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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE
REQUIRED]
For the transition period from to
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 no.)
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:
Title of each class Name of each exchange on which registered
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Class A Stock American Stock Exchange
Warrants to purchase shares of Class A Stock American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class A Stock
4% Cumulative Convertible Preferred Stock
6 1/2% Cumulative Convertible Preferred Stock
(Titles of Classes)
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].
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The number of shares outstanding of each of the issuer's classes of
common stock is: Common- 3,000,000; Class A- 20,497,124 (as of March 20,
1996).
The aggregate market value of the voting stock held by nonaffiliates of
the registrant is $60,698,244 (as of March 20, 1996).
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<PAGE>
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OF AMPAL-AMERICAN ISRAEL CORPORATION
PART I
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ITEM 1. BUSINESS
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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, finance, 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,
and its wholly-owned subsidiary Atad Hevra Lehashkaot Limited ("Atad") are
currently Ampal's controlling shareholders and Hapoalim is currently the
Company's principal lender. Members of the Hapoalim group of companies,
including Investment Company of Bank Hapoalim Ltd., sometimes invest jointly
with the Company. See "Recent Developments."
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
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privatization of government-owned companies and the acceleration of the peace
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.
Listed below by industry segment are the Company's most significant
investees, the principal business of each and the percentage of equity owned,
directly or indirectly, by Ampal. The table below also indicates whether the
investee is 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, 1995
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HOTELS AND LEISURE-TIME
<S> <C> <C>
Coral World International Limited.................. Underwater Observatories 50.0
and Marine Parks
Country Club Kfar Saba Limited..................... Country Club Facility 51.0
Hod Hasharon Sport Center (1992) Country Club Facility 50.0
Limited Partnership..............................
Moriah Hotels Ltd. ................................ Hotel Chain 46.0
REAL ESTATE, FINANCE AND OTHER HOLDINGS
Am-Hal Ltd....................................... 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
Ampal Realty Corporation......................... Commercial Real Estate 95.0
Bay Heart Limited................................ Shopping Mall Owner/Lessor 37.0
Epsilon Investment House Ltd..................... Investment Bank 20.0
Etz Vanir Ltd. and Yakhin Mataim Ltd............. Citrus Groves 50.0
Industrial Buildings Corporation Ltd. Industrial Real Estate 5.6(1)
(TASE)...........................................
Nir Ltd.......................................... Holding Company 99.9
Ophir Holdings Ltd. ("Ophir").................... Holding Company 42.5
Renaissance Israel............................... Investment Fund 15.0
Shmey-Bar Group.................................. Commercial Real Estate 7.1(2)
ENERGY DISTRIBUTION
Granite Hacarmel Investments Ltd. (TASE) Distribution of Refined 21.3
Petroleum Products
BASIC INDUSTRY
Carmel Container Systems Limited (AMEX: Packaging Materials and 20.4
"KML").......................................... Carton Production
Davidson-Atai Publishers Ltd. Publications 20.7
M.D.F. Industries Ltd............................ Medium Density Fiber Products 50.0
Orlite Industries (1959) Ltd. (TASE)............. Composite Material Products 22.8(3)
Paradise Mattresses (1992) Ltd................... Mattresses and Fold-out Beds 85.1
Pri Ha'emek (Canned and Frozen Food) 88
Ltd............................................ Frozen and Canned Food 58.2
</TABLE>
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<TABLE><CAPTION>
PERCENTAGE
AS OF
INDUSTRY SEGMENT PRINCIPAL BUSINESS DECEMBER 31, 1995
- ---------------- ------------------ -----------------
HIGH TECHNOLOGY AND COMMUNICATIONS
<S> <C> <C>
Breeze Wireless Communications Ltd............... Wireless Local Area Network 13.6
Comfy Interactive Movies Ltd. ................... Computer Technology for Children 9.5(4)
Courses Investment in Technology Ltd............. Venture Capital Fund 4.6(5)
Idan Software Industries I.S.I. Ltd. Telecommunications Services 7.9
(NASDAQ: "IDANF")...............................
Mercury Interactive Corporation Automated Software Quality 0.6
(NASDAQ NMS: "MERQ")............................ Products
Memco Software Ltd............................... Software Products 7.7(6)
M-Systems Flash Disk Pioneers Ltd. Data Storage Media 4.1
(NASDAQ: "FLSHF")...............................
Qronus Interactive Israel (1994) Ltd............. Automated Software Quality 11.7(7)
Products
Teledata Communication Ltd. (NASDAQ NMS: Telecommunications Systems 10.4(8)
"TLDCF")........................................
Trinet Venture Capital Fund Ltd.................. Venture Capital Fund 50.0
U.D.S. - Ultimate Distribution
Systems Ltd.................................... Distribution Software 21.9
</TABLE>
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<TABLE>
<S> <C>
(1) The Company's ownership reflects 42.5% of Ophir's 13.3% ownership of Industrial Buildings.
(2) 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.
(3) The Company's ownership includes 22.7% of Orlite owned directly and 42.5% of Ophir's .2% ownership
of Orlite.
(4) The Company's ownership includes 5.8% of Comfy owned directly and 50% of Trinet's 7.4% ownership of
Comfy.
(5) The Company's ownership includes 2.5% of Courses Investment owned directly and 42.5% of Ophir's 5%
ownership of Courses Investment.
(6) The Company's ownership reflects 42.5% of Ophir's 18% ownership of Memco.
(7) The Company's ownership includes 11.5% of Qronus owned directly and .6% of Mercury's 42.1%
ownership of Qronus.
(8) The Company's ownership includes 2.2% of Teledata owned directly and 42.5% of Ophir's 19.2%
ownership of Teledata.
</TABLE>
SIGNIFICANT RECENT DEVELOPMENTS SINCE BEGINNING OF LAST FISCAL YEAR
HAPOALIM'S PROPOSED SALE OF CLASS A STOCK AND EQUALIZATION OF COMMON STOCK
In February 1996, Hapoalim, which, as of March 20, 1996, beneficially
owned 100% of Ampal's Common Stock and 50.3% of its outstanding Class A Stock,
announced that its Board of Directors had authorized it to conduct negotiations
with the Steinmetz family ("Steinmetz") with a view to reaching an agreement
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based on Steinmetz's proposal to acquire a portion of Hapoalim's interest in
Ampal at a price that reflects a valuation of Ampal which exceeds its current
market value.
In addition, Hapoalim has proposed to Ampal that they enter into a
transaction to equalize the voting, dividend and liquidation rights of Ampal's
Common Stock with those of the Class A Stock. The proposed sale of the Class A
Stock and equalization are part of Hapoalim's effort to comply with Israeli
banking law by decreasing Hapoalim's holdings in and means of control over Ampal
to 25% or less by December 31, 1996. See "Certain United States and Israeli
Regulatory Matters - Israeli Banking Regulations," for a discussion of further
reductions in Hapoalim's ownership of Ampal that may be required under Israeli
law.
Hapoalim has expressed its view that, in any such equalization, it
should be compensated for giving up its special voting rights as a holder of
Common Stock by receiving more than one share of Class A Stock or its equivalent
in exchange for each share of Common Stock. Hapoalim has also indicated that in
the event Hapoalim and Ampal are unable to agree on a mutually acceptable
equalization transaction, Hapoalim would consider selling the Common Stock.
Ampal's Board of Directors has formed a "Special Committee," consisting
of five outside directors, to consider Hapoalim's request to equalize the Common
Stock, and to negotiate, approve or disapprove any such transaction on Ampal's
behalf. The Special Committee has retained independent counsel and an
independent investment bank to advise it in connection with Hapoalim's proposal.
The Special Committee has not yet made any decision with respect to such
proposal.
Hapoalim is the Company's principal lender and members of the Hapoalim
group of companies, including Investment Company of Bank Hapoalim Ltd.,
sometimes invest jointly with the Company. See "Certain Relationships and
Related Transactions." The Company is unsure of what effect the reduction of
Hapoalim's interest in Ampal will have on these relationships.
In addition, Ampal may lose certain rights granted under a stockholders
agreement to select directors to the board of Granite Hacarmel Investments Ltd.
("Granite") if Hapoalim no longer controls Ampal. If Ampal loses these rights,
Ampal may no longer be able to account for its holdings in Granite under the
equity method of accounting. Furthermore, if Ampal is no longer controlled by
Hapoalim, then under the terms of a shareholders agreement between Ampal and the
other shareholder of Coral World International Limited ("Coral World"), Ampal
may be required to seek to sell its shares of Coral World to an outside person
(subject to a right of first refusal by the other shareholder) or, failing that,
to sell its shares to the other shareholder at a price equal to the greater of
the book value or seven times the previous year's earnings per share. See
"Energy Distribution - Granite Hacarmel Investments Ltd." and "Hotels and
Leisure-Time - Coral World International Limited."
PURCHASE OF 800 SECOND AVENUE
In June 1995, Ampal Realty Corporation, a newly formed corporation,
purchased a real property on which an approximately 290,000 square-foot office
building is located for approximately $45 million. The building is located at
800 Second Avenue, New York, New York. See "Real Estate, Finance and Other
Holdings - Ampal Realty Corporation."
SALE OF BANK HAPOALIM (CAYMAN) LTD.
In August 1995, the Company sold its Ordinary Shares and 7% Preferred
Shares of Bank Hapoalim (Cayman) Ltd., which constituted 49% and 50% of each
series, respectively, to Hapoalim. The sales price was $20.3 million, which was
slightly in excess of the Company's carrying value for its investment. See
"Certain Relationships and Related Transactions."
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AUTHORIZATION OF ADDITIONAL CLASS A STOCK
On November 8, 1995, at a Special Meeting of Shareholders of Ampal, the
shareholders voted to approve an amendment to Ampal's Certificate of
Incorporation increasing the number of authorized shares of Class A Stock from
30,000,000 to 60,000,000.
STOCK REPURCHASE PROGRAM
In March 1995, 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. As of December 31, 1995, Ampal had repurchased 605,400 shares of
its Class A Stock at an average price of $6.32 per share. On February 21, 1996,
in connection with developments regarding Hapoalim's ownership of Ampal's
equity, Ampal announced that it had temporarily suspended purchases under this
program. See "Hapoalim's Proposed Sale of Class A Stock and Equalization of
Common Stock."
For a discussion of other developments regarding the Company's investees
and affiliates, see below.
HOTELS AND LEISURE-TIME
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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). 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 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 215 persons as of December 31, 1995.
In 1995, Coral World's parks had a total of approximately 1.2 million
visitors. In September 1995, Coral World's marine park in St. Thomas was damaged
by two hurricanes and was closed. $1.1 million will be recovered under an
insurance policy. Coral World is in a dispute with another insurance company and
its agent with respect to its claim for up to $1.2 million of additional
coverage. It is too early to determine the outcome of this dispute or when this
park will be re-opened. Coral World's marine park in Nassau has suffered
substantial losses due to heavy competition and it is considering the sale of
this park.
Coral World is planning a new park in Maui, Hawaii.
COUNTRY CLUB KFAR SABA LIMITED ("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, which has a capacity of 2,000 member families, had
approximately 1,900 member families for each of the 1994/95 and 1995/96 seasons.
The construction cost of the Club was $5.2 million, which was financed
principally with debt which is expected to be repaid by 2000. Kfar Saba's
revenues are principally attributable to annual memberships. The Company owns
51% of Kfar Saba.
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HOD HASHARON SPORT CENTER (1992) LIMITED PARTNERSHIP ("HOD HASHARON")
On December 31, 1995, the Company purchased from Kfar Saba its 50%
interest in Hod Hasharon for $1.4 million.
Hod Hasharon operates a similar country club facility (the "H.H. Club")
in Hod Hasharon, a town adjacent to Kfar Saba. The H.H. Club, which has a
capacity of 1,600 member families, had approximately 1,345 member families for
the 1995/96 season compared with 650 member families for the 1994/95 season. The
H.H. Club, which opened in July 1994, was constructed at a cost of $4.8 million,
of which $2.1 million was borrowed from banks.
MORIAH HOTELS LTD. ("MORIAH")
Moriah, which is 46%-owned by the Company, is one of the largest hotel
chain in Israel based both upon the number of rooms and the number of locations.
The following chart provides certain information with respect to hotels
Moriah owns or operates:
NO. OF MORIAH'S
LOCATION CATEGORY ROOMS INTEREST
- -------- -------- ----- --------
Jerusalem Luxury 295 Owns
Eilat Luxury 325 Owns
Dead Sea Luxury 200 Owns
Tel Aviv Luxury 350 Leases(1)
Tiberias Luxury 270 Leases(2)
Dead Sea First Class 195 Manages(3)
Zichron Yaakov Economy 110 Manages(3)
Nazareth Economy 110 Manages(3)
-----
Total 1,855
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(1) Net lease which expires in 2006.
(2) Net lease which expires in 2001.
(3) Management agreement which expires in 2004.
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 1995, Moriah spent approximately $6
million on general improvements and renovations, including $3 million on the Tel
Aviv hotel. The Tel Aviv hotel, which is undergoing a $13 million renovation, of
which $3 million is to be provided by the landlord, was closed in November 1995
and is expected to reopen in the Spring of 1996.
Tourist arrivals in Israel during 1995 and 1994 were 2.5 million and 2
million, respectively. Moriah's occupancy rate was 72% (75%, exclusive of the
economy hotels) in 1995 and 68% (73%, exclusive of the economy hotels) in 1994.
The average occupancy rate in the Israeli hotel industry during 1995 was 68% and
during 1994 was 65%. Moriah's average room rate (expressed in dollars) rose by
4.6% in 1995 compared to 1994, 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 in recent years,
additional hotels have been or are being constructed and competition is expected
to intensify.
Moriah employed approximately 1,650 persons as of December 31, 1995.
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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
litigated the costs of protective measures and compensatory damages. As a result
of a settlement of the litigation in 1995, all actions and counter-actions filed
by the parties to the litigation were withdrawn, however, Moriah retained the
right to sue Dead Sea Works, one of the original defendants in the litigation,
for damages due to any further rise in the sea level.
In December 1995, Moriah entered into a strategic agreement with
Radisson SAS, the international hotel chain, pursuant to which Moriah has been
granted a 30-year exclusive franchise in Israel. Moriah's hotels have been
renamed to include the Radisson name and are now included in the Radisson
reservation network. The agreement also grants Moriah the right to operate
hotels in Jordan under the name Radisson Moriah.
REAL ESTATE, FINANCE AND OTHER HOLDINGS
In Israel, most land is owned by the Israeli Government. In this Report,
reference to ownership of land means either direct ownership of land or a
long-term lease from the Israeli Government, which is in most respects regarded
in Israel as the functional equivalent of ownership. It is the Israeli
Government's policy to renew its long-term leases (which usually have a term of
49 years) upon their expiration.
AM-HAL LTD. ("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 center,
which was completed in March 1992, includes 159 apartments which were fully
occupied on December 31, 1995, compared with 88%-occupied on December 31, 1994,
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 rent of $325,000 per year.
The Company and a subsidiary of The Israel Corporation, a major Israeli
holding 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. These loans have
been repaid.
Due to the success of this project, and the increased demand for its
services, the Company is searching for suitable locations for similar projects
in the greater Tel Aviv area.
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.
It has recently been reported in the media that Israeli banks are the
subject of allegations that they engaged in improper business practices
regarding lending. The lending practices engaged in by the two development banks
and the finance subsidiary were substantially similar to the lending practices
of the other Israeli banks and, to that extent, the Company may be subjected to
the same possible claims. One claim in the amount of NIS 2.7 million
(approximately $900,000 at current exchange rates) has already been asserted. It
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is too early to determine the extent of any additional claims which may be
asserted in this regard or the outcome of any such claims. However, to the best
of the Company's knowledge, the Company's subsidiaries, which operated as
banking institutions, acted within the law and in accordance with the procedures
and customs in effect at the time. The Company expects to vigorously defend the
claim which has been asserted in the event it results in litigation and believes
that the applicable statute of limitations constitutes a bar to all but a
relatively small portion of the claim. 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 Financial 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 $39 million of these debentures were
outstanding as of December 31, 1995. 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 which
houses its principal offices. 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.
AMPAL REALTY CORPORATION ("AMPAL REALTY")
In June 1995, Ampal Realty, a newly formed corporation, purchased a real
property on which an approximately 290,000 square-foot office building is
located for approximately $45 million. The building is located at 800 Second
Avenue, New York, New York. The building is 46%-occupied by the Consulate of the
Government of Israel in New York and many other Israel government offices under
a lease which expires on December 31, 2009, with an option by the lessee to
extend for an additional six years.
The purchase was partially financed by a loan of $30 million from
Hapoalim at an interest rate based on a three-month London Interbank Offered
Rate plus 1% which matures on the initial expiry date of June 28, 1996. As
originally contemplated, Ampal Realty has requested and Hapoalim has agreed, to
extend the repayment of the loan until June 28, 2000 with quarterly principal
payments commencing March 28, 1997. Ampal guaranteed $20 million of this loan.
As of December 31, 1995 and the date of purchase, the building was 74%
and 85% occupied, respectively. During 1996, Ampal Realty is planning to upgrade
the lobby, elevators and air conditioning system in the building.
The Company owns 95% of Ampal Realty. An unrelated party owns the
remaining 5% of Ampal Realty and also has an option to purchase 1% of Ampal
Realty from the Company. The Company and the other party have entered into a
shareholders' agreement which requires each of them to provide financing and
guarantees on a basis pro rata to its percentage shareholding in Ampal Realty.
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From the date of purchase of 800 Second Avenue on June 28, 1995 through
December 31, 1995, Ampal Realty recorded approximately $4.3 million in rent.
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. The Company owns 37% of
Bay Heart.
Bay Heart owns a 50% interest in 90,000 square feet of land adjacent to
the Mall. The remaining 50% interest is held by an unrelated group of investors
with whom Bay Heart entered into a joint venture agreement. Bay Heart also owns
30,000 square feet of land adjacent to the Mall. These plots of land are
intended to be used for the construction of an addition to the Mall.
Bay Heart is a party to 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. ("Renaissance")
Epsilon is an investment bank which provides portfolio management services and
Renaissance 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 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 an unrelated company,
Yakhin Hakal Ltd. ("Yakhin Hakal") 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. The
court ruled that Ampal and Yakhin Hakal should jointly appoint an additional
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director of these companies, who will cast the deciding vote in cases of
dispute. Yakhin Hakal has filed an appeal and requested a stay concerning the
implementation of the court's ruling. The appeal was denied by the Israeli
Supreme Court. The parties have agreed to request that the court appoint the
additional director. These companies have not reported their financial results
to Ampal since 1990 and therefore, these financial results have not been
included in the Company's financial statements.
In February 1995, Yakhin Hakal and its affiliates commenced a legal
proceeding seeking to cause Etz Vanir and Yakhin Mataim to redeem 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 is contesting this legal proceeding. A hearing is scheduled
to be held in April 1996. 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 11.2 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 2,300 lessees under net leases having terms of up to ten years.
See "Conditions in Israel-Certain Israeli Real Estate Tax Matters" for a
discussion of Israeli real estate tax considerations that may be applicable to
certain real property leases of Industrial Buildings. The average occupancy rate
in buildings owned or leased by Industrial Buildings was approximately 91% at
December 31, 1995.
Industrial Buildings' plans include building a project in the Tel Aviv
area comprising approximately 490 apartments, a commercial center of
approximately 43,000 square feet, an office building of approximately 150,000
square feet and parking facilities of approximately 920,000 square feet.
Approximately 7.5% 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 financial results,
by decreasing staff and overhead costs and aggressively negotiating lease
renewal terms. Mivnat Holdings Ltd. ("Mivnat"), 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 December 1995, Industrial Buildings paid Mivnat a dividend of approximately
NIS 46 million ($14.7 million).
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.
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Industrial Buildings had a staff of approximately 48 permanent employees
as of December 31, 1995.
OPHIR HOLDINGS LTD. ("OPHIR")
Ophir is a holding company that holds interests in Teledata
Communication, Ltd. and Industrial Buildings which 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 have not been consolidated in the Company's financial statements.
They 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."
The Company and the Investment Company of Bank Hapoalim are parties to a
shareholders' agreement regarding joint voting, directorships and rights of
first refusal.
Ophir has developed 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. Ophir has begun marketing the
space for sale or rental purposes. The estimated cost of this project is $6
million.
Ophir owns two acres of land in an industrial park in Netanya, Israel
together with an unrelated party. 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 $5 million. Ophir's share of the property and
joint venture is 70%.
Ophir owns 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. Ophir's interest in Shmey-Bar was acquired with a nominal investment
accompanied by a $2 million shareholder's loan.
Ophir is, through a wholly-owned subsidiary, a limited partner 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 in return for providing a guarantee for Clark/67's $2.7 million bank loan,
received a mortgage on this property.
In September 1994, Ophir acquired a 10% interest in Memco Software Ltd.
("Memco") for $1.25 million. In July 1995, Ophir exercised options to acquire an
additional 10% interest in Memco for $1.25 million. Simultaneously, an unrelated
company, Platinum Technology Inc., acquired a 10% equity interest in Memco for
$4 million, diluting Ophir's interest to 18%. Platinum also paid Memco $6
million for non-exclusive marketing rights regarding the software produced by
Memco on a worldwide basis, except for the United States. Memco is engaged in
the development and manufacturing of software products which secure open systems
based on UNIX. Their products are currently being tested in Israel and
elsewhere. In October 1994, Memco established a wholly-owned subsidiary which
markets, and supplies support and maintenance for, its products in the United
States.
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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
have begun construction of 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.
In September 1995, Ophir acquired a 10% interest in a joint venture
which has agreed to purchase 4.4 million square feet of land near Haifa for
approximately $15 million, on which the parties intend to develop a commercial
real estate project for rent. Ophir has obligated itself to invest up to $1.5
million in the first stage of this project and its share of development costs is
estimated to be as much as $30 million.
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, 1995, 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 $1,325,000 in Renaissance Israel as of
December 31, 1995. 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 to be the second international telecommunications carrier 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 liquefied
petroleum gas. Through its subsidiaries, Granite also manufactures and markets
lubricating oils and automotive batteries.
During 1995, Sonol added five new public gas stations to its network and
as of December 31, 1995, Sonol supplied petroleum products to 151 public gas
stations in Israel, of which 105 are owned by or leased to Sonol. Sonol sold
approximately 2.4 and 1.8 million metric tons of refined petroleum products and
lubricating oils in 1995 and 1994, respectively. The main source of the increase
was additional sales to large customers.
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
and diesel oil in Israel. Since 1988, the Israeli government licensed new fuel
companies and also allowed Oil Refineries Ltd., the sole oil refinery operator
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in Israel, and large industrial customers, such as Israel Electric Corp., to
engage in the importation of oil. As a result, Granite's share in the refined
petroleum products market has declined and may decline further and discounts and
customer credits have increased. Beginning in 1992, the Israeli government
lifted price controls on many of the fuel products sold outside of public
service stations, and from July 1993 price controls were removed from all
products, except 95 and 96 octane gasolines sold to and in public service
stations. The price control on sales of those products to public service
stations was lifted in October 1993, so that the only remaining price controls
apply to sales by the stations to the public of 95 and 96 octane gasolines.
Prices of products sold by the Refineries to Sonol and the other petroleum
marketing companies remain under government control.
During 1994, a law was passed canceling 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.
Sonol, as well as the Paz and Delek fuel marketing companies, appealed
the June 1993 ruling of the Controller of Restrictive Trade Practices which
declared that the exclusive agreements entered into between the fuel marketing
companies and filling station owners are restrictive trade agreements. The
appeal is now pending in Restrictive Trade Practices Court in Jerusalem.
On December 14, 1995, the Controller of Restrictive Trade Practices
amended the above ruling following a compromise arrangement reached with Sonol
and Paz in their above-mentioned appeals. Under the terms of the compromise
arrangement, Sonol will release 36 stations not subject to an "Accepted Leasing
Agreement" as defined in the arrangement and the Controller will rescind his
ruling regarding other stations in which Sonol is party to such an "Accepted
Leasing Agreement" and Sonol will withdraw its appeal. The implementation of the
compromise arrangement is subject to possible objections by interested parties.
Objections contesting the compromise arrangement have been filed both with the
Controller and in the courts, and the arrangement as well as the appeals of
Sonol and Paz have been suspended until the final ruling by the courts regarding
the objections. Although Granite is unable to determine the effect of these
changes on future sales volumes and profits, their impact may be material.
In order to attempt to offset adverse effects of reforms in the energy
market, Sonol continues to emphasize improving efficiency through modernization
and aggressive but selective expansion. Furthermore, Granite is pursuing a
policy of diversification. In 1993, Granite established a subsidiary, Granite
Hacarmel Properties (1993) Ltd. ("Granite Properties") which invests in real
estate projects in Israel. During 1995, Granite Properties invested
approximately $8.5 million in commercial real estate projects. In early 1996,
Granite Properties, through a subsidiary, entered into an agreement to invest
approximately $22 million to acquire 10% of the equity of Nitzba Holdings Ltd.,
a company mainly involved in holding and developing real estate projects.
Sonol is negotiating to acquire franchises from international
convenience store and fast food chains. In addition, Sonol, through a subsidiary
received exclusive rights in Israel for the sale of car wash machines and fuel
pumps. Furthermore, Sonol has implemented self-operation of public service
stations. As of December 31, 1995, 11 such stations were operated by Sonol and
this figure is expected to increase significantly during 1996.
During 1995, as a result of additional purchases of shares by the
Company, the Company's ownership of Granite increased to 21.3%, as of December
31, 1995. 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 15.7%. The Company is party to an
agreement with the other shareholders of Granite which expires on 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
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own an aggregate of 83.2% 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 54.4% 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 ownership interest and board representation) the
Company would 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. See "Significant Developments Since Beginning of Last
Fiscal Year - Hapoalim's Proposed Sale of Class A Stock and Equalization of
Common Stock."
BASIC INDUSTRY
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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.
Carmel estimates that it 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.
During the last few years, sales of packaging products to exporters of
agricultural products have declined slightly, but have been partially offset by
an increase in domestic sales.
In 1995, Carmel invested $4.7 million and expects to make additional
investments of approximately $22 million in total in 1996 and 1997 for machinery
and infrastructure. In 1996 and 1997, Carmel expects to consolidate two of its
plants and move them to a leased property in Caesarea, Israel. As of December
31, 1995, Carmel employed 760 persons.
The Company owns 20.4% of the shares of Carmel, of which 0.4% were
acquired during 1995. 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 sale or transfer of 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.
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DAVIDSON-ATAI PUBLISHERS LTD. ("DAVIDSON-ATAI")
Davidson-Atai is the publisher of a multi-volume series entitled "The
World of the Bible," a contemporary interpretation of the Bible with ample
documentation, of which 22 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, distributions and
book stores.
Davidson-Atai is also a publisher of magazines. It publishes the Hebrew
edition of "Popular Science" and "Psychology Today" and expects to publish the
Hebrew editions of other magazines.
The Company owns 20.7% of Davidson-Atai.
M.D.F. INDUSTRIES LTD. ("M.D.F.")
The Company owns 50% of M.D.F., formerly known as M.D.F. Boards Industry
Ltd., which has established a plant in Israel for the production of medium
density fiber boards. The cost of establishing the M.D.F. plant was
approximately $48 million, $20 million above the originally estimated cost, of
which $15.4 million has been granted by the Israel Government Investment Center.
As of December 31, 1995, the Company had invested $5.1 million and made loans of
$3.9 million to M.D.F. The plant is currently in its testing period and is
expected to be fully operational by May, 1996.
ORLITE INDUSTRIES (1959) LTD. ("ORLITE")
Orlite, formerly known as Orlite Engineering Company Ltd., 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 previously 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 1995,
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, 1995, Orlite employed 157 permanent workers and 25
temporary workers. Orlite owns its manufacturing facilities.
During 1995, as a result of additional purchases of shares by the
Company, the Company's ownership of Orlite was increased to 22.8% as of December
31, 1995.
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
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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.
PRI HA'EMEK (CANNED AND FROZEN FOOD) 88 LTD. ("PRI HA'EMEK")
Pri Ha'emek processes and packages frozen vegetables, canned juices and
other vegetable and citrus products in Israel and markets its products primarily
in Israel and Europe and, to a lesser extent, in North America 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.
During 1995, Pri Ha'emek recorded losses of $6.1 million, as compared
with losses of $.7 million in 1994, due to decreased sales prices and increased
cost of goods sold. This has led to a restructuring of Pri Ha'emek's management.
Pri Ha'emek has recently stopped producing orange and grapefruit juices for
export and tomato products, and plans to concentrate on frozen food, carton
juices and canned foods. It has also reduced manpower from 135 to 100, with
further reductions being considered and has reduced inventory. These losses have
caused the management of Pri Ha'emek to believe that Pri Ha'emek's continued
status as a "going concern" is subject to the level of success of a recovery
plan which has been instituted which includes the aforementioned changes and
sale or lease of certain fixed assets. Furthermore, the company has agreed to
provide $1.5 million to Pri Ha'emek to support the recovery plan and may
provide additional amounts under certain circumstances. There can be no
assurance that Pri Ha'emek's recovery plan will succeed and further losses
are expected before it can fully take effect.
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 processes food for other
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 accounted for approximately 45% of its sales in
1994 and 39% in 1995. 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's assets were purchased from another operating entity in
1988 and 1990. The Company and Pri Ha'emek's then other shareholder 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 1995, the Company purchased additional shares and convertible
debentures of Pri Ha'emek on the TASE and at December 31, 1995 its interest was
58.2% compared with 54.7% on December 31, 1994.
In December 1995, the Company purchased a 50% interest in a 58,000
square-foot commercial building built on 182,000 square feet of land for $1.75
million from Pri Ha'emek. Pri Ha'emek retained an option to repurchase the
Company's interest in this property for $2 million until June 30, 1997 and to
repurchase 50% of the Company's interest in this property for $1 million until
December 31, 1998. Also, in December 1995, Pri Ha'emek sold the other 50% of
this property to an unrelated party for $1.75 million.
In 1995, Pri Ha'emek received $657,000 in rental income from its real
property.
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HIGH TECHNOLOGY AND COMMUNICATIONS
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BREEZE WIRELESS COMMUNICATIONS LTD. ("BREEZE")
In June 1995, the Company invested $1,000,000 to acquire a 13.6% equity
interest in Breeze.
Breeze, formerly known as Lannair, Ltd., is an Israeli company which
develops, manufactures and markets wireless local area networks ("LAN"s) for
computers, using license-free, spread spectrum radio technology. Breeze's
product strategy focuses on two product lines, wireless LANs for personal
computers and notebooks and wireless remote bridges and modems. Breeze has a
distribution network with more than 100 distributors in 45 countries. It has a
United States subsidiary which develops sales and provides support to customers
on the American continent.
COMFY INTERACTIVE MOVIES LTD. ("COMFY")
In December 1995, the Company invested $555,000 to acquire a 5.8% equity
interest in Comfy. In addition, Trinet, the Company's 50%-owned venture capital
fund, owns a 7.4% equity interest in Comfy. Comfy is developing and marketing a
computer keyboard and interactive movies specially designed for children ages
1-6.
COURSES INVESTMENT IN TECHNOLOGY LTD. ("COURSES INVESTMENT")
The Company and Ophir own 2.5% and 5% of Courses Investment,
respectively. Courses Investment is a venture capital fund which has invested in
18 start-up companies in the fields of communications, software and electronics.
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"), through a subsidiary, provides tenant
communication services to office buildings and other facilities. Elitec, through
another subsidiary, provides outbound international telephone and facsimile
services to Israeli business customers and issues a telephone calling card to
Israeli business executives, professionals and others for use primarily in
placing direct-dial inter-country calls. Elitec shares are publicly traded on
the TASE.
Idan's subsidiary, ASP Computer Products, Inc., designs, manufactures
and distributes peripheral equipment for computers including sharing devices
between personal computers, laser printers and facsimile machines.
On October 18, 1995, Israel's Ministry of Communications (the "MOC")
solicited proposals for two licenses for the operation of an unrestricted,
bi-directional international telephone service (the "International Carrier
Licenses"). It is expected that the licensees will operate as international
carriers in competition with Bezeq, The Israel Telecommunication Corp. Ltd. Idan
has formed a consortium with British Telecommunications Plc, Tadiran Ltd.,
Darcom Limited and M.C.I. to participate in the bid for the International
Carrier Licenses. The MOC anticipates announcing the awardees of these licenses
by October 1996.
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 the 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.
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<PAGE>
The Company owns 7.9% of Idan, which it purchased in 1993 for $3.5
million. Idan is quoted on NASDAQ under the symbol "IDANF."
MERCURY INTERACTIVE CORPORATION ("MERCURY")
Mercury believes it is the world leader in Automated Software Quality
(ASQ), providing a complete set of integrated enterprise-wide client/server
testing solutions. Its tools automate the full range of client/server testing
needs and enable developers and professionals to improve time-to-market,
increase productivity and quality, and reduce costs throughout the system's life
cycle.
Founded in 1989, with headquarters in Sunnyvale, California, Mercury has
15 sales and customer support centers world-wide, as well as an extensive
network of distributors throughout North America, Europe and the Far East.
Mercury currently employs over 300 staff including a research and development
organization in Israel.
Mercury and its distributors offer comprehensive service and support to
their customers. Customer support services provide both hot-line and on-site
technical support, intensive customer training, as well as testing consultancy
and methodology services. The market for ASQ products is relatively new and
undeveloped, and Mercury faces competition from several companies in the United
States and Europe.
Mercury's shares are quoted on the NASDAQ NMS under the symbol "MERQ."
In 1995 the Company recorded a gain of approximately $.9 million
(approximately $.6 million after taxes) from the sales of a major portion of its
shares of Mercury and an additional unrealized gain of $.4 million ($.3 million
after taxes) on its remaining shares. As a result of these sales, the Company's
ownership of Mercury was reduced from 2.4% on December 31, 1994 to 0.6% on
December 31, 1995.
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. Through a subsidiary, it is developing proprietary advance and highly
integrated components for use in voice recording and playback in portable
applications, including cellular phones, organizers and personal digital
assistants.
M Systems' shares are quoted on NASDAQ under the symbol "FLSHF."
QRONUS INTERACTIVE ISRAEL (1994) LTD. ("QRONUS")
In 1994, Qronus was established to develop and sell automated software
testing tools for real-time embedded systems, which are typically custom-built
computer systems built for a specific control need. The key target markets for
Qronus' technology are medical systems, industrial automation and
instrumentation, point-of-sale and other non-standard client-server
applications, telecommunications, military and aerospace. Qronus was established
by Mercury, which holds a 42.1% interest in Qronus.
The Company directly owns an 11.5% interest in Qronus.
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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). Teledata's products allow telephone companies to serve greater
numbers of subscribers with existing infrastructure, without the need to invest
significant sums in upgrading existing transmission links. 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 price pressure and delayed introduction of new products. As a result
of this decline, Teledata took several measures to reverse the downturn.
During 1995, Teledata was restructured, which included workforce
reductions, property consolidations and addition of a new senior management
team. A new marketing strategy was introduced, focusing on two main business
lines, digital loop carriers and wireless access products. During 1995, Teledata
recorded a loss of $1.2 million on sales of $32.1 million compared to income of
$.6 million on sales of $28 million in 1994. The 1995 loss was caused by
decreased sales prices due to increased competition.
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 1995, Ophir recorded a gain of $.2 million from the sale of a portion
of its shares of Teledata. As a result of these transactions, Ampal's ownership
of Teledata remained at 2.2% and Ophir's was reduced to 19.2%.
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.
Since inception, Trinet acquired a 66% interest in Imagenet Ltd., which
is developing and marketing computer aided network engineering software
products, for $1,500,000; a 7.4% interest in Comfy Interactive Movies Ltd.,
which is developing and marketing a computer keyboard and interactive movies
specially designed for children ages 1-6, for $888,000, see "Comfy Interactive
Movies Ltd."; a 7.8% interest in Logal Software and Educational Systems Ltd.,
which computed a public offering in March 1996, and is developing and marketing
computerized educational systems for learning science in high schools and
colleges, for $600,000; a 2.2% interest in Peptor Ltd., which is developing
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advanced pharmaceutical products based on synthetic peptides, for $680,000 and a
51% interest in Smart Link Ltd., which is developing and marketing multimedia
products, for $900,000.
U.D.S. - ULTIMATE DISTRIBUTION SYSTEMS LTD. ("U.D.S.")
In September 1995, the Company invested $1.3 million to acquire a 21.9%
equity interest in U.D.S. and three-year options to acquire an additional 4.4%
equity interest.
U.D.S., formerly known as Barshar Ltd., is an Israeli-based software
company specializing in the management and optimization of a variety of logistic
tasks for the distribution industry. Its products allow savings in the cost of
distribution and increased management control over routing of products and
people. Its software has been adopted by Coca Cola-Israel, El Al Airlines,
several major Israeli medical centers as well as by a major distributor of
Anheuser Busch in the United States, for the management of personnel ground
transportation.
EMPLOYEES
As of December 31, 1995, Ampal had 12 employees including 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.
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 elections of a Palestinian council were held in
January 1996. In addition, PLO Chairman Arafat sent a letter to then 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
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<PAGE>
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.
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 7.5% 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 75,000 new
immigrants arrived during 1995. During the period 1990 through 1995, Israel's
population increased by approximately 22.2%. The 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.
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 will have
received approximately $10 billion of United States Government loan guarantees
by 1998, 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 6.9% in 1995 while
business sector GDP rose by 8.3%, the highest rates of growth since 1972. Per
capita GDP increased by 4.2%. 1995 marked the sixth consecutive year of rapid
growth since the onset of mass immigration. During this period, GDP rose by an
annual average of 6% and business sector GDP increased by 7.1%.
Rapid economic growth in 1995 was fueled primarily by exports and
investments. Exports of goods and services increased by 8.6% over 1994, leading
to a notable cumulative export growth of 52% during the period 1992-1995,
following four years of low rates of export growth during the period 1988-1991.
During the period 1992-1995, imports of goods and services grew at a rate of
56%. The concurrent increase in the import surplus amounted to $11 billion.
