SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 20-F

                Annual Report pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                   For the fiscal year ended December 31, 2000

                         Commission file number: 1-9178

                              KOOR INDUSTRIES LTD.
-------------------------------------------------------------------------------
    (Exact name of Registrant as specified in its charter and translation of
                         Registrant's name into English)

                                     Israel
-------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or organization)

                   21 Ha'arbaa Street, Tel Aviv 64739, Israel
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                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

                                                     Name of Each Exchange
      Title of Each Class                             On Which Registered
      -------------------                             -------------------

     American Depositary Shares, Each              New York Stock Exchange
       Representing 0.20 Ordinary
   Shares, Par Value NIS 1.00 Per Share

Securities registered or to be registered pursuant to Section 12(g) of the Act:

                                      None
       -------------------------------------------------------------------
                                (Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:

                                      None
       -------------------------------------------------------------------
                                (Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the
annual report:

            15,901,407 Ordinary Shares, Par Value NIS 1.00 Per Share
            --------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:

         Yes   X           No
            -------          --------

Indicate by check mark which financial statements the registrant has
elected to follow:

         Item 17   X       Item 18
                -------           --------



                             TABLE OF CONTENTS
                                                                           Page
                                                                           ----
Item 1.     Identity of Directors, Senior Management and Advisers............2
Item 2.     Offer Statistics and Expected Timetable..........................2
Item 3.     Key Information..................................................2
Item 4.     Information on the Company......................................13
Item 5.     Operating and Financial Review and Prospects....................45
Item 6.     Directors, Senior Management and Employees......................60
Item 7.     Major Shareholders and Related Party Transactions...............71
Item 8.     Financial Information...........................................73
Item 9.     The Offer and Listing...........................................77
Item 10.    Additional Information..........................................79
Item 11.    Quantitative and Qualitative Disclosures About Market Risk......92
Item 12.    Description of Securities Other than Equity Securities..........95
Item 13.    Defaults, Dividend Arrearages and Delinquencies.................95
Item 14.    Material Modifications to the Rights of Security Holders
            and Use of Proceeds.............................................95
Item 15.    [Reserved]......................................................95
Item 16.    [Reserved]......................................................95
Item 17.    Financial Statements............................................95
Item 18.    Financial Statements............................................95
Item 19.    Exhibits........................................................95




                              PRELIMINARY NOTE

         This annual report contains historical information and
forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995 with respect to Koor's business, financial
condition and results of operations. The words "anticipate," "believe,"
"estimate," "expect," "intend," "may," "plan," "project" and "should" and
similar expressions, as they relate to Koor or its management, are intended
to identify forward-looking statements. Such statements reflect the current
views and assumptions of Koor with respect to future events and are subject
to risks and uncertainties. Many factors could cause the actual results,
performance or achievements of Koor to be materially different from any
future results, performance or achievements that may be expressed or
implied by such forward-looking statements, including, among others,
changes in general economic and business conditions, changes in currency
exchange rates and interest rates, inability to meet efficiency and cost
reduction objectives, changes in business strategy and various other
factors, both referenced and not referenced in this annual report. These
risks are more fully described under Item 3, "Key Information - Risk
Factors" of this annual report. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected, intended, planned or
projected. Koor does not intend or assume any obligation to update these
forward-looking statements.

         All references in this document to "Koor" are to Koor Industries
Ltd., a company organized under the laws of the State of Israel, and all
references to "the Koor Group," "we," "us," or "our" are to Koor and its
consolidated subsidiaries and affiliates.

         In this annual report, unless otherwise specified or unless the
context otherwise requires, all references to "$" or "dollars" are to U.S.
dollars and all references to "NIS" are to New Israeli Shekels. Unless
otherwise stated, certain amounts reported in adjusted NIS on Koor's
consolidated financial statements for the year ended December 31, 2000 have
been translated into U.S. dollars for the convenience of the reader at the
exchange rate of the dollar on December 31, 2000 (NIS 4.041 = $1.00), as
published by the Bank of Israel (see Note 2B(1) of Notes to our financial
statements included elsewhere in this annual report). Therefore, it is
possible to compute the dollar equivalent of any of the figures in adjusted
NIS by dividing such NIS by the rate of exchange at December 31, 2000.

         In this document, all references to Koor's percentage of equity
ownership in its subsidiaries are prior to having taken into account the
possible dilution that may be caused by the exercise of options granted to
executive officers of certain subsidiaries or of other convertible
securities.

                                   PART I


Item 1.     Identity of Directors, Senior Management and Advisers.
            ------------------------------------------------------

              Not Applicable.

Item 2.     Offer Statistics and Expected Timetable.
            ----------------------------------------

              Not Applicable.

Item 3.     Key Information.
            ----------------

Selected Financial Data

         The following selected consolidated financial data as of December
31, 1999 and 2000 and for the years ended December 31, 1998, 1999 and 2000
has been derived from our financial statements. These financial statements
have been prepared in accordance with generally accepted accounting
principles in Israel, or Israeli GAAP, which differ in certain respects
from U.S. GAAP (see Note 28 to the Financial Statements), and audited by
KPMG Somekh Chaikin, independent certified public accountants in Israel.
The consolidated selected financial data as of December 31, 1996, 1997 and
1998 and for the years ended December 31, 1996 and 1997 have been derived
from other consolidated financial statements not included in this annual
report and have also been prepared in accordance with Israeli GAAP and
audited by KPMG Somekh Chaikin, except for the consolidated selected
financial data as of and for the year ended December 31, 1996 which was
audited by Kost, Forer & Gabbay, a member of Ernst & Young International.
The selected consolidated financial data set forth below should be read in
conjunction with and are qualified by reference to "Item 5, Operating and
Financial Review and Prospects." and the Financial Statements and notes
thereto and other financial information included elsewhere in this annual
report.

         The financial data amounts are expressed in adjusted NIS or in
dollars. For the convenience of the reader, the 2000 data contains
translation of NIS into dollars. No representation is made that NIS amounts
have been, could have been or can be converted into dollars at the
prevailing rate on December 31, 2000, or at any other rate. All figures
have been adjusted to reflect the increase in the Israeli Consumer Price
Index, or CPI, and are accordingly all expressed in the terms of the
purchasing power at December 2000, and not in the figures as originally
reported.

<TABLE>
<CAPTION>
                                                               Year Ended December, 31
                                ---------------------------------------------------------------------------------------
                                    1996          1997           1998          1999          2000           2000
                                ---------------------------------------------------------------------------------------
                                                        (In thousands, except per share data)
                                                            Adjusted NIS                                US Dollars
                                ---------------------------------------------------------------------------------------

Operating Data:
Israeli GAAP:

<S>                                       <C>            <C>            <C>             <C>             <C>             <C>
Sales ..................................  12,519,342     12,925,375     12,792,316      10,675,301       8,281,242      2,049,305

Gross Profit ...........................   2,822,887      3,035,346      2,925,292       2,545,435       1,979,830        489,936


Operating Earnings .....................   1,093,732      1,035,594        711,950         837,870         645,136        159,648
Financial expenses, net ................     137,569        151,843        251,015         358,289         330,681         81,832
Other income, net ......................     160,175        117,399        (71,270)        107,228         520,963        128,919
Minority interest, net .................     249,587        254,530        239,964          (2,472)         15,849          3,922
Result of discontinued
  activities, net ......................      16,590         15,929         69,420              --              --             --


Net earnings for the year ..............     692,396        537,337         47,121         549,119         267,687         66,243
Basic earnings per ordinary
    share ..............................       45.71          35.05           3.07           34.89           17.40           4.31
Diluted earnings per ordinary
  share ................................       43.38          34.05           3.07           34.56           17.32           4.29

Cash dividends declared per
 ordinary share ........................        6.41           7.56          13.94           14.10            3.80           0.94

U.S. GAAP:
Income  before extraordinary
  item .................................     661,760        478,098         41,373         532,424         250,694         62,038


Net income .............................     666,214        480,740         43,190         537,899         250,694         62,038
Earnings per ordinary share ............       44.09          32.03           2.77           34.20           16.30           4.03
Earnings per ADS .......................        8.82           6.41           0.55            6.84            3.26           0.81

Balance Sheet Data:
Israeli GAAP:
Working capital ........................   2,343,577      3,045,391      3,487,042         910,131         988,503        244,618
Total assets ...........................  13,638,925     14,853,291     17,785,548      17,370,600      14,768,417      3,654,644
Short-term debt ........................   1,829,827      2,186,861      2,730,806       3,559,014       2,695,516        667,042
Long-term debt .........................   2,024,935      2,103,303      4,695,801       4,070,334       3,320,514        821,706
Shareholders' equity ...................   4,040,471      4,532,206      4,075,918       4,384,714       4,306,250      1,065,640

U.S. GAAP:
Total assets ...........................  13,835,621     15,136,166     17,986,891      17,560,693      14,922,599      3,692,799
Shareholders' equity ...................   3,961,587      4,532,207      4,043,258       4,422,258       4,196,031      1,038,364

Number of  shares ......................  15,069,830     15,307,569     15,723,327      15,730,971      15,192,374             --
</TABLE>


         Exchange Rate Information

         The following table shows, for each of the months indicated, the
high and low exchange rates between New Israeli Shekels and U.S. dollars,
expressed as shekels per U.S. dollar and based upon the daily
representative rate of exchange as reported by the Bank of Israel:

   Month                                 High (NIS)          Low (NIS)
   -------------                      ---------------     ---------------
   December 2000                          4.103               4.041
   January 2000                           4.153               4.067
   February 2001                          4.143               4.100
   March 2001                             4.217               4.115
   April 2001                             4.226               4.139
   May 2001                               4.152               4.122

         The following table shows, for periods indicated, the average
exchange rate between New Israeli Shekels and U.S. dollars, expressed as
shekels per U.S. dollar, calculated based on the average of the exchange
rates on the last day of each month during the relevant period as reported
by the Bank of Israel:

   Year                                             Average (NIS)
   ---------                                        ---------------
   1996                                             3.195
   1997                                             3.465
   1998                                             3.810
   1999                                             4.153
   2000                                             4.068

         On June 28, 2001, the exchange rate was NIS 4.167 per U.S. dollar
as reported by the Bank of Israel.

         The effect of exchange rate fluctuations on the business and
operations of Koor is discussed in "Item 5. Operating and Financial Review
and Prospects."

Dividends

         In determining whether to declare a dividend, Koor's Board of
Directors may take into consideration, among other things, Koor's profits,
business and financial conditions, the economic situation and other
conditions, as deemed appropriate by the Board of Directors.

         Koor paid an interim dividend for 2000 of NIS 3.80 per ordinary
share on July 3, 2000, and declared additional dividends for 1999 of NIS
2.70 and NIS 7.80 per ordinary share which were paid on January 11, 2000
and April 10, 2000, respectively.

         In April 2000, Koor's Board of Directors approved the repurchase,
from time to time, of up to NIS 205 million worth of its shares in the open
market. By September 2000, Koor had repurchased 538,592 ordinary shares (or
about 3.4% of the ordinary share capital) at a cost of approximately NIS
203 million. This sum was deducted from Koor's shareholders' equity

Risk Factors

         Risks Related to Koor

         We depend on our subsidiaries and affiliates for dividends and
management fees.

         Koor conducts its business primarily through its wholly and
partially owned subsidiaries, and is dependent upon management fees and
cash distributions from its subsidiaries and affiliates as a source of cash
flow for funding its corporate level activities. Koor received management
fees in the amount of NIS 40 million and of NIS 65 million in 2000 and
1999, respectively, pursuant to management agreements between Koor and
certain subsidiaries and affiliates. In addition, in 2000 Koor received NIS
352 million in dividends from subsidiaries and affiliates, of which NIS 226
million was received from Telrad Networks Ltd. ("Telrad") and NIS 57
million was received from Koor Properties Ltd. ("Koor Properties"). In
1999, Koor received NIS 1,540 million in dividends from subsidiaries and
affiliates, of which NIS 1,131 million was received from Tadiran Ltd.
("Tadiran"), including with respect to sales of interests in subsidiaries,
and NIS 355 million was received from Mashav Initiating and Development
Ltd. ("Mashav"). In recommending dividends and approving management fees,
the directors and applicable committees of each subsidiary must take into
consideration (i) Israeli corporate law, (ii) tax exemption for
undistributed profits under the Law for the Encouragement of Capital
Investments of 1959, (iii) the provisions of the charter documents of the
subsidiary, (iv) the best interests of such subsidiary, and (v) any
restrictive covenants that may be contained in financing or other
agreements of such subsidiary. Certain of Koor's subsidiaries are subject
to certain dividend payment restrictions derived from such certain
subsidiaries' partnership structure, organizational documents, credit
agreements and tax considerations. Koor's other principal sources of funds
are from bank loans and sales of assets, including shares of Koor's
subsidiaries. In the event that Koor was to experience a substantial
reduction in the level of payments of dividends and management fees, there
can be no assurance that alternative sources of cash flow will be available
to Koor to carry out certain of its investment plans, to pay dividends on
its capital stock and to service its debt.

         In addition, all unsecured indebtedness of Koor is effectively
subordinated to all liabilities, including trade payables of Koor's
subsidiaries. Any right of Koor to receive assets of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the
holders of Koor's indebtedness to participate in those assets) will be
effectively subordinated to the claims of that subsidiary's creditors
(including trade creditors), except to the extent that Koor is itself
recognized as a creditor of such subsidiary, in which case the claims of
Koor would still be subordinate to any security interests in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held
by Koor. Under Israeli law, certain indebtedness of a company under
liquidation, including certain indebtedness resulting from an employment
relationship or tenancy and certain indebtedness resulting from
governmental and municipal tax liabilities, may rank prior to other
unsecured indebtedness.

         We need to develop and introduce new products in the
telecommunication equipment and defense electronics businesses and we rely
on licensed technology.

         For the years ended December 31, 2000 and 1999, the
telecommunication equipment and defense electronics businesses accounted
for approximately 40.4% and 33.1% of Koor's conso-lidated revenues,
respectively, and for 72.2% and 82.5% of Koor's total research and
develop-ment expenses, respectively. In addition, Koor's investment in ECI
Telecom Ltd. ("ECI") accounts for 76.5% of Koor's total investments in the
telecommunications equipment industry. The businesses and markets in these
segments are characterized by rapid technological development.
Consequently, the ability to anticipate changes in technology and to
develop and introduce new and enhanced products incorporating such new
technologies on a timely basis will be significant factors in the ability
of the businesses in the telecommunication equipment and defense
electronics businesses to grow and to remain competitive. Telrad Networks
Ltd. (formerly Telrad Telecommunication & Electronic Industries Ltd.)
("Telrad"), Elisra Electronic Systems Ltd. ("Elisra") and ECI establish
their own research and development priorities and budgets. In addition,
certain of Telrad's products have been based on technology licensed from
Nortel Networks Ltd. ("Nortel"). As a result, our ability to introduce new
and enhanced products has been partially dependent on Nortel continuing to
provide advanced technology to Telrad. However, following the completion of
the establishment of Nortel Israel and the related change in Telrad's
business, such reliance shall be substantially reduced. In addition, one of
our objectives is to continue to seek to apply certain of the advanced
technologies developed in our defense electronic businesses to new
commercial products. However, there can be no assurance that such
technologies will be successfully applied or that markets will develop for
such products.

         We rely on the expiration of patents and depend on regulatory
approval in the agrochemicals industry.

         For the years ended December 31, 2000 and 1999, agrochemicals
business accounted for approximately 41.8% and 33.2% of Koor's consolidated
revenues, respectively. Certain of Koor's subsidiaries specialize in the
improvement and production of agrochemical generic products, which are
products that are based on expired patents. Development of new generic
products requires substantial expenditures for research and development,
product registration, construction of production lines and marketing in
support of new product introduction. An important component for the growth
of the agrochemicals business is the successful introduction of new generic
chemical products to the market in a timely manner (promptly after patents
expire). Reintroduction of any new legislation to extend the life of
patents on chemical products could adversely affect the ability of the
agrochemicals business to introduce new products.

         Patent protection in Europe is valid for 20 years from the date of
application. During the beginning of any patent term, the companies that
own patents deal in licensing products in various countries. In February
1997, offices of the European Authority approved an extension of the
validity of patents filed for registration since 1985. The extension of the
patent term for an additional period ensures patent owners an additional
period of exclusivity of 15 years from the date of receipt of first
license, provided that the addition may not be greater than 5 years. In
most countries, marketing of new products is conditional upon obtaining
licensing from the competent authority. The obtaining of licenses is a
lengthy process with substantial costs. A possible delay in the development
of new products and/or in obtaining requisite licenses could have a
negative effect on the results of activity and the financial status of
Koor.

         Most countries require us to obtain regulatory approval prior to
selling newly introduced products, which is both time consuming and
expensive. Any delay in the development or introduction of new products or
in obtaining regulatory approval from the countries where the Agrochemicals
business markets its products may have a material adverse effect on our
results of operations and financial condition. In addition, new
developments in the field of trans-genetic plant species that are toxic to
insects and plant species that are resistant to fungal disease may have an
adverse effect on sales of the agrochemicals business.

         The investment in hi-tech companies carries with it a high level
of risk.

         Up until the date of the financial statements, Koor, through Koor
Corporate Venture Capital, or Koor CVC, invested a total of $86 million in
venture capital funds and start-up companies. The investment in hi-tech and
venture capital companies carries with it a high level of risk. The main
risk factors are: (a) the uncertainty involved in advanced technological
developments in the field of internet and telecommunications in light of
the innovativeness involved in this sort of activity, and the lack of
certainty that the product will be developed or that a market will be found
for it, if and when it is developed, high marketing costs, and competition
from others; (b) the uncertainty existing on the date of commencement of
projects as to the total investment required for developing a product and
the lack of certainty that funding will be found for the continued
development and marketing of products, if developed; (c) the fast
technological changes that characterize the fields of operation of the
companies in which investments are made could reduce or cancel demand for
products developed by the companies in which the investments are being
made; (d) the dependence of start-up companies, including companies
receiving investments, on their founders or on key personnel, especially in
the areas of management and development; (e) the lack of certainty
regarding the ability of a company receiving investments to recruit
appropriate personnel, in particular when faced with increasing competition
for quality personnel; (f) the lack of intellectual property protection for
internet products and increased competition in this area; (g) the lack of
ability to control and manage the corporation receiving the investment, and
holding securities that constitute a minority as opposed to the
entrepreneur who holds most of the shares in Koor.

         Telrad, one of Koor's significant subsidiaries, depends on one key
supplier.

         Telrad, one of Koor's significant subsidiaries, has been
substantially dependent upon its relationship with Nortel as a key supplier
of technology and as a key customer of Telrad's products. For the years
ended December 31, 2000 and 1999, approximately 23.2% and 18.1%,
respectively, of Koor's consolidated revenues and 61.13% and 43.2%,
respectively, of Telrad's revenues were derived from sales to Nortel.
Although Telrad and Koor believe that the relationship with Nortel is
generally good, if such relationship is terminated or diminished for any
reason, it could have a material adverse affect on Telrad's business,
financial condition or results of operation, which may have an adverse
effect on Koor.

         The operations of the Koor Group are exposed to the risk of
harming the environment.

         The operations of the Koor Group are exposed to the risk of
harming the environment, as certain subsidiaries manufacture, use,
transmit, store and sell toxic and other materials. The Koor Group believes
that it is in fulfillment of the relevant environmental laws and
regulations. The Koor Group bore considerable costs and investments in
order to fulfill environmental laws and regulations. Koor cannot estimate
the size of additional investments that might be required as a result of
amendments to legal provisions, including investments in adjustment of
products to requirements. In addition, the risks of causing environmental
damage are not insurable risks.

         We are under investigation by the Israeli Office of Restrictive
Trade Practices.

         On December 13, 1998 the Controller announced in a press release
that the Investigations Department of the Israeli Office of Restrictive
Trade Practices ("Israeli Antitrust Authority") has concluded the
investigation regarding allegations of illegal restrictive arrangements
between Koor, Tadiran Telecommunications Ltd. ("TTL"), Telrad, The Israel
Telecommunications Corporation Limited ("Bezeq") and Bezeqcall
Communications Ltd. in the field of the supply of public switches and in
the N.S.R. area. According to the announcement, the investigators recommend
indicting some of the examinees regarding some of the allegations
investigated, and the Legal Department of the Israeli Antitrust Authority
will decide if offenses were in fact committed and if there is a sufficient
evidential basis for trial. As of June 20, 2001, no details were released
about the findings of the Legal Department. Under the Law for Restrictive
Trade Practices, 1988 (the "Israeli Antitrust Law"), a fine may be levied
against an entity that has violated this law. There is also the possibility
of negative repercussion in the civil domain, should it be proven that
violations have indeed been committed. The management of Koor and its
subsidiaries, after consultation with their legal counsel, are in the
opinion that, at this stage, as long as the results of the Antitrust
Commissioner's examinations have not yet been published, it is not possible
to assess the possible developments in this matter, nor to evaluate if a
significant loss is expected to result, if at all.

         Certain of Koor's subsidiaries have exposure from fluctuations in
prices of raw materials and commodities.

         Certain of Koor's subsidiaries, primarily those in the
agrochemical industry, have exposure to risk stemming from fluctuations in
prices of raw materials and commodities. These companies tend to enter into
long-term contracts and to guarantee prices in advance for half a year to
one year.

         Reduction in worldwide spending for military products may
adversely affect our earnings.

         For the years ended December 31, 2000 and 1999, sales of military
products accounted for approximately 13.6% and 10.9%, respectively, of
Koor's consolidated revenues. Around the world and in Israel there have
been fluctuations in the demand for defense electronic products. Worldwide
demand for military products has been generally declining during the past
few years. In Israel, however, there has been a strengthening of the upward
trend in demand for defense economic products as reflected in the size and
rate of receipt of orders, and the increase in backlog which was
approximately NIS 2.5 billion at the end of 2000. This trend would likely
have a positive influence on the profitability and financial condition of
Koor's defense electronics business. However, in the event expenditures
continue to decline worldwide and are reduced in Israel for systems or
projects of the type we produce or perform, and are not offset by greater
foreign sales or other new systems or products, there will be a reduction
in the volume of contracts or subcontracts we are awarded. Such reductions
may result in a material adverse effect upon our results of operations and
financial condition.

         Risks Related to Israel

         Exchange rate fluctuations and inflation in Israel impact our
business.

         A significant portion of Koor's major subsidiaries and affiliates
sales are made outside of Israel in dollars or other non-Israeli currencies
and these companies incur significant portions of their expenses in NIS.
Alternatively, some subsidiaries and affiliates whose sales are principally
in NIS incur expenses in dollars or in other non-Israeli currencies. For
example, a significant portion of the revenues of the telecommunication
equipment, defense electronics and the agrochemicals businesses are in
dollars, whereas a significant portion of expenses of these businesses are
incurred in NIS and generally linked to the Israeli CPI. In addition,
certain borrowings are linked to the dollar or other non-Israeli currencies
or to the CPI. The rate of inflation in Israel in the past years is,
however, gradually declining. During the calendar years 1998, 1999 and 2000
the annual rate of inflation was approximately 8.6%, 1.3% and 0%,
respectively while the NIS was devalued against the dollar by approximately
17.6%, -0.2% and -2.7%, respectively. In 2000, inflation reached 0% for the
first time ever, due to a reduction in prices worldwide and due to the high
NIS interest rate. Continued deflation in Israel and the delay in or lack
of any devaluation of the NIS in relation to the dollar and other
currencies may have a material adverse effect on our results of operations
and financial condition.

         To compensate for inflation in Israel and changes in the relative
value of Israeli currency compared to the dollar and other currencies, we
have adopted financial strategies, including entering into foreign currency
transactions with respect to certain specific commitments and general
hedging transactions with respect to monetary assets and liabilities
denominated in non-Israeli currencies (including Brazilian currency). There
can be no assurance, however, that such activities, or others that we may
undertake from time to time, will eliminate the negative financial impact
of such fluctuations.

         Conditions in Israel may affect our operations.

         Koor and its principal subsidiaries are incorporated under the
laws of the State of Israel, where their principal offices and substantial
portion of the Koor Group's operations are located. We are directly
influenced by the political, economic and military conditions affecting
Israel. Accordingly, any major hostilities involving Israel, the
interruption or curtailment of trade between Israel and its present trading
partners, a significant increase in inflation or a significant downturn in
the economic or financial condition of Israel could have a material adverse
effect on our business, results of operations and financial condition. In
addition, there are a number of countries, particularly in the Middle East,
which restrict business with Israel or Israeli companies. There can be no
assurance that restrictive laws or policies directed toward Israel or
Israeli businesses will not have an adverse impact on the expansion of our
business.

         The increased hostilities in the West Bank and Gaza Strip affect
our tourism and other businesses.

         Since the end of September 2000, there has been an escalation of
violence in the West Bank and Gaza Strip and increased terrorist activities
within Israel, causing a sharp decrease in tourism to Israel and a further
deceleration in all parts of the Israeli economy. The areas of tourism,
communications, software and internet have been most effected by the
increased hostilities and the recession in the Israeli real estate market
became more entrenched.

         Many of our directors, officers and employees are obligated to
perform military reserve duty in Israel.

         Generally, Israeli adult male citizens and permanent residents
through the age of 48 are obligated to perform up to 39 days of military
reserve duty annually. Some of our directors, officers and employees are
currently obligated to perform annual reserve duty. Additionally, all such
persons are subject to being called to active duty at any time under
emergency circumstances. We have operated effectively under these
requirements since we began operations. No assessment can be made, however,
as to the full impact of these requirements on our workforce or business if
conditions should change and we cannot predict the effect on us of any
expansion or reduction of these obligations.

         Israel's economy may be destabilized.

         Israel's economy has been subject to a number of destabilizing
factors. These include a period of severe inflation in the early to
mid-1980s, low foreign exchange reserves, fluctuations in world commodity
prices, military conflicts and civil unrest. For these and other reasons,
the Government of Israel has intervened in different sectors of the
economy. Such intervention has included employing fiscal and monetary
policies, import duties, foreign currency restrictions and controls of
wages, prices and foreign currency exchange rates. The Israeli government
has periodically changed its policies in all of these areas. The policies
may make it more difficult for us to operate our business as we have in the
past.

         Service and enforcement of legal process on us and our directors
and officers may be difficult to obtain.

         Service of process upon our directors and officers and the Israeli
experts named herein, all of whom reside outside the United States, may be
difficult to obtain within the United States. Furthermore, since
substantially all of our assets, all of our directors and officers and the
Israeli experts named in this prospectus, are located outside the United
States, any judgment obtained in the United States against us or these
individuals or entities may not be collectible within the United States.

         There is doubt as to the enforceability of civil liabilities under
the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, in original actions instituted in Israel. However,
subject to certain time limitations and other conditions, Israeli courts
may enforce final judgments of United States courts for liquidated amounts
in civil matters, including judgments based upon the civil liability
provisions of the Securities Act and the Securities Exchange Act.

         We depend on the availability of certain government benefits and
programs.

         We derive and expect to continue to derive benefits from various
programs and laws in Israel including tax benefits relating to our
"Approved Enterprise" programs and grants from the Office of the Chief
Scientist, or OCS, for research and development. For the years ended
December 31, 2000 and 1999, Koor's consolidated companies benefited from
government investment grants of approximately NIS 15 million and NIS 45
million, respectively, and received government grants in the fields of
research and development approximately NIS 29 million and NIS 52 million,
respectively. To be eligible for these grants, programs and tax benefits,
we must continue to meet certain conditions, including making certain
specified investments in fixed assets from our equity. From time to time,
the Israeli government has discussed reducing or eliminating the
availability of these grants, programs and benefits. A change in government
policy in these areas is liable to have a negative affect on profitability
and on Koor's financial condition.

         Under this law, by virtue of the "approved enterprise" status
granted to certain enterprises of several investees, these companies are
entitled to various tax benefits. The income derived from these enterprises
during a period of up to 10 years, from the year in which these enterprises
first had taxable income (limited to 12 years from commencement of
production or 14 years from the date of the approval, whichever is
earlier), is subject to a corporate tax rate of 0-25%. For fixed assets
serving the approved enterprise, investees are entitled to an accelerated
amortization deduction over five years.

         In the event that an investee distributes a dividend to
shareholders out of income attributable revenues from an approved
enterprise which received a tax exemption, the company that distributes the
dividend would be liable to tax at 25% of the earnings distributed.
Deferred taxes in respect of income from approved enterprises were not
provided, since it is the Group's policy not to initiate a distribution of
dividend that involves an additional tax liability to the Group.

         Benefits are conditional upon the fulfillment of terms set out in
law or in deeds of approval. Non-fulfillments of terms could cause
cancellation of the benefit, in whole or in part, and the return of benefit
sums, plus interest and linkage differentials. The investees met all terms
set out as above as at the dates of the financial reports.

         As security for the implementation of the approved projects and
compliance with the conditions of the approval, a charge has been
registered on the above subsidiaries' assets in favor of the State of
Israel.

         Risks Related to Our Ordinary Shares

         Our share price may be volatile and may decline.

         Numerous factors, some of which are beyond our control, may cause
the market price of our ADSs or ordinary shares to fluctuate significantly.
These factors include, among other things, announcements of technological
innovations, earning releases by us or our competitors, market conditions
in the industry and the general state of the securities markets (with
particular emphasis on the technology and Israeli sectors of the securities
markets).

         Our operating results in one or more future periods may fluctuate
significantly and may cause our share price to be volatile.

         Our quarterly operating results may be subject to significant
fluctuations due to various factors, including divestitures of companies,
competitive pressures and general economic conditions. Because a
significant portion of our overhead consists of fixed costs, our quarterly
results may be adversely impacted if sales fall below management's
expectations. As a result, our results of operations for any quarter may
not necessarily be indicative of results for any future period. Due to all
of the foregoing factors, in some future quarters our sales or operating
results may be below the expectations of public market analysis or
investors. In such event, the market price of the ADSs would likely be
materially adversely affected.


Item 4.  Information on the Company

         We are a company limited by shares organized and existing under
the laws of the State of Israel. We were initially incorporated in 1944 and
our full legal and commercial name is Koor Industries Ltd.

         The address of our registered office is 21 Ha`arbaa Street, Tel
Aviv 64739, Israel, and our telephone number is 972-3-623-8333. The address
of our internet website is: www.koor.com. Our ADSs are listed on the New
York Stock Exchange and our ordinary shares and convertible debentures are
listed on the Tel-Aviv Stock Exchange.

General

         We are a diversified investment holding company. We are engaged,
through our direct and indirect wholly and partially owned subsidiaries and
affiliates, in the following core businesses: telecommunication equipment,
defense electronics and agrochemicals as well as in other businesses. We
are also engaged in seeking out new investment opportunities in high
technology and life science businesses. In 2000, international sales
represented approximately 65% of our consolidated revenues. A majority of
our revenues are derived from businesses in which we are the leading
producer or provider of such goods and services in Israel. In 2000, we
reported NIS 8.3 billion ($2.0 billion) of consolidated revenues, NIS 645
million ($160 million) of consolidated operating earnings, and NIS 268
million ($66 million) of consolidated net earnings.

