOCK WARRANTS
------------------------

Each Unit consists of one share of Class A Stock, par value $1.00 per share
(the "Class A Stock"), of Ampal-American Israel Corporation ("Ampal") and one
redeemable warrant to purchase one share of Ampal's Class A Stock at $ per
share (a "Warrant"). Of the 4,000,000 Units offered hereby, Units are
being offered initially in the United States by the U.S. Underwriters and
Units are being offered initially outside the United States by the
International Managers (subject to transfers between the U.S. Underwriters and
the International Managers). Such offerings are referred to collectively as the
"Offerings." The offering price and underwriting discounts and commissions per
Unit are identical for both Offerings. See "Underwriting."

The Warrants are exercisable at any time from the time the Warrants are
separately transferable until , 1999. The Warrants are callable by
Ampal, in whole or in part, from and after , 1996, without payment to
the holder. See "Description of Securities."

The Class A Stock is traded on the American Stock Exchange (the "AMEX")
under the symbol "AIS.A." The closing price of Ampal's Class A Stock on January
20, 1994 was $12.50. See "Price Range of Class A Stock." The Units and Warrants
have been authorized for listing on the AMEX, subject to official notice of
issuance.

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. For a more complete description of Ampal's capital stock see
"Description of Securities."

------------------------

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.

<TABLE>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Unit............................... $ $ $
Total(3)............................... $ $ $
</TABLE>

(1) Ampal has agreed to indemnify the U.S. Underwriters and International
Managers against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of the Offerings, estimated at $ ,
payable by Ampal.
(3) Ampal has granted the U.S. Underwriters and the International Managers
options, exercisable within 30 days of the date hereof, to purchase up to
500,000 additional Units solely to cover over-allotments. If such options
are exercised in full, the total "Price to Public," "Underwriting Discounts
and Commissions" and "Proceeds to Company" will be $ , $
and $ , respectively. See "Underwriting."

------------------------

The Units offered by this Prospectus are offered by the U.S. Underwriters,
subject to prior sale, to withdrawal, cancellation or modification of the offer
without notice, to delivery to and acceptance by the U.S. Underwriters and to
certain further conditions. It is expected that delivery of the Units will be
made at the offices of Lehman Brothers Inc., New York, New York on or about
February , 1994.

------------------------
LEHMAN BROTHERS
OPPENHEIMER & CO., INC.
FURMAN SELZ INCORPORATED

JANUARY , 1994

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

[Photograph: Moriah Eilat Hotel] [Photograph: Moriah Plaza Hotel,
Tel Aviv]

[Photograph: Coral World - Red Sea underwater observatory]

IN CONNECTION WITH THESE OFFERINGS, THE U.S. UNDERWRITERS AND THE
INTERNATIONAL MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF THE UNITS, THE CLASS A STOCK AND/OR THE WARRANTS OF
AMPAL AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

OFFERS AND SALES OF THE UNITS IN THE UNITED KINGDOM, AND ADVERTISEMENTS IN
CONNECTION THEREWITH, ARE SUBJECT TO CERTAIN RESTRICTIONS.

All references in this Prospectus to dollars ($) are to U.S. dollars and to
NIS are to New Israeli Shekels. On December 31, 1992 and September 30, 1993 the
exchange rates between the U.S. dollar and NIS were $1.00 = NIS 2.764 and $1.00
= NIS 2.864, respectively. See Note 1 of the Notes to Consolidated Financial
Statements of Ampal for a description of foreign currency translations.

<PAGE>

[Photograph: Pri Ha'emek - a major [Photograph: Granite Hacarmel,
Israeli food processor (products)] a leading Israeli distributor
of refined petroleum products
(plant)]

[Photograph: Industrial Buildings -
Israel's largest owner/lessor of
industrial properties (buildings)]

[Photograph: Bay Heart -
Shopping mall, located in
Haifa, Israel's third largest
city (interior of building)]
[Photograph: (building site)]

<PAGE>

[Photograph: Ampal Subsidiaries -
Commercial Real Estate (buildings)]

[Photograph: Orlite Engineering -
Composite material products for
military and civilian applications
(products)]

[Photograph: Paradise Matresses -
Mattresses and beds (products)]

[Photograph: Carmel Containers -
An Israeli leader in packaging
products (products)]

<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the information and
financial statements and notes thereto, appearing elsewhere in this Prospectus
or incorporated by reference herein. Unless otherwise indicated (a) the
information in the Prospectus does not give effect to the over-allotment options
granted to the U.S. Underwriters and the International Managers and (b) all
references herein to "Ampal" refer to Ampal-American Israel Corporation and to
"Company" include Ampal and its subsidiaries and Ophir Holdings Ltd. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations."

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. Ampal 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. 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.

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. The Company
believes that recent progress in peace negotiations between Israel, the
Palestinians and certain Arab states may improve the economic climate in the
region, benefit the Company's investees and create additional investment
opportunities.

Between January 1 and November 1, 1993, the Company acquired interests in
five companies (including additions to existing holdings) for an aggregate of
$60.7 million (including an investment of approximately $50 million by Ophir
Holdings Ltd. in Industrial Buildings Corporation Ltd. (Mivnei Taasiya Ltd.)).
See "The Company--Recent and Pending Transactions." The following table sets
forth certain information with respect to the Company's principal holdings:

<TABLE> <CAPTION>
AGGREGATE CARRYING AGGREGATE QUOTED
VALUE AS OF MARKET VALUE OF
NUMBER OF PUBLIC SEPTEMBER 30, 1993(1)(2) HOLDINGS IN PUBLIC
NUMBER OF NON- COMPANIES(3) ------------------------ COMPANIES AS OF
PUBLIC COMPANIES AS AS OF NON-PUBLIC PUBLIC NOVEMBER 1,
OF NOVEMBER 1, 1993 NOVEMBER 1, 1993 COMPANIES COMPANIES 1993(2)(4)
------------------- ------------------- ----------- ----------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Hotels and Leisure-Time............... 3 -- $ 27,565 $ -- $ --
Real Estate, Finance and Other
Holdings.............................. 10 1 73,668 50,617 60,786
Energy Distribution................... -- 1 -- 31,242 52,416
Basic Industry........................ 3 2 7,407 5,291 10,754
High Technology and Communications.... 2 3 4,241 15,321 62,731

<FN>
- ---------------

(1) Carrying value does not reflect shareholders' loans to the Company's
affiliates. For selected financial information regarding certain of the
Company's holdings, see "Business." Carrying values of investments held by
Ophir Holdings Ltd. are shown without deduction for minority interests.

(2) Does not give effect to the November 1993 private placement of shares of
Ophir Holdings Ltd. and its consequent deconsolidation. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations" and "Business."

(3) Shares traded in public securities markets in the United States or Israel.

(4) Based on closing sale price (or if none, the last quoted price) as reported
on the Tel Aviv Stock Exchange ("TASE"), except for Teledata Communication
Ltd. and Mercury Interactive Corporation whose market values are based on
the closing sale price of such companies' shares as quoted on the NASDAQ
NMS, Idan Software Industries I.S.I. Ltd. whose market value is based on the
mean between the bid and ask prices of its shares as quoted on NASDAQ and
Carmel Container Systems, Ltd. whose market value is based on the closing
sale price of its shares as quoted on the AMEX. For those securities traded
in Israel, aggregate quoted market value is based upon an exchange rate of
$1.00 = NIS 2.934. Aggregate dollar values shown do not necessarily reflect
the values the Company would receive if it were to dispose of its holdings.
</TABLE>

3
<PAGE>
Bank Hapoalim B.M. ("Hapoalim"), the largest bank in Israel, is Ampal's
controlling shareholder and principal lender. As of September 30, 1993, Hapoalim
held 64.7% 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. Pending 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 for a period of 180 days after the date of this
Prospectus. See "Special Considerations--Concentration of Ownership; Potential
Change in Control," "Certain Transactions," "Conditions in Israel" and
"Underwriting."

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" and "Conditions in Israel."

THE OFFERINGS

Securities Offered............ 4,000,000 Units (4,500,000 Units if the U.S.
Underwriters' and International Managers'
over-allotment options are exercised in
full), each Unit consisting of one share of
Class A Stock and one Warrant to purchase
one share of Class A Stock. The Class A
Stock and Warrants included in the Units
will not be separately transferable until
, 1994 or such earlier date as
may be determined by the Representatives of
the U.S. Underwriters and International
Managers.
Class A Stock Outstanding(1)

Prior to the Offerings...... 16,077,044

Following the Offerings..... 20,077,044
Use of Proceeds............... Financing of future acquisitions, additions to
existing holdings and other working capital
and general corporate purposes, including
early redemptions of outstanding Ampal
debentures. See "Use of Proceeds."

Listing/Trading............... The Class A Stock trades on the AMEX under the
symbol "AIS.A." The Units and the Warrants
have been authorized for listing on the
AMEX, subject to official notice of
issuance.
AMEX Symbol for the Units..... "AIS.E"
AMEX Symbol for the
Warrants.................... "AIS.WS"

Warrants
Exercise Price.............. Each Warrant entitles the holder to purchase
one share of Class A Stock at $ per
share in cash, subject to adjustment. See
"Description of Securities--Warrants."
Exercise Period............. Commencing on the date the Warrants are
separately transferable until five years from
the date of issue, unless earlier called by
Ampal. See "Description of
Securities--Warrants."
Call Provision.............. Callable by Ampal, on not less than 30 days
notice, in whole or in part, on or after two
years from the date of issuance without
payment to the holder. See "Description of
Securities-- Warrants."

- ---------------

(1) Assuming no conversion of outstanding Preferred Stock on and after
January 20, 1994. On January 20, 1994, 4,641,292 shares of Class A Stock
were issuable upon conversion of Preferred Stock outstanding.

4
<PAGE>
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
PRO FORMA
YEAR ENDED
NINE MONTHS DECEMBER
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30, 31,(1)
------------------------------------------------------- -------------------- -------------
1988 1989 1990(2) 1991 1992 1992 1993 1992
---------- ---------- --------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Equity in earnings of
affiliates and others $ 9,641 $ 8,002 $ 5,725 $ 5,593 $ 11,195 $ 6,548 $ 7,599 $ 12,061
Total revenues......... 141,545 127,537 110,401 71,519 85,302 71,800 53,145 75,822
Net income (loss)...... 5,405(3) 1,509 1,116 1,126(4) 10,324 9,941 (1,632)(5) 8,169
Earnings (loss) per
Class A share(6)..... $.23(3) $.06 $.05 $.05(4) $.44 $.42 $(.07)(5) $.34
Weighted average number
of Class A shares
outstanding.......... 20,837 20,773 20,718 20,717 20,717 20,717 20,717 20,717
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash
equivalents.......... $ 36,194 $ 20,582 $ 17,971 $ 7,515 $ 9,698 $ 6,995 $ 2,036
Investments............ 55,551 61,186 63,918 67,627 109,912 102,681 162,481
Total assets........... 1,179,750 1,100,756 436,024 404,466 333,267 345,606 370,458
Total liabilities and
minority interests... 1,071,218 992,429 327,177 295,048 214,065 226,788 255,132
Total shareholders'
equity............... 108,532 108,327 108,847 109,418 119,202 118,818 115,326

<CAPTION>
PRO FORMA
NINE MONTHS ENDED
SEPTEMBER 30,(1)
-----------------
1993
-----------------
<S> <C>
STATEMENT OF INCOME DATA:
Equity in earnings of
affiliates and others $ 4,445
Total revenues......... 49,137
Net income (loss)...... (2,374)
Earnings (loss) per
Class A share(6)......... $(.10)
Weighted average number
of Class A shares
outstanding.......... 20,717
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash
equivalents.......... $ 2,036
Investments............ 110,485
Total assets........... 317,833
Total liabilities and
minority interests... 200,354
Total shareholders'
equity............... 117,479

<FN>
- ---------------
(1) Gives effect to the deconsolidation of Ophir Holdings Ltd. and to the
acquisition by Ophir Holdings Ltd. of an interest in Industrial Buildings
Corporation Ltd. (Mivnei Taasiya Ltd.) as if such transactions occurred at
the beginning of each such period, with respect to the pro forma information
for the year ended December 31, 1992, and January 1, 1993. The pro forma
balance sheet information gives effect to these transactions as if they
occurred on September 30, 1993. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations,"
"Business" and the Pro Forma Consolidated Financial Statements presented
elsewhere in this Prospectus.

(2) Prior to 1989, Ampal was primarily engaged in making loans to businesses in
Israel through its industrial banking subsidiaries and, to a lesser extent,
in investing in Israeli companies. Because of changes in the relationship
between interest rates in the United States and Israel in 1988 and 1989, the
margin the Company had earned from these lending activities was effectively
eliminated. In 1990 substantially all of the loan portfolios of its
industrial banking subsidiaries were sold to Hapoalim.

(3) Includes extraordinary income of $1,275, equal to $.05 per share, which
represents tax loss carryforwards utilized by subsidiaries.

(4) Includes extraordinary income of $726, equal to $.03 per share, which
represents tax loss carryforwards utilized by subsidiaries.

(5) Includes cumulative effect on prior years of change in accounting principle
of $(4,982), equal to $(.21) per share. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--General."

(6) Calculation of earnings (loss) per Class A share includes weighted average
number of Class A shares outstanding and 3.0 million shares of Common Stock.
</TABLE>

5
<PAGE>
THE COMPANY

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. The Company believes that recent progress in peace negotiations
between Israel, the Palestinians and certain Arab states may improve the
economic climate in the region, benefit the Company's investees and create
additional investment opportunities.

Listed below by industry segment are the Company's most significant
investees, the principal business of each and the percentage of equity owned,
directly or indirectly, by Ampal. For further information with respect to the
investees, including information with respect to Ampal's carrying values for
certain investees, see "Business."

<TABLE>
PERCENTAGE
AS OF
INDUSTRY SEGMENT PRINCIPAL BUSINESS SEPTEMBER 30, 1993
- --------------------------------------------------------------------------- ----------------------------- -------------------
<S> <C> <C>
HOTELS AND LEISURE-TIME
Moriah Hotels Ltd. ...................................................... Hotel Chain 46.0%
Coral World International Limited........................................ Underwater Observatories and 50.0
Marine Parks
Country Club Kfar Saba Ltd. ............................................. Country Club Facilities 51.0
REAL ESTATE, FINANCE AND OTHER HOLDINGS
Industrial Buildings Corporation Ltd.
(Mivnei Taasiya Ltd.) (TASE)........................................... Industrial Real Estate 12.8(1)(2)
Bay Heart Limited (Lev Hamifratz Limited)................................ Shopping Mall Owner/Lessor 37.0
Bank Hapoalim (Cayman) Ltd. ............................................. Commercial Bank Holding 49.0
Company
Etz Vanir Ltd. and Yakhin Mataim Ltd. ................................... Citrus Groves 50.0
Am-Hal Limited........................................................... Senior Citizen Facility 50.0
Ampal (Israel) Ltd. ..................................................... Holding Company 100.0
Ophir Holdings Ltd. ..................................................... Holding Company 49.4(2)
Ampal Development (Israel) Ltd. ......................................... Holding Company 100.0
Nir Ltd. ................................................................ Holding Company 99.9
Ampal Financial Services Ltd. ........................................... Holding Company 100.0
ENERGY DISTRIBUTION
Granite Hacarmel Investments Ltd. (TASE) ................................ Distribution of Refined 21.6
Petroleum Products
BASIC INDUSTRY
Pri Ha'emek (Canned and Frozen Food) 88 Ltd. ............................ Frozen and Canned Food 74.9
Paradise Mattresses (1992) Ltd. ......................................... Mattresses and Fold-out Beds 85.1
Carmel Container Systems Ltd. (AMEX: "KML").............................. Packaging Materials and 20.0
Carton Production
Orlite Engineering Company Ltd. (TASE) .................................. Composite Material Products 31.0
Davidson-Atai Publishers Ltd. ........................................... Publications 22.5
HIGH TECHNOLOGY AND COMMUNICATIONS
Teledata Communication Ltd. (NASDAQ NMS: "TLDCF")........................ Telecommunications Systems 22.2(2)(3)
Mercury Interactive Corporation (NASDAQ NMS: "MERQ")..................... Automated Software Quality 4.9(4)
Products

DSP Group, Inc. ......................................................... Digital Signal Processing 6.7(5)(2)
Technologies

DSP Telecommunications Ltd............................................... Digital Signal Processing 4.4(1)(2)
Technologies
Idan Software Industries I.S.I. Ltd. (NASDAQ: "IDANF")................... Telecommunications Services 8.4(6)

<FN>
- ---------------
(1) Held by Ophir Holdings Ltd.

(2) As a result of a private placement in November 1993, Ampal's interest in
Ophir Holdings Ltd. was reduced to 42.5%.

(3) Includes 19.7% held by Ophir Holdings Ltd..

(4) 3.8% after the Mercury Interactive Corporation public offering in October
1993.

(5) Includes 3.1% held by Ophir Holdings Ltd.

(6) 7.8% after the Idan Software Industries I.S.I. Ltd. private placement in
October 1993.
</TABLE>

6
<PAGE>
RECENT AND PENDING TRANSACTIONS

Since 1992, the Company has continued to expand its activities in Israel.
It is currently negotiating certain transactions and has made additional
investments, including the following:

Pending Transactions

The Company is constantly reviewing investment proposals received from a
variety of sources. Ophir Holdings Ltd. ("Ophir"), which is 42.5% owned by
Ampal, has recently agreed, subject to the receipt of certain governmental and
other 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.

The Company is considering several prospective ventures including one to
establish, together with an affiliate of Hapoalim, a venture capital fund which
will make investments in high-technology ventures, including investments in
start-up entities. The Company and the Hapoalim affiliate would each invest up
to $2.5 million in this fund.

There is no assurance that any of these pending transactions or prospective
ventures will be completed or that the proposed terms of investment will not be
modified.

Recent Transactions

. In January 1994, the Company invested approximately $66,000 for 50% of the
equity of, and made a loan of $1.0 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. The Company believes that at
present all medium density fiber materials used in Israel are imported.

. In August 1993, the Company invested approximately $3.5 million in Idan
Software Industries I.S.I. Ltd. ("Idan") for approximately 8.4% of Idan's
shares. Idan provides telecommunications services and markets
telecommunications products in Israel and overseas. Following Idan's private
placement in October 1993, the Company holds approximately 7.8% of Idan's
shares. Idan's shares are quoted on NASDAQ under the symbol "IDANF."

. In February and June 1993, the Company invested an aggregate of approximately
$4.3 million in Paradise Mattresses (1992) Ltd. ("Paradise") for an aggregate
of approximately 85.1% of the shares of Paradise. Paradise is one of Israel's
largest manufacturers and distributors of mattresses and fold-out beds.

. In March 1993, the Company, through Ophir, participated in the purchase from
the Government of Israel of a controlling interest in Industrial Buildings
Corporation Ltd. ("Industrial Buildings"), the largest owner/lessor of
industrial properties in Israel. Ophir purchased 12.8% of the shares of
Industrial Buildings for approximately $50 million. Ampal owns 42.5% of Ophir.

. In 1992 and 1993, Ampal purchased approximately 3.6% of the shares of DSP
Group, Inc. ("DSP Group") for approximately $1.1 million from an unrelated DSP
Group shareholder. In 1992, Ophir invested approximately $1.9 million for
securities which it exchanged for 3.1% of the shares of DSP Group. DSP Group
is a leading developer of cost effective, high performance digital signal
processing software and integrated circuits for digital speech processing.
Ophir also owns 4.4% of DSP Telecommunications Ltd. ("DSP
Telecommunications"), an investee of the DSP Group, for which it paid $1
million in 1992. DSP Telecommunications is primarily engaged in the
development and marketing of digital signal processing-based integrated
circuits for the wireless communications market.

. In the first quarter of 1993, the Company invested approximately $300,000 in
Davidson-Atai Publishers Ltd. ("Davidson-Atai") for 22.5% of the shares of
Davidson-Atai. Davidson-Atai is a newly established Israeli publishing house.

7
<PAGE>
. In July 1992, the Company purchased from an unrelated shareholder for
approximately $2.2 million, 20% of the shares of Carmel Container Systems
Limited ("Carmel"), one of the two largest Israeli manufacturers of cardboard
packaging materials. Carmel's shares are traded on the AMEX under the symbol
"KML."

. In March 1992, the Company invested approximately $1.5 million in Mercury
Interactive Corporation ("Mercury") for approximately 4.9% of Mercury's
shares. Mercury develops, markets and supports products that automate testing
and quality assurance for developers of client/server software and systems.
Following Mercury's initial public offering in October 1993, the Company holds
approximately 3.8% of Mercury's shares. Mercury's shares are traded on NASDAQ
NMS under the symbol "MERQ."

Ampal is a New York corporation that was organized on February 6, 1942. The
Company's headquarters are located at 1177 Avenue of the Americas, New York, New
York 10036. Its telephone number is (212) 782-2100.

8
<PAGE>
SPECIAL CONSIDERATIONS

In addition to the other information in this Prospectus, the following
factors should be carefully considered by prospective investors in evaluating
the Company before purchasing any of the Units offered hereby.

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.
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.

Since the establishment of the State of Israel in 1948, 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.
("Moriah") and Coral World International Limited ("Coral World"). In January
1991, a direct hit by an Iraqi scud missile caused damage to a shopping mall
under construction by Bay Heart Limited ("Bay Heart"). Pri Ha'emek (Canned and
Frozen Food) 88 Ltd. ("Pri Ha'emek"), a food processing company, also
experienced a downturn in business as a result of this crisis.

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 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.

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.

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.

9
<PAGE>
Economic Policy

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.

In 1992, for the third consecutive year, the economy of Israel underwent an
appreciable expansion. During calendar years 1990 through 1992, Israel's gross
domestic product ("GDP") increased by 5.8%, 6.2% and 6.6%, respectively, while
the total amount of exports was approximately $11.6 billion, $11.2 billion and
$12.4 billion, respectively. In the first half of 1993, GDP increased by 1.3%
and exports were approximately $6.8 billion. The Israeli Government's monetary
policy contributed to relative price and exchange rate stability during most of
these years despite fluctuating rates of economic growth 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 450,000 new
immigrants arrived through the end of 1992 and approximately 36,000 new
immigrants arrived during the first half of 1993. During the period 1990 through
the first six months of 1993, Israel's population increased by approximately
15.2%. 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.

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.

For additional information regarding economic conditions in Israel see
"Conditions in Israel."

10
<PAGE>
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.

SEC EXEMPTIVE ORDER

In 1947, the Securities and Exchange Commission (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 September 30, 1993, Hapoalim owned beneficially approximately 64.7%
of the outstanding Class A Stock, assuming conversion of all 3,350 shares of the
4% Preferred Stock, as defined below, and all 122,536 shares of the 6 1/2%
Preferred Stock, as defined below, owned by it. Hapoalim also beneficially owns
100% of the outstanding Common Stock of Ampal. Upon consummation of the sale of
4,000,000 Units pursuant to the Offerings, without giving effect to the grant or
exercise of any options that may be granted pursuant to the Company's Stock
Option Plan (the "Stock Option Plan") and assuming no conversion of Preferred
Stock, other than by Hapoalim, Hapoalim will own beneficially approximately
51.9% of the outstanding Class A Stock (approximately 50.7% if the overallotment
options are fully exercised, approximately 43.4% if the Warrants are fully
exercised and approximately 41.6% if the Warrants issued in connection with the
overallotment options are fully exercised). See "Management--Stock Option Plan"
for a discussion of options that may be granted under the Stock Option Plan. 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 "Class A Directors"), 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. Following the Offerings,
Hapoalim, so long as it continues to beneficially own a majority of each of the
Common Stock and the Class A Stock, will be able to elect all of Ampal's
directors. In the event that Ampal's 4% Cumulative
11
<PAGE>
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. See "Description of Securities--Voting Rights."

A proposed Israeli law would require Hapoalim to reduce its holdings in
non-banking corporations, including Ampal, to 25% or less of the means of
control of such corporations within two years of the enactment of the law.
Because of the size of its holdings, if Hapoalim were to dispose of its shares
of Class A Stock in public sales, there could be an adverse impact on the market
for the Class A Stock. Other potential effects of this proposed legislation
cannot be predicted at this time. See "Special Considerations--Market
Considerations" and "Conditions in Israel--Other Israeli Regulations--The
Banking Law."

There is also recently enacted legislation in Israel that will likely
result in a change of ownership of Hapoalim, and may result in a significant
change in the composition of Hapoalim's board of directors. The impact, if any,
of this legislation on the Company cannot be predicted. In May 1993, the
Government of Israel sold a total of approximately 8% of the shares of Hapoalim
in a public offering and also sold options to purchase an additional
approximately 10% of the shares of Hapoalim. In November 1993, the Government of
Israel sold 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. See
"Conditions in Israel--Other Israeli Regulations--The Bank Share Arrangement."

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. See "Certain Transactions."

CERTAIN CONSIDERATIONS RELATING TO THE INVESTEES

The Company's results of operations may be affected by capital transactions
of investee companies. The issuance of shares by an investee company that is
accounted for under the equity method at a price per share above the Company's
carrying value per share for such investee company results in the Company
recognizing income for the period in which such issuance is made, while the
issuance of shares by such an investee company at a price per share that is
below the Company's carrying value per share for such investee company results
in the Company recognizing a loss for the period in which such issuance is made.

The Company's Israeli investees whose customary business and accounting
("functional") currency is the NIS prepare inflation-adjusted financial
statements under Israeli generally accepted accounting principles ("GAAP").
Thus, in a period of inflation the carrying amounts of assets, other than cash,
and liabilities are adjusted to reflect the effect of the change in general
purchasing power. Under United States GAAP, these companies report net gains or
losses in their income statements resulting from changes in assets or
liabilities linked to the Israeli Consumer Price Index ("CPI"). United States
GAAP requires investee companies to prepare different financial statements for
inclusion of those companies' results in the consolidated financial statements
of the Company. These financial statements are translated into dollars under
United States GAAP and to the extent that rates of exchange between foreign
currencies and dollars result in gains or losses, such gain or loss is reflected
in the balance sheets of these companies. Consequently, even though an investee
may have achieved profits in local currency as reported in its financial
statements prepared under Israeli GAAP, there may be a loss reflected in the
investee's financial statements prepared for inclusion in the consolidated
financial statements of the Company under United States GAAP.

To the extent there is a divergence between the rate of inflation and the
rate of exchange between the NIS and the dollar, Israeli investee companies
whose functional currency is the dollar will record

12
<PAGE>
translation gains or losses in their statements of income. Where considered
appropriate, these investees have adopted financial strategies that attempt to
compensate for inflation in Israel and changes in the relative value of the NIS
compared to the dollar and other currencies. However, continuing inflation in
Israel and delays in the devaluation of the Israeli currency against the dollar
and other currencies could have an adverse impact on some of the investees as
well as on Israel's economy as a whole.

MARKET CONSIDERATIONS
As of January 20, 1994 approximately 36.2 of the Class A Stock was
owned by non-affiliated shareholders (assuming conversion in full of all
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. Pending legislation in
Israel may require Hapoalim to divest a substantial portion of its holdings of
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 for a period of 180 days after the date of this
Prospectus. See "Conditions in Israel-- Other Israeli Regulations--The Banking
Law" and "Underwriting."

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, Warrants
and Units. 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 TASE 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.

USE OF PROCEEDS

The net proceeds to be received by Ampal from the sale of the 4,000,000
Units (which do not include proceeds from exercise of Warrants or exercise of
the U.S. Underwriters' and International Managers' overallotment options) are
estimated to be approximately $ after deduction of expenses. Portions
of the net proceeds are expected to be employed to finance new investments and
additions to existing holdings. There are several new investments presently
under consideration. See "The Company-- Recent and Pending Transactions." Other
new investments may be identified in the future. Ampal also intends to use a
portion of the proceeds to fund early redemptions of its 8% to 10% debentures
and variable rate debentures callable in 1994. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources." Any remaining proceeds will be used for working capital and general
corporate purposes.

Pending use of the net proceeds from the Offerings 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.

13
<PAGE>
CAPITALIZATION

The following table sets forth the unaudited capitalization of the Company
at September 30, 1993, and as adjusted to give effect to the sale by Ampal of
4,000,000 Units pursuant to the Offerings. The table does not reflect the
deconsolidation of Ophir and should be read in conjunction with the Consolidated
Financial Statements and Pro Forma Consolidated Financial Statements of the
Company and the related notes, included elsewhere in this Prospectus.

<TABLE> <CAPTION>
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total liabilities and minority interests............................................... $ 255,132 $ 255,132(1)
----------- -----------
Shareholders' equity:
Common Stock, par value $1.00; 3,000,000 shares authorized; 3,000,000 shares
outstanding........................................................................ 3,000 3,000

Class A Stock, par value $1.00; 30,000,000 shares authorized; 15,966,872 shares
issued (including 128,904 shares held in treasury); 19,837,968 shares, as adjusted
(2)(3)............................................................................. 15,967 19,838
4% Preferred Stock, par value $5.00; 650,000 shares authorized; 223,869 shares issued
(including 8,338 shares held in treasury), 215,531 shares, after conversion
of tresury shares(4)............................................................. 1,119 1,077
6 1/2% Preferred Stock, par value $5.00; 4,282,850 shares authorized; 1,270,960
shares issued (including 3,824 shares held in treasury), 1,267,136 shares, after
conversion of treasury shares(4)................................................. 6,355 6,336

Additional paid-in capital........................................................... 10,468
Retained earnings.................................................................... 80,181 80,181
Cumulative translation adjustments................................................... (1,764) (1,764)
----------- -----------
Total shareholders' equity............................................................. 115,326
----------- -----------
Total capitalization................................................................... $ 370,458 $
----------- -----------
----------- -----------
<FN>
- ---------------
(1) Does not reflect the redemption of debentures which may be effected with a
portion of the proceeds of the Offerings. See "Use of Proceeds."

(2) Does not reflect (i) 4,000,000 shares of Class A Stock reserved for issuance
upon exercise of the Warrants included in the Units offered hereby, (ii)
500,000 shares of Class A Stock included in the Units that may be sold upon
exercise of the U.S. Underwriters' and International Managers'
over-allotment options (and 500,000 shares of Class A Stock reserved for
issuance under the Warrants included therein), (iii) 4,878,963 shares of
Class A Stock issuable upon conversion of Preferred Stock outstanding as of
September 30, 1993 (1,077,555 shares on conversion of the outstanding 4%
Preferred Stock and 3,801,408 shares on conversion of the outstanding 6 1/2%
Preferred Stock) and (iv) 200,000 shares of Class A Stock issuable upon
exercise of options which may be granted pursuant to the Stock Option Plan.
See "Description of Securities" and "Management--Stock Option Plan."

(3) All shares of Class A Stock held in treasury will be sold in the
Offerings.

(4) All shares of Preferred Stock held in treasury have been converted in
accordance with their terms to shares of Class A Stock, which will in turn
be sold in the Offerings.

</TABLE>

14
<PAGE>
PRICE RANGE OF CLASS A STOCK

Ampal's Class A Stock is listed on the AMEX under the symbol "AIS.A." The
following table sets forth the high and low sales prices for the Class A Stock,
as reported on the American Stock Exchange Composite Tape for each calendar
quarter during the periods indicated:

<TABLE> <CAPTION>
<S> <C> <C>
HIGH LOW
--------- ---------
1992:
First Quarter....................................................................... 5 7/8 3 1/3
Second Quarter...................................................................... 6 7/8 4 1/2
Third Quarter....................................................................... 6 1/4 5 1/8
Fourth Quarter...................................................................... 6 1/4 4 3/4
1993:
First Quarter....................................................................... 9 7/8 5 1/4
Second Quarter...................................................................... 9 1/2 7 1/4
Third Quarter....................................................................... 12 1/4 7 5/8
Fourth Quarter...................................................................... 13 10 1/4
1994:
First Quarter (to January 20, 1994)................................................. 12 1/2 11
</TABLE>

As of January 20, 1994, there were 16,077,044 shares of Class A Stock
outstanding held by 1,490 holders of record.

DIVIDEND POLICY

Ampal has not paid cash dividends on its Class A Stock since 1989 and has
no present intention of declaring a cash dividend on the Class A Stock. Past
decisions not to pay cash dividends reflected the policy of Ampal to apply
retained earnings, including funds realized from the disposition of holdings, to
finance its business activities and to redeem debentures. The payment of cash
dividends in the future will depend upon the Company's operating results, cash
flow, working capital requirements and other factors deemed pertinent by its
board of directors. See "Description of Securities--Capital Stock-- Dividend
Rights."

15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below for, and as of the
end of, each of the five years in the period ended December 31, 1992, are
derived from audited consolidated financial statements of the Company. The
consolidated financial statements of the Company as of December 31, 1991 and
1992, and for each of the years in the three-year period ended December 31,
1992, and the report thereon of Arthur Andersen & Co., independent public
accountants, are included elsewhere in this Prospectus. The selected
consolidated financial data presented below as of December 31, 1988 and 1989,
and for each of the years then ended, are derived from the consolidated
financial statements of the Company audited by the Company's previous auditors.

The selected consolidated financial data presented below for, and as of the
end of, the nine months ended September 30, 1992 and 1993 and the pro forma
consolidated financial data for the year ended December 31, 1992 and for, and as
of, the nine months ended September 30, 1993 are derived from unaudited
consolidated financial statements of the Company which, in the opinion of the
Company, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the consolidated financial
position of the Company as of those dates and the results of operations of the
Company for those periods. The pro forma balance sheet data gives effect to the
deconsolidation of Ophir and to the acquisition by Ophir of an interest in
Industrial Buildings as if such transactions occurred as of September 30, 1993.
The pro forma statements of income data for the year ended December 31, 1992 and
the nine months ended September 30, 1993 give effect to the aforementioned
transactions as if they took place at the beginning of each such period. The pro
forma information does not purport to be indicative of the results that actually
would have occurred had the transactions been effected on January 1, of the pro
forma periods presented. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations," "Business" and the
Pro Forma Consolidated Financial Statements presented elsewhere in this
Prospectus. Operating results for the nine months ended September 30, 1993 may
not be indicative of the results that may be expected for the full year. The
selected consolidated financial data set forth below should be read in
conjunction with the Company's consolidated financial statements and related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" which are included elsewhere in this Prospectus.
<TABLE> <CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1988 1989 1990(1) 1991 1992 1992 1993
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Interest.................................. $ 85,574 $ 77,709 $ 57,182 $ 27,260 $ 18,613 $ 16,374 $ 12,892
Food processing........................... -- -- -- -- 31,482 26,469 24,221
Manufacturing and distribution............ -- -- -- -- -- -- 2,314
Hotel & leisure-time operations........... 39,847 37,461 39,521 28,719 -- -- --
Equity in earnings of affiliates and
others.................................. 9,641 8,002 5,725 5,593 11,195 6,548 7,599
Other income.............................. 3,808 4,365 5,036 5,347 7,130 5,510 4,493
Gains on issuance of shares by affiliates -- -- -- -- 13,062 13,062 --
Gains on sale of investments.............. 2,675 -- 2,937 4,600 3,820 3,837 1,626
--------- --------- --------- --------- --------- --------- ---------
Total revenues.......................... 141,545 127,537 110,401 71,519 85,302 71,800 53,145
--------- --------- --------- --------- --------- --------- ---------
Expenses:
Interest.................................. 73,467 69,791 55,821 26,006 18,346 14,235 17,215
Food processing........................... -- -- -- -- 24,415 20,911 20,049
Manufacturing and distribution............ -- -- -- -- -- -- 1,442
Hotel and leisure-time operations......... 31,045 29,106 31,828 26,465 -- -- --
Other expenses including translation loss
(gain).................................. 26,338 23,860 16,182 12,945 14,151 10,396 8,786
Minority interests........................ 792 257 392 1,609 4,785 4,575 (300)
--------- --------- --------- --------- --------- --------- ---------
Total expenses.......................... 131,642 123,014 104,223 67,025 61,697 50,117 47,192
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes.................. 9,903 4,523 6,178 4,494 23,605 21,683 5,953
Income taxes................................ 5,773 3,014 5,062 4,094 13,281 11,742 2,603
--------- --------- --------- --------- --------- --------- ---------
Net income before extraordinary income and
cumulative effect of change in accounting
principle................................. 4,130 1,509 1,116 400 10,324 9,941 3,350
Extraordinary income........................ 1,275(2) -- -- 726(2) -- -- --
Cumulative effect on prior years of change
in accounting principle................... -- -- -- -- -- -- (4,982)
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)......................... $ 5,405 $ 1,509 $ 1,116 $ 1,126 $ 10,324 $ 9,941 $ (1,632)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) per Class A share:
Earnings before extraordinary income and
cumulative effect of change in
accounting principle.................... $ .18 $ .06 $ .05 $ .02 $ .44 $ .42 $ .14
Extraordinary income...................... .05(2) -- -- .03(2) -- -- --
Cumulative effect on prior years of change
in accounting principle................. -- -- -- -- -- -- (.21)
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) per Class A share(3)...... $ .23 $ .06 $ .05 $ .05 $ .44 $ .42 $ (.07)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average number of Class A shares
and equivalent shares outstanding....... 20,837 20,773 20,718 20,717 20,717 20,717 20,717
Dividends per Class A share............... $ .07 $ .06 -- -- -- -- --
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents................... $ 36,194 $ 20,582 $ 17,971 $ 7,515 $ 9,698 $ 6,995 $ 2,036
Investments................................. 55,551 61,186 63,918 67,627 109,912 102,681 162,481
Total assets................................ 1,179,750 1,100,756 436,024 404,466 333,267 345,606 370,458
Total liabilities and minority interests.... 1,071,218 992,429 327,177 295,048 214,065 226,788 255,132
Total shareholders' equity.................. 108,532 108,327 108,847 109,418 119,202 118,818 115,326

<CAPTION>
PRO FORMA
PRO FORMA NINE MONTHS
YEAR ENDED ENDED
DECEMBER SEPTEMBER
31, 30,
----------- -----------
1992 1993
----------- -----------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Interest.................................. $ 18,365 $ 13,127
Food processing........................... 31,482 24,221
Manufacturing and distribution............ -- 2,314
Hotel & leisure-time operations........... -- --
Equity in earnings of affiliates and
others.................................. 12,061 4,445
Other income.............................. 5,626 3,404
Gains on issuance of shares by affiliates 7,869 --
Gains on sale of investments.............. 419 1,626
----------- -----------
Total revenues.......................... 75,822 49,137
----------- -----------
Expenses:
Interest.................................. 17,936 14,322
Food processing........................... 24,415 20,049
Manufacturing and distribution............ -- 1,442
Hotel and leisure-time operations......... -- --
Other expenses including translation loss
(gain).................................. 13,012 8,440
Minority interests........................ 537 (194)
----------- -----------
Total expenses.......................... 55,900 44,059
----------- -----------
Income before income taxes.................. 19,922 5,078
Income taxes................................ 11,753 2,470
----------- -----------
Net income before extraordinary income and
cumulative effect of change in accounting
principle................................. 8,169 2,608
Extraordinary income........................ -- --
Cumulative effect on prior years of change
in accounting principle................... -- (4,982)
----------- -----------
Net income (loss)......................... $ 8,169 $ (2,374)
----------- -----------
----------- -----------
Earnings (loss) per Class A share:
Earnings before extraordinary income and
cumulative effect of change in
accounting principle.................... $ .34 $ .11
Extraordinary income...................... -- --
Cumulative effect on prior years of change
in accounting principle................. -- (.21)
----------- -----------
Earnings (loss) per Class A share(3)...... $ .34 $ (.10)
----------- -----------
----------- -----------
Weighted average number of Class A shares
and equivalent shares outstanding....... 20,717 20,717
Dividends per Class A share............... -- --
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents................... $ 2,036
Investments................................. 110,485
Total assets................................ 317,833
Total liabilities and minority interests.... 200,354
Total shareholders' equity.................. 117,479

<FN>
- ---------------

(1) Prior to 1989, Ampal was primarily engaged in making loans to businesses in
Israel through its industrial banking subsidiaries and, to a lesser extent,
in investing in Israeli companies. Because of changes in relative interest
rates in the United States and Israel in 1988 and 1989, the margin the
Company had earned from these lending activities was effectively eliminated.
In 1990 substantially all of the loan portfolios of its industrial banking
subsidiaries were sold to Hapoalim.
(2) Represents tax loss carryforwards utilized by subsidiaries.
(3) Calculation of earnings (loss) per Class A share includes weighted average
number of Class A shares outstanding and 3.0 million shares of Common Stock.
</TABLE>

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company's results of operations are directly affected by the results of
operations of its investees.

Investees which are greater than 50%-owned are included in the consolidated
financial statements of the Company. The Company accounts for its holdings in
investees over which the Company exercises significant influence, generally 20%-
to 50%-owned companies, under the equity method. Under the equity method, the
Company recognizes its proportionate share of such companies' income based on
its percentage of direct and indirect equity interests in earnings of those
companies. The Company accounts for its holdings in investees, other than those
described above, on the cost method. Under the cost method, the Company accounts
for its investment at the lower of cost or market. The Company's results of
operations may be affected by capital transactions of investee companies. Thus,
the issuance of shares by an investee company which is accounted for under the
equity method at a price per share above Ampal's carrying value per share for
such investee company results in Ampal recognizing income for the period in
which such issuance is made, while the issuance of shares by such an investee at
a price per share that is below Ampal's carrying value per share for such
investee company results in Ampal recognizing a loss for the period in which
such issuance is made. A comparison of the Company's financial statements from
year to year must be considered in light of the Company's acquisitions and
divestitures during the period.

The Company's effective tax rates have been and in the future may be above
United States statutory rates, in part, because of taxes paid in foreign
jurisdictions by investees for which Ampal does not fully receive tax credits in
the United States.

Effective January 1, 1993, Ampal was required to adopt the Statement of
Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes"
("SFAS No. 109") which requires a change from the deferred method to the
liability method of accounting for income taxes. The cumulative effect on prior
years of this change in accounting principle was reflected as a nonrecurring
reduction of net income and an increase in deferred income tax liability of
approximately $5 million. This was reported separately in the consolidated
statement of income for the nine months ended September 30, 1993. This change
required no payment to any taxing jurisdiction and had no material effect on
income tax expense for the current period. Prior years' financial statements
have not been restated to apply the provisions of SFAS No. 109.

Based on the guidelines of SFAS No. 52, "Foreign Currency Translation"
("SFAS No. 52"), the economy in Israel is no longer considered
hyper-inflationary as a result of changes in the economic conditions and the
decrease in the rate of inflation in Israel. Accordingly, as of the second
quarter of 1993, for those subsidiaries and affiliates whose functional currency
is considered to be the NIS, assets and liabilities were translated at the rate
of exchange at the end of the reporting period and revenues and expenses were
translated at the average currency exchange rates during the reporting period.
Gains or losses from translations of those foreign companies' financial
statements are recorded as a separate component of shareholders' equity at June
30, 1993. Prior years' financial statements have not been restated to apply SFAS
No. 52. Prior to 1993, translation gains and losses were reflected in the
Company's consolidated statements of income. The effect of this change in method
of reporting translations on the March 31, 1993 financial statements was
immaterial.

Moriah and Orlite Engineering Company Ltd. ("Orlite") report their
financial statements on a three-month lag. Consequently, for example, their
results for the 12 month period ended September 30, 1992 were incorporated into
the Company's 1992 consolidated annual financial statements.

17
<PAGE>
RESULTS OF OPERATIONS

Nine Months Ended September 30, 1993 Compared to Nine Months Ended September
30, 1992

Consolidated net income decreased from net income of $9.9 million for the
nine months ended September 30, 1992 to a net loss of $1.6 million for the nine
months ended September 30, 1993. This decrease was primarily attributable to
gains on issuance of shares by affiliates and gains on sale of shares in 1992
which were greater than those in the comparable period in 1993, reductions in
net interest earnings and earnings from food processing operations and the
adoption of SFAS No. 109 in 1993 which were partially offset by an increase in
equity in earnings of affiliates and the inclusion of Paradise's results.
Consolidated net income before cumulative effect of change in accounting
principle (SFAS No. 109) decreased from $9.9 million for the nine months ended
September 30, 1992 to $3.4 million for the nine months ended September 30, 1993.

The decrease in net interest earnings for the nine months ended September
30, 1993 as compared to the same period in 1992 resulted from additional
interest income earned by Ampal from a prepayment of a deposit receivable in
1992, and additional interest expense in 1993 resulting from Ophir's bank
borrowings to finance its investment in Industrial Buildings.

Equity in earnings of affiliates increased for the nine months ended
September 30, 1993 as compared to the same period in 1992. The increase was
mainly attributable to Ampal's share of earnings of newly acquired affiliates
including Industrial Buildings and Carmel, as well as from Moriah and Teledata
Communication Ltd. ("Teledata"). Food processing revenues decreased because
sales were affected by foreign currency fluctuations.

In February and October 1992, Granite concluded two public offerings in
Israel on the TASE for proceeds of approximately $60 million and $42 million,
respectively, which Granite intends to use for expansion, diversification and
the repayment of high interest debt. As a result of these transactions the
Company's ownership interest in Granite was diluted from 26% to 21.6%. Also in
February 1992, Moriah concluded a private placement of 20% of its shares with a
related party in Israel for a price of $12.5 million. These funds were used,
together with internal sources, bank borrowings and a $7 million government
grant, to finance the approximately $32 million renovation and expansion of the
Moriah Eilat Hotel which was reopened in August 1992. As a result of the private
placement, the Company's ownership in Moriah was diluted from 57.5% to 46%.
Thus, effective in the first quarter of 1992, the Company no longer consolidates
the results of Moriah in its financial statements but accounts for its
investment in Moriah under the equity method. The Moriah and Granite offerings
resulted in gains on issuance of shares of $7.0 million (approximately $2.7
million after taxes).

In April 1992, Teledata concluded a public offering of its securities in
the United States. This offering resulted in a gain on issuance of shares of
$5.8 million ($2.1 million after taxes and a deduction for Ophir's minority
interest). In connection with Teledata's public offering, Ampal and Ophir (then
a consolidated subsidiary of Ampal) sold a portion of their interests in
Teledata and realized a gain on sale of $3.8 million ($1.2 million after taxes
and a deduction for Ophir's minority interest). During 1993, the Company sold
additional shares in Teledata and realized a gain on sale of $1.5 million
(approximately $900,000 after taxes). As a result of these transactions, Ampal's
ownership of Teledata was reduced to 2.5% and Ophir's to 19.7%.

In November 1993, the capital structure of Ophir was reorganized to
equalize the voting and equity interests of its two shareholders. Immediately
thereafter, Ophir concluded a private placement to a different related party
under which it issued 15% of its shares for approximately $10.2 million. As a
result, the Company's interest in Ophir was diluted from 50% to 42.5%. Until
September 30, 1993, Ophir's financial statements were consolidated by the
Company. As a result of these transactions, in the fourth quarter of 1993 Ophir
will be accounted for under the equity method, and the Company will record a
gain on issuance of shares of approximately $3.1 million (approximately $2
million after taxes). At September 30, 1993, the Company's consolidated balance
sheet included Ophir's assets of approximately $69.4 million and Ophir's
liabilities and minority interests of approximately $57.1 million and the
consolidated income statement included Ophir's revenues of approximately $3.6
million.
18
<PAGE>
Had these transactions been consummated on September 30, 1993, the Company's
investment in Ophir under the equity method would have been approximately $11.8
million.

Year Ended December 31, 1992 Compared to Year Ended December 31, 1991

Consolidated net income increased to $10.3 million in 1992 from $1.1
million in 1991. This increase was primarily attributable to gains on issuance
and sale of shares, which resulted from offerings of shares by investee
companies as described above.

Interest revenue declined in 1992 as compared to 1991 as a result of
repayments of existing deposits, notes and loans receivable. During the same
period interest expense also declined as a result of the repayment of
debentures, notes and loans payable. In addition, net interest earnings in 1992
were greatly reduced in the fourth quarter by a 13% devaluation of the NIS to
the dollar. See "Conditions in Israel--Inflation and Devaluation."

In December 1991, the Company acquired an additional 24.9% interest in its
food processing subsidiary, Pri Ha'emek, for $2 million (a 50% interest was
acquired in 1988). This brought the Company's total ownership to 74.9%.
Therefore, Pri Ha'emek's assets and liabilities have been consolidated in the
Company's consolidated balance sheet at December 31, 1992 and 1991; its results
of operations were consolidated in the Company's consolidated statement of
income in 1992 and included in equity in earnings of affiliates in 1991. Pri
Ha'emek showed significant increases in revenues, operating costs and net income
in 1992 resulting from increased sales to the domestic market as well as sales
of new product lines.

Equity in earnings of affiliates and others increased significantly in
1992. The income for Moriah increased substantially as a result of higher
occupancy rates which reflected increased tourism as well as higher room rates.
In 1991, the occupancy rates in the hotels were much lower as a result of the
virtual standstill in tourism to Israel during the Persian Gulf crisis and its
aftermath. Moriah's income for its year ended September 30, 1992 was reported in
this category in the Company's 1992 financial statements. The earnings of the
Company's real estate affiliates also increased significantly in 1992 because of
the effect which the fourth quarter devaluation had on their borrowings which
are linked to the CPI.