After deducting unilateral transfers of $7 billion, the deficit in the current
account for 1995 totalled $4.2 billion, one and one-half times the amount
recorded in 1993.
In 1995, private consumption rose by the rate of 7.1%, amounting to 4.4%
in per capita terms. Consumption of durables increased by 11.5%. Private
consumption has been growing rapidly since 1990 and nearly always at a higher
rate than the growth in GDP. This has led to a decline in gross savings from 24%
of GDP in 1994 to 20.6% of GDP in 1995, 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 11% in 1992 to 6.3% in
1995, following an increase of 320,000 in the number of employed persons,
260,000 of whom are in the business sector. The unemployment rate among
immigrants declined to 9% at the end of 1995.
Israel's labor force is amongst the most highly educated in the world.
Its 135 engineers per 10,000 employees ratio is twice as high as the United
States' ratio of 70 per 10,000. Labor productivity is forecast to increase at a
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rapid pace as the immigrant employees, 44% of whom have college education, learn
the language and are absorbed into the economy.
The inflation rate decreased from 14.5% in 1994 to 8.1% in 1995, the
lowest rate in 26 years. Following a 56% increase in fruit and vegetable prices
in 1994, their prices dropped by 25% in 1995.
Housing prices increased by 23.7% in 1995 compared to 13.6% in 1994.
The Bank of Israel continued its tight monetary policy in 1995. The
interest rate charged to banks was increased a number of times during 1995,
resulting in high short-term interest rates. This restrictive monetary policy
contributed to low inflation in 1995.
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. Since 1993 there were reductions in the
corporation tax and value-added tax and the elimination of marginal taxes that
were viewed as interfering with economic activity. The overseas travel tax and
the levy on some imported services were abolished in January 1993. A customs
agreement with the European Free Trade Association countries was implemented in
January 1993.
During 1995, the New Israeli Shekel ("NIS") was devalued by 3.9%
relative to the United States dollar from NIS 3.018 to NIS 3.135. This modest
devaluation resulted primarily from the high interest rates in Israel and the
overall depreciation of the United States 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
United States dollar or the Israeli CPI, including payment obligations and
receivables of many of the Companies' investees.
The following table sets forth for the periods indicated the effects of
annual inflation on linkage adjustments and annual devaluations, as discussed in
the preceding paragraph.
<TABLE>
<CAPTION>
ISRAEL ANNUAL U.S.
ANNUAL CLOSING INFLATION ANNUAL
INFLATION EXCHANGE ANNUAL ADJUSTED FOR INFLATION
YEAR ENDED DEC. 31 RATE(1) RATE(2) DEVALUATION(3) DEVALUATION(4) RATE(5)
- ------------------ --------- --------- -------------- -------------- --------
<C> <C> <C> <C> <C> <C>
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 2.6
1995.................. 8.1 3.135 3.9 4.1 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.
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(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.
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.
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 ("E.E.C.")
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. A renewal of this agreement was signed in November 1995. Israel signed a
similar agreement with the European Free Trade Association ("EFTA") in 1992.
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. Israel is the only
country in the world with free trade agreements with the United States, EFTA and
E.E.C..
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.
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<PAGE>
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 a high import
surplus for many years. This surplus 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 1995, the number of tourists who arrived in Israel was approximately
2.5 million compared with 2 million in 1994.
On December 31, 1993, December 31, 1994 and September 30, 1995, Israel's
outstanding net foreign debt was approximately $15.7 billion, $16.5 billion and
$18.5 billion, respectively. Israel had approximately $8.2 billion of foreign
exchange reserves at the end of 1995 compared to $6.8 billion at the end of 1994
and $6.4 billion at the end of 1993.
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 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% and still later to 7%) 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 principal shareholders and
their related companies.
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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. A similar assessment made against Bay Heart in
this regard by the tax authorities has been abandoned.
The Company's investees have taken the position, which the Company
believes is shared by many of the other affected taxpayers in Israel, that the
Commissioner's position in this matter is incorrect. The Company cannot predict
whether the Commissioner's position will be upheld or, if upheld, the effect on
the Company and its investees.
Israeli Banking Regulations
In October 1993, the Bank Arrangement Shares (Temporary Provision) Law
5754 - 1993 (the "Bank Shares Law") was enacted by the Knesset, the Israeli
parliament. Under the Bank Shares Law, 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 Law is to facilitate the
sale by the Government of Israel of shares in Israeli banks. In addition, the
Bank Shares Law 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,
one of which has been qualified to continue negotiations. However, the results
have not been announced.
A provision of the Banking (Licensing) Law, 5741 - 1981, as amended (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 Israeli banks, including Hapoalim, to invest more than 25% of its capital
in non-banking corporations, including Ampal, and to hold more than 25% of the
means of control of each such corporation. 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. 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 addition, under an amendment to the Banking Law enacted in March
1994, Israeli banks, including Hapoalim, are required to reduce their holdings
in and means of control over grandfathered non-banking corporations, including
Ampal, to 25% by not later than December 31, 1996. Following recommendations of
a committee formed by the Ministry of Finance in order to examine the overall
economic implications of a further reduction in the permitted holdings of banks
in non-banking corporations, the Government of Israel has recently introduced a
new bill to amend the Banking Law. This bill would require banks, including
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Hapoalim, to further reduce their holdings in and means of control over
individual non-banking corporations such as Ampal to 20% by December 31, 1999,
and to reduce their overall investment in non-banking corporations to 20% of the
bank's capital by date. Pursuant to this bill, each bank's permitted investments
in non-banking corporations by the end of 2002, would not exceed 15% of each
Israeli bank's capital, with the addition of up to 10% of its capital permitted
to be invested, subject to certain limitations, in certain eligible non-banking
corporations. See "Significant Developments Since Beginning of Last Fiscal Year
- - Hapoalim's Proposed Sale of Class A Stock and Equalization of Common Stock."
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 25% of
the voting shares or 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 Ampal does
not believe that these limitations contained in the BHC and the regulations of
the Board of Governors of the Federal Reserve System thereunder have had or will
have any material adverse impact upon the Company or its operations.
Israeli Foreign Exchange Regulations
Foreign exchange regulations are in effect in Israel. The regulations
are administered by the Controller of Foreign Currency, an official of the Bank
of Israel, who is appointed by the Minister of Finance. The Company's capital
investments in Israeli enterprises and the payment in U.S. dollars of dividends
on such investments do not require prior approval by the Controller. Under
Israeli law, foreign investors who make foreign currency investments in Israeli
companies are entitled to receive payments of dividends and proceeds upon resale
of the investment in that foreign currency.
To the extent that loans or investments have been or will be made by
Ampal or any of its subsidiaries in or to Israeli enterprises, substantially all
such loans or investments have been, and will be, made in such manner as to
permit the payment of dividends, interest and principal and proceeds of resale
thereon in U.S. dollars.
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 1995, Israeli companies were taxed on their income at a rate of
37%. For 1996, this tax rate will be reduced to 36%. 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%, 38% and 37% from 1990
through 1995.
A tax treaty between Israel and the United States became effective on
December 30, 1994. This treaty has not had a substantial impact on the taxation
of the Company in the United States or in Israel.
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Ampal has income from interest, rent and dividends resulting from its
investments in Israel. Under Israeli law, Ampal has been required to file
reports with the Israeli tax authorities with respect to such income. In
addition, as noted below, Ampal is subject to a withholding tax on dividends
received from Israeli companies at a rate of either 25%, 15% or 12.5%, depending
on the 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 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 37% in 1995 and is scheduled to be
reduced to 36% in 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.
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<PAGE>
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" 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 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.
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<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:
Year Ended December 31,
-----------------------
1995 1994 1993
-------------------------
Return on Assets (net income divided
by average total assets) .................... .61% 2.17% .06%*
Return on Equity (net income divided
by average shareholders' equity) ............ 1.25% 4.56% .19%*
Dividend Payout Ratio Per Class A
Share (dividends declared per share
divided by net income per share) ............ 2.6 -- --
Equity to Assets Ratio (average equity
divided by average total assets) ............ 48.74% 47.58% 33.17%
* Includes cumulative effect on prior years of change in accounting principle
of $(4,982,000).
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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.
The Company leases office space in various locations in the United
States and Israel to Hapoalim and its subsidiaries in exchange for total annual
rental payments of approximately $3,001,000, which includes $119,000 received as
rental payments in connection with its property in Chicago, Illinois, see
"Certain Relationships and Related Transactions." These lease transactions
consist of the following in 1995:
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 1995,
Ampal received $352,000 as rental payments for these premises.
Hapoalim leases premises owned by Ampal (Israel) 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 1995, Ampal (Israel) received $258,000 rental payments for these
premises.
Hapoalim leases two premises owned by Ampal Development, 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 1995, Ampal Development received $403,000 as rental payments for these
premises.
Hapoalim leases two premises owned by Ampal Development (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 1995, Ampal Development received
$866,000 as rental payments for these premises.
Hapoalim leases two premises owned by Ampal Financial 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 1995,
Ampal Financial Services received $564,000 as rental payments for these
premises.
Hapoalim leases three premises owned by Nir 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 1995, Nir received
$440,000 as rental 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 1995 totalled $442,000.
Other properties of the Company, and the Company's acquisition of a
building located at 800 Second Avenue, New York, New York, are discussed
elsewhere in this Report. See "Business."
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
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<PAGE>
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
is contesting this legal proceeding. A hearing is scheduled to be held in April
1996.
For a description of a claim for NIS 2.7 million asserted against Ampal
Financial, see "Real Estate, Finance and Other Holdings - Ampal Development
(Israel) Ltd., Nir Ltd. and Ampal Financial Services Ltd."
For a description of the Israeli Tax Commissioner's position concerning
certain reporting requirements and taxes, see "Certain United States and Israeli
Regulatory Matters - Certain Israeli Real Estate Tax Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
On November 8, 1995, at a Special Meeting of Shareholders of
Ampal, the shareholders voted to approve an amendment to Ampal's Certificate of
Incorporation increasing the number of authorized shares of Class A Stock from
30,000,000 to 60,000,000 by the following vote:
FOR AGAINST ABSTAIN
----------------------------------------------------------------
20,448,688 13,242 4,413
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
------ -----
1995:
Fourth Quarter.................................. $ 6 1/4 $ 5 1/8
Third Quarter................................... 7 3/16 5 3/4
Second Quarter.................................. 6 7/8 5 5/8
First Quarter................................... 7 1/8 5 1/2
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
As of March 20, 1996, there were 1,345 record holders of Class A Stock.
Redeemable Warrants to purchase Class A Stock, issued in connection with
Ampal's 1994 public offering, are listed on the AMEX under the symbol "AIS.WS."
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.
There is no established public trading market for the Common Stock.
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<PAGE>
VOTING RIGHTS
Unless dividends on any outstanding Preferred Stock are in arrears for
three successive years, as discussed below, the holders of Class A Stock are
entitled to one vote per share on all matters voted upon by shareholders and,
voting as a class, have the right to elect the Class A Directors. The Class A
Directors constitute 25% of the total number of directors. Other than in the
election of Class A Directors, the holders of Common Stock, voting as a class,
are entitled to as many votes as shall equal the number of votes to which the
holders of Class A Stock are entitled, but in no event more than ten votes per
share of Common Stock, unless dividends on any outstanding series of Preferred
Stock are in arrears for three successive years, in which case the holders of
all outstanding series of Preferred Stock as to which dividends are in arrears
shall have the exclusive right to vote for the election of directors until all
cumulative dividend arrearages are paid. The shares of Common Stock and Class A
Stock do not have cumulative voting rights, which means, if not more than
30,000,000 shares of Class A Stock are outstanding, that any holder or holders,
acting in concert, of more than 50% of the Common Stock can, if such person or
persons owns at least one share of Class A Stock, elect all of the directors
other than the Class A Directors if that person or persons chooses to do so. See
"Significant Developments Since Beginning of Last Fiscal Year" and "Security
Ownership of Certain Beneficial Ownership and Management - Principal
Shareholders of Ampal - Certain Beneficial Owners."
DIVIDEND POLICY
In 1995, Ampal paid a dividend of $.21 per share on its Class A Stock
and Common Stock. Ampal had not paid a dividend on the Class A Stock since 1989
and had never paid a dividend on its Common 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.
Dividends on all classes of Ampal's shares are payable as a percentage
of par value. The holders of Ampal's presently authorized and issued 4%
Preferred Stock and 6 1/2% Preferred Stock (each having a $5.00 par value) are
entitled to receive cumulative dividends at the rates of 4% and 6 1/2% per
annum, respectively, payable out of surplus or net earnings of Ampal before any
dividends are paid on the Common Stock or Class A Stock. If Ampal fails to pay
such dividend on the Preferred Stock in any calendar year, such deficiency must
be paid in full, without interest, before any dividends may be paid on the Class
A Stock or Common Stock. After the payment of all cumulative dividends on the
Preferred Stock and a 4% dividend on the Class A Stock (par value $1.00 per
share), the Board may, but is not required to, declare dividends out of any
remaining surplus or net earnings of Ampal, which dividends are participated in
by the holders of 4% Preferred Stock and Class A Stock to the extent of an
additional 8% each, before the holders of the Common Stock are entitled to
receive any dividends. If after the payment of the aforesaid dividends on the
Preferred Stock and Class A Stock there remains any surplus, the Board may, but
is not required to, declare dividends out of any remaining surplus in an amount
of up to 12% on the Common Stock. If, thereafter, there remains any surplus, any
dividends declared are to be participated in by the holders of 4% Preferred
Stock, Class A Stock and Common Stock, pro rata.
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<PAGE>
Item 6.
SELECTED FINANCIAL DATA
- -----------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
Revenues............ $ 78,151 $ 80,943 $ 73,243 $ 85,302 $ 71,519
Net income.......... 2,166 7,334 226* 10,324 1,126**
Earnings per Class A
share.............. $.08 $.27 $.01* $.44 $.05**
Total assets........ 349,325 342,880 304,060 333,267 404,466
Notes, deposits and
debentures payable. 147,016 128,554 152,113 176,130 249,959
Dividends declared per
Class A share...... $.21 - - - -
* 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.
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<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, finance, 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. The results of 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 are 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 each
period.
The Company's effective tax rates have been, and in the future may be, above
United States statutory rates, in part, because of taxes paid in foreign
jurisdictions by investees for which Ampal does not fully receive tax credits in
the United States.
Effective January 1, 1993, the Company was required to adopt 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.
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
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<PAGE>
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.
Should the NIS be devalued against the dollar, cumulative translation
adjustments are likely to result in reductions of shareholders' equity. As of
December 31, 1995, the effect on shareholders' equity was a decrease of
approximately $4.4 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, 1995 the aggregate fair
value of available-for-sale securities was $2.6 million.
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting for
Stock Based Compensation," which will require companies either to reflect in
their financial statements or as supplemental disclosure the impact on earnings
and earnings per share of the fair value of stock-based compensation using
certain pricing models for the option component of stock option plans. It is the
Company's intention to continue to account in its basic financial statements
under the general philosophy of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," as allowed under the new standard,
which measures only the intrinsic option value as compensation. Disclosure, as
required by SFAS No. 123, will be made commencing with the Company's financial
statements for the year ending December 31, 1996, and will reflect the impact of
the compensation for options issued in 1996 (if any) in the Notes to the
Consolidated Financial Statements. Accordingly, SFAS No. 123 has no impact on
the financial position and results of operations for any period described
herein.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." This Statement establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. There was
no effect of SFAS No. 121 on the financial statements of the Company as no such
event or changes in circumstances occurred.
RESULTS OF OPERATIONS
- ---------------------
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
- ---------------------------------------------------------------------
Consolidated net income decreased from $7.3 million for the year ended December
31, 1994 to $2.2 million for the year ended December 31, 1995. The decrease in
net income in 1995 resulted primarily from the significantly greater losses
incurred by the Company's food processing subsidiary, Pri Ha'emek (Canned and
Frozen Food) 88 Ltd. ("Pri Ha'emek"), the absence of gains on issuance of shares
which were recorded in 1994, lower realized and unrealized gains on investments,
and higher net interest expense and effective income tax rate in 1995. These
decreases were partially offset by gains on sale of real estate rental property,
and an increase in net rental income and equity in earnings of affiliates in
1995.
Equity in earnings of affiliates increased for the year ended December 31, 1995
as compared to the same period in 1994. The earnings of the Company's
42.5%-owned affiliate, Ophir Holdings Ltd. ("Ophir"), increased in 1995 because
of realized gains recorded on its
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<PAGE>
investment in DSP Communications, Inc. as well as decreased interest expense on
its CPI-linked bank borrowings in 1995 due to the lower rate of increase in the
Consumer Price Index ("CPI") in Israel. In 1995, the Company recorded its share
of earnings of its then 49%-owned affiliate, Bank Hapoalim (Cayman) Ltd.
("Cayman") through the date of sale of Cayman, whereas in 1994 the Company
recorded its share of losses of Cayman, mainly because Cayman recorded
unrealized losses on its marketable securities. Bay Heart Limited, the Company's
37%-owned affiliate which owns and operates a shopping mall near Haifa, reported
improved results in 1995 mainly because of lower interest expense on its
CPI-linked borrowings in 1995 due to the lower rate of increase in the CPI in
Israel. Carmel Container Systems Limited ("Carmel"), the Company's 20.4%-owned
affiliate, which is a manufacturer of paper-based packaging, also reported
higher earnings in 1995 because of increased sales volume and selling prices
which were adjusted for the continuing increase in the price of paper on
international markets in 1995. At the same time, Carmel's gross profit increased
due to greater efficiency and improvements originating from investments in
equipment as well as the renovation of production lines at its plants. Am-Hal
Ltd., the Company's 50%-owned affiliate which operates a luxury senior citizens
center in Rishon Lezion, recorded higher earnings in 1995 resulting from a
higher occupancy rate which reached 100% in 1995 and a decrease in finance
expenses resulting from loan repayments. These increases were partially offset
by the decrease in the 1995 earnings of Granite Hacarmel Investments Limited
("Granite"), the Company's 21.3%-owned affiliate, because of decreased income
from dividends, higher financing expenses, and increased provision for taxes
which resulted from the unavailability of tax benefits in 1995 which were
available in 1994. In addition, equity in earnings of affiliates was also
affected by the Company's share of losses recorded by Teledata Communication
Ltd. ("Teledata") (a 10.4%-owned affiliate), as a result of decreases in its
sales prices because of increased competition, losses incurred by a marine park
in Nassau, Bahamas, which is owned by the Company's 50%-owned affiliate, Coral
World International Limited, and losses recorded by the Company's start-up
affiliates.
Pri Ha'emek recorded significantly higher losses in 1995 as compared to 1994.
Pri Ha'emek generates sales in two markets: domestic and export. Revenues from
export sales decreased mainly due to the erosion of the NIS to the British Pound
Sterling in 1995. Revenues from domestic sales decreased in 1995 mainly due to
lower sales prices; however, in September 1995 Pri Ha'emek raised its sales
prices in the domestic market, which resulted in a significant decrease in sales
volume in the fourth quarter of 1995. Cost of goods sold increased in 1995 due
to the increases in labor costs and costs of raw materials, a decrease in labor
productivity, reduction in discounts from suppliers and write-downs of
inventories from cost to market values. As a result of Pri Ha'emek's
disappointing performance, the company's Managing Director was replaced and Pri
Ha'emek has initiated a recovery plan. The management of Pri Ha'emek believes
that the continued operations of Pri Ha'emek as a "going concern" is subject to
the degree to which the recovery plan is successful. Furthermore, the Company
has agreed to provide $1.5 million to Pri Ha'emek to support the recovery plan
and may provide additional amounts under certain circumstances. There can be no
assurance that Pri Ha'emek's recovery plan will succeed and further losses are
expected before it can fully take effect.
Interest income from related parties decreased in 1995 due to the scheduled
repayments of deposits, notes and loans receivable to related parties. Net
interest expense increased mainly because of increased interest expense recorded
on an Israeli CPI-linked loan which was refinanced in 1995 by Pri Ha'emek (prior
to refinancing, the loan was linked to the U.S. dollar), and interest expense
incurred in connection with the purchase of an office building located at 800
Second Avenue, New York, New York ("800 Second Avenue"). See Liquidity and
Capital Resources.
The increases in rental income and rental property operating expenses are
attributable to the operations of 800 Second Avenue.
The Company recorded $.3 million and $2.4 million of unrealized gains on
marketable securities and $1.9 million and $3.1 million of gains on sale of
investments in the years ended December 31, 1995 and 1994, respectively. These
gains were mainly attributed to the Company's investments in DSP Group, Inc.
("DSP Group") and Mercury Interactive Corporation ("Mercury"). In addition, on
August 15, 1995 Ampal sold all of its Ordinary Shares and 7% Preferred Shares of
Cayman, which constituted 49% and 50% of each series, respectively, to Bank
Hapoalim B.M. ("Hapoalim"). The sales price was approximately $20.3 million and
the Company recorded a gain on sale of approximately $.4 million ($.2 million,
net of taxes). The Company obtained an opinion from an independent investment
consultant that the consideration received in the sale was fair to the Company.
The aggregate fair value of
-36-
<PAGE>
trading securities amounted to approximately $3.3
million and $7.1 million at December 31, 1995 and 1994, respectively.
In 1994 the Company recorded gains on issuance of shares of $2.3 million by Pri
Ha'emek and $.3 million by Granite.
Gains on sale of real estate rental property consisted of the following:
On November 6, 1995 Ampal sold its property located at 174 North Michigan
Avenue, Chicago, Illinois to an unrelated party for $.85 million. In connection
therewith, Ampal received $.55 million from Hapoalim and Ampal, as landlord, and
Hapoalim, as tenant, released each other from their respective obligations under
a lease which was scheduled to expire in 2007. Ampal obtained an opinion from an
independent real estate consultant that the consideration received from Hapoalim
was fair to Ampal. The Company recorded a total gain of approximately $.5
million ($.3 million, net of taxes).
On December 31, 1995 Pri Ha'emek sold a 58,000 square-foot commercial building
built on 182,000 square feet of land for $3.5 million (50% was sold to the
Company) and realized a gain of $3 million, 50% of which was eliminated in
consolidation. Pri Ha'emek also retained an option to purchase the Company's
interest in this property for $2 million until June 30, 1997 and to repurchase
50% of the Company's interest in this property for $1 million until December 31,
1998.
The increase in the minority interests in 1995 is mainly attributable to the
minority interests' share of losses of Pri Ha'emek.
The increase in the effective income tax rate from 43% in 1994 to 73% in 1995 is
attributable to changes in the components of taxable income and a reported loss
of Pri Ha'emek from which no tax benefit was available.
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 SFAS 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's 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 then 49%-owned affiliate, Cayman recorded
unrealized losses on its marketable securities. The Company's share of earnings
in 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's 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.
-37-
<PAGE>
In February 1994, the other shareholder of 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 ("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, 1995 its
interest was 58.2%. If all warrants and convertible debentures are exercised,
the Company's interest would be diluted to 41%.
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).
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 1994, the Company received gross proceeds in the amount of $2.6 million from
sales of 120,000 shares of DSP Group and realized gains of $2 million ($1.3
million after taxes).
In 1994, the Company received gross proceeds in the amount of $1.9 million from
sales of 155,000 shares of Mercury and recorded a gain of approximately $1.5
million ($1 million after taxes).
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 had been determined to be permanently impaired in value.
During 1993, the Company sold additional shares in Teledata and realized gains
on sales of $1.5 million (approximately $.7 million after taxes).
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.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At December 31, 1995, cash and cash equivalents were $16.7 million as compared
with $37.5 million at December 31, 1994. In addition, Ampal had approximately
$34 million of highly liquid interest-bearing securities included in the
investments caption at December 31, 1995 as compared with approximately $16
million at December 31, 1994.
-38-
<PAGE>
In 1995, the Company's investment portfolio was affected by the $20.3 million
sale of the Company's interest in Cayman, new investments of approximately $10
million, sales of Mercury and DSP Group shares of approximately $6 million and
an increase in short-term investments of $18 million.
New investments in 1995 were:
On June 28, 1995 the Company's 95%-owned subsidiary purchased a property ("800
Second Avenue") for approximately $45 million on which an approximately 290,000
square-foot office building is located. The building is located at 800 Second
Avenue, New York, New York and houses the Consulate of the Government of Israel
in New York and many other Israel government offices as well as other tenants.
The purchase was partially financed by a loan of $30 million from Hapoalim. The
Company financed the balance of the acquisition from its own funds.
In January 1995, the Company invested $1.5 million to acquire a 20% equity
interest in Epsilon Investment House Ltd. ("Epsilon") and its affiliate,
Renaissance Investment Company Ltd. ("Renaissance"). Epsilon is an investment
bank which provides portfolio management and Renaissance provides underwriting
services in Israel through its subsidiaries.
In September 1995, the Company invested $1.3 million to acquire a 21.9% equity
interest and three-year options to acquire an additional 4.4% equity in U.D.S. -
Ultimate Distribution Systems Ltd. (formerly known as Barshar Ltd.), an Israeli
based software company specializing in the management and optimization of a
variety of logistic tasks for the distribution industry.
In 1995 the Company invested an aggregate of approximately $2.6 million for
13.6% of Breeze Wireless Communications Ltd., an Israeli company which develops,
manufactures and markets wireless local area networks for computers, 4.1% of
M-Systems Flash Disk Pioneers Ltd., an Israeli company which develops,
manufactures and markets data storage media based on "flash memory," a new
silicon memory chip, and 5.8% of Comfy Interactive Movies Ltd., an Israeli
company which develops and markets a computer keyboard and interactive movies
specially designed for children ages 1-6. The Company also invested
approximately $1.6 million to acquire additional interests in its existing
subsidiaries and affiliates.
In 1995, the Company invested an additional $3.3 million in M.D.F. Industries
LTD ("M.D.F.") and made additional loans of $2.7 million. M.D.F. was
established to produce and market medium density fiber boards in Israel.
It constructed a plant which is currently in its testing phase and is expected
to commence operations shortly.
Deposits, notes and loans receivable, and debentures payable declined as a
result of scheduled repayments. At December 31, 1995, the Company's deposits,
notes and loans receivable aggregated $73 million with varying interest rates
and maturities. The deposits are guaranteed by Hapoalim. Notes and loans payable
increased primarily as a result of $30 million of new borrowings used to finance
the acquisition of 800 Second Avenue which cost a total of approximately $45
million. At December 31, 1995, Ampal had $35.4 million aggregate principal
amount, net of discounts, of its debentures outstanding which are scheduled to
mature by 2003. These debentures bear interest at fixed rates ranging from 10%
to 13%. These debentures are not subject to call provisions and are expected to
remain outstanding until they mature in accordance with their terms although a
portion of such debentures may be presented to Ampal for payment prior to
scheduled maturity. Also outstanding at December 31, 1995 was $39 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.
As of December 31, 1995, the Company had issued guarantees on certain
outstanding loans to its investees and subsidiaries in the aggregate principal
amount of $13.5 million, and has a share of the commitments issued by and to its
investees of up to $24 million.
In 1995 Ampal paid dividends on its Class A Stock and Common Stock in the amount
of $.21 per share, and $1.05 and $.325 per share on its 4% and 6-1/2% Preferred
Stock, respectively. Total dividends paid in 1995 amounted to $5.6 million as
compared with 1994 dividends of $.4 million which was paid only on the Preferred
Stock.
-39-
<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. At December 31, 1995, Ampal had acquired 605,400 shares for $3.8 million.
In February 1996, in connection with developments regarding Hapoalim's ownership
of Ampal's equity, Ampal announced that it had temporarily suspended purchases
under this program.
-40-
<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, 1995 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, 1995. 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 45% and 66% in 1995, 43% and 70% in 1994,
respectively, and revenues of 77% in 1993. 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 $8,691,000, $5,881,000 and $9,236,000 for the years ended December
31, 1995, 1994 and 1993, 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, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1995, 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 25, 1996
-41-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ---------------------------------------------------------------------------
(Dollars in thousands, except per share data)
REVENUES:
Equity in earnings of affiliates.......... $ 7,424 $ 5,793 $ 9,037
Food processing and manufacturing......... 41,601 43,753 35,570
Interest:
Related parties.......................... 10,515 15,823 16,311
Others................................... 3,781 2,135 1,411
Rental income............................. 8,450 3,390 4,045
Gains on issuance of shares by subsidiary
and affiliates (Note 2)................... - 2,692 3,185
Realized and unrealized gains on
investments (Notes 1(d) and 2)............ 2,193 5,525 1,973
Gains on sale of real estate rental
property (Note 2)......................... 2,009 - -
Other..................................... 2,178 1,832 1,711
-------- -------- --------
Total revenues....................... 78,151 80,943 73,243
-------- -------- --------
EXPENSES:
Food processing and manufacturing......... 46,767 41,493 32,482
Interest:
Related parties.......................... 4,392 3,781 5,068
Others................................... 11,898 15,328 17,296
Rental property operating expenses........ 3,385 507 502
Minority interests........................ (3,448) (588) (402)
Other..................................... 7,124 7,501 7,480
-------- -------- --------
Total expenses....................... 70,118 68,022 62,426
-------- -------- --------
Income before income taxes................ 8,033 12,921 10,817
Income taxes (Note 8)..................... 5,867 5,587 5,609
-------- -------- --------
Income before cumulative effect of change
in accounting principle................... 2,166 7,334 5,208
Cumulative effect on prior years of change
in accounting principle (Note 1(f))....... - - (4,982)
-------- -------- --------
NET INCOME........................... $ 2,166 $ 7,334 $ 226
======== ======== ========
Earnings (loss) per Class A share:
Earnings before cumulative effect of
change in accounting principle........... $ .08 $ .27 $ .22
Cumulative effect on prior years of
change in accounting principle (Note 1(f)) - - (.21)
----- ----- -----
Earnings per Class A share (Note 7)...... $ .08 $ .27 $ .01
===== ===== =====
Weighted average number of Class A and
equivalent shares outstanding (in
thousands)............................... 24,980 24,526 20,717
Dividends per Class A share.............. $ .21 $ - $ -
The accompanying notes are an integral part of the consolidated financial
statements.
-42-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED BALANCE SHEETS
ASSETS AS AT DECEMBER 31, 1995 1994
- -------------------------------------------------------------------------
(Dollars in thousands)
Cash and cash equivalents..................... $ 16,694 $ 37,532
Deposits, notes and loans receivable (Note 3):
Related parties............................. 71,484 90,462
Others...................................... 1,489 3,786
Investments (Notes 2 and 9)................... 142,291 136,109
Real estate rental property, less accumulated
depreciation of $4,994 and $4,556 (Note 2)... 57,289 13,600
Property and equipment, less accumulated
depreciation of $8,876 and $7,060............ 17,920 17,314
Other assets (Note 1(h))...................... 42,158 44,077
-------- --------
TOTAL ASSETS.................................. $349,325 $342,880
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
-43-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND
SHAREHOLDERS' EQUITY AS AT DECEMBER 31, 1995 1994
- -------------------------------------------------------------------------
(Dollars in thousands)
LIABILITIES
Notes and loans payable (Note 4):
Related parties............................. $ 51,041 $ 24,837
Others...................................... 17,086 19,226
Debentures (Note 5)........................... 78,889 84,491
Accounts and income taxes payable, accrued
expenses and minority interests.............. 37,894 40,832
-------- --------
Total liabilities..................... 184,910 169,386
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY (Notes 6 and 13)
4% Cumulative, Participating, Convertible
Preferred Stock, $5 par value; authorized
650,000 shares; issued and outstanding
199,030 and 206,608 shares................... 995 1,033
6-1/2% Cumulative, Convertible Preferred Stock,
$5 par value; authorized 4,282,850 shares;
issued and outstanding 1,052,599 and 1,114,927
shares...................................... 5,263 5,575
Class A Stock, $1 par value; authorized
60,000,000 shares; issued 21,065,392 and
20,840,518 shares; outstanding 20,459,992
and 20,840,518 shares........................ 21,066 20,841
Common Stock, $1 par value; authorized, issued
and outstanding 3,000,000 shares............. 3,000 3,000
Additional paid-in capital.................... 57,310 57,185
Retained earnings............................. 85,559 89,007
Treasury Stock, at cost (Note 6).............. (3,829) -
Cumulative translation adjustments (Note 1(c)) (4,354) (2,636)
Unrealized loss on marketable securities
(Note 1(d)) (595) (511)
-------- --------
Total shareholders' equity............ 164,415 173,494
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.... $349,325 $342,880
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
-44-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ---------------------------------------------------------------------------
(Dollars in thousands)
Cash flows from operating activities:
Net income............................... $ 2,166 $ 7,334 $ 226
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Equity in earnings of affiliates........ (7,424) (5,793) (9,037)
Gains on issuance of shares by subsidiary
and affiliates......................... - (2,692) (3,185)
Realized and unrealized gains on
investments........................... (2,193) (5,525) (1,973)
Gains on sale of real estate rental
property............................... (2,009) - -
Translation loss........................ 15 100 225
Depreciation expense.................... 2,860 2,255 2,346
Amortization expense.................... 4,691 5,228 5,127
Minority interests...................... (3,448) (588) (402)
Cumulative effect on prior years of
change in accounting principle......... - - 4,982
Deconsolidation of investee company
previously accounted for as a subsidiary - - 1,946
Decrease (increase) in other assets...... 3,499 (2,773) (6,594)
(Decrease) increase in accounts and income
taxes payable, accrued expenses and
minority interests...................... (1,771) 1,916 852
Investments made in trading securities... (6,403) (2,099) -
Proceeds from sale of trading securities. 13,379 3,012 -
Dividends received from affiliates....... 4,898 4,767 3,369
-------- -------- --------
Net cash provided by (used in) operating
activities............................. 8,260 5,142 (2,118)
-------- -------- --------
Cash flows from investing activities:
Deposits, notes and loans receivable
collected:
Related parties......................... 26,177 36,552 32,871
Others.................................. 2,517 3,030 2,378
Deposits, notes and loans receivable granted:
Related parties......................... (5,271) (8,716) (5,645)
Others.................................. (155) (1,756) (176)
Investments made in:
Available-for-sale securities........... (1,369) - -
Affiliates and others................... (33,681) (23,776) (6,874)
Proceeds from sale of investments:
Affiliates and others................... 26,633 4,715 9,281
Purchase of property and equipment....... (2,268) (3,062) (4,292)
Purchase of real estate rental property.. (45,408) - -
Proceeds from sale of real estate rental
property................................ 1,426 - -
-------- -------- --------
Net cash (used in) provided by investing
activities............................. (31,399) 6,987 27,543
-------- -------- --------
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ---------------------------------------------------------------------------
(Dollars in thousands)
Cash flows from financing activities:
Notes and loans payable received:
Related parties......................... $ 33,216 $ 1,757 $ 19,715
Others.................................. 7,718 5,738 6,777
Notes and loans payable repaid:
Related parties......................... (7,153) (20,556) (31,837)
Others.................................. (9,903) (4,867) (8,137)
Debentures issued by subsidiary.......... - 4,855 -
Debentures repaid........................ (11,093) (20,486) (17,639)
Proceeds from issuance of shares to
minority interests..................... 50 - 686
Proceeds from issuance of shares......... - 57,460 -
Dividends paid........................... (5,614) (406) (440)
Purchase of treasury stock............... (3,829) - -
-------- -------- --------
Net cash provided by (used in) financing
activities............................. 3,392 23,495 (30,875)
-------- -------- --------
Effect of exchange rate changes on cash and
cash equivalents......................... (1,091) (1,270) (1,070)
-------- -------- --------
Net (decrease) increase in cash and cash
equivalents.............................. (20,838) 34,354 (6,520)
Cash and cash equivalents at beginning of
year...................................... 37,532 3,178 9,698
-------- -------- --------
Cash and cash equivalents at end of year.. $ 16,694 $ 37,532 $ 3,178
======== ======== ========
Supplemental Disclosure of Cash Flow
Information
Cash paid during the year:
Interest:
Related parties......................... $ 2,790 $ 1,790 $ 2,599
Others.................................. 5,155 5,677 7,495
-------- -------- --------
Total interest paid................... $ 7,945 $ 7,467 $ 10,094
======== ======== ========
Income taxes paid....................... $ 6,940 $ 1,921 $ 3,853
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
-46-
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ---------------------------------------------------------------------------
(Dollars in thousands, except share amounts and per share data)
4% PREFERRED STOCK
Balance, beginning of year................ $ 1,033 $ 1,068 $ 1,202
Conversion of 7,578, 7,112 and 26,808
shares into Class A Stock................. (38) (35) (134)
-------- -------- --------
Balance, end of year...................... $ 995 $ 1,033 $ 1,068
======== ======== ========
6-1/2% PREFERRED STOCK
Balance, beginning of year................ $ 5,575 $ 6,011 $ 7,554
Conversion of 62,328, 87,415 and 309,018
shares into Class A Stock................. (312) (436) (1,543)
-------- -------- --------
Balance, end of year...................... $ 5,263 $ 5,575 $ 6,011
======== ======== ========
CLASS A STOCK
Balance, beginning of year................ $ 20,841 $ 16,225 $ 15,164
Issuance of shares upon conversion of
Preferred Stock.......................... 225 298 1,061
Issuance of shares in a public offering*.. - 4,318 -
-------- -------- --------
Balance, end of year...................... $ 21,066 $ 20,841 $ 16,225
======== ======== ========
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year................ $ 57,185 $ 10,605 $ 9,989
Conversion of Preferred Stock............. 125 173 616
Proceeds from issuance of shares in a
public offering........................... - 46,407 -
-------- -------- --------
Balance, end of year...................... $ 57,310 $ 57,185 $ 10,605
======== ======== ========
RETAINED EARNINGS
Balance, beginning of year................ $ 89,007 $ 82,079 $ 82,293
Net income................................ 2,166 7,334 226
Dividends:
4% Preferred Stock - $1.05, $.20 and $.20
per share.............................. (209) (42) (43)
6-1/2% Preferred Stock - $.325 per share (351) (364) (397)
Class A Stock - $.21 per share.......... (4,424) - -
Common Stock - $.21 per share........... (630) - -
-------- -------- --------
Balance, end of year...................... $ 85,559 $ 89,007 $ 82,079
======== ======== ========
TREASURY STOCK (Note 6)
Balance, beginning of year................ $ - $ - $ -
Purchase of 605,400 shares of Class A
Stock at cost............................. (3,829) - -
-------- -------- --------
Balance, end of year...................... $ (3,829) $ - $ -
======== ======== ========
* Issuance of 4,500,000 shares, including 182,066 held in treasury.
