SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
NO. 4
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
-----------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission file number 1-8707
------
PEC Israel Economic Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maine 13-1143528
- ----------------------------------------- --------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
511 Fifth Avenue, New York, New York 10017
- ----------------------------------------- --------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 687-2400
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- --------------------------------------------------------------------------------
Common Stock (par value $1.00 per share) New York Stock Exchange
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
None
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
<PAGE>
The aggregate market value of the outstanding Common Stock of the
registrant held by non-affiliates on March 26, 1999 was approximately
$101,041,000. Such aggregate market value was computed on the basis of the
closing price of the Common Stock of the registrant on the New York Stock
Exchange on that date. See Part II, Item 5, "Market for the Registrant's Common
Stock and Related Stockholder Matters."
As of March 26, 1999, 18,362,188 shares of Common Stock were outstanding.
<PAGE>
The Registrant, PEC Israel Economic Corporation ("PEC" or the "Company"),
hereby amends (i) Item 8 of Part II of PEC's Annual Report on Form 10-K for the
year ended December 31, 1998, as previously amended (the "1998 Form 10-K"), by
replacing the financial statements of Property and Building Corporation Ltd.
("Property & Building") as at and for the year ended December 31, 1998 (the
"Prior Property & Building 1998 Financial Statements") with the financial
statements of Property & Building as at and for the year ended December 31, 1998
(the "Current Property & Building 1998 Financial Statements"), which begin four
pages after this page, the sole difference between the Prior Property & Building
1998 Financial Statements and the Current Property & Building 1998 Financial
Statements being a revised Note 35 in the Current Property & Building 1998
Financial Statements, and (ii) Item 14(a)(2)(f) of Part IV of the 1998 Form 10-K
by adding the following reports of certified public accountants with respect to
the financial statements of the following entities filed pursuant to Rule 2-05
of Regulation S-X:
For the year ended December 31, 1998:
Aclim 2000 (for Ecology) Limited, a subsidiary of Property and
Building Corporation Ltd.
Adir International Communications Services Corporation Ltd.
ASE Advanced Systems Europe B.V., a subsidiary of Liraz Systems Ltd.
Camdev Ltd.
"Gad" Building Company Limited, a subsidiary of Property and
Building Corporation Ltd.
Galil Medical Ltd., a subsidiary of DEP Technology Holdings Ltd.
Ham-Let U.S.A., Inc., a subsidiary of Ham-Let (Israel-Canada) Ltd.
H.T. Components U.S.A., Inc., a subsidiary of Ham-Let (Israel-
Canada) Ltd.
I.C.P. - Israel Cable Programming Company Ltd., a subsidiary of DIC
and PEC Cable TV Ltd.
ISPRO The Israeli Properties Rental Corporation Ltd., a subsidiary
of Property and Building Corporation Ltd.
Level 8 Systems, Inc., a subsidiary of Liraz Systems Ltd.
Liraz Systems Ltd.
Logal Educational Software and Systems Ltd.
Medi-Card Ltd., a subsidiary of DEP Technology Holdings Ltd.
Merkaz Herzlia "A" Ltd., a subsidiary of Property and Building
Corporation Ltd.
Merkaz Herzlia "B" Ltd., a subsidiary of Property and Building
Corporation Ltd.
<PAGE>
Naveh Building and Development Ltd., a subsidiary of Property and
Building Corporation Ltd.
Netvision Ltd., a subsidiary of DIC and PEC Cable TV Ltd.
Polyoptics Ltd., a subsidiary of Soreq Development Center (S.D.C.)
Ltd.
Renaissance Fund LDC
Sano Dispec Development Ltd.
Science Based Industries Campus Ltd., a subsidiary of Property and
Building Corporation Ltd.
Soreq Development Center (S.D.C.) Ltd.
Verdeco Technologies Ltd., a subsidiary of DEP Technology Holdings
Ltd.
For the year ended December 31, 1997:
Adir International Communications Services Ltd.
ASE Advanced Systems Europe B.V., a subsidiary of Liraz Systems Ltd.
Bayside Land Corporation Ltd., a subsidiary of Property and Building
Corporation Ltd.
Century Canning Industries Co. W.L.L., a subsidiary of Caniel-
Israel Can Company Ltd.
DEP Technology Holdings Ltd.
DIC and PEC Cable TV Ltd.
Dutch Can Pack Holding B.V., a subsidiary of Caniel - Israel Can
Company Ltd.
Gemini Capital Fund Management Ltd.
Gemini Israel Fund L.P.
General Engineers Limited
Ham-Let U.S.A., Inc., a subsidiary of Ham-Let (Israel-Canada) Ltd.
H.T. Components U.S.A., Inc., a subsidiary of Ham-Let (Israel-
Canada) Ltd.
Israsat International Communications Ltd., a subsidiary of Gilat
Communications Ltd.
Kedem Chemicals Ltd., a subsidiary of Tambour Limited
Level 8 Systems, Inc., a subsidiary of Liraz Systems Ltd.
<PAGE>
Lev Hamifratz Ltd., a subsidiary of Super-Sol Ltd.
Mul-T-Lock France S.A.R.L., a subsidiary of Mul-T-Lock Ltd.
Mul-T-Lock USA, Inc., a subsidiary of Mul-T-Lock Ltd.
Nitroxid (1993) Production and Marketing Ltd., a subsidiary of
Maxima Air Separation Center Ltd.
Rol Profil Ltd., a subsidiary of Klil Industries Ltd.
Skydata, Inc., a subsidiary of Gilat Satellite Networks Ltd.
Tambour Paints Ltd., a subsidiary of Tambour Limited
For the year ended December 31, 1996:
ASE Advanced Systems Europe B.V., a subsidiary of Liraz Systems Ltd.
Dutch Can Pack Holding B.V., a subsidiary of Caniel-Israel Can
Company Ltd.
Ispah Holdings Ltd.
Level 8 Systems, Inc., a subsidiary of Liraz Systems Ltd.
Lev Hamifratz Ltd., a subsidiary of Super-Sol Ltd.
Maxima-Air Separation Center Ltd.
Retail Chains Hungary Kereskedelmi Kft., a subsidiary of Super- Sol
Ltd.
Sano Dispec Development Ltd.
Tambour Paints Ltd., a subsidiary of Tambour Limited
Yaana Systems Ltd., a subsidiary of Liraz Systems Ltd.
<PAGE>
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.
PEC Israel Economic Corporation
By: /S/ JAMES I. EDELSON
--------------------------------------
DATE: September 3, 1999 James I. Edelson
Executive Vice President and Secretary
<PAGE>
Property and Building Corporation
Limited and Subsidiaries
Financial Statements
As at December 31, 1998
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Financial Statements as at December 31, 1998
- --------------------------------------------------------------------------------
Contents
Page
----
Auditors' Report 2
Balance Sheets 3
Statements of Earnings 5
Statement of Shareholders' Equity 6
Statements of Cash Flows 7
Notes to the Financial Statements 11
Annex - Percentage of Holding in Related Companies 64
<PAGE>
March 11, 1999
Auditors' Report to the Shareholders of
Property and Building Corporation Limited
We have audited the financial statements of Property and Building Corporation
Limited (hereinafter "the Company") and its consolidated financial statements,
as follows:
- - Balance sheets as at December 31, 1998 and 1997.
- - Statements of earnings, statements of changes in shareholders' equity and
statements of cash flows for each of the three years the last of which
ended December 31, 1998.
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 audits.
We did not audit the financial statements of certain subsidiaries, including
those consolidated by the proportionate consolidation method, whose assets
constitute 80% of the total consolidated assets as at December 31, 1998 and
1997, and whose revenues constitute 86%, 72% and 90% of the consolidated
revenues for the years ended on December 31, 1998, 1997 and 1996 respectively.
The financial statements of those subsidiaries were audited by other auditors
whose reports thereon were furnished to us. Our opinion, insofar as it relates
to amounts emanating from the financial statements of such subsidiaries, is
based solely on the said reports of the other auditors. Furthermore, the data
included in the financial statements which relates to the net asset value of an
affiliate and the Company's equity in its earnings is based on financial
statements which were audited by other auditors.
We conducted our audits in accordance with generally accepted auditing
standards, including standards prescribed by the Auditors Regulations (Manner of
Auditor's Performance) - 1973. Such standards require that we plan and perform
the audit to obtain reasonable assurance that the financial statements are free
of material misstatement whether due to error or intentional misrepresentation.
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 Board of
Directors and by Management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a fair basis for our
opinion.
The above mentioned financial statements were prepared on the basis of the
historical cost convention, in historical values, adjusted for the changes in
the general purchasing power of the Israeli currency in accordance with opinions
of the Institute of Certified Public Accountants in Israel. Condensed data in
nominal historical values, on the basis of which the adjusted financial
statements were prepared, is presented in Note 34.
In our opinion, based on our audit and on the reports of the abovementioned
other auditors, the financial statements referred to above present fairly, in
all material respects, in conformity with accounting principles generally
accepted in Israel, consistently applied, the financial position of the Company
and the consolidated financial position of the Company and its subsidiaries as
at December 31, 1998 and 1997 and the results of their operations, the changes
in the shareholders' equity and their cash flows for each of the three years the
last of which ended December 31, 1998. Furthermore, these statements have, in
our opinion, been prepared in accordance with the Securities Regulations
(Preparation of Annual Financial Statements) 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 affects the determination of historical net earnings
and shareholders' equity to the extent summarized in Note 35C to the financial
statements.
Certified Public Accountants (Isr.)
F-2
<PAGE>
Balance Sheets as at December 31
- --------------------------------------------------------------------------------
In terms of shekels of December 1998 (in NIS thousands)
<TABLE>
<CAPTION>
Consolidated The Company
------------------- ---------------------
Note 1998 1997 1998 1997
----------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash
equivalents 2 102,997 168,583 1,220 1,634
Short-term deposits
and loans 3,547 1,768
Marketable securities 3 13,223 38,571 576 644
Trade receivables 4 48,814 22,165 31
Other receivables
and debit balances 5 48,533 22,066 20,987 5,855
Apartments and other
inventories 6 74,124 6,693 7,285 1,439
Building projects
under construction 7 105,780 141,011 4,690 2,861
--------- --------- --------- ---------
397,018 400,857 34,789 12,433
--------- --------- --------- ---------
Land 8 499,061 434,130 4,072 9,471
--------- --------- --------- ---------
Long-term loans and
deposits 9 4,965 3,527 3,237 2,840
--------- --------- --------- ---------
Investments
In investee companies 10 155,024 126,752 1,067,610 971,805
--------- --------- --------- ---------
Fixed Assets
Buildings, land,
plantations and other 1,640,048 1,444,770 55,656 55,554
Less/- Accumulated
depreciation 343,966 339,672 24,338 23,540
--------- --------- --------- ---------
1,296,082 1,105,098 31,318 32,014
--------- --------- --------- ---------
Deferred Charges
and Other Assets 24,916 26,311 379 410
--------- --------- --------- ---------
2,377,066 2,096,675 1,141,405 1,028,973
========= ========= ========= =========
</TABLE>
The notes and the annex are an integral part of the financial statements.
F-3
<PAGE>
Property and Building Corporation Limited and Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidated The Company
--------------------- ---------------------
Note 1998 1997 1998 1997
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current Liabilities
Advances from purchasers
of apartments and
others, net 13 19,432 4,345 2,603 1,058
Short-term credit from banks 14 17,500 27,367
Current maturities of long -
term liabilities 52,727 47,943 2,191 2,609
Suppliers and contractors 15 14,055 9,912
Creditors and credit balances 16 127,733 77,157 19,655 34,486
Deferred taxes 17 2,347 49
Proposed dividend 31,265 25,100 20,000 18,466
--------- --------- --------- ---------
262,712 194,171 44,449 56,668
--------- --------- --------- ---------
Long-term Liabilities
Convertible debentures 18 240,469 248,254
Debentures 18 33,239 38,992
Liabilities to banks and
provident funds 18 352,597 223,691
Other long term liabilities 18 60,151 63,601 6,574 8,798
Capital note 18 20,000
Deferred taxes 17 24,546 21,445 1,764 1,294
Liability for employee
severance benefits, net 19 3,442 2,566
--------- --------- --------- ---------
714,444 598,549 28,338 10,092
--------- --------- --------- ---------
Minority interest 330,465 330,915
--------- ---------
Receipt on account of
option warrants in
a subsidiary 10,827 10,827
--------- ---------
Shareholders' Equity 1,068,618 962,213 1,067,610 962,213
--------- --------- --------- ---------
Contingent Liabilities
and Commitments 20
2,377,066 2,096,675 1,141,405 1,028,973
========= ========= ========= =========
</TABLE>
- ----------------------------------
Dov Tadmor - Chairman of the Board
- ----------------------------------
Abraham Attias - Managing Director
March 11, 1999
F-4
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Statements of Earnings for the Year Ended December 31
- --------------------------------------------------------------------------------
In terms of shekels of December 1998 (in NIS thousands)
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------- ----------------------------
Note 1998 1997 1996 1998 1997 1996
------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income
Rentals and warehousing 156,481 149,130 139,941 9,865 8,520 8,328
From construction and other sources 21 334,765 292,156 249,906 50,563 57,746
The Company's equity in the net earnings of investee
companies 22 6,582 7,115 13,788 111,750 65,356 69,105
Gain on sale of investments and fixed assets 23 70,715 10,985 3,087 15 655 81
Income from securities, financing and others 24 12,682 12,796 7,519 1,955 2,226 2,696
------- ------- ------- ------- ------- -------
581,225 472,182 414,241 174,148 134,503 80,210
------- ------- ------- ------- ------- -------
Costs and Expenses
Construction and other costs 25 242,800 212,620 175,549 33,327 41,747
Administrative and general 26 38,505 34,829 33,780 8,230 7,828 7,423
Selling and marketing 27 5,381 5,426 4,146 266 953
Property maintenance (excluding depreciation) 12,970 12,237 11,446 1,057 847 883
Depreciation and amortization 28 27,875 24,454 21,573 1,059 1,050 1,371
Property taxes on land 8,390 9,450 8,239 540 923 1,049
Financing 29 26,320 26,150 17,901 1,287 1,177 3,393
------- ------- ------- ------- ------- -------
362,241 325,166 272,634 45,766 54,519 14,119
------- ------- ------- ------- ------- -------
Earnings before taxes on income 218,984 147,016 141,607 128,382 79,984 66,091
Taxes on income 30 64,877 47,285 46,316 6,276 6,561 (1,007)
------- ------- ------- ------- ------- -------
Earnings after taxation 154,107 99,731 95,291 122,106 73,423 67,098
Less/- Minority interest in earnings 32,001 26,308 28,193
------- ------- ------- ------- ------- -------
Net earnings for the year 122,106 73,423 67,098 122,106 73,423 67,098
======= ======= ======= ======= ======= =======
Earnings Per Share
Net earnings per share of a par
value of NIS 1.00 (in NIS) 29.46 17.81 17.24 29.46 17.81 17.24
======= ======= ======= ======= ======= =======
</TABLE>
The notes and the annex are an integral part of the financial statements.
F-5
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Statements of Shareholders' Equity
- --------------------------------------------------------------------------------
In terms of shekels of December 1998 (in NIS thousands)
<TABLE>
<CAPTION>
Share Capital Premium Capitalized Retained Total
capital surplus on shares surplus in earnings
subsidiaries
------- ------- --------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance as at January 1,
1996 193,135 155,734* 28,192 383,974 761,035
Net earnings for the year 67,098 67,098
Issue of shares 669 85,594 86,263
Inflationary erosion of dividend
declared in the previous year 644 644
Proposed dividend - 280% (13,365) (13,365)
------- ------- ------ ------ ------- ---------
Balance as at December 31,
1996 193,804 155,734 85,594 28,192 438,351 901,675
Net earnings for the year 73,423 73,423
Exercise of share options 29 4,451 4,480
Tax benefit in respect of the
exercise of share purchase
options by employees 666 666
Inflationary erosion of dividend
declared in the previous 435 435
Proposed dividend - 412% (18,466) (18,466)
------- ------- ------ ------ ------- ---------
Balance as at December 31,
1997 193,833 156,400 90,045 28,192 493,743 962,213
Net earnings for the year 122,106 122,106
Exercise of share options 15 3,716 3,731
Tax benefit in respect of the
exercise of share purchase
options by employees 306 306
Inflationary erosion of dividend
declared in the previous year 262 262
Proposed dividend - 482.7% (20,000) (20,000)
------- ------- ------ ------ ------- ---------
Balance as at December 31,
1998 193,848 156,706 93,761 28,192 596,111 1,068,618
======= ======= ====== ====== ======= =========
</TABLE>
* Capital surplus created until December 31, 1991.
The notes and the annex are an integral part of the financial statements.
F-6
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Statements of Cash Flows for the Year Ended December 31
- --------------------------------------------------------------------------------
In terms of shekels of December 1998 (in NIS thousands)
<TABLE>
<CAPTION>
Consolidated The Company
-------------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash flows generated by operating activities
Net earnings 122,106 73,423 67,098 122,106 73,423 67,098
Adjustments to reconcile net earnings to
net cash flows generated by operating
activities (Annex): (7,763) 46,987 62,912 (102,377) (104,823) (27,275)
-------- -------- -------- -------- -------- --------
Net cash inflow (outflow) generated by operating
activities 114,343 120,410 130,010 19,729 (31,400) 39,823
-------- -------- -------- -------- -------- --------
Cash flows generating by investing activities
Proceeds from realization of investment in
investee company 29,800
Payments on account of investments (26,274) (1,020)
Investments in investee companies (32,930) (2,938) (40,368) (27,697) (4,765) (101,949)
Dividend received from investee companies 5,772 8,534 8,852 44,662 18,242 13,861
Acquisition of the interest of another
shareholder, in a formerly
proportionately consolidated company (Annex B) (10,213)
Repayment of another shareholder's
portion of shareholders' loan
in a formerly proportionately consolidated company (17,505)
Purchase of marketable securities (7,281) (42,255) (654,850) (39) (37) (11)
Proceeds from sale of marketable securities 35,755 44,863 660,926 95 99 130
Acquisition and development of land (87,093) (38,948) (132,311) (2,408) (2,698) (5,330)
Purchase and construction of fixed assets (188,842) (163,788) (136,760) (368) (1,090) (168)
Collections of credit relating to sale of real estate 1,669 1,862
Proceeds from sale of fixed assets and real estate 60,891 1,182 2,199 51 34
Repayment of long-term deposits and loans 1,351 2,000 790 912
Granting of long-term loans (4,801) (3,145) (2,513) (2,308) (1,231)
Repayment (Granting) of short-term deposits (1,779) 16,546 (17,927)
Repayment of loans to subsidiaries 11,661 857
-------- -------- -------- -------- -------- --------
Net cash inflow (outflow) generated by investing
activities (272,949) (146,480) (307,587) 11,675 19,104 (93,807)
-------- -------- -------- -------- -------- --------
</TABLE>
F-7
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Statements of Cash Flows for the Year Ended December 31 (cont'd)
- --------------------------------------------------------------------------------
In terms of shekels of December 1998 in NIS thousands)
<TABLE>
<CAPTION>
Consolidated The Company
-------------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash flows generated by financing activities
Dividend paid
- - by the parent company (18,204) (12,930) (10,280) (18,204) (12,930) (10,280)
- - to outside shareholders of subsidiary companies (6,539) (5,384) (4,915)
Payment of debentures (13,562) (9,716) (14,370)
Payment of long-term loans (31,450) (67,734) (3,492) (2,191) (405) (320)
Receipt of long-term loans 167,872 33,733 148,245
Receipt of capital note from subsidiary 20,000
Repayment (receipt) of long-term loan from subsidiary, net 1,550 (21,818)
Receipt (repayment) of credit from subsidiary company (34,748) 20,389
Receipt (repayment) of short-term bank credit (9,867) 13,129 (16,949) (406) (405) 405
Payments to outside shareholders of subsidiary (125) (79) (495)
Repayments of credit in respect of real estate acquisition (612) (14,511) (36,537)
Securities issue by a subsidiary 1,776 190,253 69,540
Share issue by the Company 3,731 4,481 86,262 3,731 4,481 86,263
------- ------- ------- ------- ------- -------
Net cash inflow (outflow) generated by financing activities 93,020 131,242 217,009 (31,818) 12,680 54,250
------- ------- ------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents (65,586) 105,172 39,432 (414) 384 266
Cash and cash equivalents at beginning of year 168,583 63,411 23,979 1,634 1,250 984
------- ------- ------- ------- ------- -------
Cash and cash equivalents at end of year 102,997 168,583 63,411 1,220 1,634 1,250
======= ======= ======= ======= ======= =======
</TABLE>
The notes and the annex are an integral part of the financial statements.
F-8
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Statements of Cash Flows for the Year Ended December 31 (cont'd)
- --------------------------------------------------------------------------------
In terms of shekels of December 1998 (in NIS thousands)
<TABLE>
<CAPTION>
Consolidated The Company
-------------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Annex A
Adjustments to reconcile net earnings to
net cash generated by operating activities:
Transactions not involving cash flows:
The Company's equity in the net
earnings of investee companies (6,582) (7,115) (13,788) (111,750) (65,356) (69,105)
Outside shareholders' interest in earnings 32,001 26,308 28,193
Depreciation and amortization 28,706 25,188 22,178 1,059 1,050 1,372
Net changes in deferred taxes (11,282) (19,216) 4,502 (40) 1,671 (1,793)
Increase (decrease) in liability for
employee severance benefits 876 (28) (93) (8) (1) 1
Decrease (increase) in value of securities (3,126) (3,463) (5,414) 12 (27) (26)
Income from realization of investments
and issue of capital by investee companies (11,028) (58) (655) (58)
Capital losses (gains) on sale of fixed assets
and real estate (68,055) 43 (3,029) (15) (23)
Inflationary erosion of long-term deposits and loans, net (380) 6,433 1,844 328 445 123
Amortization of debenture discount 1,057 1,149 904
Changes in current assets and liabilities:
(Increase) decrease in trade receivables (26,649) 23,656 (16,378) (31)
(Increase) decrease in other receivables 3,415 2,374 20,211 1,502 (1,347) (1,541)
(Increase) decrease in construction costs, net 7,787 (475) 22,052 1,677 (4,528) 7,368
Increase (decrease) in suppliers and subcontractors 4,143 (1,186) 3,050
Increase (decrease) in other payables 30,326 4,347 (1,262) 4,889 (36,075) 33,325
-------- -------- -------- -------- -------- --------
Total adjustments (7,763) 46,987 62,912 (102,377) (104,823) (27,275)
======== ======== ======== ======== ======== ========
Significant non-cash transactions:
Purchase of fixed assets on credit 328 11,444
-------- --------
Purchase of real estate on credit 11,570
--------
Sale of fixed assets on credit 18,725 1,669
-------- --------
</TABLE>
F-9
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Statements of Cash Flows for the Year Ended December 31 (cont'd)
- --------------------------------------------------------------------------------
In terms of shekels of December 1998 (in NIS thousands)
Consolidated
------------
1998
------------
Annex B
Acquisition of the interest of another
shareholder, in a formerly
proportionately consolidated company
Assets and liabilities of the company
at the date of acquisition :
Working capital (cash and cash equivalents) 30
Fixed assets, net 22,836
Long term liabilities (17,505)
Difference created due to acquisition 4,852
------------
10,213
============
F-10
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 1 - Reporting Principles and Accounting Policies
A. Reporting Principles
1. Definitions
In these financial statements:
(a) Subsidiaries - companies whose financial statements are
consolidated directly or indirectly with those of Property and
Building Corporation Limited (the "Company").