Business Overview

         Strategy

         In October 1997, as a result of certain transactions, the Claridge
Group (comprised of Claridge Israel Ltd. (Claridge) and affiliated
entities) became the largest shareholder of Koor, holding of record, as of
June 20, 2001, 35.5% of the outstanding ordinary shares. Beginning in July
1998, Koor initiated an extensive corporate restructuring program, designed
to transform itself into a diversified investment holding company with
controlling stakes in leading high-growth, export-oriented Israeli
companies. Based on these criteria, Koor has made the strategic decision to
focus on three businesses: telecommunication equipment, defense electronics
and agrochemicals. Koor's holdings in these businesses have the potential
to grow internally, as well as through mergers and acquisitions.

         Management has implemented key elements of the strategic program
to date, including a substantial capital reallocation process, in which
proceeds from the sale of low growth domestic businesses have been
re-invested to increase Koor's stakes in its core businesses. In this
regard, in 1999 and in the beginning of 2000, Koor continued to divest
itself of non-core holdings, including its interests in Koor Finance,
Contahal, Merhav, the Switching Division of Tadiran Telecommunications,
Tekem (ATL), Tadiran Information Systems, Koor Metals, Phoenicia, Yonah,
Tadiran Com, Tadiran Telematics, Mashav (Nesher), Merkavim Metal Works Ltd.
("Merkavim"), Middle East Tube Co. Ltd. (Metco) and the Q Group PLC ("Q
Group").

         In addition, as part of its strategic plan, Koor is seeking out
new investment opportunities in high growth potential business in the
fields of telecommunications technologies and services located in Israel
and around the world. Koor also invests in Internet ideas and technology
through investments in leading funds and recently established a joint
venture to invest in biotechnology and life science companies in Israel.

         The Telecommunication Equipment Business

         The activities in this business are conducted primarily through
ECI and Telrad. Until 1999, this business also included the activities of
TTL, which was merged into ECI, effective as of January 1, 1999.

         Koor's telecommunication equipment business generated NIS 2,201
million and NIS 2,200 million of revenues in 2000 and 1999, respectively,
representing 26.6% and 20.6%, respectively, of Koor's consolidated revenues
for such years. International sales accounted for 68.5% and 70.0% of the
revenues of the telecommunication equipment business for 2000 and 1999,
respectively.

         A substantial portion of the sales made by the telecommunication
equipment business, other than those of ECI which were not consolidated in
1999 and 2000, are made to one principal customer: Nortel. In 2000, the
sales to Nortel represented 53%, of the telecommunication equipment
business' revenues. In May 2000, Koor, Telrad and Nortel entered into an
agreement to establish a new company under the name Nortel Israel. This
venture, in which Nortel is the majority shareholder and Koor owns 28%,
acquires and operates Telrad's public switching and TX1 Systems businesses,
which currently comprise the majority of Telrad's sales to Nortel.

         The principal companies in the Telecommunication Equipment
business are:

                           Percentage
                           Of Equity
                           Ownership       Principal Products and Services

ECI Telecom Ltd.             34.96%(1)     Telecommunication equipment
                                            and systems
Telrad  Networks Ltd.       100.00%        Telecommunication equipment
                                            and systems


(1)      Not  consolidated  in Koor's  Financial  Statements and not
         included in backlog data. The ordinary shares of ECI are quoted
         on Nasdaq (NASDAQ: ECIL).

         ECI

         ECI is a provider of integrated network solutions for digital
communications and data transmission systems enabling network operators to
deliver cost-effective services. ECI designs, develops, manufactures,
markets and supports end-to-end digital telecommunications solutions for
today's new services and converging networks. ECI's products create
bandwidth, maximize revenues for network operators, expand capacity,
improve performance and enable new revenue-producing services. These
products enhance the capabilities of existing networks to support voice,
data, video and multimedia services. ECI's equipment supports traffic in
more than 500 service networks in over 145 countries.

         At the beginning of 2000, following the appointment of new senior
management, ECI announced a new strategic plan designed to focus its
operations on key product growth areas, including broad band access,
transport systems and media gateways.

         ECI is in the advanced stages of a reorganization process that it
announced in 2000. The principal goal of the reorganization plan is a
horizontal split of the five main business units of ECI, in order to turn
them into separate public companies directly owned by the current
shareholders of ECI. In light of the changes in the US capital market and
in the field of communications worldwide that occurred during the second
half of 2000, ECI is also examining other possibilities aimed at realizing
the underlying value of the new companies.

         On January 1, 2001, ECI set up five wholly owned subsidiaries
which received the employees of the various operational departments, as
follows:

             1.   Enavis Networks Ltd. (formerly the Transport Networks
                  division of ECI), which provides network management
                  systems and other products that enable telecommunications
                  service providers and large business networks to
                  construct communications networks in an efficient manner;

             2.   Inovia Telecoms Ltd. (formerly the Access Networks
                  division of ECI), which provides products that increase
                  the line capacity for the local subscriber loop;

             3.   Lightscape Networks Ltd. (formerly the Optical Networks
                  division of ECI), which provides optical networking
                  products that comply with a number of international
                  transmission standards;

             4.   InnoWave Ltd. (has always been maintained as a separate
                  subsidiary), which provides wireless access solutions for
                  the local subscriber loop; and

             5.   ECI Telecom - NGTS Ltd. (formerly the NGTS division of
                  ECI), which provides products intended to increase the
                  transmission capacity of satellite communication, optical
                  cables, microwave and coaxial cables.

         The plan of reorganization is to be effectuated by the ECI's
transferring the relevant assets and liabilities of the business to be
conducted by each subsidiary to that subsidiary. The plan contemplates that
ECI will continue to operate its existing manufacturing business, will
continue to hold its shares in ECtel Ltd. and various start-up companies,
and will perform, on an interim basis, management, technology,
administrative and other services for the subsidiaries.

         ECI's revenues, gross profit, losses from continuing operations
and net income in 2000, as reported in its financial report, amounted to
$1,170 million, $451 million, $(60) million and $91 million, respectively.
ECI is included in Koor's Financial Statements on an equity basis.

         Share Ownership Information. Since the beginning of 1999, Koor has
increased its stake in ECI to 34.96 % (as of June 20, 2001) through the
following transactions: the exercise of a call option to purchase an
additional 5% interest in ECI from Clal Electronics on February 8, 1999 for
NIS 593 Million ($142 Million); the merger between ECI and TTL pursuant to
which Tadiran received a 12.5% interest in ECI; additional open market
purchases by Koor; and the effects of an open market stock buyback program
by ECI.

         In 1998, Koor and Clal Electronics entered into a voting
agreement, pursuant to which both companies agreed to vote their shares at
the ECI General Meeting of shareholders to permit Koor to nominate a
majority of the directors of ECI, and to permit Clal Electronics to
nominate 20% of the directors.

         In March 1999, TTL, formerly an 81% subsidiary of Tadiran, was
merged into ECI. Pursuant to the merger, the shareholders of TTL were
issued new shares of ECI representing a 15.4% interest in ECI. In 1998,
TTL's results of operations were consolidated in Koor's Financial
Statements. In 1998, TTL reported sales, operating income and net income of
NIS 1,761 million, NIS 179 million and NIS 169 million, respectively.

         TTL's public switching equipment division was not included in the
merger and during 1999 Tadiran sold substantially all the assets and
liabilities of the switching division for $24 million.

         The merger was recorded in Koor's financial statements at book
value in accordance with the Israeli GAAP rule for similar asset exchange
transactions which resulted in no recognition of gain and an increase of
NIS 179 million in the amount of goodwill in ECI recorded in Koor's
Financial Statements. In accordance with US GAAP, Koor would have recorded
a capital gain (after taxes) of NIS 64 million and an additional increase
in goodwill of NIS 191 million.

         In October 1999, Ectel Ltd., a wholly owned subsidiary of ECI,
whose principal business is the development, production and marketing of
fraud detection systems in communication networks and improvement of
traffic quality in communication networks, completed an initial public
offering on Nasdaq. As a result of this offering, ECI recorded a capital
gain of $29.7 million. ECI holdings in Ectel declined to 75%. In October
1999 Telegate Ltd., an affiliate of ECI completed a share and capital notes
exchange transaction with Terayon Communications Systems Ltd., which
resulted in a capital gain to ECI of $25.5 million. ECI recorded an
additional gain of approximately $31 million in the first quarter of 2000
in connection with the transactions related to the exchange offer.

         In 1999, ECI recorded a loss of approximately $37 million as a
result of the termination of four different discontinued operations. In
addition, in 1999 the current loss from these discontinued operations
amounted to approximately $26 million.

         An additional step in this course of action was the sale of
operations which were not part of ECI's core businesses. Similarly, ECI
intends to act in order to realize operations in the business systems
division. As part of this plan, it was resolved to cease producing and
developing certain products, to lay-off employees and to remove equipment
that would become redundant in the new organizational structure. ECI has
noted allocations in reports released in 2000 for reorganization expenses
in the sum of $ 26 million and allocations for reduction of the value of
fixed and intangible assets in the sum of $23 million based on external
evaluation. ECI losses according to Israeli GAAP, totaled $147 million in
the fourth quarter of 2000 and a total of $ 67 million for 2000. ECI's
results for 2000 include capital gain of approximately $31 million from the
sale of Terayon shares, which was recorded in the first quarter of 2000.
Its results for the second quarter of 2000 include one-time expenses of
approximately $29 million in respect of the purchase of R&D in process,
deriving from acquisition of companies.

          ECI's losses in accordance with Israeli GAAP totaled $270 million
in the first quarter of 2001, compared to income of $68 million in the
first quarter of 2000. This loss includes a non-recurring expense of $185
million for the writing-off of inventories, capital losses and
reorganization expenses. ECI's loss in the first quarter of 2001 in
accordance with U.S. GAAP was $256 million.

         As a result of the continuing drop in global demand for
communications products including ECI's products, the uncertainty with
regard to the recovery of the market, the significant reduction in ECI's
sales forecasts and the change for the worse in the indications recently
received about the fair value of ECI in general, and each of the spun-off
companies in particular, Koor's management decided to to reduce the book
value of the investment in ECI by NIS 208 million, to NIS 2,193 million.
The reduction is presented as a write-off in Koor's financial statements
under the line item captioned "Group's equity in the operating results of
affiliates, net".

         On March 4, 2001 Koor and Tadiran entered into an agreement
pursuant to which Tadiran sold to Koor all the shares of ECI held by it, at
the market price prevailing on the date of the sale.

         In June 2001, Koor purchased additional 1,613,478 shares of ECI at
the price of $5.06 per share which represent 1.7% of the outstanding of
ECI's shares.

         Three putative shareholder class action lawsuits were filed
against ECI and several of its former officers on and after June 12, 2001.
The plaintiffs in each such action seek to represent a class of investors
in ECI's securities throughout a specified period, approximately from May
2000 to February 2001. The plaintiffs allege that ECI and the individual
defendants made false and misleading statements about ECI's financial
condition, revenues, expenses and results of operations, in violation of
federal securities laws and seek damages in an unspecified amount. ECI
believes that the plaintiffs' claims have no basis and intends to
vigorously defend the actions. At this preliminary stage of the
proceedings, ECI cannot predict the outcome of the litigation, nor can it
make any estimate of the amount of damages, if any, for which it will be
held responsible in the event of a negative conclusion to the litigation.


         Telrad

         Telrad is a leading Israeli company in today's telecommunications
market.

         Its primary activities are performing projects of development and
building of advanced systems in the Telecommunications field and the
development, manufacturing and selling of advanced OEM products to the
international markets. In addition, Telrad sells to the local and
international markets its own brand of PABXs (Private Automatic Branch
Exchange). Telrad's operations are divided into three independent
market-oriented divisions.

         Nortel Telecom Solutions (NTS) - Is responsible for R&D as well as
sales and support of OEM products to Nortel.

         Advanced Operations Solution (AOS) - This division is responsible
for all the production of Telrad and operates directly and through
subcontractors.

         Ventures - Establishing subsidiaries (Spin-offs and Start-ups -
see below `Start-ups and new subsidiaries')

         Reorganization plans

         In November 1998, Telrad's Board of Directors approved a
reorganization plan. According to Telrad's new organizational structure,
Telrad's operations were divided in 1999 into three independent
market-oriented divisions. At the end of 1999, Telrad's Board approved an
additional restructuring program at the cost of NIS 85 million (pre-tax)
for the release of additional employees. This plan is in addition to the
first plan that was provided for in 1998 at the cost of NIS 223 million
(pre-tax). Until December 31, 1999, Telrad's work force was reduced by
approximately 950 employees without disturbances to labor relations mainly
through voluntary resignations and early retirement, and approximately 100
more employees retired by the end of the first quarter of 2000. In 2000,
Telrad included in its Financial Statements an expense of NIS 257 million
(pre-tax) following the approval of Telrad's Board for a plan to reduce its
work force by another 388 employees.

         As part of Telrad's reorganization plan, Telrad effected the
spin-off of certain of its technology and development divisions and formed
them into separate start-up subsidiary companies, in order to provide
Telrad with new sources of proprietary technology-based growth in the
telecommunications fields.

         Start-ups and new subsidiaries

         During the period starting at the end of 1999 until mid-2000,
Telrad effected the spin-off of or established several start-up companies.

         Be Connected Ltd. Be Connected is involved in the developing and
marketing of next generation integrated broadband access solutions to
support all types of services (narrowband & broadband) for the telecom
market.

         During 2000, Be Connected raised $15 million from Cisco Systems
Inc., the international communications company, at a post-money valuation
of $140 million.

         Com-Match Ltd. Com-Match is a pioneer IP-to-PSTN and IP-IP access
solutions provider. Its carrier-grade, HW & SW integrated set of solutions
offer full interoperability between current PSTN and Next-Gen IP networks.
ComMatch's sales in 2001 totaled NIS 2.088 million.

         Telrad Hawk Net I Ltd ("Net I"). Net I is a provider of Fraud &
security Management systems for IP and NGN designed to meet evolving market
needs.

         Firebit Ltd. Firebit provides network based security and resource
sharing solutions through a broadband ready service delivery platform
operated by service providers/operators.

         Telrad Tenecs Ltd. On April 2001, Telrad created spin-off of its
"Digital-Keybox" line of product and established Telrad Tenecs Ltd. In
2000, the sales of this product line amounted $43 million. The sale of its
products to the U.S. market is performed by its U.S. subsidiary, Telrad
Tenecs Inc.

         At the beginning of 2001, Telrad closed two of its subsidiaries,
Galaxtel and Aptonix, as part of its program to reduce costs.

         On January 31, 2001 Telrad sold Felix Telecom, its subsidiary in
Romania, for $1.8 million.

         Relationship with Nortel

         Telrad held licenses to the know-how underlying the digital
switching and transmission systems utilized in its public and private
switches pursuant to agreements with Nortel.

         In January 1995, Telrad entered into a cooperation agreement with
Nortel that enabled Telrad to market Nortel products in Israel and other
specified territories and to sell Telrad developed products to Nortel.

         In January 1997, Nortel exercised an option, granted in 1995, to
purchase 20% of Telrad's ordinary shares for $45 million. According to the
shareholders agreement, Nortel had a put option to sell its Telrad shares.
In January 1997, Telrad licensed the right to use certain existing and
future know-how from Nortel for a ten-year period, for which Telrad was
unconditionally required to pay Nortel NIS 62 million ($15 million).

         All of the foregoing agreements with Nortel have been changed due
to the implementation of the following agreements concerning the
establishment of Nortel Israel.

         In May 2000, Koor, Telrad and Nortel signed an agreement to
establish a new company under the name of "Nortel Networks Israel (Sales
and Marketing) Ltd" ("Nortel Israel"). Nortel holds 72% of this new venture
and Koor and Telrad hold 28%.

         Nortel Israel acquired from Telrad the sales, marketing and
support functions of its public switching and TX1 systems businesses and
Telrad's operations in these fields in Israel and in several export
markets. In addition, Nortel Israel represents all of Nortel's activities
in Israel.

         Koor invested approximately $5.6 million in the share capital of
Nortel Israel and provided a shareholder's loan of $42 million. The loan is
repayable in 2003, and bears intrest at 6% per year.

         The transactions contemplated by the agreement closed on August
31, 2000 and Telrad sold these businesses to Nortel Israel for
approximately $ 90 million as well as the value of the transferred assets.
The business operations that Telrad sold to Nortel Israel constitute
approximately 40% of Telrad's business.

         As a result of these transactions, Koor recorded a capital gain
(after tax) in the third quarter of 2000 of approximately NIS 258 million.

          Telrad retained its proprietary key system business known as SBS
and its telecommunications start-up businesses as well as continuing to
manufacture directly and through outsourcing arrangements (see discussion
below regarding the sale of the Ma'alot plant) and undertake research and
development on behalf of the new company and Nortel.

         As part of the overall agreement, Koor acquired Nortel's 20% stake
in Telrad for $45 million and invested, together with Telrad, $49 million
in shares and loans to Nortel Israel.

         In addition, Koor and Telrad were granted a put option to sell its
holding in Nortel Israel to Nortel and gave Nortel a call option. These
options are exercisable at the end of three years, at a price based on a
formula set forth in the agreement.

         As part of the agreements, the parties decided on the terms by
which Telrad will supply certain products to Nortel Israel and to other
Nortel entities.

         Sale of Ma'alot plant

         In September 2000, Telrad sold its plant in Ma'alot to Israel EMS
Ltd. ("SCI") for $31 million. This sale included inventory, fixed assets
and additional tangible property. In accordance with the sale agreement,
SCI undertook to manufacture for Telrad electronic products for a period of
at least four years. These electronic products are sold to Nortel after
Telrad's inspection and finalization. In addition SCI paid a premium to
Nortel and Telrad, Telrad's share was $5 million. As a result of the
transaction, Telrad record a capital gain, after tax, of NIS 20 million.

         Credit Risk Exposure

         As part of the above mentioned agreement with Nortel, Telrad
retained the receivables from the related sales to customers in countries
that typically include extended credit terms, that involve certain risks in
light of the political and economic conditions. Such countries include
Ethiopia, Papua New Guinea, Myanmar, the Palestinian Authority, Chile,
Bolivia and Georgia.

         As of December 31, 2000 and 1999, Telrad's long-term credit risk
exposure from these agreements amounted to NIS 153 million and NIS 216
million respectively.

         Dependence on Key Customers and Suppliers

         Telrad is substantially dependent upon its relationship with
Nortel as a key customer of Telrad's products. For the years ended December
31, 2000 and 1999, approximately 14.2% and 7.8% respectively, of Koor's
consolidated revenues and 61% and 43%, respectively, of Telrad's revenues
were derived from sales to Nortel. This dependence increased after the
completion of the transaction with Nortel Israel. In addition, Telrad also
relies on SCI as a key subcontractor for the products sold to Nortel.

         Cost Reduction Plan

         A major decline in the international communications industry began
at the end of the year 2000. Due to the decline, Nortel decided to reduce
significantly the purchases from Telrad.

         As a result of the sharp decline in its sales, the management of
Telrad decided, at the beginning of the year 2001, to take several steps to
minimize the damage.

         These steps, in addition to the Reorganization plan, included
reductions of costs, including shutting down 2 start-up subsidiaries,
pausing all recruitment of new personnel and cutting down in various costs
such as advertising, travel abroad and exhibitions.

         Telrad's Backlog.

         As of December 31, 2000, Telrad had no backlog of confirmed
orders, due to the decline of the Telecommunications market, compared to
aggregate backlog of confirmed orders of NIS 1,247 million, as of December
31, 1999.

         Defense Electronics Business

         The activities in this business are conducted through various
former subsidiaries of Tadiran, including Elisra, Tadiran Electronic
Systems Ltd. ("Tadiran Electronic") and Tadiran Spectralink Ltd. ("Tadiran
Spectralink," and collectively with Elisra and Tadiran Electronic, "the
Elisra Group"), and principally involves the design, manufacture,
distribution and support of a wide range of advanced electronic systems,
primarily for military purposes. Koor's defense electronics business had
revenues of NIS 1,333 million and NIS 1,147 million for 1999 and 2000,
respectively, representing 12.5% and 13.9%, respectively, of Koor's
consolidated revenues during such periods. In 2000, the majority of the
sales of defense electronic business were made to defense-related
customers.

         In 2000, the Elisra Group's sales to the Israeli Ministry of
Defense (IMDF) represented 17% of the Elisra Group's revenues.

<TABLE>
         The principal companies in the Defense Electronics business are:
<CAPTION>
                                         Percentage
                                         Of Equity
                                         Ownership       Principal Products and Services

<S>                                      <C>             <C>
Elisra Electronic Systems Ltd.           100.0           Electronic warfare, equipment and systems
Tadiran Electronic Systems Ltd.          100.0           Command, control, communications and intelligence
                                                         systems for defense applications
Tadiran Spectralink Ltd.                 100.0           Advanced data and video links for military use
BVR Systems (1998) Ltd.                  46.0(1)         Advanced military training and simulation systems

(1) The ordinary shares of BVR are quoted on Nasdaq (NASDAQ: BVRS).
</TABLE>

         On January 20, 2000, in an effort to simplify Koor's corporate
structure, Koor, Tadiran and Elisra entered into an agreement pursuant to
which Tadiran transferred all of its holdings in Elisra to Koor free of
charge, effective as of January 1, 2000. In addition, Tadiran transferred
its shares in Tadiran Electronic and Tadiran Spectralink to Elisra, also
free of charge. On June 28, 2000, upon receipt of the relevant approvals,
the share transfers were completed.

         Elisra Electronic Systems Ltd. ("Elisra")

         Elisra designs, develops and produces electronic warfare and
surveillance systems for military purposes, as well as a range of
electronic and microwave components for the commercial market. Elisra
offers a diversified range of combat-proven electronic warfare (EW)
systems, including radar warning systems, active countermeasure systems,
comprehensive self-protection systems, electronic intelligence (ELINT)
systems, sophisticated communication links, complemented by extremely
light-weight components. Elisra also develops a wide range of active and
passive microwave components. Microwave and RF components are essential to
nearly all intricate electronic equipment, as well as microwave
telecommunication and satellite systems.

         Tadiran Electronic Systems Ltd. ("Tadiran Electronic")

         Tadiran Electronic is engaged in providing solutions for a variety
of customers in the field of C4I (Command, Control, Communication,
Computing Intelligence), EW COMINT systems and spectrum management and
control systems.

         An array of electronic hardware and computer software is
incorporated into the C4I systems, which enable the collection, processing,
analysis and display of large quantities of information to facilitate
effective dissemination and accelerate decision making for better Battle
Management capabilities.

         Tadiran Electronic has developed a simulator for a Tactical
Ballistic Missile (TBM), Defense Battle Management Center for the U.S.
Ballistic Missile Defense Organization (BMDO) and the Israeli Ministry of
Defense. The simulator is currently operating and providing information for
both organizations.

         Tadiran Electronic is also a supplier of the Battle Management
Center of the Israeli Arrow Defense weapons system.

         Tadiran Electronic's activities in the field of electronic warfare
systems involve the design, development and distribution of a broad range
of strategic and tactical electronic warfare systems for ground, naval and
airborne platforms. Passive electronic warfare systems analyze and display
information with respect to incoming signals and weapons, while active
electronic warfare systems render hostile communication ineffective through
electronic countermeasure techniques.

         Based on electronic warfare technology, a new range of commercial
applications have evolved in the area of spectrum management control.
Integrated spectrum management and monitoring systems provide nationwide
solutions to various telecommunication administrations.

         Tadiran Spectralink Ltd.

         Tadiran Spectralink Ltd. develops and manufactures data and video
links for a variety of applications, including unmanned aerial vehicles,
guided weapons and satellite communications. Based on these links, command
and control systems for airborne and naval applications are developed.

         BVR Systems (1998) Ltd. ("BVR")

         As part of its strategy to focus on the defense electronics
business, in 1999 Koor and Elisra acquired a 28.6% interest in BVR. BVR is
a diversified world leader in advanced military training and simulation
systems, which offers highly efficient and cost effective solutions for the
simulation, training and debriefing needs of modern air, sea and ground
forces. Koor acquired its interest in BVR through open market share
purchases at various prices with an aggregate cost of NIS 20 million and
through the acquisition by Elisra of shares in BVR in a private placement
transaction for an aggregate consideration of NIS 14 million.

         During 2000, Elisra acquired shares of BVR from several third
parties and through a private placement for approximately $10 million.
Elisra also purchased all the shares held by Koor in BVR. During the third
quarter of 2000, a provision of approximately NIS 40 million was recorded
for the write-off of part of the goodwill, due to a decrease in the value
of the shares that is not of a temporary nature. As at the end of year
2000, Elisra's holdings in BVR amounted to 46%. Elisra has the right to
appoint five out of nine nominees to BVR's Board of Directors.

         Since September 30, 2000, BVR is consolidated in Koor's financial
statements.

         Sales to governments, their agencies and government-controlled
companies within the telecommunication equipment and defense electronics
businesses, are subject to substantial governmental regulation affecting
the award, performance, payment and termination of government contracts.

         As of December 31, 2000, the defense electronics business had an
aggregate backlog of confirmed orders of NIS 2,492 million ($ 617 million)
compared to NIS 1,848 million, as of December 31, 1999. In the first
quarter of 2001 the defense electronics business received new orders of
approximately $72 million.

         During the first quarter of 2001, the management of Elisra decided
to write-off an amount of $8.3 million from the balance of goodwill of
B.V.R. (a subsidiary of Elisra) based among other things on its business
operations, order backlog and updated evaluations regarding its marketing
potential. The write-off is presented at item "other income (expenses),
net".

         On March 17, 2001, a fire broke out in the plants of its
subsidiaries, Tadiran Systems Ltd. and Tadiran Spectralink Ltd. In the
opinion of the management of the above companies based on, among other
things, the opinion of its legal advisors, the value of compensation
received from the insurance companies will not be less than the amount of
fire damages. In estimating the said compensation, the amounts for less of
interim profits of $3.8 million recognized in previous periods for "work in
process" damaged in the fire, have not been included. These amounts are
reflected in the Consolidated Statement of Income in line item "other
income (expenses), net".

         Agrochemicals Business

         The activities in the agrochemicals business are conducted
primarily through the direct and indirect subsidiaries of Makhteshim-Agan
Industries Ltd. ("MA Industries"), which are Makhteshim Chemical Works Ltd.
("Makhteshim"), Agan Chemical Manufacturers Ltd. ("Agan") and Milenia Agro
Ciensias S.A. ("Milenia") (collectively, the "MA Group"). These companies
are leading international suppliers of generic crop protection products.
Makhteshim and Agan are Israel's largest producers of insecticides,
fungicides and herbicides. Agan is also a manufacturer of synthetic aroma
chemicals. The agrochemicals business had revenues of NIS 3,460 million and
NIS 3,541 million in 2000 and 1999, respectively, representing 41.8% and
33.2%, respectively, of Koor's consolidated revenues during such periods.
International activities, primarily sales in Europe, North America and
Latin America, accounted for 89.2% and 89.3% of the Agrochemicals business'
revenues in 2000 and 1999, respectively.

         The principal companies in the agrochemicals business are:
<TABLE>
<CAPTION>
                                     Percentage
                                     Of Equity
                                     Ownership       Principal Products and Services

<S>                                  <C>             <C>
Makhteshim-Agan Industries Ltd.        59.9(1)       Holding Company
Makhteshim Chemical Works Ltd.       100.0(2)        Insecticides and fungicides and other chemicals
Agan Chemical Manufacturers Ltd.     100.0(2)        Herbicides and synthetic aroma chemicals
Milenia Agro Ciensias S.A.           100.0(2)        Formulation and distribution of crop protection
                                                     chemicals
</TABLE>
(1)  The ordinary shares of MA Industries are traded on the TASE.
(2)  Indicates the percentage of direct ownership by MA Industries.

         The Agrochemicals Business Environment in 2000

         During 2000, the global agrochemicals market decreased by
approximately 1% in real terms which the MA Group believes was due to the
following factors: the low prices for agricultural crops, the reduction in
the amount of land cultivated in western Europe in the wake of the land
set-aside policy, the use of genetically engineered seeds in the U.S. and
Argentina. At the same time, the year 2000 was characterized as a year in
which the expansion of the use of genetically engineered seeds slowed.

         The slump in agricultural commodity prices (soy, wheat, and corn)
continued in 2000, as a result of the oversupply and erroneous planting
plans. In 2000, there was an increase of 3.3% in the soy planted area and
6% in output, whereas wheat output fell by 0.5% and corn increased by 0.3%.
In the near future, no significant improvement is expected in the price
levels of these commodities.

         2000 was the second year in which there was significant use of
genetic engineering technologies in agriculture. However, this market
continues to comprise less than 10% of the total market. For now, the
growth in this sector appears to have slowed considerably. The key business
emphasis remains on the cost-benefit advantages of using genetically
engineered inputs (input traits). However, the broad opposition shown to
their use, mainly among European and Japanese consumers, considerably
reduced the willingness of additional farmers to use these technologies.

         In 2000, the move towards consolidation among the major
multinational companies in the agrochemicals industry continued, and
resulted in fewer but larger competitors in this field. This wave of
mergers created huge gaps between the turnovers of the merged companies and
of companies that did not participate in the current round of mergers. This
fact puts pressure on the latter to continue to search for opportunities to
expand their operations or, alternatively, to withdraw from the market. In
any event, it appears that the merger trend will continue. As a result of
the mergers, most of the companies were forced to divest several of their
products as a condition for approval of the mergers by anti-trust
authorities. For example, Syngenta divested products with annual sales
turnover of hundreds of millions of dollars in the first round.
Consequently, a relatively large number of attractive products were put up
for sale, some at favorable prices. The sale of additional products is
expected as the merger process continues, with the rationalization of the
product portfolios of the merged companies intensifying. This phenomenon
creates one-time opportunities for companies that are focused and committed
to the industry, including Makhteshim-Agan.

         Already in 1999, the MA Group assessed that the industry's
restructuring would create business opportunities. The focus was on
maximizing the potential to substantially improve Koor's portfolio. A
mapping and analysis was performed of the products offer for sale in
tenders. These were a result of requirements by the European Commission in
order to approve the various mergers, and internal decisions of the merging
companies to cut the number of products in their new portfolio. Koor's
alertness and ability to react quickly led to its winning several tenders.
At the instruction of the anti-trust commissioner, Syngenta was obliged to
sell several products as a condition for approval of the merger between
Novartis and Zeneca. After evaluating all the products offered for sale,
and their suitability to the MA Group's strategy, Koor participated in
three tenders, and won them all.

