================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------
For the fiscal year ended December 31, 1993 Commission file number 0-538
AMPAL-AMERICAN ISRAEL CORPORATION
(Exact name of Registrant as specified in its Charter)
New York 13-0435685
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1177 Avenue of the Americas, New York, New York 10036
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 782-2100.
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange on
Title of each class which Registered
------------------- ------------------------
Class A Stock American Stock Exchange
Warrants to purchase shares of Class A Stock American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class A Stock
(Title of Class)
4% Cumulative Convertible Preferred Stock
(Title of Class)
6 1/2% Cumulative Convertible Preferred Stock
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
----------------------------------------------
The number of shares outstanding of each of the issuer's classes of common
stock is Common -- 3,000,000; Class A -- 20,710,594 (as of March 23, 1994).
The aggregate market value of the voting stock held by nonaffiliates
of the Registrant is $97,642,639 (as of March 23, 1994).
================================================================================
<PAGE>
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OF AMPAL-AMERICAN ISRAEL CORPORATION
PART I
------
Item 1. Business
--------
As used in this report (the "Report"), the term "Ampal" only refers to
Ampal-American Israel Corporation, the parent company; the term "Company"
refers to Ampal and its consolidated subsidiaries. Ampal is a New York
corporation founded in 1942.
For industry segment financial information, see Note 10 to the Company's
consolidated financial statements included elsewhere herein.
The Company acquires interests in businesses located in the State of
Israel or that are Israel-related. An important objective of Ampal is to make
investments in companies that take advantage of growth in Israel's domestic
economy. The Company has diversified interests in the following sectors:
hotels and leisure-time, real estate, energy distribution, basic industry and
high technology and communications.
The Company emphasizes long-term appreciation over short-term returns and
liquidity. The Company often makes equity investments accompanied by more
significant loans or loan guarantees with the intention that cash flow from
operations of the investee companies will repay these loans within a relatively
short period. In determining whether to acquire an interest in a specific
company, the Company considers quality of management, qualification of
investment partners, potential return on investment, projected cash flow,
market share and growth potential.
The Company generally seeks to acquire and maintain a sufficient equity
interest in a company to permit it, on its own or with investment partners, to
have a significant influence in the management and operation of that company.
The Company often seeks investment partners who have expertise in the business
in which an investment is being made or whose operations and associations
provide the investee company with additional markets, sources of supply,
financing or other competitive advantages. Frequently, the Company enters into
arrangements with its investment partners or with the company in which it is
investing in order to ensure board representation or other rights relating to
its investments. Bank Hapoalim B.M. ("Hapoalim"), the largest bank in Israel,
is Ampal's controlling shareholder and principal lender. The Company usually
makes investments with or through affiliated companies. Members of the
Hapoalim group of companies, including Investment Company of Bank Hapoalim
Ltd., sometimes invest jointly with the Company.
Ampal was founded prior to the establishment of the State of Israel as
part of the effort of the Jewish community in Palestine to provide resources
for and benefit from the growth of its economy. Ampal has participated in the
economic development of Israel by providing capital and management to
commercial, banking, credit, industrial and agricultural enterprises located in
Israel or that are Israel-related. Ampal intends to continue to adhere to its
historical policy of focusing its business interests primarily on long-term
holdings in Israel-related enterprises.
-1-
<PAGE>
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.
Prior to 1989, Ampal was primarily engaged in making loans to businesses
in Israel through its industrial banking subsidiaries and, to a lesser extent,
investing in Israeli companies. In 1989, the Company discontinued this lending
activity, and in 1990 substantially all of the loan portfolios of its
industrial banking subsidiaries were sold to Hapoalim.
-2-
<PAGE>
Listed below by industry segment are the Company's most significant
investees, the principal business of each, the percentage of equity owned,
directly or indirectly, by Ampal and if listed on the American Stock Exchange
("AMEX"), or quoted on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), NASDAQ National Market System ("NASDAQ NMS") or
Tel Aviv Stock Exchange ("TASE"). For further information with respect to the
investees, see below.
<TABLE>
<CAPTION>
PERCENTAGE
AS OF
INDUSTRY SEGMENT PRINCIPAL BUSINESS DECEMBER 31, 1993
- - ---------------- ------------------ -----------------
<S> <C> <C>
HOTELS AND LEISURE-TIME
Moriah Hotels Ltd. ............... Hotel Chain 46.0%
Coral World International
Limited......................... Underwater Observatories 50.0
and 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 5.4(1)
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 42.5
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(2)
Petroleum Products
BASIC INDUSTRY
Pri Ha'emek (Canned and Frozen Food)
88 Ltd. ........................ Frozen and Canned Food 74.9(3)
Paradise Mattresses (1992) Ltd.... Mattresses and Fold-out Beds 85.1
Carmel Container Systems Limited
(AMEX: "KML")................... Packaging Materials and 20.0
Carton Production
Orlite Engineering Company Ltd.
(TASE) ......................... Composite Material Products 30.1(4)
Davidson-Atai Publishers Ltd...... Publications 22.5
HIGH TECHNOLOGY AND COMMUNICATIONS
Teledata Communication Ltd.
(NASDAQ NMS: "TLDCF")........... Telecommunications Systems 10.9(5)
Mercury Interactive Corporation
(NASDAQ NMS: "MERQ")............ Automated Software Quality 3.8
Products
DSP Group, Inc. (NASDAQ NMS:
"DSPG")......................... Digital Signal Processing 4.9(6)
Technologies
DSP Telecommunications Ltd........ Digital Signal Processing 1.9(7)
Technologies
Idan Software Industries I.S.I. Ltd.
(NASDAQ: "IDANF")............... Telecommunications Services 7.8
</TABLE>
-3-
<PAGE>
- - --------------
(1) Ampal's ownership reflects 42.5% of Ophir's 12.8% ownership of Industrial
Buildings.
(2) As a result of the exercise of warrants and conversion of debentures,
Ampal's ownership of Granite was diluted to 21.2% as of March 15, 1994.
(3) In March 1994, Ampal's ownership was reduced to 66.7% and may be further
reduced pending completion of Pri Ha'emek's public offering (see "Pri
Ha'emek").
(4) As a result of the exercise of options, Ampal's ownership of Orlite was
diluted to 29.5% as of March 15, 1994.
(5) Ampal's ownership includes 2.5% of Teledata owned directly and 42.5% of
Ophir's 19.7% ownership of Teledata.
(6) Ampal's ownership includes 3.6% of DSP Group owned directly and 42.5% of
Ophir's 3.1% ownership of DSP Group. Following the initial public offering of
DSP Group in February 1994, Ampal's ownership of DSP Group was reduced to 3.6%
including 2.6% of DSP Group owned directly and 42.5% of Ophir's 2.3% ownership
of DSP Group.
(7) Ampal's ownership reflects 42.5% of Ophir's 4.4% ownership of DSP
Telecommunications.
-4-
<PAGE>
1994 Public Offering
On February 1, 1994, Ampal completed a public offering of 4.5 million
units, sold for $12.125 per unit, consisting of one share of Class A Stock and
one redeemable warrant to purchase one share of Class A Stock at $16.00 per
share. The warrants are exercisable until January 31, 1999 but are callable by
Ampal, in whole or in part, from and after February 1, 1996, without payment to
the holder. Net proceeds from the offering were approximately $50.8 million.
Since February 2, 1994, the Class A Stock and warrant components of the units
are trading separately.
Certain Pending Transactions
The Company, through Ophir Holdings Ltd. ("Ophir"), which is 42.5% owned
by Ampal, has recently agreed, subject to the receipt of certain approvals, to
make equity investments and loans totalling approximately $2.5 million, for a
16.7% interest in each of three new Israeli companies formed to acquire certain
commercial real estate holdings of a major Israeli cooperative wholesale supply
company. The aggregate purchase price for this commercial real estate is
expected to be approximately $52.5 million and is expected to be financed
principally with mortgage loans which may be guaranteed in whole or in part by
the shareholders. Development costs of the properties may also be paid or
guaranteed by the shareholders.
In Israel, cellular telephone service is currently operated solely by one
entity. The Israeli Ministry of Communications requested bids for a second
cellular telephone service in Israel. In February 1994, Cellphone, Ltd., in
which the Company holds an approximate 4.99% equity interest, filed an
application with the Israeli Ministry of Communications for the license to
provide this cellular service.
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 February, 1994, the Company established, 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 are
expected to each invest up to $2.5 million in this fund. As of
March 15, 1994, the fund had made investments of $300,000.
- - - In January 1994, the Company invested approximately $66,000 for 50%
of the equity of, and made a loan of $1 million to, M.D.F. Boards
Industry Ltd. ("MDF"). MDF is a joint venture between the Company
and a subsidiary of Etz Lavud Ltd., a publicly-owned Israeli lumber
manufacturer. MDF intends to establish a plant in Israel to
manufacture medium density fiber products for the construction and
furniture industries.
- - - In 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.
- - - 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.
-5-
<PAGE>
- - - In 1992 and 1993, Ampal purchased approximately $1.1 million from
an unrelated DSP Group shareholder, shares of DSP Group which
currently approximate 2.6% of DSP Group's equity. In 1992, Ophir
invested approximately $1.9 million for securities which it
exchanged for 2.3% 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.
- - - 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 recently-
established Israeli publishing house.
HOTELS AND LEISURE-TIME
MORIAH HOTELS LTD. ("MORIAH")
Moriah, which is 46%-owned by the Company 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 1993, Moriah spent
approximately $4 million on general improvements and renovations.
Tourist arrivals increased in Israel by approximately 10% in 1993 as
compared to 1992. Moriah's occupancy rate was 73% in 1993 and 74% in 1992
(which excluded the Moriah Eilat Hotel which was closed for renovation for part
of 1992) (in both years, excluding the three economy hotels which came under
Moriah management in 1993). The average occupancy rate in the Israeli hotel
industry during 1993 was 67% and during 1992 was 68%.
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 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.
-6-
<PAGE>
Moriah employed approximately 1,750 persons as of December 31, 1993.
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")
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), which also includes a 22 villa luxury hotel and Perth and Manly
(Australia). 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 1993 Coral World's parks had a total of approximately 1.3 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. Coral World
employed a total of 275 persons as of December 31, 1993.
COUNTRY CLUB KFAR SABA LTD. ("KFAR SABA")
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.
The Company owns 51% of Kfar Saba and the remaining 49% is owned by an
unrelated party. 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 Report,
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) upon their expiration.
INDUSTRIAL BUILDINGS CORPORATION LTD. (MIVNEI TAASIYA LTD.) ("INDUSTRIAL
BUILDINGS")
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 10.4 million square feet of space
in industrial buildings throughout Israel (including approximately 10% in the
-7-
<PAGE>
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 118 acres of vacant land for
industrial purposes throughout Israel.
The buildings which are owned by Industrial Buildings are leased to
approximately 1,900 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
December 31, 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 800,000 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% 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. This dividend represents an amount significantly in
excess of 60% of Industrial Buildings 1993 earnings.
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 Relationships and Related
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.
BAY HEART LIMITED (LEV HAMIFRATZ LIMITED) ("BAY HEART")
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.
-8-
<PAGE>
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.
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. This assessment has been
dropped. See "Certain United States and Israeli Regulatory Matters--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 Bay
Heart.
BANK HAPOALIM (CAYMAN) LTD. ("CAYMAN")
Cayman is a bank holding company which owns 50% of 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. In 1994, Cayman sold to an unrelated bank 50% of Casa Bancaria at a
price based upon the net equity of Casa Bancaria at December 31, 1993. 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%. Each of them owns $2 million of 7% preferred shares of Cayman. See
"Certain Relationships and Related 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)")
Ampal (Israel), 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 Relationships and Related Transactions." Ampal (Israel) also acts
as a holding company for other investments discussed elsewhere in this Report.
OPHIR HOLDINGS LTD. ("OPHIR")
Ophir is a holding company that holds interests in Teledata, Industrial
Buildings, DSP Group and DSP Telecommunications. These companies are discussed
elsewhere in this Report. 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
Relationships and Related Transactions." For a discussion of Israeli real
estate tax considerations that may be applicable to certain real property
leases of Ophir, see "Certain United States and Israeli Regulatory
Matters--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.
-9-
<PAGE>
Subsequently, 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 and its results are no longer consolidated in
the Company's financial statements and are now recorded by the equity method of
accounting. In 1993, the Company recorded a gain on issuance of shares of
approximately $3.2 million (approximately $2.1 million after taxes) as a result
of Ophir's sale of shares. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations" and
"Certain Relationships and Related Transactions."
Ophir intends to develop on property owned by it in Petach Tikva, 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 million.
Ophir owns a 60% interest in a partnership that recently purchased two
acres of land in an industrial park in Netanya, Israel for $2.7 million. On
this site, the partnership intends to develop a 120,000 square foot building
for both industrial and commercial uses. The estimated cost of development of
this project is $6 million.
ETZ VANIR LTD. ("ETZ VANIR") AND YAKHIN MATAIM LTD. ("YAKHIN MATAIM")
Both Etz Vanir Ltd. and Yakhin Mataim Ltd. 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 $4.0 million for
services it has rendered to the companies. This litigation is pending.
AM-HAL LIMITED ("AM-HAL")
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 70% 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.
AMPAL DEVELOPMENT (ISRAEL) LTD. ("AMPAL DEVELOPMENT"), NIR LTD. ("NIR") AND
AMPAL
FINANCIAL SERVICES LTD. ("AMPAL FINANCIAL") TOGETHER, THE "HOLDING
COMPANIES")
Ampal Development, Nir and Ampal Financial, 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 Relationships and Related Transactions."
Ampal Development owns five commercial properties located in Israel
-10-
<PAGE>
aggregating approximately 36,900 square feet. Four of these properties are net
leased to Hapoalim. Nir owns four 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 Relationships and Related
Transactions." For a discussion of Israeli real estate tax considerations that
may be applicable to certain real property leases of the Holding Companies, see
"Certain United States and Israeli Regulatory Matters--Certain Israeli Real
Estate Tax Matters."
The Holding Companies hold interests in other companies discussed
elsewhere in this Report 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")
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 1.8 million metric tons of refined petroleum products
and lubricating oils in each of 1992 and 1993, representing approximately 25.7%
and 24.8% of the total sales of such products in Israel by the three major fuel
companies in Israel in 1992 and 1993, respectively.
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 1993, warrants to purchase convertible debentures of Granite were
exercised for an aggregate of approximately $18.8 million. As a result of the
exercise of warrants and conversion of debentures, the Company's ownership of
Granite was diluted to 21.2% as of March 15, 1994. 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%. The Company is party to an agreement with the other
shareholders of Granite which expires February 8, 1998 and which entitles the
-11-
<PAGE>
Company to appoint three out of the eleven 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.
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")
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.
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 private labels.
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 in 1993 only accounted for approximately 55% 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.
At December 31, 1993, the Company owned 74.9% of the shares of Pri
Ha'emek. In February 1994, Pri Ha'emek's other shareholder purchased additional
shares in Pri Ha'emek at the same price the Company paid for its shares in
1991, diluting the Company's ownership to 66.7%. In March 1994, Pri Ha'emek
conducted an initial public offering in Israel on the TASE. The offering did
not meet the distribution requirement under the regulations of the TASE, and as
-12-
<PAGE>
a result, Pri Ha'emek's underwriters deposited for sale by a trustee shares
which are expected to be sold, at such prices as the trustee may realize, over
a thirty day period. The Company has agreed to pay to the trustee up to NIS 2
million (approximately $670,000) to fund its pro-rata share of the difference
between the proceeds of those sales and the amount which would have been
received if the shares were sold at the public offering price. The Company's
interest in Pri Ha'emek will be initially diluted to 51.3%, and upon exercise
of all options and convertible debentures, the Company's interest may be
diluted to 35.3%. If the Company's interest in Pri Ha'emek decreases below
50%, Pri Ha'emek's results will no longer be consolidated with the Company's
but will be recorded by the equity method of accounting.
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.
PARADISE MATTRESSES (1992) LTD. ("PARADISE")
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.
CARMEL CONTAINER SYSTEMS LIMITED ("CARMEL")
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, a United States investor,
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
-13-
<PAGE>
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. 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")
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.
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
1993, Israel Electric Corp. and Bezeq (the Israeli telephone company) accounted
for 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.
As of December 31, 1993, the Company owned 30.1% of the shares of Orlite.
Due to exercise of options by the public, the Company's ownership of Orlite was
diluted to 29.5% as of March 15, 1994. Another Hapoalim affiliate owns an
identical interest. Depending upon whether and to what extent the Company and
the public exercise their options, the Company's ownership of the equity of
Orlite could be reduced to 24.9%.
DAVIDSON-ATAI PUBLISHERS LTD. ("DAVIDSON-ATAI")
Davidson-Atai is a recently-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")
Teledata designs, develops, manufactures, markets and supports
concentrators and multiplexers for integration in the "local loop" of telephone
networks (the portion of the network that links individual subscribers to a
local exchange). 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
-14-
<PAGE>
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 1993, Teledata invested $6.2 million in research and development as
compared to $4 million in 1992. 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 60
countries, and has installed its equipment in 37 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 1993, the Company recorded a gain of $1.5 million (approximately
$700,000 after taxes) from the sale of a 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 remained at 19.7%.
MERCURY INTERACTIVE CORPORATION ("MERCURY")
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 single-user
application testing for UNIX/X Windows, MS Windows and Windows NT as well those
for multi-user system testing. Its announced products include those for OS/2
and Macintosh. Mercury has licensed over 4,000 copies of its ASQ products to
over 300 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. ("DSP GROUP") AND DSP TELECOMMUNICATIONS LTD.("DSP
TELECOMMUNICATIONS")
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.
As of December 31, 1993, Ampal owned directly 3.6% of the equity of DSP
Group which it purchased from an unaffiliated DSP Group shareholder in 1993 for
-15-
<PAGE>
approximately $1.1 million and Ophir, which is 42.5% owned by the Company,
owned 2.3% of DSP Group for which it paid approximately $1.9 million in 1992.
Another Hapoalim affiliate also owned 3.6% of DSP Group. In February 1994, DSP
Group completed an initial public offering of its shares. It shares are quoted
on the NASDAQ NMS under the symbol "DSPG." Following the offering Ampal, Ophir
and the Hapoalim affiliate own 2.6%, 2.3% and 2.6%, respectively, of DSP Group.
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")
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. In January 1994, this subsidiary reduced its prices for these services
in response to a price reduction for these services implemented by Bezek, the
Israeli national telephone company. This price reduction has had an adverse
impact on this subsidiary, Elitec and Idan. 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.
In February 1994, Olam 1 Advanced Communications Ltd., in which Idan holds
an approximate 9% equity interest filed an application with the Israeli
Ministry of Communications for a license to provide the second cellular
telephone service in Israel.
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."
EMPLOYEES
- - ---------
As of December 31, 1993, Ampal had 12 employees plus 4 employees whose
compensation is reimbursed to Ampal by Moriah and 1 employee whose compensation
is shared with Hapoalim. Ampal (Israel) had 9 employees and Ampal Industries
(Israel) Ltd. had 4 employees as of that date. Relations between Ampal and its
employees are satisfactory.
-16-
<PAGE>
CONDITIONS IN ISRAEL
Most of the companies in which Ampal directly or indirectly invests,
conduct their principal operations in Israel and are directly affected by the
economic, political, military, social and demographic conditions there. The
following information is included in order to describe certain of these
conditions in Israel. All figures and percentages are approximate. A
substantial portion of the information with respect to Israel presented
hereunder has been taken from Annual Reports of the Bank of Israel, the Israeli
Central Bureau of Statistics and from economic reports of Hapoalim. No
independent verification has been made of such information.
Operations in Israel
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. and
Coral World. In January 1991, a direct hit by an Iraqi scud missile caused
damage to a shopping mall under construction by Bay Heart. Pri Ha'emek, a food
processing company, also experienced a downturn in business as a result of this
crisis.
Since 1991, negotiations have taken place between Israel, its Arab
neighbors and the Palestinians to end the state of hostility in the region. In
September 1993, a breakthrough occurred in Israeli-Palestinian relations. A
joint Israeli-Palestinian Declaration of Principles was signed by Israel and
the Palestine Liberation Organization ("PLO") in Washington, D.C., outlining
interim Palestinian self-government arrangements. These arrangements include
implementation of Palestinian self-rule in the Gaza Strip and Jericho, proposed
elections of a Palestinian council and plans for extensive economic
cooperation. In addition, PLO Chairman Arafat sent a letter to Israeli Prime
Minister Rabin in which the PLO recognized Israel's right to exist in peace and
security, renounced terrorism and violence and affirmed that the clauses of the
PLO Covenant denying Israel's right to exist are no longer valid. In reply,
Israel recognized the PLO as the representative of the Palestinians in the
peace negotiations. Since then, Israel and the PLO have conducted a series of
discussions, which have been periodically interrupted due to events in the
region, designed to implement the Declaration of Principles.
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.
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
-17-
<PAGE>
government actions.
Demographics
Since the beginning of 1990, Israel has been experiencing a new wave of
immigration, primarily from the former Soviet Union. Approximately 77,000 new
immigrants arrived through the end of 1993. During the period 1990 through
1993, Israel's population increased by approximately 16.7%. Although the
increased immigration from the former Soviet Union may benefit Israel and its
economy in the long-term by providing highly educated, cost competitive labor
and by stimulating its economic growth, it has placed an increased strain on
government services and national resources. A sustained decrease in
immigration would alleviate some of the strain, but a decrease may also have a
negative effect on those investees whose revenue is derived mainly from the
sale of products and services in Israel. The impact of a significant change in
the flow of immigration on the operations of the investees is unclear.
The Israeli Government has found it necessary to raise additional revenue
and to dedicate substantial funds to support programs, including housing,
education and job training, designed to assist in the absorption of the new
immigrants. No prediction can be made as to the policies that will be adopted
in the future or the effect thereof on these and other government spending
programs.
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.
Inflation and Devaluation
Over the past four years, Israel's economy has experienced very high rates
of growth, exceeding 6% in 1990-92 (an average of 7.5% a year in the business
sector) and amounting to 3.5% in 1993. The lower growth rate of 1993 was due
to an anticipated 27% drop in investment in residential construction. Economic
growth in Israel over the past two years has been fueled by the export sector.
Exports of goods and services rose by 14.4% in 1992 and amounted to 20.8
billion dollars and increased by an additional 11.8% in 1993 to reach an
estimated 22 billion dollars. The Israeli Government's monetary policy
contributed to relative price and exchange rate stability during most of the
year despite fluctuating rates of economic growth during the year and a high
rate of unemployment.
In 1993, the number of tourists who arrived in Israel increased to
approximately 2 million from approximately 1.5 million and 1 million in 1992
and 1991, respectively.
Israel's average unemployment rate was reduced to 10% at the end of 1993
from 11.2% at the end of 1992 and 10.6% at the end of 1991.
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 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 1993, the New Israeli Shekel ("NIS") was devalued by 8% relative to
the dollar from NIS 2.764 to NIS 2.986. This devaluation resulted primarily
-18-
<PAGE>
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, including payment obligations and receivables of many of the Companies'
investees.
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
1993............................... 11.2 2.986 8.0 2.93 2.7
</TABLE>
- - --------------
(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.
Israeli Investment
Since the establishment of the State of Israel in 1948, the Government of
Israel has promoted the development of industrial and agricultural projects
through a variety of methods including tax abatements and 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 usually are provided in the
forms of grants, regulated in accordance with the Law for Encouragement of
-19-
<PAGE>
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. This deficit has been
covered primarily by military and economic aid from the United States, personal
remittances from abroad, sales of Israel Government bonds, primarily in the
United States, 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 September 30, 1993, Israel's
outstanding net foreign debt was approximately $15.1 billion, $14.7 billion and
$16.4 billion, respectively. Israel had approximately $6.4 billion of foreign
exchange reserves at the end of 1993 compared to $5.1 billion at the end of
1992 and $6.3 billion at the end of 1991.
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.
In an effort to stimulate exports and economic growth, the Israeli
-20-
<PAGE>
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.
-21-
<PAGE>
CERTAIN UNITED STATES AND ISRAELI REGULATORY MATTERS
S.E.C. 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.
Certain Israeli Real Estate Tax Matters
Under Israeli law, a lease of real property with a term of more than 10
years is required to be reported to the Israeli Appreciation Tax Authorities
and is subject to a land appreciation tax or an income tax and an acquisition
tax. The Israeli Tax Commissioner has recently taken the position that certain
arrangements for the lease of real property, including multiple leases, leases
with renewal options and leases or options to lease between affiliated
companies, which in the aggregate provide a term exceeding 10 years, are
subject to the above reporting and taxes.
Certain of the investees, including Ophir, Industrial Buildings and
Carmel, are parties (mostly as lessors) to lease transactions which, under the
Commissioner's interpretation, may be deemed leases for terms in excess of 10
years. These investees have all reported their lease income as taxable income
and have recently reported such transactions to the tax authorities. Should
the tax authorities decide to enforce their position and prevail, these
investees would be in breach of Israeli law, and could be subject to material
taxes and to civil and criminal penalties. An assessment made against Bay
Heart in this regard by the tax authorities has been dropped.
The Company's investees have taken the position, which the Company
believes is shared by many of the other affected taxpayers in Israel, that the
Commissioner's position in this matter is incorrect. The Company cannot
predict whether the Commissioner's position will be upheld or, if upheld, the
effect on the Company and its investees.
Israeli Banking Regulations
In October 1993, the Bank Share Settlement Act (Temporary Provisions) 1993
(the "Bank Shares Act") was enacted by the Knesset, the Israeli parliament.
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
State of Israel. The purpose of the Bank Shares Act is to facilitate the sale
by the Government of Israel of shares in Israeli banks. In addition, 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 of each bank will be
exercised by a supervisory committee appointed for that bank by a public
advisory committee which is in turn approved by the Israeli Government. These
supervisory committees will appoint directors for each of the banks.
In May 1993, the Government of Israel sold a total of approximately 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.
-22-
<PAGE>
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 of means of control in non-banking corporation. Hapoalim may not
extend credit to the Company except in the ordinary course of business and on
terms similar to those on which credit is extended to other customers of the
same class.
In March, 1994, an amendment to the Banking Law was enacted by the
Knesset. Under the amendment, banks, including Hapoalim, are required to
reduce their holdings of individual non-banking business corporations,
including Ampal, to 25% or less by and not later than December 31, 1996. In
addition, it has been proposed by the Government, that the Minister of Finance
form a committee to examine the overall economic implications of a further
reduction in the permitted holdings of banking corporations in non-banking
business corporations.
From time to time, the Company engages in transactions with Hapoalim and
its affiliates. Currently, the Company maintains substantial deposits with
Hapoalim and its subsidiaries. See "Certain Relationships and Related
Transactions."
United States Banking Regulations
Due to its status as a subsidiary of Hapoalim which is subject, through
the United States International Banking Act of 1978 ("IBA"), to the provisions
of the United States Bank Holding Company Act of 1956 ("BHC"), there may be
limitations upon the direct or indirect investment activities of Ampal in the
United States. While Ampal itself is a "grandfathered" investment of Hapoalim
under the IBA for purposes of the BHC, Ampal may not invest in more than 5% of
the voting shares or 25% of the equity of United States corporations or
non-United States corporations which have a majority of their assets in or
revenues derived from the United States, subject to certain exceptions.
Management of the Company does not believe that these limitations contained in
the BHC and the regulations of the Board of Governors of the Federal Reserve
System thereunder have had or will have any material adverse impact upon the
Company or its operations.
Israeli Foreign Exchange Regulations
Foreign exchange regulations are in effect in Israel. The regulations are
administered by the Controller of Foreign Currency, an official of the Bank of
Israel, who is appointed by the Minister of Finance. The Company's capital
investments in Israeli enterprises and the payment in U.S. dollars of dividends
on such investments do not require prior approval by the Controller. Under
Israeli law, foreign investors who make 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.
-23-
<PAGE>
TAX INFORMATION
Israeli Taxation Of Ampal
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%, 40% and 39% in 1990 through 1993.
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 39% in 1993 (and is scheduled to be reduced to 38%
and further to 36% in stages during 1994 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
-24-
<PAGE>
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.
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 years 1993 and 1994, 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
-25-
<PAGE>
together with interest accrued on such tax since the date of the gain
recognition agreement.
RETURN ON EQUITY AND ASSETS
- - ---------------------------
The following table sets forth information regarding the return on equity and
assets of the Company for the years indicated:
Year Ended December 31,
-----------------------------
1993 1992 1991
-----------------------------
Return on Assets (net income divided
by average total assets).............. .06%* 2.88% .27%
Return on Equity (net income divided
by average shareholders' equity)...... .19%* 8.91% 1.04%
Dividend Payout Ratio Per Class A
Share (dividends declared per share
divided by net income per share)...... - - -
Equity to Assets Ratio (average equity
divided by average total assets)...... 33.17% 32.29% 26.31%
* Includes cumulative effect on prior years of change in accounting principle
of $(4,982,000).
Item 2. PROPERTY
--------
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 1993 amounted to approximately $178,000. 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 $3,251,000. 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 9, 2003, with annual rental
payments based upon 11% of the cost of the property. In 1993, Ampal received
$352,000 as rental payments for these premises.
Hapoalim leases premises owned by Ampal (Israel) Ltd
., an Ampal subsidiary,
located at 111 Arlozoroff Street, Tel Aviv under a 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 rental payments for these premises.
Hapoalim leases two premises owned by Ampal Development (Israel) Ltd
., an Ampal
subsidiary, located at 65 Allenby Street and 99 Ben Yehuda Street, Tel Aviv.
These leases expire December 31, 1996 (with options to extend the lease term
through December 31, 2002) with annual rental payments based upon 10% of the
value of the property linked to the CPI. In 1993, Ampal Development (Israel)
received $326,000 as rental payments for these premises.
-26-
<PAGE>
Hapoalim leases two premises owned by Ampal Development (Israel) Ltd
. located
at 39 Shenker Street, Holon and 111 Yaffe Nof Street, Haifa. These leases
expire on September 30, 2000, with annual rental payments approximately equal
to 10% of the cost of the property linked to the CPI. In 1993, Ampal
Development (Israel) received $705,000 as rental payments for these premises.
Hapoalim and its affiliates lease two premises owned by Mercazim Investments
Ltd., a subsidiary of a company 42.5% owned by Ampal. These leases expire on
May 30, 2000, November 30, 2002 and July 30, 2003, respectively, with the
annual rental payments at market rates. In 1993, Mercazim received $662,000 as
rental payments for these premises.