(b) Proportionately consolidated subsidiaries - companies whose
financial statements are consolidated with those of the
Company by the proportionate consolidation method.
(c) Affiliated companies - companies, except for subsidiaries and
proportionately consolidated subsidiaries, the investment in
which is included directly or indirectly on the equity basis
in the company's statements.
(d) Investee companies - subsidiaries, proportionately
consolidated subsidiaries and affiliated companies.
(e) Other companies - companies which are not investee companies.
(f) Initial difference - difference between acquisition cost and
adjusted net asset value of investments in shares of investee
companies as at acquisition date.
(g) Related parties - as defined in Opinion No. 29 of the
Institute of Certified Public Accountants in Israel.
(h) Interested parties - as defined in the Israeli Securities Law.
(i) Group - The Company and her subsidiaries
2. The financial statements have been prepared in a format suited, in
the opinion of the Management, to the Company's type of business, in
accordance with Regulation 8 of the Securities Regulations
(Preparation of Annual Financial Statements), 1993)
B. Uncertainty Due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. Similar problems may
also occur in systems that use the digits "99" in a date field as
indication of something other than the year 1999. The effects of the Year
2000 Issue may be experienced before, on, or after January 1, 2000, and if
not addressed, the impact on operations and financial reporting may range
from minor errors to significant systems failure which could affect an
entity's ability to conduct regular business operations. It is not
possible to be certain that all aspects of the Year 2000 issue affecting
the Company including those relating to the remediation efforts of
customers, suppliers or other third parties, will be fully resolved.
F-11
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
C. Financial statements in adjusted values
1. The Company prepares adjusted financial statements on the basis of
cost adjusted for the changes in the general purchasing power of the
shekel (see Note 34 for condensed financial statements in nominal
historical values).
2. The adjusted value of non-monetary assets do not purport to reflect
their real economic or market value but rather historical cost
adjusted for changes in the purchasing power of the shekel.
3. In the adjusted financial statements, the term, "cost" means
"adjusted cost".
4. Comparative figures have also been adjusted to shekels of December
1998.
D. Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to use estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as at the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results may differ from such
estimates.
E. Principles of adjustment
1. Balance sheet
Non-monetary items (construction work and advances, real estate,
investment in companies, fixed assets, deferred charges, share
capital), have been adjusted on the basis of changes in the consumer
price index from the index published in respect of the month of the
transaction to the index published in respect of the month of the
balance sheet date. Monetary items are stated in the adjusted
balance sheet at their historical values.
The net asset value of investments in investee companies is
determined on the basis of the adjusted financial statements of
these companies.
2. Statement of earnings
(a) The various items of the statement of earnings have been
adjusted according to changes in the consumer price index as
follows:
(1) Income and expenses deriving from non-monetary items
(such as depreciation and amortization, building
projects, changes in inventory, prepayments and deferred
income, etc.) or from provisions included in the balance
sheet (e.g., provisions for severance pay, holiday pay,
etc.) have been adjusted on the basis of specific
indices parallel to adjustment of related balance sheet
items.
F-12
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 1 - Reporting Principles and Accounting Policies (cont'd)
E. Principles of adjustment (cont'd)
2. Statement of earnings (cont'd)
(2) The remaining items in the statement of earnings (e.g.,
rental income, selling, general and administrative
expenses) except for components of the financing item,
have been adjusted on the basis of the index in respect
of the month in which the transaction was effected.
(3) The calculation of the Company's equity in the results
of operation of the investee companies and outside
shareholders' share in the results of operation of
subsidiaries was based on the adjusted financial
statements of such companies.
(4) Net financing items reflect revenue and expenses in real
terms, the inflationary erosion of monetary items during
the year, and profits and loss from realization and
revaluation of marketable securities.
(b) Taxes on income
Current taxes comprise payments on account made during the
year plus amounts due at balance sheet date (or less amounts
refundable at balance sheet date). The payments on account
have been adjusted on the basis of the consumer price index of
the date the payments were made. Amounts payable (or
refundable) have been included unadjusted. Current taxes
include, therefore, the expense derived from inflationary
erosion of the value of payments made on account from time of
payment to year end.
Deferred taxes - see Note 1F(12) below.
3. Statement of shareholders' equity
The dividend that was declared and actually paid in the year has
been adjusted on the basis of the consumer price index at the date
of payment. The dividend proposed/declared during the year but
unpaid at balance sheet date is included with no adjustment.
The amount stated as "erosion in value of dividend" reflects the
erosion of the real value of the dividend proposed/declared in the
previous year and actually paid during the current year (this
erosion relates to the period from the beginning of the current year
up to the date of payment).
The difference between the net asset value of companies transferred
from the Company to a subsidiary and the consideration given in
exchange thereof, by way of issue of shares, has been carried to a
capital reserve in accordance with guidelines based on Section 36A
of the Securities Law - 1968.
F-13
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 1 - Reporting Principles and Accounting Policies (cont'd)
E. Principles of adjustment (cont'd)
4. Statement of cash flows
The statement has been prepared in accordance with Opinion No. 51 of
the Institute of Certified Public Accountants in Israel. The
statement provides information on cash receipts and payments during
the year from current activities, investment and finance, and is
expressed in terms of shekels of the current year end.
F. Accounting policies
1. Consolidated financial statements
(a) The consolidated financial statements include the controlled
subsidiaries. Companies under joint control are consolidated
in the financial statements using the proportionate
consolidation method.
(b) The list of companies whose reports were included in the
consolidated reports, the percentage of voting rights, and the
percentage of shareholding granting rights to profits, is
presented in the annex to the financial reports. In addition,
affiliated companies not consolidated are also presented in
the annex to the financial reports.
(c) For the purposes of consolidation, the amounts in the
financial statements of the subsidiary companies being
consolidated were included after adjustments required in
respect of application of uniform Group accounting principles.
(d) Balances between subsidiaries and inter-company profits from
sales between the companies not yet realized outside of the
Group were canceled.
(e) (1) At the time of acquisition, the excess cost of
investment over net asset value is recorded as goodwill.
(2) Excess cost attributed to assets and liabilities is
recorded in the appropriate accounts on the balance
sheet.
(3) Excess of adjusted net asset value over cost of
investment is initially attributed to intangible assets,
any excess of adjusted net asset value over cost of the
investment not attributed to intangible assets is
attributed to nonmonetary assets, in accordance with the
company's interest in such assets.
(f) Goodwill disclosed on the consolidated balance sheet under the
heading "Deferred charges and other assets" is amortized
equally, on an annual basis, over a 10 year period.
F-14
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 1 - Reporting Principles and Accounting Policies (cont'd)
F. Accounting policies (cont'd)
1. Consolidated financial statements (cont'd)
(g.) Real estate properties of the Company and its subsidiaries
that are registered in the name of other subsidiaries that are
property companies (which were established for the sole
purpose of holding real estate or for their rental) are
included in the balance sheets based on the cost of these
assets to those subsidiaries.
In the statement of earnings, the income and expenses relating
to the above assets were included based on the Company's rate
of holding in the stated subsidiary companies.
2. Marketable securities
(a) Marketable government bonds and other marketable securities
are stated at their market value as at balance sheet date.
(b) Mutual fund certificates in trust funds are stated at
redemption value as at balance sheet date.
(c) Changes in value of securities are fully recognized on a
current basis.
3. Building projects
(a) The Company and subsidiary construction companies record
construction work on the basis of approved invoices and
amounts paid on account to the contractors, designers and
others.
(b) The completed units and units under construction are stated in
the financial statements at cost but not exceeding their
market value.
4. Inventory
(a) The inventory of apartments and work in process are recorded
at cost (cost of land, sub-contractors and other expenses) not
to exceed the market value of the built apartments.
(b) Inventory of supplies, air conditioning and others is valued
at the lower of cost or market value, cost being determined on
the "FIFO" basis.
5. Land
(a) Land is stated at cost which is not in excess of market value.
(b) The portion of the land which is under construction is
included in building projects and stated under current assets
or as a deduction from advances from purchasers of apartments
under current liabilities.
(c) Shops in completed buildings are stated at cost but not in
excess of market value.
F-15
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 1 - Reporting Principles and Accounting Policies (cont'd)
F. Accounting policies (cont'd)
6. Investments in related and other companies
(a) Investments in investee companies are stated on the equity
basis. The investments in shares of other companies, which are
not quoted securities, are stated at cost which, in
Management's opinion, is not less than fair value.
(b) The Company's equity in the profits and losses of the investee
companies is based on the latest audited financial statements
of these companies, after adjustments required from the
application of the uniform accounting principles of the Group.
(c) The initial difference regarding investee companies, is
allocated to assets of such companies (building projects, real
estate and fixed assets) and their amortization as an expense
or as income is made in accordance with the life of those
assets or upon their realization; amounts which cannot be
allocated to such assets are amortized at 10% per year.
7. Provision for doubtful debts
The provision for doubtful debts is calculated on the basis of
specific identification of balances whose collection is in doubt.
8. Fixed assets
(a) Fixed assets are stated at cost. Depreciation is computed by
the straight line method over the estimated useful life of the
assets.
(b) The financing cost incurred as a result of loans and credit,
for the purchase or development of fixed assets and other
acquisition/development costs were added to the cost of the
asset, up until the date of use.
9. Other assets - Initial difference which cannot be allocated to
assets - see Note 1F(6)(c).
10. Deferred charges
(a) Expenses relating to debenture issues are written off against
income over debenture lives in proportion to their outstanding
balance.
(b) Taxes in connection with unrealized profits from real estate
transactions - taxes relating to real estate transactions are
amortized over the life of the asset or parallel to the period
of transaction.
F-16
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 1 - Reporting Principles and Accounting Policies (cont'd)
F. Accounting policies (cont'd)
11. Convertible debentures
(a) Debentures, the conversion of which is not, as at balance
sheet date, expected according to guidelines set by the
Institute of Certified Public Accountants in Israel, are
stated as long-term liabilities. The debentures include the
liabilities at balance sheet date in accordance with the
conditions of the issue, less the discount which has not been
amortized as at balance sheet date.
(b) The above discount (resulting from the difference between
amount received at the date of the issue and the stated value
of the debentures) is amortized using the implicit interest
method over the period of the debentures in proportion to
their outstanding balance.
12. Deferred taxes
Deferred taxes in the adjusted financial statements reflect mainly
the following areas of timing differences of items between their
financial statement inclusion and inclusion in chargeable income for
tax purposes, or because their treatment for tax purposes is
different:
(a) Differences between the undepreciated cost of depreciable
assets for tax purposes and their undepreciated cost in the
financial statements.
(b) Differences in recognition of income from marketable
securities held from the beginning of the year.
(c) Differences relating to adjustment of cost of inventory,
advances from customers, adjustment of land and development.
(d) Expenses allowable in the future for tax purposes - sales
expenses, administrative expenses, and finance expenses that
for tax purposes were allocated to buildings under
construction, provisions for holiday pay and severance pay.
(e) The deduction for inflation which is carried forward to future
years.
(f) Losses for tax purposes which are expected to be realized.
(g) Advance rental payments which are liable to tax upon receipt
and other timing differences.
Deferred taxes are computed using the tax rate expected to be in
effect at the time of reversal as known at the time of the
preparation of the financial statements.
No deferred tax was computed in respect of investments in investee
companies as the intention of the Management is to hold these
companies and not to realize them.
F-17
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 1 - Reporting Principles and Accounting Policies (cont'd)
F. Accounting policies (cont'd)
13. Income recognition
(a) Income from rent - Rental income is recognized in the period
to which the rent related, amounts in arrears are recognized
only upon collection.
(b) Income from construction work -
Income from construction transactions is recognized according
to the "completed contract" method, that is when the
construction work has been completed and the major part of the
constructed units has been sold. Where all the constructed
units have been sold before they have been completed, income
is recognized according to the "percentage of completion
method".
A subsidiary whose activities relate to installation of air
conditioning systems as an executing contractor, recognizes
income from long-term projects by the "percentage of
completion method".
14. Year 2000 compliance
The costs to prepare and convert those years belonging to the
existing programs of the company, to be able to differentiate the
20th century and those belonging to the 21st century, are recorded
as current expenses at the time they are incurred.
15. Foreign currency and linkage
Assets and liabilities that are linked to or denominated in foreign
currency are included as follows:
(a) Balances linked to the consumer price index are stated in the
balance sheet according to the index in respect of the last
month of the reported year except for balances which are
linked to the known index which are adjusted according to the
last index published as at the date of the financial
statements.
(b) Foreign currency balances or those linked to foreign currency
are adjusted using the representative rate published by the
Bank of Israel as at balance sheet date.
F-18
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 1 - Reporting Principles and Accounting Policies (cont'd)
F. Accounting policies (cont'd)
15. Foreign currency and linkage (cont'd)
Data concerning consumer price index and foreign currency rates:
<TABLE>
<CAPTION>
% of change
December 31 December 31 December 31 -------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Consumer price
index, in points 166.3 153.1 143.1 8.6 7.0 10.6
Consumer price
index, (latest
known index)
in points 166.2 153.6 142.0 8.2 8.2 11.0
Exchange
rate of the
U.S. dollar,
in NIS 4.16 3.536 3.251 17.6 8.8 3.7
</TABLE>
16. Earnings per share
Earnings per share were calculated in accordance with Opinion No. 55
of the Institute of Certified Public Accountants in Israel, based on
the par value of the issued and paid up share capital outstanding
during the year as stated in Note 34D.
F-19
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 2 - Cash and Cash Equivalents
<TABLE>
<CAPTION>
Consolidated The Company
------------------------- -------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Short-term deposits with banks 102,709 168,268 1,208 1,628
Cash at bank 288 315 12 6
----------- ----------- ----------- -----------
102,997 168,583 1,220 1,634
=========== =========== =========== ===========
</TABLE>
The cash and deposits are stated in Israeli shekels.
Note 3 - Marketable Securities
<TABLE>
<CAPTION>
Consolidated The Company
------------------------- -------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Government loans 7,372 22,021
Mutual fund certificates 5,379 11,014
Debentures issued by a
subsidiary* 576 644
Other debentures 330 805
Shares 142 1,621
Convertible securities 3,110
----------- ----------- ----------- -----------
13,223 38,571 576 644
=========== =========== =========== ===========
</TABLE>
* See Note 20C(1)
F-20
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 4 - Trade Receivables
A. Composition:
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------- -----------
December 31 December 31 December 31
1998 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Purchasers of apartments and shops 30,101 4,778 31
Rentals and warehousing* 10,292 11,238
Air conditioning and others* 4,976 4,097
Notes receivable 3,445 2,052
----------- ----------- -----------
48,814 22,165 31
=========== =========== ===========
* After deduction of provision for
doubtful debts 1,215 1,123
=========== ===========
</TABLE>
B. Purchasers of apartments are linked mainly to the construction
inputs index.
Note 5 - Other Receivables and Debit Balances
<TABLE>
<CAPTION>
Consolidated The Company
------------------------------ -----------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Accrued income 5,122 6,487 235
Purchasers of fixed assets* 18,969
Deferred taxes 15,906 5,537 3,845 3,384
Deposits and prepaid expenses 1,246 1,030 12 9
Advances to Tax Authorities
less provisions 1,267 3,037 442
Current maturities of long-term
loans to employees and
deposits 2,965 1,333 1,620 789
Other debtors 1,359 3,642 44 1,438
Value Added Tax authorities 1,699 1,000
Subsidiary - current account** 15,024
----------- ----------- ----------- -----------
48,533 22,066 20,987 5,855
=========== =========== =========== ===========
</TABLE>
* Balance linked mainly to U.S. dollar.
** Carries annual interest rate of 2%.
F-21
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 6 - Apartments and Other Inventories
<TABLE>
<CAPTION>
Consolidated The Company
------------------------------ -----------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Apartments in completed building 72,628 5,777 7,285 1,439
Air-conditioning equipment and
other 1,496 916
------ ----- ----- -----
74,124 6,693 7,285 1,439
====== ===== ===== =====
</TABLE>
Note 7 - Building Projects Under Construction
<TABLE>
<CAPTION>
Consolidated The Company
------------------------------ -----------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Land 60,004 86,030 4,306 3,147
Construction work 108,332 153,737 1,237 3,331
------- ------- ----- -----
168,336 239,767 5,543 6,478
Less - Advances from
apartment purchasers 62,556 98,756 853 3,617
------- ------- ----- -----
105,780 141,011 4,690 2,861
======= ======= ===== =====
</TABLE>
F-22
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 8 - Land
A. Composition:
<TABLE>
<CAPTION>
Consolidated The Company
------------------------------ -----------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Freehold land * 250,809 201,632 4,072 9,471
Leasehold land 237,519 221,320
Stores in completed
buildings and other
installations 5,623 5,849
Parking lot and sports
center 3,450 3,477
Expenses relating to
future stages of
construction 1,660 1,852
----------- ----------- ----------- -----------
499,061 434,130 4,072 9,471
=========== =========== =========== ===========
</TABLE>
* Including NIS 29.2 million in rights to land which have not yet been
registered in the name of the subsidiary (the subsidiary did
register a caveat).
Land at a value of NIS 2.2 million is in an area in which the land
ownership rights are in the process of being finalized. Once the
process is completed the rights will be registered in the name of
the Company. Land at a value of NIS 25 million will be registered in
the name of the company upon completion of the payments on account.
B. In the opinion of Management the value of land exceeds the value
stated in the balance sheet.
C. Leasehold rights in land:
The lease Cost
expires in
---------- ----------
Capitalized leasehold 2048 236,573
Uncapitalized leasehold 2040 *946
----------
237,519
==========
* The land has not as yet been registered in the name of the Company
at the Land Registry Office.
F-23
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 9 - Long-term Loans and Deposits
A. Composition:
(1) In the consolidated balance sheet:
<TABLE>
<CAPTION>
Interest December 31
rate December 31, 1998 1997
-------- ------------------------------------- -----------
Total Current Balance Balance
% maturities
-------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Loans to
employees for
issue of stock and
realizing
options(C) 2 7,892 2,955 4,937 3,493
Deposits with
banks -
For the granting
of loans to
apartment
purchasers 4 38 10 28 34
----- ----- ----- -----
7,930 2,965 4,965 3,527
===== ===== ===== =====
(2) In the company balance sheet:
Loans to
employees for
issue of stock and
realizing options 4,857 1,620 3,237 2,840
===== ===== ===== =====
</TABLE>
B. The deposits and the loans are linked to the consumer price index.
C. Employee loans are secured by liens on severance pay funds and
insurance policies.
F-24
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 9 - Long-term Loans and Deposits (cont'd)
D. Classification of long-term deposits and loans by years of maturity:
<TABLE>
<CAPTION>
Consolidated The Company
------------------------- -------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Within 12 months - current
maturities 2,965 1,333 1,620 789
===== ===== ===== ===
During second year 2,482 1,162 1,620 789
During third year 2,483 1,103 1,617 789
No date of redemption but no
later than 2001 1,262 1,262
----- ----- ----- -----
4,965 3,527 3,237 2,840
===== ===== ===== =====
</TABLE>
E. Loans at a value of NIS 4,938 thousand are eligible for early
repayment.
F-25
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 10 - Investments in Investee Companies
A. Consolidated balance sheet
<TABLE>
<CAPTION>
December 31
December 31, 1998 1997
---------------------------------------- -----------
Opening Changes Total Total
balance
------- ------- -------- -----------
<S> <C> <C> <C> <C>
1. Composition:
Affiliated companies
Shares at cost, include -
Adjusted net asset value at the
date of acquisition (a) 101,650 101,650 101,650
Initial difference, net 3,488 3,488 3,488
------- ------- -------
105,138 105,138 105,138
Add -
The Company's share in the net
post-acquisition profits 21,688 3,351 25,039 21,688
Amortization of initial
difference (1,952) (1,353) (3,305) (1,952)
------- ------- ------- -------
Book value of shares (b) 124,874 1,998 126,872 124,874
------- ------- ------- -------
Payment in respect of initial
difference of subsidiary
company (c) 1,447 1,447 1,447
Payment on account of share
acquisition (d) 26,274 26,274
Other company 431 431 431
------- ------- ------- -------
126,752 28,272 155,024 126,752
======= ======= ======= =======
</TABLE>
(a) The investment is presented net of dividends distributed by an
affiliated company out of pre-acquisition earnings, amounting to NIS
5,256 thousand.
(b) Includes quoted shares whose adjusted equity value at balance sheet
date is NIS 112,366 thousand (December 31, 1997 - NIS 86,462
thousand). The market value of these shares at balance sheet date is
NIS 159,238 thousand (December 31, 1997 - NIS 112,364 thousand).
(c) Payment on account of options in the subsidiary company (i.e.
payment in respect of initial difference) amounted to NIS 1,447
thousand. The market value of the options as at December 31, 1998 is
NIS 363 thousand.
(d) Payments on account of share acquisitions - see Note 20C(7).
