The following table sets forth certain information regarding Ampal’s directors and executive officers as of March 9, 2004:
The numbers listed below, which follow the names of some of the foregoing directors, designate committee membership:
In 2003, the Board met two times and acted 7times by written consent; the Executive Committee did not conduct meetings but acted by written consent three times; and the Audit Committee met 9 times and acted by written consent one time. The Stock Option and Compensation Committee met one time and acted by written consent one time. All directors attended more than 75% of the aggregate of (1) the total number of Board meetings held during the period in 2003 for which such individual was a director and (2) the total number of meetings held by all committees of the Board on which such individual served in 2003 (during the period of such service). Each director of the Board is elected for a one year term and serves until his or her successor is duly elected and qualified.
The following sets forth the ages of all of the above-mentioned directors and executive officers, all positions and offices with Ampal or its subsidiaries held by each director and officer and principal occupations during the last five years.
YOSEF A. MAIMAN, 58, has been the Chairman of the Board of Ampal since April 25, 2002. Mr. Maiman has been President and Chief Executive Officer of Merhav M.N.F. Ltd. (“Merhav”), one of the largest international project development companies based in Israel, since its founding in 1975. Mr. Maiman is also the Chairman of the Board of Directors of Channel Ten, a commercial television station in Israel, a director of Eltek, Ltd. (“Eltek”), a developer and manufacturer of printed circuit boards, a member of the Board of Directors of the Middle East Task Force of the New York Council on Foreign Relations and Honorary Consul to Israel from Peru. Mr. Maiman is also member of the Board of Trustees of the Tel Aviv University, Chairman of the Israeli Board of the Jaffee Center for Strategic Studies at Tel Aviv University, a member of the Board of Governors of Ben Gurion University, and the Chairman of the Board of Trustees of the International Policy Institute for Counter Terrorism.
JACK BIGIO, 38 has been the President and Chief Executive Officer of Ampal since April 25, 2002, and a director of Ampal since March 6, 2002. From 1998 until April 2002, Mr. Bigio held various officer positions at Merhav, most recently as the Senior Vice President - Operations and Finance. Mr. Bigio is also a director of Eltek.
LEO MALAMUD, 52, has been a director of Ampal since March 6, 2002. Since 1996, Mr. Malamud was the Senior Vice President of Merhav. Mr. Malamud is also a director of Eltek.
MICHAEL ARNON, 78, was Chairman of the Board of Directors of Ampal from November 1990 until July 1994, when he retired. Mr. Arnon has been a director of Ampal since 1986. From July 1986 until November 1990, Mr. Arnon was President and Chief Executive Officer of Ampal.
Dr. JOSEPH YERUSHALMI, 66, has been Senior Vice President - Head of Energy and Infrastructure Projects of Merhav since 1995. He has been a director of Ampal since August 16, 2002.
YEHUDA KARNI, 75, was a senior partner in the law firm of Firon Karni Sarov & Firon, from 1961 until his retirement in 2000. He has been a director of Ampal since August 16, 2002.
EITAN HABER, 64, was the Head of Bureau for the former Prime Minister of Israel, Yitzhak Rabin, from July 1993 until November 1995. Since 1996, Mr. Haber has been the President and Chief Executive Officer of Geopol Ltd., which represents the Korean conglomerate Samsung in Israel and the Middle East; Kavim Ltd., a production and project development company; and Adar Real Estate Ltd., a real estate company. Mr. Haber is also a member of various non-profit organizations. He has been a director of Ampal since August 16, 2002.
MENAHEM MORAG, 53, has been a director of Ampal since January 27, 2004. From 1996 to 1999 Mr. Morag was the Head of Finance and Budget at the Israeli Prime Minister’s office in Tel Aviv. From 1999 to 2001, Mr. Morag was the Controller and Ombudsman at the Israeli Prime Minister’s office in Tel Aviv. From 2001 to 2003, Mr. Morag was the Head of Human Resources Department at the Israeli Prime Minister’s office in Tel Aviv. Since, 2003, Mr. Morag has been the Head of the Council of the Pensioners Association of the Israeli Prime Minister’s office in Tel Aviv.
SHLOMO SHALEV, 42, has been Senior Vice President - Investments since May 2002. From August 1997 through April 2002, Mr. Shalev was Vice President in Ampal Industries (Israel) Ltd, a wholly owned subsidiary of the Company. From August 1994 through July 1997, Mr. Shalev was the Israeli Consul for Economic Affairs in the northwest region of the Unites States.
DAFNA SHARIR, 35, has been Senior Vice President - Investments since May 2002. From March 1999 through April 2002, Ms. Sharir was a Director of Mergers and Acquisitions of Amdocs Limited. From July 1998 through February 1999, Ms. Sharir was an international tax consultant at Kost Forer & Gabay, a member of Ernst & Young International.
68
IRIT ELUZ, 37, has been the Chief Financial Officer and Vice President - Finance and Treasurer since May 2002. From January 2000 through April 2002, Ms. Eluz was the Associate Chief Financial Officer of Merhav. From June 1995 through December 1999, Ms. Eluz was the Chief Financial Officer of Kamor Group.
YORAM FIRON, 35, has been Secretary and Vice President - Investments and Corporate Affairs since May 2002. During the preceding five years, Mr. Firon was a Vice President of Merhav and a partner in the law firm of Firon Karni Sarov & Firon.
AMIT MANSUR, 34, has been Vice President – Investments since March 2003. From September 2000 through December 2002, Mr. Mansur served at Alrov Group as Strategy & Business Development Manager. From February 1997 through September 2000, Mr. Mansur was a projects manager at the Financial Advisory Services of KPMG Somekh Chaikin.
GIORA BAR-NIR, 47, has been the Controller since March 2002. During the preceding five years, Mr. Bar-Nir was the Controller of the Israeli subsidiaries of Ampal.
ALLA KANTER, 46, has been Vice President-Accounting since September 1995. Ms. Kanter was the Controller from August 1990 until March 2002.
AUDIT COMMITTEE
The Company has an Audit Committee of the Board consisting of Messrs. Arnon, Karni, Haber and Morag, each of whom is an independent director as defined under the rules of the National Association of Securities Dealers, Inc. and the rules promulgated by the Securities and Exchange Commission. The Board has determined that Mr. Morag is an “audit committee financial expert” for purposes of the rules promulgated by the Securities and Exchange Commission.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Ampal’s executive officers and directors, and persons who own more than 10% of a registered class of Ampal’s equity securities, to file with the Securities and Exchange Commission initial statements of beneficial ownership (Form 3), and statements of changes in beneficial ownership (Forms 4 and 5), of Class A Stock of Ampal. To the Company’s knowledge, based solely on its review of the copies of such forms received by it, all filing requirements applicable to its executive officers, directors and greater than 10-percent stockholders were complied with.
CODE OF ETHICS
The Company has adopted a code of ethics (as defined in the rules promulgated under the Securities Exchange Act of 1934) that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer, or person performing similar functions. A copy of the Company’s code of ethics is available on the Company’s website at www.ampal.com (the “Company’s Website”).
CODE OF CONDUCT
The Company has adopted a code of conduct that applies to all of the Company’s employees, directors and officers. A copy of the code of conduct is available on the Company’s Website.
69
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The table below presents information regarding remuneration paid for services to Ampal and its subsidiaries by the executive officers named below during the three fiscal years ended December 31, 2003, 2002 and 2001.
| | | | | | | | | | Annual Compensation
| | | |
|---|
Name and Principal
Position
| Year
| Salaries
$ | Bonus
$ | other
annual
Compensation(6)
$ | Long-Term
Compensation
Number of
Securities
Underlying
Options(7)
| All
Other
Compensation(8)
|
|---|
| | | | | | | |
|---|
| Yosef A. Maiman(1)(9) | | | | | | | | | | | | | | | | | | |
| Chairman of the Board | | 2003 | | | 506,849 | | | 155,953 | | | 25,570 | | | - | | | 2,002 | |
| | | 2002 | | | 324,376 | | | - | | | 15,765 | | | 250,000 | | | 410 | |
| | | | | | | | | | | | | | | | | | | |
| Jack Bigio (2)(9) | | 2003 | | | 257,547 | | | 106,189 | | | 71,777 | | | - | | | 88,389 | |
| President and CEO | | 2002 | | | 280,130 | | | | | | 43,498 | | | 150,000 | | | 40,740 | |
| | | | | | | | | | | | | | | | | | | |
| Dafna Sharir (4)(9) | | 2003 | | | 211,557 | | | 64,052 | | | 45,031 | | | - | | | 48,041 | |
| Senior Vice President Investments | | 2002 | | | 116,192 | | | | | | 25,726 | | | 90,000 | | | 25,069 | |
| | | | | | | | | | | | | | | | | | | |
| Irit Eluz (4)(9) | | 2003 | | | 183,959 | | | 55,698 | | | 39,631 | | | - | | | 42,000 | |
| CFO – Vice President Finance and | | 2002 | | | 100,993 | | | | | | 21,959 | | | 78,500 | | | 21,735 | |
| Treasurer |
| | | | | | | | | | | | | | | | | | | |
| Shlomo Shalev (3) | | 2003 | | | 167,093 | | | 34,254 | | | 33,048 | | | - | | | 41,712 | |
| Senior Vice President Investment | | 2002 | | | 149,225 | | | 63,240 | | | 27,815 | | | 90,000 | | | 37,279 | |
| | | 2001 | | | 143,093 | | | 61,406 | | | 17,408 | | | 20,000 | (5) | | 36,137 | |
___________________
| (1) | Mr. Maiman has been employed by Ampal since April 25, 2002 as Chairman of the Board. Mr. Maiman is entitled to receive a base salary of $483,000 (payable in NIS) per annum (plus benefits). |
| |
| (2) | Mr. Bigio has been employed by Ampal since April 25, 2002 as President and CEO. Mr. Bigio is entitled to receive a base salary of $250,000 (payable in NIS) per annum (plus benefits). |
| |
| (3) | Mr. Shalev was appointed Senior Vice President of Investment since May 21, 2002. |
| | |
| (4) | Has been employed by Ampal since April 25, 2002. |
| | |
| (5) | Expired on February 20, 2003. |
| | |
| (6) | Consists of amounts reimbursed for the payment of taxes. |
| | |
| (7) | Represents the number of shares of Class A Stock underlying options granted to the named executive officers. |
| | |
| (8) | Comprised of Ampal (Israel’s) contribution pursuant to: (i.) Ampal (Israel’s) pension plan and (ii.) Ampal (Israel’s) education fund and (iii.) use of car and (iv.) use of mobile phone. |
| | |
| (9) | In terms of change in control entitled to 6 months salary. |
70
| | Fiscal Year-End Option Values | |
| | | |
| | Number of Securities Underlying | Unrealized Value of |
| | Unexercised Options at Fiscal Year | In-the-Money Options |
| | Ended December 31, 2003 | |
| |
|
|---|
Name
| Exercisable
| Unexercisable
| Exercisable
| Unexercisable
|
|---|
| Yosef A. Maiman | | 78,125 | | | 171,875 | | $ | 243,750 | | $ | 536,250 | |
| Jack Bigio | | 46,875 | | | 103,125 | | $ | 146,250 | | $ | 321,750 | |
| Dafna Sharir | | 28,125 | | | 61,875 | | $ | 87,750 | | $ | 193,050 | |
| Irit Eluz | | 24,531 | | | 53,969 | | $ | 76,537 | | $ | 168,383 | |
| Shlomo Shalev | | 28,125 | | | 61,875 | | $ | 87,750 | | $ | 193,050 | |
Option Grants In Last Fiscal Year
No stock options to purchase our Class A Stock were granted to our named executive officers during fiscal year ended December 31, 2003.
Other Benefits
Ampal maintains a money purchase pension plan (“Pension Plan”) for its eligible employees. Eligible employees are all full-time employees of Ampal except non-resident aliens outside the United States, night-shift employees and employees represented by a collective bargaining unit. Ampal’s contribution is equal to 7% of each employee’s compensation plus 5.7% of the compensation in excess of the Social Security taxable wage base for that year.
Employees become vested in amounts contributed by Ampal depending on the number of years of service, as provided in the following table:
Years of Service
| Vested
Percentage
|
|---|
| less than 2 years | | 0 | % |
| 2 but less than 3 years | | 20 | % |
| 3 but less than 4 years | | 40 | % |
| 4 but less than 5 years | | 60 | % |
| 5 but less than 6 years | | 80 | % |
| 6 or more years | | 100 | % |
Benefits under the Pension Plan are paid in a lump sum, in an annuity form or in installments.
Ampal maintains a savings plan (the “Savings Plan”) for its eligible employees pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”). Eligible employees are all employees of Ampal except non-resident aliens, night-shift employees and employees represented by a collective bargaining unit. Participation by employees in the Savings Plan is voluntary. Participating employees may direct that a specific percentage of their annual compensation (up to 15%) be contributed to a self-directed 401(k) savings account. The amount which any employee could contribute to his or her 401(k)savings account in 2003 was limited under the Code to $11,000. Effective January 1, 1996, the Savings Plan was amended so that Ampal matches 50% of each employee’s contribution up to a maximum of 3% of the employee’s compensation. Employees who were eligible to participate in the Savings Plan as of December 31, 1995, are 100% vested at all times in the account balances maintained in their 401(k) savings account. Employees who became eligible to participate in the Savings Plan on or after January 1, 1996, become vested in amounts contributed by Ampal depending on the number of years of service, as provided in the following table:
71
Years of Service
| Vested
Percentage
|
|---|
| Less than 2 years | | 0 | % |
| 2 but less than 3 years | | 20 | % |
| 3 but less than 4 years | | 40 | % |
| 4 but less than 5 years | | 60 | % |
| 5 but less than 6 years | | 80 | % |
| 6 or more years | | 100 | % |
Benefits under the Savings Plan are required to be paid in a single, lump-sum distribution. Payment is usually made after termination of employment.
Compensation of Directors
Directors of Ampal (other than Mr. Maiman and Mr. Bigio) received $750 per Board meeting attended until December 31, 2003. Thereafter, directors of Ampal shall receive $1,500 per Board meeting attended. The Chairman of the Board receives $2,000. Directors of Ampal also receive the same amount for attendance at meetings of committees of the Board, provided that such committee meetings are on separate days and on a day other than the day of a regularly scheduled Board meeting.
The following table sets forth certain information regarding stock options granted to purchase our Class A Stock to our directors during the three fiscal years ended December 2003, 2002 and 2001.
| | | | | |
|---|
| | | | | |
|---|
| | Year
| 2003
| 2002
| 2001
|
|---|
| | Yosef A. Maiman (3) | | - | | | 250,000 | | | - | |
| | Jack Bigio (5) | | - | | | 150,000 | | | - | |
| | Leo Malamud (5) | | - | | | 150,000 | | | - | |
| | Dr. Joseph Yerushalmi (4) | | - | | | 100,000 | | | - | |
| | Eitan Haber (4) | | - | | | 15,000 | | | - | |
| | Michael Arnon | | - | | | 15,000 | | | 5,000 | |
| | Yehuda Karni (4) | | - | | | 15,000 | | | - | |
| | Daniel Steinmetz (1) | | - | | | - | | | 10,000 | |
| | Raz Steinmetz (1) | | - | | | - | | | 30,000 | |
| | Yaacov Elinav (1) | | - | | | - | | | 5,000 | |
| | Kenneth L. Henderson (1) | | - | | | - | | | 5,000 | |
| | Hillel Peled (2) | | - | | | - | | | 5,000 | |
| | Avi A. Vigder (1) | | - | | | - | | | 5,000 | |
| | Eliyahu Wagner (2) | | - | | | - | | | 5,000 | |
| | Benzion Benbassat (1) | | - | | | - | | | 5,000 | |
(1) Resigned April 25, 2002.
(2) Did not stand for re-election at the Annual Meeting of Shareholders held on August 16, 2002.
(3) Since April 25, 2002.
(4) Since August 16, 2002.
(5) Since March 6, 2002.
72
Stock Option Plan
In March 1998, the Board approved a Long-Term Incentive Plan (’’1998 Plan’’) permitting the granting of options to all employees, officers, directors and consultants of the Company and its subsidiaries to purchase up to an aggregate of 400,000 shares of Class A Stock. The 1998 Plan was approved by a majority of the Company’s shareholders at the June 19, 1998 annual meeting of shareholders. The 1998 Plan remains in effect for a period of ten years. As of December 31, 2003, 119,100 options of the 1998 Plan are outstanding.
On February 15, 2000, the Stock Option Committee approved a new Incentive Plan (“2000 Plan”), under which the Company has reserved 4 million shares of Class A Stock, permitting the granting of options to all employees, officers and directors. The 2000 Plan was approved by the Board of Directors at a meeting held on March 27, 2000 and was approved by a majority of the Company’s shareholders at the June 29, 2000 annual meeting of shareholders. The 2000 Plan remains in effect for a period of ten years. As of December 31, 2003, 1,277,000 options of the 2000 Plan are outstanding.
The options granted under the 1998 Plan and the 2000 Plan (collectively, the “Plans”) may be either incentive stock options, at an exercise price to be determined by the Stock Option and Compensation Committee (“the Committee”) but not less than 100% of the fair market value of the underlying options on the date of grant, or non-incentive stock options, at an exercise price to be determined by the Committee. The Committee may also grant, at its discretion, “restricted stock,” “dividend equivalent awards,” which entitle the recipient to receive dividends in the form of Class A Stock, cash or a combination of both and “stock appreciation rights,” which permit the recipient to receive an amount in the form of Class A Stock, cash or a combination of both, equal to the number of shares of Class A Stock with respect to which the rights are exercised multiplied by the excess of the fair market value of the Class A Stock on the exercise date over the exercise price. The options granted under the Plans were granted either at market value or above.
Under each of the Plans, all granted but unvested options become immediately exercisable upon the occurrence of a change in control of the Company. On February 26, 2002, the controlling shareholder of the Company, Rebar Financial Corp., sold all of its stock in the Company to Y.M. Noy Investments Ltd. Accordingly, all options granted but unvested under the Plans were immediately exercisable.
The Company accounts for all plans under APB Opinion No. 25, under which no compensation costs were incurred in the years ended December 31, 2001, 2002 and 2003. If compensation cost for the options under the above Plans had been determined in accordance with SFAS No. 123, the Company’s net income (loss) and EPS would have been.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Stock Option and Compensation Committee functions as both the compensation and stock option committee of Ampal. The members of this Committee include Mr. Michael Arnon, Mr. Yehuda Karni and Mr. Eitan Haber. Mr. Arnon was formerly President and Chief Executive Officer of Ampal from July 1986 until November 1990 and the Chairman of the Board from November 1990 until July 1994 (see, Item 10 of this Report).
73
| | |
| ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
| | Equity Compensation Plan Information(1)
|
|---|
Plan category
| Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
(a) | Weighted-average
exercise price of
outstanding options,
warrants and rights
(b) | Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
(c) |
|---|
| | | | |
|---|
| Equity compensation | | 1,396,100 | | | 3.46 | | | 3,003,900 | |
| plans approved by |
| security holders |
| | | | | | | | | | |
| Equity compensation | | N/A | | | N/A | | | N/A | |
| plans not approved |
| by security holders |
| | | | | | | | | | |
| Total | | 1,396,100 | | | 3.46 | | | 3,003,900 | |
(1) All information provided as of December 31, 2003.
PRINCIPAL SHAREHOLDERS OF AMPAL
The following table sets forth information as of March 9, 2004, as to the holders known to Ampal who beneficially own more than 5% of the Class A Stock, the only outstanding series of voting securities of Ampal. For purposes of computation of the percentage ownership of Class A Stock held by such stockholders set forth in the table, conversion of any 4% Cumulative Convertible Preferred Stock (the “4% Preferred Stock”) and 6 1/2% Cumulative Convertible Preferred Stock (the “6 1/2% Preferred Stock”) owned by such beneficial owner has been assumed, without increasing the number of shares of Class A Stock outstanding by amounts arising from possible conversions of convertible securities held by shareholders other than such beneficial owner. As of March 9, 2004, there were 19,808,855 (not including treasury shares) shares of Class A Stock of Ampal outstanding. In addition, as of March 9, 2004, there were 552,116 non-voting shares of 6 1/2% Preferred Stock outstanding (each convertible into 3 shares of Class A Stock outstanding and 127,577non-voting shares of 4% Preferred Stock outstanding (each convertible into 5 shares of Class A Stock).
74
Security Ownership of Certain Beneficial Owners
| | Name and Address
of Beneficial Owner
| Title of Class
| Number of Shares
and Nature
of Beneficial Ownership
| Percent
of Outstanding
Shares of
Class A Stock
|
|---|
| | | | | | | | | | | |
| | Y.M Noy Investments Ltd., of 33
Havazelet Hasharon St.,
Herzliya, Israel | | Class A Stock | | | 11,750,132 | (1) | | 59.31 | % |
| | | | | | | | | | | |
| | Yosef A. Maiman
Y.M Noy Investments Ltd., of 33
Havazelet Hasharon St.,
Herzliya, Israel | | Class A Stock | | | 11,843,882 | (1)(2) | | 59.79 | % |
| | | | | | | | | | | |
| | Ohad Maiman
Y.M Noy Investments Ltd., of 33
Havazelet Hasharon St.,
Herzliya, Israel
| | Class A Stock | | | 11,750,132 | (1) | | 59.31 | % |
| | | | | | | | | | | |
| | Noa Maiman
Y.M Noy Investments Ltd., of 33
Havazelet Hasharon St.,
Herzliya, Israel | | Class A Stock | | | 11,750,132 | (1) | | 59.31 | % |
_______________
| (1) | Consists of 11,750,132 shares of Class A Stock held directly by Y.M. Noy Investments Ltd. Yosef A. Maiman owns 100% of the economic shares and one-third of the voting shares of Y.M. Noy Investments Ltd.. In addition, Mr. Maiman holds an option to acquire the remaining two-thirds of the voting shares of Y.M. Noy Investments Ltd. (which are currently owned by Ohad Maiman and Noa Maiman, the son and daughter, respectively, of Mr. Maiman). |
| | |
| (2) | Includes 93,750 shares of Class A Stock underlying options which are currently exercisable by Mr. Maiman. |
| | |
75
Security Ownership of Management
| | The following table sets forth information as of March 9, 2004 as to each class of equity securities of Ampal or any of its subsidiaries beneficially owned by each director and named executive officer of Ampal listed in the Summary Compensation Table and by all directors and named executive officers of Ampal as a group. All ownership is direct unless otherwise noted. The table does not include directors or named executive officers who do not own any such shares: |
| Name | Number of Shares and
Nature of Beneficial
Ownership
of Class A Stock | Percent of Outstanding
Shares of
Class A Stock |
|---|
|
|
|
| Yosef Maiman | 11,843,882 | (1)(2) | 59.79 | % |
| Jack Bigio | 56,250 | (2) | * | |
| Dafna Sharir | 33,750 | (2) | * | |
| Shlomo Shalev | 33,750 | (2) | * | |
| Irit Eluz | 29,438 | (2) | * | |
| Leo Malamud | 56,250 | (2) | * | |
| Dr. Josef Yerushalmi | 37,500 | (2) | * | |
| Eitan Haber | 5,625 | (2) | * | |
| Yehuda Karni | 5,625 | (2) | * | |
| Michael Arnon | 20,625 | (2) | * | |
| All Directors and Executive Officers as a Group | 12,122,695 | | 61.20 | % |
____________
| * | Represents less than 1% of the class of securities. |
| | |
| (1) | Attributable to 11,750,132 shares of Class A Stock held directly by Y.M. Noy Investments Ltd. See “Security Ownership of Certain Beneficial Owners.” In addition, this represents 93,750 shares underlying options for Yosef Maiman which are presently exercisable. |
| | |
| (2) | Represents shares underlying options which are presently exercisable or exercisable in 60 days.. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Audit Committee of Ampal has the duty and responsibility of approving all transactions between Ampal, on the one hand, and any officer, director, or affiliate thereof, on the other hand, or in which any officer, director or affiliate has a material interest. Under the rules promulgated by Nasdaq, the Audit Committee must review and approve all transactions between Ampal on the one hand and any officer, director or principal shareholder of Ampal on the other hand. The Audit Committee considers and evaluates potential related party transactions from time to time, including co-investment opportunities and other types of transactions. The Audit Committee has the authority to engage independent legal, financial and other advisors.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES. The fees of Kesselman & Kesselman (“Kesselman”) fees for professional services rendered for the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2003 and December 31, 2002 and reviewing the financial statements included in the Company’s quarterly reports on Form 10-Q were $223,000 and $150,000, respectively. Fees billed to the Company by Arthur Andersen LLP (“Andersen”) for reviewing the financial statements included in the Company’s quarterly report for the fiscal quarter ended March 31, 2002 amounted to $37,000.