In 1992, the Company recorded gains on issuance of shares, primarily as a
result of offerings of shares by Granite, Moriah and Teledata, and a gain on
sale of shares of Teledata described in the discussion covering the nine month
periods.

Other expenses declined in 1992 from 1991 primarily as a result of a
reduction of headquarters expenses and the deconsolidation of Moriah in 1992.

There was a translation loss of $1.4 million in 1992 as compared to a gain
of $300,000 in 1991. Translation gains and losses in 1992 and 1991 resulted from
the effect of devaluations which approximated 21% and 11%, respectively.
Increases in the rates of inflation in Israel (as of November of each year) were
9% for 1992 and 18% for 1991, respectively. See "Conditions in Israel."

The decrease in the effective income tax rate to 56% in 1992 from 75% in
1991 (net of utilization of tax loss carryforwards) resulted from changes in the
components of taxable income, changes in tax rates relating to previously
recorded deferred income taxes and reported losses of certain subsidiaries for
which no tax benefits were available.

Year Ended December 31, 1991 Compared to Year Ended December 31, 1990

Consolidated net income increased slightly in 1991 from 1990.

Interest revenue and interest expense decreased in 1991 as compared to 1990
as a result of the sale of substantially all of the loan portfolios of the
Company's banking subsidiaries to Hapoalim in August 1990. As a result of the
sale and because of the cessation of new banking activity, the banking
subsidiaries voluntarily relinquished their banking licenses in 1991 and now
conduct their operations as finance companies.

19
<PAGE>
Hotel revenues and operating expenses (which are reflected for the years
ended September 30) decreased in 1991 as a result of lower occupancy rates
caused by decreased tourism to Israel during the Persian Gulf crisis and its
aftermath. In addition, the Moriah Eilat Hotel was closed for renovation and
expansion in August 1990 and did not reopen until August 1992.

Equity in earnings of affiliates decreased in 1991 from 1990 due to
decreases in earnings of most of the investees accounted for under the equity
method. The Persian Gulf crisis affected the 1991 operations of most of the
Company's Israeli investees. Pri Ha'emek reported an increased loss in 1991
primarily as a result of the Persian Gulf crisis and a drought. As described
above, in December 1991, the Company acquired an additional 24.9% interest in
Pri Ha'emek which brought its total investment to 74.9%. In January 1991, a
direct hit by an Iraqi scud missile caused substantial damage to a shopping mall
under construction by Bay Heart, a 37%-owned investee of the Company. The mall
was scheduled to open in February, but instead was not fully opened for business
until May 1991. In 1991, Bay Heart experienced losses caused by one-time
operating expenses, loss of revenues caused by the delayed opening and high
finance expenses on its borrowings. The volume of business of Bank Hapoalim
(Cayman) Ltd. ("Cayman") (in which the Company has a 49% interest) has
contracted as a result of a planned decrease in business activities of that
company and, consequently, the earnings of the company declined. Teledata
experienced a significant increase in sales in 1991 which resulted from a large
increase in business in Europe, particularly in Germany.

In 1991, the Company sold its shares of Clal (Israel) Ltd. resulting in a
pre-tax gain amounting to $4.6 million ($1.4 million, net of taxes and minority
interest).

Other expenses declined in 1991 from 1990 primarily as a result of a
reduction in headquarters expenses in both the New York and Tel Aviv offices, as
well as a reduction of expenses incurred by the Company's Israeli finance
subsidiaries.

Translation gains and losses in 1990 and 1991, respectively, resulted from
the effect of devaluations which approximated 4% and 11%, respectively.

The decrease in the effective income tax rate to 75% in 1991 (net of
utilization of tax loss carryforwards) from 82% in 1990 resulted from changes in
the components of taxable income, changes in tax rates relating to previously
recorded deferred income taxes and reported losses of certain subsidiaries for
which no tax benefits were available.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1993, the Company had cash and cash equivalents
totalling approximately $2 million and Ampal had bank lines of credit totalling
$10 million. Any new investments which the Company may make are likely to be
funded from the Company's internal cash flow, a portion of the net proceeds of
the Offerings or bank borrowings.

At September 30, 1993, the Company's debt to equity ratio was 2.21 to 1. At
December 31, 1992, the Company's debt to equity ratio was 1.8 to 1 as compared
with 2.7 to 1 at December 31, 1991. The ratios of earnings to combined fixed
charges and preferred stock dividends for the years 1988, 1989, 1990, 1991, 1992
and the nine months ended September 30, 1993 were 1.10:1, 1.02:1, 1.12:1,
1.08:1, 2.18:1 and .97:1, respectively.

Deposits receivable have continued to decline since 1990 as a result of
repayments. During the first nine months of 1993, the decrease in cash and cash
equivalents and debentures payable was mainly attributable to the early
redemption of $9.3 million of high interest-bearing debentures which Ampal
called in this period and to new investments made during the period.

Since 1989, Ampal has called for early redemption an aggregate of
approximately $120 million principal amount of debentures, which includes $9.3
million called during the first nine months of 1993. In 1992, debentures were
redeemed or paid at maturity in the principal amount of $54.7 million, of which
the early redemption of high interest-bearing debentures amounted to $39.4
million. Since September 30, 1993, Ampal has made optional redemptions of
approximately $5.1 million of its 8% to
20
<PAGE>
10% debentures maturing in 2000. In 1994, Ampal intends to make further optional
redemptions of approximately $9.1 million of its 8% to 10% debentures maturing
in 2000 and approximately $6.5 million of its debentures which mature in 1996
and bear interest at a variable rate, presently 7.5%. These redemptions will be
funded from internal cash flow, a portion of the net proceeds of the Offerings
or bank borrowings. At September 30, 1993, Ampal had $52 million aggregate
principal amount, net of discounts, of its debentures outstanding which are
scheduled to mature by 2003, including debentures which may be called for early
redemption. Most of these debentures bear interest at fixed rates ranging from
10% to 13%. Of the $52 million of Ampal's outstanding debentures, $21.4 million
principal amount, net of discounts, of non-callable debentures are scheduled to
mature between January 1, 1994 and December 31, 1996. A portion of such
debentures may be presented to Ampal for payment prior to scheduled maturity. An
additional $47 million principal amount of the Company's outstanding debentures
were issued by an Israeli subsidiary and are secured by $49 million of deposits
with Hapoalim. The cash flow from these deposits is matched to scheduled
payments of principal and interest on the Israeli subsidiary's debentures. The
aggregate $99 million principal amount, net of discounts, of the Company's
outstanding debentures represents $120.6 million aggregate principal amount
payable upon maturity. In addition to such debentures, at September 30, 1993,
the Company had $108 million of notes and loans payable, $46.5 million of which
represents the unpaid balance of the Company's borrowings used to finance
Ophir's investment in Industrial Buildings. In addition, at September 30, 1993,
the Company had deposits and notes and loans receivable aggregating $124.5
million with varying interest rates and maturities. Repayment of these deposits
and notes and loans receivable is guaranteed by Hapoalim.

In January 1994, the Company invested approximately $66,000 for 50% of the
equity of, and made a loan of $1.0 million to, 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.
Ophir has recently agreed, subject to the receipt of certain governmental and
other 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.

As of September 30, 1993, the Company had issued guarantees on certain
outstanding loans to its investees in the aggregate principal amount of $13.3
million, and had made additional commitments to lend up to $13.2 million to
investees and to guarantee up to $8.2 million of obligations of investees.

In the first quarter of 1993, Ophir, which is now 42.5% owned by the
Company, participated in the purchase from the Government of Israel of 51.3% of
the shares in Industrial Buildings, the largest owner/lessor of industrial
buildings in Israel. The remainder of the shares of this company are held by the
public. Ophir's approximately $50 million investment in Industrial Buildings was
financed primarily by borrowings from two unrelated banks. Approximately $12
million of this debt matures in 1994. Under the loan agreement relating to the
Industrial Buildings investment, any amount distributed as a dividend by
Industrial Buildings must first be applied to repay then due borrowings. Ophir
and another Hapoalim affiliate that participated in the purchase, have pledged
their interest in the holding company that purchased the Industrial Buildings
shares, as well as the Industrial Buildings shares themselves, to secure
borrowings of Ophir and that Hapoalim affiliate from an unaffiliated bank.
Industrial Buildings shares held by the holding company, also collateralize a
loan made by Hapoalim to another unaffiliated participant in the purchase. There
are cross-default provisions which would require acceleration of Ophir's
repayment obligations and, potentially, could cause foreclosure on the
Industrial Buildings shares if any of the other participants were to default on
their loans. See "Certain Transactions." Ophir owns an equivalent 12.8% of the
equity of Industrial Buildings.

21
<PAGE>
BUSINESS

The Company acquires interests in businesses located in the State of Israel
or that are Israel-related. The Company has diversified interests in the
following sectors: hotels and leisure-time, real estate, energy distribution,
basic industry, high technology and communications.

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 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. Because of changes in the relationship between
interest rates in the United States and in Israel in the late 1980s, the Company
discontinued this lending activity, and in 1990 substantially all of the loan
portfolios of its industrial banking subsidiaries were sold to Hapoalim.

The following chart lists the investments of the Company (without deduction
for minority interest) and the total amount invested by the Company, exclusive
of shareholders' loans and guarantees, the carrying value of the Company's
interest therein as of December 31, 1992 and September 30, 1993 and, if the
shares of such investee are publicly traded, the quoted market value of the
Company's interest therein as of December 31, 1992, September 30, 1993 and
November 1, 1993. Quoted market values do not necessarily reflect amounts that
could be realized on a sale of all or part of the Company's interest.
<TABLE> <CAPTION>
CARRYING VALUE QUOTED MARKET VALUE(1)
--------------------------------------- ----------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
INDUSTRY SEGMENT COST 1992 1993 1992 1993
- ---------------------------------------------------- --------- ------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
HOTELS AND LEISURE-TIME
Moriah Hotels Ltd................................. $ 4,011 $ 18,681 $ 18,994 $ -- $ --
Coral World International Limited................. 7,771 9,912 9,653 -- --
Country Club Kfar Saba Ltd........................ 3 (976) (1,082) -- --
REAL ESTATE, FINANCE AND OTHER HOLDINGS
Industrial Buildings Corporation Ltd. (Mivnei
Taasiya Ltd.)(2)................................ 51,338 -- 50,617 -- 57,718
Bay Heart Limited (Lev Hamifratz Limited)......... 1,080 2,556 1,514 -- --
Bank Hapoalim (Cayman) Ltd........................ 9,332 21,579 21,870 -- --
Etz Vanir Ltd. and Yakhin Mataim Ltd.............. 1,034 793 793 -- --
Am-Hal Limited.................................... 1,223 1,535 730 -- --
Ampal (Israel) Ltd.(3)............................ 4,362 9,526 9,040 -- --
Ophir Holdings Ltd.(2)(3)......................... 560 5,718 3,909 -- --
Ampal Development (Israel) Ltd.(3)................ 7,028 18,334 19,461 -- --
Nir Ltd........................................... 885 4,160 4,930 -- --
Ampal Financial Services Ltd...................... 1,290 10,239 11,421 -- --
ENERGY DISTRIBUTION
Granite Hacarmel Investments Ltd.................. 2,024 28,233 31,242 44,545 46,207
BASIC INDUSTRY
Pri Ha'emek (Canned and Frozen Food) 88 Ltd....... 3,000 2,805 2,675 -- --
Paradise Mattresses (1992) Ltd.................... 4,317 -- 4,484 -- --
Carmel Container Systems Ltd...................... 2,241 2,451 2,973 3,150 4,284
Orlite Engineering Company Ltd.................... 743 2,290 2,318 2,987 4,217
Davidson-Atai Publishers Ltd...................... 271 -- 248 -- --
HIGH TECHNOLOGY AND COMMUNICATIONS
Teledata Communication Ltd.(2).................... 828 9,140 10,362 37,814 48,379
Mercury Interactive Corporation................... 1,478 1,478 1,478 -- --
DSP Group, Inc.(2)................................ 3,241 1,996 3,241 -- --
DSP Telecommunications Ltd........................ 1,000 1,000 1,000 -- --
Idan Software Industries I.S.I. Ltd............... 3,481 -- 3,481 -- 4,229

NOVEMBER 1,
INDUSTRY SEGMENT 1993
- ---------------------------------------------------- ------------
<S> <C>
HOTELS AND LEISURE-TIME
Moriah Hotels Ltd................................. $ --
Coral World International Limited................. --
Country Club Kfar Saba Ltd........................ --
REAL ESTATE, FINANCE AND OTHER HOLDINGS
Industrial Buildings Corporation Ltd. (Mivnei
Taasiya Ltd.)(2)................................ 60,786
Bay Heart Limited (Lev Hamifratz Limited)......... --
Bank Hapoalim (Cayman) Ltd........................ --
Etz Vanir Ltd. and Yakhin Mataim Ltd.............. --
Am-Hal Limited.................................... --
Ampal (Israel) Ltd.(3)............................ --
Ophir Holdings Ltd.(2)(3)......................... --
Ampal Development (Israel) Ltd.(3)................ --
Nir Ltd........................................... --
Ampal Financial Services Ltd...................... --
ENERGY DISTRIBUTION
Granite Hacarmel Investments Ltd.................. 52,416
BASIC INDUSTRY
Pri Ha'emek (Canned and Frozen Food) 88 Ltd....... --
Paradise Mattresses (1992) Ltd.................... --
Carmel Container Systems Ltd...................... 5,922
Orlite Engineering Company Ltd.................... 4,832
Davidson-Atai Publishers Ltd...................... --
HIGH TECHNOLOGY AND COMMUNICATIONS
Teledata Communication Ltd.(2).................... 49,243
Mercury Interactive Corporation................... 8,384
DSP Group, Inc.(2)................................ --
DSP Telecommunications Ltd........................ --
Idan Software Industries I.S.I. Ltd............... 5,104

<FN>
- ---------------
(1) Based on closing sale price (or if none, the last quoted price) as reported
on the TASE, except for Teledata and Mercury whose market values are based
on the closing sale price of such companies' shares as quoted on the NASDAQ
NMS, Idan whose market value is based on the mean between the bid and ask
prices of its shares as quoted on NASDAQ and Carmel whose market value is
based on the closing sale price of its shares as quoted on the AMEX. For
those securities traded in Israel, aggregate quoted market value is based
upon an exchange rate of $1.00 = NIS 2.934.

(2) Does not give effect to the November 1993 private placement of shares in
Ophir and the consequent deconsolidation of Ophir. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations" and "Business."

(3) Carrying value excludes investee's share in the equity in earnings of its
subsidiaries and affiliates.
</TABLE>

22
<PAGE>
INVESTMENT IN ISRAEL

An important objective of Ampal is to make investments in companies which
take advantage of growth in Israel's domestic economy. The Israeli economy has
expanded appreciably over the past three years. During calendar years 1990
through 1992, GDP increased by 5.8%, 6.2%, and 6.6%, respectively. In the first
half of 1993, gross domestic product increased by approximately 1.3%. From 1990
through 1992 the population of Israel increased from 4.6 million to
approximately 5.2 million, primarily due to immigration from the former Soviet
Union. Tourism has also grown, with the number of tourists arriving in Israel in
1992 increasing to approximately 1.5 million from approximately 1 million in
1991. During the first six months of 1993, approximately 800,000 tourists
visited Israel.

Inflation and exchange rates have remained relatively stable. Between
December 31, 1990 and December 31, 1992, the Israeli annual inflation rate
decreased from 17.6% to 9.4% while the NIS-dollar exchange rate increased from
2.05 to 2.76. For the first nine months of 1993 the inflation rate was 8.0% and
at September 30, 1993 the rate of exchange was one dollar for 2.86 NIS. The
unemployment rate in Israel also has remained relatively stable increasing from
9.6% in 1990 to 11.2% in 1992 and decreasing to 9.7% at June 30, 1993. See
"Conditions in Israel."

Ampal believes that progress in the peace negotiations between Israel, the
Palestinians and certain Arab states may improve the economic climate in the
region, benefit the Company's investees and create additional investment
opportunities. See "Conditions in Israel."

INVESTMENT STRATEGY

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. Ampal is presented with numerous investment opportunities on an
on-going basis. The Company invests in only a small percentage of these
opportunities.

Ampal 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 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.
Members of the Hapoalim group of companies, including Investment Company of Bank
Hapoalim Ltd., sometimes invest jointly with the Company.

The Company emphasizes long-term appreciation over short-term returns and
liquidity. The Company often makes a nominal equity investment accompanied by
more significant loans or loan guarantees with the intention that cash flow from
operations of the investee company will repay its loans.

23
<PAGE>
HOTELS AND LEISURE-TIME

MORIAH HOTELS LTD.

Moriah is the largest hotel chain in Israel based both upon the number of
rooms and the number of locations.

The following chart provides certain information with respect to hotels
Moriah owns or operates:

NO. OF MORIAH'S
LOCATION CATEGORY ROOMS INTEREST
- ------------------- -------------------- ----------- --------------
Jerusalem Luxury 295 Owns
Eilat Luxury 325 Owns
Dead Sea Luxury 200 Owns
Tel Aviv Luxury 350 Leases(1)
Tiberias Luxury 270 Leases(2)
Dead Sea First Class 195 Manages(3)
Zichron Yaakov Economy 110 Manages(4)
Nazareth Economy 110 Manages(4)
Maalot Economy 110 Manages(4)

- ---------------

(1) Net lease which expires in 1996.

(2) Net lease which expires in 2001.

(3) Management agreement which expires in 1995.

(4) No formal management agreement has yet been signed.

Moriah's competitive position has been enhanced by operating out of more
locations than any other chain in Israel, improving its facilities and providing
high quality service to its guests. During 1992, Moriah spent approximately
$15.4 million on improvements and renovations, approximately 87% of which was
spent on the completion of a major expansion of the Moriah Eilat Hotel. The
total cost of the Eilat project was approximately $32 million, of which
approximately $7 million was recouped through government grants. Among the
improvements were the addition of a new wing containing 150 guest rooms, three
new restaurants, an entertainment lounge, two new swimming pools and new public
spaces. The hotel was reopened in August 1992.

Following net losses in 1990 and 1991, Moriah returned to profitability in
1992. Tourist arrivals increased in Israel by approximately 50% in 1992 as
compared to 1991. Moriah's occupancy rate increased from 57% in 1991 to 74% in
1992 (in both years, excluding Moriah Eilat) and to 77% in 1993 (excluding the
three economy hotels which came under Moriah management in 1993). In 1991, the
occupancy rates in Moriah's hotels were much lower as a result of the reduction
in tourism to Israel during the Persian Gulf crisis and its aftermath. The
average occupancy rate in the Israeli hotel industry during 1992 was 67.6%.

Moriah's competitive position could be adversely affected by economic
changes in foreign countries, construction of new hotels in locations which
compete with Moriah's hotels or political or military unrest in Israel or other
areas of the Middle East. As a result of the significant rise in tourism in
Israel, additional hotels have been constructed and competition is expected to
intensify.

Moriah employed approximately 1,750 persons as of December 31, 1993.

The Company owns 46% of Moriah. Its interest was diluted in 1992 from 57.5%
to 46% when an affiliate of Hapoalim invested $12.5 million in exchange for 20%
of the equity in Moriah.

24
<PAGE>
Set forth below is selected summary financial data of Moriah for its last
three fiscal years:

<TABLE> <CAPTION>
SEPTEMBER 30,
-------------------------------
1990 1991 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Total assets........................................................ $ 39,142 $ 42,556 $ 58,836
Liabilities......................................................... 10,796 18,152 18,987
Shareholders' equity................................................ 28,346 24,404 39,849
Revenues............................................................ 34,477 27,368 43,226
Income (loss) before income taxes................................... (14) (3,954) 2,945
Net income (loss)................................................... (318) (3,942) 2,945
</TABLE>

The Moriah-owned Dead Sea hotel is located on the shore of a pool adjacent
to the Dead Sea. Because of industrial activities at the pool, its water level
has been rising to levels that threaten the hotel structure. Moriah is currently
in litigation with respect to the costs of protective measures and other related
matters.

CORAL WORLD INTERNATIONAL LIMITED

Coral World, which is 50%-owned by the Company, owns or controls marine
parks in Eilat (Israel), St. Thomas (United States Virgin Islands), Nassau
(Bahamas) and Perth and Manly (Australia) and a 22 villa luxury hotel in Nassau
(Bahamas). In addition, Coral World provides consulting services to an unrelated
group of investors regarding construction of an underwater facility in the
Pacific Rim. The Company's marine parks, other than those in Australia, are
located within or next to coral reefs and visitors at these parks view marine
life in its natural coral habitat through large underwater windows. Coral
World's marine parks in Perth and Manly, Australia allow visitors to walk
through transparent acrylic tubes on the bottom of a man-made aquarium
surrounded by marine life.

In 1992 Coral World's parks (including the Manly aquarium which was not
acquired until March 1992) had a total of approximately 1.2 million visitors. In
addition to admission charges, Coral World's food and beverage concessions and
retail outlets are a significant revenue source. Coral World expects to build,
acquire or manage new facilities in the future. As of September 30, 1993, Ampal
is committed to loan to Coral World up to approximately $6.2 million, subject to
adjustment based upon the United States consumer price index, with respect to
new projects which must be approved by Ampal. Coral World employed a total of
275 persons as of December 31, 1993.

Set forth below is selected summary financial data of Coral World for its
last three fiscal years:

<TABLE> <CAPTION>
DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Total assets........................................................ $ 23,003 $ 25,753 $ 29,689
Liabilities and minority interest................................... 7,405 10,170 11,835
Shareholders' equity................................................ 15,598 15,583 17,854
Revenues............................................................ 14,434 13,139 17,441
Income before income taxes.......................................... 1,209 81 742
Net income (loss)................................................... 756 (75) 701
</TABLE>

COUNTRY CLUB KFAR SABA LTD.

Country Club Kfar Saba Ltd. ("Kfar Saba") operates a country club facility
(the "Club") in Kfar Saba, a town north of Tel Aviv. Kfar Saba holds a long term
lease to the real property on which the Club is situated. The Club's facilities
include swimming pools, tennis courts and a clubhouse.

During 1992 and 1993, the Club had approximately 2,000 member families and
operated at capacity. The construction cost of the Club was $5.2 million, which
was financed principally with debt which is expected to be repaid by 1997. Kfar
Saba's revenues are principally attributable to annual memberships.

25
<PAGE>
The Company owns 51% of Kfar Saba and the remaining 49% is owned by an
unrelated party. The Company has guaranteed up to $2.4 million of Kfar Saba's
lease obligations. Kfar Saba and another investor are each 50% owners of a
project to construct a second country club in nearby Hod Hasharon. Construction
began during 1993 and is expected to be completed in the first half of 1994.
Kfar Saba's investment is expected to be approximately $1.7 million.

REAL ESTATE, FINANCE AND OTHER HOLDINGS

In Israel, most land is owned by the Israeli Government. In this
Prospectus, reference to ownership of land means either direct ownership of land
or a long-term lease from the Israeli Government, which is in most respects
regarded in Israel as the functional equivalent of ownership. It is the Israeli
Government's policy and practice to renew its long-term leases (which usually
have a term of 49 years) as a matter of course upon their expiration.

INDUSTRIAL BUILDINGS CORPORATION LTD. (MIVNEI TAASIYA LTD.)

Industrial Buildings, Israel's largest owner/lessor of industrial property,
is engaged principally in the development and construction of buildings in
Israel for industrial and commercial use and in project management. Industrial
Buildings carries out infrastructure development projects for industrial and
residential purposes, principally for a number of government agencies and
authorities. Industrial Buildings hires and coordinates the work of contractors,
planners and suppliers of various engineering services.

Industrial Buildings owns approximately 10.7 million square feet of space
in industrial buildings throughout Israel (including approximately 10% in the
administered territories). It owns both multi-purpose buildings and
built-to-suit buildings which are constructed in accordance with the specific
requirements of tenants. In certain cases, there is an option in the tenant's
favor to purchase the leased property, and, in the case of most built-to-suit
properties, a commitment on the part of the tenant to purchase the property.
Industrial Buildings also owns approximately 115 acres of vacant land for
industrial purposes throughout Israel.

The buildings which are owned by Industrial Buildings are leased to
approximately 1,800 lessees under net leases having terms of up to ten years.
See "Conditions in Israel--Certain Israeli Real Estate Tax Matters" for a
discussion of Israeli real estate tax considerations that may be applicable to
certain real property leases of Industrial Buildings. The average vacancy rate
in buildings owned or leased by Industrial Buildings was approximately 7% at
September 30, 1993.

Industrial Buildings' plans include building a project in the Tel Aviv area
comprising approximately 400 apartments, a commercial center of approximately
43,000 square feet, an office building of approximately 25,000 square feet and
parking facilities of approximately 646,000 square feet. Industrial Buildings
has also entered into agreements with a fuel company and an Israeli supermarket
chain for the joint development of properties.

Industrial Buildings was founded as an Israeli Government company in 1961.
In 1988, Industrial Buildings first offered its shares to the public and its
shares are traded on the TASE. In 1993, the Government of Israel privatized the
company by selling its 51.3% stake in Industrial Buildings. Since the
privatization, Industrial Buildings has focused on improving results by
decreasing staff and overhead costs and aggressively negotiating lease renewal
terms. A holding company in which Ophir has a 25% equity interest and 23.2%
voting interest purchased the Government's interest in Industrial Buildings.
Ophir's investment in the holding company is approximately $50 million. Ampal
owns 42.5% of Ophir. Industrial Buildings has announced a policy to distribute
as a dividend not less than 60% of each year's earnings during the period 1993
through 1996. In January 1994, Industrial Buildings distributed as a dividend
approximately NIS 195 million to its shareholders, which was funded with a
portion of NIS 244 million of long-term debt.

26
<PAGE>
Ophir's interest in the holding company and the holding company's interest
in Industrial Buildings are subject to foreclosure in the event of a default by
any of the investors under the bank credit agreements entered into in connection
with the acquisition. See "Certain Transactions." Any amounts distributed as a
dividend by Industrial Buildings are required to be applied first to pay then
due borrowings.

Industrial Buildings had a staff of approximately 42 permanent employees as
of December 31, 1993.

Set forth below is selected summary financial data of Industrial Buildings
for its last two fiscal years presented in adjusted NIS as of December 31, 1992
in accordance with Israeli GAAP:

<TABLE> <CAPTION>
DECEMBER 31,(1)
------------------------------------
1991 1992
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Total assets.................................................... NIS 1,153,370 NIS 1,180,708
Liabilities..................................................... 376,131 447,805
Shareholders' equity............................................ 777,239 732,903
Revenues........................................................ 94,997 106,816
Income before income taxes...................................... 44,133 53,919
Net income...................................................... 32,215 35,449
<FN>
- ---------------

(1) NIS financial statements for Industrial Buildings are presented elsewhere in
this Prospectus. Since Industrial Buildings has historically reported its
financial results in NIS under Israeli GAAP, dollar financial statements in
accordance with U.S. GAAP are unavailable. For information related to
Industrial Buildings' nominal (historical) financial statements and a
reconciliation to United States GAAP, see Note 25 to Industrial Buildings'
financial statements.
</TABLE>

BAY HEART LIMITED (LEV HAMIFRATZ LIMITED)

Bay Heart was established in 1987 to develop and lease a shopping mall (the
"Mall") in the Haifa Bay area. Haifa is the third largest city in Israel. The
Mall, which opened in May 1991, is a modern three story facility with
approximately 279,760 square feet of rentable space. The Mall is located at the
intersection of two major roads and provides a large mix of retail and
entertainment facilities including seven movie theaters. Approximately 37,500
square feet of the Mall are occupied by Supersol Ltd., one of the two largest
Israeli supermarket chains, and the parent of a co-investor in Bay Heart. Shekem
Department Stores, a major Israeli department store, is the other anchor tenant
under a net lease for approximately 57,600 square feet of retail and
approximately 17,750 square feet of storage and other space expiring in 2001.
Approximately 98% of the Mall premises is now occupied, primarily under two-year
leases, except for anchor tenants.

The total cost of the Mall was approximately $53 million which was financed
principally with debt. The Company has guaranteed approximately $12.6 million of
Bay Heart's borrowings.

Bay Heart is negotiating with the Port and Railway Authority for Bay Heart
to build a station for a suburban railway line adjacent to the Mall which will
provide direct access to the Mall. If negotiations are successful and necessary
approvals are obtained, Bay Heart's investment in that project is expected to be
approximately $1.2 million. Bay Heart is also negotiating the purchase, for
approximately $1.6 million, of a 50% interest in a partnership to purchase
property in the vicinity of the Mall for the purpose of developing a commercial
center. The Company owns 37% of the shares of Bay Heart.

Set forth below is selected summary financial data of Bay Heart for its
fiscal years 1991 and 1992:

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991(1) 1992
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Total assets.................................................................... $ 54,461 $ 52,506
Liabilities..................................................................... 53,438 45,605
Shareholders' equity............................................................ 1,023 6,901
Revenues........................................................................ 4,281 7,048
Income (loss) before income taxes............................................... (1,890) 6,114
Net income (loss)............................................................... (1,890) 5,878
<FN>
- ---------------

(1) The Mall became fully operational in May 1991.
</TABLE>

27
<PAGE>
An assessment was made against Bay Heart by the Israeli tax authorities for
the payment of approximately $11.5 million based on taxes claimed due on certain
long term leases entered into by Bay Heart. Bay Heart's appeal of the assessment
is pending. Based on legal advice, Bay Heart's management believes that Bay
Heart will not be liable for these taxes. See "Conditions in Israel--Certain
Israeli Real Estate Tax Matters."

BANK HAPOALIM (CAYMAN) LTD.

Cayman is a bank holding company which owns Hapoalim (Latin America) Casa
Bancaria S.A.("Casa Bancaria"), an Uruguayan commercial bank, invests in Israeli
and other mutual funds and administers a small loan portfolio. Cayman is
currently in negotiations with an unrelated bank regarding the sale of 50% of
Casa Bancaria at a price based upon the net equity of Casa Bancaria at December
31, 1993. For the year ended December 31, 1992, Cayman's net income amounted to
approximately $1.5 million. In recent years, other than in 1992, Cayman has paid
out a significant portion of its retained earnings as dividends to its two
shareholders, causing a contraction in its size and volume of activity. It
intends to continue to pay dividends from its retained earnings in the future.
Ampal owns 49% of the outstanding shares of common stock of Cayman, and Hapoalim
owns the remaining 51%. Ampal also owns $2 million of 7% preferred shares of
Cayman and an equivalent amount is expected to be issued to Hapoalim for $2
million. See "Certain Transactions." In 1992, Cayman did not pay a dividend on
its common stock but paid the required dividend on its 7% preferred shares. In
1993, Cayman paid a $4 million dividend on its common stock and the required
dividend on its 7% preferred shares.

AMPAL (ISRAEL) LTD.

Ampal (Israel) Ltd., a wholly owned subsidiary of Ampal, owns an
approximately 57,000 square foot commercial property located in Tel Aviv. A
portion of this property is net leased to Hapoalim and another portion is net
leased to Moriah. See "Certain Transactions." Ampal (Israel) Ltd. also acts as a
holding company for other investments discussed elsewhere in this Prospectus.

OPHIR HOLDINGS LTD.

Ophir is a holding company that holds interests in Teledata, Industrial
Buildings, DSP Group and DSP Telecommunications. These companies are discussed
elsewhere in this Prospectus. In addition, Ophir has also made investments in
two unaffiliated mutual funds and a newly-formed biotechnology company and has
recently agreed, subject to the receipt of certain governmental and other
approvals, to make an investment 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.

Ophir owns, through a wholly owned subsidiary, nine real estate properties
located in Israel aggregating approximately 179,700 square feet. Three of these
properties are net leased to Hapoalim or its subsidiaries. See "Certain
Transactions." For a discussion of Israeli real estate tax considerations that
may be applicable to certain real property leases of Ophir, see "Conditions in
Israel--Certain Israeli Real Estate Tax Matters."

Until November 1993, Ampal owned 60% of the voting shares and 49.4% of the
equity interest in Ophir, and the balance was owned by a Hapoalim affiliate. In
November 1993, the two shareholders' interests in Ophir were equalized.
Concurrently, 15% of the shares in Ophir were issued to another Hapoalim
affiliate for approximately $10.2 million. As a result of these transactions,
Ophir is now 42.5% owned by Ampal, its results will not be consolidated in the
Company's financial statements for any reporting periods after September 30,
1993 and the Company will record a gain on issuance of shares of approximately
$3.1 million (approximately $2 million after taxes). See "Management's
28

<PAGE>
Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations" and "Certain Transactions."

Ophir intends to develop on property owned by it in Israel, approximately
60,300 square feet of office and commercial space and approximately 59,200
square feet of parking space. The estimated cost of this project is $5.0
million.

ETZ VANIR LTD. AND YAKHIN MATAIM LTD.

Both Etz Vanir Ltd. ("Etz Vanir") and Yakhin Mataim Ltd. ("Yakhin Mataim")
cultivate orange, grapefruit, clementine, lemon and avocado groves in Israel
pursuant to various long-term land leases which, including renewal options, do
not expire until the mid-21st century. These properties are located near the
city of Netanya between an existing and a proposed highway. Approximately 1,200
acres are presently under cultivation by these two companies. The majority of
their crops is exported.

Ampal owns 50% of the equity of Etz Vanir and Yakhin Mataim. The remaining
50% of the equity of these companies is owned by Yakhin Hakal Ltd. ("Yakhin
Hakal"), a company which is not related to Ampal, which manages their
operations. Because of a dispute between Ampal and Yakhin Hakal regarding the
operating agreement for the companies, the Company has requested that an Israeli
court declare the agreement null and void, and in its response Yakhin Hakal has
stated that the companies owe it approximately $2.5 million for services it has
rendered to the companies. This litigation is pending.

AM-HAL LIMITED

Am-Hal Limited ("Am-Hal") has developed and operates a luxury senior
citizens center in Rishon Lezion, a city located approximately 10 miles from Tel
Aviv. The senior citizens center, which was completed in March 1992, includes
160 apartments of which 65% are occupied, an 80-bed geriatric ward which is
fully occupied, a swimming pool and other recreational facilities. The geriatric
ward is leased by Am-Hal to a non-affiliated health care provider until 2002.
Rental payments are based upon the profits of the geriatric ward.

The Company and a subsidiary of The Israel Corporation, a major Israeli
company, each own 50% of Am-Hal. The aggregate cost of the center was
approximately $21 million, and was financed principally by loans made or
guaranteed by the shareholders and refundable tenant deposits. In addition, the
Company has agreed to indemnify The Israel Corporation for up to $12 million in
the event that The Israel Corporation is required to repay deposits that were
received by Am-Hal from residents.

AMPAL DEVELOPMENT (ISRAEL) LTD., NIR LTD. AND AMPAL FINANCIAL SERVICES LTD.

Ampal Development (Israel) Ltd. ("Ampal Development (Israel)"), Nir Ltd.
("Nir") and Ampal Financial Services Ltd. ("Ampal Finance" and together with
Ampal Development (Israel) and Nir, the "Holding Companies"), each of which is
wholly-owned by the Company, are engaged in the business of financing
acquisitions by the Company and holding and leasing commercial real estate in
Israel. Prior to 1989, these companies had acted primarily as lenders, and their
financing activities were the principal activities of the Company. In 1990, the
Holding Companies sold substantially all their loan portfolios to Hapoalim, and
they relinquished their banking licenses. The Holding Companies still service
certain loans made by them prior to their ceasing lending activity which are
guaranteed by Hapoalim. See "Certain Transactions."

Ampal Development (Israel) owns five commercial properties located in
Israel aggregating approximately 36,900 square feet. Four of these properties
are net leased to Hapoalim. Nir owns four
29
<PAGE>
commercial properties located in Israel aggregating approximately 17,750 square
feet. Three of these properties are net leased to Hapoalim. Ampal Finance owns
two commercial properties located in Israel aggregating approximately 7,250
square feet. Both of these properties are net leased to Hapoalim. See "Certain
Transactions." For a discussion of Israeli real estate tax considerations that
may be applicable to certain real property leases of the Holding Companies, see
"Conditions in Israel--Certain Israeli Real Estate Tax Matters."

The Holding Companies hold interests in other companies discussed elsewhere
in this Prospectus and also make loans to these and other investees in
furtherance of their businesses.

Ampal Development issued debentures which are publicly traded on the TASE.
An aggregate of approximately $43.1 million of these debentures were outstanding
as of December 31, 1993. Ampal Development has deposited with Hapoalim funds
sufficient to pay all principal and interest on these debentures.

ENERGY DISTRIBUTION

GRANITE HACARMEL INVESTMENTS LTD.

Granite owns the Sonol group of companies, the third largest Israeli
distributor of refined petroleum products. Supergas, a wholly-owned subsidiary
of Granite, is the third largest marketer and distributor in Israel of liquified
petroleum gas. Through its subsidiaries, Granite also manufactures and markets
lubricating oils and automotive batteries.

As of December 31, 1993, Sonol supplied gas to 149 gas stations in Israel,
of which 106 are owned by or leased on a long-term basis to Sonol. The Sonol
group sold approximately 1.6 million and 1.8 million metric tons of refined
petroleum products and lubricating oils in 1991 and 1992, respectively,
representing approximately 24.7% and 25.7% of the total sales of such products
in Israel by the three major fuel companies in Israel during these years.

Prior to 1988, Sonol and the other two major fuel companies had a monopoly
in the importation of oil into and the distribution of gasoline, fuel oil and
diesel in Israel. Since 1988, the Israeli government has licensed new fuel
companies and also recently allowed Oil Refineries Ltd., the sole oil refinery
operator in Israel, and large industrial customers, such as Israel Electric
Corp., to engage in the importation of oil. As a result, Granite's sales volume
and share in the refined petroleum products market have declined and may decline
further. Beginning in 1992, the Israeli government also lifted price controls on
many of the fuel products sold by Sonol. Moreover, the Israeli Ministry of
Energy recently has declared its intention to permit new gas stations to be
licensed more quickly and in locations not previously permitted. Although
Granite is unable to determine the effect of these changes on future sales
volume and profits, their impact may be material.

In order to attempt to offset the possible adverse effects of reforms in
the energy market, Granite continues to emphasize improving efficiency through
modernization, selective expansion and staff reductions. Furthermore, Granite
expects to pursue a policy of diversification. Recently, Granite established a
subsidiary which will invest in real estate projects in Israel. The new
subsidiary has contracted to participate in two real estate projects and is
studying other opportunities. Granite is also conducting a strategic survey to
identify other potential areas of investment.

In February and October 1992, Granite concluded public offerings of shares
and warrants and convertible debentures on the TASE in the amounts of
approximately $60 million and $42 million, respectively. In the first half of
1993, warrants to purchase convertible debentures were exercised for an
aggregate of approximately $18.8 million. As a result of the public offering of
the shares and warrants
30
<PAGE>
and the subsequent exercise of a portion of these warrants, the Company's
ownership of Granite was diluted from 26% to 21.6%. The Company also owns
warrants to purchase additional shares in Granite. Depending upon whether and to
what extent the Company and the public exercise their warrants and debenture
conversion rights, the Company's ownership of the equity of Granite could be
reduced to 12.9%. Prior to the public offerings, the Company entered into an
agreement with the other shareholders of Granite which expires February 8, 1998
and which entitles the Company to appoint three out of the 11 members of
Granite's board. The Company and these shareholders, who currently collectively
own an aggregate of 83.1% of Granite, have also agreed to certain restrictions
on transfer and to vote together at general meetings of Granite's shareholders.
This agreement is terminable on 120 days' notice if a party (or a related group)
acquires more than 43% of Granite's share capital. Recently, one of the parties
to the agreement acquired the interest of another and now owns 54% of Granite's
share capital. The shareholder and the Company have agreed to negotiate a new
or amended agreement and have entered into an interim agreement which provides
for the Company's continuing right to designate three members of Granite's board
until February 8, 1998 (the stated expiration date of the current agreement),
provided that there is no change in control over Ampal. If Ampal ceases to
exercise "significant influence" over Granite under applicable accounting
principles (which the Company believes it continues to exercise by virtue of
its board representation), Ampal will no longer be permitted to account for its
holdings in Granite under the equity method of accounting, and the Company's
reported earnings could be adversely affected.

Set forth below is selected summary financial data of Granite for its last
three fiscal years:

<TABLE> <CAPTION>
DECEMBER 31,
-------------------------------------
1990 1991 1992
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Total assets.................................................... $ 394,498 $ 317,465 $ 328,996
Liabilities..................................................... 311,699 241,338 207,047
Shareholders' equity............................................ 82,799 76,127 121,949
Revenues........................................................ 479,083 409,007 429,982
Income before income taxes...................................... 21,891 25,118 28,434
Net income...................................................... 12,759 18,779 17,808
</TABLE>

On June 29, 1993, the Controller of Restrictive Trade Practices of the
Israeli Ministry of Industry and Commerce issued a determination regarding the
exclusive agreements between the Israeli oil marketing companies and filling
station operators stating that these agreements violate Israeli antitrust law.
In his determination the Controller stated that his ruling would affect
approximately 77% of the Sonol stations (which are those stations not owned by
Sonol). The Controller postponed the effective date of his decision, and Sonol
has filed an appeal. Until there is a decision on the appeal, Granite has slowed
its investments in non-owned filling stations. If upheld in its current form,
the Controller's determination will be considered prima facie evidence in legal
proceedings between station operators and Sonol and may have a material adverse
effect on Granite.

BASIC INDUSTRY

PRI HA'EMEK (CANNED AND FROZEN FOOD) 88 LTD.

Pri Ha'emek processes and packages frozen vegetables, canned juices and
other vegetable and citrus products in Israel and markets its products primarily
in Israel and Europe and, to a lesser extent, in North America. Pri Ha'emek has
facilities for processing frozen vegetables, citrus and other fruit products and
tomatoes and owns a cannery and a freezer plant. Pri Ha'emek also uses a large
freezer plant which is partially owned by the Company.

31
<PAGE>
Pri Ha'emek sells to large retail chains. Its products are marketed in
Israel principally under its "Pri Ha'emek" and "Priman" names and elsewhere
principally under private label. Pri Ha'emek also does some food processing for
other food companies, mainly for export out of Israel. Pri Ha'emek intends to
expand its food product lines and to seek agreements for the marketing of its
products under other brand names.

Pri Ha'emek's principal growth market is the domestic Israeli market.
Because of the increase in domestic Israeli sales, exports which had accounted
for a majority of sales now only account for approximately one-half of its
sales. Pri Ha'emek's main product lines have a significant share of the Israeli
market.

Historically Pri Ha'emek has not experienced substantial import
restrictions for its products in the overseas markets it serves, but there can
be no assurance that trade barriers will not be established in the future that
could materially and adversely affect Pri Ha'emek's export businesses.

Pri Ha'emek employed 97 persons on a full time basis as of December 31,
1993. Pri Ha'emek also employs workers on a temporary basis to assist it with
its seasonal needs.

The Company owns 74.9% of the shares of Pri Ha'emek. Pri Ha'emek has
granted to its other shareholder an option to purchase additional shares in Pri
Ha'emek at the same price the Company paid for its shares in 1991, and in
November 1993, Pri Ha'emek filed a registration statement for an intended
initial public offering in Israel on the TASE. As a result of these
developments, the Company's interest in Pri Ha'emek may be diluted to 36.14%.
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. Pri
Ha'emek's assets were purchased from another operating entity in 1988 and 1990.
The Company and Pri Ha'emek's other shareholder have agreed, among other
matters, to appoint directors in proportion to their respective share holdings,
to rights of first refusal, to certain restrictions on transfer and to require
approval for certain corporate actions.

Set forth below is selected summary financial data of Pri Ha'emek for its
last three fiscal years:

<TABLE> <CAPTION>
DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Total assets........................................................ $ 29,456 $ 32,768 $ 35,938
Liabilities......................................................... 28,565 30,525 32,723
Shareholders' equity................................................ 891 2,243 3,215
Revenues............................................................ 24,781 24,001 31,621
Income (loss) before income taxes................................... (1,951) (1,648) 972
Net income (loss)................................................... (1,943) (1,648) 972
</TABLE>

PARADISE MATTRESSES (1992) LTD.

Paradise is a leading manufacturer and distributor of mattresses and
fold-out beds in Israel. Paradise manufactures and distributes its mattresses
under the brand names "Paradise," "Mefi" and "Sealy." "Sealy" mattresses are
manufactured and distributed by Paradise under a ten-year exclusive license
covering the Israeli market expiring in 2002 with an option for an additional
five-year term. Paradise owns its own manufacturing facilities and employs
approximately 100 persons. It distributes mattresses through independent stores
and by direct sales to hotels. Paradise commenced business in 1992 when it
purchased a 40-year old division of an unrelated company.

The Company currently owns approximately 85.1% of the share capital of
Paradise, approximately half of which was purchased in February 1993 and half of
which was purchased in June 1993 for $2 million and $2.3 million, respectively.

32
<PAGE>
CARMEL CONTAINER SYSTEMS LIMITED

Carmel is one of the leading Israeli designers and manufacturers of
paper-based packaging and related products. Carmel manufactures a varied line of
products, including corrugated shipping containers, moisture-resistant
packaging, consumer packaging, triple-wall packaging and wooden pallets and
boxes.

The Company estimates that Carmel manufactures approximately 25% of the
corrugated board, approximately 85% of the corrugated triple wall, and
approximately 35% of the corrugated board packaging in Israel. Carmel's products
are marketed to a wide variety of customers for diverse uses, but its principal
market is packaging for agricultural products and for the food and beverage
industry. Although sales of packaging products to exporters of agricultural
products have declined slightly, an increase in domestic sales has compensated
for this decline.

As of December 31, 1993, Carmel employed 670 persons. Carmel has in the
past experienced labor difficulties, including a two-week strike in 1992 at one
of its plants.

Recently, Carmel initiated measures to reduce its work force, consolidate
certain operations and upgrade certain equipment. Carmel expects to make
additional investment in equipment of approximately $12.5 million between 1993
and 1995 for these purposes, of which $5.5 million has already been committed.

Shares of Carmel are listed for trading on the AMEX under the symbol "KML."

In July 1992, the Company acquired 20% of the shares of Carmel for
approximately $2.2 million. The Company, American Israel Paper Mills Ltd., the
largest paper producer in Israel, and Robert Kraft are parties to a
shareholders' agreement with respect to their shareholdings (which aggregate
approximately 78% of the shares) in Carmel. The agreement includes provisions
governing board representation, required votes for specified corporate actions,
matters on which the shareholders agree to cooperate and rights of first refusal
with respect to the shares owned by the parties. The parties to the
shareholders' agreement have also agreed to make available guarantees to third
parties of obligations of Carmel. The Company's guarantee obligation, which is
currently unused, is limited to $2 million. Carmel has granted to International
Forest Products Corporation, an affiliate of Mr. Kraft, a right to supply up to
80% of Carmel's requirements for imported paper and forest products in the
ordinary course of Carmel's business and on a competitive basis.

ORLITE ENGINEERING COMPANY LTD.

Orlite is one of Israel's largest manufacturer of composite material
products for military and civilian applications, including specialized fireproof
ammunition storage containers for the Israeli Merkava tank, ballistic helmets
for military and police use, outdoor storage boxes for telecommunications, cable
and electrical switching equipment and specialized aerospace components.

Orlite's markets are changing due to spending cuts undertaken by the
Israeli Ministry of Defense ("MOD"). As a result, Orlite expects no growth in
sales to MOD, which at one point had represented almost 90% of Orlite's sales,
and is focusing on sales of its civilian products which have grown in recent
years and which Orlite believes will continue to constitute its most important
growth segment. In 1992, approximately 50% of Orlite's sales were of military
products (reduced from 77% in 1991). The balance were of civilian products.

Orlite's largest growth products are its composite outdoor storage cabinets
which house electrical, cable and telecommunications equipment and are less
susceptible to adverse weather conditions than metal cabinets. In 1992, Israel
Electric Corp. and Bezeq (the Israeli telephone company) accounted for
33
<PAGE>
a substantial portion of Orlite's civilian sales. Orlite seeks to expand its
sales base by, among other methods, developing other applications for its
technology and exporting its products.

As of December 31, 1993, Orlite employed 144 permanent workers and 17
temporary workers. Orlite owns its manufacturing facilities.

The Company owns 31% of the shares of Orlite. Another Hapoalim affiliate
owns an identical interest. In May 1992, Orlite concluded a public offering of
its shares on the TASE.

DAVIDSON-ATAI PUBLISHERS LTD.

Davidson-Atai is a newly established publishing house. As its first
project, Davidson-Atai has begun publishing, in Hebrew, the initial volumes of a
multi-volume series entitled "The World of the Bible," an illustrated series
about the Bible. Davidson-Atai expects to translate this series and publish it
abroad. Davidson-Atai distributes its books through subscriptions and book
stores.

The Company owns 22.5% of Davidson-Atai which it purchased for
approximately $300,000 in 1993 upon initial capitalization of this company.

HIGH TECHNOLOGY AND COMMUNICATIONS

TELEDATA COMMUNICATION LTD.

Teledata designs, develops, manufactures, markets and supports
concentrators and multiplexers for incorporation into telephone networks.
Multiplexers eliminate the requirement of a single, dedicated connection
extending the entire distance from each subscriber's premises to the local
exchange. This is accomplished by permitting groups of subscribers to be
connected by individual twisted pairs of copper wires to a remote terminal which
is connected, in turn, to a central terminal at the local exchange by means of a
single link (which may consist of copper cables, fiber optic cables, radio or
domestic satellite). A multiplexer can utilize this single link to transmit many
conversations simultaneously. Line concentrators enable telephone operating
companies to utilize the links from the remote terminal to the central terminal
more efficiently by allocating the capacity of these links among a greater
number of subscribers.