         Details on the products are presented below:

         o   Propaquizafop is a herbicide used on weeds in broad-leaved
             crops such as cotton, rapeseed, soya, potatoes, peanuts, green
             beans and various other vegetables. The product is protected
             by patents that are being transferred to a subsidiary as part
             of the transaction, and is intended mainly for the markets of
             Western Europe.

         o   Tau Fluvalinate is an insecticide used against aphids. It is a
             "green" product (environmentally friendly) and is used mainly
             in grains and stone crops, in orchards and in flowers. The
             product is intended mainly for the markets of Western Europe.

         o   In addition, distribution rights were acquired for a group of
             products in Scandinavian countries that contain 5 fungicides
             formulated to treat grain crops: Corbel, Tilt Top, Tilt,
             Stereo and Tern. The products are considered leaders in their
             fields.

         In addition, the acquisition of the following products from
         Aventis was completed:

         o   Guazatine, also known by the commercial name "Panoctine", is a
             material used to disinfect grain and cotton seeds, and is
             formulated to prevent diseases from developing in the seed or
             the soil, mainly the disease Fusarium spp. The material
             constitutes an excellent marketing platform for joining with
             the Group's existing products for the seed treatment market.
             This product is sold mainly in Northern and Western Europe.

         o   Clofentezine, which is also known by its commercial name,
             Apollo, is a product formulated to protect plants from mites,
             which infest mainly orchards, citrus, vines and rapeseed. This
             is a relatively new product that is considered environmentally
             friendly. Apollo is one of the most important materials in its
             field. It is synergetic with the Group's existing product
             portfolio, and will contribute to strengthen the Group's
             marketing position. The product's principal target markets are
             the U.S., Japan and Western Europe.

         All of these acquisitions are strategic to MA Group, and their
objective is to strengthen its marketing position in different countries
and in different crops, while maximizing the creative synergy.

         In view of the condition of the market, MA Group decided at the
end of 1999 to implement an internal restructuring plan, which includes
consolidating manufacturing facilities, both in Israel and abroad; reducing
the number of employees, particularly among administration and management;
across-the-board cost-cutting measures; focusing on the MA Group's
essential businesses; and improving the MA Group's operating cash-flow to
take advantage of opportunities within the industry as they arise.
Specifically, the MA Group consolidate its manufacturing plants in Brazil,
close down its Be'er Sheva-based production facilities and relocate
production to the MA Group's main plant in Ramat Hovav. During 2000,
savings of more than $10 million were achieved (compared with plans for $8
million), by significantly reducing fixed expenses and cutting manpower.
During the year, the MA Group continued the process of optimizing working
capital, as a result of the measures taken with regard to customer credit,
inventories and supplier credit. Consequently, for the second running year,
there is significant improvement in cash flows from operating activities,
which totaled $128.5 million (NIS 519.3 million).

         Crop Protection

         Generic agrochemicals offer an alternative source for widely
utilized chemicals previously manufactured under patent by larger
research-based chemical manufacturers. Research-based chemical
manufacturers often focus their resources on developing new agrochemicals
and supply of additional chemicals by generic manufacturers, such as
Makhteshim and Agan, to supplement their capacity. In the next few years,
as a result of decreased resources commited to research and development of
new agrochemicals products and expire of existing patents, significant
number of widely used agrochemicals are expected to lose patent protection
in many geographic regions (primarily South America), substantially
increasing the available market for sales by generic manufacturers. The off
patent component of the agrochemical industry is anticipated to grow from
about 55% today to over 70% of the market by 2004. In addition, the
modernization of the agricultural industries of Eastern Europe and other
developing countries offer increasing sales opportunities for both
research-based and generic agrochemical manufacturers.

         The major competitors of this business in the international market
for agrochemicals are major international research-based chemical
producers. The major international chemical producers have significant
influence on the prices of most of Makhteshim's and Agan's products. In the
Israeli market, Makhteshim and Agan compete with importers with respect to
most of their products, and Makhteshim competes with both importers and
Israeli producers with respect to non-pesticide products.

         The development of new generic products require significant
investments for research, licensing, establishment of production and
marketing facilities. The MA Group typically focus on products that require
a high degree of sophistication in process development and production,
which are, therefore, less susceptible to extensive competition. Their
prices, therefore, tend to be relatively higher than sectors where
competition is more prevalent. For many of these products, the MA Group is
the world's second largest manufacturer, with the original research-based
chemical company maintaining the majority share. Koor believes that the MA
Group's ability to compete with major international research-based chemical
companies and other generic chemical manufacturers is based upon their
flexible manufacturing facilities, advanced research and development
capabilities, fulfillment of stringent registration and licensing
requirements of various countries, compliance with environmental
regulations, material purity, worldwide marketing and cooperation with
certain multinational companies regarding the production and marketing of
numerous products.

         An essential component of the MA Group's ability to maintain its
market share on the worldwide market is the successful introduction of new
generic products immediately after the expiration of the patents validity.
In 1998, an amendment was passed to Israeli Patents Law 1967, which has
certain beneficial ramifications for the Israeli agrochemical industry.
Under this amendment, (i) subject to certain conditions, research
activities on a patent during the patent period for the purposes of
production deployment after the patent expiration will not constitute
misuse of an invention, and (ii) the period of patents in the agrochemical
industry cannot be extended. These changes should facilitate the
introduction of new products by the MA Group.

         The MA Group plan to develop, over the next several years
additional agrochemical products, including fungicides, insecticides,
herbicides and biotechnological products, based primarily on a substantial
number of patents of other parties expiring within the next few years. MA
Group's total average investment program for the next several years has an
estimated yearly budget of $50 million and includes substantial investments
in these products. Recently, the MA Group purchased the right to
manufacture and market certain new agrochemical products from the
developers of such markets. The MA Group also entered into an additional
co-production agreement with Syngenta (Zeneca).

         New research and developments in the field of trans-genetic plant
species that can tolerate insects and in plant species that are resistant
to fungal diseases may have an adverse impact on the demand for the MA
Group products during the next few years, depending upon the success of
such developments.

         Makhteshim and Agan market their crop protection chemicals
primarily to foreign manufacturers which use such chemicals in the
formulation of a wide range of products and sell the formulations to
distributors and end users. Agan manufactures over twenty different active
ingredients which are sold as technical grade materials and "ready"
formulations. These technical grade materials are used in the formulation
of a wide range of herbicides and plant growth regulators. The "ready"
formulations are sold to distributors. Agan sells its synthetic aroma
chemicals principally to the detergent, soap and cosmetics industries.

         No single product manufactured and sold by Makhteshim and Agan
accounted for more than 10% of Makhteshim's and Agan's total sales in 2000
or 1999.

         Foreign Activities

         As part of its strategy to focus on its core businesses and to
increase market penetration in these fields, Koor has continued to expand
its businesses in the Agrochemicals business abroad.

         In August 2000, Makhteshim-Agan completed the acquisition of the
minority shares in Milenia, and now has full ownership of its shares.

         In December 1998, MA Group acquired a 45% interest in Productos
Fitosanitarios Proficol El Carmen S.A. ("Proficol"), one of the leading
agrochemicals distribution companies in Colombia. In December 2000, MA
Group acquired another 12.5% of Proficol (Colombia), achieving a stake of
57.5%. Koor believes that Proficol constitutes a significant anchor for the
MA Group activities in the Paco-Andeau region (the northern South American
countries).

         In the beginning of 1999, Milenia established a joint venture with
Kasba S.A., a leading marketer of agricultural inputs (including
fertilizers, seeds and crop protection chemicals) in Paraguay.

         Other Matters

         In July 1999, the MA Group acquired a 50% interest in Luxembourg
Pharmaceuticals Ltds ("Luxemburg"), a manufacturer of pharmaceuticals and
medical instruments for a total consideration of $7.1 million. Concurrently
with the acquisition the MA Group sold to Luxembourg its holdings in a
subsidiary Koor Medica Ltd. for $1 million. In July 2000, The MA Group
completed acquire of the remaining of Luxembourg .

         From time to time, certain of the MA Group's agrochemicals
products have been the subject of legislative or other initiatives to
curtail or regulate their use due to environmental, health and safety
concerns. Also, most countries require MA Group to obtain regulatory
approval prior to selling newly-introduced products, procedures which are
both time-consuming and costly. For a discussion of certain governmental
regulations applicable to the Agrochemicals business, see "Regulation."

         Venture Capital Investments

         As part of Koor's strategic plan, Koor is exploring new investment
opportunities in high growth potential businesses located in Israel and
around the world in the fields of telecommunications and internet
technology biotechnology and life sciences.

         On 2 January, 2000, Koor and a wholly owned subsidiary established
a registered partnership called "Koor Corporate Venture Capital" ("Koor
CVC"), within which Koor is concentrating its investment activities in
venture capital funds and in high-tech companies with growth potential. The
action was taken in implementation of Koor's strategic decision to increase
its investments in those fields.

         In this framework, Koor CVC signed documents for joining, as a
limited partner, venture capital funds: Polaris Venture Capital Fund III
L.P., BRM Capital Fund L.P., Genesis Partners II (Israel) L.P., Carmel
Software Fund (Israel) L.P., Synergy Ventures Partner (BVI) LT, Star
Management of Investment No II (2000) L.P., Delta Ventures (Ltd.) and in
which it committed to invest up to a total of $73 million. Koor CVC will be
entitled to permanent representation on the advisory committees of some of
the aforementioned funds.

         Koor CVC also signed agreements with various start-up companies,
mostly new companies to invest in them directly up to a total of $92
million.

         As if December 31, 2000, Koor had invested, through Koor CVC, in
venture capital funds and start-up companies some $94 million including $8
million to acquire Tadiran Scopus Ltd. from Tadiran Ltd.

         During the fourth quarter of 2000, Koor invested, through Koor
CVC, a total of approximately $24 million in start-up companies (Camelot
Information Technologies, Orsus Solutions, Pharmaspec, Followap, Extent
Technology, Telespree), and also invested some $6 million in venture
capital funds (Genesis Partners II Israel, BRM, Delta, Carmel, Synergy,
Polaris Venture).

         During the first quarter of 2001, Koor invested through Koor CVC
an amount of $17 million in start-up companies of which three are new
investments in the fields of communications and software (Comsys, WanWall,
AOS), one new investment in the field of life sciences (Medgenics) and two
further investments in existing companies (Followap, SigmaOne) and
transferred $2 million to venture capital funds (BRM, Polaris Venture), in
the framework of its undertaking to invest in these companies.

         During the first quarter of 2001, Scopus Ltd. (a subsidiary of
Koor CVC) issued preferred shares to a third party in consideration for
$8.7 million. The obligation for the preferred share is presented with the
minority rights item.

         During the second quarter of 2001, the partnership invested
additional investments in the portfolio companies and funds and in new
companies an amount of about $2 million (Genesis Partners II Israel,
Sigmaone, Simbionix).

         SigmaOne Communications Inc. ("SigmaOne")

         In 1997, Tadiran together with certain U.S. investors established
SigmaOne, a U.S. subsidiary, to engage in the marketing of technologies and
solutions for locating cellular phone users who have dialed the emergency
service number to assistance centers (911).

         During 2000, Koor CVC invested $5 million in 2.5 million shares of
SigmaOne. In addition, during 2000 and the first 6 months of 2001, Koor CVC
provided SigmaOne with loans in a total sum of $8 million to finance
operating activities.

         During March 2001, Koor CVC wrote off an investment of $5 million
in SigmaOne and in addition made a provision of $8 million for SigmaOne's
debt to the partnership. Concurrently a negative investment registered in
the past in Tadiran was written off. The total net loss, resulting from the
write off of the investments in SigmaOne is $8.9 million.

         On May 4, 2001, Koor CVC sold its holdings in SigmaOne (50%) to
the KL-LLC Group. On the same date, Koor CVC converted the existing loan to
SigmaOne into a new loan with an option to convert the loan amount to 15% of
SigmOne's shares.

         Other Businesses

         Koor has an interest in certain service industries, mainly
tourism, real estate and trading and in the production of batteries. In the
previous years this segment also included electrical appliances, software,
food, consumer products and metal products.

         The principal companies in other businesses are:

<TABLE>
<CAPTION>
                                      Percentage
                                      Of Equity
                                      Ownership      Principal Products and Services
<S>                                    <C>           <C>
Sheraton Moriah (Israel) Ltd.           55.0         Hotel chain
Knafaim-Arkia Holdings Ltd.             28.1(1)      Aviation and tourism services
Koor Properties Ltd.                   100.0         Real estate
Koor Trade Ltd.                        100.0         International trade
United Steel Mills Ltd.                 72.7         Steel Manufacturer
------------------
(1) Not consolidated and not included in business data. The ordinary shares
of Knafaim are traded on the TASE.
</TABLE>

         Tourism

         Koor's interests in Israel's tourism industry include ownership
and management of hotels and resorts, and other tourism-related services,
such as airlines. The tourism business had revenues of NIS 621 million and
NIS 588 million for 2000 and 1999, respectively.

         Sheraton Moriah (Israel) Ltd. ("Sheraton Moriah")

         On January 24, 1999 Koor and Sheraton International Inc. won a
public tender for the purchase of a 100% interest in Sheraton Moriah. On
April 12, 1999 the transaction was completed based on a value of NIS 266
million ($63.5 million). In October 1999, Koor completed the sale of a 20%
interest in Sheraton Moriah to a subsidiary of Bank Hapoalim Currently Koor
has an 55% interest in Sheraton Moriah.

         On December 30, 1999, Koor merged its other hotel operations,
including its interest in Herod's Hotel in Eilat into the Sheraton Moriah
network. Prior to the sale Koor recorded a NIS 38 million provision for a
write off in value of these hotels.

         The Sheraton Moriah hotel network consists of approximately 3,000
rooms in 11 hotels (owned and leased) in major tourist locations in Israel,
operating under the following brand names: Sheraton (7 hotels), Luxury
Collection (one hotel) and Sheraton Four Points (three hotels).

         Knafaim-Arkia Holdings Ltd. ("Knafaim")

         Koor holds a 28.1% interest in Knafaim. Knafaim owns a variety of
businesses in the travel and tourism industry, including Arkia Israeli
Airlines Ltd., Israel's largest domestic airline. Arkia also purchases and
leases back aircraft and operates charter flights to Europe. Knafaim also
holds other companies that supply various tourism services, both
domestically and internationally.

         Histour Eltiv Ltd. ("Histour")

         On February 21, 2000, Koor completed the transfer of its holdings
(51%) in Histour which provides tourist services in Israel for the release
of Koor's guarantees of the liabilities of Histour. In addition, Koor
invested approximate NIS 16 million in Histour in exchange for preferred
shares. Koor's capital gain after tax amounted to approximately NIS 2
million.

         Y.D. Vehicles and Transport Ltd. ("Y.D.")

         On June 4, 2000, Koor sold its holdings of approximately 33.3% in
Y.D., an Israeli car rental and leasing company which operates the
concession of Europe-cars, for approximately NIS 16 million. The capital
gain to Koor, after tax, amounted to approximately NIS 1 million, and was
recorded in the second quarter of 2000.

         Real Estate

         Koor Properties Ltd. ("Koor Properties")

         Koor Properties owns and develops real estate in Israel. In 1999
Koor Properties assumed the management of seven Tadiran sites with an
aggregate area of 250,000 square meters. Annual rent from these sites is
NIS 47 million ($11.4 million). In addition, Koor Properties owns real
property of 570,000 square meters in the aggregate, of which a significant
part is undeveloped and the rest is in various phases of development. Koor
Properties has entered into several agreements with respect to this
property to build industrial and commercial parks and to build, renovate
and lease buildings. The land is being developed according to market
conditions, and the development is being financed through bank loans
secured by the land. Koor Properties also owns a prefabricated concrete
element plant.

         In December 1999, Koor Properties purchased Soltam Ltd. interest
(50%) in an industrial park at Yokneam for NIS 21 million ($5 million).

         On October 3, 2000, Koor Properties, a wholly owned subsidiary of
Koor, sold its 50% holdings in Carmel Gate Ltd., a high-yield real estate
company, to APS Carmel Gate Holdings for $20 million. The capital gain to
Koor, after tax, amounted to approximately NIS 52 million which was
recorded in the fourth quarter of 2000.

         On October 11, 2000, Koor Properties entered into a series of
agreements with various companies of the Delek Group. These agreements
related to the rights of Koor Properties in various real estate assets
covering a total area of about 135 dunams or about 34 acres, that are
designated as agriculture, industry and residential properties. In
addition, Koor Properties undertook to build for the Delek Group on certain
portions of this land, a logistics center covering about 10,000 square
meters. The total consideration for the rights in the land and for the
construction of the building was approximately $20.8 million. The capital
gain to Koor, after tax, amounted to approximately NIS 23 million and was
recorded in the fourth quarter of year 2000.

         On December 25, 2000, Koor Properties sold all its shares in Yuval
Gad Ltd. for approximately $6.5 million. The capital gain to Koor, after
tax, amounted to approximately NIS 4 million.

         Trading

         Koor Trade Ltd. ("Koor Trade")

         Koor Trade imports, exports and distributes a broad range of
industrial, agricultural and consumer products through its worldwide
network of offices, including offices in Europe, Asia, Latin America and
Australia. Koor Trade had revenues of NIS 111 million and NIS 121 million
in 2000 and 1999, respectively. Koor Trade owns a 49% equity interest in
Balton, an English international trading company, which is engaged in
trading activities in seven countries in Africa relating to agricultural,
telecommunications, electromechanical and air-conditioning equipment,
construction and other projects.

         Steel

         United Steel Mills Ltd. ("USM")

         United Steel Mills Ltd. is Israel's largest manufacturer of steel
reinforcement bars, wire rods and wire mesh. USM supplies approximately 40%
of the concrete reinforcement products used in the Israeli construction
market and the remainder is supplied by another Israeli manufacturer and by
importers. Most of the products manufactured by USM are sold in Israel, the
Gaza Strip and the West Bank. USM had revenues of NIS 407 million and NIS
449 million in 2000 and 1999, respectively.

         USM owns and operates six main production facilities, including a
scrap yard and a shredding plant that processes steel scrap, a melting
plant, two rolling mills and a plant that manufactures wire mesh, used in
the construction industry to reinforce concrete, and a range of other steel
products used in manufacturing.

         The Israeli government does not materially restrict the import of
steel to Israel, although certain other foreign countries protect their
local industry in various ways, such as by imposing import and other
tariffs. Imports of foreign steel have adversely affected sales by USM.

         As a result of increased dumping and low selling prices, USM's
recorded net losses of NIS 31 million and NIS 77 million in 1999 and 1998,
respectively. As a result of such continuing losses, USM experienced
liquidity problems, which led USM and Koor to conduct negotiations with
USM's creditors to reach an agreement to reschedule USM's debt. In 1999,
Koor recorded a write off of NIS 102 million for its total investment in
USM's equity and the balance of Koor's loans at December 31, 1999.

         On March 2, 2000, USM announced that it had not obtained an
arrangement with it creditors and that the negotiations between the parties
had been terminated.

         On March 16, 2000, USM and its subsidiaries filed an application
in the Haifa District Court for a stay order on proceedings pursuant to
Section 350 of the Companies Law, 1999 and for the appointment of a
trustee. The court acceded to the application and gave an order to freeze
proceedings against the applicants, making it impossible to continue or
commence any legal proceeding against the applicants without court
approval. The court did this to enable the applicants to formulate a
comprehensive recovery plan and a proposal for a creditors' arrangement,
which will be submitted to the court. In addition, the court decided to
revoke the powers of USM's Board of Directors and to appoint a trustee for
the period of the order. In the decision, all management powers in Koor and
its subsidiaries were vested in the trustee. Furthermore, the court decided
to approve the approach by the trustee to various business corporations, to
interest them in acquiring and/or operating Koor and/or its subsidiaries.

         Koor agreed to the stay on proceedings and, acting ex gratia, in
March 2000 made NIS 15 million available in credit for the trustee's
current operation at USM. If no deficit is generated in the trustee's fund
account, this special credit will have, on certain terms, a status of a
preferred debt senior to USM's other creditors. During the third quarter of
2000, a provision of NIS 15 million was recorded in Koor's financial
statements for this special credit.

         On December 16, 2000, with the expiration of all possible periods
set out in the law to stay the proceedings, the Haifa District Court
decided to extend the stay of proceedings for a further six months, after
receiving the consent of a general meeting of creditors. In order to enable
continued stay of the proceedings, Koor agreed, ex gratia to provide
additional credit to the trustee in the sum of NIS 6 million, subject to
the same conditions that applied to the special credit. The additional
credit was transferred to USM on January 17, 2001. Since the additional
credit was provided on the same conditions and under the same limitations
as applied to the special credit, a provision of NIS 6 was recorded in
Koor's financial statements.

         Mashav Enterprise and Development Ltd. ("Mashav")

         On January 6, 2000, Koor sold its entire holding (50%) in Mashav
to Clal Industries and Investments Ltd. for approximately NIS 890 million.
Koor also received 47.5% of the share capital of Mashal Alumina Industries
Ltd., a former subsidiary of Mashav, whose business is the development of a
process for producing alumina an aluminum compound. The net capital gain to
Koor in respect of this transaction amounted to approximately NIS 234
million (after allocation of NIS 129 million deferred taxes). Prior to the
sale, on December 30, 1999, Koor received dividends from Mashav in the
amount of NIS 355 million.

         On October 5, 1997 and January 5, 1998, in authorizing the merger
of the Claridge Group and Koor, the Controller of Restrictive Trade
Practices imposed certain restrictions on both Koor and the Claridge Group
regarding their joint holdings with Clal Industries and IDB in Mashav
(including Granite) and in ECI. In accordance with the restrictions, Koor
entered into an agreement in April 1998 with Clal Industries pursuant to
which Clal Industries received an option to acquire 25% of Mashav's share
capital from Koor.

         In accordance with the April 1998 agreement, in May 1998 Mashav
sold its interest in Tambour Ltd. for NIS 128 million and on July 8, 1998,
Mashav divested its holding in Granite for a total consideration of
approximately NIS 778 million. In 1998, Koor received a dividend from
Mashav of NIS 394 million distributed out of these proceeds and an
additional dividend of NIS 187 million.

         Middle East Tubes Company Ltd. ("Metco")

         Metco is the largest producer of steel pipes in Israel. Metco
manufactures a wide range of welded steel pipes for water and sewage
infrastructure, plumbing, oil and gas transportation and the transportation
of petrochemicals and industrial liquids, as well as pipes for the
construction industry.

         On March 30, 2000, Koor sold its entire holding of approximately
76% in Metco for approximately NIS 83 million, to Yakobinski Lerer Civil
Engineering Contractors Ltd. (of Gaon Holdings Group Ltd.) and 3-I
Investment in Industry Ltd. Following a loss of NIS 25 million which was
reported by Metco in the first quarter of 2000, Koor recorded a capital
gain of approximately NIS 20 million in the same quarter.

         Other Divestitures

         Tadiran  - software companies

         On March 9, 1999, May 16, 1999 and June 1, 1999, Tadiran divested
its holdings in three software development and services companies for a
total consideration of NIS 464 million. Koor recorded in 1999 NIS 244
million capital gain before taxes from these transactions.

         Tadiran Telematics Ltd.

         On February 15, 2000, Tadiran sold its entire holding (100%) in
Tadiran Telematics Ltd., to Ituran Location and Control Ltd. for
approximately NIS 31 million. The capital loss to Koor of NIS 7.5 million
was recorded in 1999.

         Tadiran Appliances Ltd. ("Tadiran Appliances")

         Tadiran Appliances is major Israeli manufacturer and distributor
of no-frost refrigerators, air conditioners and mini-bars. Tadiran
Appliances also imports and distributes in Israel certain brand name and
private label electrical appliances. On March 30, 2000, Tadiran sold its
entire holding (approximately 56%) in Tadiran Appliances to Nechushtan
Investment Co. Ltd. for approximately NIS 134 million. The capital loss to
Koor at NIS 13 million was recorded in 1999.

         Tadiran Batteries Ltd. (Tadiran Batteries)

         Tadiran Batteries is a major Israeli manufacturer and distributor
of batteries, including high technology lithium thionly chloride batteries.
Tadiran Batteries' lithium thionyl chloride batteries are principally used
as a primary and backup power supplies for utility matters, communication
equipment, smoke detectors, burglar alarms and other products.

         On July 25, 2000, Tadiran sold Tadiran Batteries, its wholly owned
subsidiary, to SAFT Participations S.A. for approximately $33 million
(including a dividend). The capital gain to Koor, after tax, was
approximately NIS 56 million, and was recorded in the third quarter of
2000.

         Food and Related Products

         In October 1999 Koor completed the sale of its 75% interest in
Phoenicia Glass Works Ltd, Israel's sole producer of glass containers,
bottles and jars for food uses for NIS 6 million. In addition, in July 1999
Koor completed the sale of Yona Fishing and Industry Ltd. that produces
canned and smoked fish.

         Metal Products

         In August 1999, Koor completed the sale of its interest (100%) in
Koor Metals Ltd. for a total consideration of NIS 11 Million.

         In January 2000, Koor completed the sale of all its holdings (51%)
in Merkavim Metal Works Ltd. to Meir Automobiles and Trucks Co. Ltd. for
approximately NIS 18 million. The capital gain to Koor in respect of this
transaction amounted to approximately NIS 4 million.

         Q Group

         On January 18, 2000, Koor announced that following completion of a
tender offer for the purchase of the holdings of various shareholders in Q
Group, in which the Koor Group held approximately 23%, Koor sold its
holdings in Q Group for approximately NIS 41 million. The capital gain to
Koor from this sale (before tax) amounted to approximately NIS 30 million,
and was recorded in the first quarter of 2000.

         Koor Finance Ltd. ("Koor Finance")

         On March 16, 2000, the sale of Koor's holding (20%) in Koor
Finance to Menorah Holdings and B. Gaon Holdings Ltd. was completed by
virtue of a put option which was granted, in consideration of approximately
NIS 12 million. The capital gain after tax which was generated in the sale,
amounted to approximately NIS 2 million.

         Other Investments

         Electric Fuel Corporation Ltd. ("EFC")

         On March 15, 2000, Koor entered into an agreement with Electric
Fuel Corporation Ltd. ("EFC"), a public company whose shares are traded on
the Nasdaq Stock Market, pursuant to which EFC would acquire Tadiran
Batteries from Tadiran and Koor would invest $10.5 million in EFC in
exchange for an allotment of approximately 14% of the EFC common stock to
Koor and Tadiran. In May 2000, the sale of Tadiran Batteries was cancelled
by mutual consent. In May 2000, Koor invested $10 million in the share
capital of EFC. On June 15, 2000, Tadiran entered into an agreement to sell
its interest in Tadiran Batteries for a total consideration of
approximately $33 million.

         On December 31, 2000, following the divestiture of about 25% of
the investment, the investment in EFC shares is presented as a current
investment in listed securities in the amount of approximately $4 million
or approximately 4% of EFC's share capital.

         Nice-Systems Ltd. ("Nice")

         In 2000, Koor purchased 648,789 ordinary shares of Nice, a public
company whose shares are traded on the Nasdaq Stock Market (or
approximately 5.0% of Nice's outstanding shares), through open market
purchases for a total of approximately $16 million.

Suppliers

         The companies engaged in the Koor Group's businesses purchase the
materials and components used in their products from numerous independent
suppliers. These materials and components are not normally purchased under
long-term contracts. Most of the items purchased by these businesses are
obtainable from a variety of suppliers, and such businesses normally
maintain alternative sources for major items. In some cases these companies
have annual purchasing agreements with their major suppliers, which
establish prices, quality thresholds and delivery schedules.

         To date, the Koor Group's businesses have not experienced any
significant difficulty in obtaining timely delivery of supplies, and
management believes these businesses maintain adequate inventories of
certain significant imported components. However, with respect to certain
components, there maybe a lengthy period of preparation for production and
adaptation for the businesses requirements. Accordingly, short-term
shortages may arise in the event that these companies were required to
change suppliers without advance planning. The unavailability of such
components during such change-over period could result in production
delays, which might adversely affect the business.

Research and Development

         The companies in the Koor Group in the Telecommunication
Equipment, Defense Electronics, Venture Capital Investment and in the
Agrochemicals business are actively engaged in research and development
programs intended to develop new products, manufacturing processes, systems
and technologies and to enhance existing products and processes. Research
and development is conducted throughout the Koor Group, and is funded by a
combination of Koor's own resources and grants from the Israeli Government
and, in the case of the Elisra Group, the Israel-United States Bi-National
Research and Development Foundation ("BIRD-F"). The Koor Group believes its
research and development effort has been an important factor in
establishing and maintaining its competitive position. The Koor Group has
increased its research and development expenditures significantly in the
past few years and intends to continue such expenditures in the future.

         The following table sets forth the percentage of gross research
and development expenditures incurred by the Koor Group's principal
businesses in 1999 and 2000 as a percentage of the total sales of these
businesses:

                                                   1999        2000
                                                     %           %
                                                     -           -
            Telecommunications Equipment           10.2         9.9
            Defense Electronics                     5.3         4.2
            Agrochemicals                           1.9         2.3

         The Koor Group's updated research and development efforts have
resulted in an increase in the sales of internally designed products.
Management believes that research and development in high technology areas,
such as the Telecommunication Equipment, Defense Electronics and
Agrochemicals businesses, is important to the Koor Group's future growth,
particularly in products targeted for export markets. Accordingly, it is
anticipated that the foregoing businesses will account for a majority of
the Koor Group's research and development efforts in the future. As part of
its research and development programs, the Koor Group not only seeks to
develop new products, but also seeks to apply newly developed technologies
to improve its existing products.

         In each of the last three fiscal years, the Koor Group received
grants from the Government of Israel through the Office of the Chief
Scientist (the "OCS") for the development of certain products. The Koor
Group generally may receive from the OCS 20% to 66% of certain research and
development expenditures for particular projects. Under the terms of
Israeli Government participation, a royalty of 3% to 5% of the net sales of
products developed from a project funded by the OCS is generally required
to be paid, beginning with the commencement of sales of products developed
with grant funds and ending when 100% to 150% of the grant is repaid. The
Koor Group has paid in the past, and currently pays, royalties on sales of
such products. Terms of Israeli Government participation also require that
the research and development be conducted by the applicant for the grant as
specified in the grant application and that the manufacturing of products
developed with government grants be performed in Israel, unless a special
approval has been granted. Separate Israeli Government consent is required
to transfer to third parties technologies developed through projects in
which the government participates. Such restrictions, however, do not apply
to exports from Israel of products developed with such technologies. From
time to time the Government of Israel has revised its policies regarding
the availability of grants and participation, and there can be no assurance
that the Government's support of research and development will continue in
the future. In addition, in order to be eligible for the governmental
grants, programs and tax benefits, the Koor Group must continue to meet
additional certain conditions, including making certain specified
investments in fixed assets. Should the Koor Group fail to meet such
conditions in the future, it could be required to refund grants or tax
benefits already received (together with interest and certain inflation
adjustments). Although the Koor Group expects that the Approved Enterprise
status of its facilities and programs will continue, the termination or
reduction of certain grants, programs and tax benefits (particularly
benefits available to the Koor Group as a result of the Approved Enterprise
status of substantially all of the Koor Group's facilities and programs)
could have a material adverse effect on Koor's results of operations and
financial condition. See Note 16G(2) of Notes to Financial Statements.