TAX FEES. Kesselman’s tax fees for the fiscal years ended December 31, 2003, were $103,600. No tax fees were billed for services rendered by Andersen for the fiscal year ended December 31, 2002.
ALL OTHER FEES - Kesselman’s fees for other services for the fiscal year ended December 31, 2003, were $49,200 respectively. No other services fees were billed for services rendered by Andersen for the fiscal year ended December 31, 2002.
All of the services provided by our principal accounting firm described above under the captions “Audit Fees”, “Tax Fees” and “All Other Fees” were approved by our Audit Committee. The Audit Committee has determined that the rendering of professional services described above by Kesselman is compatible with maintaining the auditor’s independence.
Audit Committee Pre-Approval Policies
The Company’s Audit Committee Charter provides that the Audit Committee shall approve in advance all audit services and all non-audit services provided by the independent auditors based on policies and procedures developed by the Audit Committee from time to time. The Audit Committee will not approve any non-audit services prohibited by applicable SEC regulations or any services in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported by the Internal Revenue Code and related regulations.
Our Audit Committee requires that our independent auditor, in conjunction with our Chief Financial Officer, be responsible for seeking pre-approval for providing services to us and that any request for pre-approval must inform the Audit Committee about each service to be provided and must provide detail as to the particular service to be provided.
77
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
| (a) | The following documents are filed as a part of this report: |
| | |
| | Page
Reference |
|---|
| |
|
| (1) Financial Statements and Supplementary Data | |
| | |
| Ampal-American Israel Corporation and Subsidiaries | |
| | |
| Report of Independent Auditors | 34-36 |
| Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001 . | 37 |
| | |
| Consolidated Balance Sheets as at December 31, 2003 and 2002 | 38-39 |
| | |
| Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001 | 40-41 |
| Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2003, 2002 and 2001 | 42-43 |
| Consolidated Statements of Comprehensive Income for the years ended December 31, 2003, 2002 and 2001 | 44 |
| Notes to Consolidated Financial Statements | 45-66 |
| Supplementary Data: |
| Selected quarterly financial data for the years ended December 31, 2003 and 2002 | 26 |
| | |
| (2) Financial Statement Schedules | |
| |
| (i) Schedule of Representative Rates of Exchange between the U.S. dollar and New Israeli Shekel for three years ended December 31, 2003 |
| |
Representative Rates of Exchange
Between the U.S. Dollar and the New Israeli Shekel
For the Three Years Ended December 31, 2003 |
| |
| The following table shows the amount of New Israeli Shekels equivalent to one U.S. Dollar on the dates indicated: |
| | 2003
| 2002
| 2001
|
|---|
| March 31 | 4.687 | 4.668 | 4.192 |
| June 30 | 4.312 | 4.769 | 4.165 |
| September 30 | 4.441 | 4.871 | 4.355 |
| December 31 | 4.379 | 4.737 | 4.416 |
| | |
| | (ii) Consolidated financial statements filed pursuant to Rule 3-09 of Regulation S-X |
| | |
| | The Company has determined that Granite was a “significant subsidiary” for the year ended December 31, 2003. Granite is a foreign business and audited financial statements are in the process of being prepared for fiscal 2003. The Company intends to file, unless otherwise not required, an amended 10-K/A on or prior to the due date of June 30, 2004, which will include, as an exhibit, the audited, stand-alone, financial statements of Granite as required by Reg. S-X 3-09(b)(2). |
78
Ophir Holdings Ltd.
Report of Certified Public Accountants
Consolidated Balance Sheets as at December 31, 2003 and 2002.
Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001..
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001
Notes to Financial Statements
OphirTech Ltd.
Report of Certified Public Accountants
Balance Sheets as at December 31, 2003 and 2002
Statements of Income for the years ended December 31, 2003, 2002 and 2001
Statements of Changes in Shareholders' Equity for the years ended December 31, 2003, 2002 and 2001
Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001
Notes to Financial Statements
| Trinet Venture Capital Ltd. |
| | Report of Certified Public Accountants |
| | Balance Sheets as at December 31, 2001 and 2000 |
| | Statements of Income for the years ended December 31, 2001, 2000 and 1999 |
| | Statements of Shareholders' deficiency for the years ended December 31, 2001, 2000 and 1999 |
| | |
| | Notes to Financial Statements |
| | |
| | (iii) Reports of Other Certified Public Accountants filed pursuant to Rule 2-05 of Regulation S-X: |
| | |
| | AM-HAL Ltd. |
| | Bay Heart Ltd. |
| | Carmel Container Systems Ltd. |
| | Coral World International Limited |
| | Country Club Kfar Saba Limited |
| | Epsilon Investment House Ltd. |
| | Granite Hacarmel Investments Limited. |
| | Hod Hasharon Sport Center Ltd. |
| | Hod Hasharon Sport Center (1992) Limited Partnership |
| | Renaissance Investment Co. Ltd. |
| | Shmey-Bar Real Estate 1993 Ltd. |
| | Shmey-Bar (I.A.) 1993 Ltd. |
| | Shmey-Bar (T.H.) 1993 Ltd. |
| | Trinet Investment in High-Tech Ltd. |
79
| |
| (3) Exhibits Required by Item 601 of Regulation S-K |
| | |
| Exhibit 2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession |
| | |
| | 2a. | Purchase and Sale Agreement, dated January 5, 1998, between Ampal Communications, Inc. and Motorola Communications Israel Ltd. (Includes as Exhibit A the form of Partnership Agreement between Ampal Communications, Inc. and Motorola Communications Israel Ltd. and as Exhibit B the form of Shareholders' Agreement between Ampal Communications, Inc. and Motorola Communications Israel Ltd.) (Filed as Exhibit 2 to a Current Report on Form 8-K, dated February 5, 1998, and incorporated herein by reference, File No. 0-538.) |
| | 2b. | Amendment, dated January 22, 1998, to (i) Purchase and Sale Agreement, dated January 5, 1998, between Ampal Communications, Inc. and Motorola Communications Israel Ltd., (ii) Partnership Agreement between Ampal Communications, Inc. and Motorola Communications Israel Ltd. and (iii) form of Shareholders' Agreement between Ampal Communications, Inc. and Motorola Communications Israel Ltd. (Filed as Exhibit 2a to a Current Report on Form 8-K, dated February 5, 1998, and incorporated herein by reference, File No. 0-538.) |
| | | |
| Exhibit 3 - Articles of Incorporation and By-Laws |
| | | |
| | 3a. | Amended and Restated Certificate of Incorporation of Ampal-American Israel Corporation, dated May 28, 1997. (Filed as Exhibit 3a. to Form 10-Q, for the quarter ended June 30, 1997 and incorporated herein by reference, File No. 0-5380). |
| | 3b. | By-Laws of Ampal-American Israel Corporation as amended, dated February 14, 2002 (incorporated by reference to Exhibit 3b. of Ampal's Form 10-K filed on March 27, 2002). |
| | | |
| Exhibit 4 - Instruments Defining the Rights of Security Holders, Including Indentures |
| | | |
| | 4a. | Form of Indenture dated as of November 1, 1984. (Filed as Exhibit 4a. to Registration Statement No. 2-88582 and incorporated herein by reference). |
| | 4b. | Form of Indenture dated as of May 1, 1986. (Filed as Exhibit 4a. to Pre-Effective Amendment No. 1 to Registration Statement No. 33-5578 and incorporated herein by reference). |
| | | |
| Exhibit 10 - Material Contracts |
| | | |
| | 10a. | Agreement, dated March 22, 1993, between the Investment Company of Bank Leumi, Ltd., and Ophir Holdings Ltd., Mercazim Investments Ltd., Diur B.P. Ltd. and Mivnat Holdings Ltd. (Filed as Exhibit 10.4 to Pre-Effective Amendment No. 1 to Registration Statement No. 33-51023 and incorporated herein by reference). |
80
| | | |
| | 10b. | Agreement, dated March 30, 1994, between Poalim Investments Ltd., Ampal (Israel) Ltd. and Ampal Industries (Israel) Ltd. (Translation). (Filed as Exhibit 10l, to Form 10-K for the fiscal year ended December 31, 1994 and incorporated herein by reference, File No. 0-538). |
| | 10c. | Loan Agreement, dated April 27, 1998, between Bank Hapoalim Ltd. and Ampal Communications Limited Partnership (Filed as Exhibit 10.1 to Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-538). |
| | 10d. | Form of Loan Agreement between Ampal Communications Limited Partnership and Bank Leumi Le-Israel B.M. Filed as Exhibit 10.2 to Report on Form 10-Q for the quarter ended June 30, 1998, File No. 0-538). |
| | 10e. | Sale and Purchase Agreement, dated November 8, 2000, between Ampal Realty Corporation and Second 800 LLC. (filed as Exhibit 10I to Form 10-K for the fiscal year ended December 31, 2002, File No. 000-00538). |
| | 10f. | The Company's 1998 Long-Term Incentive Plan (filed as Exhibit A to the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders).* |
| | 10g. | The Company's 2000 Incentive Plan (filed as an exhibit to the Company's Proxy Statement for the 2000 Annual Meeting of Shareholders).* |
| | 10h. | Amendment to the Company's 1998 Long Term Incentive Plan adopted by the Board of Directors on February 14, 2002.* (Filed as Exhibit 10h to the report on Form 10K. Filed on March 27, 2003) |
| | 10i | Amendment to the Company's 2000 Incentive Plan adopted by the Board of Directors on February 14, 2002.* (Filed as Exhibit 10i to the report on Form 10K. Filed on March 27, 2003). |
| |
| Exhibit 11 - Computation of Earnings Per Share |
| | | |
| Exhibit 12 - Statement re Computation of Ratios |
| | | |
| Exhibit 21 - List of Subsidiaries |
| | | |
| Exhibit 23 - Consents of Auditors: |
| | | |
|---|
| 23 | .1 | AM-HAL Ltd. | | E-23.1 | |
| 23 | .2 | Ampal-American Israel Corporation | | E-23.2 | |
| 23 | .3 | Bay Heart, Ltd. | | E-23.3 | |
| 23 | .4 | Carmel Container Systems Ltd. | | E-23.4 | |
| 23 | .5 | Coral World International Ltd. | | E-23.5 | |
| 23 | .6 | Country Club Kfar Saba Limited | | E-23.6 | |
| 23 | .7 | Epsilon Investment House Ltd. | | E-23.7 | |
| 23 | .8 | Granite Hacarmel Investment Limited | | E-23.8 | |
| 23 | .9 | Hod Hasharon Sport Center Ltd. | | E-23.9 | |
| 23 | .10 | Hod Hasharon Sport Center (1992) Ltd. Partnership | | E-23.10 | |
| 23 | .11 | Ophir Holdings Ltd. | | E-23.11 | |
| 23 | .12 | Ophirtech Ltd. | | E-23.12 | |
| 23 | .13 | Renaissance Investment Co. Ltd. | | E-23.13 | |
| 23 | .14 | Shmey-Bar Real Estate 1993 Ltd. | | E-23.14 | |
| 23 | .15 | Shmey-Bar (T.H.) 1993 Ltd. | | E-23.15 | |
| 23 | .16 | Shmey-Bar (I.A.) 1993 Ltd. | | E-23.16 | |
| 23 | .17 | Trinet Investment in High-Tech Ltd. | | E-23.17 | |
| 23 | .18 | Trinet Venture Capital Ltd. | | E-23.18 | |
81
| | | |
| | | Exhibit 31.1 - Certification of Jack Bigio pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | | |
| | | Exhibit 31.2 - Certification of Irit Eluz pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | |
| | | Exhibit 32 - Certification of Jack Bigio and Irit Eluz pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | | |
| * Management contract, compensatory plan or arrangement. |
| | | |
| Reports on Form 8-K |
| | | |
| | | No reports on Form 8-K were filed during the quarter ended at December 31, 2003. |
82
| OPHIR HOLDINGS LTD. |
| (An Israeli Corporation) |
| 2003 ANNUAL REPORT |
| OPHIR HOLDINGS LTD. |
| 2003 ANNUAL REPORT |
TABLE OF CONTENTS
| | Page | |
|---|
| | REPORT OF INDEPENDENT AUDITORS | | 2-3 | |
| | FINANCIAL STATEMENTS - CONSOLIDATED - IN | |
| | ADJUSTED NEW ISRAELI SHEKELS (NIS): | |
| | Balance sheets | | 4-5 | |
| | Statements of income (Losses) | | 6 | |
| | Statements of changes in shareholders’ equity | | 7 | |
| | Statements of cash flows | | 8-9 | |
| | Notes to financial statements | | 10-33 | |
| | | | | |
REPORT OF INDEPENDENT AUDITORS
To the shareholders of
OPHIR HOLDINGS LTD.
We have audited the consolidated financial statements of Ophir Holdings Ltd. and its subsidiaries (the “Company”): balance sheets as of December 31, 2003 and 2002 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, 2003. 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 auditing standards generally accepted in Israel and in the United States of America, including those prescribed by the Israeli 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. 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 the other independent auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audits, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2003 and 2002 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, 2003, in conformity with accounting principles generally accepted in Israel.
As explained in note 1b, the financial statements referred to above are presented in values adjusted for the changes in the general purchasing power of Israeli currency, in accordance with pronouncements of the Institute of Certified Public Accountants in Israel.
Accounting principles generally accepted in Israel vary in certain cignificant respects from accounting principles generally accepted in the United States.Information relating to the nature and effect of such differences is presented in note 14 to the consolidated financial statements.
| Tel-Aviv, Israel | Kesselman & Kesselman |
| March 9 2004 | Certified Public Accountants (Isr.) |
2
| OPHIR HOLDINGS LTD. |
| CONSOLIDATED BALANCE SHEETS |
| IN ADJUSTED NEW ISRAELI SHEKELS |
| | | December 31
|
|---|
| | Note
| 2003
| 2002
|
|---|
| | | In thousands
|
|---|
| A s s e t s | | 8c | | | | | |
| CURRENT ASSETS: | | 12 | | | |
| Cash and cash equivalents | | | | 3,215 | | 416 | |
| Marketable securities | | | | 353 | | 189 | |
| Accounts receivable | | 13a | | 11,947 | | 2,812 | |
| Deferred income taxes | | 10b | | | | 2,816 | |
| Rental property designated for sale, net of | |
| advances received from the buyers | | 5 | | | | 18,420 | |
| |
| |
| |
| T o t a l current assets | | | | 15,515 | | 24,653 | |
| |
| |
| |
| LAND - BUSINESS INVENTORY | | 1e;8a(2) | | 13,048 | | 13,048 | |
| |
| |
| |
| INVESTMENTS: | |
| Associated companies | | 3;12 | | 187,505 | | 185,317 | |
| Other companies | | 4 | | 177,324 | | 176,675 | |
| Loan to a company which is | |
| an interested party | | 11b | | 8,703 | | *8,347 | |
| |
| |
| |
| | | | | 373,532 | | 370,339 | |
| |
| |
| |
| | |
| FIXED ASSETS - buildings leased , net of | |
| accumulated depreciation | | 5 | | 58,884 | | 83,449 | |
| |
| |
| |
| | | | | 460,979 | | 491,489 | |
| |
| |
| |
| | ____________________ | ) | Roni Harel | |
| | DIRECTORS | ) | | |
| | | ) | Shlomo Shalev | |
Date of approval of the financial statements: March 9, 2004.
3
| | | December 31
|
|---|
| | Note
| 2003
| 2002
|
|---|
| | | In thousands
|
|---|
| Liabilities and shareholders’ equity | | 8c | | | | | |
| CURRENT LIABILITIES: | | 12 | |
| Bank credit | | 13b | | 8,338 | | 21,598 | |
| Accounts payable and accruals | | 13c | | 8,034 | | 8,067 | |
| |
| |
| |
| T o t a l current liabilities | | | | 16,372 | | 29,665 | |
| |
| |
| |
| LONG-TERM LIABILITIES: | | 12 | |
| Bank loans (net of current maturities) | | 6 | | 66,456 | | 74,824 | |
| Capital notes to an associated company | | 7 | | 151,601 | | 148,751 | |
| Capital note to an interested party | | 7 | | 1,069 | | 1,049 | |
| Payables in respect of acquisition of land - | |
| business inventory | | 8a(2) | | 11,793 | | 11,973 | |
| Deferred income taxes | | 10b | | 2,676 | | 2,521 | |
| |
| |
| |
| T o t a l long-term liabilities | | | | 233,595 | | 239,118 | |
| |
| |
| |
| T o t a l liabilities | | | | 249,967 | | 268,783 | |
| COMMITMENTS AND CONTINGENT | |
| LIABILITIES | | 8 | |
| MINORITY INTEREST | | 2 | | 26 | | 11 | |
| SHAREHOLDERS’ EQUITY | | 9 | | 210,986 | | 222,695 | |
| |
| |
| |
| | | | | 460,979 | | 491,489 |
| |
| |
| |
* Reclassified.
The accompanying notes are an integral part of the financial statements.
4
| OPHIR HOLDINGS LTD. |
| CONSOLIDATED STATEMENTS OF INCOME (LOSSES) |
| IN ADJUSTED NEW ISRAELI SHEKELS |
| | Note
| 2003
| 2002
| 2001
|
|---|
| | | In thousands
|
|---|
| REVENUES AND GAINS: | | | | | | | | | |
| From lease of buildings | | | | 10,278 | | 13,735 | | 14,400 | |
| Share in profits (losses) of associated companies - net | | 3 | | (2,071 | ) | 1,662 | | 752 | |
| Gain from sale and increase in value of marketable shares - net | | | | 164 | | 291 | | 17,259 | |
| Gain from sale of land-business inventory | | | | 120 | | 412 | |
| Dividend received from other companies | | | | 7,896 | | 97 | | 6,378 | |
| Management fees from associated companies and others | | 11a | | 438 | | 471 | | 429 | |
| Financial income - net | | 11a;13f | | | | | | 68 | |
| |
| |
| |
| |
| | | | | 16,825 | | 16,668 | | 39,286 | |
| |
| |
| |
| |
| EXPENSES AND LOSSES: | |
| Operating cost of buildings for rent (including depreciation) | | | | 3,613 | | 3,934 | | 3,605 | |
| Write-down of investments in associated companies | | 3 | | | | 5,004 | |
| Write-down of investments in other companies | | 4 | | | | 20,605 | |
| General and administrative expenses - net | | 11a | | 4,623 | | 7,440 | | 5,793 | |
| Loss from sale of leased buildings - net | | 5 | | 30 | |
| Financial expenses - net | | 11a;13f | | 1,532 | | 1,580 | |
| |
| |
| |
| |
| | | | | 9,798 | | 38,563 | | 9,398 | |
| |
| |
| |
| |
| INCOME (LOSS) BEFORE TAXES ON INCOME | | | | 7,027 | | (21,895 | ) | 29,888 | |
| TAXES ON INCOME (TAX SAVING) | | 10 | | 4,731 | | (13,761 | ) | 10,125 | |
| |
| |
| |
| |
| INCOME (LOSS) AFTER TAXES ON INCOME | |
| (TAX SAVING) | | | | 2,296 | | (8,134 | ) | 19,763 | |
| MINORITY INTEREST IN LOSSES (PROFITS) OF A | |
| SUBSIDIARY | | | | 15 | | (67 | ) | 4 | |
| |
| |
| |
| |
| NET INCOME (LOSS) FOR THE YEAR | | | | 2,311 | | (8,201 | ) | 19,767 | |
| |
| |
| |
| |
The accompanying notes are an integral part of the financial statements.
5
| OPHIR HOLDINGS LTD. |
| STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY |
| IN ADJUSTED NEW ISRAELI SHEKELS |
| | Share
capital | Capital
surplus | Retained
earnings | Total |
|---|
| |
|
|
|
|
|---|
| | I n t h o u s a n d s
|
|---|
| | | | | |
|---|
| BALANCE AT JANUARY 1, 2001 | | 2,832 | | 80,488 | | 327,058 | | 410,378 | |
| CHANGES DURING 2001: | |
| Net income | | | | | | 19,767 | | 19,767 | |
| Dividend | | | | | | (199,249 | ) | (199,249 | ) |
|
| |
| |
| |
| |
| BALANCE AT DECEMBER 31, 2001 | | 2,832 | | 80,488 | | 147,576 | | 230,896 | |
| | | | | | | | | | |
| CHANGES DURING 2002 - loss | | | | | | (8,201 | ) | (8,201 | ) |
|
| |
| |
| |
| |
| BALANCE AT DECEMBER 31, 2002 | | 2,832 | | 80,488 | | 139,375 | | 222,695 | |
| CHANGES DURING 2003: | |
| Net income | | | | | | 2,311 | | 2,311 | |
| Dividend | | | | | | (14,000 | ) | (14,000 | ) |
| Erosion of capital note | | | | (20 | ) | | | (20 | ) |
|
| |
| |
| |
| |
| BALANCE AT DECEMBER 31, 2003 | | 2,832 | | 80,468 | | 127,686 | | 210,986 | |
|
| |
| |
| |
| |
The accompanying notes are an integral part of the financial statements.