Teledata currently produces a single line of multiplexers and line
concentrators. Teledata is in the process of developing three new lines of
products including those for digital and wireless platforms.

In addition to Israel, Teledata markets its products in Europe, Asia, South
America, Central America and Oceania (Australia and the surrounding islands).
Teledata maintains marketing activities in 55 countries, and has installed its
equipment in 25 countries. As of December 31, 1993, Teledata employed 187
persons, as compared to 138 at December 31, 1992.

The sector of the telecommunications industry in which Teledata operates is
highly competitive. Teledata competes directly with manufacturers of equipment
similar to Teledata's products. Teledata experiences competition from providers
of alternative solutions for local loop enhancement.

Teledata's shares are quoted on the NASDAQ NMS under the symbol "TLDCF."

In April 1992, Teledata concluded an initial public offering of its
securities in the United States. In connection with this offering, the Company
sold a portion of its interest in Teledata, and realized a gain on sale of $3.8
million (approximately $1.2 million after taxes and a deduction for minority
interest). In addition, this offering resulted in a gain on issuance of shares
of $5.8 million (approximately $2.1 million after taxes and a deduction for
minority interest). In 1993, the Company recorded a gain of
34
<PAGE>
$1.5 million (approximately $900,000 after taxes) from the sale of an additional
portion of its shares of Teledata. As a result of these transactions Ampal's
ownership of Teledata was diluted to 2.5% and Ophir's to 19.7%.

Set forth below is selected summary financial data of Teledata for its last
three fiscal years:

<TABLE> <CAPTION>
DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Total assets.......................................................... $ 3,463 $ 15,690 $ 45,570
Liabilities and minority interest..................................... 3,427 11,551 6,059
Shareholders' equity.................................................. 36 4,139 39,511
Revenues.............................................................. 4,731 17,356 23,003
Income before income taxes............................................ 690 4,158 7,027
Net income............................................................ 690 3,985 6,728
</TABLE>

MERCURY INTERACTIVE CORPORATION

Mercury develops, markets and supports a family of Automated Software
Quality ("ASQ") products that automate testing and quality assurance for
developers of client/server software and systems. By using Mercury's ASQ
products, corporate software development organizations, system integrators and
independent software vendors can identify software errors, commonly referred to
as bugs, more quickly and efficiently than traditional methods allow. This
enables developers of software to compress software development cycles, reduce
costs and improve software quality.

Mercury's products are targeted to the workstation and personal computer
platforms. Mercury's current ASQ products include those for UNIX/X Windows and
for MS Windows, and its announced products include those for multi-user system
testing and for Windows NT, OS/2 and Macintosh. Mercury has licensed over 3,000
copies of its ASQ products to over 150 customers worldwide in a broad range of
industries.

The market for ASQ products is relatively new and undeveloped, and Mercury
faces competition from several companies in the United States and Europe.

Mercury is a Delaware corporation with its headquarters in California.
Mercury's research and development facility is located in Israel. In October
1993, Mercury completed an initial public offering of its shares. Its shares are
quoted on the NASDAQ NMS under the symbol "MERQ." Following the public offering,
the Company owns 3.8% of the shares of Mercury which it purchased in March 1992
for approximately $1.5 million.

DSP GROUP, INC. AND DSP TELECOMMUNICATIONS LTD.

DSP Group is a leading developer of high performance, cost effective,
digital signal processing ("DSP") software and integrated circuits for digital
speech products, targeted at the convergence of the personal computer,
communications and consumer electronics markets. Digital speech technology
provides fundamental advantages over analog speech technology and represents an
enabling technology for a broad range of major applications in these markets.
DSP Group pioneered the all-digital telephone answering machine market. DSP
Group has developed TrueSpeechTM, a proprietary digital speech compression
technology, which offers significant advantages over competing technologies and
is being positioned as an industry standard. DSP Group also has interests in
related companies engaged in telecommunications and video compression
technologies.

The Company owns directly 3.6% of the equity of DSP Group which it
purchased from an unaffiliated DSP Group shareholder in 1993 for approximately
$1.1 million. Ophir, which is 42.5%
35
<PAGE>
owned by the Company, owns 3.1% of DSP Group for which it paid approximately
$1.9 million in 1992. Another Hapoalim affiliate also owns 3.6% of DSP Group. In
December 1993, DSP Group filed a registration statement for a public offering of
its shares in the United States, which has not yet been declared effective.

Ophir also owns 4.4% of DSP Telecommunications, a DSP Group investee, for
which it paid $1 million in 1992. DSP Telecommunications is a leading developer
of cost effective, high performance DSP software and integrated circuits for
digital communications products targeted at the emerging wireless communications
market.

IDAN SOFTWARE INDUSTRIES I.S.I. LTD.

Idan, through its direct and indirect subsidiaries, is a provider of
telecommunications services and products. To date, Idan has provided these
services and products in Israel, although during 1994 Idan plans to begin
marketing certain of its services and products in Europe and selected countries
elsewhere.

Idan's subsidiary, Elitec Industries 77 Ltd. ("Elitec"), installs and
operates coin-operated pay telephones, installs and provides bedside telephone
service to hospital patients and provides tenant communication services to
office buildings and other facilities. Elitec, through a subsidiary, provides
outbound international telephone and facsimile services to Israeli business
customers and issues a telephone calling card to Israeli business executives,
professionals and others for use primarily in placing direct-dial inter-country
calls. Elitec, through another subsidiary, provides paging services in central
Israel. Elitec shares are publicly traded on the TASE.

During the past two years, Idan's subsidiaries have sought to benefit from
the Israeli Government's decision to open up segments of the telecommunications
industry to competition. These companies have focused on obtaining Israeli
Government licenses to enable them to provide certain telecommunications and
value-added services and products in Israel and to commence the operation of
businesses which provide these services and products. Idan faces substantial
competition for the services and products it offers.

Idan is dependent on short-term licenses from the Israeli Ministry of
Communications for the services it offers.

The Company has entered into a shareholders' agreement pursuant to which it
has agreed to vote all of its shares in favor of all of Idan's nominees to its
board of directors, and for so long as it holds at least 70% of the shares it
purchased in the private placement from Idan, the other shareholders have agreed
to vote in favor of the Company's nominee to Idan's board of directors.

In July 1993, the Company purchased 8.4% of Idan's shares for approximately
$3.5 million. In October 1993, Idan completed a private placement of 6.7% of its
shares for $3.2 million. As a result of this placement, the Company's ownership
of Idan was reduced to 7.8%.

Idan is quoted on NASDAQ under the symbol "IDANF."

36
<PAGE>
CONDITIONS IN ISRAEL

The following information is included in order to advise prospective
purchasers of Units in the Offerings of certain conditions in Israel that could
affect the Company and its investors. All figures and percentages are
approximate. A substantial portion of the information with respect to Israel
presented hereunder and under "Special Considerations--Operations in Israel" has
been taken from Annual Reports of the Bank of Israel and the Israeli Central
Bureau of Statistics. GDP growth rates for 1990, 1991 and 1992 were obtained
from economic reports of Hapoalim. No independent verification has been made of
such information or of other information taken from other Israeli government
publications.

ISRAELI-PALESTINIAN DECLARATION OF PRINCIPLES

In September 1993, a breakthrough occurred in Israeli-Palestinian
relations. A joint Israeli-Palestinian Declaration of Principles was signed by
Israel and the PLO in Washington, D.C., outlining the interim self-government
arrangements. These arrangements include early 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. The result of this
initiative will depend on the parties' ability to agree on the details and the
implementation of these complex arrangements.

INFLATION AND DEVALUATION

Israel's economy suffered from an extended period of rampant inflation in
the early 1980's which reached a peak annual rate of 445% during 1984. Inflation
resulted from both internal and external factors, including a sharp rise in
international prices, dependence on imported goods and services and frequent
devaluations of the Israeli currency. Other significant factors included large
budget deficits caused by heavy defense expenditures, debt service requirements
and substantial social expenditures. Prior to 1985, a substantial portion of
Government spending was financed by borrowing, with Israeli tax revenue
accounting for only about half of Government of Israel expenditures. Since 1985,
the budget deficit has been substantially reduced. Defense spending continues to
account for a substantial amount of Government of Israel expenditures. In
addition, decreases in price subsidies needed to limit budget deficits
contributed to price increases.

In 1992, for the third consecutive year, the economy of Israel underwent an
appreciable expansion. During calendar years 1990 through 1992, Israel's GDP
increased by 5.8%, 6.2% and 6.6%, respectively, while the total amount of export
was $11.6 billion, $11.2 billion and $12.4 billion, respectively, and, in the
first half of 1993, $6.8 billion. During the period 1990 through the first six
months of 1993, the population has increased by 15.2% primarily due to
immigration from the former Soviet Union. 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.

The number of tourists who arrived in Israel in 1991 was approximately 1.0
million and it increased to approximately 1.5 million in 1992. In the first half
of 1993 the number of tourists was approximately 800,000.

Israel's unemployment rate increased to 11.2% at the end of 1992 from
approximately 10.6% at the end of 1991 and approximately 9.6% at the end of
1990. At June 30, 1993 the unemployment rate was 9.7%.

The Israeli Government's primary economic policy objective has been to
increase business sector employment, and the Government has adopted several
economic policy measures in order to stimulate
37
<PAGE>
public and private sector investment and expand business activity. In this
respect, in early 1993 there were reductions in the corporation tax and value
added tax and the elimination of marginal taxes that were viewed as interfering
with economic activity. The overseas travel tax and the levy on some imported
services were abolished in January 1993. Earlier, in May 1992, the payroll tax
on businesses was abolished. A customs agreement with the European Free Trade
Association countries was implemented in January 1993.

During 1992, the NIS was devalued relative to the dollar from NIS 2.283 to
NIS 2.764, a 21% devaluation, and was further devalued to NIS 2.864 at the end
of September 1993, a 3.6% devaluation. These devaluations resulted primarily
from the overall appreciation of the dollar in world money markets.

To offset the effects of inflation on the purchasing power of the Israeli
currency, the Government of Israel has instituted "linkage" policies which have
also been followed by most private organizations. Through linkage, the amount of
an obligation or payment is increased from time to time by an amount related to
changes in an index which may be the exchange rate of a foreign currency or a
price index. The payee is thus compensated for the relative decline in the
purchasing power of the NIS. Linkage adjustments may be based upon the total or
only a specified percentage of the change in the index being used. Many
obligations or payments in Israeli currency are linked to the dollar or the CPI.

The following table sets forth for the periods indicated the effects of
annual inflation on linkage adjustments and annual devaluations, as discussed in
the preceding paragraph.

<TABLE> <CAPTION>
ISRAEL ANNUAL U.S.
ANNUAL CLOSING INFLATION ANNUAL
INFLATION EXCHANGE ANNUAL ADJUSTED FOR INFLATION
YEAR ENDED DEC. 31, RATE(1) RATE(2) DEVALUATION(3) DEVALUATION(4) RATE(5)
- -------------------------------------------------- ----------- ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1984.............................................. 444.9% 0.640 492.7% (8.06)% 4.3%
1985.............................................. 185.2 1.499 134.8 21.49 3.8
1986.............................................. 19.6 1.486 (0.9) 20.65 1.9
1987.............................................. 16.1 1.539 3.5 12.16 3.8
1988.............................................. 16.4 1.807 (6) 17.4 (0.86) 4.1
1989.............................................. 20.7 1.963 8.7 11.08 4.6
1990.............................................. 17.6 2.048 4.3 12.72 5.4
1991.............................................. 18.0 2.283 11.5 5.85 4.2
1992.............................................. 9.4 2.764 21.1 (9.64) 3.0

<FN>
- ---------------
(1) "Israel Annual Inflation Rate" is the percentage increase in the Israeli CPI
between December of the year indicated and December of the preceding year.
(2) "Closing Exchange Rate" is the rate of exchange of one dollar for the NIS at
December 31 of the year indicated as reported by the Bank of Israel.
(3) "Annual Devaluation" is the percentage increase in the value of the dollar
in relation to the NIS during the calendar year.
(4) "Annual Inflation Adjusted for Devaluation" is obtained by dividing the
December Israeli CPI by the Closing Exchange Rate, thus first obtaining a
dollar-adjusted Israeli CPI, and then calculating the yearly percentage
changes in this adjusted index.
(5) "U.S. Annual Inflation Rate" is obtained by calculating the percentage
change in the United States Consumer Price Index for All Urban Consumers, as
published by the Bureau of Labor Statistics of the United States Department
of Labor.
(6) The official closing exchange rate on December 31, 1988, was NIS 1.685 to
the dollar. On January 1, 1989, a devaluation of the NIS was declared and a
new exchange rate of NIS 1.807 to the dollar was determined.
</TABLE>

ISRAELI INVESTMENT

Since the establishment of the State of Israel in 1948, the Government of
Israel has promoted and developed industrial and agricultural pursuits through a
variety of methods including (i) direct grants-in-aid, (ii) direct ownership in
agricultural and industrial enterprises, (iii) tax abatements and (iv) tax
incentives.

Industrial research and development projects in Israel may qualify for
government aid if they deal with the development of commercial products to be
made in Israel for sale abroad. Direct incentives
38
<PAGE>
usually are provided in the forms of grants, regulated in accordance with the
Law for Encouragement of Industrial Research and Development 1984.

Since 1988, the Government of Israel's policy has been one of privatization
aimed at reducing its direct ownership interest in enterprises, and the
Government of Israel has sold or is planning to sell all or part of its stake in
many Government-owned companies.

TRADE AGREEMENTS

Israel is a member of the United Nations, the International Monetary Fund,
the International Bank for Reconstruction and Development and the International
Finance Corporation. Israel is also a signatory to the General Agreement on
Tariffs and Trade which provides for reciprocal lowering of trade barriers among
its members.

Israel became associated with the European Economic Community by an
agreement concluded on July 1, 1975 which confers certain advantages with
respect to Israeli exports to most European countries and obliges Israel to
lower its tariffs with respect to imports from those countries over a number of
years.

In 1985, Israel and the United States entered into an agreement to
establish a Free Trade Area ("FTA") which is intended ultimately to eliminate
all tariff and certain nontariff barriers on most trade between the two
countries. Under the FTA agreement, most products received immediate duty-free
status in 1985, stated reductions are taking place on others and reductions in
tariffs relative to a third category may be accelerated between 1990 and 1995,
by which year all tariffs are to have been eliminated.

The end of the Cold War has enabled Israel to establish commercial and
trade relations with a number of nations, including Russia, China and the
nations of Eastern Europe, with which Israel had not previously had such
relations.

ECONOMIC FACTORS

Israel's defense expenditures, debt service and expenditures for the
absorption of immigrants are very high. As a result, the share of Israeli
resources available for other national purposes is limited. The defense burden,
debt service and expenditures for the absorption of immigrants, development of
the economy and the provision of a minimum standard of living, particularly for
the members of the lower income segments of the community, and the maintenance
of a minimum level of net foreign reserves, have resulted in high balance of
payments deficits for many years. In order to finance this deficit, Israel must
ensure an adequate inflow of capital imports.

The main sources of the country's capital imports are military and economic
aid from the United States, personal remittances from abroad, sales of Israel
Government bonds, primarily in the United States, intergovernmental,
institutional and free market loans and contributions from the Jewish community
worldwide.

Israel does not have an abundance of raw materials, including oil, and
therefore it is dependent to a large degree on the import of such raw materials.

At December 31, 1991, December 31, 1992 and June 30, 1993, Israel's
outstanding net foreign debt was approximately $15.1 billion, $14.7 billion and
$16.7 billion, respectively. Israel had approximately $5.1 billion of foreign
exchange reserves at the end of 1992 compared to $6.3 billion at the end of
1991, $6.3 billion at the end of 1990 and $5.3 billion at the end of 1989.

ECONOMIC AND MONETARY POLICIES

In order to stimulate economic growth, the Israeli Government has continued
a more liberal monetary policy adopted in 1989 aimed at reducing interest rates
and increasing the availability of investment capital. This policy increased the
availability of such capital by loosening restrictions on the importation of
foreign capital into the country and freeing additional foreign currency
deposits held in Israeli banks for domestic lending by reducing bank liquidity
requirements.

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In an effort to stimulate exports and economic growth, the Israeli
Government abandoned the fixed exchange rate policy which was followed in
previous years. Commencing in 1989 the rate of exchange was allowed to
fluctuate, within a range of 3% (later changed to 5%) up or down, after an
initial devaluation of 13.4%. Further fluctuations and devaluations have
occurred or have been declared since then, including a 13.3% devaluation in the
fourth quarter of 1992. The current exchange rate mechanism adopted in December
1991 allows the exchange rate to fluctuate around a diagonal mid-band rate which
will rise by up to 9% per annum and would allow for a total nominal depreciation
of the NIS of up to 18% for 1993.

In the past several years the Israeli Government has also liberalized
regulations relating to the Israeli securities market.

For a discussion of Israeli taxes see "Tax Information--Israeli Income
Taxes."

Further measures which affect wages, prices, taxes, Israeli Government
spending, securities markets and currency control may be adopted. The potential
effect of political and military events in the Middle East or proposed economic
reforms on the Israeli economy in general and the Company cannot be predicted.

OTHER ISRAELI REGULATIONS

The Banking Law

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. The Banking Law does not permit
Hapoalim to acquire additional means of control in Ampal. Additionally, not more
than 25% of the capital of Hapoalim may be invested in non-banking business
corporations, including Ampal. Under the Banking Law, the Company may not use
financing directly or indirectly provided by Hapoalim to make acquisitions.
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.

On August 30, 1993, a proposed amendment to the Banking Law passed the
preliminary voting stage in the Knesset, the Israeli Parliament. Under the
amendment, banks, including Hapoalim, would be required to reduce its holdings
of non-banking business corporations, including Ampal, to 25% or less within two
years of its enactment. In addition, it has been proposed 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.

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 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.

The Bank Share Arrangement

In October 1993, the Bank Share Settlement Act (Temporary Provisions) 1993
(the "Bank Shares Act") was enacted by the Knesset. Under the Bank Shares Act,
in October 1993, the shares of several Israeli banks, including a majority of
the shares of Hapoalim, were transferred to the Government of Israel. The
purpose of the Bank Shares Act is to facilitate the Government of Israel's sale
of shares in Israeli banks. However, the Bank Shares Act is intended to limit
the Government's interference in the day-to-day operations of the banks. Control
over such shares will be exercised by a supervisory
40
<PAGE>
committee appointed by a public advisory committee which is in turn approved by
the Israeli Government. This committee will appoint directors for the banks.

The Bank Shares Act may result in a significant change in the composition
of Hapoalim's board of directors and in Hapoalim's relationship with Ampal. The
impact of these developments upon the Company can not be predicted.

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 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 Bay Heart, Ophir, Industrial Buildings
and Carmel, 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. Bay Heart has recently received an assessment from
the tax authorities based upon certain long term leases to which it is a party.
Bay Heart is appealing the assessment. See "Business."

The Company cannot predict whether the Commissioner's position will be
upheld or, if upheld, the effect on the Company and its investees.

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TAX INFORMATION

ISRAELI INCOME TAXES

Ampal (to the extent that it has income derived in Israel) and Ampal's
Israeli subsidiaries are subject to taxes imposed under the Israeli Income Tax
Ordinance. For 1993, Israeli companies are taxed on their income at a rate of
39%. For 1994 through 1996, this tax rate will be reduced to 38%, 37% and 36%,
respectively. These reductions represent the final stage of reforms begun in
1987. These reforms consisted of combining two separate types of taxes on
company income, company tax and income tax, into one tax, and reducing the
effective tax rate on company income in 1987 from 61% to 45%, with further
reductions to 43.5%, 41% and 40% in 1990 through 1992.

Ampal has income from interest, rent and dividends resulting from its
investments in Israel. Under Israeli law, Ampal has been filing reports with the
Israeli tax authorities with respect to such income. In addition, as noted
below, Ampal is subject to withholding tax on dividends received from Israeli
companies at a rate of 25%. Under an arrangement with the Israeli tax
authorities, such income has been taxed based on principles generally applied in
Israel to income of non-residents. Ampal has filed reports with the Israeli tax
authorities through 1991 and has received "final assessments" with respect to
such reports (which final assessments are, under Israeli law, subject to
reconsideration by the tax authorities only in certain limited circumstances,
including fraud). Based on the tax returns filed by Ampal through 1991, it has
not been required to make any additional tax payments in excess of the
withholding on its dividends. In addition, under Ampal's arrangement with the
Israeli tax authorities, the aggregate taxes paid by Ampal in Israel and the
United States on interest, rental and dividend income derived from Israeli
sources has not exceeded the taxation which would have been payable by Ampal in
the United States had such interest, rental and dividend income been derived by
Ampal from United States sources. There can be no assurance that this
arrangement will continue in the future. This arrangement does not apply to
taxation of Ampal's Israeli subsidiaries.

Under the provisions of the Income Tax Ordinance, income paid to
non-residents of Israel by residents is generally subject to withholding tax at
the rate of 25%. No withholding has been made on interest and rent payable to
Ampal under an exemption which Ampal has received from the income tax
authorities on an annual basis. There can be no assurance that this exemption
will continue in the future. With regard to dividends, however, payments to
Ampal are withheld at the 25% rate (as opposed to dividends payable to Israeli
companies, which are exempt from tax). The continued tax treatment of Ampal by
the Israeli tax authorities in the manner described above is based on Ampal
continuing to be treated, for tax purposes, as a non-resident of Israel that is
not doing business in Israel.

Under Israeli law, a tax is payable on capital gains of residents and
non-residents of Israel. With regard to non-residents, this tax applies to gains
on sales of assets either located in Israel or which represent a right to assets
located in Israel (including gains arising from the sale of shares of stock in
companies resident in Israel). The portion of the gain attributable to inflation
is taxable at 10%, while the remainder of the profit, if any, is taxable to
corporations at 40% in 1992 (and is scheduled to be reduced to 39% and further
to 36% in stages during 1993 through 1996). Non-residents of Israel are exempt
from the 10% tax on the inflationary gain derived from the sale of shares in
companies that are considered Israeli residents if they choose to compute the
inflationary portion of the gain based on the change in the rate of exchange
between Israeli currency and the foreign currency in which the shares were
purchased from the date the shares were purchased until the date the shares were
sold.

The Income Tax Law (Adjustment for Inflation), 5745-1985, which applies to
companies which have business income in Israel or which claim a deduction in
Israel for financing costs, has been in force since the 1985 tax year. The law
provides for the preservation of equity whereby certain corporate assets are
classified broadly into Fixed (inflation resistant) and Non-Fixed (non-inflation
resistant) Assets. Where shareholders' equity, as defined therein, exceeds the
depreciated cost of Fixed Assets, a tax deduction which takes into account the
effect of the annual inflationary change on such excess is allowed, subject to
certain limitations. If the depreciated cost of Fixed Assets exceeds
shareholders' equity, then such excess, multiplied by the annual inflation
change, is added to taxable income.

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A proposed tax treaty between Israel and the United States was signed in
1975, and amended by protocols signed in 1980 and January 1993. Ratification of
the treaty is pending in both countries. The Company believes that this treaty
will not have a substantial impact on the taxation of the Company in the United
States or in Israel.

Individuals and companies in Israel pay VAT at a rate of 17% of the price
of assets sold and services rendered. They can deduct VAT paid on goods and
services acquired by them.

UNITED STATES TAXATION OF AMPAL

Ampal and its United States subsidiaries (in the following tax discussion,
generally "Ampal") are subject to United States taxation on their consolidated
taxable income from foreign and domestic sources. The gross income of Ampal for
tax purposes includes or may include (i) income earned directly by Ampal, (ii)
Ampal's share of "subpart F income" earned by certain foreign corporations
controlled by Ampal, (iii) Ampal's share of income earned by certain electing
"passive foreign investment companies" or (under a pending tax bill) "passive
foreign corporations" of which Ampal is a stockholder and (iv) an amount (if
any) generally equal to Ampal's share of a controlled foreign corporation's
"excess passive assets." Subpart F income includes dividends, interest and
certain rents and capital gains. Excess passive assets of a controlled foreign
corporation for a taxable year are the excess of the average of the amounts of
passive assets held by the corporation as of the close of each quarter of a
taxable year over 25% of the average of the amounts of total assets held by the
corporation at such times. For calendar year 1993, the maximum rate applicable
to domestic corporations is 35%.

Ampal is entitled to claim as a credit against its United States income tax
liability all or a portion of income taxes, or of taxes imposed in lieu of
income taxes, paid to foreign countries. If Ampal receives dividends from a
foreign corporation in which it owns 10% or more of the voting stock, in
determining total foreign income taxes paid by Ampal for purposes of the foreign
tax credit, Ampal is treated as having paid the same proportion of the foreign
corporation's post-1986 foreign income taxes as the amount of such dividends
bears to the foreign corporation's post-1986 undistributed earnings.

In general, the total foreign tax credit that Ampal may claim is limited to
the proportion of Ampal's United States income taxes that its foreign source
taxable income bears to its taxable income from all sources, foreign and
domestic. The Internal Revenue Code of 1986, as amended (the "Code"), also
limits the ability of Ampal to offset its United States tax liability with
foreign tax credits by subjecting various types of income to separate
limitations. Source of income and deduction rules may further limit the use of
foreign taxes as an offset against United States tax liability. As a result of
the operation of these rules, Ampal may choose to take a deduction for foreign
taxes in lieu of the foreign tax credit.

Ampal may be subject to the alternative minimum tax ("AMT") on
corporations. Generally, the tax base for the AMT on corporations is the
taxpayer's taxable income increased or decreased by certain adjustments and tax
preferences for the year. The resulting amount, called alternative minimum
taxable income, is then reduced by an exemption amount and subject to tax at a
20% rate. As with the regular tax computation, AMT can be offset by foreign tax
credits (separately calculated under AMT rules and generally limited to 90% of
AMT liability as specially computed for this purpose).

In connection with the transfer in 1992 of its stock in Granite to a
foreign subsidiary, Ampal entered into a gain recognition agreement with the
Internal Revenue Service. Under this agreement, if the foreign subsidiary sells
all or a portion of its stock in Granite before 2003, Ampal generally will be
required to recognize for tax purposes a proportionate amount of gain based upon
the fair market value of the stock in Granite on the date of the transfer to the
foreign subsidiary, and to pay tax due in respect of such gain together with
interest accrued on such tax since the date of the gain recognition agreement.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO UNITED STATES HOLDERS OF UNITS

The following is a brief summary, based on current law, of certain Federal
income tax consequences associated with the acquisition, holding and disposition
of the Units and the Class A Stock and
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Warrants included in the Units by a holder who is a United States person. A
"United States person" means a citizen or resident of the United States, a
corporation or partnership created or organized under the laws of the United
States or of any state, or an estate or trust the income of which is includible
in gross income for United States federal income tax purposes regardless of its
source. This discussion assumes that the Units are held as capital assets and
does not address all aspects of United States Federal income tax that may be
relevant to a United States holder of Units in light of his or her specific
circumstances. Accordingly, prospective investors are urged to consult their own
tax advisors with respect to the particular tax consequences to them of
acquiring, holding and disposing of the Units, the Class A Stock or the Warrants
as well as any tax consequences that may arise under the laws of any foreign,
state, local or other taxing jurisdiction to which they may be subject.

For Federal income tax purposes, the issue price of a Unit must be
allocated between the Class A Stock and the Warrant included in the Unit in
proportion to their respective fair market values at the time of issuance. The
amount allocated to each component in the Unit will constitute the tax basis of
that component. Upon exercise of a Warrant, the basis of the Warrant plus the
amount paid on the exercise of the Warrant will be the basis of the new share of
Class A Stock issued.

No gain or loss will be recognized by a holder of a Warrant upon exercising
the Warrant (nor will Ampal recognize any income upon exercise). The holding
period of a share of Class A Stock acquired upon the exercise of a Warrant will
commence upon the exercise date of the Warrant. Any gain or loss recognized by a
holder upon the sale of Class A Stock or a Warrant generally will constitute a
capital gain or capital loss. Any loss recognized upon the lapse of a Warrant
generally will constitute a capital loss.

CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO FOREIGN HOLDERS OF UNITS

The following is a general discussion, based on current law, of certain
United States federal income and estate tax consequences associated with the
acquisition, holding and disposition of the Units and the Class A Stock and
Warrants included in the Units by a holder who, for United States federal income
tax purposes, is not a United States person (a "Foreign Holder") or who, for
United States federal estate tax purposes, is neither a citizen of nor resident
in the United States. This discussion does not address all aspects of United
States federal tax that may be relevant to Foreign Holders in light of their
specific circumstances, or the United States federal tax consequences of an
investment by a Foreign Holder in a United States corporation or partnership
that acquires, owns or disposes of Units or of the Class A Stock and Warrants
included in the Units. Prospective investors are urged to consult their own tax
advisors with respect to the particular tax consequences to them of acquiring,
holding and disposing of the Units, the Class A Stock or the Warrants, as well
as any tax consequences that may arise under the laws of any foreign, state,
local or other taxing jurisdiction to which they may be subject.

Dividends

Dividends paid to a Foreign Holder generally will be subject to withholding
of United States federal income tax at the rate of 30% (or a lower rate
prescribed by an applicable income tax treaty) unless such dividends are
effectively connected with the conduct of a trade or business within the United
States by the Foreign Holder, in which case the dividends generally will be
subject to United States federal income tax on a net basis in a manner similar
to dividends paid to a United States person. Such effectively connected
dividends received by corporate Foreign Holders may also be subject to the 30%
United States branch profits tax that is imposed with respect to a foreign
corporation's earnings and profits that are effectively connected with its
conduct of a trade or business within the United States, as reduced or increased
by any increase or decrease, respectively, in such foreign corporation's United
States net equity. Different rules from those described above may be provided by
an applicable income tax treaty. A Foreign Holder will be required to satisfy
certain certification requirements in order to obtain any reduction of, or
exemption from, United States withholding taxes under the foregoing rules.

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Gain on Disposition

Subject to special rules applicable to individuals, described in the next
paragraph, a Foreign Holder generally will not be subject to United States
federal income tax with respect to any gain realized upon the sale or other
disposition of Class A Stock or a Warrant except to the extent that (i) the gain
is (or is treated under the sourcing rules as) effectively connected with the
conduct of a trade or business within the United States by the Foreign Holder
("effectively connected income") or (ii) the gain is treated as effectively
connected income because Ampal is, was or becomes a "United States real property
holding corporation" for United States federal income tax purposes and certain
other requirements are met. Ampal has not been, and is not expected to become, a
United States real property holding corporation. Any gain that is (or is treated
as being) effectively connected income normally will not be subject to United
States withholding taxes, but will be subject to United States federal income
tax at the rates which would be applicable to such gain in the hands of a United
States person (and possibly, with respect to corporate holders, the branch
profits tax). Applicable income tax treaties may provide for reduction or
elimination of the United States tax to which such gain may be subject.

In addition to the rules described above, an individual Foreign Holder who
is not engaged in a United States trade or business and who holds Class A Stock
or a Warrant as a capital asset generally will be subject to tax at a 30% rate
on gain realized on the disposition of such asset if such individual is present
in the United States for 183 days or more in the taxable year of disposition and
has a "tax home" in the United States.

Federal Estate Tax

The United States federal estate tax generally is imposed on the value of
property, subject to certain deductions, owned by an individual who is neither a
citizen nor a resident (as defined for United States federal estate tax
purposes) of the United States at the date of death, to the extent such property
is situated or treated as situated in the United States. The federal estate tax
is imposed at graduated rates ranging from 18% to 55% and is reduced by a credit
that exempts the first $60,000 of the "United States taxable estate." Class A
Stock or a Warrant owned or treated as owned by an individual who is neither a
citizen nor a resident of the United States at the date of death will be
included in the individual's United States taxable estate for federal estate tax
purposes, subject to the terms of any applicable estate tax treaty.

Information Reporting and Backup Withholding

Ampal or its designated paying agent (the "payor") must report annually to
the Internal Revenue Service and to each Foreign Holder the amount of dividends
paid to, and the tax, if any, withheld with respect to, such Foreign Holder.
This information might also be required to be made available to the tax
authorities of the country in which a Foreign Holder resides.

The 31% United States federal backup withholding tax, which generally is
levied against certain payments to persons who fail to furnish certain
identifying information to the payor, generally will not apply to dividends paid
to a Foreign Holder at an address outside the United States. The backup
withholding tax and information reporting requirements will apply, however, to
the payment to a Foreign Holder of the gross proceeds of disposition of Class A
Stock or (other than upon exercise) of a Warrant by or through a United States
office of a United States or foreign broker, unless the Foreign Holder either
(i) certifies to the broker under penalties of perjury as to its name, address
and status as a Foreign Holder and certain other matters, or (ii) the Holder
otherwise establishes an exemption. Under certain circumstances, the foreign
office of a United States or foreign broker may also be subject to the backup
withholding tax and information reporting requirements applicable to the payment
to a Foreign Holder of the proceeds of a disposition of Class A Stock or a
Warrant. Any amounts withheld under the backup withholding rules will be
refunded or credited against a Foreign Holder's United States federal income tax
liability, provided that required information is furnished to the Internal
Revenue Service.

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MANAGEMENT

The following table sets forth certain information regarding Ampal's
directors and executive officers:

NAME POSITION
- ------------------------------------------ ----------------------------------
Michael Arnon(1).......................... Chairman of the Board and Director
Lawrence Lefkowitz(1)..................... President, Chief Executive Officer
and Director
Moshe Mor................................. Vice President--Israel Operations
Alan L. Schaffer.......................... Vice President--Finance and
Treasurer
Alla Kanter............................... Controller
Michael K. Marks.......................... Secretary
Miri Lent................................. Assistant Vice President--Israel
Operations
Susan Rosenberg........................... Assistant Treasurer
Yair Youtzis.............................. Assistant Vice President--Hotel
Operations
Harry B. Henshel.......................... Class A Director
Leon Riebman(2)........................... Class A Director

Evelyn Sommer(1)(2)(3).................... Class A Director

Stanley Batkin(1)(3)...................... Director
Yaacov Elinav(1)(4)....................... Director
Eitan Raff(1)(3).......................... Director
Shimon Ravid(4)........................... Director
Alexander Yuhjtman(1)(2)(4)............... Director

- ---------------

(1) Member of the Executive Committee

(2) Member of the Audit Committee

(3) Member of the Related Party Transactions Committee

(4) Member of the Stock Option Committee

MICHAEL ARNON, 68, has been Chairman of the Board of Directors of Ampal
since November 1990. From July 1986 until November 1990, he was President and
Chief Executive Officer of Ampal. From March 1983 until April 1990 he also
served as a director of Israel Continental Bank Ltd., a partially-owned
subsidiary of Hapoalim, where he had been an Alternative Chairman of the Board
until 1987. He became a director of Ampal in 1986.

LAWRENCE LEFKOWITZ, 55, has been President and Chief Executive Officer of
Ampal since November 1990. He joined Ampal in 1977 as Vice President-Legal and
Secretary. In August 1990 he also became Counsel to Hapoalim in charge of the
Legal Department for the United States Branches. He became a director of Ampal
in 1990. See "Certain Transactions."

MOSHE MOR, 58, has been Vice President-Israel Operations of Ampal since
1986. He is primarily responsible for reviewing and negotiating business
opportunities presented to the Company. From 1975 to 1985, he was Chief
Financial Officer of Zim Israel Navigation Company Limited.

ALAN L. SCHAFFER, 51, has been Vice President-Finance and Treasurer since
August 1990. From December 1988 until then, he was Vice President-Accounting and
Controller of Ampal. From 1984 to 1988 he was Controller of Ampal and has been
employed by Ampal since 1983. From 1976 to 1982 he was Senior Financial Advisor
at The New York Stock Exchange.

ALLA KANTER, 36, has been Controller of Ampal since August 1990. From
January 1986 to August 1990 she served as Assistant Controller of Ampal.

MICHAEL K. MARKS, 29, has been Secretary of Ampal since December 1992 and
has been employed by Ampal since August 1992. From January 1992 until July 1992
he was an attorney for the law firm of Weitz and Luxenberg, P.C. From August
1988 until May 1991 he attended Emory University School of Law.

MIRI LENT, 37, has been Assistant Vice President-Israel Operations of Ampal
since July 1988 and has been employed by Ampal (Israel) for more than five
years.

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SUSAN ROSENBERG, 49, has been Assistant Treasurer of Ampal since November
1990 and has been employed by Ampal for more than five years.

YAIR YOUTZIS, 56, has been Assistant Vice President-Hotel Operations of
Ampal and Managing Director of Moriah for more than five years.

HARRY B. HENSHEL, 74, has been Chairman of the Board of Bulova Corporation
since 1974. He also serves as Chairman of the Chief Executives Council of Omega
Group since 1990 and as a Director of the Ponce Hotel Corporation for more than
20 years and the Universal Holdings Corp. since 1993. He is a member of the
advisory Board of the New York State Business Partnership for more than 5 years
and a Trustee of the New York Backstretch Employees Pension Trust for more than
10 years. He became a director of Ampal in September 1993.

LEON RIEBMAN, 73, is Chairman and Chief Executive Officer and a director of
AEL Industries, Inc., an electronic defense system manufacturer, for more than
five years. He is also a director of the Bank and Trust Company of Old York
Road. He became a director of Ampal in 1979.

EVELYN SOMMER, 54, has been President of Women's International Zionist
Organization-USA, and a representative of Women's International Zionist
Organization to the United Nations for more than five years, and has been
Chairman, American Section of the World Jewish Congress, since December 1990.
She became a director of Ampal in 1982.

STANLEY BATKIN, 79, served on the Board of Directors of Ampal Industries
from 1983 until 1990 and was a member of its Executive Committee from 1986 until
1990. He became a director of Ampal in 1991.

YAACOV ELINAV, 49, has been a Senior Deputy Managing Director of Hapoalim
since August 1992 and a Member of the Board of Management of Hapoalim since
October 1991. From October 1991 to August 1992, he was a Deputy Managing
Director of Hapoalim. From October 1988 to October 1991, he was head of the
corporate division of Hapoalim. From 1983 to October 1988 he was Manager of the
New York Branches of Hapoalim. He became a director of Ampal in July 1992. See
"Certain Transactions."

EITAN RAFF, 52, has been Alternate Chairman of the Board of Maritime Bank
since November 1992, where he had been Chairman of the Board from August 1988
until November 1992. He also serves as a Director of Wolfson Clore Mayer Ltd., a
diversified investment company, where he had been Managing Director from July
1987 until April 1992 and as Chairman of Mirage Development Ltd., Yozma Venture
Capital Ltd. and Karta Jerusalem Development Centre. He became a director of
Ampal in 1987.

SHIMON RAVID, 57, has been Senior Deputy Managing Director of Hapoalim
since October 1989. From February 1988 until June 1989 he was Chief Financial
and Operating Officer of Koor Ltd. He became a director of Ampal in 1990. See
"Certain Transactions."

ALEXANDER YUHJTMAN, 58, has been Executive Vice President, Regional
Manager, Western Hemisphere of Hapoalim since October 1988. Prior thereto he was
in charge of Hapoalim's International Division. He served as a director of Ampal
from 1988 to 1989 and was reelected in 1990. See "Certain Transactions."

STOCK OPTION PLAN

Ampal's Board of Directors has approved the Stock Option Plan which is
subject to shareholder approval and which provides for grants of options to
purchase up to 200,000 shares of Class A Stock in the aggregate to employees,
officers and directors of Ampal and certain subsidiaries of Ampal. Options
granted under the Stock Option Plan may be either options which are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Code ("ISOs"), or options that are not intended to so qualify ("Non-ISOs"). The
Stock Option Plan's effectiveness is subject to the approval of Ampal's
shareholders.

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The Stock Option Plan is administered by the Board of Directors or by a
Stock Option Committee thereof (the "Committee") consisting exclusively of
directors who are "disinterested persons." The Board of Directors (or the
Committee) determines, subject to the terms of the Stock Option Plan, the
individuals to whom options are to be granted and the terms of the options,
including the exercise price, number of shares subject to each option, whether
the option is to qualify as an ISO and the vesting of rights to exercise each
option.

The exercise price of each ISO granted under the Plan must be not less than
the fair market value of the shares on the date of grant or 110% of the fair
market value on the date of grant if the ISO grantee owns stock representing
more than 10% of the voting power of Ampal's capital stock or value of all
classes of stock of Ampal or a subsidiary corporation. The exercise price of
each Non-ISO granted under the Stock Option Plan, which may be less than fair
market value on the date of grant, will be fixed by the Board of Directors (or
the Committee) at the time the Non-ISO is granted.

The Board of Directors (or the Committee) shall determine the dates on
which each option shall be exercisable and the conditions precedent to such
exercise. However, all options, other than those granted to non-employee
directors of Ampal, must not be exercisable prior to the second anniversary of
their date of grant. Options granted to non-employee directors of Ampal shall be
exercisable immediately upon grant. The terms of options granted under the Stock
Option Plan may not exceed five years.

The aggregate fair market value, determined at the date of grant, of shares
that may first become exercisable in any calendar year under all ISOs granted to
any one employee under any plans of Ampal or a subsidiary may not exceed
$100,000.

CERTAIN TRANSACTIONS

The Board of Directors of Ampal maintains a Related Party Transactions
Committee comprised of independent directors which, on an annual basis, reviews
and passes upon the fairness of any business dealings and arrangements (other
than borrowings on then prevailing market terms or deposits made in the ordinary
course of business) between the Company and Hapoalim or any other affiliated
party. If the Committee determines that such dealings are no longer in the
Company's best interests or involve terms less advantageous to the Company than
could be obtained from unaffiliated third parties, Ampal will use its best
efforts to modify or discontinue such arrangements. With certain exceptions, the
Company may not enter into transactions with Hapoalim or its affiliates, or any
officer, director or principal stockholder of the Company, without first
obtaining the approval of the Related Party Transactions Committee.

The management of the Company believes that all of the following
transactions were done on terms which were no less advantageous to the Company
than could have been obtained from unaffiliated third parties.

The Company borrows and receives deposits from Hapoalim and its
subsidiaries. During 1992 the largest amount of such indebtedness outstanding at
any one time was $60,245,000. The amount of interest expense paid by the Company
to Hapoalim was $5,536,000. Additionally, the Company makes loans to and
maintains deposits with Hapoalim and its subsidiaries. The largest amount of
such loans and deposits at any one time during 1992 was $183,297,000 and
interest income thereon was $16,180,000. As of December 31, 1992, the amount of
borrowings and deposits from Hapoalim and its subsidiaries was $51,015,000 and
the amount of loans to and deposits with Hapoalim and its subsidiaries was
$131,002,000. Ampal is the beneficiary of a $10 million committed line of credit
from Hapoalim which expires in October 1994. Borrowings under this line of
credit bear interest at a variable rate of interest equal to LIBOR plus 1/2%.
Such loans and borrowings are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other unrelated persons and, in the opinion of the management
of the Company, do not involve more than normal risk of collectibility or
present other unfavorable features. Hapoalim also guarantees
48
<PAGE>
loans secured by the Holding Companies which were made by them prior to their
ceasing lending activity.

In 1987, Hapoalim issued a guarantee in favor of an unrelated bank which
extended a $10,000,000 five-year loan to Ampal which matured on October 30,
1992. The annual guarantee fee paid by Ampal equalled one-half of one percent of
the outstanding loan balance plus interest due thereon.

For purposes of tax planning for the Company, Ampal Finance assigned a
$13,000,000 deposit with the Accountant General of Israel maturing in 2002 and a
similar deposit received from Hapoalim to Hapoalim, thereby foregoing a 0.2%
margin on the transaction. The amount of this margin was equal to approximately
$26,000 in 1992, which is less than the tax benefits to the Company attributable
to this transaction, and gradually decreases thereafter.

Ampal currently occupies executive office space leased by Hapoalim at 1177
Avenue of the Americas, New York City and will pay Hapoalim base rent of
approximately $168,000 per year commencing in September 1994, subject to
escalation. Ampal has space located at 10 Rockefeller Plaza subleased until
September 30, 1994 from Hapoalim for an annual rental, subject to escalation.
The rental payments for 1992 amounted to approximately $184,000. Until November
1990, Ampal occupied the entire floor, constituting 10,710 square feet. At that
time, Ampal modified the sublease to return 65% of that space to Hapoalim, which
then subleased it to an unrelated party subject to Ampal's guarantee of total
rent payments equivalent to the rent previously paid under Ampal's sublease in
the event the third party defaults.

The Company leases office space in various locations in the United States
and Israel to Hapoalim and its subsidiaries in exchange for total annual rental
payments of approximately $3,576,000. These lease transactions consist of the
following:

Hapoalim leases a portion of premises owned by Ampal located
at 105 Arlozoroff Street, Tel Aviv under a lease which expires March 7, 2003,
with annual rental payments based upon 11% of the cost of the property. The
annual rent for the premises is approximately $352,000.

Hapoalim leases premises owned by Ampal (Israel), located at 111 Arlozoroff
Street, Tel Aviv under a nine-year lease which expires on September 30, 2000,
with annual rental payments based upon 10% of the value of the property linked
to the CPI. In 1993, Ampal (Israel) received $220,000 as rent for these
premises.

Ampal Development (Israel) owns two premises located in Tel Aviv
aggregating approximately 17,000 square feet which were leased to Hapoalim for
use as branch offices. These leases expire December 31, 1996 (with options to
extend the lease term through December 31, 2002). The rental received from
Hapoalim in 1993 on these premises was $326,000.

Ampal Development (Israel) owns two offices aggregating approximately
16,500 square feet, located in Holon and Haifa, which are leased to Hapoalim for
use as branch offices under nine-year leases which expire on September 30, 2000.
Annual rental payments are equal to approximately 10% of the cost of the
property linked to the CPI. Ampal Development (Israel) received $705,000 as rent
for these premises during 1993.

An Ophir subsidiary has rented three properties in Israel to Hapoalim or
subsidiaries of Hapoalim for periods of up to ten years with the annual rental
payments at market rates. The aggregate rentals received by this Ophir
subsidiary for 1993 with respect to these properties was approximately $750,000.

Ampal Finance has rented premises in Ramat Hasharon and Rosh Pina to
Hapoalim under nine-year leases expiring September 30, 2000, with the annual
rental payments based upon 10% of the cost of the premises linked to the CPI.
The rental received in 1993 for these premises was $469,000.

Nir has rented two premises to Hapoalim, one in Tel Aviv for nine years and
one in B'nai Brak for five years (with an option to extend the lease for a
period of four years and eleven months), with the annual rental payments based
upon 10% of the cost of the premises linked to the CPI. The lease on the
premises in Tel Aviv expires on September 30, 2000, and the lease on the
premises in B'nai Brak expires
49
<PAGE>

on July 10, 1997 (on June 10, 2002, if the option is exercised). The rental
received in 1993 for these premises was $377,000.

Ampal leases an office building located at 174 North Michigan Avenue,
Chicago, Illinois to Hapoalim under a twenty-year net lease expiring in 2007 for
a net rental of $140,000 per year. At the conclusion of the term, Ampal has the
option of requiring Hapoalim to purchase the building at its then fair market
value.

Under agreements initially made in 1984 and extended in 1989, Ophir
separately leases a hotel and parking area in Herzelia, Israel from an unrelated
party. Ophir subleases these properties to Hapoalim on terms identical to those
it pays. The rental received in 1993 for these premises was approximately
$250,000.

Until November 1993, Ampal owned 60% of the voting shares and 49.4% of the
equity interest in Ophir, and the balance was owned by a Hapoalim affiliate. In
November 1993, the two shareholders' interests in Ophir were equalized. In
connection with the equalization, the Company obtained a fairness opinion from
an independent investment consultant. Concurrently, 15% of the shares in Ophir
were issued to another Hapoalim affiliate for approximately $10.2 million. As a
result, Ophir is now 42.5% owned by Ampal and its results will not be
consolidated in the Company's financial statements after September 30, 1993.

Ophir and the other Hapoalim affiliate shareholder in the holding company
that purchased 51.3% of the shares in Industrial Buildings have together pledged
their shares in this company and this company's shares in Industrial Buildings
to secure borrowings from unaffiliated lenders to finance the acquisition.
Moreover, loans from Hapoalim to an unaffiliated shareholder in this holding
company are also collateralized by shares in Industrial Buildings owned by the
holding company and, under cross-default provisions, a default by any of the
shareholders in the holding company could cause acceleration of Ophir's
obligations, and, potentially, foreclosure on the Industrial Buildings shares
held by this holding company.

Ophir, which has no employees, pays to another Hapoalim affiliate a
management fee of approximately $50,000 per year for administrative services.
Moreover, under a recent agreement among Ophir's three shareholders, Ophir has
agreed to pay annually to each of Ampal and a Hapoalim affiliate shareholder of
Ophir an additional management fee of approximately $85,300 in NIS linked to the
dollar.

Poalim Capital Markets and Investments Ltd., an affiliate of Hapoalim, is
participating in the International Offering as an International Manager on terms
identical to the other International Managers and served as an underwriter of
the public offerings of Granite, Orlite and Teledata.