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ---------------------------------------------------------------------------
(Dollars in thousands, except share amounts and per share data)
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year................ $ (2,636) $ (2,171) $ -
Foreign currency translation adjustment... (1,718) (465) (2,171)
-------- -------- --------
Balance, end of year...................... $ (4,354) $ (2,636) $ (2,171)
======== ======== ========
UNREALIZED LOSS ON MARKETABLE SECURITIES
Balance, beginning of year................ $ (511) $ 4,300** $ -
Transfer to trading securities............ - (3,800) -
Write-down due to permanent impairment.... - (500) -
Unrealized loss, net...................... (84) (511) -
-------- -------- --------
Balance, end of year...................... $ (595) $ (511) $ -
======== ======== ========
** Represents cumulative effect of adoption of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
The accompanying notes are an integral part of the consolidated financial
statements.
-48-
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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, the largest bank in Israel, and its wholly-owned subsidiary, Atad
Hevra Lehashkaot Limited ("Atad"), are currently Ampal's controlling
shareholders.
A provision of the Banking (Licensing) Law, 5741-1981, as amended, (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 Israeli banks, including Hapoalim, to invest more than 25% of its capital
in non-banking corporations and to hold more than 25% of the means of control of
each such corporation. 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. 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 in the same class.
In addition, under an amendment to the Banking Law enacted in March 1994,
Israeli banks, including Hapoalim, are required to reduce their holdings of
grandfathered non-banking corporations, including Ampal, to 25% by not later
than December 31, 1996 (see Note 13). Following recommendations of a committee
formed by the Israeli Ministry of Finance in order to examine the overall
economic implications of a further reduction in the permitted holdings of banks
in non-banking corporations, the Government of Israel has recently introduced a
new bill to amend the Banking Law. This bill would require banks, including
Hapoalim, to further reduce their holdings in individual non-banking
corporations such as Ampal to 20% by December 31, 1999, and to reduce their
overall investment in non-banking corporations to 20% of the bank's capital by
that date. Pursuant to this bill, each bank's aggregate permitted investments in
non-banking corporations by the end of 2002, would not exceed 15% of each bank's
capital, with the addition of up to 10% of its capital permitted to be invested,
subject to certain limitations and/or in certain eligible non-banking
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 were
not deemed affiliates or related parties.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(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.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(c) Translation of Foreign Currencies
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.
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.
(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, was
reflected on a December 31 year-end basis in 1995 and 1994. The effect of this
change on the Company's 1994 consolidated financial statements was 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, 1995 and 1994 the aggregate fair values of
available-for-sale securities were $2.6 million and $.8 million. Prior to
January 1, 1994 the Company recorded its investments in marketable securities at
the lower of cost or market.
In the years ended December 31, 1995 and 1994, the Company recorded $.3
million and $2.4 million of unrealized gains on marketable securities in the
statement of income. In 1994, included in that amount were gross gains of $4.6
million on trading securities 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 then 49%-owned
affiliate, Bank Hapoalim (Cayman) Ltd., recorded an unrealized loss on
marketable securities, the Company's share of which was approximately $.8
million, which resulted from the transfer of securities from the
available-for-sale category to the trading security category.
During 1995 and 1994, the Company invested approximately $6.4 million and
$2.1 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
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Deferred income taxes are not provided on undistributed earnings of
foreign subsidiaries totalling approximately $30 million, since such earnings
are currently expected to be permanently reinvested outside the United States.
If the earnings were not considered permanently invested, approximately $11
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 $18 million ($17.6 million in 1994).
Note 2 - Acquisitions and Dispositions
(a) On June 28, 1995 the Company's 95%-owned subsidiary purchased a property
("800 Second Avenue") for approximately $45 million on which an approximately
290,000 square-foot office building is located. The building is located at 800
Second Avenue, New York, New York and houses the Consulate of the Government of
Israel in New York and many other Israel government offices as well as other
tenants. The purchase was partially financed by a loan of $30 million from
Hapoalim (see Note 4). The Company financed the balance of the acquisition from
its own funds.
(b) In January 1995, the Company invested $1.5 million to acquire a 20% equity
interest in Epsilon Investment House Ltd. ("Epsilon") and its affiliate,
Renaissance Investment Company Ltd. ("Renaissance"). Epsilon is an investment
bank which provides portfolio management and Renaissance provides underwriting
services in Israel through its subsidiaries.
(c) In September 1995, the Company invested $1.3 million to acquire a 21.9%
equity interest and three-year options to acquire an additional 4.4% equity in
U.D.S. - Ultimate Distribution Systems Ltd. (formerly known as Barshar Ltd.), an
Israeli based software company specializing in the management and optimization
of a variety of logistic tasks for the distribution industry.
(d) In 1995 the Company invested an aggregate of approximately $2.6 million for
13.6% of Breeze Wireless Communications Ltd., an Israeli company which develops,
manufactures and markets wireless local area networks for computers, 4.1% of
M-Systems Flash Disk Pioneers Ltd., an Israeli company which develops,
manufactures and markets data storage media based on "flash memory," a new
silicon memory chip, and 5.8% of Comfy Interactive Movies Ltd., an Israeli
company which develops and markets a computer keyboard and interactive movies
specially designed for children ages 1-6. The Company also invested
approximately $1.6 million to acquire additional interests in its existing
subsidiaries and affiliates.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(e) On August 15, 1995 Ampal sold all of its Ordinary Shares and 7%
Preferred Shares of Bank Hapoalim (Cayman) Ltd. ("Cayman"), which constituted
49% and 50% of each series, respectively, to Hapoalim. The sales price was
approximately $20.3 million and the Company recorded a gain on sale of
approximately $.4 million ($.2 million, net of taxes). The Company obtained
an opinion from an independent investment consultant that the consideration
received in the sale was fair to the Company. The Company recorded its share
of earnings in Cayman through the date of sale.
(f) On November 6, 1995 Ampal sold its property located at 174 North
Michigan Avenue, Chicago, Illinois to an unrelated party for $.85 million.
In connection therewith, Ampal received $.55 million from Hapoalim and Ampal,
as landlord, and Hapoalim, as tenant, released each other from their respective
obligations under a lease which was scheduled to expire in 2007. Ampal obtained
an opinion from an independent real estate consultant that the consideration
received from Hapoalim was fair to Ampal. The Company recorded a total gain
of approximately $.5 million ($.3 million, net of taxes).
(g) In 1994, the Company invested in 50% of the equity of M.D.F.
Industries Ltd. ("M.D.F.") in the amount of $1.8 million and made loans of
$1.3 million to the company. In 1995, the Company invested an additional
$3.3 million in M.D.F. and made additional loans of $2.7 million. M.D.F.
was established to produce and market medium density fiber boards in
Israel. It constructed a plant which is currently in its testing phase and
is expected to commence operations shortly.
(h) 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, 1995 its interest was 58.21%. If all warrants and
convertible debentures were to be exercised, the Company's interest would be
diluted to 41%.
On December 31, 1995 Pri Ha'emek sold a 58,000 square-foot commercial
building built on 182,000 square feet of land for $3.5 million (50% of the
building was sold to the Company) and realized a gain on sale of $3 million, 50%
of which was eliminated in consolidation. Pri Ha'emek also retained an option to
repurchase the Company's interest in this property for $2 million until June 30,
1997 and to repurchase 50% of the Company's interest in this property for $1
million until December 31, 1998.
(i) In 1995 and 1994, the Company received gross proceeds in the amounts
of $1.9 and $2.6 million from sales of 106,000 and 120,000 shares of DSP
Group, Inc. ("DSP Group") and recorded a loss of $.1 million and a gain of
$2 million ($.1 million and $1.3 million after taxes), respectively.
(j) In 1995 and 1994, the Company received gross proceeds in the amounts
of $4 million and $1.9 million from sales of 237,000 and 155,000 shares of
Mercury Interactive Corporation ("Mercury"), which the Company acquired in
1992, and recorded gains of approximately $.9 million and $1.5 million ($.6
million and $1 million after taxes), respectively.
(k) 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.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(l) During 1993, the Company sold shares in Teledata Communications Ltd.
("Teledata") and realized gains on sales of $1.5 million (approximately $.7
million after taxes). As a result of the Company's dilution in Ophir (see Note
2(n)) and additional sales during 1995 and 1994, the Company's ownership in
Teledata was further reduced to 10.4% (see Note 9).
(m) 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).
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 10 years and notes and loans
receivable have maturities of up to 6 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.
On June 28, 1995, in connection with the purchase of 800 Second Avenue
(see Note 2(a)), a subsidiary borrowed $30 million from Hapoalim at an interest
rate based on London Interbank Offered Rates plus 1% (6.6875% at December 31,
1995), payable quarterly with principal due on June 28, 1996. In March 1996 the
subsidiary requested, and Hapoalim approved, an extension of the loan to June
28, 2000 with principal payable in 14 quarterly installments commencing March
28, 1997.
The weighted average interest rates on the balances of short-term
borrowings at year-end are as follows: 7.45% on $56.7 million, 11.83% on $22.3
million and 5.71% on $30.7 million in 1995, 1994 and 1993, respectively.
Note 5 - Debentures
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Debentures outstanding at December 31 consist of:
1995 1994
------------------
Ampal:
Various series with interest rates ranging from
10%-13%, maturing 1996-2003............................ $ 47,934 $ 53,202
Ampal Development (Israel) Ltd.:
Various series with interest rates ranging from
6.2%-7.5%, linked to the Consumer Price Index in
Israel, maturing 1996-2005, secured by assets of
$41 million............................................ 38,992 43,161
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 $43 million......... 4,511 4,713
------- -------
91,437 101,076
Less: Unamortized discounts............................. 12,548 16,585
---------- --------
Total................................................... $ 78,889 $ 84,491
======== ========
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:
1996 - $41,806*
1997 - 5,778
1998 - 6,579
1999 - 6,579
2000 - 7,135
Thereafter - 11,653
* If no debentures are presented for early redemption, scheduled maturities will
amount to $22,590.
Note 6 - Shareholders' Equity
Capital Stock
The 4% and 6-1/2% Preferred shares are convertible into 5 and 3 shares of
Class A Stock, respectively. At December 31, 1995, a total of 8,779,072 shares
of Class A Stock is reserved for issuance upon the conversion of the Preferred
Stock and the exercise of warrants and options.
The 4% and 6-1/2% Preferred Stock are preferred as to dividends on a
cumulative basis. Additional dividends out of available retained earnings, if
declared, are payable on an annual non-cumulative basis as a percentage of par
value as follows:
(i) up to 4% on Class A Stock, then
(ii) up to 8% on Class A Stock and 4% Preferred Stock, ratably, then
(iii) up to 12% on Common Stock, then
(iv) on 4% Preferred Stock, Class A Stock and Common Stock, ratably.
Preferred shares are nonvoting unless dividends are in arrears for three
successive years. At December 31, 1995, there are no dividend arrearages.
In March 1995, 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. As of December 31, 1995, Ampal had repurchased 605,400 shares of its
Class A Stock for approximately $3.8 million. On February 21, 1996, in
connection with developments
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<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
regarding Hapoalim's ownership of Ampal's equity, Ampal announced that it had
temporarily suspended purchases under this program (See Note 13).
On November 8, 1995, at a Special Meeting of Shareholders of Ampal, the
shareholders voted to approve an amendment to Ampal's Certificate of
Incorporation increasing the number of shares of Class A Stock from 30,000,000
to 60,000,000.
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
8,775 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 in 1994. The Stock Option
Plan was approved by Ampal's shareholders on September 22, 1994. At December 31,
1995, 27,500 options are exercisable and 98,625 options become exercisable on
January 25, 1996.
Retained Earnings
At December 31, 1995, retained earnings include $53.5 million for
affiliates accounted for by the equity method, of which $31.7 million and an
additional $40.1 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
during 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 28 million, 27.5 million and 23.7
million shares in 1995, 1994 and 1993, respectively.
Note 8 - Income Taxes
1995 1994 1993
-------------------------
The components of current and deferred
income tax expense (benefit) are:
Current:
State and local........................ $ 65 $ 60 $ 8
Federal................................ 6,239 1,311 1,254
Foreign................................ 1,153 796 1,668
Deferred:
State and local........................ 60 - -
Federal................................ (1,772) 2,095 3,319
Foreign................................ 122 1,325 (640)
-------- -------- --------
Total............................... $ 5,867 $ 5,587 $ 5,609
======== ======== ========
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of deferred income tax
expense are:
Unrealized (losses) gains............... $ (30) $ 2,240 $ -
Equity in earnings of affiliates........ (1,808) 1,066 2,563
Gains on issuances of shares............ - 941 1,115
Debenture selling expenses.............. (27) (240) (294)
Other................................... 275 (587) (705)
-------- -------- --------
Total................................ $ (1,590) $ 3,420 $ 2,679
======== ======== ========
The domestic and foreign components of income
(loss) before income taxes are:
Domestic................................ $ 1,571 $ 253 $ (1,418)
Foreign................................. 6,462 12,668 12,235
-------- -------- --------
Total................................ $ 8,033 $ 12,921 $ 10,817
======== ======== ========
A reconciliation of income taxes between the
statutory and effective tax is as follows:
Federal income tax at 35%, 35% and 34%.. $ 2,811 $ 4,523 $ 3,678
Taxes on foreign income in excess of U.S.
rate.................................... 3,026 1,426 1,925
Other................................... 30 (362) 6
-------- -------- --------
Total effective tax: 73%, 43% and 52%... $ 5,867 $ 5,587 $ 5,609
======== ======== ========
Other assets include approximately $1.5 million ($2 million in 1994) 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 $23.1 million ($24.6 million in 1994) of deferred tax liability
provided on undistributed earnings of the affiliates.
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:
1995 1994 1993
--------------------------
Am-Hal Ltd............................. 50% 50% 50%
Bank Hapoalim (Cayman) Ltd (see Note 2(e)) - 49 49
Bay Heart Limited...................... 37 37 37
Carmel Containers Systems Limited...... 20.4 20 20
Coral World International Limited...... 50 50 50
Davidson-Atai Publishers Ltd........... 20.7 20.7 22.5
Epsilon Investment House Ltd........... 20 - -
Hod Hasharon Sport Center (1992) Limited
Partnership........................... 50 25.5 25.5
Granite Hacarmel Investments Limited... 21.3 21.2 21.6
M.D.F. Industries Ltd.................. 50 - -
Moriah Hotels Ltd...................... 46 46 46
Ophir Holdings Ltd. (Note 2(m))........ 42.5 42.5 42.5
Orlite Industries (1959) Ltd........... 22.7 22 30.1
Renaissance Investment Company Ltd..... 20 - -
Teledata Communication Ltd............. 2.2* 2.2* 2.5*
Trinet Investment in High-Tech Ltd..... 37.5 37.5 -
Trinet Venture Capital Ltd............. 50 50 -
U.D.S. - Ultimate Distribution Systems Ltd. 21.9 - -
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
* In addition, Ophir Holdings Ltd. holds 19.2% of Teledata's shares.
Combined summarized financial information for the above companies is as follows:
1995 1994 1993
-----------------------------
Revenues............................... $750,876 $592,012 $558,979
Gross profit........................... 164,108 119,072 104,833
Net income........................... 29,103 25,215 23,246
Property and equipment................. $335,209 $282,956 $247,616
Other assets........................... 429,807 477,412 452,546
-------- -------- --------
Total assets......................... $765,016 $760,368 $700,162
======== ======== ========
Total liabilities, including bank
borrowings............................. $460,477 $438,102 $419,328
======== ======== ========
The carrying value of the Company's investments in shares of its publicly traded
affiliates and others at December 31, 1995 amounted to $42.5 million and had a
market value of $48.9 million, which is based upon quoted market prices of
shares traded on the American Stock Exchange, NASDAQ and the Tel Aviv Stock
Exchange.
Note 10 - Segment Information
Segment information presented below results primarily from operations in Israel.
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -------------------------------------------------------------------------
Revenues:
- --------
Finance........................... $ 17,982 $ 29,599 $ 27,367
Real estate rental................ 10,484(d) -(e) -(e)
Food processing................... 31,376 35,024 30,726
Mattress manufacturing............ 10,174 9,625 4,950
Leisure-time...................... 1,514 1,411 1,428
Intercompany adjustments.......... (803) (509) (265)
-------- -------- --------
Total........................ $ 70,727 $ 75,150 $ 64,206
======== ======== ========
Equity in Earnings (Losses) of
- ------------------------------
Affiliates:
- ----------
Finance........................... $ 566(b) $ (2,531)(b) $ (128)(b)
Real estate rental................ (678)(c) -(e) -(e)
Food processing................... - - -
Mattress manufacturing............ - - 243
Leisure-time...................... 1,779(a) 3,647(a) 2,586(a)
-------- -------- --------
Total........................ $ 1,667 $ 1,116 $ 2,701
======== ======== ========
Pretax Operating Income (Loss):
- -------------------------------
Finance........................... $ 1,125 $ 7,720 $ 1,516
Real estate rental................ 5,444 -(e) -(e)
Food processing................... (9,106) (693) (37)
Mattress manufacturing............ 428 401 508
Leisure-time...................... (730) (889) (610)
-------- -------- --------
Total........................ $ (2,839) $ 6,539 $ 1,377
======== ======== ========
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<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total Assets:
- -------------
Finance........................... $256,731 $289,914 $259,025
Real estate rental................ 61,804 -(e) -(e)
Food processing................... 42,843 47,837 37,083
Mattress manufacturing............ 7,912 8,328 8,752
Leisure-time...................... 4,949 4,792 4,654
Intercompany adjustments.......... (24,914) (7,991) (5,454)
-------- -------- --------
Total........................ $349,325 $342,880 $304,060
======== ======== ========
Investments in Affiliates:
- --------------------------
Finance........................... $ - $ 28,913(b) $ 31,508(b)
Real estate rental................ 9,768(c) -(e) -(e)
Food processing................... - - -
Mattress manufacturing............ - - -
Leisure-time...................... 37,108(a) 35,194(a) 30,636(a)
-------- -------- --------
Total........................ $ 46,876 $ 64,107 $ 62,144
======== ======== ========
Capital Expenditures:
- ---------------------
Finance........................... $ 26 $ 154 $ 48
Real estate rental................ 45,408 -(e) -(e)
Food processing................... 1,769 2,470 832
Mattress manufacturing............ 368 334 3,317
Leisure-time...................... 105 104 95
-------- -------- --------
Total........................ $ 47,676 $ 3,062 $ 4,292
======== ======== ========
Depreciation and Amortization:
- ------------------------------
Finance........................... $ 4,322 $ 5,276 $ 5,402
Real estate rental................ 815 -(e) -(e)
Food processing................... 1,472 1,151 1,122
Mattress manufacturing............ 650 725 634
Leisure-time...................... 292 331 315
-------- -------- --------
Total........................ $ 7,551 $ 7,483 $ 7,473
======== ======== ========
Corporate office expense is principally applicable to the financing operation
and has been charged to that segment above. Revenues and pretax operating income
above exclude equity in earnings of affiliates and minority interests.
(a) Operations in Australia, Bahamas, Israel, U.S. Virgin Islands and
United States.
(b) Operations in Israel (1994 and 1993 only) and Cayman Islands.
(c) Operations in Israel.
(d) Includes gains on sale of real estate rental property (see Notes 2(f) and
2(h)).
(e) The Company did not have a real estate rental segment in 1994 and 1993;
all amounts related to real estate rental for these years are reflected in
the finance segment.
The real estate rental segment consists of rental property owned in Israel
and the United States leased to related and unrelated parties. The food
processing segment is composed of Pri Ha'emek, which processes and
packages vegetables, canned juices and other vegetable and citrus products
in Israel. It markets its products primarily to large retail chains in Israel
and, to a lesser extent, North America and Japan. The mattress manufacturing
segment consists of Paradise, which is a leading manufacturer and distributor
of mattresses and fold-out beds in Israel whose customer base consists of
independent stores as well as hotels chains. The leisure time segment consist
primarily of Coral World International Limited (marine parks located around
the world) and Moriah Hotels Ltd. (hotel chain in Israel).
Because of Pri Ha'emek's continuing losses, the company's management has
put into effect a recovery program, the implementation of which started at
the end of 1995 and the principal components of which are a reduction in those
manufacturing and marketing activities which do not contribute to the company's
profitability, a reduction in the size of the workforce, the realization of
those fixed assets which have ceased to contribute to manufacturing activities,
and the development of and increase in capacity and efficiency of those
production lines which will contribute to an increase in the company's
profitability. The management of Pri Ha'emek believes that the continued
operations of Pri Ha'emek as a "going concern" is subject to the degree to which
the recovery plan is successful. Furthermore, the company has agreed to provide
$1.5 million to Pri Ha'emek to support the recovery plan and may provide
additional amounts under certain circumstances. There can be no assurance that
Pri Ha'emek's recovery plan will succeed and further losses are expected before
it can fully take effect.
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<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) Commitments
Due to the relative short term of commitments discussed in Note 12, their
contract value is considered to be their fair value.
(e) 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.
1995 1994
------------------ ----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
Financial assets:
Cash and cash equivalents.... $ 16,694 $ 16,694 $ 37,532 $ 37,532
Deposits, notes and loans
receivable.................. 72,973 71,993 94,248 93,186
Investments.................. 40,100 40,100 24,663 24,663
-------- -------- -------- --------
$129,767 $128,787 $156,443 $155,381
======== ======== ======== ========
Financial liabilities:
Deposits, notes and loans
payable..................... $ 68,127 $ 67,488 $ 44,063 $ 43,369
Debentures outstanding....... 78,889 81,476 84,491 85,650
-------- -------- -------- --------
$147,016 $148,964 $128,554 $129,019
======== ======== ======== ========
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 $679,000 a year for the years 1996 through 1998,
and $536,000 for 1999, and $553,000 for 2000 and $1.8 million in the aggregate,
thereafter. The leases expire in 2009, 1998 and 2000, respectively.
(b) For the years 1996 through 2000, the combined minimum lease receipts to be
received by the Company from rental properties are approximately $8.3 million in
1996 ($2.8 million from related parties); $7.9 million in 1997 ($2.3 million
from related parties); $7.8 million in 1998 ($2.1 million from related parties);
$8.0 million in 1999 ($2.1 million from related parties); $7.7 million in 2000
($1.6 million from related parties); and $62.5 million in the aggregate,
thereafter ($.2 million from related parties).
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<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(c) The Company has issued guarantees on bank loans to its investees and
subsidiaries totalling $13.5 million.
The Company's share of the commitments to its investees amounted to $24
million.
A consolidated subsidiary pledged all of its assets in the amount of
approximately $43 million to banks (including a related party) in order to
secure a mortgage and its debt to debenture holders.
(d) An appeal filed by Sonol, a subsidiary of the Company's investee, Granite,
together with appeals filed by Paz and Delek, the other two major fuel marketing
companies, against the June 1993 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 now pending in the District Court in Jerusalem.
The Controller of Restrictive Trade Practices, on December 14, 1995
amended the above ruling following a compromise agreement reached between Sonol
and Paz in their above mentioned appeals. Under the terms of the compromise
arrangement, Sonol will release 36 stations not subject to an "Accepted Leasing
Agreement" as defined in the arrangement and the Controller will rescind his
ruling regarding other stations in which Sonol is party to such an "Accepted
Leasing Agreement." The implementation of this arrangement is being contested in
the courts and has, thus, been suspended until a final decision is reached.
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, the Israeli Parlament.
A draft proposal of legislation by the Ministry of Energy and
Infrastructure regarding the term of exclusive contracts between the fuel
marketing companies and station owners has been forwarded to government
ministries, the President of the Supreme Court and law faculties for their
comments.
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 Granite in
particular.
(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 abandoned.
The Company's investees have taken the position, which the Company
believes is shared by many of the other affected taxpayers in Israel, that the
Commissioner's position in this matter is incorrect. The Company cannot predict
whether the Commissioner's position will be upheld or, if upheld, the effect on
the Company and its investees.
(f) In February 1995, Yakhin Hakal and its affiliates commenced a legal
proceeding in Tel Aviv District Court seeking to cause Etz Vanir Ltd. ("Etz
Vanir") and Yakhin Mataim
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<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ltd. ("Yakhin Mataim") to redeem the perpetual
debentures owned by Ampal for approximately $.7 million 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.
(g) It has recently been reported in the media that Israeli banks are the
subject of allegations that they engaged in improper business practices
regarding lending. The lending practices engaged in by two subsidiaries of the
Company which formerly were industrial development banks and a finance
subsidiary were substantially similar to the lending practices of the other
Israeli banks and, to that extent, the Company may be subjected to the same
possible claims. One claim in the amount of $.9 million has already been
asserted. It is too early to tell the extent of any additional claims which may
be asserted in this regard or the outcome of any such claims. However, to the
best of the Company's knowledge, the Company's subsidiaries, which operated as
banking institutions, acted within the law and in accordance with the procedures
and customs in effect at the time. The Company expects to vigorously defend the
claim which has been asserted, in the event it results in litigation and
believes that the applicable statute of limitations constitutes a bar to all but
a relatively small portion of the claim.
Note 13 - Subsequent Events
In February, 1996, Hapoalim, which, as of March 20, 1996, beneficially
owned 100% of Ampal's Common Stock and 50.3% of its Class A Stock, announced
that its Board of Directors had authorized it to conduct negotiations with the
Steinmetz Family ("STEINMETZ") with a view to reaching an agreement based on
Steinmetz's proposal to acquire a portion of Hapoalim's interest in Ampal at a
price that relects a valuation of Ampal which exceeds its current market value.
In addition, Hapoalim has proposed to Ampal that they enter into a
transaction to equalize the voting, dividend and liquidation rights of Ampal's
Common Stock with those of the Class A Stock. The proposed sale of the Class A
Stock and equalization are part of Hapoalim's effort to comply with Israeli
banking law by decreasing Hapoalim's holdings in and means of control over Ampal
to 25% or less by December 31, 1996.
Hapoalim has expressed its view that, in any such equalization, it should
be compensated for giving up its special voting rights as a holder of Common
Stock by receiving more than one share of Class A Stock or its equivalent in
exchange for each share of Common Stock. Hapoalim has also indicated that in the
event Hapoalim and Ampal are unable to agree on a mutually acceptable
equalization transaction, Hapoalim would consider selling the Common Stock.
Ampal's Board of Directors has formed a "Special Committee," consisting of
five outside directors, to consider Hapoalim's request to equalize the Common
Stock, and to negotiate, approve or disapprove any such transaction on Ampal's
behalf. The Special Committee has retained independent counsel and an
independent investment bank to advise it in connection with Hapoalim's proposal.
The Special Committee has not yet made any decision with respect to such
proposal.
Hapoalim is the Company's principal lender and members of the Hapoalim
group of companies, including Investment Company of Bank Hapoalim Ltd.,
sometimes invest jointly with the Company. Should these proposed transactions
occur, the Company is unsure of what effect the reduction of Hapoalim's interest
in Ampal will have on these relationships in the future.
In addition, Ampal may lose certain rights granted under a stockholder
agreement to select directors to the board of Granite Hacarmel Investments
Limited ("Granite") if Hapoalim no longer controls Ampal. If Ampal loses these
rights, Ampal may no longer be
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<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
able to account for its holdings in Granite under the equity method of
accounting if various warrants and debenture conversion rights to
purchase shares of Granite are exercised, thereby reducing the Company's
percentage ownership of Granite.
In addition, if Ampal is no longer controlled by Hapoalim, under the terms
of the Shareholders Agreement between Ampal and the other shareholder of Coral
World International Limited ("Coral World"), Ampal may be required to seek to
sell its shares of Coral World to an outside person (subject to a right of first
refusal by the other shareholder) or, failing that, to sell its shares to the
other shareholder at a price which shall be the greater of the book value or
seven times the previous year's earnings per share.
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<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
- ---------------------------------
(Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-----------------------------------------------------
(Dollars in thousands, except per share data)
Year Ended
December 31, 1995
- -----------------
Revenues.............. $ 19,609 $ 19,869 $ 20,125 $ 18,548 $ 78,151
Net interest (expense)
income............... (253) (917) (953) 129 (1,994)
Food processing and
manufacturing
operations .......... 746 (24) (1,181) (4,707) (5,166)
Net income (loss)..... 1,586 1,001 485 (906) 2,166
Earnings per Class A
share................ .06 .03 .02 (.03) .08
Year Ended
December 31, 1994
- -----------------
Revenues.............. $ 20,175 $ 17,371 $ 24,183 $ 19,214 $ 80,943
Net interest (expense)
income............... (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
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<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:
NAME POSITION
Shlomo Recht(1)................ Chairman of the Board and Director
Lawrence Lefkowitz(1).......... President, Chief Executive Officer and Director
Moshe Mor...................... Executive Vice President
Alan L. Schaffer............... Vice President-Finance and Treasurer
Alla Kanter.................... Vice President-Accounting and Controller
Michael K. Marks............... Vice President-Legal and Secretary
Miri Lent...................... Assistant Vice President-Israel Operations
Harry B. Henshel(2)(5)......... Class A Director
Herbert Kronish(5)............. Class A Director
Evelyn Sommer(2)(3)(5)......... Class A Director
Arie Abend(2).................. Director
Michael Arnon(1)............... Director
Stanley Batkin(1)(3)(5)........ Director
Yaacov Elinav(1)(4)............ Director
Irwin Hochberg(3)(5)........... Director
Shimon Ravid(4)................ Director
- ------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Related Party Transactions Committee
(4) Member of the Stock Option Committee
(5) Member of the Special Committee
SHLOMO RECHT, 54, 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 1988 until 1989,
and since March 1994, he has served as a director of Ampal.
LAWRENCE LEFKOWITZ, 58, has been President and Chief Executive Officer
of Ampal since November 1990. 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, 60, has been Executive Vice President of Ampal since December
1995. Prior thereto, he was Vice President-Israel Operations of Ampal for more
than five years.
ALAN L. SCHAFFER, 53, has been Vice President-Finance and Treasurer of
Ampal for more than five years.
ALLA KANTER, 38, has been Vice President-Accounting of Ampal since
September 1995 and Controller of Ampal for more than five years.
MICHAEL K. MARKS, 31, has been Vice President-Legal of Ampal since
September 1995 and Secretary of Ampal since December 1992. He has been employed
by Ampal since August 1992. From January 1992 until July 1992, he was an
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<PAGE>
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, 39, has been Assistant Vice President-Israel Operations of
Ampal for more than five years.
HARRY B. HENSHEL, 77, 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., a subsidiary of Ampal from 1982 until 1990.
He became a director of Ampal in 1993.
HERBERT KRONISH, 69, has been a Senior Partner of Kronish, Lieb, Weiner
& Hellman LLP 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.
EVELYN SOMMER, 56, 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, has been Chairman,
American Section of the World Jewish Congress, for more than five years and has
been Chairman, North American Section of the World Jewish Congress since January
1996. She became a director of Ampal in 1982.
ARIE ABEND, 58, has been a Joint Managing Director of Hapoalim since
February 1994 and Regional Manager, Western Hemisphere of Hapoalim since August
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, 70, 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. He became a director of Ampal
in 1986.
STANLEY I. BATKIN, 81, served on the Board of Directors of Ampal
Industries, Inc. 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, 51, has been a 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, 67, has been a Senior Partner and President of Bloom
Hochberg & Co., P.C., CPA's, which provides accounting, auditing and tax
services and 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.
SHIMON RAVID, 59, 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. He became a director of Ampal in 1990.
See "Certain Relationships and Related Transactions."
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<PAGE>
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, 1995.
<TABLE>
<CAPTION>
Name and Principal Other Annual All Other
Position Year Salary Bonus Compensation Compensation
- ----------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Lawrence Lefkowitz(1) 1995 $212,351 $16,335 $9,088 $26,055(3)
(President and 1994 204,351 8,710 24,619(4)
Chief Executive Officer) 1993 193,351 8,141 22,862(5)
Moshe Mor 1995 145,880 37,185 13,982(6)
(Executive Vice President) 1994 120,377 15,930(6)
1993 115,640 14,573 12,981(6)
Alan L. Schaffer 1995 142,250 10,942 16,467(7)
(Vice President-Finance 1994 136,750 14,413(5)
and Treasurer) 1993 130,000 13,510(5)
Miri Lent 1995 111,767 29,880 17,463(6)
(Assistant Vice President- 1994 93,777 14,749(6)
Israel Operations) 1993 97,021 8,821 14,756(6)
Shlomo Recht(2) 1995 114,633 10,455 13,337
(Chairman of the Board) 1994 79,174 7,662 9,333
1993
<CAPTION>
- ---------------------
<S> <C>
(1) Services of Mr. Lefkowitz are shared by Ampal and Hapoalim and Hapoalim
reimbursed Ampal $100,000 per year from August 1990 through December
1995. Beginning in January 1996, Hapoalim will reimburse Ampal $120,000
per year. Mr. Lefkowitz is employed pursuant to an employment agreement
expiring September 12, 1997, renewable thereafter automatically for
successive one-year terms unless one year's prior notice is given,
providing for the payment of salary which shall not be less than the
salary paid to him in 1992 and which salary is subject to annual review.
(2) Mr. Recht began employment with the Company in April 1994.
(3) Comprised of Ampal's contribution pursuant to: (i) Ampal's Pension Plan of $15,562; (ii) Ampal's
Supplementary Executive Retirement Plan of $9,993 and (iii) Ampal's Savings Plan of $500.
(4) 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.
(5) Comprised of Ampal's contribution pursuant to Ampal's Savings Plan of $500 and the remainder pursuant
to Ampal's Pension Plan, described below.
(6) Comprised of Ampal (Israel)'s contribution to its pension plan on behalf of Mr. Mor and Ms. Lent
(7) Comprised of Ampal's contribution pursuant to: (i) Ampal's Pension Plan of $15,562; (ii) Ampal's
Supplementary Executive Retirement Plan of $405 and (iii) Ampal's Savings Plan of $500.
</TABLE>
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<PAGE>
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised In-
Unexercised the-Money Options
Options at at Fiscal-Year End
Name Fiscal Year-End ($)
- ---- ------------------------------- --------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Lawrence Lefkowitz 0 16,000 0 0
Moshe Mor 0 15,150 0 0
Alan L. Schaffer 0 13,000 0 0
Miri Lent 0 11,500 0 0
Shlomo Recht 0 0 0 0
</TABLE>
(1) No options were granted to or exercised by any named executive officer
during 1995.
Other Compensation
Directors of Ampal who are not employees of the Company or of its parent
company 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
collective bargaining 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").
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<PAGE>
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 (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 1995
was limited under the Code to $9,240. For each plan year up to and including
1995, Ampal matched 50% of each employee's contribution up to a maximum matching
contribution of $500 for each participant. Effective January 1, 1996, the
Savings Plan was amended so that Ampal matches 50% of each employee's
contribution up to a maximum of 3% of the employee's compensation. This
amendment also provides that employees who are eligible to participate in the
Savings Plan as of December 31, 1995 are 100% vested at all times in the account
balances maintained in their 401(k) savings account and that employees who
become eligible to participate in the Savings Plan on or after January 1, 1996,
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 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
-68-
<PAGE>
directors of Ampal, must not be exercisable prior to the second anniversary of
their date of grant. Options granted to non-employee directors of Ampal shall be
exercisable immediately upon grant. The terms of options granted under the Stock
Option Plan may not exceed five years.
The aggregate fair market value, determined at the date of grant, of
shares that may first become exercisable in any calendar year under all ISOs
granted to any one employee under any plans of Ampal or a subsidiary may not
exceed $100,000.
In January 1994, pursuant to the Stock Option Plan, Non-ISO Options to
purchase 134,900 Class A shares were granted to employees, officers, and
directors of Ampal and certain subsidiaries of Ampal. No stock options were
granted under the Stock Option Plan during 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, members of the Executive Committee of the
Board of Directors which functions as the compensation committee of the
Company included: Mr. Arnon, formerly Chairman of the Board of Ampal; Mr.
Lefkowitz, President and Chief Executive Officer of Ampal and Counsel to
Hapoalim; Mr. Stanley I. Batkin; Mr. Yaacov Elinav, Senior Deputy Managing
Director of Hapoalim; and Mr. Shlomo Recht, Chairman of the Board of
Ampal. 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 AMPAL
The following tables set forth information as at March 20, 1996 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 20, 1996, there were issued and
outstanding 20,497,124 shares of Class A Stock and 3,000,000 shares of Common
Stock. In addition, there were issued and outstanding 1,042,552 non-voting
shares of 6-1/2% Preferred Stock (each convertible into three shares of Class A
Stock) and 197,540 non-voting shares of 4% Preferred Stock (each convertible
into five shares of Class A Stock).
-69-
<PAGE>
<TABLE><CAPTION>
Certain Beneficial Owners
Name and Address Amount and Nature Percent
of Beneficial Owner Title of Class of Beneficial Ownership of Class(1)
- ------------------ -------------- ----------------------- -----------
<S> <C> <C> <C>
Bank Hapoalim B.M. Class A Stock 10,500,991 shs.(2) 50.3%(2)
50 Rothschild Blvd. Common Stock 3,000,000 shs. 100%
Tel Aviv, Israel
Atad Hevra Lehashkaot
Limited Class A Stock 10,500,991 shs.(3) 50.3%(3)
50 Rothschild Blvd.
Tel Aviv, Israel
</TABLE>
- -------------
(1) Based upon number of shares outstanding as of March 20, 1996.
(2) These shares represent all of the shares owned by Atad Hevra Lehashkaot
Limited described below. Assumes conversion of 122,536 shares of 6-1/2%
Preferred Stock and 3,350 shares of 4% Preferred Stock.