6
(Continued) – 1
| OPHIR HOLDINGS LTD. |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| IN ADJUSTED NEW ISRAELI SHEKELS |
| | 2003
| 2002
| 2001
|
|---|
| | In thousands
|
|---|
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | |
| Net income (loss) for the year | | 2,311 | | (8,201 | ) | 19,767 | |
| Adjustments required to reflect the cash flows from operating activities* | | 3,703 | | 11,273 | | (17,207 | ) |
|
| |
| |
| |
| Net cash provided by operating activities | | 6,014 | | 3,072 | | 2,560 | |
|
| |
| |
| |
| CASH FLOWS FROM INVESTING ACTIVITIES: | |
| Proceeds from sale of investment in other companies | | | | 6,559 | | 3,741 | |
| Proceed from sale of leased buildings | | 30,190 | |
| Proceeds from sale of marketable shares | | | | | | 25,535 | |
| Investment in associated companies (including capital notes and loans - net) | | (424 | ) | (602 | ) | (681 | ) |
| Investments in other companies | | (301 | ) | (1,388 | ) | (109 | ) |
| Investment in fixed assets (mainly buildings) | | | | | | (913 | ) | |
| Short-term bank deposit | | | | | | 139,312 | | |
| Withdrawal of long-term bank deposit | | | | 2,117 | | 4,093 | |
| Proceed from sale of business inventory | | 120 | | 412 | | | |
| Advances on account of rental property designated for sale | | | | 2,739 | |
| Collection of short-term loan to shareholders | | | | | | 57,730 | |
| Loan to a company which is an interested party | | (192 | ) | (3,358 | ) |
|
| |
| |
| |
| Net cash provided by Investing activities | | 29,393 | | 6,479 | | 228,708 | |
|
| |
| |
| |
| CASH FLOWS FROM FINANCING ACTIVITIES: | |
| Repayment of long-term bank loans- net | | (8,307 | ) | (8,314 | ) | (8,301 | ) |
| Short-term loan from a company which is an interested party- net | | | | | | (17,570 | ) | |
| Dividend paid | | (11,047 | ) | | | (199,249 | ) |
| Short-term bank credit and loans - net | | (13,254 | ) | (2,445 | ) | (6,400 | ) |
|
| |
| |
| |
| Net cash used in financing activities | | (32,608 | ) | (10,759 | ) | (231,520 | ) |
|
| |
| |
| |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | 2,799 | | (1,208 | ) | (252 | ) |
| BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | | 416 | | 1,624 | | 1,876 | |
|
| |
| |
| |
| BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR | | 3,215 | | 416 | | 1,624 | |
|
| |
| |
| |
7
(Concluded) - 2
| OPHIR HOLDINGS LTD. |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| IN ADJUSTED NEW ISRAELI SHEKELS |
| | 2003
| 2002
| 2001
|
|---|
| | In thousands
|
|---|
| * Adjustments required to reflect the cash flows from operating | | | | | | |
| activities: |
| Income and expenses not involving cash flows: |
| Share in losses (profits) of associated companies - net | 2,071 | | (1,662 | ) | (752 | ) |
| Depreciation | 1,953 | | 2,490 | | 2,496 | |
| Deferred income taxes - net | 2,971 | | (3,672 | ) | 582 | |
| Minority interest in losses of a subsidiary (2002 - net of dividend) | 15 | | (4 | ) | (4 | ) |
| Increase (decrease) in liabilities for employee rights upon retirement | | | | | (53 | ) |
| Gain from sale of fixed assets and business inventory - net | (120 | ) | (412 | ) |
| Loss from sale of leased buildings | 30 | |
| Gain from sale and decrease in value of marketable shares - net | (164 | ) | (291 | ) | (17,259 | ) |
| Write-down of investment in associated companies and other | | | 25,609 | |
| Linkage differences (erosion) on long-term bank loans - net | (67 | ) | 163 | | 3 | |
| Linkage differences and interest on bank deposit - net | | | 2 | | (355 | ) |
| Erosion (linkage differences) on short-term loan to a company which is |
| an interested party | (164 | ) | (64 | ) | (2,366 | ) |
| Linkage differences and interest on loans to associated companies and |
| others | (1,333 | ) | (1,103 | ) | (933 | ) |
|
| |
| |
| |
| | 5,192 | | 21,056 | | (18,641 | ) |
|
| |
| |
| |
| Changes in operating asset and liability items: |
| Decrease (increase) in accounts receivable | 1,677 | | (247 | ) | 86 | |
| Increase (decrease) in accounts payable and accruals | (3,166 | ) | (9,536 | ) | 1,348 | |
|
| |
| |
| |
| | (1,489 | ) | (9,783 | ) | 1,434 | |
|
| |
| |
| |
| | 3,703 | | 11,273 | | (17,207 | ) |
|
| |
| |
| |
The accompanying notes are an integral part of the financial statements.
8
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS |
| |
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
| | The significant accounting policies, applied on a consistent basis, are as follows: |
| |
| 1) | Ophir Holdings Ltd. (“Ophir”) is a holding company which also owns commercial buildings designated for rent. |
| | |
| | The subsidiary Merkazim Investments Ltd. is engaged in the renting of commercial buildings. In 2003, this company sold all its holdings in the commercial buildings that were designated for rent (see note 5b.). |
| |
| | The subsidiary, New Horizons (1993) Ltd., holds a number of properties (designated for sale), which were purchased from an interested party, see also note 8a(2). |
| |
| | As to the activities of the associated companies, see note 3c. |
| |
| | Subsidiary - | a company controlled or owned to the extent of over 50%, |
| | the financial statements of which have been consolidated |
| | with the financial statements of Ophir. |
| | |
| | | |
| | Associated company - | a company controlled to the extent of 20% or over (which is not a subsidiary), or a company less than 20% controlled which
complies with the condition relating to “significant influence”, as prescribed by Opinion 68 of the Institute of Certified Public
Accountants in Israel (the “Israeli Institute”), the investment in which is presented by the equity method. |
| | |
| | | |
| | Another company - | a company to which the conditions specified in the preceding paragraphs do not apply. |
| | |
| | | |
| | The Group - | Ophir and its subsidiaries and associated companies. |
| | |
| | | |
| | Interested parties - | as defined in the Israeli Securities (Preparation of Annual Financial Statements) Regulations, 1993. |
| | |
| | | |
| | Related parties - | as defined in Opinion 29 of the Israeli Institute. |
9
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
| b. Adjusted financialstatements: |
| | |
| 1) | The 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 Israeli Institute. All figures in the financial statements are presented in adjusted new Israeli shekels (NIS) which have a uniform purchasing power (December 2003 adjusted NIS) - based upon the changes in the Israeli consumer price index; the “Israeli CPI” (see also note 12b). |
| | |
| | The adjustment of the financial statements is based on the accounts of the Ophir and its Israeli subsidiaries, maintained in nominal NIS. |
| | |
| | The components of the income statements were, for the most part, adjusted as follows: the components relating to transactions carried out during the year (revenues, labor costs, etc.) were adjusted on the basis of the index for the month in which the transaction was carried out, while those relating to non-monetary balance sheet items (mainly - depreciation and write-downs) were adjusted on the same basis as the related balance sheet item. The financing component represents financial income and expenses in real terms and the erosion of balances of monetary items during the year. |
| |
| 2) | As mentioned in (1) above, these financial statements have been drawn up in accordance with the principles of adjustment prescribed by pronouncements of the Israeli Institute, on the basis of the changes in the Israeli CPI. |
| | |
| 3) | The adjusted amounts of non-monetary assets do not necessarily represent realization value or current economic value, but only the original historical values, adjusted to reflect the changes in the general purchasing power of Israeli currency. In these financial statements, the term “cost” signifies cost in adjusted Israeli currency. |
| | |
| 4) | In October 2001, the Israel Accounting Standards Board (“the IASB”) issued Israel Accounting Standard No. 12 - Discontinuance of Adjusting Financial Statements for Inflation, which provided for the discontinuance of adjusting financial statements for the effects of inflation, as of January 1, 2003. In December 2002, Accounting Standard No. 17 was issued that postponed the date from which Accounting Standard No. 12 is to be applied until January 1, 2004. The inflation-adjusted amounts as of December 31, 2003 will be the base for the nominal-historical financial reporting in the following periods. |
| | |
| | The implementation of Standard No. 12 will mainly affect the financial expenses item. |
10
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
| c. Principlesofconsolidation: |
| | |
| 1) | The consolidated financial statements include the accounts of the Ophir and its subsidiaries. The companies included in consolidation are listed in note 2a. |
| | |
| 2) | Intercompany balances and transactions have been eliminated. |
| | |
| | These securities (except for investment in shares constituting “permanent investment”, see f(3) below), are stated at market value. |
| |
| | The changes in value of the above securities are carried to income. |
| |
| e. | Land - business inventory |
| | |
| | The land is presented at cost which - in managements’ estimation - is lower than market value. |
| |
| | According to the agreements for the purchase of land, the Company might pay additional costs of up to 90% of the net sale proceeds, see also note 8a(2). |
| |
| | (a) | The investments in these companies are accounted for by the equity method. The balance of the investment as of December 31, 2003 is presented net of a provision for the impairment in value of an associated company, see j. below and note 3. |
| | |
| (b) | The excess of cost of the investment in associated companies over the Company’s share in their equity in net assets at date of acquisition (“excess of cost of investment”) represents, in part, the amount attributed to land and buildings in certain companies and amounts not attributed to specific assets (goodwill) in other companies. The amount attributed to buildings is amortized in equal annual installments of 4% per year, while the amount attributed to goodwill is amortized in equal annual installments of 10% per year. |
11
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
| | The investments in the shares of these companies, including investments in quoted shares, which the Company intends to hold for a long period (“permanent investment”), are stated at cost (see also below), net of write-down for decrease in value which is not of a temporary nature. |
| |
| | Investments in companies, which were accounted for by the equity method, was reclassified as an investments in other companies, since the Company no longer had a “significant influence”, are stated by the equity method as of the date of the reclassification. |
| |
| 1) | These assets are stated at cost. |
| | |
| 2) | Cost of fixed assets includes the Company’s share in a joint venture engaged solely in construction of a building and rental thereof. |
| | |
| 3) | Financial expenses in respect of loans and credit applied to finance the construction or acquisition of buildings - incurred until construction was completed - were charged to cost of the buildings. |
| | |
| 4) | The assets are depreciated by the straight-line method, on basis of their estimated
useful life. Annual rates of depreciation are 2% or 4%. |
| | |
| 1) | Deferred taxes are computed in respect of differences between the amounts presented in these statements and those taken into account for tax purposes. As to the factors in respect of which deferred taxes have been included - see note 10b. |
| | |
| | Deferred tax balances are computed at the tax rate expected to be in effect at time of release to income from the deferred tax accounts. The amount of deferred taxes presented in the income statement reflects changes in the above balances during the year. |
| |
| 2) | Taxes which would apply in the event of disposal of investments in subsidiaries and associated companies have not been taken into account in computing the deferred taxes, since as of the date of approval of these financial statements it is the Company’s policy to hold these investments, not to realize them. |
| | |
| | Income from leasing of buildings is recognized on the accrual basis, in accordance with the terms of the agreements with tenants. |
12
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES(continued):
| | j. Impairment of assets : |
| |
| | In February 2003, Accounting Standard No. 15 of the Israeli Accounting Standards Board - “Impairment of Assets”, became effective. This standard requires a periodic review to evaluate the need for a provision for the impairment of the Company’s non-monetary assets - fixed assets and identifiable intangibles, including goodwill, as well as investments in associated companies. |
| |
| | The Company has opted for early adoption of the standard and accordingly, commencing from December 31, 2002, the Company assess’ - at each balance sheet date - whether any events have occurred or changes in circumstances have taken place, which might indicate that there has been an impairment of one or more of the abova assets. When such indicators of impairment are present, the Company evaluates whether the carrying value of the investment in the asset is recoverable from the cash flows anticipated from that asset, and, if necessary, records an impairment provision up to the amount needed to adjust carrying amount to the recoverable amount. |
| |
| | The recoverable value of an asset is determined according to the higher of the net selling price of the asset or its value in use to the Company. The value in use is determined according to the present value of anticipated cash flows from the continued use of the asset, including those expected at the time of its future retirement and disposal. |
| |
| | The impairment loss is carried directly to income. Where indicators are present that beneficial events have occurred or beneficial changes in circumstances have taken place, the impairment provision in respect of the asset (other than goodwill) may be cancelled or reduced in the future, so long as the recoverable value of the asset has increased, as a result of changes in the estimates previously employed in determining such value. |
| |
| | The Group considers all highly liquid investments, which include short-term bank deposits (up to three months from date of deposit) that are not restricted as to withdrawal or use, to be cash equivalents. |
| |
| l. | Net income per NIS 1 of par value of ordinary shares |
| | |
| | The financial statements do not include data regarding net income per NIS 1 of par value of ordinary shares, since that data would not provide significant additional information to that otherwise provided by the financial statements. |
| |
| m. Formatofincomestatements |
| | |
| | In view of the nature of the Company’s activities - holding of companies which operate in different fields - the Company is of the opinion that concentrated presentation of all revenue and gain items as a group, and of all expense and loss items in a separate group is more suitable to reflect its activities. |
13
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
| | Balances the linkage arrangements in respect of which stipulate linkage to the last index published prior to date of payment are stated on basis of the last index published prior to the latest balance sheet date (the index for November). |
| |
| o. | Use of estimates in the preparation of financial statements |
| | |
| | The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting years. Actual results could differ from those estimates. |
NOTE 2 - SUBSIDIARIES:
| Following is a list of the subsidiaries consolidated in Ophir’s financial statements: |
| | |
| | Wholly-owned: |
| | Ophir Financing Ltd. - inactive; |
| | Maoz Financial Investments Ltd. (“Maoz”) - inactive; |
| | Merkazim Investments Ltd. (“Merkazim”) a wholly-owned subsidiary of Maoz; |
| | 80%-owned - New Horizons (1993) Ltd. (“New Horizons”). |
NOTE 3 - INVESTMENTSINASSOCIATEDCOMPANIES:
| a. | The investments are composed as follows: |
| December 31
|
|---|
| 2003
| 2002
|
|---|
| | Adjusted NIS in
thousands
|
|---|
| | Equity in net assets: | | | | | | | | |
| | Cost of shares | | | | 14,449 | | | 14,449 | |
| | Share in accumulated undistributed profit | | | | 85,134 | | | 84,355 | |
| | Share in capital surplus derived by Mivnat | | |
| | Holdings Ltd. from sale of its investment | | |
| | in Industrial Buildings Ltd. to its | | |
| | Shareholders (see notes 1c(1) and 4(a)) | | | | 66,065 | | | 66,065 | |
|
| |
| |
| | | | | | 165,648 | | | 164,869 | |
| | Long-term loans (2) | | | | 26,861 | | | 25,452 | |
| | L e s s - provision for impairment of investment | | | | (5,004 | ) | | (5,004 | ) |
|
| |
| |
| | | | | | 187,505 | | | 185,317 | |
|
| |
| |
| (1) | Including accumulated erosion of capital notes and gains on dilution of holding in associated companies resulting from issuance of shares to a third party. |
| | |
| (2) | The loans are linked to the Israeli CPI, bear interest at annual rates of 4%-5% and have no fixed maturity date. |
| | |
14
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 3 - INVESTMENTSINASSOCIATEDCOMPANIES:
| | b. The changes in the investments in 2003 are as follows: |
| Adjusted NIS in
thousands
|
|---|
| | Balance at beginning of year | | 185,317 | |
| | Changes during the year: | |
| | Share in losses of associated companies - net | | (2,071 | ) |
| | Loan to associated company | | 424 | |
| | Share in erosion of capital note issued to an | |
| | associated company | | 2,850 | |
| | Accrued linkage differentials and interest in respect | |
| | of long-term loans | | 985 | |
|
| |
| | Balance at end of year | | 187,505 | |
|
| |
| c. | Following are details relating to the associated companies: |
| | |
| 1) | Mivnat Holdings Ltd. (“Mivnat”) |
| | |
| | Mivnat was established in 1993 by Ophir, the subsidiary - Merkazim, and others, some of whom were interested parties, in order to acquire the Israeli Government’s shares in Industrial Buildings Ltd. (“Industrial Buildings”). During March 1993, Mivnat acquired these shares in consideration of adjusted NIS 1,053 million. Ophir holds 18.75% interest in Mivnat, directly, and 25% interest jointly with Merkazim. |
| |
| | As described in note 4(a), on December 31, 1998, Mivnat sold its holdings in Industrial Buildings to its shareholders (including Ophir). Upon the consummation of the transaction, Mivnat ceased to have any rights in the shares of Industrial Buildings. |
| |
| 2) | Shmey-Bar Real Estate 1993 Ltd., Shmey-Bar (T.H.) 1993 Ltd. and Shmey-Bar(I.A.) 1993 Ltd. (“Shmey-Bar companies”). |
| | |
| | The Company, along with a group of companies, established the Shmey-Bar companies in 1993. These companies were established for the purpose of dealing in development of fruit bearing properties. They purchased rights to real estate and options to purchase real estate in Tel-Aviv, Haifa, Beer-Sheva, Kiryat Shemona, Eilat Jerusalem, Holon, Tel-Hanan and Ramla, all from Hamashbir Hamerkazi Israel Cooperative Wholesale Society Ltd. |
| |
| | On December 31, 2002, the Company wrote-down its investment in the Shmey-Bar companies by adjusted NIS 5,004,000. |
15
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 3 - INVESTMENTSINASSOCIATEDCOMPANIES (continued):
| 3) | Lysh The Coastal High-way Ltd. (“L1”) |
| | |
| | In June 1999, the Company entered into an investment agreement with Lysh Commercial and Road Services Ltd. (“L2”), a company controlled by Polar Investments Ltd. - an interested party in the Company, and with L1, a wholly-owned subsidiary of L2. |
| |
| | L1 has a 50% holding in Beit Herut-Lysh Development Company Ltd. (“BHL”), which has invested in a project for the leasing of commercial premises near Moshav Beit Herut (the “project”). |
| |
| | BHL developed 16,850 square meters of land owned by the Israel Lands Administration (the “Administration”), in accordance with resolution 717 of the Administration. A commercial project occupying approximately 10,000 square meters was constructed on that land. The Company’s share in L1 is approximately 25% (its share in the project being approximately 12.5%). The project was commercialized in March 2000. As of December 31, 2003 and 2002, the Company had invested in L1 approximately adjusted NIS 5.5 million and adjusted NIS 5 million, respectively.. |
| |
| | The Company has also undertaken to provide guarantees in an amount equivalent to 25% of the construction costs. As of December 31, 2003, the Company’s share in the loans made to BHL amounts to approximately adjusted NIS 15 million. |
| |
| | The auditors of L1, while not qualifying their opinion on L1’s financial statements for 2003, drew attention to the financial position of BHL, whose financial statements presented a loss of some adjusted NIS 2 million (net of financial expenses in the amount of adjusted NIS 4.5 million) and negative working capital amounting to some adjusted NIS 8.2 million at December 31, 2003. |
| |
| | In 2003, BHL received shareholders’ loans in the amount of approximately adjusted NIS 1.5 million from L1. In addition, during the reported period BHL reached an arrangement with a bank, which has not yet been put in writing, which postpones the repayment of the principal of the loans until January 2005 and schedules the repayment of the balance of the loan over a period 18 years. |
| |
| | L1’s management believes that these negotiations will bear fruit and that on their conclusion BHL will obtain the additional financing required. |
16
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 4 - INVESTMENTSINOTHER COMPANIES:
| December 31
|
|---|
| 2003
| 2002
|
|---|
| Adjusted NIS in
thousands
|
|---|
| | Industrial Buildings (a) | | | | 172,540 | | | 172,548 | |
| | Memadim Investments Ltd. (“Memadim”) (b) | | | | 3,284 | | | 2,627 | |
| | Mahalachim Investment in Technology Ltd. (“Mahalachim”) (c) | | | | 1,464 | | | 1,464 | |
| | Others | | | | 36 | | | 36 | |
|
| |
| |
| | | | | | 177,324 | | | 176,675 | |
|
| |
| |
| (a) | Industrial Buildings is engaged in initiation, and construction, of buildings for industry, designated for rental and sale, and in the management of land development and infrastructure preparation for residence and industry. |
| | On December 31, 1998, Mivnat sold to its shareholders (including the Company) its entire holding in the issued and paid share capital of Industrial Buildings (see note 3c(1)). Within the framework of this transaction, the Company acquired from Mivnat 13% of the issued and paid share capital of Industrial Buildings - 37,227,210 ordinary shares of NIS 1 par value and 2,978,177 warrants (Series 3) in consideration of adjusted NIS 279,830 thousands. The shares acquired as above have been pledged in favor of a bank to secure loans received from it. |
| | In 2001, the Company sold 576,633 shares of Industrial Buildings in consideration of adjusted NIS 3.7 million. The pre-tax profit that the Company derived from this sale is approximately adjusted NIS 411,000. |
| |
| | In 2002, the Company sold 1,027,653 shares of Industrial Buildings in consideration of approximately NIS 6.6 million, at a pre-tax gain of approximately adjusted NIS 625,000. The holding rate in Industrial Buildings subsequent to this sale is approximately 11.7%. |
| |
| | After balance sheet date, in February 2004, the Company sold 3,179,489 shares of Industrial Buildings in consideration of approximately adjusted NIS 15 million. The pre-tax profit that the Company derived from this sale is approximately adjusted NIS 1.7 million. |
| |
| | In 2003, the Company received a dividend of adjusted NIS 7.4 million from Industrial Buildings. |
| |
| | The shares of Industrial Buildings are traded on the Tel-Aviv Stock Exchange. The market value of the holdings of the Company in the shares of Industrial Buildings at December 31, 2003 and 2002 is approximately adjusted NIS 153.6 million and adjusted NIS 82.4 million, respectively. |
| |
| | Shortly before the date of approval of the financial statements, the market value of the Company’s share in Industrial Buildings aggregated adjusted NIS 176 million (this amount includes the portion sold after balance sheet date). |
17
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 4 - INVESTMENTSINOTHER COMPANIES (continued):
| | Based, inter alia, on a valuation that it had received, on December 31, 2002 the Company wrote-down its investment in Industrial Buildings by adjusted NIS 20,605,000. |
| |
| (b) | Memadim was established in 1995 by the Company, along with a group of companies, one of which is Industrial Buildings, for the purpose of real estate development. The Company directly holds 10% of the ownership and control of Memadim and Industrial Buildings holds 40% of the ownership and control of Memadim. |
| | |
| (c) | Mahalachim is a venture capital fund. The Company holds shares conferring upon it a 3.5% holding in this company. The investment as of December 31, 2003 and 2002 is presented net of previous years write-down of adjusted NIS 2,273,000. |
18
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 5 - FIXED ASSETS:
| a. | Composition of assets (buildings-leased, including land) and the depreciation accumulated in respect thereof, and changes therein during 2003, are as follows: |
| | |
| | | C o s t
| A c c u m u l a t e d d e p r e c i a t i o n
| |
|---|
| Depreciated |
|---|
balance at
|
|---|
|
|---|
|
|---|
| | | Balance at
beginning
of year | In respect
of
retirements
during
the year | Balance
at end
of year | Balance at
beginning
of year | Additions
during
the year | In respect
of
retirements
during
the year | Balance
at end
of year |
|---|
December 31
|
|---|
| 2003 | 2002 |
|---|
| | |
|
|
|
|
|
|
|
|
|
|---|
| | | Adjusted NIS in thousands | Adjusted NIS in thousands | Adjusted NIS in thousands |
|---|
| | |
|
|
|
| | | | 101,074 | | | 35,023 | | | 66,051 | | | 17,625 | | | 1,953 | | | 12,411 | | | 7,167 | | | 58,884 | | | 83,449 | |
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
19
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (Continued) |
| |
NOTE 5 - FIXED ASSETS (continued):
| b. | The companies’ rights in real estate are as follows: |
| C o s t
| Accumulated
depreciation
|
|---|
| December 31
| December 31
|
|---|
| 2003
| 2002
| 2003
| 2002
|
|---|
| Adjusted NIS in thousands
|
|---|
| | Ophir: | | | | | | | | | | | | |
| | Building on land jointly leased with | |
| | other companies for 44 years | |
| | ending October 31, 2037 - | |
| | (Ophir’s share - 70%) (1) | | 66,051 | | | 66,051 | | | 7,167 | | | 5,710 | |
|
| |
| |
| |
| |
| | Merkazim (2): | |
| | Buildings on subsidiary’s land | | | | | 4,777 | | | | | | 1,471 | |
| | Building jointly owned with | |
| | an interested party | | | | | 30,246 | | | | | | 10,444 | |
|
| |
| |
| |
| |
| | T o t a l - Merkazim | | | | | 35,023 | | | | | | 11,915 | |
|
| |
| |
| |
| |
| | T o t a l | | 66,051 | | | 101,074 | | | 7,167 | | | 17,625 | |
|
| |
| |
| |
| |
| (1) | The building is located on an area of 30,500 Sq.m., of which 17,700 Sq.m. consist of commercial areas. The building is leased as part of a joint venture, the Ophir’s share in which is 70%. |
| | |
| | On April 14, 2003, the parties entered into a lease agreement with the Administration. The lease expires on October 31, 2037. The annual lease fees payable by the Company amount to adjusted NIS 30,000. |
| |
| | In order to secure the completion of the registration of an unaffiliated party, who had purchased an area of some 900 Sq.m. of the area of the building in 1999, with the Land Registry, the Company has provided a guarantee of adjusted NIS 3.8 million in favor of the buyer. |
| |
| (2) | The buildings owned by Merkazim have been sold in 2002 and 2003, as follows: |
| | |
| - | In December 2002, Merkazim, has entered into agreements for the sale of four buildings for a consideration of adjusted NIS 27,282,000. The sale of the buildings was completed in 2003. |
| | |
| - | In June 2003, Merkazim entered into another agreement for the sale of a real estate asset in return for adjusted NIS 2,639,000. |
| | |
| - | In July 2003, Merkazim entered into an additional agreement for the sale of a real estate asset in return for adjusted NIS 13,860,000. |
| | |
| | During the year ended December 31, 2003, a loss of adjusted NIS 30,000 was included in the accounts in respect of the sale of the aforementioned real estate assets. |
20
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 6 - LONG-TERM BANK LOANS:
| a. | The loans are linked to the Israeli CPI and bear interest at the annual rate of 4%.