F-26
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 10 - Investments in Investee Companies
A. Consolidated balance sheet (cont'd)
2. The following are details pertaining to proportionally consolidated
subsidiaries which were included in the consolidated financial
statements of the company as at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
December 31 December 31
1998 1997
----------- -----------
<S> <C> <C>
(a) Balance sheet data
Assets:
Current assets 265 429
Fixed assets 52,103 59,613
----------- -----------
52,368 60,042
=========== ===========
Liabilities and shareholders' equity:
Current liabilities 5,870 4,341
Long-term liabilities 13,409
Shareholders' equity 33,089 55,701
----------- -----------
52,368 60,042
=========== ===========
</TABLE>
(b) Statements of earnings
<TABLE>
<CAPTION>
December 31 December 31 December 31
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Income: 3,706 3,842 3,229
----------- ----------- -----------
Costs and expenses:
Property maintenance 355 482 413
Administrative and general 423 446 375
Financing, net 370 81
Depreciation 815 897 863
----------- ----------- -----------
1,963 1,906 1,651
----------- ----------- -----------
Earnings before taxes 1,743 1,936 1,578
Taxes on income 628 680 570
----------- ----------- -----------
1,115 1,256 1,008
=========== =========== ===========
</TABLE>
F-27
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 10 - Investments in Investee and Other Companies (cont'd)
B. Company balance sheet
<TABLE>
<CAPTION>
Subsidiaries Affiliated December 31 December 31
companies 1998 1997
---- ----
Total Total
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Shares at cost, include -
Adjusted net asset value at
date of acquisition 365,526 365,526 342,755
Initial difference, net (2) 12,722 19,631 32,353 27,427
--------- ------ --------- -------
378,248 19,361 397,879 370,182
Add -
The Company's share in net
post-acquisition profits 688,625 3,730 672,355 603,448
Amortization of initial
difference (1,576) (2,499) (4,075) (2,256)
--------- ------ --------- -------
Book value of shares (1) 1,045,297 20,862 1,066,159 971,374
Loan (3) 1,020 1,020
Other company 431 431 431
--------- ------ --------- -------
1,046,748 20,862 1,067,610 971,805
========= ====== ========= =======
</TABLE>
(1) Payment on account of options in the subsidiary company (i.e.
payment in respect of initial difference) amounted to NIS 1,447
thousand. The market value of the options as at December 31, 1998 is
NIS 363 thousand.
(2) Includes quoted shares whose adjusted equity value at balance sheet
date is NIS 776,284 thousand (December 31, 1997 - NIS 843,214
thousand). The market value of these shares at balance sheet date is
NIS 1,105,420 thousand (December 31, 1997 - NIS 1,072,097 thousand).
(3) Payment on account of investment in Carmelton Group Ltd.- See Note
20C(6).
F-28
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 11 - Fixed Assets
A. Consolidated balance sheet:
<TABLE>
<CAPTION>
Leased Land Buildings Plantations Vehicles Machinery
commercial intended under and and
buildings for the construction irrigation equipment
and office construction network
premises of buildings (3)
(1) (1)(2)
---------- ------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cost
Balance at beginning of year 995,590 264,658 150,918 8,429 6,080 7,870
Additions 103,713 32,200 90,216 1,791 5
Transfers 102,111 (15,906) (86,205)
Disposals (31,938) (1,040) (236)
---------- ---------- ---------- ---------- ---------- ----------
Balance at end of year 1,169,476 280,952 154,929 8,429 6,831 7,639
---------- ---------- ---------- ---------- ---------- ----------
Accumulated depreciation
Balance at beginning of year 315,300 7,432 2,644 7,091
Depreciation 23,874 888 272
Disposals (20,786) (631) (236)
---------- ---------- ---------- ----------
Balance at end of year 318,388 7,432 2,901 7,127
---------- ---------- ---------- ----------
Depreciated cost
as at December 31, 1998 851,088 280,952 154,929 997 3,930 512
========== ========== ========== ========== ========== ==========
Depreciated cost
as at December 31, 1997 680,290 264,658 150,918 997 3,436 779
========== ========== ========== ========== ========== ==========
<CAPTION>
Other Total Total
assets
December 31 December 31
1998 1997
------ ----------- -----------
<S> <C> <C> <C>
Cost
Balance at beginning of year 11,225 1,444,770 1,268,085
Additions 567 228,492 177,830
Transfers
Disposals (33,214) (1,145)
---------- ---------- ----------
Balance at end of year 11,792 1,640,048 1,444,770
---------- ---------- ----------
Accumulated depreciation
Balance at beginning of year 7,205 339,672 317,641
Depreciation 913 25,947 22,760
Disposals (21,653) (729)
---------- ---------- ----------
Balance at end of year 8,118 343,966 339,642
---------- ---------- ----------
Depreciated cost
as at December 31, 1998 3,674 1,296,082
========== ==========
Depreciated cost
as at December 31, 1997 4,020 1,105,098
========== ==========
</TABLE>
F-29
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 11 - Fixed Assets (cont'd)
A. Consolidated balance sheet: (cont'd)
(1) Including rights in land aggregating NIS 459,118 thousand. The land
is mainly registered in the names of the Company and the
subsidiaries. Part of the land, of an adjusted cost of NIS 234,404
thousand, is freehold land of the Company and the subsidiaries.
Another part, of an adjusted cost of NIS 234,717 thousand, is
leasehold land, leased by subsidiaries (of which NIS 8,373 is an
uncapitalized lease). The lease is for various periods up to 2042,
with the option for extension for another 49 years. Part of the land
has not yet been registered in the names of the companies, mainly
because the land ownership rights have not yet been formalized in
certain areas where some of the property is located.
(2) Including land amounting to NIS 18,544 thousand in respect of which
the Residential Building Commission approved a plan to rezone the
land from agricultural land to land for residential and commercial
purposes.
(3) The plantations are on land area totaling 334 dunams (freehold land
- 97 dunams, leasehold land - 237 dunams, leased until the year 2062
and thereafter).
(4) The cost of the fixed assets includes financing costs of NIS 6,593
thousand (December 31, 1997 - NIS 4,111 thousand).
F-30
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 11 - Fixed Assets (cont'd)
B. Company balance sheet
<TABLE>
<CAPTION>
Leased Buildings Vehicles Other Total Total
building under assets
and office construction
premises
December 31 December 31
(1) (2) 1998 1997
---------- ------------ -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Cost
Balance at beginning of year 38,232 15,490 841 991 55,554 54,465
Additions 1,089
Transfers 15,490 (15,490) 290 78 368
Disposals (266) (266)
------- ------- ------- ------- ------- -------
Balance at end of year 53,722 865 1,069 55,656 55,554
------- ------- ------- ------- ------- -------
Accumulated depreciation
Balance at beginning of year 22,611 568 361 23,540 22,519
Depreciation 781 113 133 1,027 1,021
Disposals (229) (229)
------- ------- ------- ------- -------
Balance at end of year 23,392 452 494 24,338 23,540
------- ------- ------- ------- -------
Depreciated cost as at
December 31, 1998 30,330 413 575 31,318
======= ======= ======= =======
Depreciated cost as at
December 31, 1997 15,620 15,490 274 630 32,014
======= ======= ======= ======= =======
</TABLE>
(1) Includes rights in land amounting to NIS 24,605 thousand.
(2) Land on which an office building is being constructed in a combination
transaction.
F-31
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 11 - Fixed Assets (cont'd)
C. Rates of depreciation %
-----
Buildings 4-2
Plantations and irrigation plants 20-15
Vehicles 15
Machinery and equipment 20-10
Other assets 33-6
Note 12 - Deferred Charges and Other Assets
<TABLE>
<CAPTION>
Cost Accumulated
amortization Amortized cost
----------- ----------- ----------- -----------
December 31 December 31 December 31 December 31
1998 1998 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
A. Consolidated balance sheet
Deferred charges -
Capital raising expenses 19,418 10,325 9,093 11,375
Deferred taxes in connection
with unrealized profits from
real estate transactions 2,970 1,487 1,483 1,635
------ ------ ------ ------
Deferred charges 22,388 11,812 10,576 13,010
------ ------ ------ ------
Other assets - initial difference 6,280 1,570 4,710 5,338
Deferred taxes for timing
differences 9,630 9,630 7,963
------ ------ ------ ------
15,910 1,570 14,340 13,301
------ ------ ------ ------
38,298 13,382 24,916 26,311
====== ====== ====== ======
B. The Company balance sheet
Deferred charges -
Taxes in connection with
unrealized profits from
real estate transactions 734 355 379 410
====== ====== ====== ======
</TABLE>
F-32
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 13 - Advances from Purchasers of Apartments and Others, Net
<TABLE>
<CAPTION>
Consolidated The Company
------------------------- -------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Advances 72,263 43,302 17,236 9,796
------ ------ ------ ------
Less -
land 6,586 14,338 4,708 3,147
construction work 46,245 24,619 9,925 5,591
------ ------ ------ ------
52,831 38,957 14,633 8,738
------ ------ ------ ------
19,432 4,345 2,603 1,058
====== ====== ====== ======
</TABLE>
Note 14 - Credit from Banking Entities
<TABLE>
<CAPTION>
Consolidated
Terms of ---------------------------
linkage and December 31 December 31
interest 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Overdraft Prime + 1% 14,483 10,511
Import financing German marks 3,017 3,001
Short-term loans 13.8% - 15.2% 13,855
------ ------
17,500 27,367
====== ======
</TABLE>
Note 15 - Suppliers and Subcontractors
<TABLE>
<CAPTION>
Consolidated
---------------------------
December 31 December 31
1998 1997
----------- -----------
<S> <C> <C>
Current accounts 10,107 6,108
Checks and notes payable 3,948 3,804
------ -----
14,055 9,912
====== =====
</TABLE>
F-33
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 16 - Creditors and Credit Balances
<TABLE>
<CAPTION>
Consolidated The Company
-------------------------- --------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sellers of land 11,570 592
Income received in advance 4,779 3,834
Employees and other liabilities
related to salaries 6,762 4,470 1,865 1,704
Institutions 26,906 21,200 8,942 7,489
Subsidiary - current account* 19,724
Provision for completion of
construction 41,201 14,398 6,550 3,418
Liability relating to
appreciation tax and
consent fees 8,254 10,317
Expenses payable 13,139 16,474 1,712 1,129
Others 15,122 5,872 586 1,022
----------- ----------- ----------- -----------
127,733 77,157 19,655 34,486
=========== =========== =========== ===========
</TABLE>
* Bear annual interest at rates of 2% (1997 - bear annual interest at prime
rate).
Note 17 - Deferred Taxes
1. Composition:
<TABLE>
<CAPTION>
In respect of In respect of Other timing Total Total
depreciable building differences
fixed assets projects December 31, December 31,
less advances 1998 1997
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A. Consolidated
Balance as at
beginning of
year (8,577) (9,491) 7,776 (10,292) (29,508)
Changes (3,510) 15,465 (673) 11,282 19,216
------- ------ ----- ------- -------
Balance as at
end of year (12,087) 5,974 7,103 990 (10,292)
======= ====== ===== ======= =======
B. The Company
Balance as at
beginning of
year 21 1,407 613 2,041 3,712
Changes (5) (17) 62 40 (1,671)
------- ------ ----- ------- -------
Balance as at
end of year 16 1,390 675 2,081 2,041
======= ====== ===== ======= =======
</TABLE>
F-34
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 17 - Deferred Taxes (cont'd)
2. The deferred taxes are stated as follows:
<TABLE>
<CAPTION>
Consolidated The Company
-------------------------- --------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Under current assets 15,906 5,537 3,845 3,384
Under other assets 9,630 7,963
Under current liabilities (2,347) (49)
Under long-term liabilities (24,546) (21,445) (1,764) (1,294)
----------- ----------- ----------- -----------
990 (10,292) 2,081 2,041
=========== =========== =========== ===========
</TABLE>
Note 18 - Long-term Liabilities
A. Composition in the consolidated balance sheet:
<TABLE>
<CAPTION>
Consolidated Consolidated
----------------------------------- ------------
December 31, 1998 1997
----------------------------------- ------------
Total Current Balance Balance
maturities
------- ---------- ------- ------------
<S> <C> <C> <C> <C>
Convertible debentures 248,325 7,856 240,469 248,254
Debentures (2) 38,891 5,652 33,239 38,992
Liabilities to banks (3) 230,645 9,169 221,476 99,941
Liabilities to provident funds (4) 161,171 30,050 131,121 123,750
Other liabilities (5) 60,151 60,151 63,601
------- ------ ------- -------
739,183 52,727 686,456 574,538
======= ====== ======= =======
</TABLE>
1. Convertible debentures
(a) Convertible debentures, with a balance, as at balance sheet date, of
NIS 51,676 thousand were issued by Hadarim Properties Ltd. (a
subsidiary) per a prospectus published on February 28, 1996.
The debentures bear interest at the rate of 3.5% p.a.. Both
principal and interest are linked to the CPI published for February
1996, and they are redeemable on February 28 of each year from 1998
to 2005. The debentures can be converted into shares on any business
day, beginning with the day they are registered for trading and
until February 8, 2001 at the conversion price of NIS 80 par value
of debentures for each ordinary share of a par value of NIS 1. After
February 8, 2001 the debentures will no longer be convertible.
F-35
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 18 - Long-term Liabilities (cont'd)
The market value of the debentures as at December 31, 1998 is NIS
53,013 thousand. (December 31, 1997 - NIS 55,113)
The debentures are secured by a fixed charge on a token deposit
which was deposited with the trustee of the debentures. The
subsidiary is free to pledge its assets without limitation as to
amount and degree, including the registering of charges on
additional debenture series, without the necessity of obtaining the
consent of the trustee.
(b) Non marketable convertible debentures, with a balance, as at balance
sheet date, of NIS 54,779 thousand were issued by Hadarim Properties
Ltd. (a subsidiary) per a prospectus published on August 31, 1997.
The debentures bear interest at the rate of 2.5% p.a.. Both
principal and interest are linked to the CPI published for July
1997, and they are redeemable on August 31 of each year from 2001 to
2004. The debentures can be converted into shares on any business
day, beginning with the day they are registered for trading and
until August 12, 2001 at the conversion price of NIS 130 par value
of debentures for each ordinary share of a par value of NIS 1. After
August 12, 2001 the debentures will no longer be convertible.
The debentures are secured by a fixed charge on a token deposit
which was deposited with the trustee of the debentures. The
subsidiary is free to pledge its assets without limitation as to
amount and degree, including the registering of charges on
additional debenture series, without the necessity of obtaining the
consent of the trustee.
(c) Marketable convertible debentures, with a balance, as at balance
sheet date, of NIS 141,870 thousand were issued by Bayside Land
Corporation (a subsidiary) per a prospectus published on September
24, 1997.
The debentures bear interest at the rate of 2.5% p.a.. Both
principal and interest are linked to the CPI published for September
1997, and they are redeemable on September 20 of each year from 2000
to 2006. The debentures can be converted into shares on any business
day, beginning October 1, 1997 and until August 31, 2001 at the
conversion price of NIS 885 par value of debentures for each
ordinary share of a par value of NIS 1. After August 31, 2001 the
debentures will no longer be convertible.
The market value of the debentures as at December 31, 1998 is NIS
123,375 thousand.
The debentures are secured by a fixed charge on a token deposit
which was deposited with the trustee of the debentures. The
subsidiary is free to pledge its assets without limitation as to
amount and degree, including the registering of charges on
additional debenture series, without the necessity of obtaining the
consent of the trustee.
F-36
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 18 - Long-term Liabilities (cont'd)
A. Composition: (cont'd)
2. Debentures
Composition:
Consolidated
--------------------------------
December 31 December 31
1998 1997
----------- -----------
Total debentures 38,891 44,665
Current maturities 5,652 5,673
----------- -----------
33,239 38,992
=========== ===========
Series B
Marketable debentures, the balance of which as at the balance sheet date
was NIS 38,891 thousand were issued by Property and Building (Finance
1986) Limited (subsidiary) per a prospectus published on July 29, 1990.
The debentures bear interest at the rate of 1.85% per annum and are linked
(principal and interest) to the consumer price index. The redemption dates
are in the years 1998 - 2002. The debentures were issued to the public at
a price of NIS 90 for every NIS 100 nominal value of debenture. The market
value of the debentures at December 31, 1998 is NIS 33,327 thousand.
Series - 6 and 7
Debentures from these series were issued in the past by the Company, and
transferred to Property and Building (Finance 1986) Limited (subsidiary)
as part of a court approved reorganization between the companies,
effective from July 1, 1987. The balance of the outstanding debentures was
fully redeemed in 1997 together with the long-term deposits whose source
was the proceeds from the issue of the debentures. These debentures bore
interest at the rate of 5% per annum and were linked (principal and
interest) to the consumer price index.
Guarantees
Debentures from Series B are secured by way of an equal first floating
charge on all assets of the subsidiary company. The Company has guaranteed
the full redemption of all the debentures issued and has undertook not to
create in the future any lien on its assets so long as the series B
debentures are not fully redeemed.
Assurance of regular trading of debentures - See Note 20C(1).
F-37
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 18 - Long-term Liabilities (cont'd)
A. Composition: (cont'd)
3. Liabilities to banks
<TABLE>
<CAPTION>
December 31 December 31
Interest Current 1998 1997
rate Total maturities
-------- ------- -------
% Balance Balance
-------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Consolidated
balance sheet 4.7 - 4.95 230,645 9,169 221,476 99,941
======= ======= ======= =======
</TABLE>
4. Liabilities to provident funds
<TABLE>
<S> <C> <C> <C> <C> <C>
Consolidated
balance sheet 4.9 161,171 30,050 131,121 123,750
======= ======= ======= =======
</TABLE>
The liabilities at (3) and (4) are linked to the consumer price index.
5. Other long-term liabilities
The liability is non-interest bearing and is linked to the
construction input index see Note 20C(5).
B. Composition in the Company balance sheet:
(1) Other long-term liabilities
Loans from subsidiaries bear interest of 4% and are linked to the
consumer price index.
(2) A capital note of NIS 20,000 bears an annual interest rate that
cannot exceed 30% of the rate of increase in the consumer price
index.
F-38
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 18 - Long-term Liabilities (cont'd)
C. Classification of long-term liabilities by years of maturity
<TABLE>
<CAPTION>
Consolidated The Company
------------------------- ------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Within 12 months -
current maturities 52,727 47,943 2,191 2,609
=========== =========== =========== ===========
During second year 154,167 52,147 2,191 2,200
During third year 110,682 142,600 2,191 2,200
During fourth year 110,659 86,240 2,192 2,200
During fifth year 84,573 81,975 2,198
Beyond fifth year till 2005 166,224 147,975
Without redemption date* 60,151 63,601
----------- ----------- ----------- -----------
686,456 574,538 6,574 8,798
=========== =========== =========== ===========
</TABLE>
* Liabilities pertaining to construction and land sellers.
Note 19 - Liability For Employee Severance Benefits, net
A. The commitments in respect of employee severance pay of the Company
and of its subsidiaries are fully covered by deposits with severance
pay funds, profits and linkage increments accrued thereon, insurance
policies and provisions. With respect to the major part of the
above-mentioned sums, the Group companies have no rights of
withdrawal.
B. Composition:
<TABLE>
<CAPTION>
Consolidated The Company
------------------------- ------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Liability in respect of
employee severance* 9,302 8,145 457 474
Less - amounts funded* 5,860 5,579 457 474
----------- ----------- ----------- -----------
3,442 2,566 -- --
=========== =========== =========== ===========
</TABLE>
* Not including the surrender values of insurance policies for
severance pay.
C. A wholly-owned subsidiary is committed to a retirement arrangement
with a widow of an ex-general manager of the subsidiary. Based on an
independent actuary's opinion, a liability amounting to NIS 2.3
million (December 31, 1997 - NIS 2.4 millions) is included in the
balance sheet as part of the above mentioned severance liability.
F-39
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 20 - Contingent Liabilities and Commitments
A. Contingent liabilities
<TABLE>
<CAPTION>
Consolidated The Company
------------------------- ------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1. Guarantees Granted
(a) In respect of dwelling
purchase insurance 55 288 55 288
(b) On behalf of subsidiaries
in respect of -
Performance guarantees 229 225
Debentures 38,891 44,665
</TABLE>
The guarantees are linked mainly to the consumer price index and partly to
the construction inputs index.
2. Claims have been filed against the Company and subsidiaries, in the
regular course of business, by apartment purchasers, alleging
building defects and/or late delivery. The Company and the
subsidiaries do not make any provisions for repairs and warranties,
since the agreement with the executing contractors provide for the
contractors to indemnify them in respect of such claims.
3. A legal suit was filed in 1994 against a subsidiary regarding the
distribution of profit from a project executed in the years
1981-1985. The plaintiff contends that a partnership, with which the
Company had an agreement, is entitled to receive a share in the
profits. The plaintiff who claims that he is entitled to one half of
the profits of the partnership, is demanding that the said
subsidiary pay him NIS 5,839 plus legal costs connected with the
claim. The subsidiary has filed a statement of defense against the
said claim in which it denies the facts stated in the statement of
claim. The subsidiary has made no provision in its books in respect
thereto.
4. Regarding the private placement of Hadarim Properties Ltd. (a
subsidiary), the Company undertook to compensate Hadarim Properties
Ltd. (with regards to the lots of the subsidiary in their respect of
which a contract exists with Israel Land Administration) with the
value of the lots, if by chance the above mentioned contract is not
executed and the lots are returned to the Administration. Should
payment be made to the Administration, Property and Building Ltd.
will pay Hadarim Properties Ltd., a sum of not more than NIS 11.1
million linked to the CPI of the month of September 1995, bearing
interest of 8%.
F-40
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 20 - Contingent Liabilities and Commitments (cont'd)
B. Liens
1. A subsidiary has pledged real estate in two projects as well as the
assets and anticipated receipts of a project in favor of a bank (an
interested party) in respect of the financing of the project.
2. Another subsidiary has rights in land in favor of banks to secure
loans received to finance its acquisition. The Company has also
given a dollar linked promissory note in the amount of NIS 2.9
million as security as well as a bank guarantee in the amount of NIS
0.58 million linked to the dollar to secure the performance of its
undertaking towards the Israel Lands Administration to develop the
area.
C. Commitments
1. Under the terms of a prospectus for the issue of debentures (series
"B") by a subsidiary as stated in Note 18A(2) the Company supplied a
bank with debentures out of the aforementioned issue, in an amount
of NIS 375,000 N.V. and cash of NIS 337,500 linked with terms
identical to those of the debentures. The debentures and cash held
by the bank will be used to ensure regular trading at the stock
exchange and will be reduced proportionately to the repayment of the
debentures. As at December 31, 1998, balances held by the bank, per
the above arrangement, amounted to NIS 270,108 (nominal value) in
debentures and NIS 702 thousand in cash (including short-term
deposits) (December 31, 1997 - NIS 290,400 N.V. and NIS 776 in
cash).
