SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 2-1271
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PEC Israel Economic Corporation
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(Exact name of registrant as specified in its charter)
Maine 13-114-3528
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
511 Fifth Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 687-2400
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock (par value $1.00 per share) New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
Exhibit Index is on Page 116.
Page 1 of 184 pages.
The aggregate market value of the outstanding Common Stock of the
registrant held by non-affiliates on March 24, 1994 was approximately
$157,211,000. Such aggregate market value was computed on the basis of
the closing price of the Common Stock of the registrant on the New York
Stock Exchange on that date. See Part II, Item 5, "Market for the
Registrant's Common Stock and Related Stockholder Matters."
As of March 24, 1994, 18,758,588 shares of Common Stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement to be filed in
connection with its 1994 Annual Meeting of Shareholders are incorporated
by reference in Part III.
Page 2
PART I
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Item 1. BUSINESS
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PEC Israel Economic Corporation ("PEC" or the "Company")
organizes, acquires interest in, finances and participates in the
management of companies which are located in the State of Israel
or are Israel-related. PEC is often involved in the early
development of a company and has participated in the organization
of over 100 Israeli enterprises since its incorporation in 1926.
The Company participates actively in management and is involved
in a broad cross-section of Israeli companies engaged in various
fields of business, including high technology and communications,
manufacturing, building and construction, shipping and consumer
products.
Among PEC's holdings are significant interests in Scitex
Corporation Ltd. and Elron Electronic Industries Ltd., Israel's
largest paint producer (Tambour Ltd.), Israel's largest manufacturer
of cans and metal packaging material (Caniel-Israel Can Company
Ltd.), one of Israel's most active real estate construction and
development companies (Property and Building Corporation Ltd.), one
of Israel's largest shipping companies (El-Yam Ships Ltd.) and one
of the largest supermarket chains in Israel (Super-Sol Ltd.).
PEC acquires interests in companies which have attractive
long-term growth potential. PEC generally seeks to acquire and
maintain a sufficient equity interest in a company to permit PEC,
in conjunction with other companies controlled by IDB Holding
Corporation Ltd. ("IDB Holding" and, together with the companies
controlled by it, the "IDB Group"), to have a significant
influence in the management and operation of that company. PEC
emphasizes the potential for long-term capital appreciation over
the ability or intention of an enterprise to provide a cash
return in the near future. Among the other factors PEC considers
in determining whether to acquire an interest in a specific
enterprise are quality of management, global or domestic market
share, export sales potential and ability to take advantage of
the growth of the domestic Israeli economy.
IDB Holding, through its majority owned subsidiary, IDB
Development Corporation Ltd. ("IDB Development"), owns beneficially
approximately 70% of the outstanding Common Stock of PEC. IDB
Holding is controlled by Mr. Raphael Recanati, Chairman of the
Board of PEC, and members of his family.
IDB Holding is one of the largest business enterprises operating
in the private sector of the Israeli economy, with
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consolidated assets exceeding $1.8 billion at December 31, 1993.
Discount Investment Corporation Ltd. ("Discount Investment"),
another indirect subsidiary of IDB Holding, owns shares of many
Israeli companies in which PEC has holdings and has an agreement
with PEC that each will offer the other equal participation in
business opportunities that become available to either of them in
Israel for a fee of 2.5% of the equity invested by the paying party
in business opportunities initiated or initially presented by
the other. PEC participates directly and through a contractual
arrangement with Discount Investment in the management of the
companies in which PEC holds equity interests. PEC and Discount
Investment have agreed to cooperate on matters concerning the
advancement and development of companies located in Israel in
which each of them owns voting interests, including the use of
their voting power as shareholders on a mutually agreed basis.
PEC also has entered into voting agreements with other members of
the IDB Group with respect to voting of the stock of certain of
such companies.
PEC believes that its agreements with Discount Investment
and PEC's relationship with the IDB Group afford PEC an important
source of new business opportunities in Israel, significant
influence in the management and operations of companies in which
PEC holds shares and savings in PEC's cost of conducting its
business.
PEC has received an Order from the United States Securities
and Exchange Commission determining that it is not an investment
company within the meaning of the Investment Company Act of 1940.
In light of the Order, PEC has determined that its business
holdings should continue to be concentrated in Israel-related
companies that it, IDB Holding and other members of the IDB Group
control or in which they exercise a significant influence.
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The Affiliates
The following chart lists by industry group the companies in Israel or
related to Israel in which PEC holds voting equity interests (the "Affiliates"),
the principal business of each such company and, with respect to each such
company, the percentage of equity owned directly by each of PEC, Discount
Investment and the IDB Group in the aggregate. For additional information with
respect to the Affiliates, including information with respect to carrying
values, see Note 3 of Notes to Consolidated Financial Statements of PEC and
Subsidiaries.
Percentage
Equity Ownership as of
December 31, 1993
---------------------------
Discount IDB
Principal Business PEC Investment Group(1)
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High Technology and Communications
Scitex Corporation Ltd. Color Electronic 6.0% 5.9% 23.8%
Prepress Systems
Elron Electronic Diversified High 11.3 21.8 33.1
Industries Ltd. Technology Holdings
Tevel Israel International Cable Television 23.7 24.7 48.4(2)
Communications Ltd.
Tel-Ad Jerusalem Studios Television Station ---- 23.0 23.0(3)
Ltd.
Gilat Satellite Networks Satellite Communi- 9.8 9.1 18.9
Ltd. cations
Gilat Communication Cable Television 10.7 10.8 21.5(4)
Engineering 1990 Ltd.
Electronics Line (E.L.) Electronic Security 13.9 13.9 27.8
Ltd. Systems
RDC-Rafael Development High Technology 16.7 16.7 50.1(5)
Corporation Ltd. Products
Lipman Electronic Electronic and Computerized 6.1 6.1 12.2
Engineering Ltd. Systems
Nice Systems Ltd. Electronic Defense 5.9 6.0 11.9
Systems
Gemini Israel Fund L.P. Venture Capital Fund 11.2 11.2 29.9(6)
(Primarily High Technology)
Advent Israel Limited Venture Capital Fund 5.4 5.4 10.8(7)
Partnership (Primarily High Technology)
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Percentage
Equity Ownership as of
December 31, 1993
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Discount IDB
Principal Business PEC Investment Group(1)
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High Technology and Communications (continued)
Logal Educational Software Educational Software 7.7% 7.7% 44.8%(8)
and Systems Ltd.
Adir International Outgoing International Tele- 24.9 25.1 50.0
Communications Services communication Services from
Ltd. Israel
Tius Elcon Ltd. Electronic Products 13.0 13.0 26.0
Sign-On Computer Communi- Private Network Communi- 13.2 13.3 26.5
cations Services Ltd. cations
RTS Telecommunications International Telecom- 15.0 15.0 30.0
Services Ltd. munication Services
in St. Petersburg, Russia
RPA Leasing Inc. Lessor of Telephone 25.0 25.0 50.0
Equipment
Pharmos Corporation Development-Stage Phar- 0.4 0.4 0.8
maceutical Company
Incubator for Technological Support of Development Stage - - - (9)
Enterpreneurship Kiryat High Technology Companies
Weizmann Ltd.
Industry
Tambour Ltd. Paint and Related Products 44.9 22.4 67.3(10)
Caniel-Israel Can Cans and Metal Packaging 28.2 14.2 42.4
Company Ltd.
Mul-T-Lock Ltd. Security Locking Systems 13.6 13.6 27.2
Klil Industries Ltd. Aluminum Extrusions 15.1 33.9 49.0
Lego Irrigation Ltd. Irrigation Equipment 16.0 16.0 32.0(11)
Maxima Air Separation Industrial Gas Separation 11.7 11.6 23.3(12)
Center Ltd.
Tefron Ltd. Lingerie and Undergarments 13.0 13.0 26.0
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Percentage
Equity Ownership as of
December 31, 1993
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Discount IDB
Principal Business PEC Investment Group(1)
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Construction and Development
Property and Building Real Estate Development and 30.6% 14.0% 51.2%
Corporation Ltd. Management
Camdev Ltd. Real Estate Development 26.0 ---- 100.0
Shipping, Marketing and Other
El-Yam Ships Ltd.(13) Bulk Shipping 10.1 14.3 24.4
Super-Sol Ltd. Supermarkets 18.9 16.2 49.9(14)
General Engineers Limited Distribution of 100.0 ---- 100.0
Equipment and Consumer
Products
Bulk Trading Corporation Grain Import Services 50.0 50.0 100.0
Ltd.
<FN>
(1) Total holdings of members of the IDB Group.
(2) Interests in Tevel Israel International Communications Ltd. are held through a
holding company, DIC and PEC Cable TV Ltd.
(3) PEC has contracted with Discount Investment to purchase from Discount Investment an
11.5% interest in Tel-Ad Jerusalem Studios Ltd. and has paid the purchase price
in advance. The purchase is subject to the approval of the
Israel Television Authority.
(4) As a result of a private placement by Gilat Communication Engineering 1990 Ltd.
in January 1994, as of March 24, 1994, PEC owned 10.0%, Discount Investment owned
10.1% and the IDB Group owned 20.1%, respectively, of the ordinary shares of Gilat
Communication Engineering 1990 Ltd.
(5) Interests in RDC-Rafael Development Corporation Ltd. are held through a holding
company, DEP Technology Holdings Ltd.
(6) PEC owns 18.5% of Gemini Capital Fund Management Ltd., the general partner of
Gemini Israel Fund L.P., which has a nominal equity interest in Gemini Israel Fund
L.P. The interests of PEC, Discount Investment and the IDB Group in Gemini Israel
Fund L.P. represent nonvoting limited partnership interests.
(7) Represents interests in Advent Israel Limited Partnership and a parallel limited
partnership (together, "Advent Israel"), on a combined basis, other than in the
assets and results of operations attributable to Advent Israel's interest in
Gemini Israel Fund L.P.
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(8) The ownership interest of the IDB Group includes the 26.9% ownership interest of
Gemini Israel Fund L.P. in Logal Educational Software and Systems Ltd.
(9) PEC and Discount Investment have each contracted to purchase a 16.65% interest in
the Incubator for Technological Entrepreneurship Kiryat Weizmann Ltd. Upon
completion of such purchases, the IDB Group will have a 33.3% interest in the
Incubator for Technological Entrepreneurship Kiryat Weizmann Ltd.
(10) As the result of the exercise of options for ordinary shares of Tambour Ltd. after
December 31, 1993, including all of the one year options that were sold in the
initial public offering by Tambour Ltd. in February 1993, as of March 24, 1994, PEC
owned 41.3%, Discount Investment owned 20.5% and the IDB Group owned 61.8%,
respectively, of the ordinary shares of Tambour.
(11) As the result of an initial public offering by Lego Irrigation Ltd. in January
1994, as of March 24, 1994, PEC owned 13.0%, Discount Investment owned 13.0% and
the IDB Group owned 26.0%, respectively, of the ordinary shares of Lego Irrigation
Ltd.
(12) As the result of sales of ordinary shares of Maxima Air Separation Center Ltd. after
December 31, 1993, as of March 24, 1994, PEC owned 11.2%, Discount Investment owned
11.3% and the IDB Group owned 22.5%, respectively, of the ordinary shares of Maxima
Air Separation Center Ltd.
(13) Includes the Company's interests in Financial Holdings El-Yam (Hamigdal) Ltd.
(14) As the result of purchases of ordinary shares of Super-Sol Ltd. made in March 1994 by
Discount Investment, as of March 24, 1994, PEC owned 18.9%, Discount Investment
owned 16.6% and the IDB Group owned 50.3%, respectively, of the ordinary shares of
Super-Sol Ltd.
PEC also owns nonvoting preferred stock of Israel Discount Bank of New York
representing approximately 8.6% of Israel Discount Bank of New York's total outstanding
equity as of December 31, 1993.
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High Technology and Communications
Scitex Corporation Ltd. ("Scitex"). Scitex develops,
manufactures, markets and services color electronic prepress
systems for the printing and publishing industries worldwide.
The color prepress process includes the input, assembly, editing
and integration of color images (photographs and artwork) and
text and production of color separation films used to prepare
printing plates for high quality, high volume printing. Scitex's
products are used to automate the prepress production of high
resolution color printed media such as magazines, trade journals,
newspapers, catalogs, annual reports and advertising. These
products allow users to work throughout the color prepress
process in a digital environment, significantly reducing
production time, material waste and labor requirements, while
improving image and color quality and facilitating design
creativity.
Scitex provides customers with a broad range of connectivity
(the ability to connect to many types of systems and protocols),
including a wide selection of integrated solutions in PostScript,
a popular page description language, for the desktop publishing,
graphic arts and high-end prepress markets. Its communications
products streamline multinational news publishing.
Scitex pioneered the development of color electronic
prepress systems with the introduction in 1979 of the first
digital workstation for page layout and the editing and assembly
of color images. Since that time, Scitex has introduced a full
range of color electronic prepress products. Scitex has designed
its products to operate on a stand-alone basis or to be combined
in networks that meet the unique application requirements and
production environments of its customers. Scitex is the global
market leader in its industry and has installed more than 3,000
color electronic prepress systems worldwide. Customers include
Time, Fortune, Sports Illustrated, The New York Times, National
Geographic, USA Today, Rizzoli, A. Mondadori, Bauer Druck,
Gutenberghus, Tappan Group, Dai Nippon Printing, Asahi Shimbun,
Sara Lee and Pepsico.
Scitex, through its wholly owned subsidiary Leaf Systems,
Inc. ("Leaf"), designs, develops, manufactures and markets
products for scanning, transmitting and handling color and
black-and-white photographic images, particularly for newspaper,
magazine, photojournalism and desktop publishing applications.
Leaf has developed innovative digital cameras and camera backs
for capturing color images directly into the computer, bypassing
the film and scanning stages.
Iris Graphics, Inc. ("Iris"), a subsidiary of Scitex, is the
world's leading developer and manufacturer of high quality color
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inkjet printers. The printers produce high-resolution prints and
proofs on various types of paper and other material. Iris has
adapted an automatic inkjet printer for medical imaging, reducing
the cost of duplicate films without compromising the quality of
the images. In addition to the Iris products, Scitex also
markets a very large format inkjet printer that prints color
billboards.
Scitex markets and sells its products primarily through
wholly owned subsidiaries in North America, Europe, and Hong
Kong, and through a joint venture in Japan. In these markets,
Scitex and its Japanese joint venture sell primarily through
their direct sales force personnel. Virtually all of Scitex's
sales are outside of Israel.
In 1993, Scitex entered the high-speed, variable data,
digital printing market through its acquisition of Eastman
Kodak's Dayton Operation which develops, manufactures and markets
very high speed black and white ink-jet printers, used primarily
for promotional and mail applications.
Scitex's ordinary shares are listed for quotation on the
National Association of Securities Dealers Automatic Quotation
System/National Market System ('NASDAQ/NMS') (symbol "SCIXF").
PEC, Discount Investment, Clal Electronics Industries Limited
("Clal"), another member of the IDB Group, and International
Paper Company are parties to a shareholders' agreement with
respect to their ordinary shares of Scitex that, among other
things, (i) provides that Scitex have a board of directors of 13
members, consisting of the current chief executive officer of
Scitex (for as long as he holds that office) and four nominees
designated by each of PEC and Discount Investment as a group,
International Paper Company and Clal, (ii) provides that the
Chairman of the Board of Scitex and of its executive committee be
selected from the directors designated by PEC, Discount
Investment and Clal and (iii) restricts the acquisition and
disposition by such shareholders of ordinary shares of Scitex.
Elron Electronic Industries Ltd. ("Elron"). Elron conducts
its business principally through high technology operating
companies in which it holds controlling or other significant
equity interests. Elron's various affiliates design, develop,
manufacture, market and service state-of-the-art electronic
systems and products for diagnostic medical imaging, defense
electronics, high speed data communications, automated optical
inspection, manufacturing automation and quality control
applications. Its affiliates also produce software and expert
systems designed to enhance productivity and systems which
provide rapid prototyping and low-volume production of
application specific integrated circuits. Elron has organized,
invested in and developed companies with promising new
technologies believed to have global marketing potential that
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could benefit from ties with Israel. Elron has developed and
expanded by identifying focused entrepreneurial teams and
providing them with significant strategic, financial and
managerial assistance to refine and exploit their technologies.
Elron's affiliates include publicly-traded and privately-
held companies. Its principal publicly-traded affiliates are
Elbit Ltd. (39% owned - advanced electronic systems and products
for defense, medical, industrial and commercial applications -
NASDAQ/NMS symbol "ELBTF"); Elscint Limited, a 55% owned
subsidiary of Elbit Ltd. (diagnostic medical imaging systems and
products - New York Stock Exchange, Inc. symbol "ELT"); Fibronics
International Inc. (42% owned - local area networking (LAN) and
inter-networking solutions for enterprise level information
distribution and a comprehensive integrated network management
system - NASDAQ/NMS symbol "FBRX"); Orbotech Ltd. (19% owned -
equipment for automated optical inspection and computer-aided
design for the printed circuit industry and laser imaging
equipment for graphic arts and optical inspection for production
of liquid crystal flat panel displays - NASDAQ/NMS symbol
"ORBKF") and NetManage Inc. (4% owned - integrated set of
connectivity applications and development tools for the Microsoft
Windows operating environment - NASDAQ/NMS symbol "NETM"). Among
Elron's privately-held affiliates are Chip Express Corp. (48%
owned - rapid prototyping and low-volume production of
application specific integrated circuits); Zoran Corp. (17% owned
- - integrated circuits for digital signal image processing
compression and enhancement); ServiceSoft Corporation (21%
owned - software systems for automation of field service and
maintenance of complex systems and products); and Adar
International Inc. (100% subsidiary-development of computer-based
courseware). Elbit Ltd., together with Elbit's 55% subsidiary,
Elscint Limited, is Elron's largest holding and accounts for the
major part of Elron's revenues and earnings.
Elron's ordinary shares are listed for quotation on the
NASDAQ/NMS in the United States (Symbol "ELRNF") and on the Tel
Aviv Stock Exchange ("TASE").
Tevel Israel International Communications Ltd. ("Tevel").
PEC owns, through its interest in DIC and PEC Cable TV Ltd.,
23.7% of Tevel, which was established in 1988 to develop,
construct and operate cable television systems in Israel. PEC's
partners in Tevel are Discount Investment and United
International Holding Inc., a publicly traded American
corporation that provides multi-channel television services
outside the United States. Tevel has exclusive franchises for
the whole of the Tel Aviv-Givataim metropolitan area, the
southern region of Ashdod-Ashkelon and the Nazareth-Jezreel
Valley. These franchises include approximately 290,000
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households - approximately 24% of the homes in Israel. Tevel
commenced cable broadcasting in the Tel Aviv area during 1990, in
Ashdod in the beginning of 1991 and in Nazareth in the beginning
of 1993. As of the end of December 1993, Tevel had completed the
network construction in almost all of these areas. As of
February 1, 1994, Tevel had approximately 175,000 subscribers,
constituting approximately 64% of the households in the area in
which network construction has been completed.
At present, Tevel offers customers a package of 38 channels,
including local, national and regional broadcasting channels,
satellite delivered channels from Europe and Asia and five
channels, subtitled in Hebrew, that are programmed by all of the
cable companies in Israel - a movie channel, a sports channel, a
family entertainment channel, a science, nature and cultural
channel and a children's entertainment channel. Tevel has
installed advanced scrambling and addressable two-way equipment
that protects the service from theft and gives Tevel the
opportunity to offer in the future additional programming for
which it may charge separately.
Tel-Ad Jerusalem Studios Ltd. ("Tel-Ad"). Tel-Ad is a major
producer of television programs in Israel, producing prerecorded
and live studio productions as well as productions on location.
Tel-Ad produces a broad spectrum of programs, including
documentaries, popular entertainment shows, educational programs
and commercials.
In July 1993, Tel-Ad was selected as one of three companies
to operate Israel's second television station, the only privately
operated commercial television station. Tel-Ad is responsible
for the entire programming for two days every week and for every
Saturday in a four month period every year. Broadcasts on the
second television station began in November 1993.
Currently, PEC has no interest in Tel-Ad. PEC has
contracted to purchase an 11.5% interest in Tel-Ad from Discount
Investment Corporation Ltd. and has paid the purchase price in
advance. The purchase is subject to the approval of the Israel
Television Authority. Upon completion of the purchase, PEC will
be obligated to guarantee approximately $3.6 million of Tel-Ad's
obligations.
Gilat Satellite Networks Ltd. ("Gilat Satellite"). Gilat
Satellite designs, develops, manufactures, markets and supports
very small aperture terminal ("VSAT") satellite networks for
voice and data communications. VSAT networks provide satellite-
based communication between a central location (a "hub") and a
large number of geographically-dispersed locations. Gilat
Satellite markets principally three product lines:
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o TwoWay VSAT - an interactive network for transaction
oriented data communications. It may be used for credit card
authorization, inventory control, drug prescription verification,
reservation processing, on-line lotteries and automatic teller
machine (ATM) transactions.
o OneWay VSAT - a data broadcast network used for the
distribution of real-time financial information, newswire
broadcasts, paging signals to remote transmitters, point-to-
multipoint facsimile transmissions and compact disc quality FM
music. Value added services available on OneWay VSAT include
business news television, background music and electronic
advertising.
o FaraWay VSAT - a rural telephony network that delivers
telephone services, facsimile transmissions and data
communications to remote and undeveloped areas that lack adequate
telecommunications infrastructure.
Gilat Satellite has established strategic relationships for
product development and marketing with GTE Spacenet Corporation,
Comsat Technology Services and GTECH Corporation in the United
States and with ANI Bosch in Germany and Alcatel SESA in Spain.