In connection with Ampal's purchases in 1992 and 1993 of 7.2% of DSP Group,
the Company granted a Hapoalim subsidiary, an option to purchase, and the
Hapoalim subsidiary granted Ampal an option to sell, 50% of Ampal's interest in
the DSP Group for $1.1 million, the same purchase price the Company paid, plus
interest. In October 1993, the Hapoalim subsidiary exercised its option to
purchase this interest.

In February 1992, Gmul Investment Company Ltd., an affiliate of Hapoalim,
purchased 20% of Moriah for approximately $12.5 million. As a result of this
transaction, the Company's interest in Moriah was diluted from 57.5% to 46%.

In 1991, the Company agreed that its third lien on certain assets of Pri
Ha'emek would rank behind the lien of Hapoalim on those assets.

The services of Mr. Lefkowitz are shared by Ampal and Hapoalim pursuant to
an arrangement renewable semi-annually whereby Hapoalim reimburses Ampal for a
portion of his compensation. Hapoalim paid $75,000 with respect to services
provided under this arrangement for the first nine months of 1993. During 1992,
Hapoalim reimbursed Ampal $151,000 for the services of Mr. Lefkowitz and two
other Ampal employees under the arrangement.

50
<PAGE>
Ampal owns $2 million of 7% preferred shares of Cayman. An equivalent
amount of 7% preferred shares in Cayman is expected to be issued to Hapoalim for
$2 million.

DESCRIPTION OF SECURITIES

UNITS

The Class A Stock and Warrants offered hereby will be sold only in Units.
Each Unit consists of one share of Class A Stock and one Warrant. The Warrants,
which will be in registered form, will be issued pursuant to a warrant agreement
dated as of , 1994 (the "Warrant Agreement") between Ampal and Chemical
Bank, as warrant agent ("Warrant Agent"). No Units or Warrants have been issued
prior to the Offerings.

The Class A Stock and Warrants will not be separately transferable prior to
, 1994 or such earlier date as may be determined by the
Representatives of the U.S. Underwriters and International Managers (the
"Separation Date"). Prior to the Separation Date, the certificates representing
the Warrants will also represent the shares of Class A Stock in the Units. On or
after the Separation Date, the Class A Stock and Warrants comprising the Units
will only be separately transferable and will not be transferable as Units.
Certificates evidencing the shares of Class A Stock in the Units will be issued
to the holders of record of the Units on the Separation Date or as soon as
practicable after the Separation Date.

The Company's Class A Stock is currently listed on the AMEX. The Units and
the Warrants have been authorized for listing on the AMEX, subject to official
notice of issuance.

CAPITAL STOCK

The authorized capital stock of Ampal currently consists of 30,000,000
shares of Class A Stock, par value $1.00 per share, 4,932,850 shares of
Preferred Stock, par value $5.00 per share and 3,000,000 shares of Common Stock,
par value $1.00 per share. There are two outstanding series of Preferred Stock,
the 4% Preferred Stock and the 6 1/2% Preferred Stock.

Voting Rights

Unless dividends on any outstanding Preferred Stock are in arrears for
three successive years, as discussed below, 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, a right to elect the Class A Directors. Other than in the
election of Class A Directors, the holders of Common Stock, voting as a class,
are entitled to 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, unless dividends on any outstanding series of Preferred
Stock are in arrears for three successive years in which case 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. The shares of Common Stock and Class A
Stock do not have cumulative voting rights, which means that any holder or
holders, acting in concert, of more than 50% of the Common Stock can, if such
person or persons owns at least one share of Class A Stock, elect all of the
directors other than the Class A Directors if that person or persons chooses to
do so.

Dividend Rights

Dividends on all classes of Ampal's shares are payable as a percentage of
par value. The holders of Ampal's presently authorized and issued 4% Preferred
Stock and 6 1/2% Preferred Stock (each having a $5.00 par value) are entitled to
receive cumulative dividends at the rates of 4% and 6 1/2% per annum,
respectively, payable out of surplus or net earnings of Ampal before any
dividends are paid on the Common Stock or Class A Stock. If Ampal fails to pay
such dividend on the Preferred Stock in any calendar year, such deficiency must
be paid in full, without interest, before any dividends may be paid
51
<PAGE>
on the Class A Stock or Common Stock. After the payment of all cumulative
dividends on the Preferred Stock and a 4% dividend on the Class A Stock (par
value $1.00 per share), the Board may, but is not required to, declare dividends
out of any remaining surplus or net earnings of Ampal, which dividends are
participated in by the holders of 4% Preferred Stock and Class A Stock to the
extent of an additional 8% each, before the holders of the Common Stock are
entitled to receive any dividends. If after the payment of the aforesaid
dividends on the Preferred Stock and Class A Stock there remains any surplus,
the Board may, but is not required to, declare dividends out of any remaining
surplus in an amount of up to 12% on the Common Stock. If, thereafter, there
remains any surplus, any dividends declared are to be participated in by the
holders of 4% Preferred Stock, Class A Stock and Common Stock, pro rata.

Liquidation Rights

In the event of liquidation, dissolution or winding up of Ampal, the
holders of the Preferred Stock will be entitled to receive an amount equal to
the share's par value ($5.00 per share), sharing pari passu, together with
accrued dividends to the date of payment, before any distribution or payment may
be made to the holders of Class A Stock, Common Stock or any other stock ranking
junior to the Preferred Stock. After the holders of Preferred Stock, Class A
Stock and Common Stock are paid the par value of their shares (plus accrued
dividends), holders of 4% Preferred Stock, Class A Stock and Common Stock share
ratably in the distribution of any remaining assets without regard to class of
stock, on the basis of the number of shares held multiplied by the par value
thereof.

Preemptive Rights and Redemption Provisions

No holder of any class of shares of Ampal, now or hereafter authorized, has
any preferential or preemptive right to subscribe for, purchase or receive any
shares of any class of Ampal, or any options or warrants for such shares, or any
rights to subscribe to or purchase such shares or any securities convertible
into or exchangeable for, or carrying options or warrants for, or other rights
to purchase, such shares, which may at any time be issued, sold or offered for
sale by Ampal.

There are no redemption provisions relating to the Class A Stock.

Conversion Rights

Ampal's Preferred Stock may be authorized and issued in such series and
with such designations, preferences and privileges as may be determined by its
Board. There are presently authorized and issued two classes of Preferred Stock.
The 4% Preferred Stock and 6 1/2% Preferred Stock are convertible at any time
into fully paid and non-assessable shares of Class A Stock at the rate of five
shares of Class A Stock for each share of 4% Preferred Stock and three shares of
Class A Stock for each share of 6 1/2% Preferred Stock. The Class A Stock and
Common Stock have no conversion rights.

Special Provisions Relating to Class A Stock

So long as the Class A Stock is listed on the AMEX, Ampal is not permitted
to issue any other class of security having voting rights which would (i)
deprive the Class A Stock of its right, voting as a class, to elect the Class A
Directors, (ii) have the right to vote, as a class, more than ten times the
number of shares of such other class of security then outstanding and entitled
to vote or (iii) have voting rights which would otherwise adversely affect the
voting rights of the Class A Stock. The authorization or issuance of additional
Class A Stock or Common Stock or securities convertible into or exchangeable for
Class A Stock or Common Stock are not to be deemed to adversely affect the
voting rights of the holders of the Class A Stock.

Transfer Agent and Registrar

The transfer agent and registrar for the Class A Stock and the Units is
Chemical Bank, New York, New York.

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<PAGE>
WARRANTS

The Warrants will be issued under the Warrant Agreement, the form of which
has been filed as an exhibit to the Registration Statement and is incorporated
by reference herein. This description is qualified in its entirety by reference
thereto.

Exercise, Call and Rights

Each Warrant entitles the registered holder thereof to purchase one share
of Class A Stock at a price of per share, subject to adjustment (the
"Exercise Price"). The Warrants will be exercisable at any time after they are
separately transferable until the earlier of five business days preceding their
redemption date or their date of expiration, , 1999. Ampal has
authorized and reserved for issuance that number of shares of Class A Stock
sufficient to provide for the exercise of the Warrants. When delivered, such
shares of Class A Stock will be fully paid and nonassessable. No fractional
shares will be issued upon exercise of Warrants, but Ampal will pay the cash
value of any fractional shares otherwise issuable.

The Warrants are not callable by Ampal until two years after their date of
issuance. On or after , 1996 the Warrants are callable by Ampal, in
whole or in part, without payment to the holder. The Company is required under
the terms of the Warrant Agreement to mail to the holders of the Warrants notice
of any redemption at least 30 days prior to the date scheduled for such call.
The Warrants will be exercisable at any time after they are separately
transferrable to the earlier of their date of expiration or five business days
preceding their redemption date.

Warrants may be exercised by surrendering to the Warrant Agent a Warrant
certificate duly completed and signed by the registered holder indicating his or
her election to exercise all or a portion of the Warrants evidenced by such
certificate. Surrendered Warrant certificates must be accompanied by payment of
the aggregate Exercise Price of the Warrants to be exercised. Payment shall be
made in cash or by check.

The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the number of shares issuable thereunder in certain
events, such as stock dividends and splits and distributions of stock or assets.
Warrant holders are entitled to participate in rights, warrants or similiar
offerings made below market value by Ampal to all its Class A stockholders as if
the holders of Warrants were then holders of the Class A Stock underlying the
Warrants.

Dividend and Voting Rights

Holders of Warrants are not entitled, by virtue of being such holders, to
receive dividends or to consent or to receive notice as stockholders with
respect to any meeting of stockholders for the election of directors of Ampal or
any other matter, or to vote at any such meeting, or to exercise any right
whatsoever as stockholders of Ampal.

Transfer Agent and Registrar

The transfer agent and registrar of the Warrants is Chemical Bank.

The exercise price of the Warrants has been determined by negotiations
between the Company and the Representatives of the U.S. Underwriters and the
Lead Managers. The principal factors considered in determining these prices were
the market price of the Class A Stock, the Company's financial condition and
prospects, market prices of similar securities of certain other publicly traded
companies and the general condition of the securities market.

Warrants are generally more speculative than Class A Stock which is
purchasable upon the exercise thereof. A Warrant may become valueless, or of
reduced value, if the market price of the Class A Stock decreases or increases
only modestly over the term of the Warrant.

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<PAGE>
UNDERWRITING

The underwriters of the United States Offering of the Units (the "U.S.
Underwriters"), for whom Lehman Brothers Inc., Oppenheimer & Co., Inc. and
Furman Selz Incorporated are acting as representatives (the "Representatives"),
have severally agreed, subject to the terms and conditions of the U.S.
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement, to purchase from Ampal and Ampal has agreed to sell to
the U.S. Underwriters, the aggregate number of Units set forth opposite their
respective names below:

<TABLE> <CAPTION>
NUMBER OF
U.S. UNDERWRITERS UNITS
- ------------------------------------------------------------------------------------------ -----------
<S> <C>
Lehman Brothers Inc.......................................................................
Oppenheimer & Co., Inc....................................................................
Furman Selz Incorporated..................................................................

-----------
Total................................................................................
-----------
-----------
</TABLE>

The managers of the International Offering of the Units (the "International
Managers"), for whom Lehman Brothers International (Europe), Oppenheimer
International Ltd., Furman Selz Incorporated and Poalim Capital Markets and
Investments Ltd. are acting as lead managers (the "Lead Managers"), have
severally agreed, subject to the terms and conditions of the International
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement, to purchase from Ampal and Ampal has agreed to sell to
the International Managers, the aggregate number of Units set forth opposite
their respective names below:

<TABLE> <CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS UNITS
- ----------------------------------------------------------------------------------------- -----------
<S> <C>

Lehman Brothers International (Europe)...................................................
Oppenheimer International Ltd............................................................
Furman Selz Incorporated.................................................................
Poalim Capital Markets & Investments Ltd.................................................
Clal Issuing Ltd.........................................................................
Mizrahi Underwriting Company Ltd.........................................................
-----------
Total...............................................................................
-----------
-----------

</TABLE>

54
<PAGE>
The U.S. Underwriting Agreement and the International Underwriting
Agreement (collectively, the "Underwriting Agreements") provide that the
obligations of the several U.S. Underwriters and the International Managers to
purchase Units are subject to the certain conditions contained therein, and that
if any of the foregoing Units are purchased by the U.S. Underwriters pursuant to
the U.S. Underwriting Agreement or by the International Managers pursuant to the
International Underwriting Agreement, all the Units agreed to be purchased by
either the U.S. Underwriters or the International Managers, as the case may be,
pursuant to their respective Underwriting Agreements must be so purchased. The
offering price and underwriting discounts and commissions for the United States
Offering and the International Offering are identical. The closing of the United
States Offering is a condition to the closing of the International Offering and
the closing of the International Offering is a condition to the closing of the
United States Offering.

Ampal has been advised that the U.S. Underwriters and the International
Managers propose to offer the Units directly to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
selected dealers (who may include the U.S. Underwriters and the International
Managers) at such public offering price less a selling concession not in excess
of $ per Unit. The selected dealers may reallow a concession not in
excess of $ per Unit to certain brokers and dealers. After the
initial public offering, the public offering price, the concession to selected
dealers and the reallowance may be changed by the Representatives and the Lead
Managers.

The U.S. Underwriters and the International Managers have entered into an
Agreement between U.S. Underwriters and International Managers pursuant to which
each U.S. Underwriter has agreed that, as a part of the distribution of the
Units offered in the United States Offering, (a) it is not purchasing any such
Units for the account of anyone other than a U.S. person and (b) it has not
offered or sold, and will not offer, sell, resell or deliver, directly and
indirectly, any of such Units or distribute any prospectus relating to the
United States Offering to anyone other than a U.S. person. In addition, pursuant
to this same Agreement, each International Manager has agreed that, as part of
the distribution of the Units offered in the International Offering, (a) it is
not purchasing any of such Units for the account of any U.S. person and (b) it
has not offered or sold, and will not offer, sell or deliver, directly or
indirectly, any of such Units or distribute any prospectus relating to the
International Offering to any U.S. person. The foregoing limitations do not
apply to stabilization transactions or to certain other transactions specified
in the Underwriting Agreements and the Agreement between U.S. Underwriters and
International Managers, including (i) certain purchases and sales between the
U.S. Underwriters and the International Managers, (ii) certain offers, sales,
resales, deliveries or distributions to or through investment advisors or other
persons exercising investment discretion, (iii) purchases, offers or sales by a
U.S. Underwriter who is also acting as an International Manager or by an
International Manager who is also acting as a U.S. Underwriter and (iv) other
transactions specifically approved by the Representatives and the Lead Managers.

Pursuant to the Agreement between U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the International
Managers of such number of Units as may be mutually agreed. The price of any
Units so sold shall be the public offering price as then in effect for Units
being sold by the U.S. Underwriters and the International Managers, less an
amount not greater than the selling concession allocable to such Units. To the
extent that there are sales between the U.S. Underwriters and the International
Managers pursuant to the Agreement between U.S. Underwriters and International
Managers, the number of Units initially available for sale by the U.S.
Underwriters or by the International Managers may be more or less than the
amount specified on the cover page of this Prospectus.

Each International Manager has represented and agreed that (i) it has not
offered or sold, and will not offer or sell, in the United Kingdom, by means of
any documents, any Units other than to persons whose ordinary business it is to
buy or sell shares or debentures, whether as principal or agent (except under
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985); (ii) it has complied and will comply with all
applicable provisions of the Financial Services
55
<PAGE>
Act 1986 with respect to anything done by it in relation to the Units, the Class
A Stock and the Warrants in, from or otherwise involving the United Kingdom, and
(iii) it has only issued or passed on, and will only issue or pass on to any
person in the United Kingdom, any document received by it in connection with the
issue of the Units if that person is of a kind described in Article 9(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988.

No action has been taken in any jurisdiction by Ampal or the International
Managers that would permit a public offering of the Units offered pursuant to
the Offerings in any jurisdiction where action for that purpose is required,
other than the United States. Persons into whose possession this Prospectus
comes are required by Ampal and the International Managers to inform themselves
about and to observe any restrictions as to the offering of the Units offered
pursuant to the Offerings and the distribution of this Prospectus.

Purchasers of the Units offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover hereof.

Ampal granted to the U.S. Underwriters an option to purchase up to an
additional Units and the International Managers have been granted a
similar option to purchase up to an additional Units at the initial
public offering price less the aggregate underwriting discount, solely to cover
over-allotments if any. The options may be exercised at any time up to 30 days
after the date of this Prospectus. To the extent that the U.S. Underwriters or
the International Managers exercise such options, each of the U.S. Underwriters
or the International Managers, as the case may be, will be committed, subject to
certain conditions, to purchase a number of option Units proportionate to such
U.S. Underwriter's or International Manager's initial commitment.

Ampal and Hapoalim have agreed not to offer, sell or otherwise dispose of
any shares of Class A Stock for a period of 180 days after the date of this
Prospectus without prior written consent of the Representatives, except in the
case of Ampal in connection with certain permitted issuances described in the
Underwriting Agreements. Ampal has agreed to indemnify the U.S. Underwriters and
the International Managers against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Act"), or to contribute to
payments that the U.S. Underwriters and International Managers may be required
to make in respect thereof.

Prior to the Offerings there has been no public trading market for the
Units or the Warrants. Consequently, the initial public offering price of the
Units and the exercise price of the Warrants have been determined by
negotiations between Ampal and the Representatives of the U.S. Underwriters and
the Lead Managers. Among the factors considered in determining these prices were
the market price of the Class A Stock, Ampal's financial condition and
prospects, market prices of similar securities of certain other publicly traded
companies and the general condition of the securities market.

LEGAL MATTERS

The legality of the issuance of the Units offered hereby and the Class A
Stock and the Warrants comprising the Units will be passed on for Ampal by
Kronish, Lieb, Weiner & Hellman, New York, New York. In respect of certain legal
matters concerning the law of the State of Israel, Kronish, Lieb, Weiner &
Hellman will rely on the opinion of Meitar, Littman, Nechmad & Co., Ramat-Gan,
Israel. Certain legal matters will be passed upon for the Underwriters by
Fulbright & Jaworski L.L.P., New York, New York. In respect of certain legal
matters concerning the law of the State of Israel, Fulbright & Jaworski L.L.P.,
will rely on the opinion of Herzog, Fox & Neeman, Tel Aviv, Israel.

56
<PAGE>
EXPERTS

The Consolidated Financial Statements and schedules of the Company included
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,
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
referred to above have been included herein in reliance upon the authority of
those firms as experts in giving said reports. The Financial Statements of
Industrial Buildings included in this Prospectus, to the extent and for the
periods indicated in their reports with respect thereto, have been audited by
Kost, Levary and Forer, certified public accountants (Israel). The Financial
Statements of Industrial Buildings have been included herein in reliance upon
the authority of such firm as experts in giving said reports.

AVAILABLE INFORMATION

Ampal has filed a Registration Statement on Form S-2 under the Act, with
the Commission with respect to the Offerings. As permitted by the rules and
regulations of the Commission, this Prospectus omits certain of the information
contained in the Registration Statement. For further information with respect to
the Company and the Units being offered by this Prospectus, reference is hereby
made to such Registration Statement, including the exhibits 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, and in accordance therewith, files reports and
other information with the Commission. Reports, proxy statements and other
information filed by the Company 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 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:

(1) Annual Report on Form 10-K for the fiscal year ended December 31,
1992;

(2) Quarterly Reports on Form 10-Q, as amended, for the quarters ended
March 31, 1993 and June 30, 1993 and on Form 10-Q for the quarter ended
September 30, 1993.

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 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).

57
<PAGE>
INDEX TO FINANCIAL INFORMATION

PAGE
----------
Ampal-American Israel Corporation and Subsidiaries:
Report of Independent Public Accountants........................ F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1990, 1991 and 1992 and for the Nine Months
Ended September 30, 1992 (unaudited) and 1993 (unaudited)... F-3
Consolidated Balance Sheets as at December 31, 1991 and 1992
and as at September 30, 1993 (unaudited).................... F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1990, 1991 and 1992 and for the Nine Months
Ended September 30, 1992 (unaudited) and 1993 (unaudited)... F-5
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 1990, 1991 and 1992........ F-6
Notes to Consolidated Financial Statements................... F-7 - F-16
Selected Quarterly Financial Data (unaudited)..................... F-17
Representative Rates of Exchange Between the U.S. Dollar and the
New Israeli Shekel for the Years Ended December 31, 1990, 1991
and 1992 and for the nine months ended September 30, 1993....... F-18
Industrial Buildings Corporation Limited:
Report of Independent Auditors.................................. F-19
Consolidated Financial Statements:
Balance Sheet as at December 31, 1991 and 1992............... F-20
Statement of Income for the Years Ended December 31, 1990,
1991 and 1992............................................... F-21
Statement of Changes in Shareholders' Equity for the Years
Ended December 31, 1990, 1991 and 1992...................... F-22
Statement of Cash Flows for the Years Ended December 31,
1990, 1991 and 1992......................................... F-23
F-24 -
Notes to Financial Statements................................ F-49
Balance Sheet as at December 31, 1992 and September 30, 1993
(unaudited)................................................. F-50
Statement of Income for the Nine Months Ended September 30,
1992 (unaudited) and 1993 (unaudited)....................... F-51
Statement of Changes in Shareholders' Equity for the Nine
Months Ended September 30, 1993 (unaudited)................. F-52
Statement of Cash Flows for the Nine Months Ended September
30, 1992 (unaudited) and 1993 (unaudited)................... F-53
F-54 -
Notes to Unaudited Financial Statements...................... F-56
Ampal-American Israel Corporation Pro Forma Financial Statements:
Introduction to Pro Forma Financial Statements.................. F-57
Pro Forma Consolidated Statement of Income for the Nine Months
Ended September 30, 1993 (unaudited)......................... F-58
Pro Forma Consolidated Balance Sheet as at September 30, 1993
(unaudited).................................................. F-59
Notes to Pro Forma Consolidated Financial Statements............ F-60
Pro Forma Consolidated Statement of Income for the Year Ended
December 31, 1992 (unaudited)................................ F-61
Notes to Pro Forma Consolidated Financial Statements............ F-62

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
AMPAL-AMERICAN ISRAEL CORPORATION:

We have audited the accompanying consolidated balance sheets of
Ampal-American Israel Corporation and subsidiaries (the "Company") as of
December 31, 1992 and 1991, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1992. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of certain consolidated subsidiaries, which statements
reflect assets and revenues of 29% and 56%, respectively, of the consolidated
totals as of and for the year ended December 31, 1992, 23% and 53%,
respectively, of the consolidated totals as of and for the year ended December
31, 1991 and 13% and 38%, respectively, of the consolidated totals as of and for
the year ended December 31, 1990. Also, we did not audit the financial
statements of certain companies, the investments in which are reflected in the
accompanying financial statements using the equity method of accounting. The
Company's equity in earnings of these companies represents $11,167,000,
$5,436,000 and $5,322,000 for the years ended December 31, 1992, 1991 and 1990,
respectively. The statements of these subsidiaries and companies were audited by
other auditors whose reports have been furnished to us and our opinion, insofar
as it relates to the amounts included for these entities, is based solely on the
reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Ampal-American Israel Corporation and subsidiaries as
of December 31, 1992 and 1991, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1992, in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN & CO.

New York, N.Y.
March 18, 1993

F-2
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE> <CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30
-------------------------------- --------------------
1990 1991 1992 1992 1993
---------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Interest:
Related parties....................................... $ 15,672 $ 23,732 $ 17,058 $ 14,008 $ 11,801
Others................................................ 41,510 3,528 1,555 2,366 1,091
Food processing (Note 2)................................ -- -- 31,482 26,469 24,221
Hotel and leisure-time operations (Note 2).............. 39,521 28,719 -- -- --
Manufacturing and distribution (Note 14(a))............. -- -- -- -- 2,314
Equity in earnings of affiliates and others (Note 10)... 5,725 5,593 11,195 6,548 7,599
Other income:
Related parties....................................... 3,729 3,981 4,574 3,620 2,701
Others................................................ 1,307 1,366 2,556 1,890 1,792
Gains on issuance of shares by affiliates (Note 2)...... -- -- 13,062 13,062 --
Gain on sale of investments (Note 2 and 14(b)):
Related parties....................................... 2,539 -- -- -- --
Others................................................ 398 4,600 3,820 3,837 1,626
---------- --------- --------- --------- ---------
Total revenues..................................... 110,401 71,519 85,302 71,800 53,145
---------- --------- --------- --------- ---------
Expenses:
Interest:
Related parties....................................... 29,707 6,807 5,536 4,004 3,476
Others................................................ 26,114 19,199 12,810 10,231 13,739
Food processing (Note 2)................................ -- -- 24,415 20,911 20,049
Hotel and leisure-time operations (Note 2).............. 31,828 26,465 -- -- --
Manufacturing and distribution (Note 14(a))............. -- -- -- -- 1,442
Other expenses.......................................... 15,858 13,274 12,738 9,723 8,912
Translation loss (gain)................................. 324 (329) 1,413 673 (126)
Minority interests...................................... 392 1,609 4,785 4,575 (300)
---------- --------- --------- --------- ---------
Total expenses..................................... 104,223 67,025 61,697 50,117 47,192
---------- --------- --------- --------- ---------
Income before income taxes................................ 6,178 4,494 23,605 21,683 5,953
Income taxes (Note 9)..................................... 5,062 4,094 13,281 11,742 2,603
---------- --------- --------- --------- ---------
Income before extraordinary income........................ 1,116 400 10,324 9,941 3,350
Extraordinary income (Note 1(g)).......................... -- 726 -- -- --
---------- --------- --------- --------- ---------
Net income before cumulative effect of change in
accounting principle...................................... 1,116 1,126 10,324 9,941 3,350
Cumulative effect on prior years of change in accounting
principle (Note 14(c)).................................... -- -- -- -- (4,982)
---------- --------- --------- --------- ---------
Net (loss) income.................................. $ 1,116 $ 1,126 $ 10,324 $ 9,941 $ (1,632)
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Earnings (loss) per Class A share (Note 8):
Earnings before extraordinary income.................... $ .05 $ .02 $ .44 $ .42 $ .14
Extraordinary income.................................... -- .03 -- -- --
---------- --------- --------- --------- ---------
Earnings before cumulative effect of change in accounting
principle................................................. .05 .05 .44 .42 .14
Cumulative effect on prior years of change in accounting
principle................................................. -- -- -- -- (.21)
---------- --------- --------- --------- ---------
Earnings (loss) per Class A share.................. $ .05 $ .05 $ .44 $ .42 $ (.07)
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Weighted average number of Class A and equivalent shares
outstanding (in thousands)................................ 20,718 20,717 20,717 20,717 20,717
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-3
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE> <CAPTION>
AS AT
-------------------------------------------
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1991 1992 1993
------------- ------------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents........................................... $ 7,515 $ 9,698 $ 2,036
Deposits (Note 3):
Related parties................................................... 178,506 125,220 107,658
Others............................................................ 3,316 593 250
Notes and loans receivable (Note 3):
Related parties................................................... 18,081 13,439 11,226
Others............................................................ 11,736 6,111 5,319
Investments:
Related parties (Notes 2, 10, 14(a) and 14(d)).................... 62,012 97,243 149,531
Others............................................................ 5,615 12,669 12,950
Property and equipment, less accumulated depreciation of $25,673,
$9,687 and $11,335................................................ 69,835 32,675 35,087
Other assets, including accrued interest............................ 47,850 35,619 46,401
------------- ------------- -------------

Total Assets................................................. $ 404,466 $ 333,267 $ 370,458
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits payable (Note 4):

Related parties................................................ $ 8,413 $ 3,828 $ 3,332

Notes and loans payable (Note 5):
Related parties................................................ 54,098 49,433 46,669
Others (Note 14(d))............................................ 21,134 19,023 61,415
Debentures outstanding (Note 6):
Related parties................................................ 6,803 3,051 3,184
Others......................................................... 159,511 100,795 95,844
Accounts and income taxes payable and accrued expenses:
Related parties................................................ 1,962 3,041 1,045
Others......................................................... 28,075 25,303 33,853
------------- ------------- -------------
Total liabilities............................................ 279,996 204,474 245,342
------------- ------------- -------------
Minority interests
Related parties................................................... 13,746 9,591 9,351
Others............................................................ 1,306 -- 439
------------- ------------- -------------
Total minority interests..................................... 15,052 9,591 9,790
------------- ------------- -------------
Commitments and Contingencies (Note 13)
Shareholders' equity (Note 7)
4% Cumulative, Participating, Convertible Preferred Stock, $5 par
value; authorized 650,000 shares; issued 251,871, 240,528 and
223,869 shares; outstanding 243,513, 232,170 and 215,511
shares......................................................... 1,259 1,202 1,119
6 1/2% Cumulative, Convertible Preferred Stock, $5 par value;
authorized 4,282,850 shares; issued 1,546,672, 1,510,924 and
1,270,960 shares; outstanding 1,542,848, 1,507,100 and
1,267,136 shares............................................... 7,733 7,554 6,355
Class A Stock, $1 par value; authorized 30,000,000 shares; issued
14,999,376, 15,163,685 and 15,966,872 shares; outstanding
14,870,472, 15,034,781 and 15,837,968 shares................... 14,999 15,164 15,967
Common Stock, $1 par value; authorized, issued and outstanding
3,000,000 shares............................................... 3,000 3,000 3,000
Additional paid-in capital........................................ 9,918 9,989 10,468
Retained earnings................................................. 72,509 82,293 80,181
Cumulative translations adjustments (Note 14(c)) -- -- (1,764)
------------- ------------- -------------
Total shareholders' equity................................... 109,418 119,202 115,326
------------- ------------- -------------
Total Liabilities and Shareholders' Equity................... $ 404,466 $ 333,267 $ 370,458
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE> <CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1990 1991 1992 1992 1993
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................. $ 1,116 $ 1,126 $ 10,324 $ 9,941 $ (1,632)
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in earnings of affiliates and others................. (5,725) (5,593) (11,195) (6,548) (7,599)
Gains on issuance of shares by affiliates................... -- -- (13,062) (13,062) --
Cumulative effect on prior years of change in accounting
principle................................................. -- -- -- -- 4,982
Gain on sale of investments................................. (2,937) (4,600) (3,820) (3,837) (1,626)
Translation loss (gain)..................................... 324 (329) 1,413 673 (126)
Depreciation expense........................................ 3,409 3,500 1,865 1,363 1,771
Amortization expense........................................ 5,564 6,321 6,011 4,614 3,710
Minority interests.......................................... 392 1,609 4,785 4,575 (300)
Provision for loan losses................................... (1,693) -- -- -- --
Expenses relating to sale of loan portfolios................ 2,031 -- -- -- --
Deconsolidation of investee company previously accounted for
as a subsidiary............................................. -- -- (1,093) (1,093) --
Consolidation of subsidiary previously accounted for by the
equity method............................................... -- 418 --
(Increase) Decrease in other assets........................... 4,244 1,744 3,412 2,211 (7,784)
Increase (decrease) in accounts and income taxes payable and
accrued expenses:
Related parties............................................. 4,710 (2,778) 1,029 (1,040) (2,020)
Others...................................................... 1,149 838 5,634 8,614 1,646
Dividends received from affiliates............................ 5,937 1,886 7,065 5,737 1,409
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating activities....... 18,521 4,142 12,368 12,148 (7,569)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Deposits receivable granted:
Related parties............................................. (45,184) -- -- -- --
Others...................................................... (5,500) -- -- -- --
Deposits receivable collected:
Related parties............................................. 22,861 48,844 47,492 37,868 19,614
Others...................................................... 31,127 21,231 2,775 2,525 350
Notes and loans receivable granted:
Related parties............................................. (2,810) (13,090) (3,513) (2,551) (728)
Others...................................................... (2,107) -- -- -- --
Notes and loans receivable collected:
Related parties............................................. 2,903 2,186 5,473 2,421 3,309
Others...................................................... 67,757 1,865 6,935 5,344 1,155
Investments made:
Related parties............................................. (60) (2,645) (3,323) (3,296) (51,817)
Others...................................................... (3,461) (2,547) (8,438) (3,668) (5,612)
Proceeds from sales of investments:
Related parties............................................. 2,550 -- -- -- --
Others...................................................... 3,031 7,937 5,272 5,093 7,224
Proceeds from sale of loan portfolios......................... 32,473 -- -- -- --
Purchase of property and equipment............................ (3,394) (9,953) (765) (544) (4,286)
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities....... 100,186 53,828 51,908 43,192 (30,791)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Deposits payable received:
Related parties............................................. 7,538 -- 1,322 1,322 --
Others...................................................... 530 -- --
Deposits payable repaid:
Related parties............................................. (58,597) (18,599) (5,686) (4,877) (586)
Others...................................................... (8,441) -- -- -- (75)
Notes and loans payable received:
Related parties............................................. 2,340 9,085 12,999 385 22,656
Others...................................................... 243 1,221 6,981 1,315 49,290
Notes and loans payable repaid:
Related parties............................................. (18,482) (16,167) (14,194) (7,549) (25,769)
Others...................................................... (4,936) (4,400) (1,803) (1,105) (5,088)
Debentures outstanding repaid:
Related parties............................................. (2,604) -- (3,243) -- --
Others...................................................... (37,800) (39,449) (57,719) (44,772) (9,377)
Dividends paid:
Others...................................................... (596) (551) (540) -- --
Minority interests.......................................... (575) (177) -- -- 686
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities....... (121,380) (69,037) (61,883) (55,281) 31,737
Effect of exchange rate changes on cash and cash equivalents... 62 611 (210) (579) (1,039)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents........... (2,611) (10,456) 2,183 (520) (7,662)
Cash and cash equivalents at beginning of period............... 20,582 17,971 7,515 7,515 9,698
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period..................... $ 17,971 $ 7,515 $ 9,698 $ 6,995 $ 2,036
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental Disclosure of Cash Flow Information (see Note 2(a)
for non-cash financing and investing activities)
Cash paid during the period:
Interest:

Related parties............................................. $ 34,443 $ 16,443 $ 5,507 $ 4,711 $ 2,060

Others...................................................... 23,075 6,847 10,573 9,832 6,487
--------- --------- --------- --------- ---------
Total interest paid....................................... $ 57,518 $ 23,290 $ 16,080 $ 14,543 $ 8,547
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income taxes paid (refunded), net......................... $ (1,343) $ 401 $ 5,820 $ 5,125 $ 2,928
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-5
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
4% Preferred Stock
Balance, beginning of year................................................... $ 1,366 $ 1,310 $ 1,259
Conversion of 11,086, 10,128 and 11,413 shares
into Class A Stock........................................................ (56) (51) (57)
--------- --------- ---------
Balance, end of year.................................................... $ 1,310 $ 1,259 $ 1,202
--------- --------- ---------
--------- --------- ---------
6 1/2% Preferred Stock
Balance, beginning of year................................................... $ 8,447 $ 8,027 $ 7,733
Conversion of 83,954, 58,586 and 35,748 shares
into Class A Stock........................................................ (420) (294) (179)
--------- --------- ---------
Balance, end of year.................................................... $ 8,027 $ 7,733 $ 7,554
--------- --------- ---------
--------- --------- ---------
Class A Stock
Balance, beginning of year................................................... $ 14,466 $ 14,773 $ 14,999
Issuance of shares upon conversion of Preferred Stock........................ 307 226 165
--------- --------- ---------
Balance, end of year.................................................... $ 14,773 $ 14,999 $ 15,164
--------- --------- ---------
--------- --------- ---------
Additional Paid-In Capital
Balance, beginning of year................................................... $ 9,634 $ 9,803 $ 9,918
Conversion of Preferred Stock................................................ 169 119 71
Purchase of treasury shares--4% Preferred Stock and 6 1/2% Preferred Stock... -- (4) --
--------- --------- ---------
Balance, end of year.................................................... $ 9,803 $ 9,918 $ 9,989
--------- --------- ---------
--------- --------- ---------
Retained Earnings
Balance, beginning of year................................................... $ 71,414 $ 71,934 $ 72,509
Net income................................................................... 1,116 1,126 10,324
Dividends:
4% Preferred Stock--$.20 per share........................................ (52) (49) (47)
6 1/2% Preferred Stock--$.325 per share................................... (544) (502) (493)
--------- --------- ---------
Balance, end of year.................................................... $ 71,934 $ 72,509 $ 82,293
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-6
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1992 AND EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER
31, 1992
(DOLLARS IN THOUSANDS)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) The Company

As used in these financial statements, the term the "Company" refers to
Ampal-American Israel Corporation ("Ampal") and its consolidated subsidiaries. A
substantial portion of the Company's operations involves transactions with Bank
Hapoalim B.M. ("Hapoalim") and companies affiliated or related thereto.
Hapoalim, an Israeli banking corporation, owns controlling voting rights in
Ampal. Hevrat Ha'ovdim controls Hapoalim pursuant to an agreement with the
Israeli Government which will terminate on October 31, 1993.

The Government has announced that until the above-mentioned date it will
attempt to provide for a legal framework which will prevent the Israeli banks,
which were part of the Bank Share Arrangement of 1983, including Hapoalim, from
becoming Government corporations. It is impossible to predict the nature of this
arrangement and whether it will indeed come into force.

In February 1993, the Government decided to offer for sale to the public
20% of Hapoalim's shares held by the "Securities Company" and requested the
approval for this transaction by the Finance Committee of the Knesset. However,
following the demands of certain members of that Committee to re-examine the
structure of banking groups in Israel, prior to any such sale of shares (which
demand was based on the general guidelines proposed by the Governor of the Bank
of Israel), the Minister of Finance has withdrawn said request for the time
being, and declared his intention to renew the process of sale within a few
months.

The issues to be re-examined relate, inter alia, to the control which the
banks exercise over provident funds and mutual funds as well as to the size of
their holdings in non-banking corporations, such as the Company.

Companies controlled by Hevrat Ha'ovdim which are not part of the Hapoalim
family of companies are not deemed affiliates or related parties.

(b) Consolidation

The consolidated financial statements include the accounts of Ampal and its
subsidiaries. The financial statements of the Moriah group of companies are
consolidated through their year ended September 30th in 1991 and 1990. Effective
with the first quarter of 1992, the Company no longer consolidates the results
of the Moriah group of companies in its financial statements, but accounts for
its investment in these companies by the equity method. The Company's interest
in the Moriah group was diluted from 57.5% to 46% as a result of a private
placement transaction (see Note 2 below).

Assets and liabilities of foreign subsidiaries and companies accounted for
by the equity method are translated using year-end rates of exchange, except for
property and equipment and certain investment and equity accounts which are
translated at rates of exchange prevailing on the dates of acquisition.

Revenues and expenses are translated at average rates of exchange during
the year for certain subsidiaries, while others are translated at rates of
exchange at the transaction date. Revenue and expense items relating to assets
translated at historical rates are translated on the same basis as the related
asset. All translation gains and losses are included in the determination of
income for the period.

F-7
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

(d) Investments

Investments in which the Company exercises significant influence, generally
20%-50% owned companies, are accounted for by the equity method, whereby the
Company recognizes its share of such companies' income. The equity in earnings
of two companies are reflected through their year ending September 30th.

Investments, other than those reflected by the equity method, are stated at
cost, which in the aggregate approximates fair value.

(e) Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation,
computed by the straight-line method over the estimated useful lives of the
assets.

(f) Income Taxes

Income taxes in the financial statements are recorded in accordance with
APB Opinion No. 11. In the first quarter of 1993 the Company will adopt FASB
Statement No. 109, "Accounting for Income Taxes," (see Note 9). Deferred income
taxes result from timing differences between taxable income and income before
income taxes reported for financial statement purposes. Such differences relate
principally to tax provisions on equity in earnings of affiliates and provisions
for uncollectible loans.

No U.S. income tax is provided on the undistributed earnings of foreign
subsidiaries totalling approximately $43 million (net), since such earnings are
currently expected to be reinvested outside the United States or will be offset
by available foreign tax credits. U.S. income tax is provided on equity in
earnings of affiliates to the extent that taxes on such earnings would exceed
available foreign tax credits. Ampal's foreign subsidiaries file separate tax
returns and provide for taxes accordingly.

(g) Extraordinary Income

Extraordinary income includes tax loss carryforwards utilized by
subsidiaries.

(h) Cash Equivalents

Cash equivalents include time deposits and notes receivable with original
maturities of 90 days or less.

NOTE 2--ACQUISITIONS AND DISPOSITIONS

(a) In February 1992, the Company's investee Granite Hacarmel Investments
Ltd. concluded a public offering of shares, warrants and convertible debentures
in Israel on the Tel Aviv Stock Exchange for an aggregate price of approximately
$60 million. As a result of this transaction the Company's ownership of Granite
was diluted from 26% to 21.7% with further dilutions possible, subject to the
exercise of warrants or conversion of debentures.

Also in February 1992, the Company's subsidiary Moriah Hotels Ltd.
concluded a private placement of its shares with a related party in Israel for a
price of $12.5 million for 20% of the company (see Note 1).

These offerings resulted in gains on issuance of shares of $7 million
(approximately $2.7 million after taxes).

F-8
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 2--ACQUISITIONS AND DISPOSITIONS--(CONTINUED)

(b) In April 1992, the Company's investee Teledata Communication Ltd.
concluded a public offering of its securities in the United States. In
connection with this offering, the Company sold a portion of its interest in
Teledata, and realized a gain on sale of $3.8 million (approximately $1.2
million after taxes and a deduction for minority interest). In addition, this
offering resulted in a gain on issuance of shares of $5.8 million (approximately
$2.1 million after taxes and a deduction for Ophir Holdings Ltd.'s minority
interest). As a result of this transaction the Company's ownership of Teledata
was diluted from 21.7% to 13.1%.

(c) In May 1992, Orlite Engineering Company Ltd. concluded a public
offering of its shares in Israel which diluted the Company's investment to 31.1%
from 41.9%.

(d) In July 1992, the Company acquired 20% of the shares of Carmel
Container Systems Ltd., Israel's second largest carton producer, for $2.2
million.

(e) In 1991, the Company sold its holdings of Clal (Israel) Ltd. shares.
The resulting pretax gain amounted to $4.6 million ($1.4 million, net of taxes
and minority interest).

(f) On December 15, 1991, the Company acquired an additional 24.9% interest
in Pri Ha'emek (Canned and Frozen Food) 88 Ltd. ("Pri Ha'emek") for $2 million
(50% interest was acquired in 1988). This transaction brought the total
investment to 74.9%. Accordingly, Pri Ha'emek's assets and liabilities have been
consolidated in the Company's consolidated balance sheet at December 31, 1992
and 1991; its results of operations were consolidated in the Company's
consolidated statement of income in 1992 and included in equity in earnings of
affiliates in 1991 and 1990.

In 1990, Pri Ha'emek exercised its option to purchase a frozen food plant
and adjoining cold storage facilities for $4.5 million, financed with a
long-term loan.

(g) In 1990, the Company's sale of its investment in Delek-The Israel Fuel
Corporation Ltd. resulted in a pretax gain of $2.5 million ($2.4 million net of
taxes).

NOTE 3--DEPOSITS AND NOTES AND LOANS RECEIVABLE

Generally, notes and loans receivable were collateralized by liens on real
property and/or other tangible business assets or by guarantees, some of which
were from Hapoalim and its subsidiaries. There were no charges to the allowance
for loan losses in 1992, 1991 and 1990. Deposits and notes and loans receivable
earn interest at varying rates depending upon their linkage provisions and are
guaranteed by Hapoalim. Deposits have maturities of up to 13 years and notes and
loans receivable have maturities of up to 5 years.

NOTE 4--DEPOSITS PAYABLE

Deposits payable bear interest at varying rates depending upon their
linkage provisions and have maturities of up to 4 years.

NOTE 5--NOTES AND LOANS PAYABLE

Notes and loans payable consist primarily of borrowings from banks at rates
of interest either based on London Interbank Offered Rates or linked to the
Consumer Price Index in Israel and mature through 2002.

F-9
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 6--DEBENTURES OUTSTANDING

Debentures outstanding as at December 31 consist of:

<TABLE> <CAPTION>
1991 1992
----------- -----------
<S> <C> <C>
Ampal:
Various series with interest rates ranging from 8%-13%, maturing
1993-2003..................................................... $ 141,276 $ 83,424
Ampal Development
(Israel) Ltd.:
Various series with interest rates ranging from 6.2%-- 7.5%,
linked to the Consumer Price Index in Israel, maturing
1993-2005, secured by assets of $47 million................... 53,296 44,749
----------- -----------
194,572 128,173
Less: Unamortized Discounts........................................ 28,258 24,327
----------- -----------
Total....................................................... $ 166,314 $ 103,846
----------- -----------
----------- -----------
</TABLE>

Certain debentures are presentable for early maturity. If presented for
early maturity, maturities (including required obligations) for the five years
ending December 31 would be:

<TABLE>
<S> <C>
1993.............................................................................. $ 42,683*
1994.............................................................................. 4,767
1995.............................................................................. 19,044
1996.............................................................................. 20,063
1997.............................................................................. 4,767
<FN>
- ---------------

* If no debentures are presented for early redemption, scheduled maturities will
amount to $8,159.
</TABLE>

The 1993 amounts shown above include $4 million of debentures with interest
rates ranging from 8%-10%, maturing in 1996, which were redeemed in the first
quarter of 1993.

NOTE 7--SHAREHOLDERS' EQUITY

Capital Stock

The 4% and 6 1/2% Preferred shares are convertible into 5 and 3 shares of
Class A Stock, respectively. At December 31, 1992, a total of 5,682,150 shares
of Class A Stock is reserved for issuance upon the conversion of the Preferred
Stock.

The 4% and 6 1/2% Preferred Stock are preferred as to dividends on a
cumulative basis. Preferred shares are nonvoting unless dividends are in arrears
for three successive years. At December 31, 1992, there are no dividend
arrearages. If dividends are paid on Class A Stock in amounts exceeding certain
levels, then the Preferred and Common stocks are entitled to additional
dividends in accordance with a specified formula.

Retained Earnings

At December 31, 1992, retained earnings include $66.4 million for
affiliates accounted for by the equity method, of which $32.7 million and
approximately $26.2 million from subsidiaries is not available for the payment
of dividends. In most cases this results from Israeli requirements that
dividends may only be paid on the basis of shekel-denominated and not
dollar-denominated retained earnings.

F-10
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 8--EARNINGS PER CLASS A SHARE ("EPS")

Earnings per share is reflected for Class A Stock and not for Common Stock since
Class A Stock is publicly held whereas the Common Stock is not. EPS assumes the
conversion of the 4% and 6 1/2% Preferred Stock into Class A Stock at the
beginning of the year and gives effect to the participatory rights of 3 million
shares of Common Stock. Therefore, EPS is calculated by dividing net income by
23.7 million shares.

NOTE 9--INCOME TAXES

<TABLE> <CAPTION>
1990 1991 1992
--------- --------- ---------
<S> <C> <C> <C>
The components of current and deferred income tax expense (benefit) are as
follows:
Current:
State and local............................................................ $ 60 $ (69) $ 60
Federal.................................................................... 1,712 1,255 2,056
Foreign.................................................................... 1,288 1,546 3,647
Deferred:
Federal.................................................................... 804 1,362 7,518
Foreign.................................................................... 1,198 -- --
--------- --------- ---------
Total.................................................................... $ 5,062 $ 4,094 $ 13,281
--------- --------- ---------
--------- --------- ---------
The components of deferred income tax expense are as follows:
Provision for loan losses..................................................... $ 1,250 $ -- $ --
Equity in earnings of affiliates and others................................... 1,258 1,971 4,484
Debenture selling expenses.................................................... (631) (637) (501)
Gains on issuance of shares................................................... -- -- 3,549
Other......................................................................... 125 28 (14)
--------- --------- ---------
Total.................................................................... $ 2,002 $ 1,362 $ 7,518
--------- --------- ---------
--------- --------- ---------
The domestic and foreign components of income (loss) before income taxes are as
follows:
Domestic...................................................................... $ (3,799) $ (3,737) $ (452)
Foreign....................................................................... 9,977 8,231 24,057
--------- --------- ---------
Total.................................................................... $ 6,178 $ 4,494 $ 23,605
--------- --------- ---------
--------- --------- ---------
A reconciliation of income taxes between the statutory and effective tax
follows:
Federal income tax at 34%..................................................... $ 2,101 $ 1,528 $ 8,026
Taxes on equity in earnings of affiliates in excess of U.S. tax rate.......... 1,890 2,012 2,931
Taxes on foreign income in excess of U.S. rate................................ 701 377 2,175
Other......................................................................... 370 177 149
--------- --------- ---------
Total effective tax: 82%, 92% and 56%.................................... $ 5,062 $ 4,094 $ 13,281
--------- --------- ---------
--------- --------- ---------
Total effective tax, net of extraordinary income: 82%, 75% and 56%....... $ 5,062 $ 3,368 $ 13,281
--------- --------- ---------
--------- --------- ---------
</TABLE>

In the first quarter of 1993 the Company will adopt FASB Statement No. 109,
"Accounting for Income Taxes." The effect of implementing the accounting
standards in that statement would have resulted in a reduction of the Company's
shareholders' equity of approximately $5 million which will be reflected in net
income in the first quarter of 1993.