(3) As reported by Bank Hapoalim B.M. on Form 5 - Annual Statement of Changes
in Beneficial Ownership filed dated February 14, 1996 with the Securities
and Exchange Commission. Bank Hapoalim B.M. changed the nature of its
beneficial ownership of such shares from direct to indirect by transferring
ownership of such shares to this wholly-owned Israeli corporation. 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 20, 1996 as to each
class of equity securities of Ampal, its parent or any of its subsidiaries
beneficially owned by each director and each executive officer of Ampal listed
in the Summary Compensation Table and by all directors and executive officers of
Ampal as a group. The directors and executive officers of Ampal individually and
as a group do not own in excess of 1% of any class of the equity securities of
Ampal, its 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:
Ampal-American Israel Corporation
---------------------------------
CLASS A STOCK
------------- Amount and Nature
Name of Beneficial Ownership
---- -----------------------
Michael Arnon 7,500(1)
Stanley I. Batkin 10,000(2)
Harry B. Henshel 22,000(2) (3)
Irwin Hochberg 3,000(4)
Herbert Kronish 1,000
Lawrence Lefkowitz 48,375(5)
Miri Lent 11,500(6)
Moshe Mor 16,150(7)
Shlomo Recht 2,000
Alan L. Schaffer 13,000(8)
Evelyn Sommer 5,000(2)
All Directors and Executive Officers as a Group 154,025(3)(9)
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<PAGE>
WARRANTS TO PURCHASE
CLASS A STOCK
- -------------------- Amount and Nature
Name of Beneficial Ownership
---- ------------------------
Harry B. Henshel 14,000
All Directors and Executive Officers as a Group 14,500
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 Executive Officers as a Group 774,410
- -------------
(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 Warrants to purchase 14,000 shares of Class A Stock issuable upon
the exercise of currently exercisable Warrants.
(4) Includes 1,000 shares held of record by Mr. Hochberg's wife.
(5) Includes 23,100 shares of Class A Stock held by a trust under an estate as
to which Mr. Lefkowitz is co-personal representative and options to
purchase 16,000 shares of Class A Stock issuable upon the exercise of
currently exercisable stock options.
(6) Includes options to purchase 11,500 shares of Class A Stock issuable upon
the exercise of currently exercisable stock options.
(7) Includes options to purchase 15,150 shares of Class A Stock issuable upon
the exercise of currently exercisable stock options.
(8) Includes options to purchase 13,000 shares of Class A Stock issuable upon
the exercise of currently exercisable stock options.
(9) Includes options to purchase 91,150 shares of Class A Stock issuable upon
the exercise of currently exercisable stock options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The Board of Directors of Ampal maintains a Related Party Transactions
Committee comprised of independent directors which 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. 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.
-71-
<PAGE>
Hapoalim has recently proposed to Ampal that they enter into a
transaction to equalize the rights of Ampal's Common Stock with those of the
Class A Stock. A Special Committee of the Board of Directors of Ampal was
formed. See "Significant Developments Since Beginning of Last Fiscal Year -
Hapoalim's Proposed Sale of Class A Stock and Equalization of Common Stock."
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 from Hapoalim and its subsidiaries. During 1995 the
largest amount of such indebtedness outstanding at any one time was $50,012,000.
The amount of interest expense paid by the Company to Hapoalim was $4,276,000.
Additionally, the Company maintains deposits with and makes loans to Hapoalim
and its subsidiaries. The largest amount of such deposits and loans at any one
time during 1995 was $79,281,000 and interest income thereon was $8,182,000. As
of December 31, 1995, the amount of borrowings from Hapoalim and its
subsidiaries was $48,513,000 and the amount of deposits with and loans to
Hapoalim and its subsidiaries was $68,133,000. Ampal is the beneficiary of a $2
million committed line of credit from Hapoalim which expires in October 1996.
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.
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 1995, Hapoalim reimbursed Ampal $100,000 for
the services of Mr. Lefkowitz under the arrangement. In 1996, Hapoalim will
reimburse Ampal $120,000 for these services.
In August 1995, the Company sold its Ordinary Shares and 7% Preferred
Shares of Bank Hapoalim (Cayman) Ltd., which constituted 49% and 50% of each
series, respectively, to Hapoalim. The sales price was $20.3 million, which was
slightly in excess of the Company's carrying value for its investment. Ampal
obtained an opinion from an independent investment consultant that the
consideration received in the sale was fair to Ampal.
In November 1995, Ampal sold its property located at 174 North Michigan
Avenue, Chicago, Illinois to an unrelated party for $850,000. In connection
therewith, Ampal received $550,000 from Hapoalim and Ampal, as landlord, and
Hapoalim, as tenant, released each other from their respective obligations,
under a lease which was scheduled to expire in 2007. Ampal obtained an opinion
from an independent real estate consultant that the consideration received from
Hapoalim was fair to Ampal. In 1995, Ampal received $119,000 as rental payment
for those premises.
For additional information regarding transactions between the Company
and Hapoalim, see "Business Real Estate, Finance and Other Holdings - Ampal
Realty Corporation" and "Item 2. Property."
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<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:
<TABLE>
<CAPTION>
Page
Reference*
----------
(1) Financial Statements and Supplementary Data
Ampal-American Israel Corporation and Subsidiaries
<S> <C>
Report of Independent Public Accountants...................... 41
Consolidated Statements of Income for the years
ended December 31, 1995, 1994 and 1993.................... 42
Consolidated Balance Sheets as at
December 31, 1995 and 1994................................ 43
Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1994 and 1993.............. 45
Consolidated Statements of Changes in
Shareholders' Equity for the years
ended December 31, 1995, 1994 and 1993.................... 47
Notes to Consolidated Financial Statements.................... 49
Supplementary Data:
Selected quarterly financial data for the years
ended December 31, 1995 and 1994.......................... 63
(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, 1995....................... 78
(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........................ 79
Consolidated Balance Sheets as at
December 31, 1995, and 1994............................... 81
Consolidated Statements of Income for the
years ended December 31, 1995, 1994 and 1993.............. 83
Consolidated Statements of Shareholders'
Equity for the years ended
December 31, 1995, 1994 and 1993.......................... 84
Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1994 and 1993.............. 85
Notes to Consolidated Financial Statements.................... 89
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(iii) Reports of Other Certified Public Accountants filed pursuant to
Rule 2-05 of Regulation S-X:
AM-HAL Ltd.................................................... 133
Ampal Engineering (1994) Ltd.................................. 134
Ampal Enterprises Ltd......................................... 136
Ampal Financial Services Ltd.................................. 138
Ampal Holding (1991) Ltd...................................... 140
Ampal Industries (Israel) Ltd................................. 142
Ampal (Israel) Ltd............................................ 144
Ampal Properties Ltd.......................................... 146
Bank Hapoalim (Cayman) Ltd.................................... 148
Bay Heart Ltd................................................. 150
Carmel Containers Systems Limited............................. 152
Carmel Containers Systems Limited (U.S. Dollars).............. 154
Country Club Kfar Saba Limited................................ 156
Davidson-Atai Publishers Ltd. (Special Purpose)............... 158
Epsilon Investment House Ltd.................................. 160
Hapoalim (Latin America) Casa Bancaria S.A.................... 161
Hod Hasharon Sport Center (1992) Limited
Partnership................................................ 163
M.D.F. Industries Ltd......................................... 165
Mivnat Holdings Ltd........................................... 166
Moriah Hotels Ltd............................................. 167
Nir Ltd....................................................... 168
Ophir Holdings Ltd............................................ 170
Orlite Industries (1959) Ltd.................................. 171
Orlite Industries (1959) Ltd. (U.S. Dollars).................. 172
Paradise Mattresses (1992) Ltd. .............................. 173
Pri Ha'emek (Canned and Frozen Food) 88 Ltd................... 175
Red Sea Marineland Holding (1973) Ltd......................... 177
Red Sea Underwater Observatory Ltd............................ 178
Renaissance Investment Co. Ltd................................ 179
Shmey-Bar Real Estate 1993 Ltd................................ 180
Shmey-Bar (T.H.) 1993 Ltd..................................... 182
The Snow and Cool Palace (Limited Partnership)................ 183
Teledata Communication Ltd.................................... 184
Trinet Investment in High-Tech Ltd............................ 185
Trinet Venture Capital Ltd.................................... 186
U.D.S.-Ultimate Distribution Systems Ltd...................... 188
(3) List of Exhibits (separately bound)
Exhibit 3 - Articles of Incorporation and By-Laws
3a. --Restated Certificate of Incorporation dated December 23,
1982. E-1
3b. --Certificate of Correction of Certificate of Amendment to the
Certificate of Incorporation dated December 27 1982. E-14
3c. --Certificate of Amendment of the Certificate of Incorporation
dated March 17, 1983. E-16
3d. --Certificate of Amendment of the Certificate of Incorporation
dated July 14, 1988. E-23
3e. --Certificate of Amendment of the Certificate of Incorporation
dated November 30, 1995. E-25
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
Reference*
<S> <C>
3f. --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 November 1, 1984 (filed
as Exhibit 4a to Registration Statement No.
2-88582 and incorporated herein by reference).
4b. --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. --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).
10c. --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).
10d. --Agreement dated February 7, 1992 between and
Inerta-Energies 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).
10e. --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).
10f. --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).
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
Reference*
----------
<S> <C>
10g. --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).
10h. --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).
10i. --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).
10j. --Agreement dated March 30, 1994 between Investment
Company of Bank Hapoalim Ltd., Ampal (Israel) Ltd. and Ampal
Industries (Israel) Ltd. [Translation]. (filed as Exhibit
10l to Form 10-K for the fiscal year ended December 31, 1994
and incorporated herein by reference. File No. 0-538)
10k. --Agreement of Sale and Purchase, dated April 12, 1995
between Massachusetts Mutual Life Insurance Company
and Ampal Realty Corporation (filed as Exhibit (1) to
Form 8-K, dated June 28, 1995, and incorporated herein
by reference.
File No. 0-538).
10l. --Amendment dated June 12, 1995 to Exhibit 10l (filed as
Exhibit (2) to Form 8-K, dated June 28, 1995 and
incorporated herein by reference. File No. 0-538)
10m. --Agreement dated August 15, 1995 by and among Ampal-
American Israel Corporation and Bank Hapoalim B.M. E-27
Exhibit 11 -- Statement re Computation of earnings per share................ E-29
Exhibit 12 -- Statements re Computation of Ratios........................... E-30
Exhibit 21 -- Subsidiaries of the Registrant................................ E-31
Exhibit 23 -- Consents of Auditors:
AM-HAL Ltd.................................................... E-32
Ampal-American Israel Corporation............................. E-33
Ampal Engineering (1994) Ltd.................................. E-34
Ampal Enterprises Ltd......................................... E-35
Ampal Financial Services Ltd.................................. E-36
Ampal Holding (1991) Ltd...................................... E-37
Ampal Industries (Israel) Ltd................................. E-38
Ampal (Israel) Ltd............................................ E-39
Ampal Properties Ltd.......................................... E-40
Bank Hapoalim (Cayman) Ltd.................................... E-41
Bay Heart Ltd................................................. E-42
Carmel Containers Systems Limited............................. E-43
Country Club Kfar Saba Limited................................ E-44
Davidson-Atai Publishers Ltd.................................. E-45
Epsilon Investment House Ltd.................................. E-46
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Granite Hacarmel Investments Limited.......................... E-47
Hapoalim (Latin America) Casa Bancaria S.A.................... E-48
Hod Hasharon Sport Center (1992) Ltd. Partnership............. E-49
M.D.F. Industries Ltd......................................... E-50
Mivnat Holdings Ltd........................................... E-51
Moriah Hotels Ltd............................................. E-52
Nir Ltd....................................................... E-53
Ophir Holdings Ltd............................................ E-54
Orlite Industries (1959) Ltd.................................. E-55
Paradise Mattresses (1992) Ltd................................ E-56
Pri Ha'emek (Canned and Frozen Food) 88 Ltd................... E-57
Red Sea Marineland Holding (1973) Ltd......................... E-58
Red Sea Underwater Observatory Ltd............................ E-59
Renaissance Investment Co. Ltd................................ E-60
Shmey-Bar Real Estate 1993 Ltd................................ E-61
Shmey-Bar (T.H.) 1993 Ltd..................................... E-62
The Snow and Cool Palace (Limited Partnership)................ E-63
Teledata Communication Ltd.................................... E-64
Trinet Investment in High-Tech Ltd............................ E-65
Trinet Venture Capital Ltd.................................... E-66
U.D.S.-Ultimate Distribution Systems Ltd...................... E-67
Exhibit 25 -- Powers of Attorney............................................ E-68
</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, 1995.
* Page references preceded by the letter "E" refer to the separately bound
volume of exhibits.
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<PAGE>
REPRESENTATIVE RATES OF EXCHANGE
BETWEEN THE U.S. DOLLAR AND THE NEW ISRAELI SHEKEL
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
-------------------------------------------
The following table shows the amount of New Israeli Shekels equivalent to
one U.S. Dollar on the dates indicated:
1995 1994 1993
-------------------------
March 31 2.968 2.969 2.768
June 30 2.951 3.033 2.805
September 30 2.995 3.013 2.864
December 31 3.135 3.018 2.986
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<PAGE>
Certified Public Accountants (Isr) [ISRAEL ADDRESS]
- --------------------------------------------------------------------------------
Somekh Chaikin [LOGO]
Haifa, February 26, 1996
Independent Auditor's Report to the Shareholders of Granite Hacarmel
Investments Limited
We have audited the consolidated balance sheets of Granite Hacarmel
Investments Limited and its subsidiaries ("the Company") as at December 31,
1995 and 1994, the related statements of income and shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1995, 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 in Israel, including those prescribed under the
Auditors Regulations (Auditor's Mode of Performance), 1973 and in
accordance with U.S. GAAS and accordingly we have performed such auditing
procedures as we considered necessary in the circumstances. These standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement
presentations. We believe that our audits provide a reasonable basis for
our opinion.
The above statements have been prepared on the basis of historical cost as
adjusted for the changes in the general purchasing power of the Israel
currency in accordance with opinions issued by the Institute of Certified
Public Accountants in Israel.
We did not audit the financial statements of a consolidated subsidiary,
whose statements reflect total assets and total revenues constituting 4%
and 2.7% (1994 - 3.8% and 2.8%), 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, 1995 and 1994, 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, 1995, in conformity with
generally accepted accounting principles.
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<PAGE>
The consolidated financial statements, stated in U.S dollars in accordance
with U.S generally accepted accounting principles, are translated according
to the principles prescribed by Statement of Financial Accounting Standards
No. 52 (F.A.S.B 52). Those statements are based on historical nominal
amounts and are included in Note 31. to the financial statements.
Without qualifying our opinion we would like to bring to attention Note 28
to the financial statements regarding judicial proceedings concerning the
ruling by the controller of restrictive trade practices, a proposed law
dealing with the shortening of the periods of exclusive agreements entered
into by a subsidiary company and filling station operators and the
legislation proposed by the Ministry of Energy dealing with the fuel
market. 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.
/s/ Somekh Chaikin
Certified Public Accountants (Israel)
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<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
Adjusted to the Index of December 1995
--------------------------------------
N
o Adjusted NIS. (thousands)
-------------------------
t December 31, December 31,
------------ -----------
e 1995 1994
- ---- ----
Current assets
- --------------
Cash and cash equivalents 18,504 6,554
Marketable securities 4 214 5,171
Short-term deposit - 32,570
Compulsory government loan 4.A. 564 669
Accounts receivable and debit balances 5 386,566 422,271
Inventories 6 286,379 333,109
--------- -------
692,227 800,344
--------- -------
Long-term investments,
loans, and debit balances
Subsidiaries, affiliated
companies and others 7 58,757 69,983
Long-term loans 8 20,975 16,739
Compulsory government loan 210 718
--------- -------
79,942 87,440
--------- -------
Fixed assets 9
Property, plant and equipment 1,047,463 973,263
Less: Accumulated depreciation 518,422 467,222
--------- -------
529,041 506,041
--------- -------
Other assets and deferred charges, net 10 18,300 17,553
--------- -------
--------- -------
1,319,510 1,411,378
========= =========
-3-
-81-
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
Adjusted to the Index of December 1995
--------------------------------------
N
o Adjusted NIS. (thousands)
-------------------------
t December 31, December 31,
------------ -----------
e 1995 1994
- ---- ----
Current liabilities
-------------------
Short-term bank credit 11 141,977 173,536
Loans from others 12 - 5,389
Accounts payable 13 138,634 138,991
Current portion of
convertible debentures 15 36,482 11,609
Other liabilities and credit balances 14 63,180 66,371
Dividend declared - 43,100
--------- ---------
380,273 438,996
--------- ---------
Long-term liabilities
---------------------
Long-term loans 15 7,520 8,280
Debentures convertible into
shares of the company 15 207,836 252,341
Debentures convertible into
shares of a subsidiary 15 3,681 5,543
Customers' deposits 16 56,567 57,741
Liabilities for post-retirement
benefits, net 17 7,629 8,823
Deferred taxes, net 18 5,155 10,876
Capital notes issued by
a consolidated company 284 308
--------- ---------
288,672 343,912
--------- ---------
Minority interest 8,325 8,066
------------------ --------- ---------
Collaterals, commitments and contingent
---------------------------------------
liabilities 27,28
-----------
Shareholders' equity 642,240 620,404
-------------------- --------- ---------
1,319,510 1,411,378
========= =========
/s/ J. Rosen
- --------------------------------
J. Rosen - Chairman of the Board
/s/ M. Mor
- --------------------------------
M. Mor - Director
/s/ M. Erez
- --------------------------------
M. Erez - Managing Director
Date: February 26, 1996.
The accompanying notes are an integral part of the financial statements.
-4-
-82-
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
Adjusted to the Index of December 1995
--------------------------------------
N
o Adjusted NIS. (thousands)
-------------------------
t Year ended December 31,
-----------------------
e 1995 1994 1993
- ---- ---- ----
Sales 2,441,541 2,146,472 2,130,694
Less: Government imposts 847,768 817,851 762,634
--------- --------- ---------
Net sales 1,593,773 1,328,621 1,368,060
Cost of sales 22 1,266,140 1,031,074 1,085,936
--------- --------- ---------
Gross profit 327,633 297,547 282,124
--------- --------- ---------
Selling and marketing expenses 23 183,655 174,801 168,203
General and administrative expenses 24 49,113 41,766 42,823
--------- --------- ---------
232,768 216,567 211,026
--------- --------- ---------
Income from operations 94,865 80,980 71,098
--------- --------- ---------
Financing (expenses) income, net 25 (13,114) (9,971) 10,364
Other income, net 3,815 5,963 3,149
--------- --------- ---------
(9,299) (4,008) 13,513
--------- --------- ---------
Income before taxes on income 85,566 76,972 84,611
Taxes on income 26 35,976 22,791 30,958
--------- --------- ---------
Income after taxes on income 49,590 54,181 53,653
Company's share in (loss) income
of affiliates, net (2,795) 738 1,075
Minority interest in income
of consolidated subsidiaries (568) (318) (547)
--------- --------- ---------
Net income 46,227 54,601 54,181
========= ========= =========
Earnings per ordinary share (in adjusted NIS.):
Primary 0.38 0.45 0.45
===== ===== =====
Fully diluted 0.25 0.19 0.28
===== ===== =====
The accompanying notes are an integral part of the financial statements.
-5-
-83-
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
Adjusted to the Index of December 1995
--------------------------------------
Adjusted NIS. (thousands)
--------------------------------------------
Capital Premium Retained
Earnings Total
------- ------- -------- -----
Balance as at January 1, 1993 178,851 88,394 341,277 608,522
Changes in 1993:
Net income for the year - - 54,181 54,181
Proceeds from exercise
of stock options 501 1,850 - 2,351
Dividend declared, net (*) - - (73,924) (73,924)
------- ------- ------ ------
Balance as at December 31, 1993 179,352 90,244 321,534 591,130
Changes in 1994:
Net income for the year - - 54,601 54,601
Conversion of debentures
into shares 2,814 13,284 - 16,098
Dividend declared, net (*) - - (41,425) (41,425)
------- ------- ------ -----
Balance as at December 31, 1994 182,166 103,528 334,710 620,404
Changes in 1995:
Net income for the year - - 46,227 46,227
Dividend paid, net (*) - - (24,391) (24,391)
------- ------- ------ -----
Balance as at December 31, 1995 182,166 103,528 356,546 642,240
======= ======= ======= =======
(*) Net of erosion of dividend declared in previous year.
The accompanying notes are an integral part of the financial statements.
-6-
-84-
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW
------------------------------------
Adjusted to the Index of December 1995
--------------------------------------
Adjusted NIS. (thousands)
----------------------------
Year ended December 31,
----------------------------
1995 1994 1993
---- ---- ----
Cash flows from operating activities
- ------------------------------------
Net income 46,227 54,601 54,181
Adjustments to reconcile net income
to operating cash flows (A): 96,618 79,591 11,844
------- ------- -------
Net cash provided by operating activities 142,845 134,192 66,025
------- ------- -------
Cash flows from investing activities
- ------------------------------------
Acquisition of fixed assets (76,815) (90,048) (72,648)
Investment grant - 546 198
Proceeds from sale of fixed assets 1,590 3,124 1,778
Dividend received from affiliates - - 928
Loan granted to an affiliated company - (11,763) -
Long-term loans granted (1) (3,087) (1,912) (2,665)
Collection of long-term loans 6,230 5,979 10,825
Investment in other assets and deferred charges (5,034) (2,765) (3,729)
Payment on account of investment in
an affiliated company (5,170) - (18,965)
Proceeds from redemption of compulsory
government loan 669 702 710
Proceeds from (investments in)
marketable securities, net 5,093 6,727 (13,102)
Proceeds from (investment in) short-term deposit 33,692 (32,431) -
Investment in capital note of an affiliated
company - (6,792) -
Repayment of part of an investment in an
affiliated company - 438 -
Reduction of investments in
companies by dividend received - 6,248 -
Acquisition of an affiliated company - (91) -
Repayment of capital notes from interested
parties 28,023 - -
Acquisition of an initially
consolidated company (B) 2 - -
------- ------- -------
Net cash used for investing activities (14,807) (122,038) (96,670)
128,038 12,154 (30,645)
C/F ------- ------ -------
-7-
-85-
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND S UBSIDIARIES
------------------------------------------ -----------
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
------------------------------------------------
Adjusted to the Index of December 1995
--------------------------------------
<TABLE><CAPTION>
Adjusted NIS. (thousands)
----------------------------
Year ended December 31,
----------------------------
1995 1994 1993
---- ---- ----
B/F 128,038 12,154 (30,645)
------- ------ --------
Cash flows from financing activities:
- -------------------------------------
<S> <C> <C> <C>
Dividend paid (67,491) (72,560) (24,464)
Dividend paid to minority shareholders
in a consolidated subsidiary (309) (125) (265)
Short-term credit from banks, net (31,513) 67,515 (22,990)
Short-term loans from others, net (5,389) (4,681) (6,269)
Long-term loans received (4) - 301 -
Long-term loans repaid (2)(3) (1,244) (995) (1,373)
Redemption of capital notes issued
by a consolidated company - (2,540) -
Customers' deposits received 1,723 1,779 2,574
Customers' deposits repaid (711) (1,041) (1,522)
Redemption of debentures (11,154) - -
Exercise of options for
shares of the Company - - 2,351
Exercise of options for
debentures of the Company, net - - 69,058
Expenses regarding conversion
of debentures into shares (5) - (28) -
------- ------ -------
Net cash provided by (used for)
financing activities (116,088) (12,375) 17,100
------- ------ -------
Increase (Decrease) in cash and
cash equivalents 11,950 (221) (13,545)
Cash and cash equivalents at beginning of year 6,554 6,775 20,320
Cash and cash equivalents at end of year 18,504 6,554 6,775
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
-8-
-86-
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
------------------------------------------------
Adjusted to the Index of December 1995
--------------------------------------
<TABLE><CAPTION>
Adjusted NIS. (thousands)
---------------------------
Year ended December 31,
---------------------------
1995 1994 1993
---- ---- ----
(A)
Adjustments to reconcile net
- ----------------------------
income to operating cash flows:
- -------------------------------
<S> <C> <C> <C>
Income and expenses not requiring cash flows -
Depreciation and amortization 57,586 53,891 51,663
Deferred taxes, net (6,531) (5,034) (1,068)
(Decrease) Increase in accrued employee
post-retirement benefits, net (1,504) 3,397 (746)
Minority interest in income of
consolidated subsidiaries 568 318 547
Company's share in undistributed
loss of affiliates, net 4,495 924 321
Income from decrease in holding in
a consolidated subsidiary pursuant to
conversion of its debentures into shares - (559) -
Capital gains (397) (1,078) (183)
Erosion of investments in capital notes, net (411) 1,088 88
Erosion of long-term loans,
debentures and capital notes issued (10,482) (35,180) (7,471)
Erosion of loans granted 659 (73) (148)
(Increase) Decrease in value of compulsory
Government loan and securities, net (192) 1,340 (302)
Erosion of customers' deposits (2,186) (7,973) (15,768)
Erosion of short-term deposit (1,122) (138) -
Partial write-off of investment in
an affiliated company 3,000 - -
Changes in assets and liabilities -
Decrease (Increase) in accounts receivable
and debit balances (1)(2)(3) 12,739 (5,348) (79,451)
Decrease in inventories 46,925 41,628 127,345
(Decrease) Increase in accounts payable,
other liabilities and credit balances (4) (6,529) 32,388 (62,983)
------ ------ ------
96,618 79,591 11,844
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
-9-
-87-
<PAGE>
GRANITE HACARMEL INVESTMENTS LIMITED AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
------------------------------------------------
Adjusted to the Index of December 1995
--------------------------------------
Adjusted NIS. (thousands)
----------------------------
Year ended December 31,
---------------------------
1995 1994 1993
---- ---- ----
(B)
Acquisition of an initially
- ---------------------------
consolidated company
- --------------------
Assets and liabilities of the
said company as at the acquisition date:
Working capital (not including
cash and cash equivalents) (86) - -
Fixed assets, net (677) - -
Long-term debt, net 765 - -
Reserve for the loss of the affiliated
company as of the day of changeover to
a consolidated company 367 - -
Goodwill (367) - -
---- ---- ----
2 - -
==== ==== ====
Activities not requiring cash flow:
(1) In 1995, current receivables from customers were converted into long-term
loans in the amount of NIS. 9,855 thousand (1994 - NIS. 2,689 thousand,
1993 - NIS. 3,684 thousand).
(2) In 1994, a loan received from an affiliated company in the amount of NIS.
698 thousand was offset against a receivable from an affiliated company.
(3) In 1993, a long-term loan received from a customer in the amount of NIS.
4,099 thousand was offset against the debt of the customer.
(4) In 1993, a long-term loan received from an affiliated company in the amount
of NIS. 5,567 thousand was offset against the credit balance of the
affiliated company.
(5) In 1994, 11,473,515 debentures (series 2) were converted into 2,294,703
ordinary shares (Notes 15.B.). In 1995, 110 debentures were converted to 20
ordinary shares.
The accompanying notes are an integral part of the financial statements.
-10-
-88-
<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
1995 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 1995 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 1995, based on the Consumer Price Index published by
the Central Bureau of Statistics ("Index"), on January 15, 1996 (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 1995. 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.
-11-
-89-
<PAGE>
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS IN ADJUSTED VALUES (CONTINUED)
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 nominal 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.
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 1995 index.
-12-
-90-
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES
A. Principles of consolidation
---------------------------
1. The consolidated financial statements of the Company include the
consolidated financial statements of the Company and its
subsidiaries. The list of subsidiaries which are included in the
consolidated financial statements and the percent ownership and
control therein are included in a separate schedule to the
financial statements.
2. Intercompany balances and transactions of consolidated companies
have been eliminated.
B. Investments in subsidiary and affiliated companies
--------------------------------------------------
1. The investments in subsidiaries and affiliated companies 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.
C. Valuation of inventories
------------------------
1. Inventory of crude oil and refined products
-------------------------------------------
The major part of the crude oil and refined product inventories
of the wholly-owned subsidiary, Sonol Israel Limited ("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).
-13-
-91-
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
1. 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
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.
-14-
-92-
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
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
Index, are stated according to the linkage conditions applying to
each balance.
The Index, the exchange rates and the rate of changes therein
were as follows:
December 31, Changes in %
------------------ -------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
Index 313.3 289.8 253.2 8.1 14.5 11.2
Exchange rate of
the U.S. dollar 3.135 3.018 2.986 3.9 1.1 7.1
2. Income and expenses in foreign currencies or linked thereto are
included in the appropriate items of the statements of income
based on the exchange rate in effect when such items were
recorded.
3. Exchange rate or linkage differences resulting from the
adjustment of assets and liabilities in foreign currency or of
assets and liabilities linked to the Index are included in the
statements of income in the appropriate items at the time
incurred.
H. Investments
-----------
1. Government loan
---------------
The investment in a Government Loan is reflected at its present
discounted value as calculated in accordance with directions
specified in the opinions of the Institute of Certified Public
Accountants in Israel. The change in the value of the Government
loan is included in the statement of income.
2. Marketable Securities
---------------------
The marketable securities are carried at their market value on
the date of the balance sheet. The changes in the value of the
securities are reflected in the statement of income.
-15-
-93-
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
3. Investment in 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%. (As of December 31, 1995 the investment in
capital notes is reflected at its full value in "Accounts
receivable and debit balances").
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 26.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 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.
-16-
-94-
<PAGE>
NOTE 2 - SIGNIFICANT REPORTING AND ACCOUNTING POLICIES (CONTINUED)
K. Recognition of income
---------------------
1. Products sales - Income from the sale of products is recorded
upon dispatch to the customer.
2. Rental income - Rental income is recorded upon receipt of
payment, proportionately to the relevant period.
L. Provision for linkage increments on customers' deposits
-------------------------------------------------------
The wholly-owned subsidiary, Supergas Israel Gas Distribution Company
Ltd. ("Supergas") is obligated under a Government decree to pay
customers terminating their gas purchasing agreement an amount equal
to the latest approved deposit authorized by the Ministry of Trade and
Industry, together with linkage increments from the date of the last
approval to the date of payment. In periods subsequent to the last
approval, Supergas provides for amending 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 of the options.
2. Fully diluted earnings
----------------------
The fully diluted earnings per share are computed on the basis of
the computation of the primary earnings per share taking into
consideration theoretical conversion of the convertible
securities subject to an anti dilutive test as stated in the
aforementioned Opinion.
N. 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" with a bank by
which it acquired U.S. dollars bearing interest at flexible
rates, against an unlinked shekel loan, bearing interest at
flexible rates. The transaction may be closed at any time by
netting the liability against the asset. The accumulated effect
of the transaction is reflected in the statements of income.
-17-
-95-
<PAGE>
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.
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 former Price
Structure Agreement remained in force.
The Reform, which was enacted as of August 8, 1988, is being
implemented in stages. 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.
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. In accordance with a government decision
in 1991 a further reduction of Emergency inventories was
implemented in the current year.
The implementation of the first stage of the Reform resulted in
increased competition and, as a result, had an impact on
quantities sold and caused an increase in discounts granted and
expanded customer credit.
3. Beginning in December 1992, Government price controls were lifted
from fuel products sold outside public stations. As of July 1993
government retail price controls were lifted from fuel products
marketed through public stations with the exception of benzine 95
and 96 octane and, as of October 1993, government wholesale price
controls were lifted from the maximum price of benzine 95 and 96
octane sold to public stations.
-18-
-96-
<PAGE>
NOTE 3 - ACCOUNTING WITH THE FUEL AUTHORITY AND THE REFORM FOR THE ENERGY SECTOR
(CONTINUED)
4. In October 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.
5. In 1995, the Minister of Energy and Infrastructure appointed a
committee which will consider various alternatives to the present
structure for the holding of Emergency Stocks of crude oil and
refined petroleum products in the economy and which will submit
the recommended alternative. The Company is not aware of the
committee's recommendations. In the the Company's opinion, no
negative effect on Sonol's financial position or on its
profitability is expected as a result of the committee's
deliberations and decisions.
6. On September 1, 1995 the Government published a decree the
purpose of which is to regulate infrastructure rates in the fuel
economy-decree for the Stability of Products and Services
(Temporary Order) (Infrastructure Rates in the Fuel Economy)
1995.
The decree establishes, inter alia, the various types of
infrastructure services and the maximum prices allowed, as well
as the method for updating the prices.
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.
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. In January 1995,
a convention was signed between the Ministry of Energy and
several gas companies, among them Supergas, establishing
standards of service to their clients. In May 1995, price
controls in effect on the price of gas were lifted. Concurrently,
the companies who are parties to the convention have undertaken
not to deviate, when setting their prices to the consumer, from
an agreed upon formula for an interim period of two years.
-19-
-97-
<PAGE>
NOTE 3 - ACCOUNTING WITH THE FUEL AUTHORITY AND THE REFORM FOR THE ENERGY SECTOR
(CONTINUED)
2. Supergas lodged a claim in the District Court for a declarative
judgement against the Ministry of Energy and Infrastructure, the
Fuel Authority, regarding two matters relating to the period
before the Gas Reform. In its ruling, the Court accepted
Supergas' claim on one matter and rejected the second claim.
Subsequent to the balance sheet date, an appeal was submitted by
the government to the Supreme Court. Supergas, too, intends to
appeal the ruling before the Supreme Court. Supergas has not
recorded income on its books for that part of the claim which the
District Court ruled in its favor pending the appeal to the
Supreme Court as mentioned above. The accounts between Supergas
and the Ministry of Energy - the Fuel Authority have not yet been
settled. According to Supergas' calculations, the amount due to
Supergas, should the Supreme Court reject the Government appeal,
amounts to approximately NIS. 11 million as of the balance sheet
date.
NOTE 4 - MARKETABLE SECURITIES
Adjusted NIS. (thousands)
-------------------------
December 31,
------------------------
1995 1994
---- ----
Debentures linked to the consumer price index - 2,870
Debentures linked to foreign currency - 1,098
Shares, options and convertible debentures 214 1,035
Others - 168
------ ------
214 5,171
====== ======
NOTE 4.A. 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.
-20-
-98-
<PAGE>
NOTE 5 - ACCOUNTS RECEIVABLE AND DEBIT BALANCES
Adjusted NIS. (thousands)
-------------------------
December 31,
-------------------------
1995 1994
---- ----
Customers
---------
Customers - open accounts (I) 309,740 276,545
Checks and notes receivable 24,676 26,437
Short-term loans and current portion
of long-term loans granted 6,099 6,299
Less - provision for doubtful receivables(*) (9,450) (5,687)
------- -------
331,065 303,594
------- -------
Receivables and debit balances
------------------------------
Fuel Authority 13,212 49,400
Government Institutions 174 670
Income receivable 8,882 7,764
Employees 1,057 683
Prepaid expenses 4,570 3,547
Income tax receivable 7,532 11,711
Future tax benefits, net(**) 4,199 3,389
Current portion of capital notes 10,100 28,070
Others 5,775 13,443
------- -------
55,501 118,677
------- -------
386,566 422,271
======= =======
Including related and interested parties 25,723 36,248
======= =======
(I) The largest balance of interested
parties during the year 19,690 35,514
======= =======
(*) See note 2.I.
(**) See note 18.
NOTE 6 - INVENTORIES
Adjusted NIS. (thousands)
-------------------------
December 31,
-------------------------
1995 1994
---- ----
Crude oil and raw materials 74,009 118,440
Finished products 204,575 207,069
Materials and supplies 7,795 7,600
------- -------
286,379 333,109
======= =======
-21-
-99-
<PAGE>
NOTE 7 - SUBSIDIARIES, AFFILIATES AND OTHER INVESTMENTS
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------
December 31,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Affiliated companies:
Share in equity 16,827 17,323
Goodwill and excess cost attributed, net 7,510 7,510
Less: accumulated amortization (3,445) (412)
------ ------
Book value (1)(4) 20,892 24,421
Payments on account of shares (4) 5,170 -
Long-term loans (4) 9,228 12,163
Capital note and capital reserve, net
of provision for loss (3) 6,720 6,817
------ ------
42,010 43,401
Capital notes to interested parties (2) - 9,835
Affiliated companies - cost 163 163
Others - cost 16,584 16,584
------ ------
58,757 69,983
====== ======
1. Cost of shares including retained
earning as of December 31, 1991 5,583 5,583
Changes, beginning 1.1.92:
Cost of shares acquired 18,619 18,619
Retained earnings (*) (3,619) 219
Changes in capital reserves 309 -
------ ----
Book value 20,892 24,421
====== ======
(*) Dividend received in the current year 1,700 1,663
====== ======
2. Information pertaining to Capital Notes:
Adjusted NIS. (thousands)
-------------------------
December 31,
-------------------------
1995 1994
---- ----
Par value (A)(C) 10,100 38,988
Writedown to present value (B) - 1,083
Present value 10,100 37,905
Less: current portion reflected in
accounts receivable and debit balances 10,100 28,070
- 9,835
====== ======
</TABLE>
-22-
-100-
<PAGE>
NOTE 7 - SUBSIDIARIES, AFFILIATES AND OTHER INVESTMENTS (CONTINUED)
A. The balance of capital notes as of December 31, 1995 in the
amount of NIS.10,100 thousand was repaid on January 10, 1996.
B. See Note 2.H.3.
C. Capital notes are non-negotiable, unlinked and bear no interest.
3. Capital note is unsecured and non-negotiable, linked to the Index,
bears no interest and matures in the year 2001.
4. A. The loans given by a subsidiary to the affiliated company Otzem
Promotion and Investments (1991) Ltd. ("Otzem") are index linked
and bear interest at the rate of 5.5% p.a. In July 1995, the
subsidiary company forgave the interest in respect of a loan of
NIS. 10,229 thousand retroactive to January 1, 1995. The date of
maturity is subject to the financial capabilities of Otzem.
B. Due to the operating results of Otzem, the wholly-owned
subsidiary company, Granite Hacarmel Properties (1993)
Ltd.,("Granite Properties") wrote off amounts totalling NIS.