Hapoalim leases two premises owned by Ampal Financial Services Ltd
., an Ampal
subsidiary, in Ramat Hasharon and Rosh Pina. These leases expire on September
30, 2000, with the annual rental payments based upon 10% of the cost of the
premises, linked to the CPI. In 1993, Ampal Financial Services received
$469,000 as rental payments for these premises.
Hapoalim leases two premises owned by Nir Ltd., an Ampal subsidiary, one
in Tel Aviv and one in B'nai Brak, 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 on July 10, 1997 (on June 10, 2002, if an option is
exercised). In 1993, Nir received $377,000 as rental for these premises.
Hapoalim leases an office building owned by Ampal located at 174 North
Michigan Avenue, Chicago, Illinois. This lease expires on 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. In 1993, Ampal received $140,000 as rental payments for these premises.
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. In 1993, Ophir received $250,000 as rental
payments for these premises.
Ampal-Israel, Ampal Development, Nir and Mercazim own several properties in
Jerusalem, Kfar Saba, Kiryat Aryeh, Tel Aviv, Beersheva and B'nai Brak,
including industrial plants, four supermarkets, and other properties which are
leased to various parties. The rent received by these companies for all of
these properties in 1993 totalled $1,171,000.
Other properties of the Company are discussed elsewhere in this Report
.
Item 3. Legal Proceedings
-----------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not Applicable.
-27-
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
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:
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
As of March 23, 1994, there were 1,459 record holders of Class A Stock.
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.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1993 1992 1991 1990 1989
------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues.............. $ 73,243 $ 85,302 $ 71,519 $ 110,401 $ 127,537
Net income............ 226* 10,324 1,126** 1,116 1,509
Earnings per Class A share...... $.01* $.44 $.05** $.05 $.06
Total assets.......... 304,060 333,267 404,466 436,024 1,100,756
Deposits and debentures
outstanding......... 94,362 107,674 174,727 225,603 870,878
Dividends declared per Class A
share............... - - - - $.06
</TABLE>
* Includes cumulative effect on prior years of change in accounting
principle of $(4,982), equal to $(.21) per
share.
** Includes extraordinary income of $726, equal to $.03 per share.
-28-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
GENERAL
- - -------
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. 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 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.
The Company's results of operations are directly affected by the results of
operations of its investees.
Companies 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. If the Company's interest in a subsidiary were to be reduced to
20%-50%, the investment would be recorded under the equity method. The
Company's results of operations may be affected by capital transactions of
investee companies which are 20%- to 50%-owned. Thus, the issuance of shares
by an investee company which 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 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 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.
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, 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 was reported separately in the consolidated statement of income
for the year ended December 31, 1993. This change required no payments to any
taxing jurisdiction and had no material effect on the current year's provision
for income taxes and on income before cumulative effect of change in accounting
-29-
<PAGE>
principle. 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
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. During 1993, for those subsidiaries and affiliates whose functional
currency is considered to be the New Israeli Shekel ("NIS"), assets and
liabilities are translated at the rate of exchange at the end of the reporting
period and revenues and expenses are translated at the average rates of
exchange during the reporting period. Translation differences of those foreign
companies' financial statements are included in the cumulative translation
adjustment account of shareholders' equity at December 31, 1993. Prior to
1993, translation gains and losses for these subsidiaries and affiliates were
reflected in the Company's consolidated statements of income.
Should the NIS continue to be devalued against the dollar, such cumulative
translation adjustments are likely to result in reductions of shareholders'
equity. As of December 31, 1993, the effect on shareholders' equity was a
decrease of approximately $2.2 million. Upon disposition of an investment, the
related cumulative translation adjustment balance will be recognized in
determining gains or losses.
Moriah Hotels Ltd. ("Moriah") and Orlite Engineering Company Ltd. ("Orlite")
report their financial statements on a three-month lag. Consequently, their
results for the 12-month period ended September 30, 1993 were incorporated into
the Company's 1993 consolidated annual financial statements.
RESULTS OF OPERATIONS
- - ---------------------
Year Ended December 31, 1993 Compared to Year Ended December 31, 1992
Consolidated net income before the cumulative effect of a change in accounting
principle decreased to $5.2 million in 1993 from $10.3 million in 1992. In
1993 and 1992, there were special factors which impacted both years' reported
net income. 1993 net income included approximately $3 million of gains on
issuance of shares by affiliates and gains on sales of investments (net of
minority interests and income taxes), whereas 1992's net income included
approximately $6.2 million of similar gains. Furthermore, in 1993 the Company
was required to record a nonrecurring charge of approximately $5 million with
respect to its adoption of SFAS No. 109 which resulted in net income of $.2
million as compared with $10.3 million in 1992.
The decrease in net interest earnings in 1993 as compared to 1992 resulted from
additional interest income earned by the Company 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 Ltd.
("Industrial Buildings"). In the first quarter of 1993, Ophir Holdings Ltd.
("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. Ophir owns an equivalent of
12.8% of the equity of Industrial Buildings.
Equity in earnings of affiliates decreased for the year ended December 31, 1993
as compared to the same period in 1992. The decrease was mainly attributable
to the Company's share of losses of its real estate affiliates which recorded
high finance expenses on their borrowings linked to the Consumer Price Index in
Israel ("CPI"). In the past, these finance expenses were substantially offset
by the translation gains resulting from the devaluation of the Israeli shekel
to the U.S. dollar. In 1993, based on the guidelines of SFAS No. 52 (see
General), these companies changed the method of translating their shekel
financial statements to U.S. dollars, and the translation gains are no longer
reflected in the statement of income but are included in the cumulative
translation adjustment account of shareholders' equity. The losses from real
estate affiliates were partially offset by the Company's share of the earnings
of the Moriah Group of companies which increased in 1993 as a result of higher
occupancy reflecting the rise in tourism to Israel as well as the Company's
share of earnings of newly acquired affiliates.
-30-
<PAGE>
Food processing revenues which reflect sales of the Company's then 74.9%-owned
subsidiary, Pri Ha'emek (Canned and Frozen Food) 88 Ltd. ("Pri Ha'emek"),
decreased because sales were affected by foreign currency fluctuations. In
February 1994, Pri Ha'emek's other shareholder purchased additional shares in
Pri Ha'emek at the same price the Company paid for its shares in 1991, diluting
the Company's ownership to 66.7%. In March 1994, Pri Ha'emek conducted an
initial public offering in Israel on the Tel Aviv Stock Exchange ("TASE"). The
offering did not meet the distribution requirement under the regulations of the
TASE and as a result, Pri Ha'emek's underwriters deposited for sale by a
trustee shares which are expected to be sold, at such prices as the trustee may
realize, over a thirty-day period. The Company has agreed to pay to the
trustee up to NIS 2 million (approximately $670,000) to fund its pro-rata share
of the difference between the proceeds of those sales and the amount which
would have been received if the shares were sold at the public offering price.
The Company's interest in Pri Ha'emek will be initially diluted to 51.3% and
upon exercise of all options and convertible debentures, the Company's interest
may be diluted to 35.3%. If the Company's interest in Pri Ha'emek decreases
below 50%, Pri Ha'emek's results will no longer be consolidated with the
Company's but will be recorded by the equity method of accounting.
In February and June 1993, the Company invested an aggregate of approximately
$4.3 million in Paradise Mattresses Industries (1992) Ltd. ("Paradise") for
approximately 85.1% of the shares of Paradise. Paradise's assets and
liabilities were consolidated commencing June 30, 1993; its manufacturing and
distribution operations were included in equity in earnings of affiliates for
the six months ended June 30, 1993 and consolidated for the six months ended
December 31, 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.
In November 1993, the capital structure of Ophir was reorganized to equalize
the voting and equity interests of its two shareholders. Subsequently, 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 was accounted
for under the equity method, and the Company recorded a gain on issuance of
shares of approximately $3.2 million (approximately $2.1 million after taxes).
In February and October 1992, Granite Hacarmel Investments Limited ("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 million (approximately $2.7 million after taxes).
In April 1992, Teledata Communication Ltd. ("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, the Company and Ophir (then a consolidated subsidiary of the Company)
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 $.7 million after
taxes). As a result of these transactions, the Company's ownership of Teledata
was reduced to 2.5% and Ophir's to 19.7%.
-31-
<PAGE>
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.
In December 1991, the Company acquired an additional 24.9% interest in its food
processing subsidiary, Pri Ha'emek (Canned and Frozen Food) 88 Ltd. ("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 of 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 the twelve-month period 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 year ended
December 31, 1993 as compared to the year ended December 31, 1992.
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.
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.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
As of December 31, 1993, the Company had cash and cash equivalents totalling
approximately $3.2 million and had a committed $10 million bank line of credit
which expires in October 1994. 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 offering (described below) or bank borrowings.
On January 25, 1994, the Company sold in a public offering 4.5 million units
consisting of one share of Class A stock and one redeemable warrant to purchase
one share of Ampal's Class A stock, for $12.125 per unit. The warrants are
exercisable at $16 per share at any time until January 31, 1999, and are
callable by Ampal, in whole or in part, from and after February 1, 1996,
-32-
<PAGE>
without payment to the holder. The net proceeds, which the Company received
from this offering, amounted to approximately $51 million. The Company intends
to use the proceeds of this offering for the financing of acquisitions,
additions to existing holdings and other working capital and general corporate
purposes, including early redemptions of outstanding Ampal debentures.
At December 31, 1993, the Company's debt to equity ratio was 1.31 to 1 as
compared with 1.48 to 1 at December 31, 1992. On a pro forma basis, at
December 31, 1993, giving effect to the proceeds of the public offering, the
ratio would have been .91 to 1.
Deposits receivable have continued to decline since 1990 as a result of
repayments. During 1993, the decreases in cash and cash equivalents and
debentures payable were mainly attributable to the early redemption of
approximately $14 million of high interest-bearing debentures which Ampal
called and to new investments made.
Since 1989, Ampal has called for early redemption an aggregate of approximately
$121 million principal amount of debentures. 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.
In March 1994, Ampal made an optional redemption of approximately $6.5 million
of its 7.5% variable rate debentures which were scheduled to mature in 1996.
Later in 1994, Ampal intends to make further optional redemptions of
approximately $9.1 million of its 8% to 10% debentures maturing in 2000. These
redemptions have been and are expected to be funded from internal cash flow, a
portion of the net proceeds of the offerings or bank borrowings. At December
31, 1993, Ampal had $48.2 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 $48.2 million of
Ampal's outstanding debentures, $22.1 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 $43.1 million
principal amount of the Company's outstanding debentures were issued by an
Israeli subsidiary and are secured by $45 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 Company's outstanding
debentures includes an aggregate principal amount, net of discounts, of $75.7
million which is not callable prior to scheduled maturity. At December 31,
1993, the Company had deposits and notes and loans receivable aggregating
$116.4 million with varying interest rates and maturities and repayment is
guaranteed by Hapoalim.
As of December 31, 1993, the Company had issued guarantees on certain
outstanding loans to its investees in the aggregate principal amount of $18.9
million, and has a share of the commitments issued by and to its investees of
up to $25.7 million.
In 1993, the Company acquired interests in five companies for an aggregate of
$9.7 million.
-33-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
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, 1993 and
1992, 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, 1993. These financial statements and the schedules referred
to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits. We did not audit the financial statements of
certain consolidated subsidiaries, which statements reflect assets and revenues
of 43% and 77%, respectively, of the consolidated totals as of and for the year
ended December 31, 1993, 29% and 56%, respectively, of the consolidated totals
as of and for the year ended December 31, 1992 and revenues of 53% of the
consolidated total for the year ended December 31, 1991. 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
$9,236,000, $11,167,000 and $5,436,000 for the years ended December 31, 1993,
1992 and 1991, 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 those
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, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 14(a)(2)
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion based on our audits and
the reports of other auditors, 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.
As explained in Note 1(f) to the Consolidated Financial Statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
ARTHUR ANDERSEN & CO.
New York, NY
March 23, 1994
-34-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993 1992 1991
- - --------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
REVENUES:
Interest:
<S> <C> <C> <C>
Related parties.............................$ 16,311 $ 17,058 $ 23,732
Others...................................... 1,411 1,555 3,528
Food processing (Note 2(j))................... 30,626 31,482 -
Hotel and leisure-time operations (Note 2(f)). - - 28,719
Manufacturing and distribution (Note 2(a)).... 4,944 - -
Equity in earnings of affiliates and others
(Note 9)..................................... 9,037 11,195 5,593
Other income:
Related parties............................. 3,592 4,574 3,981
Others...................................... 2,164 2,556 1,366
Gains on issuance of shares by affiliates
(Note 2)..................................... 3,185 13,062 -
Gain on sale of investments (Note 2).......... 1,973 3,820 4,600
-------- -------- --------
Total revenues............................ 73,243 85,302 71,519
-------- -------- --------
EXPENSES:
Interest:
Related parties............................. 5,068 5,536 6,807
Others...................................... 17,296 12,810 19,199
Food processing (Note 2(j))................... 24,688 24,415 -
Hotel and leisure-time operations (Note 2(f)). - - 26,465
Manufacturing and distribution (Note 2(a)).... 2,886 - -
Other expenses................................ 12,666 12,738 13,274
Translation loss (gain)....................... 225 1,413
(329)
Minority interests............................ (403) 4,785 1,609
-------- -------- --------
Total expenses........................... 62,426 61,697 67,025
-------- -------- --------
Income before income taxes.................... 10,817 23,605 4,494
Income taxes (Note 8)......................... 5,609 13,281 4,094
-------- -------- --------
Income before extraordinary income............ 5,208 10,324 400
Extraordinary income (Note 1(g)).............. - - 726
-------- -------- --------
Income before cumulative effect of change
in accounting principle...................... 5,208 10,324 1,126
Cumulative effect on prior years of change in
accounting principle (Note 1(f))............. (4,982) - -
-------- -------- --------
NET INCOME...............................$ 226 $ 10,324 $ 1,126
======== ======== ========
Earnings per Class A share (Note 7):
Earnings before extraordinary income..... $.22 $.44 $.02
Extraordinary income..................... - - .03
---- ---- ----
Earnings before cumulative effect of change in
accounting principle......................... .22 .44 .05
Cumulative effect on prior years of change in
accounting principle......................... (.21) - -
---- ---- ----
Earnings per Class A share............... $.01 $.44 $.05
==== ==== ====
Weighted average number of Class A and
equivalent shares outstanding (in thousands). 20,717 20,717 20,717
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-35-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31,
ASSETS AS AT 1993 1992
- - ------------------------------------------------------------------------------
(Dollars in thousands)
Cash and cash equivalents...................... $ 3,178 $ 9,698
Deposits (Note 3):
Related parties.............................. 99,481 125,220
Others....................................... - 593
Notes and loans receivable (Note 3):
Related parties.............................. 11,948 13,439
Others....................................... 4,964 6,111
Investments:
Related parties (Notes 2 and 9).............. 103,319 97,243
Others....................................... 8,322 12,669
Property and equipment, less accumulated
depreciation of $10,554 and $9,687............ 30,496 32,675
Other assets (Note 1(i))........................ 42,352 35,619
---------- ----------
TOTAL ASSETS................................... $ 304,060 $ 333,267
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
-36-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND DECEMBER 31, DECEMBER 31,
SHAREHOLDERS' EQUITY AS AT 1993 1992
- - -------------------------------------------------------------------------------
(Dollars in thousands)
LIABILITIES
Deposits and notes and loans payable (Note 4):
Related parties............................... $ 42,752 $ 53,261
Others........................................ 18,091 19,023
Debentures outstanding (Note 5):
Related parties............................... - 3,051
Others........................................ 91,270 100,795
Accounts and income taxes payable and accrued
expenses:
Related parties............................... 1,169 3,041
Others........................................ 33,621 25,303
---------- ----------
Total liabilities....................... 186,903 204,474
---------- ----------
MINORITY INTERESTS
Related parties............................... - 9,591
Others........................................ 340 -
---------- ----------
Total minority interests................ 340 9,591
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY (Notes 6 and 13)
4% Cumulative, Participating, Convertible
Preferred Stock, $5 par value; authorized
650,000 shares; issued 213,720 and 240,528
shares; outstanding 213,720 and 232,170 shares 1,068 1,202
6-1/2% Cumulative, Convertible Preferred Stock,
$5 par value; authorized 4,282,850 shares;
issued 1,202,342 and 1,510,924 shares; out-
standing 1,202,342 and 1,507,100 shares........ 6,011 7,554
Class A Stock, $1 par value; authorized
30,000,000 shares; issued 16,224,779 and
15,163,685 shares; outstanding 16,042,713
and 15,034,781 shares.......................... 16,225 15,164
Common Stock, $1 par value; authorized, issued
and outstanding 3,000,000 shares............... 3,000 3,000
Additional paid-in capital...................... 10,605 9,989
Retained earnings............................... 82,079 82,293
Cumulative translation adjustments (Note 1(c)).. (2,171) -
---------- ----------
Total shareholders' equity.............. 116,817 119,202
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 304,060 $ 333,267
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
-37-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993 1992 1991
- - -------------------------------------------------------------------------------
(Dollars in thousands)
Cash flows from operating activities:
Net income.................................. $ 226 $ 10,324 $ 1,126
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Equity in earnings of affiliates and others (9,037) (11,195) (5,593)
Gains on issuance of shares by affiliates.. (3,185) (13,062) -
Cumulative effect on prior years of change
in accounting principle................... 4,982 - -
Gain on sale of investments................ (1,973) (3,820) (4,600)
Translation loss (gain).................... 225 1,413 (329)
Depreciation expense....................... 2,346 1,865 3,500
Amortization expense....................... 5,127 6,011 6,321
Minority interests......................... (403) 4,785 1,609
Deconsolidation of investee company pre-
viously accounted for as a subsidiary...... 1,946 (1,093) -
Consolidation of subsidiary previously
accounted for by the equity method......... - - 418
(Increase) decrease in other assets......... (6,594) 3,412 1,744
(Decrease) increase in accounts and income
taxes payable and accrued expenses:
Related parties............................ (1,841) 1,029 (2,778)
Others..................................... 2,694 5,634 838
Dividends received from affiliates.......... 3,369 7,065 1,886
-------- -------- --------
Net cash (used in) provided by operating
activities................................ (2,118) 12,368 4,142
-------- -------- --------
Cash flows from investing activities:
Deposits receivable collected:
Related parties............................ 27,361 47,492 48,844
Others..................................... 600 2,775 21,231
Notes and loans receivable granted:
Related parties............................ (5,645) (3,513) (13,090)
Others..................................... (176) - -
Notes and loans receivable collected:
Related parties............................ 5,510 5,473 2,186
Others..................................... 1,778 6,935 1,865
Investments made:
Related parties............................ (820) (3,323) (2,645)
Others..................................... (6,054) (8,438) (2,547)
Proceeds from sales of investments:
Others..................................... 9,281 5,272 7,937
Purchase of property and equipment.......... (4,292) (765) (9,953)
-------- -------- --------
Net cash provided by investing activities.. 27,543 51,908 53,828
-------- -------- --------
The accompanying notes are an integral part of the consolidated financial
statements.
-38-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993 1992 1991
- - -------------------------------------------------------------------------------
(Dollars in thousands)
Cash flows from financing activities:
Deposits and notes and loans payable received:
Related parties............................. 19,715 14,321 9,085
Others...................................... 6,777 6,981 1,221
Deposits and notes and loans payable repaid:
Related parties............................. (31,837) (19,880) (34,766)
Others ..................................... (8,137) (1,803) (4,400)
Debentures outstanding repaid:
Related parties............................. (3,217) (3,243) -
Others...................................... (14,422) (57,719) (39,449)
Investment in subsidiary by minority
shareholder................................. 686 - -
Dividends paid:
Others...................................... (440) (540) (551)
Minority interests.......................... - - (177)
-------- -------- --------
Net cash used in financing activities....... (30,875) (61,883) (69,037)
Effect of exchange rate changes on cash
and cash equivalents......................... (1,070) (210) 611
-------- -------- --------
Net (decrease) increase in cash and cash
equivalents.................................. (6,520) 2,183 (10,456)
Cash and cash equivalents at beginning
of year...................................... 9,698 7,515 17,971
-------- -------- --------
Cash and cash equivalents at end of year......$ 3,178 $ 9,698 $ 7,515
======== ======== ========
Supplemental Disclosure of Cash Flow Information
(see Note 2(a) for non-cash financing and
investing activities)
Cash paid during the year:
Interest:
Related parties.............................$ 2,599 $ 5,507 $ 16,443
Others...................................... 7,495 10,573 6,847
-------- -------- --------
Total interest paid.......................$ 10,094 $ 16,080 $ 23,290
======== ======== ========
Income taxes paid, net......................$ 3,853 $ 5,820 $ 401
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
-39-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1993 1992 1991
- - ------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
4% PREFERRED STOCK
Balance, beginning of year................... $ 1,202 $ 1,259 $ 1,310
Conversion of 26,808; 11,413 and 10,128
shares into Class A Stock................... (134) (57) (51)
Balance, end of year......................... $ 1,068 $ 1,202 $ 1,259
======== ======== ========
6-1/2% PREFERRED STOCK
Balance, beginning of year................... $ 7,554 $ 7,733 $ 8,027
Conversion of 309,018; 35,748 and 58,586
shares into Class A Stock................... (1,543) (179) (294)
-------- -------- --------
Balance, end of year......................... $ 6,011 $ 7,554 $ 7,733
======== ======== ========
CLASS A STOCK
Balance, beginning of year................... $ 15,164 $ 14,999 $ 14,773
Issuance of shares upon conversion of
Preferred Stock............................. 1,061 165 226
-------- -------- --------
Balance, end of year......................... $ 16,225 $ 15,164 $ 14,999
======== ======== ========
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year................... $ 9,989 $ 9,918 $ 9,803
Conversion of Preferred Stock................ 616 71 119
Purchase of treasury shares - 4% Preferred
Stock and 6-1/2% Preferred Stock............ - - (4)
-------- -------- --------
Balance, end of year......................... $ 10,605 $ 9,989 $ 9,918
======== ======== ========
RETAINED EARNINGS
Balance, beginning of year................... $ 82,293 $ 72,509 $ 71,934
Net income................................... 226 10,324 1,126
Dividends:
4% Preferred Stock - $.20 per share........ (43) (47) (49)
6-1/2% Preferred Stock - $.325 per share... (397) (493) (502)
-------- -------- --------
Balance, end of year......................... $ 82,079 $ 82,293 $ 72,509
======== ======== ========
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year................... $ - $ - $ -
Foreign currency translation adjustment...... (2,171) - -
-------- -------- --------
Balance, end of year......................... $ (2,171) $ - $ -
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
-40-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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.
In October 1993, the Bank Share Settlement Act (Temporary Provisions) 1993
(the "Bank Shares Act") was enacted by the Knesset, the Israeli Parliament.
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
State of Israel. The purpose of the Bank Shares Act is to facilitate the sale
by the Government of Israel of its shares in Israeli banks. In addition, 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 of each bank will
be exercised by a supervisory committee appointed for that bank by a public
advisory committee which is in turn approved by the Israeli Government. These
supervisory committees will appoint directors for each of the banks.
In May 1993, the Government of Israel sold a total of approximately 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. 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 of means of control in non-banking corporations. Hapoalim may not
extend credit to the Company except in the ordinary course of business and on
terms similar to those on which credit is extended to other customers of the
same class.
In March 1994, an amendment to the Banking Law was enacted in the Knesset.
Under the amendment, banks, including Hapoalim, are required to reduce their
holdings of individual non-banking business corporations, which would include
Ampal, to 25% or less not later than December 31, 1996. In addition, it has
been proposed by the Government that the Minister of Finance form a committee
to examine the overall economic implications of a further reduction in the
permitted holdings of banking corporations in non-banking business
corporations.
-41-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Prior to November 1993 Hapoalim was controlled by Hevrat Ha'ovdim.
Companies controlled by Hevrat Ha'ovdim which are not part of the Hapoalim
family of companies and companies controlled by the Government of Israel are
not deemed affiliates or related parties.
(b) Consolidation
The consolidated financial statements include the accounts of Ampal and
its subsidiaries. Certain prior year amounts have been reclassified to conform
with the current year's presentation.
(c) Translation of Foreign Currencies
Based on the guidelines of Statement of Financial Accounting Standards
("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. During 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 of
exchange during the reporting period. Translation differences of those foreign
companies' financial statements are included in the cumulative translation
adjustment account of shareholders' equity at December 31, 1993. Prior to 1993
translation gains and losses were reflected in the consolidated statement of
income. Prior to 1993, all Israeli companies were deemed to have the U.S.
dollar as their functional currency.
Assets and liabilities of foreign subsidiaries and companies accounted for
by the equity method whose functional currency is the U.S. dollar 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.
Translation gain and losses for these companies are reflected in the
consolidated statement of income.
(d) Investments
Investments in which the Company exercises significant influence,
-42-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, Moriah Hotels Ltd. ("Moriah") and Orlite
Engineering Company Ltd. ("Orlite"), 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.
The Company has not adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The effect of implementing this
accounting standard in 1993 would have resulted in an increase in investments
of $7.4 million, an increase in deferred income taxes payable of $3.1 million
and an increase in shareholders' equity of $4.3 million. The Company will be
required to adopt SFAS No. 115 in 1994.
(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
Effective January 1, 1993, the Company was required to adopt 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 was reported separately in the
consolidated statement of income for the year ended December 31, 1993. This
change required no payments to any taxing jurisdiction and had no material
effect on the current year's provision for income taxes and on income before
cumulative effect of change in accounting principle. Prior years' financial
statements have not been restated to apply the provisions of SFAS No. 109.
Deferred income taxes are not provided on the temporary differences
related to the undistributed earnings of foreign subsidiaries totalling
approximately $45 million, since such earnings are currently expected to
be permanently reinvested outside the United States. If the earnings were not
considered permanently invested, approximately $15 million of deferred income
taxes, would have been provided. Deferred income taxes are provided on equity
in earnings of, and gains on issuances of shares by, affiliates. 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.
-43-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(h) Cash Equivalents
Cash equivalents include time deposits and notes receivable with original
maturities of 90 days or less.
(i) Other Assets
Other assets include inventory in the amount of $18 million ($15.4 million
in 1992).
Note 2 - Acquisitions and Dispositions
(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 June 30, 1993; its manufacturing and
distribution operations were consolidated for the six months ended December 31,
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) In April 1992, the Company's investee, Teledata Communication Ltd.
("Teledata"), 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 ("Ophir") minority interest). As a result of these
transactions the Company's ownership of Teledata was diluted from 21.7% to
13.1%.
During 1993, the Company sold additional shares in Teledata and realized
gains on sales of $1.5 million (approximately $.7 million after taxes). As a
result of these transactions the Company's ownership of Teledata was decreased
from 13.1% to 12.2%. As a result of the Company's dilution in Ophir, the
Company's ownership in Teledata was further reduced to 10.9%.
(c) In March 1993, Ophir, then a subsidiary of the Company, made an investment
in approximately 12.8% of the equity of Industrial Buildings Corporation Ltd.
("Industrial Buildings") 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.
-44-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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%. Immediately thereafter, Ophir made a private placement of its shares to a
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 was accounted for under the equity method of accounting
and the Company recorded a gain on issuance of shares of approximately $3.2
million (approximately $2.1 million after taxes).
(d) 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. Following Idan's private placement in October 1993, the Company holds
approximately 7.8% of Idan's shares.
(e) In the first quarter of 1993, the Company invested approximately $300,000
in Davidson-Atai Publishers ("Davidson-Atai") for 22.5% of the shares of
Davidson-Atai, which is a recently established Israeli publishing house.
(f) In February and October 1992, the Company's investee, Granite Hacarmel
Investments Ltd., concluded public offerings of shares, warrants and
convertible debentures in Israel on the Tel Aviv Stock Exchange for an
aggregate price of approximately $102 million. As a result of these
transactions 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. As of December 31, 1993 the Company's ownership was
further reduced to 21.6%.
Also, in February 1992, the Company's then subsidiary Moriah 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. The financial statements of the Moriah
group of companies are consolidated through their year ending September 30th.
Effective with the first quarter of 1992, the Company no longer consolidated
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.
These offerings resulted in gains on issuance of shares of $7 million
(approximately $2.7 million after taxes).
(g) In May 1992, Orlite concluded a public offering of its shares in Israel
which diluted the Company's investment to 31.1% from 41.9%. As of December 31,
1993 the Company's ownership was further reduced to 30.1%.
(h) 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.
(i) 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).
-45-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(j) 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,
1993 and 1992; its results of operations were consolidated in the Company's
consolidated statement of income in 1993 and 1992 and included in equity in
earnings of affiliates in 1991 (See Note 13).
Note 3 - Deposits and Notes and Loans Receivable
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 12 years and notes and loans receivable have
maturities of up to 6 years.
Note 4 - Deposits and Notes and Loans Payable
Deposits, 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 U.S. Dollar and mature through 2001. The Company has a $10
million committed bank line of credit which expires in October 1994.
Note 5 - Debentures Outstanding
Debentures outstanding as at December 31 consist of:
1993 1992
-------------------
Ampal:
Various series with interest rates ranging from 8%-13%,
maturing 1994-2003..................................... $ 68,828 $ 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 1994-2005, secured by assets of
$45 million............................................ 43,071 44,749
-------- --------
111,899 128,173
Less: Unamortized discounts............................. 20,629 24,327
-------- --------
Total................................................... $ 91,270 $103,846
======== ========
Certain debentures are presentable for early maturity. If presented for
early maturity, maturities (including required obligations) for the five years
-46-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ending December 31 would be:
1994 - $31,148*
1995 - 19,347
1996 - 20,345
1997 - 5,074
1998 - 5,074
* If no debentures are presented for early redemption, scheduled maturities
will amount to $20,668.
The 1994 amounts shown above include $6.5 million of debentures with an
interest rate of 7.5%, maturing in 1996, which were redeemed in the first
quarter of 1994.
Note 6 - Shareholders' Equity
Capital Stock
Shares of the 4% and 6-1/2% Preferred Stock are convertible into 5 and 3
shares of Class A Stock, respectively. At December 31, 1993, a total of
4,674,318 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, 1993, 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, 1993, retained earnings include $73.6 million for
affiliates accounted for by the equity method, of which $33.9 million and
approximately $32.9 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.
Note 7 - 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 the Common Stock. Therefore, EPS is calculated by dividing
net income by 23.7 million shares.
