===============================================================================
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, 1994 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 American Stock Exchange
shares of Class A Stock
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 [x].
The number of shares outstanding of each of the issuer's classes of common
stock is
Common --- 3,000,000; Class A --- 20,859,860 (as of March 22, 1995).
The aggregate market value of the voting stock held by nonaffiliates
of the Registrant is $60,430,651 (as of March 22, 1995).
===============================================================================
<PAGE>
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
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. 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. The Company sometimes
makes investments with or through affiliated companies. 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. 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. The Company 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. The Company intends to continue to
adhere to its historical policy of focusing its business interests primarily
on long-term holdings in Israel-related enterprises. The earnings of its
Israeli subsidiaries are customarily reinvested in Israel, rather than being
distributed as dividends.
The growth of the Israeli economy, the success of a number of
Israeli-based companies, particularly in the area of high technology, the
privatization of government-owned companies and the acceleration of the peace
-1-
<PAGE>
process over the last few years, 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.
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, 1994
---------------- ------------------ -----------------
<S> <C> <C>
HOTELS AND LEISURE-TIME
Coral World International Limited............................. Underwater Observatories 50.0
and Marine Parks
Country Club Kfar Saba Ltd. .................................. Country Club Facilities 51.0
Moriah Hotels Ltd. ............................................... Hotel Chain 46.0
REAL ESTATE, FINANCE AND OTHER HOLDINGS
Am-Hal Limited.................................................... Senior Citizen Facility 50.0
Ampal Development (Israel) Ltd. ............................. Holding Company 100.0
Ampal Financial Services Ltd. ................................. Holding Company 100.0
Ampal (Israel) Ltd. ............................................... Holding Company 100.0
Bank Hapoalim (Cayman) Ltd. ................................ Commercial Bank Holding 49.0
Company
Bay Heart Limited................................................. Shopping Mall Owner/Lessor 37.0
Epsilon Investment House Ltd. ................................ Investment Bank 20.0(1)
Etz Vanir Ltd. and Yakhin Mataim Ltd. .................... Citrus Groves 50.0
Industrial Buildings Corporation Ltd. (TASE).............. Industrial Real Estate 5.6(2)
Nir Ltd. ............................................................. Holding Company 99.9
Ophir Holdings Ltd. .............................................. Holding Company 42.5
Renaissance Israel................................................. Investment Fund 15.0
Shmey-Bar Group................................................. Commercial Real Estate 7.1(3)
ENERGY DISTRIBUTION
Granite Hacarmel Investments Ltd. (TASE)................ Distribution of Refined 21.2
Petroleum Products
BASIC INDUSTRY
Carmel Container Systems Limited (AMEX: "KML")... Packaging Materials and 20.0
Carton Production
Davidson-Atai Publishers Ltd. ................................. Publications 20.7
M.D.F. Boards Industry Ltd. .................................. Medium Density Fiber Products 50.0
Orlite Engineering Company Ltd. (TASE).................. Composite Material Products 22.0(4)
Paradise Mattresses (1992) Ltd. .............................. Mattresses and Fold-out Beds 85.1
Pri Ha'emek (Canned and Frozen Food) 88 Ltd. ......... Frozen and Canned Food 54.7(5)
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
AS OF
INDUSTRY SEGMENT PRINCIPAL BUSINESS DECEMBER 31, 1994
---------------- ------------------ -----------------
<S> <C> <C>
HIGH TECHNOLOGY AND COMMUNICATIONS
Courses Investment in Technology Ltd. ..................... Venture Capital Fund 4.6(6)
DSP Group, Inc. (NASDAQ NMS: "DSPG")................... Digital Signal Processing 1.9(7)
Technologies
Idan Software Industries I.S.I. Ltd. (NASDAQ: "IDANF"). Telecommunications Services 7.9
Mercury Interactive Corporation (NASDAQ NMS: "MERQ")... Automated Software Quality 2.4(8)
Products
M-Systems Flash Disk Pioneers Ltd. (NASDAQ: "FLSHF")... Data Storage Media 4.1(1)
Qronus Interactive Israel (1994) Ltd. ........................ Automated Software Quality 12.5(9)
Products
Teledata Communication Ltd. (NASDAQ NMS: "TLDCF")...... Telecommunications Systems 10.6(10)
Trinet Venture Capital Fund Ltd............................... Venture Capital Fund 50.0
</TABLE>
--------------
(1) Investment made in January 1995.
(2) The Company's ownership reflects 42.5% of Ophir's 13.3% ownership of
Industrial Buildings.
(3) The Company's ownership reflects 42.5% of Ophir's holdings of 16.7% in
each of the following three companies: Shmey-Bar (I.A.) 1993 Ltd.;
Shmey-Bar (T.H.) 1993 Ltd. and Shmey-Bar Real Estate 1993 Ltd.
(4) As a result of Company purchases in 1995, the Company's ownership was
increased to 22.6% as of March 22, 1995.
(5) As a result of Company purchases in 1995, the Company's ownership was
increased to 55.9% as of March 22, 1995.
(6) The Company's ownership includes 2.5% of Courses Investment owned
directly and 42.5% of Ophir's 5% ownership of Courses Investment.
(7) The Company's ownership includes 1% of DSP Group owned directly and
42.5% of Ophir's 2.1% ownership of DSP Group. As a result of Company
sales in 1995, the Company's ownership was decreased to 1.4% as of March
22, 1995.
(8) As a result of Company sales in 1995, the Company's ownership was
reduced to 1.3% as of March 22, 1995.
(9) The Company's ownership includes 11.5% of Qronus owned directly and 2.3%
of Mercury's 42.1% ownership of Qronus.
(10) The Company's ownership includes 2.2% of Teledata owned directly and
42.5% of Ophir's 19.7% ownership of Teledata.
-3-
<PAGE>
STOCK REPURCHASE PROGRAM
At its March 28, 1995 meeting, the Board of Directors of Ampal approved
the repurchase by Ampal of up to 2 million shares of its Class A Stock, at
market prices from time to time.
1994 PUBLIC OFFERING
On February 1, 1994, Ampal completed a public offering of 4.5 million
units, which sold for $12.125 per unit, each 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 $51 million. Since February 2, 1994, the Class A Stock and
warrant components of the units are trading separately.
HOTELS AND LEISURE-TIME
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 management of an underwater facility
in Jakarta, Indonesia. Coral World'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 a transparent acrylic tube on the bottom of a
man-made aquarium surrounded by marine life.
In 1994 Coral World's parks had a total of approximately 1.3 million
visitors. In addition to admission charges, Coral World's food and beverage
facilities and retail outlets are a significant revenue source. Coral World
employed a total of 275 persons as of December 31, 1994.
Coral World's global expansion is continuing with new parks in various
planning stages including Maui, Hawaii and Hurghada, Egypt.
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.
The Club had approximately 1,900 member families for the 1994/95 season
compared with 2,000 for the 1993/94 season, when it 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 another country
club in nearby Hod Hasharon that opened on July 1, 1994. This club had 650
member families for the 1994/95 season and as of January 3, 1995, 830 member
families had subscribed for the 1995/96 season. This club has a capacity of
1,600 member families. Kfar Saba's investment in this project was
approximately $1 million.
-4-
<PAGE>
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:
<TABLE>
<CAPTION>
NO. OF MORIAH'S
LOCATION CATEGORY ROOMS INTEREST
-------- -------- ------ --------
<S> <C> <C> <C> <C>
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(5)
-------
Total 1,965
</TABLE>
---------------
(1) Net lease which expires in 1996. The renewal of this lease is under
negotiation.
(2) Net lease which expires in 2001.
(3) Management agreement which expires on March 31, 1995. The renewal of
this agreement is under negotiation.
(4) No formal management agreement has yet been signed.
(5) On October 1, 1994, Moriah ceased managing this hotel.
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 1994, Moriah spent
approximately $3 million on general improvements and renovations.
Tourist arrivals in Israel during both 1994 and 1993 were 2 million.
Moriah's occupancy rate was 72% in 1994 and 73% in 1993 (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 1994
was 65% and during 1993 was 67%. Moriah's average room rate (expressed in
dollars) rose by 3% in 1994 compared to 1993, reflecting improved competitive
conditions.
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 or are being constructed and competition is expected to
intensify.
Moriah employed approximately 1,800 persons as of December 31, 1994.
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 compensatory damages.
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
-5-
<PAGE>
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.
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 88% were occupied on December 31, 1994, compared with 70%
on December 31, 1993, 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, with a minimum of
$270,000 per year.
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
aggregating approximately 37,000 square feet. Four of these properties are
net leased to Hapoalim. Nir owns four commercial properties located in
Israel aggregating approximately 18,000 square feet. Three of these
properties are net leased to Hapoalim. Ampal Finance owns two commercial
properties located in Israel aggregating approximately 7,000 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 $43.2 million of these debentures were
outstanding as of December 31, 1994. Ampal Development has deposited with
Hapoalim funds sufficient to pay all principal and interest on these
debentures.
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.
-6-
<PAGE>
BANK HAPOALIM (CAYMAN) LTD. ("CAYMAN")
Cayman, 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. In 1994 and 1993, Cayman paid $1 million and $4 million in dividends
on its common stock, respectively, as well as the required dividend on its 7%
preferred shares.
BAY HEART 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 280,000 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.
In July 1994, Bay Heart purchased a 50% interest in 90,000 square feet
of land adjacent to the Mall for $1.7 million. The remaining 50% interest is
held by an unrelated group of investors with whom Bay Heart entered into a
joint venture agreement. In October 1994, Bay Heart purchased 30,000 square
feet of land adjacent to the Mall for $1.1 million. These plots of land are
intended to be used for the construction of an addition to the Mall.
Bay Heart has recently signed a Letter of Intent with both the Ports and
Railways Authority and a subsidiary of the Egged bus company regarding the
establishment of a joint company, in which each will be equal investors, for
the construction of a transportation and business complex next to the Mall.
This project will include the construction of both a bus terminal and train
station. The land for this project is owned by the Ports and Railways
Authority which is expected to make it available to the joint company.
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.
EPSILON INVESTMENT HOUSE LTD. ("EPSILON")
In January 1995, the Company invested $1.5 million and acquired 20% of
Epsilon and its affiliate Renaissance Investment Company Ltd. Epsilon is an
investment bank which provides portfolio management and this affiliate
provides underwriting services in Israel through its subsidiaries.
ETZ VANIR LTD. ("ETZ VANIR") AND YAKHIN MATAIM LTD. ("YAKHIN MATAIM")
Both Etz Vanir and Yakhin Mataim cultivate orange, grapefruit,
clementine, lemon and avocado groves in Israel pursuant to various long-term
land leases which, including renewal options, do not expire until the
-7-
<PAGE>
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, Ampal 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 million
for services it has rendered to the companies. This litigation is pending.
In February 1995, Yakhin Hakal and its affiliates commenced a legal
proceeding seeking to cause Etz Vanir and Yakhin Mataim to redeem the
perpetual debentures owned by Ampal for approximately $700,000 and to require
Ampal to surrender all of its preferred shares of Etz Vanir and Yakhin Mataim
for their par value. Ampal intends to vigorously contest this legal
proceeding. See, "Legal Proceedings."
INDUSTRIAL BUILDINGS CORPORATION 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 10.7 million square feet of
space in industrial buildings throughout Israel. 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.
The buildings which are owned by Industrial Buildings are leased to
approximately 1,900 lessees under net leases having terms of up to tenyears.
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
occupancy rate in buildings owned or leased by Industrial Buildings was
approximately 91% at December 31, 1994.
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 145,000
square feet and parking facilities of approximately 860,000 square feet.
Approximately 9% of Industrial Buildings' space is located in the
administered territories. Industrial Buildings cannot predict whether the
ongoing peace process will have an effect on this space. See "Conditions in
Israel."
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 was approximately $50 million. Ampal owns
42.5% of Ophir. Industrial Buildings' policy is 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
-8-
<PAGE>
a dividend approximately NIS 195 million ($66 million) to its shareholders,
which was funded with a portion of NIS 244 million ($82 million) of long-term
debt. This dividend represents an amount significantly in excess of 60% of
Industrial Buildings' 1993 earnings. In December 1994, Industrial Buildings'
distributed a dividend of NIS 55 million ($18 million) to its shareholders.
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. 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 43 permanent employees
as of December 31, 1994.
OPHIR HOLDINGS LTD. ("OPHIR")
Ophir is a holding company that holds interests in Teledata
Communication, Ltd., Industrial Buildings, DSP Group, Inc. and DSP
Communications, Inc. These companies are discussed elsewhere in this Report.
In addition, Ophir has invested in two unaffiliated mutual funds and a
newly-formed biotechnology company.
Ophir owns, through a wholly-owned subsidiary, nine real estate
properties located in Israel aggregating approximately 180,000 square feet.
Three of these properties are net leased to Hapoalim or its subsidiaries.
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."
Ophir is 42.5%-owned by the Company and since September 30, 1993, its
results are no longer consolidated in the Company's financial statements and
are now recorded by the equity method of accounting. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations."
In March 1994, the Company and the Investment Company of Bank Hapoalim
entered into a shareholders' agreement regarding joint voting, directorships
and rights of first refusal.
Ophir intends to develop approximately 60,000 square feet of office and
commercial space and approximately 59,000 square feet of parking space on
property owned by it in Petach Tikva, Israel. The estimated cost of this
project is $5 million.
In February 1994, Ophir purchased two acres of land in an industrial
park in Netanya, Israel for $2.7 million, together with an unrelated party.
In August 1994, these parties entered into a joint venture agreement
regarding this site on which they intend 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. Ophir's share of the property and
joint venture is 70%.
In April 1994, Ophir acquired a 16.7% interest in the Shmey-Bar group of
companies ("Shmey-Bar"). Shmey-Bar acquired 2.3 million square feet of real
estate properties from Hamashbir Hamerkazi, Ltd. ("Hamashbir Hamerkazi"), for
$27.7 million. In the same transaction, Shmey-Bar received an option to
acquire, for $26.3 million, an additional 700,000 square feet of real estate
properties from Hamashbir Hamerkazi. These properties are situated in
various locations in Israel and are primarily either presently or previously
occupied by Hamashbir Hamerkazi. Ophir's interest in Shmey-Bar was acquired
with a nominal investment accompanied by a $2 million shareholder's loan.
In August 1994, Ophir acquired a limited partnership interest in
Clark/67 Associates L.P. ("Clark/67") which purchased an office building in
New Jersey for $3.2 million. Ophir invested $250,000 of Clark/67's $500,000
capital and provided a guarantee for Clark/67's $2.7 million bank loan.
-9-
<PAGE>
In September 1994, Ophir acquired a 10% interest in Memco Software Ltd.
("Memco") for $1.25 million. In the same transaction, Ophir received options
to acquire an additional 10% interest in Memco for $1.25 million, subject to
Memco's achievement of certain milestones and should Memco not achieve
certain sales results, Ophir will be entitled to receive an additional 6% of
Memco. Memco is engaged in the development and manufacturing of software
products which secure open systems based on UNIX. Their product is currently
being tested in Israel and elsewhere. In October 1994, Memco established a
wholly-owned subsidiary which will market, and supply support and maintenance
for, its products in the United States.
In December 1994, Ophir invested approximately $6 million and acquired
33% of a 60,000 square-foot property in Tel Aviv. The owners of the property
expect to construct a building on the property consisting of 229,000 square
feet of office space, 22,000 square feet of commercial space and 500 parking
spaces at a total cost of approximately $30 million. In addition, Granite
Hacarmel Investments Ltd. invested $3 million and acquired 17% of this
property.
RENAISSANCE ISRAEL
In July 1994, the Company agreed to invest $3 million for 15% of
Renaissance Israel, a fund that invests in Israel-related companies generally
on the same terms and conditions as the Renaissance Fund LDC. (the
"Renaissance Fund"). The Renaissance Fund was formed in 1994 to invest
primarily in emerging markets, basic industry and government privatizations
in Israel and elsewhere in the Middle East. As of December 31, 1994,
Renaissance Israel and the Renaissance Fund had committed capital of $20.3
million and $135.2 million, respectively. The Company had invested an
aggregate of $750,000 and $1,325,000 in Renaissance Israel as of December 31,
1994 and March 9, 1995, respectively. The Company has a representative on
the Executive Committee of the Renaissance Fund and is entitled to certain
potential co-investment opportunities.
In March 1995, Renaissance Israel and the Renaissance Fund (together,
the "Funds") invested a total of approximately $29 million and acquired a
24.9% interest in a holding company which acquired 100% of the shares of
Shikun U'Fituach le-Israel Ltd. ("SHOP") from the Israeli Government for
approximately $293 million, of which approximately $176 million consisted of
non-recourse debt financing from banks. The Company's interest and share of
the investment in this holding company is 0.7% and $850,000, respectively.
SHOP is one of Israel's largest housing and development companies whose
activities include residential and industrial construction as well as
infrastructure for residential areas.
In March 1995, the Funds invested a total of approximately $8 million
and acquired 25.1% of Clalcom Ltd. ("Clalcom"). The Company's interest and
share of the investment in Clalcom is 0.7% and $250,000 respectively.
Clalcom is engaged in the telecommunications business in Israel and is
expected to take part in a bid for the second international
telecommunications operator in Israel.
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, 1994, Sonol supplied gas to 146 gas stations in
Israel, of which 111 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 1994 and 1993,
representing approximately 25.8% and 24.8% of the total sales of such
products in Israel by the three major fuel companies in Israel in 1994 and
1993, respectively.
-10-
<PAGE>
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, during 1994 a law was passed cancelling certain zoning
limitations and permitting new gas stations in locations not previously
permitted. Also, proposals for legislation were submitted which would limit
the maximum duration of supply and leasing contracts between the oil
marketing companies and gas station owners. 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, Sonol continues to emphasize improving efficiency through
modernization, selective expansion and staff reductions. Furthermore,
Granite expects to pursue a policy of diversification. In 1993, Granite
established a subsidiary, Granite Hacarmel Properties, Ltd. ("Granite
Properties") which invests in real estate projects in Israel. Through
December 31, 1994, Granite Properties contracted to invest approximately $27
million in commercial real estate projects and is studying other
opportunities. Through its newly formed subsidiary, Granite Hacarmel
Holdings and Development, Ltd., Granite is also examining possible
investments in the tourism and industrial sectors.
During 1994, as a result of the conversion of debentures, the Company's
ownership of Granite was diluted to 21.2% and the Company recorded a gain on
issuance of shares of $.3 million ($.2 million after taxes). 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 Company to appoint three of the eleven members of Granite's
board. The Company and these shareholders, who currently collectively own an
aggregate of 83.0% 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. During 1994, one
of the parties to the agreement acquired the interest of another and now owns
54.2% 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 of Ampal. If the Company 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), the Company 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. In 1992, Granite concluded
two public offerings on the TASE and raised approximately $102 million.
In June, 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. 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.
-11-
<PAGE>
BASIC INDUSTRY
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
folding 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.
Recently, Carmel initiated measures to reduce its work force,
consolidate certain operations and upgrade certain equipment. In 1994,
Carmel invested $5.5 million and expects to make additional investments of
approximately $15 million in total in 1995 and 1996 for machinery and
infrastructure. In 1996, Carmel expects to consolidate two of its plants and
move them to a leased property in Caesarea. As of December 31, 1994, Carmel
employed 695 persons.
In July 1992, the Company acquired 20% of the shares of Carmel for
approximately $2.2 million. Shares of Carmel are listed for trading on the
AMEX under the symbol "KML." 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 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.
DAVIDSON-ATAI PUBLISHERS LTD. ("DAVIDSON-ATAI")
Davidson-Atai is the publisher of a multi-volume series entitled "The
World of the Bible," a contemporary scientific interpretation of the Bible
with ample documentation of which 19 out of 24 volumes have been published.
In addition Davidson-Atai has published a multi-volume illustrated series on
the Bible for children. Davidson-Atai expects to translate this series and
publish it abroad. Davidson-Atai distributes its books through subscriptions
and book stores.
Davidson-Atai is also a publisher of magazines. It publishes the Hebrew
edition of "Popular Science" magazine and expects to soon publish the Hebrew
edition of "Prevention" magazine.
As a result of private placements during 1994, the Company's interest in
Davidson-Atai was diluted from 22.5% to 20.7%.
MDF BOARDS INDUSTRY LTD. ("MDF")
In January 1994, the Company agreed to acquire 50% of MDF which is
establishing a plant for the production and marketing of medium density fiber
boards in Israel. The original estimated cost of establishing the MDF plant
was approximately $28 million of which $10.7 million has been granted, and
loans of $9 million have been guaranteed, by the Israel Government Investment
Center. As of December 31, 1994, the Company had invested $1.8 million and
made loans of $1.3 million to MDF. MDF currently estimates that the cost of
-12-
<PAGE>
the plant will be approximately $42 million.
MDF has sought approval from the Israeli Government Investment Center
for an additional grant of $5.3 million and additional government guaranteed
loans of $4.5 million. Should such approvals be granted, Ampal's 50% share
of the investment which was estimated at $4.5 million, would increase to $6.3
million. Should such approvals not be granted in full, Ampal's 50% share of
the investment may be increased up to a total of $10.3 million.
ORLITE ENGINEERING COMPANY LTD. ("ORLITE")
Orlite is one of Israel's largest manufacturers 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, specialized aerospace
components, outdoor storage distribution cabinets for telecommunications and
cable and electrical switching equipment.
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 to
more than 50% of Orlite's sales 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
1994, 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, 1994, Orlite employed 148 permanent workers and 25
temporary workers. Orlite owns its manufacturing facilities.
As of December 31, 1993, the Company owned 30.1% of the shares of
Orlite. The Company's ownership of the shares of Orlite was reduced to 22%
as of December 31, 1994, as a result of exercises of options by the Company
and others, as well as purchases of shares on the TASE by the Company. The
Company's ownership of the shares of Orlite was increased to 22.6% as of
March 22, 1995, as a result of additional purchases on the TASE.
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 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.
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
-13-
<PAGE>
products in Israel and markets its products primarily in Israel and Europe
and, to a lesser extent, in North America and Japan. 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 in Petach Tikvah which is partially owned by the Company.
Pri Ha'emek sells primarily 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. In 1994, Pri Ha'emek
became the Israeli-licensed producer, importer and distributor of Del Monte
products.
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
45% of its sales in 1994. 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 108 persons on a full time basis as of December 31,
1994. Pri Ha'emek also employs workers on a temporary basis to assist it
with its seasonal needs. In addition, in 1994, Pri Ha'emek received $250,000
in rental income.
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.
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 from 74.9% to 66.7%. In March 1994,
Pri Ha'emek conducted an initial public offering in Israel on the TASE. In
connection with this offering, the Company realized a gain on issuance of
shares of $2.3 million ($1.5 million, after taxes). The Company's interest
in Pri Ha'emek was initially diluted to 51.3%. Subsequent to the public
offering, the Company has purchased additional shares and convertible
debentures on the TASE and at December 31, 1994 and March 22, 1995 its
interests were 54.7% and 55.9%, respectively. Upon exercise of all warrants
and convertible debentures, the Company's interest may be diluted to 38.5%
based on its March 22, 1995 interest. 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.
HIGH TECHNOLOGY AND COMMUNICATIONS
COURSES INVESTMENT IN TECHNOLOGY LTD. ("COURSES INVESTMENT")
In 1994, the Company invested $375,000 and in 1993, Ophir invested
$700,000 and acquired 2.5% and 5% of Courses Investment, respectively.
Courses Investment is a venture capital fund which invests primarily in
media, software and technology infrastructure companies.
DSP GROUP, INC. ("DSP GROUP") AND DSP COMMUNICATIONS, INC.("DSP
COMMUNICATIONS")
DSP Group is a leading developer of high performance, digital signal
processing ("DSP") based software and hardware solutions for digital speech
products targeted at the convergence of the personal computer, communications
and consumer electronics markets. Digital speech technology provides
fundamental advantages
-14-
<PAGE>
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
TrueSpeech(TM), 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, video compression and audio
algorithm technologies.
In February 1994, DSP Group completed an initial public offering of its
shares in which it raised $27.6 million. Its shares are quoted on the NASDAQ
NMS under the symbol "DSPG."
In 1994, Ampal recorded a gain of $2 million ($1.3 million after taxes)
from the sale of a portion of its shares of DSP Group. As a result of these
transactions, Ampal owned directly 1% of the equity of DSP Group and Ophir
owned 2.1% of DSP Group at December 31, 1994. From January 1, 1995 until
March 22, 1995, Ampal sold additional shares of DSP Group, reducing its
direct ownership further to 0.5%.
As of December 31, 1994, Ophir owned 4.8% of DSP Telecommunications Ltd.
("DSP Telecom"), and DSP Group owned approximately 5%. DSP Telecom a former
subsidiary of DSP Group, primarily engaged in the development and marketing
of DSP based integrated circuits for the wireless communications market under
a license granted by DSP Group. In March 1995, Ophir's interest in DSP
Telecom was exchanged for the same interest in DSP Communications, which
assumed the business of DSP Telecom. Immediately thereafter, DSP
Communications completed an initial public offering of its shares in which it
raised $19.6 million, diluting Ophir's interest to 2.7%. DSP Communications'
shares are quoted on the NASDAQ NMS under the symbol "DSPC."
IDAN SOFTWARE INDUSTRIES I.S.I. LTD. ("IDAN")
Idan, through its direct and indirect subsidiaries, is a provider of
telecommunications services and products in Israel. 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 Bezeq, 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.
In May 1994, Idan acquired 51% of the voting capital stock of ASP
Computer Products, Inc. for $2.9 million. ASP designs, manufactures and
distributes peripheral equipment for computers including sharing devices
between personal computers, laser printers and facsimile machines.
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 ("MOC") for the services it offers.
In December 1994, the MOC announced that it will invite qualified bidders
in early 1995 to submit competitive bids for two General Licenses, each of
which will entitle the licensee to operate an unrestricted, bi-directional,
international telephone service. Idan is planning to participate in a
consortium which will submit a bid for these licenses.
-15-
<PAGE>
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 the nominees
nominated by the other parties to this agreement to Idan's 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.
The Company owns 7.9% of Idan. Idan is quoted on NASDAQ under the
symbol "IDANF."
MERCURY INTERACTIVE CORPORATION ("MERCURY")
Mercury develops, markets and supports a complete family of automated
software quality ("ASQ") solutions that automate and manage 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 software platforms such as UNIX/X Windows, MS Windows
and Windows NT as well as those for multi-user system testing. Its announced
products include those for hardware platforms such as OS/2 and Macintosh.
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."
In 1994, the Company recorded a gain of approximately $1.5 million
(approximately $1 million after taxes) from the sale of a portion of its
shares of Mercury. As a result of these transactions, the Company's
ownership of Mercury was reduced to 2.4% on December 31, 1994. From January
1, 1995 until March 22, 1995, the Company sold additional shares of Mercury
reducing its ownership further to 1.3%.
M SYSTEMS FLASH DISK PIONEERS LTD. ("M SYSTEMS")
In January 1995, the Company acquired 260,416 common shares, equal to a
4.1% interest in M Systems, for $1 million and received warrants to purchase
an additional 130,206 common shares at $4.61 per share until June 30, 1998.
M Systems is an Israeli company engaged in the development, manufacturing and
marketing of data storage media based on "flash memory," a new silicon memory
chip. In 1994, M Systems entered into a license agreement with Intel
Corporation, established a state-of-the-art surface mount technology
manufacturing facility, expanded its marketing and sales force and completed
the design of its broad Flash Disk product line.
M Systems has announced that it has received a letter from the Personal
Computer Memory Card International Association stating that Sun Disk
Corporation (a competitor of M Systems) has alleged that its patents may
apply to certain of M Systems' products. M Systems has announced that its
attorneys have closely examined these patents and feel strongly that Sun
Disks' claims are entirely groundless.
M Systems is quoted on NASDAQ under the symbol "FLSHF."
QRONUS INTERACTIVE ISRAEL (1994) LTD. ("QRONUS")
In June 1994, the Company acquired an 11.5% interest in Qronus for $1
million. Qronus is engaged in the research, development, manufacturing and
marketing of automated software quality solutions for non-standard
-16-
<PAGE>
platforms, embedded systems and real-time computer systems. Qronus was
established by Mercury, which holds a 42.1% interest in Qronus.
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 among a greater number
of subscribers. Teledata currently markets four product lines for use in the
local loop. In addition to Israel, Teledata markets its products in Europe,
Asia, South America, Central America and Oceania (Australia and the
surrounding islands).
During 1994 Teledata experienced a sharp decline in sales and earnings,
due primarily to a slowdown in the sales of the DCS-20, its flagship product,
which resulted from increased competition in its traditional markets and
persistent pressure on prices and delayed introduction of new products. As a
result of this decline, Teledata has taken several measures to reverse the
downturn.