|
| | |
| b. | The loans mature in the following years after the balance sheet dates: |
| December 31
|
|---|
| 2003
| 2002
|
|---|
| Adjusted NIS in
thousands
|
|---|
| | First year - current maturities | | 8,307 | | | 8,313 | |
|
| |
| |
| | Second year | | 8,307 | | | 8,313 | |
| | Third year | | 8,307 | | | 8,313 | |
| | Fourth year | | 8,307 | | | 8,313 | |
| | Fifth year | | 8,307 | | | 8,313 | |
| | Sixth year and thereafter (through 2012) | | 33,228 | | | 41,572 | |
|
| |
| |
| | | | 66,456 | | | 74,824 | |
|
| |
| |
| | | | 74,763 | | | 83,137 | |
|
| |
| |
| c. | As to pledges to secure the loans and limitations relating to them, see note 8c. |
NOTE 7 - CAPITAL NOTES:
| a. | On December 31, 1998, Ophir and a subsidiary, Merkazim, issued capital notes to Mivnat with a par value of NIS 113,770,000 and NIS 37,831,000, respectively. The capital notes are unlinked and interest-free. |
| | |
| | Capital notes with an aggregate par value of NIS 151,351,000 are repayable at par, upon demand of Mivnat, on January 1, 2004 and only on that date. In February 2004, the shareholders of Mivnat decided to extend the repayment date until January 1, 2005. The balance of the capital notes, NIS 250,000 par value, is repayable annually under the terms stipulated in the agreement. |
| |
| b. | In 2002, a subsidiary issued capital note with a par value of NIS 1,069,000 to the minority shareholder in the subsidiary. The minority shareholder in the subsidiary is entitled to receive the principal of the note, without interest or linkage, this after a period not less than one year. |
21
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
| |
| NOTE 8 - | COMMITMENTS, CONTINGENT LIABILITIES, PLEDGES AND LIMITATIONS IN
RESPECT OF LIABILITIES: |
| |
| 1) | The Company has undertaken to invest in Memadim (see note 4b) approximately 10% of the cost of the land and building of a rental project which is constructed by Memadim on the Carmel shore. The investment was made partly through investment in Memadim (mainly shareholders loans), and partly by way of a guarantee provided. The Company’s share in future construction costs is estimated at approximately $ 17 million. As of December 31, 2003, the balance of the loans to Memadim amounts to approximately adjusted NIS 89 million. |
| | |
| 2) | In December 1996, the subsidiary New Horizons acquired real estate (intended for sale) from a then interested party which holds 20% of New Horizons’ shares. The selling company will be entitled to 90% of the profits from the subsequent sale of the real estate, with the balance accruing to New Horizons. The registration of the real estate in New Horizons’ name in the Land Registry has not yet been completed. |
| | |
| 3) | As to the Company’s commitment to grant guarantees to BHL, see note 3c(3). |
| | |
| 4) | Ophir and a subsidiary receive various services from the shareholders’ in Ophir, including management services, head office services, bookkeeping and legal services. As to the expenses recorded in respect of such services, see note 11. |
| | |
| 1) | Ophir and Merkazim have provided mutual guarantees to secure the long-term loans received from banks. |
| | |
| 2) | The tax authorities have issued betterment tax assessments for the subsidiary Merkazim, claiming that the actual betterment derived was higher than that reported by the subsidiary and demanding the payment of additional tax in the amount of approximately NIS 4.1 million. In the opinion of the Company’s management, the tax authorities’ claims are unfounded. Accordingly, no additional tax expense was recorded in respect of said assessments. |
| | |
| 3) | As to a guarantee in favor of buyers of premises in a building, see note 5b(1). |
| | |
| c. | Pledges and restrictions in respect of liabilities |
| | |
| | To secure repayment of long-term bank loans in the total amount of adjusted NIS 74.8 million at December 31, 2003 the Company has undertaken towards the bank that the Company’s shareholders’ equity will not fall below adjusted NIS 76 million, the total consolidated liabilities will not be more than 3.25 times the shareholders’ equity, and the average annual net income for the recent three years will not, at any time, fall below adjusted NIS 7.6 million. As of balance sheet date, the Company has not met its obligation to maintain the aforementioned level of annual net income. On March 4, 2004, the Company received the bank’s approval that the original repayment schedule is not to be changed, despite the Company’s failure to meet its obligation, as above. This approval is limited to the period ending on January 1, 2005. |
22
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
| NOTE 8 - | COMMITMENTS, CONTINGENT LIABILITIES, PLEDGES AND LIMITATIONS IN
RESPECT OF LIABILITIES (continued): |
| |
| | The shares of Industrial Buildings have been pledged as security for these loans, see note 4(a). |
NOTE 9 - SHARE CAPITAL
| | Composed at December 31, 2003 and 2002 as follows: |
| Number of shares
| Amount in NIS
|
|---|
| Authorized
| Issued and
paid
| Authorized
| Issued and
paid
|
|---|
| | Ordinary shares of NIS 0.001 | | | | | | | | | | | | |
| | par value | | 160,000 | | | 100,000 | | | 162 | | | 101 | |
|
| |
| |
| |
| |
| | Deferred shares of NIS 0.0001 | |
| | par value* | | 3 | | | 3 | | | 0.0003 | | | 0.0003 | |
|
| |
| |
| |
| |
| * | The deferred shares confer upon their holders the right to receive their par value upon liquidation of the Company. |
23
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 10 - TAXES ON INCOME:
| a. | Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments ) Law, 1985 |
| | |
| | Under this law, results for tax purposes are measured in real terms, in accordance with the changes in the Israeli CPI. Ophir and its Israeli subsidiaries are taxed under this law. |
| |
| 1) | The composition of the deferred taxes, and the changes therein during the reported years, are as follows: |
| | Depreciable
fixed assets*
|
|---|
| Adjusted NIS in
thousands
|
|---|
| | Balance at January 1, 2002
| | (3,377 | ) |
| | Changes in 2002 - | | | |
| | amounts carried to income | | 3,672 | |
| | | |
| |
| | Balance at December 31, 2002 | | 295 | |
| | Changes in 2003 - | | | |
| | amounts carried to income | | (2,971 | ) |
| | | |
| |
| | Balance at December 31, 2003 | | (2,676 | ) |
|
| |
* Taking into account the provisions of Opinion 40 of the Israeli Institute, see c. below.
| 2) | Deferred taxes are presented in the balance sheets as follows: |
| December 31
|
|---|
| 2003
| 2002
|
|---|
| Adjusted NIS in thousands
|
|---|
| | Among current assets | | | | | | 2,816 | |
| | Among long-term liabilities | | | (2,676 | ) | | (2,521 | ) |
| | | |
| |
| |
| | | | | (2,676 | ) | | 295 | |
| | | |
| |
| |
| | The deferred taxes are computed at the tax rate of 36%. |
| |
24
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 10 - TAXES ON INCOME (continued):
| c. | Undepreciatedbalanceofcostoffixedassets-theportion inrespectofwhichdeferredtaxeshavenotbeenprovided |
| | |
| | The balance of undepreciated cost of certain depreciable fixed assets includes the amounts detailed below which will not be allowed for tax purposes by way of depreciation or as cost upon realization of the assets. These amounts are regarded as permanent differences (in respect of which no deferred taxes are to be provided) in accordance with Opinion 40 of the Israeli Institute: |
| 2003
| 2002
|
|---|
| Adjusted NIS
in thousands
|
|---|
| | Balance at beginning of year | | | 12,605 | | | 19,650 | |
| | Decrease in the above balance due to: | |
| | Depreciation charge for the year | | | (496 | ) | | (845 | ) |
| | Buildings sold (2002 - designated for sale) | | | (12,109 | ) | | (6,200 | ) |
|
| |
| |
| | Balance at end of year | | | -,- | | | 12,605 | |
|
| |
| |
| d. | Taxesonincomeincludedintheincomestatements: |
| | |
| 2003
| 2002
| 2001
|
|---|
| Adjusted NIS in thousands
|
|---|
| | For the reported year: | | | | | | | | | |
| | Current | | 1,760 | | | 3,238 | | | 9,543 | |
| | Deferred, see also b. above | | 2,971 | | | (2,312 | ) | | 582 | |
|
| |
| |
| |
| | | | 4,731 | | | 926 | | | 10,125 | |
|
| |
| |
| |
| | For previous years: | |
| | Current | | | | | (13,326 | ) | | | |
| | Deferred, see also b. above | | | | | (1,361 | ) | | | |
| | | | | | |
| | | | |
| | | | | | | (14,687 | ) | | | |
|
| |
| |
| |
| | | | 4,731 | | | (13,761 | ) | | 10,125 | |
|
| |
| |
| |
| | Current taxes are computed at the tax rates of 36%. |
25
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 10 - TAXES ON INCOME (continued):
| 2) | Following is a reconciliation of the theoretical tax expense, assuming all income is taxed at the regular tax rates applicable to companies in Israel (see (1) above), and the actual tax expense: |
| | | 2003
| 2002
| 2001
|
|---|
| | | Adjusted NIS in thousands
|
|---|
| | Income (loss) before taxes on income as reported in
the income statements | | 7,027 | | | (21,895 | ) | | 29,888 | |
| | A d d (less) - share in losses (profits) of associated companies - net | | 2,071 | | | (1,662 | ) | | (752 | ) |
| |
| |
| |
| |
| | B a l a n c e - income | | 9,098 | | | (23,557 | ) | | 29,136 | |
| |
| |
| |
| |
| | Theoretical tax expense (tax saving) | | 3,275 | | | (8,481 | ) | | 10,489 | |
| | Increase (decrease) in taxes resulting from permanent |
| | differences - the tax effect: |
| | Disallowable deductions (exempt income) | | (156 | ) | | 9,219 | | | 267 | |
| | Differences for which deferred taxes were not |
| | created in previous years, net | | 4,101 | |
| | Taxes on income subject to different rates - |
| | dividends received from other companies | | (2,843 | ) | | (33 | ) | | (2,319 | ) |
| | Sundry - net | | 354 | | | 221 | | | 1,688 | |
| |
| |
| |
| |
| | Taxes on income for the reported year | | 4,731 | | | 926 | | | 10,125 | |
| |
| |
| |
| |
| | Ophir has received final assessments through tax year 2000. |
| |
| | Subsidiaries: |
| | Merkazim - assessments that are considered as final through tax year 1999. |
| | New Horizons (1993) Ltd.- assessments that are considered as final through tax year 1998. |
| | Ophir Financing Ltd. - Final assessments have been received through tax year 1999. |
NOTE 11 - TRANSACTIONS AND BALANCES WITH INTERESTED PARTIES AND RELATED PARTIES:
| a. Transactionswith interested partiesandrelated parties: |
| | |
| 2003
| 2002
| 2001
|
|---|
| Adjusted NIS in thousands
|
|---|
| | Income (expenses): | | | | | | | | | | |
| | Financial income in respect of short-term loans to | |
| | shareholders | | | | | | | | | 3,018 | | |
| | |
| |
| | Financial income in respect of loans to | |
| | Associated companies | | | 637 | | | 2,539 | | | 1,269 | |
|
| |
| |
| |
| | Management fees from other company | | | 438 | | | 471 | | | 429 | |
|
| |
| |
| |
| | Included in general and administrative expenses | | | (3,507 | ) | | (3,151 | ) | | (1,121 | ) |
|
| |
| |
| |
| | Participation in expenses of shareholders and a | |
| | company which is an interested party | | | (250 | ) | | (3,328 | ) | | (3,344 | ) |
|
| |
| |
| |
| | Financial income (expenses) in respect of short-term | |
| | loans with a company which is an interested party | | | | | | 551 | | | 26 | |
| |
| |
| |
| | As to other transactions with, and commitments to, interested parties, see note 8. |
26
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
| NOTE 11 - | TRANSACTIONS AND BALANCES WITH INTERESTED PARTIES AND RELATED
PARTIES (continued): |
| |
| | b. Balances with interested parties and related parties: |
| |
| | 1) Receivables (payables): |
| December 31
|
|---|
| 2003
| 2002
|
|---|
| Adjusted NIS in thousands
|
|---|
| | a) Loan to a company which is | | | | | | | |
| | an interested party (1) | | | 8,703 | | | 8,347 | |
|
| |
| |
| | b) Long-term receivables - loans to associated | |
| | Companies (2) | | | 26,857 | | | 25,452 | |
|
| |
| |
| | c) A company which is an interested | |
| | party - current account | | | (589 | ) | | (578 | ) |
|
| |
| |
| | d) Shareholders - current accounts | | | (3,308 | ) | | (2,402 | ) |
|
| |
| |
| (1) | The loan is linked to the Israeli CPI and bears no interest. |
| | |
| | The Company that is an interested party is to repay this debt out of its future positive cash flow. |
| |
| (2) | The loans are linked to the Israeli CPI and bear annual interest at the rate of 4%-5%. |
| | |
| | As to current balances with associated and other companies, see note 13a. |
| | |
| 2) | Long-term liability in respect of acquisition of land - business inventory - is linked to the Israeli CPI and bears no interest. |
27
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 12 - LINKAGE OF MONETARY BALANCES:
| December 31, 2003
|
|---|
| In, or
linked to
the
dollar
| Linked
to the
Israeli CPI
| Unlinked
| Total
|
|---|
| Adjusted NIS in thousands
|
|---|
| | Assets: | | | | | | | | | | | | |
| | Current assets: |
| | Cash and cash equivalents | | 16 | | | | | | 3,199 | | | 3,215 | |
| | Short-term investments | | | | | | | | 353 | | | 353 | |
| | Accounts receivable | | | | | 11,298 | | | 649 | | | 11,947 | |
| | Loan to a company which is |
| | an interested party | | | | | 8,703 | | | | | | 8,703 | |
| | Loans to associated companies | | | | | 26,857 | | | | | | 26,857 | |
|
| |
| |
| |
| |
| | | | 16 | | | 46,858 | | | 4,201 | | | 51,075 | |
|
| |
| |
| |
| |
| | Liabilities: |
| | Current liabilities: |
| | Accounts payable and accruals | | | | | 3,897 | | | 4,137 | | | 8,034 | |
| | Long-term liabilities: |
| | Bank loans (including current |
| | maturities) | | | | | 74,763 | | | | | | 74,763 | |
| | Capital notes to associated company | | | | | | | | 151,539 | | | 151,539 | |
| | Capital note to an interested party | | | | | | | | 1,069 | | | 1,069 | |
|
| |
| |
| |
| |
| | | | -,- | | | 78,660 | | | 156,745 | | | 235,405 |
|
| |
| |
| |
| |
| b. DataregardingtheexchangerateandtheIsraeliCPI: |
| |
| | | Exchange rate
of one dollar | Israeli
CPI* |
| | At end of year: |
|
|
| | 2003 | NIS 4.379 | 178.6 points |
| | 2002 | NIS 4.737 | 182.01 points |
| | 2001 | NIS 4.416 | 170.9 points |
| | 2000 | NIS 4.041 | 168.5 points |
| | | | |
| | Increase (decrease) during the year: | | |
| | 2003 | (7.5)% | (1.9)% |
| | 2002 | 7.3% | 6.5% |
| | 2001 | 9.3% | 1.4% |
| | 2000 | (2.7)% | 0.0% |
| * | Based on the index for the month ending on each balance sheet date, on the basis of 1993 average = 100. |
28
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 13 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:
| December 31
|
|---|
| 2003
| 2002
|
|---|
| Adjusted NIS in
thousands
|
|---|
| a. Accounts receivable: | | | | | | | | |
| Deposits in respect of sale | | |
| of fixed assets | | | | 10,812 | |
| Associated companies | | |
| and others | | | | 486 | | | 470 | |
| Institutions | | | | | | | 164 | |
| VAT receivable in respect of | | |
| buildings designated for sale | | | | | | | 1,445 | |
| Other | | | | 649 | | | 733 | |
|
| |
| |
| | | | | 11,947 | | | 2,812 | |
|
| |
| |
| b. Bank credit: | | |
| Short-term credit and loans* | | | | 31 | | | 13,285 | |
| Current maturities of long- | | |
| term loans, see note 6 | | | | 8,307 | | | 8,313 | |
|
| |
| |
| | | | | 8,338 | | | 21,598 | |
|
| |
| |
| * 2002 - Unlinked and bearing annual interest of 4.6% | | | | | |
| | | |
| | | |
| c. Accounts payable and accruals: | | |
| Trade | | | | 290 | | | 122 | |
| Institutions | | | | 2,522 | | | 4,236 | |
| Accrued expenses | | | | 192 | | | 136 | |
| Interested party - current | | |
| accounts | | | | 589 | | | 578 | |
| Shareholders - current accounts | | | | 3,308 | | | 2,402 | |
| Other | | | | 1,133 | | | 593 | |
|
| |
| |
| | | | | 8,034 | | | 8,067 | |
|
| |
| |
| d. | Concentrations of credit risks |
| | |
| The Group’s cash and cash equivalents and short-term investments at December 31, 2003 and 2002 are deposited with Israeli banks. The Company is of the opinion that the credit risk in respect of these balances is remote. |
29
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
NOTE 13 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (continued):
| e. | Fair value of financial instruments |
| | |
| | The fair value of financial instruments included in the working capital of the Group is usually identical or close to their carrying value. The fair value of long-term loans to associated and other companies and long-term bank loans also approximates their carrying value, since they bear interest at rates close to prevailing market rates. As to the fair value of the investment in Industrial Buildings - traded on the Tel-Aviv Stock Exchange - see note 4(a). The determination of the fair value of the capital notes to associated company and subsidiary and long-term liabilities in respect of acquisition of land – business inventory is not practical. |
| 2003
| 2002
| 2001
|
|---|
| Adjusted NIS in thousands
|
|---|
| | f. Financial expenses (income) - net: | | | | | | | | | | |
| | | |
| | Financial expenses: | |
| | In respect of long-term loans | | | 3,324 | | | 3,857 | | | 5,083 | |
| | In respect of short-term bank credit | | | 232 | | | 684 | | | 1,511 | |
| | In respect of a short-term loan from a company | |
| | which is an interested party | | | | | | 735 | | | 1,411 | |
| | Other | | | 138 | |
|
| |
| |
| |
| | | | | 3,694 | | | 5,276 | | | 8,005 | |
|
| |
| |
| |
| | Financial income: | |
| | In respect of bank deposits | | | 411 | | | 263 | | | 3,059 | |
| | In respect of short-term loans to associated | |
| | companies | | | 637 | | | 2,539 | | | 1,269 | |
| | In respect of short-term loans to shareholders | | | | | | | | | 3,018 | |
| | In respect of a loan to a company which is | |
| | an interested party | | | | | | 551 | | | 26 | |
| | Assigned interest and linkage differences | | | 262 | |
| | Other | | | 852 | | | 343 | | | 701 | |
|
| |
| |
| |
| | | | | 2,162 | | | 3,696 | | | 8,073 | |
|
| |
| |
| |
| | | | | 1,532 | | | 1,580 | | | (68 | ) |
|
| |
| |
| |
30
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
| NOTE 14 | – EFFECT OF MATERIAL DIFFERENCES BETWEEN GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES IN ISRAEL AND IN THE U.S.A.: |
| | |
| | a. General: |
| |
| 1) | The Company prepares its financial statements in accordance with Israeli GAAP. As applicable to these financial statements, Israeli GAAP and U.S. of America GAAP vary in certain significant respects, as described below: |
| | |
| | In accordance with Israeli GAAP, the Company comprehensively includes the effect of the changes in the general purchasing power of Israeli currency in these financial statements, as described in note 1b. In view of the inflation in Israel, this is considered a more meaningful presentation than financial reporting based on historical cost. |
| |
| | The adjustments to reflect the changes in the general purchasing power of Israeli currency have been reversed in the reconciliation of Israeli GAAP to U.S. GAAP. |
| |
| | 3) Investment in marketable securities |
| |
| | In accordance with Israeli GAAP, since the company’s intent is to hold this investment for a long period, it is stated at cost, net of write-down for decrease in value, which is not of a temporary nature. |
| |
| | Under U.S. GAAP, this investment is classified as an investment in available for sale and is reported at fair value with unrealized gains and losses, recorded as a separate component of comprehensive income in shareholders’ equity until realized. |
31
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
| NOTE 14 – | EFFECT OF MATERIAL DIFFERENCES BETWEEN GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES IN ISRAEL AND IN THE U.S.A. (continued): |
| | |
| b. | The effect of the material GAAP differences, as described in a. above, on the consolidated financial statements is as follows: |
| | |
| 2003
| 2002
| 2001
|
|---|
| NIS in thousands
|
|---|
| | Net income (losses) as reported in these | | | | | | | | | | |
| | financial statements according | |
| | to Israeli GAAP) | | | 2,311 | | | (8,201 | ) | | 19,767 | |
| | Effect of the treatment of the following | |
| | items under U.S. GAAP: | |
| | Reversal of the adjustment due to | |
| | effect of inflation | | | 39,051 | | | 17,475 | | | 341 | |
| | Other | | | (405 | ) | | (210 | ) | | 30 | |
| | | |
| |
| |
| |
| | Net income under U.S. GAAP | | | 40,957 | | | 9,064 | | | 20,138 | |
| | | |
| |
| |
| |
| December 31,
|
|---|
| 2003
| 2002
|
|---|
| NIS in thousands
|
|---|
| | Shareholders’ equity, as reported | | | | | | | |
| | in these financial statements, | |
| | according to Israeli GAAP | | | 210,986 | | | 222,695 | |
| | Effect of the treatment of the | |
| | above differences under | |
| | U.S. GAAP: | |
| | Reversal of the adjustment due | |
| | effect of inflation, net | | | (85,378 | ) | | (124,429 | ) |
| | Marketable securities | | | 43,584 | | | (34,694 | ) |
| | Other | | | (347 | ) | | 38 | |
| | | |
| |
| |
| | Shareholders’ equity under | |
| | U.S. GAAP | | | 168,845 | | | 63,610 | |
| | | |
| |
| |
32
| OPHIR HOLDINGS LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
| NOTE 14 – | EFFECT OF MATERIAL DIFFERENCES BETWEEN GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES IN ISRAEL AND IN THE U.S.A. (continued): |
| 3) | The effect of the foregoing GAAP difference on reporting comprehensive income, is as follows: |
| 2003
| 2002
| 2001
|
|---|
| NIS in thousands
|
|---|
| | Net income as recorded to | | | | | | | | | | |
| | U.S. GAAP, see above | | | 40,957 | | | 9,064 | | | 20,138 | |
| | Other comprehensive | |
| | income - gains not | |
| | reported in the income | |
| | statement - | |
| | Unrealized gains on | |
| | marketable securities | | | 78,278 | | | (121,578 | ) | | (6,116 | ) |
| | | |
| |
| |
| |
| | Comprehensive income (losses) | | | 119,235 | | | (112,514 | ) | | 14,022 | |
| | | |
| |
| |
| |
33
OPHIRTECH LTD.
(An Israeli Corporation)
2003 ANNUAL REPORT
OPHIRTECH LTD.
2003 ANNUAL REPORT
TABLE OF CONTENTS
| | | Page |
| REPORT OF INDEPENDENT AUDITORS | 2 |
| FINANCIAL STATEMENTS - IN ADJUSTED | |
| | NEW ISRAELI SHEKELS (NIS): | |
| | Balance sheets | 3 |
| | Statements of operations | 4 |
| | Statements of changes in shareholders’ equity | 5 |
| | Statements of cash flows | 6 |
| | Notes to financial statements | 7-23 |
 |
| |
Kesselman & Kesselman
Certified Public Accountants (Isr.)
Trade Tower, 25 Hamered Street
Tel Aviv 68125 Israel
P.O Box 452 Tel Aviv 61003
Telephone +972-3-7954555
Facsimile +972-3-7954556 |
REPORT OF INDEPENDENT AUDITORS
To the shareholders of
OPHIRTECH LTD.