-47-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Income Taxes
1993 1992 1991
------------------------------
The components of current and deferred
income tax expense (benefit) are as follows:
Current:
State and local............................. $ 8 $ 60 $ (69)
Federal..................................... 1,254 2,056 1,255
Foreign..................................... 1,668 3,647 1,546
Deferred:
Federal..................................... 3,319 7,518 1,362
Foreign..................................... (640) - -
-------- -------- --------
Total.................................... $ 5,609 $ 13,281 $ 4,094
======== ======== ========
The components of deferred income tax expense
are as follows:
Equity in earnings of affiliates and others.. $ 2,563 $ 4,484 $ 1,971
Gains on issuance of shares.................. 1,115 3,549 -
Debenture selling expenses................... (294) (501) (637)
Other........................................ (705) (14) 28
-------- -------- --------
Total..................................... $ 2,679 $ 7,518 $ 1,362
======== ======== ========
The domestic and foreign components of income
(loss) before income taxes are as follows:
Domestic..................................... $ (1,418) $ (452) $ (3,737)
Foreign...................................... 12,235 24,057 8,231
-------- -------- --------
Total..................................... $ 10,817 $ 23,605 $ 4,494
======== ======== ========
A reconciliation of income taxes between the
statutory and effective tax follows:
Federal income tax at 34%.................... $ 3,678 $ 8,026 $ 1,528
Taxes on equity in earnings of affiliates in
excess of U.S. tax rate..................... 221 2,931 2,012
Taxes on foreign income in excess of U.S.
rate........................................ 1,704 2,175 377
Other........................................ 6 149 177
-------- -------- --------
Total effective tax: 52%, 56% and 91%........ $ 5,609 $ 13,281 $ 4,094
======== ======== ========
Total effective tax, net of extraordinary
income: 52%, 56% and 75%.................... $ 5,609 $ 13,281 $ 3,368
======== ======== ========
Other assets include approximately $3 million of deferred tax assets which
represent the tax benefit of the temporary differences between the carrying
values of the fixed assets in the financial statements and their income tax
bases. Accounts and income taxes payable and accrued expenses include
approximately $22.5 million of deferred tax liability provided on the temporary
differences related to the equity in the undistributed earnings of the
affiliates.
-48-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Investments in Affiliates and Others
The companies accounted for by the equity method and the Company's share of
equity in those investments are:
1993 1992 1991
--------------------------
Am-Hal Ltd................................. 50% 50% 50%
Bank Hapoalim (Cayman) Ltd................. 49 49 49
Bay Heart Limited.......................... 37 37 37
Carmel Containers Ltd...................... 20 20 -
Coral World International Ltd.............. 50 50 50
Davidson-Atai Publishers Ltd............... 22.5 - -
Etz Vanir Ltd.............................. 50 50 50
Granite Hacarmel Investments Ltd........... 21.6 21.7 26
Moriah Hotels Ltd. (Note 1(b))............. 46 46 -
Ophir Holdings Ltd. (Note 2(c))............ 42.5 - -
Orlite Engineering Company Ltd............. 30.1 31.1 41.9
Teledata Communication Ltd................. 2.5** 13.1* 21.7*
Yakhin Mataim Ltd.......................... 50 50 50
* Net of minority interest.
** In addition, Ophir Holdings Ltd. holds 19.7% of Teledata's shares.
Combined summarized financial information for the above companies is as
follows:
1993 1992 1991
----------------------------
Revenues.................................... $558,979 $570,756 $485,736
Gross profit................................ 104,833 130,546 96,024
Net income................................ 23,246 36,664 22,314
Fixed assets................................ $247,616 $239,860 $179,755
Other assets................................ 452,546 417,946 353,459
-------- -------- --------
Total assets.............................. $700,162 $657,806 $533,214
======== ======== ========
Total liabilities, including bank borrowings $419,328 $373,815 $383,228
======== ======== ========
The Company's investments in shares of its publicly traded affiliates and
others at December 31, 1993 amounted to $38.6 million and had a market value of
$71.3 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 assurance that these values could be realized by the Company.
-49-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Segment Information
Segment information presented below results primarily from operations from
Israel.
<TABLE>
<CAPTION>
Food Leisure- Intercompany
Finance Processing Manufacturing Time Adjustments Total
------------------------------------------------------------------------------------
December 31, 1993
- - -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenues......................... $ 27,367 $ 30,726 $ 4,950 $ 1,428 $ (265) $ 64,206
Equity in (losses) earnings of
affiliates...................... (128)** - 243 2,586* - 2,701
Pretax operating income (loss)... 1,516 (37) 508 (610) - 1,377
Total assets..................... 259,025 37,083 8,752 4,654 (5,454) 304,060
Investment in affiliates......... 31,508** - - 30,636* - 62,144
Capital expenditures............. 48 832 3,317 95 - 4,292
Depreciation and amortization.... 5,402 1,122 634 315 - 7,473
December 31, 1992
- - -----------------
Revenues......................... $ 41,199 $ 31,621 $ - $ 1,579 $ (292) $ 74,107
Equity in earnings of affiliates. 676** - - 1,182* - 1,858
Pretax operating income.......... 15,670 928 - 597 - 17,195
Total assets..................... 296,707 36,336 - 4,562 (4,338) 333,267
Investment in affiliates......... 21,579** - - 28,614* - 50,193
Capital expenditures............. 73 489 - 203 - 765
Depreciation and amortization.... 6,500 1,075 - 301 - 7,876
December 31, 1991
- - -----------------
Revenues......................... $ 36,838 $ - $ - $ 29,189 $ (101) $ 65,926
Equity in earnings (losses) of
affiliates...................... 899** - - (237)* - 662
Pretax operating income (loss)... 5,157 - - (4,647) - 510
Total assets..................... 327,637 33,209 - 48,324 (4,704) 404,466
Investment in affiliates......... 20,903** - - 8,427* - 29,330
Capital expenditures............. 292 867 - 9,706 - 10,865
Depreciation and amortization.... 7,029 924 - 2,792 - 10,745
</TABLE>
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 Israel (1993 only) and Cayman Islands.
-50-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - 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 and 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.
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.
1993 1992
-------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
Financial assets:
Cash and cash equivalents...... $ 3,178 $ 3,178 $ 9,698 $ 9,698
Deposits and notes and loans
receivable.................... 116,393 123,910 145,363 152,849
-------- -------- -------- --------
$119,571 $127,088 $155,061 $162,547
======== ======== ======== ========
Financial liabilities:
Deposits and notes and loans
payable....................... $ 60,843 $ 61,628 $ 72,284 $ 73,908
Debentures outstanding......... 91,270 102,429 103,846 113,602
-------- -------- -------- --------
$152,113 $164,057 $176,130 $187,510
======== ======== ======== ========
-51-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Commitments and Contingencies
(a) For the years 1994 through 1998, the combined minimum annual lease
payments on the Company's corporate offices, Country Club Kfar Saba and
Paradise, without giving effect to future escalations, are approximately
$549,000 per year, and $2.7 million in the aggregate, thereafter. These leases
expire in 1994, 2009, 1998 and 2000, respectively.
(b) For the years 1994 through 1998, the combined minimum lease receipts to
be received by the Company from rental properties are approximately $2.4
million in 1994; $2.4 million in 1995; $2.4 million in 1996; $1.6 million in
1997; $1.5 million in 1998; and $2.7 million in the aggregate, thereafter.
(c) The Company has issued guarantees on bank loans to its investees and
subsidiaries totalling $18.9 million.
The Company's share of the commitments issued by and to its investees
amounted to approximately $25.7 million.
A consolidated subsidiary pledged the majority of its assets in the
amount of $33.4 million to banks (including a related party) in order to secure
a mortgage.
Note 13 - Subsequent Events
On January 25, 1994, the Company sold in a public offering 4.5 million
units consisting of one share of Class A stock and one redeemable warrant to
purchase one share of Ampal's Class A stock, for $12.125 per unit. The
warrants are exercisable at $16 per share at any time until January 31, 1999
and are callable by Ampal, in whole or in part, from and after February 1,
1996, without payment to the holder. The net proceeds, which the Company
received from this offering, amounted to approximately $51 million.
On November 5, 1993, Ampal's Board of Directors approved a stock option
plan 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. On January 25, 1994, the Stock Option
Committee of the Board of Directors approved the issuance of 134,900 options in
the aggregate at an exercise price of $10.91 per share (a 10% discount from
market price on the date of grant). The Stock Option Plan is subject to
approval by Ampal's shareholders.
In February 1994, Pri Ha'emek's other shareholder purchased additional
shares in Pri Ha'emek at the same price the Company paid for its shares in
-52-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1991, diluting the Company's ownership to 66.7%. In March 1994, Pri Ha'emek
conducted an initial public offering in Israel on the Tel Aviv Stock Exchange
("TASE"). The offering did not meet the distribution requirement under the
regulations of the TASE and as a result, Pri Ha'emek's underwriters deposited
for sale by a trustee shares which are expected to be sold, at such prices as
the trustee may realize, over a thirty-day period. The Company has agreed to
pay to the trustee up to NIS 2 million (approximately $670,000) to fund its
pro-rata share of the difference between the proceeds of those sales and the
amount which would have been received if the shares were sold at the public
offering price. The Company's interest in Pri Ha'emek will be initially
diluted to 51.3% and upon exercise of all options and convertible debentures,
the Company's interest may be diluted to 35.3%. If the Company's interest in
Pri Ha'emek decreases below 50%, Pri Ha'emek's results will no longer be
consolidated with the Company's but will be recorded by the equity method of
accounting.
-53-
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
- - ---------------------------------
(Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
--------------------------------------------------------------------------
(Dollars in thousands, except per share data)
Year Ended December 31, 1993:
- - ----------------------------
<S> <C> <C> <C> <C> <C>
Revenues........................ $ 16,366 $ 19,848 $ 16,931 $ 20,098 $ 73,243
Net interest (expense).......... (97) (2,144) (2,082) (319) (4,642)
Food processing................. 1,350 911 1,911 1,766 5,938
Manufacturing and distribution.. - - 872 1,186 2,058
Net income (loss)............... (2,751)* 384 735 1,858 226*
Earnings (loss) per Class A
share......................... (.12)* .02 .03 .08 .01*
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
</TABLE>
* Includes cumulative effect on prior years of change in accounting
principle of ($4,982), equal to $(.21) per share.
-54-
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND
-------------------------------
FINANCIAL DISCLOSURE
--------------------
None
-55-
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
OF THE REGISTRANT
-----------------
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
Shlomo Recht(1)........................... Vice 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(2)....................... Class A Director
Leon Riebman.............................. Class A Director
Evelyn Sommer(2)(3)....................... Class A Director
Stanley Batkin(1)(3)...................... Director
Yaacov Elinav(1)(4)....................... Director
Eitan Raff(3)............................. Director
Shimon Ravid(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, 56, 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 Relationships and Related Transactions."
SHLOMO RECHT, 52, has been Vice Chairman of the Board of Directors of
Ampal since March 1994. From April 1990, until March 1994, he was Managing
Director of Poalim Capital Markets and Investments Ltd. From October 1988
until March 1990, he was Assistant Managing Director of Hapoalim. From 1988
until 1989, he served as a director of Ampal. He again became a director of
Ampal in March 1994.
-56-
<PAGE>
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.
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.
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.
SUSAN ROSENBERG, 50, 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, 75, 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, 55, 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 I. 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. During 1993,
Mr. Batkin filed, not on a timely basis, one Initial Statement of Beneficial
Ownership of Securities and one Statement of changes in Beneficial Ownership of
Securities regarding one transaction.
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 Relationships and Related 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 Relationships and Related Transactions."
-57-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The table below presents information regarding remuneration paid or
accrued for services to Ampal and its subsidiaries by the executive officers
named below during the three fiscal years ended December 31, 1993. Ampal has
no bonus or stock option plans for executive officers.
SUMMARY COMPENSATION TABLE
- - --------------------------
<TABLE>
<CAPTION>
Name and Principal Other Annual All Other
Position Year Salary(1)(2) Compensation Compensation
- - ------------------ ---- ------ ------------ ------------
<S> <C> <C> <C> <C>
Lawrence Lefkowitz(3) 1993 $193,351
$8,141 $22,862(4)
(President and 1992 191,961 6,382 21,856(4)
Chief Executive Officer) 1991 174,851 20,652(4)
Moshe Mor 1993 130,213 12,981(5)
(Vice President-Israel 1992 92,763 11,713(5)
Operations) 1991 81,879 9,606(5)
Alan L. Schaffer 1993 130,000 13,839(4)
(Vice President-Finance 1992 127,212 13,277(4)
and Treasurer) 1991 116,000 12,000(4)
Miri Lent 1993 105,842 14,756(5)
(Assistant Vice President-Israel
Operations) 1992 84,107 11,503(5)
1991 59,996 5,922(5)
</TABLE>
- - ---------------------
(1) Services of Mr. Lefkowitz are shared by Ampal and Hapoalim and Hapoalim
reimburses Ampal $100,000 per year under an arrangement begun in August,
1990.
(2) There were 27 pay periods in 1992 and 26 pay periods in each of 1993 and
1991.
(3) Mr. Lefkowitz is employed pursuant to an employment agreement expiring
September 12, 1997, renewable thereafter automatically for successive
one-year terms unless one year's prior notice is given, providing for the
payment of salary which shall not be less than the salary paid to him in
1992 and which salary is subject to annual review.
(4) Comprised of Ampal's contribution pursuant to Ampal's Savings Plan of $500
per year and the remainder pursuant to Ampal's Pension Plan, described
below.
(5) Comprised of Ampal (Israel)'s contribution to a pension plan on behalf of
Mr. Mor and Ms. Lent.
Other Compensation
Directors of Ampal who are not employees of the Company or of its
parent company receive $250 per board meeting attended. Such persons also
receive $250 for attendance at meetings of committees of the Board of
Directors, provided that such committee meetings are held on separate days and
a day other than the day of a regularly scheduled board meeting.
Other Benefits
Ampal maintains a defined contribution pension plan for its eligible
employees ("Pension Plan"). Eligible employees are all full-time employees of
Ampal except non-resident aliens. In 1990, the Pension Plan was amended so
that Ampal's contribution was equal to 7% of each employee's basic wages plus
5.4% of the employee's basic wages for that year in excess of the Social
Security taxable wage base for that year. In 1994, the Pension Plan was
amended so that Ampal's contribution will be equal to 7% of each employee's
basic wages plus 5.7% of the employee's basic wages for that year in excess of
the Social Security taxable wage base for that year.
Employees become vested in amounts contributed by Ampal depending on
the number of years of service worked, as provided in the following table:
-58-
<PAGE>
Vested
Years of Service Percentage:
---------------- -----------
less than 2 years 0%
2 but less than 3 years 20%
3 but less than 4 years 40%
4 but less than 5 years 60%
5 but less than 6 years 80%
6 or more years 100%
Benefits under the Pension Plan are usually paid either in a lump sum
or as an annuity.
Ampal adopted a Severance Plan effective January 1, 1985 for the
benefit of employees of Ampal who were employed as of December 31, 1982 and who
continued to be so employed as at December 31, 1985. The purpose of the
Severance Plan is to provide certain severance compensation to eligible
employees which will equal the amount of severance compensation which would
have been paid as of the day prior to the adoption of the Pension Plan. The
severance compensation to be paid pursuant to this Severance Plan will be
adjusted downward to account for any past service amount which has been
allocated to such employees' Pension Plan accounts pursuant to the terms of the
Pension Plan. The severance compensation will also be adjusted as of December
31 of each year by a percentage which equals the rate of return on assets in
the Pension Plan. Payment of severance compensation is required to be made in
a lump sum as soon after employment is terminated as practicable unless the
full amount of the severance compensation has been previously allocated to such
employees' Pension Plan accounts.
Ampal maintains a Savings Plan for its eligible employees pursuant to
Section 401(k) of the Internal Revenue Code of 1954. Eligible employees are all
employees of Ampal except non-resident aliens and night-shift employees.
Participation by employees in the Savings Plan is voluntary. Participating
employees may elect to defer a specific limited percentage of their annual
compensation (up to 15%) and contribute the same to a self-directed 401(k)
savings account. The amount which any employee could contribute to his or her
401(k) savings account in 1993 was limited by the Tax Reform Act of 1986 to
$8,994. For each plan year Ampal matches 50% of each employee's contribution
up to a maximum matching contribution of $500 for each participant.
Participating employees are 100% vested at all times in the account balances
maintained in their 401(k) savings account. Benefits under the Savings Plan
are required to be paid in a single, lump-sum distribution. Payment is usually
made upon attainment of retirement age or termination of employment.
STOCK OPTION PLAN
In November 1993, Ampal's Board of Directors approved a stock option plan
(the "Stock Option Plan") which provides for grants of options to purchase up
to 200,000 shares of Ampal 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.
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 not to be granted options under the Stock Option Plan. 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
-59-
<PAGE>
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.
In January 1994, pursuant to the Stock Option Plan, Non-ISO Options to
purchase 134,900 Class A shares were granted to employees, officers, and
directors of Ampal and certain subsidiaries of Ampal. The grant of these
options is subject to the approval of Ampal's shareholders.
-60-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSHIP AND MANAGEMENT
-----------------------------------------------------------------
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following tables set forth information as at March 23, 1994 as to the
holders known to Ampal to beneficially own more than 5% of any class of voting
securities of Ampal and, as to all directors and officers as a group,
concerning the beneficial ownership of any class of equity securities of Ampal.
For purposes of computation of the percentage ownership of Class A Stock set
forth in the table, conversion of any 4% Cumulative Convertible Preferred Stock
(the "4% Preferred") and 6-1/2% Cumulative Convertible Preferred Stock (the
"6-1/2% Preferred") owned by such beneficial owner has been assumed, without
increasing the number of shares of Class A Stock outstanding by amounts arising
from possible conversions of convertible securities held by shareholders other
than such beneficial owner. As at March 23, 1994, there were issued and
outstanding 20,710,594 shares of Class A Stock of the Company and 3,000,000
shares of Common Stock. In addition, there were issued and outstanding
1,148,884 non-voting shares of 6-1/2% Preferred (each convertible into 3 shares
of Class A Stock) and 212,218 non-voting shares of 4% Preferred (each
convertible into 5 shares of Class A Stock).
Certain Beneficial Owners
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner Title of Class of Beneficial Ownership of Class (1)
- - ------------------- -------------- ----------------------- --------
<S> <C> <C> <C>
Bank Hapoalim B.M. Class A Stock 10,500,991 shs. (2) 49.8% (2)
50 Rothschild Blvd. Common Stock 3,000,000 shs. 100%
Tel Aviv, Israel
</TABLE>
(1) Based upon number of shares outstanding as of March 23, 1994.
(2) As reported by Bank Hapoalim B.M. on Form 4 - Statement of Changes in
Beneficial Ownership filed with the Securities and Exchange Commission on
or about March 5, 1992. Assumes conversion of 122,536 shares of 6-1/2%
Convertible Preferred Stock and 3,350 shares of 4% Preferred Stock.
-61-
<PAGE>
Security Ownership Of Management
The following table sets forth information as at March 23, 1994 as to each
class of equity securities of Ampal, its parent or any of its subsidiaries
beneficially owned by each director and officer of Ampal and by all directors
and officers of Ampal as a group:
Ampal-American Israel Corporation
---------------------------------
<TABLE>
<CAPTION>
Amount and Nature Percent
Title of Class Name of Beneficial Ownership (1) of Class
- - -------------- ---- --------------------------- --------
<S> <C> <C> <C>
Class A Stock Lawrence Lefkowitz (2) 10,700 shs. less than 1%
6-1/2% Preferred 7,225 shs. less than 1%
Class A Stock Leon Riebman 24,600 shs. less than 1%
Class A Stock Harry B. Henshel 3,000 shs. less than 1%
Class A Stock Michael K. Marks 500 shs. less than 1%
Warrants to Purchase 500 wts. less than 1%
Class A Stock
Class A Stock All Directors and 38,800 shs. less than 1%
6-1/2% Preferred Officers as a Group 7,225 shs. less than 1%
Warrants to Purchase 500 wts. less than 1%
Class A Stock
Bank Hapoalim B.M.
------------------
Amount and Nature Percent
Title of Class Name of Beneficial Ownership (1) of Class
- - -------------- ---- --------------------------- --------
Ordinary Shares Michael Arnon 83,300 shs. less than 1%
Ordinary Shares Yaacov Elinav 183,970 shs. less than 1%
Ordinary Shares Shimon Ravid 190,610 shs. less than 1%
Ordinary Shares Shlomo Recht 128,810 shs. less than 1%
Ordinary Shares All Directors and 586,720 shs. less than 1%
Officers as a Group
</TABLE>
(1) All ownerships are direct, unless otherwise noted. The table does not
include directors who do not own any shares.
(2) Includes 8,700 shares of Class A Stock and 4,800 shares of 6-1/2%
Preferred Stock held by a trust under an estate as to which Mr. Lefkowitz
is co-personal representative.
-62-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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 1993 the largest amount of such indebtedness outstanding
at any one time was $51,015,000. The amount of interest expense paid by the
Company to Hapoalim was $4,819,000. 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 1993 was $131,002,000 and
interest income thereon was $15,583,000. As of December 31, 1993, the amount
of borrowings and deposits from Hapoalim and its subsidiaries was $40,257,000
and the amount of loans to and deposits with Hapoalim and its subsidiaries was
$104,241,000. 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
loans secured by the Holding Companies which were made by them prior to their
ceasing lending activity.
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 have not been
consolidated in the Company's financial statements after September 30, 1993 but
are now recorded on the equity method of accounting.
In March 1993, Ophir and another Hapoalim affiliate shareholder in the
holding company that purchased 51.3% of the shares in Industrial Buildings Ltd.
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. In 1993, Ophir paid $78,000 to Ampal and $132,000 to the Hapoalim
affiliate for management fees.
In connection with Ampal's purchases in 1992 and 1993 of 5.2% of DSP
Group, Inc., 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.
-63-
<PAGE>
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. In 1993, Hapoalim reimbursed Ampal $100,000 for
the services of Mr. Lefkowitz under the arrangement.
Ampal owns $2 million of 7% preferred shares of Bank Hapoalim (Cayman)
Ltd. In 1994, an equivalent amount of 7% preferred shares in Bank Hapoalim
(Cayman) Ltd. was issued to Hapoalim for $2 million.
For additional information regarding real estate transactions between the
Company and Hapoalim, see "Item 2. Property," discussed above.
-64-
<PAGE>
PART IV
-------
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a) The following documents are filed as a part of this report:
Page
Reference*
----------
(1) Financial Statements and Supplementary Data
Ampal-American Israel Corporation and Subsidiaries
Report of Independent Public Accountants............... 37
Consolidated Statements of Income for
the years ended December 31, 1993, 1992 and 1991.... 38
Consolidated Balance Sheets as at
December 31, 1993 and 1992.......................... 39
Consolidated Statements of Cash Flows for the years
ended December 31, 1993, 1992 and 1991.............. 41
Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 1993,
1992 and 1991....................................... 43
Notes to Consolidated Financial
Statements.......................................... 44
Supplementary Data:
Selected quarterly financial data for the years
ended December 31, 1993 and 1992....................... 58
(2) Financial Statement Schedules
Schedules which have been omitted are not
applicable or the required information is shown
in the financial statements or notes thereto.
(i) Ampal-American Israel Corporation and Subsidiaries
Schedule IV............................................ 71
Schedule IX............................................ 74
Schedule X............................................. 75
(ii) Schedule of Representative Rates of Exchange
between the U.S. dollar and Israeli shekel
for three years ended December 31, 1993................ 76
-65-
<PAGE>
Page
Reference*
----------
(iii) Consolidated financial statements filed pursuant to
Rule 3-09 of Regulation S-X
Granite Hacarmel Investments Limited and Subsidiaries
Report of Certified Public Accountants...................... 77
Consolidated Balance Sheets as at
December 31, 1993, and 1992......................... 79
Consolidated Statements of Income for the years ended
December 31, 1993, 1992 and 1991.................... 81
Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1993,
1992 and 1991....................................... 82
Consolidated Statements of Cash Flows for the years
ended December 31, 1993, 1992 and 1991.............. 83
Notes to Consolidated Financial Statements............. 85
(iv) Reports of Other Certified Public Accountants
filed pursuant to Rule 2-05 of Regulation S-X:
AM-HAL Ltd............................................. 127
AM-HAL Ltd. (Special Purpose).......................... 128
Ampal Enterprises Ltd.................................. 129
Ampal Financial Services Ltd........................... 130
Ampal Holdings (1991) Ltd.............................. 131
Ampal (Israel) Ltd..................................... 132
Ampal Industries (Israel) Ltd.......................... 134
Ampal Properties Ltd................................... 135
Bank Hapoalim (Cayman) Ltd............................. 137
Bay Heart Ltd.......................................... 138
Bay Heart Ltd. (Special Purpose)....................... 139
Carmel Containers Systems Limited...................... 140
Carmel Containers Systems Limited (U.S. Dollars)....... 142
Country Club Kfar Saba Limited......................... 143
Davidson-Atai Publishers Ltd........................... 145
Hapoalim (Latin America) Casa Bancaria S.A............. 146
Mivnat Holding Ltd..................................... 148
Moriah Hotels Ltd. and its subsidiaries................ 149
Ophir Holdings Ltd..................................... 150
Orlite Engineering Company Ltd......................... 151
Paradise Mattresses (1992) Ltd. (U.S. Dollars)......... 152
Pri Ha'emek (Canned and Frozen Food) 88 Ltd............ 153
Red Sea Marineland Holding (1973) Ltd.................. 154
Red Sea Underwater Observatory Ltd..................... 155
The Snow and Cool Palace (Limited Partnership)......... 156
Teledata Communication Ltd............................. 157
(3) List of Exhibits (separately bound)
Exhibit 3 - Articles of Incorporation and By-Laws
3a. --Restated Certificate of Incorporation
dated December 23, 1982 (filed as
Exhibit 3t to Registration Statement
No. 2-81156 and incorporated herein by
reference).
3b. --Certificate of Amendment of the
Certificate of Incorporation 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).
-66-
<PAGE>
<TABLE><CAPTION>
Page
Reference*
----------
<S> <C> <C>
3c. --Certificate of Amendment of the
Certificate of Incorporation dated July
26, 1988 (filed as Exhibit 3c to Form
10-K for fiscal year ended December 31,
1988 and incorporated herein by
reference. File No. 0-538).
3d. --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 0-538.
Exhibit 4 - Instruments defining the rights of security holders,
including indentures
4a. --Form of Indenture dated as of June 6, 1980 (filed
as Exhibit 13a to Registration Statement No.
2-68234 and incorporated herein by reference).
4b. --Form of Indenture dated as of April 1, 1982 (filed
as Exhibit 4a to Registration Statement No.
2-77263 and incorporated herein by reference).
4c. --Form of Indenture dated as of November 1, 1984 (filed
as Exhibit 4a to Registration Statement No.
2-88582 and incorporated herein by reference).
4d. --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).
Exhibit 10 -- Material contracts
10a. --Employment contract of Lawrence Lefkowitz,
dated July 26, 1993 (filed as Exhibit 10.2 to
Pre-Effective Amendment No. 1 to Registration
Statement No. 33-51023 and incorporated herein
by reference).
10b. --Sublease Modification dated as of October 30, 1990
between Ampal-American Israel Corporation and
Bank Hapoalim B.M. (filed as Exhibit 10c to
Form 10-K for fiscal year ended December 31,
1990 and incorporated herein by reference.
File No. 0-538).
10c. --Legal Services Agreement dated as of August 1,
1990 between Bank Hapoalim B.M. and Ampal-
American Israel Corporation (filed as Exhibit 10i
to Form 10-K for fiscal year ended December 31, 1990
and incorporated herein by reference. File No.
0-538).
10d. --Underwriting Agreement between Ampal-American Israel
Corporation and Lehman Brothers Inc., Oppenheimer &
Co., Inc. and Furman Selz Incorporated and Ampal-
American Israel Corporation
and Lehman Brothers International (Europe),
Oppenheimer & Co., Inc., Furman Selz Incorporated
and Poalim Capital Markets and Investments Ltd.
dated January 24, 1994. (filed as Exhibit 1.1 to
Pre-Effective Amendment No. 1 to Registration
Statement No.33-51023 and incorporated herein by
reference).
10e. --Warrant Agreement between Ampal-American Israel E-1
Corporation and Chemical Bank, dated as of February 1,
1994.
</TABLE>
-67-
<PAGE>
<TABLE><CAPTION>
Page
Reference*
----------
<S> <C> <C>
10f. --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].
(filed as Exhibit 10.1 to Pre-Effective Amendment No.
1 to Registration Statement No.33-51023 and
incorporated herein by reference).
10g. --Ampal-American Israel Corporation's 1993 Stock Option
Plan. (filed as Exhibit 10.3 to Pre-Effective
Amendment No. 1 to Registration Statement No.33-51023
and incorporated herein by reference).
10h. --Amendment dated as of March 23, 1994 to Ampal-American E-27
Israel Corporation's 1993 Stock Option Plan.
10i. --Agreement dated March 22, 1993 between the Investment
Company of Bank Leumi, Ltd., and Ophir Holdings Ltd.,
Mercazim Investments Ltd., Diur B.P. Ltd. and Mivnat
Holdings Ltd. (filed as Exhibit 10.4 to Pre-Effective
Amendment No. 1 to Registration Statement No.33-51023
and incorporated herein by reference).
10j. --Committed Line of Credit Agreement dated as of June 5,
1992 and amendments dated October 31, 1992 and October
31, 1993. (filed as Exhibit 10.5 to Pre-Effective
Amendment No. 1 to Registration Statement No.33-51023
and incorporated herein by reference).
10k. --Agreement dated January 18, 1994 between Ampal
Industries, Inc. and Inerta-Energies and Future
Technologies Ltd. [Translation]. (filed as Exhibit
10.6 to Pre-Effective Amendment No. 1 to Registration
Statement No.33-51023 and incorporated herein by
reference).
Exhibit 11 -- Statement re Computation of earnings per share. E-28
Exhibit 12 -- Statements re Computation of Ratios .......... E-29
Exhibit 21 -- Subsidiaries of the Registrant ............... E-30
Exhibit 25 -- Powers of Attorney ........................... E-32
</TABLE>
(b) Reports on Form 8-K: No reports on Form 8-K were filed by the Registrant
during the last quarter of the year ended December 31, 1993.
* Page references preceded by the letter "E" refer to the separately
bound volume of exhibits.