In March 1993, Gilat Satellite had an initial public
offering of its stock in the United States and its stock is now
traded on the NASDAQ/NMS under the trading symbol "GILTF".
Gilat Communication Engineering 1990 Ltd. ("Gilat
Communication"). Gilat Communication offers engineering design
and technical and managerial consulting services for all types of
telecommunication, cable television and satellite communication
systems. Gilat Communication also specializes in network
management, systems monitoring and maintenance services for
telecommunication and cable television systems. Through a
company it established with Sign-On Computer Communications
Services Ltd. and Elbit Ltd., Gilat Communication provides point
to point international satellite communication services to
corporate clients in Israel.
In 1994, Gilat Communication intends to operate satellite
networks in Israel that will serve beeper companies, insurance
agencies, education and vocational training centers and hospitals
and clinics.
Electronics Line (E.L.) Ltd. ("Electronics Line"). Elec-
tronics Line is engaged in the design, development, production,
international marketing and servicing of advanced electronic home
and business security systems, including passive infrared motion
detectors, alarms and radio or telephone operated devices for
communication with central monitoring stations. Electronics Line
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has been innovative in the application of radio communication and
infrared and microwave technologies to several devices.
Electronics Line generates more than 90% of its revenues from
sales outside of Israel. Electronics Line's stock is traded on
the TASE.
RDC-Rafael Development Corporation Ltd.("RDC"). RDC was
established in July 1993 to conduct the commercial exploitation
of non-military applications of technologies developed by Rafael
Armament Development Authority, a division of the Israel Ministry
of Defense ("Rafael"). Rafael is one of Israel's largest
industrial enterprises and Israel's largest research and
development organization, employing over 3,000 individuals who
hold a doctorate degree or an advanced engineering degree.
The two shareholders of RDC are DEP Technology Holdings
Ltd., a holding company owned equally by PEC, Discount Investment
and Elron Electronic Industries Ltd., all members of the IDB
Holding Group, and Galram Technology Industries Ltd., the Israeli
governmental entity in charge of the commercial exploitation in
non-military markets of Rafael's technologies.
RDC, through its interests in the following companies, is
working on several projects, including development of the
products and processes set forth below:
o Powerspectrum Technology Ltd., which is developing a
wireless telecommunications network that provides full duplex
service, utilizing frequency hopping-multiple access technology.
o Carcom Carry Communications Ltd., which manufactures
the BIPSAT, a briefcase portable satellite communication terminal
for global communication.
o Oramir Semiconductor Equipment Company Ltd., which
produces the L-Stripper, a new process that allows the removal of
photoresist in the manufacturing process of silicon wafers used
in the semiconductor industry.
o Semiconductor Engineering Laboratories Ltd., which
manufactures the MC 100, a semiautomatic system for the
preparation of cross-sectional samples of semiconductor wafers
for examination by a scanning electron microscope.
Lipman Electronic Engineering Ltd. ("Lipman"). Lipman
develops, manufactures and markets a variety of sophisticated
electronic and computerized systems primarily for communication
applications. Lipman's products include test and enhancement
systems for public telephone exchanges, equipment for electronic
fund transfers and systems that combine electronic cash registers
with the verification and implementation of credit card
transactions at points of sale.
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In May 1993, Lipman completed an initial public offering of its
stock in Israel and its stock is now traded on the TASE.
Nice Systems Ltd. ("Nice"). Nice is engaged in the
development and manufacture of high technology electronic
systems, including electronic defense systems, and high speed
data communication networks. Nice concentrates in the areas of
data communications and voice storage and retrieval systems,
designing and manufacturing high speed network equipment,
including ATM switches, fiber distribution data interface (FDDI)
bridges and routers, network analyzers and voice loggers. Nice
has jointly developed and marketed products in the United States
with TRW, TRW's subsidiary ESL, Retix and Tekelec. Nice's stock
is traded on the TASE.
Gemini Israel Fund L.P. ("Gemini") and Advent Israel Limited
Partnership ("Advent Israel"). In 1993, PEC, Discount
Investment, Advent International Corporation, an American company
that initiates and manages venture capital funds, and Yozma
Venture Capital Ltd., a corporation formed by the Israeli
government to encourage Israeli private industrial enterprises
("Yozma"), established a $36 million investment program with two
components, Gemini and Advent Israel.
Gemini is a venture capital limited partnership that invests
in high technology and industrial companies located in Israel,
especially those that are export oriented and are in the early
stages of their development.
Advent Israel is a venture capital limited partnership
managed by Advent International that acquires interests in high
technology companies that are located both in Israel and outside
Israel whose businesses are related to Israel. Advent Israel is
a limited partner in Gemini.
Advent Israel and a parallel limited partnership have
received capital commitments from their partners of $20 million,
of which Advent Israel and such limited partnership have agreed
to invest $10.75 million in Gemini and to invest $9.25 million in
portfolio companies. Gemini has received capital commitments of
approximately $26.75 million from its partners. Combined, Gemini
and Advent Israel constitute a substantial venture capital
program whose purpose is to invest in companies located in Israel
or related to Israel.
PEC has made a $3 million capital commitment to Gemini.
PEC's partners in Gemini are Discount Investment, Scitex and
Elron (two of PEC's affiliated companies), Advent Israel and
Yozma. Gemini may offer PEC and the other partners the
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opportunity to purchase interests in entities in which Gemini is
acquiring an interest.
At the end of 1993, Gemini had invested an aggregate of
approximately $4.0 million in the following five companies:
o Logal Educational Software & Systems Ltd., a
corporation that develops, designs and publishes educational
software. PEC also has a direct interest in Logal.
o Holo-Or Ltd., a designer and manufacturer of products
based on proprietary diffractive optics technology.
o GeneSoft Ltd., a corporation that develops application
performance tuning tools for mainframe and client-server software
systems.
o OrNet Data Communication Technologies Ltd., a designer
and developer of subsystems and complete hardware/software
systems for boosting the performance of local area networks
(LANs).
o Aisys Ltd., a designer and developer of software for
automatic programming of silicon microcontrollers to operate
peripherals.
PEC is a limited partner in Advent Israel and has made a
$500,000 capital commitment to Advent Israel. As a limited
partner in Advent Israel, PEC has an indirect interest in all of
Advent Israel's holdings other than Advent Israel's interest in
Gemini. One of Advent Israel's first acquisitions was the
purchase of an interest in P-Com Inc., a California manufacturer
of microwave radios for short (1 to 20 kilometers) range
telecommunications interconnections. Much of the technology P-
Com utilizes was developed in Israel.
Logal Educational Software and Systems Ltd. ("Logal").
Logal develops, designs, and publishes educational software based
on the philosophy that learning is the active construction of
knowledge.
Logal's software consists of simulation-based programs that
integrate sophisticated authoring systems, multimedia, animation,
spreadsheets, and numerous output options in a format that
complements varied learning situations. Logal's complete line of
products consist of Explorer, an award-winning series for
--------
physics, biology, and chemistry, Tangible Math, a complete
-------------
curriculum mathematics program group and two unique reading
comprehension programs, What's the Story? and Colorful Clues.
---------------- -------- -----
Logal recently produced its first program in compact disc-read
only memory "CD-ROM" format and plans to develop curriculum
materials utilizing this technology.
I-14
Adir International Communications Services Ltd. ("Adir"). Adir,
which began operations in 1992, provides outgoing international
telephone service and facsimile communications from Israel,
primarily serving corporate clients. Adir was granted
licenses by Israel's Ministry of Communications to provide these
services in direct competition with Bezeq, Israel's government
controlled telephone company. Adir is able to charge customers
who make a substantial number of outgoing international telephone
calls and facsimile transmissions lower rates than Bezeq because
of the lower costs of Adir's telecommunications network.
Tius Elcon Ltd. ("Tius Elcon"). Tius Elcon initiates,
designs, develops, produces and sells electronic products for the
home care market, concentrating on the over-the-counter
paramedical and healthful food preparation markets. Its products
include the Memotherm Baby Thermometer, which permits accurate
non-invasive measurement of a baby's temperature, and the
Fertimeter, a device that can predict, through sampling of
uterine mucus, the date a woman will ovulate three days in
advance. Substantially all of Tius Elcon's products are
exported.
Sign-On Computer Communications Services Ltd. ("Sign-On").
Sign-On, which began operations in 1992, furnishes private
network telecommunications to corporate clients in Israel.
Through a company it established with Gilat Communication
Engineering 1990 Ltd. and Elbit Ltd., Sign-On provides point to
point international satellite communication services to corporate
clients in Israel.
RTS Telecommunications Services Ltd. ("RTS"). RTS was
formed in 1992 by PEC, Discount Investment and American and
Russian investors to provide international telecommunication
services. RTS provides major hotels in St. Petersburg, Russia
with direct dialing international telephone service by means of a
microwave and satellite based network which connects the hotels
with international telephone networks, utilizing the services of
Adir International Communications Services Ltd.
RPA Leasing Inc. ("RPA"). RPA was formed in 1992 to lease
telecommunication equipment to other companies. RPA has leased
for a five year term ending in December 1998 telephone equipment
and switchboards to a Russian company for use in major hotels in
St. Petersburg, Russia.
Pharmos Corporation ("Pharmos"). Pharmos is a development-
stage pharmaceutical company that specializes in the design and
formulation of novel, proprietary drug-delivery technologies
targeting diseases of the eye, principally glaucoma and ocular
inflamation, and the brain, principally stroke and
I-15
head trauma. Chemically manipulated, the drugs are targeted for
- - and become activated within - the specific organ, minimizing
the occurrence of local and systemic toxic side effects and
increasing the drugs' therapeutic index. The common stock of
Pharmos is traded on the NASDAQ/NMS under the trading symbol
"PARS".
Incubator for Technological Entrepreneurship Kiryat Weizmann
Ltd. ("Incubator Company"). Incubator Company, an affiliate of
the Weizmann Instutute of Science, provides managerial and
administrative support and facilities to initial development
stage companies that Incubator Company believes can successfully
develop products for commercial use utilizing novel technologies.
PEC has contracted to acquire a 16.65% interest in Incubator
Company. In connection with such acquisition, PEC has agreed to
purchase a 5% interest in up to 12 new companies that are
admitted to the Incubator Company program for a purchase price of
$10,000 for each 5% interest. As part of such purchase, PEC will
receive the right to increase its interest in each new company by
an additional 8% if an interest in the new company is purchased
by a third party. The purchase price of such 8% interest is to
be based on the purchase price paid by the third party. Discount
Investment also has contracted to acquire a 16.65% interest in
Incubator Company on the same terms as PEC.
Industry
Tambour Ltd. ("Tambour"). Tambour is Israel's largest paint
producer. Its products include a wide range of water-based and
synthetic paints, polyurethanes, epoxies, varnishes, texture
coatings and primers, as well as special purpose paints for
aviation and marine application. Tambour currently supplies
approximately 70% of Israel's paint requirements and exports its
products to over 30 countries. Its products are sold throughout
Israel.
Tambour's strategy is to diversify into areas where it can
apply its managerial and technological expertise. Through its
affiliates, Tambour is involved in production and marketing of
water treatment facilities and chemicals (Italchem-Ayalon Ltd.),
metal treatment chemicals (Chemitas 1988 Ltd.), glues and
emulsions (Serafon Resinous Chemicals Corp. Ltd.), industrial
sewage treatment systems (Aniam Ltd.) and the manufacture of
printing ink (Tzah-Israeli Printing Inks Ltd.). Tambour also
produces decorative wall-facing bricks. In February 1993,
Tambour had an initial public offering of its stock in Israel and
its stock is traded on the TASE.
Caniel-Israel Can Company Ltd. ("Caniel"). Caniel is
Israel's largest manufacturer of cans and metal packaging
material for processed and canned foods, soft drinks and beer.
Caniel utilizes the latest technology to produce a full line of
high quality products. It is Israel's only manufacturer of
I-16
beverage cans. Caniel has converted its production line for soft
drinks and beer packaging from tin plate to aluminum. The new
aluminum cans improve the protection of packaged drinks and are
more economical to recycle than tin cans. The new cans are
opened by using a new "stay-on tab" rather than a "pull-off tab".
Caniel also manufactures metal packaging for a variety of
industrial and household products such as paints, lubricants,
detergents and aerosols. Substantially all of Caniel's cans are
used in Israel. Caniel also produces biodegradable plastic
bottles for soft drinks and mineral water. Caniel's stock is
traded on the TASE.
Mul-T-Lock Ltd. (Mul-T-Lock"). Mul-T-Lock designs,
manufactures, markets and installs high security locking systems.
Mul-T-Lock's products include various types of security locks,
decorative security doors, bomb, gas and fire resistant steel
doors and windows, automobile transmission locks, sophisticated
cylinders and a line of high security off-the-shelf products,
including padlocks with accessories. The cylinders and padlocks
include telescopic pin-tumblers for which keys are produced by a
computer-controlled machine. Many of Mul-T-Lock's products are
protected by patents and proprietary designs. Mul-T-Lock markets
its products throughout Israel and in over 50 countries
worldwide.
Mul-T-Lock manufactures machinery for lock manufacturing and
is also the exclusive distributor in Israel of doors and gates
made by Stanley U.S.A. Mul-T-Lock's stock is traded on the TASE.
Klil Industries Ltd. ("Klil"). Klil is engaged in aluminum
extrusion, including casting of billets, manufacturing of
extrusion dies and painting of extrusions. Klil is a leading
supplier of aluminum extrusions in the form of semi-finished
painted and mill-finished products for industry, as well as
finished aluminum products to the building industry, such as
windows, doors, curtain walls and shutters. Substantially all of
Klil's products are sold in Israel. Klil's stock is traded on
the TASE.
Lego Irrigation Ltd. ("Lego", formerly named Lego M.
Lemelstreich Ltd.). Lego develops and manufactures irrigation
equipment. Lego invented and patented the labyrinth dripper
irrigation system and has developed and patented the world's
smallest adjustable ball driven sprinkler. Lego's products,
which are used in gardening and agriculture, range from small
"Do-It-Yourself" irrigation systems to large turnkey irrigation
systems for farms. Lego's products are exported throughout the
world. In 1993 Lego began to manufacture the Pulsator, an
irrigation system using a new proprietary technology that
utilizes micro-sprinklers, micro-sprays and drip irrigation.
I-17
At the end of 1993, Lego had an initial public offering of
its stock in Israel and its stock is now traded on the TASE.
Maxima Air Separation Center Ltd. ("Maxima"). Maxima is
Israel's second largest producer of industrial and specialized
gases with a market share in Israel of approximately 45%. Its
primary products are nitrogen and oxygen which it extracts from
the air at its plant in the Negev desert in southern Israel.
Nitrogen is used in the petro-chemical industry and in fire
prevention devices. Oxygen is used primarily in hospitals and in
welding in the construction industry. Maxima's customers are
mainly larger industrial users of gases.
Maxima also sells argon and acetylene and has facilities for
mixing industrial gases and for filling containers with helium
and hydrogen. Maxima imports specialized gases for laboratories
and for use in the electronics industry.
During 1994, Maxima plans to increase its capacity to
produce gases by approximately 35%. Maxima's stock is traded on
the TASE.
Tefron Ltd. ("Tefron"). Tefron designs, manufactures and
markets high quality lingerie and undergarments for women, men
and children for sale in Israel and for export. It operates
sewing, cutting and knitting plants and a development center for
the design and manufacture of its products. Tefron's products
are marketed in Israel under Tefron's brand names and in Western
Europe and the United States under the brand names of leading
department stores.
Construction and Development
Property and Building Corporation Ltd. ("Property &
Building"). Property & Building is one of the largest real
estate holding companies in Israel and is engaged, directly and
through its subsidiaries and affiliates, in the development,
construction and sale of residential and office buildings, the
construction and rental of industrial, office and commercial
developments, the purchase and development of land, and the
furnishing of financial services, property management and
property maintenance. Property & Building is also a substantial
shareholder in companies engaged in the citrus industry in
Israel. The companies accounted for approximately 36% of
Israel's total citrus exports in 1993. In the development of
residential housing, it is Property & Building's policy to
develop and construct large, high quality projects for sale
principally to upper income purchasers; such projects generally
include recreational and commercial facilities. Property &
Building owns approximately 340,000 square meters of floor space
located mainly in prime areas which it rents to tenants. The
I-18
occupancy rate for its rental properties is approximately 98%. A
subsidiary of Property & Building owns interests in modern sports
complexes in Israel. The stock of Property & Building and the
stock of five of its subsidiaries and affiliates are traded on
the TASE.
Camdev Ltd. ("Camdev"). Camdev, which is 74% owned by
Property & Building, is building 64 residential housing units of
a planned 94 units in the Pisgat Zeev neighborhood of Jerusalem.
The property that is being developed is part of a housing
development Camdev previously built and represents substantially
the entire balance of the property held by Camdev for
development.
Shipping, Marketing and Other
El-Yam Ships Ltd. ("El-Yam") and Financial Holdings El-Yam
(Hamigdal) Ltd. ("FHEY"). El-Yam is engaged, through sub-
sidiaries, in worldwide ocean transportation of oil and dry bulk
cargoes, such as grains, coal and iron ore. Its fleet, which
aggregates approximately 724,000 deadweight tons, is operated
under charters for varying durations. El-Yam has been engaged in
the worldwide shipping business for over 40 years.
El-Yam owns nonvoting preferred stock of FHEY representing
substantially all of the equity in FHEY. FHEY in turn owns
approximately 35.55% of IDB Holding. IDB Holding owns through
subsidiaries approximately 70.3% of PEC's common stock. PEC owns
10.1% of the voting shares of FHEY and Discount Investment owns
approximately 14% of such voting shares.
Super-Sol Ltd. ("Super-Sol"). Super-Sol operates one of the
largest chains of supermarkets throughout Israel. In addition to
food, its 76 supermarkets sell consumer items such as household
goods and textiles. Its supermarkets include 44 neighborhood
Super-Sol stores, which cater primarily to high and middle income
families with emphasis on a wide variety of high quality food
products and services, 17 large regional Hypercol stores, located
primarily in industrial areas and serving predominately high and
middle income families with both food and other products, and 13
Gal-Yarok stores, located primarily in lower income areas.
Super-Sol also operates a central computerized ordering center
which caters to customers in major metropolitan areas desiring to
place orders by telephone.
The food industry in Israel is characterized by increasing
competition, as department stores have begun to provide food
products, and small discount food chains have emerged to meet the
needs of large numbers of immigrants who are not familiar with
supermarket shopping and who have limited financial resources.
Increased capital available to competing supermarket chains which
I-19
are in the process of raising capital from the public may also
affect competition. In an effort to retain its significant
market share (approximately 32.5% of sales of major chains and 9%
of the entire retail food industry in Israel) Super-Sol has
extended store hours in some of its stores and has extended the
availability and duration of credit to supermarket customers,
while continuing to stress high standards of service associated
with the Super-Sol name. In addition, in 1993, Super-Sol
established a new chain of "food warehouses", named "Machsaney
Mazon", which sells a smaller variety of goods than other stores
at substantially lower prices and appeals to price-conscious
customers. Super-Sol opened its third food warehouse in March
1994.
A subsidiary of Super-Sol won a bidding contest to purchase a
controlling 50% interest in the "Budapest Kozert" company, a chain
of 24 supermarkets throughout Hungary. The purchase is subject
to the signing of a definitive agreement with the privatization
authority in Hungary.
In March 1994, a company established by Super-Sol and other
investors opened the first of what Super-Sol expects to be a
chain of office product super stores in Israel.
Super-Sol holds a substantial interest in a newly
established chain of "do-it-yourself" stores in Israel selling
building and home improvement products. In 1993, the chain
opened its first two stores. Super-Sol's stock is traded on the
TASE.
General Engineers Limited ("General Engineers"). General
Engineers merchandises, installs and services equipment for the
following markets in Israel: Energy - power generation and power
delivery equipment; Medical - diagnostic x-ray, ultra-sound and
surgical equipment; Scientific - diffraction and spectroscopy
systems; General Industry - a wide variety of electrical and
mechanical systems, and industrial diamonds; Lighting - lamps and
luminaires; Household Appliances - major appliances and
housewares. This variety of equipment is manufactured by various
United States and European manufacturers. General Engineers is
the only distributor and service agent for certain General
Electric equipment in Israel, and is the exclusive distributor of
equipment in Israel for American Sterilizer Co., Lapp Insulator
Inc., Softronics Ltd., Black & Decker, Okonite, Liebherr,
Zerowatt, 3-L Filters and Rigaku Co.
Bulk Trading Corporation Ltd. ("Bulk Trading") Bulk Trading
provides a full range of import services to major grain companies
in Israel, including purchasing, locating suitable vessels for
shipment, coordinating shipments, arranging for letters of
credit, and arranging for loading, discharge and storage
facilities.
I-20
Israel Discount Bank of New York ("IDBNY"). PEC owns 75,251
shares of nonvoting preferred stock of IDBNY with a carrying
value of approximately $27 million. IDBNY is a New York State
chartered, full-service commercial bank, with its principal
office and one additional branch in New York City, a branch in
the Cayman Islands, a banking subsidiary in Uruguay and
representative offices in London, Paris, Toronto and Montreal.