Teledata is currently undergoing a reorganization, which has included
replacing its chief executive officer, reducing its workforce to 170
employees as of the end of February 1995 as compared with 251 as of the
beginning of December 1994 and downsizing its premises.
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 1994, the Company recorded a small gain from the sale of a portion of
its shares of Teledata. As a result of these transactions, Ampal's ownership
of Teledata was reduced to 2.2% and Ophir's remained at 19.7%.
TRINET VENTURE CAPITAL LTD. ("TRINET")
In February 1994, the Company and an affiliate of Hapoalim established
Trinet, a venture capital fund for investments in high-technology ventures,
including investments in start-up entities, in Israel. Each of the Company
and the Hapoalim affiliate has committed to invest up to $2.5 million in
Trinet. Trinet is managed by Trinet Investment in High-Tech Ltd. which is
37.5%- owned by each of the shareholders of Trinet.
In 1994, Trinet acquired a 51% interest in Imagenet Ltd. which is
developing and marketing computer aided network engineering software
products, for $700,000 and an option to purchase an additional 15% interest
for $800,000; a 10.7% interest in Comfy Interactive Movies Ltd., which is
developing and marketing a computer keyboard and interactive movies specially
designed for children ages 2-6, for $769,000; a 7.8% interest in Logal
Software and Educational Systems Ltd., which is developing and marketing
computerized educational systems for learning science in high schools and
colleges, for $500,000 and a 1.8% interest in Peptor Ltd., which is
developing advanced pharmaceutical products based on synthetic peptides, for
$300,000. In February 1995, Trinet, acquired a 35% interest in Smart Link
Ltd., which is developing and marketing multimedia
-17-
<PAGE>
products, for $500,000.
EMPLOYEES
---------
As of December 31, 1994, Ampal had 12 employees plus 5 employees whose
compensation is reimbursed to Ampal by Moriah and 1 employee whose
compensation is shared with Hapoalim. Ampal (Israel) had 8 employees and
Ampal Industries (Israel) Ltd. had 5 employees as of that date. Relations
between Ampal and its employees are satisfactory.
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, although its impact has
decreased since 1993, with the progress in the peace process, as discussed
below. 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. 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.
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
with the signing of the Oslo Agreement. This was followed by a joint
Israeli-Palestinian Declaration of Principles (the "Declaration") which was
signed by Israel and the Palestine Liberation Organization ("PLO") in
Washington, D.C., outlining interim Palestinian self-government arrangements.
As a result of these agreements, Palestinian self-rule in the Gaza Strip and
Jericho has been implemented and proposed elections of a Palestinian council
and plans for extensive economic cooperation are contemplated. 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 complete these arrangements. Israel signed a peace
agreement with Jordan which has led to diplomatic and commercial relations.
Israel is currently negotiating a peace agreement with Syria.
All male adult permanent residents of Israel under the age of 51 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
-18-
<PAGE>
operated effectively under these and similar requirements, no assessment can
be made of the full impact of such requirements on the Company or its
investees.
Industrial Buildings, a major owner/lessor of industrial properties in
Israel, owns approximately 1 million square feet of industrial buildings in
the administered territories (approximately 9% of its total holdings). The
future status of buildings owned and property leased by Industrial Buildings
in the administered territories is uncertain, but historically the Government
of Israel has compensated property owners for forfeitures resulting from
government actions.
Demographics
Since the beginning of 1990, Israel has been experiencing a new wave of
immigration, primarily from the former Soviet Union. Approximately 80,000
new immigrants arrived during 1994. During the period 1990 through 1994,
Israel's population increased by approximately 19.1%. This 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.
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. These 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
Israel's gross domestic product ("GDP") increased by 6.8% in 1994 while
business sector GDP rose by 7.9%, the highest rates of growth since 1972.
Per capita GDP increased by 4.3%. 1994 marked the fifth consecutive year of
rapid growth since 1990 at the onset of mass immigration. During this
period, GDP rose by an annual average of 5.8% and business sector GDP went up
by 6.9%.
Rapid economic growth in 1994 was fueled primarily by exports and
private consumption. Exports of goods and services increased by 10.6% over
1993, leading to a notable cumulative export growth of 10% in 1992-1994,
following four years of low rates of export growth during 1988-1991. Within
the same three year period, imports of goods and services grew at the
similarly high rate of 38%. The concurrent increase in the import surplus
amounted to $10 billion. After deducting unilateral transfers of $7 billion,
the deficit in the current account for 1994 totalled $3 billion, double the
amount recorded in 1993.
In 1994, private consumption rose by the rate of 9.3%, amounting to 6.7%
in per capita terms. Consumption of durables increased even more, by 12.2%.
Private consumption has been growing rapidly since 1990 and nearly always at
a higher rate than the growth in GDP. This development led to a decline in
gross saving from 24% to 20.7% of GDP, and to the aforementioned rise in the
current account deficit.
The rapid growth in the economy was accompanied by a very notable
decrease in the unemployment rate, from an average of 10% in 1993 to 7.6% in
1994 following an increase of 120,000 in the number of employed
-19-
<PAGE>
persons, 100,000 of whom are in the business sector. During 1992-1994,
employment increased by 287,000, with the business sector accounting for
236,000. The unemployment rate among immigrants fell very steeply, and at
the end of 1994 reached 15%.
Together with these favorable developments and apart from the
aforementioned current account deficit, the economy experienced a rise in
inflation in 1994, to a level of 14.5%, compared with the officially targeted
annual inflation rate of 8%. The rise in inflation was largely due to the
highly expansionary monetary policy maintained until the end of 1993, and to
an upsurge in the prices of housing (24%) and fruit and vegetables (56%). At
the end of 1994 the level of housing prices was 80% higher in real terms than
in 1987, which represents a critical problem over and above its effect on the
consumer price index.
The Bank of Israel's expansionary monetary policy of the past few years
was reversed in 1994. The lending rate was increased repeatedly during 1994,
resulting in high short-term interest rates. This restrictive monetary
policy was the result of the rising inflation rate over and above the 8% goal
set for 1994 by the Finance Ministry and the Bank of Israel.
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 and
1994 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 1994, the New Israeli Shekel ("NIS") was devalued by 1.1%
relative to the dollar from NIS 2.986 to NIS 3.018. This modest devaluation
resulted primarily from the overall depreciation 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.
-20-
<PAGE>
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 3.6
1986........................... 19.6 1.486 (0.9) 20.65 1.9
1987........................... 16.1 1.539 3.5 12.16 3.6
1988........................... 16.4 1.807(6) 17.4 (0.86) 4.1
1989........................... 20.7 1.963 8.7 11.08 4.8
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 3.0
1994........................... 14.5 3.018 1.1 13.2 2.8
</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 United States
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
United States 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 United States 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 United States 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 Industrial Research and Development 1984.
-21-
<PAGE>
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.
In each of 1993 and 1994, the number of tourists who arrived in Israel
was approximately 2 million compared with 1.3 million in 1992.
At December 31, 1992, December 31, 1993 and September 30, 1994, Israel's
outstanding net foreign debt was approximately $15.2 billion, $15.7 billion
and $17.7 billion, respectively. Israel had approximately $6.8 billion of
foreign exchange reserves at the end of 1994 compared to $6.4 billion at the
end of 1993 and $5.1 billion at the end of 1992.
Economic and Monetary Policies
In order to stimulate economic growth, the Israeli Government has
continued a policy adopted in 1989 aimed at 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
-22-
<PAGE>
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
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 initially was allowed to increase by 9% per annum, and
since July 1993, to increase by 6% per annum.
In the past several years the Israeli Government has also liberalized
regulations relating to the Israeli securities market.
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 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.
-23-
<PAGE>
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 1993, the Government of Israel sold a portion of the shares of
Hapoalim in public offerings resulting in the public owning 23.3% of
Hapoalim's shares. In December 1994, the Government of Israel publicly
requested bids for the purchase from the Government of a controlling interest
(between 20% and 40%) of the shares of Hapoalim. The bidding period ended in
March 1994. It has been reported that two groups of bidders have
participated in this bidding process, however, the results have not been
announced.
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 interests in a non-banking corporation exceeding 24.9%.
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.
-24-
<PAGE>
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.
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 1994, Israeli companies are taxed on their income at a
rate of 38%. For 1995 through 1996, this tax rate will be reduced to 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% 39% and 38% in 1990 through 1994.
A tax treaty between Israel and the United States became effective on
December 30, 1994. 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.
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 either 25%, 15% or 12.5%, depending on
percentage ownership of the investment and the type of income generated by
that company (as opposed to dividends payable to Israeli companies, which are
exempt from tax, except for the dividends paid by an approved enterprise to
either residents or non-residents, the tax on which is withheld at a rate of
15%). 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 1993 and has received "final assessments" with respect to such
reports filed through 1992 (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 1993, 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.
Generally, under the provisions of the Income Tax Ordinance, income paid
to non-residents of Israel by residents of Israel is generally subject to
withholding tax at the rate of 25%. However, withholding rates on income
paid to United States residents by residents of Israel are subject to the
United States-Israel tax treaty. No withholding has been made on interest
and rent payable to Ampal under an exemption which Ampal has
-25-
<PAGE>
received from the income tax authorities on an annual basis. There can be no
assurance that this exemption will continue in the future. 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). Since January 1, 1994, the
portion of the gain attributable to inflation prior to that date is taxable
at a rate of 10%, while the portion since that date is exempt from tax, while
the remainder of the profit, if any, is taxable to corporations at 38% in
1994 and is scheduled to be reduced to 37% and further to 36% in stages
during 1995 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), 1985, which applies to
companies which have business income in Israel or which claim a deduction in
Israel for financing costs, has been in force since the 1985 tax year. The
law provides for the preservation of equity whereby certain corporate assets
are classified broadly into Fixed (inflation resistant) and Non-Fixed
(non-inflation resistant) Assets. Where shareholders' equity, as defined
therein, exceeds the depreciated cost of Fixed Assets, a tax deduction which
takes into account the effect of the annual inflationary change on such
excess is allowed, subject to certain limitations. If the depreciated cost
of Fixed Assets exceeds shareholders' equity, then such excess, multiplied by
the annual inflation change, is added to taxable income.
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 for the purpose of their business.
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 "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. Since 1993, the maximum rate
applicable to domestic corporations is 35%.
Ampal is entitled to claim as a credit against its United States income
tax liability all or a portion of income taxes, or of taxes imposed in lieu
of income taxes, paid to foreign countries. If Ampal receives dividends from
a foreign corporation in which it owns 10% or more of the voting stock, in
determining total foreign income taxes paid by Ampal for purposes of the
foreign tax credit, Ampal is treated as having paid the same proportion of
the foreign corporation's post-1986 foreign income taxes as the amount of
such dividends bears to the foreign corporation's post-1986 undistributed
earnings.
In general, the total foreign tax credit that Ampal may claim is limited
to the proportion of Ampal's United States income taxes that its foreign
source taxable income bears to its taxable income from all sources, foreign
-26-
<PAGE>
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 transfers in 1992 of its stock in Granite and in
1994 of its stock in Orlite to separate foreign subsidiaries, Ampal entered
into gain recognition agreements with the Internal Revenue Service. Under
these agreements, if either foreign subsidiary sells all or a portion of its
stock in Granite before 2003 or in Orlite before 2005, Ampal generally will
be required to recognize for tax purposes a proportionate amount of gain
based upon the fair market value of the stock sold on the date of the
transfer to the foreign subsidiary, and to pay tax due in respect of such
gain together with interest accrued on such tax since the date of the gain
recognition agreement.
-27-
<PAGE>
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:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1994 1993 1992
---------------------------------------------
<S> <C> <C> <C>
Return on Assets (net income divided
by average total assets).............. 2.17% .06%* 2.88%
Return on Equity (net income divided
by average shareholders' equity)...... 4.56% .19%* 8.91%
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)...... 47.58% 33.17% 32.29%
</TABLE>
* Includes cumulative effect on prior years of change in
accounting principle of $(4,982,000).
-28-
<PAGE>
Item 2. PROPERTY
--------
Ampal subleases 4,936 square feet of office space leased by Hapoalim at
1177 Avenue of the Americas, New York City under a sublease which expires on
August 30, 2009 and pays Hapoalim base rent of approximately $170,000 per
year which commenced in September 1994, subject to escalation.
Ampal had space located at 10 Rockefeller Plaza subleased until
September 30, 1994 from Hapoalim. The rental payments for 1994 amounted to
approximately $134,000. Until November, 1990 Ampal occupied the entire
floor, constituting 10,710 square feet. At that time, the sublease was
modified 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 defaulted. The third party did not, in fact, pay the full
rental, prior to the expiration of its sublease and Hapoalim has sued it for
collection of amounts due of $140,000.
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 $2,769,000. These lease transactions
consist of the following:
Hapoalim leases a portion of premises owned by Ampal located at 105
Arlozoroff Street, Tel Aviv under a lease which expires March 7, 2003, with
annual rental payments based upon 11% of the cost of the property. In 1994,
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 1994, Ampal (Israel)
received $234,000 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 1994, Ampal
Development (Israel) received $357,000 as rental payments for these premises.
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
1994, Ampal Development (Israel) received $773,000 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 1994, Ampal Financial Services
received $512,000 as rental payments for these premises.
Hapoalim leases three premises owned by Nir Ltd., an Ampal subsidiary,
two 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 1994, Nir received $400,000 as rental for these
premises.
Hapoalim leases an office building owned by Ampal located at 174 North
Michigan Avenue, Chicago, Illinois. This lease expires in 2007 and provides
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
-29-
<PAGE>
1994, Ampal received $140,000 as rental payments for these premises.
Ampal-Israel, Ampal Development, and Nir each own a commercial property
in Tel Aviv, which are leased to various parties. The rent received by these
companies for all of these properties in 1994 totalled $371,000.
Other properties of the Company are discussed elsewhere in this Report.
ITEM 3. LEGAL PROCEEDINGS
-----------------
In February 1995, Yakhin Hakal and its affiliates commenced a legal
proceeding in Tel Aviv District Court seeking to cause Etz Vanir and Yakhin
Mataim to redeem the perpetual debentures owned by Ampal for approximately
$700,000 and to require Ampal to surrender all of its preferred shares of
Etz Vanir and Yakhin Mataim for their par value, on the alleged grounds
that these are debt and not equity investments. It is Ampal's view, that
its investments in these companies, which were made in the 1950's, are
equity investments and are not subject to redemption by these companies,
other than upon liquidation. Ampal intends to vigorously contest this
legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not Applicable.
-30-
<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 consolidated transaction reporting system for each
calendar quarter during the periods indicated:
HIGH LOW
---- ---
1994:
Fourth Quarter....................................... 9 1/2 6 1/4
Third Quarter........................................ 10 5/8 6 3/4
Second Quarter....................................... 9 3/4 6 3/4
First Quarter........................................ 13 1/8 8 7/8
1993:
Fourth Quarter....................................... 13 9 7/8
Third Quarter........................................ 12 1/4 7 5/8
Second Quarter....................................... 9 1/2 7 1/4
First Quarter........................................ 9 7/8 5 1/4
As of March 22, 1995, there were 1,448 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.
-31-
<PAGE>
Item 6.
SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues........................ $ 80,943 $ 73,243 $ 85,302 $ 71,519 $ 110,401
Net income...................... 7,334 226* 10,324 1,126** 1,116
Earnings per Class A share...... $.27 $.01* $.44 $.05** $.05
Total assets.................... 342,880 304,060 333,267 404,466 436,024
Notes, deposits and debentures
payable....................... 128,554 152,113 176,130 249,959 287,726
</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.
<PAGE>
Items 7 & 8.
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. 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. In determining whether to acquire
an interest in a specific company, the Company considers quality of
management, qualifications of investment partners, potential return on
investment, projected cash flow, market share and growth potential.
The Company emphasizes long-term appreciation over short-term returns and
liquidity. The Company often makes equity investments accompanied by more
significant loans or loan guarantees with the intention that cash flow from
operations of the investee companies will repay these loans.
The Company'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
("affiliates"), 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
the affiliates. Thus, the issuance of shares by an affiliate at a price
per share above the Company's carrying value per share for such affiliate
results in the Company recognizing income for the period in which such
issuance is made, while the issuance of shares by such affiliate at a price
per share that is below the Company's carrying value per share for such
affiliate 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 or in accordance with
Statement of Financial Accounting Standards ("SFAS") No.115, "Accounting for
Certain Investments in Debt and Equity Securities."
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.
<PAGE>
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 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 provision for income taxes and
on income before cumulative effect of change in accounting principle for the
year ended December 31, 1993. The financial statements for the year ended
December 31, 1992 were not 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. Starting in 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, 1994.
Prior to 1993, translation gains and losses for these subsidiaries and
affiliates were reflected in the Company'sconsolidated statements of income.
Should the NIS be devalued against the dollar, cumulative translation
adjustments are likely to result in reductions of shareholders' equity. As
of December 31, 1994, the effect on shareholders' equity was a decrease of
approximately $2.6 million. Upon disposition of an investment, the related
cumulative translation adjustment balance will be recognized in determining
gains or losses.
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" which requires that
marketable equity securities, other than equity securities accounted for by
the equity method, be reported at fair value. For those securities which are
classified as trading securities, unrealized gains and losses are reported in
the statement of income. Unrealized gains and losses from those securities
which are classified as available-for-sale are reported as a separate
component of shareholders' equity. The cumulative effect of adopting this
accounting principle as of January 1, 1994 was 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. At December 31,
1994, the net effect of market fluctuations resulted in a $.5 million
decrease in shareholders' equity. At December 31, 1994 the aggregate fair
value of available-for-sale securities was $.8 million and gross unrealized
losses were $2.7 million.
<PAGE>
In 1993 and 1992, Moriah Hotels Ltd. ("Moriah") and Orlite Engineering
Company Ltd. ("Orlite") reported their financial statements on a three-month
lag. Consequently, their results for the twelve-month period ended September
30, 1993 and 1992 were incorporated into the Company's 1993 and 1992
consolidated annual financial statements. In 1994, the Company reflected
these companies' earnings on a December 31 year-end basis. The effect of
this change on the Company's consolidated financial statements is
immaterial.
RESULTS OF OPERATIONS
---------------------
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
---------------------------------------------------------------------
Consolidated net income increased from $.2 million for the year ended
December 31, 1993 to $7.3 million for the year ended December 31, 1994. In
1993, the Company was required to record a nonrecurring charge to net income
of approximately $5 million with respect to its adoption of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." Net
income in 1994 increased as a result of increased gains on sales of
investments, unrealized gains on marketable securities, and a reduction in
net interest expense. These increases were partially offset by reductions in
equity in earnings of affiliates and rental income.
The decreases in interest expense and therefore in net interest expense for
the year ended December 31, 1994 as compared to the same period in 1993
resulted from the repayment of notes, loans and debentures. Also, Ophir
Holdings Ltd.'s ("Ophir") results, which were consolidated in the first
nine months of 1993, are reflected by the equity method in 1994 because the
Company's interest in Ophir was diluted to 42.5% in November 1993. In 1993,
Ophir incurred significant interest expense on bank borrowings used to
finance its March 1993 investment in Industrial Buildings Corporation Ltd.
("Industrial Buildings") and as a result recorded a loss in that year.
Equity in earnings of affiliates decreased for the year ended December 31,
1994 as compared to the same period in 1993 because Ophir's 1993 loss was not
reported by the equity method in 1993 (see above). In 1994, Ophir reported
further losses due to significant financing expense associated with its
acquisition of Industrial Buildings. Equity in earnings of affiliates was
also reduced in 1994 because the Company's 49%-owned affiliate, Bank Hapoalim
(Cayman) Ltd. recorded unrealized losses on its marketable securities. The
Company's share of earnings in Teledata Communication Ltd. ("Teledata"), of
which the Company owns 2.2% directly and 19.7% (8.4% net to the Company)
through Ophir, also decreased significantly because of a sharp decrease in
Teledata's sales and earnings in 1994 primarily due to increased competition
and delayed introduction of new products. These decreases were partially
offset by the increase in the Company's share of Granite Hacarmel Investments
Limited's ("Granite") earnings in 1994, because of increased capital gains
recorded by Granite as well as significant tax savings that Granite was able
to achieve. The Company's 50% share of earnings of Coral World International
Ltd.'s marine park in Eilat also increased in 1994 due to the increased
number of visitors and higher admission prices.
In February 1994, the other shareholder of Pri Ha'emek (Canned and Frozen
Food) 88 Ltd. ("Pri Ha'emek"), the Company's then 74.9%-owned subsidiary,
<PAGE>
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"). In connection with this offering, the Company
realized a gain on issuance of shares of $2.3 million ($1.5 million after
taxes). The Company's interest in Pri Ha'emek was initially diluted to
51.25%. Subsequent to the public offering, the Company has purchased
additional shares and convertible debentures and at December 31, 1994 its
interest was 54.7%. If all warrants and convertible debentures are
exercised, the Company's interest would be diluted to 37.6%.
During the first quarter of 1994, Granite issued additional shares upon
conversions of its debentures. The Company's interest in Granite was diluted
from 21.6% to 21.2% and the Company recorded a gain on issuance of shares of
$.3 million ($.2 million after taxes).
In 1993, as a result of a dilution of the Company's interest in Ophir, the
Company recorded a gain on issuance of shares of approximately $3.2 million
(approximately $2.1 million after taxes). See Results of Operations for the
year ended December 31, 1993 compared to the year ended December 31, 1992.
In February and June 1993, the Company invested an aggregate of approximately
$4.3 million in Paradise Mattresses (1992) Ltd. ("Paradise") for 85.1% of the
shares of Paradise. Paradise's assets and liabilities were consolidated
commencing June 30, 1993; since July 1, 1993 its manufacturing and
distribution operations have been consolidated and were 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.
In 1994, the Company recorded realized and unrealized gains on investments in
the amount of $5.5 million as follows:
In the third quarter of 1994, the Company received gross proceeds in the
amount of $2.6 million from sales of 120,000 shares of DSP Group, Inc. ("DSP
Group") and realized gains of $2 million ($1.3 million after taxes). As of
December 31, 1994, the Company held approximately 174,000 shares (1.9% of DSP
Group's outstanding shares), including its share of Ophir's holdings of DSP
Group.
In 1994, mainly during the fourth quarter, the Company received gross
proceeds in the amount of $1.9 million from sales of 155,000 shares of
Mercury Interactive Corporation ("Mercury"), which the Company acquired in
1992, and recorded a gain of approximately $1.5 million ($1 million after
taxes). As of December 31, 1994, the Company held approximately 311,000
shares (approximately 2.4% of Mercury's outstanding shares).
In the year ended December 31, 1994, the Company recorded $2.4 million of
unrealized gains on marketable securities, which are classified as trading
securities, in the statement of income. Included in that amount were gross
gains of $4.6 million and gross losses of $2.2 million on available-for-sale
securities which have been determined to be permanently impaired in value.
<PAGE>
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%. Because of the Company's dilution in Ophir,
and additional sales during 1994, the Company's ownership in Teledata was
further reduced to 10.6%.
Rental income decreased because Ophir's financial statements, are reflected
by the equity method commencing on October 1, 1993.
The increase in other expenses is mainly attributable to the consolidation of
Paradise's financial statements commencing July 1, 1993.
The decrease in the effective income tax rate to 43% in 1994 from 52% in 1993
resulted from changes in the components of taxable income and certain
subsidiaries' losses for which no tax benefits were available in 1993.
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. In the first quarter of 1993, Ophir which is 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
<PAGE>
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.
Food processing revenues of Pri Ha'emek decreased because sales were affected
by foreign currency fluctuations.
In February and June 1993, the Company invested an aggregate of approximately
$4.3 million in Paradise for 85.1% of the shares of Paradise. Paradise's
assets and liabilities were consolidated commencing June 30, 1993; since July
1, 1993 its manufacturing and distribution operations have been consolidated
and were 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.
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 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%. 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 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%.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of December 31, 1994, cash and cash equivalents were $42.1 million; an
increase of $38.9 million from December 31, 1993. This increase is mainly
attributable to proceeds received by Ampal from its public offering (see
below), of which $32.4 million was invested in cash and cash equivalents at
December 31, 1994. The Company's food processing subsidiary, Pri Ha'emek,
raised $11.4 million ($7 million of equity and $4.4 million of convertible
debentures) in a public offering in Israel (see Results of Operations).
On February 1, 1994, Ampal completed a public offering of 4.5 million units,
each unit 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. This offering resulted in net proceeds
to Ampal of approximately $51 million.
In 1994, the Company's investments increased by approximately $20 million.
This increase is primarily related to the investment of a portion of the
proceeds of the public offering in short-term interest-bearing securities
and new investments.
At December 31, 1994, the Company's debt to equity ratio was .74 to 1 as
compared with 1.3 to 1 at December 31, 1993.
Deposits, notes and loans receivable, and deposits, notes and loans payable
declined as a result of scheduled repayments. Debentures declined primarily
as a result of the early redemption of $15.5 million of high interest-bearing
debentures and the scheduled repayment of approximately $5 million of other
debentures. All remaining outstanding Ampal debentures are not subject to
call provisions and are expected to remain outstanding until they mature in
accordance with their terms. In addition, Pri Ha'emek issued convertible
debentures in the amount of $4.4 million.
At December 31, 1994, Ampal had $36.6 million aggregate principal amount, net
of discounts, of its debentures outstanding which are scheduled to mature by
2003. Most of these debentures bear interest at fixed rates ranging from 10%
to 13%. A portion of such debentures may be presented to Ampal for payment
prior to scheduled maturity. Also outstanding at December 31, 1994 was $43
million principal amount of debentures issued by an Israeli subsidiary. Cash
flow from deposits is matched to scheduled payments of principal and interest
on the Israeli subsidiary's debentures. At December 31, 1994, the Company
had deposits, notes and loans receivable aggregating $94 million with varying
interest rates and maturities. The deposits are guaranteed by Hapoalim.
As of December 31, 1994, the Company had issued guarantees on certain
outstanding loans to its investees and subsidiaries in the aggregate
principal amount of $14.9 million, and has a share of the commitments
issuedby and to its investees of up to $49.1 million.
<PAGE>
In March 1995, Ampal's Board of Directors approved the repurchase of up
to 2 million shares of its Class A Stock through open market
purchases from time to time.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Ampal-American Israel Corporation:
We have audited the accompanying consolidated balance sheets of Ampal-
American Israel Corporation (a New York corporation) and subsidiaries (the "
Company") as of December 31, 1994 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, 1994. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits. We did not audit the financial statements of certain
consolidated subsidiaries, which statements reflect assets and revenues of
43% and 70% in 1994, 43% and 77% in 1993, respectively, and revenues of
56% in 1992. Also, we did not audit the financial statements of certain
affiliated companies, the investments in which are reflected in the
accompanying financial statements using the equity method of accounting.