         In May 1999, Israeli Ministry of Finance decided to place limits
on the funds OCS grants to Israel's 24 largest companies. The full extent
of the decision is unknown, however it may have a material adverse effect
on Koor's results of operations.

         The following table shows, for each of the periods indicated, the
gross research and development expenses of the Koor Group, the portion of
such expenses that were funded by the Israeli Government (primarily through
the OCS) and BIRD-F, and the net cost to the Koor Group of its research and
development expenses:
<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                        1998             1999             2000             2000
                                                   -------------------------------------------------------------------
                                                                            (in thousands)
                                                                     Adjusted NIS                      US Dollars
                                                   -------------------------------------------------------------------
<S>                                              <C>              <C>              <C>                 <C>
Gross research and development expenses                583,778          443,367          366,680            90,740
Portion funded by the Israeli Government and
BIRD-F(1)                                               56,180           15,645            6,872             1,700
Net research and development expenses                  527,598          427,722          359,808            89,040
------------------
(1)  Net of royalties.
</TABLE>


Competition

         In 2000, the majority of Koor's revenues from telecommunication
equipment, defense electronics and agrochemicals businesses were derived
from international sales. The companies comprising these businesses are
focusing on developing new markets to increase international sales. The
worldwide marketing of products in each of these businesses is highly
competitive and certain competitors are substantially larger and have
substantially greater financial, production and research and development
resources, more extensive marketing and selling organizations, greater name
recognition and longer selling experience than Koor. Some of the
competitors are also able to provide their customers with more direct
financing or greater access to long-term, relatively low-cost government
loans to finance equipment purchases.

Patents and Intellectual Property

         Companies in the Koor Group own and control a substantial number
of patents, trade secrets, confidential information, trademarks, trade
names and copyrights which, in the aggregate, are of material importance to
the Koor Group's business. Management is of the opinion that the Koor
Group's business, as a whole, is not materially dependent upon any one of
such assets or any related group of such assets. The Koor Group is also
licensed to use certain patents and technology owned and controlled by
others, and, similarly, other companies are licensed to use certain patents
and technology owned and controlled by the Koor Group.

         The IMDF retains (and, in certain limited circumstances, certain
of the Koor Group's other customers, including the United States
Government, may retain) certain rights to technologies and inventions
resulting from the Koor Group's performance as a prime contractor or
subcontractor under certain contracts and may disclose such information to
third parties, including other defense contractors who may be competitors
of the Koor Group. When the IMDF and, in certain limited circumstances,
certain of the Koor Group's other customers, fund research and development,
they usually acquire rights to data and title to inventions and the Koor
Group may retain a non-exclusive license for such inventions. In certain
circumstances, the IMDF and some of the Koor Group's other customers are
entitled to receive royalties in respect of the sale of products, the
development of which was financed by those entities. However, if the IMDF
or one of the Koor Group's other customers purchases only the end product,
the Koor Group normally retains the principal rights to the technology.

Regulation

         The Koor Group's diverse businesses are subject to significant
statutory and administrative regulation in the various jurisdictions in
which the Koor Group operates throughout the world. Among the regulations
to which the Koor Group is subject are those described below.

         Monopoly and Pricing Regulations

         In connection with the purchase of Koor shares by the Claridge
Group, and the application submitted to the Restrictive Trade Practices
Controller regarding the merger of Koor and the Claridge Group, the
Controller, in his approval to the merger on October 1997, imposed several
restrictions upon Koor. These restrictions were cancelled following Koor's
sale of its interest in Mashav.

         Koor or other subsidiaries or affiliates of Koor may be declared
monopolies or otherwise be subject to certain legal obligations and
restrictions established by the Restrictive Trade Practices Controller or
by the Restrictive Business Practices Court (the "Court") in the event that
the market share of these companies exceeds certain prescribed limits.

         Environmental, Health and Safety Matters

         General

         The Koor Group is subject to laws and regulations concerning
environmental, product safety, health and safety matters, and regulation of
chemicals in countries where it manufactures and sells its products. These
requirements include regulation of the handling, manufacture,
transportation, use and disposal of materials, including the discharge of
pollutants into the environment. In the normal course of its businesses,
the Koor Group is exposed to risks relating to possible releases of
hazardous substances into the environment, which may cause environmental or
property damage or personal injuries. In Israel, where the Koor Group
maintains its principal production facilities, losses and damages relating
to continuous environmental pollution are currently uninsurable.

         It is the Koor Group's policy to comply with environmental product
safety, health and safety requirements, and to provide workplaces for
employees that are safe and environmentally sound, and that will not
adversely affect the health or environment of communities in which the Koor
Group operates. From time to time, the Koor Group's facilities may be
subject to environmental compliance actions and the resolution of such
matters has in the past involved the establishment of certain compliance
programs. Israeli legislation enacted in 1997 amended certain environmental
laws by authorizing the relevant administrative and regulatory agencies to
impose certain sanctions, including issuing an order against any person
that violates such environmental laws to remove the environmental hazard.
In addition, such law imposes criminal liability on the officers and
directors of a corporation that violates such environmental related laws,
and increases the monetary sanctions that such officers, directors and
corporations may be ordered to pay as a result of such violations. The Koor
Group has established worker safety programs and procedures in its plants,
which the Koor Group believes are reasonable under the circumstances, and
the Koor Group believes that its experience relating to worker accidents is
generally consistent with industry-wide experience. Furthermore, the Koor
Group believes that it is not currently subject to material liabilities for
non-compliance with applicable environmental, health and safety laws,
although there is a risk that legislation enacted in the future could
create liabilities for past activities undertaken in compliance with
then-current laws and regulations or that there may be environmental damage
of which the Koor Group is not aware.

         In addition to the specific matters described below, at a number
of locations at which certain of the businesses have conducted
manufacturing operations for many years, it is possible that contamination
may exist as a result of on-site waste disposal, spills, use of wastewater
treatment ponds, or other historical practices. While in recent years
industrial solid wastes generally have been disposed of at a central
State-authorized disposal facility in Ramat Hovav, this central facility
was not available to Israeli industry during earlier periods of operation.
It is unclear whether any existing conditions on any Company-owned property
will require significant redemption or cleanup in the future, and the Koor
Group cannot speculate about the timing or potential costs associated with
such cleanup. It is possible, however, that material expenditures could be
required with respect to these past practices.

         In recent years, the operations of the Koor Group's businesses
have become subject to increasingly stringent legislation and regulation
related to occupational safety and health, product registration and
environmental protection. Such legislation and regulations are complex and
constantly changing, and there can be no assurance that such regulatory
changes in the future will not require the Koor Group to make significant
capital expenditures to modify, supplement or replace equipment, or to
change methods of disposal or discharge, or the manner in which the Koor
Group manufactures products or operates its businesses. In Israel, in
particular, the Koor Group anticipates that increasingly stringent
requirements will result in substantial expenditures, particularly for
improvements of environmental controls at older facilities. The Koor Group
has generally adopted, or intends to adopt in its newer facilities,
environmental control standards comparable to those set by the German
Technische Anleitung Luft air emission regulations. These regulations set
forth strict controls on air emissions from industrial facilities. The
Israeli government has looked to these standards as a basis for upgrading
its air pollution requirements and has applied the standards to some, but
not all, facilities in Israel.

         The Koor Group regularly incurs capital expenditures and operating
costs to comply with various environmental, health and safety laws and
regulations. The costs related to environmental matters may increase
significantly in the future if the implementation of new environmental
standards in Israel is more rapid or stringent than currently anticipated
by the Koor Group, or if contemplated pollution control measures do not
achieve the desired results.

         Agrochemical Industry

         The distribution and use of agricultural chemical products,
including crop protection chemicals such as those produced by the
agrochemicals business, are regulated in most parts of the world, requiring
extensive testing, quality control and compliance with registration
procedures. The strictest standards are applied in the United States, where
the Environmental Protection Agency ("EPA") is the leading regulator, and
in Japan and Western Europe. The granting of a registration involves
consideration of health, safety and environmental issues, as well as the
performance and benefits of the product. The registration for an
agricultural chemical product in the U.S. and in Western Europe is often
subject to data call-in or process. Usually, updating the registration
necessitates the submission of additional data by the MA Group, the Koor
Group's agrochemical division. Re-registrations, which permit the continued
sales of pesticides for an additional period, are frequently granted as a
matter of course, subject to compliance during the term of the registration
period. While the MA Group is not aware of any immediate intent to cancel
any of their registrations, there can be no assurance that the MA Group
might not face a revocation process or encounter difficulties in renewing
the registrations for its products for additional periods.

         From time to time, some of the MA Group's agrochemical products
are subject to legislative or other initiatives to curtail or regulate
their use due to environmental, health or safety concerns.

         Registration expenditures for the MA Group in 2000 were $13
million compared to $20 million in 1999. The MA Group believes that its
registration expenditures in the future will increase, based on the
stricter standards that are expected to be applied in countries where the
MA Group sells its products. As a result of the foregoing developments and
obligations, virtually all of the MA Group's businesses in recent years
have spent significant amounts on operation and maintenance, as well as
under capital programs to address increasingly stringent requirements with
respect to environmental, safety, and health protection concerns.

         Agan expects to invest approximately $20 million over the next
five years in biological wastewater treatment facilities, pollution control
equipment and other environmental related matters.

         Pursuant to recent analysis of underground sub-layers in Ramat
Hovav, where one of Makhteshim's plants is located, signs of possible
contamination were discovered. Further surveys are being conducted in
conjunction with other plants in Ramat Hovav by certain University
institutions, and Makhteshim has undertaken to finance one-third of the
$1.2 million research expenses. At this stage, Makhteshim cannot assess the
possible cost it might incur in respect of the above, should a solution be
found and implemented.

         Defense and Government Contracts

         The businesses of the Koor Group which sell their products to
military and governmental markets are subject to various statutes,
regulations and administrative rules governing defense and government
contracts and the manufacture and sale of defense products in the United
States, Israel and other countries, including the following:

         Defense Electronics subsidiaries export a number of military
systems and products in accordance with the military export policy of the
State of Israel. Current Israeli policy encourages exports to approved
customers of military systems and products similar to those manufactured by
the Koor Group, provided that such exports do not run counter to Israeli
Government policy, including national security considerations. A permit is
required to initiate a sale proposal and an export license is necessary for
the actual sale transaction. To date, the Koor Group has not encountered
significant difficulties in obtaining or retaining the necessary permits or
licenses, but no assurance can be given that the Koor Group will continue
to be able to obtain or retain such permits or licenses or, that one or
more permits or licenses will not be revoked, or that governmental policy
with respect to military exports will not be altered. Difficulties in
obtaining or retaining such permits or licenses, if encountered in the
future, could have a material adverse effect upon the Koor Group.

         In addition, the revocation of a required permit or license after
having been granted would likely preclude the Koor Group from fulfilling
its contractual obligations. In such a case, Koor might be unable to assert
the defense of force majeure (or a similar defense) relating to any
resulting breach of contract claim and might therefore be held liable for
damages, or subject to other penalties. Substantial damages arising from
such a claim could have a material adverse effect upon Koor's results of
operations and financial condition. In addition, suspension or debarment of
the Koor Group as a government contractor is among the possible penalties
imposed for defaulting on a contractual obligation due to the revocation of
a license.

Joint Ventures, Subcontracting and Teaming Arrangements

         Certain military projects of the Koor Group are conducted under
joint ventures, subcontracting or other "teaming" arrangements pursuant to
which the Koor Group is responsible for a portion, but less than all, of a
project. In certain of such instances, the Koor Group is not permitted to
participate, or even assist, in that portion of the project for which it is
not responsible. Notwithstanding the foregoing, in the event of a
termination of, or a default under, certain prime contracts or subcontracts
(whether or not the Koor Group is a party to such prime contract or
subcontract), including a termination for cause or convenience or a default
on the part of a joint venture, prime contractor, subcontractor or
"teaming" partner (for which termination or default neither the Koor Group
nor such other person is responsible and which termination or default may
be beyond the control of the Koor Group and such other person), the Koor
Group might be held liable for damages, or subject to other penalties,
which could be very substantial and might have a material adverse effect on
Koor's results of operations and financial condition. Moreover, certain
joint ventures, subcontracting or other "teaming" agreements to which the
Koor Group is a party, deny or limit the right of the non-defaulting party
to seek damages or indemnification from the defaulting party in such
circumstances.

         Contract Financing

         There are various types of financing terms applicable to defense
contracts (and in some cases, large telecommunications contracts). In some
cases, the Koor Group receives progress or milestone payments according to
a percentage of the progress in performance or achievement of specific
milestones. In certain cases, work is performed prior to receipt of any
payment, which means that the Koor Group finances the project. In other
cases, the Koor Group receives advances prior to incurring the cost of
fulfilling the contract, which creates a positive project cash flow. In
this latter case, the customer normally requires financial guarantees
against advances paid. The Koor Group often receives substantial advances
from its customers. In the event that a contract under which an advance has
been paid is canceled, the Koor Group may be required to return all or a
portion of such advance to the customer. If sales had been recognized under
such a contract, such cancellation could cause losses to the Koor Group
that might have a materially adverse effect on Koor's results of operations
and financial condition.

         Fixed Price Contracts

         Approximately 90%-95% of the Koor Group's defense contracts are
made on a fixed price basis. Such contracts are subject to the risk that
actual costs may exceed those anticipated at the time the contracts are
executed, particularly when the products to be sold pursuant to the
contracts require a substantial amount of development.

Organizational Structure

         The following is a list of all of Koor's significant subsidiaries,
including the name, country of incorporation or residence, proportion of
ownership interest and, if different, proportion of voting power held.

<TABLE>
<CAPTION>
                                            Country of       Percentage of   Percentage of voting
                                         Incorporation or      ownership      power (if different
Name of Subsidiary                          residence          interest         from ownership)
-----------------------------------      ----------------    -------------   --------------------
<S>                                           <C>                <C>                   <C>
Koor Corporate Venture Capital                Israel             100%                  *
Elisra Electronic Systems Ltd.                Israel             100%                  *
Makhteshim-Agan Industries Ltd.               Israel             58.9%                 *
ECI Telecom Ltd.                              Israel            34.96%                 *
Telrad Networks Ltd.                          Israel             100%                  *
Sheraton Moriah (Israel) Hotels Ltd.          Israel             55.0%                 *
Knafaim Arkia Holdings Ltd.                   Israel             28.1%                 *
Koor Trade Ltd.                               Israel             100%                  *
</TABLE>

Property, Plants and Equipment

         Koor's headquarters are located in the Platinum building at 21
Ha`arbaa St., Tel-Aviv, Israel where Koor owns an aggregate of 18,000
square feet of office space. Koor purchased this facility in 1998.

         The manufacturing facilities of the Koor Group companies are
located throughout Israel. Major concentrations are in the Beersheva/Ramat
Hovav area in the south and the Tel Aviv-Petach Tikva-Holon-
Ramla-Lod-Ashdod area in the central part of Israel. Koor owns its major
manufacturing plants, facilities, machinery and equipment. In addition,
Koor leases certain manufacturing and office facilities.

         Most of the industrial land utilized by Koor is under 49-year
leases from the Israel Lands Authority (in a significant number of cases
with options for an additional 49 years). Land rent on uncapitalized leases
is generally equal to 4% of the value of the land per annum and is subject
to revaluation every seven years.

         Koor believes that, in general, it has sufficient plant capacity
for its current level of operations and that it has the ability to expand
its plant capacity when required.

Item 5.  Operating and Financial Review and Prospects.

         The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes included elsewhere in this annual report. This discussion
contains forward-looking statements that involve risks and uncertainties.
Our actual results may differ significantly from those projected in the
forward-looking statements. Factors that might cause future results to
differ significantly from those projected in the forward-looking statements
include, but are not limited to, those discussed below and elsewhere in
this annual report particularly those described above under Item 3, "Key
Information - Risk Factors."

         The Financial Statements are presented in NIS, adjusted to reflect
changes in the consumer price index ("CPI") through the latest balance
sheet date. The financial statements of the MA Group, Elisra Group and ECI
are prepared in dollars, the functional currency of these companies, which
are then translated into NIS at the rate of exchange prevailing at the end
of the period. See Note 2B to the Financial Statements. For comparative
purposes, financial data of prior periods for these companies are adjusted
to reflect changes in the CPI between the prior periods and the most recent
reported period. During periods when the rate of inflation in Israel
differs significantly from the rate of devaluation of the NIS in relation
to the dollar, application of inflation accounting to Koor's Financial
Statements creates distortions between the comparative financial data of
subsidiaries whose functional currency is the dollar, as reported in the
financial statements of those companies and as reflected in Koor's
Financial Statements.

         Currently, Koor's management is exploring the possibility of
preparing Financial Statements in dollars as from April 1, 2000. The
presentation in dollars is subject to approval by Israeli authorities, and
is conditioned on deriving a majority (approximately 75%) of revenues in
dollars and other foreign currency.

         Transactions between Koor's subsidiaries are entered into on an
arm's-length basis and, in management's opinion, generally on terms no less
favorable than those available from third parties.

Impact of Devaluation on Results of Operations and on Monetary Assets and
Liabilities

         The following table sets forth, for the periods indicated, certain
information with respect to the rate of inflation in Israel, the rate of
devaluation of the NIS in relation to the dollar and the rate of inflation
in Israel adjusted for the NIS-dollar devaluation:

<TABLE>
<CAPTION>
                                                                                                    Annual
                      Israeli                               Closing             Annual              Inflation
Year ended            Consumer          Israeli Inflation   Exchange rate       devaluation         adjusted for
December 31,          Price Index(1)    Price Rate(2)       of the dollar(3)    rate(4)             devaluation(5)
------------          --------------    -------------       ----------------    -----------         --------------
<S>                   <C>                <C>                <C>                <C>                 <C>
1996                  143.1              10.6                NIS 3.251          3.7                 6.9
1997                  153.1              7.0                 NIS 3.536          8.8                 (1.8)
1998                  166.3              8.6                 NIS 4.160          17.6                (9.0)
1999                  168.5              1.3                 NIS 4.153          (0.2)               1.5
2000                  168.5              0.0                 NIS 4.041          (2.7)               2.7

</TABLE>

------------------

(1)  For purposes of this table, the CPI figures use 1993 as base equal to
     100. These figures are based on reports of the Israel Central
     Statistics Bureau.

(2)  Annual inflation is the percentage change in the CPI in Israel between
     December of the year indicated and December of the preceding year.

(3)  Closing exchange rate is the rate of exchange between the NIS and the
     dollar at December 31 of the year indicated, as reported by the Bank
     of Israel.

(4)  Annual devaluation is the percentage increase in the value of the
     dollar in relation to the NIS during the year indicated.

(5)  Annual inflation adjusted for devaluation is obtained by dividing the
     Israeli inflation rate (column 2 plus 1) by the annual devaluation
     rate (column 4 plus 1), minus 1.

         Since most of Koor's operations are based in Israel, Koor incurs
significant expenses in NIS, which expenses are usually linked, wholly or
partially, to changes in the CPI.

         The relationship between Koor's monetary assets and liabilities,
and the extent to which these are linked to a particular currency or price
index, affects Koor's financial results. In the event of a devaluation of
the NIS, in relation to the dollar, Koor would report a financial expense
to the extent that its dollar-denominated or dollar-linked monetary
liabilities exceed its dollar-denominated or dollar-linked monetary assets
or, conversely, Koor would report financial income if its
dollar-denominated or dollar-linked monetary assets exceeded its
dollar-denominated or dollar-linked monetary liabilities. On December 31,
2000, the excess of Koor's foreign currency denominated or linked monetary
liabilities over its foreign currency denominated or linked monetary assets
was NIS 2,267 million (the majority of which was dollar-denominated or
dollar-linked).

         In addition, Koor and certain subsidiaries have entered into
financial agreements with major Israeli banks and other financial
institutions in order to reduce the overall exposure of assets and
liabilities denominated in foreign currencies, and commitments for the
purchase of raw materials and the sale of goods in currencies other than
the dollar arising from foreign currency exchange rates. Such agreements
include forward sales, purchase contracts, sale options and swap
transactions. For more details regarding the balance of Koor's hedging
agreements as at December 31, 2000, see note 21 to the Financial
Statements.

         Koor and its subsidiaries do not hold or issue financial
instruments or derivative financial instruments for trading purposes. See
Note 21B to the Financial Statements. The caption "Financial expenses, net"
in the Financial Statements includes the impact of these factors on
monetary assets and liabilities, as well as regular interest expense.

Effective Corporate Tax Rate

         Koor does not file a consolidated tax return with its
subsidiaries, and is taxed only on its own income. Each subsidiary of Koor
files its own tax return, based on its own taxable income. The income tax
obligations of Koor and its Israeli subsidiaries are based on earnings
determined in nominal NIS for Israeli statutory purposes, adjusted for tax
purposes, in terms of end-of-year Israeli currency, in accordance with
changes in the CPI. The tax provision in the Financial Statements does not
directly relate to income shown on such statements, for the reconciliation
between the theoretical and actual tax expense. Non-Israeli subsidiaries
are taxed based upon tax laws in their countries of residence. The
effective corporate tax rate is affected mainly by tax benefits arising
from reduced tax rates applied to Approved Enterprises, utilization of tax
loss carryforwards for which no deferred taxes were recorded, the effect of
the Inflationary Adjustment Law on Israeli companies, whose functional
currency is the dollar and disallowance of provisions for anticipated
losses from the sale of assets. Koor's overall effective tax rates for
1998, 1999 and 2000 were 60.0%, 27.6% and 33.7%, respectively. See Note 16
to the Financial Statements.

         Results of Operation

         The following tables summarize certain recent financial
information relating to each of Koor's businesses. The tables are prepared
on the same basis as that utilized in the Financial Statements.




<TABLE>
<CAPTION>


                                                                                                             Translation
                                                                            1999/1998                        into          2000/1999
                             CPI - adjusted NIS                             Changes    CPI-adjusted NIS      Dollars       Changes
                             -----------------------------------            --------   ----------------      -----------   ---------
                             1998            %      1999            %       %          2000         %        2000          %
                             --------------  -----  -----------     -----   -----      ---------    -----     ---------    ---------
                             (In thousands)         (In thousands)                    (In thousands)         (In thousands)
REVENUES FROM SALES

<S>                           <C>            <C>      <C>           <C>     <C>       <C>           <C>        <C>        <C>
Telecommunication equipment   3,419,501      26.73    2,199,702     20.61   (35.67)   2,201,159     26.58      544,707      0.50
Defense electronics           1,572,584      12.29    1,333,690     12.49   (15.19)   1,146,767     13.85      283,783    (13.90)
Argochemicals                 3,376,893      26.40    3,540,922     33.17     4.86    3,460,288     41.78      856,295    ( 2.30)
Venture capital investments                                                              80,117      0.97       19,826     NA
Other                         4,423,338      34.58    3,600,987     33.73   (18.59)   1,392,911     16.82      344,694    (61.3)
                             -----------    ------   ----------    ------   -------   ---------     -----    ---------    ---------

Total                        12,792,316     100.00   10,675,301    100.00   (16.55)   8,281,242       100%   2,049,305   (22.42)
                             ===========    ======   ==========    ======   =======   =========     =====    =========    =========

OPERATING EARNINGS:

Telecommunication equipment      46,406       5.28      260,662     27.67   461.70      249,603     33.90       61,768   (4.24)
Defense electronics             167,684      19.07       69,060      7.33   (58.81)      53,475      7.26       13,233   (22.57)
Argochemicals                   428,441      48.74      390,503     41.45    (8.85)     441,351     59.93      109,218    13.05
Venture capital investments                                                              (5,907)    (0.80)      (1,462)   NA
Other                           236,544      26.91      221,895     23.55    (6.19)       2,122     (0.29)        (525)   NA
                             -----------    ------   ----------    ------   -------   ---------     -----    ---------    ---------
Total segments                  879,075     100.00      942,120    100.00     7.17      736,400    100.00      182,232   (21.84)

Joint general expenses          167,125                 104,250             (37.62)      91.264     12.46)      22,585   (12.46)

Total operating earnings        711,950                 837,870             (17.69)     645,136     23.00)     159,647   (23.00)
                             ===========    ======   ==========    ======   =======   =========     =====    =========    =========

CAPITAL EXPENDITURES:

Telecommunication equipment     208,106     19.09        67,051      9.50   (67.78)     100,017     16.68       24,750    49.17
Defense electronics              67,772      6.22        42,888      6.07   (36.72)      30,954      5.16        7.660   (27.83)
Argochemicals                   340,780     31.25       277,545     39.31   (18.56)     318,459     53.12       78.807    14.74
Venture capital investments                                                               1,690      0.28          418    NA
Other                           473,683     43.44       318,533     45.12   (32.75)     148,446     24.76       36,736   (53.40)
                             -----------    ------   ----------    ------   -------   ---------     -----    ---------    ---------
Total segments                1,090,341    100.00       706,017    100.00   (35.25)     599,566    100.00      148,371   (15.08)
                             ===========    ======   ==========    ======   =======   =========     =====    =========    =========

Discontinued activity            31,873                  -

Corporate assets                 27,112                  14,052             (48.17)         761                    188   (94.60)
                             -----------    ------   ----------    ------   -------   ---------     -----    ---------    ---------

Total                         1,149,326                 720,069             (37.35)     600,327                148,559   (16.63)
                             ===========    ======   ==========    ======   =======   =========     =====    =========    =========

EXPORTS OF KOOR PRODUCTS
 BY BUSINESSES (1)

Telecommunication             2,201,755     33.40     1,539,242     27.53   (30.01)   1,729,948     31.95      428,099    12.34
Defense electronics           1,069,924     16.23       763,151     13.65   (28.67)     692,692     12.79      171,425    (9.23)
Argochemicals                 2,789,365     42.32     2,918,533     52.19     4.63    2,844,698     52.53      703,959    (2.53)
Venture capital investments                                                              77,704      1.43       19,229     NA
Other                           530,195      8.05       370,640      6.63    30.10       70,087      1.30       17,345    (81.10)

Total                         6,591,239    100.00     5,591,566    100.00   (15.17)   5,415,129    100.00    1,340,047    (3.16)
                             ===========    ======   ==========    ======   =======   =========     =====    =========    =========

DESTINATIONS (2)

North America                 1,907,365     28.94     1,608,174     28.76   (15.69)   1,675,227     30.94      414,558     4.17
Europe                        2,032,650     30.84     1,710,133     30.58   (15.87)   1,608,069     29.70      397.938    (5.97)
South America                 1,563,876     23.72     1,433,075     25.63   ( 8.37)   1,343,912     24.82      332,569    (6.21)
Asia and Austrailia             910,925     13.82       711,052     12.72   (21.94)     658,267     12.15      162,898    (7.45)
Africa                          176,423      2.68       129,132      2.31   (26.80)     129,654      2.39       32,084     0.40

Total                         6,591,239    100.00     5,591,566    100.00   (15.17)   5,415,129       100    1,340,047    (3.16)
                             ===========    ======   ==========    ======   =======   =========     =====    =========    =========

</TABLE>


-----------------------------
(1) Including foreign industrial operations.
(2) Destination to which shipment is made.




Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

         The following is an analysis of Koor's consolidated results of
operations, which is followed by an analysis of results of operations of
each of Koor's businesses.

         Revenues. Revenues decreased 22.4% to NIS 8,281 million in 2000
compared to NIS 10,675 million in 1999. Exports and international
operations, representing 65.4% of revenues, decreased 3.2% in 2000, due to
divestitures of Mashav and others.

         Revenues increased less than 1% in Telecommunication Equipment
business and decreased by 2.2%, 14.0%, and 61.3% in the Agrochemicals, the
Defense Electronics, and in the Other Businesses, respectively.

         Operating earnings. Operating earnings decreased 23.0% to NIS 736
million in 2000 compared to NIS 838 million in 1999. Operating earnings
decreased 4.2%in the Telecommunication Equipment business and 22.6% in the
Defense Electronics business. Operating earnings increased 13.1% in the
Agrochemicals business.

         Financing expenses, net. Financing expenses decreased 7.6% to NIS
331 million in 2000 compared to NIS 358 million in 1999. For the purposes
of comparison, the fact that there was a real revaluation in 2000, i.e.,
the Shekel was revalued against the US Dollar, as opposed to stability of
the CPI at 2.7%, whilst in 1999, there had been a revaluation of 1.5%, must
be taken into account. The main decrease in financing expenses in 2000
occurred due to a decrease in financing costs at Telrad (NIS 29 million)
and at Koor a decrease of a further NIS 18 million stemmed from a decrease
in financial liabilities. The termination of the consolidation of companies
sold contributed NIS 9 million to this decrease. On the other hand, finance
expenses at Tadiran increased by NIS 27 million and at Sheraton Moriah by
NIS 18 million, due to an increase in financial liabilities.

         Other income, net. Other income, net amounted to NIS 521 million
in 2000 compared NIS 107 million in 1999 (for adjustments to net income in
accordance with US GAAP, see Note 28 to the Financial Statements). This
item includes mainly capital gains in the amount of NIS 916 million from
divestiture of holdings and activities, mainly at Mashav, Telrad public
exchange operations, the Telrad plant in Maalot, Tadiran Batteries Middle
East Tube, Carmel Gate and others. Compared with NIS 642 million in 1999
which stemmed mainly from divestiture of holdings in Tadiran Com, Tekem,
Tadiran Information Systems, Contahal, subsidiaries and affiliates of
Telrad Holdings Ltd. (mainly ISDN-NET), Koor Finance, Phoenicia and Merhav.
The other expenses included in this item are mainly severance pay expenses
totaling NIS 288 million compared with NIS 206 million last year and
amortization of goodwill in the amount of NIS 50 million compared with NIS
49 million last year. This also includes other expenses in the sum of NIS
59 million compared with other expenses in the sum of NIS 319 million last
year stemming mainly from write-off of value of assets, mainly in United
Steel Mills, Sheraton Moriah, Scopus, Batteries, Tadiran Appliances, and in
MA Industries following the reorganization.

         Taxes on income. Taxes on income increased 74.1% to NIS 282
million in 2000 compared to NIS 162 million in 1999. Taxes on income as a
percentage of income before taxes in 2000 and 1999 were 33.74% and 27.60%,
respectively. The increase in the amount of taxes on income stemmed from
the fact that in 2000 Koor, in the divestiture of Mashav, divested tax
assets in the sum of NIS 129 million as against a recording of tax
expenses. Similarly, there was an increase in the amount of tax on income
at the MA Group and there was an increase in the sum of taxes on income as
a result of the payment of taxes on capital gains, mainly due to
divestiture of assets in Koor Properties.