IDBNY also maintains an international banking facility at its
headquarters in New York City. As of December 31, 1993, IDBNY
had consolidated assets of $3.5 billion, total deposits of $3.1
billion and total capital funds (including subordinated capital
notes and the allowance for possible loan losses) of $350
million. Its net income was $11 million in 1993, $14 million in
1992 and $11 million in 1991. IDBNY was ranked by The American
------------
Banker as the 16th largest commercial bank in New York State and
- ------
the 144th largest commercial bank in the United States in terms
of deposits as of December 31, 1993. IDBNY is a member of the
Federal Deposit Insurance Corporation. It is a subsidiary of
Israel Discount Bank Ltd. ("IDBL"), the third largest bank in
Israel. The terms of the IDBNY preferred stock held by PEC
provide for a yearly dividend equal to the preferred stock's
share of the net income of IDBNY for the year, based generally on
the preferred stock's proportionate share of IDBNY's total
shareholder equity in that year. For this purpose, the preferred
stock constitutes 8.6% of the total shareholders' equity for the
year beginning January 1, 1994. IDBL has an option to acquire
the preferred stock at any time until September 1995 at a price
equal to approximately $27 million. If IDBL at any time disposes
of IDBNY shares representing more than 75% of the equity or
voting power in IDBNY, PEC has the right to require the purchase
of the preferred stock at a price equal to approximately $27
million.
Conditions in Israel
Substantially all of the Company's Affiliates conduct their
principal operations in Israel and are directly affected by
economic, political and military conditions in that country. The
manufacturing operations of certain of the Affiliates are heavily
dependent upon components imported from the United States and
other countries, and a substantial majority of the sales of some
Affiliates are made outside Israel. Accordingly, the results of
operations of the Company and substantially all of the Affiliates
could be adversely affected if major hostilities involving Israel
should occur or if trade between Israel and its present trading
partners should be interrupted for substantial periods.
Since the establishment of the State of Israel in 1948, a
state of hostility has existed, varying as to degree and in-
tensity, among Israel and various Arab countries. A peace
agreement between Israel and Egypt was signed in 1979 and limited
I-21
economic and full political relations have been established
between the two countries. Since October 1991, Israel and
certain of its neighbors have held direct negotiations to end the
state of hostility between them and establish peace. In
September 1993, Israel entered into a Declaration of Principles
with the Palestine Liberation Organization (the "PLO"), which
sets forth a basic framework for continued negotiations between
Israel and the PLO with respect to ending the state of hostility
between such parties. Although negotiations are continuing among
Israel, certain of its neighbors and the PLO, to date such
negotiations have not resulted in any definitive agreement.
Since December 1987, civil unrest has existed in the
territories which Israel has administered since 1967. To date,
the ongoing civil unrest has not had a material adverse impact on
the financial condition or operations of the Affiliates. No
predictions can be made whether a resolution of these problems
will be achieved or the nature thereof, or whether the
continuation of the civil unrest in these territories may have a
material adverse impact on the operations of the Affiliates in
the future.
All male adult citizens and permanent residents of Israel
under the age of 51 are, unless exempt, obligated to perform
approximately 48 days of military reserve duty annually. Some
unmarried women up to age 24 may also be required to perform up
to 48 days of annual military reserve duty. Additionally, all
such residents are subject to being called to active duty at any
time under emergency circumstances. Many of the Affiliates' male
officers and employees are currently obligated to perform annual
reserve duty. While the Affiliates have operated effectively
under these requirements since their organization, no assessment
can be made of the full impact of such requirements on the
Affiliates' work forces or businesses if conditions should
change, and no prediction can be made as to the effect on the
Affiliates of any expansion or reduction of such obligations.
The results of operations of certain of the Affiliates have
been favorably affected by their participation in Israeli
Government programs related to research and development, foreign
currency exchange rate insurance, taxation and capital investment
incentives, some of which have been reduced in recent years.
Their results of operations would be adversely affected if these
programs were further reduced or eliminated and not replaced with
equivalent programs or if their ability to participate in these
programs were significantly reduced.
Demographics
Since the beginning of 1990, Israel has been experiencing a
new wave of immigration primarily from the former Soviet Union.
I-22
Approximately 550,000 new immigrants arrived through the end of
1993, of which approximately 77,000 arrived in 1993, and it is
expected that additional immigrants will arrive in Israel during
the next few years. While the number of immigrants in 1993 was
lower than in 1990 and 1991, the future level of immigration is
largely dependent on the political stability of Russia and the
other countries of the former Soviet Union. If the number of
additional immigrants is substantial, the increased population
will place an increased strain on government services, short-term
economic development and national resources.
The Israeli Government has found it necessary to raise
additional revenue and to dedicate substantial funds to support
programs, including housing, education and job training, designed
to assist in the absorption of the new immigrants. Israeli
Government policy in this area is in flux, and no prediction can
be made as to the policies that will be adopted in the future or
the effect thereof on other government spending programs,
including defense. However, the increased immigration may also
benefit Israel and its economy in the long-term by providing
highly educated, cost competitive labor and by stimulating its
growth.
While a decrease in the rate of immigration would relieve
strain on government services, short-term economic development
and national resources, such a decrease could also have a
negative effect on those Affiliates whose revenues are derived
mainly from the sale of products and services in Israel. These
Affiliates include housing developers, such as Property &
Building, manufacturers of supplies for the construction and
housing industry, such as Tambour, and purveyors of food and
other necessities, such as Super-Sol. No assessment can be made
of the full impact of a significant change in the flow of
immigration on the results of operations of these Affiliates or
the other companies in which PEC has an interest.
The State of Israel receives significant amounts of economic
and military assistance from the United States. In addition, in
1992 the United States agreed to provide Israel with supplemental
assistance in the form of up to $10 billion of loan guarantees
in order to help meet the strains imposed by increased
immigration. In 1993, Israel borrowed $2 billion that was
guaranteed by the United States. The borrowed funds were used to
bolster Israel's foreign exchange reserves and to fund increased
investments, mainly in infrastructure. Israel plans to borrow $2
billion per year guaranteed by the United States over the next
four years. The Israeli economy would suffer material adverse
consequences were such economic, military and supplemental
assistance to be significantly reduced.
I-23
Economy
In 1993, the Israeli economy once more achieved an annual
growth rate in excess of the growth rates recorded by the
economies of almost all other developed countries. The year was
also a turning point. Export industries became the leading
growth sector of the economy, replacing the construction industry
as the major source of economic expansion. The increasing
predominance of export industries represents a highly favorable
structural change in the economy.
Gross domestic product ("GDP") increased by 3.5% in 1993,
fueled by the production of tradable goods, an activity which can
provide a basis for sustained economic growth, rather than
construction activity, which can have only a limited effect on
long-term growth. Although the increase in GDP in 1993 was lower
than in previous years, it was more than double the average
annual growth rate achieved since 1990 by countries belonging to
the Organization for Economic Cooperation and Development (the
OECD). Moreover, GDP growth accelerated during the second half
of 1993, increasing by 8% compared to the first half of the year.
Exports of goods and services rose by 11.8% in real terms
during 1993 to reach $22.3 billion, following a decrease of 1.5%
in 1991 due to the Gulf War and an increase of 14.4% in 1992.
Unlike 1992, when much of the increase in exports resulted from a
growth in tourism, most of 1993's growth in exports is
attributable to an increase of 15% in industrial exports
(excluding diamonds). This change is the clearest indication
that tradable goods are growing as a percentage of total GDP.
The growth of exports in 1993 is all the more impressive in view
of an increase in international trade of only 3%. Approximately
25% of the growth in merchandise exports is attributable to
increased sales to Eastern Europe and the Far East. As a result
of this increase, the proportion of total exports to Israel's
traditional markets in the United States and Europe declined.
However, this decline may be partially reversed now that West
European economies are gradually recovering from a long
recession, and may be more receptive to imports from Israel.
Earnings from tourism rose by 16%. In dollar terms, merchandise
exports rose by 13% to $14.1 billion and industrial exports
(excluding diamonds) increased by 15% to $10.19 billion. The
fastest growing industrial export sectors were metals, machinery
and electronics (26%) and chemicals (21%). Exports of polished
diamonds reached almost $3 billion, an increase of 13% from 1992.
Citrus exports grew by 13% in 1993, enabling overall agricultural
exports to rise by 1% to $558 million, after declining by 14% in
1992.
Imports of civilian goods and services (which exclude
defense imports) rose by 13.9% in real terms to $28.2 billion in
I-24
1993, resulting in an excess of imports of civilian goods and
services over exports of such goods and services (an "import
surplus") of $5.9 billion. This import surplus was greater than
the adjusted 1992 figure of $5.4 billion. Most categories of
imports increased, especially imports of industrial raw
materials, which grew because of their reduced prices in 1993 and
an anticipated rise in business activity. The reduced price of
imports was partly the result of a policy of permitting increased
foreign competition in the economy. The strong performance by
Israeli industrial exporters led to a slight reduction in the
civilian trade deficit (the excess of merchandise imports over
exports) from $6.3 billion in 1992 to $6.18 billion in 1993.
The economy was adversely effected by the closure of the
administered territories, which resulted in a temporary
disruption of agricultural production, delays in infrastructure
investment, and a faster than intended decline in housing
construction.
Despite the continued growth in the labor market resulting
from immigration and increased overall labor force participation,
the unemployment rate fell from 11.2% in 1992 to an annual
average of 10.4% during the whole of 1993, and 9.0% in the last
quarter of the year. The rapid 4.1% growth in the labor force to
1.9 million was exceeded by the even faster 5.7% increase in the
number of Israelis employed (an additional 94,000 employed
persons). This increase in employment resulted from a number of
developments, principally a decrease in the number of hours
worked per job (in 1992, employers preferred to pay for more
overtime hours rather than recruit new workers); the replacement
of workers from the territories by Israelis; labor-intensive job
creation schemes; and the establishment of stricter criteria for
receiving unemployment benefits, encouraging the unemployed to
accept available jobs. Special progress was made during the year
in absorbing immigrants within the labor force, resulting in a
decrease in the unemployment rate among immigrants from 29%
percent in 1992 to 20% in 1993. In addition, more immigrants
found work in their fields of training. Although Israel's rate
of unemployment is rather high compared to many Western
countries, unemployment in Israel is structurally quite
different, because of much faster growth in both job creation and
the labor force. Initial estimates show that real wages in 1993
remained practically unchanged compared to 1992. Wages fell in
the business sector by approximately 1.0% and rose by 1.5% in the
public sector.
The consumer price index (CPI) rose by 11.25% in 1993, a
higher rate than in 1992, due in part to a rise in housing prices
(a major component of the index) following a decrease in 1992.
There was a very uneven pattern of price increases during 1993.
I-25
Overall, the inflation rate was moderated by a number of factors,
including a slower increase in the use of resources, a reduction
in the budget deficit (which alleviated demand pressures and
boosted confidence in the government's economic policy) and the
government's efforts to prevent the cost of price-controlled
commodities from increasing beyond the general level of price
rises. Increased foreign competition and cheaper imports also
helped moderate price rises. The stabilizing effect of low
inflation provided an incentive for export-led growth in 1993, as
did the reduction in government involvement in the economy, which
allowed more resources to be channeled into the business sector.
During 1993, the New Israel Shekel ("NIS") was devalued from
NIS 2.76 to $1.00 to NIS 2.99 to $1.00, an 8% devaluation.
Israel had approximately $6.4 billion of foreign exchange
reserves at the end of 1993 compared to $5.1 billion at the end
of 1992, $6.3 billion at the end of 1991, $5.2 billion at the end
of 1990 and $4.4 billion at the end of 1989.
I-26
Item 2. PROPERTIES
- ------------------
None.
Item 3. LEGAL PROCEEDINGS
- -------------------------
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
None.
Executive Officers of the Registrant
- ------------------------------------
Date First
Elected to
Name Age Position Office
- ---- --- -------- ----------
Joseph Ciechanover(a) 60 President Sept. 1980
James I. Edelson(b) 37 Executive Feb. 1992
Vice President,
Secretary and
General Counsel
William Gold(c) 56 Treasurer Feb. 1992
Officers are elected for a one-year term at the Annual
Meeting of Directors scheduled in June of each year.
(a) Mr. Ciechanover is a Director of IDB Holding and IDB
Development. From 1986 through 1991, Mr. Ciechanover
was also Chairman of Israel Discount Bank Ltd. Prior
to joining the Company, Mr. Ciechanover was
Director-General of Israel's Ministry of Foreign
Affairs.
(b) Mr. Edelson is also U.S. Resident Secretary of IDB
Holding. Prior to joining the Company, from August
1988 to January 1992, Mr. Edelson was associated with
the law firm of Proskauer Rose Goetz & Mendelsohn, New
York, New York.
(c) Mr. Gold was Secretary and Assistant Treasurer of the
Company from August 1970 to February 1992.
I-27
PART II
-------
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
- -------------------------------------------------------------
STOCKHOLDER MATTERS
-------------------
(a) During 1992 and the beginning of 1993 until January 19, 1993,
shares of the Company's Common Stock traded on the American Stock
Exchange Composite Tape under the trading symbol ("IEC"). On January
19, 1993, shares of the Company's Common Stock began trading on the New
York Stock Exchange under the same trading symbol. At the same time,
trading of the Company's Common Stock on the American Stock Exchange was
discontinued. The range of high and low sales prices (adjusted for a
two-for-one stock split in the form of a stock dividend effected on
February 25, 1992) of the Company's Common Stock for each of the fiscal
quarters during the last two fiscal years as reported on the American
Stock Exchange Composite Tape until January 19, 1993 and as reported on
the New York Stock Exchange Composite Tape from January 19, 1993 are set
forth below.
1992 High Low
---- ---- ---
First Quarter $21-1/4 $15
Second Quarter 16-3/4 12-3/4
Third Quarter 20-1/8 15-3/4
Fourth Quarter 28 19-7/8
1993
----
First Quarter $30-7/8 $24-1/4
Second Quarter 27-1/4 22-3/8
Third Quarter 34-1/4 22-3/4
Fourth Quarter 34 28-1/4
On March 24, 1994 the closing price of the Company's Common Stock
on the New York Stock Exchange was $28.50 per share.
(b) As of March 24, 1994 there were 2,665 shareholders of record
of the Company's Common Stock.
(c) The Company has not paid cash dividends since 1979. The
decision not to pay cash dividends reflects the policy of the Company to
apply retained earnings, including funds realized from the disposition
of holdings, to finance its business activities. The payment of cash
dividends in the future will depend upon the Company's operating
results, cash flow, working capital requirements and other factors
deemed pertinent by the Board of Directors.
II-1
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the years ended
December 31, 1993, 1992 and 1991, and at December 31, 1993 and 1992, are
derived from the audited consolidated financial statements of the Company set
forth elsewhere in this Annual Report which have been prepared in accordance
with accounting principles generally accepted in the United States and have
been audited by Arthur Andersen & Co. and Haft & Gluckman, each independent
public accountants, as indicated in their report included elsewhere herein.
The selected consolidated financial data for the years ended December 31, 1990
and 1989, and at December 31, 1991, 1990 and 1989, are derived from other
audited consolidated financial statements of the Company not appearing in this
Annual Report which have also been prepared in accordance with accounting
principles generally accepted in the United States and have been audited by
Arthur Andersen & Co. and Haft & Gluckman in 1991 and 1990 and by Haft &
Gluckman in 1989.
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(In thousands of dollars except as to per share
amounts which are in dollars adjusted for a
two-for-one stock split in the form of a stock
dividend effected on February 25, 1992 and
except as to the number of shares which are in
thousands of shares adjusted for such stock
split.)
Income from:
Equity in net income of
Affiliated Companies $ 33,542 $ 30,301 $ 25,899 $ 21,954 $ 15,288
Total Revenues 65,181 60,354 43,205 34,538 30,258
Net Income* 41,970 33,106 22,099 18,592 15,004
Net Income per Common Share* 2.24 1.89 1.40 1.22 1.02
Weighted Average Number of
Outstanding Common Shares 18,759 17,509 15,733 15,164 14,636
Total Assets 347,873 314,592 233,905 210,629 182,252
Total Liabilities 40,636 37,925 27,979 27,968 25,542
Shareholders' Equity 307,237 276,667 205,926 182,661 156,710
Common Shareholders' Equity
per Common Share 16.38 14.75 13.07 11.64 10.70
Number of Outstanding Common
Shares at the End of Each Year 18,759 18,759 15,759 15,691 14,636
*Net income for 1989 includes extraordinary credits of $824,000 or $.05 per
share of Common Stock. Net income for 1993 is after cumulative effect of
change in accounting for income taxes of $(1,173,713) or $(.06) per share of
Common Stock.
No dividends were paid during the last five years.
II-2
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Results of Operations
Year Ended December 31, 1993
Compared to Year Ended December 31, 1992
Consolidated net income increased to $42.0 million in
1993 from $33.1 million in 1992. The increase in consolidated
net income in 1993 as compared to 1992 resulted primarily from
increases in PEC's equity in net income of Affiliated Companies
and in net gain on sales of investments and a decrease in the
provision for income taxes. The increase attributable to these
factors was partially offset by a decrease in other income and by
the effect of PEC's adoption of Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("SFAS 109")
effective January 1, 1993.
PEC's equity in net income of Affiliated Companies in
1993 increased to $33.5 million from $30.3 million in 1992. The
increase in equity in net income of Affiliated Companies for 1993
reflects PEC's elimination of approximately $2.2 million of
reserves for Tefron that PEC determined were no longer required,
PEC's recognition of approximately $1.7 million of equity in net
income of C.I.D.L. Inc. ("CIDL") resulting from CIDL's sale of
all of its shares of F.I.B.I. Holding Company Limited, its sole
asset, and improved results of some of PEC's Affiliated
Companies, principally El-Yam, Property & Building, Super-Sol and
Gilat Satellite. These increases were partially offset by reduced
earnings of certain other Affiliated Companies, principally
Scitex, DIC and PEC Cable TV Ltd. (the holding company for PEC's
interest in Tevel), Tambour and Elron and by losses in respect of Adir,
RTS and Bulk Trading.
PEC realized a net gain on issuance of shares by
Affiliated Companies of approximately $11.5 million in 1993
compared to approximately $11.3 million in 1992. Approximately
$8.5 million of the net gain on issuance of shares by Affiliated
Companies in 1993 resulted from Tambour's sale in February 1993
of ordinary shares and one and two year options to purchase
ordinary shares in an underwritten initial public offering in
Israel and the subsequent exercise of some of those options. See
Note 3(b) to the Notes to Consolidated Financial Statements with
respect to the effect of the exercise in February 1994 of all the
then outstanding one year options. Approximately $2.2 million of
net gain on the issuance of shares by Affiliated Companies in 1993
resulted from Gilat Satellite's sale in April 1993 of ordinary
shares in an underwritten initial public offering in the United
States. A private placement of ordinary shares by Mul-T-Lock in
January 1993 resulted in PEC realizing approximately $647,000 of
II-3
net gain on the issuance of shares by Affiliated Companies. The
net gain on issuance of shares by Affiliated Companies in 1992
resulted almost entirely from Scitex's sale in May 1992 of newly
issued ordinary shares of Scitex to International Paper Company
and from Elron's sale in March 1992 of newly issued ordinary
shares of Elron to a group of investors in a private placement.
The net gain on sale of investments in 1993 of
approximately $4.1 million resulted from the sale of marketable
securities of U.S. companies, the sale of 30% of the shares of
Tefron and the sale of a small portion of shares of Maxima, while
the net gain on sale of investments in 1992 of approximately $2.0
million resulted from the sale of a small portion of the shares
of Mul-T-Lock, the sale of all of PEC's shares in Tedea
Technological Development and Automation Ltd. and the sale of
marketable securities of U.S. companies.
The decrease in other income in 1993 reflects
principally a loss with respect to PEC's interest in a limited
partnership, which limited partnership generated income in 1992.
The amount of the decrease was partially offset by increased fees
in 1993 for management services.
General and administrative expenses in 1993 increased
compared to 1992 due in part to the write-off of deferred
American Stock Exchange listing fees for PEC's common stock and
higher costs for financial and other services provided to the
Company.
The provision for income taxes in 1993 decreased to
$7.6 million from $13.2 million in 1992. As described in Note 2
to the Notes to Consolidated Financial Statements, the Company
accrues deferred income taxes on undistributed earnings of, gains
on issuances of shares by, of Affiliated Companies that are not
more than 50% owned by the IDB Group or in which the IDB Group
does not otherwise have effective control. The Company does
not provide deferred income taxes with respect to undistributed
earnings of, gains on issuances of shares by, Affiliated
Companies that are more than 50% owned by the IDB Group
or in which the IDB Group otherwise has effective
control (the "Majority-Owned Affiliated Companies").
Such amounts are currently expected to be permanently
reinvested in the Majority-Owned Affiliated Companies.
The reduced provision for income taxes in 1993 is primarily
attributable to an increase in the proportion of income from
undistributed earnings of, and gains on issuances of shares by,
Majority-Owned Affiliated Companies in 1993 compared to 1992,
including the $8.5 million gain on issuance of shares by Tambour.
In addition, PEC's provision for income taxes decreased
in 1993 as compared to 1992 as a result of PEC's sale of 30% of
the shares of Tefron in 1993. Although PEC had no carrying value
for its interest in Tefron prior to the sale because the carrying
II-4
value of its interest in Tefron had previously been reduced as a
result of PEC's recognition of Tefron's losses, the basis of PEC's
interest in Tefron for tax purposes prior to the sale was the cost
of such interest. Upon PEC's sale of 30% of the shares of Tefron,
PEC recognized all of the proceeds of such sale as net gain, but
for tax purposes PEC realized a capital loss which
reduced PEC's provision for income taxes by approximately $1.9
million. As discussed in Note 4 to the Notes to the Consolidated
Financial Statements, the foregoing reductions in provision for
income taxes were partially offset by an increased provision for
income taxes of approximately $800,000 as a result of the increase
in 1993 in the United States federal corporate income tax rate
from 34% to 35% for taxable income greater than $10 million.
Approximately $688,000 of this increased provision relates to an
additional deferred tax provision as of January 1, 1993.
Effective on January 1, 1993 PEC adopted SFAS 109,
which increased PEC's deferred tax liability by approximately
$1.2 million. As discussed in Note 2 to the Notes to the
Consolidated Financial Statements, this increased liability has
been recorded through PEC's income statement and reported as a
cumulative effect of a change in accounting principle.