2. There are commitments of the Company and subsidiaries in respect of
the purchase of real estate, residential construction, and
development and construction of building estimated as at balance
sheet date at an approximate amount of NIS 271 million. (December
31, 1997 - NIS 244 million).
3. A subsidiary leased part of a building to the Government of Israel
for a term of 15 years, from 1992, with a right, of the lessee, to
shorten the term to 12 years. Annual lease payments amount to
approximately NIS 3,800 thousand.
4. The Company has signed an agreement with a subsidiary according to
which the subsidiary will manage a construction project for the
Company, and will receive a management fee at a given rate of the
sales proceeds.
5. In 1995, a subsidiary acquired 72% of the land rights in an area of
72 dunams for a price of NIS 56.8 million, which will be paid in
construction services.
6. After the balance sheet date, a contract was signed, between the
Israeli Government and Carmelton Group Ltd., giving Carmelton the
right to renovate, build, finance and operate the Carmel tunnels.
The shareholders of Carmelton are an International Spanish Company,
Drogdos (40%), Property and Building Ltd.(20%), Astrom (20%) and
Fibi (20%). The expected cost of the project is $160 million. In
addition, Carmelton will pay royalties of NIS 266 million to the
Government of Israel.
7. After the balance sheet date, a deal was finalized between Bayside
Ltd. (a subsidiary) and Industrial Information Center-Haifa (MATAM).
According to the deal, MATAM will allot 50.1% of its shares to
Bayside for NIS 246.5 million which will be invested in MATAM.
F-41
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 21 - Income from Construction and Other Sources
<TABLE>
<CAPTION>
Consolidated The Company
------------------------------------------------ -----------------------------
Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Apartments,
stores and land 302,969 259,479 213,055 50,563 57,746
Air-conditioning
systems and
others 30,783 31,561 35,569
Citrus crop 1,013 1,116 1,282
----------- ----------- ----------- ----------- -----------
334,765 292,156 249,906 50,563 57,746
=========== =========== =========== =========== ===========
</TABLE>
Note 22 - The Company's Equity in the Net Earnings of Investee Companies
<TABLE>
<CAPTION>
Consolidated The Company
------------------------------------------------ -----------------------------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
The Company's
equity net, in the
earnings of
investee
companies 7,935 7,824 14,325 113,569 66,578 69,468
Portion of initial
difference
amortized (1,353) (709) (537) (1,819) (1,222) (363)
----------- ----------- ----------- ----------- ----------- -----------
6,582 7,115 13,788 111,750 65,356 69,105
=========== =========== =========== =========== =========== ===========
Includes dividend
received 4,389 8,534 8,852 44,662 18,242 13,861
=========== =========== =========== =========== =========== ===========
</TABLE>
F-42
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 23 - Income from Investments and Fixed Assets
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------------------- ------------------------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gains on
realization of
investments in
investee
companies 11,028 58 665 58
Gains on sale
of fixed
assets and land 70,715 (43) 3,029 15 23
---------- ---------- ---------- ---------- ---------- ----------
70,715 10,985 3,087 15 655 81
========== ========== ========== ========== ========== ==========
</TABLE>
Note 24 - Income from Securities, Financing and Other Income
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------------------- ------------------------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gains relating to
marketable
securities -
Appreciation
(depreciation)
in value 3,126 3,463 1,300 (12) 27 25
Interest from
securities 2,514 1,923 1,118 14 15 15
----------- ----------- ----------- ----------- ----------- -----------
5,640 5,386 2,418 2 42 40
Interest -
From banks
and others 3,378 4,938 3,298 64
From investee
companies 27 4 815
Management
fees 1,935 1,671 1,628 1,926 2,116 1,841
Other income 1,729 801 175
----------- ----------- ----------- ----------- ----------- -----------
12,682 12,796 7,519 1,955 2,226 2,696
=========== =========== =========== =========== =========== ===========
</TABLE>
F-43
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 25 - Construction and Other Costs
<TABLE>
<CAPTION>
Consolidated The Company
------------------------------------------------ -----------------------------
Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Apartments,
shops and land:
Construction
expenses 180,261 140,790 112,113 34,087 36,879
Land 54,755 37,062 23,232 5,086 6,301
Change in
inventories of
apartment and
shops (19,704) 5,265 6,141 (5,846) (1,439)
----------- ----------- ----------- ----------- -----------
215,312 183,117 141,486 33,327 41,741
----------- ----------- ----------- ----------- -----------
Air conditioning
systems and
others:
Materials and
installation* 31,904 28,124 28,840
Change in
inventories of
air-conditioning
and other
equipment (5,823) 2 3,904
----------- ----------- -----------
26,081 28,126 32,744
----------- ----------- -----------
Citrus crops -
Cultivating and
picking
expenses 1,407 1,377 1,319
----------- ----------- -----------
242,800 212,620 175,549 33,327 41,741
=========== =========== =========== =========== ===========
* Including
depreciation 695 734 604
=========== =========== ===========
</TABLE>
F-44
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 26 - Administrative and General Expenses
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------------------- ------------------------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Salaries and
related expenses 26,053 23,470 24,117 6,195 5,757 5,998
Directors' fees 863 950 1,044 306 290 323
Professional
services 3,744 3,010 2,642 534 296 191
Office
maintenance 3,630 3,468 3,188 1,109 1,009 976
Other 4,376 4,102 3,128 653 993 448
----------- ----------- ----------- ----------- ----------- -----------
38,666 35,000 34,119 8,797 8,345 7,936
----------- ----------- ----------- ----------- ----------- -----------
Less -
Directors fees
received from
affiliated
companies (161) (171) (339)
Participation in
expenses by a
subsidiary (567) (517) (513)
----------- ----------- ----------- ----------- ----------- -----------
38,505 34,829 33,780 8,230 7,828 7,423
=========== =========== =========== =========== =========== ===========
</TABLE>
The expected costs to complete computer system compliance with year 2000 is of
NIS 258 thousand. The accumulated cost to date for computer system compliance at
December 31, 1998 is NIS 247 thousand. Total costs for the year are NIS 247
thousand.
F-45
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 27 - Selling and Marketing
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------------------- --------------------------
Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Salaries and
related
expenses 1,676 1,697 1,441
Advertising and
others 3,705 3,729 2,705 266 953
----------- ----------- ----------- ----------- -----------
5,381 5,426 4,146 266 953
=========== =========== =========== =========== ===========
</TABLE>
Note 28 - Depreciation and Amortization
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------------------- ------------------------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Depreciation 24,811 22,025 19,738 1,028 1,021 1,340
Amortization 3,064 2,429 1,835 31 29 31
----------- ----------- ----------- ----------- ----------- -----------
27,875 24,454 21,573 1,059 1,050 1,371
=========== =========== =========== =========== =========== ===========
</TABLE>
Note 29 - Financing Expenses
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------------------- ------------------------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
To investee
companies 936 1,177 3,372
In respect of
debentures 7,382 8,467 4,394
To banks and
others 18,562 17,678 13,499 100 21
To income tax
authority 376 5 8 251
----------- ----------- ----------- ----------- ----------- -----------
26,320 26,150 17,901 1,287 1,177 3,393
=========== =========== =========== =========== =========== ===========
</TABLE>
F-46
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 30 - Taxes on Income
A. Tax under inflationary conditions
The Income Tax Law (Adjustments for Inflation) - 1985, effective beginning
with the 1985 tax year, put into practice measurement of results for tax
purposes, on a (non-inflationary) basis. The various adjustments required
by the above Law are intended to result in taxation based on real income.
This notwithstanding, adjustment of nominal profit according to the tax
laws does not always equal the adjustment for inflation according to
opinions of the Institute of Certified Public Accountants in Israel. As a
result there are differences between adjusted profit per the financial
statements and adjusted profit for tax purposes.
B. Carryforward to future years of losses and deductions for tax
purposes
Carryforward losses for tax purposes in subsidiary companies, adjusted for
inflation are in the amount of NIS 15,840 thousand as at balance sheet
date (December 31, 1997 - NIS 16,410 thousand). Losses from securities
that are deductible in future years against real income from marketable
securities amount to an adjusted amount of NIS 11,285 thousand at balance
sheet date. (December 31, 1997 - NIS 16,527)
Deductions for inflation of subsidiaries carried forward are in the amount
of NIS 35,730 thousand (December 31, 1997 - NIS 32,035 thousand).
The balances of carryforward losses and the deduction for inflation are
carried forward linked to the changes in the consumer price index as per
the Law mentioned in A above. No deferred taxes have been created in
respect of these carryforwards, with the exception of NIS 7,070 thousand
for which deferred taxes were created.
C. Composition:
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------------------- ------------------------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Provision for
current year 76,764 66,282 41,714 6,493 4,890 798
Taxes relating
to prior years (605) 219 100 (177) (12)
Deferred taxes,
net (11,282) (19,216) 4,502 (40) 1,671 (1,793)
----------- ----------- ----------- ----------- ----------- -----------
64,877 47,285 46,316 6,276 6,561 (1,007)
=========== =========== =========== =========== =========== ===========
</TABLE>
F-47
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 30 - Taxes on Income (cont'd)
D. Final tax assessments for the Company have been received up to and
including 1997. Subsidiary companies have received final assessments
for tax years 1987-1997. One subsidiary has not received tax
assessments since inception (1986).
E. The main differences between the theoretical tax on the reported
income and the amount of the provision for taxes actually charged
for the current year.
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------------------- ------------------------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Adjusted income before taxes
per statement of earnings 218,984 147,014 141,607 128,382 79,984 66,901
Statutory tax rate (%) 36 36 36 36 36 36
-------- -------- -------- -------- -------- --------
Theoretical tax on the adjusted
earnings 78,834 52,925 50,978 46,217 28,794 23,793
Tax additions (savings) from:
Company's equity in the net
earnings of investee companies (2,370) (2,561) (4,963) (40,230) (23,527) (24,878)
Realization of investments
in and gain on issue of
capital by investee companies (2,130) (21) (236) (29)
Expenses not recognized for
tax purposes :
Depreciation and amortization 2,187 3,383 2,949 220 235 352
Others 51 162 162 30 152 128
Inflationary erosion of advance
tax payments 1,824 612 1,170 243 1 10
Income subject to reduced tax
rates (12,785) (268) (995)
Losses carried forward from
prior years (1,148) (2,279) (3,352)
Losses for which deferred taxes
were not provided (mainly
from securities) (1,277) (1,233) 1,332
Outside shareholder interest in
joint venture 35 (2) (180)
Other - mainly difference in
inflationary adjustment
principles for financial
reporting purposes and for
tax purposes 131 (1,543) (864) (27) 1,142 (371)
Adjustments relating to
prior years (605) 219 100 (177) (12)
-------- -------- -------- -------- -------- --------
64,877 47,285 46,316 6,276 6,561 (1,007)
======== ======== ======== ======== ======== ========
</TABLE>
F-48
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 31 - Related Parties and Interested Parties
Consolidated
<TABLE>
<CAPTION>
Consolidated The Company
----------------------------------------- ------------------------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31 December 31 December 31 December 31 December 31 December 31
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
A. Balance sheet data
Cash, security deposits
and receivables 93,932 154,143 6,848 5,539
Subsidiary - current account* 15,024
Loans from banks
and provident funds 154,190 164,578 8,765 11,407
Creditors - Orchard
cultivation and others 868 709 558
Subsidiary - current account 20,353
Highest balance during the year 43,978
Subsidiary - capital note 20,000
B. Statement of earnings data
Financing income from
deposits and loans
From investee companies 26 3 815
From banks and others 2,926 2,208 2,252 (8) 8
Participation of related
parties in general expenses 567 517 513
Other income from
related parties
Management fees 1,935 1,671 1,628 1,926 2,116 1,841
Rent 24,067 24,027 15,282 1,275 1,504 1,301
Financing charges to
related parties
Investee companies 936 1,141 3,372
Banks and others 12,568 9,670 5,187
Benefits to an interested party
employed by the Company:
Salary and fringe benefits** 1,706 1,598 1,507 1,706 1,598 1,507
Payments to members of
the Board of Directors
(1997 and 1998 for 8
directors;
1996 for 9 directors) 306 290 323 306 290 323
</TABLE>
* Represents the highest balance during the period.
** During the reporting year, the interested party exercised options that had
been granted to him in the past (see Note 32C). The difference between the
exercise price of the options and the value of the shares received
according to the market prices of the shares on the dates of exercise,
amounted to approximately NIS 445 thousand (1997 - difference in respect
of utilization of rights to shares amounted to NIS 1,001 thousand).
F-49
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 31 - Related Parties and Interested Parties (cont'd)
C. Trust funds are managed by related parties.
D. Transactions with entities connected with certain banking groups.
The Company was exempted by the Securities Authority from including the
disclosure of transactions with an interested party, as is required by the
regulations, other than in the case of extraordinary transactions. In the
opinion of Management the transactions with such banks were effected in
the ordinary course of business, at terms and at prices which are not
different from regular market terms and prices.
Note 32 - Private Placement and Issue of Subsidiary
A. A security issue by the Company
In May 1996 the Company issued 549,356 ordinary shares with a par value of
NIS 1 per share, by way of rights to shareholders and unquoted option
holders.
In addition, the Company issued 7,357 ordinary shares to employees. The
net proceeds of the issues was NIS 86,263 thousand.
B. Issues by subsidiaries
1. In the month of March 1996, the subsidiary, Hadarim Properties Ltd.,
effected an issue to the public of registered debentures in the
amount of NIS 49,988,750, (see Note 18A(1)(a)). The debentures bear
interest of 3.5% p.a., are linked to the consumer price index and
are convertible until February 8, 2001. 615,625 share purchase
option warrants which are exercisable until February 28, 2000, were
also issued to the public. Proceeds from the public issues amounted
to NIS 68,444 thousand.
In addition, 2,072,600 ordinary shares with a par value of NIS 1 per
share, were issued to shareholders of the subsidiary by way of
rights. Proceeds of this issue amounted to NIS 90,025 thousand.
2. In the month of August 1997, the subsidiary, Hadarim Properties
Ltd., effected a private placement of (nonmarketable) convertible
debentures to the provident funds of Bank Discount Group, at a value
of NIS 50 million. The debentures bear an interest rate of 2.5% p.a.
Both the principal and interest rate are linked to the consumer
price index and are convertible until August 12, 2001. The proceeds
from the private placement amounted to NIS 49,938 thousand.
F-50
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 32 - Private Placement and Issue of Subsidiary (cont'd)
B. Issues by subsidiaries (cont'd)
3. In the month of September 1997, the subsidiary, Bayside Land
Corporation Ltd., effected an issue to the public of registered
debenture in the amount of NIS 130,005 thousand N.V. The debentures
bear interest of 2.5% p.a., are linked to the consumer price index
and are convertible until August 31, 2001. (See Note 18A (1)(c)).
270,000 share purchase option warrants which are exercisable until
September 20, 2001, were also issued to the public.
The proceeds from the public issues amounted to NIS 136,024
thousand.
C. Share purchase option programs
1. The Company has the following share purchase option programs for its
employees and for the employees of its subsidiaries:
Share purchase option programs that have been exercised:
(a) A program dated May 1992 for the allotment of option warrants,
at no cost, to senior executives of the Company and of its
subsidiaries. From 1996 through 1997 the option holders
exercised 24,043 options at an aggregate exercise price of NIS
3,874 thousand (as at balance sheet date). According to the
terms of the program, loans were made available to the
employees holding the options in an aggregate amount of NIS
3,372 thousand, (as at balance sheet date). The loans bear
interest of 2% and are repayable in three annual installments
plus any consumer price index linkage differentials.
(b) A program dated October 1994 for the allotment of option
warrants, at no cost, to senior executives of the Company and
of its subsidiaries for the purchase of shares of the Company.
During 1998, the option holders exercised all the allotted
options of the program (according to a prospectus published on
May 1996 for the issue of rights of the Company). Total shares
purchased amounted to 14,650 at an aggregate price of NIS
3,731 thousand (as at the balance sheet date). Option holders
who are employees of the Company or its subsidiaries were
given loans of NIS 2,870 thousand (as at balance sheet date).
The loans bear interest of 2% and are repayable in three
annual installments plus any consumer price index linkage
differentials.
F-51
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 32 - Private Placement and Issue of Subsidiary (cont'd)
C. Share purchase option programs (cont'd)
Share purchase option program not yet exercised:
A program dated December 1997 for the allotment of 40,140 option
warrants, at no cost, to senior executives of the Company and of its
subsidiaries for the purchase of 40,140 shares of the Company (of
these, the Managing Director is entitled to 11,707 option warrants).
The options will be allotted in three equal portions and will be
exercisable over a three year period, commencing two years after the
date they were allotted. The exercise price of the first portion is
NIS 241.62 per option (as of the balance sheet date). The exercise
price of the remaining portions will be the lower of the above
mentioned exercise price linked to the exchange rate of the U.S.
dollar or the average of the closing market prices in the 7 trading
days preceding the date they were granted. Assuming that all of the
as yet unexercised option warrants of the above described programs
are exercised, all of the shares acquired under these option
programs, represent 0.96% of the Company's equity and voting rights.
2. Subsidiaries have share purchase option programs as described below:
(a) Bayside Land Company Ltd., declared two share purchase option
programs for its senior employees:
Share purchase option program that has been exercised:
A program dated October 1994 for the allotment of option
warrants, at no cost to senior executives of the Company.
During the years 1997 and 1998 the option shareholders
exercised all the options allotted, based on the program, and
acquired 6,970 shares of the Company with a par value of NIS 1
per share at an aggregate price of NIS 2,600 thousand (as at
balance sheet date). Options holders, according to the
program, who are employees of the Company, were given loans of
NIS 1,676 thousand, (as at the balance sheet date), that will
be repaid in three installments starting November 1999.
Share purchase option program not yet exercised :
A program dated November 1997 for the allotment of option
warrants, to senior executives of the Company, for purchase of
12,418 shares of the Company. Under the assumption that all
the options under the plan are exercised the warrants will
provide 0.6.% of the equity in the Company and 0.9.% in the
voting rights.
F-52
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 32 - Private Placement and Issue of Subsidiary (cont'd)
C. Share purchase option programs (cont'd)
2. Subsidiaries have share purchase option programs as described
below:(cont'd)
(b) Hadarim Properties Ltd. allotted 8,727 share purchase option
warrants (Series 1) to its employees under a prospectus
published in February 1996. The said subsidiary also published
an option program on January 1998 for the allotment of 68,307
share purchase option warrants to its senior employees and to
the employees of its subsidiaries. Assuming that all of the
outstanding option warrants allotted under the above two
programs are exercised, all of the shares acquired represent
1.06% (0.86% in full dilution) of Hadarim Properties equity
and voting rights.
(c) Ispro Israel Company for building rental Ltd. (subsidiary),
published a share purchase option program in January 1998
allotting options to its senior employees to purchase 41,513
of its shares. Assuming that all of the options allotted will
be exercised, the shares which will thereby be acquired,
represent 1.3% of Ispro's equity and voting rights.
Note 33 - Financial Instruments and Risk Management
A. Risk management
As at December 31, 1998 and 1997 the Group had cash and cash equivalents
on deposit with Israeli banks in the amount of NIS 102,997 thousand and
NIS 168,589 thousand respectively. Marketable securities of NIS 35,509
thousand and NIS 34,722 respectively, held by the Group consist mainly of
quoted government bonds, mutual fund certificates and other debentures.
The debts of apartment purchasers included in the balance sheet are
secured by the apartments themselves until delivery, which is effected
only upon final payment. Therefore, the Company does not consider itself
subject to any significant risk exposure.
B. Fair value of financial instruments
The Groups financial instruments consist of non-derivative assets; cash
and cash equivalents, quoted securities, and accounts receivable, and
non-derivative liabilities, short-term credit, accounts payable, loans,
convertible debentures and other liabilities. Because of their nature the
fair value of the financial instrument described above, included in
working capital is the same as the value at which they are stated in the
balance sheet. The fair value of the loans included in other long-term
liabilities, liabilities to banks and provident funds is also close to its
value as stated in the balance sheet, since such financial instruments
bear interest at rates which are close to the going market interest rates.
The fair value of the convertible debentures is given in Note 18A(1). The
fair value of marketable debentures is presented in Note 18A(2).