         Equity in the operating results of affiliates, net. Equity of Koor
in the losses of affiliates in 2000 amounted to approximately NIS 270
million compared with NIS 122 million equity of Koor in the profits of
affiliated companies in 1999. This item includes mainly Koor's equity share
in the net losses of ECI, in the amount of NIS 235 million, compared with
Koor's equity share in the profits of ECI at NIS 144 million in 1999, as
well as Koor's equity share in the profits of affiliates of Tadiran,
Knafaim Arkia Holdings and Balton CP, after deduction of Koor's equity
share in the losses of BVR in the three first quarters of the year (as of
September 30, 2000, BVR was consolidated in the financial statements of
Elisra).

         Minority interest in subsidiaries, net. Minority interest in the
losses of subsidiaries amounted to NIS 15 million in 2000 compared to
minority interest in the profits of NIS 2 million in 1999. The decrease in
this item occurred mainly due to the losses at BVR, Telrad, Sheraton -
Moriah and USM.

         Net earnings. As a result of the above factors, net earnings
decreased to NIS 268 million in 2000 compared to NIS 549 million in 1999.
As a percentage of revenues, net earnings were 3.2% in 2000 compared to
5.1% in 1999.

         Telecommunications Equipment Business
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                 ----------------------------------------------------------------
                                                         1999               2000                2000
                                                 ----------------------------------------------------------------
                                                       (Adjusted NIS in thousands)          ($ in thousands)(1)
<S>                                                    <C>                 <C>                      <C>
Revenue.....................................           2,199,702           2,201,159                544,707
Operating earnings..........................             260,662             249,603                 61,768
</TABLE>

------------------

(1)  The exchange rate between shekels and U.S. dollars on December 31,
     2000 was NIS 4.041 per U.S. dollar as reported by the Bank of Israel.


         Revenues from the Telecommunication Equipment business amounted to
NIS 2,201 million, similar to NIS 2,200 million in 1999. Telrad decreased
its sales by NIS 12 million in 2000 following the sale of operations to
Nortel Israel, which was partly compensated for by an increase in sales of
others of Telrad's operations.

         Revenues from this business related to sales of telecommunication
equipment to Nortel were NIS 1,175 million in 2000 compared to NIS 836
million in 1999, or 53% compared to 38.0% of the telecommunication
equipment business revenues in 2000 and 1999, respectively.

         The telecommunication equipment business exports amounted to NIS
1,730 million in 2000 compared to NIS 1,539 million in 1999. The increase
of export sales resulted primarily from Telrad's increased export sales of
its OEM products.

         Operating earnings from this business decreased 4.2% in 2000 to
NIS 250 million compared to NIS 261 million in 1999. The decrease was a
result of a sharp decrease in sales, coupled with a slower rate of decrease
of expenses.

         In August 2000, Telrad entered into an agreement to sell the
public switching and other operations that constitutes approximately
30%-40% of Telrad's revenues from sales to Nortel Israel.

         Defense Electronics Business
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                 ----------------------------------------------------------------
                                                         1999               2000                2000
                                                 ----------------------------------------------------------------
                                                       (Adjusted NIS in thousands)          ($ in thousands)(1)
<S>                                                    <C>                 <C>                      <C>
Revenue.....................................          1,333,690           1,146,767                283,783
Operating earnings..........................             69,060              53,475                13,233
</TABLE>

   ------------------

(1)  The exchange rate between shekels and U.S. dollars on December 31,
     2000 was NIS 4.041 per U.S. dollar as reported by the Bank of Israel.


         Revenues from the defense electronics business decreased 13.9% to
NIS 1,147 million in 2000 from NIS 1,333 million in 1999. This decrease was
primarily due to the termination of consolidation of Tadiran Com.

         Operating earnings from this business decreased 21.7% in 2000 to
NIS 53 million compared to NIS 69 million in 1999. This decrease was
primarily due to the termination of consolidation of Tadiran Com.

         Agrochemicals Business
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                 ----------------------------------------------------------------
                                                         1999               2000                2000
                                                 ----------------------------------------------------------------
                                                       (Adjusted NIS in thousands)          ($ in thousands)(1)

<S>                                                   <C>                 <C>                      <C>
Revenue.....................................          3,540,922           3,460,288                856,295
Operating earnings..........................            390,503             441,351                109,218
</TABLE>

------------------

(1)  The exchange rate between shekels and U.S. dollars on December 31,
     2000 was NIS 4.041 per U.S. dollar as reported by the Bank of Israel.


         Revenues from the agrochemicals business decreased 2.3% to NIS
3,460 million in 2000 compared to NIS 3,541 million in 1999, primarily as a
result of decreased sales of MA group. Approximately 82.2% and 82.4% of the
sales in 2000 and 1999, respectively, were made outside of Israel. 36% and
36.1% of total sales in 2000 and 1999, respectively, were to South America.

         Operating earnings for this business increased 13.1% in 2000 to
NIS 441 million compared to NIS 391 million in 1999. The increase in
operating income was primarily due to restruction plan implemented by MA
group.

         Venture Capital Investments

         This segment was set up for the first time in 2000, when the Koor
Corporate Venture Capital Partnership was set up. As at the date of the
financial statements, Koor invested $86 million in venture capital funds
and start-up companies, via the Koor Corporate Venture Capital Partnership
in addition, Koor CVC acquired Tadiran Scopus Ltd. From Tadiran Ltd. Sales
in this segment in 2000 stem from Scopus, in the sum of NIS 80 million. The
operating loss in 2000 was NIS 6 million. Investments in fixed assets in
this segment amounted in 2000 to NIS 2 million.

         Other Businesses
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                 ----------------------------------------------------------------
                                                         1999               2000                2000
                                                 ----------------------------------------------------------------
                                                       (Adjusted NIS in thousands)          ($ in thousands)(1)

<S>                                                   <C>                  <C>                        <C>
Revenue.....................................          3,600,987            1,392,911                  344,694
Operating earnings (losses).................            221,895               (2,122)                    (525)
</TABLE>


------------------

(1)  The exchange rate between shekels and U.S. dollars on December 31,
     2000 was NIS 4.041 per U.S. dollar as reported by the Bank of Israel.


         Revenues of the other businesses in 2000 decreased 61.3% to NIS
1,393 million compared to NIS 3,601 million in 1999. The decrease was
principally the result of the divestiture of Mashav, Tadiran Appliances,
Koor Metal, Tekem and others.

         Operating losses in 2000 were NIS 2 million compared to operating
revenues of NIS 222 million in 1999, primarily due to the divestiture of
the above companies.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

         The following is an analysis of Koor's consolidated results of
operations, which is followed by an analysis of results of operations of
each of Koor's businesses.

         Revenues. Revenues decreased 16.5% to NIS 10,675 million in 1999
compared to NIS 12,792 million in 1998. Exports and international
operations, representing 52.4% of revenues, decreased 15.2% in 1999,
primarily due to sales of companies which are no longer consolidated in the
framework of consolidated financial statements which was partially offset
by increased exports in Telrad and in the Agrochemicals business.

         Revenues increased 4.9% in the Agrochemicals business and
decreased by 35.7%, 15.2% and 18.59% in the Telecommunication Equipment,
the Defense Electronics, and in the Other Businesses, respectively.

         Operating earnings. Operating earnings increased 17.7% to NIS 838
million in 1999 compared to NIS 712 million in 1998. Operating earnings
increased 461.7% in the Telecommunication Equipment business .Operating
earnings decreased 58.8% in the Defense Electronics business, 8.9% in the
Agrochemicals business and 6.2% in the Other Businesses business.

         Financing expenses, net. Financing expenses increased 42.6% to NIS
358 million in 1999 compared to NIS 251 million in 1998. The above increase
occurred primarily in Koor, as a result of increase in long-term bank
borrowings mainly for the purchase of ECI during 1999 and in the MA Group,
as a result of significant translation differences between the Brazilian
currency and the dollar.

         Other income, net. Other income, net amounted to NIS 107 million
in 1999 compared to other expenses of NIS 71 million in 1998. Other income
in 1999 consisted mainly of NIS 642 million in capital gains derived from
the divestiture of holdings, mainly in Tadiran Com., Tekem, Tadiran
Information Systems, Conthal, Merhav, Telrad Holdings and Phoenicia (NIS
434 million in income in 1998), net of NIS 206 million in additional
provisions for retirement and pension arrangements, in particular in Telrad
and MA Group (NIS 269 million in provisions in 1998) and from NIS 266
million in expenses in respect of writing down of assets, mainly United
Steel, Hotels and the reorganization program in the MA Group (NIS 232
million in expenses in 1998). Other income, net was partially offset by an
amortization of goodwill of NIS 49 million in 1999 ( NIS 27 in 1998) and
NIS 53 million provision due to uncertainty in Brazil in 1999.

         Taxes on income. Taxes on income decreased 30.8% to NIS 162
million in 1999 compared to NIS 234 million in 1998. Taxes on income as a
percentage of income before taxes in 1999 and 1998 were 27.6% and 60.0%,
respectively. The decrease in taxes derives mainly from the anticipated
utilization of carry forward losses due to divestiture of Mashav of NIS 129
million in Koor and the decline of the adverse affect of devaluation on the
tax expense of subsidiaries the financial statements of which are dollar
adjusted.

         Equity in the operating results of affiliates, net. Koor's share
in net profits of affiliated companies increased to NIS 122 million in 1999
compared to NIS 62 million in 1998, primarily as a result of the increase
in Koor's share in the profits of ECI from NIS 49 million in 1998 to NIS
144 million in 1999.

         Minority interest in subsidiaries, net. Minority interest in the
losses of subsidiaries amounted to NIS 2 million in 1999 compared to
minority interest in the profits of NIS 240 million in 1998. The decrease
in this item occurred mainly in the profits of Tadiran as a result of
Koor's purchase of the minority interests, the termination of consolidation
of TTL and the decline in profits of the MA Group.

         Net earnings. As a result of the above factors, net earnings
increased to NIS 549 million in 1999 compared to NIS 47 million in 1998. As
a percentage of revenues, net earnings were 5.1% in 1999 compared to 0.4%
in 1998.

         Telecommunications Equipment Business
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                 ----------------------------------------------------------------
                                                          1998              1999                   1999
                                                 ----------------------------------------------------------------
                                                       (Adjusted NIS in thousands)          ($ in thousands)(1)
<S>                                                   <C>                 <C>                    <C>
Revenue.....................................          3,419,501           2,199,702              529,666
Operating earnings..........................             46,406             260,662               62,765
------------------
</TABLE>


(1)  The exchange rate between shekels and U.S. dollars on December 31,
     1999 was NIS 4.153 per U.S. dollar as reported by the Bank of Israel.


         Revenues from the Telecommunication Equipment business decreased
35.7% to NIS 2,200 million in 1999 from NIS 3,420 million in 1998. The
termination of consolidation of TTL in 1999 following the ECI merger caused
a decrease in revenues of NIS 1,717 million. Telrad increased its sales by
NIS 484 million in 1999 mainly as a result of increased supplies to Nortel.

         Revenues from this business related to sales of telecommunication
equipment to Nortel were NIS 836 million in 1999 compared to NIS 533
million in 1998, or 38.0% compared to 15.6% of the Telecommunication
Equipment business revenues in 1999 and 1998, respectively.

         The Telecommunication Equipment business exports amounted to NIS
1,539 million in 1999 compared to NIS 2,202 million in 1998. The decrease
of export sales resulted primarily from the termination of consolidation of
TTL in 1999, which was partially offset by increased export sales of
Telrad.

         Operating earnings from this business increased 461.7% in 1999 to
NIS 261 million compared to NIS 46 million in 1998. The increase in
operating earnings was a result of an NIS 264 million operating profit in
Telrad in 1999 due to a reorganization program implemented by Telrad's new
management since the second half of 1998 and an increase in Telrad sales of
telecommunications equipment. In 1998 Telrad's operating loss amounted to
NIS 113 million. In 1998 the businesses operating profit included NIS 176
million from TTL, which merged into ECI effective as of January 1, 1999.

         In May 2000, Telrad signed an agreement to sell the Public
Switching and other operations that constitutes approximately 40%-50% of
Telrad's business to Nortel Israel.

         Defense Electronics Business

<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                 ----------------------------------------------------------------
                                                          1998              1999                   1999
                                                 ----------------------------------------------------------------
                                                       (Adjusted NIS in thousands)          ($ in thousands)(1)
<S>                                                    <C>               <C>                      <C>
Revenue.....................................           1,572,584         1,333,690                321,139
Operating earnings..........................             167,684            69,060                 16,629
</TABLE>


------------------

(1)  The exchange rate between shekels and U.S. dollars on December 31,
     1999 was NIS 4.153 per U.S. dollar as reported by the Bank of Israel.


         Revenues from the Defense Electronics business decreased 15.2% to
NIS 1,334 million in 1999 from NIS 1,573 million in 1998. This decrease was
primarily due a NIS 280 million decrease in revenues from Tadiran Com. due
to the sale of this company in the fourth quarter of 1999 and the decrease
in military exports of communication systems to the U.S. Army. This
decrease was partially offset by an increase in sales of Elisra.

         Operating earnings from this business decreased 58.8% in 1999 to
NIS 69 million compared to NIS 168 million in 1998. The decrease in
operating earnings was a result of an NIS 60 million decline in operating
profit in Tadiran Com. in 1999 and NIS 47 million decline in operating
profit in TES mainly due to the cost of a reorganization program and a
result of decline in sales that was partially offset by an increase in
operating profit in Elisra and Tadiran Spectralink.

         Agrochemicals Business
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                 ----------------------------------------------------------------
                                                          1998              1999                   1999
                                                 ----------------------------------------------------------------
                                                       (Adjusted NIS in thousands)          ($ in thousands)(1)
<S>                                                   <C>                 <C>                    <C>
Revenue.....................................          3,3767,893          3,540,922              852,618
Operating earnings..........................             428,441            390,503               94,029
</TABLE>


------------------

(1)  The exchange rate between shekels and U.S. dollars on December 31,
     1999 was NIS 4.153 per U.S. dollar as reported by the Bank of Israel.


         Revenues from the Agrochemicals business increased 4.9% to NIS
3,541 million in 1999 compared to NIS 3,377 million in 1998, primarily as a
result of increased sales of newly launched herbicides and insecticides
products and sales of newly acquired companies. Approximately 89.3% and
90.7% of the sales in 1999 and 1998, respectively, were made outside of
Israel. 36.1% and 39.0% of total sales in 1999 and 1998, respectively, were
to South America.

         Operating earnings for this business decreased 8.9% in 1999 to NIS
391 million compared to NIS 428 million in 1998. The decrease in operating
income was primarily due to the erosion of sale prices as a result of
reduced demand for agrochemicals and increased competition from major
international chemical companies.

         Building and Infrastructure Materials Business
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                 ----------------------------------------------------------------
                                                          1998              1999                   1999
                                                 ----------------------------------------------------------------
                                                       (Adjusted NIS in thousands)          ($ in thousands)(1)
<S>                                                   <C>                 <C>                    <C>
Revenue.....................................          1,645,089           1,445,878              328,152
Operating earnings..........................             76,251             127,210               30,631
</TABLE>


------------------

(1)  The exchange rate between shekels and U.S. dollars on December 31,
     1999 was NIS 4.153 per U.S. dollar as reported by the Bank of Israel.


         Revenues from the Building and Infrastructure Materials business
decreased 12.1% to NIS 1,446 million in 1999 compared to NIS 1,645 million
in 1998. The decrease in revenues in 1999 was primarily a result of a
continued erosion in selling prices in cement and pipes due to slowdown in
the Israeli construction market as well as, the divestiture at the end of
the second quarter of 1999 of Merhav. In 1999, Metco's revenues decreased
18.2% to NIS 196 million compared to NIS 240 million in 1998.

         Operating earnings for this business increased 67.19% in 1999 to
NIS 127 million compared to NIS 76 million in 1998, primarily due to a
substantial decrease in operating losses of United Steel and increase in
operating profit in Nesher due to the commencement of production at its dry
line plant.

         In 1999 and at the beginning of 2000, Koor disposed of its
interest in all of the companies in this business other than United Steel
Mills.

         Other Businesses
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                 ----------------------------------------------------------------
                                                          1998              1999                   1999
                                                 ----------------------------------------------------------------
                                                       (Adjusted NIS in thousands)          ($ in thousands)(1)

<S>                                                   <C>                  <C>                       <C>
Revenue.....................................          2,778,249            2,155,109                 518,928
Operating earnings..........................            160,293               94,685                  22,799
</TABLE>


-----------------

(1)  The exchange rate between shekels and U.S. dollars on December 31,
     1999 was NIS 4.153 per U.S. dollar as reported by the Bank of Israel.


         Revenues of the Other businesses in 1999 decreased 22.4% to NIS
2,155 million compared to NIS 2,778 million in 1998. The decrease was
principally the result of the sale of a number of holdings in this business
in 1998 and 1999, including Soltam, Pri Hagalil, Hod Lavan, the Software
companies of Tadiran and others. This decrease was partially offset by an
increase in sales of Sheraton Moriah of NIS 142 million, which was
consolidated for the first time in 1999.

         Operating earnings for this business decreased 40.9% in 1999 to
NIS 95 million compared to NIS 160 million in 1997, primarily due to the
divestiture Tadiran software-related companies and food-related companies
which reported operating earnings in 1998 and an increase in the operating
losses from the tourism hotel activities.

Quarterly Results

         The following table presents unaudited quarterly financial
information for each of the four quarters in the year ended December 31,
2000. Such information has been prepared on the same basis as our
consolidated financial statements.
<TABLE>
<CAPTION>
                                                               Quarter Ended
                                     ----------------------------------------------------------------
                                          March            June        September 30,      December
                                        31, 2000         30, 2000           2000          31, 2000
                                     ----------------------------------------------------------------
                                                          (in millions of U.S. dollars)
<S>                                  <C>                 <C>            <C>               <C>

Revenues                             $533                $529           $507              $ 480
Gross profit                         $143                $133           $121              $  46
Research and development, net        $ 22                $ 23           $ 20              $  22
Operating income (loss)              $ 59                $ 53           $ 41              $   7
Net income (loss)                    $ 87                $  1           $ 47              $ (69)
</TABLE>

         Our operating results may be subject to significant fluctuations
in future periods. Our operating results for any particular quarter are not
necessarily indicative of any future results. Our quarterly operating
results may be subject to significant fluctuations due to various factors,
including the length of the sale cycles, the timing and size of orders and
shipments to customers, variations in distribution channels, mix of
products, new product introductions, competitive pressures and general
economic conditions.

Liquidity and Capital Resources

         Koor finances its corporate level activities principally through
proceeds from divestitures, management fees and dividends it receives
subsidiaries and affiliates and through debt financing. In 2000 and 1999,
Koor received management fees in the amount of NIS 40 million and of NIS 65
million, respectively, and dividends (including return of investment) in
the amount of NIS 352 million and NIS 1,540 million, respectively. The
dividends received in 2000 and 1999 includes dividends from Tadiran,
Mashav, Koor Properties, Telrad Networks and Telrad Holdings that represent
proceeds received from divestitures.

         Koor's shareholder' equity at December 31, 2000 decreased 2% to
NIS 4,306 million, compared to NIS 4,385 million at December 31, 1999. The
decrease in 2000 was primarily due to Koor's repurchase of approximately
3.4% of its ordinary share capital and the dividend paid by Koor on its
ordinary shares.

         Working capital at December 31, 2000 was NIS 989 million, compared
to NIS 910 million at December 31, l999 and NIS 3,487 million at December
31, l998. The increase in 2000 is primarily due to decrease in credit from
banks due to the divestiture of Mashav and other companies.

         Long-term debt aggregated NIS 3,321 million at December 31, 2000
and constituted 22.5% of total assets, compared to NIS 4,070 million
constituted 23.4% of total assets at December 31, 1999. The decrease in the
balance of long-term debt is attributed mainly to long-term debt repaid by
Koor in 2000.

         Total debt at December 31, 2000 decreased 21.14% to NIS 6,016
million, or 40.7% of total assets, compared to NIS 7,629 million, or 43.9%
of total assets, at December 31, 1999. This decrease was a result of
decrease in liabilities at Koor (NIS 630 million) and from divestiture (NIS
707 million).

Cash Flows

         Cash flows from operating activities decreased 35.6% to NIS 464
million in 2000, compared to NIS 721 million in 1999. The decrease in
assets and liabilities items linked to operating activities, particularly
customers and receivables, plus the increase in suppliers and payables in
2000, which amounts to NIS 159 million, caused an increase of cash flow
from operating activities in comparison to the increase in these items in
the sum of NIS 4 million in 1999. The decrease in the customers and
receivables item in the sum of NIS 185 million relates mainly to Telrad and
MA Industries, which stems from the sale of customer debts to Banks in MA
Industries. The increase in suppliers and payables in the sum of NIS 37
million relates mainly to MA Industries and Telrad.

         Cash flows from investment activities increased to an inflow of
NIS 201 million in 2000 compared to outflows of NIS 1,743 million.
Investments in fixed and other assets, net of investment grants, aggregated
NIS 551 million in 2000 compared to NIS 717 million in 1999, and
represented 147% of depreciation and amortization compared to 126% in 1999.
The principal investments in fixed assets during 2000 were by the MA Group,
Telrad, Sheraton - Moriah, Koor Properties and Elisra.

         The net proceeds from sale of investments and fixed assets
contributed NIS 1,936 million to cash flows generated from investment
activities in 2000, compared to NIS 834 million in 1999. The 2000 net
proceeds are mainly from the realization of holding and activities, Mashav,
Telrad, Middle East Tube, Tadiran Appliances, Tadiran Batteries, and Carmel
Gate, and from realization of fixed assets, mainly from Koor Properties.

         In 2000, investment in affiliated companies, net, aggregated NIS
19 million compared to NIS 887 million in 1999, mainly due to investment in
ECI in 1999.

         The investment in consolidated subsidiaries aggregated NIS 301
million in 2000 compared to NIS 119 million in 1999. The 2000 investment is
primarily attributed to MA Industries and BVR.

         Financing activities in 2000 consumed NIS 1,130 million compared
to generating NIS 989 million in 1999.

         Long-term debt incurred during 2000 totaled NIS 503 million,
compared to NIS 764 million in 1999. Long term debt in 2000 consisted
primarily of loans taken by MA Group and Telrad. Repayment of long-term
debt totaled NIS 1,086 million in 2000, compared to NIS 606 million in
1999.

         Net short-term debt decreased by outflow NIS 219 million in 2000,
compared to inflow NIS 914 million in 1999. Short-term debt in 2000
decreased mainly due to divestiture of Mashav and decrease in Tadiran.

         Dividends in the amount of NIS 224 million and NIS 144 million
were paid to Koor's shareholders in 2000 and 1999, respectively.

Impact of Inflation and Currency Fluctuations

         The dollar cost of our operations in Israel is influenced by the
extent to which any increase in the rate of inflation in Israel is not
offset (or is offset on a lagging basis) by a devaluation of the NIS in
relation to the dollar. The inflation rate in Israel was 0% in 2000 as
compared to 1.3% in 1999. At the same time, the devaluation of the NIS
against the dollar was -2.7% in 2000 and -0.2% in 1999. The increase in the
dollar cost of our operations in Israel relates primarily to the cost of
salaries in Israel, which are paid in NIS, and constitute a substantial
portion of our expenses.

Trend Information

         Our financial condition and results of operation may be subject to
significant fluctuations in future periods. Our past financial condition
and results of operation are not necessarily indicative of any future
results. Our future financial condition and results of operation may be
subject to significant fluctuations due to various factors, including the
divestiture of subsidiaries or other companies, the length of the sale
cycles, the timing and size of orders and shipments to customers,
variations in distribution channels, mix of products, new product
introductions, competitive pressures and general economic conditions.


Item 6.  Directors, Senior Management and Employees.
         Directors and Senior Management

         The following table sets forth, as of June 20, 2001, the name, age
and position of each director and executive officer of Koor:

Charles R. Bronfman                 70      Chairman of the Board of Directors

Jonathan Kolber(l) (3)              39      Executive Vice Chairman of the
                                            Board of Directors and Chief
                                            Executive Officer
Dr. Janet Aviad                     59      Director
Joseph Dauber(l) (3)                66      Director
Moshe Dovrat (2) (4)                56      Director
Ron Feinstein(2)                    63      Director
Avi Harel (2)                       53      Director
Andrew Hauptman (1)                 32      Director
Prof.Jacob Hornik(l) (2) (3) (4)    59      Director
Eli Hurwitz                         69      Director
Irit Izakson                        50      Director
Samuel Minzberg                     52      Director
Chemi Peres                         43      Director
David Rubner                        61      Director
Prof. Gabriela Shalev               60      Director
Danny Biran                         58      President
Yuval Yanai                         49      Senior Vice President and
                                            Chief Financial Officer
Aaron Zuker                         56      Vice President
Shlomo Heller                       57      General Counsel and Corporate
                                            Secretary
Iftah Atir                          52      Vice President
Ran Maidan                          31      Vice President

(1)   Member of the Executive Committee
(2)   Member of the Audit Committee.
(3)   Member of the Remuneration Committee.
(4)   Outside Director.  Under the Israeli Companies Law 1999
      (the "Companies Law"), publicly held companies in Israel are
      required to appoint at least two Outside Directors.

         Set forth below is a biographical summary of each of the
above-named directors and executive officers of Koor.

         Charles R. Bronfman has been Chairman of the Board of Directors of
Koor since November 1997. Mr. Bronfman is a director, Co-Chairman of the
Seagram Company Ltd., Chairman of the Board of Directors of Claridge Israel
LLC, and the CRB Foundation. He is also a member of the Board of Directors
of the Vivendi Universal S.A.

         Jonathan B. Kolber has been Executive Vice Chairman of the Koor
Board of Directors since November 1997 and Chief Executive Officer of Koor
since July 1, 1998. Mr. Kolber has been President of Claridge Israel Inc.
or its predecessors since 1989. Mr. Kolber was associated with Cemp
Investments from 1985 to 1987 and was a Vice President of Claridge Inc., an
affiliate of Claridge, from 1986 to 1990. He also serves as director of
other Israeli companies, including MA Industries, Tadiran, Arkia and R.M.
Renaissance Management (1993) Ltd. He also serves as Chairman of the Board
of ECI since April 1997. He has a Bachelor degree in Near Eastern Languages
and Civilizations from Harvard University and a Certificate on Advanced
Arabic from the American University of Cairo.

         Dr. Janet Aviad has been a director of Koor since June 2000. Dr.
Aviad serves as Vice President of the Andrea and Charles Bronfman
Philanthropies, a family of private foundations dedicated to Canadian
Heritage and Jewish Peoplehood, and as a director of Keren Karev, the
Israeli branch of the Philanthropies. Dr. Aviad was a Senior Lecturer of
Education at the Hebrew University in Jerusalem for almost twenty years.
Dr. Aviad has an M.A. and a Ph.D. in the Sociology of Religion from
Columbia University and a BHL from the Jewish Theological Seminary.

         Joseph Dauber has been a director of Koor since June 1995. Mr.
Dauber has been the Chairman of the Board of Directors of Poalim American
Express since April 1995 and also of Isracard Ltd. and its subsidiaries
since April 1994. Mr. Dauber has been a Joint General Manager of Bank
Hapoalim since 1994. He has been a member of the management of Bank
Hapoalim since July 1988 and the Deputy Chairman of the management since
1999. Mr. Dauber is the Chairman of the Board of Directors of Isracard
Ltd., Eurocard Ltd., and Poalim American Expres Ltd., and a durector of
Poalim Properties (Shares) Ltd. He has also been a director of The
Investment Company of Bank Hapoalim Ltd. since June 1994. Between 1989 and
February 1995, Mr. Dauber was a director of Bank Hapoalim (Switzerland)
Ltd.

         Moshe Dovrat has been an outside director of Koor since March
1997. Since 1992 to September 1996, Mr. Dovrat was the General Manager of
the Investment Center of the Ministry of Industry and Trade. Prior thereto,
Mr. Dovrat was the owner of an economic consulting company, before which,
he was the Head of the Economics Division of Kupat Holim, the major health
insurance fund in Israel. Since 1997, Mr. Dovrat has been a director of
Rotlex (1994) Ltd. and Makefet Pension Fund, a Chairman of the Board of
Directors of Kfar Bloom Hotel and an independent director of Etgar
Investments and Development Ltd. and Ortel Ltd.

         Ron Feinstein has been a director of Koor since October 1991 and
since 1999 he has served as a Chairman of the Board of Directors of
Sheraton Moriah Israel and Tadiran. From 1996 until 1998 Mr. Feinstein
served as a Chairman of the Board of Radisson Moriah Hotels Ltd. Since
1992, Mr. Feinstein has also served as the Chairman of the Board of Tourist
Industry Development Corporation Ltd. Mr. Feinstein was a partner in the
law firm of Glass, Feinstein and Bar-Sela from 1981 through March 1997 and
since then he is a senior partner in the law office and notary of Feinstein
and Feinstein.

         Avi Harel has been a director of Koor since September 1998. Mr.
Harel serves as a director of certain affiliates of Bank Hapoalim,
including Poalim Capital Markets - Investment Bank Ltd., Poalim Capital
Markets and Investments - Holdings Ltd., Poalim Capital Markets and
Investments Ltd., Ma'alot the Israeli Company of Securities Grading Ltd.
and Bank Otzar Ha'chayal Ltd. Mr. Harel holds an MA in Economics from the
Tel-Aviv University.

         Andrew Hauptman has been a director of Koor since November 1997.
During the past five years, he was a Director of Business Development and
Strategic Planning at the Universal Studios Holdings (UK) Ltd. and at
present he is the President of Andell Inc. Mr. Hauptman holds an MBA degree
from Harvard University.

         Prof. Jacob Hornik has been an outside director of Koor since
March 1997. Prof. Hornik was the Associate Dean and he is a Professor of
Marketing and Advertising at the Leon Recanati Graduate School of Business,
Tel-Aviv University. Prof. Hornik holds a Ph.D. in Business Administration
from Syracuse University, New York. Prof. Hornik acts as a consultant to
various organizations and is an independent director of Supersol Ltd. He
serves on the editorial boards of several academic journals, including the
International Journal of Research in Marketing. Prof. Hornik has also
taught and lectured at a number of universities outside Israel, including,
the University of Chicago, Northwestern University, New York University,
and the University of Washington at Seattle.

         Eli Hurwitz has been a director of Koor since November 1997. Mr.
Hurwitz is the President and Chief Executive Officer of Teva Pharmaceutical
Industries Ltd. Mr. Hurwitz serves as a director of Teva Pharmaceutical
Industries Ltd. and Vishay Intertechnology Inc.

         Irit Izakson has been a director of Koor since September 2000. She
was previously Head of the Industrial Sector at the Business Division of
Bank Leumi Le-Israel Ltd. She is a director of several financial,
investment and commercial companies including Bank Hapoalim, Israel Corp.
Mehadrin Ltd., Meshulam Levinshtein Ltd., Nisco Industries Ltd., Erison
Holdings (1998) Ltd., and Eurocom Telecomunication Ltd. Mrs. Izakson holds
a B.A. in Economics from the University of Tel Aviv and an M.Sc in
Operational Research from Tel Aviv University.