F-11
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 10--INVESTMENTS IN AFFILIATES AND OTHERS

The companies accounted for under the equity method and the Company's share of
equity in those investments are:

<TABLE> <CAPTION>
1990 1991 1992
--------- --------- ---------
<S> <C> <C> <C>
Am-Hal Ltd....................................................................... 50% 50% 50%
Bank Hapoalim (Cayman) Ltd....................................................... 49 49 49
Bay Heart Limited................................................................ -- 37 37
Carmel Containers Ltd............................................................ -- -- 20
Coral World International Ltd.................................................... 50 50 50
Etz Vanir Ltd.................................................................... 50 50 50
Granite Hacarmel Investments Ltd................................................. 26 26 21.7
Moriah Hotels Ltd. (Note 1(b))................................................... -- -- 46
Orlite Engineering Company Ltd. ................................................. 41.9 41.9 31.1
Pri Ha'emek (Canned and Frozen Food) 88 Ltd. (Note 2(e))......................... 50 74.9 --
Teledata Communication Ltd.* .................................................... 21.2 21.7 13.1
Yakhin Mataim Ltd................................................................ 50 50 50
<FN>
- ---------------

* Net of minority interest.
</TABLE>

Combined summarized financial information for the above companies is as
follows:

<TABLE> <CAPTION>
1990 1991 1992
----------- ----------- -----------
<S> <C> <C> <C>
Revenues.............................................. $ 549,239 $ 488,728 $ 577,531
Gross profit.......................................... 86,482 96,024 130,538
Net income............................................ 18,449 20,948 36,704
Fixed assets.......................................... $ 116,367 $ 179,755 $ 240,384
Other assets.......................................... 455,300 353,459 417,602
----------- ----------- -----------
Total assets.......................................... $ 571,667 $ 533,214 $ 657,986
----------- ----------- -----------
----------- ----------- -----------
Total liabilities, including bank borrowings.......... $ 422,879 $ 383,228 $ 373,094
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The Company's investments in shares of its publicly traded affiliates and
others at December 31, 1992 amounted to $38.2 million and had a market value of
$72.2 million, which is based upon quoted market prices of shares traded on the
American Stock Exchange, NASDAQ and the Tel Aviv Stock Exchange. There can be no
assurances that these values could be realized by the Company.

F-12
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 11--SEGMENT INFORMATION

Segment information presented below results primarily from operations from
Israel.

<TABLE> <CAPTION>
FOOD INTER-COMPANY
LEISURE-TIME FINANCE PROCESSING ADJUSTMENTS TOTAL
------------ ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1990
Revenues.................................. $ 40,526 $ 64,214 $ -- $ (64) $ 104,676
Equity in earnings of affiliates.......... 189* 1,879** -- -- 2,068
Pretax operating income................... 296 549 -- -- 845
Total assets.............................. 44,943 391,241 -- (160) 436,024
Investment in affiliates.................. 8,664* 20,984** -- -- 29,648
Capital expenditures...................... 3,347 105 -- -- 3,452
Depreciation and amortization............. 2,765 6,208 -- -- 8,973
December 31, 1991
Revenues.................................. $ 29,189 $ 36,838 $ -- $ (101) $ 65,926
Equity in earnings of affiliates.......... (237)* 899** -- -- 662
Pretax operating (loss) income............ (4,647) 5,157 -- -- 510
Total assets.............................. 48,324 327,637 33,209 (4,704) 404,466
Investment in affiliates.................. 8,427* 20,903** -- -- 29,330
Capital expenditures...................... 9,706 292 867 -- 10,865
Depreciation and amortization............. 2,792 7,029 924 -- 10,745
December 31, 1992
Revenues.................................. $ 1,579 $ 41,199 $ 31,621 $ (292) $ 74,107
Equity in earnings of affiliates.......... 1,182* 676** -- -- 1,858
Pretax operating income (loss)............ 597 15,670 928 -- 17,195
Total assets.............................. 4,562 296,707 36,336 (4,338) 333,267
Investment in affiliates.................. 28,614* 21,579** -- -- 50,193
Capital expenditures...................... 203 73 489 -- 765
Depreciation and amortization............. 301 6,500 1,075 -- 7,876
<FN>
- ---------------

Interest expense and corporate office expense are principally applicable to the
financing operation and have been charged to that segment above. Revenues and
pretax operating income above exclude equity in earnings of affiliates and
minority interests.

* Operations in Australia (1992 and 1991 only), Bahamas, Israel and U.S. Virgin
Islands.

** Operations in Cayman Islands.
</TABLE>

NOTE 12--DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

a) Cash and Cash Equivalents. Short-term investments, the carrying
amount is a reasonable estimate of fair value.

b) Deposits, Notes and Loans Receivable. The fair value of these
deposits, notes and loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.

F-13
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 12--DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)

c) Deposits Payable, Notes and Loans Payable and Debentures
Outstanding. The fair value of notes and loans payable, deposits payable
and debentures outstanding is estimated by discounting the future cash
flows using the current rates offered by lenders for similar borrowings
with similar credit ratings and for the same remaining maturities.

<TABLE> <CAPTION>
1992
------------------------
CARRYING FAIR
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents........................................ $ 9,698 $ 9,698
Deposits and notes and loans receivable.......................... 145,363 152,849
----------- -----------
$ 155,061 $ 162,547
----------- -----------
----------- -----------
Financial liabilities:
Deposits and notes and loans payable............................. $ 72,284 $ 73,908
Debentures outstanding........................................... 103,846 113,602
----------- -----------
$ 176,130 $ 187,510
----------- -----------
----------- -----------
</TABLE>

NOTE 13--COMMITMENTS AND CONTINGENCIES

(a) For the years 1993 to 1997, the combined minimum annual lease payments
on the Company's corporate offices and the Country Club Kfar Saba, without
giving effect to future escalations, are approximately $157,000 per year, and
$3.8 million in the aggregate, thereafter. These leases expire in 1994 and 2037,
respectively.

(b) For the years 1993 to 1997, the combined minimum lease receipts to be
received by the Company from rental properties are approximately $3.5 million in
1993; $3.1 million in 1994; $3.0 million in 1995; $3.0 million in 1996; $3.0
million in 1997; and $9.2 million in the aggregate, thereafter.

The Company's share of the commitments issued by and to its investees
amounted to approximately $18.4 million.

A consolidated subsidiary pledged the majority of its assets in the amount
of $25.3 million to banks (including a related party) in order to secure a
mortgage.

(d) Ophir Holdings Ltd. ("Ophir"), a 60%-owned subsidiary, joined a group
composed of an unrelated company, the Jerusalem Economic Corporation, and a
subsidiary of Hapoalim. This group won a tender issued by the Government of
Israel for the disposal of 51.26% of the shares owned by the Government in
Mivnei Taasiya Ltd. (Industrial Buildings Ltd.). The remainder of the shares of
this company are held by the public. The price paid by the group for 51.26% of
the shares was $201 million. Ophir is participating in the group up to the
extent of 25% ($50 million), equal to 12.815% of the equity of Mivnei Taasiya.
The $50 million will be financed primarily by borrowing from two unrelated
banks. Mivnei Taasiya owns approximately 1 million square meters of industrial
buildings in Israel.

F-14
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 14--CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1992 AND 1993 AND AT SEPTEMBER 30, 1993 (UNAUDITED)

(a) In February and June 1993, the Company invested an aggregate of
approximately $4.3 million in Paradise Mattresses (1992) Ltd. ("Paradise") for
approximately 85.1% of the shares of Paradise. Paradise's assets and liabilities
were consolidated commencing as of June 30, 1993; its manufacturing and
distribution operations were consolidated for the three months ended September
30, 1993 and included in equity in earnings of affiliates for the six months
ended June 30, 1993. Paradise is a company which manufactures and markets
mattresses and fold-out beds in Israel and is a licensee of the Sealy
Posturepedic Mattress name and manufacturing process.

(b) During 1993, the Company sold additional shares in Teledata and
realized gains on sales of $1.5 million (approximately $.9 million after taxes).
As a result of these transactions the Company's ownership of Teledata was
diluted from 21.7% to 12.2%. As a result of the Company's dilution in Ophir, the
Company's ownership in Teledata has been reduced to 10.9%.

(c) Effective January 1, 1993, the Company was required to adopt Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes," which requires a change from the deferred method to the liability method
of accounting for income taxes. The cumulative effect on prior years of this
change in accounting principle was reflected as a nonrecurring reduction of net
income and an increase in deferred income tax liability of approximately $5
million. This is reported separately in the consolidated statement of income for
the nine months ended September 30, 1993. This change required no payments to
any taxing jurisdiction and had no material effect on the current period's net
income. Prior years' financial statements have not been restated to apply the
provisions of SFAS No. 109.

Based on the guidelines of SFAS No. 52, "Foreign Currency Translation," the
Company determined that the economy in Israel should no longer be considered
hyperinflationary as a result of changes in the economic conditions and the
decrease in the rate of inflation in Israel. Accordingly, as of the second
quarter of 1993, for those subsidiaries and affiliates whose functional currency
is considered to be the Israeli shekel, assets and liabilities were translated
at the rate of exchange at the end of the reporting period and revenues and
expenses were translated at the average rates during the reporting period. Gains
or losses from translations of those foreign companies' financial statements are
recorded as a separate component of shareholders' equity at September 30, 1993.
Prior to 1993 translation gains and losses were reflected in the consolidated
income statement. The effect of this change in method of reporting translations
on the March 31, 1993 financial statements was immaterial.

Reference should be made to the notes to the Company's December 31, 1992
consolidated financial statements for additional details of the Company's
consolidated financial condition, results of operations and cash flows. The
details in those notes have not changed except as a result of normal
transactions in the interim. All adjustments (of a normal recurring nature)
which are, in the opinion of management, necessary to a fair presentation of the
results of the interim period have been included.

(d) In March 1993, Ophir Holdings Ltd. ("Ophir"), a subsidiary of the
Company, made an investment in approximately 12.8% of the equity of Industrial
Buildings Corporation Ltd. (Mivnei Taasiya Ltd.) in the amount of approximately
$50 million, which is being accounted for by the equity method of accounting.
Industrial Buildings owns approximately one million square meters of industrial
buildings in Israel. The investment was financed primarily by borrowings from
unrelated banks and was made, together with other investors, as part of a group
which acquired approximately 51% of Industrial Buildings. Ophir's interest in
Industrial Buildings has been pledged to secure borrowings by it and other
investors in the group.

F-15
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 14--CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1992 AND 1993 AND AT SEPTEMBER 30, 1993
(UNAUDITED)--(CONTINUED)

Had the acquisition of Industrial Buildings been effected as of January 1,
1993 and January 1, 1992 the Company would have reported, on a pro forma basis,
the following:

<TABLE> <CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1992 1993
--------- ---------
(DOLLARS IN
THOUSANDS, EXCEPT
EARNINGS PER SHARE)
<S> <C> <C>
Revenues..................................................... $ 73,725 $ 53,638
Net income (loss)............................................ 8,573 (2,511)
Earnings (loss) per Class A share............................ $ .36 $ (.11)
</TABLE>

In November 1993, the capital structure of Ophir was reorganized to provide
for only one class of shares, instead of the two classes which previously
existed. In connection with the recapitalization, Ophir received a "fairness"
opinion from an independent investment consultant. As part of that transaction,
the Company's equity interest in Ophir was increased from 49.4% to 50% and its
voting interest was decreased from 60% to 50%. The equity ownership of a related
party was decreased from 50.7% to 50% and its voting interest was increased from
40% to 50%. Immediately thereafter, Ophir made a private placement of its shares
to a different related party under which it issued 15% of its shares for
approximately $10.2 million and the Company's interest in Ophir was diluted from
50% to 42.5%.

Until September 30, 1993, Ophir's financial statements were consolidated by
the Company. As a result of the above-mentioned transactions, in the fourth
quarter of 1993 Ophir will be accounted for under the equity method of
accounting and the Company will record a gain on issuance of shares of
approximately $3.1 million (approximately $2 million after taxes). At September
30, 1993 the Company's consolidated balance sheet included assets of
approximately $69.4 million and the consolidated income statement included
revenues of approximately $3.6 million with respect to Ophir. Had the
above-mentioned transactions been consummated on September 30, 1993, the
Company's investment in Ophir on the equity method would have been approximately
$11.8 million.

F-16
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)

<TABLE> <CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
--------- ------------ --------- ------------ ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1991:
Revenues......................................... $ 19,184 $ 13,042 $ 19,855 $ 19,438 $ 71,519
Net interest income (expense).................... (496) 14 1,328 408 1,254
Hotel and leisure-time operating income (loss)... (939) (1,033) 1,743 2,483 2,254
Net income (loss)................................ (752) (278) 1,276 880* 1,126*
Earnings (loss) per Class A share................ (.03) (.01) .05 .04* .05*
Year Ended December 31, 1992:
Revenues......................................... $ 28,325 $ 27,391 $ 16,084 $ 13,502 $ 85,302
Net interest income (expense).................... 1,929 48 162 (1,872) 267
Food processing operating income................. 1,636 2,191 1,731 1,509 7,067
Net income....................................... 5,626 3,613 702 383 10,324
Earnings per Class A share....................... .24 .15 .03 .02 .44
<FN>
- ---------------
* Includes extraordinary income of $726,000, equal to $.03 per share which
represents loss carryforwards utilized by subsidiaries.
</TABLE>

F-17
<PAGE>
REPRESENTATIVE RATES OF EXCHANGE
BETWEEN THE U.S. DOLLAR AND THE NEW ISRAELI SHEKEL
FOR THE THREE YEARS ENDED DECEMBER 31, 1990, 1991 AND 1992
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993

The following table shows the amount of New Israeli Shekels equivalent to
one U.S. Dollar on the dates indicated:

<TABLE> <CAPTION>
1990 1991 1992 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
March 31................................................. 1.994 2.261 2.404 2.768
June 30.................................................. 2.078 2.395 2.444 2.805
September 30............................................. 2.057 2.393 2.439 2.864
December 31.............................................. 2.048 2.283 2.764
</TABLE>

F-18
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Shareholders of
INDUSTRIAL BUILDINGS CORPORATION LIMITED

We have audited the balance sheet of Industrial Buildings Corporation
Limited (hereafter--"the Company") as at December 31, 1992 and 1991 and the
related statements of income, changes in shareholders' equity and cash flows for
the years ended December 31, 1992, 1991 and 1990. Our audit was made in
accordance with generally accepted auditing standards including those prescribed
by the Auditors (Mode of Performance) Regulations (Israel), 1973, and,
accordingly, included such tests of the accounting records and such other
auditing procedures as we have considered necessary in the circumstances.

The aforementioned financial statements have been prepared on the basis of
the historical costs adjusted for the changes in the general purchasing power of
the Israeli currency as measured by the changes in the Israeli Consumer Price
Index, as required by Statements of the Institute of Certified Public
Accountants of Israel. A summary of the financial statements in nominal
(historical) Israeli shekels, which served as a basis for the adjusted
statements, is presented in Note 25.

In our opinion, the aforementioned financial statements present fairly the
financial position of the Company as at December 31, 1992 and 1991 and the
results of its operations, changes in its shareholders' equity and cash flows
for the years ended December 31, 1992, 1991 and 1990, in conformity with
accounting principles generally accepted in Israel.

It is also our opinion that the aforementioned financial statements comply
with the requirements of the Israel Securities Regulations (Preparation of
Financial Statements), 1993.

Pursuant to the United States Securities and Exchange Commission
requirements, we state:

(a) The above-mentioned generally accepted accounting principles were
applied on a consistent basis.

(b) The auditing standards and procedures mentioned above are Israeli
auditing standards and procedures, which are substantially similar to
standards in the United States.

KOST, LEVARY AND FORER
Certified Public Accountants (Israel)

Tel Aviv, Israel
April 28, 1993

F-19
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
BALANCE SHEET
(ADJUSTED TO SHEKELS OF DECEMBER 1992)

<TABLE> <CAPTION>
DECEMBER 31,
----------------------
NOTE 1991 1992
----------- ---------- ----------
(NOTE ADJUSTED NIS IN
THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................................... 32,460 28,385
Bank deposits................................................................... 6,059 3,545
Marketable securities........................................................... 3 127,896 108,971
Accounts receivable............................................................. 4 53,731* 67,421
---------- ----------
220,146 208,322
---------- ----------
Investment and Long-Term Receivables:
Bank deposits................................................................... 5 5,910 2,378
Long-term receivables........................................................... 6 155,569 150,268
Government loans................................................................ 685 --
Investment in a subsidiary...................................................... 7 1,673 1,700
---------- ----------
163,837 154,346
---------- ----------
Real Estate, Net.................................................................. 8 744,367 795,137
---------- ----------
Fixed Assets, Net................................................................. 9 18,907 18,449
---------- ----------
Deferred Charges, Net............................................................. 10 6,113 4,454
---------- ----------
1,153,370 1,180,708
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term loans........................................... 12 39,669 39,527
Accounts payable and accrued liabilities........................................ 11 30,411 46,167
Unearned rental income.......................................................... 2,207 1,642
Dividend proposed for payment................................................... 36,092 120,000
---------- ----------
108,379 207,336
---------- ----------
Long-Term Liabilities:
Long-term loans................................................................. 12 166,797 126,309
Lessees' deposits............................................................... 13 8,226 7,985
Unearned rental income.......................................................... 429 --
Debentures...................................................................... 14a 31,860 31,630
Debentures convertible into shares.............................................. 14b 10,467 --
---------- ----------
217,779 165,924
---------- ----------
Accruals:
Severance pay and pension, net.................................................. 15 1,469 1,401
Deferred income taxes........................................................... 24d 48,504* 68,001
---------- ----------
49,973 69,402
---------- ----------
Debentures Convertible into Shares................................................ 14b -- 5,143
---------- ----------
Share Capital, Perpetual Loans, Capital Surplus and Retained Earnings:
Share capital................................................................... 25c 508,759 526,358
Perpetual loans................................................................. 18 9,430 8,622
Capital surplus................................................................. 26,631 48,947
Retained earnings............................................................... 232,419 148,976
---------- ----------
777,239 732,903
---------- ----------
1,153,370 1,180,708
---------- ----------
---------- ----------
<FN>
- ---------------
* Reclassified.
</TABLE>

The accompanying notes are an integral part of the financial statements.

..................... ..................... ....................
A. Klang Y. Ariav S. Sayad
Chairman of the Director Managing Director
Board of Directors

F-20
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
STATEMENT OF INCOME
(ADJUSTED TO SHEKELS OF DECEMBER 1992)

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
NOTE 1990 1991 1992
----------- --------- --------- ---------
(ADJUSTED NIS IN THOUSANDS)
(EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Rental fees from lessees................................................ 80,085 80,372 80,239
Government completion of rental fees.................................... 22 7,902 1,557 --
--------- --------- ---------
87,987 81,929 80,239
Work management fees.................................................... 3,356 10,505 8,511
--------- --------- ---------
91,343 92,434 88,750
Maintenance and work management costs................................... 23a 39,193 40,239 38,831
--------- --------- ---------
52,150 52,195 49,919
General and administrative expenses..................................... 23b 10,091 10,054 12,554
--------- --------- ---------
42,059 42,141 37,365
Financial expenses, net................................................. 23c 5,731* 571* 1,512
--------- --------- ---------
36,328 41,570 35,853
Gain (loss) on securities............................................... (5,514)* 1,513* 17,036
Gain on realization of assets........................................... 23d 15,360 927 1,003
--------- --------- ---------
Income before taxes on income........................................... 46,174 44,010 53,892
Taxes on income......................................................... 24a 14,007 11,918 18,470
--------- --------- ---------
Income for the year after taxes on income............................... 32,167 32,092 35,422
Equity in earnings (losses) of a subsidiary............................. (26) 123 27
--------- --------- ---------
Net income for the year............................................ 32,141 32,215 35,449
--------- --------- ---------
--------- --------- ---------
Earnings per share:
Primary earnings per NIS 1 par value in adjusted NIS............... 0.117 0.121 0.127
--------- --------- ---------
--------- --------- ---------
Fully-diluted earnings per NIS 1 par value in adjusted NIS......... 0.116 0.117 0.127
--------- --------- ---------
--------- --------- ---------
<FN>
- ---------------

* Reclassified.
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-21
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(ADJUSTED TO SHEKELS OF DECEMBER 1992)
<TABLE> <CAPTION>
CAPITAL
RESERVE IN
FUND FOR RECEIPTS ON RESPECT OF
DISTRIBUTION ACCOUNT OF EROSION OF
SHARE PERPETUAL OF BONUS SHARE STOCK PERPETUAL RETAINED
CAPITAL LOANS SHARES PREMIUM OPTIONS LOANS EARNINGS
--------- ----------- ----------- ----------- ----------- ----------- ---------
(ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1990................... 434,766 13,089 6,137 587 1,762 6,291 242,971
Realization of stock options (series 1).... 41,678 -- -- 5,485 -- -- --
Conversion of debentures convertible into
shares................................... 1,622 -- (5,158) 5,410 -- -- --
Erosion of perpetual loans................. -- (1,958) -- -- -- 1,958 --
Net income for the year.................... -- -- -- -- -- -- 32,141
Dividend in respect of perpetual loans..... -- -- -- -- -- -- (260)
Interim dividend proposed for payment
(2.07%*)................................. -- -- -- -- -- -- (7,036)
Reconcilement of dividend proposed for
payment in previous year................. -- -- -- -- -- -- 1,202
--------- ----------- ----------- ----------- ----------- ----------- ---------
Balance at December 31, 1990................. 478,066 11,131 979 11,482 1,762 8,249 269,018
Transfer to a fund for distribution of
bonus shares............................. -- -- 32,462 -- -- -- (32,462)
Distribution of bonus shares............... 30,198 -- (30,198) -- -- -- --
Realization of stock options (series 2).... 8 -- (1) 10 (1) -- --
Realization of debentures convertible into
shares................................... 487 -- (85) 271 -- -- --
Erosion of perpetual loans................. -- (1,701) -- -- -- 1,701 --
Net income for the year.................... -- -- -- -- -- -- 32,215
Dividend in respect of perpetual loans..... -- -- -- -- -- -- (260)
Dividend proposed for payment (12.42%)*.... -- -- -- -- -- -- (36,092)
--------- ----------- ----------- ----------- ----------- ----------- ---------
Balance at December 31, 1991................. 508,759 9,430 3,157 11,763 1,761 9,950 232,419
Realization of stock options (series 2).... 14,108 -- (1,551) 23,084 (1,761) -- --
Conversion of debentures convertible into
shares................................... 3,491 -- (818) 2,554 -- -- --
Erosion of perpetual loans................. -- (808) -- -- -- 808 --
Net income for the year.................... -- -- -- -- -- -- 35,449
Dividend in respect of perpetual loans..... -- -- -- -- -- -- (260)
Dividend proposed for payment (12.49%)*.... -- -- -- -- -- -- (120,000)
Reconcilement of dividend proposed for
payment in previous year................. -- -- -- -- -- -- 1,368
--------- ----------- ----------- ----------- ----------- ----------- ---------
Balance at December 31, 1992................. 526,358 8,622 788 37,401 -- 10,758 148,976

<CAPTION>
TOTAL
---------
<S> <C>
Balance at January 1, 1990................... 705,603
Realization of stock options (series 1).... 47,163
Conversion of debentures convertible into
shares................................... 1,874
Erosion of perpetual loans................. --
Net income for the year.................... 32,141
Dividend in respect of perpetual loans..... (260)
Interim dividend proposed for payment
(2.07%*)................................. (7,036)
Reconcilement of dividend proposed for
payment in previous year................. 1,202
---------
Balance at December 31, 1990................. 780,687
Transfer to a fund for distribution of
bonus shares............................. --
Distribution of bonus shares............... --
Realization of stock options (series 2).... 16
Realization of debentures convertible into
shares................................... 673
Erosion of perpetual loans................. --
Net income for the year.................... 32,215
Dividend in respect of perpetual loans..... (260)
Dividend proposed for payment (12.42%)*.... (36,092)
---------
Balance at December 31, 1991................. 777,239
Realization of stock options (series 2).... 33,880
Conversion of debentures convertible into
shares................................... 5,227
Erosion of perpetual loans................. --
Net income for the year.................... 35,449
Dividend in respect of perpetual loans..... (260)
Dividend proposed for payment (12.49%)*.... (120,000)
Reconcilement of dividend proposed for
payment in previous year................. 1,368
---------
Balance at December 31, 1992................. 732,903

<FN>
- ---------------

* The rate is computed on the basis of the par value of the nominal share
capital.
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-22
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
STATEMENT OF CASH FLOWS
(ADJUSTED TO SHEKELS OF DECEMBER 1992)

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
ADJUSTED NIS IN THOUSANDS
<S> <C> <C> <C>
Cash flows from operating activities:
Net income for the year........................................................... 32,141 32,215 35,449
Adjustments to reconcile net income to net cash provided by operating
activities(a)................................................................... 29,050 25,798 34,999
--------- --------- ---------
Net cash provided by operating activities..................................... 61,191 58,013 70,448
--------- --------- ---------
Cash flows from investing activities:
Investment in fixed assets........................................................ (3,909) (1,673) (1,355)
Investment in real estate......................................................... (71,841) (54,398) (114,637)
Sale (acquisition) of marketable securities, net.................................. (20,838) 6,289 35,961
Redemption (acquisition) of bank deposits, net.................................... (8,736) 8,612 --
Government grant received......................................................... 10,044 3,462 13,726
Proceeds from realization of real estate.......................................... 16,381 34,749 25,551
Proceeds from realization of fixed assets......................................... 315 254 277
Proceeds from redemption of government loans...................................... 311 73 655
Redemption (acquisition) of long-term deposits, net............................... 2,019 (4,632) 5,941
--------- --------- ---------
Net cash used in investing activities......................................... (76,254) (7,264) (33,881)
--------- --------- ---------
Cash flows from financing activities:
Exercise of stock options......................................................... 47,163 16 33,880
Lessees' deposits, net............................................................ (446) (103) (241)
Dividend paid..................................................................... (19,493) -- (34,724)
Dividend in respect of perpetual loans............................................ (260) (260) (260)
Repayment of long-term loans and other long-term liabilities...................... (36,730) (42,567) (39,297)
Short-term bank credits, net...................................................... (608) -- --
--------- --------- ---------
Net cash used in financing activities......................................... (10,374) (42,914) (40,642)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents................................ (25,437) 7,835 (4,075)
Cash and cash equivalents at the beginning of the year.............................. 50,062 24,625 32,460
--------- --------- ---------
Cash and cash equivalents at the end of the year.............................. 24,625 32,460 28,385
--------- --------- ---------
--------- --------- ---------
(a) Adjustment to reconcile net income to net cash provided by operating activities:
Income and expenses not relating to cash flows:...................................
Depreciation and amortization................................................... 36,215 36,363 35,204
Deferred income taxes, net...................................................... 9,889 11,654 18,357
Gain (loss) from marketable securities.......................................... 5,514 (1,513) (17,036)
Decrease in accrued severance pay and pension................................... (271) (202) (68)
Gain on realization of assets and changes in provision for losses............... (15,360) (927) (1,003)
Erosion of long-term loans and debentures....................................... 1,342 (758) (1,509)
Erosion of long-term receivables and bank deposits.............................. (1,550) 84 419
Increase in value of government loans........................................... (49) (34) (19)
Equity in losses (earnings) of a subsidiary..................................... 26 (123) (27)
--------- --------- ---------
35,756 44,544 34,318
--------- --------- ---------
Changes in assets and liabilities:
Decrease (increase) in long-term receivables.................................... (530) 363 6,556
Increase in accounts receivables................................................ (2,932) (25,090) (19,052)
Increase in accounts payable and accrued liabilities............................ 6,876 8,344 14,171
Decrease in unearned lease fees................................................. (10,120) (2,363) (994)
--------- --------- ---------
(6,706) (18,746) 681
--------- --------- ---------
29,050 25,798 34,999
--------- --------- ---------
--------- --------- ---------
(b) Supplementary information:
Total interest paid............................................................... 10,301 11,333 12,148
--------- --------- ---------
--------- --------- ---------
Total taxes paid.................................................................. 309 622 425
--------- --------- ---------
--------- --------- ---------
(c) Non-cash operations:
1. Sale of buildings by long-term credit.......................................... 45,184 7,768 2,695
--------- --------- ---------
--------- --------- ---------
2. Conversion of debentures into shares........................................... 2,064 719 5,378
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-23
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS

NOTE 1--GENERAL

a. Definitions:

"The Company"--Industrial Buildings Corporation Limited.

"The subsidiary"--a subsidiary in which the Company holds 100% of rights to
share capital, voting rights, and the right to appoint directors.

b. "Government Company":

At balance sheet date the Company was owned and controlled by the State of
Israel (hereafter-- the "State") and was, therefore, accordingly subject to the
provisions of the Government Companies Law, 1975.

c. "Public Company":

In March 1988, the Company issued shares, debentures and stock options
which were registered for trade on the Tel-Aviv Stock Exchange.

In December 1989, the State and the Company made a sales offer and an
issuance consisting of shares, options and purchase options which were sold and
issued by the State and the Company.

As of balance sheet date, the percentage of holdings of the State in the
Company is about 52%. Fully-diluted--the percentage reaches about 51%.

Subsequent to balance sheet date the State sold all its holdings in the
Company (see Note 27).

d. Company activities:

The Company is engaged mainly in initiating and erecting buildings for
industry, trades and commerce intended for leasing and sale, as well as in
managing work by the "cost plus" method, and in developing infrastructure for
residential housing and industry.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES

a. Financial statements in adjusted new Israeli shekels:

1. The Company maintains its accounting records in nominal (historical) new
Israeli shekels.

The financial statements have been prepared in accordance with Statements
of the Institute of Certified Public Accountants in Israel, on the basis of
historical costs adjusted to the changes in the general purchasing power of the
Israeli currency.

The nominal shekel financial statements have been restated in terms of the
constant purchasing power of the new Israeli shekel as measured by the changes
in the Consumer Price Index.

All figures in these financial statements, including those of previous
years, have been adjusted to the Consumer Price Index published for December
1992.

F-24
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

The following are details of the Consumer Price Index and the rate of
exchange of the U.S. dollar:

<TABLE> <CAPTION>
RATE OF EXCHANGE
CONSUMER PRICE OF THE U.S.
AT THE END OF THE YEAR INDEX (POINTS)* DOLLAR
- ------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
1989............................................................... 149.9 NIS 1.963
1990............................................................... 176.3 NIS 2.048
1991............................................................... 208.1 NIS 2.283
1992............................................................... 227.6 NIS 2.764

<CAPTION>
<S> <C> <C>
THE CHANGE DURING THE YEAR:
- --------------------------------------------------------------------------------------
1990............................................................... 17.62% 4.33%
1991............................................................... 18.04% 11.47%
1992............................................................... 9.37% 21.07%
<FN>
- ---------------

* According to the Consumer Price Index published for the month ended in the
balance sheet date on average basis 1987 = 100.
</TABLE>

2. The adjusted values of non-monetary assets do not necessarily represent
their real economic value, but rather their historical cost adjusted for the
changes in the general purchasing power of the Israeli currency.

3. The term "cost" in these financial statements refers to adjusted new
Israeli shekel costs, unless otherwise indicated.

4. A summary of the financial statements in nominal Israeli shekels, which
served as a basis for the adjusted statements, is presented in Note 25.

b. Principles of adjustment:

1. Balance Sheet:

a) Non-monetary items (such as fixed assets, real estate, investment
in a subsidiary, other assets, advances from customers, prereceived income
and shareholders' equity and capital surplus), have been adjusted on the
basis of the changes in the Consumer Price Index from the date of
acquisition or transaction until December 1992.

b) Monetary items (items as to which balance sheet amounts reflect
current values or realization at balance sheet date) are reflected in the
balance sheet as of December 31, 1992 in their nominal amount (figures for
the preceding year have been adjusted to December 1991 Consumer Price
Index).

2. Statement of income:

a) The components of the statement of income (except for financing),
relating to transactions carried out during the year, have been adjusted at
monthly indices on the dates the transactions occurred. The erosion of
monetary balances relating to the aforesaid transactions has been included
in financial income or expenses.

b) Statement of income items relating to non-monetary balance sheet
items such as depreciation and amortization have been adjusted on the same
basis applied for adjusting the relevant balance sheet items.

F-25
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

The components of the statement of income relating to provisions included
in the balance sheet, such as provisions for severance pay and vacation pay,
have been determined on the basis of the changes in the balances of the related
balance sheet items.

c. Fixed assets:

1. These assets are stated at cost net of accumulated depreciation.

2. Depreciation is computed by the straight-line method over the estimated
useful lives of the assets.

The annual depreciation rates grouped by the various assets are as follows:

<TABLE> <CAPTION>
%
---------
<S> <C>
Offices............................................................................... 2
Motor vehicles........................................................................ 15
Computers, furniture and equipment.................................................... 6-20
</TABLE>

d. Real estate:

1. Real estate is presented at cost, net of investment grants received and
net of accumulated depreciation.

The cost of buildings erected by the Company and cost of works in progress
include, among other things, real interest costs, if any, for the period until
the commencement of operations of the assets and part of the expenses of the
engineering department which supervises these works.

2. Depreciation is computed at cost less investment grants, by the
straight-line method over the estimated useful lives of the assets. The annual
depreciation rates are as follows:

<TABLE> <CAPTION>
%
---------
<S> <C>
Buildings for leasing and sale.......................................................... 2
Industrial systems and installations in buildings....................................... 10
</TABLE>

3. Real estate leasing transactions are presented in the financial
statements by the "operating lease" method.

As to buildings the lessees of which have committed themselves to purchase
in a price not fully-linked to the Consumer Price Index (CPI), a provision for
losses in respect of erosion of the component not fully linked to the CPI has
been made.

4. Income or loss on sale of real estate, including sales by long-term
credit, is calculated specifically for each asset separately.

e. Investment in a subsidiary:

Investment in a subsidiary is presented by the equity method. Since the
subsidiary's scope of activity is immaterial as compared to the Company's
financial scope, no consolidated financial statements have been prepared.

f. Government loans:

Government loans are presented in accordance with the recommendations of
the Statements of the Institute of Certified Public Accountants in Israel.

F-26
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

g. Marketable securities:

Marketable securities are presented at market value as of balance sheet
date.

Market value of the securities as of balance sheet date is not
significantly different from the cost of the securities with the addition of
interest accrued on debentures as at balance sheet date.

h. Deferred charges:

Expenses related to issues of debentures and obtaining a long-term loan are
amortized over the period of benefiting from the proceeds, based on the balances
in circulation at the end of each year.

i. Provision for doubtful debts:

Provision for doubtful debts has been determined specifically regarding
debts whose collection is doubtful.

j. Taxes on Income:

1. Deferred taxes:

a) The provision for deferred taxes was created in order to regulate
the tax burden resulting from timing differences between the results
measured in the financial statements and those measured for income tax
purposes. The provision is computed at the expected tax rate at the time of
realization.

b) The main items in respect of which deferred taxes were computed
are: accelerated depreciation, prereceived rental fees, advances from
customers, provision for severance pay and pension, provision for vacation
pay leave, provision for doubtful debts, and accumulated loss for tax
purposes.

c) According to a Statement of the Institute of Certified Public
Accountants in Israel, a provision for deferred taxes was not computed in
respect of part of the adjustment of depreciable fixed assets, whose
depreciation period is 20 years or more, which will not be recognized as
tax deductible, and in respect of adjustment of depreciable fixed assets
which are a priori not entitled to depreciation for tax purposes.

2. Current taxes:

Current taxes include inflationary tax in respect of sale of buildings.
(See Note 24c, 3b).

k. Linkage to the CPI or to foreign currency:

Assets or liabilities linked to the CPI or to foreign currency are
presented according to the terms of the contractual agreement.

l. Earnings per share:

Earnings per share are computed according to a Statement of the Institute
of Certified Public Accountants in Israel.

m. Perpetual loans:

The perpetual loans are not linked and are presented within the framework
of share capital, capital surplus and retained earnings items at an amount
identical to their nominal amount at balance sheet date (comparative figures
have been adjusted of shekels of December 1992).

F-27
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Erosion of perpetual loans is charged directly to capital surplus, while
the interest payments in respect of these loans, considered as dividend, are
deducted from the total retained earnings.

NOTE 3--MARKETABLE SECURITIES

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991 1992
--------- ---------
ADJUSTED NIS IN
THOUSANDS
--------------------
<S> <C> <C>
Government debentures........................................................... 93,938 72,580
Other debentures................................................................ 16,829 22,999
Trust and other funds........................................................... 17,129 13,392
--------- ---------
127,896 108,971
--------- ---------
--------- ---------
</TABLE>

NOTE 4--ACCOUNTS RECEIVABLE

<TABLE> <CAPTION>
<S> <C> <C>
Lessees......................................................................... 6,980 7,257
Less provision for doubtful debts............................................... (2,590) (3,235)
--------- ---------
4,390 4,022
Current maturities of debentures of the State of Israel--through Ministry of
Defense and Rafael(1)........................................................... 17,714 7,951
Current maturities of other long-term receivables............................... 2,706 4,401
Works' orders................................................................... 16,125 31,796
Purchasers...................................................................... 1,836 1,985
Tax refunds receivable.......................................................... 1,248 2,083
Investment grants receivable.................................................... 4,624 5,984
Employees....................................................................... 724* 660
A subsidiary.................................................................... 434 --
Deferred income taxes(2)........................................................ 2,409* 3,549
Other........................................................................... 1,521 4,990
--------- ---------
53,731 67,421
--------- ---------
--------- ---------
<FN>
- ---------------

(1) See Note 6a.

(2) See Note 24d.

* Reclassified.
</TABLE>

NOTE 5--BANK DEPOSITS

a. Long-term deposits are linked to the CPI and bear an annual weighted
interest rate of 3.25%.

F-28
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 5--BANK DEPOSITS--(CONTINUED)

b. Composed as follows:

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991 1992
--------- ---------
ADJUSTED NIS IN
THOUSANDS
<S> <C> <C>
Deposits............................................................................ 9,886 5,867
Less current maturities............................................................. 3,976 3,489
--------- ---------
5,910 2,378
--------- ---------
--------- ---------
</TABLE>

NOTE 6--LONG-TERM RECEIVABLES

a. Composed as follows:

<TABLE> <CAPTION>
WEIGHTED
INTEREST
RATE DECEMBER 31,
LINKAGE ----------- --------------------
TERMS % 1991 1992
----------- ----------- --------- ---------
ADJUSTED NIS IN
THOUSANDS
<S> <C> <C> <C> <C>
State of Israel--through Ministry of Defense and
Rafael(c).................................................. CPI 5.09 122,734 111,840
Less current maturities.................................... 17,714 7,951
--------- ---------
105,020 103,889
--------- ---------
Other receivables(d)....................................... CPI 4.62 53,255 50,780
Less current maturities.................................... 2,706 4,401
--------- ---------
50,549 46,379
--------- ---------
155,569 150,268
--------- ---------
--------- ---------
</TABLE>

b. Aggregate maturities of long-term loans:

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991 1992
--------- ---------
ADJUSTED NIS IN
THOUSANDS
<S> <C> <C>
First year (current maturities)................................................. 20,420 12,352
--------- ---------
Second year..................................................................... 12,045 13,145
Third year...................................................................... 12,839 14,385
Fourth year..................................................................... 14,083 15,072
Fifth year...................................................................... 14,770 11,173
Sixth year and thereafter....................................................... 101,832 96,493
--------- ---------
155,569 150,268
--------- ---------
175,989 162,620
--------- ---------
--------- ---------
</TABLE>

c. State debts through the Ministry of Defense and Rafael:

In February, a compromise arrangement was signed between the Company and
the State of Israel through the Ministry of Defense and the Weapons Development
Authority (hereafter--"Rafael"), arranging the payments due from Rafael to the
Company in respect of buildings erected by the Company for Rafael.

F-29
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 6--LONG-TERM RECEIVABLES--(CONTINUED)

According to the terms of the arrangement, Rafael is to pay the Company for
its debts as of the date of making the arrangement and for payments in respect
of leasing and purchasing of buildings not as yet due, a total sum of
approximately NIS 160 million. This sum will be paid over a period of 18 years,
in equal monthly installments linked to the CPI, plus a linked interest at an
annual rate of 3.5%.

Moreover, Rafael undertook to pay the Company all the amounts which the
Company is obligated to pay to the First International Bank of Israel in respect
of a loan received by the Company within the framework of an arrangement for
financing part of the leasing payments which Rafael was to pay the Company (see
Note 12). In addition, Rafael paid the Company, shortly following the signing of
the arrangement, a total sum of approximately NIS 13 million in respect of the
amounts paid by the Company to the bank on account of the abovementioned loan,
and which were not repaid to it by Rafael.

The compromise agreement was validated by a judgment.

d. Collaterals for other long-term receivables:

About NIS 36 million out of the long-term receivables are collateraled by
the following means:

1. Third party guarantees (mainly guarantees by the World Zionist
Federation).

2. Liability for payment by the State or a government company.

3. The Company's rights in the building are being transferred to the
purchasers only following completion of payments.

NOTE 7--INVESTMENT IN A SUBSIDIARY

The Company has full control of the Trades Development Company Ltd.
(hereafter--"TDC"). Regarding transactions and balances with TDC--see Note 20d.

F-30
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8--REAL ESTATE, NET

a. Composed as follows:

<TABLE> <CAPTION>
BUILDINGS
(INCLUDING
LAND) SYSTEMS TOTAL
----------- --------- -----------
ADJUSTED NIS IN THOUSANDS
<S> <C> <C> <C>
Cost at January 1, 1992......................................... 1,145,980 120,749 1,266,729
Additions during the year(1).................................... 98,514 1,037 99,551
Disposals during the year....................................... (16,205) (2,970) (19,175)
----------- --------- -----------
Balance at December 31, 1992(2)(3).............................. 1,228,289 118,816 1,347,105
----------- --------- -----------
Depreciation at January 1, 1992................................. 390,430 50,488 440,918
Additions during the year....................................... 21,012 11,213 32,225
Disposals during the year....................................... (6,973) (1,203) (8,176)
----------- --------- -----------
Depreciated cost at December 31, 1992........................... 404,469 60,498 464,967
----------- --------- -----------
823,820 58,318 882,138
----------- ---------
----------- ---------
Provision for losses............................................ (5,955)
Advance payments from customers................................. (81,046)
-----------
Real estate, net at December 31, 1992(4)........................ 795,137
-----------
-----------
Depreciated cost at December 31, 1991........................... 755,550 70,261 825,811
----------- ---------
----------- ---------
Provision for losses............................................ (3,003)
Advance payments from customers................................. (78,441)
-----------
744,367
-----------
-----------
<FN>
- ---------------

(1) Including the charging of expenses of the planning department at a total of
some NIS 1,255 thousand.

(2) Including NIS 106,448 thousands buildings and systems being erected
(including land) (at December 31, 1991--NIS 56,388 thousand).

(3) Net of investment grants at a total of NIS 381,370 thousands.

(4) Including land at a total of NIS 88,372 thousands.
</TABLE>

b. Company's rights in real estate as at December 31, 1992 are as follows:

<TABLE> <CAPTION>
REGISTERED AT NOT REGISTERED
THE LAND AT THE LAND
REGISTRY REGISTRY TOTAL
------------- ----------------- ---------
% % %
------------- ----------------- ---------
<S> <C> <C> <C>
Ownership rights................................................. 4.5 4.4 8.9
Capitalized leasing rights....................................... 13.5 63.3 76.8
Leasing rights................................................... 1.0 13.3 14.3
----- ----- ---------
19.0 81.0 100.0
----- ----- ---------
----- ----- ---------
</TABLE>

c. Investment grants

1. The Investment Center has approved under the Law for the Encouragement
of Capital Investments, 1959 (hereafter--the "Law") various of the Company's
programs for erecting buildings, including equipment and installations in
buildings.

2. Under the Law, the Company is entitled to receive investment grants for
its approved investments, to claim accelerated depreciation for tax purposes as
well as to a reduced tax rate.

3. The amount of the grant is deducted from the cost of the assets in order
to calculate depreciation for tax purposes.

4. Under the law, the Investment Center is authorized to demand that the
Company, should it fail to fulfill the terms of the approval, return the grants
that it received with the addition of interest and
F-31
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8--REAL ESTATE, NET--(CONTINUED)

linkage differences from the date they were received. Moreover, the Company will
have to repay the entire tax benefits (accelerated depreciation and the reduced
tax rate). In the opinion of the Company's management, the Company is fulfilling
the approvals' terms.

NOTE 9--FIXED ASSETS, NET

<TABLE> <CAPTION>
OFFICE
EQUIPMENT
AND
OFFICES* VEHICLES FURNITURE TOTAL
--------- ----------- ----------- ---------
ADJUSTED NIS IN THOUSANDS
<S> <C> <C> <C> <C>
Cost as at January 1, 1992.............................................. 15,814 1,713 8,479 26,006
Additions during the year............................................... 39 641 675 1,355
Disposals during the year............................................... -- (719) (255) (974)
--------- ----------- ----------- ---------
Balance as at December 31, 1992......................................... 15,853 1,635 8,899 26,387
--------- ----------- ----------- ---------
Accumulated depreciation as at January 1, 1992.......................... 1,603 617 4,879 7,099
Additions during the year............................................... 312 251 908 1,471
Disposals during the year............................................... -- (429) (203) (632)
--------- ----------- ----------- ---------
Balance as at December 31, 1992......................................... 1,915 439 5,584 7,938
--------- ----------- ----------- ---------
--------- ----------- ----------- ---------
Depreciated cost as at December 31, 1992................................ 13,938 1,196 3,315 18,449
--------- ----------- ----------- ---------
--------- ----------- ----------- ---------
Depreciated cost as at December 31, 1991................................ 14,211 1,096 3,600 18,907
--------- ----------- ----------- ---------
--------- ----------- ----------- ---------
<FN>
- ---------------

* Offices in Tel-Aviv (at depreciated cost of about NIS 11 million) have not as
yet been registered in the Land Registry Office in the Company's name.
</TABLE>

NOTE 10--DEFERRED CHARGES, NET

Including expenses relating to the raising of capital through a public
offering on basis of a prospectus, as well as a long-term loan received, as
follows:

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991 1992
--------- ---------
ADJUSTED NIS IN
THOUSANDS
<S> <C> <C>
Expenses of capital raising........................................................ 9,441 9,441
Expenses of discounting debentures................................................. 3,887 3,887
--------- ---------
13,328 13,328
Less accumulated amortization...................................................... 7,215 8,874
--------- ---------
6,113 4,454
--------- ---------
--------- ---------
</TABLE>

F-32
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 11--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991 1992
--------- ---------
ADJUSTED NIS IN
THOUSANDS
<S> <C> <C>
Treasury--withheld income tax and VAT.............................................. 1,358 595
Lessees............................................................................ 719 406
Work orders and entrepreneurs...................................................... 1,395 116
Contractors and designers.......................................................... 21,613 37,849
A subsidiary....................................................................... -- 597
Other and expenses payable......................................................... 5,326 6,604
--------- ---------
30,411* 46,167
--------- ---------
--------- ---------
<FN>
- ---------------

* Reclassified
</TABLE>

NOTE 12--LONG TERM LOANS

a. Composition of loans by lenders, linkage terms, and interest rates:

<TABLE> <CAPTION>
WEIGHTED
ANNUAL BALANCE OF CURRENT LONG-TERM LOANS
INTEREST THE LOANS MATURITIES DECEMBER 31,
RATE ----------- ----------- --------------------
DECEMBER 31, 1992 1991 1992
--------- ------------------------ --------- ---------
(%) (ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Industrial Development Bank Ltd.:
CPI--linked loans........................................ 1.43 113,116 30,897 113,825 82,219
Loans linked to the U.S. dollar.......................... 7.50 990 358 895 632
----------- ----------- --------- ---------
114,106 31,255 114,720 82,851
----------- ----------- --------- ---------
State of Israel:
CPI--linked loans........................................ 1.16 3,522 828 3,546 2,694
Unlinked loans........................................... 17.00 14 3 14 11
----------- ----------- --------- ---------
3,536 831 3,560 2,705
----------- ----------- --------- ---------
Bank Leumi LeIsrael
Ltd.:
CPI--linked loan......................................... 9.10 26,864 2,985 27,060 23,879
First International
Bank of Israel
Ltd.:*
CPI--linked loan......................................... 12.00 20,891 4,017 21,043 16,874
Various lenders:
CPI--linked loans........................................ 8.30 439 439 414 --
----------- ----------- --------- ---------
165,836 39,527 166,797 126,309
----------- ----------- --------- ---------
----------- ----------- --------- ---------
<FN>
- ---------------

* See note 6c.
</TABLE>

F-33
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 12--LONG TERM LOANS--(CONTINUED)

b. Aggregate maturities of the loans:

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991 1992
--------- ---------
(ADJUSTED NIS IN
THOUSANDS)
<S> <C> <C>
First year
(current maturities)..................................................................... 39,669 39,527
--------- ---------
Second year................................................................................ 39,654 37,797
Third year................................................................................. 38,031 29,998
Fourth year................................................................................ 30,199 21,194
Fifth year................................................................................. 21,324 14,834
Sixth year and thereafter.................................................................. 37,589 22,486
--------- ---------
166,797 126,309
--------- ---------
206,466 165,836
--------- ---------
--------- ---------
</TABLE>

c. As to collaterals for the loans--see Note 19.