The Company's equity in net earnings (loss) of these companies represents
$5,881,000, $9,236,000 and $11,167,000 for the years ended December 31,
1994, 1993 and 1992, 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, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As explained in Note 1(d) to the consolidated financial statements, effective
January 1, 1994, the Company changed its method of accounting for certain
investments in debt and equity securities. Also, 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 LLP
New York, New York
March 22, 1995
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
REVENUES:
Equity in earnings of affiliates............. $ 5,793 $ 9,037 $ 11,195
Food processing and manufacturing............ 43,753 35,570 31,482
Interest:
Related parties............................. 15,823 16,311 17,058
Others...................................... 2,135 1,411 1,555
Gains on issuance of shares by subsidiary and
affiliates (Note 2)......................... 2,692 3,185 13,062
Realized and unrealized gains on investments
(Notes 1(d) and 2).......................... 5,525 1,973 3,820
Rental income................................ 3,390 4,045 4,719
Other........................................ 1,832 1,711 2,411
-------- -------- --------
Total revenues.......................... 80,943 73,243 85,302
-------- -------- --------
EXPENSES:
Food processing and manufacturing............ 34,447 27,574 24,415
Interest:
Related parties............................. 3,781 5,068 5,536
Others...................................... 15,328 17,296 12,810
Other........................................ 14,466 12,488 18,936
-------- -------- --------
Total expenses.......................... 68,022 62,426 61,697
-------- -------- --------
Income before income taxes................... 12,921 10,817 23,605
Income taxes (Note 8)........................ 5,587 5,609 13,281
-------- -------- --------
Income before cumulative effect of change
in accounting principle..................... 7,334 5,208 10,324
Cumulative effect on prior years of change in
accounting principle (Note 1(f))............ - (4,982) -
-------- -------- --------
NET INCOME.............................. $ 7,334 $ 226 $ 10,324
======== ======== ========
Earnings (loss) per Class A share:
Earnings before cumulative effect of change
in accounting principle.................... $ .27 $ .22 $ .44
Cumulative effect on prior years of change
in accounting principle (Note 1(f))........ - (.21) -
----- ----- -----
Earnings per Class A share (Note 7)......... $ .27 $ .01 $ .44
===== ===== =====
Weighted average number of Class A and
equivalent shares outstanding (in thousands) 24,526 20,717 20,717
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS AS AT DECEMBER 31, 1994 1993
-----------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Cash and cash equivalents...................... $ 42,104 $ 3,178
Deposits, notes and loans receivable (Note 3):
Related parties.............................. 90,462 111,429
Others....................................... 3,786 4,964
Investments (Notes 2 and 9).................... 131,537 111,641
Property and equipment, less accumulated
depreciation of $11,616 and $10,554........... 30,914 30,496
Other assets (Note 1(h))....................... 44,077 42,352
---------- ----------
TOTAL ASSETS................................... $ 342,880 $ 304,060
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND
SHAREHOLDERS' EQUITY AS AT DECEMBER 31, 1994 1993
---------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
LIABILITIES
Deposits, notes and loans payable (Note 4):
Related parties............................... $ 24,837 $ 42,752
Others........................................ 19,226 18,091
Debentures (Note 5)............................. 84,491 91,270
Accounts and income taxes payable, accrued
expenses and minority interests................ 40,832 35,130
---------- ----------
Total liabilities....................... 169,386 187,243
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY (Notes 6 and 13(b))
4% Cumulative, Participating, Convertible
Preferred Stock, $5 par value; authorized
650,000 shares; issued and outstanding
206,608 and 213,720 shares..................... 1,033 1,068
6-1/2% Cumulative, Convertible Preferred Stock,
$5 par value; authorized 4,282,850 shares;
issued and outstanding 1,114,927 and 1,202,342
shares......................................... 5,575 6,011
Class A Stock, $1 par value; authorized
30,000,000 shares; issued 20,840,518 and
16,224,779 shares; outstanding 20,840,518
and 16,042,713 shares.......................... 20,841 16,225
Common Stock, $1 par value; authorized, issued
and outstanding 3,000,000 shares............... 3,000 3,000
Additional paid-in capital...................... 57,185 10,605
Retained earnings............................... 89,007 82,079
Cumulative translation adjustments (Note 1(c)).. (2,636) (2,171)
Unrealized loss on marketable securities
(Note 1(d)).................................... (511) -
---------- ----------
Total shareholders' equity.............. 173,494 116,817
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 342,880 $ 304,060
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 7,334 $ 226 $ 10,324
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Equity in earnings of affiliates........... (5,793) (9,037) (11,195)
Gains on issuance of shares by subsidiary
and affiliates............................ (2,692) (3,185) (13,062)
Realized and unrealized gains on
investments............................... (5,525) (1,973) (3,820)
Translation loss........................... 100 225 1,413
Depreciation expense....................... 2,255 2,346 1,865
Amortization expense....................... 5,228 5,127 6,011
Minority interests......................... (588) (403) 4,785
Cumulative effect on prior years of change
in accounting principle................... - 4,982 -
Deconsolidation of investee company pre-
viously accounted for as a subsidiary...... - 1,946 (1,093)
(Increase) decrease in other assets......... (2,773) (6,594) 3,412
Increase in accounts and income taxes
payable, accrued expenses and minority
interests.................................. 1,916 853 6,663
Dividends received from affiliates.......... 4,767 3,369 7,065
-------- -------- --------
Net cash provided by (used in) operating
activities................................ 4,229 (2,118) 12,368
-------- -------- --------
Cash flows from investing activities:
Deposits, notes and loans receivable
collected:
Related parties........................... 36,552 32,871 52,965
Others.................................... 3,030 2,378 9,710
Deposits, notes and loans receivable
granted:
Related parties........................... (8,716) (5,645) (3,513)
Others.................................... (1,756) (176) -
Investments made............................ (21,303) (6,874) (11,761)
Proceeds from sales of investments.......... 7,727 9,281 5,272
Purchase of property and equipment.......... (3,062) (4,292) (765)
-------- -------- --------
Net cash provided by investing activities.. 12,472 27,543 51,908
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Deposits, notes and loans payable received:
Related parties............................. 1,757 19,715 14,321
Others...................................... 5,738 6,777 6,981
Deposits, notes and loans payable repaid:
Related parties............................. (20,556) (31,837) (19,880)
Others...................................... (4,867) (8,137) (1,803)
Debentures issued by subsidiary.............. 4,855 - -
Debentures repaid............................ (20,486) (17,639) (60,962)
Investment in subsidiary by minority
shareholder................................. - 686 -
Proceeds from issuance of shares............. 57,460 - -
Dividends paid............................... (406) (440) (540)
-------- -------- -------
Net cash provided by (used in) financing
activities................................. 23,495 (30,875) (61,883)
-------- -------- -------
Effect of exchange rate changes on cash
and cash equivalents......................... (1,270) (1,070) 210
-------- -------- -------
Net increase (decrease) in cash and cash
equivalents.................................. 38,926 (6,520) 2,183
Cash and cash equivalents at beginning
of year...................................... 3,178 9,698 7,515
-------- -------- --------
Cash and cash equivalents at end of year...... $ 42,104 $ 3,178 $ 9,698
======== ======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year:
Interest:
Related parties............................. $ 1,790 $ 2,599 $ 5,507
Others...................................... 5,677 7,495 10,573
-------- -------- --------
Total interest paid....................... $ 7,467 $ 10,094 $ 16,080
======== ======== ========
Income taxes paid, net...................... $ 1,921 $ 3,853 $ 5,820
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except share amounts and per share data)
<S> <C> <C> <C>
4% PREFERRED STOCK
Balance, beginning of year................... $ 1,068 $ 1,202 $ 1,259
Conversion of 7,112, 26,808 and 11,413
shares into Class A Stock................... (35) (134) (57)
-------- -------- --------
Balance, end of year......................... $ 1,033 $ 1,068 $ 1,202
======== ======== ========
6-1/2% PREFERRED STOCK
Balance, beginning of year................... $ 6,011 $ 7,554 $ 7,733
Conversion of 87,415, 309,018 and 35,748
shares into Class A Stock................... (436) (1,543) (179)
-------- -------- --------
Balance, end of year......................... $ 5,575 $ 6,011 $ 7,554
======== ======== ========
CLASS A STOCK
Balance, beginning of year................... $ 16,225 $ 15,164 $ 14,999
Issuance of shares upon conversion of
Preferred Stock............................. 298 1,061 165
Issuance of shares in a public offering*..... 4,318 - -
-------- -------- --------
Balance, end of year......................... $ 20,841 $ 16,225 $ 15,164
======== ======== ========
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year................... $ 10,605 $ 9,989 $ 9,918
Conversion of Preferred Stock................ 173 616 71
Proceeds from issuance of shares in a public
offering.................................... 46,407 - -
-------- -------- --------
Balance, end of year......................... $ 57,185 $ 10,605 $ 9,989
======== ======== ========
RETAINED EARNINGS
Balance, beginning of year................... $ 82,079 $ 82,293 $ 72,509
Net income................................... 7,334 226 10,324
Dividends:
4% Preferred Stock - $.20 per share........ (42) (43) (47)
6-1/2% Preferred Stock - $.325 per share... (364) (397) (493)
-------- -------- --------
Balance, end of year......................... $ 89,007 $ 82,079 $ 82,293
======== ======== ========
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year................... $ (2,171) $ - $ -
Foreign currency translation adjustment...... (465) (2,171) -
-------- -------- --------
Balance, end of year......................... $ (2,636) $ (2,171) $ -
======== ======== ========
UNREALIZED LOSS ON MARKETABLE SECURITIES
Cumulative effect of adoption of SFAS No. 115 $ 4,300 $ - $ -
Transfer to trading securities............... (3,800) - -
Unrealized loss, net of permanent impairment
of $2,200................................... (1,011) - -
-------- -------- --------
Balance, end of year......................... $ (511) $ - $ -
======== ======== ========
</TABLE>
* Issuance of 4,500,000 shares, including 182,066 held in treasury.
The accompanying notes are an integral part of the consolidated financial
statements.
<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.
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 interests in a non-banking
corporation exceeding 24.9%. 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.
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.
Investments in which the Company exercises significant
influence, generally 20%-50% owned companies ("affiliates"), are
accounted for by the equity method, whereby the Company
recognizes its proportionate share of such companies' net income
or loss.
(c) Translation of Foreign Currencies
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 1993 and 1994, for those subsidiaries and affiliates
whose functional currency is considered to be the New 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, 1994 and 1993.
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
except for revenue and expense items relating to assets
translated at historical rates which are translated on the same
basis as the related asset. Translation gains and losses for
these companies are 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 and translation
gains and losses were reflected in the consolidated statement of
income.
(d) Investments
The equity in earnings of two companies, Moriah Hotels Ltd.
("Moriah") and Orlite Engineering Company Ltd. ("Orlite"), which
was reflected through their year ending September 30th in the
consolidated statement of income in 1993 and 1992, was reflected
on a December 31 year-end basis in 1994. The effect of this
change on the Company's consolidated financial statements is
immaterial.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
which requires that marketable equity securities, other than equity
securities accounted for by the equity method, be reported at fair
value. For those securities which are classified as trading securities,
unrealized gains and losses are reported in the statement of income.
Unrealized gains and losses from those securities which are classified
as available-for-sale are reported as a separate component of shareholders'
equity. The cumulative effect of adopting this accounting principle as of
January 1, 1994 was 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. At December
31, 1994, the net effect of market fluctuations resulted in a $.5
million decrease in shareholders' equity. At December 31, 1994
the aggregate fair value of available-for-sale securities was $.8
million and gross unrealized losses were $2.7 million. Prior to
January 1, 1994 the Company recorded its investments in
marketable securities at the lower of cost or market.
In the year ended December 31, 1994, the Company recorded
$2.4 million of unrealized gains on marketable securities in the
statement of income. Included in that amount were gross gains of
$4.6 million on trading securities
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and gross losses of $2.2 million on available-for-sale securities
which have been determined to be permanently impaired in value.
In the quarter ended December 31, 1994, the Company's 49%-
owned affiliate, Bank Hapoalim (Cayman) Ltd., recorded an
unrealized loss on marketable securities of approximately $1.6
million which resulted from the transfer of securities from the
available-for-sale category to the trading security category.
During 1994 the Company invested approximately $1 million in
marketable securities.
(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 provision for income taxes and on income before cumulative
effect of change in accounting principle for the year ended
December 31, 1993. The financial statements for the year ended
December 31, 1992 were not restated to apply the provisions of
SFAS No. 109.
Deferred income taxes are not provided on undistributed
earnings of foreign subsidiaries totalling approximately $39
million, since such earnings are currently expected to be
permanently reinvested outside the United States. If the
earnings were not considered permanently invested, approximately
$14 million of deferred income taxes would have been provided.
Deferred income taxes are provided on equity in earnings of
affiliates, and gains on issuances of shares by affiliates, and
unrealized gains on investments. Ampal's foreign subsidiaries
file separate tax returns and provide for taxes accordingly.
(g) Cash Equivalents
Cash equivalents include time deposits and notes receivable
with original maturities of 90 days or less.
(h) Other Assets
Other assets include inventories of the food processing and
manufacturing subsidiaries in the amount of $17.6 million ($18
million in 1993).
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Acquisitions and Dispositions
(a) In 1994, the Company invested in 50% of the equity of M.D.F.
Boards Industry Ltd. ("MDF") in the amount of $1.8 million
and made loans of $1.3 million to the company. MDF was
established to produce medium density fiber boards in Israel.
(b) In February 1994, the other shareholder of Pri Ha'emek
(Canned and Frozen Food) 88 Ltd. ("Pri Ha'emek"), the Company's
then 74.9%-owned subsidiary, 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. In connection with this offering, the
Company realized a gain on issuance of shares of $2.3 million
($1.5 million after taxes). The Company's interest in Pri
Ha'emek was initially diluted to 51.25%. Subsequent to the
public offering, the Company has purchased additional shares and
convertible debentures and at December 31, 1994 its interest was
54.7%. If all warrants and convertible debentures were to be
exercised, the Company's interest would be diluted to 37.6%.
(c) In the third quarter of 1994, the Company received gross
proceeds in the amount of $2.6 million from sales of 120,000
shares of DSP Group, Inc. ("DSP Group") and realized gains of $2
million ($1.3 million after taxes). As of December 31, 1994, the
Company held approximately 174,000 shares (1.9% of DSP Group's
outstanding shares), including its share of Ophir Holdings Ltd.'s
("Ophir") holdings of DSP Group.
(d) In 1994, mainly during the fourth quarter, the Company
received gross proceeds in the amount of $1.9 million from sales
of 155,000 shares of Mercury Interactive Corporation ("Mercury"),
which the Company acquired in 1992, and recorded a gain of
approximately $1.5 million ($1 million after taxes). As of
December 31, 1994, the Company held approximately 311,000 shares
(approximately 2.4% of Mercury's outstanding shares).
(e) In February and June 1993, the Company invested an aggregate
of approximately $4.3 million in Paradise Mattresses (1992) Ltd.
("Paradise") for 85.1% of the shares of Paradise. Paradise's
assets and liabilities were consolidated commencing June 30,
1993; since July 1, 1993 its manufacturing and distribution
operations have been consolidated and were included in equity in
earnings of affiliates for the six months ended June 30, 1993.
(f) 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
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
shares of $5.8 million (approximately $2.1 million after taxes
and a deduction for Ophir's 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 (see Note
2(g)) and additional sales during 1994, the Company's ownership
in Teledata was further reduced to 10.6% (see Note 9).
(g) 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 it is accounting for by the
equity method. 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.
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).
(h) 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 7.9%
of Idan's shares.
(i) In the first quarter of 1993, the Company invested
approximately $.3 million in Davidson-Atai Publishers ("Davidson-
Atai") for 22.5% of the shares of Davidson-Atai, which is a
recently established Israeli publishing house. As a result of
private placements during 1994, the Company's interest in
Davidson- Atai was diluted to 20.7%.
(j) In February and October 1992, the Company's investee,
Granite Hacarmel Investments Ltd. ("Granite"), concluded public
offerings of shares, warrants and convertible debentures in
Israel on the Tel Aviv Stock Exchange for an
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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%.
During the first quarter of 1994, Granite issued additional
shares upon conversions of its debentures. The Company's
interest in Granite was diluted from 21.6% to 21.2%.
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 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
$.3 million ($.2 million after taxes) in 1994 and $7 million
(approximately $2.7 million after taxes) in 1992.
(k) 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, 1994, the Company's ownership was
further diluted to 22%.
(l) In July 1992, the Company acquired 20% of the shares of
Carmel Container Systems Ltd. ("Carmel"), Israel's second largest
carton producer, for $2.2 million.
Note 3 - Deposits, Notes and Loans Receivable
Deposits, notes and loans receivable earn interest at
varying rates depending upon their linkage provisions. The
deposits are guaranteed by Hapoalim. Deposits have maturities of
up to 11 years and notes and loans receivable have maturities of
up to 5 years.
Note 4 - Deposits, Notes and Loans Payable
Deposits, notes and loans payable consist primarily of bank
borrowings either in U.S. Dollars, linked to the U.S. Dollar or
in unlinked shekels with interest rates varying depending upon
their linkage provision and mature through 2003.
The weighted average interest rates on the balances of
short-term borrowings at year-end are as follows: 11.83% on
$22.3 million, 5.71% on $30.7 million and 6.81% on $36.6 million
in 1994, 1993 and 1992, respectively.
Note 5 - Debentures
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Debentures outstanding as at December 31 consist of:
<TABLE>
<CAPTION>
1994 1993
-------------------
<S> <C> <C>
Ampal:
Various series with interest rates ranging from
10%-13%, maturing 1995-2003............................ $ 53,202 $ 68,828
Ampal Development (Israel) Ltd.:
Various series with interest rates ranging from
6.2%-7.5%, linked to the Consumer Price Index in
Israel, maturing 1995-2005, secured by assets of
$45 million............................................ 43,161 43,071
Pri Ha'emek (Canned and Frozen Food) 88 Ltd.:
Various series with an interest rate of 3%, linked to
the Consumer Price Index in Israel, maturing 1998-2003,
secured by assets of approximately $48 million......... 4,713 -
-------- --------
101,076 111,899
Less: Unamortized discounts............................. 16,585 20,629
-------- --------
Total................................................... $ 84,491 $ 91,270
======== ========
</TABLE>
Certain debentures are presentable for early redemption. If
presented for early redemption, maturities (including required
obligations) for the five years ending December 31 would be:
1995 - $22,269*
1996 - 29,876
1997 - 5,571
1998 - 6,380
1999 - 6,380
Thereafter - 18,544
* If no debentures are presented for early redemption, scheduled
maturities will amount to $10,779.
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. 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, 1994, 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
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
specified formula.
On February 1, 1994, Ampal completed a public offering of
4.5 million units, each 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
Ampal 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 (of which 225 options have been canceled) in the
aggregate at an exercise price of $10.91 per share (a 10%
discount from market price on the date of grant). The entire
discount was recorded as compensation expense. The Stock Option
Plan was approved by Ampal's shareholders on September 22, 1994.
At December 31, 1994, 32,500 options are exercisable and 102,175
options become exercisable on January 25, 1996.
At December 31, 1994, an aggregate of 9,012,496 shares of Class A
Stock is reserved for issuance upon the conversion of the
Preferred Stock and the exercise of warrants and options.
Retained Earnings
At December 31, 1994, retained earnings include $61.5
million for affiliates accounted for by the equity method, of
which $31.9 million and an additional approximately $37.5 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. The exercise of warrants and options
is not included in the calculation of EPS because their effect
would be anti-dilutive. Therefore, EPS is calculated by dividing
net income by 27.5 million shares in 1994 and 23.7 million in
1993 and 1992.
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Income Taxes
<TABLE>
<CAPTION>
1994 1993 1992
----------------------------------------
<S> <C> <C> <C>
The components of current and deferred
income tax expense (benefit) are as follows:
Current:
State and local............................. $ 60 $ 8 $ 60
Federal..................................... 1,311 1,254 2,056
Foreign..................................... 796 1,668 3,647
Deferred:
Federal..................................... 2,095 3,319 7,518
Foreign..................................... 1,325 (640) -
-------- -------- --------
Total.................................... $ 5,587 $ 5,609 $ 13,281
======== ======== ========
The components of deferred income tax expense
are as follows:
Unrealized gains............................. $ 2,240 $ - $ -
Equity in earnings of affiliates and others.. 1,066 2,563 4,484
Gains on issuances of shares................. 941 1,115 3,549
Debenture selling expenses................... (240) (294) (501)
Other........................................ (587) (705) (14)
-------- -------- --------
Total..................................... $ 3,420 $ 2,679 $ 7,518
======== ======== ========
The domestic and foreign components of income
(loss) before income taxes are as follows:
Domestic..................................... $ 253 $ (1,418) $ (452)
Foreign...................................... 12,668 12,235 24,057
-------- -------- --------
Total..................................... $ 12,921 $ 10,817 $ 23,605
======== ======== ========
A reconciliation of income taxes between the
statutory and effective tax follows:
Federal income tax at 35%, 34% and 34%....... $ 4,523 $ 3,678 $ 8,026
Taxes on equity in earnings of affiliates in
excess of U.S. tax rate..................... 61 221 2,931
Taxes on foreign income in excess of U.S.
rate........................................ 1,365 1,704 2,175
Other........................................ (362) 6 149
-------- -------- --------
Total effective tax: 43%, 52% and 56%........ $ 5,587 $ 5,609 $ 13,281
======== ======== ========
</TABLE>
Other assets include approximately $2 million ($3 million in 1993) 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 $24.6 million
($22.5 million in 1993) of deferred tax liability provided on
undistributed earnings of the affiliates.
<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:
<TABLE>
<CAPTION>
1994 1993 1992
----------------------------------------
<S> <C> <C> <C>
Am-Hal Ltd................................. 50% 50% 50%
Bank Hapoalim (Cayman) Ltd................. 49 49 49
Bay Heart Limited.......................... 37 37 37
Carmel Containers Ltd...................... 20 20 20
Coral World International Ltd.............. 50 50 50
Davidson-Atai Publishers Ltd............... 20.7 22.5 -
Etz Vanir Ltd.............................. 50 50 50
Hod Hasharon Sport Center (1992) Limited
Partnership............................... 25.5 25.5 -
Granite Hacarmel Investments Ltd........... 21.2 21.6 21.7
Moriah Hotels Ltd.......................... 46 46 46
Ophir Holdings Ltd. (Note 2(g))............ 42.5 42.5 -
Orlite Engineering Company Ltd............. 22 30.1 31.1
Teledata Communication Ltd................. 2.2** 2.5** 13.1*
Trinet Investment in High-Tech Ltd......... 37.5 - -
Trinet Venture Capital Ltd................. 50 - -
Yakhin Mataim Ltd.......................... 50 50 50
</TABLE>
* 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:
<TABLE>
<CAPTION>
1994 1993 1992
----------------------------------------
<S> <C> <C> <C>
Revenues.................................... $592,012 $558,979 $570,756
Gross profit................................ 119,072 104,833 130,546
Net income................................ 25,215 23,246 36,664
Property and equipment...................... $282,956 $247,616 $239,860
Other assets................................ 477,412 452,546 417,946
-------- -------- --------
Total assets.............................. $760,368 $700,162 $657,806
======== ======== ========
Total liabilities, including bank borrowings $438,102 $419,328 $373,815
======== ======== ========
</TABLE>
The carrying value of the Company's investments in shares of its
publicly traded affiliates and others at December 31, 1994 amounted to
$41.1 million and had a market value of $52.8 million, which is based
upon quoted market prices of shares traded on the American Stock
Exchange, NASDAQ and the Tel Aviv Stock Exchange.
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Segment Information
<TABLE>
<CAPTION>
Segment information presented below results primarily from operations in Israel.
Food Mattress Leisure- Intercompany
Finance Processing Manufacturing Time Adjustments Total
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1994
-----------------
Revenues......................... $ 29,599 $ 35,024 $ 9,625 $ 1,411 $ (509) $ 75,150
Equity in (losses) earnings of
affiliates...................... (2,531)** - - 3,647* - 1,116
Pretax operating income (loss)... 7,720 (693) 401 (889) - 6,539
Total assets..................... 289,914 47,837 8,328 4,792 (7,991) 342,880
Investment in affiliates......... 28,913** - - 35,194* - 64,107
Capital expenditures............. 154 2,470 334 104 - 3,062
Depreciation and amortization.... 5,276 1,151 725 331 - 7,483
December 31, 1993
-----------------
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
</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, Bahamas, Israel and U.S. Virgin Islands.
** - Operations in Israel (1994 and 1993 only) and Cayman Islands.
<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
For short-term investments, the carrying amount is a
reasonable estimate of fair value.
b) Deposits, Notes and Loans Receivable
The fair value of these deposits, notes and loans is
estimated by discounting the future cash flows using the current
rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
c) Investments
For financial instruments with maturities between 91 days
and 1 year, and all marketable securities, the carrying amount is
a reasonable estimate of fair value.
d) Deposits, Notes and Loans Payable and Debentures
The fair value of notes and loans payable, deposits payable
and debentures outstanding is estimated by discounting the future
cash flows using the current rates offered by lenders for similar
borrowings with similar credit ratings and for the same remaining
maturities.
<TABLE>
<CAPTION>
1994 1993
------------------------ -----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents...... $ 42,104 $ 42,104 $ 3,178 $ 3,178
Deposits, notes and loans
receivable.................... 94,248 93,186 116,393 123,910
Investments.................... 20,091 20,091 - -
-------- -------- -------- --------
$156,443 $155,381 $119,571 $127,088
======== ======== ======== ========
Financial liabilities:
Deposits, notes and loans
payable....................... $ 44,063 $ 43,369 $ 60,843 $ 61,628
Debentures outstanding......... 84,491 85,650 91,270 102,429
-------- -------- -------- --------
$128,554 $129,019 $152,113 $164,057
======== ======== ======== ========
</TABLE>
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Commitments and Contingencies
(a) The combined minimum annual lease payments on Ampal's
corporate offices, Country Club Kfar Saba and Paradise, without
giving effect to future escalations, are approximately $595,000 a
year for the years 1995 through 1998, and $476,000 for 1999 and
$2 million in the aggregate, thereafter. The leases expire in
2009, 1998 and 1999, respectively.
(b) For the years 1995 through 1999, the combined minimum lease
receipts to be received by the Company from rental properties
(primarily from related parties) are approximately $2.8 million
in 1995; $2.8 million in 1996; $2.3 million in 1997; $2.1 million
in 1998; $2.1 million in 1999; and $2.2 million in the aggregate,
thereafter.
(c) The Company has issued guarantees on bank loans to its
investees and subsidiaries totalling $14.9 million.
The Company's share of the commitments issued by and to its
investees amounted to $49.1 million.
A consolidated subsidiary pledged all of its assets in the
amount of approximately $48 million to banks (including a related
party) in order to secure a mortgage and its debt to debenture
holders. In addition, the Company's share of an investee's
assets pledged in order to secure a mortgage amounts to $14
million.
The Company's share of floating charges of the assets of an
investees is $47.4 million.
(d) In June 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, including a subsidiary of the
Company's investee, Granite, 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 that subsidiary's stations (which are
those stations not owned by the subsidiary). The Controller
postponed the effective date of his decision, and the subsidiary
has filed an appeal. If upheld in its current form, the
Controller's determination will be considered prima facie
evidence in legal proceedings between station operators and the
subsidiary and may have a material adverse effect on Granite.
(e) Under Israeli law, a lease of real property with a term of
more than 10 years is required to be reported to the Israeli
Appreciation Tax Authorities and is subject to a land appreciation
tax or an income tax and an acquisition tax. The Israeli Tax
Commissioner has taken the position that certain arrangements for
the lease of real property, including multiple leases, leases with
renewal options and leases or options to lease between affiliated
companies, which in the aggregate provide a term exceeding 10 years,
are subject to the above reporting and taxes.
Certain of the investees, including 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 Limited 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.
Note 13 - Subsequent Events
(a) In February 1995, Yakhin Hakal Ltd. and its affiliates
commenced a legal proceeding seeking to cause Etz Vanir Ltd.
("Etz Vanir") and Yakhin Mataim Ltd. ("Yakhin Mataim") to redeem
the perpetual debentures owned by Ampal for approximately $.7
million (which approximates the Company's carrying value)
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and to require Ampal to surrender all of its preferred shares of
Etz Vanir and Yakhin Mataim for their par value. Ampal intends
to contest this legal proceeding vigorously.
(b) In March 1995, Ampal's Board of Directors
approved the repurchase of up to 2 million shares of its Class A
Stock through open market purchases from time to time.
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
---------------------------------
(Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
----------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994:
----------------------------
Revenues........................ $ 20,175 $ 17,371 $ 24,183 $ 19,214 $ 80,943
Net interest income (expense)... (352) (219) 4 (584) (1,151)
Food processing and
manufacturing operations....... 1,242 2,697 3,235 2,132 9,306
Net income...................... 2,674 501 3,864 295 7,334
Earnings per Class A share...... .10 .02 .14 .01 .27
Year Ended December 31, 1993:
----------------------------
Revenues........................ $ 16,366 $ 19,848 $ 16,931 $ 20,098 $ 73,243
Net interest expense............ (97) (2,144) (2,082) (319) (4,642)
Food processing and
manufacturing operations....... 1,350 911 2,783 2,952 7,996
Net income (loss)............... (2,751)* 384 735 1,858 226*
Earnings (loss) per Class A
share......................... (.12)* .02 .03 .08 .01*
</TABLE>
* Includes cumulative effect on prior years of change in
accounting principle of ($4,982), equal to $(.21) per share.
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------
None
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:
<TABLE>
<CAPTION>
NAME POSITION
------------------------------------------ --------------------------------------------
<S> <C>
Shlomo Recht(1)........................... Chairman of the Board and Director
Lawrence Lefkowitz(1)..................... President, Chief Executive Officer
and Director
Moshe Mor................................. Vice President--Israel Operations
Alan L. Schaffer.......................... Vice President--Finance and
Treasurer
Alla Kanter............................... Controller
Michael K. Marks.......................... Secretary
Miri Lent................................. Assistant Vice President--Israel Operations
Susan Rosenberg........................... Assistant Treasurer
Harry B. Henshel(2)....................... Class A Director
Herbert Kronish........................... Class A Director
Leon Riebman.............................. Class A Director
Evelyn Sommer(2)(3)....................... Class A Director
Arie Abend(2)............................. Director
Michael Arnon(1).......................... Director
Stanley Batkin(1)(3)...................... Director
Yaacov Elinav(1)(4)....................... Director
Irwin Hochberg............................ Director
Eitan Raff(3)............................. Director
Shimon Ravid(4)........................... Director
</TABLE>
--------------
(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
SHLOMO RECHT, 53, has been Chairman of the Board of Directors of Ampal
since July 1994. From March 1994 until July 1994, he was Vice Chairman of
the Board of Directors of Ampal. 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 an Assistant Managing Director of
Hapoalim. From 1988 until 1989, and since March 1994, he has served as a
director of Ampal.