F-53
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 34 - Condensed Financial Statements in Nominal Historical Values - The
Company
A. Balance Sheet
December 31 December 31
1998 1997
----------- -----------
Current Assets
Cash and cash equivalents 1,220 1,504
Marketable securities 576 593
Other receivables 20,711 4,900
Building projects under construction and
apartments inventory 11,004 3,357
----------- -----------
33,511 10,354
----------- -----------
Land 300 5,348
----------- -----------
Long-term Loans 3,237 2,615
----------- -----------
Investments
In investee and other companies 675,291 563,248
----------- -----------
Fixed Assets
Buildings, land, plantations and others 9,858 10,126
Less/- Accumulated depreciation 686 599
----------- -----------
9,172 9,527
----------- -----------
Deferred Charges 26 28
----------- -----------
721,537 591,120
=========== ===========
F-54
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 34 - Condensed Financial Statements in Nominal Historical Values - The
Company (cont'd)
A. Balance Sheet (cont'd)
December 31 December 31
1998 1997
----------- -----------
Current Liabilities
Advances from purchasers of
apartments and others, net 2,832 1,402
Current maturities of long-term liabilities 2,191 2,402
Other payables 19,655 32,367
Proposed dividend 20,000 17,000
----------- -----------
44,678 53,171
----------- -----------
Long-term Liabilities
Liabilities to banks and provident funds 6,574 8,100
Capital note 20,000
----------- -----------
26,574 8,100
----------- -----------
Shareholders' equity 650,285 529,849
----------- -----------
721,537 591,120
=========== ===========
F-55
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 34 - Condensed Financial Statements in Nominal Historical Values - The
Company (cont'd)
B. Statements of Earnings for the Year Ended December 31
1998 1997 1996
------- ------- ------
Income
Rentals and warehousing 9,378 7,643 6,827
From construction 47,022 49,084
The Company's equity in the net
earnings of investee companies, net 126,946 72,255 86,417
Gains from investments and fixed assets 28 1,904 22
Income from securities, financing
and others income 2,448 2,770 3,603
------- ------- ------
185,822 133,626 96,869
------- ------- ------
Costs and expenses
Construction 30,665 34,669
Administrative, selling and others 8,307 8,014 6,340
Property maintenance (excluding depreciation) 1,005 763 733
Depreciation and amortization 213 147 146
Property taxes on land 510 817 864
Interest and linkage differences 3,966 4,214 9,720
------- ------- ------
44,666 48,624 17,803
------- ------- ------
Earnings before taxes on income 141,156 85,002 79,066
Taxes on income 4,853 5,005 (1,036)
------- ------- ------
Net earnings for the year 136,303 79,907 80,102
======= ======= ======
F-56
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 34 - Condensed Financial Statements in Nominal Historical Value - The
Company (cont'd)
C. Statement of Shareholders' Equity
Share Capital Retained Total
capital surplus earnings
------- ------- -------- -------
Balance as at
January 1, 1996 3,546 17,409 301,585 322,540
Net earnings for the year
ended December 31, 1996 80,102 80,102
Capital issue 557 71,287 71,844
Proposed dividend - 280% (11,500) (11,500)
----- ------ ------- -------
Balance as at
December 31, 1996 4,103 88,696 370,187 462,986
Net earnings for year ended
December 31, 1997 79,907 79,907
Exercised option warrants 26 3,930 3,956
Proposed dividend - 412% (17,000) (17,000)
----- ------ ------- -------
Balance at December 31, 1997 4,129 92,626 433,094 529,849
Net earnings for current year 136,303 136,303
Exercised option warrants 15 4,118 4,133
Proposed dividend - 482.7% (20,000) (20,000)
----- ------ ------- -------
4,144 96,744 549,397 650,285
===== ====== ======= =======
D. Share capital (cont'd)
1. Composition
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
---------------------- -----------------------
Authorized Issued Authorized Issued
---------- ---------- ---------- ----------
NIS NIS NIS NIS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Ordinary shares of a par value
of NIS 1 each (registered) -
Listed on the Tel-Aviv
Stock Exchange 6,000,000 4,143,615 6,000,000 4,128,965
========== ========== ========== ==========
</TABLE>
F-57
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 35 - Statements for Incorporation in the Financial Statements of PEC
A. Change in Reporting Principles
The main consolidated financial statements of Property and Building
Corporation Limited and subsidiaries as at December 31, 1997 and for the
year ended at that date are prepared in NIS adjusted for the changes in
the consumer price index, according to the rules set forth in the opinions
of the Institute of Certified Public Accountants in Israel.
For the purpose of their inclusion in the financial statements of the
ultimate American shareholder of the Company, PEC Israel Economic
Corporation ("PEC"), the Company prepared these special condensed
financial statements ("special statements") which are presented in
accordance with the instructions of PEC (see below).
Up to and including December 31, 1992, for the purpose of inclusion in the
financial statements of PEC, the Company prepared financial statements in
U.S. dollars ("dollars"). These dollar financial statements were
translated into dollar terms in accordance with the remeasurement
principles set forth in Opinion No. 52 of the Financial Accounting
Standards Board of the United States for entities operating in highly
inflationary economies.
The rate of inflation declined significantly in recent years. For this
reason, in 1993 PEC decided that the translation to dollars will be done
in accordance with the principles applied regarding economies which are no
longer considered highly inflationary.
These statements were prepared for the purpose of their translation into
dollars and inclusion in the consolidated financial statements of PEC,
according to the instructions of PEC, as follows:
1. The special statements are prepared in nominal NIS.
2. The balances in NIS as at January 1, 1993, were calculated by the
translation to NIS of the non-monetary assets and capital reserves
and surplus as presented in the dollar statements as at December 31,
1992 according to the exchange rate in effect at that date ($1 = NIS
2.764).
3. Transactions executed after January 1, 1993 are stated in the
special statements at their original value in nominal NIS.
4. In addition to their being presented according to the instructions
of PEC, the special statements were adjusted to accounting
principles generally accepted in the United States.
5. During 1995 the Company adopted Opinion No. 57 of the Institute of
Certified Public Accountants in Israel whereby entities under joint
control are consolidated on a proportionate basis. For the purposes
of this Note the opinion has not been implemented. The
non-implementation has no effect on the profits reported in this
note.
F-58
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 35 - Statements for Incorporation in the Financial Statements of PEC
(cont'd)
B. Condensed Financial Statements
1. Balance Sheet
Consolidated
----------------------------
December 31 December 31
1998 1997
----------- -----------
Current Assets
Cash and cash equivalents 102,985 155,017
Short-term deposits and loans 3,547 1,628
Marketable securities 13,223 35,509
Trade receivables 49,091 20,501
Other receivables and debit balances 62,602 30,844
Apartments and other inventories 62,805 5,482
Building projects under construction 75,373 100,919
--------- ---------
369,626 350,080
--------- ---------
Land 393,781 319,774
--------- ---------
Long-term Deposits 4,965 3,247
--------- ---------
Investments
In investee companies 120,769 102,505
--------- ---------
Fixed Assets
Buildings, land and other 1,109,056 856,560
Less/ - Accumulated depreciation 118,248 113,619
--------- ---------
990,808 742,941
--------- ---------
Deferred Charges and Other Assets 85,801 65,419
--------- ---------
1,965,750 1,583,966
========= =========
F-59
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 35 - Statements for Incorporation in the Financial Statements of PEC
(cont'd)
B. Condensed Financial Statements (cont'd)
1. Balance Sheet (cont'd)
<TABLE>
<CAPTION>
Consolidated
-------------------------
December 31 December 31
1998 1997
----------- -----------
<S> <C> <C>
Current Liabilities
Advances from purchasers of apartments and others, net 21,071 11,965
Credit from banks 19,900 28,955
Current maturities of long-term liabilities 53,405 44,138
Suppliers and sub-contractors 14,055 22,379
Creditors and credit balances 130,545 57,968
Deferred taxes 105
Proposed dividend 29,768 23,107
--------- ---------
268,744 188,617
--------- ---------
Long-term Liabilities
Long-term loans 723,734 551,475
Deferred taxes 1,099 1,284
Liability in respect of employee severance benefits 3,442 2,362
--------- ---------
728,275 555,121
--------- ---------
Minority interest 217,513 212,329
--------- ---------
Receipt on account of option warrants in a subsidiary 8,665 8,665
--------- ---------
Shareholders' Equity
Share capital 81,327 81,312
Capital surplus 96,670 92,684
Retained earnings 564,556 445,238
--------- ---------
742,553 619,234
--------- ---------
1,965,750 1,583,966
========= =========
</TABLE>
F-60
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 35 - Statements for Incorporation in the Financial Statements of PEC
(cont'd)
B. Condensed Financial Statements (cont'd)
2. Statement of Earnings for the Year Ended December 31
<TABLE>
<CAPTION>
Consolidated
---------------------------------------
December 31 December 31 December 31
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Income
Rentals and warehousing 150,363 135,647 114,593
From construction and other sources 314,527 254,702 201,753
The Company's equity in the net
earnings of investee companies 13,231 12,435 16,710
Gains on sale of investments and fixed assets 77,163 12,652 2,780
Income from securities, financing and others 19,353 18,664 20,810
----------- ----------- -----------
574,637 434,100 356,646
----------- ----------- -----------
Cost and expenses
Construction and other costs 206,232 176,030 135,188
Administrative, selling and others 42,747 36,913 32,123
Property maintenance (excluding depreciation) 12,827 11,231 9,598
Depreciation and amortization 18,114 14,570 10,854
Property taxes on land 8,066 8,510 6,617
Financing (*) 76,042 48,699 34,239
----------- ----------- -----------
364,028 295,953 228,619
----------- ----------- -----------
Earnings before taxes on income 210,609 138,147 128,027
Taxes on income 36,518 23,415 20,324
----------- ----------- -----------
Earnings after taxation 174,091 114,732 107,703
Less/ - Minority interest in earnings 34,773 30,136 30,157
----------- ----------- -----------
Net earnings 139,318 84,596 77,546
=========== =========== ===========
Earnings Per Share
Primary earnings per share of NIS 1.00 par
value (in NIS) 33.62 20.53 19.92
=========== =========== ===========
Diluted earning per share 32.66 19.72 19.58
=========== =========== ===========
</TABLE>
* A subsidiary engaged in construction work, purchased real estate
rights for construction projects. These investments were financed by
bank loans and by other Group companies, in a total amount of NIS
131 million. The financing expenses relating to such loans, which
amounted to NIS 17,400 thousands during the year ended December 31,
1996, were attributed in these statements to the cost
F-61
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
of the real estate, resulting in an increase in the net earnings for
the year ended December 31, 1996 of NIS 11,136 thousands.
F-62
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 35 - Statements for Incorporation in the Financial Statements of PEC
(cont'd)
B. Condensed Financial Statements (cont'd)
3. Statement of Shareholders' Equity
Share Capital Retained Total
capital surplus earnings
------- ------- -------- --------
Balance as at
January 1, 1996 80,729 16,700 311,596 409,025
Net earnings for
the year ended
December 31, 1996 77,546 77,546
Issue of share 558 71,287 71,845
Paid-in capital
stock options, net 473 473
Proposed dividend,
net - 280% (11,500) (11,500)
------ ------ ------- -------
Balance as at
December 31, 1996 81,287 88,460 377,642 547,389
Net earnings for the year
ended December 31, 1997 84,596 84,596
Issue of Shares 25 3,930 3,955
Paid in capital options, net 294 294
Proposed dividend, net - 412% (17,000) (17,000)
------ ------ ------- -------
Balance as at
December 31, 1997 81,312 92,684 445,238 619,234
------ ------ ------- -------
Net earnings for the year
ended December 31, 1998 139,318 139,318
Issue of Shares 15 3,505 3,520
Paid in capital options, net 481 481
Proposed dividend, net - 482.7% (20,000) (20,000)
------ ------ ------- -------
Balance as at
December 31, 1998 81,327 96,670 564,556 742,553
====== ====== ======= =======
F-63
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Note 35 - Statements for Incorporation in the Financial Statements of PEC
(cont'd)
C. Adjustment of the nominal historical income to the income for the
purpose of PEC:
<TABLE>
<CAPTION>
Consolidated
---------------------------------------
December 31 December 31 December 31
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Nominal historical net income as per
the statement of earnings 136,303 79,907 80,102
Adjustment of differences relating to
the following items: 3,365 1,245 405
Advances from apartment purchasers (195)
Construction work and land 1,271 (544) (2,677)
The Company's equity in the net earnings
of investee companies 2,974 657 (1,355)
Income from investments and fixed assets (3,177) (1,881) 19
Financing (2,567) 854 (2,609)
Depreciation and amortization (3,073) (3,169) (3,287)
Deferred taxes 6,859 9,113 8,370
Minority interest in earnings (125) (1,758) (701)
Others (2,512) 172 (526)
----------- ----------- -----------
Net income for the special purpose
statement of earnings 139,318 84,570 77,546
=========== =========== ===========
</TABLE>
F-64
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Annex - Percentage of Holding in Investee Companies as at December 31, 1998
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
Percent of holding (1) Percent of holding (1)
---------------------- ----------------------
Voting Equity Voting Equity
--------- ------ ---------- ------
% % % %
--------- ------ ---------- ------
<S> <C> <C> <C> <C>
Subsidiary companies
Bayside Land Corporation Ltd.*(2) 73.74 67.44 70.58 64.42
Hadarim Properties Ltd.(3) 90.00 90.00 90.00 90.00
Naveh Building & Development Ltd. 90.00 90.00 90.00 90.00
"Gad" Building Company Ltd. 90.00 90.00 90.00 90.00
"Ispro" The Israeli Properties
Rental Corp. Ltd. 73.94 73.94 66.38 66.38
Shadar Building Company Ltd. 100 100 100 100
Merkaz Herzlia "A" Ltd. 100 100 100 100
Merkaz Herzlia "B" Ltd.(4) 100 74.16 100 100
"Hon" Investment and Trust
Company Ltd. 100 100 100 100
Property and Building
(Finance 1986) Ltd. 100 100 100 100
Aclim 2000 for Ecology Ltd. 100 100 100 100
"Gilat" Building and Housing
in Development Areas Ltd. 100 100 100 100
Nichsei Nachalat Beit
Hashoeva B.M 100 100 100 100
Em Hamoshavot - Hatzafon
Hachadash 100 100 100 100
Affiliated companies
Science Based Industries 50 50 50 50
Campus Ltd.
Mehadrin Ltd. 34.96 34.96 34.96 34.96
Bartan Holdings and
Investment Ltd. 30.93 30.93 30.93 30.93
K.B.A Townbuilders Group Ltd.(7) 23.13 23.13 23.13 23.13
Carneltan Group Ltd. 20.00 20.00
</TABLE>
(1) Including shareholding through subsidiaries.
(2) Conversion of the Consolidated Companies will dilute the Companies
holdings from 56.22% in capital stock and 57.32% in voting.
F-65
<PAGE>
Property and Building Corporation Limited and Subsidiaries
Notes to the Financial Statements as at December 31, 1998 (in NIS thousands)
- --------------------------------------------------------------------------------
Annex - Percentage of Holding in Investee Companies as at December 31, 1998
(3) The conversion of the debentures of the subsidiary will result in
the dilution of the Company's holding therein to 82.86%.
The exercise of the option warrants of the subsidiary together with
the conversion of the debentures will results in the dilution of the
Company's holding to 76.78%.
The conversion of non marketable debentures of the subsidiary,
together with the previous conversions will result in a dilution of
the Company's holding to 73.46%.
(4) This shareholding entitles the Company to 97.35% of the profits
distributed by way of cash dividend.
(5) Directly and through the Company A.A. Holdings Ltd.
(6) See Note 20C(6).
(7) As to the dilutive influence of the Consolidated Employee Option
Plan - See Note 32C(2).
F-66
[LETTERHEAD OF FELLMAN & FELLMAN]
Report of Independent Public Accountants
OF
ACLIM 2000 (FOR ECOLOGY) LIMITED
We have audited the accompanying balance sheets of ACLIM 2000 (FOR ECOLOGY)
LIMITED Company as of December 31, 1998 and 1997, and the related statements of
income, changes in shareholders' equity and cash flows for each of the three
years ended December 31, 1998, expressed in New Israel Shekels. These financial
statements are the responsibility of the Company's Board of Directors and
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 United States. 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 aforementioned 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.
In our opinion, the financial statements present fairly the financial position
of the Company as of December 31, 1998 and 1997, and the results of its
operations, changes in shareholder's equity and cash flows for each of the three
years ended December 31, 1998, in conformity with accounting principles
generally accepted in Israel, consistently applied.
The financial statements for each of the three years ended December 31, 1998,
have been prepared on the basis of accounting policies determined by PEC Israel
Economic Corporation (a related party) and in accordance with its needs.
Tel - Aviv February 8, 1999
/s/ Fellman & Fellman
[LETTERHEAD OF SHLOMO ZIV & CO.]
INDEPENDENT AUDITOR'S REPORT
To the shareholders of
ADIR INTERNATIONAL COMMUNICATIONS SERVICES CORP. LTD.
We have audited the accompanying balance sheets of ADIR INTERNATIONAL
COMMUNICATIONS SERVICES CORP. LTD. (herein - "the Company") as of December 31,
1998 and 1997, the consolidated balance sheets as of those dates, the related
statements of profit and loss, changes in shareholders' equity and cash flows of
the Company and consolidated - for each of the two years ,the last of which
ended December 31, 1998. These financial statements are the responsibility of
the Company's Board of Directors and 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. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements, either originating within the financial
statements themselves, or due to any misleading statement included therein. 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 Company's Board
of Directors and Management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The above financial statements have been prepared on the basis of the historical
cost convention, adjusted to the purchasing power of the Israeli currency, in
accordance with the Opinions of the Institute of Certified Public Accountants in
Israel. A summary of the Company's nominal data, on the basis of which the
adjusted statements were prepared, is stated in Note 15.
In our opinion, the above financial statements present fairly, in all material
respects, the financial position - of the Company and consolidated - as of
December 31, 1998 and 1997 and the results of operations, changes in
shareholders' equity and cash flows - of the Company and consolidated - for each
of the two years, the last of which ended December 31, 1998.
<PAGE>
According to paragraph 211 of the companies ordinance (new form) - 1983, we
would note that we have received all the information and explanations we
required, and that our opinion on the above financial statements is given
according to the best of our knowledge and explanations that we received and as
shown in the books of the Company.
Accounting principles generally accepted in Israel differ in certain respects
from accounting principles generally accepted in the United States. As
applicable to the company, the application of the latter would not have a
significant effect.
Without qualifying our opinion, we direct the attention to note 1 c, with
respect to the sale of the company's operations and assets.
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, February 18,1999
[LETTERHEAD OF VERHAAR EN VERBERNE]
AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of ASE Advanced
Systems Europe B.V. at Eindhoven as of 31 December 1998, and the related
consolidated statement of operations, changes in shareholders equity and cash
flow for the year then ended. These financial statements are the responsibility
of the company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance 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
audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects. the consolidated financial position of ASE Advanced
Systems Europe B.V. as of 31 December 1998 and of their operations and their
cash flow for the year then ended, in conformity with generally accepted
accounting principles.
Helmond, 15 January 1999
Verhaar en Verberne
/s/ P.M. Riemslag Baas CPA
P.M. Riemslag Baas CPA
[LETTERHEAD OF KPMG]
February 15, 1999
Auditors' Report to the Shareholders of
Camdev Limited
We have audited the financial statements of Camdev Limited (hereinafter "the
Company") as follows:
- Balance sheets as at December 31, 1998 and 1997
- Statements of earnings, statements of changes in
shareholders' equity and statements of cash flows for
each of the three years ended December 31, 1998
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards, including standards prescribed by the Auditors Regulations (Manner of
Auditor's Performance) 1973. Such standards require that we plan and perform the
audit to obtain reasonable assurance that the financial statements are free of
material misstatement, whether due to error or intentional misrepresentation. 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 Board of
Directors and 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 mentioned financial statements were prepared on the basis of the
historical cost convention, in historical values adjusted for the changes in the
general purchasing power of the Israeli currency, in accordance with opinions of
the Institute of Certified Public Accountants in Israel. Condensed data of the
Company in nominal historical values, on the basis of which its adjusted
financial statements were prepared, is presented in Note 9.
<PAGE>
In our opinion, based on our audit, the financial statements referred to above
present fairly, in conformity with accounting principles generally accepted in
Israel, consistently applied, in all material respects, the financial position
of the Company as at December 31, 1998 and 1997 and the results of its
operations, changes in its shareholders' equity and its cash flows for each of
the three years, the last of which ended December 31, 1998. Furthermore, these
statements have, in our opinion, been prepared in accordance with the Securities
Regulations (Preparation of Annual Financial Statements) 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 affects the determination of nominal net profit and
shareholders' equity to the extent summarized in Note 10C to the financial
statements.
/s/ Somekh Chaikin
Certified Public Accountants (Isr.)
[LETTERHEAD OF HAFT & HAFT & CO.]
AUDITORS' REPORT TO THE SHAREHOLDERS OF "GAD" BUILDING COMPANY LIMITED
We have audited the accompanying balance sheets of "Gad" Building Company
Limited ("the Company") as of December 31, 1998 and 1997, and the consolidated
balance sheets as of the same dates, and the related consolidated statements of
income, changes in shareholders' equity and cash flows - of the Company and the
Consolidated - for each of the three years in the period ended December 31,
1998. These financial statements are the responsibility of the Company's Board
of Directors and 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 subsidiaries, whose assets
constitute approximately 1.0% and 3.6% of consolidated total assets as of
December 31, 1998 and 1997, respectively, and whose revenues constitute
approximately 1.4%, 0.8% and 100% of consolidated total revenues for the years
ended December 31, 1998, 1997, and 1996, respectively. Those statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included in respect of the
aforementioned 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 under the Israeli Auditors' Regulations
(Auditors' Mode of Performance), 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, either intentional or
unintentional in nature. 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 Company's Board of Directors and 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.
The aforementioned financial statements have been prepared on the historical
cost basis, adjusted to reflect changes in the general purchasing power of the
Israeli currency, in accordance with pronouncements of the Institute of
Certified Public Accountants in Israel. A summary of the Company's financial
statements in nominal Israeli Shekels which served as a basis for the Company's
adjusted statements, is presented in Note 23.
Note 25 includes financial statements that have been prepared on the basis of
accounting policies determined by PEC Israel Economic Corporation (a related
party) and in accordance with its needs. For this matter, the financial
statements of certain subsidiaries, whose assets constitute approximately 1.1%
and 2.5% of consolidated total assets as of December 31, 1998 and 1997,
respectively, and whose revenues constitute approximately 1.4%, 0.8% and 100% of
consolidated total revenues for the years ended December 31, 1998, 1997, and
1996, respectively, were audited by other auditors whose reports have been
furnished to us.
In our opinion, based on our audits and on the reports of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of - the Company and the Consolidated - as of
December 31, 1998 and 1997, and the results of operations, changes in
shareholders' equity and cash flows of - the Company and the Consolidated - for
each of the three years in the period ended December 31, 1998, in accordance
with generally accepted accounting principles in Israel. Furthermore, in our
opinion, the financial statements have been prepared in accordance with the
Israel Securities Regulations (Preparation of Annual Financial Statements),
1993.
/s/ H.H.S.L. Haft & Haft & Co.
Tel-Aviv, Israel H.H.S.L. Haft & Haft & Co.
February 25, 1999 Certified Public Accountants (Isr.)
[LETTERHEAD OF RATZKOVOSKY FRIED MANDOLA]
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
GALIL MEDICAL LTD.
We have audited the accompanying consolidated balance sheets of Galil
Medical Ltd. - a company in the development stage (hereinafter the "Company")
and its subsidiary as of December 31, 1998, the balance sheets of the Company as
of December 31,1998 and 1997, the related consolidated statements of operations,
changes in shareholders' equity and cash flows for the year ended December
31,1998 and the related statements of operations, changes in shareholders'
equity and cash flows for the years ended December 31, 1998 and 1997. These
financial statements are the responsibility of the Company's Board of Directors
and 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 by the Israeli Auditors' Regulations (Mode
of Performance), 1973 which do not differ in any significant respect from United
States 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, either originating
within the financial statements themselves, or due to any misleading statement
included therein. 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 Company's Board of Directors and 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
the historical cost convention, adjusted to reflect the changes in the general
purchasing power of the Israeli currency - on the basis of the changes in the
exchange rate of the U.S. Dollar - in accordance with the opinions of the
Institute of Certified Public Accountants in Israel. Condensed nominal Israeli
currency data, on the basis of which the adjusted financial statements of the
Company were prepared, is presented in Note 21.