We have audited the balance sheets of Ophirtech Ltd. (the “Company”) as of December 31, 2003 and 2002 and the statements of operations, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31,2003. 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 auditing standards generally accepted in Israel and in the United States of America, including those prescribed by the Israeli 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. 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.
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, 2003 and 2002 and the results of its operations, the changes in its shareholders’ equity and its cash flows for each of the three years in the period ended December 31,2003, in conformity with accounting principles generally accepted in Israel.
As explained in note 1b, the financial statements referred to above are presented in values adjusted for the changes in the general purchasing power of Israeli currency, in accordance with pronouncements of the Institute of Certified Public Accountants in Israel.
Accounting principles generally accepted in Israel vary in certain significant respects from accounting principles generally accepted in the United States of America. Information regarding to the nature and effect of such differences is presented in note 9 to the financial statements.
| Tel-Aviv, Israel | Kesselman & Kesselman |
| March 9, 2004 | Certified Public Accountants (Isr.) |
| | |
| Kesselman & Kesselman is a member of PricewaterhouseCoopers International Limited, a company limited by guarantee registered in England and Wales. |
2
| | | |
| OPHIRTECH LTD. |
| BALANCE SHEETS |
| IN ADJUSTED NEW ISRAELI SHEKELS |
| | December 31
|
|---|
| Note
| 2003
| 2002
|
|---|
| | In thousands
|
|---|
| A s s e t s | | | | | | |
| CURRENT ASSETS: |
| Cash and cash equivalents | | | 26 | | 6 | |
| Accountants receivable | 7a | | 638 | | 605 | |
| |
| |
| |
| T o t a l current assets | | | 664 | | 611 | |
| |
| |
| |
| INVESTMENTS IN COMPANIES | 2 | | 37,762 | | 35,912 | |
| |
| |
| |
| FIXED ASSETS: | 3 | | | | | |
| Cost | | | | | 112 | |
| L e s s - accumulated depreciation | | | | | 33 | |
| | |
| |
| | | | | | 79 | |
| |
| |
| |
| | | | 38,426 | | 36,602 | |
| |
| |
| |
| Liabilities and shareholders’ equity |
| CURRENT LIABILITIES: | 7b | (2) |
| Short-term credit: |
| Bank credit | 7b | | 1,839 | | 1,963 | |
| Shareholders | | | 4,166 | | | |
| Loan from a corporate interested party | 7c | | 8,703 | | 8,347 | |
| Accounts payable and accruals | 7d | | 23 | | 689 | |
| |
| |
| |
| T o t a l current liabilities | | | 14,731 | | 10,999 | |
| SHAREHOLDERS’ EQUITY | 4 | | 23,695 | | 25,603 | |
| |
| |
| |
| | | | 38,426 | | 36,602 | |
| |
| |
| |
| | ____________________________ | ) | | |
| | Roni Harel | ) | | |
| | | ) | DIRECTORS | |
| | ____________________________ | ) | | |
| | Shlomo Shalev | ) | | |
| | | | | |
| | Date of approval of the financial statements: March 9, 2004 |
The accompanying notes are an integral part of the financial statements.
3
| | | |
| OPHIRTECH LTD. |
| STATEMENTS OF OPERATIONS |
| IN ADJUSTED NEW ISRAELI SHEKELS |
| 2003
| 2002
| 2001
|
|---|
| | WRITE-DOWN OF INVESTMENTS IN COMPANIES | | 1,239 | | 41,988 | | 46,820 | |
| | GENERAL AND ADMINISTRATIVE EXPENSES (note 7g) | | 251 | | 319 | | 1,034 | |
| | FINANCIAL EXPENSES (INCOME) - net | | 416 | | 135 | | (334 | ) |
| | CAPITAL LOSS ON SALE OF FIXED ASSETS | | 2 | | 143 | |
|
| |
| |
| |
| | LOSS FOR THE YEAR | | 1,908 | | 42,585 | | 47,520 | |
|
| |
| |
| |
The accompanying notes are an integral part of the financial statements.
4
| | | |
| OPHIRTECH LTD. |
| STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY |
| IN ADJUSTED NEW ISRAELI SHEKELS |
| Share
capital | Receipts on
account
of shares
to be allotted | Accumulated
deficit | Total |
|---|
|
|
|
|
|
| I n t h o u s a n d s
|
|---|
| | BALANCE AT JANUARY 1, 2001 | | * | | 137,622 | | (21,914 | ) | 115,708 | |
| | CHANGES DURING 2001 - loss | | | | | | (47,520 | ) | (47,520 | ) |
|
| |
| |
| |
| |
| | BALANCE AT DECEMBER 31, 2001 | | * | | 137,622 | | (69,434 | ) | 68,188 | |
| | CHANGES DURING 2002 - loss | | | | | | (42,585 | ) | (42,585 | ) |
|
| |
| |
| |
| |
| | BALANCE AT DECEMBER 31, 2002 | | * | | 137,622 | | (112,019 | ) | 25,603 | |
| | CHANGES DURING 2003 - loss | | | | | | (1,908 | ) | (1,908 | ) |
|
| |
| |
| |
| |
| | BALANCE AT DECEMBER 31, 2003 | | * | | 137,622 | | (113,927 | ) | 23,695 | |
|
| |
| |
| |
| |
* Represents an amount less than adjusted NIS 1,000.
The accompanying notes are an integral part of the financial statements.
5
| | | |
| OPHIRTECH LTD. |
| STATEMENTS OF CASH FLOWS |
| IN ADJUSTED NEW ISRAELI SHEKELS |
| 2003
| 2002
| 2001
|
|---|
| In thousands
|
|---|
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | |
| Loss for the year | | (1,908 | ) | (42,585 | ) | (47,520 | ) |
| Adjustments required to reflect the cash flows from | |
| operating activities* | | 714 | | 42,701 | | 46,300 | |
|
| |
| |
| |
| Net cash provided by (used in) operating activities | | (1,194 | ) | 116 | | (1,220 | ) |
|
| |
| |
| |
| CASH FLOWS FROM INVESTING ACTIVITIES: | |
| Purchase of fixed assets | | | | | | (102 | ) |
| Investment in companies | | (3,089 | ) | (4,419 | ) | (17,306 | ) |
| Proceeds from sale of fixed assets | | 70 | | 45 | | | |
| Decrease in short-term loan to a corporate | |
| interested party | | | | | | 12,645 | |
|
| |
| |
| |
| Net cash used in investing activities | | (3,019 | ) | (4,374 | ) | (4,763 | ) |
|
| |
| |
| |
| CASH FLOWS FROM FINANCING ACTIVITIES: | |
| Credit from shareholders - net | | 4,166 | | | | | |
| Increase in short term loan from a corporate | |
| interested party | | 191 | | 3,358 | | 4,924 | |
| Short-term bank credit | | (124 | ) | (127 | ) | 2,090 | |
|
| |
| |
| |
| Net cash provided by financing activities | | 4,233 | | 3,231 | | 7,014 | |
|
| |
| |
| |
| INCREASE (DECREASE) IN CASH AND CASH | |
| EQUIVALENTS | | 20 | | (1,027 | ) | 1,031 | |
| BALANCE OF CASH AND CASH EQUIVALENTS AT | |
| BEGINNING OF YEAR | | 6 | | 1,033 | | 2 | |
|
| |
| |
| |
| BALANCE OF CASH AND CASH EQUIVALENTS AT | |
| END OF YEAR | | 26 | | 6 | | 1,033 | |
|
| |
| |
| |
| * Adjustments required to reflect cash flows from | |
| operating activities: | |
| Expenses not involving cash flows: | |
| Depreciation | | 7 | | 55 | | 66 | |
| Write-down of investments in companies | | 1,239 | | 41,988 | | 46,820 | |
| Capital loss on sale of fixed assets | | 2 | | 143 | | | |
| Liabilities for employee rights upon retirement - net | | | | 496 | | 70 | |
| Linkage differences (erosion) of a loan with a corporate | |
| interested party | | 165 | | 65 | | (60 | ) |
|
| |
| |
| |
| | | 1,413 | | 42,747 | | 46,896 | |
|
| |
| |
| |
| Changes in operating asset and liability items: | |
| Decrease (increase) in accounts receivable | | (33 | ) | 474 | | (1,067 | ) |
| Increase (decrease) in accounts payable and accruals | | (666 | ) | (520 | ) | 471 | |
|
| |
| |
| |
| | | (699 | ) | (46 | ) | (596 | ) |
|
| |
| |
| |
| | | 714 | | 42,701 | | 46,300 | |
|
| |
| |
| |
The accompanying notes are an integral part of the financial statements.
6
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS |
| NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES |
| | The significant accounting policies, applied on a consistent basis, are as follows: |
| | | | |
| | a. | General: |
| | | | |
| | | 1) | Ophirtech Ltd. (the “Company”), which is owned by Polar Investments Group (42.5%), Ampal (Israel) Ltd. and Ampal Industries (Israel) Ltd. (42.5%) and Gmul Investment Company Ltd. (15%), was incorporated on March 29, 2000. The Company invests in start-up companies in various stages of development, from newly established enterprises to companies that have reached advanced development stage. |
| | | | |
| | | | On March 30, 2000, the Company purchased investments in high-tech companies engaged in various fields of activity (communications, software, security, etc.) from Ophir Holdings Ltd. (“Ophir Holdings”), which at that time was a company under common control, for approximately adjusted NIS 76 million.
The difference between the proceeds and the carrying value of those investments on the books of Ophir Holdings was carried to the Company’s accumulated deficit, in accordance with the Israeli Securities (Presentation in Financial Reports of Acts between Body Corporate and its Controlling Member) Regulations, 1996. |
| | | | |
| On January 1, 2001, the employees of Ophir Holdings and one of its subsidiaries were transferred to the Company. During 2002 and 2001 Ophir Holdings and its subsidiary participated in the employees’ payroll costs, as well as the Company’s general and administrative expenses - see note 7g. |
| | | | |
| | | 2) | Interested parties - as defined in the Israeli Securities (Preparation of Annual Financial Statements) Regulations, 1993. |
| | | | |
| | b. | Adjusted financial statements: |
| | | | |
| | | 1) | The financial statements have been prepared on the basis of historical cost adjusted for the changes in the general purchasing power of Israeli currency, in accordance with pronouncements of the Institute of Certified Public Accountants in Israel (the “Israeli Institute”). All figures in the financial statements are presented in adjusted new Israeli shekels (NIS) which have a uniform purchasing power (December 2003 adjusted NIS) - based upon the changes in the Israeli consumer price index (the “Israeli CPI”, see also i. below). |
| | | | |
| | | | The adjustment of the financial statements is based on the accounts of the Company, maintained in nominal NIS. Condensed nominal Israeli currency data, on the basis of which the adjusted financial statements were prepared, are presented in note 8. |
7
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| |
| NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued): |
| | | | The components of the statements of operations were, for the most part, adjusted as follows: the components relating to transactions carried out during the year were adjusted on the basis of the index for the month in which the transaction was carried out, while those relating to non-monetary balance sheet items (mainly depreciation and write-down) were adjusted on the same basis as the related balance sheet item. The financing component represents financial income and expenses in real terms and the erosion of balances of monetary items during the year. |
| | | | |
| | | 2) | The adjusted amounts of non-monetary assets do not necessarily represent realization value or current economic value, but only the original historical values, adjusted to reflect the changes in the general purchasing power of Israeli currency. In these financial statements, the term “cost” signifies cost in adjusted Israeli currency. |
| | | | |
| | | 3) | In October 2001, the Israel Accounting Standards Board (the “IASB”) issued Accounting Standard No. 12, “Discontinuance of Adjusting Financial Statements for Inflation”, which provided for the discontinuance of adjusting financial statements for the effects of inflation, as of January 1, 2003. In December 2002, Accounting Standard No. 17 was issued that postponed the date from which Accounting Standard No. 12 is to be applied until January 1, 2004. The inflation-adjusted amounts as of December 31, 2003, as presented in these financial statements, will be the base for the nominal-historical financial reporting in the following periods. |
| | | | |
| | | | The implementation of Standard No. 12 will mainly affect the financial income and expenses item. |
| | | | |
| | c. | Investments in companies |
| | | | |
| | | The investments in the shares of these companies are presented at cost. |
| | | | |
| | | The Company reviews for impairment its investments from time to time. Impairment losses, that are revealed by such reviews are included in the Company’s accounts, see also e. hereafter. |
| | | | |
| | d. | Fixed assets: |
| | | | |
| | | 1) | These assets are stated at cost. |
| | | | |
| | | 2) | The assets are depreciated by the straight-line method, on basis of their estimated useful life. |
| | | | |
| | | | Annual rates of depreciation for vehicles are 15%. |
8
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued): |
| | | | |
| | e. | Cash equivalents |
| | | | |
| | | The Company considers all highly liquid investments, which include short-term bank deposits (up to three months from date of deposit) that are not restricted as to withdrawal or use, to be cash equivalents. |
| | | | |
| | f. | Loss per NIS 1 of par value of shares |
| | | | |
| | | The financial statements do not include data regarding loss per NIS 1 of par value of shares, since the data would not provide significant additional information to that otherwise provided by the financial statements. |
9
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued): |
| | g. | Linkage basis |
| | | | |
| | | Balances the linkage arrangements in respect of which stipulate linkage to the last index published prior to date of payment are stated on basis of the last index published prior to balance sheet date (the index for November). |
| | | | |
| | h. | Use of estimates in the preparation of financial statements |
| | | | |
| | | The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
| | | | |
| | i. | Data regarding the exchange rate and the Israeli CPI: |
| | | Exchange
rate of one
U.S.dollar | Israeli
CPI* |
|---|
| | |
|
|
| | At end of year: | | |
| | 2003 | NIS 4.379 | 178.6 points |
| | 2002 | NIS 4.737 | 182.0 points |
| | 2001 | NIS 4.416 | 170.9 points |
| | 2000 | NIS 4.041 | 168.5 points |
| | | |
| | Increase (decrease) during: | | |
| | 2003 | (7.5)% | (1.9)% |
| | 2002 | 7.3% | 6.5% |
| | 2001 | 9.3% | 1.4% |
| * Based on the index for the month ending on each balance sheet date, on the basis of 1993 average = 100. |
10
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 2 - INVESTMENTS IN COMPANIES: |
| | The composition of the investments is as follows: |
| | | December 31 |
|---|
| | |
|
|---|
| | | | 2003 | | 2002 |
|---|
| | | |
| |
|
|---|
| | | Cost | Book
value | Percentage
of control | Book
value |
|---|
| | |
|
|
|
|
|---|
| | | Adjusted NIS
in thousands | % | Adjusted
NIS in
thousands |
|---|
| | |
|
|
|
| | Pelican Security Ltd. - “Pelican” (a) | 8,885 | | 930 | | 17.0 | | 930 | |
| | | | | | | | | | |
| | Expand Networks Ltd. - “Expand” (b) | 9,378 | | 9,378 | | 9.3 | | 8,293 | |
| | | | | | | | | | |
| | Mainsoft Corporation - “Mainsoft” (c) | 500 | | 500 | | 1.9 | | 500 | |
| | | | | | | | | | |
| | Netformx Ltd. - “Netformx” (d) | 9,907 | | 2,322 | | 5.5 | | 2,322 | |
| | | | | | | | | | |
| | StoreAge Networking Technologies Ltd. - | | | | | | | | |
| | “StoreAge” (e) | 13,292 | | 13,292 | | 10.9 | | 13,292 | |
| | | | | | | | | | |
| | Indocs Online Ltd. - “Indocs” (f) | 7,519 | | -,- | | 11.9 | | 1,015 | |
| | | | | | | | | | |
| | Celvibe Ltd. - “Celvibe” (g) | 12,278 | | 1,862 | | 13.1 | | 1,864 | |
| | | | | | | | | | |
| | Viola Networks Ltd. - “Viola” (h) | 14,088 | | 6,004 | | 16.1 | | 5,340 | |
| | | | | | | | | | |
| | Cerel Ceramic Technologies Ltd. - “Cerel” (i) | 4,451 | | 3,474 | | 14.2 | | 2,356 | |
| | | | | | | | | | |
| | Others (j) | 50,189 | | -,- | | | | -,- | |
| | |
| |
| | | |
| |
| | T o t a l | 130,487 | | 37,762 | | | | 35,912 | |
| | |
| |
| | | |
| |
| | (a) | Pelican is engaged in the development of solutions to the problem of safeguarding information on the Internet against viruses and hackers. |
| | | |
| | | In February 2003, Pelican sold the know-how that it had developed and owned. |
| | | |
| | | The investment in Pelican as of December 31, 2003 is presented net of a provision of adjusted NIS 7.9 million for impairment of value. The balance of the investments reflects the consideration that the Company expects to receive from the sale of the know-how. |
| | | |
| | (b) | Expand is engaged in the development of technology designed to accelerate communications over diverse network infrastructures (including E1, T1 and frame relay lines) and improve broadband efficiency. |
| | | |
| | | In June 2003, as part of a Capital raise from existing shareholders in Expand, the Company invested $ 250,000 (adjusted NIS 1,084,000) in Expand . |
| | | |
| | (c) | Mainsoft is engaged in the development of software and tools for software developers. |
11
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 2 - INVESTMENTS IN COMPANIES (continued): |
| | (d) | Netformx is engaged in development, marketing and support of software designed for planning, operation and maintenance of computer networks. |
| | | |
| | | In January 2003, Netformx raised $ 750,000. The Company did not participate in this round. |
| | | |
| | | The investment in Netformx as of December 31, 2003 is presented net of a provision of adjusted NIS 7.6 million for impairment of value. |
| | | |
| | | Netformx is partly held by companies which are interested parties. |
| | | |
| | (e) | StoreAge is engaged in the development and marketing of a software solution and innovative data storage solutions for communications networks (Storage Area Network). |
| | | |
| | | StoreAge is partly held by a company which is an interested party. |
| | | |
| | (f) | Indocs is engaged in the development of software for E-commerce technological applications in the printing field, via the Internet and web uses. |
| | | |
| | | In 2003, the Company invested $ 50,000 (adjusted NIS 223,000) in Indocs, from a total investment of adjusted NIS 7,519,000 . |
| | | |
| | | As of December 31, 2003 the investment in Indocs is fully written-down. |
| | | |
| | (g) | Celvibe develops solutions for digital video transmission for Internet broadband networks and mobile phone communications. |
| | | |
| | | In November 2002, Celvibe ceased its operations and it is currently undergoing a winding-up procedure. |
| | | |
| | | The investment in Celvibe as of December 31, 2003 is presented net of a provision for impairment of value of adjusted NIS 10.4 million. The balance of the investment reflects the consideration that the Company expects to receive upon the winding-up of Celvibe. |
| | | |
| | (h) | Viola is engaged in the development of a software system to allow quick and uninterrupted identifications of problems and technical difficulties on various communications networks. |
| | | |
| | | In January 2002, Viola converted the bridging loans that it had raised in December 2001 into shares constituting approximately 36.2% of its share capital (fully diluted). |
| | | |
| | | In October 2003, the Company invested $ 150,000 (adjusted NIS 668,000) in Viola. |
| | | |
| | | The investment in Viola as of December 31, 2003 is presented net of a provision of adjusted NIS 8 million for impairment of value. |
12
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 2 - INVESTMENTS IN COMPANIES (continued): |
| | (i) | Cerel develops ceramic layering technologies for the passive electronic components market. |
| | | |
| | | In February 2002, the Company invested $ 700,000 (adjusted NIS 3,337,000) in Cerel. |
| | | |
| | | Cerel has completed a financing round of approximately $ 1.5 million in February 2003, based on a company value of $ 6.5 million post- money. As part of the investment, the Company acquired 47,405 preferred shares of NIS 0.1 par value each, at a price per share of $ 14.77, as well as warrants for the purchase of Cerel shares at an exercise price of $ 1 million, based on a company value of $ 10.7 million pre-money. The warrants are exercisable until September 30, 2003. |
| | | |
| | | In October 2003, the Company invested $ 250,000 (adjusted NIS 1,113,000) in Cerel based on a company value of $ 10.5 million pre- money. |
| | | |
| | | The investment in Cerel as of December 31, 2003 is presented net of a provision of adjusted NIS 980,000 for impairment of value. |
| | | |
| | (j) | Following is a list of the companies in which the Company has invested approximately NIS 50 million. An impairment provision has been made for the full amount invested : |
| | | | Cipheractive Ltd ; |
| | | | Carmel Biosensors Ltd; |
| | | | Elpas Electro-Optic Systems Ltd |
| | | | Romidot Ltd; |
| | | | RealM Technologies Ltd; |
| | | | Camelot Information Technologies Ltd; |
| | | | Interlink Computer Communications Ltd; |
| | | | Techimage Ltd; |
| | | | Iradius.Com, Inc; |
| | | | Trans4u Ltd ; |
| | | | Praxell Inc; |
| | | | Electrochemical Light Switch Inc; |
13
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| | Composition of assets, and changes therein in 2003, are as follows: |
| | | C o s t
| Accumulated depreciation
| |
|---|
| Depreciated |
|---|
balance
|
|---|
|
|---|
|
|---|
| | | Balance at
beginning
of year | Retirements
during
the year | Balance
at end
of year | Balance at
beginning
of year | Additions
during
the year | Retirements
during
the year | Balance
at end
of year |
|---|
December 31
|
|---|
| 2003 | 2002 |
|---|
| | |
|
|
|
|
|
|
|
|
|
|---|
| | | Adjusted NIS in thousands | Adjusted NIS in thousands | Adjusted NIS
in thousands |
|---|
| | |
|
|
|
| | Vehicles | | 112 | | | 112 | | | -,- | | | 33 | | | 7 | | | 40 | | | -,- | | | -,- | | | 79 | |
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| NOTE 4 - SHAREHOLDERS’ EQUITY: |
| | | |
| | a. | Share capital |
| | | | |
| | | The share capital as of December 31, 2003 and 2002 is composed of ordinary shares of NIS 1 par value, as follows: authorized - 10,000 shares; issued and paid - 1,000 shares. |
| | | | |
| | b. | Receipts on account of shares to be allotted |
| | | | |
| | | On November 1, 2000, the Company received a payment on account of shares in the amount of adjusted NIS 137,622,000 from its shareholders. The shares have not yet been allotted. |
14
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 5 - TAXES ON INCOME: |
| | | |
| | a. | Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustments Law”) |
| | | | |
| | | Under this law, results for tax purposes are measured in real terms, having regard to the changes in the Israeli CPI. The Company is taxed under this law. |
| | | | |
| | b. | Losses for tax purposes, carried forward to future years |
| | | | |
| | | Carryforward losses aggregate approximately adjusted NIS 2 million at December 31, 2003. Under the Inflationary Adjustments Law such carryforward tax losses are linked to the Israeli CPI. No deferred tax asset has been included in respect of such losses. In addition, no deferred tax asset has been included in respect of the impairment provision createdfor the investments in companies. |