LAWRENCE LEFKOWITZ, 57, has been President and Chief Executive Officer
of Ampal since November 1990. From 1977 until then, he was Vice
President-Legal and Secretary of Ampal. 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."
MOSHE MOR, 59, has been Vice President-Israel Operations of Ampal for
more than five years.
-32-
<PAGE>
ALAN L. SCHAFFER, 52, has been Vice President-Finance and Treasurer
since August 1990. From December 1988 until then, he was Vice
President-Accounting and Controller of Ampal.
ALLA KANTER, 37, has been Controller of Ampal since August 1990. From
January 1986 to August 1990 she served as Assistant Controller of Ampal.
MICHAEL K. MARKS, 30, 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, 38, 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, 51, has been Assistant Treasurer of Ampal since
November 1990 and has been employed by Ampal for more than five years.
HARRY B. HENSHEL, 76, has been Chairman of the Board of Bulova
Corporation since 1974. He has also served 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 has been 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 served on the
Board of Directors of Ampal Industries, Inc. from 1982 until 1990. He became
a director of Ampal in 1993.
HERBERT KRONISH, 68, has been a Senior Partner of Kronish, Lieb, Weiner
& Hellman and its predecessor partnerships ("KLWH") since 1958. KLWH has
been legal counsel to Ampal since 1982. He became a director of Ampal in
September 1994.
LEON RIEBMAN, 73, has been 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 Sectionof the World Jewish Congress, since December 1990.
She became a director of Ampal in 1982.
ARIE ABEND, 57, has been a Joint Managing Director of Hapoalim since
February 1994. From 1986 until February 1994, he was a Senior Deputy
Managing Director of Hapoalim. From 1984 until 1985, in 1991 and since
September 1994, he has served as a director of Ampal. See "Certain
Relationships and Related Transactions."
MICHAEL ARNON, 69, was Chairman of the Board of Directors of Ampal from
November 1990 to July 1994. 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.
STANLEY I. BATKIN, 80, served on the Board of Directors of Ampal
Industries from 1983 until 1990 and was a member of its Executive Committee
from 1986 until 1990. He became a director of Ampal in 1991.
YAACOV ELINAV, 50, has been a Member of the Board of Management of
Hapoalim since October 1991
-33-
<PAGE>
and Senior Deputy Managing Director of Hapoalim since August 1992. 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. He became a director of Ampal in July 1992. See "Certain
Relationships and Related Transactions."
IRWIN HOCHBERG, 66, has been a Senior Partner and President of Bloom
Hochberg & Co., P.C., CPA's, which provides professional and consulting
services to investment banking firms, for more than five years. He also
serves as a director of Transmedia Network, Inc. He became a director of
Ampal in September 1994.
EITAN RAFF, 53, 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, 58, has been a Joint Managing Director of Hapoalim since
February 1994. From October 1989 until February 1994, he was a Senior Deputy
Managing Director of Hapoalim. 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."
ITEM 11. EXECUTIVE COMPENSATION
----------------------
SUMMARY COMPENSATION TABLE
--------------------------
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, 1994.
<TABLE>
<CAPTION>
Name and Principal Other Annual All Other
Position Year Salary(1) Compensation Compensation
------------------------ ---- ------ ------------ ------------
<S> <C> <C> <C> <C>
Lawrence Lefkowitz(2) 1994 $204,351 $8,710 $24,619(3)
(President and 1993 193,351 8,141 22,862(4)
Chief Executive Officer) 1992 191,961 6,382 21,856(4)
Alan L. Schaffer 1994 136,750 14,413(4)
(Vice President-Finance 1993 130,000 13,839(4)
and Treasurer) 1992 127,212 13,277(4)
Moshe Mor 1994 120,377 15,930(5)
(Vice President-Israel 1993 130,213 12,981(5)
Operations) 1992 92,763 11,713(5)
</TABLE>
---------------------
(1) There were 26 pay periods in each of 1994 and 1993 and 27
pay periods in 1992.
(2) 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. Mr. Lefkowitz is
employed pursuant to an
-34-
<PAGE>
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.
(3) Comprised of Ampal's contribution pursuant to: (i) Ampal's
Pension Plan of $15,596; (ii) Ampal's Supplementary
Executive Retirement Plan of $8,523 and (iii) Ampal's
Savings Plan of $500.
(4) Comprised of Ampal's contribution pursuant to Ampal's
Savings Plan of $500 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.
OPTIONS GRANTS IN 1994
The following table sets forth information regarding the grant
of stock options during 1994 under Ampal's 1993 Stock Option Plan
(the "1993 Plan") to each of the executive officers named in the
Summary Compensation Table:
INDIVIDUAL GRANTS
-----------------
<TABLE>
<CAPTION>
Number of Market Potential Realizable Value
Shares of % of Total Price at Assumed Annual Rates
Class A Stock Options on the of Stock Price Appreciation
Underlying Granted to Exercise Date of for Stock Option Term
Options Employees Price Grant Expiration (in $)(2)
Name Granted(1) in 1994 ($/Share) ($/Share) Date 0% 5% 10%
---- ---------------- ------------ --------- --------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence Lefkowitz 16,000 15.3% 10.91 12.125 1/24/99 19,440 72,960 137,920
Moshe Mor 15,150 14.4% 10.91 12.125 1/24/99 18,407 69,084 130,593
Alan L. Schaffer 13,000 12.4% 10.91 12.125 1/24/99 15,795 59,280 112,060
</TABLE>
####
(1) Generally, the 1993 Plan prohibits the exercise of these
options prior to January 25, 1996. However, options
granted to directors of Ampal who are not also employees of
Ampal were exercisable immediately upon grant, which
occurred on January 25, 1994, subject to shareholder
approval which was obtained on September 22, 1994.
(2) These presumed potential values are mathematically derived
from certain prescribed rates of stock appreciation over
the price of the stock on the date of grant of the option.
The actual value of these option grants is dependent on the
future performance of Ampal's Class A Stock. There is no
assurance that the values reflected in this table will be
achieved.
-35-
<PAGE>
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised In-
Unexercised the-Money Options
Options at at Fiscal-Year End
Name Fiscal Year-End ($)
---- ------------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Lawrence Lefkowitz 0 16,000 0 0
Moshe Mor 0 15,150 0 0
Alan L. Schaffer 0 13,000 0 0
</TABLE>
(1) No options were exercised by any named executive officer
during 1994.
Other Compensation
Directors of Ampal who are not employees of the Company or of
its parent company received $250 prior to July 6, 1994 and receive
$500 thereafter per board meeting attended. Such persons also
receive the same amount 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 money purchase pension plan for its eligible
employees ("Pension Plan"). Eligible employees are all full-time
employees of Ampal except non-resident aliens, night shift
employees and employees represented by a collectively bargained
unit. In 1990, the Pension Plan was amended so that Ampal's
annual contribution was equal to 7% of each employee's
compensation plus 5.4% of the employee's compensation in excess of
the Social Security taxable wage base for that year. In 1994, the
Pension Plan was amended so that Ampal's contribution is equal to
7% of each employee's compensation plus 5.7% of the compensation
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:
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 paid in a lump sum, in an
annuity form or in installments.
Ampal maintains a Savings Plan for its eligible employees
pursuant to Section 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"). Eligible employees are all employees of
Ampal except non-resident aliens, night-shift employees and
employees represented by a collective bargaining unit.
Participation by employees in the Savings Plan is voluntary.
Participating employees may direct that a specific percentage of
their annual compensation
-36-
<PAGE>
(up to 15%) be contributed to a self-directed 401(k) savings
account. The amount which any employee could contribute to his or
her 401(k) savings account in 1994 was limited under the Code to
$9,240. 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 after
termination of employment.
In 1994, Ampal established a Supplementary Executive
Retirement Plan ("SERP") for its eligible employees. Ampal's
obligation under the SERP is to pay to affected employees the
amount that would have been paid to them by the Pension Plan but
for the operation of Section 401(a)(17) of the Internal Revenue
Code of 1986.
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 was approved by Ampal's
shareholders on September 22, 1994.
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 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, members of the Executive Committee of the Board of
Directors which functions as the compensation committee of the
Company included: Mr. Arnon, then Chairman of the Board of the
Company; Mr. Lefkowitz, President and Chief Executive Officer of
the Company and Counsel to Hapoalim; Mr. Stanley I. Batkin; Mr.
Yaacov Elinav, Senior Deputy Managing Director of Hapoalim; and
Mr. Alexander Yuhjtman, then Executive Vice President,
-37-
<PAGE>
Regional Manager, Western Hemisphere of Hapoalim. For a
description of business transactions between the Company and
Hapoalim, see "Certain Relationships and Related Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSHIP AND
-------------------------------------------------------
MANAGEMENT
----------
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following tables set forth information as at March 22, 1995
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 Stock") and 6-1/2%
Cumulative Convertible Preferred Stock (the "6-1/2% Preferred
Stock") 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 22, 1995, there were issued and outstanding 20,859,860
shares of Class A Stock of the Company and 3,000,000 shares of
Common Stock. In addition, there were issued and outstanding
1,109,182 non-voting shares of 6-1/2% Preferred Stock (each
convertible into 3 shares of Class A Stock) and 206,135 non-voting
shares of 4% Preferred Stock (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> <C>
Bank Hapoalim B.M. Class A Stock 10,500,991 shs.(2) 49.4%(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 22,
1995
(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% Preferred Stock and
3,350 shares of 4% Preferred Stock.
Security Ownership Of Management
The following table sets forth information as at March 22, 1995
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. The directors and officers of Ampal individually and as a
group do not own in excess of 1% of any class of the equity
securities of Ampal's parent or any of Ampal's subsidiaries. All
ownerships are direct unless otherwise noted. The table does not
include directors who do not own any such shares:
-38-
<PAGE>
Ampal-American Israel Corporation
---------------------------------
CLASS A STOCK
-------------
Amount and Nature
Name of Beneficial Ownership
---- -----------------------
Michael Arnon 7,500(1)
Stanley I. Batkin 15,000(2)
Harry B. Henshel 8,000(2)
Irwin Hochberg 3,000(3)
Herbert Kronish 1,000(4)
Lawrence Lefkowitz 10,700(5)
Michael K. Marks 1,500
Moshe Mor 1,000
Eitan Raff 5,000(2)
Shlomo Recht 2,000
Leon Riebman 29,600(2)
Evelyn Sommer 5,000(2)
-------
All Directors and Officers as a Group
89,300(6)
WARRANTS TO PURCHASE
CLASS A STOCK
-------------
Amount and Nature
Name of Beneficial Ownership
---- -----------------------
Harry B. Henshel 14,000
Michael K. Marks 500
-------
All Directors and Officers
as a Group 14,500
6-1/2% PREFERRED STOCK
----------------------
Amount and Nature
Name of Beneficial Ownership
---- -----------------------
Lawrence Lefkowitz 7,225(7)
-------
All Directors and Officers as a Group
7,225
Bank Hapoalim B.M.
------------------
ORDINARY SHARES
---------------
Amount and Nature
Name of Beneficial Ownership
---- -----------------------
Arie Abend 187,720
Michael Arnon 83,300
Yaacov Elinav 183,970
Shimon Ravid 190,610
Shlomo Recht 128,810
-------
All Directors and Officers
as a Group 774,410
-39-
<PAGE>
(1) Includes options to purchase 7,500 shares of Class A Stock
issuable upon the exercise of currently exercisable stock
options.
(2) Includes options to purchase 5,000 shares of Class A Stock
issuable upon the exercise of currently exercisable stock
options.
(3) Includes 1,000 shares held of record by Mr. Hochberg's
wife.
(4) Mr. Kronish and his wife share voting and investment power
over the shares.
(5) Includes 8,700 shares of Class A Stock held by a trust
under an estate as to which Mr. Lefkowitz is co-personal
representative.
(6) Includes options to purchase 32,500 shares of Class A Stock
issuable upon the exercise of currently exercisable stock
options.
(7) Includes 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.
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 1994 the largest amount of such
indebtedness outstanding at any one time was $40,257,000. The
amount of interest expense paid by the Company to Hapoalim was
$3,314,000. 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
1994 was $104,241,000 and interest income thereon was $6,898,000.
As of December 31, 1994, the amount of borrowings and deposits
from Hapoalim and its subsidiaries was $20,550,000 and the amount
of loans to and deposits with Hapoalim and its subsidiaries was
$79,281,000. Ampal is the beneficiary of a $2 million committed
line of credit from Hapoalim which expires in October 1995.
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.
-40-
<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 1994, Hapoalim reimbursed Ampal $100,000 for the
services of Mr. Lefkowitz under the arrangement.
For additional information regarding real estate transactions
between the Company and Hapoalim, see "Item 2. Property,"
discussed above.
-41-
<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................. 40
Consolidated Statements of Income for
the years ended December 31, 1994, 1993 and 1992...... 41
Consolidated Balance Sheets as at
December 31, 1994 and 1993............................ 43
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992................ 44
Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 1994,
1993 and 1992......................................... 46
Notes to Consolidated Financial
Statements............................................ 47
Supplementary Data:
Selected quarterly financial data for the years
ended December 31, 1994 and 1993.......................... 61
(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) Schedule of Representative Rates of Exchange
between the U.S. dollar and Israeli shekel
for three years ended December 31, 1994................... 77
-42-
<PAGE>
Page
Reference*
----------
(ii) Consolidated financial statements filed pursuant to
Rule 3-09 of Regulation S-X
Granite Hacarmel Investments Limited and Subsidiaries
Report of Certified Public Accountants....................... 78
Consolidated Balance Sheets as at
December 31, 1994, and 1993............................... 79
Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992.......................... 81
Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1994,
1993 and 1992............................................. 82
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992.................... 83
Notes to Consolidated Financial Statements................... 86
(iii) Reports of Other Certified Public Accountants
filed pursuant to Rule 2-05 of Regulation S-X:
AM-HAL Ltd................................................... 127
Ampal Enterprises Ltd........................................ 128
Ampal Financial Services Ltd................................. 129
Ampal Holding (1991) Ltd..................................... 130
Ampal (Israel) Ltd........................................... 131
Ampal Industries (Israel) Ltd................................ 133
Ampal Properties Ltd......................................... 134
Bank Hapoalim (Cayman) Ltd................................... 136
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. (Special Purpose).............. 145
Hapoalim (Latin America) Casa Bancaria S.A................... 146
Imagenet Ltd................................................. 148
Mivnat Holdings Ltd.......................................... 149
Moriah Hotels Ltd............................................ 150
Ophir Holdings Ltd........................................... 151
Orlite Engineering Company Ltd............................... 152
Orlite Engineering Company Ltd. (U.S. Dollars)............... 153
Paradise Mattresses (1992) Ltd. (U.S. Dollars)............... 154
Pri Ha'emek (Canned and Frozen Food) 88 Ltd.................. 156
Red Sea Marineland Holding (1973) Ltd........................ 157
Red Sea Underwater Observatory Ltd........................... 158
The Snow and Cool Palace (Limited Partnership)............... 159
Teledata CommunicationLtd.................................... 160
Trinet Investment in High-Tech Ltd........................... 161
Trinet Venture Capital Ltd................................... 162
(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).
-43-
<PAGE>
<TABLE>
<CAPTION>
Page
Reference*
----------
<S> <C>
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).
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
</TABLE>
-44-
<PAGE>
<TABLE>
<CAPTION>
Page
Reference*
----------
<S> <C>
Statement No.33-51023 and incorporated herein by
reference).
10e. --Warrant Agreement between Ampal-American Israel
Corporation
and Chemical Bank, dated as of February 1, 1994
(filed as Exhibit 10e to Form 10-K for the fiscal
year ended December 31, 1993 and incorporated
herein by reference. File No. 0-538).
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 Israel Corporation's 1993 Stock Option Plan
(filed as Exhibit 10h to Form 10-K for the fiscal
year ended December 31, 1993 and incorporated
herein by reference. File No. 0-538).
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).
10l. --Agreement dated March 30, 1994 between Investment
Company of Bank Hapoalim Ltd., Ampal (Israel) Ltd.
and Ampal Industries, (Israel) Ltd. [Translation].
E-1
Exhibit 11 -- Statement re Computation of earnings per
share.......................................... E-7
Exhibit 12 -- Statements re Computation of
Ratios.. ...................................... E-8
Exhibit 21 -- Subsidiaries of the Registrant.................. E-9
Exhibit 23 -- Consent of Auditors.............................
AM-HAL Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-11
Ampal-American Israel Corporation . . . . . . . . . . . . . . . . . . E-12
Ampal Enterprises Ltd . . . . . . . . . . . . . . . . . . . . . . . . E-13
Ampal Financial Services Ltd. . . . . . . . . . . . . . . . . . . . . E-14
Ampal Holding (1991) Ltd. . . . . . . . . . . . . . . . . . . . . . . E-15
Ampal (Israel) Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . E-16
Ampal Industries (Israel) Ltd.. . . . . . . . . . . . . . . . . . . . E-17
Ampal Properties Ltd. . . . . . . . . . . . . . . . . . . . . . . . . E-18
Bank Hapoalim (Cayman) Ltd.. . . . . . . . . . . . . . . . . . . . .. E-19
Bay Heart Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . E-20
Carmel Containers System Limited . . . . . . . . . . . . . . . . . . E-21
Country Club Kfar Saba Limited . . . . . . . . . . . . . . . . . . . E-22
Davidson-Atai Publishers Ltd. . . . . . . . . . . . . . . . . . . . E-23
Granite Hacarmel Investments, Limited . . . . . . . . . . . . . . . E-24
Hapoalim (Latin America) Casa Bancaria S.A. . . . . . . . . . . . . E-25
Imagenet Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . E-26
Mivnat Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . . E-27
Moriah Hotels Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . E-28
Ophir Holdings Ltd . . . . . . . . . . . . . . . . . . . . . . . . . E-29
Orlite Engineering Company Ltd. . . . . . . . . . . . . . . . . . . E-30
Paradise Mattresses (1992) Ltd. . . . . . . . . . . . . . . . . . . E-31
Pri Ha'mek (Canned and Frozen Food) 88 Ltd. . . . . . . . . . . . . E-32
Red Sea Marineland Holding (1973) LTD. . . . . . . . . . . . . . . . E-33
Red Sea Underwater Observatory Ltd. . . . . . . . . . . . . . . . . E-34
The Snow and Cool Palace (Limited Partnership) . . . . . . . . . . . E-35
Teledata Communication Ltd. . . . . . . . . . . . . . . . . . . . . E-36
Trinet Investment in High-Tech Ltd. . . . . . . . . . . . . . . . . E-37
Trinet Venture Capital Ltd. . . . . . . . . . . . . . . . . . . . . E-38
(3) List of Exhibits (seperately 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).
Exhibit 25 -- Powers of Attorney............................. E-39
</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, 1994.
* Page references preceded by the letter "E" refer to the
separately bound volume of exhibits.
-45-
<PAGE>
<TABLE>
<CAPTION>
REPRESENTATIVE RATES OF EXCHANGE
BETWEEN THE U.S. DOLLAR AND THE NEW ISRAELI SHEKEL
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
-------------------------------------------
The following table shows the amount of New Israeli Shekels equivalent to one U.S. Dollar on the dates
indicated:
1994 1993 1992
--------------------------------------
<S> <C> <C> <C>
March 31 2.969 2.768 2.404
June 30 3.033 2.805 2.444
September 30 3.013 2.864 2.439
December 31 3.018 2.986 2.764
</TABLE>
<PAGE>
Certified Public Accountants (Isr)
Tel Aviv 61006 Haifa 31001 Jerusalem 91001
33 Yavetz Street 5 Palyam Street 33 Jaffa Road
P.O.Box 609 P.O.Box 210 P.O.Box 212
Tel: (03) 517 4444 Tel: (04) 670 338 Tel: (02) 253 291
Telecopier: Telecopier: Telecopier:
(972) 3 517 4440 (972) 4 670 319 (972) 2 253 292
--------------------------------------------------------------------------------
SOMEKH CHAIKIN
Haifa, February 21, 1995
Independent Auditor's Report to the Shareholders of
Granite Hacarmel Investment Limited
We have audited the balance sheets of Granite Hacarmel Investment Limited and
its subsidiaries ("the Company") as at December 31, 1994 and 1993, 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 the 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
presentation. 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 3.8% and 2.8%
(1993 - 4.2% and 2.4%), 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, 1994 and 1993, 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, 1994, in conformity with accounting principles
generally accepted in Israel, consistently applied.
A Member of the Price Waterhouse Worldwide Organization
<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 amount and are
included in Note 28 to the financial statements.
Without qualifying our opinion we would like to bring to attention Note 25 to
the financial statements regarding judicial proceedings concerning the ruling
by the controller of restrictive trade practices pertaining to a proposed law
dealing with the shortening of the periods of exclusive agreements entered into
by a subsidiary company and filing station operators, the legislation proposed
by the Ministry of Energy dealing with the fuel market, and the law cancelling
the minimal distance requirement between filing stations. At this time, it is
not possible to estimate the effects of the legal proceedings and of the
proposed legislation on the 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 to the Index of December 1994
N
o Adjusted NIS. (thousands)
t --------------------------
e December 31, December 31,
s ------------ ------------
1994 1993
---- ----
Current assets
Cash and cash equivalents 6,063 6,267
Marketable securities 4 4,783 12,234
Short-term bank deposit 30,128 -
Compulsory Government loan 6.B. 619 692
Accounts receivable and debit balances 4.A. 390,617 366,784
Inventories 5 308,139 346,647
---------- ----------
740,349 732,624
---------- ----------
Investment
Unconsolidated subsidiaries and others 6.A. 64,737 81,114
Long-term loans receivable 7 15,484 14,167
Compulsory Government loan 6.B. 664 1,253
---------- ----------
80,885 96,534
---------- ----------
Fixed assets
Property, plant and equipment 8 900,306 823,823
Less: Accumulated depreciation 432,198 389,982
---------- ----------
468,108 433,841
---------- ----------
Other assets and deferred charges, net 9 16,237 17,203
---------- ----------
---------- ----------
1,305,579 1,280,202
========== ==========
- 3 -
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Adjusted to the Index of December 1994
N
o Adjusted NIS. (thousands)
t --------------------------
e December 31, December 31,
s ------------ ------------
1994 1993
---- ----
Current liabilities
Short-term bank credit 10 160,527 98,499
Suppliers 12A 128,572 82,293
Loans from others 11 15,724 11,680
Accounts payable and
credit balances 12 61,396 77,165
Dividend declared 27 39,869 68,670
---------- ----------
406,088 338,307
---------- ----------
Long-term liabilities
Long-term loans, less current portion 13.A. 7,659 8,740
Debentures convertible into
shares of the company, less current portion 13.B. 233,425 290,382
Debentures convertible into shares of
a subsidiary, less current portion 13.C. 5,127 8,213
Customers' deposits 14 53,413 60,105
Liabilities for post-retirement
benefits, net 15 8,162 5,511
Deferred taxes, net 16,23 10,061 15,569
Capital notes issued by
an affiliated company 285 326
---------- ----------
318,132 388,846
---------- ----------
Minority interest in
consolidated subsidiaries 7,461 6,231
---------- ----------
Collaterals, commitments and contingent
liabilities 25,24
Shareholders' equity
Capital and capital reserves 18,19 264,278 249,387
Retained earnings 309,620 297,431
---------- ----------
573,898 546,818
---------- ----------
1,305,579 1,280,202
========== ==========
--------------------------------
J. Rosen - Chairman of the Board
--------------------------------
M. Mor - Director
--------------------------------
A. Shachar - Managing Director
Date: February 21, 1995.
The accompanying notes are an integral part of the financial statements.
- 4 -
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Adjusted to the Index of December 1994
<TABLE><CAPTION>
N Adjusted NIS. (thousands)
o -------------------------------------
t Year ended December 31,
e -------------------------------------
s 1994 1993 1992
---- ---- ----
<S> <C> <C> <C> <C>
Sales 1,985,570 1,970,974 2,101,249
Less: Government imposts 756,544 705,466 721,765
--------- --------- ---------
Net sales 1,229,026 1,265,508 1,379,484
Cost of sales 20 953,783 1,004,533 1,121,841
--------- --------- ---------
Gross profit 275,243 260,975 257,643
--------- --------- ---------
Selling and marketing expenses 161,698 155,594 144,104
General and administrative expenses 21 38,635 39,613 43,254
--------- --------- ---------
200,333 195,207 187,358
--------- --------- ---------
Income from operations 74,910 65,768 70,285
--------- --------- ---------
Financing income (expenses), net 22 (9,224) 9,587 24,555
Other income, net 5,516 2,913 2,429
--------- --------- ---------
(3,708) 12,500 26,984
Income before taxes on income 71,202 78,268 97,269
Taxes on income 23 21,083 28,637 39,378
--------- --------- ---------
Income after taxes on income 50,119 49,631 57,891
Company's share in income
of affiliates, net 683 994 2,355
Minority interest in income
of consolidated subsidiaries (294) (506) (134)
--------- --------- ---------
Net income 50,508 50,119 60,112
========= ========= =========
Earnings per ordinary share
(in adjusted NIS.):
Primary 0.41 0.41 0.51
======= ======= =======
Fully diluted 0.18 0.26 0.41
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 5 -
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Adjusted to the Index of December 1994
<TABLE><CAPTION>
Adjusted NIS. (thousands)
------------------------------------------------
Capital Premium Capital Retained
Reserves Earnings Total
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance as at January 1, 1992 40,912 - 291 394,584 435,787
Changes in 1992:
Net income for the year - - - 60,112 60,112
Issuance of ordinary shares, net 27,572 81,736(*) - - 109,308
Issuance of stock dividend 96,951 - (291) (96,660) -
Proceeds from exercise
of stock options 9 32 - - 41
Dividend (**) - - - (42,342) (42,342)
------- ------- ------- ------- -------
Balance as at December 31, 1992 165,444 81,768 - 315,694 562,906
Changes in 1993:
Net income for the year - - - 50,119 50,119
Proceeds from exercise of
stock options 464 1,711 - - 2,175
Erosion of proposed dividend - - - 288 288
Dividend declared - - - (68,670) (68,670)
------- ------- ------- ------- -------
Balance as at December 31, 1993 165,908 83,479 - 297,431 546,818
Changes in 1994:
Net income for the year - - - 50,508 50,508
Conversion of
debentures into shares 2,603 12,288 - - 14,891
Erosion of dividend declared - - - 1,550 1,550
Dividend declared - - - (39,869) (39,869)
------- ------- ------- ------- -------
Balance as at December 31, 1994 168,511 95,767 - 309,620 573,898
======= ====== ===== ======= =======
</TABLE>
(*) Net of related issue expenses in the amount of NIS. 7,944 thousand.
(**) Including proposed dividend in the amount of NIS. 22,919 thousand.
The accompanying notes are an integral part of the financial statements.