5,950 thousand, NIS. 3,000 thousand as a provision in "other
income, net" and NIS. 2,950 thousand as a writeoff of the balance
of goodwill, recorded on account of its investment in Otzem, now
included in the "Company's share in (loss) income of affiliates,
net".
C. On December 31, 1995 a closing agreement was signed with Nitzba,
Hevra Le'hitnahalut Ltd. ("Nitzba") whereby most of the assets of
Nitzba were transferred to a new company, Nitzba Holdings (1995)
Ltd. ("Nitzba Holdings"). The closing agreement also provided
that Granite Properties and Ashtrom Properties Ltd. ("Ashtrom")
will each aquire 10% of the outstanding share capital of Nitzba
Holdings for a payment of approximately NIS. 67,000 thousand
each. As of the balance sheet date, Granite Properties paid NIS.
5,170 thousand on account of the investment. On January 9, 1996,
the closing date of the agreement, the Company paid on account,
an additional amount of approximately NIS. 57,000 thousand. The
balance will be paid at a later date. In connection with this
agreement, it was also agreed that Granite Properties and Ashtrom
will each acquire 15% of the rights of Nitzba in an orchard in
Nes Ziona. Granite Properties' share is estimated to be
approximately NIS. 1,900 thousand.
The agreement privides Granite Properties and Ashtrom the right
to appoint a quarter of all the directors of Nitzba Holdings. In
addition, Granite Properties and Ashtrom were granted veto rights
on several significant matters requiring decisions by the
directorate. Until such time that the shares of Nitzba Holdings
will be issued and registered for trading on the stock exchange,
no special decision will be taken at the general meeting of its
shareholders, unless all the shareholders reach a prior unanimous
decision to vote in favor of such decision. Simultaneously with
the execution of the closing agreement, an agreement was signed
between Granite Properties and Ashtrom defining their
relationship on all matters regarding cooperation between them as
shareholders in Nitzba Holdings.
-23-
-101-
<PAGE>
NOTE 7 - SUBSIDIARIES, AFFILIATES AND OTHER INVESTMENTS (CONTINUED)
Subsequent to the balance sheet date, Granite Properties decided
to transfer its rights in the said agreements to a wholly owned
subsidiary, with the exception of its rights in the orchard in
Nes Ziona as mentioned above.
5. See Note 27.B.2.j.
NOTE 8 - LONG-TERM LOANS RECEIVABLES
a. Consist of:
Adjusted NIS. (thousands)
-------------------------
December 31,
-------------------------
1995 1994
---- ----
Loans to customers 26,313 20,919
Loans to employees 144 117
Others - 67
------ ------
26,457 21,103
Less: current portion 5,482 4,364
------ ------
20,975 16,739
====== ======
The years of maturity of the loans:
First year - current portion 5,482 4,364
Second year 6,383 4,174
Third year 3,041 1,647
Fourth year 1,128 1,173
Fifth year and thereafter and
without maturity date 10,423 9,745
------ ------
26,457 21,103
====== ======
b. Breakdown of loans by level of borrowers' balances:
Borrowers' December 31, 1995 December 31, 1994
----------------- -----------------
balances Number of Total Number of Total
(NIS. thousands) loans NIS.thousands loans NIS.thousands
---------------- ----- ------------- ----- -------------
Less than 100 128 3,187 115 2,138
100 - 500 18 3,882 19 3,581
500 - 1000 4 2,978 4 2,860
Above 1000 8 16,410 6 12,524
--- ------ --- ------
158 26,457 144 21,103
=== ====== === ======
-24-
-102-
<PAGE>
NOTE 8 - LONG-TERM LOANS RECEIVABLES (CONTINUED)
c. 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%
- ----- --- ---- - ---
December 31, 1995
-----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Loans to:
Customers 2,790 4,940 12,828 126 1,712 3,917 26,313
Employees - - 144 - - - 144
Others - - - - - - -
----- ----- ------ --- ----- ----- ------
2,790 4,940 12,972 126 1,712 3,917 26,457
===== ===== ====== ==== ===== =====
Less: current
portion 5,482
------
20,975
======
December 31, 1994
-----------------
Loans to:
Customers 1,896 3,179 12,045 666 1,369 1,764 20,919
Employees - - 117 - - - 117
Others 67 - - - - - 67
----- ----- ------ --- ----- ----- ------
1,963 3,179 12,162 666 1,369 1,764 21,103
===== ===== ====== ===== ===== =====
Less: current
portion 4,364
------
16,739
======
</TABLE>
-25-
-103-
<PAGE>
NOTE 9 - 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 371,547 521,084 36,588 44,044 973,263
Additions 26,363 39,964 6,303 6,053 78,683
Disposals (11) (667) (3,805) - (4,483)
------- ------- ------ ------ ---------
Balance at end of year 397,899 560,381 39,086 50,097 1,047,463 *
------- ------- ------ ------ ---------
Accumulated depreciation
Balance at beginning
of year 99,811 316,684 23,937 26,790 467,222
Depreciation charged 10,092 37,787 3,283 3,328 54,490
Depreciation in
respect of disposals - (213) (3,077) - (3,290)
------- ------- ------ ------ ---------
Balance at end of year 109,903 354,258 24,143 30,118 518,422
------- ------- ------ ------ ---------
Depreciated balance as
of December 31, 1995 287,996 206,123 14,943 19,979 529,041
======= ======= ====== ====== =======
Depreciated balance as
of December 31, 1994 271,736 204,400 12,651 17,254 506,041
======= ======= ====== ====== =======
</TABLE>
(*) Net of investment grants in the amount of NIS. 12,491 thousand.
b. Land and buildings include buildings on lease-hold lands, the cost of
which is NIS. 158,988 thousand, for various original periods of 49 -
98 years, ending in the years 1998 - 2072. Land and buildings at a
cost of NIS. 155,776 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. Land and buildings includes:
1. NIS. 19,048 thousand, for the acquisition of 50% of the rights of
Magor Holdings Ltd. (hereafter "Magor") in land and buildings in
a project in Holon. A contract was also signed for cooperation
and management of the project, pursuant to which "Magor" has
undertaken that the rental income, net of expenses from the
project, which the wholly- owned subsidiary will receive for 10
years, will be not less than NIS. 851 thousand per year, linked
to the Index.
-26-
-104-
<PAGE>
NOTE 9 - PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
2. NIS. 39,589 thousand, on account of acquisition of 50% of the
rights of Cible Israel Investments (1992) Ltd. (hereafter
"Cible") in land and buildings in a project in the new industrial
park of Rosh Haayin. Cible has undertaken that the rental income,
net of expenses, from the project which the wholly-owned
subsidiary will receive during the first seven years, will be not
less than NIS. 1,756 thousand for the first year and NIS. 2,272
thousand for each of the following six years. The above amounts
are linked to the Index. The guaranteed income period begins one
month after the completion of each of the buildings. Two out of
the five buildings built in the industrial park were completed in
January 1995 and the remaining three buildings were completed in
June 1995.
3. NIS. 13,899 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 in a project, known as "Rubinstein
Towers". The wholly-owned subsidiary company's investment in the
project (including construction costs) will amount to
approximately NIS. 27,000 thousand.
d. Commitments and contingent liabilities - See note 27.
NOTE 10 - OTHER ASSETS AND DEFERRED CHARGES, NET
Consist of:
Adjusted NIS. (thousands)
-------------------------
Balance to be amortized
as of December 31,
-------------------------
1995 1994
---- ----
Other assets:
Deferred rent 8,326 6,172
Goodwill in consolidated
subsidiaries (1) 1,506 1,384
Others 4,574 4,926
------ ------
14,406 12,482
Deferred charges:
Expenses incurred in the issuance
of debentures by the Company (2) 6,359 8,048
Expenses incurred in the issuance
of debentures by a consolidated
subsidiary (2) 178 330
------ ------
20,943 20,860
Less: Deferred credit in a
consolidated subsidiary (1) 2,643 3,307
------ ------
18,300 17,553
====== ======
(1) For amortization see note 2.B.2
(2) For amortization see note 2.F.
-27-
-105-
<PAGE>
NOTE 11 - SHORT-TERM BANK CREDIT
Linkage terms and interest rates:
---------------------------------
Adjusted NIS. (thousands)
---------------------------------------------
December 31, 1995
---------------------------------------------
Unlinked linked Linked to Total
to foreign
Index currency
-------- ------ --------- -------
Interest rates: 14% 2.5% 5.9-8.1%
-------- ------ ---------
Overdrafts 1,619 - - 1,619
Short-term loans 139,905 - - 139,905
Current portion of
long-term loans - 40 413 453
------- --- ---- -------
141,524 40 413 141,977
======= === ==== =======
Adjusted NIS. (thousands)
--------------------------------------------
December 31, 1994
--------------------------------------------
Unlinked linked Linked to Total
to foreign
Index currency
------- ----- -------- --------
Interest rates: 17.3% 2.5% 5.9-9.2%
------- ----- --------
Overdrafts 1,330 - - 1,330
Short-term loans 171,585 - - 171,585
Current portion of
long-term loans 45 94 482 621
------- --- ---- -------
172,960 94 482 173,536
======= === ==== =======
NOTE 12 - LOANS FROM OTHERS
Loans from others as of December 31, 1994 received from interested
parties were unlinked and bore interest at the rate of 16.6% p.a.
NOTE 13 - ACCOUNTS PAYABLE
The liabilities represent open amounts and include NIS. 3,048 thousand
(1994 - NIS. 2,988 thousand) of balances to related parties.
-28-
-106-
<PAGE>
NOTE 14 - OTHER LIABILITIES AND CREDIT BALANCES
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
-------------------------
1995 1994
---- ----
Liabilities to employees and
other salary related liabilities 16,043 15,396
Institutions 29,587 35,940
Accrued expenses 7,007 5,593
Others 10,543 9,442
------- ------
63,180 66,371
======= ======
NOTE 15 - LONG-TERM LIABILITIES
A. Long-term loans
Rate of Adjusted NIS. (thousands)
-------------------------
interest December 31, December 31,
-------------------------
% 1995 1994
------- ---- ----
U.S. Dollar loans from banks(*) 5.9-8.1 589 998
Index linked loans from banks 2.5 40 134
Customers' deposit - linked
to the index - 2,790 2,804
Customers' deposit - linked
to foreign currency 0-8.2 54 55
Loan from affiliated company
- linked to the Index - 4,500 4,865
Other loans - unlinked - - 45
----- -----
7,973 8,901
Less: current portion 453 621
----- -----
7,520 8,280
===== =====
Yearly installments:
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
------------ ------------
1995 1994
---- ----
First year - current portion 453 621
----- -----
Second year 124 448
Third year 52 97
Fourth year - 22
Fifth year - -
No due date 7,344 7,713
----- -----
7,520 8,280
----- -----
7,973 8,901
===== =====
(*) Fixed rate of interest for the whole period of the loan.
Accrued interest is included in "Other liabilities and credit
balances" in Current liabilities.
-29-
-107-
<PAGE>
NOTE 15 - LONG-TERM LIABILITIES (CONTINUED)
B. Convertible debentures into shares of the Company
-------------------------------------------------
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Debentures (Series 1)(*) 65,654 78,087
Debentures (series 2)(**) 176,820 184,015
------- -------
242,474 262,102
Less - current portion 34,638 9,761
------- -------
207,836 252,341
======= =======
<CAPTION>
Yearly installments:
Adjusted NIS. (thousands)
-----------------------------------------
December 31, 1995 December 31, 1994
----------------- ------------------
Series 1 Series 2 Series 1 Series 2
-------- -------- -------- --------
<S> <C> <C> <C> <C>
First year - current portion 9,379 25,259 9,761 -
------ ------ ------ ------
Second year 9,379 25,260 9,761 26,288
Third year 9,379 25,260 9,761 26,288
Fourth year 9,379 25,260 9,761 26,288
Fifth year 9,379 25,260 9,761 26,288
Subsequent years 18,759 50,521 29,282 78,863
------ ------ ------ ------
56,275 151,561 68,326 184,015
------ ------ ------ ------
65,654 176,820 78,087 184,015
====== ======= ====== =======
</TABLE>
(*) 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 and are
payable in 7 equal annual installments on November 30 in each of
the years commencing in 1996 and ending in 2002. During the year
110 debentures were converted to shares and 6,874,975 debentures
were repaid at maturity. As of the balance sheet date, there were
48,124,827 outstanding debentures.
(**) Registered debentures (Series 2) NIS. 1.- par value each. Every
NIS. 5 par value of debentures are convertible into an ordinary
share of NIS. 1.- par value. The debentures bear interest at an
annual rate of 2.5%. The principal, interest and the price of
conversion into ordinary shares are linked to the representative
rate of exchange of the U.S. dollar and are payable in 7 equal
annual installments on November 30 in each of the years
commencing in 1996 and ending in 2002. In 1994, 11,473,515
debentures were converted into shares. As of the balance sheet
date, there were 141,174,433 outstanding debentures.
Regarding collaterals see Note 27.
-30-
-108-
<PAGE>
NOTE 15 - LONG-TERM LIABILITIES (CONTINUED)
C. Convertible debentures into shares of a subsidiary
--------------------------------------------------
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
------------ ------------
1995 1994
---- ----
Debentures (Series 1) 5,525 7,391
Less - current portion 1,844 1,848
----- -----
3,681 5,543
===== =====
NOTE 15 - LONG-TERM LIABILITIES (CONTINUED)
Yearly installments:
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
------------ ------------
1995 1994
---- ----
First year - current portion 1,844 1,848
----- -----
Second year 1,841 1,848
Third year 1,840 1,848
Fourth year - 1,847
----- -----
3,681 5,543
----- -----
5,525 7,391
===== =====
Pursuant to a public offering prospectus in May 1990, the subsidiary
company, Vulcan Batteries Ltd. ("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 2,820,893 outstanding debentures (Series 1).
The debentures are payable in three equal yearly installments (after
payment of the first 25% installment in December 1995) commencing in
December 1996 and ending in December 1998 and are convertible at any
time until 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
73.2% (instead of 79.8% as on the balance sheet date).
Regarding collaterals - see Note 27.
D. All the aforementioned debentures are listed for trading on the
Tel-Aviv Stock Exchange.
-31-
-109-
<PAGE>
NOTE 16 - CUSTOMERS' DEPOSITS
a. Customer deposits are calculated based on an estimate of the expected
update of a decree (last previous update was December 4, 1994) issued
by the Ministry of Trade and Industry based on a price update
requested by the Company.
b. Customers' deposits held by Supergas include NIS. 39,582 thousand
(1994 - NIS. 40,425 thousand) of linkage increments accrued on those
deposits (Note 2.L.).
NOTE 17 - LIABILITIES FOR POST-RETIREMENT BENEFITS, NET
Adjusted NIS. (thousands)
-------------------------
December 31, December 31,
------------ ------------
1995 1994
---- ----
Provision for severance pay, net (a) 4,809 4,928
Less: deposits in approved funds (*) 1,299 1,296
----- -----
3,510 3,632
Provision for early retirement pension (**)(b) 2,635 3,657
Provision for redemption of unutilized
sick leave (c) 1,484 1,534
----- -----
7,629 8,823
===== =====
(*) The deposits can be withdrawn subject to law. Accrued income on the
deposits is included in the statements of income.
(**) Excluding NIS. 981 thousand (1994 - NIS. 1,284 thousand) current early
retirement pension which is included in Other liabilities and credit
balances.
a. 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 in managers'
insurance policies. The deposits in approved funds and in manager's
insurance plans are not included in the financial statements as they
are not under the control of the Company.
b. 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 4.5% per annum.
c. 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 50 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%.
-32-
-110-
<PAGE>
NOTE 18 - DEFERRED TAXES
a. Consist of:
<TABLE><CAPTION>
Adjusted NIS. (thousands)
--------------------------------------------
Regarding current Regarding non-
Balance Sheet current Balance
items Sheet items Total
----------------- --------------- ------
<S> <C> <C> <C>
Balance as of January 1, 1994 (4,309) 16,830 12,521
Changes in 1994 920 (5,954) (5,034)
------ ------ ------
Balance as of December 31, 1994 (3,389) 10,876 7,487
Changes in 1995 (810) (5,721) (6,531)
------ ------ ------
Balance as of December 31, 1995 (4,199) 5,155 956
====== ====== ======
b. Presented in the balance sheet:
<CAPTION>
Adjusted NIS. (thousands)
--------------------------
December 31, December 31,
------------ ------------
<S> <C> <C>
1995 1994
---- ----
Deferred Taxes in long-term liabilities 5,155 10,876
Future tax benefits in current assets (4,199) (3,389)
----- ------
956 7,487
====== ======
</TABLE>
-33-
-111-
<PAGE>
NOTE 19 - LINKAGE OF MONETARY BALANCES
<TABLE><CAPTION>
Adjusted NIS. (thousands) Adjusted NIS. (thousands)
---------------------------- ----------------------------
December 31, 1995 December 31, 1994
---------------------------- ----------------------------
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 - 11,675 6,829 - 1,828 4,726
Accounts receivable and
debit balances 9,064 20,360 357,142 13,882 ***58,812 ***349,577
Marketable securities 134 - 80 2,887 1,098 1,186
Short-term bank deposit - - - - - 32,570
Compulsory Government
loan - 774 - - 1,387 -
Investment in
capital notes and loans 15,948 - - 18,980 - 9,835
Long-term loans granted 12,157 4,050 4,768 11,674 2,945 2,120
------ ----- ----- ------ ----- -----
37,303 36,859 368,819 47,423 66,070 400,014
====== ====== ======= ====== ======= =======
Liabilities:
Short-term bank credit - - 141,524 - - 172,915
Loans from others - - - - - 5,389
Suppliers, accounts payable
and dividend declared 18,801 100,213 82,800 15,051 ***98,986 ***134,425
Long-term liabilities
(including current
portion) and debentures 12,856 243,116 - 15,193 263,156 45
Customers' deposits(**) 56,567 - - 57,741 - -
Capital notes - - 284 - - 308
------ ----- ----- ------ ----- -----
88,224 343,329 224,608 87,985 362,142 313,082
====== ======= ======= ======= ======= =======
</TABLE>
(*) 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 16.
(***) Reclassified.
Against the excess of foreign currency linked liabilities over assets in the
amount of NIS. 306,470 thousand, Sonol holds fuel and refined products inventory
amounting to NIS. 243,372 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.
As of December 31, 1995 the balance from free dollar aquisitions from a bank
amounted to NIS. 31,300 thousand - see note 2.N.2.
-34-
-112-
<PAGE>
NOTE 20 - CAPITAL
a. Nominal values.
---------------
Consists of:
Authorized Issued and Paid(*)
----------------- ------------------
NIS. (thousands) NIS. (thousands)
----------------- ------------------
December 31, December 31,
----------------- ------------------
1995 1994 1995 1994
---- ---- ---- ----
225,000,000 Ordinary
shares of NIS. 1.- each 225,000 225,000 122,674 122,674
======= ======= ======= =======
(*) 122,674,476 ordinary shares (1994 - 122,674,456 ordinary shares).
The share capital has been increased by conversion of 110
debentures into 20 shares.
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.
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,
---------------------------
1995 1994 1993
---- ---- ----
The net income used in computing
primary earnings per share 46,227 54,601 54,181
Add (Deduct) - theoretical
income (loss) deriving from:
Exercise of options (series 2) 5,109 1,264 1,989
Conversion of debentures (series 1) (1,298) (5,752) 2,074
Conversion of debentures (series 2) (713) (11,407) (908)
------ ------ ------
Net income used in computing
diluted earnings per share 49,325 38,706 57,336
====== ====== ======
-35-
-113-
<PAGE>
NOTE 20 - CAPITAL (CONTINUED)
2. The par value of shares used in computing earning per NIS. 1.-
par value share:
Adjusted NIS. (thousands)
---------------------------
Year ended December 31,
---------------------------
1995 1994 1993
---- ---- ----
Share capital used in computing
primary earnings per share 122,674 122,674 120,318
Add - theoretical share capital
that may derive from:
Exercise of options (series 2) 39,984 39,984 39,984
Conversion of debentures (series 1) 8,750 10,000 10,000
Conversion of debentures (series 2) 28,235 28,235 28,944
------ ------ ------
The total share used in computing
diluted earnings per share 199,643 200,893 199,246
======= ======= ========
3. For examining the probability of conversion or exercise of
convertible securities, the present value was computed using a
capitalization rate of 4.5% (12.94 - 4%, 12.93 - 3%) for
securities linked to the Index and 6% (12.94 - 7%, 12.93 - 3.5%)
for securities linked to the exchange rate of the U.S. dollar.
NOTE 21 - CAPITAL RESERVES - NOMINAL VALUE
Consist of:
NIS. (thousands)
----------------------
Year ended December 31,
----------------------
1995 1994
---- ----
Share premium 71,564 71,564
Share of the Company and a subsidiary
in the revaluation reserve of an affiliate 173 156
------ ------
71,737 71,720
====== ======
-36-
-114-
<PAGE>
NOTE 22 - COST OF SALES
Consist of:
Adjusted NIS. (thousands)
------------------------------
Year ended December 31,
------------------------------
1995 1994 1993
---- ---- ----
Materials used:
---------------
Crude oil and refined
petroleum products (1)(2) 1,146,945 900,042 882,094
Raw materials and
auxiliary materials 37,429 40,276 52,786
Finished luboil
products purchased 3,073 2,799 2,578
------ ----- -----
1,187,447 943,117 937,458
--------- ------- -------
Labor and sub-contract work
---------------------------
Labor (including
related expenses) 11,580 10,613 10,843
Sub-contract work -
(refining and terminal
charges) (1) 5,975 21,162 77,046
--------- ------- -------
17,555 31,775 87,889
------ ------ ------
Production costs 48,145 43,279 51,611
------ ------ ------
Depreciation 2,923 2,930 2,579
------ ------ ------
Batteries 10,070 9,973 6,399
------ ----- -----
Total cost of sales 1,266,140 1,031,074 1,085,936
========= ========= =========
Decrease in inventories 46,925 41,628 127,345
========= ========= =========
(1) Sonol changed the mix of its purchases of imported crude oil and
refined products, increasing its purchases of refined products
from the Oil Refineries while decreasing purchases and refining
of imported crude oil.
(2) Financing income deriving from the erosion of dollar linked
credit used as a source of financing purchases of oil inventories
are included in Cost of Sales.
-37-
-115-
<PAGE>
NOTE 23 - SELLING AND MARKETING EXPENSES
Consist of:
Adjusted NIS. (thousands)
-------------------------------
Year ended December 31,
-------------------------------
1995 1994 1993
---- ---- ----
Salaries 41,150 42,404 42,509
Advertising and promotion 12,587 9,707 6,984
Depreciation and amortization 48,485 46,687 47,331
Maintenance of buildings,
plants and filling stations 37,668 36,429 35,041
Rent 8,077 5,952 3,016
Other expenses 35,688 33,622 33,322
------ ------ ------
183,655 174,801 168,203
======= ======= =======
NOTE 24 - ADMINISTRATIVE AND GENERAL EXPENSES
Consist of:
Adjusted NIS. (thousands)
-------------------------------
Year ended December 31,
-------------------------------
1995 1994 1993
---- ---- ----
Salaries 26,021 26,051 24,365
Depreciation and amortization 4,333 2,468 2,185
Consulting, legal and audit 5,335 5,203 5,853
Provision for doubtful accounts
and bad debts 3,441 (527) 3,470
Other expenses 9,983 8,571 6,950
----- ----- -----
49,113 41,766 42,823
======= ======= =======
-38-
-116-
<PAGE>
NOTE 25 - FINANCING INCOME (EXPENSES), NET
Consist of:
Adjusted NIS. (thousands)
--------------------------
Year ended December 31,
--------------------------
1995 1994 1993
---- ---- ----
From dollar linked debentures
convertible to shares 4,061 28,654 (995)
Long-term debt (*) 2,303 8,002 15,857
Profit (loss) from securities, net 136 (1,340) 302
Financing income from
other receivables (**) 19,419 19,435 23,904
Erosion of other monetary
assets and liabilities, net (39,033) (64,722) (28,704)
------- ------- -------
(13,114) (9,971) 10,364
======= ======= =======
(*) In 1993, income in the amount of NIS. 9,745 thousand was included
as a result of a retroactive adjustment of charges in accordance
with the law in respect of a subsidiary company's liabilities for
customer deposits.
(**) In 1993, income in the amount of NIS. 5,350 thousand was included
as a result of the cancellation of provisions for interest and
linkage differences.
NOTES 26 - 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.
The subsidiary, Vulcan, having the status of an approved enterprise,
is entitled to a reduced income tax rate in accordance with the Law
for the Encouragement of Capital Investments - 1959. The period of
benefits relating to a part of its production facilities has ended and
for the remaining facilities, the period of benefits will end in the
year 2001. As of the date of the financial statements, Vulcan received
final letters of approval for all the investment plans which it has
carried out.
-39-
-117-
<PAGE>
NOTE 26 - 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,
---------------------------
1995 1994 1993
---- ---- ----
Current taxes including
inflationary erosion of
advance tax payments 40,679 27,825 37,154
Deferred taxes, net (*) (6,531)** (5,034) (1,068)
----- ------ ------
34,148 22,791 36,086
------ ------ ------
Provisions (Overprovisions)
pertaining to prior years 1,828 ** - (5,128)
------ ------ ------
35,976 22,791 30,958
====== ====== ======
(*) Pursuant to the amendment of the Income Tax Law as of December 22,
1992 the rate of company tax decreased from 39% in 1993, by 1% per
year, to a rate of 36% in 1996.
(**) These provisions were included in deferred taxes.
c. Final tax assessments
---------------------
Supergas and Vulcan have received final tax assessments through the
tax year 1993. The Company, Aloc, Sonapco and Sprint, have received
final tax assessments through tax year 1991. Sonol has 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,
----------------------------
1995 1994 1993
---- ---- ----
Taxes at statutory rate 37% 38% 39%
==== ==== ====
The theoretical tax at the
applicable tax rate 31,659 29,251 32,997
Erosion of advanced tax payments 1,904 2,346 1,063
Differences in the definition of
capital and assets for tax
purposes and others, net 2,413 (8,806) 2,026
Overprovisions in respect of prior years - - (5,128)
------ ------ ------
35,976 22,791 30,958
====== ======= ======
-40-
-118-
<PAGE>
NOTE 27 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES
A. Floating and fixed charges
--------------------------
<TABLE><CAPTION>
Adjusted NIS. (thousands)
-------------------------
December 31, 1995 Collateralized by
----------------- -------------------
<S> <C> <C>
Short-term bank Floating charges on
credits 1,619 current assets of the
main subsidiaries.
Short-term Loans from banks Floating charges on
and others 139,905 current assets of Sonol.
Accounts payable and credit Floating charges on
balances including accrued current assets of Sonol
interest on short-term
bank loans 151
Long-term bank loans 629 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 grants - Floating charges on all
Vulcan's assets guaran-
teeing the fulfillment of
the terms related to the
receipt of such grants.
Although final approval
has been received the
charges have not yet been
cancelled.
Convertible debentures of Senior floating charge
a subsidiary 5,525 equal in standing to all
other senior floating
charges on all the assets
of Vulcan.
Convertible debentures Floating charge
(Including interest) 242,848 subordinated to other
floating charges on all
the assets of the
Company.
</TABLE>
B. Liabilities and contingencies
-----------------------------
1. Indemnification and Insurance of senior officers
------------------------------------------------
The Articles of Association of the Company 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.
-41-
-119-
<PAGE>
NOTE 27 - 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, based on the opinion of legal
counsel, the provisions made are sufficient to cover the
reasonable costs.
b. A claim in the amount of approximately NIS. 5 million has
been lodged against Sonol. The plaintiffs are requesting,
inter alia, the enforcement of an operating agreement of a
station being operated by another party, 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 has been 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. 5 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. Further to a claim in the amount of approximately NIS. 44
million submitted against Sonol in 1993, during the course
of arbitration proceedings (as mentioned in the December 31,
1994 financial statements), the parties, in February came to
a compromise agreement, which included the mutual
cancellation of the claims against one another, in
conjunction with an additional commercial transaction. The
parties have requested the approval of the Controller of
Restrictive Trade Practices for this transaction.
e. As a result of arbitration proceedings between the Fuel
Authority and 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 prevously recognized by the Fuel
Authority within the framework of the Price Structure.
In the opinion of Sonol's legal counsel, there is no basis
for the Fuel Authority's demand.
-42-
-120-
<PAGE>
NOTE 27 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
f. A claim against Sonol has been filed requesting a
declarative judgement to rule that a set of agreements
between Sonol and a stationholder, who is operating the
station, is invalid, being an illegal restrictive agreement.
In addition, the stationholder is asking for compensatory
payment in the amount of NIS. 3.5 million, for damages which
he contends were caused as a result of the agreement with
Sonol being a restrictive agreement or, alternatively, from
Sonol's violations of the agreement due to prejudicial
treatment against him vis a vis other station operators.
Sonol has submitted its defense, together with a
counter-claim in the amount of approximately a million
shekels. In the opinion of its legal counsel, Sonol has a
sound defense against the claim for damages. The case has
been transferred to the District Court and is currently in
the stage of pretrial disclosures. In addition, Sonol has
filed a separate court claim, in a shortened procedure, to
have the stationholder evicted.
g. Three claims were lodged against an affiliated company and
against its shareholders, which include Sonol. The total
claims of approximately NIS. 46 million pertain to 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
claims.
h. In August 1994, Vulcan received a purchase tax assessment in
the amount of approximately NIS. 1,500 thousand, net of the
tax effect, representing tax differences, linkage
increments, interest and fines for the period of January
1990 through May 1994. In September 1994, Vulcan submitted
an appeal against the aforesaid assessment, which in July
1995, was dismissed. In September 1995, Vulcan submitted an
appeal against the dismissal to the District Court. In the
Company's opinion, based on the opinion of its legal
counsel, there is a reasonable chance that Vulcan's position
will be accepted by the court. Should Vulcan's protest be
dismissed by the District Court, Vulcan will also be
assessed for tax differences for the period from June 1994
and thereafter. No provision has been provided in Vulcan's
financial statements for the above.
-43-
-121-
<PAGE>
NOTE 27 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
i. The subsidiary, Sonol, has notified a customer, who is also
its agent, of the cancellation of agency and transport
agreements with it. The cancellation, takes effect, in
accordance with the agreement, 18 months from the
notification date. The agent, who owes Sonol approximately
NIS. 7.5 million notified that it is deducting approximately
NIS. 6 million from its liability on account of damages
which it claims were caused to it by Sonol. This contention
is rejected by Sonol which is considering taking legal
action against the agent. Sonol holds various guarantees
given by the agent to secure his liabilities to Sonol. At
this time, no estimate can be made regarding the outcome of
this dispute.
j.1. Aviation Services Ltd. ("Aviation Services") an affiliated
company, operates in the various airports in Israel within
the framework of a license, whose term, after several
extensions, expired on January 1, 1996. Aviation Services is
currently negotiating with the Airport Authority to extend
the license for a period of an additional two years.
In connection with expiration of the license and the
negotiations to extend it which took place in 1992,
differences of opinion arose between Aviation Services and
the Airport Authority as to the ownership rights of land,
equipment and plants used by Aviation Services at Ben Gurion
Airport. These differences of opinion were brought before
the district court for a declarative judgement and in
February 1996 the Court ruled in favor of Aviation Services.
The Airport Authority has the right to appeal against this
decision in the Supreme Court.
2. The Government of Israel, via the Fuel Authority, has
announced its intention to declare the services provided by
Aviation Services to be infrastructure services, subject to
government supervision, whose maximum prices are determined
through decrees whithin the framework of the Law for Price
Stability of Products and Services. This would affect
Aviation Services' exclusivity in distributing jet fuel to
civil aviation.
3. The Controller of Restrictive Trade Practices has notified
Aviation Services on several occasions of his intention to
declare Aviation Services a monopoly, with all its
ramifications. The latest such announcement was received in
February 1996.
Aviation Services, based on the opinion of its legal
counsel, believes that there is a more than reasonable
chance that the Courts will rule in its favor regarding
paragraph 1 above; in regard to paragraph 2, the management
of Aviation Services is of the opinion that it is not an
infrastructure company and, therefore, the above decrees,
should they be issued, would not be applicable. In the
opinion of Aviation Services' legal counsel, if despite the
above said, the Government will issue implementation
decrees, it is doubtful whether such decrees will be upheld
by the Supreme Court.
-44-
-122-
<PAGE>
NOTE 27 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
The management of the Company, based on information obtained
from Aviation Services is unable to estimate the effects of
the events mentioned in paragraphs 2 and 3, on its financial
results, although such action would have a detrimental
effect on Aviation Services' operations.
k. See note 3.B.2.
C. The consolidated subsidiary companies are committed as follows:
Adjusted NIS. (thousands)
-------------------------
Acquisition of fixed assets 67,368
Suppliers of fuel, luboils and parts 150,234
Rental leases and obligations in
accordance with signed agreements with agencies
for the use of their outlets for marketing
Sonol's products over various periods(*) 72,042
Lease obligation for a computer
and other equipment over
periods of up to five years 950
(*) The rental liability for each of the years
following 1995 is as follows:
1996 6,766
1997 6,461
1998 5,596
1999 5,548
2000 5,313
2001 and thereafter 42,358
------
72,042
======
Investment in Nitzba Holdings Ltd, see note 7.4.C.
For royalties to a foreign company for technical knowledge provided,
for a period of ten years beginning in 1993.
-45-
-123-
<PAGE>
NOTE 27 - COLLATERALS, COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
D. The consolidated subsidiaries have
contingent liabilities in respect of:
Adjusted NIS. (thousands)
-------------------------
1. Acquisition of crude oil or refined products -
open letter of credits. 3,305
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). 893
3. Various guarantees. 1,431
4. Granite Properties (1993) Ltd. is a guarantor
to a bank on account of payments made
by the bank to a third party. 6,591
5. Sonol is a guarantor to a bank on account
of loans given by the bank to a filling station
owner who has leased the station to Sonol. 2,602
6. Sonol is a guarantor to a bank
on account of a loan given by the bank to one of
Sonol's agencies. 748
7. Sonol has given a guarantee to one of
its customers on account of a tender
for the supply of fuel products. 2,000
8. Vulcan has given a guarantee to a government
agency assuring the supply of its products. 222
9. 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 Compamy,
Sonol and a related Company. Unlimited account
-46-
-124-
<PAGE>
NOTE 28 RULING BY THE CONTROLLER OF RESTRICTIVE TRADE PRACTICES AND PROPOSED
LAWS FOR THE FUEL SECTOR
A. An appeal filed by Sonol, together with appeals filed by the Paz and
Delek fuel marketing companies, against the June 1993 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 now
pending in the District Court in Jerusalem.
The Controller of Restrictive Trade Practices, on December 14, 1995
amended the above ruling following a compromise arrangement reached
between Sonol and Paz in their above mentioned appeals. Under the
terms of the compromise arrangement, Sonol will release 36 stations
not subject to an "Accepted Leasng Agreement" as defined in the
arrangement and the Controller will rescind his ruling regarding other
stations in which Sonol is party to such an "Accepted Leasing
Agreement". The implementation of this arrangement is beng contested
in the courts and has, thus, been suspended until a final dcision is
reached.
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. A draft proposal of legislation by the Ministry of Energy and
Infrastructure regarding the term of exclusive contracts between the
fuel marketing companies and station owners has been forwarded to
government ministries, the president of the Supreme Court and law
faculties for their comments.
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 Sonol in
particular.
NOTE 29 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
---------------------------------------------------
Adjusted NIS. (thousands)
----------------------------
Year ended December 31,
----------------------------
1995 1994 1993
---- ---- ----
Financing income 936 444 344
Financing expenses 1,102 593 17
- 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.
- 47 -
-125-
<PAGE>
NOTE 29 - TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(CONTINUED)
2. Benefits to interested parties
------------------------------
<TABLE><CAPTION>
Number Adjusted NIS. (thousands)
----------------------------
of Year ended December 31,
----------------------------
persons 1995 1994 1993
------- ---- ---- ----
<S> <C> <C> <C> <C>
(a) Interested parties
employed in the group 1 1,900* 1,063 1,200
(b) Directors 13*** 659** 78 156
</TABLE>
* Including payments to a previous interested party who completed
his term during the year.
** Including NIS. 541 thousand subject to approval at the general
meeting of the Company.
*** In 1994 - 2 directors, in 1993 - 3 directors.
3. Transactions and commitments with interested and related parties
----------------------------------------------------------------
a. Transactions:
-------------
Adjusted NIS. in Thousands
----------------------------
Year ended December 31,
----------------------------
1995 1994 1993
---- ---- ----
Income:
Sales (*) 82,561 62,922 49,688
Management fee 713 785 584
(Amortization) / addition to
capital notes, net 218 (1,178) (88)
Expenses:
Rent - - 618
Participation in expenses - 89 131
(*) All the sales are to interested parties and are made in the
normal course of business and according to normal credit
terms. Transactions with related parties are made in the
normal course of business according to normal credit terms,
and do not exceed 10% of the Company's transactions.
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.
- 48 -
-126-
<PAGE>
NOTE 30 - SUBSEQUENT EVENT
Subsequent to the balance sheet date, Sonol, in parternship with others,
entered into a contractual agreement with the Company, A.P.S.K. Hom Tov
(93) Ltd (hereafter "A.P.S.K."), the owner of a new experimental process
(called "Hom Tov") to extract energy from a mixture of oil shale and fuel
residues. An investment of between NIS. 9,000 thousand and NIS. 12,000
thousand is needed in order to determine the commercial feasibility of
the new process. Sonol intends to invest NIS. 4,500 thousand, linked to
the representative rate of the U.S dollar, in 50.01% of the shares of
A.P.S.K. and/or in evaluating the new process. The agreement is subject
to pre-conditions, which if not fulfilled will cause the retroactive
cancellation of the agreement.