| | | |
| | c. | Tax assessments |
| | | |
| | | The Company has not been assessed for tax purposes since incorporation (March 29, 2000). |
| NOTE 6 - INTERESTED PARTY TRANSACTIONS AND BALANCES: |
| | | |
| | a. | Transactions: |
| | | 2003 | 2002 | 2001 |
|---|
| | |
|
|
|
|---|
| | | Adjusted NIS in thousands |
|---|
| | |
|
|---|
| | Income (expenses): | | | | | | |
| | Participation in expenses from companies |
| | which are interested parties, see note 1a | | | 3,328 | | 3,344 | |
| | |
| |
| |
| | Payroll and related expenses of an interested |
| | party employed by the Company | (187 | ) | (1,623 | ) | (1,323 | ) |
| |
| |
| |
| |
| | Financial expenses in respect of short- |
| | term loan with a company which is an |
| | Interested party | | | (556 | ) | (26 | ) |
| | |
| |
| |
| | | |
| | b. | Balances receivables (payables): |
| December 31 |
|---|
| |
|
|---|
| 2003 | 2002 |
|---|
| | | |
|
|
| | 1) | Short-term loan from a company which is an | | | | |
| | | interested party | (8,703 | ) | (8,347 | ) |
|
| |
| |
| | 2) | Current receivable - presented in the balance sheets |
| | | among accountants receivables | 589 | | 578 | |
|
| |
| |
| | |
| | 3) | Current liabilities | 4,166 | |
|
| | | |
15
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 7 - SUPPLEMENTARY FINANCIAL STAEMENT INFORMATION: |
| | Balance sheets: |
| | | | |
| | a. | Accounts receivable: |
| | | December 31 |
|---|
| | |
|
|---|
| | | 2003 | 2002 |
|---|
| | |
|
|
|---|
| | | Adjusted NIS in thousands |
|---|
| | |
|
| | Institutions | 49 | | 26 | |
| | Interested party - current accounts | 589 | | 577 | |
| | Others | | | 2 | |
| |
| |
| |
| | | 638 | | 605 | |
| |
| |
| |
| | b. | Short-term bank credit: |
| | | | |
| | | 1) | Short-term bank credit is unlinked and bears annual interest rate of 7.1% in 2003 and 10.5%in 2002. |
| | | | |
| | | 2) | In February 2001, the Company and its shareholders gave a commitment to a certain bank that the Company would not make any repayments or settlements to its shareholders on account of shareholders’ loans and/or sums received on account of shares up to an amount of approximately adjusted NIS 100 million. Also, the grant of credit by this bank in excess of $ 5 million is conditional on the Company increasing its shareholders’ equity - at the time the credit is granted - by at least double the amount of the aforementioned credit. The maximum amount of the credit to be granted is limited to $ 15 million. |
| | | |
| | c. | Short-term loan from a corporate interested party |
| | | | |
| | | The loan is linked to the Israeli CPI and bears no interest. |
| | | | |
| | d. | Accounts payable and accruals: |
| | | December 31 |
|---|
| | |
|
|---|
| | | 2003 | 2002 |
|---|
| | |
|
|
|---|
| | | Adjusted NIS in thousands |
|---|
| | |
|
| | Employees | | | 25 | |
| | Institutions | | | 70 | |
| | Accrued expenses | | | 23 | |
| | Liability for employee rights upon |
| | retirement, net of amount funded | | | 566 | |
| | Other | 23 | | 5 | |
| |
| |
| |
| | | 23 | | 689 | |
| |
| |
| |
| | e. | Concentrations of credit risks |
| | | |
| | | The Company’s cash and cash equivalents at December 31, 2003 and 2002 were deposited with Israeli banks. The Company is of the opinion that the credit risk in respect of these balances is remote. |
16
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 7 - SUPPLEMENTARY FINANCIAL STAEMENT INFORMATION: (continued): |
| | f. | Fair value of financial instruments |
| | | |
| | | The fair value of the financial instruments included in working capital of the Company is usually identical or close to their carrying value. |
| | | |
| | | Data regarding the of fair value of investments in companies is omitted because it is not practicable to determine such fair value with sufficient reliability. |
| | | |
| | Statements of operations - |
| | | |
| | g. | General and administrative expenses: |
| | 2003 | 2002 | 2001 |
|---|
| |
|
|
|
|---|
| | Adjusted NIS in thousands |
|---|
| | |
|
|---|
| | Payroll and related expenses | 187 | | 2,778 | | 3,250 | |
| | Office rent and maintenance | 22 | | 556 | | 656 | |
| | Other | 42 | | 313 | | 472 | |
| |
| |
| |
| |
| | | 251 | | 3,647 | | 4,378 | |
| | Less - participation in expenses by interested parties | | | (3,328 | ) | (3,344 | ) |
| |
| |
| |
| |
| | | 251 | | 319 | | 1,034 | |
| |
| |
| |
| |
| NOTE 8 - NOMINAL DATA: |
| | | | |
| | a. | Balance sheet data: |
| | | Nominal NIS in thousands |
|---|
| | |
|
|---|
| | | December 31 |
|---|
| | |
|
|---|
| | | 2003 | 2002 |
|---|
| | |
|
|
| | A s s e t s | | | | |
| | Current assets: |
| | Cash and cash equivalents | 26 | | 6 | |
| | Accounts receivable | 638 | | 617 | |
| |
| |
| |
| | | 664 | | 623 | |
| | Investments in companies | 35,706 | | 33,689 | |
| | Fixed assets, net of accumulated depreciation | | | 74 | |
| |
| |
| |
| | | 36,370 | | 34,386 | |
| | |
| |
| |
| | Liabilities and shareholders’ equity |
| | Current liabilities: |
| | Short-term bank credit | 1,839 | | 2,001 | |
| | Loan from a company which is an |
| | interested party | 8,703 | | 8,507 | |
| | Accounts payable and accruals | 4,189 | | 702 | |
| |
| |
| |
| | | 14,731 | | 11,210 | |
| | Shareholders’ equity, see c. above | 21,639 | | 23,176 | |
| |
| |
| |
| | | 36,370 | | 34,386 | |
| |
| |
| |
17
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 8 - NOMINAL DATA (continued): |
| | | | |
| | b. | Operating results data: |
| | | Nominal NIS in thousands |
|---|
| | |
|
|---|
| | | 2003 | 2002 | 2001 |
|---|
| |
|
|
|
| | Write-down of investments in companies | | 1,097 | | | 37,352 | | | 44,266 | |
| | General and administrative expenses | | 255 | | | 301 | | | 976 | |
| | Financial expenses (income) - net | | 188 | | | 664 | | | (294 | ) |
| | Capital loss (gain) on sale of fixed assets | | (3 | ) | | 131 | | | | |
| |
| |
| |
| |
| | Loss for the period - nominal | | 1,537 | | | 38,448 | | | 44,948 | |
| |
| |
| |
| |
| | c. | Changes in shareholders’ equity: |
| Nominal NIS in thousands |
|---|
| |
|
|---|
| Share
capital | Receipts on
account of
shares to
be allotted | Accumulated
deficit | Total |
|---|
| | |
|
|
|
|
| | Balance at January 1, 2001 | | 1 | | | 129,999 | | | (23,428 | ) | | 106,572 | |
| | Changes during 2001 - loss | | | | | | | | (44,948 | ) | | (44,948 | ) |
|
| |
| |
| |
| |
| | Balance at December 31, 2001 | | 1 | | | 129,999 | | | (68,376 | ) | | 61,624 | |
| | Changes during 2002 - loss | | | | | | | | (38,448 | ) | | (38,448 | ) |
|
| |
| |
| |
| |
| | Balance at December 31, 2002 | | 1 | | | 129,999 | | | (106,824 | ) | | 23,176 | |
| | Changes during 2003 - loss | | | | | | | | (1,537 | ) | | (1,537 | ) |
|
| |
| |
| |
| |
| | Balance at December 31, 2003 | | 1 | | | 129,999 | | | (108,361 | ) | | 21,639 | |
|
| |
| |
| |
| |
| NOTE 9 - SPECIAL CONDENSED FINANCIAL STATEMENTS: |
| | | | |
| | a. | General: |
| | | | |
| | | 1) | As stated in note 1b, the primary financial statements of the Company are drawn up in Israeli currency adjusted for the changes in the Israeli CPI. |
| | | | |
| | | | For incorporation in the financial statements of the Company’s U.S. shareholder, Ampal-American Israel Corporation (“Ampal”), the Company also prepared these special condensed consolidated financial statements (“the special statements”), see below. |
| | | | |
| | | 2) | The translation into dollars should be made in accordance with the principles set forth is Statement of Financial Accounting Standards (“FAS”) No. 52 of the Financial Accounting Standards Board of the United States (“FASB”) for economies that are not considered to be highly inflationary. |
18
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 9 - SPECIAL CONDENSED FINANCIAL STATEMENTS (continued): |
| | | | |
| | | 3) | These special statements have been prepared for the purpose of translation into dollars and inclusion in the Ampal consolidated financial statements in accordance with instructions of Ampal, as follows: |
| | | | (a) | The special statements are drawn up in Israeli currency (NIS) terms. |
| | | | | |
| | | | (b) | Adjustments required to make the data conform with U.S. generally accepted accounting principles (“GAAP”) have been made, the main difference in U.S GAAP is the ”effect of inflation”- |
| | The Company, in accordance with Israeli GAAP, comprehensively includes the effects of price level changes in the accompanying financial statements, as described in Note 1b(1).Such Israeli accounting principles measure the effects of price level changes in the inflationary nature of the Israeli economy and, as such, is considered a more meaningful presentation than financial reporting based on historical cost of Israeli and U.S accounting purposes. The effect of inflation was eliminated for the purpose of measurement according to U.S GAAP as presented in b. below. |
| | | | 4) | For the convenience of Ampal, these special statements have been translated into U.S. dollars in accordance with the principles set forth in FAS 52. |
19
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| | | b. | Following are the special statements: |
| | | | | |
| | | | 1) | Balance sheets as of December 31, 2003 and 2002: |
| New Israeli shekels | Translation into
U.S. dollars,
see a(4) above |
|---|
| |
|
|
|---|
| December 31 | December 31 |
|---|
| |
|
|
|---|
| 2003 | 2002 | 2003 | 2002 |
|---|
| |
|
|
|
|
|---|
| In thousands | In thousands |
|---|
|
|
|
|---|
| | A s s e t s | | | | | | | | | | | | | | |
| | Current assets: | | | | | | | | | | | | | | |
| | Cash and cash equivalents | | | | 26 | | | 6 | | | 6 | | | 1 | |
| | Accounts receivable | | | | 638 | | | 617 | | | 146 | | | 130 | |
|
| |
| |
| |
| |
| | T o t a l current assets | | | | 664 | | | 623 | | | 152 | | | 131 | |
| | | | | | | | | | | | | | | | |
| | Investments in companies | | | | 36,506 | | | 34,489 | | | 8,337 | | | 7,281 | |
| | Fixed assets, net of accumulated | | |
| | depreciation | | | | | | | 74 | | | | | | 16 | |
|
| |
| |
| |
| |
| | | | | | 37,170 | | | 35,186 | | | 8,489 | | | 7,428 | |
|
| |
| |
| |
| |
| | Liabilities and shareholders’equity | | |
| | Current liabilities: | | |
| | Short-term bank credit | | | | 1,839 | | | 2,001 | | | 420 | | | 422 | |
| | Loan from a company which is | | |
| | an interested party | | | | 8,703 | | | 8,507 | | | 1,987 | | | 1,796 | |
| | Accounts payable and accruals | | | | 4,189 | | | 702 | | | 957 | | | 148 | |
|
| |
| |
| |
| |
| | T o t a l current liabilities | | | | 14,731 | | | 11,210 | | | 3,364 | | | 2,366 | |
| | Shareholders’ equity | | | | 22,439 | | | 23,976 | | | 5,125 | | | 5,062 | |
|
| |
| |
| |
| |
| | | | | | 37,170 | | | 35,186 | | | 8,489 | | | 7,428 | |
|
| |
| |
| |
| |
20
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 9 - SPECIAL CONDENSED FINANCIAL STATEMENTS (continued): |
| | | | |
| | 2) | Statements of operation for each of the three years in the period ended December 31: |
| | | New Israeli shekels | Translation into U.S. dollars,
see a(4) above |
|---|
| | |
|
|
|---|
| | | 2003
| 2002
| 2001
| 2003
| 2002
| 2001
|
|---|
| | | In thousands | In thousands |
|---|
| | |
|
|
|---|
| | Write-down of investments in companies | | 1,097 | | | 37,352 | | | 44,266 | | | 251 | | | 7,841 | | | 10,024 | |
| | General and administrative expenses | | 255 | | | 301 | | | 976 | | | 56 | | | 63 | | | 231 | |
| | Financial expenses (income) - net | | 188 | | | 664 | | | (294 | ) | | 41 | | | 140 | | | (70 | ) |
| | Capital loss (gain) on sale of fixed assets | | (3 | ) | | 131 | | | | | | (1 | ) | | 27 | | | |
| |
| |
| |
| |
| |
| |
| |
| | Loss for the period | | 1,537 | | | 38,448 | | | 44,948 | | | 347 | | | 8,071 | | | 10,185 | |
| |
| |
| |
| |
| |
| |
| |
21
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 9 - SPECIAL CONDENSED FINANCIAL STATEMENTS (continued): |
| | | | |
| | | 3) | Statements of changes in shareholders’ equity for the years ended December 31, 2003 and 2002 and 2001: |
| | | New Israeli shekels |
|---|
| | |
|
|---|
| | | Share
capital | Receipts on
account
of shares
to be allotted | Accumulated
deficit | Total |
|---|
| | |
|
|
|
|
|---|
| | Balance at January 1, 2001 | 1 | | | 129,999 | | | (22,628 | ) | | 107,372 | |
| | Changes during 2001 - loss | | | | | | | (44,948 | ) | | (44,948 | ) |
| |
| |
| |
| |
| |
| | Balance at December 31, 2001 | 1 | | | 129,999 | | | (67,576 | ) | | 62,424 | |
| | Changes during 2002 - loss | | | | | | | (38,448 | ) | | (38,448 | ) |
| |
| |
| |
| |
| |
| | Balance at December 31, 2002 | 1 | | | 129,999 | | | (106,024 | ) | | 23,976 | |
| | Changes during 2003 - loss | | | | | | | (1,537 | ) | | (1,537 | ) |
| |
| |
| |
| |
| |
| | Balance at December 31, 2003 | 1 | | | 129,999 | | | (107,561 | ) | | 22,439 | |
| |
| |
| |
| |
| |
22
| | | |
| OPHIRTECH LTD. |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| NOTE 9 - SPECIAL CONDENSED FINANCIAL STATEMENTS (continued): |
| | Translation into U.S. dollars, see a(4) above |
|---|
|
|
|---|
| Share
capital | Receipts on
account
of shares
to be allotted | Accumulated
deficit | Translation
differences | Total |
|---|
| |
|
|
|
|
|
|---|
| I n t h o u s a n d s
|
|---|
| Balance at January 1, 2001 | | * | | | 31,553 | | | (5,607 | ) | | 637 | | | 26,583 | |
| | | | |
| |
| Changes during 2001: |
| Loss | | | | | | | | (10,185 | ) | | | | | (10,185 | ) |
| Other comprehensive loss - |
| translation differences | | | | | | | | | | | (2,251 | ) | | (2,251 | ) |
| | | | |
| |
| T o t a l comprehensive loss | | * | | | | | | | | | | | | (12,436 | ) |
|
| |
| |
| |
| |
| |
| Balance at December 31, 2001 | | * | | | 31,553 | | | (15,792 | ) | | (1,614 | ) | | 14,147 | |
| | | | |
| |
| Changes during 2002: |
| Loss | | | | | | | | (8,071 | ) | | | | | (8,071 | ) |
| Other comprehensive loss - |
| translation differences | | | | | | | | | | | (1,014 | ) | | (1,014 | ) |
| | | | |
| |
| T o t a l comprehensive loss | | | | | | | | | | | | | | (9,085 | ) |
|
| |
| |
| |
| |
| |
| Balance at December 31, 2002 | | * | | | 31,553 | | | (23,863 | ) | | (2,628 | ) | | 5,062 | |
| | | | |
| |
| Changes during 2003: |
| Loss | | | | | | | | (347 | ) | | | | | (347 | ) |
| Other comprehensive loss - |
| translation differences | | | | | | | | | | | 410 | | | 410 | |
| | | | |
| |
| T o t a l comprehensive income | | | | | | | | | | | | | | 63 | |
|
| |
| |
| |
| |
| |
| Balance at December 31, 2003 | | * | | | 31,553 | | | (24,210 | ) | | (2,218 | ) | | 5,125 | |
|
| |
| |
| |
| |
| |
| * Represents an amount less than $ 1,000. |
23
TRINET VENTURE CAPITAL LTD.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
TRINET VENTURE CAPITAL LTD.
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2001
CONTENTS
| Page
|
|---|
| Auditors' Report | 1-2 |
| Balance Sheets | 3 |
| Statements of Operations | 4 |
| Statements of Changes in Shareholders' Deficiency | 5 |
| Statements of Cash Flows | 6-7 |
| Notes to the Financial Statements | 8-18 |
AUDITORS’ REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
TRINET VENTURE CAPITALLTD.
We have audited the accompanying balance sheets of Trinet Venture Capital Ltd. (“the Company”) as of December 31, 2001 and 2000, and the related statements of operations, changes in shareholders’ deficiency and cash flows for each of the three years in the period ended December 31, 2001. 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 affiliates, the investments in which are recorded using the equity method of accounting. Those financial statements were audited by other auditors, whose reports have been furnished to us and our opinion, insofar as it relates to the amounts included for the affiliates, 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.
In our opinion, based on our audits and the reports of other auditors, the aforementioned financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2001 and 2000, and the results of operations, changes in shareholders’ deficiency and cash flows for each of the three years in the period ended December 31, 2001, in accordance with generally accepted accounting principles in Israel.
As described in Note 2, 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.
1
The financial information in U.S. dollars and in accordance with generally accepted accounting principles in the United States is based on nominal historical amounts in Israeli currency and is presented in Note 11. Such financial information includes investments valued at $14,768 thousand as of December 31, 2000 (99% of the total assets). The values of such investments have been estimated by the Board of Directors and management in the absence of readily ascertainable market values. We have reviewed the procedures used by the Board of Directors and management in arriving at their estimates 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, those 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.
Brightman Almagor & Co.Certified
Public Accountants
Tel Aviv, March 11, 2002.
2
TRINET VENTURE CAPITAL LTD.
BALANCE SHEETS
Adjusted to NIS of December 2001
(NIS in thousands)
| | December 31,
|
|---|
| Note
| 2 0 0 1
| 2 0 0 0
| |
|---|
| ASSETS | | | | | | | | | | | |
| | | | | | | | | | | | |
| Current assets | | |
| | | | | | | | | | | | |
| Cash and cash equivalents | | | | | | | 3 | | | 5 | |
| Related parties | | | | | | | 26,376 | | | 476 | |
| Other current assets | | | | | | | 5 | | | 5 | |
| |
| |
| |
| | | | | | | | 26,384 | | | 486 | |
| |
| |
| |
| Investments | | |
| Affiliates | | | 3 | | | | - | | | 13,758 | |
| Other companies | | | 4 | | | | - | | | 2,279 | |
| |
| |
| |
| | | | | | | | - | | | 16,037 | |
| |
| |
| |
| | | | | | | | 26,384 | | | 16,523 | |
| |
| |
| |
| LIABILITIES AND SHAREHOLDERS' | | |
| DEFICIENCY | | |
| | | | | | | | | | | | |
| Current liabilities | | | 5 | | | | 19,883 | | | 45 | |
| |
| |
| |
| Capital notes | | | 6 | | | | 20,582 | | | 20,872 | |
| |
| |
| |
| Shareholders' deficiency | | |
| Share capital | | | 7 | | | | 2 | | | 2 | |
| Capital reserves | | | | | | | 6,771 | | | 6,612 | |
| Accumulated deficit | | | | | | | (20,854 | ) | | (11,008 | ) |
| |
| |
| |
| | | | | | | | (14,081 | ) | | (4,394 | ) |
| |
| |
| |
| | | | | | | | 26,384 | | | 16,523 | |
| |
| |
| |
March 11, 2002
Date of approval | _____________
Director | _____________
Director |
The accompanying notes form an integral part of the financial statements.
3
TRINET VENTURE CAPITAL LTD.
STATEMENTS OF OPERATIONS
Adjusted to NIS of December 2001
(NIS in thousands)
| | Year ended December 31,
|
|---|
| Note
| 2 0 0 1
| 2 0 0 0
| 1 9 9 9
|
|---|
| Revenues | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Gains from realization of investments | | | 3,4 | | | | 17,051 | | | - | | | 183 | |
| Gains on changes in ownership | | |
| interests in affiliates | | | 3 | | | | 1,889 | | | 24,238 | | | - | |
| |
| |
| |
| |
| Total revenues | | | | | | | 18,940 | | | 24,238 | | | 183 | |
| |
| |
| |
| |
| Expenses | | |
| | | | | | | | | | | | | | | |
| General and administrative | | | 8 | | | | 111 | | | 90 | | | 106 | |
| Financing, net | | | | | | | - | | | - | | | 11 | |
| |
| |
| |
| |
| Total expenses | | | | | | | 111 | | | 90 | | | 117 | |
| |
| |
| |
| |
| Income before equity in operating results of | | |
| subsidiaries and affiliates | | | | | | | 18,829 | | | 24,148 | | | 66 | |
| | | | | | | | | | | | | | | |
| Equity in operating results of | | |
| subsidiaries and affiliates | | | | | | | (8,672 | ) | | (14,302 | ) | | 3,962 | |
| Write-down for decline in value of long-term | | |
| Investments | | | | | | | (173 | ) | | - | | | - | |
| |
| |
| |
| |
| Net income | | | | | | | 9,984 | | | 9,846 | | | 4,028 | |
| |
| |
| |
| |
The accompanying notes form an integral part of the financial statements.
4
TRINET VENTURE CAPITAL LTD.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY
Adjusted to NIS of December 2001
(NIS in thousands)
| Share
capital
| Capital
reserves
| Accumulated
deficit
| Total
|
|---|
| | | | |
|---|
| Balance at January 1, 1999 | | | | 2 | | | 6,473 | | | (24,882 | ) | | (18,407 | ) |
| Effect of changes in the CPI | | |
| on unlinked capital notes | | | | - | | | 279 | | | - | | | 279 | |
| Net income for the year | | | | - | | | - | | | 4,028 | | | 4,028 | |
|
| |
| |
| |
| |
| Balance at December 31, 1999 | | | | 2 | | | 6,752 | | | (20,854 | ) | | (14,100 | ) |
| Translation adjustments | | | | - | | | (140 | ) | | - | | | (140 | ) |
| Net income for the year | | | | - | | | - | | | 9,846 | | | 9,846 | |
|
| |
| |
| |
| |
| Balance at December 31, 2000 | | | | 2 | | | 6,612 | | | (11,008 | ) | | (4,394 | ) |
| Effect of changes in the CPI | | |
| on unlinked capital notes | | | | - | | | 290 | | | - | | | 290 | |
| Translation adjustments | | | | - | | | (131 | ) | | - | | | (131 | ) |
| Net income for the year | | | | - | | | - | | | 9,984 | | | 9,984 | |
| Dividend | | | | - | | | - | | | (19,830 | ) | | (19,830 | ) |
|
| |
| |
| |
| |
| Balance at December 31, 2001 | | | | 2 | | | 6,771 | | | (20,854 | ) | | (14,081 | ) |
|
| |
| |
| |
| |
The accompanying notes form an integral part of the financial statements.
5
TRINET VENTURE CAPITAL LTD.
STATEMENTS OF CASH FLOWS
Adjusted to NIS of December 2001
(NIS in thousands)
| Year ended December 31,
|
|---|
| 2 0 0 1
| 2 0 0 0
| 1 9 9 9
|
|---|
| Cash flows from operating activities | | | | | | | | | | | |
| | | | | | | | | | | | |
| Net income | | | | 9,984 | | | 9,846 | | | 4,028 | |
| Adjustments to reconcile net income (loss) to net cash | | |
| used in operating activities (Appendix A) | | | | (9,986 | ) | | (9,563 | ) | | (4,736 | ) |
|
| |
| |
| |
| Net cash provided by (used in) operating activities | | | | (2 | ) | | 283 | | | (708 | ) |
|
| |
| |
| |
| | | | | | | | | | | | |
| Cash flows from investments activities | | |
| Proceeds from realization of investment in other company | | | | - | | | - | | | 714 | |
| Investments in affiliates | | | | - | | | (281 | ) | | - | |
|
| |
| |
| |
| Net cash provided by (used in) investment activities | | | | - | | | (281 | ) | | 714 | |
|
| |
| |
| |
| | | | | | | | | | | | |
| Cash flows from financing activities | | |
| Short-term bank credit, net | | | | - | | | - | | | (3 | ) |
|
| |
| |
| |
| Net cash used in financing activities | | | | - | | | - | | | (3 | ) |
|
| |
| |
| |
| Net change in cash and cash equivalents | | | | (2 | ) | | 2 | | | 3 | |
| Cash and cash equivalents at beginning of year | | | | 5 | | | 3 | | | - | |
|
| |
| |
| |
| Cash and cash equivalents at end of year | | | | 3 | | | 5 | | | 3 | |
|
| |
| |
| |
The accompanying notes form an integral part of the financial statements.