SHAREHOLDERS' EQUITY
As a result of the change in the translation method
relating to the Company's foreign subsidiaries and certain of its
Affiliated Companies described in Note 2 to the Notes to the
Consolidated Financial Statements, commencing in 1993,
translation differences are reflected in shareholders' equity as
a "Cumulative Translation Adjustment". Upon disposition of an
investment, the related cumulative translation adjustment balance
will be recognized in determining income. Should the New Israel
Shekel ("NIS") continue to be devalued against the dollar, such
cumulative translation adjustments are likely to result in
reductions of shareholders' equity. During 1993, the NIS was
devalued 8% against the dollar, of which approximately 60% of
devaluation for the entire year occurred in the fourth quarter of
1993. As of December 31, 1993, the effect on shareholders' equity
was a decrease of approximately $11.6 million.
Year Ended December 31, 1992
Compared to Year Ended December 31, 1991
Consolidated net income increased to $33.1 million in
1992 from $22.1 million in 1991. The increase in consolidated
net income in 1992 as compared to 1991 resulted from increases in
net gain on issuance of shares by Affiliated Companies, PEC's
equity in net income of Affiliated Companies, interest and
dividend income and other income. These increases were partially
offset by reduced net gain on sales of investments and by an
increase in the provision for income taxes.
II-5
PEC realized a net gain on issuance of shares by
Affiliated Companies of $11.3 million in 1992 compared to a net
loss of approximately $242,000 in 1991. Substantially all of the
net gain in 1992 was attributable to issuances of shares by two
of PEC's Affiliated Companies. In May 1992, Scitex sold newly
issued ordinary shares of Scitex to International Paper Company,
and, as a result of the sale, PEC realized a gain of $9.1 million
and its ownership interest in Scitex was reduced from
approximately 6.3% to approximately 5.6%. Earlier, in March 1992,
Elron sold to a group of investors in a private placement
newly issued ordinary shares of Elron, and PEC realized a net
gain on issuance of shares of approximately $1.4 million and its
ownership interest in Elron was reduced from 12.2% to 11.3%.
PEC's equity in net income of Affiliated Companies in
1992 increased to $30.3 million from $25.9 million in 1991. The
increase in equity in net income of Affiliated Companies in 1992
reflected improved results of most of PEC's Affiliated Companies,
principally DIC and PEC Cable TV Ltd., Tambour, El-Yam, Super-Sol
and Scitex. These increases were partially offset by reduced net
income of some of PEC's Affiliated Companies, principally Elron
and Caniel, and by an increased loss incurred by Tefron. El-Yam,
through FHEY, had a 37.35% interest in IDB Holding in 1992, which
FHEY acquired at the end of 1991, and El-Yam's 1992 net income
reflects El-Yam's equity in the net income of IDB Holding.
On December 31, 1991, PEC sold to IDBL one half of PEC's
approximately 18% common equity interest in IDBNY for
approximately $27.0 million, a price that equalled the
proportionate share of IDBNY's shareholders' equity applicable to
that interest and PEC's carrying value of the interest.
PEC's share of the net income of IDBNY was reflected in
equity in net income of Affiliated Companies in 1991 (and
accounted for $2.0 million of PEC's equity in net income of
Affiliated Companies in 1991), but as a result of PEC's sale of
one-half of its interest in IDBNY, PEC ceased to account for its
interest in IDBNY on the equity method and, accordingly, equity
in net income of Affiliated Companies in 1992 does not include
any share of net income of IDBNY. As noted below, PEC exchanged
its remaining common equity interest in IDBNY for nonvoting
preferred stock of IDBNY on which IDBNY pays a dividend.
The increase in interest and dividend income in 1992 as
compared to 1991 resulted from a substantial increase in funds
available for investment. This increase in funds available for
investment resulted mainly from PEC's sale of 3,000,000 newly
issued shares of common stock in an underwritten public offering
on June 1, 1992, generating net proceeds of $37.6 million after
underwriting discounts and commissions and other expenses, and
PEC's sale on December 31, 1991 of one-half of its 18% common
II-6
equity in IDBNY on which it realized approximately $22.4 million
(net of approximately $4.6 million in taxes). Dividend income
also increased as a result of a dividend on the nonvoting
preferred stock of IDBNY acquired by PEC in exchange for its
remaining common equity interest in IDBNY.
The net gain on sale of investments in 1992 of
approximately $2.0 million resulted from the sale of a small
portion of shares of Mul-T-Lock, the sale of all of PEC's shares
in Tedea Technological Development and Automation Ltd. and the
sale of U.S. common stocks, while the net gain of $5.4 million on
sale of investments in 1991 resulted from the sale of a small
portion of PEC's shares of Scitex and Elron. The increase in
other income in 1992 as compared to 1991 reflects principally the
income on PEC's interest in a limited partnership which PEC
acquired in February 1992.
The reduction in interest expense in 1992 as compared
to 1991 resulted from the payment of bank debt during 1991.
General and administrative expenses for 1992 increased as
compared to 1991, primarily due to increased provisions for
employee pension expense.
The provision for income taxes in 1992 increased to
$13.2 million from $9.0 million in 1991. The increased provision
for income taxes in 1992 was primarily attributable to the
substantial increase in the amount and proportion of income other
than undistributed earnings of Majority-Owned Affiliated
Companies in 1992 compared to 1991, especially increases in gains
on issuance of shares by Affiliated Companies which were not
Majority-Owned Affiliated Companies and higher dividend and
interest income. The provision for income taxes in 1991 also
reflected a reduction of approximately $1.6 million of income tax
resulting from the settlement of issues relating to the Company's
federal income tax returns through 1986 for which reserves had
previously been provided. The effects of these factors were
partly offset by the fact that the results for 1991 included a
provision of approximately $4.6 million relating to the sale by
PEC in that year of approximately one half of its common equity
interest in IDBNY.
Liquidity and Capital Resources
As of December 31, 1993, PEC's liquid assets
(consisting of cash, cash equivalents, marketable securities of
U.S. companies and marketable bonds and notes) totaled
approximately $75 million. For the year ended December 31, 1993,
PEC received cash dividends and interest totalling $8.7 million
(including $5.3 million of dividends received from the Affiliated
Companies) which substantially exceeded the amount needed to pay
PEC's general and administrative expenses.
II-7
During 1993, PEC received a total of $25.0 million of
additional funds, of which $2.3 million was generated from the
sale of securities of Affiliated Companies, $15.9 million was
generated from the sale of marketable securities of U.S. companies
and $6.8 million was generated from the collection of notes,
loans and U.S. Government and State obligations.
During 1993, PEC purchased securities of new and
existing Affiliated Companies for approximately $17.3 million.
The new Affiliated Companies, and PEC's purchase price for their
securities, include Lego-$2.2 million, Adir-$1.1 million,
Lipman-$1.7 million, Gemini-$.9 million and Tius Elcon-$.3
million. The existing Affiliated Companies in which PEC purchased
securities in 1993 and the purchase price for such securities
consist primarily of Scitex-$4.4 million, Klil-$3.2 million,
Nice-$.9 million and Gilat Satellite-$.9 million. During 1993,
PEC purchased marketable securities of U.S. companies for
approximately $17.3 million, purchased U.S. Government and State
obligations for approximately $16.7 million, purchased notes of
Affiliated Companies for approximately $1.4 million and paid
taxes of approximately $2.0 million.
II-8
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
This item commences on the following page.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------
None.
II-9
ARTHUR ANDERSEN & CO. HAFT & GLUCKMAN
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Shareholders and Board of Directors
of PEC Israel Economic Corporation
We have audited the accompanying consolidated balance sheets of
PEC Israel Economic Corporation (a Maine corporation) and
subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December
31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We
did not audit the financial statements of certain Affiliated
Companies of the Company, which statements reflect assets and
equity in net income of $154.9 million and $25.9 million,
respectively, of the consolidated totals as of and for the year
ended December 31, 1993, $132.3 million and $21.8 million,
respectively, of the consolidated totals as of and for the year
ended December 31, 1992, and equity in net income of $22.8 million
of the consolidated total for the year ended December 31, 1991.
Those statements were audited by other auditors whose reports
have been furnished to us and our opinion, insofar as it relates
to the amounts included for those entities, is based solely on
the reports of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits and the reports of other auditors provide a reasonable
basis for our opinion.
- 1 -
In our opinion, based on our audits and the reports of other
auditors, the financial statements referred to above present
fairly, in all material respects, the financial position of PEC
Israel Economic Corporation and subsidiaries as of December 31,
1993 and 1992, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting
principles.
As explained in Note 2 to the consolidated financial statements,
effective January 1, 1993, the Company changed its method of
accounting for income taxes.
ARTHUR ANDERSEN & CO. HAFT & GLUCKMAN
New York, New York
March 24, 1994
- 2 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31,
------------
1993 1992
------ ------
ASSETS
- ------
CASH AND CASH EQUIVALENTS $ 42,665,957 $ 66,040,089
INVESTMENTS (NOTE 3) 292,484,875 239,055,331
ASSETS OF GENERAL ENGINEERS
LIMITED (NOTE 2) 8,722,142 7,234,940
OTHER ASSETS 4,000,416 2,261,831
----------- -----------
Total assets $347,873,390 $314,592,191
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
LIABILITIES:
Liabilities of General Engineers
Limited (Note 2) $ 5,484,976 $ 4,303,219
Deferred income taxes 30,214,359 24,101,063
Other liabilities 4,937,184 9,520,958
----------- ----------
Total liabilities 40,636,519 37,925,240
----------- ----------
COMMITMENTS AND CONTINGENCIES (Note 6)
- --------------------------------------
SHAREHOLDERS' EQUITY (Notes 2 and 5):
Common stock, $1.00 par value,
30,000,000 shares authorized in
1993 and 1992, 18,758,588 shares
issued and outstanding in 1993
and 1992 18,758,588 18,758,588
Class B preferred stock, no par
value, 544,514 shares authorized
in 1993 and 1992, none issued in
1993 and 1992 - -
Additional paid-in capital 99,257,071 99,078,952
Cumulative translation adjustment (11,578,060) -
Retained earnings 200,799,272 158,829,411
----------- -----------
Total shareholders' equity 307,236,871 276,666,951
----------- -----------
Total liabilities and
shareholders' equity $347,873,390 $314,592,191
=========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
- 3 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
Years Ended December 31,
------------------------
1993 1992 1991
------ ------ ------
REVENUES:
Interest and dividends-
Related parties $ - $ - $ 770,722
Other 3,369,109 3,556,626 796,239
Equity in net income of
Affiliated Companies
(Note 3) 33,541,985 30,301,198 25,898,951
Net gain (loss) on
issuance of shares by
Affiliated Companies 11,451,371 11,291,327 (241,918)
Revenues of General
Engineers Limited (Note 2) 11,955,987 11,826,517 10,298,467
Net gain on sales of
investments (Note 2) 4,081,204 1,986,788 5,443,979
Other 781,430 1,391,165 238,205
---------- ---------- ----------
65,181,086 60,353,621 43,204,645
---------- ---------- ----------
EXPENSES:
General and administrative 3,262,279 2,833,881 2,359,715
Interest -
Related parties - - 1,300
Other - - 98,173
Cost of sales and expenses
of General Engineers
Limited (Note 2) 11,224,283 11,238,017 9,679,986
---------- ---------- ----------
14,486,562 14,071,898 12,139,174
---------- ---------- ----------
Income before income
taxes and cumulative
effect of accounting
change 50,694,524 46,281,723 31,065,471
Income Taxes (Note 4) 7,550,950 13,175,631 8,966,252
---------- ---------- ----------
Income before cumulative
effect of accounting
change 43,143,574 33,106,092 22,099,219
Cumulative effect of
change in accounting
for income taxes (Note 2) (1,173,713) - -
---------- ---------- ----------
Net income $41,969,861 $33,106,092 $22,099,219
========== ========== ==========
- 4 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(continued)
Years Ended December 31,
------------------------
1993 1992 1991
------ ------ ------
Earnings per common share
before cumulative effect
of accounting change $ 2.30 $ 1.89 $ 1.40
Cumulative effect of change
in accounting for income
taxes on earnings per
common share (Note 2) (.06) - -
---------- --------- ----------
Earnings per common
share (Note 5) $ 2.24 $ 1.89 $ 1.40
========== ========= ==========
The accompanying notes are an integral part of these consolidated
financial statements.
- 5 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Note 5)
--------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
----------------------------------------------------
Cumulative
Common Paid-in Translation Retained
Stock Capital Adjustment Earnings Total
------ ------- ----------- -------- -----
Balance, January 1, 1991 $7,845,595 $71,857,010 $ - $103,624,100 $182,661,077
Exercise of stock options 33,699 466,194 - - 499,893
Two-for-one stock split
in the form of a 100%
stock dividend 7,879,294 (7,879,294) - - -
Net income - - - 22,099,219 22,099,219
Change in net unrealized
loss on marketable
equity securities - - - - 665,628
---------- ----------- ---------- ----------- ----------
Balance, December 31, 1991 15,758,588 64,443,910 - 125,723,319 205,925,817
Common stock issued 3,000,000 34,641,340 - - 37,641,340
Paid-in capital of
Affiliated Companies - (6,298) - - (6,298)
Net income - - - 33,106,092 33,106,092
---------- ----------- ----------- ----------- -----------
Balance, December 31, 1992 18,758,588 99,078,952 - 158,829,411 276,666,951
Paid-in capital of
Affiliated Companies - 178,119 - - 178,119
Cumulative translation
adjustment - - (11,578,060) - (11,578,060)
Net income - - - 41,969,861 41,969,861
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1993 $ 18,758,588 $ 99,257,071 $(11,578,060) $200,799,272 $307,236,871
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
- 6 -
<FN>
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Years Ended December 31,
------------------------
1993 1992 1991
------ ------ ------
Cash Flows From Operating
Activities:
Net income $ 41,969,861 $ 33,106,092 $ 22,099,219
Adjustments to reconcile
net income to net cash
provided by operating
activities -
Cumulative effect of
change in accounting
for income taxes 1,173,713 - -
Equity in net income
of Affiliated
Companies (33,541,985) (30,301,198) (25,898,951)
Gain on sales of
investments (4,081,204) (1,986,788) (5,443,979)
Loss (Gain) on invest-
ment in partnerships 542,844 (1,130,454) -
(Income) Loss of
consolidated
subsidiaries (1,255,724) 42,548 (420,210)
Amortization of premiums
(discounts) on
receivables, net 208,272 (15,730) (23,000)
Net (gain) loss on
issuances of shares
by Affiliated
Companies (11,451,371) (11,291,327) 241,918
Dividends from
Affiliated Companies 5,298,806 7,722,927 4,777,080
Increase in other
assets (639,145) (682,545) (836,274)
Increase in deferred
income taxes 5,250,466 8,750,402 2,474,527
Increase (decrease) in
other liabilities 630,238 (3,616,870) 3,114,146
Write off of deferred
charges 110,457 - -
----------- ----------- ----------
Net cash provided
by operating
activities $ 4,215,228 $ 597,057 $ 84,476
----------- ----------- ----------
- 7 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(continued)
Years Ended December 31,
------------------------
1993 1992 1991
------ ------ ------
Cash Flows From Investing
Activities:
Purchases of notes
receivable $ (1,370,518) $ (212,642) $ (8,451,250)
Purchases of U.S.
Government and State
obligations (16,660,422) - -
Collection of capital
notes and loans
receivable 4,172,522 95,233 2,262,747
Collection of U.S.
Government and State
obligations 2,616,845 - -
Proceeds from sales of
investments 18,233,803 13,704,030 35,691,296
Purchases of investments (34,581,590) (20,799,406) (5,301,415)
----------- ----------- ----------
Net cash (used in)
provided by
investing
activities (27,589,360) (7,212,785) 24,201,378
----------- ------------ ----------
Cash Flows From Financing
Activities:
Proceeds from issuance
of common stock - 37,641,340 -
Proceeds from exercise
of stock options - - 499,893
Payments of note payable - - (2,222,222)
----------- ----------- ----------
Net cash provided
by (used in)
financing
activities - 37,641,340 (1,722,329)
----------- ----------- ----------
Net (decrease)
increase in
cash and cash
equivalents (23,374,132) 31,025,612 22,563,525
Cash and Cash Equivalents,
beginning of year 66,040,089 35,014,477 12,450,952
----------- ----------- ----------
Cash and Cash Equivalents,
end of year $ 42,665,957 $66,040,089 $35,014,477
=========== ========== ==========
- 8 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(continued)
Years Ended December 31,
------------------------
1993 1992 1991
------ ------ ------
Supplemental Disclosure of
Cash Flow Information:
Cash paid during the
year-
Interest $ - $ - $ 107,010
Income taxes 2,041,263 7,953,546 3,505,532
Non-cash investing
activities-
Conversion of
capital notes
receivable for
shares in an
Affiliated Company $ - $ - $ 888,888
Purchase of invest-
ments on account - 4,316,000 -
Balance of funds
pending receipt on
sale of investments - 156,000 1,965,000
Exchange of shares of
Tefron $ 859,323 - -
The accompanying notes are an integral part of these consolidated
financial statements.
- 9 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. THE COMPANY
-----------
PEC Israel Economic Corporation and subsidiaries (the "Company")
organizes, acquires interests in, finances and participates in
the management of companies which are located in the State of
Israel or are Israel-related. The Company is a subsidiary of IDB
Development Corporation Ltd. ("IDB Development"). Discount
Investment Corporation Ltd. ("Discount Investment") is also a
subsidiary of IDB Development. IDB Development is a subsidiary
of IDB Holding Corporation Ltd. ("IDB Holding"). All of these
companies are hereinafter referred to as the "IDB Group
Companies". As of December 31, 1993, IDB Development owned
approximately 70.3% of the Company's outstanding common stock.
In addition, see Notes 3(e) and 5.
2. SUMMARY OF SIGNIFICANT
----------------------
ACCOUNTING POLICIES
-------------------
Investments
- -----------
The Company accounts for substantially all of its investments on
the equity method. Under the equity method, the Company records
its proportionate share of profits and losses and capital
transactions based on its percentage of direct and indirect
interests in earnings of companies 20% to 50% owned and in
companies less than 20% owned in which the Company, together with
the IDB Group Companies, has the ability to exercise significant
influence. These investees are collectively referred to as
"Affiliated Companies".
The excess of cost over net assets acquired and the excess of net
assets acquired over cost, to the extent not otherwise applied,
is amortized primarily over a ten-year period. Gains and losses
on issuances of shares by Affiliated Companies are recognized in
the accompanying consolidated statements of income.
Equity in net income of Affiliated Companies is reflected in the
Company's financial statements based upon their fiscal years, all
of which are December 31.
The Company consolidates five wholly owned subsidiaries, three of
which are foreign. The assets, liabilities and operations of one
of these subsidiaries, General Engineers Limited, a wholly owned
Israeli subsidiary, are grouped and presented separately in the
accompanying consolidated financial statements. All material
intercompany transactions and balances have been eliminated in
consolidation.
- 10 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Investments in marketable equity securities, excluding Affiliated
Companies, are carried at the lower of aggregate cost or market.
Foreign Currency Translations
- -----------------------------
The foreign subsidiaries and several Affiliated Companies prepare
their primary financial statements in local currency, the New
Israel Shekel ("NIS"), in accordance with generally accepted
accounting principles in Israel, which require financial
statements to be adjusted for the effects of inflation in Israel.
For purposes of the Company's financial statements, these
subsidiaries and Affiliated Companies provide financial
information, which for the current year is in the local currency
and for 1992 and 1991 is in U.S. dollars, prepared in accordance
with United States generally accepted accounting principles.
During 1993, it was determined that the economy of the State of
Israel should no longer be considered "highly inflationary" under
the guidelines of Statement of Financial Accounting Standards No.
52. Accordingly, NIS financial information is prepared by
subsidiaries and Affiliated Companies whose "functional currency"
is the local currency based on their dollar balances as of
December 31, 1992 and reflecting their activity during 1993 in
NIS, which is then translated based on exchange rates at year-end
for assets and liabilities and at average exchange rates for
revenues and expenses. Translation differences are reflected as
a component of shareholders' equity under the caption "Cumulative
Translation Adjustment". This change does not affect Affiliated
Companies whose "functional currency" is the dollar, as their
accounting continues as described in the following paragraph.
Prior to 1993, assets and liabilities of foreign subsidiaries and
Affiliated Companies were translated using year-end exchange
rates, except for property and equipment, inventory and certain
investment and equity accounts which were translated at exchange
rates prevailing on the dates of acquisition. Revenues and
expenses were translated primarily at the exchange rates in
effect at the time of the relevant transactions and partially at
average rates of exchange during the year. Revenue and expense
items relating to assets translated at historical rates were
translated on the same basis as the related asset. Translation
differences were included in the determination of income for the
year.
- 11 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Provision for Income Taxes
- --------------------------
The provision for income taxes is based on revenues and expenses
reported for financial statement purposes. Deferred taxes arise
from the different treatment of certain items for tax and
financial statement purposes, which result primarily from equity
in the net income of, and net gain on issuance of shares by,
Affiliated Companies. The balance of deferred income taxes at
December 31, 1993 was approximately $30.2 million. The
Company's foreign subsidiaries and the Affiliated Companies
file separate tax returns and provide for taxes
accordingly.
Effective on January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("SFAS 109"). Under SFAS 109, the deferred income tax
provision is determined under the liability method. Under this
method, deferred tax assets and liabilities are recognized based
on differences between financial statement and income tax bases
of assets and liabilities using presently enacted tax rates.