- 6 -
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Adjusted to the Index of December 1994
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------------
Year ended December 31,
-------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income 50,508 50,119 60,112
Adjustments to reconcile net income
to operating cash flows (A): 79,404 10,957 (16,806)
--------- --------- ---------
Net cash provided by operating activities 129,912 61,076 43,306
--------- --------- ---------
Cash flows from investing activities
Acquisition of fixed assets (1) (83,298) (67,202) (36,592)
Investment grant received 505 183 739
Proceeds from sale of fixed assets 2,890 1,645 1,973
Dividend received from affiliates - 858 -
Investment in loan to an affiliated company (10,881) - -
Long-term loans granted (2) (1,769) (2,465) (944)
Collection of long-term loans granted 5,531 10,013 12,787
Investment in other assets and deferred charges (2,558) (3,450) (2,980)
Payment on account of investment in
an affiliated company - (17,543) -
Proceeds from redemption of compulsory
government loan 650 657 -
Proceeds from (investments in)
marketable securities, net 6,223 (12,120) -
Investment in short-term bank deposit (30,000) - -
Investment in capital note
of an affiliated company (6,283) - -
Repayment of part of an investment in an
affiliated company 405 - -
Investment in an affiliated company (84) - -
--------- --------- ---------
Net cash used for investing activities (118,669) (89,424) (25,017)
--------- --------- ---------
C/F 11,243 (28,348) 18,289
--------- --------- ---------
</TABLE>
- 7 -
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
Adjusted to the Index of December 1994
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------------
Year ended December 31,
---------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
B/F 11,243 (28,348) 18,289
--------- --------- ---------
Cash flows from financing activities:
Dividend paid, net (67,121) (22,630) (81,259)
Dividend paid to minority shareholders
in a consolidated subsidiary (116) (245) (129)
Increase (decrease) in short-term
credit from banks, net 62,454 (21,267) (10,669)
Decrease in short term loans from others, net (4,330) (5,799) (221,721)
Long-term loans received (5) 279 - 502
Long-term loans repaid (3)(4) (920) (1,270) (1,876)
Redemption of capital notes issued
by a consolidated company (2,350) - (441)
Customers' deposits received 1,646 2,381 2,786
Customers' deposits repaid (963) (1,408) (2,248)
Proceeds from issuance of debentures, net - - 200,935
Proceeds from issuance of ordinary shares, net - - 109,441
Exercise of options for
shares of the Company - 2,175 41
Exercise of options for
shares of a subsidiary - - 122
Exercise of options for
debentures of the Company, net - 63,881 110
Expenses regarding conversion
of debentures into shares (26) - -
--------- --------- ---------
Net cash provided by (used for)
financing activities (11,447) 15,818 (4,406)
--------- --------- ---------
(Decrease) Increase in cash and
cash equivalents (204) (12,530) 13,883
Cash and cash equivalents
at beginning of year 6,267 18,797 4,914
--------- --------- ---------
Cash and cash equivalents at end of year 6,063 6,267 18,797
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 8 -
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
Adjusted to the Index of December 1994
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------------
Year ended December 31,
-------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
(A)
Adjustments to reconcile net
income to operating cash flows:
Income and expenses not requiring
cash flows -
Depreciation and amortization 46,881 43,921 40,516
Amortization of deferred charges, net 2,970 3,870* 3,022 *
Deferred taxes, net (4,657) (988) (5,455)
(Decrease) Increase in accrued employee
post-retirement benefits, net 3,142 (690) 965
Minority interest in income of
consolidated subsidiaries 294 506 134
Company's share in undistributed
loss (income) of affiliates, net 855 297 (2,134)
Income from decrease in holding in a subsidiary
pursuant to issuance of shares (517) - (33)
Capital gains (997) (169) (369)
Erosion of investment in capital notes, net 1,006 81 (8,524)
Erosion of long-term loans,
debentures and capital notes issued (32,543) (6,911)* 20,383 *
Erosion of loans granted (68) (137) (801)
Decrease (increase) in value of compulsory
Government loan and securities 1,240 (279) (478)
Erosion of customers' deposits (7,375) (14,586) (2,457)
Decrease in investments in companies by
dividend received 5,780 - -
Erosion of short-term bank deposit (128) - -
Changes in assets and liabilities -
Increase in accounts receivable
and debit balances (2)(3)(4) (4,947) (73,495) (51,191)
Decrease (Increase) in inventories 38,508 117,799 (34,412)
Increase (decrease) in suppliers,
accounts payable and credit balances (5) 29,960 (58,262) 24,028
--------- --------- ---------
79,404 10,957 (16,806)
========= ========= =========
<FN>
* Reclassified.
Activities not requiring cash flow:
(1) In December 1992, land was acquired from a customer of a subsidiary company for
the amount of NIS. 2,964 thousand. The payment was recorded against the
customer's accounts receivable.
(2) In 1994, current receivables from customers were converted into long-term loans
in the amount of NIS. 2,487 thousand (1993 - NIS. 3,408 thousand, 1992 - NIS.
13,840 thousand). Also in 1992, a balance of a loan amounting to NIS. 366
thousands was written off.
(3) In 1994, a loan received from an affiliated company in the amount of NIS. 646
thousand was set off against the debt of the company.
(4) In 1993, a long-term loan received from a customer in the amount of NIS. 3,792
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. 5,150 thousands was recorded against the credit balance of the affiliated
company.
(6) In the first quarter of 1994, 11,473,515 debentures (series 2) were converted
into 2,294,703 ordinary shares (Notes 13.b. and 18.a.).
</FN>
</TABLE>
- 9 -
<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 1994 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 1994 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 1994, based on the Consumer Price Index published
by the Central Bureau of Statistics ("Index"), on January 15, 1995
(see Note 2.G.1.)
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
and until December 1994.
- 10 -
<PAGE>
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS IN ADJUSTED VALUES (CONTINUED)
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,(see Note 2.C.2) 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.
- 11 -
<PAGE>
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS IN ADJUSTED VALUES (CONTINUED)
e. Current taxes are composed of payments on account during the
year in addition to amounts payable as of the balance sheet
date (or net of refunds claimed as of the balance sheet
date). The payments on account were adjusted based on the
prevailing index on the date of each payment, while the
amounts payable (or claimed as refund) are included without
adjustment. Accordingly, the current taxes include the
expenses arising from the erosion of the payments on
account taxes from the date of payments to the balance
sheet date.
Deferred taxes - see Note 2.J.
3. Comparative figures were adjusted to the December 1994 index.
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 two companies 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.
- 12 -
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
C. Valuation of inventories
1. Inventory of crude oil and refined products
The overwhelming portion of the crude oil and refined product
inventories of the wholly-owned subsidiary, Sonol, consists of
Emergency inventories. 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 based on
the Fuel Authority rate in accordance with the Commodities and
Services Control Order (Arrangements in the Oil Economy - 1988).
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.
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 and Amortization
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) 2- 6.5
Machinery and equipment 5-15
Vehicles 15-20
Computers 20
Furniture and office equipment (reflected in
machinery and equipment) 6-10
- 13 -
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
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.
The index, the exchange rates and the rate of changes therein
were as follows:
December 31, Changes in %
--------------------- ---------------------
1994 1993 1992 1994 1993 1992
---- ---- ---- --- ---- ----
Index 289.8 253.2 227.6 14.5 11.2 9.4
Exchange rate of
the U.S. dollar 3.018 2.986 2.7884 1.1 7.1 21.3
3. 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.
4. 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
discouted 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.
- 14 -
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
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 23.B.).
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.
- 15 -
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
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 4% 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 3% and on an annual real increase of
wages at the rate of 3%.
L. Provision for linkage increments on customers' deposits
The wholly-owned subsidiary, 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.
- 16 -
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
N. Foreign currency futures transactions
1. The results of futures transactions in the year 1993 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.
2. Sonol entered into a "free dollar transaction" by which it acquired
U.S. dollars in a bank bearing interest at changing rates, against an
unlinked shekel loan, bearing interest at changing rates. The
transaction may be closed at any time by netting the
liability against the asset. The accumulated effect of the
transaction is reflected on the statements of income.
NOTE 3 - ACCOUNTING WITH THE FUEL AUTHORITY AND THE REFORM IN 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 and the cancellation of the Price Structure Agreement;
b. Issuance, through a Government order, of a monthly price
structure for refined products setting the maximum price to
consumers and including an element of profit and a recovery of
non-direct expenses, rates similar, 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 timetable of which is as yet unknown. The
first stage of the Reform allowed 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 provided for two categories
of crude oil and refined product inventories: Emergency and
Commercial.
- 17 -
<PAGE>
NOTE 3 - ACCOUNTING WITH THE FUEL AUTHORITY AND THE REFORM FOR THE ENERGY SECTOR
(CONTINUED)
All costs and expenses related to the holding of Emergency inventories
continue to be fully recoverable from the Government while the
holding of Commercial inventories is at the risk of the oil marketing
companies.
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
credit.
3. In September 1991, the Government decided, inter alia, to reduce the
Emergency inventory levels and to effect the transfer of ownership of
the Emergency inventories of crude oil and refined products from the
oil marketing companies to the Government. To date, the Emergency
inventories have been reduced, but no timetable has been set for any
transfer of ownership.
It is the opinion of Sonol's management that implementation of the
decision to transfer or to further reduce the Emergency inventories
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 retail price controls were lifted from some fuel products
marketed by Sonol through public stations and as of October 26, 1993
Government wholesale price controls were lifted from the maximum price
of all refined products marketed by Sonol through 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. The
negative effect of this change was offset by increased sales volume of
the products involved.
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.
- 18 -
<PAGE>
NOTE 3 - ACCOUNTING WITH THE FUEL AUTHORITY AND THE REFORM FOR THE ENERGY SECTOR
(CONTINUED)
The above changes ("the Gas Reform") resulted in increased
competition, particularly in the more profitable bulk supply sector.
Such competition 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' prices to gas customers are subject to government maximum
price controls, except for bulk sales and sales to commercial
customers.
2. Supergas lodged a claim in the District Court for a declarative
judgement against the Ministry of Energy and Infrastructure, the Fuel
Authority, regarding certain amounts which partly relate to the period
before the Gas Reform and partly thereafter.
As a result of the ruling overturning a claim of another gas company
by the Supreme Court, Supergas cancelled its claim regarding certain
amounts relating to the period beginning after the commencement of the
Gas Reform.
An unsuccessful judgement in the said litigation will not result in
any negative impact on the financial position of Supergas, as
reflected in its financial statements.
In January 1995, a declaration was signed between the Ministry of
Energy and several gas companies, among them Supergas, establishing
standards of service to their clients. Based on this declaration, the
Ministry of Energy recommended that the Ministry of Finance rescind
price controls in effect on the price of gas. Concurrently, the
companies who are parties to the declaration have undertaken not to
deviate, when setting their prices to the consumer, from an agreed
upon formula for an as to yet undetermined transition period. As of
the date of these financial statements price controls have not yet
been rescinded.
- 19 -
<PAGE>
NOTE 4 - MARKETABLE SECURITIES
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------
December 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Debentures linked to the consumer price index 2,655 7,574
Debentures linked to foreign currency 1,016 1,375
Shares, options and convertible debentures 957 2,441
Others 155 844
------ ------
4,783 12,234
====== ======
</TABLE>
NOTE 4.A.- ACCOUNTS RECEIVABLE AND DEBIT BALANCES
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------
December 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Customers - open accounts (I) 255,815 217,326
Checks and notes receivable 24,455 30,489
Less - provision for doubtful receivables(*) (5,261) (7,599)
------- -------
275,009 240,216
Fuel Authority 45,697 90,453
Government Institutions 620 1,733
Income receivable 7,182 6,146
Short-term loans granted and current
portion of long-term loans granted 5,827 9,240
Employees 632 730
Prepaid expenses 3,281 4,587
Income tax receivable 10,833 -
Future tax benefits, net(**) 3,135 3,986
Current portion of capital notes 25,966 -
Others 12,435 9,693
------- -------
390,617 366,784
======= =======
(I) Including related and interested parties 33,531 8,672
======= =======
The largest balance of interested parties
during the year 32,852 5,500
======= =======
(*) See note 2.I.
(**) See note 16.
</TABLE>
NOTE 5 - INVENTORIES
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------
December 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Crude oil and raw materials 109,562 100,636
Finished products 191,547 237,548
Materials and supplies 7,030 8,463
------- -------
308,139 346,647
======= =======
</TABLE>
- 20 -
<PAGE>
NOTE 6 - INVESTMENTS
A. Investments in unconsolidated subsidiaries and others consist of:
<TABLE><CAPTION>
Adjusted NIS. (thousands)
---------------------------------------------------
December 31, 1994 December 31, 1993
----------------------- -----------------------
Shares Loans Total Shares Loans Total
----- ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Unconsolidated
subsidiaries, at cost 151 - 151 151 5 156
Affiliated companies
carried on equity
basis (1)(4) 22,590 11,251 33,841 6,141 - 6,141
Capital notes of -
interested parties (2) - 9,098 9,098 - 36,153 36,153
Capital note of an
affiliated company
and capital reserve
less provision for
its loss (3) - 6,306 6,306 - - -
Others, at cost (4) 15,341 - 15,341 38,664 - 38,664
------ ------ ------ ------ ------ ------
38,082 26,655 64,737 44,956 36,158 81,114
====== ====== ====== ====== ====== ======
</TABLE>
(1) In 1994, dividends were received from affiliated companies
amounting to NIS. 1,538 thousand (1993 - NIS. 2,149 thousand
which include NIS. 858 thousand from previous years' income).
(2) Capital notes reflected in the balance sheet are comprised as
follows:
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------
December 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Face value (a)(c) 36,066 41,277
Present value discount (b) 1,002 5,124
Discounted value 35,064 36,153
Less - current portion included in
accounts receivable and debit balances 25,966 -
------ ------
9,098 36,153
====== ======
</TABLE>
(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).
- 21 -
<PAGE>
NOTE 6 - INVESTMENTS
(c) The capital notes are non-marketable, unlinked and bear no
interest. NIS. 3,152 thousand of the capital notes (1993 -
NIS.3,607 thousand) are guaranteed by interested parties
(including former interested parties) and the balance is
unsecured.
(3) The capital note is unsecured, non marketable, linked to the
consumer price index and bears no interest.
(4) (a) In 1993 - includes NIS. 17,543 thousand relating to an
investment, through a subsidiary company, in 50% of the
shares of "Otzem Promotion and Investments (1991) 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 now in receivership. Furthermore, in
1994, a consolidated subsidiary provided a shareholders'
loan in the amount of NIS. 10,885 thousand. The
aforementioned shopping center was opened to the public in
September 1993. In 1994, the investment is included in
Affiliated companies carried on equity basis.
(b) Loans to Otzem are linked to the index and bear interest at
the rate of 5.5% per annum. The date of maturity is subject
to the financial capability of Otzem.
B. 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 80% of the increase in the Index in addition
to index linked interest of 1% per annum, or to the increase in the
representative rate of exchange of the dollar, without interest. The
loans are redeemable in four annual payments commencing in the year
1993.
- 22 -
<PAGE>
NOTE 7 - LONG-TERM LOANS RECEIVABLES
a. Consist of:
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------
December 31,
-------------------------
1994 1993
----- ----
<S> <C> <C>
Loans to customers 19,351 20,269
Loans to employees 108 146
Others 62 683
------ ------
19,521 21,098
Less: current portion 4,037 6,931
------ ------
15,484 14,167
====== ======
The years of maturity of the loans:
First year - current portion 4,037 6,931
Second year 3,861 3,882
Third year 1,524 832
Fourth year 1,085 793
Fifth year and thereafter and
without maturity date 9,014 8,660
------ ------
19,521 21,098
====== ======
</TABLE>
b. Linkage terms and interest rates:
<TABLE><CAPTION>
Adjusted NIS. (thousands)
---------------------------------------------------
Unlinked Linked to Linked to Total
index foreign
currency
------------ ------------ ------------ -----
Interest rates: 0% 10-20% 0-4% 4-10% 0% 5-9%
-- ------ ---- ----- -- ----
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1994
Loans to:
Customers 1,754 2,941 11,142 616 1,266 1,632 19,351
Employees - - 108 - - - 108
Others 62 - - - - - 62
----- ----- ------ ----- ----- ----- ------
1,816 2,941 11,250 616 1,266 1,632 19,521
===== ===== ====== ===== ===== =====
Less: current
portion 4,037
------
15,484
======
December 31, 1993
Loans to:
Customers 1,206 3,072 10,222 2,373 2,307 1,089 20,269
Employees - - 146 - - - 146
Others - 620 63 - - - 683
----- ----- ------ ----- ----- ----- ------
1,206 3,692 10,431 2,373 2,307 1,089 21,098
===== ===== ===== ===== ===== =====
Less: current
portion 6,931
------
14,167
======
</TABLE>
- 23 -
<PAGE>
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT
a. Consist of:
<TABLE><CAPTION>
Adjusted NIS. (thousands)
----------------------------------------------
Land Machinery
and and
Buildings Equipment Vehicles Others Total
--------- --------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
Cost
Balance at beginning
of year 295,214 459,862 33,053 35,694 823,823
Additions 48,738 25,285 4,226 5,049 83,298
Disposals (257) (3,124) (3,434) - (6,815)
------- ------- ------ ------ -------
Balance at end of year 343,695 482,023 33,845 40,743 900,306(*)
------- ------- ------ ------ -------
Accumulated
depreciation
Balance at beginning
of year 83,811 262,519 21,806 21,846 389,982
Depreciation charged 8,518 32,135 3,292 2,936 46,881
Depreciation in
respect of disposals - (1,709) (2,956) - (4,665)
------- ------- ------ ------ -------
Balance at end of year 92,329 292,945 22,142 24,782 432,198
------- ------- ------ ------ -------
Depreciated balance as
of December 31, 1994 251,366 189,078 11,703 15,961 468,108
======= ======= ====== ====== =======
Depreciated balance as
of December 31, 1993 211,403 197,343 11,247 13,848 433,841
======= ======= ====== ====== =======
(*) Net of investment grants in the amount of NIS. 11,555 thousand.
b. Land and buildings include buildings on lease-hold lands, the cost of which
is NIS. 134,711 thousand, for various original periods of 49 - 98 years,
ending in the years 1998 - 2072.
Land and buildings at a cost of NIS. 124,732 thousand have not yet
registered in the name of the Company or consolidated subsidiaries in the
Land Registry Office. The main reason for the lack of registration is that
the land settlement and sub-division process has not yet been arranged.
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.
</TABLE>
- 24 -
<PAGE>
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The amounts treated as permanent differences are as follows:
Adjusted NIS. (thousands)
-------------------------
Balance as of January 1, 1993 64,320
Changes in the year 1993 (4,960)
Balance as of December 31, 1993 59,360
Changes in the year 1994 (3,423)
------
Balance as of December 31, 1994 55,937
======
d. Land and buildings includes:
1. NIS. 17,494 thousand, for the acquisition by a wholly-owned
subsidiary of 50% of the rights of Magor Holdings Ltd.
(hereafter "Magor") in land and buildings in a project under
construction in Holon, known as "Lev-Magor Holon". A contract
was also signed for cooperation and management of the project,
pursuant to which "Magor" has undertaken that the income net of
expenses from the project, which the wholly-owned subsidiary
will receive for 10 years, will be not less than NIS. 787
thousand per year, linked to the Index.
2. NIS. 30,893 thousand, on account of acquisition of 50% of the
rights of the Cible Israel Investments (1992) Ltd. (hereafter
"Cible") in land and buildings in a project under construction
in the new industrial park of Rosh Haayin. The total cost of the
purchase (through a wholly-owned subsidiary) of the project, when
completed and title transferred, is approximately NIS. 39,800
thousand, adjusted to the December 1994 Index. The anticipated
completion date of the project is in mid-1995. As of January
1995, two out of five planned buildings have been completed and
have begun to be occupied. Cible has undertaken that the
income, net of expenses, from the project which the wholly
owned subsidiary will receive for seven years, will be not less
than NIS. 1,624 thousand for the first year and NIS. 2,102
thousand for each of the following six years. The amounts are
linked to the Index. The guaranteed income periods begin one
month after the completion of each of the buildings.
3. NIS. 1,480 thousand on account of acquisition of 17% of the
rights in land in Tel Aviv for the construction of an office
building and commercial area project, known as "Rubinstein
Towers". The Company's share in the project (including
construction costs) will amount to approximately NIS. 25,000
thousand and the expected completion date is late 1996.
e. Commitments and contingent liabilities - See note 24.
- 25 -
<PAGE>
NOTE 9 - OTHER ASSETS AND DEFERRED CHARGES, NET
Consist of:
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------
Balance to be amortized
-------------------------
as of December 31,
1994 1993
---- ----
<S> <C> <C>
Other assets:
Deferred rent (1) 5,709 5,208
Goodwill in consolidated
subsidiaries (2) 2,464 2,818
Others 3,373 2,882
------ ------
11,546 10,908
Deferred charges:
Expenses incurred in the issuance
of debentures by the Company (3) 7,445 9,495
Expenses incurred in the issuance
of debentures by a consolidated
subsidiary (3) 305 565
------ ------
19,296 20,968
Less: Deferred credit in a
consolidated subsidiary (2) 3,059 3,765
------ ------
16,237 17,203
====== ======
(1) Includes leasehold rights not yet amortized in the amount of NIS. 2,610
thousand (1993 - NIS. 2,688 thousand). The aforementioned leasehold rights
are for periods ending during the years 2001 - 2044.
(2) For amortization see note 2.B.(2)
(3) For amortization see note 2.F.
</TABLE>
NOTE 10 - SHORT-TERM BANK CREDIT
Linkage terms and interest rates:
Adjusted NIS. (thousands)
----------------------------------------------
December 31, 1994
----------------------------------------------
Unlinked linked Linked to Total
to foreign
Index currency
---------- ----- -------- ----
Interest rates: 17.2-24.4% 2.5% 5.9-9.2%
---------- ----- --------
Overdrafts 1,230 - - 1,230
Short-term loans 158,723 - - 158,723
Current portion of
long-term loans 41 87 446 574
------- --- ------ -------
159,994 87 446 160,527
======= === ====== =======
- 26 -
<PAGE>
NOTE 10 - SHORT-TERM BANK CREDIT (CONTINUED)
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 2,201 - - 2,201
Short-term loans 69,658 - 25,640 95,298
Current portion of
long-term loans 59 125 816 1,000
------ --- ------ -----
71,918 125 26,456 98,499
====== === ====== ======
NOTE 11 - LOANS FROM OTHERS
<TABLE><CAPTION>
Adjusted NIS. (thousands) Adjusted NIS. (thousands)
------------------------------------ -------------------------
December 31, 1994 December 31, 1993
------------------------------------ -------------------------
Unlinked Linked Linked to Total Unlinked Linked to Total
to Index foreign foreign
currency currency
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rates: 16.6% 0.1% 0.1% 0% 0%
------ ----- ----- ------ ----- ----- ------
Short term
liabilities 4,985 - - 4,985 3,706(*) 7,974 11,680
Current portion
of convertible
debentures into
share of a conso-
lidated sub-
sidiary (see note
13.C.) - 1,710 - 1,710 - - -
Current portion of
convertible
debentures into
shares of the
Company (See
Note 13.B.) - - 9,029 9,029 - - -
------ ----- ----- ------ ----- ----- ------
4,985 1,710 9,029 15,724 3,706 * 7,974 11,680
====== ===== ===== ====== ===== ===== ======
(*) 1993 include NIS. 2,366 thousand capital notes to related parties. The
capital notes were not linked, bore no interest and were redeemable at any
time.
</TABLE>
- 27 -
<PAGE>
NOTE 12 - ACCOUNTS PAYABLE AND CREDIT BALANCES
Adjusted NIS. (thousands)
--------------------------
December 31, December 31,
------------ ------------
1994 1993
---- ----
Liabilities to employees and
other salary related liabilities 14,242 17,463
Institutions 33,246 24,177
Accrued expenses 5,174 7,311
Income tax payable - 15,619
Others 8,734 12,595
------- -------
61,396 77,165
======= =======
NOTE 12.A - LIABILITIES TO SUPPLIERS
Include balances amounting to NIS. 2,764 thousand (1993 - 3,586
thousand) with related parties.
NOTE 13 - LONG-TERM LIABILITIES
A. Long-term loans
Rate of Adjusted NIS. (thousands)
--------------------------
interest December 31, December 31,
------------ ------------
% 1994 1993
-------- ---- ----
U.S. Dollar loans from banks(*) 6-9.3 923 1,568
Index linked loans from banks 2.5 124 -
Customers' deposit - linked
to index - 2,594 2,609
Customer's deposit - linked
to foreign currency - 51 58
Other loans - linked to index(**) - 4,500 5,399
Other loans - unlinked 24.4 41 106
----- -----
8,233 9,740
Less: current portion 574 1,000
----- -----
7,659 8,740
===== =====
- 28 -
<PAGE>
NOTE 13 - LONG-TERM LIABILITIES (CONTINUED)
Yearly installments:
Adjusted NIS. (thousands)
--------------------------
December 31, December 31,
------------ ------------
1994 1993
First year - current portion 574 1,000
Second year 414 549
Third year 90 363
Fourth year 20 10
Fifth year - -
No due date 7,135 7,818
----- -----
7,659 8,740
----- -----
8,233 9,740
===== =====
(*) Fixed rate of interest for the whole period of the loan
(**)Includes NIS. 4,500 (1993 - NIS. 5,150 thousand) from an
affiliated company.
Accrued interest is included in "Accounts payable and credit balances"
in Current liabilities.
B. Convertible debentures into shares of the Company
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
------------ ------------
1994 1993
---- ----
Debentures (Series 1)(*) 72,233 81,964
Debentures (series 2)(**) 170,221 208,418
------- -------
242,454 290,382
Less - current portion 9,029 -
------- -------
233,425 290,382
======= =======
- 29 -
<PAGE>
NOTE 13 - LONG-TERM LIABILITIES (CONTINUED)
Yearly installments:
Adjusted NIS. (thousands)
-----------------------------------------
December 31, 1994 December 31, 1993
----------------- ------------------
Series 1 Series 2 Series 1 Series 2
-------- -------- -------- --------
First year - current portion 9,029 - - -
------ ------- ------ -------
Second year 9,029 24,317 10,246 29,774
Third year 9,029 24,317 10,246 29,774
Fourth year 9,029 24,317 10,246 29,774
Fifth year 9,029 24,317 10,246 29,774
Subsequent years 27,088 72,953 40,980 89,322
------ ------- ------ -------
63,204 170,221 81,964 208,418
------ ------- ------ -------
72,233 170,221 81,964 208,418
====== ======= ====== =======
(*) Registered debentures (Series 1) NIS. 1.- par value each. Every NIS.
55.- par value of debentures are convertible into 10 ordinary shares
NIS. 1.- par 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 are payable 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 were 54,999,912
outstanding debentures (Series 1).
(**) Registered debentures (Series 2) NIS. 1.- par value each. Every NIS. 5
par value of debentures (Series 2) are convertible into an 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 are payable in 7 equal
yearly installments on November 30 in each of the years commencing in
1996 and ending in 2002. In 1994, 11,473,515 debentures (Series 2)
were converted into shares. As of the balance sheet date, there were
141,174,433 outstanding debentures (Series 2).
See also Note 18.A.
Regarding collaterals see Note 24.
C. Convertible debentures into shares of a subsidiary
--------------------------------------------------
Adjusted NIS. (thousands)
--------------------------
December 31, December 31,
------------ ------------
1994 1993
---- ----
Debentures (Series 1) 6,837 8,213
Less - current portion 1,710 -
----- -----
5,127 8,213
===== =====
- 30 -
<PAGE>
NOTE 13 - LONG-TERM LIABILITIES (CONTINUED)
Yearly installments:
Adjusted NIS. (thousands)
December 31, December 31,
1994 1993
First year - current portion 1,710 -
Second year 1,709 2,053
Third year 1,709 2,053
Fourth year 1,709 2,053
Fifth year - 2,054
5,127 8,213
6,837 8,213
===== =====
Pursuant to a public offering prospectus in May 1990, the subsidiary
company, Vulcan, issued 4,516,750 convertible debentures (Series 1) at
par value. The debentures are linked to the Index for April 1990, and bear
interest at an annual rate of 0.1%. From the date of issue until December
31, 1994 755,560 debentures have been converted into shares. As of the
balance sheet date there were 3,761,190 outstanding debentures (Series 1).
The debentures are payable in four equal yearly installments commencing in
December 1995 and ending in December 1998 and are convertible at any time
up to December 26, 1998 into Vulcan's 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 conversion of the
debentures into shares may dilute Sonol's holding in Vulcan to 70.8%
(instead of 79.6% as on the balance sheet date).
Regarding collaterals - see Note 24.
D. All the aforementioned debentures are listed for trading on the Tel-Aviv
Stock Exchange.
E. The real financial income of all the above debentures is NIS.26,374
thousand, (1993 - real financial expenses NIS. 1,037 thousand).
NOTE 14 - CUSTOMERS' DEPOSITS
a. Customers' deposits as of December 31, 1994 are computed based on the
deposit amount approved by the Government decree of December 4, 1994.
b. Customers' deposits held by Supergas include NIS. 37,395 thousand (1993 -
NIS. 43,539 thousand) linkage increments accrued on those deposits
(Note 2.L.).
- 31 -
<PAGE>
NOTE 15 - LIABILITIES FOR POST-RETIREMENT BENEFITS, NET
Adjusted NIS. (thousands)
--------------------------
December 31, December 31,
------------ ------------
1994 1993
---- ----
Provision for severance pay, net 4,559 3,586
Less: deposits in approved funds (*) 1,199 1,276
----- -----
3,360 2,310
Provision for early retirement pension (**) 3,383 1,512
Provision for redemption of unutilized
sick leave 1,419 1,689
----- -----
8,162 5,511
===== =====
(*) The deposits can be withdrawn subject to law. Accrued income on the
deposits is included in the statements of income.