         Samuel Minzberg has been a director of Koor since November 1997.
He is also the CFO of Claridge Inc., the President of Claridge Israel LLC
and a director in HSBC Bank Canada, Reitmans (Canada) Limited and ECI
Telecom Ltd.

         Chemi Peres has been a director of Koor since June 2000. He is a
Managing Director and Founder of Polaris Venture Capital, a venture capital
fund. Mr. Peres is one of the pioneers of the venture capital industry in
Israel. In 1992 he founded and managed Mofet Israel Technology Fund, an
Israeli venture capital fund. Mr. Peres is the Chairman of the Board of
WebGlide, and serves as a director in Orckit Communications Ltd., Aladdin
Knowledge Systems Ltd and several other companies. Mr Peres holds a B.Sc.
in industrial engineering and management and a M.B.A. from Tel Aviv
University.

         David Rubner has been a director of Koor since June 2000. He is
Chairman and CEO of Rubner Technology Ventures Ltd. Mr. Rubner was employed
with ECI from 1970 and was its President and CEO from 1991 to October 1999
and February 2000, respectively. Since November 1999 he serves as Vice
Chairman of the Board of Directors of ECI. He serves as Chairman of the
Board of Ectel Ltd., and director of VPS Ltd., Chekpoint Software Ltd.,
Efcon Ltd., Gigami Inc. and MKID Inc. Mr. Rubner holds a B.Sc. (Hons) in
Engineering from Queen Mary College, University of London and a M.S. from
Carnegie Mellon University. He is a member of the Presidium of the Israel
Manufacturers Association and was a recipient of the Industry Prize for
1995.

         Prof. Gabriela Shalev has been a director of Koor since February
1999. Prof. Shalev is a Contracts Law Professor in the Hebrew University in
Jerusalem. Prof. Shalev also serves as a director of several other
companies including Van-Lir Institute and Hadassah Hospital.

         Danny Biran has been President of Koor since July 1, 1998. He was
a director of Koor from November 1997 until his resignation on February 2,
2000. He serves as the Chairman of the Board of MA Industries, Tadiran,
Elisra, Isrex (94) Ltd., Koor Properties, and Koor Trade Ltd. Mr. Biran
serves as a director of Barak ITC (1995) - The International
Telecommunications Services Corp., Knafaim, and various companies within
the Koor Group. He is a graduate of the Law faculty of Tel-Aviv University.
He served as a senior executive in the Office of the Prime Minister in
Israel for more than ten years.

         Yuval Yanai has been Senior Vice President and Chief Financial
Officer of Koor since October 1, 2000. He served as Senior Vice President
and Chief Financial Officer of Nice Systems Ltd. from April 1998 to
September 2000. From 1991 to 1998 he was the Vice President, Finance and
Chief Financial Officer of Elscint Ltd. and member of the board of
directors of several of Elscint subsidiaries, as well as member of the
board of directors of certain public and private companies. He joined
Elscint in 1985 and served as Corporate Controller and Corporate Treasurer
through 1991. Mr. Yanai is a director of ECI Telecom Ltd. and Telrad
Networks Ltd. Mr. Yanai holds a Bachelor degree from the Tel Aviv
University.

         Shlomo Heller has been General Counsel and Corporate Secretary of
Koor since August 1997. Between 1990 and 1997 he was the General Counsel of
United Mizrahi Bank Ltd. Mr. Heller has served as a director of Telrad
since January 1998. He also serves as a director of several other companies
within the Koor Group.

         Yiftach Atir joined Koor Industries in July 2000 as head of Koor
Corporate Venture Capital. Prior to this Mr. Atir was a Managing Partner
with Evergreen Venture Capital between the years 1994 to 2000. Before
joining Evergreen, Mr. Atir served 20 years in the Israeli Defense Forces.
During the last three years in the IDF Mr. Atir served as military attache
in Japan and Korea. Mr. Atir is a director of Telrad Ltd. Mr. Atir holds an
MBA from Tel Aviv University.

         Aaron Zuker has been Vice President of Koor since January 1999. He
serves as a managing director of R.M. Renaissance Management (1993) Ltd.
and serves as a director of Isrex (94) Ltd., Clalcom Ltd., Barak ITC (1995)
Ltd., Tadiran, Elisra, Telrad Networks, MA Industries Ltd. and various
companies within Koor Group. Between the years 1990-1995 he served as CFO
and then CEO of The Jerusalem Report Publication. He is a graduate of
B.F.A. of New York Institute of Technology.

         Ran Maidan has been Vice President in charge of Mergers and
Aquisitions since June 2000. In 1999 he served as the Controller of Koor.
Mr. Maidan is a Certified Public Accountant.

Compensation

         The aggregate compensation paid to or accrued on behalf of all
directors and executive officers of Koor as a group (23 persons) during
2000 consisted of approximately $3.8 million, in salary, fees, bonus,
commissions and directors' fees and $3.1 million in amounts set aside or
accrued for to provide pension, retirement or similar benefits, but
excluding expenses (including business travel, professional and business
association dues and expenses) reimbursed to officers and other fringe
benefits commonly reimbursed or paid by companies in Israel.

         On October 3, 1995, Koor entered into an agreement with Bank
Hapoalim, pursuant to which all directors' compensation paid by Koor to any
member of the Board of Directors associated with Bank Hapoalim, would be
paid directly to Bank Hapoalim. In addition, in connection with the
Claridge Acquisition, three directors associated with Claridge assigned
their directors' compensation to Claridge. All these directors received
compensation, identical to that received by other Koor directors. All Koor
directors received compensation identical to that received by the outside
directors of Koor as described below.

         Compensation and reimbursement for Outside Directors (as described
below) is statutorily determined pursuant to a formula stated by the
Israeli Companies Law, 5759-1999, and Koor adopted the highest compensation
payable pursuant to the formula. Compensation and reimbursement of all
other directors who do not serve as officers are the same as the statutory
rates paid to Outside Directors according to a decision of the Annual
General Meeting. Directors who serve as officers of Koor do not receive any
compensation for their services on the Board. For additional information
concerning the compensation of directors, see Note 25F to the Financial
Statements.

         During 2000, officers of Koor received, in the aggregate, options
to purchase up to 35,000 ordinary shares under the 1998 Plan (as described
below) and options to purchase up to 125,000 ordinary shares under the 2000
Plan (as described below). The options granted under the 1998 Plan have an
exercise price of $108.90 and will expire on July 16, 2006 and the options
granted under the 2000 have an exercise price of $97.39 and will expire on
June 14, 2008.

Board Practices

         Pursuant to Koor's articles of association, the number of
directors serving on the board is required to be not less than five. The
appointment of members to the Board of Directors, their replacement and
removal, and the appointment of the Chairman of the Board of Directors
requires approval by Koor's shareholders by ordinary resolution. Each
member of the Board of Directors remains in office until his/her office is
vacated due to any one of the following events: death, legal incompetence,
bankruptcy or resignation or upon removal at a shareholders meeting. Koor's
chief executive officer is appointed by the Board of Directors. Koor's
executive officers serve at the discretion of Koor's chief executive
officer pursuant to powers delegated to him by Koor's Board of Directors.

         The board may appoint a committee of the board and delegate to
such committee the powers of the board as it deems appropriate, unless it
is restricted by the Companies Law. Notwithstanding the foregoing, the
board may, from time to time, revoke the delegation made to a committee of
its powers and authorities or portion thereof. The board has appointed an
executive committee which has 4 members, an audit committee which has 4
members, and a remuneration committee which has 3 members.

         Outside Directors

         Under the Companies Law, which became effective on February 1,
2000, companies incorporated under the laws of Israel whose shares have
been offered to the public in or outside of Israel are required to appoint
at least two outside directors. This law provides that a person may not be
appointed as an outside director if the person or the person's relative,
partner, employer or any entity under the person's control, has, as of the
date of the person's appointment to serve as outside director, or had,
during the two years preceding that date, any affiliation with Koor or any
entity controlling, controlled by or under common control with Koor. The
term "affiliation" includes:

         o an employment relationship;

         o a business or professional relationship maintained on a regular
           basis;

         o control; and

         o service as an office holder.

         These directors must be residents of Israel. No person may serve
as an outside director if the person's position or other business
activities create, or may create, a conflict of interest with the person's
responsibilities as an outside director or may otherwise interfere with the
person's ability to serve as an outside director.

         Outside directors are to be elected by a majority vote at a
shareholders' meeting, provided that either:

              (1) the majority of shares voted at the meeting, including at
         least one-third of the shares of non-controlling shareholders
         voted at the meeting, vote in favor of election of the director;
         or
              (2) the total number of shares of non-controlling
         shareholders voted against the election of the director does not
         exceed one percent of the aggregate voting rights in Koor.

         The initial term of an outside director will be three years and
may be extended for an additional three years. Each committee of a
company's board of directors will be required to include at least one
outside director. We intend to take all actions required for us to comply
with the new Companies Law and its requirements for outside directors.

         Our outside directors were originally appointed as public
directors under the law in effect prior to the Companies Law. Pursuant to
the terms of the Companies Law, public directors are considered to be
outside directors and may complete their terms of office. The terms of
office of our outside directors expire in March 2002.

         An outside director is entitled to compensation as provided in
regulations adopted under the Companies Law and is otherwise prohibited
from receiving any other compensation, directly or indirectly, in
connection with service provided as an outside director.

         Independent Directors

         We are subject to the rules of the NYSE applicable to listed
companies. Under the NYSE rules, we are required to appoint a minimum of
three independent directors. The independence standard under the NYSE rules
excludes any person who is a current or former employee of a company or any
of its affiliates, as well as any immediate family member of an executive
officer of a company or any of its affiliates. At least three of our
current directors meet the independence standard of the NYSE rules.

         Audit Committee

         The Companies Law requires public companies to appoint an audit
committee. The responsibilities of the audit committee under the Companies
Law include identifying irregulari-ties in the management of Koor's
business and approving related party transactions as required by law. Under
the Companies Law, an audit committee must consist of at least three
directors, including at least two outside directors. The chairman of the
board of directors, any director employed by or otherwise providing
services to Koor, and a controlling shareholder or any relative of a
controlling shareholder, may not be a member of the audit committee.

         In addition, under NYSE rules we are required to maintain an audit
committee, consisting of at least three independent directors and one
member must have accounting or related financial management expertise. The
responsibilities of the audit committee under the NYSE rules include, among
other things, evaluating the independence of a company's outside auditors.
We intend to continue to take all actions as may be necessary for us to
maintain our compliance with applicable NYSE requirements.

         Internal Auditor

         Under the Companies Law, the board of directors must appoint an
internal auditor, nominated by the audit committee. The role of the
internal auditor is to examine, among other matters, whether Koor's actions
comply with the law and orderly business procedure. Under the Companies
Law, the internal auditor may be an employee of Koor but not an office
holder, or an affiliate, or a relative of an office holder or affiliate,
and he may not be Koor's independent accountant or its representative. Koor
has appointed an internal auditor in accordance with the requirements of
the Companies Law and his reports are submitted to the Chairman and to the
audit committee and reviewed by it. The audit committee follows up the
implementation of the recommendations of the internal auditor.

         Remuneration Committee

         The Board of Directors has appointed a Remuneration Committee
comprised of 3 drectors, one of which is an outside director. The
authorities of this committee are to consider and decide on matters
pertaining to the conditions of employment of officers employed by Koor
including personal contracts, bonuses and other remuneration.

         Executive Committee

         The Board of Directors has appointed an Executive Committee
comprised of 4 directors, one of which is an outside director. This
committee is chaired by the Executive Vice Chairman. The authorities of
this committee are to consider the multi-year strategic target plan and to
advise the board on its recommendations, to approve the issue of debentures
in an amount not exceeding $75 million dollars, to obtain loans and credit
up to $75 million, to approve new investments and sale of assets in amounts
not exceeding $50 million.

Employees

         At December 31, 2000, we had approximately 8,680 employees
worldwide, which represented a decrease of 10.8% from year-end 1999.
(Employees of companies which were sold during 2000, are not included.

         The table below sets forth the break down of the geographic
location of the employees in the companies that remained with us, in the
year end of 1998, 1999, 2000:

                            Latin
              Israel       America     USA      Europe     Others      Total
              ------       -------     ---      ------     ------      -----
    1998       8,174        1,264      434       257         66       10,195
    1999       7,729        1,258      413       276         54        9,730
    2000       6,663        1,239      413       299         81        8,695

         Our future success will depend in part upon our ability to attract
and retain highly skilled and qualified personnel. Although competition for
such personnel in Israel is generally intense, we believe that adequate
personnel resources are currently available in Israel to meet our
requirements.

         The collective bargaining agreements of Koor's subsidiaries cover
a term of one to three years or are for an indefinite period. Upon
expiration of the term of an agreement, and pending negotiations for
extension, the provisions of the agreement remain in force unless one of
the parties gives a notice of termination or a new collective agreement is
entered into. Management believes that, upon expiration of such existing
agreements, its subsidiaries will be able to negotiate, without material
disruptions to Koor's business, satisfactory new agreements. However, there
can be no guarantee that satisfactory agreements will be reached in each
subsidiary or that the negotiation of such agreements will not generate
material disruptions to Koor's business. However, we are subject to certain
labor related statutes, and to certain provisions of collective bargaining
agreements between the Histadrut (General Federation of Labor in Israel)
and the Coordinating Bureau of Economic Organizations (including the
Industrialists' Association of Israel) that are applicable to our Israeli
employees by order of the Israeli Ministry of Labor and Welfare. These
statutes and provisions principally concern the length of the work day and
the work week, minimum wages for workers, contributions to a pension fund,
insurance for work-related accidents, determination of severance pay and
other conditions of employment. Furthermore, pursuant to such provisions,
the wages of most of our employees are automatically adjusted based on
changes in the Israeli consumer price index, or CPI. The amount and
frequency of these adjustments are modified from time to time.


         Israeli law generally requires the payment by employers of
severance pay upon the death of an employee, his retirement or upon
termination of employment by the employer without due cause. We currently
fund our ongoing severance obligations by making monthly payments to
approved severance funds or insurance policies. In addition, according to
the National Insurance Law, Israeli employers and employees are required to
pay predetermined sums to the National Insurance Institute, an organization
similar to the United States Social Security Administration. These
contributions entitle the employees to benefits in periods of unemployment,
work injury, maternity leave, disability, reserve military service and
bankruptcy or winding-up of the employer. Since January 1, 1995, such
amount also includes payments for national health insurance. The payments
to the National Insurance Institute are equal to approximately 14.5% of an
employee's wages (up to a specified amount), of which the employee
contributes approximately 66% and the employer contributes approximately
34%.

         Labor Relations

         The Koor Group is subject to various Israeli labor laws,
collective bargaining agreements, Israeli labor practices, as well as
orders extending certain provisions of collective bargaining agreements
between the Histadrut (currently the largest labor organization in Israel)
and the Coordinating Bureau of Economic Organizations (the federation of
employers' organizations). Such laws, agreements and orders are of wide
scope, including minimum employment standards (including, among other
things, working hours, minimum wages, vacation and severance pay), and
special issues, such as equal pay for equal work, equal opportunity in
employment, and employment of women, youth and army veterans. Currently,
all of The Koor Group's employees have individual employment agreements
with The Koor Group.

         According to the National Insurance Law, Israeli employers and
employees are required to pay predetermined sums to the National Insurance
Institute, an organization similar to the United States Social Security
Administration. These contributions entitle the employees to benefits
during periods of unemployment, work injury, maternity leave, disability,
reserve military service, and bankruptcy or the winding-up of the employer,
in addition to health insurance. The National Health Insurance Law 1994
imposes a health tax at a rate of 4.8% of the base wage.

         The collective bargaining agreements of The Koor Group's
subsidiaries cover a term of one to three years or are for an indefinite
period. Upon expiration of the term of an agreement, and pending
negotiations for extension, the provisions of the agreement remain in force
unless one of the parties gives a notice of termination or a new collective
agreement is entered into. Management believes that, upon expiration of
such existing agreements, its subsidiaries will be able to negotiate,
without material disruptions to The Koor Group's businesses, satisfactory
new agreements. However, there can be no guarantee that satisfactory
agreements will be reached in each subsidiary or that the negotiation of
such agreements will not generate material disruptions to The Koor Group's
businesses.

         In 2000, total labor costs of the Koor Group (including temporary
employees) amounted to approximately NIS 1,727 million, which represented
approximately 20.9% of the Koor Group's total revenues. The majority of the
Koor Group's labor costs are denominated in NIS and are affected by the
periodic changes in the inflation rate in Israel.

         The future success of the Koor Group will depend significantly
upon its ability to attract and retain highly skilled and qualified
personnel. Although competition for such personnel is generally intense,
the Koor Group believes adequate personnel resources are currently
available in Israel.

Share Ownership

         The only directors and executive officers of Koor who are deemed
to have beneficial ownership of more than 1% of Koor's outstanding ordinary
shares are Mr. Charles R. Bronfman, Mr. Jonathan Kolber and Mr. Andrew
Hauptman, all of whom are related to the Claridge Group, Koor's major
shareholder. For details please see Footnote 3 to the Major Shareholders
table in "Item 7, Major Shareholders and Related Party Transactions".

              As of June 20, 2001, Koor's directors and executive officers,
in the aggregate, held options under its stock option plans to purchase up
to 235,566 ordinary shares. 31,282 of these, which were granted under the
1997 Plan, have an exercise price of $98.75 and will expire 5 years from
the date of grant. 79,284 of these, which were granted under the 1998 Plan,
have an exercise price of $108.90 and will expire 5 years from the date of
grant. The remaining 125,000 of these, which were granted under the 2000
Plan, have an exercise price of $97.39 and will expire 5 years from the
date of grant.

Employee Benefit Plans

         As of June 20, 2001, options granted, or approved for grant, to
all Koor's employees to purchase up to 595,956 ordinary shares were
outstanding.

         The 1997 Stock-Based Compensation Plan

         On May 26 1997, Koor's Board of Directors adopted the 1997
Stock-Based Compensation Plan. The 1997 Plan authorizes an issuance at no
cost of options to purchase 188,968 ordinary shares. On May 27 1997,
options to purchase 134,547 ordinary shares were granted at an exercise
price of $90.989 per share, and on November 6 1997, additional options to
purchase 54,421 ordinary shares were granted at an exercise price of
$98.747 per share. At June 20, 2001, options to purchase 120,938 shares
were outstanding under the 1997 Plan. All the options under this plan are
vested. Unless exercised, options granted under the 1997 Plan shall expire
five years from the date of grant.

         A subsidiary, Koor Trusts 1995 Ltd. (Koor Trusts) together with a
trust company of a bank (together - the "Trustee") serve as Trustee for the
purposes of the 1997 Plan. According to the 1997 Plan, Koor Trusts will
purchase for the optionee, utilizing funds provided by Koor, such number of
ordinary shares issued upon the exercise of such options by the optionee,
at a price per share equal to the average closing price per share of the
ordinary shares on the TASE in the ten trading days immediately preceding
the date of the exercise, as are equal (based on such price) to the
aggregate exercise price paid by such optionee upon exercise of such
options. Upon complet-ion of the above described transactions, the
employees will hold that portion of shares which reflects the component of
profit and the balance of shares will be held by Koor Trusts. The shares
which will be purchased by Koor Trusts will be reserved for granting them
in the future to any specific employee or employees of Koor, subject to
receipt of approvals described in the 1997 Plan. Koor Trusts will not
participate or vote in General Shareholders Meetings and will not
participate in any distribution with respect to those shares. If the shares
so held by Koor Trusts in reserve shall not be granted to employees within
a reasonable period of time, Koor shall take steps to defer the rights
attached to such shares or eliminate them from Koor's share capital by way
of a reduction of capital pursuant to the Companies Law.

         On August 28, 1997, Columbus Capital Corporation (Columbus) (a
member of the Claridge Group), undertook to grant put options to those
senior employees of Koor, who were eligible for options to purchase
ordinary shares by virtue of the 1997 Plan (as well under a prior employee
stock option plan). These put options are exercisable within 90 days from
the first date in which the employees are eligible to exercise the options
under the plans. The put options confer to the employees the right to sell
to Columbus the outstanding shares granted to them and the profits inherent
in the exercise of the options. Columbus will purchase these shares from
the employees, if they should desire, for $121.25 per Ordinary Share. In
1999, employees exercised put options with respect to 9,360 ordinary
shares.

         The 1998 Stock-Based Compensation Plan

         On August 30 1998, an Extraordinary General Shareholders Meeting
approved the issuance, at no cost, of 400,000 options to be granted to
employees of Koor. Of such options, 350,017 options have been granted to
senior employees and were outstanding as of June 20, 2001 (of which 105,236
option warrants have been granted to Koor's Chief Executive Officer who is
also Vice Chairman of the Board of Directors). Each option may,
theoretically, be exercised into one Ordinary Share. In practice, however,
the optionee will not be issued the total number of shares to which he is
entitled upon exercising the options, but only the number of shares
reflecting the monetary benefit component of the option as at the exercise
date. The options vest over a three-year period from July 1998. Unless
exercised, options granted under the 1998 Plan shall expire on July 16,
2003, (excluding those granted to the Chief Executive Officer which expire
on July 16, 2002). The exercise price of the granted options is $114.7,
excluding options issued to the Chief Executive Officer, which their
exercise price is $118.3 per share. The exercise price of these options is
subject to downward adjustment in the amount of the dividends per share
that are paid prior to the date of exercise.

         As of June 20, 2001, options to purchase 350,017 ordinary shares
were outstanding under the 1998 Plan.

         2000 Amendments to the Stock-Based Compensation Plans

         On March 22, 2000, the Koor Board of Directors decided to amend
the employee stock options plans (excluding interested parties) from 1997
and 1998. It was decided that, as regards the 1998 Plan, the exercise price
would be adapted due to the dividend distribution to all the options, even
if the date of entitlement to their exercise falls prior to the entitlement
to a dividend.

         In addition, it was decided that, as regards the options from the
1997 and 1998 Plans, an employee who has resigned and who held options
whose exercise date falls due prior to his/her resignation, their exercise
period will be to the end of a five year period from the day the Plan
commenced.

         On August 6, 2000, the Board of Directors decided to amend the
stock options Plan, in such a manner that the exercise period of each
option be extended to the end of five years from the date of consolidation
of its eligibility, this vis-a-vis employees owning options, who are not
interested parties in Koor and who will not retire before the end of 2000.

         Year 2000 Stock-Based Compensation Plan

         On August 6, 2000, Koor's Board of Directors approved the issuance
at no cost of up to 400,000 options to be granted to employees of Koor. The
exercise price of the options is $97.39 per share. The terms of the 2000
Plan are substantially similar to those of the 1998 Plan. On October 5,
2000, 125,000 options were allocated to various employees.

         As of June 20, 2001, options to purchase 125,000 ordinary shares
were outstanding under the 2000 plan.

         Option Plans of Certain Subsidiaries

         Certain Koor's subsidiaries have option plans issued to their
senior employees. The term of the options expires generally in 2001. The
exercise price is similar to the market price of the subsidiary's shares,
upon issuance of the options. The rate of dilution in these subsidiaries,
following the exercise of the options, will not exceed 2%. The subsidiaries
are MA Industries and USM.


Item 7.  Major Shareholders and Related Party Transactions.

Major Shareholders

       The following table sets forth certain information with respect to
the beneficial ownership of Koor's ordinary shares as of June 20, 2001,
with respect to each person known to Koor to be the beneficial owner of 5%
or more of its outstanding ordinary shares. None of Koor's major
shareholders has any different voting rights than any other holder of its
ordinary shares.

<TABLE>
<CAPTION>
Name                                                                            Number of                   Percentage of
                                                                                 Ordinary            Outstanding Ordinary Shares
                                                                                  Shares                        Shares
                                                                            Beneficially Owned        Beneficially Owned (1) (2)
                                                                            ------------------        --------------------------

<S>                                                                        <C>                                   <C>
Claridge Group (3)....................................................     5,389,573                             35.08%

Hapoalim Properties (Shares) Ltd. (a subsidiary of Bank Hapoalim)(4)       3,180,279                             20.70%

All officers and directors as a Group (20 persons).....................      512,623(5)                           3.33%
</TABLE>

-----------------------

(1) Based upon 15,362,815 ordinary shares issued and outstanding on June
20, 2001, which amount excludes 624,577 ordinary shares owned by Koor
Trusts (1995) Ltd. that do not confer voting or distribution rights (See
Note 20A(4) to the Financial Statements), and excludes 538,592 ordinary
shares held by Koor as treasury stock purchased in the open market during
year 2000 (See Note 20B to the Financial Statements) and according to
Companies Law do not confer voting or distribution rights while held
directly by Koor. The respective numbers of ordinary shares listed as
beneficially owned in the table above, and the percentage of outstanding
ordinary shares represented thereby, do not give effect to (i) the
conversion of NIS 70,305,335 aggregate principal amount of Series F
convertible debentures into 213,046 ordinary shares, and (ii) ordinary
shares issuable upon exercise of options granted pursuant to the 1997, 1998
and 2000 Plans, which are exercisable within 60 days of this Annual Report.
See "Item 6. Directors, Senior Management and Employees", and Note 20 to
the Financial Statements.

(2) As of June 20, 2001, certain subsidiaries of Koor held an aggregate of
182,436 ordinary shares and 12,950,864374 deferred shares of Koor, par
value NIS 0.001 per share (the "Deferred Shares"). Holders of Deferred
Shares are only entitled to receive the nominal paid-up value of the
Deferred Shares in the event of the winding up of Koor, subject to prior
payment of the nominal paid-up value of the ordinary shares to the holders
of ordinary shares. The holders of the Deferred Shares do not have any
voting rights and they are not entitled to participate in the distribution
of dividend of any kind.

(3)      The Claridge Group holdings are comprised as follows:

         a) Claridge Israel L.L.C., a Delaware limited liability company,
         which holds 4,542,333 ordinary shares. Claridge Israel L.L.C. is
         owned by the following two different trusts, whose beneficiaries
         are relatives of Charles Bronfman, Koor's Chairman of the Board:

                  I. Charles Bronfman Trust - a trust established under the
                  laws of the U.S.A. (primarily) for the benefit of Charles
                  R. Bronfman and Ellen J. Bronfman Hauptman and her issue.
                  Mr. Andrew Hauptman, one of our directors is the husband
                  of Mrs. Ellen J. Bronfman Hauptman;

                  II. Charles R. Bronfman Trust - a trust established under
                  the laws of the U.S.A (primarily) for the benefit of
                  Charles R. Bronfman and Stephen R. Bronfman and his
                  issue.

         b) Anfield Ltd., a company registered in Israel, which holds
         847,240 ordinary shares. Anfield Ltd. is owned by Jonathan Kolber,
         Koor's Chief Executive Officer and Vice Chairman of the Board of
         Directors.

         The holdings of the Claridge Group in Koor shares were pledged in
favor of Bank Hapoalim as a guarantee for a loan that was given to the
Claridge Group by Bank Hapoalim.

         Pursuant to certain restrictions under an amendment to the Banking
(Licensing) Law 1981, with respect to non bank-holdings held by banking
corporations, on July 12, 1998, the Claridge Group and Bank Hapoalim, on
behalf of Hapoalim Properties (Shares) Ltd., entered into certain
agreements concerning their holdings in Koor, the principles of which are:

                  (i)      Bank Hapoalim was granted a put option to sell
                           to the Claridge Group its holdings in Koor which
                           are in the excess of 20%. The Bank exercised the
                           put option with respect to 364,038 shares and
                           the Claridge Group acquired such shares in
                           December 1999.

                  (ii)     The Claridge Group was granted a right of first
                           refusal in respect of Bank Hapoalim's holdings
                           in Koor of up to 20% ("the remaining shares of
                           Bank Hapoalim"). Should the Claridge Group not
                           exercise the above right, and Bank Hapoalim
                           desires to sell its remaining shares to any
                           third party, Bank Hapoalim will have the right
                           to demand that the Claridge Group sell to that
                           particular third party up to 5% of its holdings
                           in Koor shares, to the extent these holdings
                           exceed 32.5% of Koor's capital, in order to
                           enable that particular third party to purchase a
                           total of up to 25% of Koor Shares. In that case,
                           the price per Ordinary Share owned by the
                           Claridge Group will be the higher of $142.50 or
                           the price at which Bank Hapoalim sells its
                           remaining shares to that particular third party.
                           Such right will expire should Bank Hapoalim's
                           holdings in Koor shares be lower than 19%, under
                           circumstances stipulated in the agreements; and

                  (iii)    As long as the Claridge Group has the power to
                           nominate the majority of Koor's Board members,
                           and as long as Bank Hapoalim holdings in Koor
                           will not fall below 5%, then the Claridge Group
                           is committed to vote for the appointment of
                           members recommended by Bank Hapoalim to the Koor
                           Board of Directors, at graduated rates of
                           10%-25% of the members.

(4) One member of the board of directors of Koor (namely - Irit Izakson) is
a member of the board of Bank Hapoalim, and 2 members of the board of
directors of Koor (namely - Joseph Dauber and Avi Harel) are employees of
Bank Hapoalim. See "Item 6. Directors, Senior Management and Employees".

(5) Includes options to purchase ordinary shares held by certain officers
and directors, exercisable within 60 days of the date of this Annual Report
and 40 shares held by one director, and does not include ordinary shares
held by the Claridge Group and Hapoalim Properties (Shares) Ltd. which may
be deemed beneficially owned by certain officers and directors as described
in footnotes 3 and 4 above.

         As of December 31, 2000, Koor had [ ] ADS holders of record in the
United States, holding approximately [ ]% of its outstanding ordinary
shares.

         To Koor's knowledge, it is not directly or indirectly owned or
controlled by another corporation or by any foreign government and there
are no arrangements that might result in a change in control of Koor.

Related Party Transactions

         For details regarding transactions and loans between Koor and
related parties please see Note 25 to the Financial Statements.

Item 8.  Financial Information.

Consolidated Statements and Other Financial Information

         See "Item 17. Financial Statements" and pages F-1 through F-108.

Legal Proceedings

         Claims against Telrad

         (a) In October 1994, a claim was filed by the Union Engineers
against Telrad, for an unspecified amount. The claim pertains to the
recognition and applicability of the salary tables included in the general
collective bargaining agreements, which were signed in 1994 and 1995
between the Engineers Union and the employers in the public service sector,
to Telrad engineers.

         On January 31, 1996, a ruling was handed down by the Tel-Aviv
District Labor Court completely rejecting the claims of the Engineers
Union.

         The Engineers Union has appealed the decision to the National
Labor Court. At the opening of the hearing of the appeal, the Histadrut
submitted a petition that Koor be added as a party to the proceedings. Koor
contested the petition. On November 6, 2000, the National Labor Court
handed down its decision whereby Koor's position was accepted and Koor
wasn't added as party to the proceedings but the claim of the Engineers
Union against Telrad was accepted.