NOTE 31 - 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,
---------------------------
1995 1994
---- ----
Current assets:
Cash and cash equivalents 5,906 2,007
Investments in securities 69 1,595
Short-term deposit - 9,983
Compulsory Government loans 180 205
Accounts receivable and debit balances 123,427 129,509
Inventories 91,979 102,572
------- -------
221,561 245,871
------- -------
Investments, long-term loans and debit balances:
Unconsolidated subsidiaries and other investments 14,950 18,106
Long-term loans 6,689 5,131
Compulsory government loans 67 220
------- -------
21,706 23,457
------- -------
Property, plant and equipment 205,978 182,747
Less: Accumulated depreciation 88,015 77,132
------- -------
117,963 105,615
------- -------
Other assets and deferred charges, net 5,578 5,104
------- -------
366,808 380,047
======= =======
- 49 -
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<PAGE>
NOTE 31 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS (CONTINUED)
CONSOLIDATED BALANCE SHEETS
---------------------------
(In thousands)
Translated to U.S. Dollars
--------------------------
December 31,
--------------------------
1995 1994
---- ----
Current liabilities:
Short-term bank credits 45,287 53,189
Loans from others - 1,652
Suppliers 44,221 42,602
Current portion of convertible debentures 11,278 3,131
Other liabilities and credit balances 20,325 20,698
------- -------
121,111 121,272
------- -------
Long-term liabilities:
Long-term loans 2,401 2,538
Debentures convertible into shares
of the company (I) 64,139 74,530
Debentures convertible into shares
of a subsidiary 1,174 1,699
Customers' deposits 18,044 17,698
Liabilities for post-retirement benefits, net 2,433 2,705
Deferred taxes, net (II) 485 1,545
Capital notes issued by an affiliated company 92 93
------- -------
88,768 100,808
------- -------
Minority interest 2,362 2,174
------- -------
Shareholders' equity:
Capital 55,735 55,735
Capital reserves (II) 36,006 36,006
Retained earnings 62,826 64,052
------- -------
154,567 155,793
------- -------
366,808 380,047
======= =======
- 50 -
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<PAGE>
Note 31 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS (CONTIUED)
CONSOLIDATED STATEMENTS OF INCOMES
----------------------------------
(In thousands)
Translated to U.S. Dollars
---------------------------------
Year ended December 31,
----------------------------------
1995 1994 1993
----------- ---- ----
Revenues:
Sales 769,755 615,220 578,338
Less: Government imposts 266,939 234,058 207,119
------- ------- -------
Net sales 502,816 381,162 371,219
Other income, net 1,213 3,572 872
------- ------- -------
504,029 384,734 372,091
------- ------- -------
Costs and expenses:
Cost of sales 398,125 294,435 293,536
Selling, general and
administrative expenses 57,831 49,101 46,034
Depreciation and amortization 11,276 10,470 9,078
Financing expenses (income), net 4,209 328 (3,604)
------- ------- -------
471,441 354,334 345,044
------- ------- -------
Operating income before taxes on income 32,588 30,400 27,047
Taxes on income 11,663 6,558 8,591
------- ------- -------
Operating income after taxes on income 20,925 23,842 18,456
Company's share in income (loss)
of affiliates, net (759) (58) 355
Minority interest in income
of consolidated subsidiaries (285) (223) (198)
------- ------- -------
19,881 23,561 18,613
Cumulative effect of the change
in accounting for taxes on income (III) - - 6,728
------- ------- -------
Net income 19,881 23,561 25,341
======= ======= =======
- 51 -
-129-
<PAGE>
NOTE 31 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS (CONTINUED)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
(In thousands)
<TABLE><CAPTION>
Translated to U.S. Dollars
-------------------------------------
Retained
Capital Reserves Earninqs Total
------- -------- -------- -----
<S> <C> <C> <C> <C>
Balance as at January 1, 1993: 54,831 31,874 35,244 121,949
Changes in 1993:
Net income for the year - - 25,341 25,341
Proceeds from exercise of stock options 134 497 - 631
------ ------ ------ ------
Balance as at December 31, 1993 54,965 32,371 60,585 147,921
Changes in 1994:
Net income for the year - - 23,561 23,561
Conversion of debentures into shares 770 3,635 - 4,405
Dividend - - (20,094) (20,094)
------ ------ ------ ------
Balance as at December 31, 1994 (V) 55,735 36,006 64,052 155,793
Changes in 1995:
Net income for the year - - 19,881 19,881
Dividend paid (V) - - (21,107) (21,107)
------ ------ ------ ------
Balance as at December 31, 1995 55,735 36,006 62,826 154,567
====== ====== ====== =======
- 52 -
-130-
<PAGE>
NOTE 31 - FINANCIAL STATEMENTS TRANSLATED INTO U.S. DOLLARS (CONTINUED)
(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,
------------------------
1995 1994
---- ----
Debentures (Series 1 and 2) - face value 77,344 80,336
Discount (Series 1) (*) 2,515 3,242
------ ------
74,829 77,094
Less current portion 10,690 2,564
------ ------
64,139 74,530
====== ======
(*) The discount is being amortized over the remaining period until
their maturity.
See note 15.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 $ 130 (thousand).
(III) 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.
(IV) As mentioned in the 1994 Financial Statements, the Board of
Directors, subsequent to that balance sheet date, passed a
resolution regarding the payment of an interim dividend. The
dividend of $ 13,263 thousand which was paid in 1995, while
reflected in the 1994 Israel Shekel Financial Statements is
included together with the $ 7,844 thousand dividend paid for 1995
in the translated dollar statements in accordance with Generally
Accepted Accounting Principles.
- 53 -
-131-
<PAGE>
LIST OF THE MAIN SUBSIDIARIES AND AFFILIATES
--------------------------------------------
Holding and Control
at balance sheet date
---------------------
%
-----
Consolidated Subsidiaries
- -------------------------
Sonol Israel Ltd. 100
Vulcan Batteries Ltd. 80
Sprint Motors Ltd. 100
Milchen Sonol Agency Ltd. 67
Sonol J-M Ltd. 70
Sonol Dan Ltd. 100
Allied 0ils and Chemicals Ltd. 100
Sonol Yad Mordechai (1972) Ltd. 59
Chem Ami Ltd. 100
Sonapco Bank Street Corporation 100
Supergas Israel Gas Distribution Company Ltd. 100
Supergas Hanegev Ltd. 65
Supergas Rehovot 89 Ltd. 90
Supergas Heating (1984) Ltd. 100
Granite Hacarmel Holdings (1993) Ltd. 100
Granite Hacarmel Properties (1993) Ltd. 100
Granite Hacarmel O.Y. Holdings Ltd. 100
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
0tzem Promotion and Investments Ltd. 50.01
Yarok Az Ltd. 22.9
Lev Magor Management and Services Ltd. 50
Park Cible Management and Holdings Ltd. 50
The above list does not include inactive and/or immaterial affiliated companies
and other companies.
- 54 -
-132-
<PAGE>
[COMPANY LETTERHEAD]
Igal Brightman & Co.
AUDITORS' REPORT TO THE SHAREHOLDERS
OF AM-HAL LTD.
--------------
We have examined the balance sheets of AM-HAL Ltd. as of December 31, 1995
and 1994, the related statements of operations, changes in shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1995. Our examinations were 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 statutory financial statements 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 share
holder 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, 1995
and 1994, 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, 1995, 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 11, 1996
- 2-
-133-
<PAGE>
[COMPANY LETTERHEAD]
Report of Independent Public Accountants
----------------------------------------
To the shareholders of Ampal Engineering (1994) Ltd.
We have audited the balance sheet of Ampal Engineering (1994) Ltd. as at
December 31, 1995 and 1994, the related statements of income and
shareholders' equity, and cash flows for each of the two years in the
period ended December 31, 1995, expressed in New Israeli Shekels. These
financial statement 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 the 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.
-134-
<PAGE>
Condensed statements in historical values which formed the basis of
the adjusted statement appear in note 6 to the financial statement.
These amounts have been translated into U.S. Dollars using the method
described in Note 6.
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, 1995 and 1994, the results of its operations, the changes in
the shareholders' equity and cash flows for each of the two years ended
December 31, 1995, in conformity with accounting principles generally
accepted in Israel, consistently applied. Also, in our opinion, the
financial statements based on nominal data (note 6) present fairly, in
conformity with generally accepted accounting principles, the financial
position of the Company as at December 31, 1995 and 1994, 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, 1995, on the
basis of the historical cost convention.
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 not significantly affected
the determination of nominal/historical net income (loss) and shareholders
equity.
March 11, 1996
/s/ Shlomo Ziv & Co.
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
-135-
<PAGE>
COHEN, EYAL, YEHOSHUA & CO.
Certified Public Accountants (Isr.)
51 Weizmann St., P.O. Box 21592
Tel Aviv 61214, Israel
Tel 03-6952210, Fax 03-6950148
AMPAL ENTERPRISES LTD.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
SPECIAL PURPOSE STATEMENT
-------------------------
We have audited the balance sheets of Ampal Enterprises Ltd. as at December
31, 1995 and 1994, the related statements of profit and loss, and the
statement of changes in shareholders' equity for each of the two years in
the period ended December 31, 1995, expressed in New Israeli Shekels. These
financial statements are the responsibility of the Company's directors and
its 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. 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, whether originating in an error in the financial
statements or misstatement contained therein. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes the accounting principles used
and significant estimates made by the Company's directors and its
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
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 5 to the
financial statements.
In our opinion, the abovementioned financial statements present fairly the
financial position of the Company at December 31, 1995 and 1994, the
results of its operations and the changes in shareholders' equity for each
of the two years in the period ended December 31, 1995, in conformity with
accounting principles generally accepted in Israel, in all material
respects, consistently applied. Also, in our opinion, the financial
statements based on nominal data (Note 5) present fairly, in nominal terms,
the financial position
1
-136-
<PAGE>
of the Company as at December 31, 1995 and 1994, 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, 1995, on the basis
of the historical cost convention.
Accounting principles generally accepted in Israel differ in certain
respects from accounting principles generally accepted in the United
States. The data regarding the method of translation to U.S. dollars and
the abovementioned differences are summarized in Note 5E to the financial
statements.
Cohen, Eyal, Yehoshua & Co.
March 11, 1996 Certified Public Accountants (Isr.)
2
-137-
<PAGE>
FAHN, KANNE & Co. Certified Public Accountants (Isr.)
------------------------------------------------------
3, Druyanov St. Tel- Aviv 63143, P.O.B. 11535, Tel-Aviv 61114,
Tel. 972-3-5264444, Fax 972-3-4201386
Number: 52
Tel-Aviv, March 11, 1996
AUDITORS' REPORT TO THE SHAREHOLDERS OF
AMPAL FINANCIAL SERVICES LTD.
-----------------------------
We have audited the balance sheets of AMPAL FINANCIAL SERVICES LTD. as of
December 31, 1995 and 1994 and the related statements of income and
shareholders' equity and cash flows for the three years in the period ended
December 31, 1995, 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 audits in accordance with generally
accepted auditing standards, including those prescribed under the Auditors
Regulations (Auditors 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
that 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 the historical cost
as adjusted for 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 statements in historical values which formed the basis of the
adjusted statements appear in Note 13 to the financial statements.
In our opinion, the abovementioned financial statements present fairly the
financial position of the company as of December 31, 1995 and 1994, the
results of its operations, the changes in its shareholders' equity and its
cash flows for each of the three years in the period ended December 1995,
in conformity with accounting principles generally accepted in Israel,
consistently applied. Also, in our opinion, the financial statements based
on nominal data (Note 13) present fairly, in conformity with generally
accepted accounting principles, the financial position of the Company as of
December 31, 1995 and 1994, the results of its operations, the changes in
shareholders'
1
-138-
<PAGE>
equity, and its cash flows for each of the three years in the period ended
December 31, 1995, on the basis of the historical cost convention.
Accounting principles generally accepted in Israel differ in certain
respects from accounting principles generally accepted in the United
States. The data regarding this difference is summarized in Note 13 to the
financial statements.
Without qualifying our opinion, we call attention to Note 14 to the
financial statements regarding the exposure of the Company to a possible
claim of former customers in respect of excess interest, linkage and
charges paid in the past on loans granted to them. At the current time, it
is impossible to estimate the effects, if any, of this claim.
Fahn, Kanne & Co.
Certified Public Accountants (Isr.)
Member firm of Grant Thornton International
2
-139-
<PAGE>
[LETTERHEAD]
Report of Independent Public Accountants
----------------------------------------
To the shareholders of Ampal Holdings (1991) Ltd.
We have audited the balance sheet of Ampal Holdings (1991) Ltd. as at
December 31, 1995 and 1994, the related statements of income and
shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1995, expressed in New Israeli Shekels. These
financial statement 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 these 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 the 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.
-140-
<PAGE>
Condensed statements in historical values which formed the basis of the
adjusted statement appear in note 7 to the financial statement. These
amounts have been translated into U.S. Dollars using the method described
in Note 7.
In our opinion, based on our audit, the above mentioned financial
statements present fairly the financial position of the Company as at
December 31, 1995 and 1994, the results of its operations, the changes in
the shareholders' equity and cash flows for each of the three years ended
December 31, 1995, in conformity with accounting principles generally
accepted in Israel, consistently applied. Also, in our opinion, the
financial statements based on nominal data (note 7) present fairly, in
conformity with generally accepted accounting principles, the financial
position of the Company as at December 31, 1995 and 1994, 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, 1995, on the
basis of the historical cost convention.
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 not significantly affected
the determination of nominal/historical net income (loss) and shareholders'
equity.
March 11, 1996
/s/ Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
-141-
<PAGE>
FAHN, KANNE & Co. Certified Public Accountants (Isr.)
------------------------------------------------------
3, Druyanov St. Tel- Aviv 63143, P.O.B. 11535, Tel-Aviv 61114,
Tel. 972-3-5264444, Fax 972-3-4201386
Number: 480
Tel-Aviv, March 11, 1996
AUDITORS' REPORT TO THE SHAREHOLDERS OF
AMPAL INDUSTRIES (ISRAEL) LTD.
------------------------------
We have audited the balance sheets of AMPAL INDUSTRIES (ISRAEL) LTD. as of
December 31, 1995 and 1994 and the related statements of income and
shareholders' equity and cash flows for the three years in the period ended
December 31, 1995, 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 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
that 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 data included in the Company's financial statements relating to the
equity in an investee company and relating to the Company's share in the
results of its operations are based on financial statements which were
audited by other auditors.
The above statements have been prepared on the basis of the historical cost
as adjusted for 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 statements in historical values which formed the basis of the
adjusted statements appear in Note 18 to the financial statements.
The financial statements for 1993 and 1994 were restated to reflect the
retroactive effect of not crediting the adjustment of the capital notes of
a subsidiary to the income statement and the retroactive correction of the
Investment in an investee company, resulting from the investee's changing
its accounting policy (see Note II to the financial statements).
1
-142-
<PAGE>
In our opinion, based on our audit and the reports of other auditors, the
abovementioned financial statements present fairly the financial position
of the company as of December 31, 1995 and 1994, the results of its
operations, the changes in its shareholders' equity and its cash flows for
each of the three years in the period ended December 1995, in conformity
with accounting principles generally accepted in Israel, consistently
applied. Also, in our opinion, the financial statements based on nominal
data (Note 18) present fairly, in conformity with generally accepted
accounting principles, the financial position of the Company as of December
31, 1995 and 1994, 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, 1995, on the basis of the historical cost
convention.
Accounting principles generally accepted in Israel differ in certain
respects from accounting principles generally accepted in the United
States. The data regarding this difference is summarized in Note 19 to the
financial statements.
Fahn, Kanne & Co.
Certified Public Accountants (Isr.)
2
-143-
<PAGE>
HAFT & HAFT & CO.
- -----------------
incl. STRAUSS, LAZER & CO. Certified Public Accountants
NEXIA International
AMPAL (ISRAEL) LTD.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
SPECIAL PURPOSE STATEMENT
-------------------------
We have audited the consolidated balance sheets of Ampal (Israel) Ltd. as
at December 31, 1995 and 1994, the related consolidated statements of
profit and loss, the statement of changes in shareholders' equity and the
statement of cash flows for each of the three years in the period ended
December 31, 1995, expressed in New Israeli Shekels. These financial
statements are the responsibility of the Company's directors and its
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. 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, whether originating in an error in the financial
statements or misstatement contained therein. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes the accounting principles used
and significant estimates made by the Company's directors and its
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
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 23 to the
financial statements.
The financial statements of consolidated subsidiaries whose assets
constitute 31% (1994: 6%) of the total assets included in the consolidated
balance sheet, and whose income constitute 43% (1994: 1%) 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 audit and the reports of other auditors, the
abovementioned financial statements present fairly the financial position
of
1
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<PAGE>
the Company and its consolidated subsidiaries as at December 31, 1995 and
1994, the results of their operations, the changes in shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1995, in conformity with accounting principles generally accepted in Israel
in all material respects, consistently applied. Also, in our opinion, the
unconsolidated financial statements based on nominal data (Note 23) present
fairly, in nominal terms, the unconsolidated financial position of the
Company as at December 31, 1995 and 1994, 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, 1995, on the basis
of the historical cost convention.
Accounting principles generally accepted in Israel differ in certain
respects from accounting principles generally accepted in the United
States. The data regarding the method of translation to U.S. dollars and
the abovementioned differences are summarized in Note 23E,F to the
financial statements.
We call attention that the auditors' report of subsidiary companies
included drawing attention, without qualifying those reports, to the
subject detailed in Note 24 to the financial statements - "Publications
relating to the Banking System".
H.H.S.L. Haft & Haft & Co.
March 11, 1996 Certified Public Accountants (Isr.)
2
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<PAGE>
COHEN, EYAL, YEHOSHUA & CO.
Certified Public Accountants (Isr.)
51 Weizmann St., P.O. Box 21592
Tel Aviv 61214, Israel
Tel 03-6952210, Fax 03-6950148
AMPAL PROPERTIES LTD.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
SPECIAL PURPOSE STATEMENT
-------------------------
We have audited the balance sheets of Ampal Properties Ltd. as at December
31, 1995 and 1994, the related statements of profit and loss, the statement
of changes in shareholders' equity and the statement of cash flows for each
of the two years in the period ended December 31, 1995, expressed in New
Israeli Shekels. These financial statements are the responsibility of the
Company's directors and its 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. 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, whether originating in an error in the financial
statements or misstatement contained therein. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes the accounting principles used
and significant estimates made by the Company's directors and its
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
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 6 to the
financial statements.
In our opinion, the abovementioned financial statements present fairly the
financial position of the Company at December 31, 1995 and 1994, 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, 1995, in
conformity with accounting principles generally accepted in Israel, in all
material respects,
1
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<PAGE>
consistently applied. Also, in our opinion, the financial statements based
on nominal data (Note 6) present fairly, in nominal terms, the financial
position of the Company as at December 31, 1995 and 1994, 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, 1995, on the
basis of the historical cost convention.
Accounting principles generally accepted in Israel differ in certain
respects from accounting principles generally accepted in the United
States. The data regarding the method of translation to U.S. dollars and
the above mentioned differences are summarized in Note 6F to the financial
statements.
Cohen, Eyal, Yehoshua & Co.
March 11, 1996 Certified Public Accountants (Isr.)
2
-147-
<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
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<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)
-149-
<PAGE>
[LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS OF
BAY HEART LIMITED
We have audited the consolidated balance sheets of Bay Heart Ltd.
{hereafter: the Company) and its subsidiary as at December 31, 1995 and
1994, and the related statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1995,
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 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 26.
In our opinion, based on our audit, the above-mentioned consolidated
financial statements present fairly the financial position of the Company
as at December 31, 1995 and 1994, 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, 1995, in conformity with accounting
principles generally accepted in Israel, consistently applied.
Also, in our opinion, the condensed consolidated financial statements as
based on the nominal financial statements in Israel Shekels and shown in
Note 26 present fairly, in conformity with accounting principles generally
accepted in the United States, the financial position of the Company as at
December 31, 1995 and 1994, 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, 1995, on the basis of the historical cost
convention.
-150-
<PAGE>
[LETTERHEAD]
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 net income (loss) and shareholders' equity as reported in the Israel
primary financial statements to the extent summarized in Note 26(f) to
the financial statements.
/s/ RONEL, STETTNER & CO.
RONEL, STETTNER & CO. Certified Public
Accountants (Israel)
Haifa, February 12, 1996
N-391
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<PAGE>
KOST LEVARY & FORER
A member of
ERNST & YOUNG INTERNATIONAL
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
CARMEL CONTAINER SYSTEMS LTD.
We have audited the accompanying consolidated balance sheets of Carmel
Container Systems Ltd. and its subsidiaries as of December 31, 1994 and
1995, 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, 1995. 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 subsidiaries, the assets of which
at December 31, 1994 and 1995 constitute approximately 26% and 22%,
respectively, of total assets included in the consolidated balance sheet
and the revenues of which for the years ended December 31 1993, 1994 and
1995 constitute approximately 30%, 30% and 30%, respectively, of total
revenues included in the consolidated statement of income. Those statements
were audited by other auditors, whose reports have 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.
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 an the reports of the other
auditors, the financial statements referred to above present fairly, in all
1
-152-
<PAGE>
material respects, the consolidated financial position of Carmel Container
Systems Ltd. and its subsidiaries as of December 31, 1994 and 1995 and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles in Israel which differ in certain
respects from those followed in the United States (see Note 23 to the
consolidated financial statements).
Tel-Aviv, Israel KOST, LEVARY and FORER
March 7, 1996 Certified Public Accountants (Israel)
2
-153-
<PAGE>
KOST, LEVARY & FORER A member of
ERNST & YOUNG INTERNATIONAL
Messrs. Ampal Ltd.
- ------------------
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 1993, 1994
and 1995, which were audited by us, and on which we expressed our opinion
on March 7, 1996, 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, 1994 and 1995, and the consolidated income statement figures
for each of the two years in the period ended December 31, 1995.
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, 1994 and 1995, and the related consolidated results of
operations and changes in shareholders' equity for each of the two years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles in Israel and in the United States, on the basis of
historical cost convention, (see note 23 to the annual audited financial
statements of the company).
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.
1
-154-
<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,
Tel-Aviv, Israel KOST, LEVARY and FORER
March 7, 1996 Certified Public Accountants (Israel)
2
-155-
<PAGE>
PORAT & CO.
- -----------
Certified Public Accountants (ISR)
28 Hayezira St. Ramat-Gan 52521
Fax: 03-7527673
Tel: 7527646
Report of Independent Public Accounts
-------------------------------------
of
--
COUNTRY CLUB KFAR-SABA LIMITED
------------------------------
We have audited the financial statements of Country Club Kfar-Saba Limited
(hereinafter - the Company), and the consolidated financial statements of
the Company and its joint venture investee as follows:
- - Balance sheets of the Company as at December 31, 1995, December 31,
1994 and consolidated balance sheet as of December 31, 1994.
- - Statement of income, shareholders equity and cash flow for the
company and for the consolidated entity for the two years ended December
31, 1995. These 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.
1
-156-
<PAGE>
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.
In our opinion, based, on our audit, the above mentioned financial
statements present fairly the financial position of the company as at
December 31, 1995 and 1994, the results of its operations, the changes in
shareholders' equity and cash flows for each of the years in the period
ended December 31, 1995, in conformity with accounting principles generally
accepted in Israel, consistently applied. Also, in our opinion, the
financial statements based on nominal data (Note 23) present fairly in
conformity with generally accepted accounting principles, the financial
position of the Company as at December 31, 1995 and 1994, 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, 1995, 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 24 to the financial statements.
Porat & Co.
Certified Public Accountants (Isr.)
Ramat Gan, March 13, 1996
2
-157-
<PAGE>
COHEN, EYAL, YEHOSHUA & CO.
Certified Public Accountants (Isr.)
51 Weizmann St., P.O. Box 21592
Tel Aviv 61214, Israel
Tel 03-6952210, Fax 03-6950148
DAVIDSON-ATAI PUBLISHERS LTD.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
SPECIAL PURPOSE STATEMENT
-------------------------
We have audited the balance sheets of Davidson-Atai Publishers Ltd. as at
December 31, 1995 and 1994, the related statements of profit and loss, the
statement of changes in shareholders' equity and the statement of cash
flows for each of the three years in the period ended December 31, 1995,
expressed in New Israeli Shekels These financial statements are the
responsibility of the Company's directors and its 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. 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, whether originating in an error in the financial
statements or misstatement contained therein. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes the accounting principles use
and significant estimates made by the Company's directors and its
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
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 23 to the
financial statements.
In our opinion, the abovementioned financial statements present fairly the
financial position of the Company at December 31, 1995 and 1994, 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, 1995, in
conformity with accounting principles generally accepted in Israel, in all
material respects, consistently applied. Also, in our opinion, the
unconsolidated financial statements based on nominal data (Note 23) present
fairly, in nominal terms, the unconsolidated financial position of the
Company as at December 31, 1995 and 1994, and the result of its operations,
the changes in shareholders' equity, and its cash flows for each of the
three years in the period ended December 31, 1995, on the basis of the
historical cost convention.
1
-158-
<PAGE>
Accounting principles generally accepted in Israel differ in certain
respects from accounting principles generally accepted in the United
States. The data regarding the method of translation to U.S. dollars and
the above mentioned differences are summarized in Note 23D to the financial
statements.
Cohen, Eyal, Yeshoshua & Co.
March 11, 1996 Certified Public Accountants (Isr.)
2
-159-
<PAGE>
[LETTERHEAD]
Report of Independent Public Accountants
----------------------------------------
To the Shareholders of Epsilon Investment House Ltd.
We have audited the Consolidated Balance Sheets of Epsilon Investment House
Ltd., (an Israeli corporation) (hereinafter - "the Company") and its
subsidiary as of December 31, 1995, and the related Consolidated Statements
of Income, Changes in Shareholders' Equity for the year ended December 31,
1995, 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 audit to
obtain reasonable assurance 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 Financial Statements for the previous year have been audited by another
Certified Public Accountant.
The Statement of Cash Flows for the period has not been included in the
Financial Statements.
In our opinion, the abovementioned excepted, the Financial Statements
referred to above present fairly, in all material respects, the financial
position of the Company and its subsidiary, as of December 31, 1995 and the
results of their operations, changes in their shareholders' equity, for the
year ended December 31, 1995, in conformity with generally accepted
accounting principles.
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 2.2 to the Consolidated Financial
Statements.
/s/ Friedman, Shapira, Goldstein, Siterman & CO.
FRIEDMAN, SHAPIRA, GOLDSTEIN, SITERMAN & CO.
Certified Public Accountants
-160-
<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
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<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
-162-
<PAGE>
PORAT & CO.
- -----------
Certified Public Accountants (ISR.)
Report of Independent Public Accountants
----------------------------------------
of
__
Hod Hasharon Sport Center (1992) Limited Partnership
----------------------------------------------------
We have audited the balance sheet of Hod Hasharon Sport Center (1992)
Limited Partnership as at December 31, 1995 and 1994, the related
statements of income, partners' capital 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 partnership management.
Our responsibility is to express an opinion on these financial statements
based on our audit. 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 19 to the financial statements. These
amounts have been translated into U.S. dollars using the method described
in Note 2D.
1
-163-
<PAGE>
In our opinion, based on our audit the above mentioned financial statements
present fairly the financial position of the partnership as at December 31,
1994 and 1993, the results of its operations, the changes in partners'
capital and cash flows for each of the two years in the period ended
December 31, 1995, in conformity with accounting principles generally
accepted in Israel, consistently applied. Also, in our opinion, the
financial statements based on nominal data (Note 19) present fairly, in
conformity with generally accepted accounting principles, the financial
position of the partnership as at December 31, 1995 and 1994, and the
results of its operations, the changes in partners' capital and its cash
flows for each of the three years in the period ended December 31, 1995, 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.
Porat and Co.
Certified Public Accountants (Isr.)
Ramat Gan, 13 MARCH, 1996
2
-164-
<PAGE>
[LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
M.D.F. INDUSTRIES LTD.
----------------------
We have audited the balance sheets of M.D.F. Industries Ltd. as at
December 31, 1995 and 1994, the related statements of shareholders' equity
and cash flows for each of the two years in the period ended December 31,
1995, 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 audits in accordance with
generally accepted auditing standards, including those prescribed under the
Auditors Regulations (Auditors' 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 20 to the financial statements. These
amounts have been translated into U.S. dollars using the method described
in Note 20E(1).
In our opinion, the above-mentioned financial statements present fairly
the financial position of the Company as at December 31, 1995 and 1994, the
changes in shareholders' equity and cash flows for each of the two years in
the period ended December 31, 1995, 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, 1995 and 1994, and the changes
in shareholders' equity, and its cash flows for each of the two years in
the period ended December 31, 1995, on the basis of the historical cost
convention.
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 shareholders' equity to the extent summarized in
(Note 20) to the financial statements.
/s/ H.H.S.L. Haft & Haft & Co.
H.H.S.L. Haft & Haft & Co.
Tel-Aviv, March 10, 1996 Certified Public Accountants (Isr.)
-165-
<PAGE>
KOST LEVARY & FORER
A MEMBER OF
ERNST & YOUNG INTERNATIONAL
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
MIVNAT HOLDING LTD.
We have audited the financial statements of Mivnat Holding Ltd.
(hereafter - "the Company") and the consolidated financial statements of
the Company and its subsidiary (hereafter - "the consolidated"), as
detailed below:
- - Balance sheets of the Company and consolidated as of December 31, 1994
and 1995.
- - Statements of income, changes in shareholders' equity and cash flows
of the Company and consolidated for the nine months ended
December 31, 1993, and for each of the two years ended December 31,
1994 and 1995.
Our examinations were conducted in accordance with generally accepted
auditing standards including those prescribed by the Auditors (Mode of
Performance) Regulations (Israel), 1973, and, accordingly, included such
tests of the accounting records and such other auditing procedures as we
have considered necessary in the circumstances.
The aforementioned financial statements have been prepared on the basis
of the historical cost 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 financial statements is presented in Note 28.
In our opinion, the aforementioned financial statements present fairly
the financial position, consolidated and of the Company, as of December 31,
1994 and 1995 and the results of its operations, changes in its
shareholders' equity and cash flows for each of the periods 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 (New Version), 1983,
we state that we have obtained all the information and explanations we have
required and that our opinion on the above statements is given according to
the best of our information and the explanations received by us and as
shown by the books of the Company.
Tel-Aviv, Israel KOST, LEVARY and FORER
March 6, 1996 Certified Public Accountants Israel)
-166-
<PAGE>
HAGGAI WALLENSTEIN, DOV & CO. CPA (Isr.)
AUDITORS' REPORT
----------------
To the shareholders of
MORIAH HOTELS LTD.
------------------
We have audited the accompanying consolidated balance sheets of MORIAH
HOTELS LTD. (an Israeli corporation) (hereinafter - the company) and its
subsidiaries as at December 31, 1995 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, 1995, expressed in
U.S. dollars. 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. 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 statements 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 MORIAH HOTELS LTD. and
its subsidiaries as at December 31, 1995 and 1994, and the results of their
operations, changes in their shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
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 la. to the consolidated financial
statements.
HAGGAI WALLENSTEIN, DOV & CO.
Certified Public Accountants (Isr.)
Ramat-Gan
March 10, 1996
-167-
<PAGE>
HAFT & HAFT & CO. CERTIFIED PUBLIC ACCOUNTANTS (Isr.)
INCL STRAUSS LAZER & CO.
NEXIA
INTERNATIONAL
NIR LTD.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
SPECIAL PURPOSE STATEMENT
-------------------------
We have audited the balance sheets of Nir Ltd. as at December 31, 1995 and
1994, the related statements of profit and loss, the statement of changes
in shareholders' equity and the statement of cash flows for each of the
three years in the period ended December 31, 1995, expressed in New Israeli
Shekels. These financial statements are the responsibility of the
Company's directors and its 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. 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, whether originating in an error in the financial
statements or misstatement contained therein. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes the accounting principles used
and significant estimates made by the Company's directors and its
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
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 18 to the
financial statements.
In our opinion, the above mentioned financial statements present fairly the
financial position of the Company at December 31, 1995 and 1994, 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, 1995, in
conformity with accounting principles generally accepted in Israel, in all
material respects, consistently applied. Also, in our opinion, the
financial statements based on nominal data (Note 18) present fairly, in
nominal terms, the financial position of the Company as at December 31,
1995 and 1994, 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, 1995, on the basis of the historical cost
convention.
Accounting principles generally accepted in Israel differ in certain
respects from accounting principles generally accepted in the United
States. The data regarding the method of translation to U.S. dollar and the
abovementioned differences are summarized in Note 18E to the financial
statements.
-168-
<PAGE>
Without qualifying our opinion, we call attention to Note 25 to the
financial statements - "Publications relating to the banking system".
H.H.S.L. Haft & Haft & Co.
March 11, 1996 Certified Public Accountants (Isr.)
2
-169-
<PAGE>
[LETTERHEAD]
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, 1995 and 1994 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, 1995.
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, 1995 and 1994 constitute approximately 31% and 45%, respectively, of
total consolidated assets, and whose revenues for each of the three years
in the period ended December 31, 1995 constitute approximately 25%, 50% and
88%, respectively, of total consolidated revenues and gains, have been
examined by other auditors. The data regarding the Company's share in
excess of profits over losses of certain associated companies, a net amount
of .adjusted NIS 4,400,000 in 1995, adjusted NIS 2,925,000 in 1994 and
adjusted NIS 9,675,000 in 1993, are based on the financial statements of
those companies which have been examined by other auditors.
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
auditors 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, 1995 and 1994 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, 1995. 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.
The special condensed consolidated financial statements which are presented
in note 14 have been translated into U.S. dollars for the convenience of
one of the Company's shareholders, in accordance with the principles set
forth in Statement No. 52 of the Financial Accounting Standards Board of
the United States. The translation has been properly made.
Tel-Aviv, Israel /s/ Kesselman & Kesselman
March 6. 1996
2
-170-
<PAGE>
Certified Public Accountants
27-29 Hamered St. PO Box 50180 Tel: 972-3-5140808
68125 Tel-Aviv 61500 Tel-Aviv 972-3-5192555
Israel Israel Fax: 972-3-5101918
972-3-5175280
AUDITORS' REPORT TO THE SHAREHOLDERS OF
ORLITE INDUSTRIES (1959) LTD
We have audited the balance sheets of Orlite Industries (1959) Ltd
(hereinafter - the Company) at 31 December 1995 and 1994 and the related
statements of income, shareholders' equity and cash flows for each of the
three years ended 31 December 1995, 1994 and 1993, expressed in New Israeli
Shekels (hereinafter NIS). 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 Israeli
currency in accordance with opinions issued by the Institute of Certified
Public Accountants in Israel.
In our opinion, based on our audit, the above mentioned financial
statements present fairly the financial position of the Company at 31
December 1995 and 1994 and the results of its operations, the changes in
shareholders' equity and cash flows for each of the three years ended 31
December 1995, 1994 and 1993, in conformity with accounting principles
generally accepted in Israel, consistently applied.
Also, in our opinion, based on our audit, the financial statements of the
company, on the basis of historical cost convention, present fairly the
financial position of the Company at 31 December 1995 and 1994 and the
results of its operations, the changes in shareholders' equity for each of
the three years ended 31 December 1995, 1994 and 1993, in conformity with
accounting principles generally accepted in Israel, consistently applied.
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 historical net income and shareholders' equity to the extent summarized
in Note 19 to the financial statements.
These financial statements have been prepared in accordance with the
Securities Regulations (Preparation of Financial Statements), 1993.
/s/ BRAUDE BAVLY CPA
BRAUDE BAVLY CPA
25 February 1996
-171-
<PAGE>
KPMG Braude Bavly
Certified Public Accountants
27-29 Hamered St. P.O. Box 50180 Tel: 972-3-5140808
68125 Tel-Aviv 61500 Tel-Aviv 972-3-5192555
Israel Israel Fax: 972-3-5101918
972-3-5175280
To the Shareholders of Orlite Industries (1959) Ltd
At your request, we have audited the translation into US dollars of the
audited financial statements of Orlite Industries (1959) Ltd as of 31
December 1995, and as of 31 December 1994, which were prepared in adjusted
New Israeli Shekels (NIS), and our audited report on them was made on 25
February 1996. The translation of the above mentioned financial statements
into US dollars was made solely for the purpose of Ampal-American Israel
Corporation (hereafter - Ampal) and in accordance with the guidelines
described in the note to the financial statement 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 US dollars
in accordance with the guidelines described in note to the financial
statement.
/s/ Braude Bavly
Braude Bavly CPA
Tel Aviv, 18 March 1996
-172-
<PAGE>
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
6 Kaufman St. P.O.B. 50322
Tel-Aviv 61500, Gibor House
Haifa 31018, 2 Hanamal St. P.O.B. 1886
Summit International
Associates Inc.
Report of Independent Public Accountants
----------------------------------------
To the Shareholders of Paradise Mattresses (1992) Ltd.
We have audited the balance sheet of Paradise Mattresses Industries (1992)
Ltd. as at December 31, 1995 and 1994, the related statements of income and
shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1995, 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 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, the above-mentioned financial
statements present fairly the financial position of the Company as at
December 31, 1995 and 1994, the results of its operations, the changes in
shareholders' equity and cash flows for each of the three years ended
December 31, 1995, 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, 1995 and 1994, 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, 1995, on the
basis of the historical cost convention.
-173-
<PAGE>
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 not significantly affected
the determination of nominal/historical net income (loss) and shareholders'
equity.
March 11, 1996 Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
-174-
<PAGE>
[REUVENI, HARTUV, TEPPER & CO. LETTER HEAD]
AUDITOR'S REPORT TO THE SHAREHOLDERS OF
PRI HA'EMEK (CANNED AND FROZEN FOOD) 88 LTD.