In our opinion, based on our audits, the financial statements referred to
above - consolidated and company - present fairly, in all material respects, the
consolidated financial position of the Company and its subsidiary as of December
31, 1998 and the Company as of December 31, 1998 and 1997, the consolidated
results of their operations, changes in shareholders' equity and cash flows for
the year ended December 31, 1998, and the results of operations, changes in
shareholders' equity and cash flows for the years ended December 31, 1998 and
1997, in conformity with generally accepted accounting principles in Israel. As
applicable to the Company's financial statements, accounting principles
generally accepted in the United States and in Israel are substantially
identical in all material aspects (which differ in certain respects from those
followed in the United States - see Note 20 to the consolidated financial
statements).
Without qualifying our opinion, as above, we would like to bring to your
attention that the Company is in the development stage, whereby its principal
activity in this period is the development of a system for the performance of
cryomedical treatments by means of freezing and/or thawing tissues, and the
Company has not yet derived significant revenues from the sale of said products.
/s/ RATZKOVSKY FRIED MANDOLA & CO.
RATZKOVSKY FRIED MANDOLA & CO. Haifa, Israel
Certified Public Accountants (Israel) January 12, 1999
[Letterhead of Mohler, Nixon & Williams
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS ADVISORS]
To the Board of Directors
and Shareholders of
HAM-LET U.S.A., Inc.
INDEPENDENT ACCOUNTANTS' REPORT
We have audited the accompanying balance sheet of HAM-LET U.S.A., Inc. as
of December 31, 1998, and the related statements of operations and accumulated
deficit, and cash flows for the year then ended. Other auditors were engaged to
audit the financial statements of the Company as of and for the year ended
December 31, 1997 and, in their report dated January 28, 1998, they expressed an
unqualified opinion on those statements. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As disclosed in Notes 1 and 3 to the financial statements, HAM-LET U.S.A.,
Inc. is a member of a group of affiliated companies and has extensive
transactions and relationships with members of the group. Because of these
relationships, it is possible that the terms of these transactions are not the
same as those that would result from transactions among wholly unrelated
parties.
In our opinion, other than the information in the preceding paragraph, the
financial statements referred to above present fairly, in all material respects,
the financial position of HAM-LET U.S.A., Inc. as of December 31, 1998, and the
results of its operations and cash flows for the year then ended in conformity
with generally accepted accounting principles.
/s/ Mohler, Nixon & Williams
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
January 22, 1999
1
[Letterhead of Mohler, Nixon & Williams]
To the Board of Directors
and Shareholders of
H.T. Components U.S.A., Inc.
INDEPENDENT ACCOUNTANTS' REPORT
We have audited the accompanying balance sheet of H.T. Components U.S.A.,
Inc. as of December 31, 1998, and the related statements of operations and
accumulated deficit, and cash flows for the year then ended. Other auditors were
engaged to audit the financial statements of the Company as of and for the year
ended December 31, 1997 and, in their report dated January 28, 1998, they
expressed an unqualified opinion on those statements. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As disclosed in Notes 1 and 3 to the financial statements, H.T. Components
U.S.A., Inc. is a member of an affiliated group of companies and has extensive
transactions and relationships with members of the group. Because of these
relationships, it is possible that the terms of these transactions are not the
same as those that would result from transactions among wholly unrelated
parties.
In our opinion, other than the information in the preceding paragraph, the
financial statements referred to above present fairly, in all material respects,
the financial position of H.T. Components U.S.A., Inc., as of December 31, 1998,
and the results of its operations and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ Mohler, Nixon & Williams
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
January 22, 1999
1
[LETTERHEAD OF FAHN, KANNE & CO.]
Auditors' Report to the Shareholders of
I.C.P. - ISRAEL CABLE PROGRAMMING COMPANY LTD.
We have audited the accompanying balance sheets of I.C.P. - ISRAEL CABLE
PROGRAMMING COMPANY LTD. (hereinafter: "the Company") as of December 31, 1998
and 1997, 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,
1998. These financial statements are the responsibility of the board of
directors and management of the Company. 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 by the Israeli Auditors' Regulations (Mode
of Performance), 1973. Those standards require that we plan and perform the
audit to obtain reasonable assurance that the financial statements are free of
material misstatement, whether accidental or intentional. 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 board of directors and by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The abovementioned financial statements were prepared on the basis of historical
cost, adjusted to reflect changes in the purchasing power of the Israeli
currency, in accordance with Opinions of the Institute of Certified Public
Accountants in Israel. Condensed financial statements in nominal shekels, which
served as the basis for the adjusted statements, are presented in Note 24.
In our opinion, the aforementioned financial statements present fairly, in
conformity with generally accepted accounting principles, in all material
respects, the financial position of the Company as of December 31, 1998 and
1997, and the results of operations, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. In
addition, in our opinion, the abovementioned financial statements were prepared
in accordance with the Securities Regulations (Preparation of Annual Financial
Statements) - 1993.
Without qualifying our opinion, we call attention to Note 1(A)(3), regarding the
negotiations between the cable television companies and the Supervisor of
Restrictive Trade Practices which include, inter alia, the continued operation
of the Company. The financial statements do not contain any adjustments to the
value or classification of any assets or liabilities that might have to be made
in the event that the Company can no longer function as a "Going Concern".
/s/ Fahn, Kanne & Co.
Fahn, Kanne & Co.
Certified Public Accountants
Tel-Aviv, February 25, 1999
EZRA SHEMESH c.p.a. (Isr.)
3 Brasil street, Tel-Aviv 69052
P.O.B. 48002 Tel-Aviv 69364
Tel: 03-6416155 fax: 03-6415417
---------------------------------------------------------------------
March 9, 1999
Auditors' Report to the Shareholders of ISPRO The Israeli Properties Rental
Corporation Ltd.
I have audited the financial statements of ISPRO The Israeli Properties Rental
Corporation Ltd (hereinafter "the company") and its consolidated financial
statements, as follows:
- - Balance sheets as at December 31, 1998 and 1997.
- - Statements of earnings, statements of changes in shareholders' equity and
statements of cash flows for each of the three years the last of which
ended December 31, 1998.
Those financial statements are the responsibility of the Company's Board of
Directors and of its Management. My responsibility is to express an opinion on
these financial statements based on I audits.
I conducted my audits in accordance with generally accepted auditing standards,
including standards prescribed by the Auditors Regulations (Manner of Auditor's
Performance) - 1973. Such standards require that I plan and perform the audit to
obtain reasonable assurance that the financial statements are free of material
misstatement whether due to error or intentional misrepresentation. 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 Board of
Directors and by Management, as well as evulating the overall financial
statements presentation. I believe that my audits provide a fair basis for my
opinion.
The above mentioned financial statements were prepared on the basis of the
historical cost convention, in historical values, adjusted for the changes in
the general purchasing power of the Israeli currency in accordance with opinions
of the institute of Certified Public Accountants in Israel. Condensed data in
nominal historical values, on the basis of which the adjusted financial
statements were prepared, is presented in note 24.
In my opinion, based on my audit, the financial statements referred to above
present fairly, in all material respects, in conformity with accounting
principles generally accepted in Israel, consistently applied, the financial
position of the Company and the consolidated financial position of the Company
and its subsidiaries as at December 31, 1998 and 1997 and the results of their
operations, the changes in the shareholders' equity and their cash flows for
each of the three years the last of which ended December 31, 1998. Furthermore,
these statements have, in my opinion, been prepared in accordance with the
Securities Regulations (Preparation of Annual Financial Statements) 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 affects the determination of historical net earnings
and shareholders' equity are immaterial.
Certified public accountants.
Report of Independent Accountants
To the Shareholders of Level 8 Systems, Inc.
In our opinion, the accompanying consolidated balance sheet as of December 31,
1998 and the related consolidated statements of operations, changes in
shareholders' equity and cash flows present fairly, in all material respects,
the financial position of Level 8 Systems, Inc. (the "Company") and its
subsidiaries at December 31, 1998 and the results of their operations and their
cash flows for the year then ended, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above. The financial statements of
the Company as of December 31, 1997 and for the year then ended and for the year
ended December 31, 1996 were each audited by other independent accountants whose
reports, dated February 23, 1998 and January 31, 1997, respectively, expressed
unqualified opinions on these statements.
As explained in Note 14, the Company has entered into certain agreements with
its primary shareholder, Liraz Systems, Ltd.
/s/ PricewaterhouseCoopers LLP
Washington, D.C.
March 31, 1999
99.(12)(B)
Jungerman, Gilboa, Silber
Certified Public Accountants (Isr.)
April 19, 1999
Auditors' Report to the Shareholders of Liraz Systems Ltd.
We have audited the accompanying balance sheets of Liraz Systems Ltd. (the
Company) as at December 31, 1998 and 1997 and the consolidated balance sheets of
the Company and its subsidiaries as at such dates, and the related statements of
income, shareholders' equity, and cash flows, for each of the three years, the
last of which ended December 31, 1998. 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 audits.
We did not audit the financial statements of certain subsidiaries, whose assets
constitute 79.4% and 48.1% of the total consolidated assets as at December 31,
1998 and 1997 respectively, and whose revenues constitute 34%, 41.5%
and 53.6% of the total consolidated revenues for the years ended December 31,
1998, 1997 and 1996, respectively. The financial statements of those
subsidiaries were audited by other auditors whose reports thereon were furnished
to us. Our opinion, insofar as it relates to amounts emanating from the
financial statements of such subsidiaries, is based soley on the said reports of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards, including standards prescribed by the Auditors Regulations (Manner of
Auditor's Performance) 1973. Such standards require that we plan and perform the
audit to obtain reasonable assurance that the financial statements are free of
material misstatement, whether due to error or intentional misrepresentation. 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 Board of
Directors and 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 mentioned financial statements were prepared on the basis of the
historical cost convention, in historical values adjusted for the changes in the
general purchasing power of the Israeli currency, in accordance with opinions of
the Institute of Certified Public Accountants in Israel. Condensed data of the
Company in nominal historical values, on the basis of which its adjusted
financial statements were prepared, is presented in Note 35.
In our opinion, based on our audits and on the reports of the abovementioned
other auditors, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company and the
consolidated financial position of the Company and its subsidiaries as at
December 31, 1998 and 1997 and the results of their operations, the changes in
the shareholders' equity and their cash flows for each of the three years, the
last of which ended December 31, 1998, in conformity with generally accepted
accounting principles. Furthermore, these statements have, in our opinion, been
prepared in accordance with the Securities Regulations (Preparation of Annual
Financial Statements) 1993.
<PAGE>
In the course of our audit of the financial statements for the year ended
December 31, 1998, nothing came to our attention which would indicate the
necessity for making any material modifications to the statement of
shareholders' equity, in nominal historical values, in order for it to be in
conformity with acounting principles generally accepted in Israel and in
the U.S.
The detail of the changes required to be made on the statement of shareholders'
equity, in nominal historical values, for the year ended December 31, 1997 and
1996, in order for them to be in conformity with accounting principles generally
accepted in Israel and in the U.S., appear in Note 32 to the final statements of
December 31, 1997,
Jungerman, Gilboa, Silber
Certified Public Accountants (Isr.)
[LETTERHEAD OF ERNST & YOUNG]
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
LOGAL EDUCATIONAL SOFTWARE AND SYSTEMS LTD. AND SUBSIDIARY
We have audited the consolidated balance sheets of Logal Educational
Software and Systems Ltd. and its subsidiary at December 31, 1997 and 1998, and
the related consolidated statements of operations, changes in shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States and Israel, including those prescribed by the
Auditors Regulations (Mode of Performance) (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.
In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the consolidated financial position of
the Company and its subsidiary at December 31, 1997 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles in Israel. As applicable to the Company's
financial statements, accounting principles generally accepted in the United
States and Israel are substantially identical in all material respects.
/s/ KOST FORER & GABBAY
Tel-Aviv, Israel KOST FORER & GABBAY
February 8, 1999 A Member of Ernst & Young International
[LETTERHEAD OF RATZKOVSKY FRIED]
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF
MEDI-CARD LTD.
We have audited the accompanying balance sheets of Medi-Card Ltd. ("the
Company") as of December 31, 1998 and 1997, and the related statements of
operations, changes in shareholders' equity and cash flows for each of the two
years in the period ended December 31, 1998 and for the period from inception
(May 28, 1996) to December 31, 1996. These financial statements are the
responsibility of the Company's Board of Directors and 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 by the Israeli Auditors Regulations ( Mode
of Performance) - 1973. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatements either originating within the financial
statements themselves, or due to any misleading statement included therein. 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 Company's Board
of Directors and 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 the
historical cost convention adjusted to reflect the changes in the general
purchasing power of the Israeli currency - on the basis of the changes in the
exchange rate of the U. S. Dollar - in accordance with the opinions of the
Institute of Certified Public Accountants in Israel. Condensed nominal Israeli
currency data, on the basis of which the adjusted financial statement of the
Company were prepared, is presented in Note 18.
The Company has restated its financial statements for the year ended December
31, 1997 and for the period ended December 31, 1996 in order to retroactively
reflect the inclusion of the financial statements on the basis of the changes in
the exchange rate of the U.S Dollar, as indicated in Note 4, a change with which
we concur.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1998 and 1997 and the results of its operations, changes in shareholders' equity
and cash flows for each of the two years ended in the period ended December 31,
1998 and for the period from inception (May 28, 1996) to December 31, 1996, in
conformity with generally accepted accounting principles, in Israel which differ
in certain respects from those followed in the United States - see Note 17 to
the financial statements. Furthermore, in our opinion, the aforementioned
financial statements comply with the requirements of the Israeli Securities
Regulations (Preparation of Annual Financial Statements) - 1993.
/s/ RATZKOVSKY FRIED MANDOLA & CO.
RATZKOVSKY FRIED MANDOLA & CO.
Certified Public Accountants (Israel)
Haifa, Israel
February 21, 1999
[LETTERHEAD OF PRICEWATERHOUSECOOPERS]
AUDITORS' REPORT
To the Shareholders of
Merkaz Herzlia "A" Ltd.
We have audited the balance sheets of Merkaz Herzlia "A" Ltd. (hereafter - the
company) as of December 31, 1998 and 1997 and the statements of income, changes
in shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the company's board of directors and 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 by the Auditors (Mode of Performance)
Regulations, 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, either due to error or to intentional misrepresentation.
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 board of
directors and management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a fair basis for our opinion.
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 pronouncements 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 11.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of the company as of December 31, 1998
and 1997 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, 1998, in
conformity with generally accepted accounting principles.
Pursuant to section 211 of the Companies Ordinance (New Version), 1983, we
hereby state that we have received all the information and explanations which we
have requested and our opinion on the above mentioned financial statements is
given based on the best of our information and the explanations which we have
received and as reflected in the books of the company.
The nominal net income for each of the three years in the period ended December
31, 1998 included in the above financial statements (see note 11), differ (see
attached schedule signed by us for identification) from the net income included
in the "condensed special financial statements" for each of those years on which
we expressed our opinion on February 28, 1999 and which were prepared according
to the instructions of PEC Israeli Economic Corporation.
Tel-Aviv, February 28, 1999
/s/ Kesselman & Kesselman
[LETTERHEAD OF PRICEWATERHOUSECOOPERS]
AUDITORS' REPORT
To the Shareholders of
Merkaz Herzlia "B" Ltd.
We have audited the balance sheets of Merkaz Herzlia "B" Ltd. (hereafter - the
company) as of December 31, 1998 and 1997 and the statements of income, changes
in shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the company's board of directors and 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 by the Auditors (Mode of Performance)
Regulations, 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, either due to error or to intentional misrepresentation.
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 board of
directors and management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a fair basis for our opinion.
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 pronouncements 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 11.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of the company as of December 31, 1998
and 1997 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, 1998, in
conformity with generally accepted accounting principles.
Pursuant to section 211 of the Companies Ordinance (New Version), 1983, we
hereby state that we have received all the information and explanations which we
have requested and our opinion on the above mentioned financial statements is
given based on the best of our information and the explanations which we have
received and as reflected in the books of the company.
The nominal net income for each of the three years in the period ended December
31, 1998 included in the above financial statements (see note 11), differ (see
attached schedule signed by us for identification) from the net income included
in the "condensed special financial statements" for each of those years on which
we expressed our opinion on February 28, 1999 and which were prepared according
to the instructions of PEC Israeli Economic Corporation.
Tel-Aviv, February 28, 1999
/s/ Kesselman & Kesselman
[LETTERHEAD OF PRICEWATERHOUSECOOPERS LLP]
AUDITORS' REPORT
To the shareholders of
NAVEH BUILDING AND DEVELOPMENT LTD.
We have audited the financial statements of Naveh Building and Development Ltd.
(hereafter - the Company) and the consolidated financial statements of the
Company and its subsidiary: balance sheets as of December 31, 1998 and 1997 and
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's Board of Directors and
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We did not audit the financial statements of joint ventures, whose assets
constitute approximately 10.8% and 16% of total consolidated assets in 1998 and
1997 respectively and the investment in which is accounted for by the equity
method (see note 4). The financial statements of the above associated company
and joint ventures were audited by other auditors, whose reports have been
furnished to us, and our opinion, insofar as it relates to amounts included for
those companies, 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 Israeli Auditors (Mode of
Performance) Regulations, 1973. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement, either due to error or to intentional
misrepresentation. 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 Company's Board of Directors and 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 to reflect the changes in the general purchasing power
of Israeli currency, in accordance with pronouncements 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 15.
<PAGE>
PRICE WATERHOUSECOOPERS [LOGO]
In our opinion, based upon our audits and the reports of the other auditors
referred to above, the aforementioned financial statements present fairly, in
all material respects, the financial position - of the Company and consolidated
- - at December 31, 1998 and 1997 and the results of operations, changes in
shareholders' equity and cash flows - of the Company and consolidated - for each
of the three years in the period ended December 31,1998, in conformity with
generally accepted accounting principles. Also, in our opinion, the
abovementioned financial statements have been prepared in accordance with the
Israeli 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 the attached note.
/s/ Kesselman & Kesselman
Tel-Aviv, Israel Kesselman & Kesselman
February 21,1999 Certified Public Accountants (Isr.)
ARTHUR
ANDERSEN
LUBOSHITZ KASIERER
AUDITORS' REPORT TO THE SHAREHOLDERS
OF
NETVISION LTD.
We have audited the consolidated balance sheet of NETVISION LTD. (the Company)
and its subsidiary as of December 31, 1998 and the balance sheets of the Company
as of December 31, 1998 and 1997, and the related statements of operations,
changes in shareholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Israel, including those prescribed under the Auditors' Regulations (Auditor's
Mode of Performance), 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company and
its subsidiary as of December 31, 1998 and the financial position of the Company
as of December 31, 1998 and 1997, and the results of operations, changes in
shareholders' equity and cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Pursuant to Section 211 of the Companies Ordinance (New Version), 1983, we state
that we received all of the information and explanations which we requested and
that our opinion on the financial statements is given based on the best
information and explanations which we received and as reflected in the books of
the Company.
/s/ Luboshitz Kasierer
Certified Public Accountants (Isr.)
Haifa, March 4, 1999
61362981
EREZ KOMORNIK C.P.A. (ISR)
================================================================================
AUDITORS' REPORTS TO THE SHAREHOLDERS OF
POLYOPTICS LTD
================================================================================
We have audited the accompanying balance sheets of POLYOPTICS LTD (the Company)
as of December 31, 1998 and 1997, and the related statements of income for the
years then ended. These financial statements are the responsibility of the
Company's Board of Directors and 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. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether caused by an error in the financial
statements or by an irregularity therein. 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 Company's Board of Directors and management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a fair basis for our opinion.
The financial statements are presented on the basis of historical cost
convention in nominal values. Information as to the effect on the financial
statements of changes in the general purchasing power of the Israeli currency,
as required by generally accepted accounting principles, has not been provided.
In our opinion, except for the omission of the information referred above, the
financial statements referred to above present fairly, in all material respects,
the financial position of the Company as of December 31, 1998 and 1997 and the
results of its operations, for the years then ended, in conformity with
generally accepted accounting principles, on the basis of the historical cost
convention in nominal values.
Pursuant to Section 211 of the Companies (New Version), 1983, we state that we
have obtained the information and explanations we have required and that our
opinion on the abovementioned financial statements is given according to the
best information and explanations received by us and as shown by the books of
the Company.
KOMORNIK EREZ
21 February, 1999 C.P.A. (ISR)
- --------------------------------------------------------------------------------
46 BAZEL ST., TEL AVIV, 62744, TEL: 03-5440404
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Renaissance Fund LDC:
We have audited the accompanying statements of assets and liabilities, including
the schedule of investments, of Renaissance Fund LDC (a Cayman Islands Limited
Duration Corporation) as of December 31, 1998 and 1997, and the related
statements of operations, changes in net assets and cash flows for the years
then ended. These financial statements are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Renaissance Fund LDC as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles in the United States.
As discussed in Notes 1 and 4, the financial statements include portfolio
investments valued at $94,944,741 (92.17% of net assets) and $133,469,181
(92.22% of net assets) at December 31, 1998 and 1997, respectively, whose values
have been estimated by the Fund's Manager in the absence of readily
ascertainable market values. However, because of the inherent uncertainty of
valuation, the Fund's Manager's estimated values may differ from the values that
would have been used had a ready market existed for the investments, and the
differences could be material.
/s/ ARTHUR ANDERSEN LLP
Grand Cayman, B.W.I.
May 21, 1999
[LETTERHEAD OF PRICEWATERHOUSECOOPERS]
S41236 - 90008166
AUDITORS' REPORT
To the shareholders of
SANO DISPEC DEVELOPMENT LTD.
We have audited the financial statements of Sano Dispec Development Limited
(hereafter - the company): balance sheets at December 31, 1998 and 1997 and
statements of loss, changes in capital deficiency and cash flows for each of the
two years in the period ended December 31, 1998. These financial statements are
the responsibility of the company's board of directors and management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
Our audits were performed in accordance with generally accepted auditing
standards, including those prescribed by the Auditors (Mode of Performance)
Regulations, 1973. Those standards require that we plan and perform the audits
to obtain reasonable assurance that the financial statements are free of
material misstatement, whether caused by an error in the financial statements or
by misleading information included therein. 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 company's board of directors and management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a fair basis for our opinion.