         Telrad has filed a petition to the High Court of Justice asking
for recission of the judgment of the National Labor Court.

         In April 1996, the Lod Workers Council, on behalf of Telrad's
Committee of Monthly Workers, filed in the Regional Labor Court a claim
concerning the application of wage tables applicable in the public service
sector, to Telrad monthly employees. The parties to the litigation agreed
to stay the proceedings until the National Labor Court decides on the
appeal of the Engineering Workers.

         (b) In 2000, a claim was filed against Telrad by company employees
who are members of the company's workers' committee. They are suing for
accounts so that the plaintiffs can examine the calculation of the
distribution of earnings to employees. They are also suing for a
declaratory judgment which will determine that Telrad is obliged to draw up
new accounts for the distribution of earnings. In addition, an application
was filed to recognize the plaintiffs as the representatives of all of
Telrad's workers and employees. The court rejected the application for a
representative claim. A statement of defense has been filed.

         Claims Against ECI

         Three putative shareholder class action lawsuits were filed
against ECI and several of its former officers on and after June 12, 2001.
The plaintiffs in each such action seek to represent a class of investors
in ECI's securities throughout a specified period, approximately from May
2000 to February 2001. The plaintiffs allege that ECI and the individual
defendants made false and misleading statements about ECI's financial
condition, revenues, expenses and results of operations, in violation of
federal securities laws and seek damages in an unspecified amount. ECI
believes that the plaintiffs' claims have no basis and intends to
vigorously defend the actions. At this preliminary stage of the
proceedings, ECI cannot predict the outcome of the litigation, nor can it
make any estimate of the amount of damages, if any, for which it will be
held responsible in the event of a negative conclusion to the litigation.

         Restrictive Trade Practices

         TTL/Telrad

         During October 1997, proximate to the date of the publication of a
newspaper article containing details about alleged violations of the
Israeli Antitrust Law regarding price coordination and lack of competition
between TTL and Telrad, the Antitrust Commissioner conducted an examination
at the offices of TTL, Telrad and Koor, during which certain documents were
confiscated, certain employees were questioned and additional information
was submitted as requested.

         On December 13, 1998, the Israeli antitrust commissioner issued a
press release, in which he announced that the Investigations Department of
the Restrictive Trade Practices Authority has concluded the investigation
regarding suspicions about restrictive arrangements between Koor, TTL,
Telrad, Bezeq and Bezeqcall, in the field of the supply of switchboards for
the commercial market and in the field of N.S.R.

         According to a press release by the Israeli antitrust
commissioner, the investigators of the Investigations Department of the
Israeli Antitrust Authority recommend submitting a bill of indictment
against some of the examinees regarding some of the suspicions
investigated, and that the Legal Department of the Israeli Antitrust
Authority is to decide if offenses were in fact committed and if there is a
sufficient evidential basis for trial. As of June 20, 2001, nothing was
mentioned regarding details about the findings of the Legal Department of
the Israeli Antitrust Authority.

         Under Israeli antitrust law, penalties may be imposed against an
entity which has violated the law. There is also the possibility of
repercussions at the civil level, if damage should be proven as a result of
a violation of the law.

         The management of Koor and the subsidiaries, after consultation
with their legal counsel, are of the opinion that, at this stage, as long
as the results of the Antitrust Commissioner's examinations have not yet
been published, it is not possible to assess the possible developments in
this matter, nor to evaluate if a significant loss is expected to result -
if at all. Accordingly, it was not considered appropriate to make any
provision in the Financial Statements in respect of this matter.

         Claridge

         Pursuant to the directives of the Antitrust Commissioner, in the
conditions of the permit to merge Claridge Group with Koor and the
amendments thereto, various restrictions were imposed on the Claridge Group
and on the Koor Group. With the completion of the sale of Koor's holding in
Mashav Enterprise and Development Ltd. the restrictions imposed were
cancelled.

         TTL/ECI  Merger

         Within the framework of the merger agreement among ECI, Tadiran
and TTL, Tadiran undertook to indemnify ECI for any damage it incurred as a
result of the matters listed below:

         o   Taxes imposed on TTL and its consolidated companies over and
             above the provisions included in the financial statement.

         o   Breach of the obligations of Tadiran and TTL in the merger
             agreement concerning agreement with related parties.

         o   Any subject connected with the matters being investigated by
             the Israeli antitrust commissioner.

         The indemnity items cover losses in excess of the deductible of
between $1.5 million to $10 million (contingent upon each section
separately) and/or are restricted to 81.67% of the loss incurred.

         For indemnity purposes only, the representations made by TTL
remain valid for one year from the date of the merger. Tadiran's indemnity
in respect of the matters or facts being investigated by the Israeli
antitrust commissioner, remain valid for a period of seven years from the
date of the merger and are extendible for an additional period as long as
these matters are under investigation. All other remaining representations
made by Tadiran or TTL did not remain valid after the date of the merger.

         Environmental

         One of MA Industries' plants is located in Ramat Hovav, along with
other chemical plants, since the Government decided that the geological
layers in that particular area are completely impenetrable to liquid or
pollution. The Ministry of the Environment conducted examinations, which
determined that there is data indicating subterranean pollution in Ramat
Hovav. The examiners recommended the taking of measures to prevent the
continuation of leakages from active and inactive plants, which are liable
to constitute a source of pollution of the water table, in the area. At
this stage, MA Industries cannot estimate the costs involved, if, in the
light of the research that will be carried out, a solution will be found,
which it will be decided to implement. Furthermore, the local Municipality
at Ramat Hovav is continuing to take rehabil-itation steps relating to past
incidents.

         Claims filed against Tadiran and its subsidiaries

         (a) Employees of a plant of Tadiran, which had been closed during
1990, filed actions against Koor, alleging that they sustained injuries and
certain related illnesses had been caused by exposure to certain substances
during their employment.

         Tadiran has insurance policies that cover possible damages as a
result of these claims, and, consequently, no provisions have been made in
respect of those claims. Tadiran recorded provisions in respect of possible
damages which had been covered by an insurance company currently in the
process of liquidation.

         (b) In October 1999, Bezeq, lodged a claim against Tadiran whose
main cause is various losses incurred by Bezeq due to delays in the
performance of works which were ordered under development and application
contracts originally entered into between Bezeq and TTL in the amount of
approximately $6.7 million.

         Alternatively, Bezeq is suing for the balance of arrearage
penalties to which it alleges it is entitled pursuant to those contracts,
and which were not paid in full, in the amount of some $1.7 million.

         In an arbitration judgment handed down on February 17, 2000, all
Bezeq's arguments regarding TTL's liability for the principal claim were
dismissed. The arbitration judgment determines that pursuant to the
engagement contracts between the parties Bezeq is entitled to compensation
within the framework of arrearage penalties only. The parties are in
intensive negotiations to reach a settlement. In the opinion of the
management of Tadiran, based on the opinions of its legal counsel, Tadiran
will not bear additional substantial expenses over and above the
allocations contained in the financial statements.

         Claims filed against MA Industries and its foreign subsidiaries

         A claim was filed against MA Industries, a subsidiary of Koor in
Brazil, alleging that the subsidiary has copied a certain process, which is
a protected trade secret that is owned by the claimant. Accordingly, the
subsidiary is being sued to indemnify the claimant in respect of unfair
competition, in the amount of $12 million (based on a calculation involving
the amount of materials used). In addition, the claimant has requested that
a fine of 100 thousand Brazilian reals per day be levied against the
subsidiary in respect of the unlawful exploitation of trade secrets. The
subsidiary's management estimates that the claim has no validity and,
therefore, no provision has been included in the financial statements in
respect thereto.

         A claim was filed against MA Industries subsidiary in Brazil and
others, in the aggregate amount of $15 million, by a group that acquired
the rights to two banks that had declared bankruptcy. The subsidiary is
requested to repay a loan of $1 million, out of the aforementioned amount,
which the claimants maintain had been granted directly to the subsidiary.
With respect to the balance of the claim, the subsidiary has been sued as
the guarantor of debts of agricultural cooperatives, which were its former
shareholders.

         The subsidiary's management estimates that there is a reasonable
likelihood that its defense against the claim will be accepted and,
therefore, no provision has been included in the financial statements in
respect thereto.

         Claims and other monetary demands have been filed against MA
Industries investee in Brazil, in the aggregate amount of $15 million.

         Pursuant to the amendment of the Employment of Workers by Human
Resources Contractors Law 1996, passed in July 2000, human resources
employees are entitled to identical work conditions to those that workers
employed directly by employers as of 2001. Management of MA Industries
estimates that the amendment to this law shall not have any significant
influence on the results of its activities in the coming years.

         A number of claims have been filed against certain other companies
concerning various matters pertaining to the normal course of business,
including tax, customs and VAT liabilities, which are in various legal
proceedings. The managements of said companies believe, based on the
opinion of the legal counsel handling the claims, that appropriate
provisions in light of the circumstances have been included in the
financial statements.

         Elisra/Qualcomm

         In 1998, Qualcomm Inc. filed a claim against Elisra in response to
the claim filed by Elisra for a transaction that was cancelled by Qualcomm
in August 1996. The claim filed by Elisra was for the sum of $ 25 million
and the cross claim was for the sum of $ 79 million, plus punitive damages.
The claims were filed during arbitration proceedings in the U.S. Elisra
believes that it has a well founded cause of action against Qualcomm, and
good defense claims against the cross claim, therefore, the chance of the
claim being rejected is good. No provisions were recorded in the financial
statements for the claim.


Item 9.     The Offer and Listing.

Trading in the ADSs

         In the United States, our American Depositary Shares, or ADSs,
have been traded on the NYSE since our initial public offering in October
1995 under the symbol "KOR" and are evidenced by ADRs. Each ADS represents
0.20 fully paid ordinary shares. In addition, the ADSs are quoted on the
Stock Exchange Automated Quotation System operated by the International
Stock Exchange of the United Kingdom and the Republic of Ireland Limited
(SEAQ). The following table sets forth, for the periods indicated, the high
and low last reported sale prices for our ADSs.

                                                       ADSs
                                                       ------------------------
                                                       High             Low
                                                       --------------   -------
                                                           $               $
Annual
------
         1996..........................................18.9137          13.4500
         1997..........................................21.6271          15.0853
         1998..........................................24.4077          12.0580
         1999..........................................24.0805          15.4596
         2000..........................................22.0625          13.0000
Quarterly 1999
--------------
         First Quarter.................................20.5463          16,2933
         Second Quarter................................24.0805          20.2468
         Third Quarter.................................23.9140          16.9089
         Fourth Quarter................................20.7738          15.4596
Quarterly 2000
--------------
         First Quarter.................................21.3926          17.7233
         Second Quarter................................22.0000          16.7318
         Third Quarter.................................22.0625          18.6875
         Fourth Quarter................................19.3750          13.0000
Quarterly 2001
--------------
         First Quarter.................................13.9375           7.5200
Monthly 2000/2001
-----------------
         December......................................15.6250          13.0000
         January.......................................13.9375          11.1875
         February......................................12.4400          10.4500
         March.........................................10.8500           7.5200
         April..........................................8.3000           7.1400
         May........................................... 8.3300           7.5000

         On June 28, 2001, the last reported sale price of our ADSs was
$7.10 per ADS.

         The ADSs are issued pursuant to a Deposit Agreement entered into
by Koor and the Bank of New York, as depository. The Bank of New York's
address is 101 Barclay Street, New York, New York 10286.

Trading in the Ordinary Shares

         Koor's securities have been listed on the TASE since 1956. Our
ordinary shares have been listed on the TASE since 1991. The ordinary
shares are not listed on any other stock exchange and have not been
publicly traded outside of Israel (other than through ADSs as noted above).
The table below sets forth the high and low last reported prices of our
ordinary shares (in NIS and dollars) on the TASE. The translation into
dollars is based on the average period rate of exchange published by the
Bank of Israel.

<TABLE>
<CAPTION>
                                                            -------------------------------------------------------
                                                                                Ordinary Shares
                                                            --------------------------  ---------------------------
                                                            High                        Low
                                                            ------------  ------------  ------------   ------------
                                                            NIS           $             NIS            $
Annual
------
<S>      <C>                                               <C>            <C>           <C>              <C>
         1996...............................................335.16        105.21        245.95           76.98
         1997...............................................416.25        120.13        281.27           81.17
         1998...............................................481.00        126.25        270.00           70.87
         1999...............................................504.00        121.00        348.00           83.55
         2000...............................................455.00        111.85        255.50           62.81
Quarterly 1999
--------------
         First Quarter......................................428.00        105.42        348.00           85.71
         Second Quarter.....................................504.00        123.26        426.00          104.18
         Third Quarter......................................492.00        118.56        364.00           87.71
         Fourth Quarter.....................................443.00        104.73        351.00           82.98
Quarterly 2000
--------------
         First Quarter......................................453.00        111.74        373.00           92.00
         Second Quarter.....................................450.30        109.83        345.90           84.37
         Third Quarter......................................455.00        112.07        385.00           94.83
         Fourth Quarter.....................................393.80         96.05        255.50           62.32
Quarterly 2001
--------------
         First Quarter......................................281.20         67.99        157.00           37.95
Monthly 2000/2001
-----------------
         November...........................................334.30         81.34        305.30           74.28
         December...........................................323.20         79.22        255.50           62.62
         January............................................281.20         68.25        227.30           55.17
         February...........................................257.70         62.55        223.00           54.61
         March..............................................223.20         53.65        157.00           37.74
         April..............................................169.40         40.53        147.70           35.33
</TABLE>


         As of June [ ], 2001, the last reported price of our ordinary
shares on the TASE was NIS [ ] (or $[ ]) per share.;



Item 10. Additional Information.

Memorandum and Articles of Association

         Organization and Register

         Koor is a company limited by shares organized in the State of
Israel under the Companies Law. Koor is registered with the Registrar of
Companies of the State of Israel and has been assigned company number
52-001414-3.

         Objects and Purposes

         Koor's objects and purposes include a wide variety of business
purposes, including all kinds of investments, borrowing and lending,
purchase and sale of real estate, and to engage in any other kind of
business or commmercial activity. Koor's objects and purposes are set forth
in detail in Section 2 of its memorandum of association.

         Directors

         Pursuant to Koor's articles of association, the number of
directors serving on the board is required to be not less than five. The
appointment of members to the Board of Directors, their replacement and
removal, and the appointment of the Chairman of the Board of Directors
requires approval by Koor's shareholders by ordinary resolution. Each
member of the Board of Directors remains in office until his/her office is
vacated due to any one of the following events: death, legal incompetence,
bankruptcy or resignation or upon removal at a shareholders meeting. Koor's
chief executive officer is appointed by the Board of Directors. Koor's
executive officers serve at the discretion of Koor's chief executive
officer pursuant to powers delegated to him by Koor's Board of Directors.
The Board is authorized to appoint additional directors (whether to fill a
vacancy or create new directorship) to serve until the next annual
shareholders meeting, provided that the total number of directors does not
exceed the maximum set by the general meeting. Compensation of the Board of
Directors is fixed by the general meeting and directors shall not be
required to hold qualifying shares

         A meeting of the board may be called on the request of each
director. The quorum required for a meeting of the board consists of a
majority of directors holding office, for the time being, and entitled
under any law to attend and vote at such meeting, provided that the quorum
is not less than three. In lieu of a board meeting a resolution may be
adopted by written consent.

         The board may appoint a committee of the board and delegate to
such committee all or any of the powers of the board as it deems
appropriate. Notwithstanding the foregoing, the board may, from time to
time, revoke the delegation made to a committee of its powers and
authorities or portion thereof. The board has appointed an audit committee
which has four members, a remuneration committee which has three members
and an executive committee which has four members.

         The board has borrowing powers that may be exercised in accordance
with our articles of association. Koor's articles of association are silent
with regards to the retirement age of directors and directors involvement
in matters to which they are materially interested.

         Approval of Certain Transactions

         The Companies Law codifies the fiduciary duties that "office
holders," including directors and executive officers, owe to a company. An
office holder's fiduciary duties consist of a duty of care and a duty of
loyalty. The duty of loyalty includes avoiding any conflict of interest
between the office holder's position in Koor and his personal affairs,
avoiding any competition with Koor, avoiding exploiting any business
opportunity of Koor in order to receive personal advantage for himself or
others, and revealing to Koor any information or documents relating to
Koor's affairs which the office holder has received due to his position as
an office holder. Under the Companies Law, all arrangements as to
compensation of office holders who are not directors require approval of
the board of directors. Arrangements regarding the compensation of
directors also require audit committee and shareholder approval.

         The Companies Law requires that an office holder of Koor promptly
disclose any personal interest that he or she may have and all related
material information known to him or her, in connection with any existing
or proposed transaction by Koor. In addition, if the transaction is an
extraordinary transaction as defined under Israeli law, the office holder
must also disclose any personal interest held by the office holder's
spouse, siblings, parents, grandparents, descendants, spouse's descendants
and the spouses of any of the foregoing. In addition, the office holder
must also disclose any interest held by any corporation in which the office
holder is a 5% or greater shareholder, director or general manager or in
which he or she has the right to appoint at least one director or the
general manager. An extraordinary transaction is defined as a transaction
other than in the ordinary course of business, otherwise than on market
terms, or that is likely to have a material impact on Koor's profitability,
assets or liabilities.

         In the case of a transaction which is not an extraordinary
transaction, after the office holder complies with the above disclosure
requirement, only board approval is required unless the articles of
association of Koor provide otherwise. The transaction must not be adverse
to Koor's interest. Furthermore, if the transaction is an extraordinary
transaction, then, in addition to any approval stipulated by the articles
of association, it also must be approved by Koor's audit committee and then
by the board of directors, and, under certain circumstances, by a meeting
of the shareholders of Koor. An office holder who has a personal interest
in a matter that is considered at a meeting of the board of directors or
the audit committee may not be present at this meeting or vote on this
matter.

         The Companies Law applies the same disclosure requirements to a
controlling shareholder of a public company, which includes a shareholder
that holds 25% or more of the voting rights if no other shareholder owns
more than 50% of the voting rights in Koor. Extraordinary transactions with
a controlling shareholder or in which a controlling shareholder has a
personal interest, and the terms of compensation of a controlling
shareholder who is an office holder, require the approval of the audit
committee, the board of directors and the shareholders of Koor. The
shareholder approval must include at least one-third of the shareholders
who have no personal interest in the transaction and are present, in person
or by proxy, at the meeting or, alternatively the total shareholdings of
those who have no personal interest in the transaction who vote against the
transaction must not represent more than one percent of the voting rights
in Koor.

         In addition, a private placement of securities that will increase
the relative holdings of a shareholder that holds five percent or more of
Koor's outstanding share capital (assuming the exercise or conversion of
all securities held by such person that are exercisable for or convertible
into shares) or that will cause any person to become, as a result of the
issuance, a holder of more than five percent of Koor's outstanding share
capital, requires approval by the board of directors and the shareholders
of Koor.

         Certain types of resolutions, called special or extraordinary
resolution, such as resolutions amending a company's articles of
association and regarding changes in capitalization, mergers,
consolidations, windings up, or authorizing a class of shares with special
rights, require approval of the holders of 75% of the shares represented at
the meeting and voting thereon. Under the provisions of the Companies Law,
the shareholders of a company may decide to amend such company's articles
of association to reduce the percentage required for a special resolution
to as low as a simple majority or eliminate the distinction between
ordinary and special resolutions completely; such an amendment must be
adopted by a 75% majority.

         Under the Companies Law, a shareholder has a duty to act in good
faith towards Koor and other shareholders and to refrain from abusing his
or her power in Koor including, among other things, while voting in a
general meeting of shareholders on the following matters:

         o    any amendment to the articles of association;

         o    an increase of Koor's authorized share capital;

         o    a merger; or

         o    approval of interested party transactions which require
              shareholders approval.

         In addition, any controlling shareholder, any shareholder who
knows that it possesses power to determine the outcome of a shareholder
vote and any shareholder who, pursuant to the provisions of a company's
articles of association, has the power to appoint or prevent the
appointment of an office holder in Koor, is under a duty to act with
fairness towards Koor. The Companies Law does not describe the substance of
this duty.

         Exculpation, Insurance and Indemnification of Directors and Officers

         Under the Companies Law, an Israeli company may not exempt an
office holder from liability with respect to a breach of his duty of
loyalty, but may exempt in advance an office holder from his liability to
Koor, in whole or in part, with respect to a breach of his duty of care.
Under the Companies Law, a company may not indemnify an office holder, nor
enter into an insurance contract which would provide coverage for any
monetary liability incurred as a result of any of the following:

         o    a breach by the office holder of his duty of loyalty unless
              the office holder acted in good faith and had a reasonable
              basis to believe that the act would not prejudice Koor;

         o    a breach by the office holder of his duty of care if such
              breach was done intentionally or in disregard of the
              circumstances of the breach or its consequences;

         o    any act or omission done with the intent to derive an illegal
              personal benefit; or

         o    any fine levied against the office holder as a result of a
              criminal offense.

         Office Holder Insurance
         Our articles of association provide that, subject to the
provisions of the Companies Law, we may enter into a contract for the
insurance of the liability of any of our office holders with respect to:

         o    a breach of his duty of care to us or to another person;

         o    a breach of his fiduciary duty to us, provided that the
              office holder acted in good faith and had reasonable cause to
              assume that his act would not adversely affect the best
              interests of Koor;

         o    a financial liability imposed upon him in favor of another
              person concerning an act performed by him in his capacity as
              an office holder; or

         o    additional circumstances in respect of which it is
              permissible, under the law, to enter into a contract for the
              insurance of the liability of any of our office holders.

         Indemnification of Office Holders

         Our articles of association provide that we may indemnify an
office holder against:

         o    a financial liability imposed on him in favor of another
              person by any judgment, given in the scope of a compromise or
              an arbiter's award approved by a court concerning an act
              performed in his capacity as an office holder;

         o    reasonable litigation expenses, including attorneys' fees,
              expended by the office holder, in proceedings instituted
              against him by Koor or by another person, or in a criminal
              charge from which he was acquitted, or a criminal charge in
              which judgment is given in his favor or in respect of which
              he is acquitted, in relation to any act done by him in his
              capacity as an office holder; and

         o    additional circumstances in respect of which it is
              permissible, under the law, to indemnify officer holders.

         Required Approvals

         In addition, under the Companies Law, indemnification of, and
procurement of insurance coverage for, our office holders must be approved
by our audit committee and board of directors and, in specified
circumstances, by our shareholders.

         Description of Koor's Deferred Shares

         Holders of Deferred Shares are only entitled to receive the
nominal paid-up value of the Deferred Shares in the event of the winding up
of Koor, subject to prior payment of the nominal paid-up value of the
ordinary shares to the holders of ordinary shares. The holders of the
Deferred Shares do not have any voting rights and they are not entitled to
participate in the distribution of dividend of any kind.

         Description of Koor's Ordinary Shares

         The par value of Koor's ordinary shares is NIS 0.001 per share,
and all issued and outstanding ordinary shares are fully paid and
non-assessable. Holders of paid-up ordinary shares are entitled to
participate equally in the payment of dividends and other distributions
and, in the event of liquidation, in all distributions after the discharge
of liabilities to creditors. Koor's shareholders do not have preferential
right to purchase new shares in Koor.

         Voting is on the basis of one vote per share. An ordinary
resolution (for example, resolutions for the approval of final dividends
and the appointment of auditors) requires the affirmative vote of a
majority of shares voting in person or by proxy. A special resolution (for
example, resolutions amending the articles of association and authorizing
changes in capitalization or in the rights of shareholders) requires the
affirmative vote of at least 75% of the shares voting in person or by
proxy.

         Under the articles of association, if at anytime the share capital
is divided into various classes, Koor may by way of special resolution
consented to in writing by the holders of three quarters of the issued
shares of Koor or a special resolution passed at an extraordinary meeting,
alter the previous benefits restrictions and provisions applicable to that
class. Koor shall also be entitled, by special resolution, to amend its
share capitalization.

         The Board of Directors has the power to set aside cash profits of
Koor to pay a final dividend after appropriations for capital reserves,
such dividend must be approved at general meeting. No dividend shall be
declared at the general meeting which is greater than that recommended by
the Board of Directors. The Board of Directors, is also entitled to pay
shareholders an interim divided, if it is justified by virtue of Koor's
position on account of the divided for any financial year. All ordinary
shares represented by ADRs will be issued in registered form only. Ordinary
shares do not entitle their holders to preemptive rights.

         Meetings of Shareholders

         Under the Companies Law, Koor is required to hold an annual
meeting every year no later than fifteen months after the previous annual
meeting. In addition, under the Companies Law Koor is required to hold a
special meeting

         o    at the direction of the Board of Directors;

         o    if so requested by two directors or one fourth of the serving
              directors; or

         o    upon the request of one or more shareholder who have at least
              5% of the issued share capital and at least 1% of the voting
              rights or more or more shareholders who have at least 5% of
              the voting rights.

         If the Board of Directors receives a demand to convene a special
meeting, it must publicly announce the scheduling of the meeting within 21
days after the demand was delivered. The meeting must then be held no later
than 35 days after notice was made public.

         Under the Companies Law, the agenda at an annual meting is
determined by the Board of Directors. The agenda must also include
proposals for which the convening of a special meeting was demanded, as
well as any proposal requested by one or more shareholder who hold not less
than 1% of the voting rights, as long as the proposal is one suitable for
discussion at an annual meeting.

         Under the Companies Law, a notice of an annual meeting must be
made public (and delivered to every shareholder registered in the
shareholders register, unless it is stated otherwise in the articles of the
company as it is with Koor) at least 21 days before the meeting is
convened. The shareholders entitled to participate and vote at the meeting
are the shareholders as of the record date set in the decision to convene
the meeting, provided that the record date is not more than 40 days, and
not less than four days, before the date of the meeting.

         A quorum is represented by at least two holders of ordinary shares
personally, or by proxy, who together hold at least 1/3 of the voting
rights of Koor. If such quorum is not present, such meeting shall stand
adjourned to the same day of the week following. At the adjourned meeting
two members, irrespective of their percentage holding of voting rights
shall constitute a quorum.

         Under the Companies Law, a shareholder who intends to vote at a
meeting must demonstrate that he owns shares in accordance with the
regulations. Under these regulations, a shareholder whose shares are
registered with a member of a stock exchange (such as NYSE or the TASE)
must provide Koor with an authorization from such member regarding his
ownership as of the record date.

         Right of Non-Israeli Shareholders to Vote

         Neither Koor's memorandum of association, the articles of
association, nor the laws of the State of Israel restrict in any way the
ownership or voting of Koor's ordinary shares by nonresidents or persons
who are not citizens of Israel, except with respect to citizens or
residents of countries that are in a state of war with Israel.

         Change of Control

         Under the Companies Law, a merger requires approval by the Board
of Directors and by the shareholders of each of the merging companies. In
approving a merger, the Board of Directors must determine that there is no
reasonable expectation that, as a result of a merger, the merged company
will not be able to meet its obligations to its creditors. Creditors may
also seek a court order to enjoin or delay the merger if there is such an
expectation that the merged company will not be able to meet its
obligations to its creditors. A court may also issue other instructions for
the protection of the creditors' rights in connection with a merger.

         Under the Companies Law, a control share acquisition of a public
company is prohibited unless a special purchase offer is made to all
shareholders. Such a special purchase offer requires, among other things,
that the Board of Directors either recommend that shareholders participate
in the purchase offer or state why it cannot do so.

Material Contracts

         Merger of ECI Telecom Ltd ("ECI ") and Tadiran Telecommunication Ltd
         (" TTL")

         On March 16 1999, ECI and TTL announced the completion of a merger
between them effective from January 1 1999. Because of the merger, Koor
does not consolidate TTL. As a result of the merger, there was an increase
of the goodwill balance by approximately NIS 179 million. See note 3.A. to
the Financial Statements.

         Divestiture of Tadiran com. Ltd ("Com")

         On November 10, 1999, Tadiran sold its holdings (100%) in Com to
the Shamrock Group and others in consideration of $149 million. Koor
recorded net capital gain of NIS 164 million. See note 3.B. to the
Financial Statements.

         Divestiture of Mashav Enterprise and Development Ltd (" Mashav ")

         In January 2000, Koor sold its holdings (50%) in Mashav to Clal
Industries Ltd ("Clal") in consideration of NIS 890 million and 47.5% of
the shares of Mashal Alumina Industries Ltd. Koor record a capital gain of
NIS 363 million ( NIS 234 after tax ). On December 1999, Mashav distributes
a dividend to Koor and Clal of NIS 710 million. . See note 3.D. to the
Financial Statements.

         Sale of certain of Telrad's Businesses to Nortel Israel

         In May 2000, Koor, Telrad and Nortel Networks Ltd. ("Nortel")
established a new company under the name of "Nortel Networks Israel (Sales
and Marketing) Ltd" ("Nortel Israel"), of which Nortel holds 72%. Koor and
Telrad hold the remaining 28% without voting rights, however, they have the
right to appoint one director out of six.

         On May 25, 2000, several agreements, including an Asset Purchase
Agreement and a Shareholders Agreement, were entered into by and among
Koor, Telrad, Nortel and Nortel Israel, in connection with the sale by
Telrad to Nortel Israel of Telrad's sales, marketing and support functions
of its public switching and TX1 systems businesses and Telrad's operations
in these fields in Israel and in several export markets. Under the
agreement, Telrad received approximately $90 million for the transaction,
as well as the book value of the transferred businesses, which were valued
at approximately $10 million. These businesses in 1999 and the eight months
ended August 31, 2000, constituted approximately 43.5% and 31.3% of
Telrad's sales respectively.

         Pursuant to the agreements, Telrad will serve as a subcontractor
of Nortel Israel for the manufacture of TX1 business exchanges, which will
be marketed by Nortel Israel for the period defined in the agreement, and
will perform research and development work relating to the exchanges. In
addition, earlier agreements regarding commitments made by Telrad to
purchase know-how and pay royalties to Nortel were cancelled by mutual
consent.

         In connection with the transaction, which closed on August 31,
2000, Koor invested approximately $5.6 million in the share capital of
Nortel Israel and provided a shareholder's loan of $42 million. The loan is
repayable in 2003, and bears interest at 6% per annum. In addition,
pursuant to the Shareholders Agreement, Koor was granted a put option to
sell its holding in Nortel Israel to Nortel and gave Nortel a call option
to purchase such holding. These options can be exercised in 2003, at a
price that reflects the amount of Koor's investment in Nortel Israel plus
the yield stipulated in the agreements which is based on the performance of
Nortel Israel.

         Also on August 30, 2000, but not related to the transaction,
Nortel exercised a put option granted to it by Koor in 1997 and sold to
Koor its 20% holding in Telrad for $45 million, thereby making Telrad a
wholly-owned subsidiary of Koor.