Deferred income tax expense principally represents such temporary
differences related to investments in Affiliated Companies. The
cumulative effect on prior years of this change in accounting
principle was a reduction of net income of $1,173,713, or $.06
per share, and is reported separately in the accompanying
consolidated statements of income. Prior years' consolidated
financial statements have not been restated to apply the
provisions of SFAS 109.
Deferred income taxes of approximately $41 million have not been
accrued on the Company's temporary differences, totaling
approximately $116 million, related to its investments in
Affiliated Companies which are more than 50% owned by the IDB
Group Companies and two other companies in which the IDB Group
Companies have effective control. Such amounts are currently
expected to be permanently reinvested in these companies.
Cash Equivalents
- ----------------
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
Reclassification
- ----------------
Certain reclassifications have been made to the 1992 and 1991
consolidated financial statements to conform with the 1993
presentation.
- 12 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
3. INVESTMENTS
-----------
Certain information about the Company's investments follows
(in thousands):
December 31,
---------------------------------------
1993 1992
------------------- -------------------
Percentage Carrying Percentage Carrying
Owned Value Owned Value
---------- -------- ---------- --------
Affiliated Companies:
Scitex Corporation Ltd.
(a)(h) 6 % $43,974 6% $ 35,361
Tambour Ltd.(b)(h) 45 % 39,874 50% 28,341
Super-Sol Ltd.(c)(h) 19 % 33,362 19% 31,141
Property and Building
Corporation Ltd.
(d)(h) 31 % 31,614 31% 29,839
El-Yam Ships Ltd.
(e)(f) 10 % 21,587 10% 19,523
Elron Electronic
Industries Ltd.
(f)(h) 11 % 18,372 11% 17,270
Caniel-Israel Can
Company Ltd.(f)(h) 28 % 11,600 28% 11,431
Klil Industries Ltd.
(f)(h) 15 % 9,642 13% 6,113
Mul-T-Lock Ltd.(f)(h) 14 % 5,001 15% 3,759
Gilat Satellite Networks
Ltd. (f)(h) 10 % 3,455 13% -
DIC and PEC Cable TV Ltd.
(f) 49 % 2,573 49% 2,396
Electronics Line (E.L.)
Ltd.(f)(h) 14 % 2,494 14% 2,287
Lego Irrigation Ltd.(f) 16 % 2,335 - -
Maxima Air Separation
Center Ltd. (f)(h) 12 % 1,770 13% 1,720
Gemini Israel Fund L.P.(f) 11 % 780 - -
Tefron Ltd. (f) 13 % 312 - -
Tius Elcon Ltd.(f) 13 % 300 - -
Gilat Communication
Engineering 1990 Ltd.
(f) 11 % 264 13% 147
Tel-Ad Jerusalem Studios
Ltd.(f) - 240 - -
Camdev Ltd.(f) 26 % 175 26% 171
- 13 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Logal Educational Software
and Systems, Ltd. (f) 8% 113 - -
Sign-On Computer
Communications Services
Ltd. (f) 13% 83 13% 100
Adir International
Communications Services
Ltd.(f) 25% 62 - -
DEP Technology Holdings
Ltd. (f) See Note 6 (d) 33% - - -
C.I.D.L. Inc. (f) - - 49% 271
Bulk Trading Company Ltd.
(f) 50% - 50% 215
Tefron Holdings (1990)
Ltd. (f) - - 45% -
RPA Leasing Inc. (f) 25% - - -
RTS Telecommunications
Services Ltd.(f) 15% - - -
--------- ---------
$ 229,982 $ 190,085
--------- ---------
- 14 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
December 31,
-------------------
1993 1992
Carrying Carrying
Value Value
-------- --------
Other:
Israel Discount Bank
of New York (i) $ 26,965 $ 26,965
Advent Israel Limited
Partnership (f) 154 -
Lipman Electronic
Engineering Ltd. (j) 1,688 -
MacPell Industries, Ltd. (j) 502 -
Pharmos Corporation (j) 191 191
Nice Systems Ltd. (j) 1,712 985
Other long-term investments 116 241
------- ---------
31,328 28,382
------- ---------
Investment in limited
partnerships 7,598 6,130
Notes receivable 3,569 4,284
U.S. Government and State
obligations (j) 11,833 2,483
Investments in marketable
securities (j) 8,175 7,691
------- ---------
$292,485 $239,055
======= =========
Information about certain Affiliated Companies follows:
(a) Scitex Corporation Ltd. ("Scitex") develops,
manufactures, markets, and services color electronic
prepress systems for the printing and publishing
industries worldwide. Summarized financial information
for Scitex follows (in thousands):
December 31,
----------------------------
1993 1992 1991
-------- -------- --------
Current assets $675,626 $620,214 $362,006
Total assets 885,917 776,244 443,030
Current liabilities 168,553 134,263 116,201
Long-term liabilities 69 608 641
Shareholders' equity 716,259 641,290 325,885
Revenues 622,760 549,697 430,195
Income before taxes on income 106,221 146,021 125,426
Net income 94,339 122,375 100,564
In May 1992, Scitex sold newly issued shares to
International Paper Co. representing approximately 11% of
the share capital of Scitex for approximately $209
million. This sale resulted in a net gain after taxes to
the Company of approximately $6 million in 1992.
- 15 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(b) Tambour Ltd. ("Tambour") is Israel's largest paint
producer. Summarized financial information for
Tambour follows (in thousands):
December 31,
--------------------------
1993 1992 1991
------- -------- --------
Current assets $ 81,059 $ 58,288 $ 51,101
Total assets 114,335 78,630 64,390
Current liabilities 17,424 20,462 12,965
Long-term debt 644 845 158
Shareholders' equity 95,609 56,713 50,830
Revenue 127,046 124,435 97,407
Income before taxes on income 24,327 27,129 21,218
Net income 17,446 15,908 14,115
In February 1993, Tambour completed a public offering
of ordinary shares and one and two year options to
purchase ordinary shares in Israel. Such shares and
options are traded on the Tel Aviv Stock Exchange.
The sale of shares and options raised approximately
$27 million of capital for Tambour. As a result of
the offering and subsequent exercises of certain of
the options, the Company's proportionate share in
Tambour decreased from 50% to 44.9%, and the Company
realized a gain of approximately $8.5 million.
In February 1994 all of the then outstanding one year
options were exercised and Tambour's capital rose by
$20 million. As a result, the Company's proportionate
share in Tambour decreased to 41%, and the Company
realized a gain on issuance of shares by Tambour of
approximately $5 million in the first quarter of 1994.
(c) Super-Sol Ltd. operates one of the largest chains of
supermarkets throughout Israel. Summarized financial
information for Super-Sol Ltd. follows (in thousands):
- 16 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
December 31,
----------------------------
1993 1992 1991
-------- -------- --------
Current assets $ 144,121 $126,949 $114,217
Total assets 274,875 264,124 229,227
Current liabilities 92,818 93,226 87,564
Long-term debt 5,506 4,160 2,462
Shareholders' equity 175,301 164,568 138,522
Income 531,775 518,058 466,310
Earnings before taxes 38,137 33,607 28,251
Net earnings 25,560 19,391 16,402
(d) Property and Building Corporation Ltd. ("Property & Building")
is one of the largest real estate holding companies in Israel.
Summarized financial information for Property & Building
follows (in thousands):
December 31,
----------------------------
1993 1992 1991
------- -------- --------
Current assets* $ 65,182 $ 55,821 $ 41,001
Total assets 204,885 178,968 163,879
Current liabilities 31,447 13,987 14,978
Long-term liabilities 23,097 26,119 29,711
Shareholders' equity 101,388 95,922 87,228
Income 78,365 37,343 38,446
Earnings before taxes
on income 27,304 25,032 23,139
Net earnings 15,229 10,121 10,641
* Including building
projects and inventories 9,458 21,457 11,577
- 17 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(e) El-Yam Ships Ltd. ("El-Yam") is engaged, through
subsidiaries, in worldwide ocean transportation under
charters for varying durations. El-Yam's ships carry oil
and dry bulk, such as grains, coal and iron ore. El-Yam
owns nonvoting preferred stock of Financial Holdings El-Yam
(Hamigdal) Ltd. ("FHEY") representing substantially all
of the equity in FHEY. As of December 31, 1993, FHEY
owned 35.55% of the outstanding shares of IDB Holding,
which FHEY purchased on December 31, 1991. The Company
owns approximately 10.1% of the voting common stock of
FHEY.
IDB Holding, through IDB Development, has an equity
interest in Clal (Israel) Ltd. ("CLAL"), a publicly traded
Israeli company. El-Yam's proportionate interest in CLAL
is approximately 8% and the Company's proportionate share
is, therefore, approximately 0.8%. Prior to 1993 the
Company's investment in CLAL was carried at cost because of
the inability to obtain the financial information in U.S.
dollars in accordance with U.S. generally accepted
accounting principles that was necessary in order to record
the Company's share in the results of CLAL on the equity
basis. For 1993, the results of CLAL are included on the
equity basis. El-Yam's auditors, in their report on the
financial statements prepared for the Company's purposes,
indicate that the investment prior to 1993 was carried at
cost. In view of the Company's insignificant effective net
ownership interest and based on information provided by
CLAL, management believes the effect on the Company's
financial statements for 1992 and 1991 is not material.
(f) The following summarized financial information represents
an aggregation of the Company's percentage interests in the
Affiliated Companies for which summarized financial
information is not provided in the previous notes (in
thousands):
- 18 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
December 31,
-------------------------
1993 1992 1991
------- ------- -------
Current assets $ 33,516 $ 28,722 $ 17,093
Total assets 104,199 86,928 74,547
Long-term debt 7,758 9,558 10,277
Shareholders' equity 74,468 53,701 44,201
Revenue 45,659 42,334 36,099
Net income 6,292 7,544 4,169
On March 16, 1992, Elron Electronic Industries Ltd.
issued shares and options to purchase shares in Elron and
in its affiliate Elbit Ltd. for approximately
$23 million. This transaction resulted in the Company's
share in Elron being reduced by 0.9% to 11.3% and in a
net gain after taxes of approximately $1 million.
In January 1993, Mul-T-Lock Ltd. issued shares for
approximately $7 million in a private placement. As a
result, the Company's share in Mul-T-Lock Ltd. decreased
by approximately 1% to 13.6% and the Company realized a
gain of approximately $0.7 million.
In April 1993, Gilat Satellite Networks Ltd. sold
ordinary shares in an underwritten initial public
offering in the United States. As a result of the sale,
the Company's share in Gilat Satellite Networks Ltd.
decreased from 13% to 9% and the Company realized a gain
of approximately $2.2 million.
In September 1993, the Company sold 30% of the shares of
Tefron Ltd. resulting in the Company realizing a gain
from sale of approximately $0.7 million. As a result of
this sale, the Company eliminated a reserve of $2.2
million for Tefron Ltd. which was no longer required.
In September 1993, the Company recognized a gain of
approximately $1.7 million resulting from the sale by
C.I.D.L., Inc. ("CIDL") of all of its shares of F.I.B.I.
Holding Company Ltd. In October 1993, the Company sold
all of its holdings in CIDL to the other shareholder of
CIDL at its carrying value of such holdings.
(g) The Company's equity in the net income of Affiliated
Companies by major lines of business follows (in
thousands):
- 19 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
December 31,
-------------------------
1993 1992 1991
------ ------ ------
High technology and
communications $ 5,124 $10,430 $ 6,654
Industry 13,855 11,095 10,024
Construction and development 4,730 3,112 3,219
Shipping, marketing and other 9,833 5,664 6,002
------- ------- -------
$33,542 $30,301 $25,899
======= ======= =======
(h) Certain of the Affiliated Companies are publicly
traded and their shares are quoted on the Tel Aviv
Stock Exchange and/or U.S. exchanges. The market
values of the shares owned by the Company, based on
the closing sale price on the principal market on
which such shares are traded, were approximately $499
million and $332.2 million and their carrying values
were approximately $201 million and $137 million at
December 31, 1993 and 1992, respectively. There has
been a significant decline in the value of the
securities traded on the Tel Aviv Stock Exchange since
December 31, 1993. The market value at March 21, 1994
of shares owned by the Company at December 31, 1993
was approximately $377 million.
(i) Until December 31, 1991, the Company owned
approximately 18% of the common stock of Israel
Discount Bank of New York ("IDBNY"). On that date,
the Company sold to Israel Discount Bank
Ltd. ("IDBL") one half of such common stock interest
for approximately $27 million, a price that equaled
such interest's proportionate share of IDBNY's
shareholders' equity and the Company's carrying value
of such interest on that date. The sale was made
contemporaneously with the reduction of IDB Holding's
interest in IDBL from 66% to 13%. All of the shares
of IDBNY other than those owned by the Company were
owned by IDBL. Pursuant to a separate exchange
agreement entered into between the Company and IDBNY
in March 1992, the Company exchanged its remaining
common equity interest in IDBNY for nonvoting
preferred shares of IDBNY. IDBL has an option to
acquire the nonvoting preferred shares from the
Company at any time prior to September 1995 for
- 20 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
approximately $27 million. If IDBL at any time
disposes of IDBNY common shares representing more than
75% of the equity or voting power in IDBNY, the
Company has the right to require the purchase of the
IDBNY nonvoting preferred stock held by the Company at
a price equal to approximately $27 million.
The Company had accounted for its equity interest
in IDBNY on the equity method and, accordingly, had
included in equity in net income of Affiliated
Companies its proportionate share of the net income of
IDBNY through December 31, 1991. As of January 1,
1992, the Company accounts for its investment in IDBNY
on the cost method. The preferred stock of IDBNY pays
an annual preferred dividend equal to the preferred
stock's share of IDBNY's net income for the year,
based generally on the preferred stock's proportionate
share of IDBNY's total shareholders' equity at the
beginning of that year. For this purpose, the
preferred stock constituted approximately 9% and 8.9%
of the total shareholders' equity of IDBNY for
the years that began on January 1, 1992 and 1993,
respectively. Such preferred stock constitutes
approximately 8.6% of such shareholders' equity for
the year beginning on January 1, 1994. The Company
recognizes such dividend income on a quarterly basis
based upon IDBNY's net income for such quarter and
such dividend income is included in 1993 and 1992 in
Interest and dividends - Other in the accompanying
Consolidated Statements of Income.
While the transactions in the shares of IDBNY did not
result in a gain for financial statement purposes, the
Company realized a gain of approximately $13.5 million
for tax purposes on the sale of the 9% common equity
interest to IDBL, with respect to which approximately
$4.6 million was provided for income taxes for the
period ended December 31, 1991.
- 21 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
The Company held a Convertible Subordinated Capital
note of IDBNY which matured on December 1, 1991.
Interest was payable on the 1st of June and December
at the rate of 1.25% over the London Interbank
Offering Rate as determined semiannually. The note
was convertible into common shares in nine semiannual
amounts of $444,444 based on the book value at the
close of business one month prior to the date of
issuance. The Company has converted the semiannual
principal amounts into common shares.
(j) Marketable Securities
---------------------
Included in Investments in the accompanying
Consolidated Balance Sheets are marketable securities.
At December 31, 1993 and 1992, the market value of
these securities was $32.0 and $12.7 million,
respectively, and the cost was $24.1 and $11.4 million,
respectively.
Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"), issued in May 1993, requires
debt and equity securities, other than equity
securities accounted for under the equity method, to
be reported at fair value with unrealized gains and
losses from those securities which are classified as
"trading securities" included in net income and
unrealized gains and losses from those securities
which are classified as "available-for-sale
securities" reported as a separate component of
shareholders' equity. Debt securities classified as
"held to maturity" are reported at amortized
cost. This new accounting principle is
required to be applied to financial statements for
fiscal periods beginning after December 15, 1993,
although earlier adoption is permitted. Had SFAS 115
been applied at December 31, 1993, net income would
have increased by approximately $2.8 million, net of
taxes, as a cumulative effect of adopting SFAS 115 for
securities classified as "trading securities" and a
special account of shareholders' equity would have
increased by approximately $5.9 million, net of taxes,
as a cumulative effect of adopting SFAS 115 for
securities classified as "available-for-sale
securities". The total effect of adopting SFAS 115
would be an increase of approximately $8.7 million,
net of taxes, in shareholders' equity.
- 22 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Certain of the Affiliated Companies have adopted SFAS
115 as of January 1, 1993. The effect of adoption by
these affiliated companies is immaterial to the
accompanying consolidated financial statements. There
has been a significant decline in the value of the
securities traded on the Tel Aviv Stock Exchange
since December 31, 1993.
4. INCOME TAXES
------------
The U.S. and Foreign components of income before income taxes are
as follows (in thousands):
December 31,
-------------------------
1993 1992 1991
------ ------ ------
U.S. $12,971 $13,400 $ 5,609
Foreign 37,724 32,882 25,456
------- ------- -------
$50,695 $46,282 $31,065
======= ======= =======
Income tax expense is made up of the following components
(in thousands):
December 31,
-------------------------
1993 1992 1991
------ ------ ------
Current:
U.S. $ 465 $ 1,663 $5,123
Foreign 1,836 2,764 1,369
Deferred 5,250 8,749 2,474
------ ------- ------
$7,551 $13,176 $8,966
====== ======= ======
Deferred income tax expense principally represents temporary
differences related to equity in net income of, and gain on
issuances of shares by, Affiliated Companies.
A reconciliation of income tax expense as reflected in the accom-
panying statements with the statutory U.S. Federal income tax
rate is as follows (in thousands):
- 23 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
December 31,
------------------------
1993 1992 1991
------ ------ -------
U.S. income taxes at statutory
rates (35% for 1993, 34% for
1992 and 1991) $17,743 $15,736 $ 10,562
Excess of taxes at statutory
rates over taxes provided
on equity in net income
of, and net gain on
issuance of shares by,
Affiliated Companies (10,080) (4,227) (4,171)
Tax settlement* - - (1,572)
Tax on gain from sale of
investment (Note 3(i)) - - 4,573
Additional provision for
deferred taxes relating
to increase in statutory
rate to 35% 688 - -
Other (800) 1,667 (426)
------- ------- -------
$ 7,551 $13,176 $ 8,966
======= ======= =======
* During 1991, the Company received formal approval from the
Commissioner of Internal Revenue settling issues relating to
the Company's Federal income tax returns through 1986. This
settlement resulted in a reduction in the provision for
income taxes in 1991 by approximately $1.6 million of which
$1.3 million was previously reserved with respect to those
years.
5. SHAREHOLDERS' EQUITY
--------------------
Authorized Shares
- -----------------
At December 31, 1993 and 1992, the Company had authorized capital
consisting of 30,000,000 shares of common stock, par value $1.00 per
share, and 544,514 shares of Class B preferred stock, no par value.
At December 31, 1993 and 1992, there were 18,758,588 shares of common
stock, issued and outstanding and no outstanding shares of Class B
preferred stock.
- 24 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
5. SHAREHOLDERS' EQUITY - cont'd
--------------------
On November 22, 1993, the Board of Directors approved an amendment,
subject to the approval of shareholders, to increase the Company's
number of authorized shares of common stock from 30,000,000 shares to
40,000,000 shares. On March 22, 1994, the shareholders adopted the
amendment and the increase in the number of authorized shares became
effective on that date.
On March 24, 1994, pursuant to a plan of reorganization, PEC Holdings
Limited ("PECH"), a Maine corporation and a wholly owned subsidiary
of IDB Development which owned 13,193,592 shares of the Company's
common stock, transferred those shares of the Company's common stock
to the Company (which holds them as treasury shares) in exchange for
an identical number of newly issued shares of common stock.
Immediately after the exchange, pursuant to such plan of
reorganization, PECH was dissolved and distributed to IDB Development
the newly issued shares of the Company's common stock received in the
exchange, resulting in the Company becoming a direct subsidiary of IDB
Development.
On June 1, 1992, the Company sold 3,000,000 newly issued shares
of common stock in an underwritten public offering, generating net
proceeds of $37.6 million after underwriting discounts, commissions
and other expenses.
Stock Split
- -----------
The Board of Directors declared on November 26, 1991, a two-for-one
stock split by means of a 100% stock dividend, subject to shareholder
adoption of an increase in the Company's number of authorized shares
of common stock from 15,000,000 shares to 30,000,000 shares. On
January 21, 1992, shareholders approved the increase in the number of
authorized shares and the stock dividend was effected on February 25,
1992.
Earnings Per Common Share
- -------------------------
The computations of earnings per common share are calculated using the
weighted average number of common shares outstanding during the year.
Outstanding stock options are not included in the computation of
earnings per common share as they are antidilutive. The number of
outstanding shares in 1993 was 18,758,588 and the weighted average
number of shares in 1992 and 1991 was 17,508,588 and 15,733,314,
respectively. Earnings per share and weighted average number of
shares have been computed giving retroactive effect to the stock
split described above.
- 25 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Stock Option Plan
- -----------------
The Company had an Incentive Stock Option Plan (the "Plan") which
provided for the granting of options to purchase 164,994 shares
(adjusted for the two-for-one stock split in 1992) of common stock to
certain key officers. The Plan provided for options to be granted at
the fair market value of the common shares on the date of grant, but
in no event less than par value, and to be exercised for a period not
to exceed ten years from the date of granting the option. During
1991, all of the outstanding stock options were exercised and in
November 1993, the Plan expired.
6. COMMITMENTS AND CONTINGENCIES
-----------------------------
TO RELATED PARTIES
------------------
(a) Tevel Israel International Communications Ltd. ("Tevel"), which
is held 48.4% by DIC and PEC Cable TV Ltd., was awarded cable
television franchises in Israel. The Company and Discount
Investment are jointly committed to arrange for 51% of the
financing required by Tevel to perform its franchise
obligations, in accordance with a defined timetable and
predetermined goals. At December 31, 1993, bank guarantees
amounting to $2.2 million U.S. dollar equivalents had been
provided to ensure Tevel's performance of the foregoing
franchise obligations; a subsidiary of Discount Investment is
committed to indemnify a bank for 48.45% of any payment the
bank may be required to make under the guarantees. The Company,
in turn, is committed to indemnify the subsidiary of Discount
Investment for 49% of its commitment. The Company has also
issued a $1.8 million guarantee of credit granted by a bank to
Tevel.