(**) Excluding NIS. 1,188 thousand (1993 - NIS. 697 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, 1993 (3,690) 16,260 12,570
Changes in 1993 (296) (691) (987)
------ ------ ------
Balance as of December 31, 1993 (3,986) 15,569 11,583
Changes in 1994 851 (5,508) (4,657)
------ ------ ------
Balance as of December 31, 1994 (3,135) 10,061 6,926
====== ====== ======
b. Presented in the balance sheet:
Adjusted NIS. (thousands)
--------------------------
December 31, December 31,
------------ ------------
1994 1993
---- ----
Deferred Taxes in long-term liabilities 10,061 15,569
Future tax benefits in current assets (3,135) (3,986)
------ ------
6,926 11,583
====== ======
- 32 -
<PAGE>
NOTE 17 - LINKAGE OF MONETARY BALANCES
<TABLE><CAPTION>
Adjusted NIS. (thousands) Adjusted NIS. (thousands)
---------------------------- ---------------------------
December 31, 1994 December 31, 1993
---------------------------- ---------------------------
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 - 1,691 4,372 - 4,428 1,839
Accounts receivable and
debit balances 12,841 66,823 310,953 4,316 96,301 266,167
Marketable securities 2,671 1,016 1,096 7,574 1,375 3,285
Short-term bank deposit - - 30,128 - - -
Compulsory Government
loan - 1,283 - - 1,945 -
Investment in
capital notes and loans 17,557 - 9,098 - - 36,153
Long-term loans granted 10,799 2,724 1,961 9,400 3,045 1,722
------ ------ ------- ------ ------- -------
43,868 73,537 357,608 21,290 107,094 309,166
====== ====== ======= ====== ======= =======
Liabilities:
Loans from banks - - 159,953 - 25,640 71,859
Loans from others - - 4,985 - 7,974 3,706
Suppliers, accounts payable
and dividend declared 13,923 103,985 111,929 19,409 66,664 142,055
Long-term liabilities
(including current
portion) and debentures 14,054 243,429 41 16,221 292,008 106
Customers' deposits(**) 53,413 - - 60,105 - -
Capital notes - - 285 - - 326
------ ------ ------- ------ ------- -------
81,390 347,414 277,193 95,735 392,286 218,052
====== ======= ======= ======= ======= =======
<FN>
(*) Partly bearing interest.
(**) Against the Customers' deposit amounts, Supergas holds fixed assets on loan to
its customers, which are adjusted to the Index in the financial statements.
Regarding the linkage of Customers' deposits - see Note 14.
Against the excess of foreign currency linked liabilities over assets in the
amount of NIS. 273,900 thousand, Sonol holds oil and refined products inventory
amounting to NIS. 273,000 thousand, which is mainly emergency inventory valued
according to the changes in the rate of exchange of the U.S. dollar as explained
in note 2.C.1.
</FN>
</TABLE>
- 33 -
<PAGE>
NOTE 18 - CAPITAL
a. Nominal values.
Consists of:
Authorized Issued and Paid(*)
-------------------- -------------------
NIS. (thousands) NIS. (thousands)
-------------------- -------------------
December 31, December 31,
1994 1993 1994 1993
---- ---- ---- ----
225,000,000 Ordinary
shares of NIS. 1.- each 225,000 225,000 122,674 120,380
======= ======= ======= =======
(*) 122,674,456 ordinary shares (1993 - 120,379,753 ordinary shares).
The share capital has been increased by conversion of debentures
into shares. See Note 13.B.
b. Stock options (Series 2)
In accordance with a public offering prospectus dated February 1992 and
with a prior resolution of issuance to the Company's shareholders, the
Company issued 39,984,124 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 of December 1991). The last day
for exercising options (Series 2) is 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.
- 34 -
<PAGE>
NOTE 18 - CAPITAL (CONTINUED)
c. 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,
-----------------------------
1994 1993 1992
---- ---- ----
The net income used in computing
primary earnings per share 50,508 50,119 60,112
Add (Deduct) - theoretical
income (loss) deriving from:
Exercise of options (series 1) - - 2,034
Exercise of options (series 2) 1,169 1,840 9,180
Exercise of options (series A) - - 3,953
Exercise of debentures (series 1) (5,321) 1,919 -
Exercise of debentures (series 2) (10,552) (840) -
------ ------ ------
Net income used in computing
diluted earnings per share 35,804 53,038 75,279
====== ====== ======
2. The par value of shares used in computing earning per NIS. 1.- par
value share:
Adjusted NIS. (thousands)
------------------------------
Year ended December 31,
------------------------------
1994 1993 1992
---- ---- ----
Share capital used in computing
primary earnings per share 122,674 120,318 117,501
Add - theoretical share capital
that may derive from:
Exercise of options (series 1) - - 17,494
Exercise of options (series 2) 39,984 39,984 37,437
Exercise of options (series A) - - 13,105
Exercise of debentures (series 1) 10,000 10,000 -
Exercise of debentures (series 2) 28,235 28,944 -
The total share used in computing
diluted earnings per share 200,893 199,246 185,537
======= ======= =======
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 4% (12.93 - 3%, 12.92 - 2.5%) for securities linked to the index and
7% (12.93 - 3.5%, 12.92 - 4%) for securities linked to the exchange
rate of the U.S. dollar.
- 35 -
<PAGE>
NOTE 19 - CAPITAL RESERVES
NIS. (thousands)
------------------------
Year ended December 31,
------------------------
Nominal values 1994 1993
---- ----
Share premium 71,564 60,668
Share of the Company and a subsidiary
in the revaluation reserve of an affiliate * 156 240
------ ------
71,720 60,908
====== ======
* See also Note 28.C.
NOTE 20 - COST OF SALES
Adjusted NIS. (thousands)
-------------------------------
Year ended December 31,
-------------------------------
1994 1993 1992
---- ---- ----
Material used:
Crude oil and refined
petroleum products 832,574 815,971 898,051
Raw materials and
auxiliary materials 37,257 48,829 46,425
Finished luboil
products purchased 2,589 2,385 3,063
------- ------- -------
872,420 867,185 947,539
------- ------- -------
Labor and sub-contract work
Labor (including
related expenses) 9,817 10,030 11,054
Sub-contract work -
(refining and terminal
charges) 19,576 71,271 92,504
------- ------- -------
29,393 81,301 103,558
------- ------- -------
Production costs 40,035 47,742 56,660
------- ------- -------
Depreciation 2,710 2,386 2,606
------- ------- -------
Batteries 9,225 5,919 11,478
------- ------- -------
Total cost of sales 953,783 1,004,533 1,121,841
======= ========= =========
Increase (decrease) in inventories (38,508) (117,799) 34,412
======= ========= =========
- 36 -
<PAGE>
NOTE 21 - GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses include a decrease in the
provision for doubtful receivables and bad debts amounting to NIS.
1,462 thousand (1993 - increase in the provision NIS. 2,636
thousand; 1992 - increase in the provision NIS. 3,350 thousand).
NOTE 22 - FINANCING INCOME, NET
a. In the year 1993 includes income of NIS. 9,015 thousand resulting
from the retroactive adjustment of a subsidiary company's liability
prescribed by law in connection with customers' deposits.
Furthermore, in 1993 an income of NIS. 4,949 thousand is included
resulting from cancellation of provision for interest and linkage
increments. The cancellation resulted from receipt of final tax
assessments in respect of previous years.
b. In the year 1992, income of NIS. 5,832 thousand was included resulting
from a reduction in the discount rate on capital notes of related
parties from 20% to 11%. (see Notes 2.H.(3) and 6).
NOTES 23 - TAXES ON INCOME
a. The Company and its subsidiaries are taxed under the Income Tax Law
(Inflationary Adjustments) - 1985, effective as of the tax year
1985, which introduced the measurement of results for income tax
purposes in real terms. The various adjustments required by the
above mentioned law are made in order to align taxation to a real
income basis. Nevertheless, the adjustments of the nominal income
according to the Income Tax Law are not always identical to the
inflationary adjustments made in the financial statements in
accordance with the opinion of the Institute of Certified Public
Accountants in Israel. As a result, differences arise between the
adjusted income in the statement of income and the adjusted income
for income tax purposes.
Regarding deferred taxes for these differences, see Note 2.J.
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 (approximately 40%) and the remaining
part will conclude in 1995. Up to the date of these financial
statements, Vulcan complied with all the conditions required as a
result of its approved enterprise status.
- 37 -
<PAGE>
NOTE 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,
-------------------------
1994 1993 1992
---- ---- ----
Current taxes including
inflationary erosion of
advance tax payments 25,470 34,369 44,833
Deferred taxes, net (*) (4,657) (988) (5,455)
------- ------- ------
21,083 33,381 39,378
Overprovisions pertaining
to prior years, net - (4,744) -
------- ------- ------
21,083 28,637 39,378
====== ====== ======
(*) Pursuant to the amendment of the Income Tax Law as of December 22, 1992
the rate of company tax decreased from 40%, by 1% per year commencing
from 1993 and ending in 1996, to 36%.
The effect of the decreased rate of the tax on the net deferred taxes
included in the 1992 financial statements was a decrease in the taxes on
income in the statements of income and an increase in the adjusted net
income of NIS. 1,592 thousand.
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,
-------------------------------
1994 1993 1992
---- ---- ----
Taxes at statutory rate 38% 39% 40%
==== ==== ====
The theoretical tax at the
applicable tax rate 27,059 30,524 38,907
Erosion of advanced tax payments 2,170 983 927
Differences in the definition of
capital and assets for tax
purposes and others, net (8,146) 1,874 1,136
Adjustment of deferred taxes due
to changes in the tax rate - - (1,592)
Taxes for prior years - (4,744) -
------ ------ ------
21,083 28,637 39,378
====== ====== ======
- 38 -
<PAGE>
NOTE 24 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES
a. Floating and fixed charges
Adjusted NIS.
(thousands)
------------------
December 31, 1994 Collateralized by
------------------ ----------------------
Short-term bank Floating charges on
credits 1,230 current assets of the
main subsidiaries.
Short-term Loans from banks Floating charges on
and others 158,723 current assets of Sonol.
Accounts payable and credit Floating charges on
balances (including accrued current assets of Sonol
interest on short-term
bank loans) 157
Long-term bank loans 1,088 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 3,849 Floating charge on all
the assets of Vulcan.
Convertible debentures of Senior floating charge
a subsidiary 6,837 equal in standing to all
other senior floating
charges on all the assets
of Vulcan.
Convertible debentures Floating charge
(Including interest) 243,014 subordinated to other
floating charges on all
the assets of the
Company.
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.
- 39 -
<PAGE>
NOTE 24 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
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. 4.6 million was lodged
against Sonol. 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
Sonol's consent, the operation of the station. The district court
rejected the claim and the plaintiffs appealed to the Supreme
Court. A date for hearing has not yet been determined.
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. 4.6 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 former agencies (which is owned and managed by a
formerly related party to the Company), the agency submitted a
claim in the amount of approximately NIS. 41 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 District Court to cancel
the arbitration agreement. In the opinion of Sonol's legal
counsel, the plaintiff's prospects are negligible.
e. As a result of arbitration proceedings between the Fuel Authority,
against the Agents' organization and station owners, in which
Sonol was not a party, the arbitrator ruled that the Fuel
Authority is to reimburse the station owners for the depreciation
on their investments in stations. The arbitrator's ruling has
been confirmed by the district court. The Fuel Authority has, in
turn, demanded that the fuel marketing companies pay for the
depreciation (where applicable) to the station owners since it
claims that the depreciation component was in the past recognized
by the Fuel Authority within the framework of the price
structure.
In the opinion of Sonol's legal counsels, there is no basis
for the Fuel Authority's demand.
- 40 -
<PAGE>
NOTE 24 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
f. Two claims were lodged against an affiliated company and against
its shareholders, which include Sonol. The total claims of
approximately NIS. 41.5 million regard the sale of fuel products
pursuant to 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 sound
defense against the claim.
g. On August 29, 1994, Vulcan received a purchase tax assessment in
the amount of NIS. 1,988 thousand representing tax differences,
linkage increments, interest and fines for the period of January
1990 through May 1994.
On September 1, 1994, Vulcan submitted a protest against the
aforesaid assessment referring to counsel's opinion, whereby
Vulcan rejected all the points included in the assessment. As of
the balance sheet date, no answer has been received from the
Purchase Tax Authorities on the aforesaid protest. No provision
has been made in the financial statements regarding the
abovementioned assessment.
h. On September 8, 1994, an agreement was signed Vulcan and its
former distributor for submitting claims and arguments of Vulcan
against the distributor in the amount of NIS. 18,906 thousand, and
of the distributor against Vulcan in the amount of adjusted NIS.
5,182 thousand, to an agreed upon arbitrator, after payment of
NIS. 2,582 thousand by the distributor to Vulcan settling part of
the claims and mainly settling debts arising from battery supplies
in the past. As of the balance sheet date, no arbitrator has been
agreed upon. In the opinion of Vulcan's management, referring to
counsel's opinion, the ruling of an arbitrator may oblige the
distributor to make further payments to Vulcan. In the financial
statements no provisions have been made regarding the claims of
Vulcan against the distributor and of the distributor against
Vulcan.
- 41 -
<PAGE>
NOTE 24 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
C. The consolidated subsidiary companies are committed as follows:
Adjusted NIS. (thousands)
-------------------------
Future fixed assets expenditures 47,320
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(*) 20,534
Lease obligation for a computer
and other equipment over
periods of up to five years 758
(*) The rental liability for each of the years
following 1994 is as follows:
1995 2,435
1996 2,130
1997 1,302
1998 1,172
1999 1,153
2000 and thereafter 12,342
------
20,534
======
D. The consolidated subsidiaries have
contingent liabilities in respect of:
1. Acquisition of crude oil or refined products -
open letter of credits 29,288
2. The subsidiary Supergas has given a guarantee
in favor of a bank regarding a loan given by
the bank to a partnership (in which Supergas
is a partner) 1,244
3. Various guarantees 2,044
4. 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
- 42 -
<PAGE>
NOTE 25 - RULING BY THE CONTROLLER OF RESTRICTIVE TRADE PRACTICES, LEGISLATION
AND PROPOSED LAWS FOR THE FUEL SECTOR
A. An appeal filed by Sonol, together with the Paz and Delek fuel marketing
companies, against the ruling by the Controller of Restrictive Trade
Practices declaring that exclusive agreements entered into between the
fuel marketing companies and filling station operators are restrictive
trade agreements, is currently being heard by the District Court in
Jerusalem.
B. A private legislative proposal dealing with the shortening of the terms
of exclusive agreements entered into between the fuel marketing
companies and filling station owners and operators has passed its first
reading in the Knesset.
C. According to the best knowledge of the Company, a bill proposed by The
Ministry of Energy dealing with the fuel market has been presented to the
Ministerial Committee for Legislation dealing with new legislation.
D. At the end of July 1994, the Knesset passed the Law of The Fuel Market
(Promotion of Competition), 1994 which establishes that any provision
included in the National Delineation Plan (TMA) 18, requiring minimal
distance between filling stations, is cancelled.
At this time, it is too early to estimate the effects of the said
developments on the overall Israeli fuel market in general, and on the
Company in particular.
NOTE 26 - 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,
------------------------------
1994 1993 1992
---- ---- ----
NIS. in Thousands
------------------------------
Adjusted Adjusted Nominal
-------- -------- -------
Financing income 411 318 536
Financing expenses 549 16 1,233
- Transactions conducted in the normal course of the Company's
consolidated business with banking groups and others having an
indirect interest in the Company have not been separately disclosed.
- In 1992, the Company paid commissions in the amount of NIS. 3,499
thousands to indirect interested parties for public offerings of
shares, options and debentures.
- 43 -
<PAGE>
NOTE 26 - TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(CONTINUED)
2. Benefits to interested parties
------------------------------
Number Year ended December 31,
--------------------------
of 1994 1993 1992
persons Adjusted NIS. in Thousands
(1) Interested party
employed in the group 1 983 1,110 955
(2) Directors 2 72 144 141
3. Transactions and commitments with interested and related parties
a. Transactions:
Year ended December 31,
1994 1993 1992
Adjusted NIS. in Thousands
Income:
Sales (*) 58,205 45,963 20,720
Management fee 726 540 848
(Amortization) / addition to
capital notes, net (1,09 (81) 8,524
Expenses:
Management fee - - 1,791
Rent - 572 547
Participation in expenses 82 121 69
(*) All the sales to interested parties are made in the normal
course of business and according to normal credit
conditions.
b. Balances with interested and related parties
Balances with interested and related parties are detailed in
the financial statements and the notes attached thereto.
c. Material volume of transactions
Sonol purchases most of the fuel products from Oil
Refineries Ltd. which is obligated to supply its products
to the fuel marketing companies at the refineries gate
price, which is under Government control.
NOTE 27 - SUBSEQUENT EVENT
A resolution was passed by the Board of Directors of the Company on January
16, 1995 authorizing the payment of an interim dividend in the amount of
NIS. 39,869 thousand. The dividend is payable on February 21, 1995. The
amount of the dividend payable was included in the Current liabilities of
the Company as of December 31, 1994.
-44-
<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,
1994 1993
Current assets:
Cash and cash equivalents 2,007 1,833
Investments in securities 1,595 3,590
Short-term deposit 9,983 -
Compulsory Government loans 205 202
Accounts receivable and debit balances 129,509 107,485
Inventories 102,572 102,542
245,871 215,652
Investments:
Unconsolidated subsidiaries and others 18,106 20,482
Long-term receivables 5,131 4,145
Compulsory Government loans 220 366
23,457 24,993
Property, plant and equipment 182,747 158,531
Less: Accumulated depreciation 77,132 67,783
105,615 90,748
Other assets and deferred charges, net 5,104 5,278
380,047 336,671
======= =======
-45-
<PAGE>
NOTE 28 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS (CONTINUED)
CONSOLIDATED BALANCE SHEETS
(In thousands)
Translated to U.S. Dollars
December 31,
1994 1993
Current liabilities:
Short-term bank credits 53,189 28,823
Suppliers 42,602 24,080
Loans from others 4,783 3,417
Accounts payable and
credit balances 20,698 22,629
121,272 78,949
Long-term liabilities:
Long-term loans, less current portion 2,538 2,558
Debentures convertible into shares
of the company, less current portion (I) 74,530 80,994
Debentures convertible into shares
of a subsidiary, less current portion 1,699 2,403
Customers' deposits 17,698 17,587
Liabilities for post-retirement benefits, net 2,705 1,613
Deferred taxes, net (II) 1,545 2,864
Capital notes issued by an affiliated company 93 95
100,808 108,114
Minority shareholders' interest
in consolidated subsidiaries 2,174 1,687
Shareholders' equity:
Capital 55,735 54,965
Capital reserves (II) 36,006 32,371
Retained earnings 64,052 60,585
155,793 147,921
380,047 336,671
======= =======
-46-
<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,
1994 1993 1992
Revenues:
Sales 615,220 578,338 643,475
Less: Government imposts 234,058 207,119 221,100
Net sales 381,162 371,219 422,375
Other income, net 3,572 872 762
384,734 372,091 423,137
Costs and expenses:
Cost of sales 294,435 293,536 337,653
Selling, general and
administrative expenses 49,101 46,034 47,758
Depreciation and amortization 10,470 9,078 8,180
Financing (income) expenses, net 328 (3,604) 1,611
354,334 345,044 395,202
Operating income before taxes on income 30,400 27,047 27,935
Taxes on income 6,558 8,591 10,626
Operating income after taxes on income 23,842 18,456 17,309
Company's share in income (loss)
of affiliates, net (58) 355 510
Minority interest in income
of consolidated subsidiaries (223) (198) (11)
23,561 18,613 17,808
Cumulative effect of the change
in accounting for taxes on income (III) - 6,728 -
Net income 23,561 25,341 17,808
======= ======= =======
-47-
<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
Blance as at January 1, 1992: 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
Balance as at December 31, 1993 (V) 54,965 32,371 60,585 147,921
Changes in 1994:
Net income for the year - - 23,561 23,561
Proceeds from conversion of
debentures into shares 770 3,635 - 4,405
Dividend (V) - - (20,094) (20,094)
Balance as at December 31, 1994 55,735 36,006 64,052 155,793
====== ====== ====== =======
* After deduction of relative issuance expenses
** Includes proposed dividend in the amount of $ 6,512 thousand.
-48-
<PAGE>
NOTE 28 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS (CONTINUED)
<TABLE>
<S> <C>
(I) During 1992, the company completed an initial public offering of
shares, options and debentures, as well as a second public offering
of debentures and options to purchase 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,
1994 1993
Debentures (Series 1 and 2) - face value 80,336 84,970
Discount (Series 1) (*) 3,242 3,976
77,094 80,994
Less current portion 2,564 -
74,530 80,994
====== ======
(*) The discount is being amortized over the remaining period until their
maturity.
See note 13.B.
(II) In the initial 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 is recognized for tax purposes when such options are transferred to
the employees and income tax is paid thereon. As of the balance sheet date,
the balance of deferred tax benefits is $ 204 (thousand).
(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.
(V) As mentioned in Note 27 to the Financial Statements, the Board of Directors,
subsequent to the balance sheet date, passed a resolution regarding the
payment of an interim dividend. The dividend of NIS. 39,869 thousand, while
reflected in the Israel Shekel Financial Statements is not included in the
translated dollar statements in accordance with Generally Accepted
Accounting Principles. (Comparative figures have been reclassified
accordingly).
</TABLE>
-49-
<PAGE>
LIST OF THE MAIN SUBSIDIARIES AND AFFILIATES
Holding and Control
at balance sheet date
%
Consolidated Subsidiaries
Sonol Israel Ltd. 100
Vulcan Batteries Ltd. 79.6
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
Sonol J-M Ltd. 70
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
Granite Hacarmel Development Holdings Ltd. 100
Granite Hacarmel Development Ltd. 100
Granite Hacarmel Industries Holdings Ltd. 100
Granite Hacarmel Industries Ltd. 100
Granite Hacarmel Y.A. Holdings Ltd. 100
Affiliated Companies
Aviation Services Ltd. 22.5
Tanker Services Ltd. 25
United Petroleum Export Company Ltd. 25
Otzem Promotion and Investments Ltd. 50.01
Yarok Az Ltd. 22.9
Lev Magor Management and Services Ltd. 50
The above list does not include inactive and/or immaterial affiliated companies
and other companies.
<PAGE>
Igal Brightman
& Co.
[Logo] 3 Daniel Frisch Street Telephone: 972 (3) 692-4111
--------------
Tel Aviv 64731, ISRAEL Facsimile: 972 (3) 696-0130
P.O.B. 16593, Tel Aviv 61164
AUDITORS' REPORT TO THE SHAREHOLDERS
OF AM-HAL LTD.
--------------
We have examined the balance sheets of AM-HAL LTD. as of
December 31, 1994 and 1993, the related statements of operations,
changes in shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1994. Our examinations
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 statutory financial statement of the Company were prepared
in accordance with generally accepted accounting principles ("GAAP") in
Israel, and as explained in Note 2B, were accordingly presented
in terms of new Israeli shekels ("NIS") with a constant purchasing power.
The attached financial statements have been prepared at the request of a
shareholder on the basis of United States GAAP. See Note 2E(2) for a
discussion of the differences between Israel and U.S. GAAP as applicable
to the Company's financial statements.
In our opinion, the attached financial statements present
fairly, in terms of constant NIS, the Company's financial position as of
December 31, 1994, and 1993, and the results of its operations, changes
in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1994, 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
financial 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 15, 1995.
-----------------
Deloitte Touche
Tohmatsu
International
-----------------
<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, 1994 and 1993, the Statement of Profit and Loss and the
Statement of Changes in Shareholders' Equity for the two years ended
on that date. 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 5.
The data in the financial statements relating to the
Company's share of the included Company's profits totaling
N.I.S. 3,47? thousand, including N.I.S. 1,927 thousand for
the financial year, are based on financial statements examined by
other Certified Public Accountants.
In our opinion, based on our examination and on the
opinion of other Certified Public Accountants, as aforesaid, the
abovementioned financial statements, present fairly, in
conformity with generally accepted accounting principles, the
financial position of the Company as at December 31, 1994, the
results of its operations and the changes in its shareholder's
equity for the years ended on that date. Also, in our opinion,
the financial statements based on nominal data (Note 5)
present fairly, in nominal terms, the financial position of the
Company as at December 31, 1994 and 1993, and the results of its
operations and the changes in its shareholders' equity for the two
years 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:
(a) The above-mentioned generally accepted accounting principles
were applied on a consistent basis.
(b) 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 13, 1995
<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 13, 1995
TEL 03-294946, FAX 03-201386
AUDITORS' REPORT TO THE SHAREHOLDERS OF
AMPAL FINANCIAL SERVICES LTD.
---------------------------------------
We have examined the Balance Sheets of AMPAL FINANCIAL SERVICES
LTD. as of December 31, 1994 and 1993 and the Statements of
Income, Changes in Shareholders' Equity and the Statements of
Cash Flows for the three years ended December 31, 1994, 1993 and
1992. We have also examined the data in nominal values in the
Balance Sheets as of December 31, 1994 and 1993 and in the
Statements of Income and the Statements of Cash Flows for the
three years ended December 31, 1994, 1993 and 1992 (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, 1994 and
1993, and the results of its operations and its cash flows for
the three years ended December 1994, 1993 and 1992. 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, 1994 and 1993, and the results of its operations and its cash
flows for the three years ended December 31, 1994, 1993 and 1992,
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 applied 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.)
Member firm of Grant Thornton International
<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, 1994 and
1993, and the related statements of income, changes in
shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1994, 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 Ampal Holdings (1991) Ltd., as of December 31, 1994 and 1993,
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, 1994, in conformity with generally accepted
accounting principles.
/s/ Shlomo Ziv & Co.
--------------------
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
March 13, 1995
<PAGE>
[LOGO] HAFT & HAFT & CO.
------------------
INCL. STRAUSS, LAZAR & CO.
Certified Public Accountants (Isr.)
AUDITORS' 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, 1994 and
1993, the Consolidated Statement of Profit and Loss, the Statement of
Changes in Shareholders' Equity and the consolidated statement of Cash
Flows for each of the three years ended December 31, 1994. 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 6% (1993: 5%) of the total assets included in
the consolidated balance sheet, and whose income constitute 1%
(1993: 4%) 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 aforesaid, 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, 1994 and 1992, the results of their operations, and
the changes in shareholders' equity and their cash flows for each of the
three years ended on that date. Also in our opinion, the unconsolidated
financial statements based on nominal data (Note 24) present fairly, in
nominal terms, the unconsolidated financial position of the Company as
at December 31, 1994 and 1993, and the unconsolidated results of its
operations, changes in the shareholders' equity, and cash flows, for each of
the three years ended December 31, 1994, 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.
Pursuant to the United States Securities and Exchange
Commission requirements, we state:
(a) The above-mentioned generally accepted accounting principles
were applied on a consistent basis.
(b) The auditing standards and procedures mentioned above are
Israel 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 22, 1995
-----------------------------------------------------------------
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
<PAGE>
Number: 480
Tel-Aviv, March 13, 1995
AUDITORS' REPORT TO THE SHAREHOLDERS OF
AMPAL INDUSTRIES (ISRAEL) LTD.
---------------------------------------
We have examined the Balance Sheets of AMPAL INDUSTRIES (ISRAEL)
LTD. as of December 31, 1994 and 1993 and the Statements of
Income, Changes in Shareholders' Equity and the Statements of
Cash Flows for the three years ended December 31, 1994, 1993 and 1992.
We have also examined the data in nominal values in the Balance
Sheets as of December 31, 1994 and 1993 and in the Statements of
Income and the Statements of Cash Flows for the three years ended
December 31, 1994, 1993 and 1992 (Note 15). 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.
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.
In our opinion, 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, 1994 and
1993, 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 15) present fairly, in
conformity with generally accepted accounting principles, the
financial position of the Company as of December 31, 1994 and
1993, and the results of its operations and its cash flows for
the three years ended December 31, 1994, 1993 and 1992, 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 applied 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.)
Member firm of Grant Thornton International
<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.)
AUDITORS' 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, 1994 and 1993, the Statement of Profit and Loss, the
Statement of Changes in Shareholders' Equity and the Statement of
Cashflows for the two years ended December 31, 1994. 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 7.
A. The above financial statements do not include consolidated
financial statements of the Company with those of its
subsidiary as required by the Opinions 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. 393
thousand, are based on financial statements examined by
other Certified Public Accountants.
In our opinion, based on our examination and on 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, 1994 and 1993, the results of its operations,
the changes in its shareholder's equity and its cash flows for
the two years ended December 31, 1994. 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, 1994 and 1993, and the results of its operations, the changes
<PAGE>
in its shareholders' equity and its cash flows for the two years
ended December 31, 1994, 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:
(a) The above-mentioned generally accepted accounting principles
were applied on a consistent basis.
(b) 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 22, 1995
<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 balance sheets of Bank Hapoalim
(Cayman) Ltd. (a subsidiary of Bank Hapoalim B.M.) as at December
31, 1994 and 1993, and the related statements of income, changes
in shareholders' equity and cash flows, for each of the three years
in the period ended December 31, 1994. These financial statements are
the responsibility of the Banks' management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We did not audit the financial statements of Hapoalim (Latin America)
Casa Bancaria S.A., a 50% owned investee (1993: wholly owned subsidiary)
whose net investment and net loss constitute $1,605,408 (1993: $3,142,765)
and loss of $(90,338) (1993: $(320,922); 1992: $(111,070)) of the
respective total assets and 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 investee, 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 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 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, 1994 and 1993,
and its results of operations, changes in shareholders equity
and its cash flows for the three years in the period ended
December 31, 1994, in conformity with generally accepted
accounting principles.