-68-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
INDEBTEDNESS OF AND TO RELATED PARTIES - NOT CURRENT Schedule IV
---------------------------------------------------- -----------
(Amounts in thousands)
<TABLE>
<CAPTION>
Balance at Balance at
Name of Person Beginning Additions Deductions End
- - --------------------------------------------------------------------------------------------------
Year Ended December 31, 1993:
- - ----------------------------
INDEBTEDNESS OF:
- - ---------------
<S> <C> <C> <C> <C>
Bank Hapoalim B.M........................ $ 98,037 $ - $ 23,671 $ 74,366
All other related parties as a group..... 9,468 - 4,335 5,133
-------- -------- -------- --------
$107,505 $ - $ 28,006 $ 79,499
======== ======== ======== ========
INDEBTEDNESS TO:
- - ---------------
Bank Hapoalim B.M........................ $ 20,684 $ - $ 6,036 $ 14,648
Israel Continental Bank Ltd.............. 2,139 - 170 1,969
All other related parties as a group..... 2,246 249 - 2,495
-------- -------- -------- --------
$ 25,069 $ 249 $ 6,206 $ 19,112
======== ======== ======== ========
</TABLE>
-69-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
INDEBTEDNESS OF AND TO RELATED PARTIES - NOT CURRENT Schedule IV
---------------------------------------------------- -----------
(Amounts in thousands)
<TABLE>
<CAPTION>
Balance at Balance at
Name of Person Beginning Additions Deductions End
- - --------------------------------------------------------------------------------------------------
Year Ended December 31, 1992:
- - ----------------------------
INDEBTEDNESS OF:
- - ---------------
<S> <C> <C> <C> <C>
Bank Hapoalim B.M........................ $142,871 $ - $ 44,834 $ 98,037
Israel Continental Bank Ltd.............. - - - -
All other related parties as a group..... 10,593 - 1,125 9,468
-------- -------- -------- --------
$153,464 $ - $ 45,959 $107,505
======== ======== ======== ========
INDEBTEDNESS TO:
- - ---------------
Bank Hapoalim B.M........................ $ 35,464 $ - $ 14,780 $ 20,684
Bank Hapoalim (Cayman) Ltd............... 600 - 600 -
Israel Continental Bank Ltd.............. 2,640 - 501 2,139
All other related parties as a group..... 2,266 - 20 2,246
-------- -------- -------- --------
$ 40,970 $ - $ 15,901 $ 25,069
======== ======== ======== ========
</TABLE>
-70-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
INDEBTEDNESS OF AND TO RELATED PARTIES - NOT CURRENT Schedule IV
---------------------------------------------------- -----------
(Amounts in thousands)
<TABLE>
<CAPTION>
Balance at Balance at
Name of Person Beginning Additions Deductions End
- - --------------------------------------------------------------------------------------------------
Year Ended December 31, 1991:
- - ----------------------------
INDEBTEDNESS OF:
- - ---------------
<S> <C> <C> <C> <C>
Bank Hapoalim B.M........................ $183,168 $ - $ 40,297 $142,871
Israel Continental Bank Ltd.............. - - - -
All other related parties as a group..... 6,731 3,862 - 10,593
-------- -------- -------- --------
$189,899 $ 3,862 $ 40,297 $153,464
======== ======== ======== ========
INDEBTEDNESS TO:
- - ---------------
Bank Hapoalim B.M........................ $ 49,753 $ - $ 14,289 $ 35,464
Bank Hapoalim (Cayman) Ltd............... 1,500 - 900 600
Israel Continental Bank Ltd.............. 2,482 158 - 2,640
All other related parties as a group..... 3,967 - 1,701 2,266
-------- -------- -------- --------
$ 57,702 $ 158 $ 16,890 $ 40,970
======== ======== ======== ========
</TABLE>
-71-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
SHORT-TERM BORROWINGS Schedule IX
--------------------- -----------
(Amounts in thousands)
<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)
- - --------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1993:
- - ----------------------------
<S> <C> <C> <C> <C> <C>
Notes and loans payable $30,663 5.71% $36,568 $32,420 5.66%
Year Ended December 31, 1992:
- - ----------------------------
Notes and loans payable $36,568 6.81% $36,568 $24,642 7.76%
Year Ended December 31, 1991:
- - ----------------------------
Notes and loans payable $22,683 8.15% $22,683 $ 6,066 10.16%
</TABLE>
(1) Based on quarter-end balances.
-72-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
SUPPLEMENTARY INCOME STATEMENT INFORMATION Schedule X
------------------------------------------ ----------
(Amounts in thousands)
---------------------------------------------
Column A Column B
---------------------------------------------
Charged to Costs
Item and Expenses
---------------------------------------------
Year Ended December 31, 1993:
----------------------------
1. Maintenance and repairs $ 1,078
5. Advertising costs 833
Year Ended December 31, 1992:
----------------------------
1. Maintenance and repairs $ 4,221
5. Advertising costs 101
Year Ended December 31, 1991:
----------------------------
1. Maintenance and repairs $ 1,170
5. Advertising costs 1,116
-73-
<PAGE>
REPRESENTATIVE RATES OF EXCHANGE
BETWEEN THE U.S. DOLLAR AND THE NEW ISRAELI SHEKEL
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
-------------------------------------------
The following table shows the amount of New Israeli Shekels equivalent to
one U.S. Dollar on the dates indicated:
1993 1992 1991
------------------------------
March 31 2.768 2.404 2.261
June 30 2.805 2.444 2.395
September 30 2.864 2.439 2.393
December 31 2.986 2.764 2.283
-74-
<PAGE>
Haifa, February 15, 1994
Independent Auditor's Report to the Shareholders of
Granite Hacarmel Investments Limited
We have audited the consolidated balance sheets of Granite
Hacarmel Investments Limited and its subsidiaries ("the Company")
as at December 31, 1993 and 1992, the related statements of
income and shareholders' equity and cash flows for each of the
three years in the period then ended, expressed in New Israel
Shekels. 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 conducted our audits in
accordance with generally accepted auditing standards, including
those prescribed under the Auditors Regulations (Auditor's Mode
of Performance), 1973, and accordingly we have performed such
auditing procedures as we considered necessary in the
circumstances. For purposes of these financial statements there
is no material difference between generally accepted Israeli
auditing standards and auditing standards generally accepted in
the U.S. These 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 presentations. We believe that our audits
provide a reasonable basis for our opinion.
The above statements have been prepared on the basis of
historical cost as adjusted for the changes in the general
purchasing power of the Israel currency in accordance with
opinions issued by the Institute of Certified Public Accountants
in Israel.
We did not audit the financial statements of a consolidated
subsidiary, whose statements reflect total assets and total
revenues constituting 4.2% and 2.4% (1992 - 3.9% and 2.6%),
respectively, of the related consolidated totals. These
statements were audited by another auditor whose report has been
furnished to us, and our opinion, insofar as it relates to the
amounts included for such subsidiary, is based solely on the
report of the other auditor.
In our opinion, based on our audit and the report of the other
auditor, the above mentioned financial statements present fairly
the financial position of the Company as at December 31, 1993 and
1992, the results of its operations, the changes in shareholders'
equity and cash flows for each of the three years in the period
ended December 31, 1993, in conformity with accounting principles
generally accepted in Israel, consistently applied.
<PAGE>
The consolidated financial statements, stated in U.S. dollars in
accordance with U.S. generally accepted accounting principles,
are translated according to the principles prescribed by
Statement of Financial Accounting Standards No.52 (F.A.S.B. 52).
Those statements are based on historical nominal amounts and are
included in Note 28 to the financial statements.
Without qualifying our opinion we would like to bring to
attention Note 26 to the financial statements regarding a ruling
by the Controller of Restrictive Trade Practices of the Ministry
of Trade and Commerce that in his opinion, part of the exclusive
agreements between the oil marketing companies and filling
station operators are restrictive agreements. At this time it is
too early to estimate whether the ruling of the Controller will
be accepted by the Court of Restrictive Trade Practices and, if
so, the effects of the ruling on the overall fuel market in
general, and on the Company in particular.
Certified Public Accountants (Israel)
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Adjusted for the Index of December 1993
N
o
t Adjusted NIS. (thousands)
e December 31, December 31,
s 1993 1992
Current assets
Cash and cash equivalents 5,476 16,424
Marketable securities 4 10,689 75
Compulsory Government loan 6.C. 605 -
Accounts receivable and debit balances 4.A. 320,475 269,004
Inventories 5 302,881 405,807
--------- ---------
640,126 691,310
--------- ---------
Investment
Unconsolidated subsidiaries and others 6 70,873 56,626
Long-term loans receivable 7 12,378 12,761
Compulsory Government loan 6.C. 1,095 2,054
--------- ---------
84,346 71,441
--------- ---------
Fixed assets
Property, plant and equipment 8 719,810 664,974
Less: Accumulated depreciation 340,744 304,798
--------- ---------
379,066 360,176
--------- ---------
Other assets and deferred charges, net 9 15,031 14,753
--------- ---------
--------- ---------
1,118,569 1,137,680
========= =========
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Adjusted for the Index of December 1993
N
o
t Adjusted NIS. (thousands)
e December 31, December 31,
s 1993 1992
----
Current liabilities
Short-term bank credit 10 86,063 104,914
Loans from others 11 10,205 14,548
Accounts payable and
credit balances 12 199,326 218,792
--------- ---------
295,594 338,254
--------- ---------
Long-term liabilities
Long-term loans 13.A. 7,637 7,503
Debentures convertible into
shares of the company 13.B. 253,720 202,686
Debentures convertible into
shares of a subsidiary 13.C. 7,176 7,158
Customers' deposits 14 52,516 64,409
Liabilities for post-retirement
benefits, net 15 4,815 5,145
Deferred taxes, net 16,23 13,603 14,207
Capital notes issued to affiliated companies 285 1,275
--------- ---------
339,752 302,383
--------- ---------
Minority interest in
consolidated subsidiaries 5,444 5,207
--------- ---------
Collaterals, commitments and contingent
liabilities 25,26
Shareholders' equity
Capital and capital reserves 18,19 217,900 216,000
Retained earnings 259,879 275,836
--------- ---------
477,779 491,836
--------- ---------
1,118,569 1,137,680
========= =========
J. Rosen - Chairman of the Board
M. Mor - Director
A. Shachar - Managing Director
Date: February 15, 1994.
The accompanying notes are an integral part of the financial statements.
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Adjusted for the Index of December 1993
<CAPTION>
N
o
t Adjusted NIS. (thousands)
e Year ended December 31,
s 1993 1992 1991
<S> <C> <C> <C> <C>
Sales 1,722,127 1,835,954 1,737,883
Less: Government imposts 616,397 630,638(*) 536,399(*)
--------- --------- ---------
Net sales 1,105,730 1,205,316 1,201,484
Cost of sales 20 877,705 980,202(*) 998,554(*)
--------- --------- ---------
Gross profit 228,025 225,114 202,930
--------- --------- ---------
Selling and marketing expenses 135,949 125,910 121,309
General and administrative expenses 21 34,612 37,793 41,340
--------- --------- ---------
170,561 163,703 162,649
--------- --------- ---------
Income from operations 57,464 61,411 40,281
--------- --------- ---------
Financing income, net 22 8,377 21,455(*) 8,331(*)
Other income, net 2,545 2,122 4,260
--------- --------- ---------
10,922 23,577 12,591
--------- --------- ---------
Income before taxes on income 68,386 84,988 52,872
Taxes on income 23 25,021 34,406 24,242
--------- --------- ---------
Income after taxes on income 43,365 50,582 28,630
Company's share in income
of affiliates, net 868 2,058 1,734
Minority interest in income
of consolidated subsidiaries (442) (117) (187)
--------- --------- ---------
Net income 43,791 52,523 30,177
========= ========= =========
Earnings per ordinary share
(in adjusted NIS.):
Primary 0.36 0.45 0.27
======= ======= =======
Fully diluted 0.23 0.36 0.27
======= ======= =======
<FN>
(*) Reclassified, Note 2.N.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Adjusted for the Index of December 1993
<CAPTION>
Adjusted NIS. (thousands)
Capital Premium Capital Retained
Reserves Earnings Total
<S> <C> <C> <C> <C> <C>
Balance as at January 1, 1991 35,747 - 254 385,777 421,778
Changes in 1991:
Net income for the year - - - 30,177 30,177
Dividend, net - - - (71,189) (71,189)
-------- ------- ----- ------- -------
Balance as at December 31, 1991 35,747 - 254 344,765 380,766
Changes in 1992:
Net income for the year - - - 52,523 52,523
Issuance of ordinary shares, net 24,091 71,416(*) - - 95,507
Issuance of stock dividend 84,710 - (254) (84,456) -
Proceeds from exercise
of stock options 8 28 - - 36
Dividend (**) - - - (36,996) (36,996)
-------- ------- ----- ------- -------
Balance as at December 31, 1992 144,556 71,444 - 275,836 491,836
Changes in 1993:
Net income for the year - - - 43,791 43,791
Proceeds from exercise of
stock options 405 1,495 - - 1,900
Erosion of proposed dividend - - - 252 252
Proposed dividend - - - (60,000) (60,000)
-------- ------- ----- ------- -------
Balance as at December 31, 1993 144,961 72,939 - 259,879 477,779
======== ======= ===== ======= =======
<FN>
(*) Net of related issue expenses in the amount of NIS. 6,941 thousand.
(**) Including proposed dividend in the amount of NIS. 20,025 thousand.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOW
Adjusted for the Index of December 1993
<CAPTION>
Adjusted NIS. (thousands)
Year ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities
Net income 43,791 52,523 30,177
Adjustments to reconcile net income
to operating cash flows (A): 9,574 (14,685) 152,918
------- ------- -------
Net cash provided by operating activities 53,365 37,838 183,095
------- ------- -------
Cash flows from investing activities
Acquisition of fixed assets (2) (58,717) (31,972) (29,382)
Investment grant received 160 646 1,403
Proceeds from sale of fixed assets (1) 1,437 1,724 3,533
Dividend received from affiliates 750 - 691
Long-term loans granted (1)(3) (2,154) (825) (3,055)
Collection of long-term loans granted 8,749 11,173 5,638
Investment in other assets and deferred charges (3,015) (2,604) (3,893)
Payment on account of investment in a subsidiary (15,328) - -
Proceeds from redemption of compulsory
government loan 574 - -
Investments in marketable securities (10,590) - -
------- ------- -------
Net cash used for investing activities (78,134) (21,858) (25,065)
------- ------- -------
Cash flows from financing activities:
Dividend paid, net (19,773) (71,000) (17,158)
Dividend paid to minority shareholders
in a consolidated subsidiary (214) (113) (113)
Short-term credit from banks (18,582) (9,322) 8,210
Short term loans from others (5,067) (193,728) (152,371)
Long-term loans received (5) - 439 2,361
Long-term loans repaid (4) (1,110) (1,639) (1,212)
Redemption of capital note issued
by a consolidated company - (385) -
Customers' deposits received 2,081 2,434 3,170
Customers' deposits repaid (1,230) (1,964) (1,211)
Proceeds from issuance of debentures, net - 175,566 -
Proceeds from issuance of ordinary shares, net - 95,623 -
Exercise of options for
shares of the Company 1,900 36 -
Exercise of options for
shares of a subsidiary - 107 -
Exercise of options for
debentures of the Company, net 55,816 96 -
------- ------- -------
Net cash provided by (used for)
financing activities 13,821 (3,850) (158,324)
------- ------- -------
(Decrease) Increase in cash and
cash equivalents (10,948) 12,130 (294)
Cash and cash equivalents
at beginning of year 16,424 4,294 4,588
------- ------- -------
Cash and cash equivalents at end of year 5,476 16,424 4,294
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOW
Adjusted for the Index of December 1993
<CAPTION>
Adjusted NIS. (thousands)
Year ended December 31,
1993 1992 1991
<S> <C> <C> <C>
(A)
Adjustments to reconcile net
income to operating cash flows:
Income and expenses not requiring
cash flows -
Depreciation and amortization 38,376 35,401 35,238
Amortization of deferred charges, net 1,826 1,855 629
Deferred taxes, net (863) (4,766) 3,471
(Decrease) Increase in accrued employee
post-retirement benefits, net (603) 843 2,060
Minority interest in income of
consolidated subsidiaries 442 117 187
Company's share in undistributed
loss (income) of affiliates, net 260 (1,865) (482)
Income from decrease in holding in a subsidiary
pursuant to issuance of shares - (29) -
Capital gains (148) (322) (1,590)
Erosion of investment in capital notes, net 71 (7,448) (396)
Erosion of long-term loans,
debentures and capital notes issued (4,483) 18,595 (1,212)
Erosion of loans granted (120) (700) (301)
Increase in value of compulsory
Government loan and securities (244) (418) (231)
Erosion of customers' deposits (12,744) (2,147) (6,506)
Changes in assets and liabilities -
Increase in accounts
receivable and debit balances (2)(3)(4) (64,216) (44,728) (4,363)
Decrease (Increase) in inventories 102,926 (30,067) 274,606
(Decrease) Increase in accounts payable
and credit balances (5) (50,906) 20,994 (148,192)
------- ------- -------
9,574 (14,685) 152,918
======= ======= =======
<FN>
(1) In July 1991, assets relating to the activities of a subsidiary company were sold.
A portion of the proceeds in the amount of NIS. 7,073 thousand is being paid in
four equal semi-annual payments linked to the dollar beginning January 31, 1992.
(2) In December 1992, land was acquired from a customer of a subsidiary company for
the amount of NIS. 2,590 thousand. The payment was recorded against the
customer's accounts receivable.
(3) In 1993 current receivables from customers were converted into long-term
loans in the amount of NIS. 2,978 thousand (1992 - NIS. 12,093 thousand). Also in
1992, a balance of a loan amounting to NIS. 320 thousands was written off.
(4) In 1993, a long-term loan received from a customer in the amount of NIS. 3,313
thousand was set off against the debt of the customer.
(5) In 1993 a long-term loan received from an affiliated company in the amount of
NIS. 4,500 thousands was recorded against the credit balance of the
affiliated company.
</TABLE>
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS IN ADJUSTED VALUES
A. General
-------
1. The financial records of the Company and its consolidated subsidiaries
are maintained on a current basis in historical New Israel Shekels. In
accordance with Opinions issued by the Institute of Certified Public
Accountants in Israel, the consolidated financial statements are stated
in terms of December 1993 New Israel Shekels ("adjusted shekels") which
reflect a uniform purchasing power. Such shekel statements are
henceforth referred to as "adjusted statements".
The comparative figures (including the monetary items) in the adjusted
statements (balance sheets, statements of income, statements of changes
in shareholders' equity, statements of cash flows) are also stated in
terms of December 1993 adjusted shekels.
2. The adjusted values presented in the adjusted statements do not
necessarily reflect realizable value or current economic value, but
rather the original historical value or the value including
excess of cost over net asset value related to specific
assets, adjusted for the changes in the general purchasing power of
the Israel currency, to permit comparison of the data on a uniform
basis.
3. The term "cost" used in the adjusted statements means cost in adjusted
shekels unless otherwise stated.
B. Basis of Adjustment - Consumer Price Index
------------------------------------------
The adjusted amounts are expressed in New Israel Shekels, the
purchasing power of which reflects the average price level of the month of
December 1993, based on the Consumer Price Index ("Index") published on
January 15, 1994 (see Note 2.G.)
C. Principles of Adjustment
------------------------
1. Balance Sheet
-------------
a. The non-monetary items (the balance sheet amounts which
represent their historical value at the time of their acquisition
or creation-see below) were adjusted for the changes in the Index
since their acquisition or creation to December 1993.
<PAGE>
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS IN ADJUSTED VALUES
The following items were treated as non-monetary items: property,
plant and equipment and related accumulated depreciation,
investments carried at cost, inventories, except for inventories
of crude oil and refined products, deferred charges and the
related accumulated amortization, and shareholders' equity.
b. The value of the investments in affiliated companies carried on
the equity basis was computed on the basis of the adjusted
statements of the affiliated companies.
c. Deferred taxes, net were computed on the basis of the adjusted
data.
d. Monetary items are stated in the adjusted statements at their
historical value.
2. Statement of Income
-------------------
The items of the statement of income were adjusted in accordance with
the changes in the consumer price index as follows:
a. Amounts relating to non-monetary items in the balance sheet (e.g.
depreciation and amortization), or provisions included in the
balance sheet (e.g. severance indemnities, vacation pay) were
adjusted in accordance with the changes in the corresponding
balance sheet items.
b. Other amounts in the statement of income (e.g. sales, purchases,
other current costs), except for financing expenses (income) net,
are stated at their adjusted amounts based on the index for the
month of the related transactions.
c. The net financing item, which cannot be independently
calculated, is derived from the other items in the statement of
income. The item includes, inter alia, amounts required for the
adjustment of various items in the statement of income in respect
of the inflationary component of the financing included therein.
d. The Company's equity in the operating results of the affiliated
companies and the minority interest in the results of
consolidated subsidiaries were determined on the basis of the
adjusted statements of the investee companies.
3. Comparative figures
-------------------
Comparative figures were adjusted to the December 1993 index.
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES
A. Principles of consolidation
---------------------------
1. The consolidated financial statements of the Company include the
consolidated financial statements of the Company and its subsidiaries.
The list of subsidiaries which are included in the consolidated
financial statements and the percent ownership and control therein are
included in a separate schedule to the financial statements.
2. Intercompany balances and transactions of consolidated companies have
been eliminated.
B. Investments in subsidiary and affiliated companies
--------------------------------------------------
1 The investments in subsidiaries and affiliated companies (including
a company in which the Company has a substantial influence) are
reflected in the financial statements in accordance with their equity
adjusted to the balance sheet date together with the balance of the
excess cost or net of the balance of deferred credits. Other
investments are stated at cost which does not exceed equity as of the
balance sheet date.
Subsidiary companies own several other inactive and/or insignificant
subsidiaries and therefore are not consolidated and are carried at
cost, which does not exceed equity as at the balance sheet date.
2. The excess of cost of investments in consolidated subsidiaries, which
is not related to specific assets, over the value of net assets
acquired ("Goodwill"), is included in "Other assets and deferred
charges, net" and is amortized on the straight-line method over a
period of ten years.
The excess value of net assets acquired over cost of investments in
affiliated companies, which is not related to specific assets, is set
off against excess of cost included in "Other assets and deferred
charges, net" and is amortized on the straight line method over a
period of ten years.
3. A list of affiliated companies is included in a schedule attached to
the financial statements.
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
C. Valuation of inventories
------------------------
1. Change in the method of evaluation of Emergency crude oil and refined
---------------------------------------------------------------------
products inventories
--------------------
Sonol recorded the cumulative effect resulting from a change in the
method of valuing its Emergency inventories as defined by the
Commodities and Services Control Order (Arrangements in the Oil
Economy) - 1988 ("The Control Order"). The overwhelming portion of
the crude oil and refined product inventories consists of Emergency
inventories. In the previous method for valuing inventories,
inventories of crude oil and refined products were valued at the lower
of their adjusted cost or their market value. According to the new
method, the Emergency inventories are valued based on current value,
which does not exceed market value in accordance with the lower of the
changes in the exchange rate determined by the Fuel Authority ("Fuel
Authority rate") or the dollar exchange rate. In all instances, the
Emergency inventories valued at the Fuel Authority rate are guaranteed
by the Government by way of setting Sonol's recovery price from the
market based on the Fuel Authority rate in accordance with the Control
Order. The change in the inventory valuation method as mentioned
above has no effect on Retained Earnings as of December 31, 1991 and
on the statement of income for the year then ended. As a result of
the change, net income for 1992 was increased by NIS. 16,700 thousand,
comprising NIS. 0.14 in primary earnings per share and NIS. 0.09 in
fully diluted earnings per share.
The emergency crude oil inventory is valued on the basis of the
first-in, first out method and the emergency refined products
inventory and the commercial inventories (crude oil and refined
products) are valued on the basis of the moving average method.
2. Other inventories
-----------------
The inventories of luboils, spare parts and others are stated at the
lower of cost or market.
The cost is determined by the first-in, first out method except for
spare parts which are valued by the moving average method.
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
D. Property, plant and equipment
-----------------------------
Property, plant and equipment are carried at cost, net of investment
grants, or at cost together with the addition of excess of cost over net
asset value related to specific assets.
Betterments and improvements are charged to assets while maintenance and
repair expenses are charged as incurred to the statement of income.
E. Depreciation
------------
Depreciation is computed on the straight line method at annual rates
considered to be sufficient for depreciating the assets over their
estimated useful lives.
The annual rates of depreciation are as follows:
%
-------
Buildings (including temporary buildings) 4- 6.5
Machinery and equipment 5-15
Vehicles 15-20
Computers 20
Furniture and office equipment (reflected in
machinery and equipment) 6-10
The excess of cost over net asset value related to specific assets is
depreciated over the remaining useful life as determined at the time the
excess of cost was related to those assets.
Leasehold rights are amortized over the term of the lease.
F. Debentures convertible into shares
----------------------------------
1. Convertible debentures are presented in accordance with the Opinion
No. 53 of the Institute of Certified Public Accountants in Israel on
the basis of the probability of their conversion into shares.
Debentures are reflected in the financial statements at their
liability value.
2. Costs relating to the issuance of convertible debentures are amortized
over the remaining period until their maturity.
G. Foreign currency and linkage basis
----------------------------------
1. Assets (other than securities) and liabilities in foreign currencies
or linked thereto are stated at the exchange rates in effect for the
balance sheet date.
Assets (other than securities) and liabilities linked to the Consumer
Price Index ("the Index"), are stated according to the linkage
conditions applying to each asset.
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
1. The index, the exchange rates and the rate of changes therein were as
follows:
December 31, Changes in %
--------------------- ---------------------
1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
Index 253.2 227.6 208.1 11.2 9.4 18.0
Exchange rate of
the U.S. dollar 2.986 2.7884 2.2992 7.1 21.3 11.8
2. Income and expenses for items paid or linked to foreign currencies are
included in the appropriate paragraphs of the statements of income
based on the exchange rate in effect when such items were recorded.
3. Exchange rate or linkage differences resulting from the adjustment of
assets or liabilities in foreign currency or of assets and liabilities
linked to the consumer price index are included in the nominal
statements of income in the appropriate items at the time incurred.
H. Investments
-----------
1. Government loan
---------------
The investment in a Government Loan is reflected at its present
discounted value as calculated in accordance with directions specified
in the opinions of the Institute of Certified Public Accountants in
Israel. The change in the value of the Government loan is included
in the statement of income.
2. Marketable Securities
---------------------
The marketable securities are carried at their market value on the
date of the balance sheet. The changes in the value of the securities
are reflected in the statement of income.
3. Capital notes
-------------
The investment in capital notes, which are not capital notes of
subsidiary companies and which are unlinked and non-interest bearing
are carried at their present value, discounted at an annual rate of
11%.
I. Provision for doubtful receivables
----------------------------------
The Company provides specifically for receivables the collection of which
is doubtful in the opinion of the management.
J. Deferred taxes
--------------
Deferred taxes are computed for the purpose of the adjusted financial
statements in respect of those components which create the difference
between results measured in the adjusted financial statements and the
results measured for income tax purposes.
The deferred taxes are calculated according to the liability method at tax
rates that will be in effect when the deferred taxes will be utilized, using
tax rates that are known at the time of preparation of the financial
statements (See note 16.C.).
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
1. The main factors in respect of which deferred taxes have been included
are as follows:
a. Differences in depreciation and amortization for accounting and
tax purposes;
b. Differences between the value of inventories for accounting and
tax purposes;
c. Timing differences in recognition of income and expense items for
accounting and tax purposes (mainly linkage differences on
customers' deposits and provisions for employee post-retirement
benefits).
2. The main factors in respect of which deferred taxes have not been
computed:
a. Amounts of adjustment for the change in the purchasing power of
the New Israel Shekels relating to lands, buildings and private
motor cars, in accordance with the rules determined by the
Institute of Certified Public Accoutants in Israel.
b. Investments in subsidiaries and affiliates, because it is the
Company's intention to hold these investments rather than to sell
them.
K. Liabilities for post-retirement benefits
----------------------------------------
1. The liabilities of the Company and its subsidiaries in respect
of pension and severance indemnities are fully covered by provisions
for severance indemnities, by deposits in approved funds and by
managers' insurance policies. The deposits in approved funds and in
managers' insurance plans are not included in the financial statements
as they are not under the control of the Company.
2. The Provision for pension benefits in case of early retirement of
employees is computed at the discounted present value of the future
liabilities of the Company for such retired employees. The Company's
liability for early retirement is generally up to the time when the
employee reaches retirement age and is measured as a fixed percentage
of the maximum amount due to the employee from the pension fund. The
rate of capitalization for computing the provision is 3% per annum.
3. In accordance with the labor agreements between subsidiaries and their
employees, retiring employees (men at age 65 and women at age 60-65)
are entitled to receive a partial redemption of unutilized sick leave,
subject to a ceiling of 60 days. A provision based on an actuarial
calculation has been made in the financial statements for covering the
aforesaid liabilities. The actuarial calculation is based, inter
alia, on a capitalization rate of 6% and on an annual real increase of
wages at the rate of 3%.
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
L. Provision for linkage increments on customers' deposits
-------------------------------------------------------
Supergas is obligated under a Government decree to pay customers
terminating their gas purchasing agreement an amount equal to the latest
approved deposit together with linkage increments from the date of the last
approval to the date of payment. In periods subsequent in the last
approval, Supergas provides for updating the amounts of the deposits on the
basis of the expected next updating that it will request. Supergas
provides for this liability on a discounted present value basis.
M. Earning per share
-----------------
1. Primary earnings
----------------
The earnings per share are computed in accordance with the Opinion
No. 55 of the Institute of Certified Public Accountants in Israel,
based on the weighted average of shares outstanding, taking into
consideration the retroactive effect to the stock dividend and
options.
2. Fully diluted earnings
----------------------
The fully diluted earnings per share are computed on the basis of the
computation of the primary earnings per share taking into
consideration theoretical conversion of the convertible securities
subject to an anti dilutive test as stated in the aforementioned
Opinion.
N. Reclassification
----------------
1. As a result of the change in the inventory valuation method (Note
2.C.) in 1992, differences arose in the cost of sales amounts as
compared to amounts reported for this item in the past and, as a
result cost of sales and financing expenses have been reclassified.
2. The results of accounting with the Fuel Authority, which were
charged to the Government imposts in the past, have been reclassified
to cost of sales.
Comparative figures have been reclassified accordingly.