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 9.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of the company at December 31, 1998
and 1997 and its results of operations, changes in capital deficiency and cash
flows for each of the two years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
<PAGE>
[LETTERHEAD OF PRICEWATERHOUSECOOPERS]
Without qualifying our opinion, we draw attention to the accounting policy for
foreign entities as described in note 1c.
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. As
applicable to the company, the application of the latter would not have affected
the determination of nominal/historical loss and capital deficiency presented in
note 9.
/s/ Kesselman & Kesselman
Tel-Aviv, Kesselman & Kesselman
April 15, 1999 Certified Public Accountants (Isr.)
We have audited the financial statements of Science Based Industries Campus Ltd
("the Company") as at 31 December 1998 and 1997 and the income statements,
statements of changes in shareholders' equity and statements of cash flows for
each of the three years in the period ended 31 December 1998. These financial
statements are the responsibility of the Company's board of directors and
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 standards prescribed by the Auditors' (Mode of Performance)
Regulations, 1973. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement, either due to error or to intentional misrepresentation.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes examining
the accounting principles used and significant estimates made by the Company's
board of directors and management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a fair basis for our
opinion.
The above financial statements were prepared on the historical cost basis
adjusted for changes in the general purchasing power of the Israeli currency
according to pronouncements of the Institute of Certified Public Accountants in
Israel. Condensed nominal data of the Company, on the basis of which its
adjusted financial statements were prepared, are presented in Note 16.
In our opinion, based on our audits, the above financial statements present
fairly, in all material respects, the financial position of the Company as at 31
December 1998 and 1997, and the results of operations, the changes in
shareholders' equity and cash flows for each of the three years in the period
ended 31 December 1998. Also, in our opinion, the above financial statements
were prepared in accordance with the Securities Regulations (Preparation of
Annual Financial Statements), 1993.
Accounting principles generally accepted in Israel differ in certain respects
from accounting principles generally accepted in the United States, mainly in
respect of assets, net income and shareholders' equity. Adjustments between
generally accepted accounting principles in Israel and the United States are
presented in a schedule attached to these financial statements.
Bavly & Co.
Certified Public Accountants (Israel)
Jerusalem, 9 February 1999
ARTHUR
ANDERSEN
LUBOSHITZ KASIERER
AUDITORS' REPORT TO THE SHAREHOLDERS
OF
SOREQ DEVELOPMENT COMPANY (S.D.C.) LTD.
We have audited the accompanying balance sheets of Soreq Development Company
(S.D.C.) Ltd. (the Company) and the consolidated balance sheets of the Company
and subsidiaries as of December 31, 1998 and 1997, and the related statements of
income, changes in shareholders' equity and cash flows of the Company for each
of the three years in the period ended December 31, 1998 and the related
consolidated statements of income and cash flows for each of the two years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's Board of Directors and management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
Data relating to accrued losses in respect of a subsidiary in the amount of NIS
2.9 million and NIS 1.4 million at December 31, 1998 and 1997, respectively, and
the Company's equity in the losses of the subsidiary for the years then ended in
the amount of NIS 1.4 million and NIS 2.9 million, respectively, are based on
financial statements audited by other auditors whose reports were furnished to
us, and our opinion, insofar as it relates to the amounts included for that
subsidiary, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors' Regulations (Auditor's
Mode of Performance), 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 the Board of Directors and 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 referred to above have been prepared on the basis of
historical cost, restated for changes in the general purchasing power of the
Israeli currency, in accordance with pronouncements of the Institute of
Certified Public Accountants in Israel. Condensed financial data of the Company
in nominal Israeli currency, on the basis of which the restated financial
statements of the Company were prepared, is presented in Note 14.
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 the Company and on a consolidated basis - as of
December 31, 1998 and 1997, and the results of operations, changes in
shareholders' equity and cash flows of the Company for each of the three years
in the period ended December 31, 1998, and the results of operations and cash
flows on a consolidated basis for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Pursuant to Section 211 of the Companies Ordinance (New Version), 1983, we state
that we received all of the information and explanations which we requested and
that our opinion on the financial statements is given based on the best
information and explanations which we received and as reflected in the books of
the Company.
Without qualifying our opinion, we draw attention to Note 1C to the financial
statements according to which should the Company not succeed in obtaining
sources of financing for the continuation of its operations, substantial doubt
could arise regarding the Company's ability to continue as a going concern. The
financial statements do not include any adjustment relating to the carrying
value and classification of assets and liabilities that might result should the
Company be unable to continue as a going concern.
<PAGE>
Regarding reconciliation to generally accepted accounting principles in the
United States, see Note 15 to the financial statements.
/s/ Luboshitz Kasierer
Certified Public Accountants (Isr.)
Tel-Aviv, June 1, 1999, based
on audit completed on
March 14, 1999
[LETTERHEAD OF RATZKOVSKY FRIED]
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF
VERDECO TECHNOLOGIES LTD.
We have audited the accompanying balance sheets of Verdeco Technologies Ltd.
("the Company") as of December 31, 1998 and 1997, and the related statements of
operations, changes in shareholders' equity and cash flows for each of the two
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's Board of Directors and 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 by the Israeli Auditors Regulations (Mode
of Performance) - 1973. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatements either originating within the financial
statements themselves, or due to any misleading statement included therein. 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 Company's Board
of Directors and 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 the
historical cost convention adjusted to reflect the changes in the general
purchasing power of the Israeli currency - on the basis of the changes in the
exchange rate of the U.S. Dollar - in accordance with the opinions of the
Institute of Certified Public Accountants in Israel. Condensed nominal Israeli
currency data, on the basis of which the adjusted financial statement of the
Company were prepared, is presented in Note 16.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1998 and 1997 and the results of its operations, changes in shareholders' equity
and cash flows for each of the two years ended in the period ended December 31,
1998, in conformity with generally accepted accounting principles, in Israel
which differ in certain respects from those followed in the United States - see
Note 15 to the financial statements.
Furthermore, in our opinion, the aforementioned financial statements comply with
the requirements of the Israeli Securities Regulations (Preparation of Annual
Financial Statements) -1993.
Without qualifying our opinion, we wish to draw attention to the following: The
Company's accumulated deficit as at December 31, 1998 and negative cash flows
from operating activities and losses for the year then ended amounts to
approximately NIS 4.324 thousands, NIS 2.123 thousands and NIS 2.498 thousands,
respectively, as discussed in note 1c. The Company's ability to continue to
operate is dependent upon additional financial support until profitability is
achieved.
/s/ RATZKOVSKY FRIED MANDOLA & Co.
RATZKOVSKY FRIED MANDOLA & Co.
Certified Public Accountants (Israel)
Haifa, Israel
February 17, 1999
[LETTERHEAD OF SHLOMO ZIV & CO.]
INDEPENDENT AUDITOR'S REPORT
To the shareholders of
ADIR INTERNATIONAL COMMUNICATIONS SERVICES CORP. LTD.
We have audited the accompanying balance sheets of ADIR INTERNATIONAL
COMMUNICATIONS SERVICES CORP. LTD. (herein - "the Company") as of December 31,
1997 and 1996, the consolidated balance sheets as of those dates, the related
statements of profit and loss, changes in shareholders' equity and cash flows of
the Company and consolidated - for each of the two years ,the last of which
ended December 31, 1997. These financial statements are the responsibility of
the Company's Board of Directors and 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. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements, either originating within the financial
statements themselves, or due to any misleading statement included therein. 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 Company's Board
of Directors and Management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The above financial statements have been prepared on the basis of the historical
cost convention, adjusted to the purchasing power of the Israeli currency, in
accordance with the Opinions of the Institute of Certified Public Accountants in
Israel. A summary of the Company's nominal data, on the basis of which the
adjusted statements were prepared, is stated in Note 15.
In our opinion, the above financial statements present fairly, in all material
respects, the financial position - of the Company and consolidated - as of
December 31, 1997 and 1996 and the results of operations, changes in
shareholders' equity and cash flows - of the Company and consolidated - for each
of the two years, the last of which ended December 31, 1997.
<PAGE>
According to paragraph 211 of the companies ordinance (new form) - 1983, we
would note that we have received all the information and explanations we
required, and that our opinion on the above financial statements is given
according to the best of our knowledge and explanations that we received and as
shown in the books of the Company.
Accounting principles generally accepted in Israel differ in certain respects
from accounting principles generally accepted in the United States. As
applicable to the company, the application of the latter would not have a
significant effect.
Without qualifying our opinion, we direct the attention to note 1 c, with
respect to the sale of the company's operations and assets.
Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, February 10, 1998
AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of ASE Advanced
Systems Europe B.V. at Eindhoven as of 31 December 1997, and the related
consolidated statement of operations, changes in shareholders' equity and cash
flow for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ASE Advanced
Systems Europe B.V. as of 31 December 1997 and of their operations and their
cash flow for the year then ended, in conformity with generally accepted
accounting principles.
Nieuwegein, 13 February 1998
EshuisBlomer,
Auditors,
/s/ E.J.C. Boersen RA
E.J.C. Boersen RA
25
[LETTERHEAD OF PRICEWATERHOUSECOOPERS]
01562 - 10002303
AUDITORS' REPORT
To the shareholders of
BAYSIDE LAND CORPORATIONS LTD.
We have audited the financial statements of Bayside Land Corporation Ltd.
(hereafter - the company) and the consolidated financial statements of the
company and its subsidiaries: balance sheets as of December 31, 1997 and 1996,
and statements of income, changes in shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the company's board of directors and
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 associated companies, the
company's share in the equity of which as of December 31, 1997 and 1996 amounts
to adjusted NIS 41,392,000 and adjusted NIS 39,023,000, respectively, and the
company's share in the revenues of which amounts in 1997 to adjusted NIS
3,530,000; 1996 - adjusted NIS 2,954,000; 1995 - adjusted NIS 2,836,000. Those
statements were audited by other auditors, whose reports have been furnished ,to
us, and our opinion, insofar as it relates to amounts included for the foregoing
companies, 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, 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, either due to error or to intentional misrepresentation.
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 company's
board of directors and management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a fair basis for our
opinion.
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 pronouncements 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 14.
<PAGE>
[LOGO OF PRICEWATERHOUSECOOPERS]
In our opinion, based upon our audits and the reports of the other auditors
referred to above, the aforementioned financial statements present fairly, in
all material respects, the financial position - of the company and consolidated
- - as of December 31, 1997 and 1996 and the results of operations, changes in
shareholders' equity and cash flows - of the company and consolidated - for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. 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 the attached note.
/s/ Kesselman & Kesselman
Haifa, Israel
March 10, 1998
[LETTERHEAD OF ALLIED ACCOUNTANTS]
TO THE PARTNERS OF
CENTURY CANNING INDUSTRIES CO. W.L.L.
IRBID - JORDAN
We have audited the accompanying balance sheet of CENTURY CANNING INDUSTRIES CO.
W.L.L. as of December 31, 1997, and the related statement of cash flows for the
period from March 3, 1997 to December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with International 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of CENTURY CANNING INDUSTRIES CO. W.L.L. as
of December 31, 1997 and its cash flows for the period from March 3, 1997 to
December 31, 1997 in accordance with the Law and International Accounting
Standards.
/s/ Allied Accountants
Amman - Jordan
January 10, 1998
[LETTERHEAD OF SOMEKH CHAIKIN]
Tel Aviv, March 8, 1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE
SHAREHOLDERS OF DEP TECHNOLOGY HOLDINGS LTD.
We have audited the balance sheets of DEP Technology Holdings Limited and the
consolidated balance sheets of the Company and its subsidiaries as of December
31, 1997 and 1996, the related statements of income and shareholders' equity and
cash flows for each of the years then ended, expressed in New Israel Shekels.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors Regulations (Auditor's
Mode of Performance), 1973 and, accordingly we have performed such auditing
procedures as we considered necessary in the circumstances. For purposes of
these financial statements there is no material difference between generally
accepted Israeli auditing standards and auditing standards generally accepted in
the U.S. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentations.
We believe that our audits provide a reasonable basis for our opinion.
The above statements have been prepared on the basis of historical cost as
adjusted for the changes in the general purchasing power of the 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 23 to the financial
statements.
In our opinion, based on our audit, the above mentioned financial statements
present fairly the financial position of the Company and the consolidated
balance sheets of the Company and its subsidiaries as at December 31, 1997 and
1996, the results of its operations, the changes in shareholder's equity and
cash flows for each of the years then ended, in conformity with accounting
principles generally accepted in Israel, consistently applied.
<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 affected the determination of
nominal/historical net profit (loss) and shareholders' equity to the extent
summarized in Note 23(4) to the financial statements.
/s/ Somekh Chaikin
Somekh Chaikin
CERTIFIED PUBLIC ACCOUNTANTS (ISR)
[Letterhead of Somekh Chaikin]
Tel Aviv, March 8, 1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE
SHAREHOLDERS OF DIC AND PEC CABLE TV LTD.
We have audited the balance sheets of DIC and PEC Cable TV Ltd. as of December
31, 1997 and 1996, the related statements of income and shareholders' equity and
cash flows for each of the years then ended, expressed in New Israel Shekels.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits in accordance with generally accepted
auditing standards, including those prescribed under the Auditors Regulations
(Auditor's Mode of Performance), 1973 and, accordingly we have performed such
auditing procedures as we considered necessary in the circumstances. For
purposes of these financial statements there is no material difference between
generally accepted Israeli auditing standards and auditing standards generally
accepted in the U.S. These standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentations. We believe that our audits provide a reasonable basis for our
opinion.
The above statements have been prepared on the basis of historical cost as
adjusted for the changes in the general purchasing power of the Israel currency
in accordance with opinions issued by the Institute of Certified Public
Accountants in Israel.
Condensed statements in historical values which formed the basis of the adjusted
statements appear in Note 5 to the financial statements.
The data relating to the net asset value of the Company's investments in an
investee company and to its equity in that Company's operating results, is based
on financial statements audited by other auditors.
<PAGE>
In our opinion, based on our audit and on the report of the abovementioned other
auditors, the above mentioned financial statements present fairly the financial
position of the Company as at December 31, 1997 and 1996, the results of its
operations, the changes in shareholder's equity and cash flows for each of the
years then ended, 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
nominal/historical net profit (loss) and shareholders' equity to the extent
summarized in Note 6 to the financial statements.
/s/ Somekh Chaikin
CERTIFIED PUBLIC ACCOUNTANTS (ISR)
[LETTERHEAD OF COOPERS & LYBRAND]
AUDITORS' REPORT
Introduction
We have audited the 1997 financial statements of Dutch Can Pack Holding B.V,
Amsterdam. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
Scope
We conducted our audit in accordance with auditing standards generally accepted
in the Netherlands. 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 audit provides a reasonable basis for our
opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the
financial position of the company as of 31 December 1997 and of the result for
the year then ended in accordance with accounting principles generally accepted
in the Netherlands and comply with the financial reporting requirements included
in Part 9, Book 2 of the Netherlands Civil Code.
Amsterdam, 26 January 1998
/s/ Coopers & Lybrand N.V.
Coopers & Lybrand N.V.
[LETTERHEAD OF SOMEKH CHAIKIN]
Tel-Aviv, March 3, 1998
Auditor's Report to the Shareholders of
Gemini Capital Fund Management Ltd.
We have audited the accompanying balance sheets of Gemini Capital Fund
Management Ltd. as at December 31, 1997 and December 31, 1996, statements of
income, changes in shareholders' equity and cash flows for each of the three
years the last of which ended on December 31, 1997, 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
including those prescribed by the Israel Auditors' Regulations (Auditors' Mode
of Performance) - 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gemini Capital Fund Management
Ltd. as at December 31, 1997 and December 31, 1996, and the results of its
operations, changes in its shareholder's equity and cash flows for each of the
three years the last of which ended on December 31, 1997, in conformity with
accounting principles generally accepted in the United States and Israel on the
basis outlined in Note 2A to the financial statements.
/s/ Somekh Chaikin
Somekh Chaikin
Certified Public Accountants
[LETTERHEAD OF SOMEKH CHAIKIN]
Tel-Aviv, March 3, 1998
Auditor's Report to the Partners of
Gemini Israel Fund L.P.
We have audited the accompanying balance sheets of Gemini Israel Fund L.P. as of
December 31, 1997 and December 31, 1996, statements of income, changes in
partners capital and cash flows for each of the three years the last of which
ended on December 31, 1997, 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, including those prescribed by the Israel Auditors' Regulations
(Auditors' Mode of Performance). 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gemini Israel Fund as of
December 31, 1997 and December 31, 1996, the results of its operations, changes
in its partners capital and cash flows for each of the three years the last of
which ended December 31, 1997 in conformity with accounting principles generally
accepted in the United States on the basis detailed in Note 2A to the financial
statements.
As explained in Note 2, the financial statements include investments valued at
U.S. dollars 37,644 thousand (previous year - U.S. dollars 20,733 thousand) (95%
of partners capital at balance sheet date, previous year -75%) whose values have
been estimated by the Limited Partnership's general partner in the absence of
readily ascertainable market values. We have reviewed the procedures used by the
general partner in arriving at its estimate of value of such investments and
have inspected underlying documentation and in the circumstances we believe the
procedures are reasonable and the documentation appropriate. 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 investments existed and the differences could be material.
/s/ Somekh Chaikin
Somekh Chaikin
Certified Public Accountants
[LETTERHEAD OF KPMG]
AUDITORS' REPORT TO THE SHAREHOLDERS
OF
GENERAL ENGINEERS LIMITED
We have audited the accompanying balance sheets of General Engineers Limited
("the Company") as of December 31, 1997 and 1996 and the statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997, expressed in New Israel Shekels. These financial
statements are the responsibility of the board of directors and management of
the Company. 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 standards prescribed by 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 differences between
generally accepted Israeli auditing standards and auditing standards generally
accepted 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, whether due to an error in the financial
statements or to anything misleading therein. 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 board of directors and management of the
Company, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a fair basis for our opinion.
The above financial statements were prepared on the historical cost basis
adjusted for changes in the general purchasing power of the Israeli currency
according to Opinions of the Institute of Certified Public Accountants in
Israel. Condensed financial statements in nominal values, on the basis of which
the adjusted financial statements were prepared, are presented in Note 14 to the
financial statements.
In our opinion, based on our audits, the abovementioned financial statement
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997 and 1996, the results of its operations, the changes in
its shareholders' equity and the cash flows for each of the three years in the
period ended December 31, 1997, 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 15 to the
financial statements.
Braude Bavly
/s/ Braude Bavly
Tel Aviv. February 12, 1998
Letterhead of Price Waterhouse LLP
Report of Independent Accountants
January 28, 1998
To the Board of Directors and Shareholder of
HAM-LET U.S.A., Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations and accumulated deficit and of cash flows present fairly, in all
material respects, the financial position of HAM-LET U.S.A., Inc. (a wholly
owned subsidiary of HAM-LET (Israel/Canada) Ltd.) at December 31, 1997, and the
results of its operations and its cash flows for the year in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
HAM-LET U.S.A., Inc. is a member of group of affiliated companies and,
as disclosed in Note 3 to the financial statements, has extensive transactions
and relationships with members of the group. Because of these relationships, it
is possible that the terms of these transactions are not the same as those that
would result from transactions among wholly unrelated parties.
/s/ Price Waterhouse LLP
Letterhead of Price Waterhouse LLP
Report of Independent Accountants
January 28, 1998
To the Board of Directors and Shareholder of
H.T. Components U.S.A., Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations and accumulated deficit and of cash flows present fairly, in all
material respects, the financial position of H.T. Components U.S.A., Inc. (a
subsidiary of H.T.C., Ltd.) at December 31, 1997, and the results of its
operations and its cash flows for the year in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
H.T. Components U.S.A., Inc. is a member of group of affiliated companies and,
as disclosed in note 3 to the financial statements, has extensive transactions
and relationships with members of the group. Because of these relationships, it
is possible that the terms of these transactions are not the same as those that
would result from transactions among wholly unrelated parties.
/s/ Price Waterhouse LLP
[LOGO]
Somekh Chaikin
Tel-Aviv, February 8, 1998
Auditor's Report to the Shareholders of
Israsat International Communications Ltd.
We have audited the financial statements of Israsat International Communications
Ltd. (the Company) as detailed below:
- - Balance sheets as at December 31, 1996, and December 31, 1997.
- - Statements of income, changes in shareholders' equity and cash flows for
the years ended on December 31, 1995, 1996 and 1997.
The financial statements are the responsibility of the Company's Board of
Directors and of its management. Our responsibility is to express an opinion on
the financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards, including standards prescribed by the Auditors Regulations (Auditor's
Mode of Performance) - 1973. Such auditing standards are substantially identical
to generally accepted auditing standards in the United States. These standards
require that we plan and perform the audit to obtain reasonable assurance that
the financial statements are free of material misstatement, whether due to error
or intentional misrepresentation.
An audit includes examining, on a test basis, evidence supporting the amounts
(including the reconciliation of the net income and shareholders' equity to U.S.
generally accepted accounting principles) and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the Board of Directors and management as well as
evaluating the overall financial statements presentation. We believe that our
audits provide a fair basis for our opinion.
The above mentioned financial statements have been prepared on the basis of the
historical cost convention and are expressed in U.S. dollars on the basis
disclosed in Note 1B.
<PAGE>
In our opinion, based upon our audits, the above mentioned financial statements
present fairly, in all material respects, the financial position of the
Company as at December 31, 1996 and 1997, and the changes in shareholders'
equity and the results of their operations and cash flows, for each of the three
years ended on December 31, 1997 in conformity with generally accepted
accounting principles (GAAP) in Israel (as applicable to these financial
statements, Israeli GAAP and U.S. GAAP are substantially identical in all
material respects, except as otherwise described in Note 20 to the financial
statements).
/s/ Somekh Chaikin
Somekh Chaikin
Certified Public Accountants (Isr.)
Gabbai and Company
Certified Public Accountants (Isr)
Tel Aviv, March 4, 1998
Auditors' Report to the Shareholders of Kedem Chemicals Ltd.