6
TRINET VENTURE CAPITAL LTD.
STATEMENTS OF CASH FLOWS
Adjusted to NIS of December 2001
(NIS in thousands)
| Year ended December 31,
|
|---|
| 2 0 0 1
| 2 0 0 0
| 1 9 9 9
|
|---|
| Appendix A | | | | | | | | | | | |
| Adjustments to reconcile net income to net cash | | |
| used in operating activities: | | |
| | | | | | | | | | | | |
| Items not involving cash flows: | | |
| Gains from realization of investments | | | | (17,051 | ) | | - | | | (183 | ) |
| Gains on changes in ownership interests of affiliates | | | | (1,889 | ) | | (24,238 | ) | | - | |
| Equity in operating results of affiliates | | | | 8,672 | | | 14,302 | | | (3,962 | ) |
| Write-down for decline in value of long-term investments | | | | 173 | | | - | | | - | |
|
| |
| |
| |
| | | | | (10,095 | ) | | (9,936 | ) | | (4,145 | ) |
|
| |
| |
| |
| Changes in assets and liabilities: | | |
| Decrease (increase) in receivables from related parties | | | | 100 | | | 357 | | | (579 | ) |
| Decrease in other current assets | | | | - | | | 1 | | | 3 | |
| Increase (decrease) in current liabilities | | | | 9 | | | 15 | | | (15 | ) |
|
| |
| |
| |
| | | | | 109 | | | 373 | | | (591 | ) |
|
| |
| |
| |
| | | | | (9,986 | ) | | (9,563 | ) | | (4,736 | ) |
|
| |
| |
| |
| Appendix B | | |
| Activities non involving cash flows: | | |
| | | | | | | | | | | | |
| Dividend | | | | 19,830
| | | | | | | |
| Proceeds from realization of investments | | | | 26,000
| | | | | | | |
The accompanying notes form an integral part of the financial statements.
7
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
Note 1—General
| | A. | The Company was incorporated and registered on February 1, 1994 and commenced operations shortly thereafter. The Company was established for the purpose of investing in high-tech companies and projects that are in the manufacturing development stage or the production and marketing stage of developed products and to generate profits from the activities and holdings in such companies. |
| (1) | The Company | —Trinet Venture Capital Ltd. |
| (2) | Affiliate | —A company in which the Company has significant influence and the investment in which is presented according to the equity method of accounting (“equity basis”). |
| (3) | Other company | — A company, the investment in which is presented at cost. |
| (4) | Shareholders | — Koonras Technologies Ltd., owner of 50% of the Company’s shares from September 2000.
— Ampal Industries (Israel) Ltd., owner of 50% of the Company's shares. |
8
| (5) | Related party | — As defined in Opinion No. 29 of the Institute of Certified Public Accountants in Israel. |
| (6) | NIS | — New Israeli shekel |
| (7) | Dollar | — U.S. dollar. |
9
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
Note 2–Summary of Significant Accounting Policies
| | A. | Financial statements in adjusted values |
| | In accordance with certain pronouncements of the Institute of Certified Public Accountants in Israel, the Company prepares its financial statements on the basis of cost, adjusted for changes in the purchasing power of the NIS. Condensed financial data in nominal NIS, on the basis of which the adjusted financial statements have been prepared, is presented in Note 10. |
| | (2) | Principles of adjustment |
| | Non-monetary items (i.e. investments and shareholders’ equity) have been adjusted for changes in the Israeli Consumer Price Index (“CPI”) from the month of the transaction to the last month of the reporting period. |
| | Investments in affiliates reported on the equity basis have been presented based upon the adjusted financial statements of such companies. |
| | The adjusted values of non-monetary assets do not necessarily represent the market or economic values of such assets, but rather their cost adjusted for changes in the purchasing power of the NIS.
Monetary items (items whose amounts reflect current or realizable values) have been presented in the adjusted balance sheet at their nominal amounts as of the balance sheet date. |
| | (b) | Statements of operations |
| | Items in the statements of operations (other than financing) representing transactions during the reporting period have been adjusted on the basis of changes in the CPI from the month of the transaction to the CPI for the last month of the reporting period. |
| | Amounts related to non-monetary items and to various balance sheet accruals have been adjusted based on the related balance sheet amounts. |
| | The Company’s equity in the results of subsidiaries and affiliates has been determined based on the adjusted financial statements of such companies. |
| | Financing income or expenses are derived from the other items in the financial statements, and include, inter alia, amounts required to reconcile certain other components in the statements of operations for the element of inflation that is included therein. |
| | (c) | The comparative figures in the financial statements have been adjusted to NIS of December 2001. |
10
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
Note 2–Summary of Significant Accounting Policies (contd.)
| | B. | Investments in affiliates |
| | The Company’s investments in affiliates are presented on the equity basis. In this regard, investments are presented at original cost plus/minus the Company’s equity in the operating results of the affiliates or other changes in shareholders’ equity which have occurred since acquisition. |
| | The Company does not record its portion of losses in affiliates to the extent that the Company has not guaranteed the affiliates liabilities. |
| | Gains deriving to the Company from the issuance of shares of an investee company to a third company, which is a “Start Up” company, have been recorded as deferred income and are amortized to the statement of operations in accordance with Opinion No. 68 of the Institute of Certified Public Accountant in Israel. |
| | Differences arising between the Company’s investments in affiliates (which have been adjusted based on changes in the CPI) and the Company’s equity in the net assets of certain affiliates (based on the financial statements in dollars) are charged or credited to capital reserves. |
| | C. | Investments in other companies |
| | Investments in long-term marketable securities are presented in accordance with Opinion No. 44 of the Institute of Certified Public Accountants in Israel, on the cost basis, net of an allowance for decline in value. |
| | Investments in other companies, which are not publicly traded, are presented at cost less allowances for decline in value as per management estimate. |
| | D. | Transactions between the Company and Controlling Parties |
| | The erosion of unlinked, non-interest-bearing capital notes issued by the Company to a shareholder and a related party are reflected in the Company’s capital reserves. |
| | Deferred income taxes are computed for timing differences between the amounts of assets and liabilities as reported in the financial statements and their amounts for income tax purposes. The deferred taxes are computed at tax rates that are expected to apply when the deferred taxes are realized. |
| | The Company has not recorded deferred taxes for accumulated losses for tax purposes due to the uncertainty of their realization. |
| | F. | Use of estimates in preparation of financial statements |
| | The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
11
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
(NIS in thousands)
Note 2–Summary of Significant Accounting Policies (contd.)
| | (1) | Balances, which are linked to the CPI, are presented on the basis of the relevant CPI (according to the term of the transaction). |
| | (2) | Data in respect of the CPI and the U.S. dollar (“dollar”): |
Year ended
| CPI
as of
December
| Percentage
increase
during year
| Exchange rate
of dollar as of
December 31
| Percentage
increase
(decrease)
during year
|
|---|
| | | % | NIS | % |
|---|
| | | | | |
| 2001 | 108.1 | 1.4 | 4.416 | 9.3 |
| 2000 | 106.6 | - | 4.041 | (2.7) |
| 1999 | 106.6 | 1.3 | 4.153 | (0.2) |
Note 3–Investments in Affiliates
| December 31,
|
|---|
| 2 0 0 1
| 2 0 0 0
|
|---|
| A. Composition: | | | | | | | | |
| | | | | | | | | |
| (1) Cost (including payments on account of | | | | - | | | 12,745 | |
| shares) | | |
| Company’s share in cumulative net | | |
| changes from acquisition date | | | | - | | | 2,902 | |
|
| |
| |
| | | | | - | | | 15,647 | |
| Deferred income (See Note 3B(2)) | | | | - | | | (1,889 | ) |
|
| |
| |
| Presented as investments in affiliates | | | | - | | | 13,758 | |
|
| |
| |
| (2) NetFormx Ltd. | | | | - | | | - | |
| Smart Link Ltd. | | | | - | | | 13,758 | |
|
| |
| |
| | | | | - | | | 13,758 | |
|
| |
| |
| | (1) | In December 2001 the Company sold all of its investments in affiliates and other companies to its shareholders in exchange for NIS 26 million, which not yet been paid and presented in balance sheet as of December 31, 2001 within “Related parties”. |
| | (2) | NetFormx Ltd. (“NetFormx”) — (formerly Imagenet Ltd.
NetFormx develops, markets and supports computer-aided network engineering and software products for network design simulation and optimization. During 1996, the Company invested in the shares of NetFormx the amount of $1.5 million. |
12
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
(NIS in thousands)
Note 3–Investments in Affiliates(contd.)
| | B. | Additional details(contd.) |
| | (2) | NetFormx Ltd. (“NetFormx”) — (formerly Imagenet Ltd.)(contd.) |
| | In March 2000, Netformx issued additional shares to a group of investors, for net proceeds of NIS 75.5 million. As a result, the Company’s holding in Netformx was reduced to 16.8%. In accordance with Opinion No.68 of the Institute of Certified Public Accountants in Israel regarding third party issuances, the gain of NIS 9,823 was recorded as deferred income, of which NIS 7,934 was credited to income in 2000 against the Company’s share in the losses of Netformx and the remainder of NIS 1,889 was credited to income in 2001. |
| | See Note 3B(1) above in respect of realization of investment in Netformx by the Company. |
| | (3) | Smart Link Ltd. (“Smart”) |
| | Smart is engaged in the development and marketing of efficient software communication. As of December 31, 1996 the Company held 43.7% of Smart. |
| | In March 2000, Smart issued additional shares to a group of investors, for net proceeds of NIS 57 million. As a result, the Company’s holding in Smart was reduced to 28.73%. The gain of NIS 15,227 was credited to income. During the period after March 2000 up to date of realization of investment in Smart (see Note 3B(1) above), the Company’s holding in Smart was reduced to 28.41% due to exercise of options by third parties. |
Note 4–Investments in Other Companies
| December 31,
|
|---|
| 2 0 0 1
| 2 0 0 0
|
|---|
| A. Composition: | | | | | | | | |
| Peptor Ltd. | | | - | | | | 2,106 | |
| Simplayer.com Ltd. (formerly Logal Ltd.) | | | -
| | | | 173
| |
| | | | -
| | | | 2,279
| |
| | See Note 3B(1) above in respect of realization of investments by the Company. |
| | Peptor is engaged in the research and development of peptides for pharmeceutical medications. The original investment as of the balance sheet date amounted to $705 thousand representing 0.98% of Peptor’s shares. |
| | Simplayer.com Ltd. (formerly Logal Ltd.)( “Simplayer”) |
| | In October 1999, the Company sold all of its investment in Simplayer in exchange for NIS 694. As a result of the sale the Company recorded a gain of approximately NIS 183. |
| | In March 2000, the Company exercised its option to buy back 84,894 shares of Simplayer for $ 42 thousand. |
13
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
(NIS in thousands)
Note 5–Current Liabilities
| December 31,
|
|---|
| 2 0 0 1
| 2 0 0 0
|
|---|
| Composition: | | | | | | | | |
| Dividend to pay | | | | 19,830 | | | - | |
| Accrued expenses | | | | 53 | | | 45 | |
|
| |
| |
| | | | | 19,883 | | | 45 | |
|
| |
| |
Note 6—Capital Notes
| | The capital notes, which were issued to a related party and a shareholder, are unlinked and non-interest-bearing. |
Note 7—Share Capital
| December 31,
|
|---|
| 2 0 0 1 and 2 0 0 0
|
|---|
| Authorized
| Issued and
paid-up
|
|---|
| Number of shares: | | | | | | | | |
| Ordinary shares NIS 1 par value | | | | 25,000
| | | 1,000
| |
Note 8—General and Administrative Expenses
| Year ended December 31,
|
|---|
| 2 0 0 1
| 2 0 0 0
| 1 9 9 9
|
|---|
| Composition: | | | | | | | | | | | |
| Professional services | | | | 111 | | | 90 | | | 90 | |
| Other | | | | - | | | - | | | 16 | |
|
| |
| |
| |
| | | | | 111 | | | 90 | | | 106 | |
|
| |
| |
| |
14
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
(NIS in thousands)
Note 9–Income Taxes
| | A. | The Company is subject to the provisions of the Income Tax (Inflationary Adjustments) Law — 1985. |
| | B. | The Company has received final tax assessments for the years up to and including tax year 1997. |
Note 10—Condensed Financial Information in Nominal NIS
| | A. | Condensed balance sheets: |
| December 31,
|
|---|
| 2 0 0 1
| 2 0 0 0
|
|---|
| Assets | | | | | | | | |
| Current assets | | | | 26,384 | | | 479 | |
|
| |
| |
| Investments | | | | - | | | 13,567 | |
| Affiliates | | | | - | | | 1,364 | |
|
| |
| |
| Other companies | | | | - | | | 14,931 | |
|
| |
| |
| | | | | 26,384 | | | 15,410 | |
|
| |
| |
| | |
| Liabilities and Shareholders’ Deficiency | | |
| Current liabilities | | | | 19,883 | | | 44 | |
| Capital notes | | | | 20,582 | | | 20,582 | |
| Shareholders' deficiency | | | | (14,081 | ) | | (5,216 | ) |
|
| |
| |
| | | | | 26,384 | | | 15,410 | |
|
| |
| |
15
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTSAS
OF DECEMBER 31, 2001
(NIS in thousands)
Note 10—Condensed Financial Information in Nominal NIS(contd.)
| | B. | Condensed statements of operations: |
| Year ended December 31,
|
|---|
| 2 0 0 1
| 2 0 0 0
| 1 9 9 9
|
|---|
| Revenues | | | | | | | | | | | |
| Gains from realization of investments | | | | 18,494 | | | - | | | 190 | |
| Gains on changes in ownership | | |
| interests in affiliates | | | | 1,863 | | | 23,718 | | | - | |
| Financing, net | | | | 6 | | | - | | | - | |
|
| |
| |
| |
| | | | | 20,363 | | | 23,718 | | | 190 | |
| Expenses | | |
| General and administrative | | | | 110 | | | 88 | | | 102 | |
| Financing, net | | | | - | | | 1 | | | 9 | |
|
| |
| |
| |
| | | | | 110 | | | 89 | | | 111 | |
| Income before equity in operating results | | |
| of subsidiaries and affiliates | | | | 20,253 | | | 23,629 | | | 79 | |
| | | | | | | | | | | | |
| Equity in operating results of | | |
| subsidiaries and affiliates | | | | (8,646 | ) | | (14,105 | ) | | 3,528 | |
| Write-down for decline in value of long- | | |
| term investments | | | | (169 | ) | | - | | | - | |
|
| |
| |
| |
| Net income | | | | 11,438 | | | 9,524 | | | 3,607 | |
|
| |
| |
| |
| | C. | Statement of changes in shareholders’ deficiency: |
| Share
capital
| Capital
reserves
| Accumulated
deficit
| Total
|
|---|
| Balance at January 1, 1999 | | | | 1 | | | 49 | | | (18,821 | ) | | (18,771 | ) |
| Net income for the year | | | | - | | | - | | | 3,607 | | | 3,607 | |
|
| |
| |
| |
| |
| Balance at December 31, 1999 | | | | 1 | | | 49 | | | (15,214 | ) | | (15,164 | ) |
| Translation adjustments | | | | - | | | 424 | | | - | | | 424 | |
| Net income for the year | | | | - | | | - | | | 9,524 | | | 9,524 | |
|
| |
| |
| |
| |
| Balance at December 31, 2000 | | | | 1 | | | 473 | | | (5,690 | ) | | (5,216 | ) |
| Translation adjustments | | | | - | | | (473 | ) | | - | | | (473 | ) |
| Net income for the year | | | | - | | | - | | | 11,438 | | | 11,438 | |
| Dividend | | | | - | | | - | | | (19,830 | ) | | (19,830 | ) |
|
| |
| |
| |
| |
| Balance at December 31, 2001 | | | | 1 | | | - | | | (14,082 | ) | | (14,081 | ) |
|
| |
| |
| |
| |
16
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
| Note 11— | Condensed Financial Data in Dollars and in Accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States |
| | (1) | The Company’s functional currency is the NIS. Pursuant to the request of a shareholder, the financial information of the Company in nominal historical NIS, as presented in Note 11, has been remeasured into U.S. dollars in accordance with the principles of Statement No. 52 of the Financial Accounting Standards Board of the United States, “Foreign Currency Translation”. |
| | (2) | The Company’s objective is to achieve long-term capital appreciation from its portfolio of venture capital investments in new and developing companies and other special investment situations. In accordance with the U.S. GAAP, such portfolio investments should be reflected at fair value, defined as the quoted market price for securities for which market quotations are readily available, or as an estimate of fair value as determined in good faith by the Board of Directors and management. |
| | In accordance with the above policy, the following condensed financial information reflects investments in publicly traded securities at market value and investments in privately held portfolio securities at cost until significant developments affecting the portfolio company provide a basis for a change in valuation. In this regard, the fair value of private securities is adjusted to reflect meaningful third-party transactions in the private market or to reflect significant progress or deterioration in the development of the portfolio of the Company’s business, such that cost is no longer reflective of fair value. Unrealized appreciation or depreciation in the value of investments is reflected in earnings. |
| | (3) | Deferred income taxes in the condensed financial information below have been recorded on the unrealized appreciation of investments, net of deferred tax benefits in respect of tax loss carryforwards. |
17
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001
| Note 11— | Condensed Financial Data in Dollars and in Accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States(contd.) |
| | B. | Condensed balance sheets (dollars in thousands): |
| December 31,
|
|---|
| 2 0 0 1
| 2 0 0 0
|
|---|
| Assets | | | | | | | | |
| Current assets | | | | 5,975 | | | 119 | |
| Investments | | | | - | | | 14,768 | |
|
| |
| |
| | | | | 5,975 | | | 14,887 | |
|
| |
| |
| Liabilities and Shareholders’ Equity (Deficiency) | | |
| | | | | | | | | |
| Current liabilities | | |
| Deferred income taxes | | | | - | | | 3,153 | |
| Other current liabilities | | | | 4,502 | | | 11 | |
|
| |
| |
| | | | | 4,502 | | | 3,164 | |
| | | | | | | | | |
| Capital notes | | | | 4,661 | | | 5,093 | |
| Shareholders' equity (deficiency) | | | | (3,188 | ) | | 6,630 | |
|
| |
| |
| | | | | 5,975 | | | 14,887 | |
|
| |
| |
| | C. | Condensed statements of operations (dollars in thousands): |
| Year ended December 31,
|
|---|
| 2 0 0 1
| 2 0 0 0
| 1 9 9 9
|
|---|
| Revenues | | | | | | | | | | | |
| Gain from realization in other company | | | | - | | | - | | | 44 | |
| Gain from increase in investments' value | | | | - | | | 10,693 | | | - | |
| Financing, net | | | | 2 | | | - | | | 9 | |
|
| |
| |
| |
| | | | | 2 | | | 10,693 | | | 53 | |
|
| |
| |
| |
| Expenses | | |
| Depreciation of portfolio investments (1) | | | | 7,585 | | | 4,251 | | | - | |
| Loss from changes in ownership interests | | |
| in affiliate | | | | 70 | | | - | | | - | |
| General and administrative | | | | 25 | | | 22 | | | 24 | |
|
| |
| |
| |
| | | | | 7,680 | | | 4,273 | | | 24 | |
|
| |
| |
| |
| Income (loss) before tax benefit | | |
| (income taxes) | | | | (7,678 | ) | | 6,420 | | | 29 | |
| Tax benefit (income taxes) | | | | 2,886 | | | (2,395 | ) | | - | |
|
| |
| |
| |
| Net income (loss) | | | | (4,792 | ) | | 4,025 | | | 29 | |
| Other comprehensive income (loss)(2) | | | | (536 | ) | | (25 | ) | | 4 | |
|
| |
| |
| |
| Comprehensive income (loss) | | | | (5,328 | ) | | 4,000 | | | 33 | |
|
| |
| |
| |
18
TRINET VENTURE CAPITAL LTD.
NOTES TO THE FINANCIAL STATEMENTSAS
OF DECEMBER 31, 2000
| Note 11 — | Condensed Financial Data in Dollars and in Accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States(contd.) |
| | C. | Condensed statements of operations (dollars in thousands) (contd.) |
| | (1) | Due to various developments relating to the operations of certain portfolio companies, the Company determined that the fair value of such companies was less than the value reflected in the Company’s books. |
| | (2) | In accordance with Statement of Financial Accounting Standards No. 130 (“SFAS 130”) foreign currency translation adjustments have been presented as a component of comprehensive income. The capital reserves include other comprehensive income reflecting this foreign currency translation of 2000, 1999 and 1998, respectively. No other provision of SFAS 130 affects the financial statement presentation of the Company. |
| | D. | Statement of changes in shareholders’ equity (deficiency) (dollars inthousands): |
| Share
capital
| Retained earnings
| Capital
reserves
| Total
|
|---|
| Balance at January 1, 1999 | | | | 1 | | | 3,381 | | | (785 | ) | | 2,597 | |
| Net income | | | | - | | | 29 | | | - | | | 29 | |
| Other comprehensive income - | | |
| Translation adjustments | | | | - | | | - | | | 4 | | | 4 | |
|
| |
| |
| |
| |
| Balance at December 31, 1999 | | | | 1 | | | 3,410 | | | (781 | ) | | 2,630 | |
| Net income | | | | - | | | 4,025 | | | - | | | 4,025 | |
| Other comprehensive loss - | | |
| Translation adjustments | | | | - | | | - | | | (25 | ) | | (25 | ) |
|
| |
| |
| |
| |
| Balance at December 31, 2000 | | | | 1 | | | 7,435 | | | (806 | ) | | 6,630 | |
| Net loss | | | | - | | | (4,792 | ) | | - | | | (4,792 | ) |
| Other comprehensive income - | | |
| Translation adjustments | | | | - | | | - | | | (536 | ) | | (536 | ) |
| Dividend | | | | - | | | (4,490 | ) | | - | | | (4,490 | ) |
|
| |
| |
| |
| |
| Balance at December 31, 2001 | | | | 1 | | | (1,847 | ) | | (1,342 | ) | | (3,188 | ) |
|
| |
| |
| |
| |
19
INDEPENDENT AUDITORS’ REPORT
TO THE SHAREHOLDERS
OF AM-HAL LTD.
We have audited the accompanying balance sheets of Am-Hal Ltd. (“the Company”) and the consolidated balance sheets of the Company and a consolidated partnership as of December 31, 2003 and 2002, and the related statements of operations, changes in shareholders’ equity (deficiency) and cash flows – of the Company and on a consolidated basis – for each of the three years in the period ended December 31, 2003. 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 auditing standards generally accepted in the United States of America. 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 principles used and significant estimates made by Company’s 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 the Company and on a consolidated basis – as of December 31, 2003 and 2002, and the results of operations, changes in shareholders’ equity (deficiency) and cash flows – of the Company and on a consolidated basis – for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in Israel which, with respect to these financial statements, are substantially identical to accounting principles generally accepted in the United States of America, except as described in Note 25 to the financial statements.
As explained in Note 2B, these financial statements have been prepared in values 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.
Brightman Almagor & Co.
Certified Public Accountants
Tel Aviv, February 15, 2004
INDEPENDENT AUDITORS’ SPECIAL REPORT
We have audited the balance sheets of Am-Hal Ltd. (“the Company”) and the consolidated balance sheets of the Company and a consolidated partnership as of December 31, 2003 and 2002, and the related statements of operations, changes in shareholders’ deficiency and cash flows – of the Company and on a consolidated basis – for each of the three years in the period ended December 31, 2003, and have issued our unqualified report thereon dated February 15, 2004. The aforementioned financial statements (not presented separately herein) were prepared in new Israeli shekels (NIS) on the historical cost basis, adjusted for changes in the general purchasing power of the NIS in accordance with standards established by the Institute of Certified Public Accountants in Israel.