NOTE 13--LESSEES' DEPOSITS

Deposits linked to the CPI and not bearing interest, were received from
lessees to secure rental payments. The deposits plus linkage differences are
returned to the lessees at the end of the leasing period and after the lessees
have fulfilled all of their obligations.

NOTE 14--DEBENTURES

a. Debentures (Series "B"):

A series of registered debentures (Series "B") of NIS 15,225 thousand par
value, redeemable in equal installments in the years 1994-2003, bearing an
annual interest rate of 6.25%, linked (principal and interest) to the CPI of
January 1988. To secure these debentures, the Company registered a first degree
floating charge on all its assets and rights (see Note 19a(5)).

b. Debentures convertible into shares (Series "A"):

A series of registered debentures (Series "A") of NIS 7,500 thousand par
value, redeemable on March 31, 1993, bearing an annual interest rate of 4%,
linked (principal and interest) to the CPI of January 1988, and convertible into
ordinary registered shares of NIS 1 par value, each at a conversion rate of NIS
1 par value of debentures (Series "A") to 1.21 ordinary shares of NIS 1 par
value each (121%) (subject to adjustment in respect of every future distribution
of bonus shares), on every business banking day until March 24, 1993. To secure
these debentures, the Company registered a floating charge, of last degree, on
all of its assets and rights (see Note 19a(5)).

Considering the expected conversion of debentures, the debentures were
presented in a separate item in the balance sheet, between the shareholders'
equity and the long-term liabilities, and were included according to their
"capital value".

F-34
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 14--DEBENTURES--(CONTINUED)

Through balance sheet date, NIS 5,047 thousand par value of debentures
(Series "A") have been converted into shares.

Subsequent to balance sheet date all remaining debentures were converted
into shares (see Note 27).

NOTE 15--PROVISION FOR SEVERANCE PAY AND PENSION, NET

a. Composed as follows

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991 1992
--------- ---------
(ADJUSTED NIS IN
THOUSANDS)
<S> <C> <C>
Provision for severance pay........................................................... 2,329 2,884
Less amounts deposited................................................................ 1,823 2,444
--------- ---------
Undeposited balance................................................................... 506 440
Provision for pension................................................................. 963 961
--------- ---------
1,469 1,401
--------- ---------
--------- ---------
</TABLE>

b. The provision for severance pay covers all the Company's liabilities for
severance pay to its employees, as at balance sheet date.

c. The amounts deposited for severance pay reflect the sums deposited in
the "Makefet" fund.

d. The provision for pension pay for a former senior employee of the
Company, has been computed according to actuarial tables published by the
National Insurance Institute. The cash flow has ben capitalized at the rate of
7.5% per annum. The pension payments are linked to the CPI.

The provision for pension pay covers all of the Company's liability for the
pension payments to the abovementioned employee.

NOTE 16--STOCK OPTIONS

a. Stock options (Series 1):

All stock options (Series 1) have been realized in 1990 into ordinary
shares of NIS 1 each.

b. Stock options (Series 2):

Through balance sheet date all stock options (Series 2) have been
exercised. During the reported year 12,404,800 stock options (series 2) were
converted into shares for the consideration of approximately adjusted NIS 34
million.

F-35
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 17--CONTINGENT LIABILITIES AND OUTSTANDING CLAIMS

a. Contingent liabilities:

Under the Law for the Encouragement of Capital Investments, 1959, the
Company receives investment grants in respect of its investments within the
framework of approved programs.

See note 8d, regarding the event of the Company failing to fulfill the
terms of the programs.

b. Outstanding claims against the Company*:

The following legal and other claims exist against the Company:

1. A claim was lodged against the Company in October 1988 by a
contractor for the amount of NIS 250 thousand, for invoices of
infrastructure development work which was carried out by him between the
years 1978-1980 and which he alleges were not paid.

The Company carried out the abovementioned infrastructure development work
on behalf of the State of Israel within the framework of implementation of
infrastructure work in development areas which the Company has implemented and
is implementing on behalf of the State.

In an agreement signed between the Company and the Ministry of Industry and
Trade, it has been decided that the Ministry will indemnify the Company for any
amount that it will be charged with in the judgment in this claim, on condition
that the Company has acted regarding this work in a bona fide manner and without
negligence.

2. A corporation which entered into a lease-purchase agreement with
the Company for the erection of a building in the Alon-Hatavor industrial
zone, submitted in January 1989 a claim against the Company for the amount
of about NIS 434 thousand, claiming that the agreement was canceled by the
Company. The Company submitted a counterclaim for about NIS 549 thousand to
recover its costs. In the opinion of the Company's legal counsels, based,
inter alia, on the facts provided by the Company's employees, the Company
has a good defense in this claim.

3. In November 1990, the Company was joined as a fourth party to a
claim, alleging that the Company was responsible for indemnification of an
insurance company with a sum of NIS 500 thousand in respect of a claim
lodged against the insurance company. In the opinion of the Company's
management, based on the opinion of its legal counsels, the Company has a
good defense in this claim.

4. In February 1991, a claim was lodged against the Company for a
total of NIS 4 million, alleging that the Company was negligent in
supervising investments in a project in Beit Shean, and as a result, damage
was caused to the plaintiff. A statement of defense was submitted. In the
opinion of Company's management, based on the opinion on its legal
counsels, the Company has a good defense in this claim.

5. In August 1991, a design firm lodged a claim against the Company
for, the payment of professional fees amounting to a total of about NIS 640
thousand, which it claims that are due to it for work carried out for the
Company, and which were not paid by it. The Company submitted a statement
of defense and in November 1991 submitted a damage claim against the design
company
- ---------------

* the financial amounts are in accordance with the original amounts in the
statements of claim.

F-36
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 17--CONTINGENT LIABILITIES AND OUTSTANDING CLAIMS--(CONTINUED)

amounting to a total of NIS 1,160 thousand. In the opinion of the Company
management, based on the opinion of its legal counsels, the Company has a
good defense in this claim.

6. In March 1992, an architect lodged a claim against the Company for
the payment of professional fees amounting to a total of about NIS 850
thousand, which he claims are due him for the planning of a project. In the
opinion of the Company management, based on the opinion of its legal
counsels, the Company has a good defense in this claim.

7. The Zionist Federation (henceforth--the "Federation") notified the
Company in May 1991 that it disputes the determination of the sums due to
the Company for the sale of buildings to various tenants, the payment for
which was guaranteed by the Federation. The Federation claims that it is
entitled to examine the selling prices of the buildings according to the
procedures set out in the agreement and that until the examination is
carried out, the Federation will not continue the payments under the
agreement.

In the course of 1991, the Federation examined the selling price of
the building, and following that notified the Company that the costs of the
building examined comply with the market prices, with the exception of the
price increases during the implementation period, which are irregular, and
that it wishes to check the calculations of the price increases.

At a meeting with the Federation in March 1992, it was agreed that the
Federation will submit to the Company its reservations regarding the
calculation of the price increases.

All amounts which the Federation was due to pay by December 31, 1992
have been paid.

8. In December 1991, the Israel Lands Administration notified the
Company that it is requested to return to it a total of NIS 700 thousand
which it collected as handling fees from various entrepreneurs. The Company
rejected the Administration's demand.

9. A banking institution submitted in February 1992 a claim amounting
to about NIS 3,200 thousand against the State of Israel, the Israel Lands
Administration and the Company, claiming that the defendants were negligent
in not observing the attachment by the banking institution of the third
party's land rights.

The statement of claim states that the Company was joined to the claim
by being a trustee for the State of Israel in the matter of the claim.

In the opinion of the Company management, based on the opinion of its
legal counsels, the Company has a good defense in this claim.

In view of the stated above, the Company management is of the opinion
that there is no need to record provisions for the said claims in its
financial statements.

NOTE 18--PERPETUAL LOANS

The Company received perpetual loans from the State. The principal of the
loan is unlinked, but it bears interest at a rate of 0.5% per annum which is
fully linked to the CPI and payable each quarter.

F-37
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 19--LIENS AND GUARANTEES

a. Liens:

1. There is a floating charge on the Company's assets, unlimited in sum, of
first degree, in favor of the Industrial Development Bank of Israel Ltd., to
secure the loans received from this bank. In addition, the Company has mortgaged
in favor of this bank, by floating first degree charge, by fixed first degree
charge and by fixed first degree mortgage all the monies due and/or that will be
due to the Company from the State of Israel or from any State authority. These
monies have also been assigned to this bank by assignment by way of lien.

2. To secure a loan amounting to about NIS 27 million, the Company
registered a fixed charge, unlimited in amount, on the undemanded share capital
and on the Company's goodwill, as well as a floating charge, unlimited in
amount, on all Company assets, in favor of the Leumi Industrial Development Bank
Ltd. and/or Bank Leumi LeIsrael Ltd.

On January 21, 1987, the Company entered into an agreement with the
Industrial Development Bank of Israel Ltd., Bank Leumi LeIsrael Ltd. and Leumi
Industrial Development Bank Ltd. (henceforth--the "Banks"), according to which
any net proceeds received in the event of realizing or enforcing the floating
charge created by the Company in favor of the Banks (henceforth--the "Proceeds")
as detailed in Sections 1 and 2 above, will be divided in a manner so that 90%
of the Proceeds will be paid to the Industrial Development Bank of Israel Ltd.,
on account of the Company's debts to that bank at that time, and 10% of the
Proceeds will be paid to Bank Leumi LeIsrael Ltd. and to the Leumi Industrial
Development Bank Ltd., on account of the Company's debts to those banks at that
time.

3. To secure the fulfillment by the Company of the terms of the Approved
Enterprise status granted the Company under the Law for the Encouragement of
Capital Investments, 1959, the Company mortgaged in favor of the State all of
its property by a floating charge unlimited in amount.

4. To secure a loan totaling about NIS 21 million, the Company recorded a
fixed charge in favor of the First International Bank of Israel on the rental
payments received from the leasing of specific buildings.

5. To secure two public debenture series issues according to a prospectus
(see Note 14), the Company recorded charges on its property and rights, as
follows:

a) For the series of NIS 7,500 thousand nominal value registered
debentures (Series "A")--a floating charge of last degree on all Company
property and rights.

b) For the series of NIS 15,225 thousand nominal value registered
debentures (Series "B")-- a first degree floating charge on all its
property and rights. This floating charge is at an equal priority with the
other floating charges of first priority created by the Company in favor of
the Banks, pari passu to the amounts of liabilities that may exist from
time to time.

6. In order to secure amounts paid by assets of the Federation of Labour
(hereafter--the "Federation"), according to a selling contract from December 23,
1991, signed between the parties, the Company registered in favor of the
Institution a first-degree fixed charge, unlimited in amount, on the rights in
property in Katzrin.

b. Guarantees:

As of date of the financial statement, no guarantees have been given by the
Company, with the exception of guarantees to the courts relating to petitions
for attachments made by the Company within
F-38
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 19--LIENS AND GUARANTEES--(CONTINUED)

the framework of the claims that it submitted, and the exception of guarantees
to secure payments in respect of purchase of land and buildings by the Company.

NOTE 20--TRANSACTIONS WITH INTERESTED PARTIES

The Company conducted transactions with interested parties as follows:

a. Infrastructure development work for the State:

The Company carries out infrastructure development for industry for
the Ministry of Industry and Commerce, and the development for
infrastructure for dwelling for the Israel Lands Administration and the
Ministry of Construction and Housing. This work is fully financed by the
State.

b. Transactions with the State:

1. a) As of December 31, 1992, the total area of buildings leased
to the State amounted to about 95 thousand square meters. The State does
not enjoy preference regarding the leasing terms over other lessees
doing business with the Company.

b) Regarding the State's debt for the leasing and purchase of
buildings--see Note 6c.

2. The Company received perpetual loans and other loans from the
State. For particulars of the loans, see Notes 12 and 18.

3. According to a trust agreement with the State for the management
of the Industrial Research Center (IRC) company, the Company maintains
and leases a building owned by IRC with an area of 4,000 square meters,
located at the Technion campus in Haifa.

4. The Company manages the Industry and Trades Center with an area
of 390 dunams, located near the Erez roadblock north of Gaza, including
an industrial building with an area of about 4,500 square meters.

5. The Company leases and maintains a building belonging to the
State with a total area of about 26 thousand square meters, located in
Kiryat Shmona.

c. Investment grants:

The Company routinely receives investment grants for its investments
in buildings and equipment within the framework of programs approved under
the Law for the Encouragement of Capital Investments, 1969 (see Note 8d).

d. Transactions with the Trades Development Company Ltd.
(henceforth--"TDC"):

1. TDC is fully controlled by the Company. All TDC management
activities are conducted by the Company.

F-39
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 20--TRANSACTIONS WITH INTERESTED PARTIES--(CONTINUED)

2. Following are details of transactions and balances between TDC
and the Company:

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1990 1991 1992
--------- ----------- ---------
(ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C>
Management fees paid by TDC to the Company..................................... 117 117 114
--------- ----- ---------
--------- ----- ---------
Interest, including interest on debentures, paid by Company
to TDC....................................................................... 106 122 33
--------- ----- ---------
--------- ----- ---------
<CAPTION>
DECEMBER 31,
---------------------------------
1991 1992
--------- ---------
(ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C>
Mutual debit (credit) balances of TDC.......................................... 434 (597)
--------- ---------
--------- ---------
6.25% debentures (Series "B") of Industrial Building:
1. N.V. in nominal NIS....................................................... 568 171
--------- ---------
--------- ---------
2. Value in the books of Industrial Building Corporation Ltd. ............... 1,189 355
--------- ---------
--------- ---------
3. Value according to stock market price..................................... 1,401 432
--------- ---------
--------- ---------
</TABLE>

e. Israel Lands Administration:

The Company has agreement with the Israel Lands Administration
regarding leasing and capitalization of the land on which most of the
Company's buildings are located.

For details regarding the Company's land rights--see Note 8c.

f. Additional Transactions with Interested Parties:

The Company has conducted transactions in the regular course of
business with other corporations and bodies, which are included or may be
included in the definition of "interested parties" according to its meaning
in the Securities Law and the regulations enacted according to it, this by
force of their being related to the Government of Israel, which is an
"interested party" in the Company. To the Company's best knowledge, no
transaction had taken place between it and the abovementioned bodies or
corporations which deviated from transactions conducted by it in its
regular course of business.

g. Wages and Benefits:

According to the Company's articles of association, directors in the
Company are not entitled to remuneration for discharging their duties. The
Chairman of the Board of Directors who serves-- with the approval of the
General Meeting--as an Active Chairman, receives a salary for discharging
his duties. The total salary and related expenses (including social
benefits), paid by the Company to the Chairman of the Board (Active) in the
year ended on December 31, 1992, amounted to about NIS 286 thousands (in
1991: NIS 271 thousands and in 1990: NIS 268 thousands). The total amount
of wages and benefits paid by the Company to the general manager in 1992
amounted to NIS 237 thousands.

F-40
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 20--TRANSACTIONS WITH INTERESTED PARTIES--(CONTINUED)

In addition, the company paid on account of severance pay in respect
of previous years NIS 130 thousands for the Chairman of the Board, and a
total of NIS 52 thousands for the general manager.

NOTE 21--LINKAGE TERMS OF MONETARY BALANCES

<TABLE> <CAPTION>
DECEMBER 31, 1991 DECEMBER 31, 1992
-------------------------------------------------- --------------------------------------------------
IN FOREIGN IN FOREIGN
LINKED TO CURRENCY OR LINKED TO CURRENCY OR
THE CPI LINKED THERETO UNLINKED TOTAL THE CPI LINKED THERETO UNLINKED TOTAL
----------- --------------- --------- --------- ----------- --------------- --------- ---------
(ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents................ -- 859 31,601 32,460 -- -- 28,385 28,385
Bank deposits.............. 6,059 -- -- 6,059 3,545 -- -- 3,545
Marketable securities*..... -- -- 127,896 127,896 -- -- 108,971 108,971
Accounts receivable........ 27,452 -- 23,870 51,322 15,143 -- 48,729 63,872
Bank deposits.............. 5,910 -- -- 5,910 2,378 -- -- 2,378
Long-term receivables...... 155,569 -- -- 155,569 150,268 -- -- 150,268
Government loans........... 685 -- -- 685 -- -- -- --
----------- ----- --------- --------- ----------- --- --------- ---------
195,675 859 183,367 379,901 171,334 -- 186,085 357,419
----------- ----- --------- --------- ----------- --- --------- ---------
----------- ----- --------- --------- ----------- --- --------- ---------
LIABILITIES
Current maturities of
long-term loans.......... 39,340 324 5 39,669 39,166 358 3 39,527
Accounts payable and
accrued liabilities...... 3,475 -- 26,936 30,411 -- -- 46,167 46,167
Dividend proposed for
payment.................... -- -- 36,092 36,092 -- -- 120,000 120,000
Long-term loans............ 165,888 895 14 166,797 125,666 632 11 126,309
Lessees' deposits.......... 8,226 -- -- 8,226 7,985 -- -- 7,985
Debentures................. 31,860 -- -- 31,860 31,630 -- -- 31,630
Debentures convertible
into shares.............. 10,467 -- -- 10,467 -- -- -- --
----------- ----- --------- --------- ----------- --- --------- ---------
259,256 1,219 63,047 323,522 204,447 990 166,181 371,618
----------- ----- --------- --------- ----------- --- --------- ---------
----------- ----- --------- --------- ----------- --- --------- ---------
<FN>
- ---------------

* Including marketable debentures in the amount of approximately NIS 91 million,
linked in part to the CPI and in part to foreign currency (previous year: NIS
95 million).
</TABLE>

NOTE 22--GOVERNMENT COMPLETION OF RENTAL FEES

In 1987 the agreement between the state of Israel ("the State") and the
Company which regulated the relations between them regarding building for rent
was canceled.

Upon the cancellation of the agreement, the State paid the Company in 1987
amounts which included, inter alia, income received in advance up to the year
1991, for settling the State's obligations to complete rental payments in the
future.

The amounts received in advance were recognized as income over the
aforementioned period.

F-41
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 23--SELECTED STATEMENT OF INCOME DATA

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
(ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C>
a. Maintenance and work management costs
Depreciation of buildings and equipment......................................... 32,874 33,151 32,225
Maintenance, insurance and leasing fees......................................... 3,528 3,546 3,451
Cost of managing development work............................................... 2,791 3,542 3,155
--------- --------- ---------
39,193 40,239 38,831
--------- --------- ---------
--------- --------- ---------
b. General and administrative expenses
Salaries and benefits........................................................... 5,059 5,106 6,220
Office, computer and others..................................................... 4,232 3,977 3,217
Depreciation and amortization................................................... 2,182 2,074 1,989
--------- --------- ---------
11,473 11,157 11,426
Bad and doubtful debts.......................................................... (1,382) (1,103) 1,128
--------- --------- ---------
10,091 10,054 12,554
--------- --------- ---------
--------- --------- ---------
c. Financing expenses, net
Financing expenses:
In respect of long-term liabilities........................................... 12,910 11,768 9,329
Others........................................................................ 1,310 486 --
--------- --------- ---------
14,220 12,254 9,329
--------- --------- ---------
Financing income:
In respect of long-term liabilities........................................... 8,489 11,683 7,550
Others........................................................................ -- -- 267
--------- --------- ---------
8,489 11,683 7,817
--------- --------- ---------
--------- --------- ---------
5,731 571 1,512
--------- --------- ---------
--------- --------- ---------
d. Gain on realization of assets
Total proceeds from realization of assets....................................... 61,343 33,461 15,600
Less cost of assets realized
(including changes in provision for losses)................................... 45,983 32,534 14,597
--------- --------- ---------
15,360 927 1,003
--------- --------- ---------
--------- --------- ---------
</TABLE>

NOTE 24--PROVISION FOR TAXES ON INCOME

a. Provision for taxes on income included in the statement of income
consists of the following:

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
(ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C>
Deferred taxes *.............................................. 9,889 11,654 18,357
Current taxes................................................. -- 264 113
Taxes in respect of previous years............................ 4,118 -- --
--------- --------- ---------
14,007 11,918 18,470
--------- --------- ---------
--------- --------- ---------
</TABLE>
(Footnote on following page)

F-42
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 24--PROVISION FOR TAXES ON INCOME--(CONTINUED)

(Footnote for previous page)

- ---------------

* Composed as follows:

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
(ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C>
Depreciation differences...................................... (5,357) (8,920) (2,969)
Tax loss carryforwards........................................ 11,834 19,695 21,568
Rental fees received in advance............................... 3,036 786 736
Other......................................................... 376 93 (978)
--------- --------- ---------
9,889 11,654 18,357
--------- --------- ---------
--------- --------- ---------
</TABLE>

b. Final assessments:

1. The Company was issued final assessments up to and including the
tax year ending on December 31, 1988.

2. The subsidiary was issued final assessments up to and including the
tax year ending on March 31, 1985. In respect of the years 1987-1990 the
subsidiary received assessments made according to the best judgement,
totaling some NIS 350 thousands. The subsidiary disputed the above
assessments, but a meeting concerning the assessments has not yet been
held. In the opinion of the management of the subsidiary, the subsidiary
will not have to pay the above amounts, and therefore the subsidiary did
not make a provision in respect of these assessments in its banks.

c. Tax Laws:

1. The Law for the Encouragement of Capital Investments, 1959:

a) Accelerated depreciation: The Company is entitled to deduct in
the first five years from the commencement of use of the buildings for
rent, which were erected within the framework of approved programs under
this law, depreciation at an annual rate of 16% of the investment in the
building and 20% of the investment in industrial systems in the
building.

b) Reduced tax rate: A reduced corporate tax rate applies to the
Company's taxable income related to the approved investment, at a rate
not exceeding 25% of said income. The Company will be released from any
other tax on that same income.

The reduced tax rate applies to Company income derived from the
approved investment in the first seven years commencing with the year in
which the Company first earned taxable income from that investment, on
condition that no more than 14 years have passed from the year in which
the approval was granted, or 12 years from the year in which the asset
was activated, the earlier of the two.

c) Dividend: Income tax at a rate of 15% applies to a dividend paid
from taxable income related to the approved investment. As long as the
Company has adjusted losses for tax purposes, a tax rate of 25% will
apply to the dividend to be paid.

d) Sale of buildings: According to the terms of the approval, the
Company is prevented from selling buildings erected within the framework
of this law, except after the passage of seven years from their
erection. Selling the abovementioned buildings earlier, without
obtaining the permission of the Investment Center, constitutes a breach
of the terms of the approval.

F-43
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 24--PROVISION FOR TAXES ON INCOME--(CONTINUED)

2. Income Tax Law (Adjustments for Inflation), 1985:

The Income Tax Law (Adjustments for Inflation), 1985 applies to the
Company, and its implications on the Company are as follows:

a) The Company is entitled to a deduction for depreciation, as
defined in the law, for its investments in buildings for rental, this
in addition to the accelerated depreciation to which the Company is
entitled under the Law for the Encouragement of Capital Investments,
1959, as detailed above, as well as for its investments in fixed
assets.

b) Appreciation of securities traded on the stock exchange is
taxable income for the Company, subject to the provisions of Section
6 of this law.

c) "Inflationary Increment" as defined in this law is considered
by the Company as income from business.

"Inflationary Deduction" as defined in this law, which is
created in a certain period and not utilized therein, is carried
forward to the next reporting period and is deductible therein as an
expense, while fully linked to the CPI.

d) Losses adjusted for tax purposes that are carried forward
from preceding years are fully adjusted to the rise in the CPI. The
balance of losses adjusted for tax purposes on balance sheet date
amounts to about NIS 29 million (adjusted to the shekel of December
1992).

Moreover, the Company has a "deduction transferred due to
inflation", amounting on balance sheet date to about NIS 3 million.

3. Taxation of Building Sales:

a) Company income from the sale of buildings intended for rental,
carried out in the normal course of business, is business income and
taxable under the Income Tax Ordinance. In the Company's opinion, based
on its legal counsels, the Company is allowed, by force of its agreement
with the tax authorities, to view income from the sale of buildings
which served for rental for at least five years since their erection, as
sales which are taxable under the Land Betterment Law.

b) Under the Income Tax Law (Adjustments for Inflation), 1985, the
Company is entitled to select, at its discretion, to reduce the profit
from the sale of buildings which served for rental, by an amount equal
to the amount of these buildings as determined for the purpose of the
Income Tax Law (Taxation In Inflationary Conditions), 1982, or under the
Income Tax Law (Adjustments for Inflation), 1985, less the depreciation
accumulated for them by the sale date, multiplied by the rate of
increase of the CPI from April 1, 1982 or from the date of detraction
from equity or from the day taken into account as a "negative change",
all as the case may be, and until the month in which the property is
sold, on condition that the amount deducted does not exceed the amount
of the profit from the sale of the buildings. The amount that is
deducted, as stated, will be taxable at the rate of 10% payable within
30 days from the date on which the buildings were sold.

F-44
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 24--PROVISION FOR TAXES ON INCOME--(CONTINUED)

d. Deferred Income Taxes:

1. a) The deferred taxes are calculated due to the timing differences
between the amounts included in the adjusted statements and the amounts
taken into account for tax purposes (see Note 2j(1)).

b) The composition of the provision for deferred income taxes is as
follows:

<TABLE> <CAPTION>
IN RESPECT
OF
DEDUCTIONS
IN RESPECT IN RESPECT OF AND
OF CURRENT NON-CURRENT CARRYFORWARD
BALANCE SHEET BALANCE SHEET LOSSES FOR
ITEMS ITEMS TAX PURPOSES TOTAL
------------- ------------- ------------ ---------
(ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at January 1, 1991............... (2,561) 88,120 (51,118) 34,441
Changes during 1991.................... 152 (8,193) 19,695 11,654
------------- ------------- ------------ ---------
Balance at December 31, 1991............. (2,409) 79,927 (31,423) 46,095
Reconcilement in respect of changes in
the tax rates and other changes during
1992................................... (1,140) (2,071) 21,568 18,357
------------- ------------- ------------ ---------
Balance at December 31, 1992............. (3,549) 77,856 (9,855) 64,452
------------- ------------- ------------ ---------
------------- ------------- ------------ ---------
</TABLE>

The deferred taxes are presented in the balance sheet as follows:

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991 1992
--------- ---------
(ADJUSTED NIS IN
THOUSANDS)
<S> <C> <C>
In the framework of current assets..................................... (2,409) (3,549)
In provision for deferred taxes........................................ 48,504 68,001
--------- ---------
46,095 64,452
--------- ---------
--------- ---------
</TABLE>

2. Following are the adjusted amounts of fixed assets whose
depreciation will not be recognized as deduction for tax purposes, and
regarding which it has been determined that no provision should be made for
deferred taxes:

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991 1992
--------- ---------
(ADJUSTED NIS IN
THOUSANDS)
<S> <C> <C>
Balance of assets whose depreciation has not been allowed for
deduction at the year's beginning................................. 219,625 193,440
Amount not allowed this year........................................ 26,185 10,286
--------- ---------
Balance of assets whose depreciation will not be allowed for
deduction at year's end........................................... 193,440 183,154
--------- ---------
--------- ---------
</TABLE>

F-45
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 24--PROVISION FOR TAXES ON INCOME--(CONTINUED)

e. Reconciliation between the theoretical tax for the adjusted income
before taxes and between the provision for taxes in the books is as follows:

<TABLE> <CAPTION>
DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
(ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C>
Income before taxes on income................................. 46,174 44,010 53,892
--------- --------- ---------
--------- --------- ---------
Theoretical tax rate.......................................... 43.5% 41% 40%
--------- --------- ---------
--------- --------- ---------
Theoretical tax on the above mentioned amount................. 20,086 18,044 21,557
Increase (decrease) due to:
Decrease in tax rates....................................... (6,234) (4,841) (3,876)
Disallowable deductions (mainly depreciation)............... 7,874 11,216 4,400
Tax exempt income........................................... (126) (573) (310)
Provision for losses in respect of which deferred tax was
not computed.............................................. -- (4,378) (1,201)
Inflation differences between income for
tax purposes and income for financial
reporting purposes....................................... (5,613) (7,550) (1,478)
Tax saved due to decrease in tax rates...................... (1,535) -- (622)
Taxes in respect of preceding years, net.................... (445) -- --
--------- --------- ---------
Actual tax expense............................................ 14,007 11,918 18,470
--------- --------- ---------
--------- --------- ---------
Effective tax rate............................................ 30.3% 27.1% 34.3%
--------- --------- ---------
--------- --------- ---------
</TABLE>

NOTE 25--SUMMARY OF FINANCIAL STATEMENTS IN NOMINAL (HISTORICAL) VALUES

a. Balance sheet:

<TABLE> <CAPTION>
DECEMBER 31,
--------------------
1991 1992
--------- ---------
(NIS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets................................................................................. 199,082 204,722
Investments and long-term receivables.......................................................... 149,166 153,756
Real estate, net............................................................................... 369,676 442,505
Fixed assets, net.............................................................................. 11,137 11,294
Deferred charges, net.......................................................................... 2,894 2,104
--------- ---------
731,955 814,381
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities............................................................................ 98,948 207,248
Long-term liabilities.......................................................................... 199,031 165,924
Severance pay and pension, net................................................................. 1,343 1,401
Debentures convertible into shares............................................................. -- 5,096
--------- ---------
299,322 379,669
Shareholders' equity (Note 25c)................................................................ 432,633 434,712
--------- ---------
731,955 814,381
--------- ---------
--------- ---------
<FN>
- ---------------

* The Company revaluated the real estate on April 1, 1987.
</TABLE>

Depreciation of real estate is computed on the basis of the revaluated
cost.

F-46
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 25--SUMMARY OF FINANCIAL STATEMENTS IN NOMINAL (HISTORICAL)
VALUES--(CONTINUED)

The undepreciated balance of the revaluation addition as of balance sheet
date amounts to about NIS 142 million (December 31, 1991: about NIS 149
million).

b. Statement of Income

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
(NIS IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Rental fees from lessees............................................................... 60,862 68,974 76,222
Work management fees................................................................... 2,460 9,120 8,248
--------- --------- ---------
63,322 78,094 84,470
Maintenance and work management costs **................................................. 19,417 19,691 17,768
--------- --------- ---------
43,905 58,403 66,702
General and administrative expenses.................................................... 7,585 8,681 11,725
--------- --------- ---------
36,320 49,722 54,977
Financial expenses, net................................................................ 23,214* 12,715* 2,349
--------- --------- ---------
13,106 37,007 52,628
Gain on securities..................................................................... 10,340* 20,843* 25,626
Gain on realization of assets.......................................................... 21,422 13,552 5,247
--------- --------- ---------
Income before taxes on income.......................................................... 44,868 71,402 83,501
Taxes on income........................................................................ 686 241 113
--------- --------- ---------
Income for the year after taxes on income.............................................. 44,182 71,161 83,388
Equity in earnings of a subsidiary..................................................... 103 269 164
--------- --------- ---------
Net income for the year................................................................ 44,285 71,430 83,552
--------- --------- ---------
--------- --------- ---------
<FN>
-----------------
** Including depreciation in respect of real estate revaluation differences............ 6,697 6,552 4,332
--------- --------- ---------
--------- --------- ---------
* Reclassified.
</TABLE>

c. 1. Statement of changes in shareholders' equity

<TABLE> <CAPTION>
SHARE PERPETUAL CAPITAL RETAINED
CAPITAL LOANS SURPLUS EARNINGS TOTAL
--------- ----------- --------- ---------- ----------
(NIS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1990..................................... 210,178 8,622 63,254 36,002 318,056
Realization of stock options (series 1)...................... 29,892 -- 5,031 -- 34,923
Conversion of debentures convertible into shares............. 1,086 -- 237 -- 1,323
Net income for the year...................................... -- -- -- 44,285 44,285
Interim dividend proposed for payment (2.07%) *.............. -- -- -- (5,000) (5,000)
--------- ----------- --------- ---------- ----------
Balance at December 31, 1990................................... 241,156 8,622 68,522 75,287 393,587
Realization of stock options (series 2)...................... 7 -- 8 -- 15
Conversion of debentures convertible into shares............. 400 -- 201 -- 601
Net income for the year...................................... -- -- -- 71,430 71,430
Transfer to a fund for distribution of bonus shares.......... -- -- 25,945 (25,945) --
Distribution of bonus shares................................. 24,136 -- (24,136) -- --
Dividend proposed for payment
(12.42%) *................................................ -- -- -- (33,000) (33,000)
--------- ----------- --------- ---------- ----------
Balance at December 31, 1991................................... 265,699 8,622 70,540 87,772 432,633
Realization of stock options (series 2)...................... 13,644 -- 19,823 -- 33,467
Conversion of debentures convertible into shares............. 3,085 -- 1,975 -- 5,060
Net income for the year...................................... -- -- -- 83,552 83,552
Dividend proposed for payment
(12.49%) *................................................ -- -- -- (120,000) (120,000)
--------- ----------- --------- ---------- ----------
Balance at December 31, 1992................................... 282,428 8,622 92,338** 51,324 434,712
--------- ----------- --------- ---------- ----------
--------- ----------- --------- ---------- ----------
<FN>
- ---------------

F-47
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 25--SUMMARY OF FINANCIAL STATEMENTS IN NOMINAL (HISTORICAL)
VALUES--(CONTINUED)

* The rate is computed on the basis of the par value of the nominal share
capital.

** Including a fund for distribution of bonus shares to the holders of
debentures convertible into shares (Series A) and holders of stock options
(Series 2) in the amount of NIS 515 thousands (December 31, 1991 and
1990--NIS 2,291 thousands and NIS 535 thousands, respectively).

2. The registered capital of the Company is composed of Ordinary
Shares, NIS 1 each, as follows:

DECEMBER 31,
--------------------
(NIS IN THOUSANDS)
1991 1992
--------- ---------
278,000 294,000
--------- ---------
--------- ---------
</TABLE>

d. Differences between Israeli and United States generally accepted
accounting principles:

1. Advance payments received from customers were deducted from real
estate balances. In the United States, these prepayments are presented as
liabilities. The amount in nominal terms which was deducted from real
estate on December 31, 1992, was NIS 17,970 thousands (December 31,
1991--NIS 12,934 thousands).

2. The U.S. Financial Accounting Standards Board has promulgated
Statement No. 109, "Accounting for Income Taxes", which the Company will
implement for its U.S. GAAP requirements in 1993. The effect of
implementing the accounting standards in that statement would have resulted
in a reduction of the Company's shareholders' equity of approximately NIS
75,496 thousands, which would be reflected in net income in the first
quarter of 1993 for U.S. GAAP purposes. The Israeli tax provision is based
on adjusted shekels and the SFAS No.109 calculation was based on the
Israeli tax law.

3. The revaluation addition referred to in Note 25(a) and the
associated depreciation expense referred to in Note 25(b) would not be
recorded for U.S. GAAP purposes.

NOTE 26--EARNINGS PER SHARE

a. Primary earnings per share data:

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1990 1991 1992
--------- --------- ---------
<S> <C> <C> <C>
Weighted number of shares (in thousands)......................... 271,744 265,698 285,396
--------- --------- ---------
--------- --------- ---------
Primary income (adjusted NIS in thousands)....................... 31,894 32,215 36,347
--------- --------- ---------
--------- --------- ---------
</TABLE>

b. Adjustment of the income and the number of shares used in calculating
the primary earnings per share for the purpose of calculating the fully diluted
earnings per share, as follows:

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1990 1991 1992
------------------------ ------------------------ ------------------------
INCOME WEIGHTED INCOME WEIGHTED INCOME WEIGHTED
ADJUSTED NUMBER OF ADJUSTED NUMBER OF ADJUSTED NUMBER OF
NIS SHARES NIS SHARES NIS SHARES
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Primary earnings per share and
weighted number of shares........... 31,894 271,744 32,215 265,698 36,347 285,396
Convertible securities not included
in primary earnings per share:
Convertible debentures (Series
"A")................................ -- -- 559 6,053 -- --
Stock options (Series "2").......... 1,416 13,652 794 13,645 -- --
----------- ----------- ----------- ----------- ----------- -----------
33,310 285,396 33,568 285,396 36,347 285,396
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>

F-48
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 26--EARNINGS PER SHARE--(CONTINUED)

c. The real interest rate at balance sheet date, for the purpose of
calculating the present value of the realization addition in respect of the
stock options and the debentures conversion price, and the computation of
earnings per share index-linked, amounts to 2.5% (1991--3.5%, 1990--4%).

d. The tax rate for the various calculations is 30%.

NOTE 27--SUBSEQUENT EVENTS

1. In March 1993 the State of Israel sold all of its holdings in the
Company (comprising 51.26% of the Company's equity, fully diluted).

Following such sale, the Company is no longer a Government Company (the
sale is subject to the confirmation of the officer in charge on the restraint of
trade of the State of Israel, which has not been received until the date of
signing these financial statements).

2. In January 1993, the shareholders of the Company in their general
meeting, have approved the distribution of final cash dividend for the year 1992
amounting NIS 120,000 thousands. The dividend was paid in March 1993.

3. At March 24, 1993 all convertible debentures (Series "A") have been
converted into shares. As a result of such conversion the Company's share
capital was increased by NIS 5,212 thousands.

NOTE 28:--SUPPLEMENTARY INFORMATION

Expected rentals from long-term leases as of December 31, 1992 are as
follows:

NIS IN THOUSANDS
-----------------
1993......................................... 67,242
1994......................................... 44,794
1995......................................... 27,252
1996......................................... 21,684
1997......................................... 17,040
1998-2002.................................... 32,868

F-49
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
BALANCE SHEET
(ADJUSTED TO SHEKELS OF SEPTEMBER 1993)

<TABLE> <CAPTION>
SEPTEMBER
DECEMBER 31, 30,
1992 1993
------------ ------------
(AUDITED) (UNAUDITED)
(ADJUSTED NIS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................................... 30,668 11,124
Bank deposits....................................................................... 3,830 1,118
Marketable securities............................................................... 117,733 23,958
Accounts receivable................................................................. 72,842 58,280
------------ ------------
225,073 94,480
------------ ------------
Investments and Long-Term Receivables:
Bank deposits....................................................................... 2,569 1,730
Long-term receivables............................................................... 162,350 185,120
Investment in a subsidiary.......................................................... 1,836 1,848
------------ ------------
166,755 188,698
------------ ------------
Real Estate, Net...................................................................... 859,070 911,777
------------ ------------
Fixed Assets, Net..................................................................... 19,932 18,542
------------ ------------
Deferred Charges, Net................................................................. 4,812 3,984
------------ ------------
1,275,642 1,217,481
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term loans............................................... 42,706 48,076
Accounts payable and accrued liabilities............................................ 49,879 39,860
Unearned rental income.............................................................. 1,774 2,309
Dividend proposed for payment....................................................... 129,648 --
------------ ------------
224,007 90,245
------------ ------------
Long-Term Liabilities:
Long-term loans..................................................................... 136,465 165,159
Lessees' deposits................................................................... 8,627 8,644
Debentures.......................................................................... 34,173 30,780
------------ ------------
179,265 204,583
------------ ------------
Accruals:
Severance pay and pension, net...................................................... 1,514 1,708
Deferred income taxes............................................................... 73,469 85,086
------------ ------------
74,983 86,794
------------ ------------
Debentures Convertible into Shares.................................................... 5,556 --
------------ ------------
Share Capital, Perpetual Loans, Capital Surplus and Retained Earnings:
Share capital....................................................................... 568,679 572,107
Perpetual loans..................................................................... 9,315 8,622
Capital surplus..................................................................... 52,882 55,690
Retained earnings................................................................... 160,955 199,440
------------ ------------
791,831 835,859
------------ ------------
1,275,642 1,217,481
------------ ------------
------------ ------------
<FN>
- ---------------

* Reclassified.
</TABLE>

The accompanying notes are an integral part of the financial statements.

....................... ..................... ....................
E. Fishman S. Sayad A. Elimelech
Chairman of the General Manager Vice General Manager
Board of Directors for Finance

F-50
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
STATEMENT OF INCOME
(ADJUSTED TO SHEKELS OF SEPTEMBER 1993)

<TABLE> <CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1992 1993
------------- -------------
(UNAUDITED)
(ADJUSTED NIS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Revenues:
Rental fees from lessees......................................................... 65,481 65,108
Work management fees............................................................. 6,006 5,267
------------- -------------
71,487 70,375
Maintenance costs and work management............................................ 31,434 30,902
------------- -------------
40,053 39,473
General and administrative expenses.............................................. 8,737 8,578
------------- -------------
31,316 30,895
Financial expenses, net.......................................................... 1,662* 3,352
------------- -------------
29,654 27,543
Profit (loss) on securities...................................................... 13,423* (1,066)
Gain (loss) on realization of assets............................................. 1,392 22,534
------------- -------------
Income before taxes on income.................................................... 44,469 49,011
Taxes on income.................................................................. 13,256 15,099
------------- -------------
Income after taxes on income..................................................... 31,213 33,912
Equity in earnings of a subsidiary............................................... 28 12
------------- -------------
Net income for the period................................................... 31,241 33,924
------------- -------------
------------- -------------
Earnings per share:
Primary earnings per NIS 1 par value in adjusted NIS........................ 0.11 0.12
------------- -------------
------------- -------------
<FN>
- ---------------

* reclassified
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-51
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(ADJUSTMENT TO SHEKELS OF SEPTEMBER 1993) (UNAUDITED)

<TABLE> <CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1993
-------------------------------------------------------
SHARE PERPETUAL CAPITAL RETAINED
CAPITAL LOANS SURPLUS EARNINGS TOTAL
--------- ----------- --------- --------- ---------
(ADJUSTED NIS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at the beginning of the period................... 568,679 9,315 52,882 160,955 791,831
Conversion of debentures convertible into shares....... 3,428 -- 2,115 -- 5,543
Erosion of perpetual loans............................. -- (693) 693 -- --
Dividend in respect of perpetual loans................. -- -- -- (212) (212)
Reconcilement of dividend proposed for payment in
previous year........................................ -- -- -- 4,773 4,773
Net income for the period.............................. -- -- -- 33,924 33,924
--------- ----------- --------- --------- ---------
Balance at the end of the period......................... 572,107 8,622 55,690 199,440 835,859
--------- ----------- --------- --------- ---------
--------- ----------- --------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-52
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
STATEMENT OF CASH FLOWS
(ADJUSTED TO SHEKELS OF SEPTEMBER 1993)

<TABLE> <CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1992 1993
------------- -------------
(UNAUDITED)
(ADJUSTED NIS
IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income for the period......................................................... 31,241 33,924
Adjustments to reconcile net income to net cash provided by
operating activities(a)......................................................... 16,257 19,306
------------- -------------
Net cash provided by operating activities..................................... 47,498 53,230
------------- -------------
Cash flows from investing activities:
Investment in fixed assets........................................................ (1,148) (201)
Investment in real estate......................................................... (92,904) (100,954)
Sale of short-term securities, net................................................ 45,087 92,709
Acquisition of bank deposits, net................................................. (68) --
Government grant received......................................................... 11,115 9,447
Proceeds from realization of real estate.......................................... 25,011 17,502
Proceeds from realization of fixed assets......................................... 258 380
Proceeds from redemption of government loans...................................... 699 --
Redemption of long-term deposits, net............................................. 5,353 3,475
------------- -------------
Net cash (used in) provided by investing activities........................... (6,597) 22,358
------------- -------------
Cash flows from financing activities:
Exercise of stock options......................................................... 1,653 --
Lessees' deposits, net............................................................ (82) 17
Dividend paid..................................................................... (37,519) (124,875)
Interest in respect of perpetual loans............................................ (208) (212)
Long-term loans received.......................................................... -- 40,932
Issuance of debentures............................................................ -- 18,731
Repayment of loans and other long-term liabilities................................ (29,456) (29,725)
------------- -------------
Net cash used in financing activities......................................... (65,612) (95,132)
------------- -------------
Net decreases in cash and cash equivalents.......................................... (24,711) (19,544)
Cash and cash equivalents at the beginning of the period............................ 35,069 30,668
------------- -------------
Cash and cash equivalents at the end of the period............................ 10,358 11,124
------------- -------------
------------- -------------
(a) Adjustments to reconcile net income to net cash provided by operating
activities:
Income and expenses not relating to cash flows:
Depreciation and amortization................................................... 28,960 27,162
Deferred income taxes, net...................................................... 13,131 12,759
(Gain) loss from marketable securities.......................................... (13,423) 1,066
Increase in accrued severance pay and pension, net.............................. 12 194
Gain on realization of assets and changes in provision for losses............... (1,392) (22,534)
(Decrease) increase in value of long-term loans and debentures.................. (2,356) 733
Decrease in long-term receivables and deposits.................................. 1,640 108
Decrease in value of government loans........................................... (19) (3)
Equity in earnings of subsidiaries.............................................. (28) (12)
------------- -------------
26,525 19,473
------------- -------------
Changes in assets and liabilitites:
Decrease (increase) in long-term receivables.................................... 4,541 (4,571)
(Increase) decrease in accounts receivables..................................... (17,964) 13,658
Decrease (increase) in accounts payable and accrued liabilities................. 2,896 (9,789)
Increase in unearned rental income.............................................. 259 535
------------- -------------
(10,268) (167)
------------- -------------
16,257 19,306
------------- -------------
------------- -------------
(b) Supplementary information:
1. Total interest paid 6,333 7,729
------------- -------------
------------- -------------
2. Total taxes paid 442 171
------------- -------------
------------- -------------
(c) Non-cash operation:
1. Debentures convertible into shares in a total amount of NIS 5,433 thousands were converted
into shares.
2. Sale of buildings by long-term credit in a total amount of NIS 31,529 thousands.
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-53
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1--GENERAL

a. These financial statements have been prepared as at September 30, 1993
and for the nine months then ended. These financial statements should be viewed
in relation to the annual financial statements of the Company as at December 31,
1992 and their accompanying notes.

The details in those notes have not changed except as a result of normal
transactions in the interim. All adjustments (of a normal recurring nature)
which are, in the opinion of management, necessary to a fair presentation of the
results of the interim period have been included.

b. The interim financial statements as at September 30, 1993 have been
reviewed by the accountants of the Company. The said review is limited in scope,
according to the procedures set forth by the Institute of Certified Public
Accountants in Israel and does not constitute an examination made in accordance
with generally accepted auditing procedures. Therefore, the auditors have not
expressed their opinion on these financial statements.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies have been established in the interim
financial statements on a consistent basis in relation to the annual financial
statements as at December 31, 1992.

NOTE 3--FINANCIAL STATEMENTS IN ADJUSTED NEW ISRAELI SHEKELS

The financial statements have been prepared on the basis of historical
costs adjusted for the changes in the general purchasing power of the shekel.
Comparative figures in these financial statements were adjusted to the shekel of
September 1993.

In the nine-month period ended September 30, 1993, the Israeli Consumer
Price Index increased by 8.04%.

F-54
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)

NOTE 4--FINANCIAL STATEMENTS IN NOMINAL (HISTORICAL) NIS

a. Balance Sheet:

<TABLE> <CAPTION>
DECEMBER 31, SEPTEMBER 30,
1992 1993
------------- -----------------
(AUDITED) (UNAUDITED)
(NIS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................................... 28,385 11,124
Bank deposits................................................................ 3,545 1,118
Marketable securities........................................................ 108,971 23,958
Accounts Receivable.......................................................... 63,821 55,587
------------- -----------------
204,722 91,787
------------- -----------------
Investments and Long-Term Receivables:
Long-term deposits........................................................... 2,378 1,730
Long-term receivables........................................................ 150,268 185,120
Investment in a subsidiary................................................... 1,110 1,155
------------- -----------------
153,756 188,005
------------- -----------------
Real Estate.................................................................... 442,505 511,707
------------- -----------------
Fixed Assets, Net.............................................................. 11,294 10,426
------------- -----------------
Deferred Charges, Net.......................................................... 2,104 1,741
------------- -----------------
814,381 803,666
------------- -----------------
------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term loans........................................ 39,527 48,076
Accounts payable and accrued liabilities..................................... 46,167 39,860
Unearned rental income....................................................... 1,554 2,257
Dividend proposed for payment................................................ 120,000 --
------------- -----------------
207,248 90,193
------------- -----------------
Long-Term Liabilities:
Long-term loans.............................................................. 126,309 165,159
Unearned rental income....................................................... 7,985 8,644
Debentures................................................................... 31,630 30,780
------------- -----------------
165,924 204,583
------------- -----------------
Accruals:
Severance pay and pension, net............................................... 1,401 1,708
------------- -----------------
Debentures convertible into shares............................................. 5,096 --
------------- -----------------
Shareholders' Equity:
Share capital................................................................ 282,428 285,396
Perpetual loans.............................................................. 8,622 8,622
Capital surplus.............................................................. 92,338 94,752
Retained earnings............................................................ 51,324 118,412
------------- -----------------
434,712 507,182
------------- -----------------
814,381 803,666
------------- -----------------
------------- -----------------
</TABLE>

F-55
<PAGE>
INDUSTRIAL BUILDINGS CORPORATION LIMITED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)

NOTE 4--FINANCIAL STATEMENTS IN NOMINAL (HISTORICAL) NIS--(CONTINUED)

b. Statement of Operations

<TABLE> <CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1992 1993
------------- -----------------
(NIS IN THOUSANDS)
<S> <C> <C>
Revenues:
Rental fees from lessees...................................................... 57,001 62,711
Work management fees.......................................................... 5,310 5,143
------------- --------
62,311 67,854
Maintenance and Work Management Costs........................................... 12,590 15,322
------------- --------
49,721 52,532
General and Administrative Expenses............................................. 7,376 8,327
------------- --------
42,345 44,205
Financial Expenses, Net......................................................... 4,934 4,816
------------- --------
37,411 39,389
Gain on Securities.............................................................. 21,119 4,076
Gain on Realization of Assets................................................... 5,255 25,869
------------- --------
Income before Taxes on Income................................................... 63,785 69,334
Provision for Tax............................................................... 113 2,340
------------- --------
Income for the Period after Taxes on Income..................................... 63,672 66,994
Equity in Earnings of a Subsidiary.............................................. 87 96
------------- --------
Net Income for the Period....................................................... 63,759 67,090
------------- --------
------------- --------
</TABLE>

c. Differences between Israeli and United States generally accepted
accounting principles:

1. Advance payments received from customers were deducted from real
estate balances. In the United States, these prepayments are presented as
liabilities. The amount in nominal terms which was deducted from real
estate on September 30, 1993, was NIS 11,767 thousands (September 30,
1992--NIS 18,089 thousands).