(b) The Company has contracted with IDB Development for IDB
Development to perform management and advisory services for the
Company in Israel, including advice as to financial, economic,
accountancy, legal and tax matters, for an annual fee of
$130,000. During 1993, 1992 and 1991, the Company incurred
expenses of $130,000, $130,000 and $97,771, respectively, for
these and other services.
(c) General Engineers Limited has a $2 million credit agreement
with a bank. The Company has agreed with the bank that General
Engineers Limited will remain a subsidiary of the Company as
long as the credit agreement is in effect.
(d) The Company has agreed to invest up to $9 million over a 10
year period in DEP Technology Holding Ltd. ("DEP") of which
$1.2 million of capital notes of DEP had been purchased as of
December 31, 1993. In January 1994, the Company purchased an
additional $1.5 million of capital notes of DEP.
- 26 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(e) The Company and a wholly owned subsidiary of Discount
Investment are parties to an agreement under which, among other
things, each party provides services to the other party and
offers the other party equal participation in new business
opportunities. In consideration for such services and offers,
each party pays the other a fee of 2 1/2% of the equity
invested by such paying party in business opportunities
initiated or initially presented by the other party. In 1993
PEC paid the wholly owned subsidiary of Discount Investment
$178,000 under this agreement.
(f) In connection with the Company's investment in Gemini Israel
Fund L.P. ("Gemini"), a venture capital limited partnership,
the Company may be required to make capital contributions of up
to $3 million to Gemini. In 1993, the Company had contributed
approximately $900,000 to Gemini's capital.
(g) In connection with the Company's investment in Advent Israel
Limited Partnership ("Advent Israel"), a venture capital
limited partnership, the Company may be required to make
capital contributions of up to $500,000 to Advent Israel. In
1993, the Company had contributed approximately $150,000 to the
capital of Advent Israel.
(h) The Company has guaranteed 25% of loans from a bank to
RPA Leasing, Inc. up to a maximum amount of loans of
$3.5 million.
(i) In connection with the proposed purchase of an 11 1/2% interest
in Tel-Ad Jerusalem Studios Ltd., the Company will be required
to make guarantees for approximately $3.6 million.
(j) Certain directors of IDB Holding and/or its affiliates are also
directors of the Company.
- 27 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
7. FAIR VALUE OF FINANCIAL
-----------------------
INSTRUMENTS
-----------
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 107 ("SFAS No. 107") entitled
"Disclosures about Fair Value of Financial Instruments" which requires
entities to disclose information about the estimated fair values of
their financial instruments. SFAS No. 107 does not apply to
investments accounted for under the equity method (See Note 3).
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value.
Cash and Cash Equivalents
- -------------------------
The carrying value approximates fair value because of the short
maturity of those instruments.
Investments
- -----------
The fair value of some investments are estimated based on quoted
market prices for those or similar investments or based on contractual
amounts.
For two investments for which there are no quoted market prices,
management estimates fair value to approximate the carrying value.
1993 1992
------------------ ------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ------- -------- -------
(in thousands) (in thousands)
Cash and cash equivalents $ 42,666 $ 42,666 $ 66,040 $ 66,040
Investments-
Other 50,516 58,524 46,487 48,314
U.S. Government and State
obligations 11,833 11,939 2,483 2,483
Other assets-
U.S. Government and State
obligations 1,045 1,108 922 1,001
- 28 -
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
8. QUARTERLY RESULTS OF OPERATIONS
-------------------------------
(UNAUDITED)
-----------
Quarter Ended
--------------------------------------------
1993 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
(in thousands, except per share data)
Revenues $18,485 $17,834 $16,049 $12,813
======= ======= ======= =======
Income before
cumulative effect of
accounting change $13,264 $12,328 $10,349 $ 7,203
Cumulative effect of
change in accounting
for income taxes (1,174) - - -
------- ------ ------- ------
Net income $12,090 $12,328 $10,349 $ 7,203
======= ======= ======= =======
Earnings per
common share
before cumulative
effect of account-
ing change $ .70 $ .66 $ .55 $ .39
Cumulative effect
of change in
accounting for
income taxes
on earnings
per common share (.06) - - -
------- ------ ------- ------
Earnings per
common share $ .64 $ .66 $ .55 $ .39
======= ====== ======= ======
Quarter Ended
--------------------------------------------
1992 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
(in thousands, except per share data)
Revenues $12,154 $21,058 $14,489 $12,653
====== ====== ====== ======
Net income $ 6,869 $11,637 $ 8,970 $ 5,630
====== ====== ====== ======
Earnings per
common share $ 0.44* $ 0.69 $ 0.48 $ 0.28
====== ====== ====== ======
* Adjusted for a two-for-one stock split by way of a 100% stock
dividend effected on February 25, 1992 (See Note 5).
- 29 -
PART III
--------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------- --------------------------------------------------
See Item 13 Below. Information with respect to
executive officers of the Company is included at the end of part
I above.
Item 11. EXECUTIVE COMPENSATION
-------- ----------------------
See Item 13 Below.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
-------- ---------------------------------------------------
MANAGEMENT
----------
See Item 13 Below.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------- ----------------------------------------------
The information called for under Items 10, 11, 12 and
13 is incorporated by reference from the definitive proxy
statement to be filed by the Company in connection with its 1994
Annual Meeting of Shareholders.
III-1
PART IV
-------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
-------- ------------------------------------------------------
FORM 8-K
--------
(a)(1) The following financial statements of PEC Israel
Economic Corporation are filed in response to Item 8:
Report of Independent Public Accountants.
Consolidated Balance Sheets at December 31, 1993 and
1992.
Consolidated Statements of Income for the years ended
December 31, 1993, 1992 and 1991.
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1993, 1992 and 1991.
Consolidated Statements of Cash Flows for the years
ended December 31, 1993, 1992 and 1991.
Notes to Consolidated Financial Statements.
(a)(2)(a) Reports of certified public accountants with respect to
the financial statements of the following entities
filed pursuant to Rule 2-05 of Regulation S-X:
Adir International Communications Services Ltd.
Bulk Trading Corporation Ltd.
C.I.D.L. Inc.
Camdev Ltd.
Caniel-Israel Can Company Ltd.
DEP Technology Holdings Ltd.
DIC and PEC Cable TV Ltd.
Electronics Line (E.L.) Ltd.
Elron Electronic Industries Ltd.
El-Yam Ships Ltd.
Gemini Capital Fund Management Ltd.
Gemini Israel Fund L.P.
IV-1
General Engineers Limited
Gilat Communication Engineering 1990 Ltd.
Gilat Satellite Networks Ltd.
Ispah Holdings Limited
Israel Discount Bank of New York
Klil Industries Ltd.
Lego Irrigation Ltd.
Logal Educational Software and Systems Ltd.
Maxima Air Separation Center Ltd.
Mul-T-Lock Ltd.
PEC Finance Company Ltd.
Property and Building Corporation Ltd.
RPA Leasing Inc.
RTS Telecommunications Services Ltd.
Scitex Corporation Ltd.
Sign-On Computer Communications Services Ltd.
Super-Sol Ltd.
Tambour Ltd.
(a)(2)(b) Schedules of PEC Israel Economic Corporation have been
omitted since they are not applicable or the required
information is shown in the financial statements or
notes thereto.
(a)(3) The following exhibits are included in response to
Item 14(c):
(3)(i). Composite Articles of Incorporation of the
Company, as amended.
(3)(ii). Composite By-Laws of the Company, as amended.
IV-2
10(i)(a). Voting Agreement dated December 10, 1980 between
the Company and Discount Investment Corporation Ltd.
(formerly Discount Bank Investment Corporation Ltd.),
as amended by a Letter Agreement dated May 4, 1983 and
by an Addendum dated December 30, 1983.
10(i)(b). Amendment to Exhibit 10(i)(a) dated December 10,
1990 filed as Exhibit 10(i)(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1990 and incorporated herein by reference.
10(i)(c). Amendment to Exhibit 10(i)(a) dated as of February
1, 1993 filed as Exhibit 10(i)(c) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1992 and incorporated herein by reference.
10(i)(d). Shareholders' Agreement dated May 20, 1992 among
Clal Electronics Industries Ltd., the Company, Discount
Investment Corporation Ltd. and International Paper
Company, filed as Exhibit A to Amendment No. 13 to the
Company's Statement on Schedule 13D in respect of
ordinary shares of Scitex Corporation Ltd. held as of
June 12, 1992 and incorporated herein by reference.
10(i)(e). Agreement dated December 11, 1988 among the
Company, Discount Investment Corporation Ltd. and Elron
Electronic Industries Ltd., as amended on May 19, 1989,
filed as Exhibit 2 to the Company's Statement on
Schedule 13D in respect of ordinary shares of Elron
held as of February 28, 1990 and incorporated herein by
reference.
10(i)(f). Business Opportunities Agreement dated as of
November 30, 1993 among the Company, DIC Finance and
Management Ltd., and, for the purpose of section 5
thereof only, PEC Finance Company Ltd. and Discount
Investment Corporation Ltd.
10(i)(g). Agreement dated December 24, 1991 between Israel
Discount Bank Ltd. and PEC Financial Corporation, as
amended, filed as Exhibit 10(i)(f) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.
IV-3
10(i)(h). Exchange Agreement dated December 24, 1991
between Israel Discount Bank Ltd. and PEC Financial
Corporation, filed as Exhibit 10(i)(g) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991 and incorporated herein
by reference.
10(i)(i). Agreement dated February 19, 1992 between Israel
Discount Bank of New York and PEC Financial
Corporation, filed as Exhibit 10(i)(h) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991 and incorporated herein
by reference.
10(i)(j). Agreement dated December 31, 1991 between PEC
Loan Corporation Ltd. and IDB Development Corporation
Ltd., filed as Exhibit 10(i)(i) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.
10(i)(k). Agreement dated January 31, 1993 among the
Company, DIC Energy Holdings Ltd. and N.E.K. Properties
Ltd. in respect of ordinary shares of Tambour Ltd.,
filed as Exhibit 10(i)(k) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1992 and incorporated herein by reference.
10(i)(l). Exchange Agreement dated as of January 4, 1994
among the Company, PEC Holdings Limited and IDB
Development Corporation Ltd.
10(iii)(a). Trust Agreement dated December 19, 1991 among the
Company, Alan S. Rosenberg, as Trustee, and Joseph
Ciechanover, filed as Exhibit 10(iii)(b) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991 and incorporated herein
by reference.*
21. Subsidiaries of the Registrant.
Reports on Form 8-K:
(b) No reports on Form 8-K were filed during the fiscal
quarter ended December 31, 1993.
- --------------------------
*This is a management contract or a compensatory plan or
arrangement required to be filed as an exhibit.
IV-4
SHLOMO ZIV & CO.
Certified Public Accountants (Isr.)
Tel-Aviv 61500 Gibor House
6 Kaufman St. P.O.B. 50322
Tel. 03-5179611 Fax. 03-5179418
Haifa 31018 2 Hanamal St. P.O.B. 1886
Tel. 04-675025-6 Fax. 04-679461
AUDITORS' REPORT TO THE SHAREHOLDERS OF
---------------------------------------
ADIR INTERNATIONAL COMMUNICATIONS SERVICES CORPORATION LTD.
-----------------------------------------------------------
We have examined the Balance Sheet of Adir International Communications Services
Corporation Ltd., and the Consolidated Balance Sheet of Adir International
Communications Services Corporation, Ltd. and its subsidiary companies as at
December 31, 1993, the Statement of Profit and Loss of the Company and
consolidated, the Changes in Equity Capital and the Statement of Cash-flows of
the Company and consolidated for the year then ended. Our examination was made
in accordance with generally accepted auditing standards, including those
prescribed under the Auditors Regulations (Auditor's Mode of Performance), 1973,
and accordingly we have applied such auditing procedures as we considered
necessary in the circumstances.
The above statements have been prepared on the basis of the historical cost
convention, adjusted to the general purchasing power of the Israel Shekel, in
conformity with Opinions 36 and 50 of the Institute of Certified Public
Accountants in Israel. Condensed data in nominal Shekels of the above
statements, on the basis of which the adjusted statements have been prepared, is
given in Note 17.
For the purpose of these financial statements there is no material difference
between generally accepted Israeli auditing standards and auditing standards
generally accepted in the U.S.
In our opinion, the above financial statements present fairly, in conformity
with generally accepted accounting principles, the financial position of the
company and consolidated as at December 31, 1993, the results of operations of
the company and consolidated, the changes in its shareholders equity and the
cash-flows in the company and consolidated, for the year then ended.
Pursuant to section 211 of the Companies Ordinance (New Version) 1983, we state
that we have obtained all the information and explanations we have required and
that our opinion on the above financial statements is given according to the
best of our information and the explanations received by us as shown by the
Company's books.
March 16, 1994 Shlomo Ziv & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, March 14 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE
SHAREHOLDERS OF BULK TRADING CORPORATION LIMITED
We have audited the balance sheets of Bulk Trading Corporation
Limited as at December 31, 1993, the related statements of income
and shareholders' equity and cash flows for each of the three
years in the period then ended, expressed in New Israel Shekels.
These financial statements are the responsibility of the
Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with generally accepted auditing standards, including
those prescribed under the Auditors Regulations (Auditor's Mode
of Performance), 1973 and, accordingly we have performed such
auditing procedures as we considered necessary in the
circumstances. For purposes of these financial statements there
is no material difference between generally accepted Israeli
auditing standards and auditing standards generally accepted in
the U.S. These standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall
financial statement presentations. We believe that our audits
provide a reasonable basis for our opinion.
The above statements have been prepared on the basis of
historical coast 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 15 to the financial
statements.
In our opinion, based on our audit and the reports of other
auditors, the above mentioned financial statements present fairly
the financial position of the Company as at December 31, 1993,
the results of its operations, the changes in shareholder's
equity and cash flows for each of the three years in the period
ended December 31, 1993, in conformity with accounting principles
generally accepted in Israel, consistently applied.
Accounting principles generally accepted in Israel differ in
certain respects from accounting principles generally accepted in
the United States. The application of the latter would have
affected the determination of nominal/historical net profit
(loss) and shareholders' equity to the extent summarized in Note
16 to the financial statements.
Somekh Chaikin
CERTIFIED PUBLIC ACCOUNTANTS (ISR)
Chartered Accountants (514) 938-5600
1250. boul. Rene-Levesque ouest Telex 05 268714
Bureau 3500 Fax (514) 938-5709
Montreal (Quebec) H3B 2G4
Price Waterhouse
January 21, 1994
Auditors' Report
To the Shareholders of
C.I.D.L. Inc.
We have audited the balance sheet of C.I.D.L. Inc. as at November 2, 1993 and
the statement of income and expense and retained earnings for the period from
January 1 to November 2, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at November 2, 1993 and the
results of its operations for the period then ended in accordance with generally
accepted accounting principles.
Price Waterhouse
Chartered Accountants
Tel-Aviv, January 24, 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
Auditor's Report to the Shareholders of
Camdev Limited
We have audited the balance sheets of Camdev Limited as
at December 31, 1993 and 1992, the related statements of
income and shareholders' equity and cash flows for each
of the three years in the period then ended, expressed in
New Israel Shekels. These financial statements are the
responsibility of the Company's management.
Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted
our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors
Regulations (Auditor's Mode of Performance) - 1973, and,
accordingly we have performed such auditing procedures as
we considered necessary in the circumstances. For
purposes of these financial statements there is no
material difference between generally accepted Israeli
auditing standards and auditing standards generally
accepted in the U.S. These standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management as well as
evaluating the overall financial statement presentations.
We believe that our audits provide a reasonable basis for
our opinion.
The above statements have been prepared on the basis of
historical cost of 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 13 to
the financial statements.
In our opinion, based on our audit and the reports of
other auditors, the above mentioned financial statements
present fairly the financial position of the Company as
at December 31, 1993 and 1992, the results of its
operations, the changes in shareholder's equity and cash
flows for each of the three years in the period ended
December 31, 1993, in conformity with accounting
principles generally accepted in Israel, consistently
applied.
Accounting principles generally accepted in Israel differ
in certain respects from accounting principles generally
accepted in the United States. The application of the
latter affects the determination of nominal net profit
and shareholders' equity to the extent summarized in Note
14C to the financial statements.
Somekh Chaikin
CERTIFIED PUBLIC ACCOUNTANTS (ISR.)
ROJANSKY, HALIFI, MEIRI & CO.
Certified Public Accountants
Ezra Abdat C.P.A. (Isr.) Edmond Raviv C.P.A. (Isr.)
Nadav Hacohen C.P.A. (Isr.) Itzhak Gross C.P.A. (Isr.)
Shaul Netzer-El C.P.A. (Isr.) Eliezer Vessely C.P.A. (Isr.)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS OF
CANIEL - ISRAEL CAN COMPANY LIMITED
-----------------------------------
We have audited the consolidated balance sheet of Caniel-Israel Can
Company Limited as at December 31, 1993 and 1992, the related consolidated
Statement of income and Shareholders' Equity and cash flows for each of the
three years in the period then ended, expressed in New Israel Shekels. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in accordance with
generally accepted auditing standards, including those prescribed under the
Auditors Regulations (Auditor's Mode of Performance), 1973, and, accordingly
we have performed such auditing procedures as we considered necessary in the
circumstances. For purposes of these financial statements there is no
material difference between generally accepted Israeli auditing standards and
auditing standards generally accepted in the U.S. These standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management
as well as evaluating the overall financial statement presentations. We
believe that our audits provide a reasonable basis for our opinion.
The above Statements have been prepared on the basis of historical cost
as adjusted for the changes in the general purchasing power of the Israel
currency in accordance with opinions issued by the Institute of Certified
Public Accountants in Israel.
Condensed statements in nominal values which formed the basis of the
adjusted statements appear in (Note 22) to the financial statements.
In our opinion, based on our audit, the above mentioned financial
statements present fairly the financial position of the Company as at
December 31, 1993 and 1992, the results of its operations, the changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1993, in conformity with accounting principles generally
accepted in Israel, consistently applied.
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 profit and shareholders' equity to the extent summarized in Note
24 to the financial statements.
Tel-Aviv, ROJANSKY, HALIFI, MEIRI & CO.
February 20, 1994 CERTIFIED PUBLIC ACCOUNTANTS.
Tel-Aviv, February 28, 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
Report of Independent Public Accountants of
DEP Technology Holdings Limited
We have audited the balance sheets of DEP Technology
Holdings Limited as at December 31, 1993, the statements
of income and shareholders' equity and cash flows for the
period from July 8 to December 1993, expressed in New
Israel Shekels. These financial statements are the
responsibility of the Company's management.
Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted
our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors
Regulations (Auditor's Mode of Performance), 1973 and,
accordingly we have performed such auditing procedures as
we considered necessary in the circumstances. For
purposes of these financial statements there is no
material difference between generally accepted Israeli
auditing standards and auditing standards generally
accepted in the U.S. These standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management as well as
evaluating the overall financial statement presentations.
We believe that our audits provide a reasonable basis for
our opinion.
The above statements have been prepared on the basis of
historical cost as adjusted for the changes in the
general purchasing power of the Israel currency in
accordance with opinions issued by the Institute of
Certified Public Accountants in Israel.
Condensed statements in historical values which formed
the basis of the adjusted statements appear in Note 8 to
the financial statements.
In our opinion, based on our audit and the reports of
other auditors, the above mentioned financial statements
present fairly the financial position of the Company as
at December 31, 1993, the results of its operations, the
changes in shareholder's equity and cash flows for the
period from July 8 to December 31, 1993, in conformity
with accounting principles generally accepted in Israel,
consistently applied.
Somekh Chaikin
Certified Public Accountants (Isr.)
Tel-Aviv, March 7, 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE
SHAREHOLDERS OF LIMITED OF DIC AND PEC CABLE TV LTD.
We have audited the balance sheets of DIC and PEC Cable TV Ltd.
as at December 31, 1993 and 1992, the related statements of
income and shareholders' equity and cash flows for each of the
three years in the period then ended, expressed in New Israel
Shekels. These financial statements are the responsibility of
the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with generally accepted auditing standards, including
those prescribed under the Auditors Regulations (Auditor's Mode
of Performance), 1973 and, accordingly we have performed such
auditing procedures as we considered necessary in the
circumstances. For purposes of these financial statements there
is no material difference between generally accepted Israeli
auditing standards and auditing standards generally accepted in
the U.S. These standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall
financial statement presentations. We believe that our audits
provide a reasonable basis for our opinion.
The above statements have been prepared on the basis of
historical coast as adjusted for the changes in the general
purchasing power of the Israel currency in accordance with
opinions issued by the Institute of Certified Public Accountants
in Israel.
Condensed statements in historical values which formed the basis
of the adjusted statements appear in Note 5 to the financial
statements.
In our opinion, based on our audit and the reports of other
auditors, the above mentioned financial statements present fairly
the financial position of the Company as at December 31, 1993 and
1992, the results of its operations, the changes in shareholder's
equity and cash flows for each of the three years in the period
ended December 31, 1993, in conformity with accounting principles
generally accepted in Israel, consistently applied.
Accounting principles generally accepted in Israel differ in
certain respects from accounting principles generally accepted in
the United States. The application of the latter would have
affected the determination of nominal/historical net profit
(loss) and shareholders' equity to the extent summarized in Note
6 to the financial statements.
SOMEKH CHAIKIN
CERTIFIED PUBLIC ACCOUNTANTS (ISR)
Tel-Aviv, March 16, 1994
RASOLY & CO
Certified Public Accountants (Isr.)