We have audited the accompanying balance sheets of Kedem Chemicals Ltd. (the
Company) as at December 31, 1997 and 1996 and the consolidated balance sheets of
the Company and its subsidiaries as at such dates, and the related statements of
income, shareholders' equity, and cash flows, for each of the three years, the
last of which ended December 31, 1997. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards, including standards prescribed by the Auditors Regulations (Manner of
Auditor's Performance) 1973. Such standards require that we plan and perform the
audit to obtain reasonable assurance that the financial statements are free of
material misstatement, whether due to error or intentional misrepresentation. 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 Board of
Directors and 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 mentioned financial statements were prepared on the basis of the
historical cost convention, in historical values adjusted for the changes in the
general purchasing power of the Israeli currency, in accordance with opinions of
the Institute of Certified Public Accountants in Israel. Condensed data of the
Company in nominal historical values, on the basis of which its adjusted
financial statements were prepared, is presented in Note 28.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company and the
consolidated financial position of the Company and its subsidiaries as at
December 31, 1997 and 1996 and the results of their operations, the last of
which ended December 31, 1997, in conformity with generally accepted accounting
principles. Furthermore, these statements have, in our opinion, been prepared in
accordance with the Securities Regulations (Preparation of Annual Financial
Statements) 1993.
Without qualifying our above opinion we would call attention to Note 1(C) to the
financial statements regarding the select material segments of activity of the
Company and the subsidiary.
Gabbai and Company
Certified Public Accountants (Isr.)
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
Level 8 Systems, Inc. and Subsidiaries
We have audited the consolidated balance sheet of Level 8 Systems, Inc. and
Subsidiaries as of December 31, 1997, and the related consolidated statements of
operations, shareholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used a significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Level 8
Systems, Inc. and Subsidiaries as of December 31, 1997, and the consolidated
results of their operations and their consolidated cash flows for the year then
ended, in conformity with generally accepted accounting principles.
/S/ Grant Thornton LLP
GRANT THORNTON LLP
New York, New York
February 23, 1998 (except for Note N, as to which
the date is February 27, 1998 and Note H, as to
which the date is April 6, 1998)
Deloitte Touche Tohmatsu
Brightman, Bar Levav, Freedman
Certified Public Accountants (Isr)
Haifa, February 15, 1998
Auditors' Report to the Shareholders' of Lev Hamifratz Ltd. and its Subsidiary
We have audited the accompanying balance sheet of Lev Hamifratz Ltd. and its
subsidiary (the Company) as at December 31, 1997 and the consolidated balance
sheets of the Company and its subsidiary as at such dates, and the related
statements of income, shareholders' equity, and cash flows, for the year then
ended. 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. The financial statements of
the Company and the consolidated financial statements of the Company and its
subsidiary as at December 31 1996 and 1995 and for the years then ended were
audited by other auditors whose report thereon dated February 10, 1997, was
unqualified.
We conducted our audits in accordance with generally accepted auditing
standards, including standards prescribed by the Auditors Regulations (Manner of
Auditor's Performance) 1973. Such standards require that we plan and perform the
audit to obtain reasonable assurance that the financial statements are free of
material misstatement, whether due to error or intentional misrepresentation. 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 Board of
Directors and 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 mentioned financial statements were prepared on the basis of the
historical cost convention, in historical values adjusted for the changes in the
general purchasing power of the Israeli currency, in accordance with opinions of
the Institute of Certified Public Accountants in Israel. Condensed data of the
Company in nominal historical values, on the basis of which its adjusted
financial statements were prepared, is presented in Note 24.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of the Company and the
consolidated financial position of the Company and its subsidiaries as at
December 31, 1997, and the results of their operations, the changes in the
Shareholders' equity and their cash flows for the year then ended, in conformity
with generally accepted accounting principles. Furthermore, these statements
have, in our opinion, been prepared in accordance with the Securities
Regulations (Preparation of Annual Financial Statements) 1993.
Yigal Brightman and Co.
Certified Public Accountants (Isr.)
24 FEB. 1998
ARTHUR ANDERSEN & Co.
To: Ben H.M. Hachmang, Coopers and Lybrand N.V.
Neomi Goldgevitch
From: Philippe Mongin, Alain Brami - Arthur Andersen Paris-PGA
Fax: 31.20.568.68.88
Subject: Mul-T-Lock France S.A.R.L. - Audit opinion, December 31, 1997
Date: February 16, 1998
1. At your request we have audited the financial statements of Mul-T-Lock
France S.A.R.L. for the twelve-month period ended December 31, 1997. These
statements are presented hereunder signed for identification.
The key figures are as follows:
o net equity as at 12.31.97: FF 1,979,314.
o net profit for 1997: FF 1,001,379.
2. We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
3. These financial statements have been prepared to be used in connection
with the preparation of the consolidated financial statements of the
Mul-T-Lock Group and, accordingly, they state the assets, liabilities,
stockholders' investment and revenues and expenses of the aforementioned
unit as adjusted for that purpose. The financial statements have not been
prepared for use by other parties and may not be appropriate for such use.
4. In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of the aforementioned
unit as of December 31, 1997 and are presented in accordance with
generally accepted accounting principles.
/s/ Philippe Mongin /s/ Alain Brami
------------------- ---------------
Philippe Mongin Alain Brami
[LETTERHEAD OF HAFT & GLUCKMAN LLP]
Independent Auditor's Report
Shareholder
Mul-T-Lock USA, Inc.
Lodi, New Jersey
We have audited the accompanying balance sheets of Mul-T-Lock USA, Inc. as of
December 31, 1997 and 1996 and the related statements of income and accumulated
deficits and cash flows for the two years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Mul-T-Lock USA, Inc. as of
December 31, 1997 and 1996, and the results of its operations and cash flows for
the two years then ended in conformity with generally accepted accounting
principles.
/s/ HAFT & GLUCKMAN LLP
HAFT & GLUCKMAN
Certified Public Accountants LLP
January 23, 1998
AUDITORS' REPORT TO STOCKHOLDERS3
of
NITROXID (1993) PRODUCTION AND MARKETING LTD.
We have audited the accompanying balance sheet of NITROXID (1993) PRODUCTION AND
MARKETING LTD. ("the Company") as of December 31, 1997 and 1996, and the related
statements of operations, changes in shareholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's Board of Directors and 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. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principals used and significant
estimates made by the Board of Directors and management, as well as evaluating
the overall financial statements 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 to reflect changes in the general purchasing power of
the Israeli currency in accordance with pronouncements of the Institute of
Certified Public Accountants in Israel. Condensed nominal Israeli currency data,
on the basis of which the adjusted financial statements of the Company were
prepared, is presented in Note 16.
In our opinion, the financial statements present fairly in all material
respects, the financial position of the Company as of December 31, 1997 and
1996, and the results of its operations, changes in shareholders' equity and
cash flows for the years then ended, in accordance with generally accepted
accounting principles.
Pursuant to Section 211 of the Companies Ordinance (New Version) - 1983, we
hereby state that we received all the information and explanations which we
requested and that our opinion on the financial statements is given based on the
best of the information and the explanations which we received and as reflected
in the books of the Company.
/s/ K. DAHAN & CO.
K. DAHAN & CO.
Certified Public Accountant (Isr.)
Ramat Gan March 4, 1998.
[LETTERHEAD OF ZINGER, NIR & CO.]
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF
ROL PROFIL LTD.
We have audited the accompanying balance sheets of Rol Profil Ltd. ("the
Company") as of December 31, 1997 and 1996, and the related statements of
income, changes in shareholders' equity and cash flows for each of the two years
in the period ended December 31, 1997 and for the six months ended December 31,
1995. These financial statements are the responsibility of the Company's Board
of Directors and managements. 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 by the Israeli Auditors' Regulations
(Auditor's Mode of performance), 1973. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements, either originating within the
financial statements themselves, or due to any misleading statement included
therein. 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
Board of Directors and 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 to reflect the changes in the general purchasing power
of the Israeli currency, as required by Statements of the Institute of Certified
Public Accountants in Israel. A summary of the financial statements in nominal
(historical) Israeli shekels, which served as a basis for the adjusted
statements, is presented in Note 18.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1997 and 1996, and the results of its operations, changes in shareholders'
equity and cash flows for each of the two years in the period ended December 31,
1997 and for the six months ended December 31, 1995, in conformity with
generally accepted accounting principles in Israel and the United States. (As
applicable to these financial statements, Israeli GAAP and U.S. GAAP are
practically indentical in all material respects).
Furthermore, in our opinion, the aforementioned financial statements comply with
the requirements of the Israeli Securities Regulations (Preparation of Annual
Financial Statements), 1993.
Zinger Nir & Co.
Certified Public Accountants (Isr)
/s/ Zinger Nir & Co.
Tel - Aviv
January 30, 1998
(Letterhead of Berman, Hopkins, Wright, Arnold & LaHam, LLP)
Independent Auditors' Report
Board of Directors
and Stockholder
Skydata, Inc.
West Melbourne, Florida
We have audited the accompanying balance sheets of Skydata, Inc. (a wholly owned
subsidiary of Gilat Satellite Networks, Ltd.) as of December 31, 1997 and 1996,
and the related statements of operations, changes in stockholders' deficit and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Skydata, Inc. as of December
31, 1997 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
January 28, 1998
Melbourne, Florida
/s/ Berman, Hopkins, Wright, Arnold & LaHam, LLP
[LETTERHEAD OF MENG UND PARTNER AG BADEN]
Report of the statutory auditors
to the general meeting of
Tambour Paints Ltd
CH - 8953 DIETIKON
As statutory auditors, we have audited the accounting record and the financial
statements (balance sheet, income statement and notes) of Tambour Paints Ltd for
the year ended December 31, 1997.
These financial statements are the responsibility of the board of directors. Our
responsibility is to express an opinion on these financial statements based on
our audit. We confirm that we meet the legal requirements concerning
professional qualification and independence.
Our audit was conducted in accordance with auditing standards promulgated by the
profession, which require that an audit be planned and performed to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. We have examined on a test basis evidence supporting the
amounts and disclosures in the financial statements. We have also assessed the
accounting principles used, significant estimates made and the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the accounting record and financial statements comply with the
law and the company's articles of incorporation.
We recommend that the financial statements submitted to you be approved.
Baden/Switzerland, 29th April 1998
MENG UND PARTNER AG BADEN
/s/ Karl Peterhans /s/ Rudolf Lehmann
Karl Peterhans Rudolf Lehmann
Certified accountant Certified accountant
(in charge of the audit)
AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of ASE Advanced
Systems Europe B.V. at Eindhoven as of 31 December 1996, and the related
consolidated statement of operations, changes in shareholders' equity and cash
flow for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ASE Advanced
Systems Europe B.V. as of 31 December 1996 and of their operations and their
cash flow for the year then ended, in conformity with generally accepted
accounting principles.
Nieuwegein, 19 February 1997
EshuisBlomer,
Auditors,
E.J.C. Boersen RA
[LETTERHEAD OF COOPERS & LYBRAND]
AUDITORS' REPORT
Introduction
We have audited the 1996 financial statements of Dutch Can Pack Holding B.V,
Amsterdam. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
Scope
We conducted our audit in accordance with auditing standards generally accepted
in the Netherlands. 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 audit provides a reasonable basis for our
opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the
financial position of the company as of 31 December 1996 and of the result for
the year then ended in accordance with accounting principles generally accepted
in the Netherlands and comply with the financial reporting requirements included
in Part 9, Book 2 of the Netherlands Civil Code.
Amsterdam, February 4, 1997
/s/ Coopers & Lybrand N.V.
Coopers & Lybrand N.V.
[LETTERHEAD OF SOMEKH CHAIKIN]
Tel Aviv March 4, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE
SHAREHOLDERS OF ISPAH HOLDINGS LTD.
We have audited the balance sheets of Ispah Holdings Limited as of December 31,
1996 and 1995, the related statements of income and shareholders' equity and
cash flows for each of the years in the period then ended expressed in New
Israel Shekels. These financial statements are the responsibility of the
Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits in accordance with generally accepted
auditing standards, including those prescribed under the Auditors Regulations
(Auditor's Mode of Performance), 1973 and, accordingly we have performed such
auditing procedures as we considered necessary in the circumstances. For
purposes of these financial statements there is no material difference between
generally accepted Israeli auditing standards and auditing standards generally
accepted in the U.S. These standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
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 4 to the financial statements.
The data relating to the net asset value of the Company's investments in an
investee company and to its equity in that Company's operating results, is based
on financial statements audited by other auditors.
<PAGE>
In our opinion, based on our audit and on the report of the abovementioned other
auditors, the above mentioned financial statements present fairly the financial
position of the Company as at December 31, 1996 and 1995, the results of its
operations, the changes in shareholder's equity and cash flows for each of the
years in the period ended December 31, 1996, 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
nominal/historical net profit (loss) and shareholders' equity to the extent
summarized in Note 5 to the financial statements.
/s/ Somekh Chaikin
Somekh Chaikin
CERTIFIED PUBLIC ACCOUNTANTS (ISR)
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
Level 8 Systems, Inc.
We have audited the accompanying consolidated statements of operations, changes
in shareholders' equity, and cash flows of Level 8 Systems, Inc. for the year
ended December 31, 1996. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows of
Level 8 Systems, Inc. for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Lurie, Besikof, Lapidus & Co., LLP
LURIE, BESIKOF, LAPIDUS & CO., LLP
Minneapolis, Minnesota
January 31, 1997, (except for Note 3, as to which the dated is April 6, 1998)
Ronal Stetner and Co
Certified Public Accountants (Isr)
Haifa, February 10, 1997
Auditors' Report to the Shareholders of Lev Hamifratz Ltd.
We have audited the accompanying balance sheets of Lev Hamifratz Ltd. (the
Company) as at December 31, 1996 and 1995 and the consolidated balance sheets of
the Company and its subsidiaries as at such dates, and the related statements of
income, shareholders' equity, and cash flows, for each of the three years, the
last of which ended December 31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards, including standards prescribed by the Auditors Regulations (Manner of
Auditor's Performance) 1973. Such standards require that we plan and perform the
audit to obtain reasonable assurance that the financial statements are free of
material misstatement, whether due to error or intentional misrepresentation. 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 Board of
Directors and 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 mentioned financial statements were prepared on the basis of the
historical cost convention, in historical values adjusted for the changes in the
general purchasing power of the Israeli currency, in accordance with opinions of
the Institute of Certified Public Accountants in Israel. Condensed data of the
Company in nominal historical values, on the basis of which its adjusted
financial statements were prepared, is presented in Note 23.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company and the
consolidated financial position of the Company and its subsidiaries as at
December 31, 1996 and 1995 and the results of their operations, the last of
which ended December 31, 1996, in conformity with generally accepted accounting
principles. Furthermore, these statements have, in our opinion, been prepared in
accordance with the Securities Regulations (Preparation of Annual Financial
Statements) 1993.
Ronal Stetner and Co
Certified Public Accountants (Isr.)
[Letterhead of Deloitte Touche Tohmatsu/Brightman Almagor & Co.]
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
"MAXIMA" - AIR SEPARATION CENTER LTD.
We have audited the accompanying balance sheets of "Maxima" - Air Separation
Center Ltd. ("the Company") as of December 31, 1996 and 1995, and the
consolidated balance sheets as of such dates, and the related statements of
operations, changes in shareholders' equity and cash flows - of the Company and
on a consolidated basis - for each of the three years in the period ended
December 31, 1996, expressed in Israeli currency. These financial statements are
the responsibility of the Company's Board of Directors and management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We did not audit the financial statements of a jointly controlled subsidiary
included under the proportionate consolidation method, whose assets constitute
approximately 5.2% and 6.7% of consolidated total assets as of December 31, 1996
and 1995, respectively, and whose revenues constitute approximately 7.1%, 8.3%
and 8% of consolidated total revenues for the years ended December 31, 1996,
1995 and 1994, respectively. Those statements were audited by other auditors
whose reports have been furnished to us and our opinion, insofar as it relates
to the amounts included in respect of the aforementioned subsidiary, is based
solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors' Regulations (Auditor's
Mode of Performance) - 1973, which, for purposes of these financial statements,
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 Board of Directors and 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 to reflect changes in the general purchasing power of
the Israeli currency in accordance with pronouncements 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, is
presented in Note 30.
<PAGE>
[Letterhead of Deloitte Touche Tohmatsu/Brightman Almagor & Co.]
In our opinion, based on our audits and the reports of the other auditors, the
financial statements present fairly, in all material respects, the financial
position - of the Company and on a consolidated basis - as of December 31, 1996
and 1995, and the results of operations, changes in shareholders' equity and
cash flows - of the Company and on a consolidated basis - for each of the three
years in the period ended December 31, 1996, in accordance with generally
accepted accounting principles in Israel. Furthermore, in our opinion, the
financial statements are prepared in accordance with the Israeli Securities
Regulations (Preparation of Annual Financial Statements) - 1993.
The financial information presented in accordance with generally accepted
accounting principles in the United States is based on nominal historical data
in Israeli currency and is included in Note 31 to the financial statements.
/s/ Igal Brightman & Co.
Igal Brightman & Co.
Certified Public Accountants
Tel Aviv, February 26, 1997.
[Letterhead of KPMG Hungaria Kft.]
Report of the Independent Auditor
to the Shareholders of Retail Chains Hungary Kereskedelmi Kft.
We have audited the balance sheet of Retail Chains Hungary Kereskedelmi Kft.
(the company) as at 31 December 1996 and 1995, and the consolidated balance
sheets of the company and its subsidiaries as at such dates, and the related
statements of income, shareholders' equity and cash flows for the years ended on
such dates (hereafter financial statements). These financial statements are the
responsibility of the Company's Board of Directors and its 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 standards prescribed by the Auditors' Regulations (Manner
of Auditor's Performance) 1973. Those standards require that we plan and perform
the audit to obtain reasonable assurance that the financial statements are free
of material misstatement, whether due to error or intentional misrepresentation.
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 Board of
Directors and by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The above mentioned financial statements were prepared on the basis of the
historical cost convention, in historical values adjusted for the changes in the
general purchasing power of the Israeli currency, in accordance with opinions of
the Institute of Certified Public Accountants in Israel. Condensed data in
nominal historical values, on the basis of which the adjusted financial
statements were prepared, is presented in Note 21.
In our opinion, the above financial statements present fairly, in all material
respects, the financial position of the company and the consolidated financial
position of the company and its subsidiaries as at 31 December 1996 and 1995 and
the results of its operations, the changes in the shareholders' equity and its
cash flows for each of the years ended in such dates, in conformity with
generally accepted accounting principles.
Without qualifying our opinion, we draw your attention to note 19, post balance
sheet events, which discusses the decision made by the quotaholders to start a
liquidation process from 15 January 1997.
February 28, 1997
KPMG Hungaria Kft.
/s/ Michael Kevehazi
Michael Kevehazi
Partner
[Letterhead of PricewaterhouseCoopers]
S41236 - 90008170
AUDITORS' REPORT
To the shareholders of
SANO DISPEC DEVELOPMENT LTD.
We have audited the financial statements of Sano Dispec Development Limited
(hereafter - the company): balance sheets at December 31, 1996 and 1995 and
statements of income (loss), changes in shareholders' equity and cash flows for
each of the two years in the period ended December 31, 1996. These financial
statements are the responsibility of the company's board of directors and
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
Our audits were performed in accordance with generally accepted auditing
standards, including those prescribed by the Auditors (Mode of Performance)
Regulations, 1973. Those standards require that we plan and perform the audits
to obtain reasonable assurance that the financial statements are free of
material misstatement, whether caused by an error in the financial statements or
by misleading information included therein. 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 company's board of directors and management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a fair basis for our opinion.
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 9.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of the company at December 31, 1996
and 1995 and its results of operations, changes in shareholders' equity and cash
flows for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
<PAGE>
Without qualifying our opinion, we draw attention to the accounting policy for
foreign entities as described in note 1c.
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. As
applicable to the company, the application of the latter would not have affected
the determination of nominal/historical loss and capital deficiency presented in
note 9.
/s/ Kesselman & Kesselman
Tel-Aviv, Kesselman & Kesselman
February 19, 1997 Certified Public Accountants (Isr.)
[Letterhead of Meng Und Partner AG Baden]
Report of the statutory auditors
to the general meeting of
Tambour Paints Ltd
CH - 8953 DIETIKON
As statutory auditors, we have audited the accounting record and the financial
statements (balance sheet, income statement and notes) of Tambour Paints Ltd for
the period from August 22nd, 1996 (date of incorporation) to December 31, 1996.
These financial statements are the responsibility of the board of directors. Our
responsibility is to express an opinion on these financial statements based on
our audit. We confirm that we meet the legal requirements concerning
professional qualification and independence.
Our audit was conducted in accordance with auditing standards promulgated by the
profession, which require that an audit be planned and performed to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. We have examined on a test basis evidence supporting the
amounts and disclosures in the financial statements. We have also assessed the
accounting principles used, significant estimates made and the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the accounting record and financial statements and the proposed
appropriation of available earnings comply with the law and the company's
articles of incorporation.
We recommend that the financial statements submitted to you be approved.
Baden/Switzerland, 8th April 1997
MENG UND PARTNER AG BADEN
/s/ Karl Peterhans /s/ Rudolf Lehmann
Karl Peterhans Rudolf Lehmann
Certified accountant Certified accountant
(in charge of the audit)
[Letterhead of Ben-Gur Tenenbaum & Co.]
Auditors' Report to the Shareholders of
Yaana Systems Ltd.
We have audited the financial statements of Yaana Systems Ltd. (hereinafter --
the "Company"), and the consolidated financial statements of the Company and its
subsidiaries: balance sheets as of December 31, 1996 and 1995, and the related
statements of income, changes in shareholders' equity arid cash flows for each
of the three years in the period ended on December 31, 1996. These financial
statements are the responsibility of the Company's Board of Directors and
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 by the Auditors' Regulations (Auditor's
Mode of Performance), 1973. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement, either due to an error or to intentional
misrepresentation. 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 applied and significant
estimates made by the Board of Directors and the Management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a fair basis for our opinion.
The aforementioned financial statements have been prepared on the basis of
historical cost adjusted to reflect the changes in the general purchasing power
of the Israeli currency, in accordance with pronouncements of the Institute of
Certified Public Accountants in Israel. Condensed nominal Israeli currency data,
of the Company, on the basis of which the adjusted financial statements were
prepared, are presented in Note 27.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position -- of the Company and Consolidated --
as of December 31, 1996 and 1995, and the results of operations, changes in
shareholders' equity and cash flows -- of the Company and Consolidated -- for
each of the three years in the period ended on December 31, 1996, in conformity
with generally accepted accounting principles. In addition, in our opinion, the
abovementioned financial statements have been prepared in conformity with the
Securities Regulations (Preparation of Annual Financial Statements),1993.
/s/ Ben-Gur Tenenbaum & Co.
Ben-Gur Tenenbaum & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, February 20, 1997