We have audited the accompanying balance sheets of Pri Ha'emek (Canned and
Frozen Food) 88 Limited (hereinafter the Company) as at December 31, 1995 and
1994, the consolidated balance sheets as at December 31, 1995 and 1994, and the
statements of profit and loss, changes in shareholders' equity and cash flows of
the Company and consolidated for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's Board of Directors and of its Management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Generally Accepted Auditing Standards,
including those prescribed under the Auditors' Regulations (Auditor's Mode of
Performance), 1973. Those standards require us to plan and perform the audit
with the aim of obtaining a reasonable degree of assurance that the financial
statements are free of material misstatement, whether caused by an error in the
financial statements or caused by misleading information included therein. An
audit includes examining, on a test basis, evidence supporting the amounts and
information in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Company's Board
of Directors and Management, as well as evaluating the fairness of the overall
presentation of the financial statements. We are satisfied that our audit
provides a fair basis for our opinion. 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.
The above mentioned financial statements have been prepared in New Israel
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 1).
In our opinion, based on our audit, the above mentioned financial statements
present fairly, in conformity with Generally Accepted Accounting Principles in
all material respects the financial position of the Company and consolidated as
at December 31, 1995 and 1994, and the results of the operations, the changes in
shareholders' equity and the cash flows of the Company and consolidated for each
of the three years in the period ended December 31, 1995.
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 20 to the financial statements.
[LOGO]
2
-175-
<PAGE>
AUDITOR'S REPORT TO THE SHAREHOLDERS OF
PRI HA'EMEK (CANNED AND FROZEN FOOD) 88 LTD.
(CONTINUED)
Pursuant to Section 211 of the Companies Ordinances (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 of our information and the explanations received by us and as shown by the
books of the Company.
Without qualifying our above opinion, we draw attention to note 1(2) to the
financial statements, concerning the potential importance of matters reflected
in this note on the continuance of the Company's activities as a going concern
and its ability to pay its debts as they fall due.
/s/ Reuveni, Hartuv, Tepper
Certified Public Accountants (Isr).
Tel-Aviv, March 24, 1996.
3
-176-
<PAGE>
[LETTER HEAD]
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 Banaltabet, 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 Sheets of Red Sea Marineland Holding (1973) Ltd. as
at December 31, 1995 and 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 change 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 Sheets present fairly, in conformity with
generally accepted accounting principles, the financial position of the company
as at December 31, 1995 and 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 Sheets 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 11, 1996
/s/Dov Kahana & Co.
------------------------------
Dov Kahana & Co.
Certified Public Accountants (Isr.)
-177-
<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.PA (Isr.)
Michael Levy, C.P.A. (Isr.)
AUDITORS' REPORT
----------------
TO THE SHAREHOLDERS OF
----------------------
RED SEA UNDER WATER OBSERVATORY LTD.
------------------------------------
We have audited the Balance Sheets of Red Sea Under Water Observatory Ltd.
(hereinafter "the Company") and the Consolidated Balance Sheet of the
Company and its subsidiaries as at December 31, 1995 and 1994, the related
statements of income and shareholders' equity and cash flows of the Company
for each of the three years, Consolidated for each of the two years, in the
period ended December 31, 1995, 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 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 of the Company in historical values which formed the
basis of the adjusted statements appear in Note 14 to the financial
statements. These amounts have been translated into U.S. dollars using the
method described in Note 15.
The Financial Statements of subsidiaries operating abroad, whose assets
constitute app. 41% of the total assets contained in the Consolidated
Balance Sheet (31.12.94: app. 42%) and whose sales constitute app. 38% of
the total sales contained in the Consolidated Statement of Income for the
year ended December 31, 1995 (1994: app. 43%), have been audited by other
auditors.
In our opinion, based on our audit and the reports of other auditors, as
above mentioned, the financial statements present fairly the financial
position of the Company and Consolidated as at December 31, 1995 and 1994,
the results of operations, the changes in shareholders' equity and cash
flows of the Company for each of the three years, Consolidated for each of
the two years, in the period ended December 31, 1995, in conformity with
accounting principles generally accepted in Israel, consistently applied.
Also, in our opinion, the condensed financial statements based on nominal
data (Note 14) present fairly, in conformity with generally accepted
accounting principles in Israel and in the U.S., the financial position of
the Company as at December 31, 1995 and 1994, and the results of its
operations for each of the three years in the period ended December 31,
1995, on the basis of the historical cost convention. As applicable to
these condensed financial statements, such accounting principles are
substantially identical in all material respects.
Also in our opinion the Condensed Translated Statements into U.S. Dollars
(Note 15) are presented fairly in conformity with S.F.A.S. 52.
/s/ Dov Kahana & Co.
----------------------
Dov Kahana & Co.
Certified Public Accountants (Isr.)
-178-
<PAGE>
FRIEDMAN SHAPIRO GOLDSTEIN SITERMAN & CO.
Certified Public Accountants
Report of Independent Public Accountants
----------------------------------------
To the Shareholders of Renaissance Investment Co. Ltd.
We have audited the accompanying Consolidated Balance Sheets of Renaissance
Investment Co. Ltd., (an Israeli corporation) (hereinafter - "the Company")
and its subsidiary as of December 31, 1995 and 1994, and the related
Consolidated Statements of Income, Changes in Shareholders' Equity for each
of the two years in the period ended December 31, 1995, 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 audit to
obtain reasonable assurance 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 Statement of Cash Flows for the period has not been included in the
Financial Statements.
In our opinion, the above mentioned excepted, the Financial Statements
referred to above present fairly, in all material respects, the financial
position of the Company and its subsidiary, as of December 31, 1995 and
1994 and the results of their operations, changes in their shareholders'
equity, for each of the two years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
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 2.2 to the Consolidated Financial
Statements.
FRIEDMAN, SHAPIRA GOLDSTEIN, SITERMAN & CO.
Certified Public Accountants
Tel-Aviv, February 8, 1996
-179-
<PAGE>
[COMPANY LETTERHEAD]
KOST LEVARY & FORER
A MEMBER OF
ERNST & YOUNG INTERNATIONAL
Messrs. Ampal Ltd.
- ------------------
Re: Financial statements of Shmay-Bar (Real Estate) 1993 Ltd.
(hereafter - "the Company") remeasured into U.S. dollars
---------------------------------------------------------
As you know, the Company publishes the 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 1994 and
1995, which were audited by us, and on which we expressed our opinion on
February 27, 1996, have been provided to you. 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.
At your request, we have translated into U.S. dollars, according to
the principles determined in SFAS 52, the balance sheets at December 31,
1994 and 1995, and the income statement figures for each of the two years
in the period ended December 31, 1995.
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.
In our opinion, based upon our audit, the nominal 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 financial position of the Company and its
subsidiaries at December 31, 1994 and 1995, and the related results of
operations and changes in shareholders' equity for each of the two years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles in Israel and in the United States, on the basis of
historical cost convention.
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,
/s/ Kost, LeVary and Forer
Tel-Aviv, Israel KOST, LEVARY and FORER
February 27, 1996 Certified Public Accountants (Israel)
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[This page Intentionally Left Blank]
-181-
<PAGE>
[COMPANY LETTERHEAD]
KOST LEVARY & FORER
A MEMBER OF
ERNST & YOUNG INTERNATIONAL
Messrs. Ampal Ltd.
- ------------------
Re: Financial statements of Shmay-Bar (T.H) 1993 Ltd.
(hereafter - "the Company") remeasured into U.S. dollars
---------------------------------------------------------
As you know, the Company publishes the 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 1994 and
1995, which were audited by us, and on which we expressed our opinion on
February 27, 1996, have been provided to you. 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.
At your request, we have translated into U.S. dollars, according to
the principles determined in SFAS 52, the balance sheets at December 31,
1994 and 1995, and the income statement figures for each of the two years
in the period ended December 31, 1995.
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.
In our opinion, based upon our audit, the nominal 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 financial position of the Company and its
subsidiaries at December 31, 1994 and 1995, and the related results of
operations and changes in shareholders' equity for each of the two years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles in Israel and in the United States, on the basis of
historical cost convention.
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,
/s/ Kost, LeVary and Forer
Tel-Aviv, Israel KOST, LEVARY and FORER
February 27, 1996 Certified Public Accountants (Israel)
-182-
<PAGE>
REUVENI, HARTUV, TEPPER & CO.
Certified Public Accountants (Isr.)
------------------------------------
30 Achad Ha'am St., Tel-Aviv Israel P.O.B. 29870, Code 61298
Tel: 972-3-5604281 Fax: 972-3-5605001
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, 1995 and
1994 and the Statements of Profit and Loss, Partnerships' Equity and Cash
Flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's Board of
Directors and of its Management. Our responsibility is limited to
expressing an opinion on these financial statements based on our audit.
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, 1995 and 1994 and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1995.
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 partnership.
Certified Public Accountants (Isr.)
Tel Aviv, February 25, 1996
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<PAGE>
ALMAGOR & Co. CPA (ISR)
[LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders of
Teledata Communications Ltd.
We have audited the consolidated balance sheets of Teledata Communications
Ltd. ("the Company") at December 31, 1995 and 1994 and the related
statements of operations, shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Board of Directors and 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, whose assets constitute approximately 2% and 5% of the total
consolidated assets at December 31, 1995 and 1994, respectively, and whose
total revenues constitute approximately 13% and 22% of the consolidated
total revenues for the years ended December 31, 1995 and 1994,
respectively. Those statements were audited by other accountants whose
reports have been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for the abovementioned
subsidiaries, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards, including those prescribed by the Auditors' (Mode of
Performance) Regulations (Israel), 1973. Such auditing standards are
substantially identical to generally accepted auditing standards in the
United States. 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 the 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, based on our audit and the reports of other independent
auditors as stated above, the aforementioned consolidated financial
statements present fairly the consolidated financial position of the
Company and its subsidiaries at December 31, 1995 and 1994 and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, 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
/s/ Almagor & Co.
Ramat-Gan, Israel,
February 12, 1996
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<PAGE>
Igal Brightman & Co.
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
REPORT OF INDEPENDENT AUDITORS TO THE
BOARD OF DIRECTORS AND SHAREHOLDERS OF
TRINET INVESTMENTS IN HIGH-TECH LTD.
---------------------------------------
We have audited the balance sheets of Trinet Investments in High-Tech Ltd.
as of December 31, 1995 and 1994, and the related statements of operations,
changes in shareholders' deficiency and cash flows for the two years then
ended, expressed in Israeli currency. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Israel, including those prescribed under the Auditors'
Regulations (Mode of Performance) - 1973, which, for purposes of these
financial statements, are substantially identical to generally accepted
auditing standards in the U.S. 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.
The aforementioned financial statements have been prepared on the basis of
historical cost, adjusted for 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 financial information in
nominal-historical values, which formed the basis of the adjusted
statements, appears in Note 14 to the financial statements.
In our opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of the Company as of December
31, 1995 and 1994, and the results of its operations, changes in
shareholders' deficiency and cash flows for the two years then ended, in
conformity with accounting principles generally accepted in Israel
consistently applied.
Furthermore, in our opinion, the financial statements comply with the
requirements of the Israeli Securities Regulations (Preparation of Annual
Financial Statements) - 1993.
The financial information presented in U.S. dollars and in accordance with
generally accepted accounting principles in the United States is based on
nominal-historical amounts in Israeli currency and is presented in Note 15
to the financial statements.
Igal Brightman & Co.
Certified Public Accountants
Tel-Aviv, February 22, 1996
-185-
<PAGE>
Igal Brightman & Co.
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
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
TRINET VENTURE CAPITAL LTD.
---------------------------
We have audited the balance sheet of Trinet Venture Capital Ltd. ("the
Company") and the consolidated balance sheet of the Company and
subsidiaries as of December 31, 1995 and 1994, the related statements of
operations, changes in shareholders' deficiency and cash flows -
consolidated and the Company - for the year ended December 31, 1995 and for
the period from commencement of operations (February 1, 1994) through
December 31, 1994, expressed in Israeli currency. 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 (Mode
of Performance) - 1973, which, for purposes of these financial statements,
are substantially identical to generally accepted auditing standards in the
U.S. 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.
We did not audit the financial statements of certain subsidiaries, which
financial statements reflect approximately 31% and 23% of consolidated
total assets as of December 31, 1995 and 1994, respectively.
As described in Note 3 to the financial statements, the financial
statements as of December 31, 1994 and for the period then ended have been
restated in order to reflect a retroactive change of the accounting
treatment in respect of a subsidiary that was previously presented on the
cost method.
The aforementioned financial 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 opinions issued by the Institute
of Certified Public Accountants in Israel. Condensed financial information
in nominal-historical values, which formed the basis of the adjusted
statements, appears in Note 19 to the financial statements.
In our opinion, based on our audits and the reports of other auditors, the
aforementioned financial statements present fairly, in all material
respects, the financial position of the Company and the consolidated
financial position of the Company and subsidiaries as of December 31, 1995
and 1994, and the results of operations, changes in shareholders'
deficiency and cash flows - consolidated and the Company - for the year ended
December 31, 1995 and for
-186-
<PAGE>
the period from commencement of operations through December 31, 1994, in
conformity with accounting principles generally accepted in Israel
consistently applied.
Furthermore, in our opinion, the financial statements comply with the
requirements of the Israeli Securities Regulations (Preparation of Annual
Financial Statements) - 1993.
The financial information presented in U.S. dollars and in accordance with
generally accepted accounting principles in the United States is based on
nominal-historical amounts in Israeli currency and is presented in Note 22.
Such financial information includes securities valued at $4,068,000 and
$2,270,000 as of December 31, 1995 and 1994, respectively, representing 97%
and 99% of total assets, respectively, whose values have been estimated by
management in the absence of readily ascertainable market values. As
explained in Note 22, these privately held portfolio securities have been
valued by management at cost until significant developments provide a basis
for a change in valuation. However, because of the inherent uncertainty of
valuation, these estimated values may differ significantly from the values
that would have been used had a ready market for the securities existed,
and the differences could be material.
Igal Brightman & Co.
Certified Public Accountants
Tel-Aviv, February 22, 1996
-187-
<PAGE>
(coopers & lybrand letter head)
AUDITORS' REPORT
----------------
To the Shareholders of
U.D.S. - ULTIMATE DISTRIBUTION SYSTEMS LTD.
-------------------------------------------
(Formerly - Barshar Storage Ltd.)
---------------------------------
We have examined the balance sheet of U.D.S. - Ultimate Distribution
Systems Ltd. (hereafter - the Company) at December 31, 1995 and the
statements of loss, changes in shareholders' equity (capital deficiency)
and cash flows for the year then ended. Our examination was 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 the
Company for 1994 were audited by other certified public accountants whose
report dated April 13, 1995 expressed an unqualified opinion on those
statements. The figures for the above period included in these financial
statements are also based on those financial statements which were audited
by those other 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, on the basis of which the adjusted financial statements
were prepared, are presented in note 10.
In our opinion, the aforementioned financial statements present fairly, in
conformity with generally accepted accounting principles, the financial
position of the Company at December 31, 1995 and the results of its
operations and its cash flows for the year then ended.
Pursuant to Section 211 of the Companies Ordinance (New Version), 1983, we
state that we have obtained all the information and explanations which we
have required and our opinion on the abovementioned 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.
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 11.
The special condensed consolidated financial statements which are presented
in note 11 have been translated into U.S. dollars for the convenience of
one of the Company's shareholders, in accordance with the principles set
forth in Statement No. 52 of the Financial Accounting Standards Board of
the United States. The translation has been properly made.
Tel-Aviv, Israel
March 14, 1996
/s/ Kesselman & Kesselman
-2-
-188-
<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, on the 29th day of March,
1996.
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 29, 1996.
Signatures Title Date
- ---------- ------ ----
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
Shimon Ravid Director
Shlomo Recht Director
Evelyn Sommer Director
By /s/ Lawrence Lefkowitz March 29, 1996
- ---------------------------------------------------------
Lawrence Lefkowitz, individually, as President
(Principal Executive Officer) and as
attorney-in-fact for the Foregoing Persons
By /s/ Alan L. Schaffer March 29, 1996
- ---------------------------------------------------------
Alan L. Schaffer, Vice President-Finance and Treasurer
(Principal Financial Officer)
By /s/ Alla Kanter March 29, 1996
- --------------------------------------------------------
Alla Kanter, Vice President-Accounting and Controller
(Principal Accounting Officer)
-189-
<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
EXHIBITS
TO
FORM 10-K
FOR ANNUAL AND TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
----------------------
AMPAL-AMERICAN ISRAEL CORPORATION
(Exact name of Registrant as specified in its Charter)
================================================================================
</TABLE>
Exhibit 3a
RESTATED
CERTIFICATE OF INCORPORATION
OF
AMPAL-AMERICAN ISRAEL CORPORATION
Under Section 807 of the Business Corporation Law
We, Michael Jaffe and Lawrence Lefkowitz, being respectively the
President and Secretary of Ampal-American Israel Corporation, in accordance with
Section 807 of the Business Corporation Law, do hereby certify:
1. The name of the corporation is now Ampal-American Israel Corporation.
The corporation was formed under the name Ampal-American Palestine Trading
Corporation.
2. The certificate of incorporation was filed by the Department of State
on February 6, 1942.
3. The text of the certificate of incorporation as amended and corrected
heretofore and now in effect is hereby restated, without making any amendment or
change, to read in full as follows:
"FIRST: The name of the corporation shall be AMPAL-AMERICAN ISRAEL
CORPORATION. SECOND: The purposes for which it is to be formed are:
1. To develop trade between the United States and Palestine
and its surrounding countries and to assist in the
development of the economic resources of Palestine.
2. To subscribe for and acquire shares of stock or interests,
bonds, notes, debentures, mortgages, deeds or certificates
of trust and other evidences of indebtedness of any
individuals, firms, corporations, association, incorporated
or unincorporated, cooperative or otherwise, for any
E-1
<PAGE>
industrial, commercial, banking credit, agriculture or
other purposes in or relating to Palestine.
3. To afford financial aid to commercial banking, credit,
industrial, and agricultural enterprises cooperative and
otherwise, in and relating to Palestine, so far as may be
permitted by the laws of the State of New York.
4. To manufacture, purchase, or otherwise acquire, hold, own,
manage, sell, pledge, transfer, export, import, trade and
deal in, goods, wares and merchandise of every character
and description, whether as principal or agent.
5. To purchase or otherwise acquire real and personal property
of every kind and description, and wheresoever situated,
including the stocks, bonds, or other evidences of
indebtedness of any corporation, domestic or foreign, and
to issue in payment or exchange therefor its stock,
debentures, notes, bonds or other obligations.
6. As a reasonable incident to the transaction of other
corporate business, and so far as consistent with the laws
of the State of New York, or where necessary to prevent
corporate funds from being unproductive to lend money to
individuals, firms, corporations or association in or
relating to Palestine.
7. To apply for, obtain, register, purchase, lease or
otherwise acquire, hold, own, use, operate, introduce,
sell, assign, or otherwise dispose of, any and all
copyrights, trademarks and patents and any and all
inventions, improvements, apparatus, appliances and
processes used in connection with or secured under letters
patent of the United States of America, or elsewhere or
E-2
<PAGE>
otherwise, and to use, exercise, develop and grant licenses
in respect of. or otherwise turn to account any such
copyrights, trademarks, patents, inventions, improvements,
apparatus, appliances, processes and the patents,
inventions, improvements, apparatus, appliances, processes
and the like so acquired.
8. To make and enter intocontracts of all kinds with and to
act as agent, factor or representative for any individual,
firm association, private, public, quasi-public or
municipal corporation, state, government or governmental
authority.
9. To make and enter into any agreement not repugnant to the
laws of the State of New York with any foreign governmental
or municipal authority which may be deemed for the benefit
of the company; to obtain from any such authority or
otherwise acquire by purchase, lease, assignment, or in any
lawful manner, any powers, rights, privileges, mandates,
franchises, and concessions not repugnant to such laws
which the company may deem desirable; and to exercise and
exploit the same, and to undertake and prosecute any
business dependent thereon.
10. To exercise in respect of all bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences, of indebtedness and other property,
any and all the rights, powers and privileges of individual
owners thereof.
11. To purchase, hold, sell, transfer and reissue the shares of
its own stock provided that shares of its own stock
belonging to it shall not be voted upon directly or
indirectly; also to purchase, sell, transfer, pledge and
E-3
<PAGE>
reissue bonds, certificates of interest or debentures which
it may have issued.
12. So far as may be permitted by the laws of the State of New
York, to sell and dispose of any securities and any other
property, real or personal and to rediscount or assign any
negotiable paper, owned or acquired by the corporation in
the course of its business operations, and to borrow money
for its corporate purposes, and in that connection to
mortgage, pledge and hypothecate any shares of stock,
notes, deeds, or certificates of trust, bonds, debentures,
or other evidences of indebtedness or any other property
owned or held by it.
13. To aid by loan, subsidy, guaranty or in any other lawful
manner whatsoever, any individual, firm, corporation or
association whose bonds, stocks, or securities or other
obligations are in any manner, either directly or
indirectly held or guaranteed by the corporation; to do any
and all other acts toward the preservation, protection,
improvement or enhancement in value of any such stocks,
bonds, securities or other obligations, and to to do all
and any such acts or things designed to accomplish any such
purpose, not inconsistent with the laws of the State of New
York.
14. To authorize and permit any and all of the directors of the
Company, notwithstanding their official relations to it, to
enter into, negotiate, consummate and perform any contract,
agreement or transaction of any name or nature between the
Company and themselves, or any or all of the individuals
from time to time constituting the Board of Directors of
the Company, or any firm or corporation in which any such
E-4
<PAGE>
director may be interested, directly or indirectly, or
employed therein or connected therewith, or in which such
director or directors may hold any office as director,
officer, stockholder, employee, associate or partner, or
otherwise, whether or not such individual or individuals,
firm or corporation thus contracting with the company shall
thereby derive personal or corporate profit or benefit or
otherwise; the intent hereof being to relieve each and
every person who may be or become a director of the Company
from any disability that might otherwise exist of
contracting with the Company for the benefit of himself, or
of the copartnership or corporation in which he may be in
any wise interested.
15. To do any and all things herein set forth, and such other
things as are incidental, necessary or conducive to the
attainment of the above objects or any of them, to the same
extent as natural persons might or could do, and in any
part of the world, as principals, agents, commission
merchants, factors, contractors, trustees or otherwise,
alone or in company with others.
The objects and powers specified in any clause contained in this second
paragraph shall, except where otherwise expressed in said paragraph, be in no
wise limited or restricted by reference to or inference from the terms of any
other clause of this or other paragraph in this certificate of incorporation,
but the objects and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects and powers.
The foregoing enumeration of powers shall not be held to limit or
restrict in any manner the lawful powers of this corporation. The corporation
shall have the power to conduct its business and promote its objects in all of
E-5
<PAGE>
its branches and to have one or more offices, and to hold, purchase, mortgage
and convey real and personal property, both within and without the State of New
York, in other states, in the territories and possessions of the United States,
in Palestine, and in all other foreign countries without restriction as to the
place where or as to the extent to which such business shall be carried on.
THIRD: The aggregate number of shares which the Corporation is
authorized to issue is Thirty-Four Million Nine Hundred Ninety-Two Thousand
Eight Hundred Fifty (34,992,850) shares divided into three classes as
herein-after set forth.
FOURTH: Said Thirty-Four Million Nine Hundred Ninety-Two Thousand Eight
Hundred Fifty (34,992,850) shares which the Corporation has authority to issue
shall be divided into three classes which shall consist of Sixty Thousand
(60,000) shares of Common Stock of the par value of Fifty Dollars ($50.00) per
share, Thirty Million (30,000,000) shares of Class "A" Stock of the par value of
One Dollar ($1.00) per share, and Four Million Nine Hundred Thirty-Two Thousand
Eight Hundred Fifty (4,932,850) shares of Preferred Stock of the par value of
Five Dollars ($5.00) per share.
The designations, preferences, privileges and voting powers or
restrictions or qualifications of each of the several classes of stock shall be
as follows:
A. Class "A" Stock, Common Stock and
-------------------------------------
4% Cumulative Convertible Preferred Stock
-----------------------------------------
Six Hundred Fifty Thousand (650,000) shares of the authorized Preferred
Stock shall constitute a series of Preferred Stock designated "4% Cumulative
Convertible Preferred Stock."
The holders of the said Preferred Stock shall be entitled to receive
cumulative dividends at the rate of four (4%) percent per annum payable out of
E-6
<PAGE>
surplus or net earnings of the Corporation before any dividends are paid in such
year upon Common Stock or Class "A" Stock. The said dividends on the said
Preferred Stock shall be cumulative so that if the Corporation fails to pay such
dividends on such Preferred Stock in any calendar year, such deficiency shall be
paid in full (without interest) before any dividends shall be paid on Common
Stock or Class "A" Stock. If, after payment of all cumulative dividends on the
Preferred Stock, there shall remain any surplus, before any further dividends
are paid in such year upon the Preferred Stock, the holders of the Class "A"
Stock shall be entitled to receive non-cumulative dividends at the rate of 4%
per annum. If, after the payment of all cumulative dividends on the Preferred
Stock and payment of a non-cumulative dividend of 4% of the outstanding Class
"A" Stock, there shall remain any surplus, before the Common Stock shall be
entitled to receive dividends, the Preferred Stock and Class "A" Stock shall be
entitled to receive additional non-cumulative dividends at the rate of 8% (Eight
per cent) per annum. If, after payment of cumulative dividends on the Preferred
Stock and a payment of a non-cumulative dividend of 4% of the outstanding Class
"A" Stock, and an additional dividend of 8% of the Preferred Stock and Class "A"
Stock, there shall remain any surplus, before any additional dividends are
declared on the Preferred Stock and Class "A" Stock, the Common Stock shall be
entitled to receive a non-cumulative dividend not exceeding 12% and if
thereafter there shall remain any surplus, the same may be declared as dividends
by the Board of Directors upon the Preferred Stock, the Class "A" Stock and the
Common Stock which dividends shall be participated in pari passu by the holders
of Preferred Stock, Class "A" Stock and Common Stock.
In the event that the affairs of the Corporation are liquidated and its
assets distributed by dissolution, sale or otherwise, the holders of the
Preferred Stock then outstanding shall be paid the par value thereof and all
unpaid accrued dividends before any distribution shall be made to the holders of
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Common Stock or Class "A" Stock. After such payment to the Preferred
stockholders, the holders of the Common Stock and Class "A" Stock shall be paid
in an amount equal to the par value thereof; after which the then remaining
assets, if any, shall be distributed to the stockholders according to the number
of shares held by each and the par value thereof.
The holders of the Class "A" Stock shall be entitled to vote one (1)
vote for each share of such stock at all meetings of stockholders.
The holders of the Common Stock, at all meetings of stockholders, voting
as a class, shall be entitled to as many votes as shall equal the aggregate
number of votes to which all holders of Class "A" Stock, present either in
person or by proxy at such meeting or voting, shall be entitled to vote in
respect of the Class "A" shares.
Except as otherwise provided by law, the holders of the Preferred Stock
shall not have the right to vote at such elections, nor at any annual or special
meeting of the Corporation; nor shall they be entitled to vote in a proceeding
for mortgaging the property and franchises of the Corporation pursuant to
Section Sixteen of the Stock Corporation Law, for guaranteeing the bonds of
another corporation pursuant to Section Nineteen of the Stock Corporation Law,
for sale of the franchises and property pursuant to Section Twenty of the Stock
Corporation Law, for establishing priorities or creating preferences among the
several classes of stock pursuant to Section Thirty-Six of the Stock Corporation
Law, for consolidation pursuant to Section Eighty-Six of the Stock Corporation
Law, for voluntary dissolution pursuant to Section One Hundred and Five of the
Stock Corporation Law, nor for change of name pursuant to the General
Corporation Law. When, however, the Corporation fails to earn and pay any
dividends on the Preferred Stock for a period of three (3) successive years,
then and in that event alone, the holders of the Preferred Stock shall have the
exclusive right to vote at the election of directors one (1) vote for every
E-8
<PAGE>
share of stock. If at any time thereafter all the cumulative dividends on the
Preferred Stock shall be fully paid up to date, the holders of the Common Stock
and the Class "A" Stock shall again have the exclusive right to vote at meetings
of stockholders, except as otherwise provided by law.
The Preferred Stock, at the option of the respective holders thereof,
shall be convertible at any time and from time to time into fully paid and
non-assessable shares of Class "A" Stock, upon surrender to the Corporation or
to its Transfer Agent of the Certificates for Preferred Stock so to be
converted, duly endorsed in blank for transfer, in the ratio of five (5) shares
of Class "A" Stock for one (1) share of Preferred Stock. All shares of said
Preferred Stock so converted shall be returned and shall not again be issued by
the Corporation.
The Corporation shall at all times have in reserve a sufficient number
of shares of Class "A" Stock for issuance in exchange for shares of Preferred
Stock upon the terms and conditions hereinbefore set forth.
B. 6-1/2% Cumulative Convertible Preferred
Stock
Four Million Two Hundred Eighty-Two Thousand Eight Hundred Fifty
(4,282,850) shares of the authorized Preferred Stock shall constitute a
series designated "6 1/2% Cumulative Convertible Preferred Stock."
The holders of 6 1/2% Cumulative Convertible Preferred Stock shall be
entitled to receive cumulative dividends at the rate of six and one-half (6
1/2%) percent per annum, payable out of surplus or net earnings of the
Corporation before any dividends are paid in such year upon Common Stock or
Class "A" Stock. The said dividends on the said 6 1/2% Cumulative Convertible
Preferred Stock shall be cumulative so that if the Corporation fails to pay such
dividends on such 6 1/2% Cumulative Convertible Preferred Stock in any calendar
year, such deficiency shall be paid in full (without interest) before any
dividends shall be paid on Common Stock or Class "A" Stock. After the payment of
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<PAGE>
all current and cumulative dividends payable on the 6 1/2% Cumulative
Convertible Preferred Stock in any year, no further dividends shall be paid in
such year upon the 6 1/2% Cumulative Convertible Preferred Stock.
There shall be no preferences as to the payment of dividends on either
the 4% Cumulative Convertible Preferred Stock or 6 1/2% Cumulative Convertible
Preferred Stock, which are payable prior to the payment of dividends on the
surplus or net earnings of the Corporation are less than the aggregate amount of
the dividends payable on the 4% Cumulative Convertible Preferred Stock and 6
1/2% Cumulative Convertible Preferred Stock, then any dividends paid shall be
applied ratably (according to the respective numbers of shares thereof
outstanding multiplied by the par value thereof) to the payment of the dividends
payable on the 4% Cumulative Convertible Preferred Stock and the dividends
payable on the 6 1/2% Cumulative Convertible Preferred Stock.
In the event that the affairs of the Corporation are liquidated and its
assets distributed by dissolution, sale or otherwise, the holders of the 6 1/2%
Cumulative Convertible Preferred Stock then outstanding shall be paid the par
value thereof and all unpaid accrued dividends before any distribution shall be
made to the holders of Common Stock or Class "A" Stock, and in connection with
any payments made upon liquidation of the Corporation, there shall be no
preferences as to the payment of such amounts on the 4% Cumulative Convertible
Preferred Stock or the 6 1/2% Cumulative Convertible Preferred Stock, but in the
event the assets of the Corporation to be distributed shall be less than the
amounts payable to the 4% Cumulative Convertible Preferred Stock and 6 1/2%
Cumulative Convertible Preferred Stock, then any such payments shall be applied
ratably (according to the respective numbers of shares outstanding) to the
amounts payable on the Cumulative Convertible Preferred Stock and to the amounts
payable on the 6 1/2% Cumulative Convertible Preferred Stock.
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<PAGE>
Except as otherwise provided by law, the holders of the 6 1/2%
Cumulative Convertible Preferred Stock shall not have the right to vote at any
elections, nor at any annual or special meeting of the Corporation; nor shall
they be entitled to vote in a proceeding for mortgaging the property and
franchises of the Corporation, for guaranteeing the bonds of another
corporation, for sale of franchises and property, for establishing priorities or
creating preferences among the several classes of stock, for mergers or
consolidations of the Corporation, for voluntary dissolution, nor for a change
of name of the Corporation pursuant to the Business Corporation Law. When,
however, the Corporation fails to earn and pay any dividends on the Preferred
Stock for a period of three (3) successive years, then and in that event alone,
the holders of the Preferred Stock shall have the exclusive right to vote at the
election of directors one (1) vote for every share of stock. If at any time
thereafter all the cumulative dividends on the Preferred Stock shall be fully
paid up to date, the holders of the Common Stock and the Class "A" Stock shall
again have the exclusive right to vote at meetings of stockholders, except as
otherwise provided by law.
The 6 1/2% Cumulative Convertible Preferred Stock, at the option of the
respective holders thereof, shall be convertible at any time and from time to
time into fully paid and non-assessable shares of Class "A" Stock, upon
surrender to the Corporation or to its Transfer Agent of the Certificates for 6
1/2% Cumulative Convertible Preferred Stock so to be converted, duly endorsed in
blank for transfer, in the ratio of three (3) shares of Class "A" Stock for one
(1) share of 6 1/2% Cumulative Convertible Preferred Stock. All shares of said 6
1/2% Cumulative Convertible Preferred Stock so converted shall be returned and
shall not again be issued by the Corporation.
The Corporation shall at all times have in reserve a sufficient number
of shares of Class "A" Stock for issuance in exchange for shares of the 6 1/2%
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<PAGE>
Cumulative Convertible Preferred Stock upon the terms and conditions
hereinbefore set forth.
The Board of Directors shall have the authority to issue the preferred
stock in series. The Board of Directors is authorized to determine the number of
shares in each subsequent series and to fix from time to time before issuance,
the designations, preferences, privileges and voting powers of the shares of
each subsequent series of the preferred stock and the restrictions or
qualifications thereof; provided that the shares of all series of the same class
having voting power shall not have more than one vote each, and when the stated
dividends and amounts payable on liquidation are not paid in full, the shares of
all series of the same class shall share ratably in the payment of dividends
including accumulations, if any, in accordance with the sums which would be
payable on said shares if all dividends were declared and paid in full, and in
any distribution of assets other than by way of dividends in accordance with the
sums which would be payable on such distribution if all sums payable were
discharged in full.
FIFTH: The office of the Corporation shall be located in the City of New
York, County of New York; and the address to which the Secretary of State shall
mail a copy of process in any action or proceeding against the Corporation,
which may be served upon him is 10 Rockefeller Plaza, New York, New York.
SIXTH: The duration of the Corporation shall be perpetual.
SEVENTH: Deleted.
EIGHTH: [Omitted]
NINTH: [Omitted]
TENTH: [Omitted]
ELEVENTH: The Secretary of the State of New York is hereby designated
as the agent of the corporation upon whom process in any action or proceeding
may be served.
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<PAGE>
4. The foregoing restatement of the certificate of incorporation was
authorized by the Board of Directors of the corporation at a duly constituted
meeting held on November 5, 1982.
IN WITNESS WHEREOF, we have executed this Restated Certificate of
Incorporation and affirm it to be true under the penalties of perjury this 23rd
day of December, 1982.
/s/ Michael Jaffe
-----------------------------
Michael Jaffe, President
/s/ Lawrence Lefkowitz
-----------------------------
Lawrence Lefkowitz, Secretary
E-13
Exhibit 3b
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AMPAL-AMERICAN ISRAEL CORPORATION
The undersigned, Michael Jaffe and Lawrence Lefkowitz, pursuant
to section 105 of the Business Corporation Law, do hereby certify:
1. The name of the corporation is Ampal-American Israel
Corporation (the "Corporation").
2. The undersigned are respectively the President and Secretary
of the Corporation.
3. The certificate to be corrected, namely the certificate of
amendment (the "Certificate of Amendment") to the certificate of incorporation
of the Corporation (the "Certificate of Incorporation") was filed on October 5,
1979.
4. The Certificate of Amendment is erroneous in that the third
paragraph of Section A of Article FOURTH of the Certificate of Incorporation, as
amended thereby, which reads as follows:
"There shall be no preference in dividends as to either Common
Stock or Class "A" stock, and in the event of the declaration of
payment of dividends on either Common Stock or Class "A" Stock,
the same dividends per share shall be paid on both Common Stock
and Class "A" Stock."
is inconsistent on its face with the second paragraph of said Section A and was
erroneously included in the Certificate of Amendment.
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<PAGE>
5. This certificate is filed to correct such error by deleting
from the Certificate of Amendment said third paragraph of Section A of Article
FOURTH of the Certificate of Incorporation.
IN WITNESS WHEREOF, we have signed and verified this certificate
on the 27th day of December, 1982 and we affirm the statements contained herein
as true under penalties of perjury.
/s/ Michael Jaffe
-----------------------------
Michael Jaffe, President
/s/ Lawrence Lefkowitz
-----------------------------
Lawrence Lefkowitz, Secretary
E-15
Exhibit 3c
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMPAL-AMERICAN ISRAEL CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
We the undersigned, being President and Secretary of
Ampal-American Israel Corporation, do hereby certify as follows:
1. The name of the Corporation is AMPAL-AMERICAN ISRAEL
CORPORATION (the "Corporation"). The name under which the corporation was formed
is Ampal-American Palestine Trading Corporation.
2. The Certificate of Incorporation of the Corporation was filed
in the office of the Secretary of the State of New York on the 6th day of
February, 1942.
3. The Certificate of Incorporation of the Corporation, as
restated and filed in the Office of the Secretary of State of the State of New
York on the 29th day of December, 1982 (the "Restated Certificate of
Incorporation") is hereby amended to change the aggregate number of shares which
the Corporation is authorized to issue from Thirty-Four Million Nine Hundred
Ninety-Two Thousand Eight Hundred Fifty (34,992,850) shares to Thirty-Seven
Million Nine Hundred Thirty-Two Thousand Eight Hundred Fifty (37,932,850)
shares, so that paragraph THIRD of the Restated Certificate of Incorporation of
the Corporation shall read in its entirety as follows:
"THIRD: The aggregate number of shares which the
Corporation is authorized to issue is Thirty-Seven Million Nine
Hundred Thirty-Two Thousand Eight Hundred Fifty (37,932,850)
shares divided into three classes as hereinafter set forth."