Tel-Aviv
SOMEKH CHAIKIN
Certified Public Accountants (Isr.)
Tel-Aviv
Report of Independent Public Auditors
Electronics Line (E.L.) Limited
We have audited the consolidated balance sheets of Electronics
Line (EL) Limited as at December 31, 1993 and 1992, the related
statements of income and shareholders' equity and cash flows for
each of the three years in the period then ended, expressed in
New Israeli Shekels. These financial statements are the
responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our
audits in accordance with generally accepted auditing standards,
including those prescribed under the Auditors Regulations
(Auditor's Mode of Performance), 1973 and accordingly were have
performed such auditing procedures as we considered necessary in
the circumstances. For purposes of these financial statements
there is not material difference between generally accepted
Israeli Auditing standards and auditing standards generally
accepted in the U.S. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit includes examining, on a test basis evidence supporting the
amounts and disclosures in the financial statements are free of
material misstatement. An audit includes examining, on test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management as well evaluating the overall financial statement
presentations. We believe that our audits provide a reasonable
basis for our opinion.
The above statements have been prepared on the basis of
historical cost as adjusted for the changes in the general
purchasing power of the Israel currency in accordance with
opinions issued by the Institute of Certified Public Accountants
in Israel.
Condensed statements in historical values which formed the basis
of the adjusted statements appear in Note 28 to the financial
statements.
In our opinion, based on our audit and the reports of other
auditors, the above mentioned financial statements present fairly
the financial position of the Company as at December 31, 1993 and
1992, the results of its operations, the changes in shareholder's
equity and cash flows of each of the three years in the period
ended December 31, 1993, in conformity with accounting principles
generally accepted in Israel, consistently applied.
Accounting principles generally accepted in Israel differ in
certain respects from accounting principles generally accepted in
the United States. The application of the latter would have
affected the determination of nominal/historical net profit and
shareholders' equity to the extent summarized in Note 30 to the
financial statements.
Rasoly & Co. Somekh Chaikin
Certified Public Accountants Certified Public Accountants
(Isr.) (Isr.)
Joint Auditors
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of Elron Electronic Industries Ltd.
(extended form to comply with U.S. standards)
We have audited the balance sheets of Elron Electronic Industries Ltd., (the
"Company") as of December 31, 1993 and 1992 and the related statements of
income, shareholders' equity and cash flows for the years ended December 31,
1993, 1992, and 1991. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We did not audit the financial statements of certain affiliated companies,
used as a basis for recording the Company's net investment (1993 - $36.2
million; 1992 - $26.5 million) and equity in net income (1993 - $5.2 million;
1992 - $2.7 million; 1991 - $4.9 million) of these companies. Those
statements were audited by other independent auditors, whose reports were
furnished to us, and our opinion expressed herein, insofar as it relates to
such amounts included for these companies, is based solely on the reports of
the other independent auditors.
We conducted our audits in accordance with generally accepted auditing
standards, including those prescribed by the Auditors' (Mode of Performance)
Regulations (Israel), 1973. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statements' presentation. We believe that
our audits and the reports of other independent auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the reports of other independent
auditors, the aforementioned financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1993 and 1992 and the results of its operations and cash flows for the years
ended December 31, 1993, 1992 and 1991, in conformity with accounting
principles generally accepted in Israel and in the United States (as
applicable to the financial statements of the Company, such accounting
principles are practically identical).
As more fully disclosed in Note 2J to the financial statements, the Company
changed in 1993 its method of accounting for income taxes.
Luboshitz, Kasierer & Co. Ratzkovsky Fried & Co.
Certified Public Accountants Certified Public Accountants
(Israel) (Israel)
Haifa, Israel
March 9, 1994
HAFT & HAFT & CO. CERTIFIED PUBLIC ACCOUNTANTS (ISR.)
----------------
incl.STRAUSS,LAZER & CO.
EL-YAM SHIPS LTD.
-----------------
CONSOLIDATED FINANCIAL STATEMENTS
AS AT DECEMBER 31, 1993
-----------------------
We have examined the special purpose Consolidated Balance Sheet
of El-Yam Ships Ltd. as at December 31, 1993 and 1992 and the
related Consolidated Statements of Income, Retained Earnings and
Cash Flows for each of the three years ended December 31, 1993.
Our examination was made in accordance with generally accepted
auditing standards, including the rules prescribed under the
Israel Auditor's Regulations (Auditor's Mode of Performance),
1973, and accordingly we have applied such auditing procedures as
we considered necessary in the circumstances.
As stated at the end of Note 2d, prior to 1993, an investment by
the affiliated company in an affiliate was carried at cost, due
to the fact that the necessary data in U.S. dollars for inclusion
at equity could not be furnished.
In our opinion, except as noted in the previous paragraph as to
1992, the above Consolidated Financial Statements, derived from
the primary financial statements expressed in Israel currency,
present fairly in conformity with generally accepted accounting
principles the financial position of the Company and its
subsidiaries as at December 31, 1993 and 1992 and the results of
the operations and cash flows for each of the three years ended
December 31, 1993.
Pursuant to the United States Securities and Exchange Commission
requirements we state:
(1) The auditing standards and procedures mentioned above are
Israeli auditing standards and procedures and were
augumented by any additional procedures that were considered
necessary, in order to comply with generally accepted
auditing standards in the United States.
(2) These financial statements differ from those issued in
Israel (in conformity with generally accepted accounting
principles in Israel) as explained in Note 1 to the
financial statements.
March 24, 1994 H.H.S.L. Haft & Haft & Co.
Tel Aviv, Israel Certified Public Accountants (Isr.)
TEL AVIV : HAFT BUILD. 51 WEIZMAN ST. P.O.B. 18115,
CODE 61180, TEL.972-3-6967231, FAX.972-3-6953517
MAYA BUILD. 74 DEREKH PETAH TIKVA,
CODE 67215, TEL.972-3-5613545, FAX.972-3-5613824
HAIFA : 55 PINHAS MARGOLIN ST. P.O.B. 8081
CODE 31080, TEL.972-4-525202, FAX.972-4-555813
JERUSALEM : 16 BILU ST. P.O.B. 790
CODE 91007, TEL.972-2-638276, FAX.972-2-635534
Tel-Aviv, February 28, 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
Report of Independent Public Accountants
to the Board of Directors of
Gemini Capital Fund Management Ltd.
We have audited the accompanying balance sheet of Gemini
Capital Fund Management Ltd. as of December 31, 1993,
statements of income, changes in shareholders' equity and
cash flows for the year ended December 31, 1993,
translated into U.S. dollars. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Gemini Capital Fund Management Ltd.
as of December 31, 1993 and the results of its
operations, changes in its shareholders' equity and cash
flows for the year ended December 31, 1993, in conformity
with generally accepted accounting principles.
Somekh Chaikin
Certified Public Accountants
Tel-Aviv, February 28, 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
Report of Independent Public Accountants
to the Board of Directors of
Gemini Israel Fund L.P.
We have audited the accompanying balance sheet of Gemini
Israel Fund L.P. as of December 31, 1993, statements of
income, changes in shareholders' equity and cash flows
for the period from January 21, 1993 to December 31,
1993, translated into U.S. dollars. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. These standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Gemini Israel Fund L.P. as of
December 31, 1993 and the results of its operations,
changes in its shareholders' equity and cash flows for
the period from January 21, 1993 to December 31, 1993,
in conformity with generally accepted accounting
principles.
As explained in Note 2, the financial statements include
investments valued at US dollars 3,805 thousand (53% of
partners capital at balance sheet date) whose values have
been estimated by the Limited Partnership's general partner
in the absence of readily ascertainable market values. We
have reviewed the procedures used by the general partner in
arriving at its estimate of value of such investments and
have inspected underlying documentation and in the
circumstances we believe the procedures are reasonable and
the documentation appropriate. However, because of the
inherent uncertainty of valuation these estimated values
may differ significantly from the values that would have
been used, had a ready market for the investments existed
and the differences could be material.
Somekh Chaikin
Certified Public Accountants
BAVLY MILLNER & CO.
Certified Public Accountants
27 Hamered Street
PO Box 50075
Tel-Aviv 61 500, Israel
Tel. (03) 510-3377
Fax. (03) 517-5280
AUDITORS' REPORT TO THE SHAREHOLDERS
OF
GENERAL ENGINEERS LIMITED
We have audited the balance sheets of General Engineers Limited as at
December 31, 1993 and 1992 and the related statements of income and
shareholders' equity and cash flows for each of the three years ended
December 31, 1993, expressed in New Israel Shekels. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with generally
accepted auditing standards, including those prescribed under the Auditors
Regulations (Auditor's Mode of Performance), 1993 and, accordingly we have
performed such auditing procedures as we considered necessary in the
circumstances. For purposes of these financial statements there is no
material difference between generally accepted Israeli auditing standards and
auditing standards generally accepted in the United States. These standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement
presentations. We believe that our 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.
In our opinion, based on our audit, the above mentioned financial statements
present fairly the financial position of the Company as at December 31, 1993
and 1992, the results of its operations, the changes in shareholders' equity
and cash flows for each of the three years ended December 31, 1993, in
conformity with accounting principles generally accepted in Israel,
consistently applied.
Accounting principles generally accepted in Israel differ in certain respects
from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of
nominal/historical net profit and shareholders' equity to the extent
summarized in Note 17 to the financial statements.
Bavly Millner & Co.
Certified Public Accountants
478-26135
Tel Aviv, February 21, 1994
Bavly Millner & Co.
KESSELMAN & KESSELMAN CERTIFIED PUBLIC ACCOUNTANTS (ISR)
AUDITORS' REPORT
To the Shareholders of
GILAT COMMUNICATION ENGINEERING 1990 LTD.
-----------------------------------------
(Formerly - Gilat Cable Communication 1990 Ltd.)
We have examined the balance sheet of Gilat Communication Engineering 1990
Ltd. (hereafter - the Company) and the consolidated balance sheet of the
Company and its subsidiary at December 31, 1993 and the statements of income,
changes in shareholders' equity and cash flows - of the Company and
consolidated - for the year then ended. Our examination was made in
accordance with generally accepted auditing standards, including those
prescribed by the Israeli Auditors (Mode of Performance) Regulations, 1973,
and accordingly we have applied such auditing procedures as we considered
necessary in the circumstances. Data relating to an associated company are
based on its financial statements which have been examined by other certified
public accountants.
The aforementioned financial statements have been prepared on the basis of
historical cost adjusted to reflect the changes in the general purchasing
power of Israeli currency, in accordance with Opinions of the Institute of
Certified Public Accountants in Israel. Condensed nominal Israeli currency
data of the Company, on the basis of which its adjusted financial statements
were prepared, are presented in Note 13.
In our opinion, based upon our examination and the reports of the other
accountants referred to above, the aforementioned financial statements
present fairly, in conformity with accounting principles generally accepted
in Israel, the financial position - of the Company and consolidated - at
December 31, 1993 and the results of operations and the cash flows - of the
Company and consolidated - for the year then ended. Also, in our opinion,
the abovementioned financial statements have been prepared in accordance with
the Securities (Preparation of Annual Financial Statements) Regulations,
1993.
Accounting principles generally accepted in Israel differ in certain respects
from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of
nominal/historical net income and shareholders' equity to the extent
summarized in note 14.
Tel-Aviv, Israel Kesselman & Kesselman
February 21, 1994 Certified Public Accountants (Israel)
REPORT OF INDEPENDENT AUDITORS
- ------------------------------
To the Shareholders of
GILAT SATELLITE NETWORKS LTD.
- ----------------------------
We have examined the consolidated balance sheets of Gilat
Satellite Networks Ltd. (the "Company") and its subsidiaries at
December 31, 1993 and 1992 and the related consolidated
statements of income (loss), changes in shareholders' equity and
cash flows for each of the three years in the period ended
December 31, 1993. Our examinations were made in accordance with
generally accepted auditing standards, including those prescribed
by the Israeli Auditors (Mode of Performance) Regulations, 1973,
and accordingly included such tests of the accounting records and
such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the aforementioned financial statements present
fairly the consolidated financial position of the Company and its
subsidiaries at December 31, 1993 and 1992 and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1993, in conformity with
accounting principles generally accepted in Israel and in the
United States (as applicable to these financial statements, such
accounting principles are practically identical).
Tel-Aviv, Israel Kesselman & Kesselman
February 23, 1994 Certified Public Accountants (Israel)
Tel-Aviv, March 7, 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS OF ISPAH HOLDINGS LIMITED
We have audited the balance sheets of Ispah Holding
Limited Company as at December 31, 1993, the related
statements of income and shareholders' equity and cash
flows for each of the three years in the period then
ended, expressed in New Israel Shekels. These financial
statements are the responsibility of the Company's
management.
Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted
our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors
Regulations (Auditor's Mode of Performance), 1973 and,
accordingly we have performed such auditing procedures as
we considered necessary in the circumstances. For
purposes of these financial statements there is no
material difference between generally accepted Israeli
auditing standards and auditing standards generally
accepted in the U.S. These standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management as well as
evaluating the overall financial statement presentations.
We believe that our audits provide a reasonable basis for
our opinion.
The above statements have been prepared on the basis of
historical coast as adjusted for the changes in the
general purchasing power of the Israel currency in
accordance with opinions issued by the Institute of
Certified Public Accountants in Israel.
Condensed statements in historical values which formed
the basis of the adjusted statements appear in Note 5 to
the financial statements.
In our opinion, based on our audit and the reports of
other auditors, the above mentioned financial statements
present fairly the financial position of the Company as
at December 31, 1993, the results of its operations, the
changes in shareholder's equity and cash flows for each
of the three years in the period ended December 31, 1993,
in conformity with accounting principles generally
accepted in Israel, consistently applied.
Accounting principles generally accepted in Israel differ
in certain respects from accounting principles generally
accepted in the United States. The application of the
latter would have affected the determination of
nominal/historical net profit (loss) and shareholders'
equity to the extent summarized in Note 6 to the
financial statements.
Somekh Chaikin
CERTIFIED PUBLIC ACCOUNTANTS (ISR.)
ARTHUR
HAFT & GLUCKMAN ANDERSEN
CERTIFIED PUBLIC ACCOUNTANTS ARTHUR ANDERSEN & CO.SC
Report of Independent Public Accountants
----------------------------------------
To the Stockholders and Board of Directors
of Israel Discount Bank of New York:
We have audited the accompanying consolidated statements of
condition of Israel Discount Bank of New York (a New York State
chartered bank) and subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of income, changes
in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1993. These financial
statements are the responsibility of the Bank's 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 the Discount Bank (Latin America)
("DBLA"), a wholly-owned subsidiary, which statements reflect
total assets, interest income and net income of 5% and 4%; 6%, 6%
and 4%; and 21%, 11% and 12%, respectively, of the consolidated
totals as of December 31, 1993 and for the three years then
ended. Those statements were audited by other auditors whose
report has been furnished to us and our opinion, insofar as it
relates to the amounts included for DBLA, is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other
auditors, the financial statements referred to above present
fairly, in all material respects, the financial position of
Israel Discount Bank of New York and subsidiaries as of December
31, 1993 and 1992, the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1993 in conformity with generally accepted accounting
principles.
As discussed in note 1 and note 14, effective January 1, 1993,
Israel Discount Bank of New York changed its method of accounting
for income taxes and postretirement benefits pursuant to the
standards promulgated by the Financial Accounting Standards
Board.
Haft & Gluckman Arthur Andersen & Co.
New York, New York
March 18, 1994
KESSELMAN & KESSELMAN CERTIFIED PUBLIC ACCOUNTANTS (ISR)
AUDITORS' REPORT
To the Shareholders of
KLIL INDUSTRIES LIMITED
We have examined the balance sheet of Klil Industries Limited
(the company) and the consolidated balance sheet of the company
and its wholly-owned subsidiary at December 31, 1993, and the
statements of income, changes in shareholders' equity and cash
flows - of the company and consolidated - for the year then
ended. Our examination was made in accordance with generally
accepted auditing standards, including those prescribed by the
Auditors (Mode of Performance) Regulations, 1973, and accordingly
we have applied such auditing procedures as we considered
necessary in the circumstances.
The aforementioned financial statements have been prepared on the
basis of historical cost adjusted to reflect the changes in the
general purchasing power of Israeli currency, in accordance with
Opinions of the Institute of Certified Public Accountants in
Israel. Condensed nominal Israeli currency data of the company,
on the basis of which its adjusted financial statements were
prepared, are presented in note 11.
In our opinion, the aforementioned financial statements present
fairly, in conformity with generally accepted accounting
principles, the financial position - of the company and
consolidated - at December 31, 1993 and the results of operations
and cash flows - of the company and consolidated - for the year
then ended. Also, in our opinion, the abovementioned financial
statements have been prepared in accordance with the Securities
(Preparation of Annual Financial Statements) Regulations, 1993.
Accounting principles generally accepted in Israel differ in
certain respects from accounting principles generally accepted in
the United States. The application of the latter would have
affected the determination of nominal/historical net income and
shareholders' equity to the extent summarized in note 12.
Haifa, Kesselman & Kesselman
February 22, 1994
COHEN, EYAL, YEHOSHUA & CO.
Certified Public Accountants (Isr.)
Weizmann Street., P.O. Box 21592 Cohen Eliahu C.P.A. (Isr.)
Tel Aviv 61214 Israel Eyal Itamar C.P.A. (Isr.)
Tel. 03-6952210 Fax. 03-6953517 Yehoshua Nissim C.P.A. (Isr.)
AUDITORS REPORT TO THE SHAREHOLDERS OF
--------------------------------------
LEGO IRRIGATION LTD.
--------------------
We have examined the balance sheet of Lego Irrigation Ltd. (the Company)
as at December 31, 1993, the statements of profit and loss, changes in
shareholders' equity and cash flows for the year ended on that date. Our
examination was made in accordance with generally accepted auditing
standards, including those prescribed by the Auditors Regulations (Auditor's
Mode of Performance), 1973, and accordingly we have applied such auditing
procedures as we considered necessary in the circumstances.
The financial statements are prepared on the basis of historical cost as
adjusted for the effects of inflation according to the opinions of the
Institute of Certified Public Accountants in Israel. Note 21 gives a summary
of the abovementioned financial statements based on the nominal historical
data which served as the bases of the preparation of the adjusted statements.
In Note 22 are given data of the Company's nominal net profit and
shareholders' equity on the basis of accounting policies determined by PEC.
Israel Economic Corporation (interested party) and for its purposes.
The financial statements of a subsidiary in which the investment is
included on equity basis, were audited by other Certified Public Accountants.
The financial statements for the years 1991 and 1992 were adjusted by
way of restatement in order to present retroactively the amendment of the
accounting treatment in various items as detailed in Note 2K, an amendment to
which we agree.
In our opinion, based on our examination, and on the opinion of other
certified public accountants, as aforesaid, the above financial statements,
present fairly, in conformity with generally accepted accounting principles,
the financial position of the Company as at 31st December, 1993, the results
of its operations, changes in shareholders' equity and cash flows for the
year ended on that date and in our opinion they are prepared in accordance
with the Securities Regulations (Preparation of Annual Financial Statements),
1993.
March 3, 1994 Cohen, Eyal, Yehoshua and Co.
Certified Public Accountants (Isr.)
KOST LEVARY and FORER C.P.A. (ISRAEL)
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
LOGAL EDUCATIONAL SOFTWARE AND SYSTEMS LTD.
We have audited the balance sheet of Logal Educational Software and
Systems Limited (the "Company") and the consolidated balance sheet of the
Company and its subsidiary at December 31, 1993 and the related company and
consolidated statements of operations, changes in deficiency in shareholders'
equity and Company and consolidated cash flows for the year then ended. Our
audit was made in accordance with generally accepted auditing standards,
including those prescribed by the Auditors (Mode of Performance) Regulations
(Israel), 1973, and accordingly, included such tests of the accounting
records and such other auditing procedures as we considered necessary in the
circumstances.
The financial statements of a 100% controlled subsidiary were audited by
other accountants. The share of the Company in the losses of this subsidiary
for the year ended December 31, 1993 amounted to NIS 940 thousand and the
investment in the Company on the equity basis at December 31, 1993 amounted
to NIS 280 thousand.
The aforementioned financial statements have been prepared on the basis
of the historical costs adjusted for the changes in the general purchasing
power of the Israeli currency as measured by the changes in the Israeli
Consumer Price Index, as required by Statements of the Institute of Certified
Public Accountants in Israel. A summary of the financial statements in
nominal (historical) Israeli shekels, which served as a basis for the
adjusted statements, is presented in Note 18.
In our opinion, based on our audit and those of other auditors, the
aforementioned financial statements present fairly, in accordance with
accounting principles generally accepted in Israel, the financial position of
the Company and the financial position of the company and its subsidiary as
at December 31, 1993, the results of their operations, the changes in the
deficiency in shareholders' equity and their cash flows for the year then
ended.
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 not affect the determination of
nominal/historical net loss and shareholders' equity.
Pursuant to Section 211 of the Companies Ordinance, we state that we
have obtained all the information and explanations we have required and that
our opinion on the above statements is given according to the best of our
information and the explanations received by us and as shown by the books of
the Company.
Tel-Aviv, KOST, LEVARY and FORER
February 27, 1994 Certified Public Accountants
(Israel)
IGAL BRIGHTMAN & CO.
Certified Public Accountants
3 Daniel Frisch St., Tel-Aviv 64731, ISRAEL
P.O.B. 16593.61164 - TEL. 972-3-6964263 - FAX. 972-3-6960130
Office in Jerusalem:
New Clal Center, 42 Agrippas Street, Jerusalem 94301, ISRAEL
TEL. 972-2-235157 - FAX. 972-2-233628
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
"MAXIMA" - AIR SEPARATION CENTER LTD.