O. Foreign currency futures transactions
-------------------------------------
The results of futures transactions for the purchase of foreign currency,
meant to provide protection for the costs of imports against
fluctuations in foreign currencies (Hedging transactions) are reflected on
the statement of income at the time the import is recorded.
<PAGE>
NOTE 3 - ACCOUNTING WITH THE FUEL AUTHORITY AND THE REFORM FOR THE ENERGY SECTOR
A. Sonol
-----
1. Amounts due to or from the Fuel Authority, to the extent still
provisional, are included each year in the accounts according to
estimates prepared by Sonol based on past experience. Differences
which subsequently arise are reflected in the results of the year in
which such differences are determined.
2. In June 1988, the oil marketing companies entered into a comprehensive
agreement ("the Agreement") with the Ministries of Finance and Energy
providing mainly as follows:
a. The oil marketing companies accept the Reform Program for the
Energy Sector ("the Reform"), as it is described in the
Agreement;
b. Announcement, through a Government order, of a monthly price
structure for refined products which determines the maximum price
to consumers and which includes an element of profit and a
recovery of non-direct expenses, similar rates, in general, to
those that would have been in existence had the Price Structure
Agreement remained in force.
The Reform, which was enacted as of August 8, 1988, is being
implemented in stages, the first of which will remain in force at
least until the implementation of the second stage, the timetable of
which is as yet unknown. The first stage of the Reform allows for the
licensing of new oil and gas marketing companies, direct imports of
refined products for self-consumption by large customers and the
import of crude oil by the refineries. The refineries can sell
refined products only to licensed oil marketing companies. The Reform
also provides for two categories of crude oil and refined product
inventories; Emergency and Commercial. Furthermore, purchases are
divided into two categories; Contract and Free (Spot). Contract
purchases enter the Emergency inventories and refined products
emanating from refining of crude oil from Emergency inventories are
absorbed into the Commercial inventory.
All costs and expenses related to contract purchase and to the
holding of Emergency inventories continue to be fully recoverable from
the Government while free purchases and the holding of Commercial
inventories are at the risk of the oil marketing company.
The implementation of the first stage of the Reform caused increased
competition and, as a result, had an impact on quantities sold and
caused an increase in discounts granted and expanded customer
credits.
<PAGE>
NOTE 3 - ACCOUNTING WITH THE FUEL AUTHORITY AND THE REFORM FOR THE ENERGY SECTOR
(CONTINUED)
3. In September 1991, the Government decided, inter alia, as follows:
a. To effect the transfer of ownership of the Emergency
inventories of crude oil and refined products from the oil
marketing companies to the Government.
b. To reduce the Emergency inventories by a third, and the annual
procurement of Contract purchases to one third of annual
consumption, with the intent that the Contract purchases be
carried out via tender offers, thus eliminating the accounting
between the oil marketing companies and the Fuel Authority in
regard to the costs of such purchases. As of January 1993
contract purchases were reduced by 25% and as of January 1, 1994
the contract purchases are carried out via governmental tender
offers. The import for such contract purchases is at the full
responsibility of the importers.
It is the opinion of Sonol's management that implementation of
the decision to transfer or to reduce the Emergency inventories
will not adversely affect Sonol's profitability.
As of January 1, 1994, the requirement to purchase heavy fuel oil
and kerosine by large customers has been cancelled. It is the
opinion of Sonol's management that this will not adversely affect
Sonol's profitability.
4. Beginning in December 1992, Government price controls were lifted
from fuel products sold outside public stations. As of July 14, 1993
Government price controls were lifted from various fuel products
marketed by Sonol in public stations and as of October 26, 1993
Government price controls were lifted from the maximum price of the
refined products at the gate of installation marketed by Sonol in
public stations.
5. Beginning November 1, 1993 the method for updating the basket of
expenses used in setting and updating the maximum consumer prices of
fuel products still subject to price controls was changed.
At this stage, the negative impact of this change on the financial
results of Sonol cannot be determined.
<PAGE>
NOTE 3 - ACCOUNTING WITH THE FUEL AUTHORITY AND THE REFORM FOR THE ENERGY SECTOR
(CONTINUED)
B. Supergas
--------
1. As of August 1, 1989 the Law of Arrangements in the State Economy
(Amended Statutes) - 1989, entered into effect which provides
inter-alia for the following:
a. Licensing of new gas marketing companies;
b. Direct sales of gas by the refineries to gas marketing companies;
c. Allowing the cancellation of existing contracts between gas
suppliers and individual customers, at the customers' election,
even if bound by contract.
The above changes ("the Gas Reform") have resulted in increased
competition, particularly in the more profitable bulk supply sector.
Such competition has manifested itself primarily through price
discounting and increased customer credit. As of the balance sheet
date, the Gas Reform has not materially affected Supergas' market
share.
Supergas operates on a maximum price controlled market, except for
bulk sales and sales to commercial customers.
2. Supergas lodged a claim for a declarative judgement against the
Ministry of Energy and Infrastructure, the Fuel Authority, regarding
certain subjects which partly relate to the period before the Gas
Reform and partly thereafter.
As a result of the rejection of a claim of an other gas company in the
Supreme Court, Supergas cancelled its claim regarding subjects
relating to the period beginning after the Gas Reform.
Unsuccessful result in the legal litigation will not cause
deterioration in the financial position of Supergas as reflected in
its financial statements.
<PAGE>
NOTE 4 - MARKETABLE SECURITIES
Adjusted NIS. (thousands)
-------------------------
December 31,
------------
1993 1992
----- ----
Debentures linked to the consumer price index 6,618 -
Debentures linked to foreign currency 1,201 -
Shares, options and convertible debentures 2,133 -
Others 737 75
------ ------
10,689 75
====== ======
NOTE 4.A.-ACCOUNTS RECEIVABLE AND DEBIT BALANCES
Adjusted NIS. (thousands)
-------------------------
December 31,
------------
1993 1992
---- ----
Customers - open accounts 189,887 198,939
Checks and notes receivable 26,640 20,926
Less - provision for doubtful receivables(*) (6,640) (4,856)
------- --------
209,887 215,009
Fuel Authority 79,033 22,448
Government Institutions 1,514 778
Income receivable 5,370 6,330
Short-term loans granted and current
portion of long-term loans granted 8,073 15,585
Employees 638 554
Prepaid expenses 4,008 2,146
Future tax benefits, net(**) 3,483 3,224
Others 8,469 2,930
------- -------
320,475 269,004
======= =======
Including related and interested parties 7,577 8,434
======= =======
The largest balance of interested parties
during the year 4,806 2,090
======= =======
(*) See note 2.I.
(**) See note 16.
<PAGE>
NOTE 5 - INVENTORIES
Consist of:
Adjusted NIS. (thousands)
-------------------------
December 31,
------------
1993 1992
------- -------
Crude oil and raw materials 87,930 146,837
Finished products 207,556 250,436
Materials and supplies 7,395 8,534
------- -------
302,881 405,807
======= =======
NOTE 6 - INVESTMENTS
A. Investments in unconsolidated subsidiaries and others consist of:
Adjusted NIS. (thousands)
-------------------------
December 31, 1993 December 31, 1992
----------------------- -----------------------
Shares Loans Total Shares Loans Total
------ ----- ----- ------ ----- -----
Unconsolidated
subsidiaries, at cost 132 4 136 132 4 136
Affiliated companies
carried on equity
basis (1) 5,366 - 5,366 6,376 - 6,376
Capital notes of
interested parties(2) - 31,589 31,589 - 31,660 31,660
Others, at cost (3) 33,782 - 33,782 18,454 - 18,454
------ ------ ------ ------ ------ ------
39,280 31,593 70,873 24,962 31,664 56,626
====== ====== ====== ====== ====== ======
(1) In the year of account dividends were received from affiliated
companies amounting to NIS. 1,878 thousand (1992 - NIS. 195 thousand)
which include NIS. 750 thousand from previous years income.
(2) Capital notes reflected in the balance sheet are
comprised as follows:
Adjusted NIS. (thousands)
-------------------------
December 31,
------------
1993 1992
---- ----
Face value (a)(c) 36,066 40,123
Present value discount (b) 4,477 8,463
------ ------
Discounted value 31,589 31,660
====== ======
(a) These notes at face value mature as follows:
January 10, 1995 25,966
January 10, 1996 10,100
------
36,066
======
(b) See Note 2.H.(3).
(c) The capital notes are non-marketable, unlinked and bear no
interest.
NIS.3,152 thousand of the capital notes (1992 - NIS.3,507 thousand)
is guaranteed by interested party and the balance is unsecured.
<PAGE>
NOTE 6 - INVESTMENTS (CONTINUED)
(3) Include NIS. 15,328 thousand (1992 - Nil) relating to an investment,
through a subsidiary company, in 50% of the shares of "Otzem Promotion
and Investments Ltd." (hereafter "Otzem"). Otzem is the owner of a
new shopping center "Kanor" in Or Yehuda and of 45.2% of the shares of
"Moraz Profiles Ltd." a producer of P.V.C. profiles for the
construction industry. Furthermore, a consolidated subsidiary
undertook to provide a shareholders' loan in the amount of NIS. 9,400
thousand. The agreement, signed on September 27, 1993, is subject to
examinations and final signature. The aforementioned shopping center
was opened to the public in September 1993 and more than 95% of its
area has been rented.
B. Consolidated subsidiaries:
1. Vulcan Batteries Ltd.
---------------------
In May 1990, Vulcan Batteries Ltd. completed a public offering of its
ordinary shares, convertible debentures and options (expired as of
June 30, 1992) thereby reducing Sonol's immediate equity interest to
81.6%, and, assuming full conversion of debentures to 70.8%. The
debentures are convertible into ordinary shares at any time prior to
maturity (Note 13.C.).
2. Sprint Motors Ltd.
------------------
In 1991, Sprint Motors Ltd. (a wholly owned subsidiary of Sonol) sold
the franchise for import and marketing of motor vehicles together with
the inventory of motor vehicles, spare parts, amounts due from
customers at a price slightly in excess of the cost reflected in the
financial statements and its part in the property utilized for the
purpose of operating the franchise. As a result of the aforesaid,
Sprint Motors Ltd. ceased its car business activities.
C. Compulsory Government loan
--------------------------
The compulsory Government loan is Hagalil Peace loan [Note 2.H.(1)].
The nominal value of the Hagalil Peace loan is linked, at the Company's
discretion, to the increase in the index at the rate of 80% in addition to
an index linked interest at the rate of 1% per annum or is linked to the
increase in the representative rate of exchange of the dollar, without
interest. The loans are redeemable in four equal annual payments
commencing in the year 1993.
<PAGE>
NOTE 7 - LONG-TERM LOANS RECEIVABLES
a. Consist of:
Adjusted NIS. (thousands)
-------------------------
December 31,
------------
1993 1992
---- ----
Loans to customers 17,710 18,296
Loans to employees 127 84
Others 597 3,556
------ ------
18,434 21,936
Less: included in current assets 6,056 9,175
------ ------
12,378 12,761
====== ======
The years of maturity of the loans:
First year - current portion 6,056 9,175
Second year 3,392 4,846
Third year 727 1,453
Fourth year 693 574
Fifth year 7,566 5,888
------ ------
18,434 21,936
====== ======
b. Linkage terms and interest rates:
Adjusted NIS. (thousands)
-------------------------
Unlinked Linked to Linked to Total
index foreign
currency
-------- --------- ---------- -----
Interest rates: 0% 10-20% 0-4% 4-10% 0% 5-9%
-- ------ ---- ----- -- ----
December 31, 1993
-----------------
Loans to:
Customers 1,054 2,684 8,932 2,073 2,016 951 17,710
Employees - - 127 - - - 127
Others - 542 55 - - - 597
----- ----- ----- ----- ----- --- ------
1,054 3,226 9,114 2,073 2,016 951 18,434
===== ===== ===== ===== ===== ===
Less: included in
current assets 6,056
-----
12,378
======
December 31, 1992
-----------------
Loans to:
Customers - 4,138 7,705 3,115 909 2,429 18,296
Employees - - 84 - - - 84
Others - - 77 - - 3,479 3,556
----- ----- ----- ----- --- ----- ------
- 4,138 7,866 3,115 909 5,908 21,936
===== ===== ===== ===== === =====
Less: included in
current assets 9,175
------
12,761
======
<PAGE>
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT
a. Consist of:
Adjusted NIS. (thousands)
-------------------------
Land Machinery
and and
Buildings Equipment Vehicles Others Total
--------- --------- -------- ------ -----
Cost
----
Balance at beginning
of year 236,013 375,625 25,191 28,145 664,974
Additions 22,421 27,147 5,947 3,042 58,557
Disposals (493) (970) (2,258) - (3,721)
------- ------- ------ ------ -------
Balance at end of year 257,941 401,802 28,880 31,187 719,810(*)
------- ------- ------ ------ -------
Accumulated
depreciation
------------
Balance at beginning
of year 66,242 203,914 17,822 16,820 304,798
Depreciation charged 6,987 26,027 3,095 2,267 38,376
Depreciation in
respect of disposals - (566) (1,864) - (2,430)
------- ------- ------ ------ -------
Balance at end of year 73,229 229,375 19,053 19,087 340,744
------- ------- ------ ------ -------
Depreciated balance as
of December 31, 1993 184,712 172,427 9,827 12,100 379,066
======= ======= ====== ====== =======
Depreciated balance as
of December 31, 1992 169,771 171,711 7,369 11,325 360,176
======= ======= ====== ====== =======
(*) Net of investment grants in the amount of NIS. 9,655 thousand.
b. Land and buildings include buildings on lease-hold lands, the cost of which
is NIS. 83,366 thousand, for various original periods of 49 - 98 years,
ending in the years 1998 - 2072.
Land and buildings at a cost of NIS. 80,977 thousand have not yet
registered in the name of the Company or consolidated subsidiaries at the
Land Registry Office. The main reason for the absence of registration is
that the land settlement and division process has not yet been arranged.
<PAGE>
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
c. Differences between the depreciated balance of property, plant and
equipment in the adjusted financial statements and the future depreciable
balance of those assets for tax purposes are treated partly as timing
differences (for these differences a deferred tax provision has been made)
and partly as permanent differences.
The amounts treated as permanent differences are as follows:
Adjusted NIS. (thousands)
-------------------------
Balance as of January 1, 1992 60,509
Changes in the year 1992 (4,310)
-------
Balance as of December 31, 1992 56,199
Changes in the year 1993 (4,334)
-------
Balance as of December 31, 1993 51,865
======
d. The item land and buildings includes NIS. 12,417 thousand, payment on
account of the acquisition of 50% of the rights of the company "Magor
Holdings Ltd. (hereafter "Magor") in land and buildings in a project under
construction in Holon, which is known as "Lev-Magor Holon". The estimated
completion date of the project is May 31, 1994. The whole amount the
Company will pay (through a wholly owned subsidiary) for the project,
when completed and title transferred is estimated to be approximately
NIS. 15,200 thousand. Furthermore, a contract has been signed by the
parties for cooperation and management of the project, under which "Magor"
has undertaken that the rent from the project, which the wholly owned
subsidiary will receive for 10 years, will be not less than NIS. 700
thousand per year, linked to the index.
e. For floating and fixed charges on the above assets see Note 25.
<PAGE>
NOTE 9 - OTHER ASSETS AND DEFERRED CHARGES, NET
Consist of:
Adjusted NIS. (thousands)
-------------------------
Balance to be amortized
as of December 31,
-------------------
1993 1992
---- ----
Other assets:
-------------
Deferred rent (1) 4,551 4,266
Goodwill in consolidated
subsidiaries (2) 2,462 2,704
Others 2,518 2,072
----- -----
9,531 9,042
Deferred charges:
-----------------
Expenses incurred in the issuance
of debentures by the Company (3) 8,296 8,916
Expenses incurred in the issuance
of debentures by a consolidated
subsidiary (3) 494 633
------ ------
18,321 18,591
Less: Deferred credit in a
consolidated subsidiary (2) 3,290 3,838
------ ------
15,031 14,753
====== ======
(1) Includes leasehold rights not yet amortized in the amount of NIS. 2,349
thousand (1992 - NIS. 1,271 thousand). The aforementioned leasehold rights
are for periods ending between the years 2001 - 2044.
(2) For amortization see note 2.B.2
(3) For amortization see note 2.F.
<PAGE>
NOTE 10 - SHORT TERM BANK CREDIT
Linkage terms and interest rates:
---------------------------------
Adjusted NIS. (thousands)
-------------------------
December 31, 1993
-----------------
Unlinked linked Linked to Total
to foreign
Index currency
-------- -------- --------- -----
Interest rates: 10-19.7% 0.5-2.5% 3-9.3%
-------- -------- ------
Overdrafts 1,923 - - 1,923
Short-term loans 60,863 - 22,403 83,266
Current portion of
long-term loans 52 109 713 874
------ --- ------ ------
62,838 109 23,116 86,063
====== === ====== ======
Adjusted NIS. (thousands)
-------------------------
December 31, 1992
-----------------
Unlinked linked Linked to Total
to foreign
Index currency
-------- ------- -------- -----
Interest rates: 10-18% 0.5-2.5% 3-9%
------ -------- ----
Overdrafts 691 - 20 711
Short-term loans 43,869 - 59,191 103,060
Current portion of
long-term loans 49 128 966 1,143
------ --- ------ -------
44,609 128 60,177 104,914
====== === ====== =======
NOTE 11 - LOANS FROM OTHERS
Adjusted NIS. (thousands) Adjusted NIS. (thousands)
------------------------- -------------------------
December 31, 1993 December 31, 1992
----------------- -----------------
Unlinked Linked to Total Unlinked Linked to Total
foreign foreign
currency currency
-------- -------- ------ ------- -------- ------
Short term liabilities 3,238(*) 6,967 10,205 4,788(*) 9,760 14,548
======== ===== ====== ======== ===== ======
(*) Include NIS. 2,067 thousand (1992 - NIS. 1,343 thousand) capital notes to
related parties. The capital notes are not linked, bearing no interest and
redeemable at any time.
The above liabilities are non interest bearing.
<PAGE>
NOTE 12 - ACCOUNTS PAYABLE AND CREDIT BALANCES
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
------------ ------------
1993 1992
---- ----
Suppliers (mainly crude oil suppliers) 71,903 121,805
Institutions (mainly V.A.T. and customs) 21,125 19,558
Salaries and related expenses
(including provisions) 15,258 14,021
Accrued expenses 6,388 7,843
Income tax payable 13,647 22,586
Dividend declared payable 60,000 20,025
Others 11,005 12,954
------- -------
199,326 218,792
======= =======
Include related and interested parties 3,277 9,548
======= =======
NOTE 13 - LONG-TERM LIABILITIES
A. Long-term loans
---------------
Rate of Adjusted NIS. (thousands)
interest -------------------------
% December 31, December 31,
------- ------------ ------------
1993 1992
---- ----
U.S. Dollar loans from banks(*) 6-9.3 1,370 2,393
Customers' deposit - linked
to index - 2,280 2,263
Customer's deposit - linked
to foreign currency - 51 3,497
Other loans - linked to index(**) 0-2.5 4,717 341
Other loans - unlinked 18-19.7 93 152
----- -----
8,511 8,646
Less: current portion 874 1,143
----- -----
7,637 7,503
===== =====
<PAGE>
NOTE 13 - LONG-TERM LIABILITIES (CONTINUED)
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
------------ ------------
1993 1992
---- ----
First year - current portion 874 1,143
----- -----
Second year 480 911
Third year 317 494
Fourth year 9 329
Fifth year - 9
No due date 6,831 5,760
----- -----
7,637 7,503
----- -----
8,511 8,646
===== =====
(*) Fixed rate of interest for
the whole period of the loan
(**)1993 - includes NIS. 4,500 thousand from an affiliated company.
Accruded interest is included in "accounts payable and credit balances"
in the current liabilities.
B. Convertible debentures into shares of the Company
-------------------------------------------------
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
------------ ------------
1993 1992
---- ----
Debentures (Series 1)(*) 71,616 73,595
Debentures (series 2)(**) 182,104 129,091
------- -------
253,720 202,686
======= =======
(*) Registered debentures (Series 1) NIS. 1.- par value each. Every NIS.
55.- par value of debentures are convertible into 10 ordinary shares
NIS. 1.- per value each. The debentures bear interest at an annual rate
of 0.1%. The principal, interest and the price for conversion
into ordinary shares are linked to the representative rate of exchange
of the U.S. dollar. The debentures mature in 8 equal yearly
installments on November 30 in each of the years commencing in 1995 and
ending in 2002.
As of the balance sheet date there are 54,999,912 outstanding
debentures (Series 1).
<PAGE>
NOTE 13 - LONG-TERM LIABILITIES (CONTINUED)
(**) Registered debentures (Series 2) NIS. 1.- par value each. Every NIS. 5
par value of debentures (Series 2) are convertible into ordinary share
of NIS. 1.- par value. The debentures (Series 2) bear interest at an
annual rate of 2.5%. The principal, interest and the price for
conversion into ordinary shares are linked to the representative rate
of exchange of the U.S. dollar. The debentures mature in 7 equal
yearly installments on November 30 in each of the years commencing in
1996 and ending in 2002.
As of the balance sheet date there are 152,647,948 outstanding
debentures (Series 2).
See also Note 18.D.
Regarding collaterals see Note 25.
C. Convertible debentures into shares of a subsidiary
--------------------------------------------------
Pursuant to a prospectus of Vulcan as of May 1990, Vulcan issued to the
public 4,516,750 registered debentures (Series 1) at par value. The
debentures are linked to the index published for April 1990 and bear
interest at an annual rate of 0.1%.
The debentures mature in four equal yearly installments commencing in 1995
and ending in 1998 and they are convertible at any time up to December 26,
1998 into ordinary shares of NIS. 1.- par value at a conversion rate of 200%
(1 share for every NIS. 2.- par value of debentures converted, subject to
adjustments).
The debentures are secured by a senior floating charge, equal to all other
present and future senior floating charges on all the assets of Vulcan.
D. All the aforementioned debentures are listed for trading on the Tel-Aviv
Stock Exchange.
E. The real financial cost of all the above debentures is NIS. 906 thousand,
(1992 - NIS. 19,149 thousand).
<PAGE>
NOTE 14 - CUSTOMERS' DEPOSITS
a. Customers' deposits as of December 31, 1993 are computed based on the
deposit amount approved by the Government decree of February 10, 1994.
b. Customers' deposits held by Supergas include NIS. 38,042 thousand (1992 -
NIS. 49,229 thousand) linkage increments accrued on those deposits
(Note 2.L.).
NOTE 15 - LIABILITIES FOR POST-RETIREMENT BENEFITS, NET
Consist of:
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
------------ ------------
1993 1992
---- ----
Provision for severance pay 3,133 3,228
Less: deposits in approved funds (*) (1,115) (1,332)
----- -----
2,018 1,896
Provision for early retirement pension (**) 1,321 1,818
Provision for redemption of unutilized
sick leave 1,476 1,431
----- -----
4,815 5,145
===== =====
(*) The deposits can be withdrawn subject to law. Accrued income on the
deposits is included in the statements of income.
(**)Excluding NIS. 609 thousand (1992 - NIS. 882 thousand) current early
retirement pension which is included in accounts payable and credit
balances.
NOTE 16 - DEFERRED TAXES
a. Consist of:
Adjusted NIS. (thousands)
-------------------------
Regarding current Regarding non-
Balance Sheet current Balance
items Sheet items Total
----------------- --------------- ------
Balance as of January 1, 1992 (3,623) 19,372 15,749
Adjustment regarding changes
in the tax rate (see c. below) 82 (1,473) (1,391)
Other changes in 1992 317 (3,692) (3,375)
------ ------ ------
Balance as of December 31, 1992 (3,224) 14,207 10,983
Changes in 1993 (259) (604) (863)
------ ------ ------
Balance as of December 31, 1993 (3,483) 13,603 10,120
====== ====== ======
<PAGE>
NOTE 16 - DEFERRED TAXES (CONTINUED)
b. Presented in the balance sheet:
Adjusted NIS. (thousands)
--------------------------
December 31, December 31,
------------ ------------
1993 1992
---- ----
Deferred Taxes in long-term liabilities 13,603 14,207
Future tax benefits in current assets (3,483) (3,224)
------ -----
10,120 10,983
====== ======
c. Pursuant to the amendment of the Income Tax Law as of December 22, 1992 the
rate of company tax decreased from 40% by 1% for a year commencing from
1993 and ending in 1996 to the rate of 36%.
The impact of the decreased rate of the tax on the net deferred taxes
included in the 1992 financial statements is a decrease in the taxes on
income in the statements of income and an increase in the adjusted net
income by NIS. 1,391 thousand.
<PAGE>
NOTE 17 - LINKAGE OF MONETARY BALANCES
<TABLE> <CAPTION>
Adjusted NIS. (thousands) Adjusted NIS. (thousands)
------------------------- -------------------------
December 31, 1993 December 31, 1992
----------------- -----------------
Linked Linked to Unlinked Linked Linked to Unlinked
to foreign (*) to foreign (*)
index currency index currency
------ ---------- --------- ----- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash and cash equivalent - 3,869 1,607 - 14,334 2,090
Accounts receivable and
debit balances 3,771 78,737 237,967 6,958 28,533 233,513
Marketable securities 6,618 1,201 2,870 75 - -
Compulsory Government
loan - 1,700 - - 2,054 -
Investment in
capital notes - - 31,589 - - 31,660
Long-term loans granted 8,213 2,661 1,504 9,184 1,882 1,695
------ ------ ------- ------ ------ -------
18,602 88,168 275,537 16,217 46,803 268,958
====== ====== ======= ====== ====== =======
Liabilities:
Loans from banks - 22,403 62,786 - 59,211 44,560
Loans from others - 6,967 3,238 - 9,760 4,788
Accounts payable and
credit balances 16,959 58,247 124,120 36,742 107,901 74,149
Long-term liabilities
(including current portion)14,173 255,141 93 9,762 208,576 152
Customers' deposits 52,516 - - 64,409 - -
Capital notes - - 285 - - 1,275
------ ------ ------- ------ ------ -------
83,648 342,758 190,522 110,913 385,448 124,924
====== ======= ======= ======= ======= =======
<FN>
(*) Partly bearing interest
</TABLE>
NOTE 18 - CAPITAL
a. Nominal values.
Consists of:
Authorized Issued and Paid(*)
---------- ------------------
NIS. (thousands) NIS. (thousands)
---------------- ----------------
December 31, December 31,
------------ ------------
1993 1992 1993 1992
---- ---- ---- ----
225,000,000 Ordinary
shares of NIS. 1.- each 225,000 225,000 120,380 120,007
======= ======= ======= =======
(*) 120,379,753 ordinary shares (1992 - 120,006,964 ordinary shares).
<PAGE>
NOTE 18 - CAPITAL (CONTINUED)
b. Stock options (Series 1)
------------------------
In accordance with a prospectus dated February 1992, the Company issued,
inter alia, 20,000,000 registered stock options (Series 1) each of which
entitled the holders to acquire an ordinary share of NIS. 1.- par value in
consideration for a payment of the exercise price of NIS. 4.25 (linked to
the consumer price index). The last day for exercising options was on
February 28, 1993.
Until February 28, 1993 (the expiration date of the stock options) 379,721
stock options were exercised and the balance of stock options, which were
not exercised, expired.
c. Stock options (Series 2)
------------------------
In accordance with a prospectus dated February 1992 and with a resolution to
allocate to the Company's shareholders prior to the aforementioned issuance,
the Company issued 39,984,124 registered stock options (Series 2). Each
stock option entitles the holders to acquire an ordinary share of NIS. 1.-
par value each in consideration for a payment of the exercise price of NIS.
4.80 (linked to the consumer price index). The last day for exercising
options (Series 2) is on February 28, 1997.
As of the balance sheet date 16 stock options have been exercised. The
balance of stock options outstanding is 39,984,108 options.
d. Subsequent events
-----------------
After the balance sheet date until February 1, 1994, 7,777,130 debentures
(Series 2) (see note 13.B.) have been converted into 1,555,426 ordinary
shares of NIS. 1.- par value each.
<PAGE>
NOTE 18 - CAPITAL (CONTINUED)
e. Earnings per ordinary share
---------------------------
1. The net income used in computing earnings per NIS. 1.- par value of
shares:
Adjusted NIS. (thousands)
-------------------------
Year ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
The net income used in computing
primary earnings per share 43,791 52,523 32,085
Add - theoretical income deriving from:
Exercise of options (series 1) - 1,777 -
Exercise of options (series 2) 1,608 8,021 -
Exercise of options (series A) - 3,454 -
Exercise of debentures (series 1) 1,677 - -
Exercise of debentures (series 2) (734) - -
----- ------ ------
Net income used in computing
diluted earnings per share 46,342 65,775 32,085
====== ====== ======
2. The par value of shares used in computing earning per NIS. 1.- par
value share:
Adjusted NIS. (thousands)
-------------------------
Year ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
Share capital used in computing
primary earnings per share 120,318 117,501 119,500
Add-share capital that may derive from:
Exercise of options (series 1) - 17,494 -
Exercise of options (series 2) 39,984 37,437 -
Exercise of options (series A) - 13,105 -
Exercise of debentures (series 1) 10,000 - -
Exercise of debentures (series 2) 28,944 - -
------- ------ -------
The total share used in computing
diluted earnings per share 199,246 185,537 119,500
======= ======= =======
3. In 1992: in computing the diluted earnings per share the following were
not included, because of their anti-dilutive effect:
Debentures (series 1)
Debentures (series 2)
4. For examining the probability of conversion or exercise of convertible
securities, the present value was computed using a capitalization rate
of 3% (1992 - 2.5%, 1991 - 3.5%) for securities linked to the index and
3.5% (1992 - 4%, 1991 - 5%) for securities linked to the exchange rate
of the U.S. dollar.
<PAGE>
NOTE 19 - CAPITAL RESERVES
Adjusted NIS. (thousands)
-------------------------
Year ended December 31,
-----------------------
Nominal values 1993 1992
-------------- ---- ----
Share premium 60,668 59,286
Share of the Company and a subsidiary
in the revaluation reserve of an affiliate 240 126
------ ------
60,908 59,412
====== ======
See also Note 28.C.