As described in Note 2B, the accompanying Company and consolidated financial data in U.S. dollars as of the abovementioned dates and for the abovementioned years then ended were prepared on the basis of financial data in nominal NIS (the basis on which the Company and consolidated adjusted NIS financial statements were also prepared), translated into US dollars in accordance with the principles described in Note 2B.
In our opinion, the accompanying financial data in US dollars was translated in accordance with the principles described in Note 2B.
This report is intended solely for the information and use of the Boards of Directors and management of the Company and Ampal-American Israel Corp., and should not be used for any other purpose.
| | Brightman Almagor & Co.
Certified Public Accountants |
| Tel Aviv, February 15, 2004 | |
INDEPENDENT AUDITORS’ REPORT
TO THE SHAREHOLDERS OF
BAY HEART LTD. AND SUBSIDIARY
We have audited the accompanying balance sheets of Bay Heart Ltd. (“the Company”) as of December 31, 2003 and 2002, and the consolidated balance sheets as of such dates, and the related statements of operations, changes in shareholders’ deficiency and cash flows – of the Company and on a consolidated basis – for each of the three years in the period ended December 31, 2003. 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 auditing standards generally accepted in the United States of America. 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 the Company and on a consolidated basis – at December 31, 2003 and 2002, and the results of operations, changes in shareholders’ deficiency and cash flows – of the Company and on a consolidated basis – for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in Israel.
Accounting principles generally accepted in Israel differ in certain respects from accounting principles generally accepted in the United States. With respect to these financial statements, the difference in the application of the latter is described in Note 20.
As described in Note 2A, the above mentioned financial statements have been prepared in adjusted values based on the changes in the general purchasing power of the Israeli currency in accordance with pronouncements of the Institute of Certified Public Accountants in Israel.
The condensed consolidated financial information in U.S. dollars presented in Note 19 to the financial statements, prepared at the request of an investor, represents a translation of the Company’s financial statements in nominal values, as stated in Note 19A. In our opinion, such translation into U.S. dollars was appropriately performed on the basis stated in Note 19A.
As described in Note 1C to the financial statements regarding the Company’s business condition, the Company has a working capital deficit, shareholders’ deficiency and negative cash flows from operations. As stated in that note, the continuance of the Company’s operations and its ability to meet its short-term obligations are dependent on obtaining financing from the shareholders and/or bank financing arrangements. The Company’s management is negotiating with the bank for the refinancing of its short-term loans and the receipt of long-term loans.
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| Brightman Almagor & Co.
Certified Public Accountants
Member firm of Deloitte Touche Tohmatsu |
| Haifa, Israel, March 1, 2004. | |
To the Shareholders of
CARMEL CONTAINER SYSTEMS LTD.
We have audited the accompanying consolidated balance sheets of Carmel Container Systems Ltd. (“the Company”) and its subsidiaries as of December 31, 2002 and 2003, 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, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We did not audit the financial statements of a subsidiary whose assets included in the consolidation constitute approximately 10% and 10% of total consolidated assets as of December 31, 2002 and 2003, respectively, and whose revenues included in the consolidation constitute approximately 9%, 9% and 9% of total consolidated revenues for each of the three years ended December 31, 2001, 2002 and 2003, respectively. The financial statements of this Company was audited by other auditors whose reports has been furnished to us, and our opinion, insofar as it relates to amounts included for this company is based on the report of the other auditor.
We conducted our audits in accordance with auditing standards generally accepted in the United States and 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 misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, 2002 and 2003, and the consolidated results of their operations and cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in Israel, which differ in certain respects from those followed in the United States (see Note 21 to the consolidated financial statements).
As explained in Note 2, the consolidated financial statements referred to above are presented in values adjusted for the changes in the general purchasing power of the Israeli currency, in accordance with pronouncements of the Institute of Certified Public Accountants in Israel.
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| Tel-Aviv, Israel | KOST FORER GABBAY & KASIERER |
| March 9, 2004 | | A Member of Ernst & Young Global |
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS
OF CORAL WORLD INTERNATIONAL LTD.
We have audited the accompanying consolidated balance sheets of“Coral World International Ltd.” (the “Company”) and its subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the board of directors and the management of the Company. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States and in Israel, including those prescribed by the Israeli 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. 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 audit provides a reasonable basis for our opinion.
The financial statements of the Israeli subsidiaries of the Company have been prepared in nominal shekel values. Information regarding the effect of changes in the general purchasing power of the Israeli currency on the financial statements, as required by opinions of the Institute of Certified Public Accountants in Israel, has not been included in the financial statements. These amounts have been translated into US dollars using the method described in Note 2A.
In our opinion, except for the exclusion of the information, as mentioned in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Coral World International Ltd. and its subsidiaries as of December 31, 2003 and 2002, and the results of operations, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2003, in accordance with accounting principles generally accepted in Israel, consistently applied on the basis of the historical cost convention.
Accounting principles generally accepted in Israel differ in certain respects from accounting principles generally accepted in the United States. The application of the latter would have affected the determination of nominal net income (loss) and shareholders’ equity to the extent summarized in Note 24 to the financial statements.
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| | Fahn, Kanne & Co.
Certified Public Accountants (Isr.) |
Tel-Aviv, Israel, March 21, 2004
Report of Independent Public Accountants
To The Shareholders of Country Club Kfar Saba Ltd.
We have audited the balance sheet of Country Club Kfar Saba Ltd. as of December 31, 2002 and the related statements of income, changes in shareholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Israel and 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 audit provides 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 pronouncements issued by the Institute of Certified Public Accountants in Israel.
In our opinion, the above-mentioned financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2002 and the results of its operations, changes in shareholders’ equity and cash flows for the year then ended, in conformity with accounting principles generally accepted in Israel, which differ in certain respects from, accounting principles generally accepted in the United States (see Notes 2F and 16).
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| | Luboshitz Kasierer
Certified Public Accountants (Isr.) |
March 5, 2003
To the shareholders of
EPSILON INVESTMENT HOUSE LTD.
We have audited the balance sheet of Epsilon Investment House Ltd. (“the Company”) as of December 31, 2003, and the consolidated balance sheet as of such date and the related statements of income, changes in shareholders’ equity and cash flows – Company and consolidated – for the year ended December 31, 2003. 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 audit in accordance with generally accepted auditing standards in Israel and in the United States, including those prescribed by 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 audit provides 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 the Company and consolidated – as of December 31, 2003, and the results of operations, changes in shareholders’ equity and cash flows – of the Company and consolidated – for the year ended December 31, 2003, in conformity with generally accepted accounting principles in Israel, which differ in certain respects from those generally accepted in the United States (see Note 22 to the financial statements).
As explained in Note 2a, the financial statements referred to above are presented in values adjusted for the changes in the general purchasing power of the Israeli currency, in accordance with pronouncements of the Institute of Certified Public Accountants in Israel.
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Tel-Aviv, Israel
February 4 , 2004 | | KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global |
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF GRANITE HACARMEL INVESTMENTS LIMITED
We have audited the accompanying consolidated balance sheet of Granite Hacarmel Investments Limited and its subsidiaries (the Company) as of December 31, 2002 and the related consolidated statements of income, shareholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2002. These consolidated 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 consolidated financial statements based on our audits. We did not audit the financial statements of certain subsidiaries, whose assets constitute 2% of the total consolidated assets as of December 31, 2002 and whose revenues constitute 3.6% and 3.2% of the total consolidated revenues for the years ended December 31, 2002 and 2001, respectively. The financial statements of those subsidiaries were audited by other auditors whose reports thereon were furnished to us, and our opinion, insofar as it relates to amounts included for such subsidiaries, is based solely on the said reports of the other auditors. Furthermore, the data included in the financial statements relating to the net asset value of the Company’s investments in affiliates and to its equity in their operating results is based on the financial statements of such affiliates, some of which were audited by other auditors.
We conducted our audits in accordance with generally accepted auditing standards, including standards prescribed by the Auditors Regulation (Manner of Auditor’s Performance) 1973 and auditing standards generally accepted in 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 by Management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2002 and the results of their operations, changes in the shareholders’ equity and their cash flows for each of the years, in the two-year period ended December 31, 2002 in conformity with generally accepted accounting principles in Israel. Furthermore, these statements have, in our opinion, been prepared in accordance with the Securities Regulation (Preparation of Annual Financial Statements) 1993.
Accounting principles generally accepted in Israel vary in certain significant respects from accounting principles generally accepted in the United States of America. Application of accounting principles generally accepted in the United States of America would have affected results of operations and shareholders’ equity for each of the years in the two-year period ended December 31, 2002, to the extent summarized in Note 32 to the consolidated financial statements, as included in U.S. Dollars.
As explained in Note 2, the above mentioned consolidated financial statements are stated in 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.
Without qualifying our opinion, we would like to bring attention to Note 28 in the financial statements regarding four claims against consolidated companies which the court has been asked to recognize as class actions and other claims against a consolidated company claiming that its agreements with its customers are restrictive trade arrangements.
Somekh Chaikin
Certified Public Accountants (Israel)
Haifa Israel, March 12, 2003
To the Shareholders of Hod Hasharon Sport Center Limited
We have audited the balance sheets of Hod Hasharon Sport Center Limited as at December 31, 2003, the related statements of income and shareholders’ equity and cash flows for the year ended December 31, 2003, expressed in New Israeli Shekels.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits
We conducted our audit in accordance with auditing standards generally accepted in the United States and in Israel, including those prescribed by the Israeli 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. 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 overall financial statement presentation. We believe that our audit provides 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 7 to the financial statements. These amounts have been translated into U.S. dollars using the method described in Note 2.
In our opinion, based on our audit, the above-mentioned financial statements present fairly the financial position of the Company as at December 31, 2003, the results of its operations, the changes in shareholders’ equity and cash flows for the year ended December 31, 2003, in conformity with accounting principles generally accepted in Israel, consistently applied. Also, in our opinion, the financial statements based on nominal data (Note 7) present fairly, in conformity with generally accepted accounting principles, the financial position of the Company as at December 31, 2003, and the results of its operations, the changes in shareholders’ equity, and its cash flows for the year ended December 31, 2003, on the basis of the historical cost convention.
The financial statements of the Company conform with accounting principles generally accepted in Israel (“Israel GAAP”), which differ in certain respects from those followed in the United States (“U.S. GAAP”), as described below:
a. Effect of inflation:
The Company, in accordance with Israeli GAAP, comprehensively includes the effects of price level changes in the accompanying consolidated financial statements, as described in Note 2a. Such Israeli accounting principles measure the effects of price level changes in the inflationary nature of the Israeli economy and, as such, is considered a more meaningful presentation than financial reporting based on historical cost for Israeli and U.S. accounting purposes. The effect of inflation was eliminated for U.S. GAAP measurement purposes as presented in Note 7.
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| Abraham Schurder | | |
Name (ABAS partner)
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| KPMG Somekh Chaikin Tel Aviv | | |
Office
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March 21, 2004
Date | | |
To the Shareholders of Hod Hasharon Sport Center (1992) Limited Partnership
We have audited the balance sheets of Hod Hasharon Sport Center (1992) Limited Partnership as at December31, 2003, the related statements of income and shareholders’ equity and cash flows for the year ended December 31, 2003, expressed in New Israeli Shekels.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits
We conducted our audit in accordance with auditing standards generally accepted in the United States and in Israel, including those prescribed by the Israeli 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. 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 overall financial statement presentation. We believe that our audit provides 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 16 to the financial statements. These amounts have been translated into U.S. dollars using the method described in Note 2(H).
In our opinion, based on our audit, the above-mentioned financial statements present fairly the financial position of the Company as at December 31, 2003, the results of its operations, the changes in shareholders’ equity and cash flows for the year ended December 31, 2003, in conformity with accounting principles generally accepted in Israel, consistently applied. Also, in our opinion, the financial statements based on nominal data (Note 16) present fairly, in conformity with generally accepted accounting principles, the financial position of the Company as at December 31, 2003, and the results of its perations, the changes in shareholders’ equity, and its cash flows for the year ended December 31, 2003, on the basis of the historical cost convention.
The financial statements of Partnership conform with accounting principles generally accepted in Israel (“Israel GAAP”), which differ in certain respects from those followed in the United States (“U.S. GAAP”), as described below:
a. Accrued severance pay, net:
According to Israeli GAAP, accrued severance pay is included in the balance sheet net of amounts funded, and income from earnings on amounts funded is netted from severance pay expenses.
According to U.S, GAAP accrued severance pay is included in the balance sheets at the total liabilities amount and total amounts funded through provident fund and through insurance policies, income from earnings on amounts funded is added to severance pay fund.
The effect of this difference on both income and equity is not material.
b. Effect of inflation:
The Company, in accordance with Israeli GAAP, comprehensively includes the effects of price level changes in the accompanying consolidated financial statements, as described in Note 2a. Such Israeli accounting principles measure the effects of price level changes in the inflationary nature of the Israeli economy and, as such, is considered a more meaningful presentation than financial reporting based on historical cost for Israeli and U.S. accounting purposes. The effect of inflation was eliminated for U.S. GAAP measurement purposes as presented in Note 16.
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| Abraham Schurder | | |
Name (ABAS partner)
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| KPMG Somekh Chaikin Tel Aviv | | |
Office
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February 24, 2004
Date | | |
1
Report of Independent Public Accountants
To The Partners of Hod Hasharon Sport Center (1992) Limited Partnership.
We have audited the balance sheet of Hod Hasharon Sport Center (1992) Limited Partnership as of December 31, 2002 and the related statements of income, changes in patners’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Israel and 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 audit provides 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 pronouncements issued by the Institute of Certified Public Accountants in Israel.
In our opinion, the above-mentioned financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2002 and the results of its operations, changes in patners’ equity and cash flows for the year then ended, in conformity with accounting principles generally accepted in Israel, which differ in certain respects from, accounting principles generally accepted in the United States (see Notes 2E and 16).
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| | Luboshitz Kasierer
Certified Public Accountants (Isr.) |
February 27, 2003
2
AUDITORS’ REPORT
To the shareholders of
RENAISSANCE INVESTMENT COMPANY LTD.
We have audited the balance sheet of Renaissance Investment Company Ltd. (“the Company”) as of December 31, 2003, and the related statements of income, changes in shareholders’ equity and cash flows for each of the year ended December 31, 2003. 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 audit in accordance with generally accepted auditing standards in Israel and in the Unites States, including those prescribed by 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 audit provides 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 the Company as of December 31, 2003, and the results of its operations, the changes in shareholders’ equity and its cash flows for each of the year ended December 31, 2003, in conformity with generally accepted accounting principles in Israel, which differ in certain respects from those generally accepted in the United States (see Note 14 to the financial statements),
As explained in Note 2, the financial statements referred to above are presented in values adjusted for the changes in the general purchasing power of the Israeli currency, in accordance with pronouncements of the Institute of Certified Public Accountants in Israel.
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| Tel-Aviv, Israel | KOST FORER GABBAY & KASIERER |
| February 4 , 2004 | A Member of Ernst & Young Global |
3
Messrs. Ampal Ltd.
| | Re: | Financial statements of Shmay-Bar Real Estate (1993) Ltd.
("the Company") translated into U.S. dollars |
As you know, the Company publishes in Israel financial statements in NIS adjusted to the changes in the Consumer Price Index, in accordance with Statements of the Institute of Certified Public Accountants in Israel. These primary annual financial statements of the Company for the years 2002 and 2001, which were audited by us, and on which we expressed our opinion on February 16, 2003, have been provided to you.
We have audited the accompanying translated U.S. dollar balance sheets of the Company as of December 31, 2002 and 2001, and the related translated U.S. dollar statements of income for each of the three years in the period ended December 31, 2002. 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 and the United States, including those prescribed by the Israeli 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, 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 management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The aforementioned translated U.S. dollar financial statements have been prepared on the basis of nominal NIS historical cost. Disclosure of the effect of the changes in the general purchasing power of the Israeli currency in the financial statements as stated in the Opinions of the Institute of Certified Public Accountants in Israel, has not been included in the above mentioned statements.
Full financial statement disclosures and statements of cash flows that are as required according to generally accepted accounting principles have not been presented and as such, the translated U.S. dollar financial statements mentioned above are to be read in conjunction with the primary annual audited financial statements of the Company, as of December 31, 2002 and their accompanying Notes.
In our opinion, except for the effects of the matters discussed in the preceding paragraphs, the translated U.S. dollar financial statements referred to above present fairly, in all material respects, the translated U.S. dollar financial position of the Company as of December 31, 2002 and 2001, and the related translated U.S. dollar results of its operations for each of the three years in the period ended December 31, 2002, in conformity with generally accepted accounting principles in Israel. As applicable to the Company’s financial statements, accounting principles generally excepted in the United Sates and in Israel are substantially identical in all material respects.
Also, in our opinion, the translation of the aforementioned nominal figures into U.S. dollars was made in accordance with the principles set forth in SFAS 52, see Note 2.
The aforementioned financial statements are designated solely for you as shareholders of the Company, are not to be published or delivered to others.
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| Tel-Aviv, Israel | KOST FORER & GABBAY |
| February 16, 2003 | A Member of Ernst & Young International |
4
Messrs. Ampal Ltd.
| | Re: | Financial statements of Shmay-Bar (I.A) 1993 Ltd.
("the Company") translated into U.S. dollars |
As you know, the Company publishes in Israel financial statements in NIS adjusted to the changes in the Consumer Price Index, in accordance with Statements of the Institute of Certified Public Accountants in Israel. These primary annual financial statements of the Company for the years 2002 and 2001, which were audited by us, and on which we expressed our opinion on February 16, 2003, have been provided to you.
We have audited the accompanying translated U.S. dollar balance sheets of the Company as of December 31, 2002 and 2001, and the related translated U.S. dollar statements of income for each of the three years in the period ended December 31, 2002. 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 and the United States, including those prescribed by the Israeli 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, 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 management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The aforementioned translated U.S. dollar financial statements have been prepared on the basis of nominal NIS historical cost. Disclosure of the effect of the changes in the general purchasing power of the Israeli currency in the financial statements as stated in the Opinions of the Institute of Certified Public Accountants in Israel, has not been included in the above mentioned statements.
Full financial statement disclosures and statements of cash flows that are as required according to generally accepted accounting principles have not been presented and as such, the translated U.S. dollar financial statements mentioned above are to be read in conjunction with the primary annual audited financial statements of the Company, as of December 31, 2002 and their accompanying Notes.
In our opinion, except for the effects of the matters discussed in the preceding paragraphs, the translated U.S. dollar financial statements referred to above present fairly, in all material respects, the translated U.S. dollar financial position of the Company as of December 31, 2002 and 2001, and the related translated U.S. dollar results of its operations for each of the three years in the period ended December 31, 2002, in conformity with generally accepted accounting principles in Israel. As applicable to the Company’s financial statements, accounting principles generally excepted in the United Sates and in Israel are substantially identical in all material respects.
Also, in our opinion, the translation of the aforementioned nominal figures into U.S. dollars was made in accordance with the principles set forth in SFAS 52, see Note 2.
The aforementioned financial statements are designated solely for you as shareholders of the Company, are not to be published or delivered to others.
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| Tel-Aviv, Israel | KOST FORER & GABBAY |
| February 16, 2003 | A Member of Ernst & Young International |
5
Messrs. Ampal Ltd.
| | Re: | Financial statements of Shmay-Bar (T.H) 1993 Ltd.
("the Company") translated into U.S. dollars |
As you know, the Company publishes in Israel financial statements in NIS adjusted to the changes in the Consumer Price Index, in accordance with Statements of the Institute of Certified Public Accountants in Israel. These primary annual financial statements of the Company for the years 2002 and 2001, which were audited by us, and on which we expressed our opinion on February 16, 2003, have been provided to you.
We have audited the accompanying translated U.S. dollar balance sheets of the Company as of December 31, 2002 and 2001, and the related translated U.S. dollar statements of income for each of the three years in the period ended December 31, 2002. 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 and the United States, including those prescribed by the Israeli 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, 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 management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The aforementioned translated U.S. dollar financial statements have been prepared on the basis of nominal NIS historical cost. Disclosure of the effect of the changes in the general purchasing power of the Israeli currency in the financial statements as stated in the Opinions of the Institute of Certified Public Accountants in Israel, has not been included in the above mentioned statements.
Full financial statement disclosures and statements of cash flows that are as required according to generally accepted accounting principles have not been presented and as such, the translated U.S. dollar financial statements mentioned above are to be read in conjunction with the primary annual audited financial statements of the Company, as of December 31, 2002 and their accompanying Notes.
In our opinion, except for the effects of the matters discussed in the preceding paragraphs, the translated U.S. dollar financial statements referred to above present fairly, in all material respects, the translated U.S. dollar financial position of the Company as of December 31, 2002 and 2001, and the related translated U.S. dollar results of its operations for each of the three years in the period ended December 31, 2002, in conformity with generally accepted accounting principles in Israel. As applicable to the Company’s financial statements, accounting principles generally excepted in the United Sates and in Israel are substantially identical in all material respects.
Also, in our opinion, the translation of the aforementioned nominal figures into U.S. dollars was made in accordance with the principles set forth in SFAS 52, see Note 2.
The aforementioned financial statements are designated solely for you as shareholders of the Company, are not to be published or delivered to others.
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| Tel-Aviv, Israel | KOST FORER & GABBAY |
| February 16, 2003 | A Member of Ernst & Young International |
6
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
TRINET INVESTMENTS IN HIGH-TECH LTD.
We have audited the accompanying balance sheets of Trinet Investments in High-Tech Ltd. (“the Company”) as of December 31, 2002 and 2001, and the related statements of operations and changes in shareholders’ deficiency for each of the three years in the period ended December 31, 2002. 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 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.
During 2002 the company ceased its operations.
In our opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2002 and 2001, and the results of its operations and changes in shareholders’ deficiency for each of the three years in the period ended December 31, 2002, in accordance with generally accepted accounting principles in Israel.
As described in Note 2, 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.
The financial information presented in U.S. dollars and in accordance with generally accepted accounting principles in the United States is based on nominal historical amounts in Israeli currency and is presented in Note 8 to the financial statements.
Brightman Almagor & Co.
Certified Public Accountants
Tel Aviv, March 13, 2003
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29 th day of March, 2004.
| | Ampal-American Israel Corporation |
| | | |
| | By: /s/JACK BIGIO | |
| | Jack Bigio, Chief Executive Officer and | |
| | President (Principal Executive Officer) | |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 29, 2004.
| | Signatures | Title | Date | |
| | | | | |
| | /s/YOSEF A. MAIMAN | Chairman of the Board of | March 29, 2004 | |
| | Yosef A. Maiman | Directors | | |
| | | | | |
| | /s/Jack Bigio | President & CEO - Director | March 29, 2004 | |
| | Jack Bigio | | | |
| | | | | |
| | /s/LEO MALAMUD | Director | March 29, 2004 | |
| | Leo Malamud | | | |
| | | | | |
| | /S/DR. JOSEPH YERUSHALMI | Director | March 29, 2004 | |
| | Dr. Joseph Yerushalmi | | | |
| | | | | |
| | /s/YEHUDA KARNI | Director | March 29, 2004 | |
| | Yehuda Karni | | | |
| | | | | |
| | /s/EITAN HABER | Director | March 29, 2004 | |
| | Eitan Haber | | | |
| | | | | |
| | /s/MICHAEL ARNON | Director | March 29, 2004 | |
| | Michael Arnon | | | |
| | | | | |
| | /s/ MENAHEM MORAG | Director | March 29, 2004 | |
| | Menahem Morag | | | |
| | | | | |
| | /s/IRIT ELUZ | CFO, Vice President – | March 29, 2004 | |
| | Irit Eluz | Finance and Treasurer | | |
| | | Principal Financal Officer | | |
| | | | | |
| | /s/ALLA KANTER | Vice President – | March 29, 2004 | |
| | Alla Kanter | Accounting and Controller | | |
| | | (Principal Accounting | | |
| | | Officer) | | |
| | | | | |
| | /s/GIORA BAR – NIR | Controller | March 29, 2004 | |
| | Giora Bar-Nir | | | |
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