E-16
<PAGE>
4. The Restated Certificate of Incorporation is hereby amended to
change the number of authorized and outstanding shares of Common Stock from
Sixty Thousand (60,000) shares having a par value of Fifty Dollars ($50) per
share to Three Million (3,000,000) shares having a par value of One Dollar ($1)
per share, the terms of the change being at the rate of One (1) outstanding
share of Common Stock, par value Fifty ($50) Dollars per share for Fifty (50)
shares of Common Stock, par value One ($1) Dollar per share, so that the first
subparagraph of paragraph FOURTH of the Restated Certificate of Incorporation
shall read in its entirety as follows:
"FOURTH: Said Thirty-Seven Million Nine Hundred Thirty-Two
Thousand Eight Hundred Fifty (37,932,850) shares which the
Corporation has authority to issue shall be divided into three
classes which shall consist of Three Million (3,000,000) shares
of Common Stock having a par value of One Dollar ($1) per share,
Thirty Million (30,000,000) shares of Class "A" Stock having a
par value of One Dollar ($1) per share and Four Million Nine
Hundred Thirty-Two Thousand Eight Hundred Fifty (4,932,850)
shares of Preferred Stock having a par value of Five Dollars
($5.00) per share."
5. The Restated Certificate of Incorporation is hereby amended to
authorize the Class A shareholders, voting as a class, to elect 25% of the Board
of Directors (rounded up to the nearest whole number of directors), with the
remaining directors to be elected by both Common and Class A shareholders, so
that the fourth subparagraph of Section A of paragraph FOURTH of the Restated
Certificate of Incorporation shall read in its entirety as follows:
"The holders of the Class "A" Stock shall be entitled to
vote one (1) vote for each share of such stock at all meetings of
stockholders. At all elections of directors of the Corporation,
the holders of the Class "A" Stock, voting as a class, shall have
the right to elect a number of directors (rounded up to the
nearest whole number of directors) equal to 25% of the Board of
Directors as it may be constituted at the time of such election
("Class A Directors"), in accordance with the By-Laws of the
Corporation."
6. The Restated Certificate of Incorporation is hereby amended to
limit the holders of the Common Stock, at all meetings of stockholders, voting
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<PAGE>
as a class, on all matters other than the election of Class A Directors, to as
many votes as shall equal the aggregate number of votes to which all holders of
Class A Stock, present either in person or by proxy at such meeting and voting,
shall be entitled to vote in respect of the Class A Stock, but not more than ten
times the number of shares of Common Stock then outstanding and entitled to
vote, so that the fifth subparagraph of Section A of paragraph FOURTH of the
Restated Certificate of Incorporation shall read in its entirety as follows:
"On all matters other than the election of the Class A
Directors, the holders of the Common Stock, at all meeting of
stockholders, voting as a class, shall be entitled to as many
votes as shall equal the aggregate number of votes to which all
holders of Class "A" Stock, present either in person or by proxy
at such meeting and voting, shall be entitled to vote in respect
of the Class "A" Stock but not more than ten (10) times the
number of shares of Common Stock then outstanding and entitled to
vote."
7. The Restated Certificate of Incorporation is hereby amended to
prohibit issuance by the Company, so long as its Class A Stock is listed on the
American Stock Exchange, of any other class of security having voting rights
which would deprive the Class A Stock of its right to elect the Class A
Directors or which could vote, as a class, more than ten times the number of
shares of such other class of security then outstanding and entitled to vote or
which would otherwise adversely affect the voting rights of the Class A Stock,
by the addition of a new third subparagraph to paragraph FOURTH of the Restated
Certificate of Incorporation which shall read in its entirety as follows:
"So long as the Class "A" Stock is listed on the American
Stock Exchange, the Corporation shall not issue after March 17,
1983 any other class of security having voting rights which would
(i) deprive the Class "A" Stock of its right, voting as a class,
to elect the Class A Directors (as that term is hereinafter
defined), (ii) have the right to vote, as a class, more than ten
times the number of shares of such other class of security then
outstanding and entitled to vote or (iii) have voting rights
which would otherwise adversely affect the voting rights of the
Class "A" Stock; provided, however, that for the purposes hereof
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<PAGE>
the authorization or issuance of additional Class "A" Stock or
Common Stock or securities convertible into or exchangeable for
Class "A" Stock or Common Stock shall not be deemed to adversely
affect the voting rights of the holders of the Class "A" Stock."
8. The Restated Certificate of Incorporation is hereby amended to
preclude additional issuance of Common Stock or stock distribution shares on
Common Stock unless on or after March 17, 1983 at least an equal number of
shares of Class A Stock have been issued or distributed, by the addition of a
new second subparagraph to paragraph FOURTH of the Restated Certificate of
Incorporation which shall read in its entirety as follows:
"From and after March 17, 1983 the Corporation shall not
issue any additional shares of Common Stock or stock distribution
shares of Common Stock on or in respect of Common Stock unless at
least an equal number of shares of Class "A" Common Stock have
been issued or distributed since that date."
9. The Restated Certificate of Incorporation is hereby amended to
add anti-dilution provisions regarding the conversion privileges of the holders
of the 4% Cumulative Convertible Preferred Stock and the holders of the 6-1/2%
Cumulative Convertible Preferred Stock and to authorize cash payments in lieu of
issuing fractions of shares, so that the seventh subparagraph of Section A of
paragraph FOURTH of the Restated Certificate of Incorporation shall read in its
entirety as follows:
"The Preferred Stock, at the option of the respective
holders thereof, shall be convertible at any time and from time
to time into fully paid and non-assessable shares of Class "A"
Stock, upon surrender to the Corporation or to its Transfer Agent
of the certificates for Preferred Stock so to be converted, duly
endorsed in blank for transfer, in the ratio of five (5) shares
of Class "A" Stock for one (1) share of Preferred Stock (such
ratio to be appropriately adjusted, as determined by the Board of
Directors, to reflect all mergers, consolidations and other
reorganizations of the Corporation and all forward stock splits,
reverse stock splits, stock distributions, stock dividends or
other reclassifications or recapitalizations of or on the Class
"A" Stock). All shares of said Preferred Stock so converted shall
be retired and shall not again be issued by the Corporation. The
Corporation shall not be required to issue fractions of a share
of Class "A" Stock or scrip representing any such fraction of a
share upon conversion of the Preferred Stock. If any fraction of
a share of Class "A" Stock would, except for the provisions
hereof, be issuable on the conversion of any Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such
fraction equal to the value of such fraction computed on the
basis of the Market Price per share of Class "A" Stock (as
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<PAGE>
hereinafter defined) on the date that the certificate
representing the Preferred Stock, in respect of which such
fraction would otherwise be issuable, is received by the
Corporation or its Transfer Agent for conversion. For the
purposes of this Certificate of Incorporation, the "Market Price"
per share of Class "A" Stock for a given date shall be deemed to
be the average of the daily closing prices for the 30 consecutive
business days ending with such date. The closing price for each
day shall be the last reported sale on the principal national
securities exchange on which the shares of Class "A" Stock are
admitted to trading or listed, or if not admitted to trading or
listed on any national securities exchange, the average of the
last highest reported bid and lowest reported asked prices as
furnished by the National Quotation Bureau Incorporated or such
other nationally recognized quotation service selected by the
Board of Directors for this purpose, if said Bureau is not at the
time furnishing quotations.";
and so that the sixth paragraph of Section B of paragraph FOURTH of the Restated
Certificate of Incorporation of the Corporation shall read in its entirety as
follows:
"The 6-1/2% Cumulative Convertible Preferred Stock, at the
option of the respective holders thereof, shall be convertible at
any time and from time to time into fully paid and non-assessable
shares of Class "A" Stock, upon surrender to the Corporation or
to its Transfer Agent of the certificates for 6-1/2% Cumulative
Convertible Preferred Stock so to be converted, duly endorsed in
blank for transfer, in the ratio of three (3) shares of Class "A"
Stock for one (1) share of 6-1/2% Cumulative Convertible
Preferred Stock (such ratio to be appropriately adjusted, as
determined by the Board of Directors, to reflect all mergers,
consolidations and other reorganizations of the Corporation and
all forward stock splits, reverse stock splits, stock
distributions, stock dividends or other reclassifications or
recapitalizations of or on the Class "A" Stock). All shares of
said 6-1/2% Cumulative Convertible Preferred Stock so converted
shall be retired and shall not again be issued by the
Corporation. The Corporation shall not be required to issue
fractions of a share of Class "A" Stock or scrip representing any
such fraction of a share upon conversion of the 6-1/2% Cumulative
Convertible Preferred Stock. If any fraction of a share of Class
"A" Stock would, except for the provisions of this subparagraph,
be issuable on the conversion of any 6-1/2% Cumulative
Convertible Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fraction equal to the value of such
fraction computed on the basis of the Market Price per share of
Class "A" Stock on the date that the certificate representing the
6-1/2% Cumulative Convertible Preferred Stock, in respect of
which such fraction would otherwise be issuable, is received by
the Corporation or its Transfer Agent for conversion."
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<PAGE>
10. The Restated Certificate of Incorporation is hereby amended
to eliminate all shareholder preemptive rights, by the addition of a new
paragraph SEVENTH to the Restated Certificate of Incorporation which shall read
in its entirety as follows:
"SEVENTH: No holder of shares of the Corporation of any
class, now or hereafter authorized, shall have any preferential
or preemptive right to subscribe for, purchase or receive any
shares of the Corporation of any class, now or hereafter
authorized, or any options or warrants for such shares, or any
rights to subscribe to or purchase such shares or any securities
convertible into or exchangeable for, or carrying options or
warrants for, or other rights to purchase, such shares, which may
at any time be issued, sold or offered for sale by the
Corporation."
11. These amendments to the Restated Certificate of Incorporation
were authorized by the affirmative vote of the holders of a majority of all
outstanding shares entitled to vote thereon, at a meeting of the shareholders of
the Corporation duly called and held on the 17th day of March, 1983, a quorum
being present. In addition:
(i) The amendment described in paragraph Five of this Certificate of
Amendment was authorized by the affirmative vote of the holders of a majority of
Common shares voting as a class;
(ii) The amendment described in paragraph Six of this Certificate of
Amendment was authorized by the affirmative vote of the holders of a majority of
Common shares voting as a class;
(iii) The amendment described in paragraph Eight of this Certificate of
Amendment was authorized by the affirmative vote of the holders of a majority of
Common shares voting as a class;
(iv) The amendment described in paragraph Nine of this Certificate of
Amendment was authorized by the affirmative vote of the holders of a majority of
the 4% Cumulative Convertible Preferred shares voting as a class, and by the
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<PAGE>
affirmative vote of the holders of a majority of the 6-1/2% Cumulative
Convertible Preferred shares voting as a class: and
(v) The amendment described in paragraph Ten of this Certificate of
Amendment was authorized by the affirmative vote of the holders of a majority of
Common shares voting as a class, by the affirmative vote of the holders of a
majority of Class A shares voting as a class, and by the affirmative vote of the
holders of a majority of the 4% Cumulative Convertible Preferred shares voting
as a class.
IN WITNESS WHEREOF, we have executed this Certificate and
affirm the truth of the statement herein set forth under penalties of perjury
this 17th day of March, 1983.
/s/ Michael Jaffe
-----------------------------
Michael Jaffe, President
/s/ Lawrence Lefkowitz
-----------------------------
Lawrence Lefkowitz, Secretary
E-22
Exhibit 3d
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMPAL-AMERICAN ISRAEL CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
We, the undersigned, being President and Secretary of Ampal-American Israel
Corporation, do hereby certify as follows:
1. The name of the Corporation is AMPAL-AMERICAN ISRAEL
CORPORATION (the "Corporation"). The name under which the Corporation was formed
is Ampal-American Palestine Trading Corporation.
2. The Certificate of Incorporation of the Corporation was filed
in the Office of the Secretary of State of the State of New York on the 6th day
of February, 1942.
3. The Certificate of Incorporation of the Corporation, as
restated and filed in the Office of the Secretary of State of the State of New
York on the 29th day of December, 1982, and as subsequently amended by a
Certificate of Amendment filed in the Office of the Secretary of State of the
State of New York on March 18, 1983, (the "Restated Certificate of
Incorporation") is hereby amended by the addition of a new paragraph EIGHTH to
the Restated Certificate of Incorporation which shall read in its entirety as
follows:
EIGHTH: The personal liability of the directors of the
Corporation is hereby limited to the fullest extent permitted by
law, including limitations contained in the provisions of
paragraph (b) of Section 402 of the Business Corporation Law of
the State of New York, as the same may be amended or
supplemented."
4. This amendment to the Restated Certificate of Incorporation
was authorized by a vote of the Board of Directors dated May 11, followed by the
affirmative vote of the holders of a majority of all outstanding shares entitled
to vote thereon, at a meeting of the shareholders of the Corporation duly called
and held on the 13th day of July, 1988, a quorum being present.
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<PAGE>
IN WITNESS WHEREOF, we have executed this Certificate and
affirm the truth of the statement herein set forth under penalties of perjury
this 14th day of July, 1988.
/s/ Michael Arnon
-----------------------------
Michael Arnon, President
/s/ Lawrence Lefkowitz
-----------------------------
Lawrence Lefkowitz, Secretary
E-24
Exhibit 3e
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMPAL-AMERICAN ISRAEL CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
We, the undersigned being President and Secretary of Ampal-American
Israel Corporation, do hereby certify as follows:
1. The name of the Corporation is AMPAL-AMERICAN ISRAEL
CORPORATION. It was formed under the name of Ampal-American Palestine Trading
Corporation.
2. The Certificate of Incorporation was filed in the office of
the Secretary of State of New York on the 6th day of February 1942.
3. The Certificate of Incorporation, as restated and filed in the Office
of the Secretary of State of the State of New York on the 29th day of December,
1982, and as subsequently amended by Certificates of Amendment filed in the
Office of the Secretary of the State of New York on March 18, 1983 and July 26,
1988 (the "Certificate of Incorporation") is hereby amended to increase the
aggregate number of shares which the Corporation is authorized to issue from
Thirty-Seven Million Nine Hundred Thirty-Two Thousand Eight Hundred Fifty
(37,932,850) shares to Sixty-Seven Million Nine Hundred Thirty-Two Thousand
Eight Hundred Fifty (67,932,850) shares, so that paragraph THIRD of the
Certificate of Incorporation of the Corporation shall read in its entirety as
follows:
"THIRD: The aggregate number of shares which the
Corporation is authorized to issue is Sixty-Seven Million Nine
Hundred Thirty-Two Thousand Eight Hundred Fifty (67,932,850)
shares divided into three classes as hereinafter set forth."
4. The Certificate of Incorporation is hereby amended to increase the
number of authorized and outstanding shares of Class A Stock from Thirty Million
(30,000,000) shares having a par value of One Dollar ($1) per share to Sixty
Million (60,000,000) shares having a par value of One Dollar ($1) per share, so
that the first subparagraph of paragraph FOURTH of the Certificate of
Incorporation shall read in its entirety as follows:
"FOURTH: Said Sixty-Seven Million Nine Hundred Thirty-Two
Thousand Eight Hundred Fifty (67,932,850) shares which the Corporation
has authority to issue shall be divided into three classes which shall
consist of Three Million (3,000,000) shares of Common Stock having a par
value of One Dollar ($1) per share, Sixty Million (60,000,000) shares of
Class "A" Stock having a par value of One Dollar ($1) per share and Four
Million Nine Hundred Thirty-Two Thousand Eight Hundred Fifty (4,932,850)
shares of Preferred Stock having a par value of Five Dollars ($5.00) per
share."
E-25
<PAGE>
5. The Certificate of Incorporation is hereby amended to change the post
office address to which the Secretary of State shall mail a copy of any process
against the Corporation served upon him, so that Article Fifth of the
Certificate of Incorporation shall read as follows:
"FIFTH: The office of the Corporation shall be located in the
City of New York, County of New York; and the address of which the
Secretary of State shall mail a copy of process in any action or
proceeding against the Corporation, which may be served upon him is 1177
Avenue of the Americas, New York, New York."
6. (i) The amendments to the Certificate of Incorporation described in
paragraphs Three and Four of this Certificate of Amendment were authorized by
the affirmative vote of the holders of a majority of all outstanding shares
entitled to vote thereon, at a meeting of the shareholders of the Corporation
duly called and held on the 8th day of November, 1995, a quorum being present.
(ii) The amendment to the Certificate of Incorporation described
in paragraph Five of this Certificate of Amendment was authorized by the
unanimous written consent of the directors entitled to vote thereon dated
November 9, 1993.
IN WITNESS WHEREOF, we have executed this Certificate and affirm the
truth of the statement herein set forth under penalty of perjury this 30th day
of November, 1995.
/s/Lawrence Lefkowitz
-----------------------------
Lawrence Lefkowitz, President
/s/Michael K. Marks
-----------------------------
Michael K. Marks, Secretary
E-26
Exhibit 10m
AGREEMENT dated August 15, 1995 by and among AMPAL-AMERICAN
ISRAEL CORPORATION, 1177 Avenue of the Americas, New York, New York (the
"Seller") and BANK HAPOALIM B.M., 50 Rothschild Blvd., Tel Aviv, Israel (the
"Buyer").
WITNESSETH:
WHEREAS, Seller is the owner of 4,693,780 shares of Common Stock
and 2,000,000 shares of 7% Redeemable Preferred Shares of BANK HAPOALIM (CAYMAN)
LIMITED (the "Minority Shares"); and
WHEREAS, Buyer desires to purchase the Minority Shares from
Seller and Seller desires to sell the Minority Shares to Buyer.
NOW, THEREFORE, the parties hereto agree as follows:
1. SALE OF SHARES. At the closing hereinafter provided for,
Seller shall sell and transfer the Minority Shares to Buyer and Buyer shall
purchase and acquire the Minority Shares from Seller.
2. PURCHASE PRICE. The purchase price for the Minority Shares is
U.S. $20,257,792. All taxes in connection with the Sale of Shares shall be paid
by Seller.
3. CLOSING DATE. The closing shall take place on August 15, 1995
at the offices of Seller in New York City. At the closing, Seller shall deliver
to Buyer, free and clear of all encumbrances, certificate(s) representing the
Minority Shares in negotiable form. Upon said delivery, Buyer shall wire
transfer the Purchase Price to
E-27
<PAGE>
Seller's account number 01700095-01 at Buyer's New York Branch.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
on the date first above written.
BANK HAPOALIM B.M. AMPAL-AMERICAN ISRAEL CORPORATION
By: /s/Arie Abend By: /s/Lawrence Lefkowitz
------------------- -----------------------------
Arie Abend, Joint Lawrence Lefkowitz, President
Managing Director
E-28
EXHIBIT 11
<TABLE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
SCHEDULE SETTING FORTH THE COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
12/31/95 12/31/94 12/31/93
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
Weighted average number of shares
outstanding:
4% Preferred......................... 203,913 210,611 223,997
6-1/2% Preferred..................... 1,094,202 1,143,961 1,365,155
Class A.............................. 20,677,352 20,041,094 15,501,489
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.............................. 24,980,000 89.28% 24,526,000 89.10% 20,717,000 87.35%
Common............................... 3,000,000 10.72 3,000,000 10.90 3,000,000 12.65
---------- ------ ---------- ------ ---------- ------
27,980,000 100.00% 27,526,000 100.00% 23,717,000 100.00%
========== ====== ========== ====== ========== ======
Income before cumulative effect of
change in accounting principle........ $ 2,166,000 $ 7,334,000 $ 5,208,000
Cumulative effect on prior years of
change in accounting principle........ - - (4,982,000)
----------- ----------- -----------
Net income............................ $ 2,166,000 $ 7,334,000 $ 226,000
=========== =========== ===========
Allocation of net income on the basis
of the respective dividend rights of
the above classes of stock, pro-rata:
Class A.............................. $ 1,934,000 89.28% $ 6,535,000 89.10% $ 197,000 87.35%
Common............................... 232,000 10.72 799,000 10.90 29,000 12.65
$ 2,166,000 100.00% $ 7,334,000 100.00% $ 226,000 100.00%
Earnings per Class A share:
Income before cumulative effect of
change in accounting principle....... $.08 $.27 $.22
Cumulative effect on prior years of
change in accounting principle....... - - (.21)
---- ---- ----
Earnings per Class A share............ $.08 $.27 $.01
==== ==== ====
E-29
</TABLE>
Exhibit 12
<TABLE><CAPTION>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
SCHEDULE SETTING FORTH THE COMPUTATION OF RATIOS
OF CONSOLIDATED EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------- ------------ ------------- ------------- -----------
<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....................... $ 2,059,000 $ 11,307,000 $ 4,746,000 $ 24,260,000 $ 2,396,000
Fixed charges..................... 16,538,000 20,024,000 23,575,000 20,303,000 28,196,000
------------ ------------ ------------ ------------ ------------
Earnings........................ $ 18,597,000 $ 31,331,000 $ 28,321,000 $ 44,563,000 $ 30,592,000
============ ============ ============ ============ ============
Fixed Charges:
Interest.......................... $ 16,290,000 $ 19,109,000 $ 22,364,000 $ 18,346,000 $ 26,006,000
Amortization of debenture
expenses......................... 248,000 915,000 1,211,000 1,957,000 2,190,000
------------ ------------ ------------ ------------ ------------
Fixed charges..................... $ 16,538,000 $ 20,024,000 $ 23,575,000 $ 20,303,000 $ 28,196,000
============ ============ ============ ============ ============
Ratio of earnings to fixed charges 1.12:1 1.56:1 1.20:1 2.19:1 1.08:1
============ ============ ============ ============ ============
E-30
</TABLE>
Exhibit 21
EXHIBIT 21 Subsidiaries of the Registrant
The following table sets forth information with respect to the subsidiaries of
Ampal, their respective states of organization and the percentage of voting
securities owned as of December 31, 1995:
<TABLE><CAPTION>
Percentage
Voting Securities
Name of Relationship State of Owned by
Company to Ampal Organization Immediate Parent
------- ------------ ------------ --------------------
<S> <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 Ampal Israel 99.9(3)
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, Inc. Subsidiary Delaware 100
Ampal Industries Subsidiary of Ampal Israel 100
(Israel) Ltd. Industries, Inc.
Ampal (Israel) Ltd. Subsidiary Israel 100
Ampal Properties Ltd. Subsidiary of Ampal Israel 99(6)
Industries, (Israel) Ltd.
Ampal Protected Subsidiary of Ampal Israel 99(6)
Housing (1995) Ltd. Industries, Ltd.
Ampal Realty Corporation Subsidiary of New York 95
Ampal (Israel) Ltd.
Ampal Sciences, Inc. Subsidiary of Delaware 100
Ampal Industries, Inc.
Country Club Subsidiary of Ampal Israel 51
Kfar Saba Ltd. Industries, Inc.
Nir Ltd. Subsidiary of Ampal Israel 99.96
Development (Israel) Ltd.
Paradise Mattresses Subsidiary of Ampal Israel 85.1
(1992) Ltd. Properties Ltd.
Pri Ha'emek (Canned and Subsidiary of Ampal Israel 51.25(7)
Frozen Food) 88 Ltd. Industries, Inc.
- ----------
(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 6.96% is owned by Ampal Industries (Israel) Ltd.
E-31
</TABLE>
Exhibit 23
[IGAL BRIGHT MAN & CO. LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of AM-HAL Ltd., we hereby consent to the
incorporation of our report dated February 11, 1996, included in this Form 10-K
(relating to the financial statements of AM-HAL LTD, not included herein), into
the Company's previously filed Registration Statements No. 33-51023 and No. 33-
55137.
/s/ IGAL BRIGHTMAN & CO.
IGAL BRIGHTMAN & CO.
Certified Public Accountants (Isr.)
March 25, 1996
E-32
<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 Statements File No.s 33-51023 and 33-55137.
New York, New York
March 25, 1996
E-33
<PAGE>
March 25, 1996
Arthur Anderson & Co.
1345 Avenue of the Americas
New York, N.Y. 10105
U.S.A
- -----
Gentlemen:
Re: Ampal Engineering (1994) Ltd.
Consent of independent public accountants
-----------------------------------------
As independent public accountants of Ampal Engineering (1994) 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. 55137.
Sincerely,
/s/ Shlomo Ziv & Co.
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
E-34
<PAGE>
[COHEN, EYAL, YEHOSHUA & CO. LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Ampal Enterprises Ltd., we hereby
consent to the incorporation of our report included in this form 10K, into the
Company's previous filed Registration Statement File No. 33-51023, and
No. 55137.
Cohen, Eyal, Yehoshua & Co.
Certified Public Accountants (Isr.)
March 25, 1996
E-35
<PAGE>
[FAHN, KANNE & CO. LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Ampal Financial Service 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. 55137.
/s/ Fahn, Kanne & Co.
Fahn, Kanne & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
March 25, 1996
E-36
<PAGE>
[SHLOMO ZIV & CO. LETTERHEAD]
March 25, 1996
Arthur Anderson & Co.
1345 Avenue of the Americas
New York, N.Y. 10105
U.S.A
- -----
Gentlemen,
Re: Ampal Holdings (1991) Ltd.
Consent of independent public accountants
-----------------------------------------
As independent public accountants of Ampal Holdings (1991) 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. 55137.
Sincerely,
/s/ Shlomo Ziv & Co.
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
E-37
<PAGE>
[FAHN, KANNE & CO. LETTERHEAD]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
------------------------------------------------
As independent certified 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. 55137.
/s/ Fahn, Kanne & Co.
Fahn, Kanne & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
March 25, 1996
E-38
<PAGE>
[Haft & Haft 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 10-K,
into the Company's previously filed Registration Statements File
No. 33-51023, and No. 55137.
/s/H.H.S.L. Haft & Haft & Co.
H.H.S.L. Haft & Haft & Co.
Certified Public Accountants (Isr.)
March 25, 1996
E-39
<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.
/s/ Cohen, Eyal, Yehoshua & Co.
Cohen, Eyal, Yehoshua & Co.
Certified Public Accountants (Isr.)
March 25, 1996
E-40
<PAGE>
Morris Brankin & Co.
Chartered Accountants
Ampal-American Israel Corporation
1177 Avenue of the Americas
New York, N.Y. 10036-2091
Re: CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
This is to inform you that we consent, as independent public accountants of
Bank Hapoalim (Cayman) Ltd., to the incorporation of our report included in Form
10-K, into the Ampal-American Israel Corporation's previously filed Registration
Statement File No. 33-51023, and No. 33-55137.
/s/ Morris Brankin & Co.
Morris Brankin & Co.
March 25, 1996
E-41
<PAGE>
[RONEL STETTNER & CO. LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Bay Heart Limited, 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. 33-55137.
/S/ RONEL STETTNER & CO.
RONEL STETTNER & CO.
Certified Public Accountants
(Israel)
March 26, 1996
E-42
<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 10K,
into the Company's previously filed Registration Statement File No.
33-51023, and No. 55137.
/s/ KOST, LEVARY and FORER
Tel-Aviv, Israel KOST, LEVARY and FORER
March 25, 1996 Certified Public Accountants (Israel)
E-43
<PAGE>
[Porat & Co. Letterhead]
March 25, 1996
Arthur Andersen & Co.
1345 Avenue of the Americas
New York, N.Y. 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.
/s/ Porat & Co.
Porat & Co.
Certified Public Accountants (Isr.)
E-44
<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. 33-55137.
/s/ Cohen, Eyal, Yehoshua & Co.
Cohen, Eyal, Yehoshua & Co.
Certified Public Accountants (Isr.)
March 25, 1996
E-45
<PAGE>
[FRIEDMAN, SHAPIRA, GOLDSTEIN, SITERMAN & CO. LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Epsilon Investment House Ltd., we
hereby consent to the incorporation of our report included in Form 10K,
into the Company's previously filed Registration Statement File No. 33-51023,
and No. 33-55137.
/s/ FRIEDMAN, SHAPIRA, GOLDSTEIN, SITERMAN & CO.
FRIEDMAN, SHAPIRA, GOLDSTEIN, SITERMAN & CO.
Certified Public Accountants
March 25th, 1996
E-46
<PAGE>
[SOMEKH CHAIKIN LETTERHEAD]
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 26, 1996,
included in Form 10-K of Ampal American Israel Corporation, previously
filed in Registration Statement File No. 33-51023, and No. 33-55137.
/s/ Somekh Chaikin
Somekh Chaikin
Certified Public Accountants (ISRAEL)
Haifa, March 25, 1996
E-47
<PAGE>
HAPOALIM CASA BASA
[CR. R. VILLARMARZO Y ASOC. LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Hapoalim Mayo Casa Bancaria S.A., we hereby
consent to the incorporation of our report included in this Form 10K dated
January 25, 1995, into the Company's previously filed Registration Statement
File No. 33-51023 and No. 55137.
We inform you that we also audited the financial statements for the year ended
December 31, 1995, and issued a report dated March 8, 1996 being available for
the same purposes.
March 25, 1996
/s/ CR. R. VILLARMARZO
CR. R. VILLARMARZO Y ASOC.
Ernst & Young International
E-48
<PAGE>
[PORAT & CO. LETTERHEAD]
March 25, 1996
Arthur Andersen & Co.
1345 Avenue of the American
New York, N.Y. 10105
Gentlemen,
Re: CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
OF HOD HASHARON SPORT CENTER (1992) LIMITED PARTNERSHIP
-------------------------------------------------------
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Partnership's previously filed
Registration Statement File No. 33-51023 and No. 33-55137.
/s/ Porat & Co.
Porat & Co.
Certified Public Accountants (Isr.)
E-49
<PAGE>
HAFT & HAFT & CO.
[ LETTERHEAD ]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of MDF Industries 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.
--------------------------
March 25, 1996 H.H.S.L. Haft & Haft & Co.
Certified Public Accountants (Isr.)
E-50
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of Mivnat Holding 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.
/s/ Kost, LeVary and Forer
Tel-Aviv, Israel KOST, LEVARY and FORER
March 25, 1996 Certified Public Accountants (Israel)
E-51
<PAGE>
HAGGAI WALLENSTEIN, DOV & Co., C.P.A. (Isr.)
[ LETTERHEAD ]
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, DOV & Co.
Certified Public Accountants (Isr.)
Ramat-Gan, Israel
March 25, 1996
E-52
<PAGE>
HAFT & HAFT & CO.
[ LETTERHEAD ]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Nir 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.
--------------------------
March 25, 1996 H.H.S.L. Haft & Haft & Co.
Certified Public Accountants (Isr.)
E-53
<PAGE>
Kesselman Coopers
& Kesselman & Lybrand
[ LETTERHEAD ]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of Ophir Holdings Ltd., we hereby
consent to the incorporation of our report dated March 3, 1996 on the
financial statements of Ophir Holdings Ltd. included in this form 10K,
into Ampal-American Israel Corporation's previously filed Registration
Statement File No. 33-51023, and No. 55137.
Tel-Aviv, Israel
March 25, 1996
E-54
<PAGE>
[KPMG Braude Bavly LetterHead]
Certified Public Accountants
March 26, 1996 Ref 4021
J:\L96\03\CONS
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
U.S.A.
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 Industries (1959) Ltd. for the year
ended December 31, 1995, dated February 25, 1996, included in this Form 10K,
into the Ampal American-Israel Corporation's previously filed Registration
Statement File No. 33-51023, and No. 55137.
/s/ Braude Bavly
Braude Bavly
Certified Public Accountants
E-55
<PAGE>
[SHLOMO ZIV & CO. LETTERHEAD]
March 25, 1996
Arthur Andersen & 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 of Paradise Mattresses (1992) 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.
55137.
Sincerely,
/s/ Shlomo Ziv & Co.
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
E-56
<PAGE>
(REUVENI, HARTUV, TEPPER & CO. LETTERHEAD)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of Pri Ha'emek (Canned and Frozen Foods)
88 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. 33-55137.
/s/Reuveni, Hartuv, Tepper & Co.
REUVENI, HARTUV, TEPPER & CO.
Certified Public Accountants (Isr.)
March 26, 1996
E-57
<PAGE>
(DOV KAHANA & CO. LETTERHEAD)
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 11, 1996 included in this Form 10-K, into the
Company's previously filed Registration Statement File No. 33-51023, and
No. 33-55137.
/s/Dov Kahana & Co.
DOV KAHANA & CO.
Certified Public Accountants (Isr.)
Ramat-Gan, March 25, 1996
E-58
<PAGE>
(DOV KAHANA & CO. LETTERHEAD)
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 Underwater Observatory
Ltd. dated March 21, 1996 included in this Form 10-K, into the Company's
previously filed Registration Statement File No. 33-51023, and No. 33-
55137.
/s/Dov Kahana & Co.
DOV KAHANA & CO.
Certified Public Accountants (Isr.)
Ramat-Gan, March 25, 1996
E-59
<PAGE>
(FRIEDMAN, SHAPIRA, GOLDSTEIN, SITERMAN & CO. LETTERHEAD)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants Of Renaissance Investment Co. 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.
/s/Friedman, Shapira, Goldstein,
Siterman & Co.
FRIEDMAN, SHAPIRA, GOLDSTEIN,
SITERMAN, & CO.
Certified Public Accountants
March 25, 1996
E-60
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of Shmay Bar Real Estate (1993) 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.
/s/Kost, Levary and Forer
KOST, LEVARY, AND FORER
Certified Public Accountant(Israel)
Tel Aviv, Israel
March 25, 1996
E-61
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of Shmay Bar (T.H.) 1993 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.
/s/Kost, Levary and Forer
KOST, LEVARY, AND FORER
Certified Public Accountant(Israel)
Tel-Aviv, Israel
March 25, 1996
E-62
<PAGE>
(REUVENI, HARTUV, TEPPER & CO. LETTERHEAD)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of The Snow and Cool Palace (Limited
Partnership), we hereby consent to the incorporation of our report included
in this Form 10K, into the Limited Partnership's previously filed Registration
Statement File No. 33-51023 and No. 55137.
/s/Reuveni, Hartuv, Tepper & Co.
REUVENI, HARTUV, TEPPER & CO.
Certified Public Accountants (Isr.)
March 26, 1996
E-63
<PAGE>
(ALMAGOR & Co. C.P.A.(Isr.) LETTERHEAD)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of Teledata Communications Ltd., we
hereby consent to the incorporation of our report on the consolidated
financial statements of Teledata Communications Ltd. dated February 12, 1996
included in this Form 10-K, into the previously filed Registration
Statement File No. 33-51023 and No. 55137 of Ampal American Israel
Corporation.
/s/Almagor & Co.
ALMAGOR & CO.
Certified Public Accountants
March 25, 1996
E-64
<PAGE>
(IGAL BRIGHTMAN & CO. LETTERHEAD)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of TRINET INVESTMENTS IN HIGH-TECH LTD.,
we hereby consent to the incorporation of our report dated February 22,
1996, included in this Form 10-K (relating to the financial statements of
TRINET INVESTMENTS IN HIGH-TECH LTD. not included herein), into the
Company's previously filed Registration Statements No. 33-51023 and
No. 33-55137.
/s/Igal Brightman & Co.
IGAL BRIGHTMAN & CO.
Certified Public Accountants (Isr.)
March 25, 1996
E-65
<PAGE>
(IGAL BRIGHTMAN & CO. LETTERHEAD)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants of TRINET VENTURE CAPITAL LTD., we hereby
consent to the incorporation of our report dated February 22, 1996,
included in this Form 10-K (relating to the financial statements of TRINET
VENTURE CAPITAL LTD. not included herein), into the Company's previously
filed Registration Statements No. 33-51023 and No. 33-55137.
/s/Igal Brightman & Co.
IGAL BRIGHTMAN & CO.
Certified Public Accountants (Isr.)
March 25, 1996
E-66
<PAGE>
(KESSELMAN & KESSELMAN (Isr.) LETTERHEAD)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of U.D.S. - Ultimate Distribution Systems
Ltd., we hereby consent to the incorporation of our report dated March 14,
1996 on the financial statements of U.D.S. - Ultimate Distribution Systems
Ltd. included in this Form 10-K, into Ampal-American Israel Corporation's
previously filed Registration Statement File No. 33-51023, and No. 55137.
/s/Kesselman & Kesselman
Tel-Aviv, Israel
March 25, 1996
E-67
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, 1995, 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.
February 9, 1996 /s/Arie Abend
- ------------------------- -----------------------
Date Signature
E-68
<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, 1995, 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.
February 7, 1996 /s/Michael Arnon
- ------------------------- -----------------------
Date Signature
E-69
<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, 1995, 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.
February 2, 1996 /s/Stanley I. Batkin
- ------------------------- -----------------------
Date Signature
E-70
<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, 1995, 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.
February 4, 1996 /s/Yaacov Elinav
- ------------------------- -----------------------
Date Signature
E-71
<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, 1995, 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.
February 5, 1996 /s/Harry B. Henshel
- ------------------------- -----------------------
Date Signature
E-72
<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, 1995, 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 5, 1996 /s/Irwin Hochberg
- ------------------------- -----------------------
Date Signature
E-73
<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, 1995, 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 8, 1996 /s/Herbert Kronish
- ------------------------- -----------------------
Date Signature
E-74
<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, 1995, 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.
February 7, 1996 /s/Lawrence Lefkowitz
- ------------------------- -----------------------
Date Signature
E-75
<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, 1995, 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.
February 9, 1996 /s/Shimon Ravid
- ------------------------- -----------------------
Date Signature
E-76
<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, 1995, 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.
February 4, 1996 /s/Shlomo Recht
- ------------------------- -----------------------
Date Signature
E-77
<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, 1995, 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 10, 1996 /s/Evelyn Sommer
- ------------------------- -----------------------
Date Signature
E-78
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 16,694
<SECURITIES> 142,291
<RECEIVABLES> 72,973
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,158
<PP&E> 89,079
<DEPRECIATION> 13,870
<TOTAL-ASSETS> 349,325
<CURRENT-LIABILITIES> 37,894
<BONDS> 147,016
0
6,258
<COMMON> 24,066
<OTHER-SE> 134,091
<TOTAL-LIABILITY-AND-EQUITY> 349,325
<SALES> 41,601
<TOTAL-REVENUES> 78,151
<CGS> 0
<TOTAL-COSTS> 46,767
<OTHER-EXPENSES> 7,061
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,290
<INCOME-PRETAX> 8,033
<INCOME-TAX> 5,867
<INCOME-CONTINUING> 2,166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,166
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