2. The U.S. Financial Accounting Standards Board has promulgated
Statement No. 109, "Accounting for Income Taxes", which the Company
implemented for its U.S. GAAP requirements in 1993. The effect of
implementing the accounting standards in that statement have resulted in a
reduction of the Company's shareholders' equity of approximately NIS 75,496
thousands as of January 1, 1993, and an increase of approximately NIS 8,168
thousands during the nine months ended September 30, 1993 for U.S. GAAP
purposes. The net amount (NIS 67,328 thousands) was reflected in net income
for the nine months ended September 30, 1993 for U.S. GAAP purposes. The
Israeli tax provision is based on adjusted shekels and the SFAS No. 109
calculation was based on the Israeli tax law.

3. The undepreciated balance of revaluation additions of real estate
assets of approximately NIS 139 million as of September 30, 1993 (September
30, 1992 about NIS 143 million) and the associated depreciation expense of
approximately NIS 3,200 thousands would not be recorded for U.S. GAAP
purposes.

NOTE 5--EARNINGS PER SHARE

a. Primary earnings per share data:

<TABLE> <CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1992 1993
--------- ---------
<S> <C> <C>
Weighted number of shares (in thousands)................................. 285,396 285,396
--------- ---------
--------- ---------
Primary income (adjusted NIS in thousands)............................... 31,637 33,924
--------- ---------
--------- ---------
</TABLE>

b. The real interest rate at balance sheet date, for the purpose of
calculating the present value of the realization addition in respect of the
stock options and the debentures conversion price, and the computation of
earnings per share index-linked, amounts to 2.5%.

c. The tax rate for the various calculations is 30%.

NOTE 6--SUBSEQUENT EVENTS

After the balance sheet date it has been resolved by the board of directors
of the Company to recommend to the general meeting to distribute cash dividends
amounting to NIS 195 million.

F-56
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION
INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)

In November 1993, the capital structure of Ophir Holdings Ltd. ("Ophir")
was reorganized to provide for only one class of shares, instead of the two
classes which previously existed. As part of that transaction, the Company's
equity interest in Ophir was increased from 49.4% to 50% and its voting interest
was decreased from 60% to 50%. The equity ownership of a related party was
decreased from 50.7% to 50% and its voting interest was increased from 40% to
50%. Immediately thereafter, Ophir made a private placement of its shares to a
different related party under which it issued 15% of its shares at a price of
approximately $10.2 million and the Company's interest in Ophir was diluted from
50% to 42.5%.

In March 1993, Ophir made an investment in approximately 12.8% of the
equity of Industrial Buildings Ltd. (Mivnei Taasiya Ltd.) in the amount of
approximately $50 million, which is being accounted for by the equity method of
accounting. Industrial Buildings owns approximately one million square meters of
industrial buildings in Israel. The investment was financed primarily by
borrowings from unrelated banks and was made, together with other investors, as
part of a group which acquired approximately 51% of Industrial Buildings.

The pro forma balance sheet gives effect to these transactions as of
September 30, 1993.

The pro forma statements of income for the year ended December 31, 1992 and
nine months ended September 30, 1993 give effect to the above-described
transactions as if they took place at the beginning of each such period. These
pro forma statements do not purport to be indicative of the results that
actually would have occurred had the above-mentioned transactions been effected
on January 1, of each period presented.

F-57
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

<TABLE> <CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1993
--------------------------------------------------------
PURCHASE OF
DECONSOLIDATION MIVNEI PRO FORMA
HISTORICAL OF OPHIR TAASIYA BALANCES
----------- --------------- ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Interest:
Related parties........................................ $ 11,801 $ 260A $ $ 12,061
Others................................................. 1,091 (25)A 1,066
Food processing.......................................... 24,221 24,221
Manufacturing and distribution........................... 2,314 2,314
(2,382)A
Equity in earnings of affiliates and others.............. 7,599 (89)B (683)D 4,445
Other income:
Related parties........................................ 2,701 (487)A 2,214
Others................................................. 1,792 (602)A 1,190
Gain on sale of investments.............................. 1,626 1,626
----------- --------------- ------------- -----------
Total revenues.................................... 53,145 (3,325) (683) 49,137
----------- --------------- ------------- -----------
EXPENSES
Interest:
Related parties........................................ 3,476 (275)A 3,201
Others................................................. 13,739 (2,618)A 11,121
Food processing.......................................... 20,049 20,049
Manufacturing and distribution........................... 1,442 1,442
Other expenses........................................... 8,912 (346)A 8,566
Translation (gain)....................................... (126) (126)
Minority interests....................................... (300) 106A (194)
----------- --------------- -----------
Total expenses.................................... 47,192 (3,133) 44,059
----------- --------------- -----------
Income before income taxes............................... 5,953 (192) (683) 5,078
Income taxes............................................. 2,603 (206)A 73E 2,470
----------- --------------- ------------- -----------
Net income before cumulative effect of change in 3,350 14 (756) 2,608
accounting principle...................................
Cumulative effect on prior years of change in accounting (4,982) (4,982)
principle..............................................
----------- --------------- ------------- -----------
NET (LOSS)........................................ $ (1,632) $ 14 $ (756) $ (2,374)
----------- --------------- ------------- -----------
----------- --------------- ------------- -----------
Earnings (loss) per Class A share:
Earnings before cumulative effect of change in accounting $ .14 $ .11
principle..............................................
Cumulative effect on prior years of change in accounting (.21) (.21)
principle..............................................
----------- -----------
(Loss) per Class A share................................. $ (.07) $ (.10)
----------- -----------
----------- -----------
Weighted average number of Class A and equivalent shares 20,717 20,717
outstanding (in thousands).............................
</TABLE>

F-58
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1993
(UNAUDITED)

<TABLE> <CAPTION>
DECONSOLIDATION PRO FORMA
HISTORICAL OF OPHIR BALANCE
---------- --------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.............................................. $ 2,036 $ $ 2,036
Deposits:
Related parties...................................................... 107,658 107,658
Others............................................................... 250 250
Notes and loans receivable:
Related parties...................................................... 11,226 3,584A 14,810
Others............................................................... 5,319 5,319
(59,826)A
Investments: 8,710B
Related parties...................................................... 149,531 3,112C 101,527
Others............................................................... 12,950 (3,992)A 8,958
Property and equipment, less accumulated depreciation of $10,194....... 35,087 (3,568)A 31,519
Other assets, including accrued interest............................... 46,401 (645)A 45,756
---------- --------------- -----------

Total Assets.................................................... $ 370,458 $ (52,625) $ 317,833
---------- --------------- -----------
---------- --------------- -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits payable:
Related parties...................................................... $ 3,332 $ $ 3,332
Notes and loans payable:
Related parties...................................................... 46,669 (3,584)A 43,085
Others............................................................... 61,415 (41,545)A 19,870
Debentures outstanding:
Related parties...................................................... 3,184 3,184
Others............................................................... 95,844 95,844
Accounts and income taxes payable and accrued expenses:
Related parties...................................................... 1,045 (93)A 952
(1,294)A
Others............................................................... 33,853 1,089C 33,648
---------- --------------- -----------
Total Liabilities............................................... 245,342 (45,427) 199,915
---------- --------------- -----------
Minority Interests
Related parties...................................................... 9,351 (9,351)A --
Other................................................................ 439 439
---------- --------------- -----------
Total minority interests........................................ 9,790 (9,351) 439
---------- --------------- -----------
Shareholders' Equity
4% Cumulative, Participating, Convertible Preferred Stock, $5 par
value; authorized 650,000 shares; issued 223,869 shares, outstanding
215,511 shares......................................................... 1,119 1,119
6 1/2% Cumulative, Convertible Preferred Stock, $5 par value;
authorized 4,282,850 shares; issued 1,270,960 shares, outstanding
1,267,136 shares..................................................... 6,355 6,355
Class A Stock, $1 par value; authorized 30,000,000 shares; issued
15,966,872 shares, outstanding 15,837,968 shares..................... 15,967 15,967
Common Stock, $1 par value; authorized, issued and outstanding
3,000,000 shares....................................................... 3,000 3,000
Additional paid-in capital............................................. 10,468 10,468
Retained earnings...................................................... 80,181 2,023C 82,204
Cumulative translation adjustments..................................... (1,764) 130A (1,634)
---------- --------------- -----------
Total shareholders' equity...................................... 115,326 2,153 117,479
---------- --------------- -----------

Total Liabilities and Shareholders' Equity............................. $ 370,458 $ (52,625) $ 317,833
---------- --------------- -----------
---------- --------------- -----------

</TABLE>

F-59
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993

A) Represents the deconsolidation of Ophir Holdings Ltd.
B) Represents the recording of Ophir Holdings Ltd. on the equity basis.
C) Represents the gain on issuance of shares by Ophir Holdings Ltd.
D) Reflects the effect on the Company's statement of income under the
assumption that Industrial Buildings was purchased on January 1,
1993.
E) Represents the tax provision on equity in earnings of Industrial
Buildings.

F-60
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31, 1992
------------------------------------------------------
PURCHASE
OF
DECONSOLIDATION INDUSTRIAL PRO FORMA
HISTORICAL OF OPHIR BUILDINGS BALANCE
----------- --------------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Interest:
Related parties......................................... $ 17,058 $ (218)A $ $ 16,840
Others.................................................. 1,555 (30)A 1,525
Food processing............................................ 31,482 31,482
(1,470)A
Equity in earnings of affiliates and others................ 11,195 3,565B (1,229)C 12,061
Other income:
Related parties......................................... 4,574 (717)A 3,857
Others.................................................. 2,556 (787)A 1,769
Gains on issuance of shares by affiliates.................. 13,062 (5,193)A 7,869
Gain on sale of investments................................ 3,820 (3,401)A 419
----------- --------------- ----------- -----------
Total revenues........................................ 85,302 (8,251) (1,229) 75,822
----------- --------------- ----------- -----------
Expenses:
Interest:
Related parties......................................... 5,536 (410)A 5,126
Others.................................................. 12,810 12,810
Food processing............................................ 24,415 24,415
Other expenses............................................. 12,738 (318)A 12,420
Translation loss........................................... 1,413 (821)A 592
Minority interests......................................... 4,785 (4,248)A 537
----------- --------------- -----------
Total expenses........................................ 61,697 (5,797) 55,900
----------- --------------- -----------
Income before income taxes................................... 23,605 (2,454) (1,229) 19,922
Income taxes................................................. 13,281 (1,880)A 352D 11,753
----------- --------------- ----------- -----------
Net Income............................................ $ 10,324 $ (574) $ (1,581) $ 8,169
----------- --------------- ----------- -----------
----------- --------------- ----------- -----------
Earnings per Class A share............................ $ .44 $ .34
----------- -----------
----------- -----------
Weighted average number of Class A and equivalent shares
outstanding (in thousands)................................... 20,717 20,717
</TABLE>

F-61
<PAGE>
.AMPAL-AMERICAN ISRAEL CORPORATION
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
AS AT DECEMBER 31, 1992

A) Represents the deconsolidation of Ophir Holdings Ltd.
B) Represents the recording of Ophir Holdings Ltd. on the equity basis.
C) Reflects the effect on the Company's statement of income under the
assumption that Industrial Buildings was purchased on January 1,
1992.
D) Represents the tax provision on equity in earnings of Industrial
Buildings.

F-62
<PAGE>

[Photograph: Teledata Communication - [Photograph: DSP Group - High
Multiplexers and concentrators for performance digital signal
telephone networks (products)] processing products (products)]

[Photograph: Idan Software - [Photograph: Mercury Interactive -
Telecommunications services and Automated software quality
products (products)] products (products)]

<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY AMPAL OR THE U.S. UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

---------------------------

TABLE OF CONTENTS

PAGE
-----------
Prospectus Summary............................. 3
The Company.................................... 6
Special Considerations......................... 9
Use of Proceeds................................ 13
Capitalization................................. 14
Price Range of Class A Stock................... 15
Dividend Policy................................ 15
Selected Consolidated Financial Data........... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 17
Business....................................... 22
Conditions in Israel........................... 37
Tax Information................................ 42
Management..................................... 46
Certain Transactions........................... 48
Description of Securities...................... 51
Underwriting................................... 54
Legal Matters.................................. 56
Experts........................................ 57
Available Information.......................... 57
Incorporation by Reference..................... 57
Index to Financial Information................. F-1

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

4,000,000 UNITS

AMPAL-AMERICAN
ISRAEL CORPORATION

4,000,000 SHARES OF CLASS A STOCK
WITH 4,000,000 REDEEMABLE
CLASS A STOCK WARRANTS

---------------------------
PROSPECTUS
, 1994
---------------------------

LEHMAN BROTHERS

OPPENHEIMER & CO., INC.

FURMAN SELZ INCORPORATED

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[Alternate Page for International Prospectus]

Subject to Completion, dated January 24, 1994

PROSPECTUS
4,000,000 UNITS
AMPAL-AMERICAN ISRAEL CORPORATION

4,000,000 SHARES OF CLASS A STOCK WITH
4,000,000 REDEEMABLE CLASS A STOCK WARRANTS
------------------------

The Class A Stock and Warrants will not be separately transferable prior to
or such earlier date as may be determined by the Representatives of
the U.S. Underwriters and International Managers of the concurrent international
offering. See "Description of Securities."

INVESTORS SHOULD CAREFULLY CONSIDER CERTAIN SPECIAL FACTORS RELATING TO THE
COMPANY.
SEE "SPECIAL CONSIDERATIONS."
------------------------

<TABLE>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Unit............................... $ $ $
Total(3)............................... $ $ $

<FN>
(1) Ampal has agreed to indemnify the U.S. Underwriters and International
Managers against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of the Offerings, estimated at $ ,
payable by Ampal.
(3) Ampal has granted the U.S. Underwriters and the International Managers
options, exercisable within 30 days of the date hereof, to purchase up to
500,000 additional Units solely to cover over-allotments. If such options
are exercised in full, the total "Price to Public," "Underwriting Discounts
and Commissions" and "Proceeds to Company" will be $ , $
and $ , respectively. See "Underwriting."
</TABLE>
------------------------

The Units offered by this Prospectus are offered by the International
Managers, subject to prior sale, to withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the International
Managers and to certain further conditions. It is expected that delivery of the
Units will be made at the offices of Lehman Brothers Inc., New York, New York on
or about February , 1994.

------------------------
LEHMAN BROTHERS
OPPENHEIMER INTERNATIONAL LTD.
FURMAN SELZ INCORPORATED

POALIM CAPITAL MARKETS & INVESTMENTS LTD.
CLAL ISSUING LTD. UNITED MIZRAHI BANK LTD.

JANUARY , 1994

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY AMPAL OR THE INTERNATIONAL MANAGERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

---------------------------

TABLE OF CONTENTS

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

4,000,000 UNITS

AMPAL-AMERICAN
ISRAEL CORPORATION

4,000,000 SHARES OF CLASS A STOCK
WITH 4,000,000 REDEEMABLE
CLASS A STOCK WARRANTS

---------------------------
PROSPECTUS
, 1994
---------------------------

LEHMAN BROTHERS

OPPENHEIMER INTERNATIONAL LTD.

FURMAN SELZ INCORPORATED

POALIM CAPITAL MARKETS & INVESTMENTS LTD.

CLAL ISSUING LTD.

UNITED MIZRAHI BANK LTD.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is an itemization of the expenses to be borne by Ampal in
connection with the distribution of the securities hereunder.

<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee................................... $ 39,181.03
NASD Filing Fee................................................................. 11,862.00
American Stock Exchange Application and Listing Fees............................ 37,500.00
Printing Costs and Expenses*.................................................... 100,000.00
Legal Fees and Expenses*........................................................ 225,000.00
Accountant's Fees and Expenses*................................................. 175,000.00
Transfer Agent's Fees and Expenses*............................................. 10,000.00
Warrant Agent's Fees and Expenses*.............................................. 10,000.00
Blue Sky Expenses and Counsel Fees*............................................. 15,000.00
Miscellaneous*.................................................................. 1,456.97
--------------
Total.................................................................... $ 625,000.00
<FN>
- ---------------

* Estimated.
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Ampal's Certificate of Incorporation provides that the personal liability
of the directors of Ampal shall be limited to the fullest extent permitted by
law including limitations contained in the provisions of paragraph (b) of
Section 402 of the Business Corporation Law of the State of New York (the
"BCL"), as amended from time to time. Ampal's By-laws contain a provision
requiring indemnification of Ampal's directors and officers to the fullest
extent authorized by the laws and statutes of the State of New York. The By-laws
require Ampal to indemnify any person by reason of the fact that such person,
his testator or intestate is or was a director or officer of Ampal against any
reasonable expenses (including attorneys' fees), actually and necessarily
incurred by him in connection with any action or proceeding (or any appeal
therein) brought (or threatened to be brought) by third parties except if such
person breached his duty to Ampal. The By-laws require Ampal to indemnify any
person by reason of the fact that such person, his testator or intestate is or
was a director or officer of Ampal against any and all judgments, fines, amounts
paid in settlement, and reasonable expenses (including attorney's fees) actually
and necessarily incurred by him in connection with any action or proceeding (or
any appeal therein) brought (or threatened to be brought) by third parties
including, without limitation, one by or in the right of any other corporation
which such person served in any capacity at the request of Ampal, if such person
acted in good faith, for a purpose which he believed to be in the best interests
of Ampal, and in criminal actions or proceedings in which he had no reasonable
cause to believe that his conduct was unlawful. Ampal's By-laws further provide
that indemnification for expenses as described above may be paid in advance of
the final disposition of such action or proceeding in the manner authorized by
the laws and statutes of the State of New York subject to repayment by the
person, his testator or intestate, to the extent such advances exceed the
indemnification to which such person is entitled or if such person is ultimately
found not entitled to indemnification under the laws and statutes of the State
of New York. Reference is made to sections 721 through 726 inclusive of the BCL
which deal with indemnification of directors and officers in their capacity as
such.

Effective January 29, 1993, the Registrant renewed a directors and officers
liability policy in the amount of $5,000,000 and an excess directors and
officers liability policy in the amount of $5,000,000. Both policies expire on
January 29, 1994 and provide coverage (subject to certain exclusions and
II-1
<PAGE>
retentions) to all of the officers and directors of the Registrant and those
subsidiaries of which the Registrant owns more than 50% of the outstanding
stock.

Under Section 6 of the proposed forms of U.S. and International
Underwriting Agreements between Ampal and the U.S. Underwriters and Ampal and
the International Managers, respectively, filed as Exhibit 1.1 hereto, the
officers, directors and controlling persons of Ampal are entitled to be
indemnified by the U.S. Underwriters against loss, claim, damage or liability
(or any action in the respect thereof) resulting from the inclusion in the
registration statement of false or misleading information provided by the U.S.
Underwriters for use therein. See Exhibit 1.1 for a complete description of such
terms.

ITEM 16. EXHIBITS.

EXHIBIT
NO. DESCRIPTION
- ----- -----------------------------------------------------------------------

1.1 --Forms of Underwriting Agreement between Registrant and Lehman
Brothers Inc., Oppenheimer & Co., Inc. and Furman Selz Incorporated
and Registrant and Lehman Brothers International (Europe),
Oppenheimer & Co., Inc., Furman Selz Incorporated and Poalim Capital
Markets and Investments Ltd.*

4.1 --Form of Indenture dated as of June 6, 1980 (filed as Exhibit 13a to
Registration Statement No. 2-68234 and incorporated herein by
reference).*
4.2 --Form of Indenture dated as of April 1, 1982 (filed as Exhibit 4a to
Registration Statement No. 2-77263 and incorporated herein by
reference).*
4.3 --Form of Indenture dated as of November 1, 1984 (filed as Exhibit 4a
to Registration Statement No. 2-88582 and incorporated herein by
reference).*
4.4 --Form of Indenture dated as of May 1, 1986 (filed as Exhibit 4a to
Pre-Effective Amendment No. 1 to Registration Statement No. 33-5578
and incorporated herein by reference).*

4.5 --Form of Warrant Agreement, as amended.
4.6 --Form of Warrant Certificate contained in Exhibit 4.5.*
4.7 --Form of Class A Stock Certificate.*

4.8 --Restated Certificate of Incorporation of the Registrant dated
December 23, 1982 (filed as Exhibit 3t to Registration Statement No.
2-81156 and incorporated herein by reference).*
4.9 --Certificate of Amendment of the Certificate of Incorporation of the
Registrant dated March 17, 1983 (filed as Exhibit 3r to Form 10-K for
the fiscal year ended December 31, 1982 and incorporated herein by
reference. File No. 0-538).*
4.10 --Certificate of Amendment of the Certificate of Incorporation of the
Registrant dated July 26, 1988 (filed as Exhibit 3c to Form 10-K for
the fiscal year ended December 31, 1988 and incorporated herein by
reference. File No. 0-538).*
4.11 --By-Laws of the Registrant, as amended (filed as Exhibit 3d to Form
10-K for fiscal year ended December 31, 1992 and incorporated herein
by reference. File No. 0-538).*

5 --Opinion of Kronish, Lieb, Weiner & Hellman.*
10.1 --Agreement dated February 7, 1992 between Inerta-Energies and Future
Technologies Ltd., Yehuda (Yuli) Offer, Offer Brothers (Management)
Ltd., Offer Shipping Ltd., Offer Ship Holdings Ltd., L.I.N.
(Holdings) Ltd, I.I.Z. European Enterprise B.V., Amnon Leon, Ampal
Industries Inc. and Yeshayahu Landau [Translation].*

10.2 --Employment Agreement between Registrant and Lawrence Lefkowitz dated
July 26, 1993.*
10.3 --Registrant's 1993 Stock Option Plan.*

10.4 --Agreement dated March 22, 1992 between the Investment Company of Bank
Leumi, Ltd., and Ophir Holdings Ltd., Mercazim Investments Ltd., Diur
B.P. Ltd. and Mivnat Holdings Ltd.*

10.5 --Committed Line of Credit Agreement dated as of June 5, 1992 and
amendments dated October 31, 1992 and October 31, 1993.*

10.6 --Agreement dated January 18, 1994 between Ampal Industries, Inc. and
Inerta-Energies and Future Technologies Ltd. [Translation].

11 --Statements re: Computation of Earnings Per Share.*
12 --Statement re: Computation of Ratios of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.*

23.1 --The Consent of Kronish, Lieb, Weiner & Hellman is contained in its
opinion filed as Exhibit 5 hereto.*

II-2
<PAGE>
EXHIBIT
NO. DESCRIPTION
- ----- -----------------------------------------------------------------------
23.2 --Consent of Arthur Andersen & Co.
23.3 --Consent of Somekh Chaiken.
23.4 --Consent of Igal Brightman & Co.
23.5 --Consent of H.H.S.L. Haft & Haft & Co.
23.6 --Consent of Fahn, Kanne & Co.
23.7 --Consent of Fahn, Kanne & Co.
23.8 --Consent of Morris Brankin & Co.
23.9 --Consent of Ronel Stettner & Co.
23.10 --Consent of Porat & Co.
23.11 --Consent of Ernst & Young International.
23.12 --Consent of Haggai Wallenstein & Co.
23.13 --Consent of Kesselman & Kesselman.
23.14 --Consent of Braude & Co.
23.15 --Consent of Reuveni, Hartuv, Tepper & Co.
23.16 --Consent of Dov Kahana & Co.
23.17 --Consent of Haggai Wallenstein & Co.
23.18 --Consent of Dov Kahana & Co.
23.19 --Consent of Reuveni, Hartuv, Tepper & Co.
23.20 --Consent of Almagor & Co.
23.21 --Consent of Kost, Levary and Forer.
24 --Powers of Attorney.*

- ---------------
* Previously filed.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement.

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act.

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement.

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.

(4) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in The City of New York, State of New York, on
January 24, 1994.

AMPAL-AMERICAN ISRAEL CORPORATION
(registrant)

By: /s/ LAWRENCE LEFKOWITZ
..................................
Lawrence Lefkowitz
President and Chief Executive
Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to this Registration Statement has been signed below by the following
persons in the following capacities on January 24, 1994.

<TABLE>
<S> <C>
NAME TITLE
- --------------------------------------------------- ------------------------------------------------------------
/s/ LAWRENCE LEFKOWITZ President, Chief Executive Officer and Director (Principal
................................................... Executive Officer)
Lawrence Lefkowitz
/s/ ALAN L. SCHAFFER Vice President--Finance and Treasurer
................................................... (Principal Financial Officer)
Alan L. Schaffer
/s/ ALLA KANTER Controller
................................................... (Principal Accounting Officer)
Alla Kanter
* Director
...................................................
Michael Arnon
* Director
...................................................
Stanley Batkin
* Director
...................................................
Yaacov Elinav
* Director
...................................................
Harry B. Henshel
* Director
...................................................
Eitan Raff
* Director
...................................................
Shimon Ravid
</TABLE>

II-4
<PAGE>

<TABLE>
<S> <C>
NAME TITLE
- --------------------------------------------------- ------------------------------------------------------------
* Director
...................................................
Leon Riebman
* Director
...................................................
Evelyn Sommer
* Director
...................................................
Alexander Yuhjtman
</TABLE>

*By: /s/ LAWRENCE LEFKOWITZ
..............................................
Lawrence Lefkowitz
Attorney-in-Fact

II-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
AMPAL-AMERICAN ISRAEL CORPORATION

We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Ampal-American Israel Corporation and
subsidiaries included in this registration statement and have issued our report
thereon dated March 18, 1993. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedules on
pages S-2 through S-4 are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.

ARTHUR ANDERSEN & CO.

New York, N.Y.
March 18, 1993

S-1
<PAGE>
SCHEDULE IV

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
INDEBTEDNESS OF AND TO RELATED PARTIES--NOT CURRENT

<TABLE> <CAPTION>
YEAR ENDED DECEMBER 31, 1990:
----------------------------------------------------------------------
BALANCE AT BALANCE AT
NAME OF PERSON BEGINNING ADDITIONS DEDUCTIONS END
- ------------------------------------------ ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Indebtedness of:
Bank Hapoalim B.M. ..................... $ 24,283,000 $ 158,885,000 $ -- $ 183,168,000
Israel Continental Bank Ltd. ........... 28,750,000 -- 28,750,000 --
All other related parties
as a group........................... 6,674,000 57,000 -- 6,731,000
---------------- ---------------- ---------------- ----------------
$ 59,707,000 $ 158,942,000 $ 28,750,000 $ 189,899,000
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
Indebtedness to:
Bank Hapoalim B.M. ..................... $ 509,995,000 $ -- $ 460,242,000 $ 49,753,000
Bank Hapoalim (Cayman) Ltd. ............ 2,700,000 -- 1,200,000 1,500,000
Israel Continental Bank Ltd. ........... 2,639,000 -- 157,000 2,482,000
All other related parties
as a group........................... 1,404,000 2,563,000 -- 3,967,000
---------------- ---------------- ---------------- ----------------
$ 516,738,000 $ 2,563,000 $ 461,599,000 $ 57,702,000
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
YEAR ENDED DECEMBER 31, 1991:
----------------------------------------------------------------------
BALANCE AT BALANCE AT
NAME OF PERSON BEGINNING ADDITIONS DEDUCTIONS END
- ------------------------------------------ ---------------- ---------------- ---------------- ----------------
Indebtedness of:
Bank Hapoalim B.M. ..................... $ 183,168,000 $ -- $ 40,297,000 $ 142,871,000
All other related parties
as a group........................... 6,731,000 3,862,000 -- 10,593,000
---------------- ---------------- ---------------- ----------------
$ 189,899,000 $ 3,862,000 $ 40,297,000 $ 153,464,000
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
Indebtedness to:
Bank Hapoalim B.M. ..................... $ 49,753,000 $ -- $ 14,289,000 $ 35,464,000
Bank Hapoalim (Cayman) Ltd. ............ 1,500,000 -- 900,000 600,000
Israel Continental Bank Ltd. ........... 2,482,000 158,000 -- 2,640,000
All other related parties
as a group........................... 3,967,000 -- 1,701,000 2,266,000
---------------- ---------------- ---------------- ----------------
$ 57,702,000 $ 158,000 $ 16,890,000 $ 40,970,000
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
YEAR ENDED DECEMBER 31, 1992:
----------------------------------------------------------------------
BALANCE AT BALANCE AT
NAME OF PERSON BEGINNING ADDITIONS DEDUCTIONS END
- ------------------------------------------ ---------------- ---------------- ---------------- ----------------
Indebtedness of:
Bank Hapoalim B.M. ..................... $ 142,871,000 $ -- $ 44,834,000 $ 98,037,000
All other related parties
as a group........................... 10,593,000 -- 1,125,000 9,468,000
---------------- ---------------- ---------------- ----------------
$ 153,464,000 $ -- $ 45,959,000 $ 107,505,000
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
Indebtedness to:
Bank Hapoalim B.M. ..................... $ 35,464,000 $ -- $ 14,780,000 $ 20,684,000
Bank Hapoalim (Cayman) Ltd. ............ 600,000 -- 600,000 --
Israel Continental Bank Ltd. ........... 2,640,000 -- 501,000 2,139,000
All other related parties
as a group........................... 2,266,000 -- 20,000 2,246,000
---------------- ---------------- ---------------- ----------------
$ 40,970,000 $ -- $ 15,901,000 $ 25,069,000
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
</TABLE>

S-2
<PAGE>
SCHEDULE IX

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS

<TABLE> <CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ---------------------------------------- -------------- ----------- ------------------ --------------- -------------------
CATEGORY OF WEIGHTED MAXIMUM AMOUNT AVERAGE AMOUNT WEIGHTED AVERAGE
AGGREGATE BALANCE AT AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
SHORT-TERM END OF INTEREST DURING THE DURING THE DURING THE
BORROWINGS PERIOD RATE PERIOD PERIOD(1) PERIOD(1)
- ---------------------------------------- -------------- ----------- ------------------ --------------- -------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1990:
Notes and loans payable............ $ 1,300,000 10.46% $ 10,390,000 $ 6,027,000 11.77%
Year Ended December 31, 1991:
Notes and loans payable............ $ 22,683,000 8.15% $ 22,683,000 $ 6,066,000 10.16%
Year Ended December 31, 1992:
Notes and loans payable............ $ 36,568,000 6.81% $ 36,568,000 $ 24,642,000 7.76%
<FN>
- ---------------

(1) Based on quarter-end balances.
</TABLE>

S-3
<PAGE>
SCHEDULE X

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION

<TABLE> <CAPTION>
COLUMN A COLUMN B
- ------------------------------------------------------------------------------------------------ ----------------
CHARGED TO COSTS
ITEM AND EXPENSES
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Year Ended December 31, 1990:
1. Maintenance and repairs................................................................. $ 1,614,000
5. Advertising costs....................................................................... 1,292,000
Year Ended December 31, 1991:
1. Maintenance and repairs................................................................. $ 1,170,000
5. Advertising costs....................................................................... 1,116,000
Year Ended December 31, 1992:
1. Maintenance and repairs................................................................. $ 4,221,000
5. Advertising costs....................................................................... 101,000
</TABLE>

S-4
<PAGE>

EXHIBIT INDEX

EXHIBIT
NO. DESCRIPTION
- ----- -----------------------------------------------------------------------
1.1 --Forms of Underwriting Agreement between Registrant and Lehman
Brothers Inc., Oppenheimer & Co., Inc. and Furman Selz Incorporated
and Registrant and Lehman Brothers International (Europe),
Oppenheimer & Co., Inc., Furman Selz Incorporated and Poalim Capital
Markets and Investments Ltd.*
4.1 --Form of Indenture dated as of June 6, 1980 (filed as Exhibit 13a to
Registration Statement No. 2-68234 and incorporated herein by
reference).*
4.2 --Form of Indenture dated as of April 1, 1982 (filed as Exhibit 4a to
Registration Statement No. 2-77263 and incorporated herein by
reference).*
4.3 --Form of Indenture dated as of November 1, 1984 (filed as Exhibit 4a
to Registration Statement No. 2-88582 and incorporated herein by
reference).*
4.4 --Form of Indenture dated as of May 1, 1986 (filed as Exhibit 4a to
Pre-Effective Amendment No. 1 to Registration Statement No. 33-5578
and incorporated herein by reference).*
4.5 --Form of Warrant Agreement, as amended.
4.6 --Form of Warrant Certificate contained in Exhibit 4.5.*
4.7 --Form of Class A Stock Certificate.*
4.8 --Restated Certificate of Incorporation of the Registrant dated
December 23, 1982 (filed as Exhibit 3t to Registration Statement No.
2-81156 and incorporated herein by reference).*
4.9 --Certificate of Amendment of the Certificate of Incorporation of the
Registrant dated March 17, 1983 (filed as Exhibit 3r to Form 10-K for
the fiscal year ended December 31, 1982 and incorporated herein by
reference. File No. 0-538).*
4.10 --Certificate of Amendment of the Certificate of Incorporation of the
Registrant dated July 26, 1988 (filed as Exhibit 3c to Form 10-K for
the fiscal year ended December 31, 1988 and incorporated herein by
reference. File No. 0-538).*
4.11 --By-Laws of the Registrant, as amended (filed as Exhibit 3d to Form
10-K for fiscal year ended December 31, 1992 and incorporated herein
by reference. File No. 0-538).*
5 --Opinion of Kronish, Lieb, Weiner & Hellman.*
10.1 --Agreement dated February 7, 1992 between Inerta-Energies and Future
Technologies Ltd., Yehuda (Yuli) Offer, Offer Brothers (Management)
Ltd., Offer Shipping Ltd., Offer Ship Holdings Ltd., L.I.N.
(Holdings) Ltd, I.I.Z. European Enterprise B.V., Amnon Leon, Ampal
Industries Inc. and Yeshayahu Landau [Translation].*
10.2 --Employment Agreement between Registrant and Lawrence Lefkowitz dated
July 26, 1993.*
10.3 --Registrant's 1993 Stock Option Plan.*
10.4 --Agreement dated March 22, 1992 between the Investment Company of Bank
Leumi, Ltd., and Ophir Holdings Ltd., Mercazim Investments Ltd., Diur
B.P. Ltd. and Mivnat Holdings Ltd.*
10.5 --Committed Line of Credit Agreement dated as of June 5, 1992 and
amendments dated October 31, 1992 and October 31, 1993.*
10.6 --Agreement dated January 18, 1994 between Ampal Industries, Inc. and
Inerta-Energies and Future Technologies Ltd. [Translation].
11 --Statements re: Computation of Earnings Per Share.*
12 --Statement re: Computation of Ratios of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.*
23.1 --The Consent of Kronish, Lieb, Weiner & Hellman is contained in its
opinion filed as Exhibit 5 hereto.*

<PAGE>

EXHIBIT
NO. DESCRIPTION
- ----- -----------------------------------------------------------------------
23.2 --Consent of Arthur Andersen & Co.
23.3 --Consent of Somekh Chaiken.
23.4 --Consent of Igal Brightman & Co.
23.5 --Consent of H.H.S.L. Haft & Haft & Co.
23.6 --Consent of Fahn, Kanne & Co.
23.7 --Consent of Fahn, Kanne & Co.
23.8 --Consent of Morris Brankin & Co.
23.9 --Consent of Ronel Stettner & Co.
23.10 --Consent of Porat & Co.
23.11 --Consent of Ernst & Young International.
23.12 --Consent of Haggai Wallenstein & Co.
23.13 --Consent of Kesselman & Kesselman.
23.14 --Consent of Braude & Co.
23.15 --Consent of Reuveni, Hartuv, Tepper & Co.
23.16 --Consent of Dov Kahana & Co.
23.17 --Consent of Haggai Wallenstein & Co.
23.18 --Consent of Dov Kahana & Co.
23.19 --Consent of Reuveni, Hartuv, Tepper & Co.
23.20 --Consent of Almagor & Co.
23.21 --Consent of Kost, Levary and Forer.
24 --Powers of Attorney.*

- ---------------
* Previously filed.

AMPAL-AMERICAN ISRAEL CORPORATION

and

CHEMICAL BANK,

as Warrant Agent

__________________

Warrants to Purchase Shares of Class A Stock
------------

__________________

WARRANT AGREEMENT

Dated as of
-----------------

<PAGE>

THIS WARRANT AGREEMENT, dated as of , 1994, is made by and
----------------
between AMPAL-AMERICAN ISRAEL CORPORATION, a New York corporation (the
"Company"), and CHEMICAL BANK, as Warrant Agent (or any successor thereto) (the
"Warrant Agent").

The Company proposes to issue up to Warrants, as hereinafter
--------
described (each a Warrant and, together, the "Warrants"), each to purchase one
share of its Class A Stock, par value $1.00 per share (the "Class A Stock") (the
shares of Class A Stock issuable upon exercise of the Warrants being referred to
herein as the "Warrant Shares"), in connection with the public offerings of up
to units (which include the Additional Units, as defined below) (the
-----------
"Units") each consisting of one share of Class A Stock (each a "Unit Share" and,
together, the "Unit Shares") and one Warrant. A portion of the Units are being
sold in a public offering in the United States underwritten on a firm commitment
basis by Lehman Brothers, Inc., Oppenheimer & Co., Inc. and Furman Selz
Incorporated as representatives (the "Representatives") of the U.S. Underwriters
in accordance with the terms of an underwriting agreement (the "United States
Underwriting Agreement") that relates to the offering of a portion of the Units
in the United States. The remaining portion of the Units are being sold in a
public offering outside of the United States underwritten on a firm commitment
basis by Lehman Brothers International, Oppenheimer International Ltd., Furman
Selz Incorporated and Poalim Capital Markets and Investments Ltd. as Lead
Managers of the International Managers (the "International Managers" and
together with the Representatives, the "Underwriters") in accordance with the
terms of an underwriting agreement (the "International Underwriting Agreement"
and together with the U.S. Underwriting Agreement, the "Underwriting
Agreements") that relate to the offering of a portion of the Units outside of
the United States. Under the Underwriting Agreements, Units (the "Firm
-----
Units") are required to be purchased by the Underwriters if any are purchased,
and, in accordance with the Underwriting Agreements, up to Units (the
------
"Additional Units") may be purchased by the Underwriters.

The Company wishes the Warrant Agent to act on behalf of the Company, and
the Warrant Agent is willing so to act, in connection with the issuance,
division, transfer, exchange and exercise of Warrants and, during the period
prior to the Separation Date, as hereinafter defined, as transfer agent and
registrar for the Units.

In consideration of the foregoing and for the purpose of defining the terms
and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants (the
"Holders"), and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confirmed, the Company and the
Warrant Agent agree as follows:

Section 1. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions set forth in this Agreement, and the Warrant Agent hereby
accepts such appointment.

<PAGE>

Section 2. Transferability and Form of Warrant.

2.1 Registration. The Warrants shall be numbered and shall be
------------
registered in a Warrant register maintained by the Warrant Agent as they are
issued. The Company and the Warrant Agent shall be entitled to treat a Holder
as the owner in fact for all purposes of each Warrant registered in such
Holder's name and shall not be bound to recognize any equitable or other claim
to or interest in such Warrant on the part of any other person, and shall not be
liable for any registration of transfer of Warrants that are registered or to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer, or with such knowledge of
such facts that its participation therein amounts to bad faith.

2.2 Transfer. The Unit Shares and Warrants included in the
--------
Units will not be separately transferable prior to , 1994 or such
------------
earlier date as may be determined by the Representatives and International
Managers (the "Separation Date"). Prior to the Separation Date, the
certificates representing the Warrants will also represent the Unit Shares. On
or after the Separation Date, the Unit Shares and the Warrants will only be
separately transferable and will not be transferable as Units. On its face, the
certificate for the Warrants shall be legended to make it a certificate for
Units through the Separation Date. Thereafter, the certificate for Warrants
shall represent only Warrants. Certificates evidencing the Unit Shares will be
issued to the Holders of the Units on the Separation Date or as soon as
practicable after the Separation Date.

The Warrants shall be transferable only on the books of the
Company maintained at the principal office of the Warrant Agent at 450 West 33rd
Street, New York, New York 10001, upon delivery thereof duly endorsed by the
Holder or by his duly authorized attorney or representative, which endorsement
shall be guaranteed by a bank or trust company located in the United States or
by a broker or dealer that is a member of a national securities exchange, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or an official copy thereof, duly certified, shall be
deposited and remain with the Warrant Agent. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited and remain with the Warrant Agent in its discretion. Upon any
registration of transfer, the Warrant Agent shall countersign and deliver a new
Warrant or Warrants to the persons entitled thereto.

2.3 Form of Warrant. The text of the Warrant and of the Form
---------------
of Election to Purchase Warrant Shares shall be substantially as set forth in
Exhibit A attached hereto. The price per Warrant Share and the number of
Warrant Shares issuable upon exercise of each Warrant are subject to adjustment
upon the occurrence of certain events, all as hereinafter provided. The
Warrants shall be executed on behalf of the Company by its President or its Vice
President-Finance, under its corporate seal produced thereon attested by its
Secretary. The signature of any of such officers on the Warrants may be manual
or facsimile.

Warrants bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any one of them shall have

<PAGE>

ceased to hold such offices prior to the delivery of such Warrants or did not
hold such offices on the date of this Agreement.

Warrants shall be dated as of the date of counter-signature
thereof by the Warrant Agent either upon initial issuance or upon division,
exchange, substitution or transfer.

Section 3. Deposit of Class A Stock.

3.1 Depositary. Prior to the Separation Date, the Warrant
----------
Agent hereby agrees to act as depositary for the Unit Shares.

3.2 Form of Certificate. Upon receipt of instructions from the
-------------------
Underwriters, the Company, on the First Closing Date and the Option Closing Date
(as such terms are defined in the Underwriting Agreements), if applicable, will
deliver to the Warrant Agent certificates for such number of Warrants as are
included in the Firm Units and in the Additional Units, in such denominations as
are specified by the Representatives. The certificates delivered by the Company
to the Warrant Agent shall be registered in the name of the Warrant Agent or its
nominee, and shall be held by the Warrant Agent and its successors, in its
capacity as depositary upon and subject to the terms of this Agreement, for the
beneficial owners thereof, which will be the registered owners of the Firm Units
and the Additional Units.

3.3 Legend. There shall be printed on the Warrants to be
------
originally issued and upon all Warrants issued on transfers, exchanges or
substitutions thereof, a legend in substantially the following form:

Until 1994, or such earlier date as designated by the
-------
Representative and International Managers as defined in the Warrant
Agreement (the "Separation Date"), this certificate evidences Units,
each consisting of one share of Class A Stock, $1.00 par value and one
Warrant to purchase one share of Class A Stock, which may be combined,
exchanged or transferred only as Units, and the shares of Class A
Stock and Warrants comprising such Units may not be split up,
combined, exchanged or transferred separately. Warrants may not be
exercised until after the Separation Date. The holder of record of
this certificate at the close of business on the Separation Date will
be mailed a certificate evidencing such holder's ownership of shares
of Class A Stock, and this certificate shall no longer represent Units
but shall represent solely the number of Warrants set forth herein.

3.4 Delivery. Subject to the next succeeding paragraph, at the
--------
Separation Date, the Warrant Agent shall prepare a record list of the holders of
Units and will submit such list to the transfer agent for the Class A Stock. As
soon after the Separation Date as practicable, the Warrant Agent, in its
capacity as depositary, shall mail to the holders of Units at the close of
business on the Separation Date, at their addresses as shown on the Warrant
register maintained by the Warrant Agent, the certificates for the Unit Shares
to which such holders are entitled.

If the Company with the consent of the Representatives and
International Managers, determines, at least seventy-two hours prior to the
First Closing Date, that the Unit Shares shall be separately transferable as of
such First Closing Date (or, if practicable, if such determination shall be made
less than seventy-two hours prior to such closing), in lieu of the actions

<PAGE>

specified in the immediately preceding paragraph, the Warrant Agent shall
deliver the certificates for such Unit Shares at the closing (or as soon
thereafter as practicable) and will prepare and submit a record list for the
Units Shares to the transfer agent for the Class A Stock.

3.5 Failure to Deliver Certificate. If the Warrant Agent, in
------------------------------
its capacity as depositary, shall be unable to make any delivery of a
certificate for a Unit Share within one year after the Separation Date, then the
Warrant Agent shall hold such certificate for the account of the person to whom
such delivery was to be made. The Warrant Agent, upon the Company's request and
at the Company's expense, shall produce and supply to the Company a list of all
such undelivered certificates, the Holders of such certificates and the last
known address of such Holders. The Company shall then cause to be published in
a newspaper printed in the English language and of general circulation in New
York City, New York, a notice prepared by the Company stating the names of the
Holders contained in such list.

Section 4. Countersignature of Warrants. The Warrants shall be
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned. Warrants may be countersigned, however, by the Warrant Agent
and may be delivered by the Warrant Agent, notwithstanding that the persons
whose manual or facsimile signatures appear thereon as proper officers of the
Company shall have ceased to be such officers at the time of such
countersignature, issuance or delivery. The Warrant Agent shall, upon written
instructions of the President, one of its Vice Presidents or the Secretary of
the Company, countersign, issue and deliver the Warrants and shall countersign
and deliver the Warrants as otherwise provided in this Agreement.

Section 5. Exchange of Warrant Certificates. Each Warrant certificate
may be exchanged at the option of the Holder thereof for another certificate or
certificates entitling the Holder thereof to purchase a like aggregate number of
Warrant Shares as the certificate or certificates surrendered then entitle such
Holder to purchase. Any Holder desiring to exchange a Warrant certificate or
certificates shall make such request in writing delivered to the Warrant Agent,
and shall surrender, properly endorsed, which endorsement shall be guaranteed as
provided in Section 2.2 hereof if the certificate or certificates are to be
issued other than in the name of the Holder, the certificate or certificates to
be so exchanged at the office of the Warrant Agent at 450 West 33rd Street, New
York, New York 10001. Thereupon, the Warrant Agent shall countersign and
deliver to the person entitled thereto a new Warrant certificate or
certificates, as the case may be, as so requested.

Section 6. Term of Warrants; Exercise of Warrants.

6.1 Term of Warrants. Subject to the terms of this Agreement,
----------------
each Holder shall have the right, which may be exercised at any time after the
Separation Date until the earlier of five business days preceding their
redemption date or their date of expiration, which shall be 5:00 p.m., New York
City time, on ____________, 1999 ("Expiration Date"), to purchase from the
Company the number of fully paid and nonassessable Warrant Shares that the
Holder may at the time be entitled to purchase on exercise of such Warrants.
After the Expiration Date, any previously unexercised Warrants shall be void and
have no value. After the Redemption Date for a Warrant, such Warrant shall be
void and have no value.

<PAGE>

6.2 Exercise of Warrants. A Warrant may be exercised upon
--------------------
surrender to the Company at the office of the Warrant Agent at 450 West 33rd
Street, New York, New York 10001, of the certificate or certificates evidencing
the Warrants to be exercised, together with the form of election to purchase on
the reverse thereof duly completed and signed, and upon payment to the Warrant
Agent for the account of the Company of the Warrant Price (as defined in Section
10 hereof) for the number of Warrant Shares in respect of which such Warrants
are then exercised.

Payment of the aggregate Warrant Price shall be made in cash or
by check.

Subject to Section 7 hereof, upon such surrender of Warrants and
payment of the Warrant Price as aforesaid, the Company shall issue and cause to
be delivered with all reasonable dispatch to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate or
certificates for the number of whole Warrant Shares so purchased upon the
exercise of such Warrants, together with cash, as provided in Section 12 hereof,
in respect of any fractional Warrant Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of
such Warrants and payment of the Warrant Price, as aforesaid; provided, however,
that if, at the date of surrender of such Warrants and payment of such Warrant
Price, the transfer books for the Warrant Shares or other class of stock
purchasable upon the exercise of such Warrants shall be closed, the certificates
for the Warrant Shares in respect of which such Warrants are then exercised
shall be issuable as of the date on which such books shall next be opened
(whether before or after the Expiration Date) and until such date the Company
shall be under no duty to deliver any certificate for such Warrant Shares;
provided further, however, that the transfer books of record, unless otherwise
required by law, shall not be closed. The rights of purchase represented by
the Warrants shall be exercisable, at the election of the Holders thereof,
either in full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of less than all of
the Warrant Shares purchasable on such exercise at any time prior to the date
of expiration of the Warrants, a new certificate evidencing the remaining
Warrant or Warrants will be issued, and the Warrant Agent is hereby irrevocably
authorized to countersign and to deliver the required new Warrant certificate
or certificates pursuant to the provisions of this Section and of Section 4
hereof and the Company, whenever required by the Warrant Agent, will supply
the Warrant Agent with Warrant certificates duly executed on behalf of the
Company for such purpose.