/s/ Morris Brankin & Co.
------------------------
Morris Brankin & Co.
January 25, 1995
(Except for note 9b,
for which the date is
March 7, 1995)
<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 consolidated balance sheets of Bay Heart
Limited (hereafter: the Company) and its subsidiary, as of December 31,
1994 and 1993, and the related consolidated statements of income, statements
of changes in shareholders' equity and of cash flows for the three
years ended December 31, 1994. 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 consolidated financial statements 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 of the
Company are presented in note 26.
In our opinion, the above financial statements present fairly the
financial position of the Company as at December 31, 1994 and 1993, and
the results of its operations and its cash flows for the three
years ended December 31, 1994, 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, February 14, 1995
<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 Consolidated Special-Purpose Financial Statements
----------------------------------------------------
We have audited the accompanying special-purpose balance sheet of
Bay Heart Limited (hereafter: the Company) and its subsidiary as of
December 31, 1994 and the related consolidated special-purpose
statements of income, changes in shareholders' equity and cash flows
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 audits.
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 consolidated financial statements of the Company and its
subsidiary 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, the accompanying consolidated special-
purpose financial statements present fairly 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 February 14,
1994.
Also, in our opinion, the translated amounts in the accompanying
financial statements translated into U.S. dollars, have been
computed on the basis set forth in Note 2 to these financial
statements.
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, February 15, 1995
<PAGE>
KOST LEVARY & FORER
A MEMBER OF
ERNST & YOUNG INTERNATIONAL
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 (hereinafter - "the
Company") and its consolidated subsidiaries as of December 31,
1993 and 1994, 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, 1994. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the
financial statements of consolidated subsidiaries, the assets of
which at December 31, 1993 and 1994 constitute approximately 24%
and 26%, respectively, of total assets included in the
consolidated balance sheet and the revenues of which for the
years ended December 31, 1992, 1993 and 1994 constitute
approximately 29%, 30% and 30%, respectively, of total revenues
included in the consolidated statement of income. Those
statements were audited by other auditors, whose report has been
furnished to us, and our opinion, insofar as it relates to data
included for these subsidiaries, is based solely upon the reports
of the other auditors.
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.
<PAGE>
KOST LEVARY & FORER
A MEMBER OF
ERNST & YOUNG INTERNATIONAL
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 audits and the reports of the
other auditors, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of the Company and its subsidiaries at
December 31, 1993 and 1994 and the related consolidated results
of operations and cash flows for each of the three years in the
period ended December 31, 1994, 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
adjusted Israeli currency date, as described in the preceding
paragraph, to be the historical costs, except for the
classification of discount on debentures, see Note 23).
KOST, LEVARY and FORER
Certified Public Accountants (Israel)
Tel-Aviv, Israel
March 7, 1995
<PAGE>
KOST
LEVARY
and
FORER
A Member of Ernst & Young International
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 for 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 years
1992, 1993 and 1994, which were audited by us, and on which we expressed
our opinion on March 7, 1995, 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
balance sheets at December 31, 1993 and 1994, and the consolidated
income statement figures for each of the three years in the period
ended December 31, 1994.
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 1994, and the
related consolidated results of operations and changes in
shareholders' equity for each of the three years in the period ended
December 31, 1994, 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 (Israel)
Tel-Aviv, Israel
March 7, 1995
<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.
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,
KOST, LEVARY and FORER
Certified Public Accountants (Israel)
Tel-Aviv, Israel
March 3, 1994
<PAGE>
PORAT & CO.
Certified Public Accountants (ISR.)
Report of Independent Public Accountants
----------------------------------------
of
COUNTRY CLUB KFAR-SABA LIMITED
------------------------------
We have audited the balance sheet of Country Club Kfar-Saba
Limited and the consolidated balance sheet of Country Club Kfar-
Saba Limited and its Joint Venture Investee as at December 31,
1994 and 1993, the related statements of income and shareholders'
equity and cash flows for each of the 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 presentation. 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.
Condensed statements in historical values which formed the basis
of the adjusted statements appear in Note 20 to the financial
statements. These amounts have been translated into U.S. dollars
using the method described in Note 2H.
28 Hayezira st. Ramat-Gan 52521 FAX: 03-7527673: Tel: 03-
7527657, 7527651, 7527646: 52521 28
<PAGE>
PORAT & CO.
Certified Public Accountants (ISR.)
Report of Independent Public Accountants
----------------------------------------
of
COUNTRY CLUB KFAR-SABA LIMITED
------------------------------
In our opinion, based on our audit, the above mentioned financial
statements present fairly the financial position of the Company
as at December 31, 1994 and 1993, the results of its operations,
the changes in shareholders' equity and cash flows for each of
the years in the period ended December 31, 1994, in conformity
with accounting principles generally accepted in Israel,
consistently applied. 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, 1994 and
1993, and the results of its operations, the changes in
shareholders' equity, and its cash flows for each of the three
years in the period ended December 31, 1994, 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
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.
Accounting principles generally accepted in Israel differ in
certain respects from accounting principles generally accepted in
the United States. The application of the latter would have
affected the determination of nominal/historical net income
(loss) and shareholders' equity to the extent summarized in Note
21 to the financial statements.
Porat and Co.
Certified Public Accountants (Isr.)
Ramat Gan, March 13, 1995
28 Hayezira st. Ramat-Gan 52521 FAX: 03-7527673: Tel: 03-
7527657, 7527651, 7527646: 52521 28
<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, 1994 and 1993, the Statement of
Profit and Loss, the Statement of Changes in Shareholders' Equity and
the Statement of Cashflows for the two years ended December 31, 1994.
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 23.
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, 1994 and 1993, the results of its operations, the changes in its
shareholder's equity and its cashflows for the two years ended
December 31, 1994. Also, in our opinion, the financial statements
based on nominal data (Note 23) present fairly, in nominal terms,
the financial position of the Company as at December 31, 1994, and 1993 and
the results of its operations, the changes in its shareholders' equity
and its cashflows for the two years ended December 31, 1994, 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:
(a) The above mentioned generally accepted accounting principles
were applied on a consistent basis.
(b) 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.
March 19, 1995 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, 1994, 1993 and
1992; the related statements of income, cash flows and changes in
equity for each of the three years in the period ended December
31, 1994. 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 situation 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, 1994, 1993 and 1992, 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 25, 1995
<PAGE>
Chaikin, Cohen, Rubin
40 Yitzhak Sadeh st., Tel-Aviv 67212
Tel: 03-5373980 Fax: 972-3-5373987
Certified Public Accountants (Isr.)
Report of Independent Public Accountants
----------------------------------------
To The shareholders of Imagenet LTD
-----------------------------------
We have audited the balance sheet of Imagenet LTD as at
December 31, 1994, the related statements of income and
shareholders' equity and cash flows for the period from June 1,
1994 (beginning of operation) through December 31, 1994,
expressed in New Israeli 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 audit 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 preform 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 statements
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 adjusted for the changes in the general
purchasing power of the Israeli Currency in accordance with the
opinions issued by the Institute of Certified Public Accountants
in Israel.
Condensed statements in historical values which formed the basis
of adjusted statements appear in Note 12 to the financial
statements.
In our opinion, the above-mentioned financial statements present
fairly the financial position of the Company as at December 31,
1994, the results of its operations, the changes in shareholders'
equity and cash flows for the period from June 1, 1994 (beginning
of operation) through December 31, 1994, in conformity with
accounting principles generally accepted in the United States and
in Israel (as applicable to these financial statements, such
accounting principles practically identical).
Chaikin, Cohen, Rubin
Certified Public Accountants (Isr.)
Tel Aviv, February 16, 1995
<PAGE>
KOST
LEVARY
AND
FORER
A Member of Ernst & Young International
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 consolidated"), as detailed below: balance sheets,
consolidated and of the Company, as at December 31, 1994 and 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 year ended December 31, 1994 and for
the nine months ended December 31, 1993.
We conducted our audit 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. A summary of the financial statements in nominal Israeli
shekels which served as a basis for the adjusted statements is
presented in Note 26.
In our opinion, the aforementioned financial statements
present fairly the financial position, consolidated and of the
Company, as at December 31, 1994 and 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 26 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.
/s/ KOST, LEVARY and FORER
------------------------------------
Tel-Aviv, Israel KOST, LEVARY and FORER
March 15, 1995 Certified Public Accountants (Israel)
<PAGE>
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 as at December 31, 1994 and 1993 and the related
consolidated statements of income and shareholders' equity and
cash flows of each of the three years in the period ended
December 31, 1994 expressed in New Israel Shekels. These
financial statements, which differ from the statutory financial
statements issued in Israel, as set forth in note 1 to the
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 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, 1994 and 1993, the consolidated results of their
operations, the changes in shareholders' equity and their cash
flows for each of the three years in the period ended
December 31, 1994, on the basis of the historical cost
convention, in conformity with accounting principles generally
accepted in Israel, consistently applied.
HAGGAI WALLENSTEIN & CO.
Certified Public Accountants (Isr.)
Tel-Aviv, March 22, 1995
<PAGE>
Kesselman & Kesselman
certified public accountants (Isr.)
Coopers & Lybrand
AUDITORS' REPORT
----------------
To the Shareholders of
OPHIR HOLDINGS LTD.
-------------------
We have examined the financial statements of Ophir Holdings Ltd.
(hereafter - the Company) and the consolidated financial
statements of the Company and its subsidiaries: balance sheets
at December 31, 1994 and 1993 and the related statements of
income, changes in shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1994. 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, 1994 and
1993 constitute approximately 45% and 56% respectively, of total
consolidated assets, and whose revenues for each of the three
years in the period ended December 31, 1994 constitute
approximately 50%, 88% and 16%, respectively, of total
consolidated revenues and gains, have been examined by other
certified public accountants. The data regarding the Company's
share in excess of profits over losses of certain associated
companies, a net amount of adjusted NIS 2,706,000 in 1994,
adjusted NIS 8,950,000 in 1993 and adjusted NIS 1,151,000 in
1992, are based on the financial statements of those companies
which have been examined by other certified public accountants.
The aforementioned financial statements have been prepared 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. Condensed nominal Israeli currency data of the Company,
on the basis of which its adjusted financial statements were
prepared, are presented in note 13.
In our opinion, based upon our examinations and the reports of
the other accountants referred to above, the aforementioned
financial statements present fairly, in conformity with
accounting principles generally accepted in Israel, the financial
position - of the Company and consolidated - at December 31, 1994
and 1993 and the results of operations and the cash flows - of
the Company and consolidated - for each of the three years in the
period ended December 31, 1994. Also, in our opinion, the
abovementioned financial statements have been prepared in
accordance with the Securities (Preparation of Annual Financial
Statements) Regulations, 1993.
Accounting principles generally accepted in Israel differ in
certain respects from accounting principles generally accepted in
the United States. The application of the latter would have
affected the determination of nominal/historical net income and
shareholders' equity to the extent summarized in note 14.
Tel-Aviv, Israel, March 15, 1995
<PAGE>
[LOGO]
BRAUDE & CO.
Certified Public Accountants
REF 4021
AUDITORS' REPORT TO THE SHAREHOLDERS OF
ORLITE ENGINEERING COMPANY LTD.
-------------------------------
We have audited the balance sheets of Orlite Engineering Company
Ltd. (hereinafter - the Company) at December 31, 1994 and 1993
and the related statements of income shareholders' equity and
cash flows for each of the three years ended December 31, 1994,
1993 and 1992, expressed in New Israel Sheqels (hereinafter
N.I.S.). 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 presentation. 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.
Condensed statements in historical nominal values which formed
the basis for the adjusted statements appear in Note 24 to the
financial statements.
In our opinion, based on our audit, the above mentioned financial
statements present fairly the financial position of the Company
at December 31, 1994 and 1993 and the results of its operations,
the changes in shareholders' equity and cash flows for each of
the three years ended December 31, 1994, 1993 and 1992, in
conformity with accounting principles generally accepted in
Israel, consistently applied. Also, in our opinion, the
financial statements based on nominal data Note 24 present
fairly, in conformity with generally accounting principles
the financial position of the company at December 31, 1994 and
1993, and the results of its operations, the changes in
shareholders' equity and its cash flows for each of the three
years ended December 31, 1994, 1993 and 1992, 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)
February 16, 1995
<PAGE>
[Logo]
BRAUDE & CO.
Certified Public Accountants
To the Board of Directors of Orlite Engineering Company Ltd.
------------------------------------------------------------
At your request, we have audited the translation into U.S.
dollars of the audited financial statements of Orlite Engineering
Company Ltd. as of December 31, 1994, and as of December 31, 1993
which were prepared in adjusted N.I.S., and our audited report on
them was made on February 16, 1995. 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 1
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
1.
BRAUDE & CO., C.P.A. (ISRAEL)
Tel-Aviv, March 15, 1995
JERUSALEM 91002,33 JAFFA ROAD P.O.B. 347 TEL. (02)222421'90
TEL-AVIV. 61024 29 HAMERED ST. P.O.B. 50180 TEL. (03)5140808'90
HAIFA 31338.65 ATZMAUT ROAD. P.O.B., 33958 TEL. (04)523224'90
TELEX: 33667 AUDITIL. FAX:972-3-294010 CABLES: BRAUDITORS
<PAGE>
Report of Independent Public Accountants
----------------------------------------
To the Shareholders of Paradise Mattresses Industries (1992) Ltd.
We have audited the balance sheet of Paradise Mattresses
Industries (1992) Ltd. as at December 31, 1994 and 1993, the
related statements of income and shareholders' equity and cash
flows for each of the two 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.
Condensed statements in historical values which formed the basis
of the adjusted statements appear in Note 25 to the financial
statements. These amounts have been translated into U.S. Dollars
using the method described in Note 25.
In our opinion, based on our audit and the above mentioned
financial statements present fairly the financial position of the
Company as at December 31, 1994 and 1993, the results of its
operations, the changes in shareholders' equity and cash flows
for each of the two years in the period ended December 31, 1994,
in conformity with accounting principles generally accepted in
Israel, consistently applied. Also, in our opinion, the
financial statements based on nominal data (Note 25) present
fairly, in conformity with generally accepted accounting
principles, the financial position of the Company as at December
31, 1994 and 1993, and the results of its operations, the changes
in shareholders' equity, and its cash flows for each of the two
years in the period ended December 31, 1994, on the basis of the
historical cost convention.
As applicable to these financial statements accounting principles
generally accepted in Israel and in the United States are
substantially identical in all material respect.
13 March 1995
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
<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, 1994 and 1993, and the statements of profit and loss,
shareholders' equity and cash flows of the Company and
consolidated for each of the three years in the period ended
December 31, 1994. 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 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, 1994
and 1993, and the results of their operations, statements of
shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1994.
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, 14 March 1995
<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, 1994 and 1993, and the related Statement of Income for
each of the two years in the period ended December 31, 1994. 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, 1994 and 1993 and
the results of its operations for each of the two years in the period ended
December 31, 1994, 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 13, 1995
/s/ Dov Kahana & Co.
--------------------
Dov Kahana & Co.
Certified Public Accountants (Isr.)
<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 Benaltabel, C.P.A. (Isr.)
Michael Levy, C.P.A. (Isr.)
AUDITORS' REPORT
TO THE SHAREHOLDERS OF
RED SEA UNDER WATER OBSERVATORY LTD.
------------------------------------
We have audited the consolidated Balance Sheet of Red Sea Under
Water Observatory Ltd. ("The Company") and subsidiaries and the
Balance Sheet of The Company as of December 31, 1994 and 1993,
and the related consolidated Statements of Income and Cash Flows
for the year ended December 31, 1994 and the statements of Income
and Cash Flows of the Company for each of the two years in the
period ended December 31, 1994 expressed in nominal New Israeli
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 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 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.
The Financial Statements of subsidiaries abroad, whose assets
constitute approximately 46% of the total assets contained in the
Consolidated Balance Sheet (31.12.1993 approximately 47%), and
whose revenues constitute approximately 43% of the total revenues
included in the consolidated Statement of Income for the year
ended December 31, 1994 have been audited by other auditors. Our
opinion, insofar as it relates to the amounts included for said
subsidiaries is based solely on the report of the other auditors.
In our opinion based on our audit and the report of the other
auditors as aforesaid the financial statements referred to above
present fairly, in all material respects, on the basis of the
historical cost convention, the financial position of The Company
and its subsidiaries as of December 31, 1994 and 1993 and the
consolidated results of their operations and cash flows for the
year ended December 31, 1994 and the results of the operations
and cash flows of The Company for each of the two years in the
period ended December 31, 1994, in conformity with generally
accepted accounting principles (except for the omission of
inflation accounting as required by Israeli GAAP).
Also, in our opinion, the translated amounts in the accompanying
consolidated financial statements translated into U.S. Dollars
have been computed on the basis set forth in note 2 to the
consolidated financial statements.
Ramat Gan, Israel, March 13, 1995
-----------------------------------
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, 1994 and 1993 and the Statements of Profit and Loss,
Partnerships' Equity and Cash Flows for each of the three years in the
period ended December 31, 1994. 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, 1994 and 1993 and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1994.
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.
/s/ REUVENI, HARTUV, TEPPER & CO.
---------------------------------
REUVENI, HARTUV, TEPPER & CO.
Certified Public Accountants (Isr.)
Tel Aviv, February 20, 1995.
<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, 1994 and 1993 and the related consolidated
statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1994. 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 5% of the total consolidated
assets at December 31, 1994, and whose sales revenues constitutes
approximately 22% of consolidated sales revenue for the year
ended December 31, 1994 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,
1994 and 1993 and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1994, 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, in all material respects,
except as described in Note 16 to the consolidated financial
statements.
Almagor & Co.
Certified Public Accountants (Israel)
/s/ Almagor & Co.
-----------------
Ramat-Gan, Israel
February 20, 1995
<PAGE>
[Igal Brightman & Co.]
3 Daniel Frisch Street
Tel Aviv 64731, Israel
P.O.B. 16593, Tel Aviv 61164
Tel. 972(3) 692-4111
Fax. 972(3) 696-0130
AUDITORS' REPORT TO THE SHAREHOLDERS OF
TRINET INVESTMENTS IN HIGH-TECH LTD.
------------------------------------
We have examined the balance sheet of TRINET INVESTMENTS IN HIGH-
TECH LTD. (the "Company") as of December 31, 1994, and the
related statements of operations, changes in shareholders'
deficiency and cash flows for period from inception of activities
to December 31, 1994. Our examination was made in accordance
with generally accepted auditing standards, including those
prescribed by 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 aforementioned financial statements have been prepared on the
basis of historical cost as adjusted for the changes in the
general purchasing power of the Israeli currency in accordance
with opinions issued by the Institute of Certified Public
Accountants in Israel. Condensed nominal financial data, on the
basis of which the adjusted financial statements have been
prepared, is presented in Note 10 to the financial statements.
In our opinion, the aforementioned financial statements present
fairly, in conformity with generally accepted accounting
principles, the financial position of the Company as of December
31, 1994, and the results of its operations, changes in
shareholders' deficiency and cash flows for the period then
ended.
The financial information in U.S. dollars and in accordance with
generally accepted accounting principles in the United States has
been translated according to the principles set forth in
Statement No. 52, "Foreign Currency Translation," of the
Financial Accounting Standards Board of the United States. Such
information is based on nominal historical amounts in Israeli
currency and is included in Note 9 to the financial statements.
Igal Brightman & Co.
Certified Public Accountants
Tel-Aviv, March 20, 1995
Deloitte Touche
Tohmatsu
International
I. Brightman, M. Bar-Levav, C. Schwartzbard, D. Valiano, A.
Inbar, B(D) Ratowitz, Z. Feldman, S. Gotnall, R. Benvenisu, E.
Hendler
Office in Jerusalem: New Clal Center, 42 Agrippas Street
Jerusalem 94301, Israel Tel. 972(2) 235157 Fax. 972(2) 233628
<PAGE>
[Igal Brightman & Co.]
3 Daniel Frisch Street
Tel Aviv 64731, Israel
P.O.B. 16593, Tel Aviv 61164
Tel. 972(3) 692-4111
Fax. 972(3) 696-0130
AUDITORS' REPORT TO THE SHAREHOLDERS OF
TRINET VENTURE CAPITAL LTD.
---------------------------
We have examined the balance sheet of TRINET VENTURE CAPITAL LTD.
(the Company) as of December 31, 1994, and the related statements
of operations, changes in shareholders' deficiency and cash flows
for period from inception of activities to December 31, 1994.
Our examination was made in accordance with generally accepted
auditing standards, including those prescribed by 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 aforementioned financial statements have been prepared on the
basis of historical cost as adjusted for the changes in the
general purchasing power of the Israeli currency in accordance
with opinions issued by the Institute of Certified Public
Accountants in Israel. Condensed nominal financial data, on the
basis of which the adjusted financial statements have been
prepared, is presented in Note 8 to the financial statements.
In our opinion, the aforementioned financial statements present
fairly, in conformity with generally accepted accounting
principles, the financial position of the Company as of December
31, 1994, and the results of its operations, changes in
shareholders' deficiency and cash flows for the period then
ended.
The financial information in U.S. dollars and in accordance with
generally accepted accounting principles in the United States has
been translated according to the principles set forth in
Statement No. 52, "Foreign Currency Translation," of the
Financial Accounting Standards Board of the United States. Such
information is based on nominal historical amounts in Israeli
currency and is included in Note 9 to the financial statements.
Igal Brightman & Co.
Certified Public Accountants
Tel-Aviv, March 20, 1995
Deloitte Touche
Tohmatsu
International
I. Brightman, M. Bar-Levav, C. Schwartzbard, D. Valiano, A.
Inbar, B(D) Ratowitz, Z. Feldman, S. Gotnall, R. Benvenisu, E.
Hendler
Office in Jerusalem: New Clal Center, 42 Agrippas Street
Jerusalem 94301, Israel Tel. 972(2) 235157 Fax. 972(2) 233628
<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 31st day of March, 1995.
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 31, 1995.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C> <C>
Arie Abend Director
Michael Arnon Director
Stanley I. Batkin Director
Yaacov Elinav Director
Harry B. Henshel Director
Irwin Hochberg Director
Herbert Kronish Director
Lawrence Lefkowitz Director
Eitan Raff Director
Shimon Ravid Director
Shlomo Recht Director
Leon Riebman Director
Evelyn Sommer Director
By /s/ Lawrence Lefkowitz March 31, 1995
-----------------------------------
Lawrence Lefkowitz, individually
and as attorney-in-fact for the
Foregoing Persons
By /s/ Alan L. Schaffer March 31, 1995
-----------------------------------
Alan L. Schaffer, Vice
President-Finance
(Principal Financial Officer)
By /s/ Alla Kanter March 31, 1995
-----------------------------------
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, 1994
AMPAL-AMERICAN ISRAEL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
</TABLE>
Exhibit 10l
AGREEMENT
---------
Drafted and Executed in Tel-Aviv on March 30, 1994
By and Between
Investment Company of Bank Hapoalim Ltd.
3 Daniel Frish Street, Tel Aviv
("Investment Company" hereinafter)
as the First Party,
and
Ampal (Israel) Ltd., and
Ampal Industries (Israel) Ltd.
111 Arlozorov Street, Tel-Aviv
(collectively "Ampal" hereinafter)
as the Second Party.
WHEREAS the Parties are shareholders in that company known as Ophir Holdings
Ltd. (hereinafter "Ophir" or "the Company"), and
WHEREAS the Parties are interested in reducing to writing that which was
orally agreed upon between themselves on November 12, 1993 with reference to
delineating the scope of their relationship with one another as Ophir
shareholders,
Accordingly, it is hereby agreed, declared and
----------------------------------------------
stipulated between the Parties as follows:
------------------------------------------
1. Recitals and Interpretation
1.1 This Agreement's recitals constitute an integral part thereof.
1.2 Section headings shall not be utilized in the interpretation of
this Agreement, their sole purpose being to facilitate reading.
1.3 In this Agreement the terms which follow shall have the definitions
which are set forth next to such terms:
1.3.1 "Shareholders" or "Parties" - Investment company and
Ampal.
1.3.2 "Shareholders' Total Holdings" - (in percentages) - the
number of ordinary shares held by the Shareholders (as
they are described above) with reference to the total
number of all ordinary shares issued by the Company.
2. Duration of Agreement
---------------------
This Agreement shall remain in effect as long as each of the Parties
hereto is entitled to appoint at least one director to Ophir's Board of
Directors and as long as the total number of directors which the Parties
hereto are entitled to appoint shall constitute the majority of Ophir's
directors.
Should one of the foregoing conditions cease to exist, this Agreement
shall automatically terminate, effective on the date such condition
ceased to exist.
<PAGE>
3. Appointment of Ophir's Directors
--------------------------------
3.1 In the relations between them, the Parties agree that as long as
GMUL Investments Company Ltd. (or whoever succeeds it and in the
event that the following right will be assertable by the successor)
has the right to appoint one of Ophir's directors, Ophir's Board of
Directors shall consist of at least seven directors.
After Ophir has attained the status of a "company" within the
meaning of Section 96(a) of the Companies Ordinance (New Version)
of 1983, Ophir's Board of Directors shall consist of at least seven
directors, and additional directors from the public ("pub. dir."
hereinafter) in such a number as required by law.
3.2 Those of Ophir's directors who are not pub. dir. and which the
Parties are entitled to recommend to the general meeting for their
appointment, in accordance with this sub-section 3.2 (hereinafter,
within this sub-section, "the number of directors") shall be
recommended jointly by the Parties in the manner hereinafter set
forth:
3.2.1 Each Shareholder shall be entitled to recommend one
director for each quantity of ordinary shares held by
such party which constitute, in terms of percentage, out
of the total number of ordinary shares issued by the
Company, a sum equal to the total number of shareholder's
shares divided by the number of directors (hereinafter
"the right-conferring sum").
3.2.2 In the event that in accordance with sub-section 3.2.1,
above, the number of directors appointed does not equal
the number of directors authorized, then that shareholder
that holds the remainder of shares (i.e. those shares
that have not voted to appoint a director in accordance
with sub-section 3.2.1, above) which is closest to "the
right-conferring sum" shall have the right to recommend
the appointment of one additional director occasioned by
the remainder, and this procedure shall be repeated until
directors equal in number to the total number of
directors authorized are appointed.
In the event that two Shareholders hold equal remainders (as
provided above), and a number of directors equal to the number
of authorized directors has not been appointed, the
Shareholders shall jointly recommend a director, per force of
their remainders.
3.2.3 As long as it is not otherwise agreed upon by the parties
in writing, the number of directors subject to the
provisions of this sub-section shall be six.
3.3 Ophir's pub. dir., in the event that there are any, shall be
recommended jointly by the Shareholders.
3.4 The Shareholders shall jointly vote in favor of the appointment of
whoever at all relevant times shall be the Managing Director, as an
additional director of Ophir.
3.5 A Shareholder upon whose recommendation one of Ophir's directors
was appointed, shall be entitled to assemble a general meeting for
the purpose of discharging the director appointed upon its
recommendation and to recommend the appointment of another director
in his place.
2
<PAGE>
3.6 In the event of the vacancy of a director's position on Ophir's
Board of Directors, for whatever reason, the Shareholder on whose
recommendation such director was appointed, shall have the right to
recommend for appointment a director to fill such vacancy.
3.7 The Shareholders hereby obligate themselves to vote, at Ophir's
general meetings, in favor of the appointment/discharge of
directors in accordance with the recommendations of the Parties as
provided in sub-sections 3.2 - 3.6, above.
4. Voting at General Meetings
--------------------------
4.1 Prior to the assembly of each of Ophir's general meetings
(excepting those general meetings on whose agenda appears solely
the appointment of directors who are not pub. dire.), the Parties
shall assemble at a preliminary meeting whose purpose will be to
formulate a united stand on those issues set forth in the agenda
for such general meeting (excepting the appointment of directors
who are not pub. dir.) and the manner of voting on such issues.
Where a general meeting has not yet been called and where a Party
hereto is of the opinion that a general meeting ought to be called,
the Parties shall, within the framework of the preliminary meeting,
consider and decide by agreement on those issues which they intend
on raising on Ophir's general meeting agenda and the manner of
voting on such issues.
The preliminary meeting may be conducted in writing.
4.2 In the absence of consensus between the Parties with reference to
the manner of voting on any particular issue, where a preliminary
meeting is not assembled or not held for whatever reason with
reference to such issue, or where the lack of consensus arises as a
result of differences of opinion expressed by the Parties with
reference to said issue, the Parties shall refrain from taking a
stand at Ophir's general meeting with reference to such issue on
which lack of consensus between the Parties exists, or from voting
against the adoption of a decision thereon, and in such a manner as
to preserve the status quo as it existed prior to the convening of
the general meeting.