NOTE 20 - COST OF SALES
Adjusted NIS. (thousands)
-------------------------
Year ended December 31,
-----------------------
1993 1992(*) 1991(*)
Material used: ---- ------- -------
--------------
Crude oil and refined
petroleum products 712,950 784,667 784,381
Raw materials and
auxiliary materials 42,664 40,564 41,994
Finished luboil
products purchased 2,084 2,676 1,599
------- ------- -------
757,698 827,907 827,974
------- ------- -------
Labor and sub-contract work
---------------------------
Labor (including
related expenses) 8,764 9,658 8,819
Sub-contract work -
(refining and terminal
charges) 62,272 80,825 91,427
------- ------- -------
71,036 90,483 100,246
------- ------- -------
Production costs 41,714 49,506 43,370
------- ------- -------
Depreciation 2,085 2,277 2,315
------- ------- -------
Automobiles - - 14,283
------- ------- -------
Batteries 5,172 10,029 10,366
------- ------- -------
Total cost of sales 877,705 980,202 998,554
======= ======= =======
Increase (decrease) in inventories (102,926) 30,067 (274,606)
======= ======= =======
(*) Reclassified, Note 2.N.
<PAGE>
NOTE 21 - GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses include a provision for doubtful
receivables and receivables written off amounting to NIS. 2,303 thousand
(1992 - NIS. 2,927 thousand; 1991 - NIS. 2,058 thousand).
NOTE 22 - FINANCING INCOME, NET
a. Includes income of NIS. 7,877 thousand resulting from the retroactive
adjustment of a subsidiary company's liability prescribed by law in
connection with customers' deposits. Furthermore, in the year of
account, income of NIS. 4,322 thousand is included resulting from
cancellation of provision for interest and linkage increments. The
cancellation became possible as a result of receiving final tax
assessments in respect of previous years.
b. In the year 1992, income of NIS. 5,096 thousand is included resulting
from a reduction in the discount rate on capital notes of related
parties from 20% to 11%. (see Notes 2.H. and 6).
NOTES 23 - TAXES ON INCOME
a. The Company opted to be taxed commencing from the tax year 1986 and ending
in the tax year 1991 under the Income Tax Regulations (Rules Relating to
the Bookkeeping of Foreign Invested Companies and of Certain Partnerships
and to the Determination of their Taxable Income) - 1986. Commencing from
the tax year 1992, the Company opted not to be taxed under the above
mentioned income tax regulations. Beginning from the tax year 1992 (Sonol,
Supergas and Aloc in prior years too) the taxable income of the Company and
its aforesaid subsidiaries is computed under the Income Tax Law
(Inflationary Adjustments) - 1985.
Vulcan, having the status of an approved enterprise, is entitled to a
reduced income tax rate in accordance with the the Law for the
Encouragement of Capital Investments - 1959. A portion of the benefits
terminated in 1992 (approx. 40%) and the remaining part will conclude in
1995. Up to the date of these financial statements, Vulcan complied with
all the conditions required a result of its approved enterprise status.
<PAGE>
NOTES 23 - TAXES ON INCOME (CONTINUED)
b. The provision for taxes on income in the statements of income consists of:
Adjusted NIS. (thousands)
-------------------------
Year ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
Current taxes including
inflationary erosion of
advance tax payments 30,029 39,172 21,428
Deferred taxes, net (*) (863) (4,766) 3,471
------ ------ ------
29,166 34,406 24,899
Overprovisions pertaining to
prior years, net (4,145) - (657)
------ ------ ------
25,021 34,406 24,242
====== ====== ======
(*) See note 16.C.
c. Final tax assessments
---------------------
The Company, Supergas, Aloc, Sonapco, Sprint, Chem Ami and Sonol Yad
Mordechai have received final tax assessments through tax year 1991. Sonol
and Vulcan have received final tax assessments through the tax year 1990.
d. Reconciliation between the theoretical tax on the reported income and the
-------------------------------------------------------------------------
tax on income charged in the statements of income
-------------------------------------------------
Adjusted NIS. (thousands)
-------------------------
Year ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
Taxes at statutory rate 39% 40% 41%
==== ==== ====
The theoretical tax at the
applicable tax rate 26,670 33,995 21,679
Erosion of advanced tax payments 859 810 1,312
Differences in the definition of
capital and assets for tax
purposes and others, net 1,637 992 1,908
Adjustment of deferred taxes due
to changes in the tax rate - (1,391) -
Taxes for prior years (4,145) - (657)
------ ------ ------
25,021 34,406 24,242
====== ====== ======
<PAGE>
NOTE 24 - ADJUSTMENT OF PROVISIONS
In prior years Sonol included in its financial statements certain provisions
for amounts that in the opinion of its management Sonol might be requested
to pay. These provisions have not been recognized for income tax purposes
and the tax has been paid.
The policy of Sonol is to estimate at every financial reporting date its
exposure as aforesaid prevailing of that date. Accordingly, Sonol
reflected in its statements of income the decrease of such provisions and
the cancellation of the remaining balance in the year ended December 31,
1991 amounted to NIS. 9,200 thousand, net after tax effect.
NOTE 25 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES
a. Floating and fixed charges
--------------------------
Adjusted NIS. (thousands)
--------------------------
December 31, 1993 Collateralized by
----------------- -----------------
Short-term bank Floating charges on
credits 1,923 current assets of the
main subsidiaries.
Loans from others Floating charges on
83,266 current assets of Sonol.
Accounts payable and credit Floating charges on
balances (including accrued current assets of Sonol
interest on short-term
bank loans) 225
Long-term bank loans 1,682 Floating charge on
current assets of Sonol
and fixed charges on all
the assets of Vulcan and
fixed charges on part of
the fixed assets of
Milchen.
Investment grant 2,922 Floating charge on all
the assets of Vulcan.
Convertible debentures of Senior floating charge
a subsidiary 7,176 equal to all other senior
floating charges on all
the assets of Vulcan.
Convertible debentures 253,720 Floating charge
subordinated to other
floating charges on all
the assets of the
Company.
<PAGE>
NOTE 25 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
b. Liabilities and contingencies
-----------------------------
1. Indemnification and Insurance of senior officers
------------------------------------------------
A general meeting of the shareholders resolved to amend the Articles of
Association of the Company in order to enable the indemnification and
insurance of directors and senior officers according to the law. The
Company insures, subject to provisions of the law, the directors' and
senior officers' liability.
2 Pending litigation
------------------
a. Claims (mainly legal claims) arising in the normal course
of business have been lodged against subsidiaries and affiliated
companies. Regarding part of the said claims appropriate
provisions have been made. In the opinion of the companies'
managements, and based on the opinion of legal counsel, the
provisions made are sufficient to cover the possible costs.
b. A claim in the amount of approximately NIS. 4 million was lodged
against the Company. The plaintiffs are requesting,
inter alia, the enforcement of an operating agreement of a station
being operated by someone else, who, according to them,
transferred to them, with the Company's consent, the operation of
the station. The Company denies all of the plaintiffs' claims and
has submitted its defense arguments which counter all the
plaintiffs' claims. In the opinion of Sonol's legal counsel no
substantial risk exists in this claim.
c. A claim was submitted against Sonol by a customer owning
land leased to Sonol on which a station was built, the substance
of which is the cancellation of all agreements between
Sonol and the plaintiff and a monetary claim against Sonol in the
amount of approximately NIS. 4 million. In the opinion of Sonol's
legal counsel the claim's prospects (as far as the amount of the
claim is concerned) are weak.
d. Within the framework of arbitration proceedings between Sonol and
one of its agencies (which is owned and managed by a related party
to the Company who ceased to be a related party subsequent to the
balance sheet date), the agency submitted a claim in the amount of
approximately NIS. 36 million, primarily on account of the loss of
current and future earnings. The Company contends that this was
done contrary to the arbitration agreement between the parties.
Sonol applied to the Court to cancel the arbitration agreement. In
the opinion of Sonol's legal counsel, the plaintiff's prospects
are negligible.
<PAGE>
NOTE 25 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
e. In November 1993 a claim was lodged against an affiliated company
and against its shareholders, which include Sonol. The total
claim is approximately NIS. 15 million regarding the sale of fuel
products under restrictive trade practices (as the plaintiff
claims) among the fuel companies. In the opinion of the legal
counsels of Sonol and the affiliated company, the companies have a
good defense against the claim.
f. A claim in the amount of NIS. 688 thousand was lodged in court
against Vulcan by a former distributor of its products regarding
losses and damage to its goodwill caused by the cancellation of
the distribution agreement with him.
Vulcan has denied the above claim and has lodged a counter-claim
in court amounting to NIS. 1,057 thousand. In the opinion of
Vulcan's management, based on the opinion of legal counsel, the
claim probably will be denied.
C. The consolidated subsidiary companies are committed as follows:
Adjusted NIS. (thousands)
-------------------------
Future fixed assets expenditures 30,285
Rental leases and obligations in
accordance with signed agreements with agencies
for the use of their outlets for marketing
of Sonol's products over various periods(*) 17,939
Lease obligation for a computer
and other equipment over
periods of up to five years 1,252
(*) The rental liability for each of the years
following 1993 is as follows:
1994 1,275
1995 969
1996 973
1997 993
1998 994
1999 and thereafter 12,735
------
17,939
======
<PAGE>
NOTE 25 - COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Adjusted NIS. (thousands)
-------------------------
D. The consolidated subsidiaries have
contingent liabilities in respect of:
1. Acquisition of crude oil or refined products -
open letter of credits 8,471
2. The subsidiary Supergas has given a guarantee
in favor of a bank regarding a loan given by 1,450
the bank to a partnership (in which Supergas is
a partner).
3. The subsidiary Sonol has guaranteed the liability
of Vulcan in regard to the acquisition of the
land and building on which it is situated 3,022
4. The consolidated subsidiary, Granite Properties,
undertook to grant a shareholder's loan to
Otzem (see Note 6.a) 9,400
5. Various guarantees 1,816
6. Guarantees given to Customs and Excise
Department for payment of customs duty,
purchase and other taxes that may be
due to that Department by the Company,
Sonol and a related Company Unlimited account
NOTE 26 - RULING BY THE CONTROLLER OF RESTRICTIVE TRADE PRACTICES
On June 29, 1993, the Controller of Restrictive Trade Practices of the Ministry
of Industry and Commerce, submitted his ruling given in accordance with
paragraph 43(a) of the Law of Restrictive Trade Practices in regard to the
exclusive agreements between the oil marketing companies and filling station
operators stating that, in his opinion, such exclusive agreements are
restrictive agreements as defined by the Law of Restrictive Trade Practices -
1988.
The Controller, in his ruling, reviewed various types of relationships between
the oil marketing companies and station operators and stated that his ruling
will effect approximately 77% of the stations of the company's subsidiary, Sonol
Israel Ltd. and 75% of all the stations in the country. The ruling does not
relate to specific agreements and does not affect Company owned stations.
The Controller ruled that he is postponing the effective date of his decision
and recommendations in accordance with paragraph 43(e) of the Law of Restrictive
Trade Practices due to the "significant influences" that may result from his
decision and will allow the oil marketing companies to protest the decision
within thirty days of the receipt of his ruling by the Court of Restrictive
Trade Practices.
<PAGE>
NOTE 26 - RULING BY THE CONTROLLER OF RESTRICTIVE TRADE PRACTICES (CONTINUED)
The controller's ruling will not be considered as prima facie evidence in any
legal proceedings unless the Court of Restrictive Trade Practices will so
determine.
Sonol has filed a protest to the Court for Restrictive Trade Practices.
At this time, it is too early to estimate whether the ruling of the Controller
will be confirmed by the Court of Restrictive Trade Practices and if so, the
effects of the ruling on the overall fuel market, in general, and on the Company
in particular.
NOTE 27 - TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
a. Benefits to interested parties and transactions with them.
----------------------------------------------------------
1. Finance income and expenses from interested parties
---------------------------------------------------
Year ended December 31,
-----------------------------
1993 1992 1991
---- ---- ----
NIS. in Thousands
-----------------
Adjusted Nominal Nominal
-------- ------- -------
Financing income 729 536 717
Financing expenses 14 1,233 1,002
- Transactions conducted in the normal course of the Company's
consolidated business with banking groups and others having and
indirect interest in the Company have not been separately disclosed.
- In 1992, the Company paid commission in the amount of NIS. 3,057
thousand to indirect interested parties for public offerings of shares,
options and debentures.
2. Benefits to interested parties
------------------------------
Year ended December 31,
Number -----------------------------
of 1993 1992 1991
persons ---- ---- ----
------- NIS. in Thousands
-----------------
(1) Interested party
employed in the group 1 970 834 784
(2) Directors (in 1991 -1) 3 126 123 72
<PAGE>
NOTE 27 - TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(CONTINUED)
3. Transactions and commitments with interested and related parties
----------------------------------------------------------------
Year ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
NIS. in Thousands
-----------------
Income:
Sales (*) 40,160 18,104 17,010
Management fee 472 741 780
(Amortization) addition to
capital notes, net (71) 7,448 396
Expenses:
Management fee - 1,565 4,064
Rent 500 478 481
Participation in expenses 106 60 169
(*) All the sales to interested parties are made in the normal course
of business and under accepted financial conditions.
A consolidated subsidiary paid management fees to related parties
in the amount of NIS. 287 thousand (1992 - 311 thousand; 1991 -
370 thousand).
b. Balances with interested and related parties
--------------------------------------------
Balances with interested and related parties are detailed in the
financial statements and the notes attached thereto.
<PAGE>
NOTE 28 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS
The financial records of the Company and its consolidated subsidiaries are
maintained on a current basis in historical nominal New Israel Shekels.
The translated consolidated financial statements, stated in U.S. dollars, have
been prepared for use in connection with the preparation of the financial
statements of a U.S. shareholder.
The functional currency of the Company is the U.S. Dollar. Despite the
significant reduction in Israel's rate of inflation, the Company has continued
to prepare its consolidated financial statements in U.S. dollars in accordance
with translation principles identical to those prescribed by Statement of
Financial Accounting Standards No. 52 ("F.A.S.B. 52"), based on the historical
nominal amounts.
CONSOLIDATED BALANCE SHEETS
---------------------------
(In thousands)
Translated to U.S. Dollars
December 31,
---------------------------
1993 1992
-------- --------
Current assets:
Cash and cash equivalents 1,833 5,296
Investments in securities 3,792 32
Accounts receivable and debit balances 107,485 85,959
Inventories 102,542 131,754
------- -------
215,652 223,041
------- -------
Investments:
Unconsolidated subsidiaries and others 20,482 15,251
Compulsory Government loans 366 660
------- -------
20,848 15,911
------- -------
Long-term receivables 4,145 4,113
------- -------
Property, plant and equipment 158,531 139,949
Less: Accumulated depreciation 67,783 59,087
------- -------
90,748 80,862
------- -------
Other assets and deferred charges, net 5,278 5,069
------- -------
336,671 328,996
======= =======
<PAGE>
NOTE 28 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS (CONTINUED)
CONSOLIDATED BALANCE SHEETS
---------------------------
(In thousands)
Translated to U.S. Dollars
--------------------------
December 31,
------------
1993 1992
---- ----
Current liabilities:
Short-term bank credits 28,823 33,819
Loans from others 3,417 4,690
Accounts payable and
credit balances 66,803 70,557
------- -------
99,043 109,066
------- -------
Long-term liabilities:
Long-term loans 2,558 2,418
Debentures convertible into shares
of the company (I) 80,994 60,627
Debentures convertible into shares
of a subsidiary 2,403 2,308
Customers' deposits 17,587 20,763
Liabilities for post-retirement benefits, net 1,613 1,659
Deferred taxes, net (II) 2,864 8,238
Capital notes issued to affiliated companies 95 411
------- -------
108,114 96,424
------- -------
Minority shareholders' interest
in consolidated subsidiaries 1,687 1,557
------- -------
Shareholders' equity:
Capital 54,965 54,831
Capital reserves (II) 32,371 31,874
Retained earnings 40,491 35,244
------- -------
127,827 121,949
------- -------
336,671 328,996
======= =======
<PAGE>
NOTE 28 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS (CONTINUED)
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In thousands)
Translated to U.S. Dollars
--------------------------
Year ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
Revenues:
Sales 578,338 643,475 585,994
Less: Government imposts 207,119 221,100(*) 181,081(*)
------- ------- -------
Net sales 371,219 422,375 404,913
Other income, net 872 762 1,602
------- ------- -------
372,091 423,137 406,515
------- ------- -------
Costs and expenses:
Cost of sales 293,536 337,653(*) 335,295(*)
Selling, general and
administrative expenses 46,034 47,758 44,672
Depreciation and amortization 9,078 8,180 7,774
Financing (income) expenses, net (3,604) 1,611 (5,588)
------- ------- -------
345,044 395,202 382,153
------- ------- -------
Operating income before taxes on income 27,047 27,935 24,362
Taxes on income 8,591 10,626 6,339
------- ------- -------
Operating income after taxes on income 18,456 17,309 18,023
Company's share in income
of affiliates, net 355 510 885
Minority interest in income
of consolidated subsidiaries (198) (11) (129)
------- ------- -------
18,613 17,808 18,779
Cumulative effect of the change
in accounting for taxes on income (III) 6,728 - -
------- ------- -------
Net income 25,341 17,808 18,779
======= ======= =======
(*) Reclassified
<PAGE>
NOTE 28 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS (CONTINUED)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
(In thousands)
Translated to U.S. Dollars
--------------------------
Retained
Capital Reserves Earnings Total
------- -------- --------- -----
Balance as at January 1, 1991 5,153 3,247 74,399 82,799
Changes in 1991:
Net income for the year - - 18,779 18,779
Dividend, net - - (25,451) (25,451)
------ ------ ------ ------
Balance as at December 31, 1991 5,153 3,247 67,727 76,127
Changes in 1992:
Net income for the year - - 17,808 17,808
Cancellation of deferred shares (2,686) 2,686 - -
Issuance of ordinary shares 8,505 31,865 - 40,370
Issuance of stock dividend 43,857 (5,933) (37,924) -
Exercise of stock options 2 9 - 11
Dividend - - (12,367) (12,367)
------ ------ ------ ------
Balance as at December 31, 1992 54,831 31,874 35,244 121,949
Changes in 1993:
Net income for the year - - 25,341 25,341
Exercise of stock options 134 497 - 631
Proposed dividend - - (20,094) (20,094)
------ ------ ------ ------
Balance as at December 31, 1993 54,965 32,371 40,491 127,827
====== ====== ====== =======
<PAGE>
NOTE 28 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS (CONTINUED)
(I) During 1992 the company completed initial public offerings of shares,
options and debentures.
The proceeds of the public offerings have been allocated to the securities
issued on the basis of their fair market prices at the beginning of
trading on the stock exchange. As a result, the debentures are carried at
their discounted values as follows:
U.S. Dollars (thousands)
-------------------------
December 31,
------------
1993 1992
---- ----
Debentures (Series 1 and 2) - face value 84,920 65,338
Discount (Series 1) (*) 3,976 4,711
------ ------
80,994 60,627
====== ======
(*) The discount is being amortized over the remaining period until their
maturity.
See note 13.B.
(II) In the public offering in February 1992, the company issued stock options
to employees. The excess of the value of the options granted over the
cost to the employees in the amount $ 1,296 (thousand) was charged to the
statement of income and credited to capital reserves. On this amount the
company recorded deferred tax benefits in the amount of $ 548 (thousand)
which will be recognized for tax purposes when the options are transferred
to the employees and income tax will be paid thereon.
(III) As of January 1, 1993, the Company adopted F.A.S.B. 109 of the American
Institute of Certified Public Accountants. The cumulative effect of this
change as of December 31, 1992, $ 6,728 thousand, was recorded by the
Company on a consolidated basis as a deferred taxes asset and reduced the
deferred taxes liability on the financial statements.
(IV) As of 1993 the Company adopted F.A.S.B. 115 (Accounting for certain
Investments in Debt and Equity Securities) of the American Institute of
Certified Public Accountants. The effect of the change in 1993 was to
increase Marketable Securities by $ 18 thousands, Net Income by $ 11
thousands and Taxes on Income by $ 7 thousands. The change had no effect
on prior years.
<PAGE>
LIST OF THE MAIN SUBSIDIARIES AND AFFILIATES
--------------------------------------------
Holding and Control
at balance sheet date
---------------------
%
-
Consolidated Subsidiaries
- - -------------------------
Sonol Israel Ltd. 100
Vulcan Batteries Ltd. 82
Sprint Motors Ltd. 100
Milchen Sonol Agency Ltd. 67
Allied Oils and Chemicals Ltd. 100
Sonol Yad Mordechai (1972) Ltd. 59
Chem Ami Ltd. 100
Sonapco Bank Street Corporation 100
Supergas Israel Gas Distribution Company Ltd. 100
Supergas Hanegev Ltd. 65
Supergas Rehovot 89 Ltd. 90
Supergas Heating (1984) Ltd. 100
Granite Hacarmel Holdings (1993) Ltd. 100
Granite Hacarmel Properties (1993) Ltd. 100
Granite Hacarmel O.Y. Holdings Ltd. 100
Affiliated Companies
- - --------------------
Aviation Services Ltd. 22.5
Tanker Services Ltd. 25
United Petroleum Export Company Ltd. 25
<PAGE>
Igal Brightman
& Co.
[Logo] 3 Daniel Frisch Street Telephone: 972 (3) 696-4263
--------------
Tel Aviv 64731, ISRAEL Facsimile: 972 (3) 696-0130
P.O.B. 16593, Tel Aviv 61164
AUDITOR'S REPORT TO THE SHAREHOLDERS
OF AM-HAL LTD.
--------------
We have audited the balance sheets of AM-HAL LTD. As of
December 31, 1993 and 1992, the statements of profit and loss,
changes in shareholders' equity and cash flows for each of the
three years then ended. Our audits were made in accordance with
generally accepted auditing standards, including those prescribed
under the Auditor's Regulations (Auditor's Mode of Performance)
1973, and accordingly we have applied such auditing procedures as
we considered necessary in the circumstances.
The primary financial statement of the company were drawn up
in accordance with generally accepted accounting principles in
Israel, and as explained in note 2B, were accordingly presented
in terms of constant New Israeli Shekels. The attached financial
statements have been prepared at the request of a shareholder on
the basis of the primary financial statements by adjusting those
statements to generally accepted accounting principles in the United
States as explained in note 2E.
In our opinion, the attached financial statements present
fairly, in terms of constant New Israeli Shekels, the financial
position of the company as of December 31, 1993, and 1992, the
results of its operations, changes in shareholders' equity and
cash flows for each of the three years then ended, in conformity
with generally accepted accounting principles in the United States.
Pursuant to section 211 of the Companies Ordinance (New
Version) 1983, we state that we have received all the information
and explanations required by us and our opinion on the above
statements is given according to the best of our knowledge and
the explanations received by us and as shown by the books of the
company.
/s/ Igal Brightman & Co.
------------------------
IGAL BRIGHTMAN & CO.
Certified Public Accountants
Tel-Aviv, February 14, 1994.
<PAGE>
Igal Brightman
& Co.
[Logo] 3 Daniel Frisch Street Telephone: 972 (3) 696-4263
--------------
Tel Aviv 64731, ISRAEL Facsimile: 972 (3) 696-0130
P.O.B. 16593, Tel Aviv 61164
To the Board of Directors of Am-Hal Ltd.
At your request, we have audited the translation into U.S.
dollars of the audited financial statements of Am-Hal Ltd. as of
December 31, 1993 which were prepared in adjusted N.I.S. and our
audited report on them was made on February 14, 1994. The
translation of the above mentioned financial statements into U.S.
dollars was made solely for the purpose of Ampal-American Israel
Corporation (hereafter - Ampal) and in accordance with the
guidelines described in Note 2, which were prescribed by Ampal.
Our audit of the translation was made in accordance with
generally accepted auditing standards, including those prescribed
under the Auditors Regulations (Auditors Mode of Performance)
1973, and accordingly we have applied such auditing procedures as
we considered necessary in the circumstances.
In our opinion the attached financial data was translated into
U.S. dollars in accordance with the guidelines described in Note
2.
/s/ Igal Brightman & Co.
-------------------------
IGAL BRIGHTMAN & CO.
Certified Public Accountants
Tel-Aviv, February 20, 1994
<PAGE>
COHEN, EYAL, YEHOSHUA & CO.
Certified Public Accountants(Isr.)
51 Weismann St., PO BOX 21592 COHEN ELIAHU C.P.A.(ISR.)
TEL AVIV 61214, ISRAEL 61214 EYAL ITAMAR C.P.A. (ISR.)
TEL 03-6952210, FAX 03-6953517 YEHOSHUA NISSIM C.P.A. (ISR.)
AUDITOR'S REPORT TO THE SHAREHOLDERS OF
---------------------------------------
AMPAL ENTERPRISES LTD.
----------------------
SPECIAL PURPOSE STATEMENTS
--------------------------
We have examined the Balance Sheet of Ampal Enterprises Ltd.
as at December 31, 1993, the Statement of Profit and Loss and the
Statement of Changes in Shareholders' Equity for the year ended
on that date. Our examination was made in accordance with
generally accepted auditing standards, including those prescribed
under the Auditor's Regulations (Auditor's Mode of Performance),
1973, and accordingly we have applied such auditing procedures as
we considered necessary in the circumstances.
The above financial statements have been prepared on the
basis of the historical cost adjusted to reflect the changes in
the general purchasing power of the Israel currency, in
accordance with rules prescribed by the Institute of Certified
Public Accountants in Israel. Condensed nominal Israel currency
data, on the basis of which the adjusted financial statements
were prepared, is presented in Note 6.
The data in the financial statements relating to the
investment in the included company and to the Company's share in
its profits, amounting to N.I.S. 1,326 thousand, are based on
financial statements examined by other Certified Public
Accountants.
In our opinion, based on our examination and the opinion of
other Certified Public Accountants, as aforesaid above, the
abovementioned financial statements, present fairly, in
conformity with generally accepted accounting principles, the
financial position of the Company as at December 31, 1993, the
results of its operations and the changes in its shareholders'
equity for the year ended on that date. Also, in our opinion,
the financial statements based on the nominal data (Note 6)
present fairly, in nominal terms, the financial position of the
Company as at December 31, 1993, and the results of its
operations and the changes in its shareholder's equity for the
year ended on that date, on the basis of the historical cost
convention.
Pursuant to Section 211A of the Companies Ordinance (New
Version), 1983, we state that we have obtained all the
information and explanations we have required and that our
opinion on the above financial statements is given according
to the best of our information and the explanations received by
us and as shown by the books of the Company.
<PAGE>
Pursuant to the United States Securities and Exchange
Commission requirements, we state that the auditing standards and
procedures mentioned above are Israel auditing standards and
procedures, which are substantially similar to standards in the
United States.
/s/ Cohen, Eyal, Yehoshua & Co.
--------------------------------
Cohen, Eyal, Yehoshua & Co.
Certified Public Accountants (Isr.)
March 8, 1994
<PAGE>
FAHN, KANNE & Co.
Certified Public Accountants (Isr.)
5, DRUYANOV ST., TEL-AVIV 63143 Number: 52
P.O.B. 11535, TEL-AVIV 61114 Tel-Aviv, March 8, 1994
TEL 03-294946, FAX 03-201386
AUDITOR'S REPORT TO THE SHAREHOLDERS OF
AMPAL FINANCIAL SERVICES LTD.
---------------------------------------
We have examined the Balance Sheets of AMPAL FINANCIAL SERVICES
LTD. as of December 31, 1993 and 1992 and the Statements of
Income, Changes in Shareholders' Equity and the Statements of
Cash Flows for the three years ended December 31, 1993, 1992 and
1991. We have also examined the data in nominal values in the
Balance Sheets as of December 31, 1993 and 1992 and in the
Statements of Income and the Statements of Cash Flows for the
three years ended December 31, 1993, 1992 and 1991 (Note 12).
Our examination was made in accordance with generally accepted
auditing standards, including those prescribed under the Auditors
Regulations (Auditors Mode of Performance) 1973, and accordingly
we have applied such auditing procedures as we considered
necessary in the circumstances.
The above financial statements were prepared on the basis of the
historical cost convention adjusted for changes in the general
purchasing power of the Israeli Shekel according to Opinions
issued by the Institute of Certified Public Accountants in
Israel.
In our opinion, the above financial statements present fairly in
conformity with generally accepted accounting principles, the
financial position of the Company as of December 31, 1993 and
1992, and the results of its operations and its cash flows for
the three years ended December 1993, 1992 and 1991. Also, in our
opinion, the financial statements based on nominal data (Note 12)
present fairly, in conformity with generally accepted accounting
principles, the financial position of the Company as of December
31, 1993 and 1992, and the results of its operations and its cash
flows for the three years ended December 31, 1993, 1992 and 1991,
on the basis of the historical cost convention.
We also state that we have obtained all the information and
explanations we have required and that our opinion on the above
financial statements is given according to the best of our
information and the explanations received by us and as shown by
the books of the Company.
Pursuant to the United States Securities and Exchange Commission
requirements, we state:-
a) The abovementioned generally accepted accounting principles
were supplied on a consistent basis.
<PAGE>
b) The auditing standards and procedures mentioned above are
Israeli auditing standards and procedures which are
substantially similar to the standards in the United States.
/s/ FAHN, KANNE & CO.
---------------------
FAHN, KANNE & CO.
Certified Public Accountants (Isr.)
<PAGE>
SHLOMO ZIV & C0.
Certified Public Accountants (Isr.)
Tel-Aviv 61500 Gibor House
6 Kaufman St. P.O.B. 50322
Tel. 03-5179611 Fax 03-5179418
Haifa 31018 2 Hanamal St. P.O.B. 1886
Tel. 04-675025-6 Fax 04-679461
Report of Independent Public Accountants
----------------------------------------
To the Shareholders of Ampal Holdings (1991) Ltd.
We have audited the accompanying balance sheet of Ampal Holdings
(1991) Ltd. (an Israeli corporation) as of December 31, 1993 and
1992, and the related statements of income, changes in
shareholders' equity and cash flows for each of the two years
in the period ended December 31, 1993, translated into U.S.
dollars. 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 conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit included 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 provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Ampal Holdings (1991) Ltd., as of December 31, 1993 and 1992,
and the results of its operations, changes in its shareholders'
equity and cash flows for each of the two years in the period
ended December 31, 1993, in conformity with generally accepted
accounting principles.
/s/ Shlomo Ziv & Co.
--------------------
Shlomo Ziv & Co.
Certified Public Accountants
March 23, 1994
<PAGE>
[LOGO] HAFT & HAFT & CO.
------------------
INCL. STRAUSS, LAZAR & CO.
Certified Public Accountants (Isr.)
AUDITOR'S REPORT TO THE SHAREHOLDER OF
AMPAL (ISRAEL) LTD.