---------------------------------------------
We have audited the balance sheets of "Maxima" - Air Separation Center Ltd. -
consolidated and for the Company - as of December 31, 1993 and 1992 and the
related statements of operations, changes in shareholders' equity and cash
flows - consolidated and for the Company - for each of the three years in the
period ended December 31, 1993, expressed in New Israeli Shekels. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits in accordance with generally
accepted auditing standards, including those prescribed by the Auditors'
Regulations (Auditor's Mode of Performance), 1993, and, accordingly, we have
performed such auditing procedures as we considered necessary in the
circumstances. For purposes of these financial statements, there is no
material difference between generally accepted Israeli auditing standards and
auditing standards generally accepted in the U.S. These standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management
as well as evaluating the overall financial statement presentations. We
believe that our audits provide a reasonable basis for our opinion.
The above statements have been prepared on the basis of historical cost as
adjusted for changes in the general purchasing power of Israeli currency, in
accordance with opinions issued by the Institute of Certified Public
Accountants in Israel. Condensed financial statements in nominal-historical
New Israeli Shekels, which formed the basis of the adjusted statements,
appear in Note 29 to the financial statements.
In our opinion, the abovementioned financial statements present fairly the
financial position - consolidated and for the Company - as of December 31,
1993 and 1992, and the results of operations, changes in shareholders' equity
and cash flows - consolidated and for the Company - for each of the three
years in the period ended December 31, 1993, in conformity with accounting
principles generally accepted in Israel, consistently applied.
Accounting principles generally accepted in Israel differ in certain respects
from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of
nominal/historical net income and shareholders' equity to the extent
summarized in Note 30 to the financial statements.
Tel-Aviv, Israel Igal Brightman & Co.
March 10, 1994. Certified Public Accountants (Isr.)
KESSELMAN & KESSELMAN Certified Public Accountants (ISR)
AUDITORS' REPORT
- ----------------
To the Shareholders of
MUL-T-LOCK LIMITED
We have examined the consolidated balance sheets at December 31,
1993 of Mul-T-Lock Limited (hereafter - the company) and its
subsidiaries and the statements of income, changes in
shareholders' equity and cash flows for the year then ended. Our
examinations were made in accordance with generally accepted
auditing standards, including those prescribed by the Auditors
(Mode of Performance) Regulations, 1973, and accordingly we have
applied such auditing procedures as we considered necessary in
the circumstances. The financial statements of consolidated
subsidiaries, whose assets at December 31, 1993 and 1992
constitute approximately 5% and 5.2%, respectively, of total
consolidated assets and whose turnover for the years 1993, 1992
and 1991 constitutes approximately 2.7%, 3.7%, and 5.4%,
respectively, of total consolidated turnover, have been examined
by other certified public accountants.
The aforementioned financial statements have been prepared on the
basis of historical cost adjusted to reflect the changes in the
general purchasing power of Israeli currency, in accordance with
Opinions of the Institute of Certified Public Accountants in
Israel. Condensed nominal Israeli currency data of the company,
on the basis of which its adjusted financial statements were
prepared, are presented in note 15.
In our opinion, based upon our examination and the reports of the
other accountants referred to above, the aforementioned financial
statements present fairly, in conformity with generally accepted
accounting principles, the consolidated financial position of the
company and its subsidiaries at December 31, 1993 and the results
of their operations and their cash flows for the year then ended.
Also, in our opinion, the abovementioned financial statements
have been prepared in accordance with the Securities (Preparation
of Annual Financial Statements) Regulations, 1993.
Accounting principles generally accepted in Israel differ in
certain respects from accounting principles generally accepted in
the United States. The application of the latter would have
affected the determination of nominal/historical net income and
shareholders' equity to the extent summarized in note 16.
Tel-Aviv,
March 3, 1994 Kesselman & Kesselman
HAFT & HAFT & CO. Certified Public Accountants (ISR)
incl. STRAUSS, LAZER & CO.
AUDITORS' REPORT TO THE SHAREHOLDERS OF PEC FINANCE COMPANY LTD.
----------------------------------------------------------------
(FORMERLY - P.E.C. LOAN CORPORATION LIMITED)
--------------------------------------------
We have examined the balance sheet of PEC Finance Company Ltd. as at
December 31, 1993, and the statements of profit and loss, of changes in
shareholders' equity and of cash flows for the year then ended. Our
examinations were made in accordance with generally accepted auditing
standards, including those prescribed by the Auditors (Mode of Performance)
Regulations, 1973, and accordingly we have applied such auditing procedures
as we considered necessary in the circumstances. The auditing standards and
procedures mentioned above are Israeli auditing standards and procedures
which are substantially similar to those generally accepted in the United
States.
The aforementioned financial statements were prepared on the basis of
historical cost adjusted for the changes in the generally purchasing power of
the Israeli currency in accordance with Opinions issued by the Institute of
Certified Public Accountants in Israel. Condensed nominal information which
formed the basis of the adjusted financial statements is given in Note 11 to
the financial statements.
Financial statements as of dates and for periods prior to January 1,
1993 were examined by other auditors.
In our opinion, based on our examination, the above financial statements
present fairly, in conformity with generally accepted accounting principles,
the financial position of the Company as at December 31, 1993, and the
results of their operations and their cash flows for the year then ended.
Accounting principles generally accepted in Israel differ in certain
respects from accounting principles generally accepted in the United States.
The effect of the application of the latter is summarized in Note 11 to the
financial statements.
H.H.S.L. Haft & Haft & Co.
Tel-Aviv, March 9, 1994 Certified Public Accountants (Isr.)
TEL AVIV : HAFT BUILD. 51 WEIZMAN ST. P.O.B. 18115, CODE
61180. TEL. 972-3-6967231, FAX. 972-3-6953517
: MAYA BUILD. 74 DEREKH PETAH TIKVA, CODE 67215.
TEL. 972-3-5613545, FAX. 972-3-5613824
HAIFA : 55 PINHAS MARGOLIN ST. P.O.B. 8081, CODE 31080.
TEL. 972-4-525202, FAX. 972-4-555813
JERUSALEM : 16 BILU ST. P.O.B. 790, CODE 91007
TEL. 972-2-638276, FAX. 972-2-635534
Tel-Aviv, March 13, 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
The Board of Directors
Property and Building Corporation Limited
We have audited the balance sheets of Property and
Building Corporation Limited ("the Company") as at
December 31, 1993 and December 31, 1992, the related
statements of earnings and shareholders' equity and cash
flows for each of the three years in the period then
ended, expressed in New Israel Shekels. These financial
statements are the responsibility of the Company's
management.
Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted
our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors
Regulations (Auditor's Mode of Performance) - 1973, and,
accordingly we have performed such auditing procedures as
we considered necessary in the circumstances. For
purposes of these financial statements there is no
material difference between generally accepted Israeli
auditing standards and auditing standards generally
accepted in the U.S. These standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management as well as
evaluating the overall financial statement presentations.
We believe that our audits provide a reasonable basis for
our opinion.
The above statements have been prepared on the basis of
historical cost as adjusted for the changes in the
general purchasing power of the Israel currency in
accordance with opinions issued by the Institute of
Certified Public Accountants in Israel.
Condensed statements in historical values which formed
the basis of the adjusted statements appear in Note 28 to
the financial statements.
In our opinion, based on our audit and the reports of
other auditors, the above mentioned financial statements
present fairly the financial position of the Company as
at December 31, 1993 and 1992, the results of its
operations, the changes in shareholder's equity and cash
flows for each of the three years in the period ended
December 31, 1993, in conformity with accounting
principles generally accepted in Israel, consistently
applied.
Accounting principles generally accepted in Israel differ
in certain respects from accounting principles generally
accepted in the United States. The application of the
latter affects the determination of nominal net profit
and shareholders' equity to the extent summarized in Note
29 C. to the financial statements.
Somekh Chaikin
CERTIFIED PUBLIC ACCOUNTANTS (ISR.)
ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of RPA Leasing, Inc.:
We have audited the accompanying balance sheet of RPA Leasing, Inc., (a
Colorado corporation) and the related statements of operations, shareholders'
deficit and cash flows for the year ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RPA Leasing, Inc. as of
December 31, 1993, and the results of their operations and their cash flows
for the year ended December 31, 1993, in conformity with generally accepted
accounting principles.
As discussed further in Note 1, the Company has not received any lease
revenues to date. If sufficient lease revenues are not generated, additional
shareholder contributions will be required to meet the Company's debt
obligations, which have been guaranteed by the Company's shareholders.
Realization of the Company's investment in leased assets and advances to
related parties is dependent upon receipt of anticipated lease revenue and
success of the Company's future operations. The accompanying financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
Denver, Colorado. Arthur Andersen & Co.
February 17, 1994
CHRYSANTHOU & CHRISTOFOROU
Certified Public Accountants (Cyprus)
Representing:
Arthur Andersen & Co.
Corner Th. Dervis - Florinis Street
P.O. Box 1675, Nicosia Cyprus
357-2-475181 Telephone
357-2-473909 Facsimile
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS OF
RTS TELECOMMUNICATIONS SERVICES LIMITED
We have audited the accompanying balance sheet of RTS Telecommunications
Services Limited as of December 31, 1993, and the related statements of
operations, shareholders' equity and cash flows for the period from January
15, 1993 to December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RTS Telecommunications
Services Limited as of December 31, 1993, and the results of its operations
and its cash flows for the period from January 15, 1993 to December 31, 1993
in conformity with generally accepted accounting principles.
CHRYSANTHOU & CHRISTOFOROU
Certified Public Accountants (Cyprus)
Nicosia, February 8, 1994
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
SCITEX CORPORATION LTD.
We have examined the consolidated balance sheets of Scitex
Corporation Ltd. (the Company) and its subsidiaries at
December 31, 1993 and 1992 and the related consolidated
statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended
December 31, 1993. Our examinations were made in accordance with
generally accepted auditing standards, including those prescribed
by the Israeli Auditors (Mode of Performance) Regulations, 1973,
and, accordingly, included such tests of the accounting records
and such other auditing procedures as we considered necessary in
the circumstances.
In our opinion, the aforementioned financial statements present
fairly the consolidated financial position of the Company and its
subsidiaries at December 31, 1993 and 1992 and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1993, in conformity with
accounting principles generally accepted in Israel and in the
United States (as applicable to these financial statements, such
accounting principles are practically identical).
Tel Aviv, Israel Kesselman & Kesselman
February 15, 1994 Certified Public Accountants (Israel)
Tel-Aviv, March 7, 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
Report of Independent Public Accountants of
Sign-on Data Communication Services Ltd.
We have audited the balance sheet of Sign-on Data
Communication Services Ltd. as at December 31, 1993, the
related statement of income and shareholders' equity and
cash flows for the year then ended, expressed in New
Israel Shekels. These financial statements are the
responsibility of the Company's management.
Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted
our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors
Regulations (Auditor's Mode of Performance), 1973 and,
accordingly we have performed such auditing procedures as
we considered necessary in the circumstances. For
purposes of these financial statements there is no
material difference between generally accepted Israeli
auditing standards and auditing standards generally
accepted in the U.S. These standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management as well as
evaluating the overall financial statement presentations.
We believe that our audits provide a reasonable basis for
our opinion.
The above statements have been prepared on the basis of
historical cost as adjusted for the changes in the
general purchasing power of the Israel currency in
accordance with opinions issued by the Institute of
Certified Public Accountants in Israel.
Condensed statements in historical values which formed
the basis of the adjusted statements appear in Note 17 to
the financial statements.
Comparative data for the years ended December 31, 1992
and 1991 included in the financial statements have been
audited and reported upon by other auditors.
In our opinion, based on our audit and the reports of
other auditors, the above mentioned financial statements
present fairly the financial position of the Company as
at December 31, 1993 and 1992, the results of its
operations, the changes in shareholder's equity and cash
flows for each of the three years in the period ended
December 31, 1993, in conformity with accounting
principles generally accepted in Israel, consistently
applied.
Accounting principles generally accepted in Israel differ
in certain respects from accounting principles generally
accepted in the United States. The application of the
latter would have affected the determination of
nominal/historical net profit (loss) and shareholders'
equity to the extent summarized in Note 18 to the
financial statements.
Somekh Chaikin
Certified Public Accountants (Isr.)
Tel-Aviv, March 10, 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
Report of Independent Public Accountants
to the Shareholders of Super-Sol Limited
We have audited the consolidated balance sheets of Super-
Sol and its subsidiaries and the financial statements of
the Company as at December 31, 1993 and 1992, the related
statements of income and shareholders' equity and cash
flows for each of the three years in the period then
ended, expressed in New Israel Shekels. These financial
statements are the responsibility of the Company's
management.
Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted
our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors
Regulations (Auditor's Mode of Performance), 1973, and
accordingly we have performed such auditing procedures as
we considered necessary in the circumstances. For
purposes of these financial statements there is no
material difference between generally accepted Israeli
auditing standards and auditing standards generally
accepted in the U.S. These standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management as well as
evaluating the overall financial statement presentations.
We believe that our audits provide a reasonable basis for
our opinion.
The above statements have been prepared on the basis of
historical cost as adjusted for the changes in the
general purchasing power of the Israel currency in
accordance with opinions issued by the Institute of
Certified Public Accountants in Israel.
Condensed statements in historical values which formed
the basis of the adjusted statements appear in Note 30 to
the financial statements.
The data relating to the equity value of investments in
affiliated companies and to the group's share in the
results of those companies are based on financial
statements some of which were examined by other auditors.
In our opinion, based on our audit and the reports of
other auditors, the above mentioned financial statements
present fairly the financial position of the Company as
at December 31, 1993 and 1992, the results of its
operations, the changes in shareholders' equity and cash
flows for each of the three years in the period ended
December 31, 1993, in conformity with accounting
principles generally accepted in Israel, consistently
applied.
Accounting principles generally accepted in Israel differ
in certain respects from accounting principles generally
accepted in the United States. The application of the
latter would have affected the determination of
historical net profit and shareholders' equity to the
extent summarized in Note 31 to the financial statements.
Somekh Chaikin
Certified Public Accountants (Isr.)
Haifa, February 23, 1994
Certified Public Accountants (Isr.)
Tel Aviv 61006
33 Yavetz Street
PO Box 609
Tel (03) 517 4444
Telecopier (972) 35174440
Haifa 31001
5 Palyam Street
PO Box 210
Tel (04) 670338
Telecopier (972) 4670319
SOMEKH CHAIKIN
Jerusalem 91001
33 Jaffa Road
PO Box 212
Tel (02) 253 3291
Telecopier (972) 225 3293
Independent Auditor's Report to the Shareholders of
Tambour Limited
We have audited the balance sheets of Tambour Limited
("the Company") and Tambour Limited and Subsidiaries
("the consolidation") as at December 31, 1993 and 1992,
the related statements of income and shareholders' equity
and cash flows for each of the three years in the period
then ended, expressed in New Israel shekels. These
financial statements are the responsibility of the
Company's management.
Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted
our audits in accordance with generally accepted auditing
standards, including those prescribed under the Auditors
Regulations (Auditor's Mode of Performance), 1973 and,
accordingly we have performed such auditing procedures as
we considered necessary in the circumstances. For
purposes of these financial statements there is no
material difference between generally accepted Israeli
auditing standards and auditing standards generally
accepted in the U.S. These standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management as well as
evaluating the overall financial statement presentations.
We believe that our audits provide a reasonable basis for
our opinion.
The above statements have been prepared on the basis of
historical cost as adjusted for the changes in the
general purchasing power of the Israel currency in
accordance with opinions issued by the Institute of
Certified Public Accountants in Israel.
Condensed statements of the Company in historical values
which formed the basis of the adjusted statements appear
in Note 20 to the financial statements.
The financial statements of a consolidated company whose
assets in 1992 comprised approximately 6.5% of the total
assets in the consolidated balance sheet and whose
revenues comprised approximately 3.3% of the total
revenues in the consolidated statement of income, were
audited by another auditor. The data included in the
Company's financial statements, relating to the
investment on equity basis and the equity in the earnings
of this company were based, in 1992, on the financial
statements audited by this other auditor.
In our opinion, based on our audit and the reports of
another auditor, as mentioned above, the above mentioned
financial statements present fairly the financial
position of the Company as at December 31, 1993 and 1992,
the results of its operations, the changes in
shareholder's equity and cash flows for each of the three
years in the period ended December 31, 1993, in
conformity with accounting principles generally accepted
in Israel, consistently applied.
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 and shareholders' equity to the extent
summarized in Note 21 to the financial statements.
Somekh Chaikin
CERTIFIED PUBLIC ACCOUNTANTS (ISRAEL)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PEC ISRAEL ECONOMIC CORPORATION
Date: March 31, 1994 By:/s/JAMES I. EDELSON
---------------------------------
James I. Edelson,
Executive Vice President and
Secretary
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Name Date
---- ----
/s/RAPHAEL RECANATI March 31, 1994
- ------------------------------
Raphael Recanati,
Chairman of the Board
of Directors
/s/JOSEPH CIECHANOVER March 31, 1994
- ------------------------------
Joseph Ciechanover,
President and Principal
Executive Officer; Director
/s/WILLIAM GOLD March 31, 1994
- ------------------------------
William Gold,
Treasurer, Principal Financial
Officer and Principal Accounting
Officer
Name Date
---- ----
/s/ROBERT H. ARNOW March 31, 1994
- ------------------------------
Robert H. Arnow, Director
March , 1994
- ------------------------------
James S. Crown, Director
March , 1994
- ------------------------------
Roger Cukierman, Director
/s/HERMANN MERKIN March 31, 1994
- ------------------------------
Hermann Merkin, Director
March , 1994
- ------------------------------
Harvey M. Meyerhoff, Director
/s/ALAN S. ROSENBERG March 31, 1994
- ------------------------------
Alan S. Rosenberg, Director
/s/GEORGE M. SHAPIRO March 31, 1994
- ------------------------------
George M. Shapiro, Director
/s/HERBERT M. SINGER March 31, 1994
- ------------------------------
Herbert M. Singer, Director
/s/DOV TADMOR March 31, 1994
- ------------------------------
Dov Tadmor, Director
/s/RICHARD S. ZEISLER March 31, 1994
- ------------------------------
Richard S. Zeisler, Director
EXHIBITS
TO
REPORT ON FORM 10-K
OF
PEC ISRAEL ECONOMIC CORPORATION
FOR THE YEAR ENDED DECEMBER 31, 1993
EXHIBIT INDEX
Page No.
(3)(i). Composite Articles of Incorporation of the
Company, as amended. 118
(3)(ii). Composite By-Laws of the Company, as amended. 126
10(i)(a). Voting Agreement dated December 10, 1980 between
the Company and Discount Investment Corporation Ltd.
(formerly Discount Bank Investment Corporation Ltd.),
as amended by a Letter Agreement dated May 4, 1983 and
by an Addendum dated December 30, 1983. 140
10(i)(b). Amendment to Exhibit 10(i)(a) dated December 10,
1990 filed as Exhibit 10(i)(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1990 and incorporated herein by reference.
10(i)(c). Amendment to Exhibit 10(i)(a) dated as of February
1, 1993 filed as Exhibit 10(i)(c) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 30, 1992 and incorporated herein by reference.
10(i)(d). Shareholders' Agreement dated May 20, 1992 among
Clal Electronics Industries Ltd., the Company, Discount
Investment Corporation Ltd. and International Paper
Company, filed as Exhibit A to Amendment No. 13 to the
Company's Statement on Schedule 13D in respect of
ordinary shares of Scitex Corporation Ltd. held as of
June 12, 1992 and incorporated herein by reference.
10(i)(e). Agreement dated December 11, 1988 among the
Company, Discount Investment Corporation Ltd. and Elron
Electronic Industries Ltd., as amended on May 19, 1989,
filed as Exhibit 2 to the Company's Statement on
Schedule 13D in respect of ordinary shares of Elron
held as of February 28, 1990 and incorporated herein by
reference.
10(i)(f). Business Opportunities Agreement dated as of
November 30, 1993 among the Company, DIC Finance and
Management Ltd., and, for the purpose of section 5
thereof only, PEC Finance Company Ltd. and Discount
Investment Corporation Ltd. 148
10(i)(g). Agreement dated December 24, 1991 between Israel
Discount Bank Ltd. and PEC Financial Corporation, as
amended, filed as Exhibit 10(i)(f) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.
Page No.
10(i)(h). Exchange Agreement dated December 24, 1991
between Israel Discount Bank Ltd. and PEC Financial
Corporation, filed as Exhibit 10(i)(g) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991 and incorporated herein
by reference.
10(i)(i). Agreement dated February 19, 1992 between Israel
Discount Bank of New York and PEC Financial
Corporation, filed as Exhibit 10(i)(h) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991 and incorporated herein
by reference.
10(i)(j). Agreement dated December 31, 1991 between PEC
Loan Corporation Ltd. and IDB Development Corporation
Ltd., filed as Exhibit 10(i)(i) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.
10(i)(k). Agreement dated January 31, 1993 among the
Company, DIC Energy Holdings Ltd. and N.E.K. Properties
Ltd. in respect of ordinary shares of Tambour Ltd.,
filed as Exhibit 10(i)(k) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1992 and incorporated herein by reference.
10(i)(l). Exchange Agreement dated as of January 4, 1994
among the Company, PEC Holdings Limited and IDB
Development Corporation Ltd. 161
10(iii)(a). Trust Agreement dated December 19, 1991 among the
Company, Alan S. Rosenberg, as Trustee, and Joseph
Ciechanover, filed as Exhibit 10(iii)(b) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991 and incorporated herein
by reference.*
21. Subsidiaries of the Registrant. 183
*This is a management contract or a compensatory plan or
arrangement required to be filed as an exhibit.