4.3 At votings at Ophir's general meetings with reference to
transactions between Ophir and any of the Shareholders, and/or at
votings with reference to which, according to law, ratification by
an Ophir general meeting is required, and/or at votings that could
be affected as a result of influence, directly or indirectly, with
reference to Ophir's investment in Mivnat Holdings Ltd. and/or in
Mivney Ta'asia Ltd., the Parties shall enjoy voting freedom and the
provisions of this section 4 shall not apply.
5. Right of First Refusal With Reference to Transfer of Ophir's Shares
-------------------------------------------------------------------
The Shareholders hereby grant each other the right of first refusal with
reference to the transfer of Ophir's shares, subject to the following
terms and conditions:
5.1 Any Party who intends on selling Ophir's Shares ("Seller"
hereinafter) shall give the other Party notice of this fact
("Notice" hereinafter).
3
<PAGE>
Such Notice shall contain the following particulars: the number of
shares being offered for sale, the price demanded therefor, the
terms of payment therefor and the identity of the offeree.
5.2 Within 30 days after receipt of the Notice, the other Party shall
reply to the Seller in writing ("Response" hereinafter).
The Response shall be either of the following:
a. "Affirmative Response" - in which will be identified the
----------------------
number of shares that the sender of the Response is willing to
purchase and whose meaning it shall be that the sender of the
Response is willing to purchase the number of shares
designated and at the price and terms of payment set forth in
the Notice; an affirmative response with reference to all the
---
shares offered for sale shall be hereinafter referred to as an
"Affirmative Response".
In the event an Affirmative Response is given without
reference to the number of shares, same shall be deemed as a
full Affirmative Response.
b. "Negative Response" - including the giving of an Affirmative
-------------------
Response with changes, that are not in favor of the Seller,
with reference to one or more of the terms of the Notice (and
to which thereafter no other Response is sent within 30 days,
in which case it will be deemed a Negative Response); or a
partial Affirmative Response; or the failure to give any
response whatsoever within 30 days as provided above, which
failure will be considered, on the tho day after receipt of
the Notice, as a Negative Response.
5.3 The service of an Affirmative Response shall be deemed as an
acceptance of the Seller's offer contained in the Notice with
reference to the number of shares that are identified in the
Response and the day upon which service of the Response is effected
shall be deemed the day on which the transaction is consummated
subject to the terms set forth in the Notice.
5.4 The service of a Negative Response shall be construed as giving the
Seller the right to sell to the offeree identified in the Notice
that number of shares with reference to which no Affirmative
Response was received and on those terms set forth in the Notice
(or at a price higher than the price set forth in the Notice and on
the same payment terms as those set forth in the Notice), and this
within 90 days of receipt of the last Response.
5.5 The provisions of this section 5 shall not apply after Ophir has
attained the status of a "Company" within the meaning of Section
96(a) of the Companies Ordinance (New Version) of 1983.
5.6 The Parties hereby agree that in the event that Ophir's Board of
Directors does not approve of the transfer of shares made in
accordance with or not contrary to the provisions of this section,
the Parties shall effectuate a change in Ophir's by-laws to the
effect that same will negate the requirement that Ophir's Board of
Directors must approve the transfer of the shares made in
accordance with and not contrary to the provisions of this section.
4
<PAGE>
5.7 The transfer of shares to a company within the transferor's group
of companies shall not be subject to the right of first refusal as
provided in this Agreement, provided that such transferee company
shall agree to be bound by the provisions of this section in full.
6. Transfer of Rights
------------------
The Shareholders are not permitted to transfer those rights created by
this Agreement to others, in whole or in part, excepting to companies
within the transferor's group of companies, provided that such
transferee companies shall agree to be bound by the terms of this
Agreement in full.
7. Arbitration
-----------
7.1 All disputes between any and all of the Parties, with reference to
this Agreement, its interpretation or performance, shall be decided
by a single arbitrator, agreed upon jointly by the Parties. In the
event that the Parties do not reach agreement on an arbitrator
within 15 days from the date that one of the Parties demanded from
the other that arbitration be conducted, the arbitrator shall be
appointed, upon application by one of the Parties, by the President
of the Israel Bar Association.
7.2 The arbitrator shall be bound by substantial law, but not by rules
of evidence and procedures established by law, and shall be
entitled to proceed with the arbitration, or any sitting thereof,
including the rendition of a judgment, even in the absence of a
Party summoned by him in writing and who did not appear. The
arbitrator must set forth the reasons for each decision made by
him.
7.3 The arbitrator shall be authorized to render interlocutory and
partial decisions and to order specific performance.
7.4 The arbitrator's decisions and their reasons shall be set forth in
writing by him.
7.5 The arbitrator shall render his judgment within 6 months of the
date that the dispute, pursuant to the provisions of this section,
was submitted to him, and shall be entitled to extend such period,
in three month increments each time, for extraordinary reasons
given by him in writing.
7.6 The arbitrator shall maintain a protocol of the deliberations and
shall transfer a printed copy thereof to each of the Parties a
reasonable period of time before the next sitting of the
arbitration.
7.7 This section shall be considered an arbitration agreement made
between the Parties.
8. Miscellaneous
-------------
8.1 This Agreement expresses the full agreement of the Parties with
reference to all the matters and interests covered thereby, and it
replaces and cancels all other agreements or understandings, oral
or written, that existed, if same existed, between the Parties,
with reference to the matters and interests covered thereby, which
anteceeded the execution of this Agreement.
8.2 Any modification and/or correction of the Agreement and/or any of
its terms and conditions shall be of no effect unless made in
writing and executed by all the Parties.
5
<PAGE>
8.3 The addresses of the Parties to this Agreement are as set forth in
the recitals to this Agreement.
Notices may be given by letter or by means of facsimile, sent to
the office of the recipient.
In Witness Hereof have the Parties Affixed their Seals:
/s/Investment Company of Bank Hapoalim Ltd. /s/Ampal Industries Ltd.
------------------------------------------- ------------------------------
Investment Company of Ampal (Israel) Ltd.
Bank Hapoalim Ltd.
/s/Ampal Industries (Israel) Ltd.
---------------------------------
Ampal Industries (Israel) Ltd.
6
<TABLE>
<CAPTION>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
SCHEDULE SETTING FORTH THE COMPUTATION OF EARNINGS PER SHARE Exhibit 11
12/31/94 12/31/93 12/31/92
--------------------- -------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Weighted average number of shares
outstanding:
4% Preferred....................... 210,611 223,997 237,701
6-1/2% Preferred................... 1,143,961 1,365,155 1,530,415
Class A............................ 20,041,094 15,501,489 14,937,184
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............................ 24,526,000 89.10% 20,717,000 87.35% 20,717,000 87.35%
Common............................. 3,000,000 10.90 3,000,000 12.65 3,000,000 12.65
----------- ------ ----------- ------- ---------- -------
27,526,000 100.00% 23,717,000 100.00% 23,717,000 100.00%
=========== ====== =========== ====== ========== ======
Income before cumulative effect of
change in accounting principle...... $ 7,334,000 $ 5,208,000 $10,324,000
Cumulative effect on prior years of
change in accounting principle...... - (4,982,000) -
----------- ----------- -----------
Net income.......................... $ 7,334,000 $ 226,000 $10,324,000
=========== =========== ===========
Allocation of net income on the basis
of the respective dividend rights of
the above classes of stock, pro-rata:
Class A............................ $ 6,535,000 89.10% $ 197,000 87.35% $ 9,018,000 87.35%
Common............................. 799,000 10.90 29,000 12.65 1,306,000 12.65
----------- ------ ----------- ------- ----------- ------
$ 7,334,000 100.00% $ 226,000 100.00% $10,324,000 100.00%
=========== ====== =========== ====== =========== ======
Earnings per Class A share:
Income before cumulative effect of
change in accounting principle..... $.27 $.22 $.44
Cumulative effect on prior years of
change in accounting principle..... - (.21) -
----
Net income.......................... $.27 $.01 $.44
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
SCHEDULE SETTING FORTH THE COMPUTATION OF RATIOS Exhibit 12
OF CONSOLIDATED EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
<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....................... $ 11,307,000 $ 4,746,000 $ 24,260,000 $ 2,396,000 $ 6,782,000
Fixed charges.................... 20,024,000 23,575,000 20,303,000 28,196,000 58,044,000
------------ ------------ ------------ ------------ ------------
Earnings....................... $ 31,331,000 $ 28,321,000 $ 44,563,000 $ 30,592,000 $ 64,826,000
============ ============ ============ ============ ============
Fixed Charges:
Interest......................... $ 19,109,000 $ 22,364,000 $ 18,346,000 $ 26,006,000 $ 55,821,000
Amortization of debenture
expenses........................ 915,000 1,211,000 1,957,000 2,190,000 2,223,000
------------ ------------ ------------ ------------ ------------
Fixed charges.................... $ 20,024,000 $ 23,575,000 $ 20,303,000 $ 28,196,000 $ 58,044,000
============ ============ ============ ============ ============
Ratio of earnings to fixed charges 1.56:1 1.20:1 2.19:1 1.08:1 1.12:1
============ ============ ============ ============ ============
</TABLE>
EXHIBIT 21 Subsidiaries of the Registrant
<TABLE>
<CAPTION>
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, 1994:
Percentage
Voting Securities
Name of Relationship State of Owned by
Company to Ampal Organization Immediate Parent
------- ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Ampal Development Subsidiary of Israel 90%(1)
(Israel) Ltd. Ampal (Israel)
Ltd.
Ampal Engineering Subsidiary of Israel 99.9%(2)
(1994) Ltd. Ampal Industries,
Inc.
Ampal Enterprises Ltd. Subsidiary of Israel 99.9%(3)
Ampal
Development
(Israel) Ltd.
Ampal Financial Subsidiary of Israel 51%(4)
Services Ltd. Ampal (Israel)
Ltd.
Ampal Holdings (1991), Subsidiary of Israel 99%(5)
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%(6)
Ltd. Ampal Industries,
(Israel) Ltd.
Ampal Sciences, Inc. Subsidiary of Delaware 100%
Ampal Industries,
Inc.
Country Club Subsidiary of Israel 51%
Kfar Saba Ltd. Ampal
Industries,
Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Voting Securities
Name of Relationship State of Owned by
Company to Ampal Organization Immediate Parent
------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Nir Ltd. Subsidiary of Israel 99.96%
Ampal
Development
(Israel) Ltd.
Paradise Mattresses Subsidiary of Israel 85.1%
(1992) Ltd. Ampal
Properties
Ltd.
Pri Ha'emek (Canned Subsidiary of Israel 51.25%(7)
and Frozen Food) 88 Ltd. Ampal
Industries,
Inc.
</TABLE>
(1) The remaining 10% of the voting securities is owned by
Ampal.
(2) The remaining .1% is owned by Ampal (Israel) Ltd.
(3) The remaining .1% is owned by Nir Ltd.
(4) The remaining 49% is owned by Ampal.
(5) The remaining 1% is owned by Ampal.
(6) The remaining 1% is owned by Ampal (Israel) Ltd.
(7) An additional 3.44% is owned by Ampal Industries
(Israel) Ltd.
IGAL BRIGHTMAN & CO. LETTERHEAD
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in Registration Statement No.
33-51023 on Form S-3 and Registration No. 33-55137 on Form S-8 of our
report dated February 15, 1995 relating to AM-HAL Ltd., appearing in this
Annual Report on Form 10-K of AMPAL American Israel Corporation for the
year ended December 31, 1994.
Igal Brightman & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
March 29, 1995
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously
filed Registration Statement File No. 33-51023 and No.33-55137.
New York, New York
March 29, 1995 Arthur Andersen LLP
<PAGE>
COHEN, EYAL, YEHOSHUA & CO. LETTERHEAD
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Ampal Enterprises, we hereby consent
to the incorporation of our reports included in this Form 10K, into the
Company's previously filed Registration Statement File No. 33-51023, and
No. 55137.
Cohen, Eyal, Yehoshua & Co.
March 29, 1995 Certified Public Accountants (Isr.)
<PAGE>
FAHN, KANNE & CO. LETTERHEAD
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
As the independent public accountants of Ampal Financial Services Ltd., we
hereby consent to the incorporation of our report included in FORM 10-K,
into the Company's previously filed Registration Statement File No. 33-
51023 and No. 33-55137.
Fahn, Kanne & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
March 29, 1995
<PAGE>
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
6 Kaufman St. P.O.B. 50322
Tel-Aviv 61500, Gibor House
Tel. 03-51796111 Fax. 03-5179418
Haita 31018. 2 Hanamal St. P.O.B. 1886
Tel. 04-575025/6 Fax. 04-679461
Summit International Associates Inc.
March 29, 1995
Arthur Andersen & Co.
1345 Avenue of the Americas
New York, NY 10105
U.S.A.
Gentlemen,
Re: Ampal Holdings (1991) Ltd.
Consent of independent public accountants
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 33-51023, and No. 33-55137.
Sincerely,
Shlomo Ziv & Co.
certified Public Accountants (Isr.)
<PAGE>
HAFT & HAFT & CO. LETTERHEAD
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Ampal (Israel) Ltd., we hereby consent
to the incorporation of our report included in this Form 10K, into the
Company's previously filed Registration Statement File No. 33-51023, and
No. 55137.
H.H.S.L. Haft & Haft & Co.
March 29, 1995 Certified Public Accountants (Isr.)
<PAGE>
FAHN, KANNE & CO. LETTERHEAD
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
As the independent public accountants of Ampal Industries (Israel) Ltd., we
hereby consent to the incorporation of our report included in FORM 10-K,
into the Company's previously filed Registration Statement File No. 33-
51023 and No. 33-55137.
Fahn, Kanne & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
March 29, 1995
<PAGE>
COHEN, EYAL, YEHOSHUA & CO. LETTERHEAD
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Ampal Properties Ltd., we hereby
consent to the incorporation of our report included in this Form 10K, into
the Company's previously filed Registration Statement File No. 33-51023,
and No. 55137.
Cohen, Eyal, Yehoshua & Co.
March 29, 1995 Certified Public Accountants (Isr.)
<PAGE>
RONEL STETTNER & CO. LETTERHEAD
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in the registration statement (File No. 33-51023 and No. 33-
55137) of our report on the financial statements of Bay Heart Limited dated
February 14, 1995, and of our report to the special purpose financial
statements of Bay Heart Limited dated February 15, 1995 included in Ampal
American Israel Corporation's FORM 10-K for the year ended December 31,
1994 and to all references to our firm included in this registration
statement.
Truly yours,
RONEL, STETTNER & CO.
Certified Public Accountants
(Israel)
March 29, 1995
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of Carmel Container Systems Ltd. we hereby
consent to the incorporation of our report included in this Form 10-k, into
the Company's previously filed Registration Statement File No. 33-51023, and
No. 33-55137.
KOST, LEVARY AND FORER
Certified Pubic Accountants (Israel)
Tel-Aviv, Israel
March 29, 1995
<PAGE>
PORAT & CO.
Certified Public Accountants (Isr.)
March 29, 1994
Arthur Andersen & Co.
1345 Avenue of the Americas
New York, NY 10105
Gentlemen,
Re: Consent of Independent Public Accountants
of Country Club Kfar-Saba Ltd.
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 33-51023, and No. 33-55137.
Porat & Co.
Certified Public Accountants (Isr.)
28 Hayezira at. Ramat-Gan 52521 FAX: 03-7527673: Tel: 03-7527657, 7527651,
7527646: 52521
<PAGE>
COHEN, EYAL, YEHOSHUA & CO. LETTERHEAD
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Davidson Atai Publishers Ltd., we
hereby consent to the incorporation of our report included in this Form
10K, into the Company's previously filed Registration Statement File No.
33-51023, and No. 55137.
Cohen, Eyal, Yehoshua & Co.
March 29, 1995 Certified Public Accountants (Isr.)
<PAGE>
CR. R. VILLARMARZO Y ASOC. LETTERHEAD
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
We consent to the incorporation by reference in Ampal-American Israel
Corporations previously filed Registration Statements No. 33-51023 and No.
33-55137 of our report dated January 25, 1995 with respect to the Financial
Statements of Hapoalim (Mayo) Casa Bancaria S.A. not separately presented in
Ampal-American Israel Corporation Form 10-K for the year ended December 31,
1994.
Montevideo, March 29, 1995
CR. R. VILLARMARZO Y ASOC.
Ernst & Young International
<PAGE>
Certified Public Accountants (Isr.)
Tel Aviv 51006
33 Yavatz Street
P.O. Box 509
Tel: (03)517 4444
Telecopier: (972) 3 517 4440
Halfa 31001
5 Palyam Street
P.O. Box 210
Tel: (04) 670 338
Telecopier: (972) 4 670 319
Jerusalem 91001
33 Jaffa Road
P.O. Box 212
Tel: (02) 253-291
Telecopier: (972) 2 253 292
Somekh Chaikin
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Granite Hacarmal Investments Limited, we
hereby consent to the incorporation of our report dated February 21, 1995,
included in Form 10-K of Ampal American Israel Corporation, previously filed
in Registration Statement File No. 33-51023, and No. 33-55137.
Certified Public Accountants (ISRAEL)
Halfa, March 29, 1995
A Member of the Price Waterhouse Worldwide Organization
<PAGE>
MORRIS BRANKIN & CO. LETTERHEAD
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Bank Hapoalim (Cayman) Ltd., we hereby
consent to the incorporation of our report included in this Form 10-K, into
the Company's previously filed Registration Statement File No. 33-51023,
and No. 33-55137.
Morris Brankin & Co.
--------------------
March 29, 1995
<PAGE>
Chaikin, Cohen, Rubin
40 Yitshak Sadeh st., Tel-Aviv 67212
Tel: 03-5373980 Fax: 972-3-537387
Certified Public Accountants (Isr.)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Imagenet LTD, we hereby consent to the
incorporation of our report included in this form 10-K, into the Company's
previously filed Registration Statement File No. 33-51023, and No. 33-55137.
Chaikin, Cohen, Rubin
Certified Public Accountants (Isr.)
Tel Aviv, Israel, March 29, 1995
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of MIVNAT HOLDING LIMITED, we hereby
consent to the incorporation of our report included in this Form 10-K, into
the Company's previously filed Registration Statement File No. 33-51023, and
No. 33-55137.
KOST, LEVARY and FORER
Certified Public Accountants (Israel)
Tel-Aviv, Israel
March 29, 1995
<PAGE>
HAGGAI WALLENSTEIN & Co. C.P.A. (Isr.)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Moriah Hotels Ltd., we hereby consent to
the incorporation of our report included in this Form 10-K, into the
Company's previously filed Registration Statement File No. 33-51023, and No.
33-55137.
HAGGAI WALLENSTEIN & CO.
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
March 29, 1995
8 Eliash St.
Jerusalem 94586
Tel. 02-244787. 243518
Fax. 02-241368
IZCHACK SHTALBERG C.P.A. (Isr.)
8
94586
02-244787 243518
02-241368
20 Heh Eyar St.
Tel Aviv 62998
Tel. 03-6966181-2-3
Fax. 03-6957454
HAGGAI WALLENSTEIN C.P.A. (Isr.)
DANNI LEVIN C.P.A. (Isr.)
ELANA DREIHER C.P.A. (Isr.)
OFFER ORLICKY C.P.A. (Isr.)
IDDO WALLENSTEIN C.P.A. (Isr.)
MOSHE ATTIAS C.P.A. (Isr.)
20
62998
03-6966181-2-3
03-6957454
<PAGE>
KESSLEMAN & KESSLEMAN LETTERHEAD
COOPERS & LYBRAND
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
of our report, dated March 15, 1995, on the consolidated financial
statements of Ophir Holding Ltd., for the year ended December 31, 1994,
included in Ampal-American Israel Corporation's Form 10-K, into the Ampal-
American Israel Corporation's previously filed Registration Statement File
No. 33-51023, and No. 33-55137.
Signature
---------
Tel-Aviv, Israel
March 29, 1995
<PAGE>
BRAUDE & CO.
CERTIFIED PUBLIC ACCOUNTANTS (ISRAEL)
INCORPORATING GOREN, BEN YAKAKOV & CO.
J:\LETER-95\MER\ARTHUR
REF Ref: 4021
29 March 1995
Arthur Andersen
Certified Public Accountants
1345 Avenue of the Americas
New York, NY 10105
U.S.A.
Dear Sirs,
Re: Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of
our report on the financial statements of Orlite Engineering Company Ltd. for
the year ended December 31, 1994, dated February 16, 1995, included in this
Form 10-K. Into the Ampal American-Israel Corporation's previously filed
Registration Statement File No. 33-51023, and No. 33-55137.
Best Regards,
JERUSALEM 91002, 33 JAFFA ROAD, P.O.B. 347, TEL. (02) 252421
TEL AVIV 68125, 29 HAMERED ST. P.O.B. 60180, TEL. (03) 5140808
HAIFA 31338, 65 ATZMAUT ORAD, P.O.B. 33958, TEL. (04) 554224
FAX: HAIFA 04~523052 JERUSALEM 02~246890 , TEL AVIV 03-5101918
<PAGE>
[Logo]
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
6 Kaufman St. P.O.B. 50322
Tel-Aviv 61300, Gibor House
Tel. 03-5179611
Fax. 03-5179418
Haifa 31018, 2 Hanamal St. P.O.B. 1336
Tel. 04-675025/6
Fax. 04-679461
March 29, 1995
Arthur Anderson & Co.
1345 Avenue of the Americas
New York, N.Y. 10105
U.S.A.
Gentlemen,
Re: Paradise Mattresses (1992) Ltd.
Consent of independent public accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 33-51023, and No. 33-55137.
Sincerely,
Shlomo Ziv & Co.
certified Public Accountants (Isr.)
<PAGE>
REUVENI, HARTUV, TEPPER & CO. LETTERHEAD
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in the Registration Statement of our report on the financial
statements of Pri Haemek (Canned and Frozen Food) 88 Ltd. dated March 14,
1995 included in Ampal American Israel Corporation's FORM 10-K for the year
ended December 31, 1994 into Ampal American Israel Corporation's previously
filed Registration Statement File No. 33-51023 and No. 33-55237 and to all
references to our firm included in such registration statement .
March 29, 1995
Reuveni, Hartuv Tepper & Co.
----------------------------
Certified Public Accountants (Isr.)
<PAGE>
[Logo]
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.)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of
our report on the financial statements of Red Sea Marineland Holding (1973)
Ltd. dated March 13, 1995 included in this Form 10-K, into the Company's
previously filed Registration Statement File No. 33-51023, and No. 33-55137.
Dov Kahana & Co.
Certified Public Accountants (Isr.)
Ramat-Gan, March 29, 1995
21146
<PAGE>
[Logo]
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.)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of
our report on the financial statements of Red Sea Under Water Observatory
Ltd. dated March 13, 1995 included in this Form 10-K, into the Company's
previously filed Registration Statement File No. 33-51023, and No. 33-55137.
Dov Kahana & Co.
Certified Public Accountants (Isr.)
Ramat-Gan, March 29, 1995
21146
<PAGE>
REUVENI, HARTUV, TEPPER & CO. LETTERHEAD
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in the Registration Statement of our report on the financial
statements of the Snow and Cool Palace (Limited Partnership) dated March 1,
1995 included in Ampal American Israel Corporation's FORM 10-K for the year
ended December 31, 1994 into Ampal American Israel Corporation's previously
filed Registration Statement Files No. 33-51023 and No. 33-55237 and to all
references to our firm included in such registration statement .
March 29, 1995
Reuveni, Hartuv Tepper & Co.
----------------------------
Certified Public Accountants (Isr.)
<PAGE>
[Logo]
Almagor & Co.-CPA (ISR)
Abba Hillel Rd.
P.O. Box 3600, Zip 52134
Ramat-Gan, Israel
Tel. 972-3-5760606
Fax. 972-3-5754671
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of
our report on the consolidated financial statements of Teledata Communication
Ltd. dated February 20, 1995 included in this Form 10-K, into the previously
filed Registration Statement File No. 33-51023, and No. 33-55137 of Ampal
American Israel Corporation.
Almagor & Co.
Certified Public Accountants
March 29, 1995
<PAGE>
[Logo]
Igal Brightman & Co.
3 Daniel Frisch Street
Tel Aviv 64731, Israel
P.O.B. 16593, Tel Aviv 61184
Tel. 972(3) 892-4111
Fax. 972(3) 856-0130
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in Registration Statement No.
33-51023 on Form S-3 and Registration No. 33-55137 on Form S-8 of our report
dated March 20, 1995 relating to Trinet Investments in High-Tech Ltd.,
appearing in this Annual Report on Form 10-K of AMPAL American Israel
Corporation for the year ended December 31, 1994.
Igal Brightman & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
March 29, 1995
Deloitte Touche
Tohmatsu
International
I. Brightman, M. Bar-Levav, C. Schwartzbard, D. Valiano, A. Inbar, B(D)
Ratowitz, Z. Feldman, S. Gotnall, R. Benvenisu, E. Hendler
Office in Jerusalem: New Clal Center, 42 Agrippas Street
Jerusalem 94301, Israel Tel. 972(2) 235157 Fax. 972(2) 233628
<PAGE>
[Logo]
Igal Brightman & Co.
3 Daniel Frisch Street
Tel Aviv 64731, Israel
P.O.B. 16593, Tel Aviv 61184
Tel. 972(3) 892-4111
Fax. 972(3) 856-0130
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in Registration Statement No.
33-51023 on Form S-3 and Registration No. 33-55137 on Form S-8 of our report
dated March 20, 1995 relating to Trinet Venture Capital Ltd., appearing in
this Annual Report on Form 10-K of AMPAL American Israel Corporation for the
year ended December 31, 1994.
Igal Brightman & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
March 29, 1995
Deloitte Touche
Tohmatsu
International
I. Brightman, M. Bar-Levav, C. Schwartzbard, D. Valiano, A. Inbar, B(D)
Ratowitz, Z. Feldman, S. Gotnall, R. Benvenisu, E. Hendler
Office in Jerusalem: New Clal Center, 42 Agrippas Street
Jerusalem 94301, Israel Tel. 972(2) 235157 Fax. 972(2) 233628
Exhibit 25
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do hereby
constitute and appoint SHLOMO RECHT, 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, 1994, 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 28, 1995 /s/Arie Abend
------------------------ ---------------------------
Date Signature
<PAGE>
Exhibit 25
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do hereby
constitute and appoint SHLOMO RECHT, 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, 1994, 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 28, 1995 /s/Michael Arnon
------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do hereby
constitute and appoint SHLOMO RECHT, 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, 1994, 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 28, 1995 /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 SHLOMO RECHT, 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, 1994, 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 28, 1995 /s/Yaacov Elinav
------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do hereby
constitute and appoint SHLOMO RECHT, 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, 1994, 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 28, 1995 /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 SHLOMO RECHT, 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, 1994, 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 28, 1995 /s/Irwin Hochberg
------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do hereby
constitute and appoint SHLOMO RECHT, 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, 1994, 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 28, 1995 /s/Herbert Kronish
------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do hereby
constitute and appoint SHLOMO RECHT, 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, 1994, 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 28, 1995 /s/Eitan Raff
------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do hereby
constitute and appoint SHLOMO RECHT, 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, 1994, 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 28, 1995 /s/Shimon Ravid
------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do hereby
constitute and appoint SHLOMO RECHT, 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, 1994, 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 28, 1995 /s/Shlomo Recht
------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do hereby
constitute and appoint SHLOMO RECHT, 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, 1994, 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 27, 1995 /s/Leon Riebman
------------------------ ---------------------------
Date Signature
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENT, that I, the undersigned, do hereby
constitute and appoint SHLOMO RECHT, 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, 1994, 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 28, 1995 /s/Evelyn Sommer
------------------------ ---------------------------
Date Signature
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains Summary financial information extracted from Registrant's
Form 10-K for the year ended December 31, 1994 and is qualified in its entirety
by reference Such Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 42,104,000
<SECURITIES> 131,537,000
<RECEIVABLES> 94,248,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,077,000
<PP&E> 42,530,000
<DEPRECIATION> 11,616,000
<TOTAL-ASSETS> 342,880,000
<CURRENT-LIABILITIES> 40,832,000
<BONDS> 128,554,000
0
6,608,000
<COMMON> 23,841,000
<OTHER-SE> 143,045,000
<TOTAL-LIABILITY-AND-EQUITY> 342,880,000
<SALES> 43,753,000
<TOTAL-REVENUES> 80,943,000
<CGS> 0
<TOTAL-COSTS> 34,447,000
<OTHER-EXPENSES> 14,466,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,109,000
<INCOME-PRETAX> 12,921,000
<INCOME-TAX> 5,587,000
<INCOME-CONTINUING> 7,334,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,334,000
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