--------------------------------------
SPECIAL PURPOSE STATEMENTS
--------------------------
We have examined the Consolidated Balance Sheet of Ampal
(Israel) Ltd. and its subsidiaries as at December 31, 1993 and
1992, the Consolidated Statement of Profit and Loss, the
Statement of Changes in Shareholders' Equity for the two years
ended December 31, 1993 and the consolidated statement of cash
flows for the year ended December 31, 1993. Our examination was
made in accordance with generally accepted auditing standards,
including those prescribed under the Auditors Regulations
(Auditor's Mode of Performance), 1973, and accordingly we have
applied such auditing procedures as we considered necessary in
the circumstances.
The above financial statements have been prepared on the
basis of the historical cost adjusted to reflect the changes in
the general purchasing power of the Israel currency, in
accordance with directives issued by the Institute of Certified
Public Accountants in Israel. Condensed nominal Israel currency
data, on the basis of which the adjusted financial statements of
the company were prepared, is presented in Note 23.
The financial statements of consolidated subsidiaries whose
assets constitutes 5% (1992: 24%) of the total assets included in
the consolidated balance sheet, and whose income constitute 4%
(1992: 60%) of the total income in the Statement of Profit and
Loss were examined by other auditors. Also, the financial
statements of included companies which were presented at their
book equity, were examined by other auditors.
In our opinion, based on our examination and on the reports
of other auditors as stated above, the above financial
statements present fairly, in the conformity with generally
accepted accounting principles, the financial position of the
Company and its consolidated subsidiaries as at December 31, 1993
and 1992, the results of their operations, and the changes in
shareholders' equity for the two years ended December 31, 1992,
and their cash flows for the year ended on that date. Also in
our opinion, the unconsolidated financial statements based on
nominal data (Note 23) present fairly, the unconsolidated
financial position of the Company as at December 31, 1993 and
1992, and the unconsolidated results of its operations, changes
in the shareholders' equity, and cash flows, for the three years
ended December 31, 1993, on the basis of the historical cost
<PAGE>
convention.
We also state that we have obtained all the information and
explanations we have required and that our opinion on the above
financial statements is given according to the best of our
information and the explanations received by us and as shown by
the books of the Company.
-----------------------------------------------------------------
TEL AVIV: HAFT BUILD. 51 WEIZMAN ST. P.O.B, 18115. CODE 61180.
TEL. 972-3-6967231, FAX 972-3-6953517
MAYA BUILD. 74 DEREKH PETAH TIKVA. CODE 67215. TEL. 972-3-
5613545, FAX. 972-3-5613824
HAIFA: 55 PINHAS MARGOLIN ST. P.O.B. 8081, CODE 31080. TEL. 972-
4-525202, FAX. 972-4-555813
JERUSALEM: 16 BILU ST. P.O.B. 790, CODE 91007. TELEPHONE 972-2-
638276, FAX. 972-2-635534
Pursuant to the United States Securities and Exchange
Commission requirements, we state:
(a) The above-mentioned generally accepted accounting principles
were supplied 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.
/s/ H.H.S.L. Haft & Haft & Co.
------------------------------
H.H.S.L. Haft & Haft & Co.
Certified Public Accountants (Isr.)
March 8, 1994
<PAGE>
Number: 480
Tel-Aviv, March 10, 1994
AUDITOR'S REPORT TO THE SHAREHOLDERS OF
AMPAL INDUSTRIES (ISRAEL) LTD.
---------------------------------------
We have examined the Balance Sheets of AMPAL INDUSTRIES (ISRAEL)
LTD. as of December 31, 1993 and 1992 and the Statements of
Income, Changes in Shareholders' Equity and the Statements of
Cash Flows for the two years ended December 31, 1993, and 1992.
We have also examined the data in nominal values in the Balance
Sheets as of December 31, 1993 and 1992 and in the Statements of
Income and the Statements of Cash Flows for the three years ended
December 31, 1993, 1992 and 1991 (Note 13). Our examination was
made in accordance with generally accepted auditing standards,
including those prescribed under the Auditors Regulations
(Auditor's Mode of Performance) 1973, and accordingly we have
applied such auditing procedures as we considered necessary in
the circumstances.
The above financial statements were prepared on the basis of the
historical cost convention adjusted for the changes in the general
purchasing power of the Israeli Shekel according to Opinions
issued by the Israel Institute of Certified Public Accountants in
Israel.
In our opinion, the data included in the Company's financial
statements relating to the equity in an investee company and in a
limited partnership and relating to the Company's share in the
results of their operations are based on financial statements
which were audited by other auditors.
The abovementioned financial statements do not include the
consolidated financial statements of the Company and its
subsidiary as required by Opinion No. 15 of the Institute for
Certified Public Accountants in Israel.
In our opinion, except as stated above and relying on our
examination and the opinions of other auditors as mentioned
above, the above financial statements present fairly in
conformity with generally accepted accounting principles, the
financial position of the Company as of December 31, 1993 and
1992, and the results of its operations and its cash flows for
the years then ended. Also, in our opinion, the financial
statements based on nominal data (Note 13) present fairly, in
conformity with generally accepted accounting principles, the
financial position of the Company as of December 31, 1993 and
1992, and the results of its operations and its cash flows for
the three years ended December 31, 1993, 1992 and 1991, on the
basis of the historical cost convention.
Pursuant to Section 211(A) of the Companies Ordinance (New
<PAGE>
Version), we state that we have obtained all the information and
explanations we have required and that our opinion on the
financial statements is given according to the best of our
information and the explanations received by us and as shown by
the books of the company.
Pursuant to the United States Securities and Exchange Commission
requirements, we state:-
a) The abovementioned generally accepted accounting principles
were supplied on a consistent basis.
b) The auditing standards and procedures mentioned above are
Israeli auditing standards and procedures which are
substantially similar to the standards in the United States.
/s/ FAHN, KANNE & CO.
---------------------
FAHN, KANNE & CO.
Certified Public Accountants (Isr.)
<PAGE>
COHEN, EYAL, YEHOSHUA & CO.
Certified Public Accountants(Isr.)
51 Weizmann St., PO BOX 21592 COHEN ELIAHU C.P.A.(ISR.)
TEL AVIV 61214, ISRAEL 61214 EYAL ITAMAR C.P.A. (ISR.)
TEL 03-6952210, FAX 03-6953517 YEHOSHUA NISSIM C.P.A. (ISR.)
AUDITOR'S REPORT TO THE SHAREHOLDERS OF
---------------------------------------
AMPAL PROPERTIES LTD.
---------------------
SPECIAL PURPOSE STATEMENTS
--------------------------
We have examined the Balance Sheet of Ampal Properties Ltd.
as at December 31, 1993, the Statement of Profit and Loss, the
Statement of Changes in Shareholders' Equity and the Statement of
Cashflows for the year ended on that date. Our examination was
made in accordance with generally accepted auditing standards,
including those prescribed under the Auditor's Regulations
(Auditor's Mode of Performance), 1973, and accordingly we have
applied such auditing procedures as we considered necessary in
the circumstances.
The above financial statements have been prepared on the
basis of the historical cost adjusted to reflect the changes in
the general purchasing power of the Israel currency, in
accordance with rules prescribed by the Institute of Certified
Public Accountants in Israel. Condensed nominal Israel currency
data, on the basis of which the adjusted financial statements
were prepared, is presented in Note 7.
A. The above financial statements do not include consolidated
financial statements of the Company with those of its
subsidiary as required by Opinion 15 of the Institute of
Certified Public Accountants in Israel.
B. The data in the financial statements relating to the
investment in the unconsolidated subsidiary and to the
Company's share in its profits, amounting to N.I.S. 1,330
thousand, are based on financial statements examined by
other Certified Public Accountants.
In our opinion, based on our examination and the opinion of
other Certified Public Accountants, as aforesaid in Paragraph B,
the abovementioned financial statements, except for the non-
inclusion of consolidated financial statements as aforesaid in
Paragraph A, present fairly, in conformity with generally
accepted accounting principles, the financial position of the
Company as at December 31, 1993, the results of its operations,
the changes in its shareholders' equity and its cash flows for
the year ended on that date. Also, in our opinion, the financial
statements based on the nominal data (Note 7) present fairly, in
nominal terms, the financial position of the Company as at
December 31, 1993, and the results of its operations, the changes
<PAGE>
in its shareholders equity and its cash flows for the year then
ended, on the basis of the historical cost convention.
Pursuant to Section 211A of the Companies Ordinance (New
Version), 1983, we state that we have obtained all the
information and explanations we have required and that our
opinion on the above financial statements is given according to
the best of our information and the explanations received by us
and as shown by the books of the Company.
Pursuant to the United States Securities and Exchange
Commission requirements, we state that the auditing standards and
procedures mentioned above are Israel auditing standards and
procedures, which are substantially similar to standards in the
United States.
/s/ Cohen, Eyal, Yehoshua & Co.
--------------------------------
Cohen, Eyal, Yehoshua & Co.
Certified Public Accountants (Isr.)
March 10, 1994
<PAGE>
S A MORRIS MORRIS BRANKIN & CO.
W J MATTHEW CHARTERED 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
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Shareholders of
BANK HAPOALIM (CAYMAN) LTD
We have audited the accompanying consolidated balance sheet of
Bank Hapoalim (Cayman) Ltd. (a subsidiary of Bank Hapoalim B.M.)
as at December 31, 1993 and 1992, 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, 1993. These consolidated financial statements are the
responsibility of the Banks' management. Our responsibility is
to express an opinion on these consolidated financial statements
based on our audits. We did not audit the financial statements
of Hapoalim (Latin America) Casa Bancaria S.A., a consolidated
subsidiary, which statements reflect total assets and revenues
constituting 44.1% and 45.4% respectively of the related
consolidated totals at December 31, 1993 (1992: 43.3% assets,
47.5% revenues, 1991: 38.4% revenues). These statements were
audited by other auditors whose reports thereon have been
furnished to us, and our opinion expressed herein, insofar as it
relates to the amounts included for the subsidiary, is based
solely upon 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 audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
out audits and the reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, based upon our audits and the reports of other
auditors, the consolidated financial statements referred to above
present fairly in all material respects, the financial position
<PAGE>
of Bank Hapoalim (Cayman) Ltd. as at December 31, 1993 and 1992,
and its results of operations, changes in shareholders equity,
and its cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted
accounting principles.
/s/ Morris Brankin & Co.
------------------------
Morris Brankin & Co.
February 15, 1994
<PAGE>
TEL. (4) 532291 FAX (4) 515873 RONEL STETTNER & CO.
35 HAMEGINIM AVE. P.O.B. 466 CERTIFIED PUBLIC ACCOUNTANTS
HAIFA 31033 ISRAEL
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF
BAY HEART LIMITED
on Special-Purpose Financial Statements
---------------------------------------
We have audited the accompanying special-purpose balance sheet of
Bay Heart Limited (hereafter: the Company) as of December 31,
1993 and the related special-purpose statements of income and
changes in shareholders' equity for the year then ended. 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 audit.
We conducted our audit 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, the 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 audit provide a reasonable basis for our opinion.
The primary financial statements of the Company audited by us
were drawn up in accordance with accounting principles generally
accepted in Israel and in accordance with the Israel Securities
Regulations (Preparation of Financial Statements), 1993. The
primary financial statements were accordingly presented in terms
of constant New Israel Shekels. As information to Ampal
Industries, Inc. (hereafter: Ampal), a shareholder of the
Company, we state that, in terms of constant Shekels, the
aforesaid Israel accounting principles, are similar in all
material respects to accounting principles generally accepted in
the United States.
The accompanying special-purpose financial statements have been
prepared for the purpose of complying with the guidelines
submitted to us by Ampal and described in Note 2.
In our opinion, based on our audit, the accompanying special-
purpose financial statements of the Company as of and for the
year ended December 31, 1993, fairly present in all material
respects the primary financial statements as adjusted to comply
with the aforesaid guidelines of Ampal. We do not express an
opinion on the said guidelines. Our opinion on the primary
<PAGE>
financial statements of the Company was given on January 20,
1994.
This report is intended solely for the information and use of the
board of directors of the Company and of Ampal.
/s/ RONEL, STETTNER & CO.
-------------------------
RONEL, STETTNER & CO.
Certified Public Accountants
(Israel)
Haifa, January 21, 1994
<PAGE>
TEL. (4) 532291 FAX (4) 515873 RONEL STETTNER & CO.
35 HAMEGINIM AVE. P.O.B. 466 CERTIFIED PUBLIC ACCOUNTANTS
HAIFA 31033 ISRAEL
AUDITORS' REPORT TO THE SHAREHOLDERS OF
BAY HEART LIMITED
---------------------------------------
We have examined the accompanying Balance Sheets of Bay Heart
Limited (hereafter: the Company) as of December 31, 1992 and
1993, and the related Statements of Operations and Statements of
Changes in Shareholders' Equity and of Cash Flows for the three
years ended December 31, 1993. Our examination was made in
accordance with generally accepted auditing standards, including
those prescribed under the Auditors Regulations (Auditor's Mode
of Performance) 1973, and accordingly we have applied such
auditing procedures as we considered necessary in the
circumstances.
The financial statement of the Company were drawn up in
accordance with accounting principles generally accepted in
Israel and, as explained in note 2, were accordingly presented in
constant New Israel Shekels. Nominal financial statements are
presented in note 23.
In our opinion, the above financial statements present fairly the
financial position of the Company as at December 31, 1993, and
the results of its operations and its cash flows for the three
years ended December 31, 1993, in conformity with accounting
principles generally accepted in Israel. As information to Ampal
Industries, Inc., a shareholder in the Company, we also state
that, in terms of constant shekels, the aforesaid accounting
principles are similar in all material respects to accounting
principles generally accepted in the United States.
We further state that in our opinion the above financial
statements are presented in accordance with the Israel Securities
Regulations (Preparation of Financial Statements), 1993.
/s/ RONEL, STETTNER & CO.
-------------------------
RONEL, STETTNER & CO.
Certified Public Accountants
(Israel)
Haifa, January 20, 1994
<PAGE>
KOST
LEVARY
and
FORER
C.P.A. (ISRAEL)
Messrs. Ampal Ltd.
Gentlemen,
Re: Financial statements of Carmel Container Systems
(hereafter - "the Company") remeasured into U.S. dollars
--------------------------------------------------------
As you know, the Company publishes to the public in Israel
and in the United States financial statements in NIS adjusted to
the changes in the Consumer Price Index, in accordance with
Statements of the Institute of Certified Public Accountants in
Israel.
The annual financial statements of the Company for the year
1993, which were audited by us, and on which we expressed our
opinion on March 3, 1994, have been provided to you.
At your request we have translated into U.S. dollars,
according to the principles determined in SFAS 52, the
consolidated income statement figures for the year ended December
31, 1993, resulting from subtracting the income statement data
for the year ended December 31, 1993 from the audited income
statement data for the whole year 1993.
In our opinion, based upon our audit and the reports of the
other auditors, the nominal consolidated financial statements,
apart from the absence of the data regarding the effects of
inflation in Israel on the financial statements, present fairly,
in all material respects, the consolidated financial position of
the Company and its subsidiaries at December 31, 1993 and the
related consolidated results of operations and changes in
shareholders' equity for the year ended December 31, 1993, in
conformity with generally accepted accounting principles in
Israel and in the United States, on the basis of historical cost
convention, (as applicable to these financial statements such
principles are in all material respects identical, except for the
accounting for discount of debentures).
Also, in our opinion, the translation of the aforementioned
nominal figures into U.S. dollars is proper, and was made in
accordance with the principles set forth in SFAS 52.
<PAGE>
The aforementioned translated income statements and this
letter are designated solely for you as shareholders of the
Company and are not to be published or delivered to others.
Sincerely,
/s/ KOST, LEVARY AND FORER
--------------------------
KOST, LEVARY AND FORER
Certified Public Accountants
Tel-Aviv, Israel
March 3, 1994
<PAGE>
KOST
LEVARY
and
FORER
C.P.A. (ISRAEL)
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of CARMEL CONTAINER SYSTEMS LIMITED
We have audited the accompanying consolidated balance sheets
of Carmel Container Systems Limited (hereafter - the "Company")
and its subsidiaries as of December 31, 1992 and 1993, 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, 1993. 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 conducted our audits in accordance with generally
accepted auditing standards in the United States and in Israel,
including those prescribed by the Auditors (Mode of Performance)
Regulations (Israel), 1973. 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 provide a reasonable basis for our
opinion.
Financial statements of consolidated subsidiaries, the
assets of which at December 31, 1992 and 1993 constitute
approximately 23% and 24%, respectively, of total assets included
in the consolidated balance sheet and the revenues of which for
the years ended December 31, 1991, 1992 and 1993 constitute
approximately 25%, 29% and 30%, respectively, of total revenues
included in the consolidated statement of operations, have been
audited by other auditors. Our opinion expressed herein, insofar
as it relates to amounts included for these subsidiaries, is
based solely upon the reports of the other auditors.
The aforementioned consolidated 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, in accordance with statements No, 36 and 50 of the
Institute of Certified Public Accountants in Israel.
In our opinion, based upon our audit and the reports of the
<PAGE>
other auditors, the aforementioned financial statements present
fairly, in all material respects the consolidated financial
position of the Company and its subsidiaries at December 31, 1992
and 1993 and the related consolidated results of operations,
changes in shareholders' equity and cash flows for the each of
the three years ended December 31, 1993, in conformity with
generally accepted accounting principles in Israel and in the
United States, (as applicable to these financial statements such
principles are in all material respects identical considering the
remeasured Israeli currency data, as described in the preceding
paragraph, to the historical costs, except for the accounting for
discount debentures, See Note 25).
Also, in our opinion, the financial statements comply with
the requirements of the Israeli Securities Regulations
(Preparation of Annual Financial Statements), 1993.
Sincerely,
/s/ KOST, LEVARY AND FORER
--------------------------
KOST, LEVARY AND FORER
Certified Public Accountants (Israel)
Tel-Aviv, Israel
March 3, 1994
<PAGE>
PORAT & Co.
Certified Public Accountants (ISR.)
AUDITORS' REPORT TO THE SHAREHOLDERS
------------------------------------
OF
--
COUNTRY CLUB KFAR-SABA LIMITED
------------------------------
We have examined the balance sheet of Country Club Kfar-Saba
Limited as of December 31, 1993 and 1992, the statement of
income, the statement of retained earnings (deficits) and the
statement of cash flows for the two years then ended. We have
also examined the information presented on the nominal
(historical) basis in the Balance Sheet as of December 31, 1993
and 1992, the statement of income, the statement of retained
earnings (deficits) and the statement of cash flows for each of
the three years ended December 31, 1993, 1992, 1991. Our
examination was made in accordance with generally accepted
auditing standards, including those prescribed by the Auditors
(Mode of Performance) Regulations, 1973, and accordingly included
other auditing procedures as we considered necessary in the
circumstances.
The aforementioned financial statements have been prepared on the
basis of the historical cost adjusted to reflect the changes in
the general purchasing power of the Israeli currency, in
accordance with the Opinions of the Institute of Certified Public
Accountants in Israel. The nominal Israeli currency data used as
the basis for the compilation of the adjusted financial
statements is presented in Note 21. The method of determining
the nominal shekel amounts for 1993 is as set out in note 2G.
In our opinion the aforementioned financial statements presented
in adjusted New Israeli Shekels present fairly in conformity with
generally accepted accounting principles, the financial position
of the company as at December 31, 1993 and 1992, and the results
of its operations, the changes in shareholders' equity and its
cash flows for the two years then ended. Also, in our opinion,
the aforementioned financial statements presented in nominal
(historical) New Israeli Shekels, present fairly in conformity
with generally accepted accounting principles, the financial
position of the company as at December 31, 1993 and 1992, and the
results of its operations, the changes in shareholders' equity
and its cash flows for the three years then ended.
(Continued)
<PAGE>
PORAT & Co.
Certified Public Accountants (ISR.)
AUDITORS' REPORT TO THE SHAREHOLDERS
------------------------------------
OF
--
COUNTRY CLUB KFAR-SABA LIMITED
------------------------------
Pursuant to section 211 of the Companies Ordinance (New Version)
1983, we state that we have obtained all the information and
explanations we have required and that our opinion on the
aforementioned financial statements is given to the best of our
information and the explanations received by us and as shown by
the books of the Company.
Pursuant to the United States Securities and Exchange Commission
requirements, we state that:
The aforementioned auditing standards and procedures are Israeli
auditing standards and procedures, which are substantially
similar to standards in the United States.
March 11, 1994
Porat and Co.
Certified Public Accounts (Isr.)
_________________________________________________________________
28 Hayezira st. Ramat-Gan 52521 FAX: 03-7527673
Tel: 03-7527657, 7527651, 7527646
<PAGE>
COHEN, EYAL, YEHOSHUA & CO.
Certified Public Accounts (Isr.)
51 WEIZMANN ST., P.O.BOX 21592 COHEN ELIAHU C.P.A.(ISR.)
TEL AVIV 61214, ISRAEL 61214 EYAL ITAMAR C.P.A. (ISR.)
TEL: 03-6952210,FAX: 03-6953517 YEHOSHUA NISSIM C.P.A. (ISR.)
AUDITORS' REPORT TO THE SHAREHOLDERS OF
---------------------------------------
DAVIDSON-ATAI PUBLISHERS LTD.
-----------------------------
SPECIAL PURPOSE STATEMENTS
--------------------------
We have examined the Balance Sheet of Davidson-Atai
Publishers Ltd. as at December 31, 1993, the Statement of Profit
and Loss, the Statement of Changes in Shareholders' Equity and
the Statement of Cashflows for the period from February 10, 1993
to December 31, 1993. Our examination was made in accordance with
generally accepted auditing standards, including those prescribed
under the Auditors Regulations (Auditor's Mode of Performance),
1973, and accordingly we have applied such auditing procedures as
we considered necessary in the circumstances.
The above financial statements have been prepared on the
basis of the historical cost adjusted to reflect the changes in
the general purchasing power of the Israel currency, in
accordance with rules prescribed by the Institute of Certified
Public Accountants in Israel. Condensed nominal Israel currency
data, on the basis of which the adjusted financial statements
were prepared, is presented in Note 20.
In our opinion, the abovementioned financial statements
present fairly, in conformity with generally accepted accounting
principles, the financial position of the Company as at December
31, 1993, the results of its operations, the changes in its
shareholder's equity and its cashflows for the period from
February 10, 1993 to December 31, 1993. Also, in our opinion,
the financial statements based on nominal data (Note 20)
present fairly, in nominal terms, the financial position of the
Company as at December 31, 1993, and the results of its
operations, the changes in its shareholders' equity and its
cashflows for the period from February 10, 1993 to December 31,
1993, on the basis of the historical cost convention.
Pursuant to Section 211A of the Companies Ordinance (New
Version), 1983, we state that we have obtained all the
information and explanations we have required and that our
opinion on the above financial statements is given according to
the best of our information and the explanations received by us
and as shown by the books of the Company.
<PAGE>
Pursuant to the United States Securities and Exchange
Commission requirements, we state that the auditing standards and
procedures mentioned above are Israel auditing standards and
procedures, which are substantially similar to standards in the
United States.
Cohen, Eyal, Yehoshua & Co.
March 10, 1994 Certified Public Accountants (Isr.)
<PAGE>
Cr.R.Villarmarzo Y Asoc. Av. 18 De Julio 984 P.4 TELS: 92 31 47
ERNST & YOUNG INTERNATIONAL Casilia De Correa 1303 FAX: 92 13 31
Contadores Publicos-Auditores 11100 Montevideo - Uruguay
Asesores Fiscales-Consultores, Gerenciales
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
The Board of Directors and Stockholders
Hapoalim (Latin America) Casa Bancaria S.A.
We have audited the accompanying balance sheets of Hapoalim
(Latin America) Casa Bancaria S.A. at December 31, 1993, 1992 and
1991; the related statements of income, cash flows and changes in
equity for each of the three years in the period ended December
31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on the financial statements based on our audits.
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 provide a reasonable basis for our opinion.
As mentioned in Note 1.5, the historical cost of land, buildings
and equipment, expressed in Uruguayan peso, has been revalued as
established by the Uruguayan Central Bank.
In our opinion, except for the restatement of land, buildings and
equipment discussed in the preceding paragraph, the financial
statements referred to above present fairly, in all material
respects, the financial position of Hapoalim (Latin America) Casa
<PAGE>
Bancaria S.A. at December 31, 1993, 1992 and 1991, the results of
operations, the cash flows and changes in equity for the years
then ended in conformity with generally accepted accounting
principles in the United States.
We have also reviewed the accompanying statements express in U.S.
dollars. In our opinion, they have been properly translated on
the basis described in Note 1.8.
CR. R. VILLARMARZO Y ASOC.
Ernst & Young International
January 18, 1994
<PAGE>
KOST
LEVARY
AND
FORER
C.P.A. (ISRAEL)
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of MIVNAT HOLDING LIMITED
We have audited the financial statements of Mivnat Holding
Limited (hereafter - "the Company") and the consolidated
financial statements of the Company and its subsidiary (hereafter
- "the subsidiary"), as detailed below: balance sheets,
consolidated and of the Company, as at December 31, 1993;
statements of income and statements of cash flows, consolidated
and of the Company, and the statement of changes in shareholders'
equity of the Company for the nine months ended December 31,
1993. 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 test 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 in
Israel.
In our opinion, the aforementioned financial statements
present fairly the financial position, consolidated and of the
Company, as at December 31, 1993 and the results of its
operations, changes in its shareholders' equity and cash flows
for the period as mentioned above, in conformity with accounting
principles generally accepted in Israel.
Accounting principles generally accepted in Israel differ in
certain respects from accounting principles generally accepted in
the United States. Financial data based on application of the
latter and translations of these data into U.S. dollars based on
the principles set forth in FASB 52, are presented in Note 25 to
the financial statements.
Pursuant to Section 211 of the Companies Ordinance, we state
that we have obtained all the information and explanations we
have required and that our opinion on the above statements is
given according to the best of our information and the
explanations received by us and as shown by the books of the
Company.
Tel-Aviv, Israel KOST, LEVARY and FORER
March 21, 1994 Certified Public Accountants (Israel)
<PAGE>
HAGGAI WALLENSTEIN & Co. C.P.A. (Isr.)
AUDITORS' REPORT
----------------
To the shareholders of
MORIAH HOTELS LTD.
------------------
We have audited the accompanying consolidated balance sheets
of Moriah Hotels Ltd. (hereinafter - the company) and its
subsidiaries at December 31, 1993 and 1992 and the related
consolidated statements of income (loss), changes in
shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1993. 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 conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audits 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 statements presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the abovementioned financial statements
present fairly, in conformity with generally accepted accounting
principles applied on a consistent basis, the consolidated
financial position of the company and its subsidiaries as at
December 31, 1993 and 1992 and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1993.
In accordance with Section 211 of the Companies Ordinance
(New Version), 1983, we state that we have obtained all the
information and explanations we have required and that our
opinion on the abovementioned financial statements is given
<PAGE>
according to the best of our information and the explanations
received by us and as shown by the books of the company and its
subsidiaries.
Tel-Aviv HAGGAI WALLENSTEIN & CO.
March 14, 1994 Certified Public Accountants (Isr.)
________________________________________________________________
IZCHACK SHTALBERG C.P.A.(Isr.) HAGGAI WALLENSTEIN C.P.A.(Isr.)
8 Eliash St. DANNI LEVIN C.P.A.(Isr.)
Jerusalem 94586 ELANA DREIHER C.P.A.(Isr.)
Tel: 02-244787,243518 OFFER ORLICKY C.P.A.(Isr.)
Fax: 02-241368 20 Heh Eyar St.
Tel Aviv 62998
Tel: 03-6966171-2-3
Fax: 03-695754
<PAGE>
KESSELMAN & KESSELMAN Certified Public Accounts (ISR.)
AUDITORS' REPORT
----------------
To the shareholders of
OPHIR HOLDINGS LTD.
-------------------
We have examined the consolidated balance sheets of Ophir
Holdings Ltd. (the "Company") and its subsidiaries at December
31, 1993 and 1992 and the related consolidated statements of
income, changes in shareholders' equity (capital deficiency) and
cash flows for each of the three years in the period ended
December 31, 1993. Our examinations were made in accordance with
generally accepted auditing standards, including those prescribed
by the Israeli Auditors (Mode of Performance) Regulations, 1973,
and accordingly we have applied such auditing procedures as we
considered necessary in the circumstances. The financial
statements of consolidated subsidiaries, whose assets at December
31, 1993 and 1992 constitute approximately 51% and 7%,
respectively, of total consolidated assets, and whose revenues
for each of the three years in the period ended December 31, 1993
constitute approximately 83%, 15% and 23%, respectively, of total
consolidated revenues, as well as the financial statements of the
associated companies, have been examined by other certified
public accountants.
The aforementioned financial statement have been prepared on the
basis of the historical cost convention in nominal Israeli
currency. Information as to the effect of the changes in the
general purchasing power of Israeli currency on the financial
statements, as prescribed by the Institute of Certified Public
Accountants in Israel, is not presented in these financial
statements. The Company's primary financial statements, which
are presented under separate cover in Hebrew, are drawn up on the
basis of historical cost adjusted to reflect the changes in the
general purchasing power of Israeli currency, in accordance with
Opinions of the Institute of Certified Public Accountants in
Israel.
In our opinion, based upon our examinations and the reports of
the other accountants mentioned above, the aforementioned
financial statements, except for the exclusion of the information
mentioned in the preceding paragraph, present fairly, in
conformity with generally accepted accounting principles, the
consolidated financial position of the Company and its
subsidiaries at December 31, 1993 and 1992 and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1993, on the basis of
historical-nominal cost.
<PAGE>
The financial statements are prepared in accordance with
accounting principles generally accepted in Israel. As to
compliance with accounting principles generally accepted in the
United States, see note 2a.
/s/ KESSELMAN & KESSELMAN
Tel-Aviv, Israel
March 7, 1994
<PAGE>
BRAUDE & CO.
CERTIFIED PUBLIC ACCOUNTS (ISRAEL)
REF 4021
AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
ORLITE ENGINEERING COMPANY LTD.
-------------------------------
We have examined the balance sheets of ORLITE ENGINEERING
COMPANY LTD. (hereinafter - the company) at December 31, 1993 and
at December 31, 1992, and the statements of income, changes in
shareholders' equity and cash flows for three years ended at
December 31, 1993, 1992 and 1991. We have also examined the
information presented on the nominal (historical) basis in the
balance sheet as at December 31, 1993 and 1992, the statement of
profit and loss, the statement of changes of shareholders' equity
for the three years ended December 31, 1993.