Section 7. Payment of Taxes. The Company will pay all documentary
stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon
the exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes that may be payable in respect of any transfer
involved in the issue or delivery of any Warrants or certificates for Warrant
Shares in a name other than that of the registered Holder of Warrants in respect
of which such Warrant Shares are issued, and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.

<PAGE>

Section 8. Mutilated or Missing Warrants. In case any of the
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company may in its discretion issue, and the Warrant Agent shall
countersign and deliver in exchange and substitution for and upon cancellation
of the mutilated Warrant certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant certificate of like
tenor and representing an equivalent right or interest; but only upon receipt of
evidence satisfactory to the Company and the Warrant Agent, of such loss, theft
or destruction of such Warrant and indemnity, if requested, also satisfactory to
them. An applicant for such a substitute Warrant certificate shall also comply
with such other reasonable requirements and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.

Section 9. Reservation of Warrant Shares; Purchase of Warrants;
Redemption of Warrants.

9.1 Reservation of Warrant Shares. There have been reserved,
-----------------------------
and the Company shall at all times keep reserved, free from preemptive rights,
out of its authorized Class A Stock, a number of shares of Class A Stock
sufficient to provide for the exercise of the rights of purchase represented by
the outstanding Warrants. The Warrant Agent, in its separate capacity as
transfer agent for the Class A Stock, and every subsequent transfer agent for
any shares of the Company's capital stock issuable upon the exercise of any of
the rights to purchase aforesaid will be irrevocably authorized and directed at
all times to reserve such number of authorized shares as shall be required for
such purpose. The Company will keep a copy of this Agreement on file with the
transfer agent for the Class A Stock and with every subsequent transfer agent
for any shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by the Warrants. The Warrant Agent in its
capacity as transfer agent for the Class A Stock and any successor transfer
agent for the Class A Stock are hereby irrevocably authorized to cause to be
issued from time to time the stock certificates required to honor outstanding
Warrants upon exercise thereof in accordance with the terms of this Agreement.
The Company will supply such transfer agent with duly executed stock
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 12 hereof. All Warrants
surrendered in the exercise of the rights thereby evidenced shall be canceled by
the Warrant Agent and shall thereafter be delivered to the Company. Promptly
after the date of expiration of the Warrants, the Warrant Agent shall certify to
the Company the aggregate number of Warrants then outstanding, and thereafter no
shares of Class A Stock shall be subject to reservation in respect of such
Warrants.

The Company covenants that all shares issued upon exercise of
the Warrants, will, upon issuance in accordance with the terms of this
Agreement, be fully paid and nonassessable and free from all taxes, liens,
charges and security interests created by the Company with respect to the
issuance thereof.

The Company from time to time will use its best efforts (a) to
obtain and keep effective any and all permits, consents and approvals of
governmental agencies and authorities and to make securities acts filings under
federal and state laws, which may be or become requisite in connection with the
issuance, sale, transfer and delivery of the Warrant certificates, the exercise
or conversion of the Warrants and the issuance, sale, transfer and delivery of
the shares of Class A Stock issued upon exercise of the Warrants, and (b) after

<PAGE>

separation, to have the Warrants listed on the principal securities exchanges on
which the Class A Stock is then listed.

9.2 Purchase of Warrants by the Company. The Company shall
-----------------------------------
have the right, except as limited by law, by other agreements or herein, to
purchase or otherwise acquire Warrants at such times, in such manner and for
such consideration as it may deem appropriate.

9.3 Right of Company to Call Warrants. The Warrants are not
---------------------------------
redeemable by the Company until two years after their date of issuance. On or
after such date, the Warrants are redeemable by the Company, from time to time
and at any time in whole or in part, without any payment. If less than all of
the Warrants are to be redeemed, the Warrant Agent shall select the Warrants to
be redeemed by lot or pro rata.

9.4 Notice of Call of Warrants by the Company. Notice of the
-----------------------------------------
redemption shall be mailed on a date at least 30 days prior to the date
scheduled for such redemption (the "Redemption Date") and shall be given to the
Warrant Agent and the Holders in accordance with the provisions of Section 19
hereof. The notice of redemption also shall be given at the time of the mailing
of notice to the Holders pursuant to this Section, by publishing, at least once
in one or more newspapers printed in the English language and in general
circulation in New York City, New York. Such notice shall state the
date, place and price of such repurchase.

9.5 Cancellation of Warrants. In the event the Company shall
------------------------
purchase, redeem or otherwise acquire Warrants, the same shall thereupon be
delivered to the Warrant Agent and be canceled by the Warrant Agent and retired.
The Warrant Agent shall cancel any Warrant surrendered for exchange,
substitution, transfer or exercise in whole or in part.

Section 10. Warrant Price. The price per share at which Warrant
Shares shall be purchasable upon exercise of Warrants (the "Warrant Price")
shall be $ .
----

Section 11. Certain Rights and Adjustment of Number and Kind of Warrant
Shares.

11.1 Certain Rights. In case the Company shall issue
--------------
rights, options or warrants to all holders of its outstanding Class A Stock,
without payment of additional consideration by such holders, entitling them to
subscribe for or purchase shares of Class A Stock at a price per share that is
lower than the current market price per share of Class A Stock (as defined in
Section 12) at the record date established by the Company in connection with the
issuance of such rights, options or warrants, each holder of a Warrant at such
record date shall be entitled to receive such rights, options or warrants as if,
and to the extent, it was at such record date the holder of the number of shares
of Class A Stock then underlying its Warrant; provided, however, that any such
rights, options or warrants issued pursuant to this Section 11.1 shall terminate
and no longer be exercisable if not exercised prior to the earliest of (i) the
scheduled expiration of such right, option or warrant, (ii) the Expiration Date,
and (iii) the Redemption Date of the Warrant with respect to which such rights,
options or warrants were issued.

<PAGE>

11.2 Adjustments. The number and kind of securities
-----------
or other property purchasable upon the exercise of each Warrant shall be
subject to adjustment from time to time upon the happening of the following
events:

(a) If the Company shall distribute to all holders of its shares of
Class A Stock evidence of its indebtedness or assets (excluding (i) cash
dividends or distributions payable out of consolidated earnings or earned
surplus, (ii) rights, options or warrants or convertible or exchangeable
securities representing the right to subscribe for or purchase shares of Class A
Stock and (iii) any other dividend or distribution of securities covered by
subsection (b) below), then in each case the number of shares of Class A Stock
thereafter purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Class A Stock theretofore purchasable upon
the exercise of each Warrant, by a fraction, of which the numerator shall be (i)
the then current market price per share of Class A Stock (as defined in Section
12) on the date of such distribution, and of which the denominator shall be (ii)
the then current market price per share of Class A Stock (as defined in Section
12) on the date of such distribution, less the then fair value (as determined in
good faith by the Board of Directors of the Company, whose determination shall
be conclusive and shall be evidenced by a resolution filed with the Warrant
Agent) of the portion of the assets or evidences of indebtedness so distributed.
Such adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to the record date
established by the Company for the determination of stockholders entitled to
receive such distribution.

(b) In case the Company shall (1) pay a dividend in, or make a
distribution of, shares of Class A Stock or of securities convertible into or
exchangeable (without payment of any additional consideration) for, Class A
Stock on its outstanding Class A Stock (other than a dividend or distribution
covered by Section 11.2 (a)), (2) subdivide its outstanding shares of Class A
Stock into a greater number of such shares or (3) combine its outstanding shares
of Class A Stock into a smaller number of such shares, the total number of
shares of Class A Stock and the number of shares of securities convertible into
Class A Stock purchasable upon the exercise of each Warrant outstanding
immediately prior thereto shall be adjusted so that the holder of any Warrant
thereafter surrendered for exercise shall be entitled to receive at the same
aggregate Warrant Price the number of shares of Class A Stock and the number of
shares of securities convertible into Class A Stock which such holder would have
owned or have been entitled to receive immediately following the happening of
any of the events described above had such Warrant been exercised in full
immediately prior to the happening of such event. Any adjustment made pursuant
to this Section 11.2(b) shall, in the case of a stock dividend or distribution,
become effective as of the record date therefor and, in the case of a
subdivision or combination, be made as of the effective date thereof. If, as a
result of an adjustment made pursuant to this Section 11.2(b), the holder of any
Warrant thereafter surrendered for exercise shall become entitled to receive
shares of two or more classes of securities of the Company, the Board of
Directors of the Company (whose determination shall be conclusive and shall be
evidenced by a Board resolution filed with the Warrant Agent) shall determine
the allocation of the adjusted Warrant Price between or among shares of such
classes of securities

(c) In the event of a capital reorganization or a reclassification
of the Class A Stock (except as provided in Sections 11.2 (b) and (d)), any
holder of Warrants, upon exercise thereof, shall be entitled to receive, in lieu

<PAGE>

of the Class A Stock to which he would have become entitled upon exercise
immediately prior to such reorganization or reclassification, the shares (of any
class or classes) or other securities or property of the Company (or cash) that
he would have been entitled to receive at the same aggregate Warrant Price upon
such reorganization or reclassification if his Warrants had been exercised
immediately prior thereto; and in any such case, appropriate provision (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and shall be evidenced by a Board resolution filed with the
Warrant Agent) shall be made for the application of this Section 11.2(c) with
respect to the rights and interests thereafter of the holders of Warrants
(including, but not limited to, the allocation of the Warrant Price between or
among the classes of capital stock), to the end that this Section 11.2(c)
(including the adjustments of the number of shares of Class A Stock or other
securities purchasable) shall thereafter be reflected, as nearly as reasonably
practicable, in all subsequent exercises of the Warrants for any shares or
securities or other property (or cash) thereafter deliverable upon the exercise
of the Warrants.

(d) In case of any consolidation of the Company with, or merger of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger which does not result in any reclassification or
change of the outstanding Class A Stock), or in case of any sale or conveyance
of all or substantially all of the assets of the Company, the corporation formed
by such consolidation or merger or the party which shall have acquired such
assets, as the case may be, shall execute and deliver to the Warrant Agent a
supplemental warrant agreement providing that the holder of each Warrant then
outstanding shall have the right thereafter (until the expiration of such
Warrant) to receive, upon exercise of such Warrant, solely the kind and amount
of shares of stock and other securities and property (or cash) receivable upon
such consolidation, merger, sale or transfer by a holder of the number of shares
of Class A Stock of the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided in this
Section. The above provision of this Section 11.2(d) shall similarly apply to
successive consolidations, mergers, sales or transfers.

(e) No adjustment in the number of shares of Class A Stock
purchasable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the number of shares of
Class A Stock purchasable upon the exercise of each Warrant; provided, however,
that any adjustments which by reason of this Section 11.2(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest cent and to the
nearest one-hundredth of a share, as the case may be.

(f) Whenever the number of shares of Class A Stock or other
securities purchasable upon exercise of a Warrant is adjusted as provided in
this Section 11.2, the Company will promptly file with the Warrant Agent a
certificate signed by the President or Vice President of the Company and by the
Treasurer or Secretary of the Company setting forth the number and kind of
shares purchasable, as so adjusted, stating that such adjustments in the number
or kind of shares or other securities conform to the requirements of this
Section 11.2 and setting forth a brief statement of the facts accounting for
such adjustments. For the purposes of the Warrant Agent, such certificates
shall be conclusive evidence of the correctness of such adjustments. Promptly

<PAGE>

after filing such certificate with the Warrant Agent, the Company, or the
Warrant Agent at the Company's request, will deliver, by first-class, postage
prepaid mail, a brief summary thereof (to be supplied by the Company) to the
registered holders of the outstanding Warrants; provided, however, that failure
-------- -------
to file or to give any notice required under this Section 11.2 (f), or any
defect therein, shall not affect the legality or validity of any such
adjustments under this Section 11.2; provided further, that, where appropriate,
----------------
such notice may be given in advance and included as part of the notice required
to be given pursuant to Section 13 hereof.

The Warrant Agent shall not be under any responsibility to determine
the correctness of any provision contained in any such supplemental warrant
agreement relating to either the kind or amount of shares of stock or securities
or property (or cash) purchasable by holders of Warrants upon the exercise of
their Warrants after any such consolidation, merger, sale or transfer or of any
adjustment to be made with respect thereto, but subject to the provisions of
Section 16 hereof, may accept as conclusive evidence of the correctness of any
such provisions, and shall be protected in relying upon, a certificate of a firm
of independent public accountants with respect thereto.

(g) Irrespective of any adjustments in the number or kind of shares
issuable upon exercise of Warrants, Warrants theretofore or thereafter issued
may continue to express the same price and number and kind of shares as are
stated in the similar Warrants initially issuable pursuant to this Warrant
Agreement.

(h) The Company may retain a firm of independent public accountants
of recognized standing, which may be the firm regularly retained by the Company,
selected by the Board of Directors of the Company or the Executive Committee of
said Board to make any computation required under this Section 11.2 and a
certificate signed by such firm shall, for purposes of the Warrant Agent, be
conclusive evidence of the correctness of any computation made under this
Section 11.2.

(i) For the purpose of Section 11, the term "Class A Stock" shall
mean (i) the class of stock designated as Class A Stock in the Restated
Certificate of Incorporation of the Company, as amended, at the date of this
Agreement, or (ii) any other class of stock resulting from successive changes or
reclassifications of such Class A Stock consisting solely of changes in par
value, or from no par value to par value, or from par value to no par value. In
the event that at any time as a result of an adjustment made pursuant to this
Section 11.2, the holder of any Warrant thereafter surrendered for exercise
shall become entitled to receive any shares of capital stock of the Company
other than shares of Class A Stock, thereafter the number of such other shares
so receivable upon exercise of any Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Class A Stock contained in this Section, and all
other provisions of this Agreement, with respect to the Class A Stock, shall
apply on like terms to any such other shares.

Section 12. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares that shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any

<PAGE>

fraction of a Warrant Share would, except for the provisions of this Section 12,
be issuable on the exercise of any Warrant (or specified portion thereof), the
Company shall calculate and pay an amount in cash equal to the then current
market price per Warrant Share multiplied by such fraction. For purposes of
Sections 11 and 12, current market price per share of Class A Stock at any date
shall be the average of the daily closing prices for 15 consecutive trading days
commencing 20 trading days before the date of such computation. The closing
price for each day shall be the daily closing prices of the Class A Stock as
reported on the composite transactions tape for the principal exchanges on which
the Class A Stock is listed or admitted to trading (the "Composite Tape"). The
closing price for each day shall be the last sale price regular way or in case
no such sale takes place on such day, the average of the closing bid and asked
prices regular way, in either case as reported on the Composite Tape, or, if the
Class A Stock is not reported on the Composite Tape, on the principal national
securities exchange on which the Class A Stock is listed or admitted to trading,
or if the Class A Stock is listed or admitted to trading on any national
securities exchange, the average of the highest reported bid and lowest reported
asked prices on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or a similar service if NASDAQ is no longer
reporting such information. If on any such date the Class A Stock is not quoted
by any such service, the current or closing market price per share of Class A
Stock on such date shall be determined by the Board of Directors of the Company
on the basis of such quotations or other information as it in good faith
considers appropriate or such other relevant evidence as may be appropriate
under the circumstances, and such determination, if made in good faith, shall be
binding upon all Holders.

Section 13. No Rights as Stockholder; Notices to Holders. Nothing
contained in this Agreement or in any of the Warrants shall be construed as
conferring upon the Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as stockholders in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter, or any rights whatsoever (except as expressly provided in Section
11.1) as stockholders of the Company. If, however, at any time prior to the
expiration of the Warrants and prior to their exercise, any of the following
events shall occur:

(a) the Company shall declare any dividend payable in
any securities upon its shares of Class A Stock or make any
distribution (other than a cash dividend) to the holders of its shares
of Class A Stock; or

(b) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger, or
sale of all or substantially all of its property, assets and business
as an entirety) shall be proposed; or

(c) the Company shall issue rights, options or
warrants to all holders of its outstanding Class A Stock, without
payment of additional consideration by such holders of the type
described in and covered by Section 11.1 then in any one or all of
said events,

the Company shall (a) give notice in writing of such event to the Warrant Agent
and the Holders as provided in Section 19 hereof and (b) cause notice of such
event to be published once in one or more newspapers printed in the English

<PAGE>

language and in general circulation in New York City, New York, such giving of
notice and publication to be completed, at least 20 days prior to the date fixed
as a record date or the date of closing the transfer books for the determination
of the stockholders entitled to such dividend, or distribution rights, or for
the determination of stockholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be. Failure to publish or
mail such notice or any defect therein or in the publication or mailing thereof
shall not affect the validity of any action taken in connection with such
dividend, distribution or subscription rights, or proposed dissolution,
liquidation or winding up.

Section 14. Disposition of Proceeds on Exercise of Warrants; Inspection
of Warrant Agreement. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
immediately available funds received by the Warrant Agent for the purchase of
the Warrant Shares through the exercise of such Warrants. The Warrant Agent
shall, upon request of the Company from time to time, deliver to the Company
such complete reports of registered ownership of the Warrants and such complete
records or transactions with respect to the Warrants and the shares of Class A
Stock as the Company may request. The Warrant Agent shall also make available
to the Company for inspection by the Company's agents or employees from time to
time as the Company may request, such original books of accounts and records
maintained by the Warrant Agent in connection with the issuance and exercise of
Warrants hereunder, such inspections to occur at the Warrant Agent's principal
office in New York, New York, as specified in Section 2.2 during normal business
hours.

The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the Holders
during normal business hours at its principal office in New York, New York. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may request.

Section 15. Merger or Consolidation or Change of Nameof Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that, such
corporation must be eligible for appointment as a successor Warrant Agent under
the provisions of Section 17 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
Warrants shall have been countersigned but not delivered, any such successor to
the Warrant Agent may adopt the countersignature of the original Warrant Agent
and deliver such Warrants so countersigned, and in case at that time any of the
Warrants shall not have been countersigned, any successor to the Warrant Agent
shall countersign and deliver such Warrants; and in all such cases Warrants
shall have the full force provided in the Warrants and in this Agreement.

In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrants so countersigned, and in case at that time any of
the Warrants shall not have been countersigned, the Warrant Agent may

<PAGE>

countersign, such Warrants either in its prior name or in its changed name, and
in all such cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.

Section 16. Concerning the Warrant Agent. The Warrant Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the Holders, by their acceptance
of Warrants, shall be bound.

16.1 Correctness of Statements. The statements
-------------------------
contained herein and in the Warrants shall be taken as statements of the Company
and the Warrant Agent assumes no responsibility for the correctness of any of
the same except such as describe the Warrant Agent or action taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of the
Warrants except as herein otherwise provided.

16.2 Breach of Covenants. The Warrant Agent shall not
-------------------
be responsible for any failure of the Company to comply with any of the
covenants contained in this Agreement or in the Warrants to be complied with by
the Company.

16.3 Performance of Duties. The Warrant Agent may
---------------------
execute and exercise any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its attorneys or agents (which
shall not include its employees) and shall not be responsible for the misconduct
or negligence of any agent appointed with due care.

16.4 Reliance on Counsel. The Warrant Agent may
-------------------
consult at any time with legal counsel satisfactory to it (who may be counsel
for the Company) and the Warrant Agent shall incur no liability or
responsibility to the Company or to any Holder in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
opinion or the advice of such counsel provided that such counsel shall have been
selected with due care.

16.5 Proof of Actions Taken. Whenever in the
----------------------
performance of its duties under this Agreement the Warrant Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed conclusively to be proved and established by a certificate signed by
the President or the Vice President-Finance, of the Company and delivered to the
Warrant Agent, and such certificate shall be full authorization to the Warrant
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.

16.6 Compensation. The Company agrees to pay the
------------
Warrant Agent reasonable compensation as set forth in the attached fee schedule
for all services rendered by the Warrant Agent in the performance of its duties
under this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the performance of its duties under this Agreement, and to
indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the performance of its duties under this
Agreement except as a result of the Warrant Agent's negligence or bad faith.

<PAGE>

16.7 Legal Proceedings. The Warrant Agent shall be
-----------------
under no obligation to institute any action, suit or legal proceeding or to take
any other action likely to involve expense unless the Company or one or more
Holders shall furnish the Warrant Agent with reasonable security and indemnity
for any costs and expenses that may be incurred, but this provision shall not
affect the power of the Warrant Agent to take such action as the Warrant Agent
may consider proper, whether with or without any such security or indemnity.
All rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrants or
the production thereof at any trial or other proceeding relative thereto, and
any such action, suit or proceeding instituted by the Warrant Agent shall be
brought in its name as Warrant Agent, and any recovery of judgment shall be for
the ratable benefit of the Holders, as their respective rights or interests may
appear.

16.8 Other Transactions in Securities of Company. The
-------------------------------------------
Warrant Agent and any stockholder, director, officer or employee of the Warrant
Agent may buy, sell or deal in any of the Warrants or other securities of the
Company or become pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company or otherwise
act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.

16.9 Liability of Warrant Agent. The Warrant Agent
--------------------------
shall act hereunder solely as agent, and its duties shall be determined solely
by the provisions hereof. The Warrant Agent shall not be liable for anything
that it may do or refrain from doing in connection with this Agreement except
for its own negligence and bad faith. Anything in this Agreement to the
contrary notwithstanding, in no event shall the Warrant Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Warrant Agent has been
advised of the likelihood of such loss or damage and regardless of the cause of
action.

16.10 Reliance on Documents. The Warrant Agent will not
---------------------
incur any liability or responsibility to the Company or to any Holder for an
action taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document or instrument reasonably believed by it to
be genuine and to have been signed, sent or presented by the proper party or
parties.

16.11 Validity of Agreement. The Warrant Agent shall
---------------------
not be under any responsibility in respect of the validity of this Agreement or
the execution and delivery hereof (except the due execution hereof by the
Warrant Agent) or in respect of the validity or execution of any Warrant (except
its countersignature thereof), nor shall the Warrant Agent by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any Warrant Shares (or other stock) to be issued pursuant to this
Agreement or any Warrant, or as to whether any Warrant Shares (or other stock)
will, when issued, be validly issued, fully paid and nonassessable, or as to the
Warrant Price or the number or amount of Warrant Shares or other securities or
other property issuable upon exercise of any Warrant.

16.12 Instructions from Company. The Warrant Agent is
--------------------------
hereby authorized and directed to accept instructions with respect to the

<PAGE>

performance of its duties hereunder from the President or the Vice President-
Finance, of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer or officers.

Section 17. Change of Warrant Agent. The Warrant Agent may resign and
be discharged from its duties under this Agreement by giving to the Company 30
days' notice in writing. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company. If the Warrant Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent, or is notified in writing by any Holder (who shall
with such notice submit his Warrant for inspection by the Company), then any
Holder may apply to any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Pending the appointment of the successor
warrant agent, the Company shall perform the duties of the Warrant Agent. Any
successor warrant agent, whether appointed by the Company or such a court, shall
be a bank or trust company, in good standing, incorporated under the laws of the
United States of America or any state thereof and having at the time of its
appointment as warrant agent a combined capital and surplus of at least
$10,000,000. After appointment, the successor warrant agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed; but the former
Warrant Agent shall deliver and transfer to the successor warrant agent any
property at the time held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Failure to file
any notice provided for in this Section 17, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor warrant agent, as the case may
be. In the event of such resignation or removal, the successor warrant agent
shall mail, first class, to each Holder, written notice of such removal or
resignation and the name and address of such successor warrant agent.

Section 18. Identity of Transfer Agent. Forthwith upon the appointment
of any subsequent transfer agent for the Class A Stock, or any other shares of
the Company's capital stock issuable upon the exercise of the Warrants, the
Company will file with the Warrant Agent a statement setting forth the name and
address of such subsequent transfer agent.

Section 19. Notices. Any notice pursuant to this Agreement by the
Company or by any Holder to the Warrant Agent, or by the Warrant Agent or by any
Holder to the Company, shall be in writing and shall be mailed first class,
postage prepaid, or delivered (a) to the Company, at 1177 Avenue of the
Americas, New York, New York 10036, and (b) to the Warrant Agent, at 450 West
33rd Street, New York, New York 10001. Each party hereto may from time to time
change the address to which notices to it are to be delivered or mailed
hereunder by notice in writing to the other party.

Any notice mailed pursuant to this Agreement by the Company or
the Warrant Agent to the Holders shall be in writing and shall be mailed first
class, postage prepaid, or delivered to such Holders at their respective
addresses on the books of the Warrant Agent.

<PAGE>

Section 20. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement, without the
approval of any Holder, in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein or to make any other provision in regard to
matters or questions arising hereunder that the Company and the Warrant Agent
may deem necessary or desirable and that shall not be inconsistent with the
provisions of the Warrants and that shall not adversely affect the interests of
the Holders.

Section 21. Successor. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

Section 22. Merger or Consolidation of the Company. The Company will
not merge or consolidate with or into any other corporation unless the
corporation resulting from such merger, or consolidation (if not the Company)
shall expressly assume, by supplemental agreement satisfactory in form to the
Warrant Agent and executed and delivered to the Warrant Agent, the due and
punctual performance and observance of each and every covenant and condition of
this Agreement to be performed and observed by the Company.

Section 23. Applicable Law. This Agreement and each Warrant issued
hereunder shall be governed by and construed in accordance with the laws of New
York, without giving effect to principles of conflict of laws.

Section 24. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Warrant Agent and the Holders any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent and the Holders.

Section 25. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.

Section 26. Captions. The captions of the Sections and subsections of
this Agreement have been inserted for convenience only and shall have no
substantive effect.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first written above.

AMPAL-AMERICAN ISRAEL CORPORATION

By:
---------------------------
Name: Lawrence Lefkowitz
Title: President

CHEMICAL BANK as Warrant Agent

By:
------------------------------
Name:
Title:

<PAGE>

Exhibit A

Redeemable Class A Stock Purchase Warrant
For the Purchase of
Shares of Class A Stock, Par Value of $1.00 Per Share, of

AMPAL-AMERICAN ISRAEL CORPORATION

(Incorporated under the law of the State of New York)

VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON ____________________

This is to certify that, for value received,

, or registered assigns, is entitled, subject to the terms and conditions
hereof and of the Warrant Agreement mentioned below, at any time on
or after the date of this certificate, and prior to 5:00 p.m., New
York City time, on ____, 1999, but not thereafter, to purchase the
number of shares set forth above of the class A stock, par value of $1.00
per share, hereinafter called Class A Stock, of Ampal-American Israel
Corporation, hereinafter called the Corporation, from the Corporation at
the purchase price of $_____ per share ("Exercise Price") and to receive a
certificate or certificates for the Class A Stock so purchased, upon
presentation and surrender to Chemical Bank, the Warrant Agent, with the form
of subscription completed and duly executed, and accompanied by payment of
the purchase price of each share purchased and any applicable transfer tax,
either in cash or by certified or bank cashier's check payable to the
order of the Corporation.

This warrant is issued under and in accordance with the Warrant Agreement
dated as of _________________ (the "Warrant Agreement"), between the Corporation
and the Warrant Agent and is subject to the terms of the Warrant Agreement, to
all of which terms every holder of this Warrant consents by acceptance hereof.
The Warrant Agreement is incorporated herein by reference and made a part
hereof and reference is made to the Warrant Agreement for a full description
of the rights, obligations, duties and immunities of the Warrant Agent, the
Corporation and the holders of the Warrant Certificates. Copies of the Warrant
Agreement are available for inspection at the office of the Warrant Agent,
450 West 33rd Street, New York, New York 10001 or may be obtained upon written
request addressed to the Corporation at 1177 Avenue of the Americas, New York,
New York 10036.

In certain events specified in the Warrant Agreement, the number of shares
which may be purchased upon the exercise of this Warrant shall be subject to
adjustment as therein provided. In certain circumstances specified in the
Warrant Agreement, the holders of Warrants may be entitled to receive rights,
options or warrants to purchase shares of Class A Stock as therein provided.
This Warrant may also be redeemed by the Corporation without payment to
the holder at certain times and under certain conditions set forth in the
Warrant Agreement.

The Corporation covenants and agrees that all shares of Class A Stock
which may be delivered upon the exercise of this Warrant will, upon delivery,
be free from all taxes, liens, and charges with respect to the purchase
thereof hereunder, and without limiting the generality of the foregoing,
the Corporation covenants and agrees that it will from time to time take
all such action as may be required to assure that the par value per
share of the Class A Stock is at all times equal to or less than the then
current Exercise Price per share of the Class A Stock issuable pursuant to
this Warrant.

The purchase rights represented by this Warrant Certificate are
exercisable at the option of the registered owner hereof in whole at any
time, or in part from time to time, within the period above specified,
provided, however, that such purchase rights shall not be exercisable with
respect to a fraction of a share of Class A Stock. As to any
fractions of a share which would otherwise be purchasable on the exercise
of a Warrant, the Corporation shall pay the cash value thereof determined
as provided in the Warrant Agreement. In case of the purchase of less
than all the shares purchasable under this Warrant Certificate, the
Corporation shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate of like tenor
for the balance of the shares purchasable hereunder.

The Corporation agrees at all times to reserve or hold available a
sufficient number of shares of Class A Stock to cover the number of
shares issuable upon the exercise of this and all other Warrant Certificates
of like tenor then outstanding.

This Warrant Certificate shall not entitle the holder hereof to any
voting rights or other rights as a stockholder of the Corporation, or to any
other rights whatsoever except the rights herein expressed and such as are
set forth in the Warrant Agreement, and no dividends shall be payable or
accrue in respect of this Warrant or the interest, represented hereby
or the shares purchasable hereunder until or unless, and except to the
extent that, this Warrant shall be exercised.

This Warrant Certificate is part of a duly authorized issue of Units,
each Unit consisting of one share of Class A Stock and one Warrant. Until
1994, or such earlier date as designated by the Representatives and
International Managers as defined in the Warrant Agreement (the "Separation
Date"), this certificate evidences Units, each consisting of one share of
Class A Stock and one Warrant to purchase one share of Class A Stock, which
may be combined, exchanged or transferred only as Units, and the shares of
Class A Stock and Warrants comprising such Units may not be split up,
combined, exchanged or transferred separately. Warrants may not be exercised
until after the Separation Date. The holder of record of this certificate at
the close of business on the Separation Date will be mailed a certificate
evidencing such holder's ownership of shares of Class A Stock, and this
certificate shall no longer represent Units but shall represent solely the
number of Warrants set forth herein.

This Warrant Certificate is exchangeable upon the surrender hereof by
the registered owner to the Warrant Agent for new Warrant Certificates of like
tenor representing in the aggregate the right to purchase the number of
shares purchasable hereunder, each of such new Warrant Certificates to
represent the right to purchase such number of shares as shall be designated
by the registered owner at the time of such surrender.

Except as otherwise above provided, this Warrant Certificate and all
rights hereunder are transferable by the registered owner hereof in person or
by duly authorized attorney on the books of the Warrant Agent upon surrender
of this Warrant Certificate, properly endorsed, to the Warrant Agent.

The Corporation may deem and treat the registered owner of this Warrant
Certificate at any time as the absolute owner hereof for all purposes and shall
not be affected by any notice to the contrary.

This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
This Warrant Certificate shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the law of such state.

In witness whereof the Corporation has caused this Warrant Certificate
to be executed by its duly authorized officers and the corporate seal
hereunder affixed.

Dated: AMPAL-AMERICAN ISRAEL CORPORATION

Countersigned: ATTEST: By
CHEMICAL BANK
as Warrant Agent

Authorized Officer Secretary President

<PAGE>

AMPAL-AMERICAN ISRAEL CORPORATION

The Corporation will furnish to any shareholder upon request
and without charge, a full statement of the designations,
relative rights, preferences and limitations of the shares of
each class of capital stock authorized to be issued by the
Corporation, of the designation, relative rights, preferences and
limitation of each series of Preferred Shares so far as they have
been fixed by the Board of Directors puruant to authority
heretofore granted to it and of the authority of the Board of
Directors to designate and fix the relative rights, preferences
and limitations of other series.

ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)

The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase
shares of Class A Stock and herewith tenders $ in
payment for such shares and any applicable taxes payable by the
undersigned in cash or a certified or official bank check payable
to the order of Ampal-American Israel Corporation, in accordance
with the terms hereof. The undersigned requests that a
certificate for such shares be registered in the name of

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF PERSON IN WHOSE
NAME SHARES ARE TO BE REGISTERED.
- ----------------------
| |
- ----------------------

- -----------------------------------------------------------------

whose address is
-------------------------------------------------
and that such certificate shall be delivered to
------------------
whose address is
-------------------------------------------------

- -----------------------------------------------------------------

If the specified number of shares is less than all of the shares
represented by this Warrant Certificate, the undersigned requests
that a new Warrant Certificate representing the right to purchase
the remaining balance of the shares be registered in the name of

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF PERSON IN WHOSE
NAME WARRANT CERTIFICATE IS TO BE REGISTERED.
- ----------------------
| |
- ----------------------

- -----------------------------------------------------------------

whose address is
-------------------------------------------------
and that such Warrant Certificate shall be delivered to
----------
whose address is
-------------------------------------------------

- -----------------------------------------------------------------

DATED: , 19
------------------------ ------

Signature Guaranteed: Signature:

------------------------------ ------------------------------

(Required if an assignment of (Signature must correspond
shares acquired on exercise or with the name as written upon
an assignment of Warrants the face of this Warrant
remaining after exercise is Certificate in every
made upon exercise. The particular, without alteration
signature must be guaranteed or enlargement or any change
by a duly authorized officer whatever.)
of a commercial bank or trust
company in the United States
or member of a registered
national securities exchange.)

ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer this Warrant Certificate)

FOR VALUE RECEIVED, hereby sells,
--------------------
assigns and transfer Warrants
---------
unto
-------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS OF ASSIGNEE)

together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint

- ------------------------------------------------------------ Attorney,
to transfer said Warrants on the books of the within-named
Company, with full power of substitution.

If said number of Warrants shall not be all the Warrants
evidenced by this Warrant Certificate, a new Warrant Certificate
shall be issued in the name of and delivered to the undersigned
for such portion of the warrants not so sold, assigned or
transferred.

DATED:
------------------------

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF PERSON IN WHOSE
NAME WARRANT CERTIFICATE IS TO BE REGISTERED.
- ----------------------
| |
- ----------------------

Signature Guaranteed: Signature:

------------------------------- -------------------------------

(The signature must be (Signature must correspond
guaranteed by a duly with the name as written upon
authorized officer of a the face of this Warrant
commercial bank or trust Certificate in every
company in the United States particular, without alteration
or member of a registered or enlargement or any change
national securities exchange.) whatever.)

Tel Aviv, January 18, 1994

Messrs.
Inerta-Energies and Future Technologies Ltd.
99 Ben Yehuda Street
Tel Aviv

Re: Granite Hacarmel Investments Ltd.
Shareholders Agreements
---------------------------------

Following is the agreed between us, as shareholders of Granite Hacarmel
Investments Ltd. (hereinafter - "Granite"), with regard to the agreement
dated February 7, 1992 between Inerta group, Ampal group, Ofer group and
Landau group, as defined in the above-mentioned agreement (hereinafter-
"the Agreement").

1. As soon as possible after the date of this letter, the parties to
this letter will negotiate with the purpose of signing an agreement
between them which will maintain the spirit of the provisions of the
Agreement, with the necessary changes (hereinafter - "The Amending
Agreement").

2. Until the signing of the Amending Agreement, the existing voting
agreement will remain in force.

3. For the avoidance of doubt it is hereby clarified that in any case
and without regard to the provisions of the Agreement or the Amending
Agreement, or their validity, and as long as the control of Ampal
remains with the existing shareholders, or as long as the majority of
the directors of Ampal's Board are appointed by the existing
shareholders, Ampal group shall maintain the right, until the end of
the Agreement's period pursuant to clause 4.1 of the Agreement, to
appoint three directors to Granite's Board and, to appoint Moshe
Mor, as long as her serves as a director of Granit on behalf of
Ampal as chairman of the Finance Committee of Granite, along with the
permanent appointment of Inerta's representative as chairman of the
Board.

In case you agree to the said in this letter, kindly confirm same by signing
at the bottom of this letter.

Sincerely Yours,

Ampal Industries, Inc.
By:

We hereby agree to said in this
letter and we undertake to act in
conformity with this letter.

Inerta-Energies and Future Technologies Ltd.
By: Y. Rosen.

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby consent to the
incorporation by reference in Ampal-American Israel Corporation's
amendment No. 2 to the registration statement on Form S-2
(File No. 33-51023) of our reports dated March 18, 1993,
included in Ampal-American Israel Corporation's FORM 10-K for
the year ended December 31, 1992 and to all references to our
Firm included in this registration statement.

ARTHUR ANDERSEN & CO.

New York, New York
January 21, 1994

Certified Public
Accountants (Isr)
Tel Aviv 61006
33 Yavetz Street
P. O. Box 609
Tel: (03) 517 4444
Telecopier: (972)
3517 4440
SOMEKH CHAIKIN
Haifa 31001
5 Palyam Street
P. O. Box 210
Tel: (04) 6703 38
Telecopier: (972)
467 0319

Jerusalem 91001
33 Jaffa Road
P. O. Box 212
Tel: (02) 253 291
Telecopier: (972)
225 3292

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to registration
statement on FORM S-2 (File No.33-51023) of Ampal American Israel
Corporation of our report on the consolidated financial
statements of Granite Hacarmel Investments Limited dated February
21, 1993, included in Ampal American Israel Corporation's FORM
10-K for the year ended December 31, 1992 and to all references
to our firm included in such registration statement.

----------------------------------------------
Certified Public Accountants (ISRAEL)

Haifa, January 21, 1994

Igal Brightman
Mordecai Bar Levav
Chaim Schwartzboro
Bernard (Dov) Ratowitz
Zeev Feldman
Shimon Gothalf
Chaim Schwartzbard
David Valiano
Adir Inbar
Rami Benvenisti
Eyal Hardler

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby consent to
the incorporation by reference in the amendment No.2 to
the registration statement on Form S-2 (File No.33-51023)
of Ampal American Israel Corporation's of our report
dated February 17, 1993 relating to the financial
statements of Am-Hal Ltd. included in Ampal American
Israel Corporation's Form 10-K for the year ended
December 31, 1992 and to all references to our firm
included in such registration statement.

Igal Brightman & Co.
January 21, 1994 Certified Public Accountants (Isr.)

HAFT & HAFT & CO.
CERTIFIED PUBLIC ACCOUNTANTS (Isr.)
INCL. STRAUSS, LAZER & CO.

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the
registration statement on Form S-2 (File No.33-51023) of Ampal
American Israel Corporation of our report on the consolidated
financial statements of Ampal (Israel) Ltd. dated March 18, 1993
included in Ampal American Israel Corporation's Form 10-K for
the year ended December 31, 1992 and to all references to our
firm included in such registration statement.

H.H.S.L. Haft &
Haft & Co.
Janauary 21, 1994 Certified
Public Accountants (Isr.)

FAHN, KANNE & CO.
CERTIFIED PUBLIC ACCOUNTANTS (Isr.)

5. DRUYANOV ST., TEL-AVIV 63143
P. O. B. 11535, TEL-AVIV 61114
TEL 03-294946, FAX. 03-201386

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the
registration statement on FORM S-2 (File No.33-51023) of Ampal
American Israel Corporation of our report on the financial
statements of Ampal Financial Services Ltd. dated March 11,
1993, included in Ampal American Israel Corporation's FORM 10-K
for the year ended December 31, 1992, and to all references to
our firm included in such registration statement.

Fahn, Kanne & Co.
Certified Public Accountants (Isr.)

Tel-Aviv, Israel
January 21, 1994

FAHN, KANNE & CO.
CERTIFIED PUBLIC ACCOUNTANTS (Isr.)

5. DRUYANOV ST., TEL-AVIV 63143
P. O. B. 11535, TEL-AVIV 61114
TEL. 03-294946, FAX. 03-201836

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the
registration statement on FORM S-2 (File No.33-51023) of Ampal
American Israel Corporation of our report on the financial
statements of Ampal Industries (Israel) Ltd. dated March 18,
1993, included in Ampal American Israel Corporation's FORM 10-K
for the year ended December 31, 1992, and to all references to
our firm included in such registration statement.

Fahn, Kanne & Co.
Certified Public Accountants
(Isr.)

Tel-Aviv, Israel
January 21, 1994

S A Morris MORRIS BRANKIN & CO.
W J Matthew C H A R T E R E D
ACCOUNTANTS
D R Cottingham
P.O. BOX 1044
West Wind Building
Grand Cayman
British West Indies

Telephone: (809 94)
98588
Facsimile: (809 94)
97325
Telex: 4248 MIDSL CP

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the
registration statement on FORM S-2 (File No:33-51023) of Ampal
American Israel Corporation of our report on the consolidated
financial statements of Bank Hapoalim (Cayman) Ltd. dated
February 22, 1993 included in Ampal American Israel Corporation's
FORM 10-K for the year ended December 31, 1992, and to all
references to our firm included in such registration statement.

-----------------------------------------------------
Auditor

January 21, 1994

RONEL STETTNER & CO.
CERTIFIED PUBLIC ACCOUNTANTS

TEL. (4)532291 FAX (4) 515873 ISRAEL
35 HAMEGINIM AVE. P.O.B. 466
HAIFA 31033

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby
consent to the incorporation by reference in
of the amendment No. 2 to the registration
statement on FORM S-2 (File No. 33-51023) of
Ampal American Israel Corporation of our
report on the financial statements of
Bay Heart Limited dated February 14, 1993,
included in Ampal American Israel Corporation's
FORM 10-K for the year ended December 31, 1992
and to all references to our firm included in
such registration statement.

Truly yours,

RONEL, STETTNER & CO.
Certified Public Accountants
(Israel)

January 21, 1994

PORAT & CO.
-----------------------------------------------------------------

--------------------------------------------------------
Certified Public Accountants (ISR.)

Re: Consent of Independent Public Accountants
-----------------------------------------

As independent public accountants, we hereby consent to the
incorporation by reference in Ampal American Israel Corporation's
amendment No. 2 to the registration statement on FORM S-2 (file
No.33-51023) of our report on the financial statements of Country
Club Kfar-Saba Ltd. dated March 12, 1993 included in Ampal
American Israel Corporation's FORM 10-K for the year ended
December 31, 1992 and to all references to our firm included in
such registration statement.

January 21, 1994

Porat & Co.

Certified Public Accountants
(Isr.)

CR. R. VILLARMARZO Y ASOC.
ERNST & YOUNG INTERNATIONAL

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

We consent to the incorporation by reference in Ampal-American
Israel Corporations Registration Statement on Form S-2 (File No.
33-51023) of our report dated February 3, 1993 with respect to
the Financial Statements of Hapoalim (Latin America) Casa
Bancaria S.A. included in Ampal-American Israel Corporations
Form 10-K for the year ended December 31, 1992 and consent to
all reference to our firm under the caption "Experts" in the
amendment No. 2 of said registration statement.

Montevideo C R . R .
VILLARMARZO Y ASOC.
January 21, 1994 Ernest & Young
International

HAGGAI WALLENSTEIN & Co. C.P.A. (Isr.)

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in Ampal American Israel Corporation's
amendment No. 2 to the registration statement on FORM S-2 (File
No.33-51023) of our report on the consolidated financial
statements of Moriah Hotels Ltd. and its subsidiaries dated
March 25, 1993, included in Ampal American Israel Corporation's
FORM 10K for the year ended December 31, 1992, and to all
references to our firm included in such registration statement.

HAGGAI WALLENSTEIN & CO.
Certified Public Accounts (Isr.)
January 21, 1994

KESSELMAN & KESSELMAN Certified Public Accountants (Isr)

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the
registration statement on FORM S-2 (File No.33-51023) of Ampal
American Israel Corporation of our report on the consolidated
financial statements of Ophir Holdings Limited, dated March 9,
1993, included in Ampal American Israel Corporation's FORM 10-K
for the year ended December 31, 1992, and to all references
to our firm included in such registration statement.

January 21, 1994

KESSELMAN & KESSELMAN

BRAUDE & CO.
CERTIFIED PUBLIC ACCOUNTANTS (ISRAEL)

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the
registration statement on Form S-2 (file No.33-51023) of Ampal
American Israel Corporation of our report on the financial
statements of Orlite Engineering Company Ltd. dated February 15,
1993, included in Ampal American Israel Corporation's Form
10-K, for the year ended December 31, 1992, and to all
references to our firm included in such registration statements.

Braude & Co.

C.P.A. (ISRAEL)

Tel-Aviv, January 21, 1994

REUVENI, HARTUV, TEPPER & CO.
Certified Public Accountants (ISR)
P.O.B. 29870 CODE 61298
30 Achad Ha'Am St., Tel Aviv, ISRAEL
TEL. 972-3-5604281 FAX. 972-3-5605001

AMPAL

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the Ampal
American Israel Corporation's registration statement on FORM S-2
(File No.33-51023) of our report on the consolidated financial
statements of Pri Haemek (Canned and Frozen Food ) 88 Ltd.
dated February 28, 1993 included in Ampal American Israel
Corporation's FORM 10-K for the year ended December 31, 1992
and to all references to our firm included in such registration
statement.

January 21, 1994

REUVENI, HARTUV, TEPPER & CO.
Certified Public Accounts (Isr.)

DOV KAHANA & CO.
Certified Public Accountants (Isr.)

54 Bezalel St. Ramat-Gan
P.O. Box 3532, Ramat-Gan 52134
TEL. 575 9681 FAX. 575 9584

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the
registration statement on FORM S-2 (File No.33-51023) of Ampal
American Israel Corporation of our report on the financial
statements of Red Sea Marineland Holding (1973) Ltd. dated
March 22, 1993, included in Ampal American Israel Corporation's
FORM 10-K for the year ended December 31, 1992, and to all
references to our firm included in such registration statement.

DOV KAHANA & CO.
Certified Public Accountants (Isr.)
Ramat-Gan. January 21, 1994

HAGGAI WALLENSTEIN & Co. C.P.A. (Isr.)

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in Ampal American Israel Corporation's
amendment No. 2 to the registration statement on Form S-2 (File
No. 33-51023) of our report on the consolidated financial
statements of RED SEA MARINELAND HOLDING (1973) LTD. AND ITS
SUBSIDIARY dated March 25, 1992, included in Ampal American
Israel Corporation's FORM 10K for the year ended December 31,
1991, and to all references to our firm included in such
registration statement.

HAGGAI WALLENSTEIN & CO.
Certified Public Accounts (Isr.)

January 21, 1994

DOV KAHANA & CO.
Certified Public Accountants (Isr.)
54 Bezalel St. Ramat-Gan
P.O. Box 3532, Ramat-Gan 52134

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the
registration statement on FORM S-2 (File No.33-51023) of Ampal
American Israel Corporation of our report on the financial
statements of Red Sea Under Water Observatory Ltd. dated
March 22, 1993, included in Ampal American Israel Corporation's
FORM 10-K for the year ended December 31, 1992, and to all
references to our firm included in such registration statement.

DOV KAHANA & CO.
C.P.A. (Isr.)
Ramat-Gan. January 21, 1994

REUVENI, HARTUV, TEPPER & CO.
CERTIFIED PUBLIC ACCOUNTANTS (Isr.)
-----------------------------------------------------------------

---------
30 ACHAD HA'AM ST., TEL-AVIV ISRAEL P.O.B. 29870, CODE 61298
TEL: 972-3-5604281 FAX: 972-3-5605001

1946/AMPI

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the Ampal
American Israel Corporation's registration statement on FORM
S-2 (File No.33-51023) of our report on the financial statements
of the Snow and Cool Palace (Limited Partnership) dated February
3, 1993 included in Ampal American Israel Corporation's FORM 10-K
for the period ended December 31, 1992 and to all references to
our firm included in such registration statement.

January 21, 1994

Reuveni, Hartuv Tepper & Co.
Certified Public Accountants (Isr.)

A&Co. Almagor & Co.
CPA(ISR)
---------------------
7, Abba Hillel Rd., P.O. Box 3600,
Zip 52134, Ramat-Gan, Israel
Tel.: 03-5760606, Fax.: 972-3-5754671

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby consent to the
incorporation by reference in the amendment No. 2 to the
registration statement on Form S-2 (File No.33-51023) of Ampal
American Israel Corporation of our report on the consolidated
financial statements of Teledata Communication Ltd., dated
February 18, 1993, included in Form 10-K of Ampal American Israel
Corporation for the year ended December 31, 1992 and to all
references to our firm in such registration statement.

Almagor & Co. (formerly Almagor-Bash & Co.)
Certified Public Accountants (Isr.)

Ramat-Gan, Israel
January 21, 1994

KOST LEVARY AND FORER

January 21, 1994

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in the Amendment No. 2 to the
registration statement on FORM S-2 (File-No. 33-51023) of Ampal
American-Israel Corporation of our report on the consolidated
financial statements of Industrial Buildings Corporation Ltd.,
dated April 28, 1993, included in Ampal American-Israel
Corporation's Form 10-K for the year ended December 31, 1992, and
to all references to our firm included in such registration
statement.

Yours truly,

KOST LEVARY AND FORER.
Certified Public Accounts (Isr.)