Our examination was made in accordance with generally
accepted auditing standards, including those prescribed under the
Auditors' Regulations (Auditor's Mode of Performance) - 1973, and
accordingly, we have applied such auditing procedures as we
considered necessary in the circumstances.
The above financial statements are based on the historical
cost adjusted to the general purchasing power of the new Israel
shekel, in accordance with the Opinions of the Institute of
Certified Public Accountants in Israel.
In our opinion, the above financial statements present
fairly, and in conformity with generally accepted accounting
principles, the financial position of the company at December 31,
1993 and 1992, and the results of its operations, the changes in
shareholders' equity, and its cash flows for the years ended
December 31, 1993, 1992 and 1991.
Also in our opinion, the financial statements based on
nominal data (note 20), present fairly, in conformity with
generally accepted accounting principles, the financial position
of the company as at December 31, 1993 and 1992, and the results
of its operations, the changes in its shareholders' equity, for
the three years ended December 31, 1993, on the basis of the
historical cost convention.
These financial statements have been prepared in accordance
with the Securities Regulations (Preparation of Financial
Statements), 1993.
BRAUDE & CO., C.P.A.(ISRAEL)
Tel-Aviv, February 14, 1994
<PAGE>
SHLOMO ZIV & CO.
Certified Public Accountants (Isr.)
Tel-Aviv 61500 Gibor House
6 Kaufman St. P.O.B. 50322
Tel: 03-5179611 Fax: 03-5179418
Haifa 31018 2 Hanamal St. P.O.B. 1886
Tel: 04-675025-6 Fax: 04-679461
Report of Independent Public Accountants
----------------------------------------
To the Shareholders of Paradise Mattresses Industries (1992) Ltd.
We have audited the accompanying balance sheet of Paradise
Mattresses Industries (1992) Ltd. (an Israeli corporation) as of
December 31, 1993, and the related statement of income, changes
in shareholders' equity and cash flows for the year ended
December 31, 1993, translated into U.S. Dollars.
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 conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits 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 provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Paradise Mattresses Industries (1992) Ltd., as of December 31,
1993 and 1992, and the results of its operations, changes in its
shareholders' equity and cash flows for the year ended December
31, 1993, in conformity with generally accepted accounting
principles.
Also, in our opinion, the translated amounts in the accompanying
summary financial statements translated into U.S. dollars have
been computed on the basis set forth in note 24 in the financial
statements.
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
22 March 1994
<PAGE>
REUVENI, HARTUV, TEPPER & CO. MEMBERS
CERTIFIED PUBLIC ACCOUNTANTS (ISR.) [logo]
----------------------------------- WORLDWIDE
30 ACHAD HA'AM ST. TEL-AVIV ISRAEL
P.O.B. 29870, DOCE 61298 S. TEPPER C.P.A. (ISR.)
TEL - 972-3-5604281 FAX - 972-3-5605001 I. REUVENI C.P.A. (ISR.)
M. COHEN C.P.A. (ISR.)
S. TABACH C.P.A. (ISR.)
CONSULTANT
K.D. HARTUV C.P.A. (ISR.)
AUDITOR'S REPORT TO THE SHAREHOLDERS OF
PRI HA'EMEK (CANNED AND FROZEN FOOD) 88 LTD.
We have examined the balance sheet of Pri Ha'emek (Canned and
Frozen Food) 88 Limited (the Company) and the consolidated
balance sheet of the Company and its subsidiaries as at December
31, 1993 and 1992, and the statements of profit and loss,
shareholders' equity and cash flows of the Company and
consolidated for each of the three years ended December 31, 1993.
Our examination was made in accordance with generally accepted
auditing standards, including those prescribed under the
Auditors' Regulations (Auditor's Mode of Performance), 1973, and
accordingly we have applied such auditing procedures as we
considered necessary in the circumstances.
The abovementioned financial statements have been prepared in New
Israeli Shekels and remeasured into U.S. Dollars in accordance
with the principles of remeasurement set forth in Statement No.
52 of the Financial Accounting Standards Board of U.S.A. (See
Note 1A).
We draw your attention to differences between the above dollar
financial statements and the adjusted shekel financial
statements, see Note 20.
In our opinion, the abovementioned financial statements present
fairly, in conformity with generally accepted accounting
principles, the financial position of the Company and of the
Company and its subsidiaries consolidated as at December 31, 1993
and 1992, and the results of their operations, statements of
shareholders' equity and cash flows for each of the three years
ended December 31, 1993.
Pursuant to Section 211 of the Companies Ordinance (New Edition)
1983, we state that we have obtained all the information and
explanations we have required and that our opinion on the above
financial statements is given according to the best our
information and the explanations received by us and as shown by
the books of the Company.
/s/ REUVENI, HARTUV, TEPPER & CO.
Certified Public Accountants (Isr.)
Tel-Aviv, March 29, 1994
<PAGE>
DOV KAHANA & CO.
Certified Public Accountants (Isr.)
54 Bezalel St. Ramat-Gan
P.O.Box 3532, Ramat-Gan 52134
Tel. 5759581
Fax. 5759584
Dov Kahana, C.P.A. (Isr.)
Joseph Benaltabet, C.P.A. (Isr.)
Michael Levy, C.P.A. (Isr.)
Auditors' Report to the Shareholders
of
Red Sea Marineland Holding (1973) Ltd.
We have examined the Balance Sheet of Red Sea Marineland Holding (1973) Ltd.
as at December 31, 1993, and the Statement of Income for the year then ended.
Our examination was made in accordance with generally accepted auditing
standards, including those prescribed under the Auditors Regulations
(Auditor's Mode of Performance) 1973, and accordingly we have applied such
auditing procedures as we considered necessary in the circumstances.
Information as to the effect of the changes in the general purchasing power
of the Israeli currency on the financial statements in accordance with
opinions of the Institute of Certified Public Accountants in Israel, has
not been included in the above statements.
In our opinion, except for the omission of the information referred to in
the preceding paragraph, the above Balance Sheet and Statement of Income
present fairly, in conformity with generally accepted accounting principles,
the financial position of the company as at December 31, 1993 and the results
of its operations for the year then ended, on the basis of the historical
cost convention.
Pursuant to Section 211 of the Companies Ordinance (New Version) - 1983, we
state that we have obtained all the information and explanations we have
required and that our opinion on the above Balance Sheet and Statement of
Income is given according to the best of our information and the
explanations received by us and as shown by the books of the company.
Ramat-Gan, Israel, March 29, 1994
/s/ Dov Kahana & Co.
--------------------
Dov Kahana & Co.
Certified Public Accountants (Isr.)
<PAGE>
AUDITOR'S REPORT
----------------
TO THE SHAREHOLDERS OF
----------------------
RED SEA UNDER WATER OBSERVATORY LTD.
------------------------------------
We have examined the Balance Sheet of Red Sea Under Water
Observatory Ltd. ("The Company") and the Consolidated Balance
Sheet of the Company and its subsidiaries as at December 31,
1993; the Statement of Income, and the Statement of Cash Flows of
the Company for the year then ended stated in Adjusted New
Israeli Shekels. The said adjusted Statements have been prepared
on the basis of the Financial Statements of the Company and the
Consolidated Balance Sheet of the Company and its subsidiaries in
nominal Shekel values. Our examination was made in accordance
with generally accepted auditing standards, including those
prescribed under the Auditors Regulations (Auditor's Mode of
Performance), 1973, and accordingly we have applied such auditing
procedures as we considered necessary in the circumstances.
Financial Statements of subsidiaries abroad, whose assets
constitute approximately 47% of the total assets contained in the
Consolidated Balance Sheet were audited by other auditors.
Based on our examination and the reports of the other auditors
referred to above, we rendered an unqualified opinion on the
above mentioned Financial Statements.
The attached Financial Statements comprise the Financial
Statements in nominal Shekel values of The Company, and the
Consolidated Balance Sheet of the Company and its subsidiaries in
nominal Shekel values, translated into U.S. Dollars in accordance
with the principles described in note 2.
Ramat Gan, Israel, March 29, 1994
-----------------------------------------
Dov Kahana & Co.
Certified Public Accountants (Isr.)
<PAGE>
REUVENI, HARTUV, TEPPER & CO. MEMBER OF
CERTIFIED PUBLIC ACCOUNTANTS (Isr.) [LOGO]
worldwide
--------------------------------------
30 ACHAD HA'AM ST., TEL-AVIV ISRAEL
P.O.B. 29870, CODE 61298
TEL: 972-3-5604281 FAX: 972-3-5605001
S. TEPPER, C.P.A. (Isr.)
I. REUVENI, C.P.A. (Isr.)
M. COHEN, C.P.A. (Isr.)
S. TABACH, C.P.A. (Isr.)
Consultant
K.D. HARTUV, C.P.A. (Isr.)
AUDITOR'S REPORT TO THE PARTNERS OF
THE SNOW AND COOL PALACE
(LIMITED PARTNERSHIP)
We have examined the Balance Sheet of The Snow and Cool Palace
(Limited Partnership) - (hereinafter the Partnership) as at
December 31, 1993 and the Statements of Profit and Loss,
Partnerships' Equity and Cash Flows for the year then ended. Our
examination was made in accordance with generally accepted
auditing standards, including those prescribed under the
Auditors' Regulations (Auditor's Mode of Performance), 1973, and
accordingly we have applied such auditing procedures as we
considered necessary in the circumstances.
The above mentioned Financial Statements have been prepared in
New Israeli Shekels and remeasured into U.S. Dollars in
accordance with the principles of remeasurement set forth in
Statement No. 52 of the Financial Accounting Standards Board of
the U.S.A. (See Note 2B).
In our opinion, the above mentioned Financial Statements present
fairly, in conformity with generally accepted accounting
principles, the financial position of the partnership as at
December 31, 1993, the results of its operations and its cash
flows for the year then ended.
We state that we have obtained all the information and explanations we
have required that our opinion on the above financial statements
is given according to the best of our information and the
explanations received by us and as shown by the books of the
partnership.
REUVENI, HARTUV, TEPPER & CO.
Certified Public Accountants (Isr.)
Tel Aviv, February 20, 1994.
<PAGE>
[LOGO] ALMAGOR & CO. - CPA (ISR)
7, Abba Hillel Rd. P.O. Box 3600
Zip 52134, Ramat-Gan, Israel
Tel. 972-3-5760606, Fax. 972-3-5754671
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
TO THE SHAREHOLDERS OF TELEDATA COMMUNICATION LTD.
--------------------------------------------------
We have examined the consolidated balance sheets of Teledata
Communication Ltd. ("the Company") and its subsidiaries at
December 31, 1993 and 1992 and the related consolidated
statements of operations, shareholders' equity and cash flows for
the years ended December 31, 1993, 1992 and 1991. Our
examinations were made in accordance with generally accepted
auditing standards, including those prescribed by the Israeli
Auditors' (Mode of Performance) Regulations, 1973, and
accordingly, included such tests of the accounting records and
such other auditing procedures as we considered necessary in the
circumstances. Such auditing standards are substantially
identical to generally accepted auditing standards in the United
States.
The financial statements of consolidated subsidiaries, whose
assets constitute approximately 7% of the total consolidated
assets at December 31, 1993, and whose sales revenues constitutes
approximately 22% of consolidated sales revenue for the year
ended December 31, 1993 have been examined by other certified
public accountants whose reports thereon have been furnished to
us. Our opinion expressed herein, insofar as it relates to the
amounts included for the abovementioned subsidiaries, is based
solely upon the reports of the other accountants.
In our opinion, based upon our examinations and the reports of
the other accountants referred to above, the aforementioned
financial statements present fairly the consolidated financial
position of the Company and its subsidiaries at December 31,
1993, 1992 and 1991, in conformity with accounting principles
generally accepted in Israel and in the United States. As
applicable to these financial statements, such accounting
principles are substantially identical.
Almagor & Co.
Certified Public Accountants (Israel)
Ramat-Gan, Israel
February 21, 1994
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 30th day of March, 1994.
AMPAL-AMERICAN ISRAEL CORPORATION
By /s/ Lawrence Lefkowitz
------------------------------
Lawrence Lefkowitz, President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons (who included a majority
of the Board of Directors) on behalf of the registrant and in the capacities
indicated on March 30, 1994.
Signatures Title Date
- - ---------- ----- ----
Michael Arnon Director
Stanley I. Batkin Director
Yaacov Elinav Director
Harry B. Henshel Director
Lawrence Lefkowitz Director
Eitan Raff Director
Shimon Ravid Director
Shlomo Recht Director
Leon Riebman Director
Evelyn Sommer Director
By /s/ Lawrence Lefkowitz March 30, 1994
- - --------------------------------------------------
Lawrence Lefkowitz, individually and as
attorney-in-fact for the Foregoing Persons
By /s/ Alan L. Schaffer March 30, 1994
- - ---------------------------------------------------
Alan L. Schaffer, Vice President-Finance
(Principal Financial Officer)
By /s/ Alla Kanter March 30, 1994
- - ----------------------------------------------------
Alla Kanter, Controller
(Principal Accounting Officer)
<PAGE>
======================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
--------------------
AMPAL-AMERICAN ISRAEL CORPORATION
(Exact name of Registrant as specified in its Charter)
======================================================
AMPAL-AMERICAN ISRAEL CORPORATION
and
CHEMICAL BANK,
as Warrant Agent
__________________
Warrants to Purchase 4,500,000 Shares of Class A Stock
__________________
WARRANT AGREEMENT
Dated as of February 1, 1994
<PAGE>
THIS WARRANT AGREEMENT, dated as of February 1, 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 4,500,000 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 4,500,000 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 & 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 500,000 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 April 4, 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
2
<PAGE>
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 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 April 4, 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
3
<PAGE>
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
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.
4
<PAGE>
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 January 31, 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.
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
5
<PAGE>
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.
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.
6
<PAGE>
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
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
7
<PAGE>
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 $16.00.
Section 11. Certain Rights and Adjustment of Number and Kind of
Warrant Shares.
Section 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.
11.2 Adjustments. The number and kind of securities or other
-----------
property purchasable upon the exercise of each Warrant and the Warrant Price
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
8
<PAGE>
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 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.
9
<PAGE>
(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
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
requiredto 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
10
<PAGE>
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.
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
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
11
<PAGE>
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
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
12
<PAGE>
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
13
<PAGE>
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
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
14
<PAGE>
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.
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
15
<PAGE>
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 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.
16
<PAGE>
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.
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.
17
<PAGE>
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.
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: Susan Joura
Title: Vice President
18
<PAGE>
Redeemable Class A Stock Purchase Warrant
For the Purchase of
Shares of Class A Stock, Par Value of $1.00 Per Share, of
Warrant to Purchase
- - ------------------ ------------------
| No. | | |
| | | |
- - ------------------ ------------------
Shares
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 JANUARY 31, 1999
Unit CUSIP 032015 40 6,
Until Separation Date
Warrant CUSIP 032015 12 5
<PAGE>
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 January 31,
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 $16.00 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 February 1, 1994 (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. On and after February 1, 1996 this Warrant may also be redeemed by
the Corporation, from time to time and at any time, in whole or in part,
without payment to the holder.
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
20
<PAGE>
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
April 4, 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.
21
<PAGE>
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.
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.
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: By
-----------------------------------------------------
CHEMICAL BANK as Warrant Agent ATTEST:
Authorized Officer Secretary President
22
<PAGE>
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 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 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
23
<PAGE>
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 (Signature must correspond
of shares acquired on with the name as written
exercise or an assignment of upon the face of this
Warrants remaining after Warrant Certificate in every
exercise is made upon particular, without
exercise. The signature alteration or enlargement or
must be guaranteed by a duly any change whatever.)
authorized officer 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)
24
<PAGE>
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.
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF PERSON IN WHOSE
NAME WARRANT CERTIFICATE IS TO BE REGISTERED.
- - ----------------------
| |
- - ----------------------
DATED: , 19
--------------------------------------------
Signature Guaranteed: Signature:
- - ------------------------------------- --------------------------------------
(The signature must be (Signature must correspond
guaranteed by a duly with the name as written
authorized officer of a upon the face of this
commercial bank or trust Warrant Certificate in every
company in the United States particular, without
or member of a registered alteration or enlargement or
national securities any change whatever.)
exchange.)
25
AMENDMENT DATED AS OF MARCH 23, 1994 TO
AMPAL-AMERICAN ISRAEL CORPORATION
1993 STOCK OPTION PLAN
1. Subparagraph (e) of Paragraph 5 is amended and restated in its
entirety as follows:
"(e) Options shall be exercised by the delivery by the
Optionee thereof to the Company at its principal office, or at
such other address as may be established by the Board of
Directors, of written notice of the number of shares of Class A
Stock with respect to which the Option is being exercised
accompanied by payment in full of the purchase price of such
shares. Payment for such shares of Class A Stock may be made (as
determined by the Board of Directors) (i) in cash, (ii) by
certified check or bank cashier's check payable to the order of
the Company in the amount of such purchase price, (iii) by
delivery of capital stock to the Company (including, by way of
irrevocable direction to the Company, shares of Class A Stock to
be received upon exercise of the Option) having a fair market
value (determined on the date of exercise in accordance with the
provisions of subparagraph (a) of this Paragraph 5) equal to said
purchase price, (iv) pursuant to a broker-assisted "cashless
exercise" program, if established by the Company, or (v) by any
combination of the methods of payment described in (i) through
(iv) above."
2. The following new subparagraph (h) shall be added to the end
of Paragraph 5:
"(h) The Company's obligation to deliver shares of
Class A Stock upon the exercise of an Option shall be subject to
the payment by the Optionee thereof of any applicable federal,
state and local withholding tax. The Company shall, to the
extent permitted by law, have the right to deduct from any
payment of any kind otherwise due to the Optionee any federal,
state or local taxes required to be withheld with respect to such
payment. Subject to the right of the Board of Directors to
disapprove any such election and require the withholding tax in
cash, an Optionee shall have the right to elect to pay the
withholding tax with shares of Class A Stock to be received upon
exercise of an Option or which are otherwise owned by the
Optionee. Any election to pay withholding taxes with stock shall
be irrevocable once made. The value of Class A Stock used as
payment for a withholding tax under this subparagraph (h) shall
be determined, in accordance with the provisions of subparagraph
(a) of this Paragraph 5, on the date of the exercise of the
Option with respect to which the withholding obligation arose."
<TABLE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
SCHEDULE SETTING FORTH THE COMPUTATION OF EARNINGS PER SHARE Exhibit 11
12/31/93 12/31/92 12/31/91
--------------------- -------------------- ---------------------
<S> <C> <C> <C>
Weighted average number of shares
outstanding:
4% Preferred....................... 223,997 237,701 247,517
6-1/2% Preferred................... 1,365,155 1,530,415 1,566,248
Class A............................ 15,501,489 14,937,184 14,780,929
Common............................. 3,000,000 3,000,000 3,000,000
=========== =========== ===========
Weighted average number of shares
outstanding assuming conversion of
preferred stock into Class A shares:
Class A............................ 20,717,000 87.35% 20,717,000 87.35% 20,717,000 87.35%
Common............................. 3,000,000 12.65 3,000,000 12.65 3,000,000 12.65
----------- ------ ----------- ------ ----------- ------
23,717,000 100.00% 23,717,000 100.00% 23,717,000 100.00%
=========== ====== =========== ====== =========== ======
Income before extraordinary income... $ 5,208,000 $10,324,000 $ 400,000
Cumulative effect on prior years of
change in accounting principle...... (4,982,000) - -
Extraordinary income................. - - 726,000
----------- ----------- -----------
Net income.......................... $ 226,000 $10,324,000 $ 1,126,000
=========== =========== ===========
Allocation of net income on the basis
of the respective dividend rights of
the above classes of stock, pro-rata:
Class A............................ $ 197,000 87.35% $ 9,018,000 87.35% $ 984,000 87.35%
Common............................. 29,000 12.65 1,306,000 12.65 142,000 12.65
----------- ------ ----------- ------ ----------- ------
$ 226,000 100.00% $10,324,000 100.00% $ 1,126,000 100.00%
=========== ====== =========== ====== =========== ======
Earnings per Class A share:
Income before extraordinary income.. $.22 $.44 $.02
Cumulative effect on prior years of
change in accounting principle..... (.21) - -
Extraordinary income................ - - .03
---- ---- ----
Net income.......................... $.01 $.44 $.05
==== ==== ====
</TABLE>
<TABLE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
SCHEDULE SETTING FORTH THE COMPUTATION OF RATIOS Exhibit 12
OF CONSOLIDATED EARNINGS TO FIXED CHARGES
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1993 1992 1991 1990 1989
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earnings:
Income (including dividends from
less-than-50%-owned affiliates)
before income taxes, equity in
earnings of affiliates and
others, cumulative effect on
prior years of change in
accounting principle, extra-
ordinary income and minority
interests....................... $ 4,746,000 $ 24,260,000 $ 2,396,000 $ 6,782,000 $ 1,678,000
Fixed charges.................... 23,257,000 20,060,000 27,953,000 57,801,000 71,443,000
------------ ------------ ------------ ------------ ------------
Earnings....................... $ 28,003,000 $ 44,320,000 $ 30,349,000 $ 64,583,000 $ 73,121,000
============ ============ ============ ============ ============
Fixed Charges:
Interest......................... $ 22,364,000 $ 18,346,000 $ 26,006,000 $ 55,821,000 $ 69,791,000
Amortization of debenture
expenses........................ 893,000 1,714,000 1,947,000 1,980,000 1,652,000
------------ ------------ ------------ ------------ ------------
Fixed charges.................... $ 23,257,000 $ 20,060,000 $ 27,953,000 $ 57,801,000 $ 71,443,000
============ ============ ============ ============ ============
Ratio of earnings to fixed charges 1.20:1 2.21:1 1.09:1 1.12:1 1.02:1
============ ============ ============ ============ ============
</TABLE>
EXHIBIT 21 Subsidiaries of the Registrant
The following table sets forth information with respect to the subsidiaries of
Ampal, their respective states of organization and the percentage of voting
securities owned as of December 31, 1993:
Percentage
Voting Securities
Name of Relationship State of Owned by
Company to Ampal Organization Immediate Parent
------- ------------ ------------ -----------------
Ampal Development Subsidiary of Israel 90%(1)
(Israel) Ltd. Ampal (Israel)
Ltd.
Ampal Enterprises Ltd. Subsidiary of Israel 99.9%(2)
Ampal
Development
(Israel) Ltd.
Ampal Financial Subsidiary of Israel 51%(3)
Services Ltd. Ampal (Israel)
Ltd.
Ampal Holdings (1991), Subsidiary of Israel 99%(4)
Ltd. Ampal Industries,
Inc.
Ampal Industries, Subsidiary Delaware 100%
Inc.
Ampal Industries Subsidiary of Israel 100%
(Israel) Ltd. Ampal Industries,
Inc.
Ampal (Israel) Ltd. Subsidiary Israel 100%
Ampal Properties Subsidiary Israel 99%(5)
Ltd. Ampal Industries,
(Israel) Ltd.
Ampal Sciences, Inc. Subsidiary Delaware 100%
Country Club Subsidiary of Israel 51%
Kfar Saba Ltd. Ampal
Industries,
Inc.
<PAGE>
Percentage
Voting Securities
Name of Relationship State of Owned by
Company to Ampal Organization Immediate Parent
------- ------------ ------------ ----------------
Nir Ltd. Subsidiary of Israel 99.93%
Ampal Holdings
(Israel) Ltd.
Paradise Mattresses Subsidiary of Israel 85.1%
(1992) Ltd. Ampal
Properties
Ltd.
Pri Ha'emek (Canned Subsidiary of Israel 74.9%
and Frozen Food) 88 Ltd. Ampal
Industries,
Inc.
(1) The remaining 10% of the voting securities is owned by Ampal.
(2) The remaining .1% is owned by Nir Ltd.
(3) The remaining 49% is owned by Ampal.
(4) The remaining 1% is owned by Ampal.
(5) The remaining 1% is owned by Ampal (Israel) Ltd.
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do
hereby constitute and appoint MICHAEL ARNON, LAWRENCE LEFKOWITZ,
and ALAN L. SCHAFFER, or any one and or more of them, my true and
lawful attorney or attorneys for me, and in my name, place and
stead, as a director and/or officer of AMPAL-AMERICAN ISRAEL
CORPORATION to sign the Annual Report on Form 10-K of AMPAL-
AMERICAN ISRAEL CORPORATION to the Securities and Exchange
Commission for the year ended December 31, 1993, and any and all
amendments thereto, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the above premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact or either of them may
lawfully do or cause to be done by virtue hereof.
March 23, 1994 /s/Michael Arnon
- - ------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do
hereby constitute and appoint MICHAEL ARNON, LAWRENCE LEFKOWITZ,
and ALAN L. SCHAFFER, or any one and or more of them, my true and
lawful attorney or attorneys for me, and in my name, place and
stead, as a director and/or officer of AMPAL-AMERICAN ISRAEL
CORPORATION to sign the Annual Report on Form 10-K of AMPAL-
AMERICAN ISRAEL CORPORATION to the Securities and Exchange
Commission for the year ended December 31, 1993, and any and all
amendments thereto, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the above premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact or either of them may
lawfully do or cause to be done by virtue hereof.
March 23, 1994 /s/Stanley I. Batkin
- - ------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do
hereby constitute and appoint MICHAEL ARNON, LAWRENCE LEFKOWITZ,
and ALAN L. SCHAFFER, or any one and or more of them, my true and
lawful attorney or attorneys for me, and in my name, place and
stead, as a director and/or officer of AMPAL-AMERICAN ISRAEL
CORPORATION to sign the Annual Report on Form 10-K of AMPAL-
AMERICAN ISRAEL CORPORATION to the Securities and Exchange
Commission for the year ended December 31, 1993, and any and all
amendments thereto, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the above premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact or either of them may
lawfully do or cause to be done by virtue hereof.
March 23, 1994 /s/Yaacov Elinav
- - ------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do
hereby constitute and appoint MICHAEL ARNON, LAWRENCE LEFKOWITZ,
and ALAN L. SCHAFFER, or any one and or more of them, my true and
lawful attorney or attorneys for me, and in my name, place and
stead, as a director and/or officer of AMPAL-AMERICAN ISRAEL
CORPORATION to sign the Annual Report on Form 10-K of AMPAL-
AMERICAN ISRAEL CORPORATION to the Securities and Exchange
Commission for the year ended December 31, 1993, and any and all
amendments thereto, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the above premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact or either of them may
lawfully do or cause to be done by virtue hereof.
March 23, 1994 /s/Harry B. Henshel
- - ------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do
hereby constitute and appoint MICHAEL ARNON, LAWRENCE LEFKOWITZ,
and ALAN L. SCHAFFER, or any one and or more of them, my true and
lawful attorney or attorneys for me, and in my name, place and
stead, as a director and/or officer of AMPAL-AMERICAN ISRAEL
CORPORATION to sign the Annual Report on Form 10-K of AMPAL-
AMERICAN ISRAEL CORPORATION to the Securities and Exchange
Commission for the year ended December 31, 1993, and any and all
amendments thereto, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the above premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact or either of them may
lawfully do or cause to be done by virtue hereof.
March 17, 1994 /s/Lawrence Lefkowitz
- - ------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do
hereby constitute and appoint MICHAEL ARNON, LAWRENCE LEFKOWITZ,
and ALAN L. SCHAFFER, or any one and or more of them, my true and
lawful attorney or attorneys for me, and in my name, place and
stead, as a director and/or officer of AMPAL-AMERICAN ISRAEL
CORPORATION to sign the Annual Report on Form 10-K of AMPAL-
AMERICAN ISRAEL CORPORATION to the Securities and Exchange
Commission for the year ended December 31, 1993, and any and all
amendments thereto, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the above premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact or either of them may
lawfully do or cause to be done by virtue hereof.
March 23, 1994 /s/Eitan Raff
- - ------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do
hereby constitute and appoint MICHAEL ARNON, LAWRENCE LEFKOWITZ,
and ALAN L. SCHAFFER, or any one and or more of them, my true and
lawful attorney or attorneys for me, and in my name, place and
stead, as a director and/or officer of AMPAL-AMERICAN ISRAEL
CORPORATION to sign the Annual Report on Form 10-K of AMPAL-
AMERICAN ISRAEL CORPORATION to the Securities and Exchange
Commission for the year ended December 31, 1993, and any and all
amendments thereto, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the above premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact or either of them may
lawfully do or cause to be done by virtue hereof.
March 23, 1994 /s/Shimon Ravid
- - ------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do
hereby constitute and appoint MICHAEL ARNON, LAWRENCE LEFKOWITZ,
and ALAN L. SCHAFFER, or any one and or more of them, my true and
lawful attorney or attorneys for me, and in my name, place and
stead, as a director and/or officer of AMPAL-AMERICAN ISRAEL
CORPORATION to sign the Annual Report on Form 10-K of AMPAL-
AMERICAN ISRAEL CORPORATION to the Securities and Exchange
Commission for the year ended December 31, 1993, and any and all
amendments thereto, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the above premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact or either of them may
lawfully do or cause to be done by virtue hereof.
March 23, 1994 /s/Shlomo Recht
- - ------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do
hereby constitute and appoint MICHAEL ARNON, LAWRENCE LEFKOWITZ,
and ALAN L. SCHAFFER, or any one and or more of them, my true and
lawful attorney or attorneys for me, and in my name, place and
stead, as a director and/or officer of AMPAL-AMERICAN ISRAEL
CORPORATION to sign the Annual Report on Form 10-K of AMPAL-
AMERICAN ISRAEL CORPORATION to the Securities and Exchange
Commission for the year ended December 31, 1993, and any and all
amendments thereto, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the above premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact or either of them may
lawfully do or cause to be done by virtue hereof.
March 23, 1994 /s/Leon Riebman
- - ------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do
hereby constitute and appoint MICHAEL ARNON, LAWRENCE LEFKOWITZ,
and ALAN L. SCHAFFER, or any one and or more of them, my true and
lawful attorney or attorneys for me, and in my name, place and
stead, as a director and/or officer of AMPAL-AMERICAN ISRAEL
CORPORATION to sign the Annual Report on Form 10-K of AMPAL-
AMERICAN ISRAEL CORPORATION to the Securities and Exchange
Commission for the year ended December 31, 1993, and any and all
amendments thereto, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the above premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact or either of them may
lawfully do or cause to be done by virtue hereof.
March 23, 1994 /s/Evelyn Sommer
- - ------------------------ ---------------------------
Date Signature