         As a result of these transactions, Koor recorded a capital gain
(after tax) in the third quarter of 2000 of approximately NIS 258 million.
See note 3.E. to the Financial Statements.

Exchange Controls

         Holders of ADSs are able to convert dividends and liquidation
distributions into freely repatriable non-Israeli currencies at the rate of
exchange prevailing at the time of repatriation, pursuant to a general
permit issued by the Controller of Foreign Exchange at the Bank of Israel,
or Controller, under the Currency Control Law, 5738-1978, or Currency
Control Law, as modified by certain reforms in May 1998, provided that
Israeli income tax has been withheld by us with respect to such amounts.

         Our ADSs may be freely held and traded pursuant to the General
Permit and the Currency Control Law. The ownership or voting of ADSs by
non-residents of Israel, except with respect to citizens of countries that
are in a state of war with Israel, are not restricted in any way by the our
memorandum of association or articles of association or by the laws of the
State of Israel.

         Pursuant to the reforms, the Bank of Israel has issued a new
"general permit." Under such general permit, foreign currency transactions
are generally permitted, except for transactions described in the permit
that are specifically restricted. Among these restricted transactions are
foreign currency transactions by institutional investors, including
investments outside of Israel by pension funds and insurers, as well as
futures contracts by foreign residents for periods of more than one month.
All foreign currency transactions must be reported to the Bank of Israel
under the new general permit.

         Certain changes in Israeli tax legislation are expected as a
result of the reforms. No assurance can be given that such legislative
changes will be forthcoming in any particular time frame, or at all.

Taxation

         The following is a discussion of Israeli and United States tax
consequences material to our United States shareholders. The discussion is
not intended, and should not be construed, as legal or professional tax
advice and does not exhaust all possible tax considerations.

         Holders of ADSs should consult their own tax advisors as to the
United States, Israeli or other tax consequences of the purchase, ownership
and disposition of ADSs, including, in particular, the effect of any
foreign, state or local taxes.

Israeli Tax Considerations

         The following discussion represents a summary of certain Israeli
tax laws affecting U.S. and other non-Israeli shareholders, for general
information only and is not intended to substitute for careful or specific
tax planning. To the extent that the discussion is based on legislation yet
to be judicially or administratively interpreted, there can be no assurance
that the views expressed herein will accord with any such interpretation in
the future. This discussion is not intended, and should not be construed,
as legal or professional tax advice, and does not cover all possible tax
considerations. Each investor should consult his or her own tax advisor as
to the particular tax consequences of an investment in the ordinary shares
including the effects of applicable Israeli or foreign or other tax laws
and possible changes in the tax laws.

         Under current law, sales of ADSs or ordinary shares of Koor are
exempt from Israeli capital gains tax so long as they are listed on the
TASE or on a stock exchange, such as the NYSE, recognized by the Israeli
Ministry of Finance and as long as the holder of such securities is an
individual or a company wholly-owned by individuals which did not receive
trading income in the relevant tax year or which has not claimed a
financial expenses deduction in such year. The latter condition with
respect to a company wholly-owned by individuals was added as a result of
an amendment from October 1998 to the Income Tax (Adjustment for Inflation)
Law 1985, which extended the applicability of such law to include
companies, including non-resident companies which are not wholly-owned by
individuals. Taxpayers to whom the Inflationary Adjustment Law does not
apply are exempt from tax on profits deriving from the sale of listed
securities, as described above. As a result of the amendment, taxpayers to
whom the Inflationary Adjustment Law applies, will be liable to tax on the
real gain accruing to them at the time of sale of securities. The base cost
for calculating the gain will be the market value of the securities on
December 31, 1998. Notwithstanding the foregoing, dealers in securities in
Israel are taxed at applicable tax rates to ordinary income.

         Pursuant to the Convention Between the Government of the United
States of America and the Government of Israel with Respect to Taxes on
Income, as amended (the "U.S.-Israel Tax Treaty"), the sale, exchange or
disposition of ADSs or ordinary shares by a person who qualifies as a
resident of the United States within the meaning of the U.S.-Israel Tax
Treaty and who is entitled to claim the benefits afforded to such resident
by the U.S.-Israel Tax Treaty ("Treaty U.S. Resident") will generally not
be subject to Israeli capital gains tax unless such Treaty U.S. Resident
held, directly or indirectly, shares representing 10% or more of the voting
power of Koor during any part of the 12-month period preceding such sale,
exchange or disposition, subject to certain conditions. A sale, exchange or
disposition of ADSs or ordinary shares by a Treaty U.S. Resident who held,
directly or indirectly, shares representing 10% or more of the voting power
of Koor at any time during such preceding 12-month period would be subject
to such Israeli tax, to the extent applicable; however, under the
U.S.-Israel Tax Treaty, such Treaty U.S. Resident would be permitted to
claim a credit for such taxes against the U.S. income tax imposed with
respect to such sale, exchange or disposition, subject to the limitations
in U.S. laws applicable to foreign tax credits.

         Non-residents of Israel are subject to income tax on income
accrued or derived from sources in Israel or received in Israel. Such
sources of income include passive income such as dividends, royalties and
interest, as well as non-passive income from services rendered in Israel.
On distributions of dividends other than bonus shares (stock dividends) by
Koor, income tax at the rate of 25% is generally withheld at source, unless
a different rate is provided in a treaty between Israel and the
shareholder's country of residence.

         During May 2000, the Public Committee regarding Changes in the Tax
System in Israel (Ben Bassat Committee) published various recommendations
to reform the tax laws, including recommendations that deal with tax relief
on earned income and with taxation income derived from capital and from
capital market operations.

         According to the recommendations, capital gain from quoted
securities of an Israeli company, realized by an individual or a company,
to which the Inflationary Adjustment Law does not apply, will be taxable at
the rate of 25%. However, according to a clarification which the Ministry
of Finance published on May 9, 2000, residents of countries with whom
Israel has signed a Treaty for the Prevention on Double Taxation (such as
the United States) will be tax-exempt on gains from securities of companies
that are listed on a stock exchange (such as the ordinary shares and ADR's
of Koor). In the case of controlling shareholders who according to
provision of the Treaty are liable to capital gains tax in Israel, those
person will have to report their income in Israel.

         These recommendations are currently under review and there can be
no assurance as to whether or not such recommendations will be adopted or
whether the final form will differ from the proposals.

U.S. Federal Income Tax Considerations

         The following is a summary of certain material U.S. Federal income
tax consequences that apply to U.S. Holders who hold ADSs as capital
assets. This summary is based on U.S. Federal income tax laws, regulations,
rulings and decisions in effect as of the date of this annual report, all
of which are subject to change at any time, possibly with retroactive
effect. This summary does not address all tax considerations that may be
relevant with respect to an investment in ADSs. This summary does not
account for the specific circumstances of any particular investor such as

         o    broker-dealers;

         o    financial institutions;

         o    certain insurance companies;

         o    investors liable for alternative minimum tax;

         o    tax-exempt organizations;

         o    investors that actually or constructively own 10 percent or
              more of our voting shares;

         o    investors holding ADSs as part of a straddle or a hedging or
              conversion transaction; and

         o    investors that are treated as partnerships or other pass
              through entities for U.S. federal income tax purposes.

         This summary does not address the effect of any U.S. Federal
taxation other than U.S. Federal income taxation. In addition, this summary
does not include any discussion of state, local or foreign taxation.

         You are urged to consult your tax advisors regarding the foreign
and United States Federal, state and local tax considerations of an
investment in ADSs.

         For purposes of this summary, a U.S. Holder is:

         o    an individual who is a citizen or, for U.S. Federal income
              tax purposes, a resident of the United States;

         o    a corporation or other entity taxable as a corporation
              created or organized in or under the laws of the United
              States or any political subdivision thereof;

         o    an estate whose income is subject to U.S. Federal income tax
              regardless of its source; or

         o    a trust if:

              (a) a court within the United States is able to exercise
primary supervision over administration of the trust; and

              (b) one or more United States persons have the authority to
control all substantial decisions of the trust.

     Taxation of Dividends

         Subject to the discussion below under "passive foreign investment
companies," the gross amount of any distributions that you receive with
respect to ADSs, including the amount of any Israeli taxes withheld from
these distributions, will constitute dividends for U.S. Federal income tax
purposes, to the extent of our current and accumulated earnings and profits
as determined for U.S. Federal income tax principles. You will be required
to include this amount of dividends in gross income as ordinary income on
the date such dividend is actually or constructively received.
Distributions in excess of our earnings and profits will be treated as a
non-taxable return of capital to the extent of your tax basis in the ADSs
and, to the extent in excess of your tax basis, will be treated as capital
gain. See "--Dispositions of ADSs" below for the discussion on the taxation
of capital gains. Dividends generally will not qualify for the
dividends-received deduction available to corporations.

         Dividends that we pay in NIS, including the amount of any Israeli
taxes withheld from these dividends, will be includible as income to you in
a U.S. dollar amount calculated by reference to the exchange rate in effect
on the day such dividends are distributed. If you convert dividends paid in
NIS into U.S. Dollars on the day the dividends are distributed, you
generally should not be required to recognize foreign currency gain or loss
with respect to such conversion. Any gain or loss resulting from a
subsequent exchange of such NIS generally will be treated as U.S. source
ordinary income or loss.

         Subject to certain conditions and limitations, you may elect to
claim a credit against your U.S. Federal income tax liability for Israeli
tax withheld from dividends received in respect of the ADSs. Dividends
generally will be treated as foreign-source passive income or financial
services income for United States foreign tax credit purposes. The rules
relating to the determination of the foreign tax credit are complex, and
you should consult your personal tax advisors to determine whether and to
what extent you would be entitled to this credit. Alternatively, you may
elect to claim a U.S. tax deduction, instead of a foreign tax credit, for
such Israeli tax, but only for a year in which you elect to do so with
respect to all foreign income taxes.

     Dispositions of ADSs

         If you sell or otherwise dispose of your ADSs, you will recognize
gain or loss for U.S. Federal income tax purposes in an amount equal to the
difference between the amount realized on the sale or other disposition and
your adjusted tax basis in your ADSs. Subject to the discussion below under
the heading "--Passive Foreign Investment Companies," such gain or loss
generally will be capital gain or loss and will be long-term capital gain
or loss if you had held the ADSs for more than one year at the time of the
sale or other disposition. The maximum Federal income tax rate on long-term
capital gains for individual taxpayers is 20 percent. Under most
circumstances, any gain that you recognize on the sale or other disposition
of ADSs will be U.S.-source for purposes of the foreign tax credit
limitation; and losses recognized will be allocated against U.S. source
income.

     Passive Foreign Investment Companies

         For U.S. Federal income tax purposes, we will be considered a
passive foreign investment company, or PFIC, for any taxable year in which
either 75% or more of our gross income is passive income, or at least 50%
of the average value of all of our assets for the taxable year produce or
are held for the production of passive income. For this purpose, passive
income includes dividends, interest, royalties, rents, annuities and the
excess of gain over losses from the disposition of assets which produce
passive income. If we were determined to be a PFIC for U.S. Federal income
tax purposes, highly complex rules would apply to U.S. Holders owning ADSs.
Accordingly, you are urged to consult your tax advisors regarding the
application of such rules.

         If we are treated as a PFIC for any taxable year,

         o    you would be required to allocate income recognized upon
              receiving certain dividends or gain recognized upon the
              disposition of ADSs ratably over your holding period for such
              ADSs,

         o    the amount allocated to each year during which we are
              considered a PFIC other than the year of the dividend payment
              or disposition would be subject to tax at the highest
              individual or corporate tax rate, as the case may be, and an
              interest charge would be imposed with respect to the
              resulting tax liability allocated to each such year,

         o    gain recognized upon the disposition of ADSs would be taxable
              as ordinary income and

         o    you would be required to make an annual return on IRS Form
              8621 regarding distributions received with respect to ADSs
              and any gain realized on your ADSs.

         One method to avoid the aforementioned treatment is to make a
timely mark-to-market election in respect of your ADSs. If you elect to
mark-to-market your ADSs, you will generally include in income any excess
of the fair market value of the ADSs at the close of each tax year over
your adjusted basis in the ADSs. If the fair market value of the ADSs had
depreciated below your adjusted basis at the close of the tax year, you may
generally deduct the excess of the adjusted basis of the ADSs over its fair
market value at that time. However, such deductions generally would be
limited to the net mark-to-market gains, if any, that you included in
income with respect to ADSs in prior years. Income recognized and
deductions allowed under the mark-to-market provisions, as well as any gain
or loss on the disposition of ADSs with respect to which the mark-to-market
election is made, is treated as ordinary income or loss.

         Based on our income, assets and activities for the year 2000, we
believe that we were not a PFIC for that year, nor do we expect to become a
PFIC in the foreseeable future. However, there can be no assurances that we
will not be treated as a PFIC for that year or any taxable year. If we are
or become a PFIC for any taxable year included in your holding period, we
generally will remain a PFIC for all subsequent taxable years with respect
to your holding of our ADSs.

         You are urged to consult your tax advisor regarding the
possibility of us being classified as a PFIC and the potential tax
consequences arising from the ownership and disposition (directly or
indirectly) of an interest in a PFIC.

     Backup Withholding and Information Reporting

         Payments in respect of ADSs may be subject to information
reporting to the U.S. Internal Revenue Service and to U.S. backup
withholding tax. Backup withholding will not apply, however, if you furnish
a correct taxpayer identification number and make any other required
certification or are otherwise exempt from backup withholding. Generally,
you will provide such certification on Form W-9 (Request for Taxpayer
Identification Number and Certification).

Documents on Display

         We are subject to certain of the information reporting
requirements of the Securities and Exchange Act of 1934, as amended. We, as
a "foreign private issuer" are exempt from the rules and regulations under
the Securities Exchange Act prescribing the furnishing and content of proxy
statements, and our officers, directors and principal shareholders are
exempt from the reporting and "short-swing" profit recovery provisions
contained in Section 16 of the Securities Exchange Act, with respect to
their purchase and sale of our shares. In addition, we are not required to
file reports and financial statements with the Securities and Exchange
Commission as frequently or as promptly as U.S. companies whose securities
are registered under the Securities Exchange Act. However, we will file
with the Securities and Exchange Commission an annual report on Form 20-F
containing financial statements audited by an independent accounting firm.
We will also furnish quarterly reports on Form 6-K containing unaudited
financial information after the end of each of the first three quarters.

         You may read and copy any document we file with the SEC at its
public reference facilities at, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's regional offices at 500 West Madison Street, Suite
1400, Chicago, IL 60661-2511 and 7 World Trade Center, 13th Floor, New
York, NY 10048. You may also obtain copies of the documents at prescribed
rates by writing to the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. The SEC also maintains a web site
that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC.
The address of this web site is http://www.sec.gov. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public
reference facilities.

Item 11.  Quantitative and Qualitative Disclosures About Market Risk.

General

         Koor's market risk represents the risk of changes in the value of
financial instruments caused by fluctuations in foreign exchange rates,
interest rates and equity prices. Koor's hedging arrangements against
market risk are not in material amounts and, as a matter of policy, Koor
does not enter into transactions of a speculative or trading nature.
Foreign currency exchange rate and interest rate exposures are monitored by
tracking actual and projected commitments and through the use of
sensitivity analysis. Koor does not believe that it is exposed to any
material market risk with regard to market risk sensitive instruments.

Market risk related to foreign currency exchange rates

         At December 31, 2000, Koor had financial liabilities denominated
in various currencies (primarily dollars). A fluctuation in currency prices
is liable to affect Koor's financing expenses.

         Koor had consolidated foreign currency-linked financial
liabilities of NIS 6,029 million, of which NIS 5,388 million is
dollar-linked and the rest, NIS 641 million, is linked to other currencies
(mainly the Brazilian Real).

         At the same time, Koor had consolidated foreign currency-linked
financial assets totaling NIS 3,762 million, of which NIS 2,698 million is
in dollars and the rest, NIS 1,064 million, is in other currencies (mainly
the Brazilian Real).

         Net financial liabilities in foreign currency for the year ended
December 31, 2000, totalled NIS 2,267 million, of which total dollar-linked
financial liabilities are NIS 2,690 million, and net financial assets
linked to other foreign currencies (mainly the Brazilian real) amounted to
NIS 423 million. A portion of the currency exposure also stems from the
export sales included in Koor's consolidated financial statements for 2000,
which include NIS 5,415 million - constituting 65% of Koor's total
consolidated sales, while a considerable portion of the expenses included
in the consolidated statements are stated in Israeli currency.

         Koor's policy regarding hedging against exposure to fluctuations
in currency prices is that each subsidiary will hedge according to the
needs and markets in which it operates; there is no policy of engaging in
currency hedging over the entire consolidated balance sheet.

         Koor's consolidated financial statements for 2000 include
transactions with financial instruments that serve mainly as a hedge
against currency exposure for the subsidiary companies.

         During 2000, Koor bought dollars in exchange for other currencies
in futures trades, call options, put options and swaps, totaling NIS 135,
370, 124 and 445 million, respectively. At the same time, Koor had
consolidated sales of dollars in exchange for other currencies through
futures trades, call options, put options and swaps totaling NIS 572, 23,
150 and 510 million, respectively. For a detailed description of
transactions with financial instruments, see Note 21 to the financial
statements.

         As of December 31, 2000, Koor had dollar-linked financial
liabilities totaling NIS 1,673 million and dollar assets totaling NIS 257
million. Net dollar-linked liabilities were NIS 1,416 million.

         Market risk relating to foreign currency exchange rates was
estimated as the potential increase in net monetary liabilities resulting
from a hypothetical 5% increase in the exchange rate of the US dollar. At
December 31, 2000, assuming such increase in the US dollar exchange rate,
Koor's financial expenses would increase by approximately NIS 71 million.
Koor believes that a 2% increase in the in the exchange rate of the US
dollar constitutes a reasonable increase for examining the impact of
exposure to foreign currency exchange rates on Koor's financing expenses,
in view of the changes that have occurred in recent years (In 1999-2000,
the dollar rose less than 3% against the shekel) and those that are
forecast for the coming year.

         As of December 31, 2000 Koor had no material hedge transactions
against the above net financial liabilities. Koor's policy is to examine
market conditions on an occasional basis and to engage in hedge
transactions accordingly.

Market risk related to interest rates

         As of December 31, 2000, Koor did not hold or issue financial
instruments regarding interest rate risk.

         Some of Koor's financial loans are denominated in variable
interest rates that are liable to fluctuate from time to time. Koor's
policy regarding exposure to interest rates is that each subsidiary manages
its own exposure. Several of Koor's subsidiaries engage in hedge
transactions against interest rate fluctuations.

         As of December 31, 2000, Koor's consolidated balance sheet
contained liabilities in foreign currency (mainly the dollar) totaling NIS
6,029 million, and non-index linked shekel loans totaling NIS 1,520
million. The consolidated balance sheets contained financial assets in
foreign currency (mainly the dollar) totaling NIS 3,762 million and
non-index linked shekel assets totaling NIS 934 million. Net financial
liabilities exposed to LIBOR interest rate fluctuations reached NIS 2,267
million, while net financial liabilities exposed to interest rate
fluctuations in Israel amounted to NIS 586 million.

         As of December 31, 2000, Koor's total liabilites exposed to
fluctuations in the LIBOR interest rate amount to NIS 1,672 million. Total
financial assets exposed to fluctuations in the LIBOR interest rate amount
to NIS 257 million. Net liabilities exposed to fluctuations in the LIBOR
interest rate amount to NIS 1,415 million. Market risk was estimated as the
potential hypothetical increase of 2% in the LIBOR interest rate and
assuming such increase, Koor's financing expenses would increase by NIS 28
million.

         The net total of Koor's liabilities exposed to fluctuations in the
interest rate in Israel is NIS 110 million. Should the interest rate in
Israel rise by 2%, Koor's financing expenses would increase by NIS 2
million.

         Koor believes that a 2% increase in the LIBOR interest rate and in
the shekel interest rate in Israel constitutes a reasonable increase for
examining the impact of exposure to interest rates on Koor's financing
expenses, in view of the changes that have occurred in recent years and
those that are forecast for the coming year.

         From time to time, Koor examines the market conditions for
engaging in hedge transactions against exposure to interest rate
fluctuations. In 2000, no hedge transactions against interest rate
fluctuations took place at the Koor parent company. In 2001, Koor decided
to purchase hedge transactions against interest rate fluctuations totaling
$55 million against exposure to interest rate fluctuations in Israel and
other countries.

Market risk related to equity prices

         Koor had short-term equity marketable securities at December 31,
2000 of approximately NIS 209 million. Market risk was estimated as the
potential hypothetical decrease of 20% in the prices of these securities.
Assuming such decrease, the fair value of the equity marketable securities
would decrease by approximately NIS 21 million. Koor believes that a 20%
decrease in the prices of these securities constitutes a reasonable
increase for examining the impact of exposure to equity prices on Koor's
financing expenses, in view of the changes in the global markets that have
occurred in the previous year and those that are forecast for the coming
year.

         In addition, Koor has long-term equity holdings in several
subsidiaries whose securities are traded on the Tel Aviv Stock Exchange and
Nasdaq. Ordinary fluctuations in the prices of these subsidiaries'
securities would not affect Koor's financial statements, however,
significant fluctuations may have an adverse affect on Koor's financial
statements.

Item 12. Description of Securities Other than Equity Securities.

         Not Applicable.


                                  PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies.

         Not Applicable.

Item 14. Material Modifications to the Rights of Security Holders and
         Use of Proceeds.

         Not Applicable.

Item 15. [Reserved]

Item 16. [Reserved]


                                  PART III

Item 17. Financial Statements.

         See pages F-1 through F-108, incorporated herein by reference.

Item 18. Financial Statements.

         Not Applicable.

Item 19. Exhibits.


    Exhibit
      No.       Description
    -------     -----------


       1.1*     Memorandum of Association of Koor Industries Ltd. (together
                with an English translation thereof) (filed as Exhibit 3.1
                to Koor Industries Ltd.'s Registration Statement on Form
                F-1 (Registration No. 333-97732) filed with the Commision
                on October 3, 1995, and incorporated herein by reference)

       1.2      Articles of Association of Koor Industries Ltd., (together
                with an English translation thereof)(filed as Exhibit 3.2
                to Koor Industries Ltd.'s Registration Statement on Form
                F-1 (Registration No. 333-97732) filed with the Commission
                on October 3, 1995 and incorporated herein by reference)

       2.1*     Form of Share Certificate (filed as Exhibit 4.1 to Koor
                Industries Ltd.'s Registration Statement on Form F-1
                (Registration No. 333-97732) filed with the Commision on
                October 3, 1995, and incorporated herein by reference)

       2.2*     Form of Deposit Agreement including Form of ADR Certificate
                (filed as Exhibit A to Koor Industries Ltd.'s Registration
                Statement on Form F-6 (Registration No. 333-97758) filed
                with the Commision on October 4, 1995, and incorporated
                herein by reference)

       4.1      Agreement and Plan of Merger, dated December 22, 1998,
                among ECI Telecom Ltd., Tadiran Telecommunications Ltd. and
                Tadiran Ltd.

       4.2*     Agreement dated December 31, 1999 between Koor and Clal
                Industries and Investments Ltd. for the sale of Koor's
                holdings in Mashav (filed as Exhibit 1.1 to Koor Industries
                Ltd.'s Annual Report on Form 20-F (File No. 001-09178)
                filed with the Commision on May 26, 2000, and incorporated
                herein by reference)

       4.3*     Agreement dated November 10, 1999 between Tadiran and the
                Shamrock Group for the sale of Tadiran's interest in
                Tadiran Com (filed as Exhibit 2.1 to Koor Industries Ltd.'s
                Annual Report on Form 20-F (File No. 001-09178) filed with
                the Commision on May 26, 2000, and incorporated herein by
                reference)

       4.4      Asset Purchase Agreement, dated May 25, 2000, by and among
                Telrad Networks Ltd., Nortel Networks Ltd., Koor Industries
                Ltd. and Nortel Networks Israel (Sales and Marketing) Ltd.

       4.5      Shareholders Agreement, dated May 25, 2000, by and among
                Nortel Networks Ltd., Nortel Communications Holdings (1997)
                Ltd., Koor Industries Ltd., Telrad Networks Ltd. and Nortel
                Networks Israel (Sales and Marketing) Ltd.

       8.1      List of significant subsidiaries

----------------------

*    Previously Filed




                                 SIGNATURES


         Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant certifies that it meets all of the
requirements for filing on Form 20-F and has duly caused this annual report
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Tel Aviv, State of Israel, on the _____ day of June, 2001.



                                KOOR INDUSTRIES LTD.



                                By:    /s/  Jonathan Kolber
                                     ---------------------------
                                      Jonathan Kolber
                                      Chief Executive Officer and Vice Chairman
                                      of the Board of Directors




                               EXHIBIT INDEX

    Exhibit
       No.      Description
    --------    -----------

       1.1*     Memorandum of Association of Koor Industries Ltd. (together
                with an English translation thereof) (filed as Exhibit 3.1
                to Koor Industries Ltd.'s Registration Statement on Form
                F-1 (Registration No. 333-97732) filed with the Commision
                on October 3, 1995, and incorporated herein by reference)

       1.2      Articles of Association of Koor Industries Ltd., (together
                with an English translation thereof)(filed as Exhibit 3.2
                to Koor Industries Ltd.'s Registration Statement on Form
                F-1 (Registration No. 333-97732) filed with the Commission
                on October 3, 1995 and incorporated herein by reference)

       2.1*     Form of Share Certificate (filed as Exhibit 4.1 to Koor
                Industries Ltd.'s Registration Statement on Form F-1
                (Registration No. 333-97732) filed with the Commision on
                October 3, 1995, and incorporated herein by reference)

       2.2*     Form of Deposit Agreement including Form of ADR Certificate
                (filed as Exhibit A to Koor Industries Ltd.'s Registration
                Statement on Form F-6 (Registration No. 333-97758) filed
                with the Commision on October 4, 1995, and incorporated
                herein by reference)

       4.1      Agreement and Plan of Merger, dated December 22, 1998,
                among ECI Telecom Ltd., Tadiran Telecommunications Ltd. and
                Tadiran Ltd.

       4.2*     Agreement dated December 31, 1999 between Koor and Clal
                Industries and Investments Ltd. for the sale of Koor's
                holdings in Mashav (filed as Exhibit 1.1 to Koor Industries
                Ltd.'s Annual Report on Form 20-F (File No. 001-09178)
                filed with the Commision on May 26, 2000, and incorporated
                herein by reference)

       4.3*     Agreement dated November 10, 1999 between Tadiran and the
                Shamrock Group for the sale of Tadiran's interest in
                Tadiran Com (filed as Exhibit 2.1 to Koor Industries Ltd.'s
                Annual Report on Form 20-F (File No. 001-09178) filed with
                the Commision on May 26, 2000, and incorporated herein by
                reference)

       4.4      Asset Purchase Agreement, dated May 25, 2000, by and among
                Telrad Networks Ltd., Nortel Networks Ltd., Koor Industries
                Ltd. and Nortel Networks Israel (Sales and Marketing) Ltd.

       4.5      Shareholders Agreement, dated May 25, 2000, by and among
                Nortel Networks Ltd., Nortel Communications Holdings (1997)
                Ltd., Koor Industries Ltd., Telrad Networks Ltd. and Nortel
                Networks Israel (Sales and Marketing) Ltd.

       8.1      List of significant subsidiaries

----------------------
*    Previously Filed



                                 Koor Industries Ltd. (an Israeli Corporation)

Financial Statements as at 31 December, 2000
------------------------------------------------------------------------------



Contents

                                                                           Page
                                                                           ----

Auditors' Report                                                              2


Financial Statements

Consolidated Balance Sheets                                                   3

Company Balance Sheets                                                        4

Consolidated Statements of Operations                                         5

Company Statements of Operations                                              6

Statement of Shareholders' Equity                                             7

Consolidated Statements of Cash Flows                                        11

Company Statements of Cash Flows                                             16

Notes to the Financial Statements                                            18




March 21, 2000

Auditors' Report to the Shareholders of
Koor Industries Ltd.

We have audited the accompanying balance sheets of Koor Industries Ltd.
(the "Company") as at December 31, 2000 and 1999, and the consolidated
balance sheets of the Company and its subsidiaries as at such dates, and
the related statements of operations, shareholders' equity, and cash flows,
for each of the three years, the last of which ended December 31, 2000.
These financial statements are the responsibility of the Company's Board of
Directors and of its Management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We did not audit the financial statements of certain subsidiaries,
including those consolidated by the proportionate consolidation method,
whose assets constitute 49% and 18% of the total consolidated assets as at
December 31, 2000 and 1999 respectively, and whose revenues constitute 56%,
16% and 31% of the total consolidated revenues for the years ended December
31, 2000, 1999, and 1998 respectively. The financial statements of those
subsidiaries were audited by other auditors whose reports thereon were
furnished to us. Our opinion, insofar as it relates to amounts emanating
from the financial statements of such subsidiaries, is based solely on the
said reports of the other auditors. Furthermore, the data included in the
financial statements relating to the net asset value of the Company's
investments in affiliates and to its share in their operating results is
based on the financial statements of such affiliates, some of which were
audited by other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and Management, as well as evaluating the overall financial
statement presentation. We believe that our audits, and reports of the
other auditors, provide a reasonable basis for our opinion.

In our opinion, based on our audits and on the reports of the
above-mentioned other auditors, the financial statements referred to above
present fairly, in all material respects, the financial position of the
Company and the consolidated financial position of the Company and its
subsidiaries as of December 31, 2000 and 1999 and the results of their
operations, the changes in shareholders' equity and their cash flows for
each of the three years, the last of which ended December 31, 2000, in
conformity with accounting principles generally accepted in Israel.

Accounting principles generally accepted in Israel vary in certain
significant respects from accounting principles generally accepted in the
United States. Application of accounting principles generally accepted in
the United States would have affected results of operations for each of the
years in the three-year period ended December 31, 2000 and stockholders'
equity as of December 31, 1999 and 1998, to the extent summarized in Note
28 to the consolidated financial statements.

As explained in Note 2B, the above-mentioned financial statements are
stated in values adjusted for the changes in the general purchasing power
of the Israeli currency, in accordance with opinions of the Institute of
Certified Public Accountants in Israel.

As discussed in Note 18A(1) to the financial statements, relating to an
investigation by the Restrictive Trade Practices Authority, concerning the
alleged coordination of prices in the Koor Group with respect to the
products of its subsidiaries, Tadiran Ltd. and Telrad Networks Ltd.
(formerly - "Telrad Industries and Telecommunications Ltd.").


Certified Public Accountants (Isr.)


<TABLE>
Consolidated Balance Sheets as at December 31
----------------------------------------------------------------------------------------------------
In terms of shekels of December 2000
<CAPTION>
                                                                                         Convenience
                                                                                         translation
                                                                                           (Note 2B)
                                                                                     ---------------
                                                                      December 31        December 31
                                                 --------------------------------    ---------------
                                                           2000              1999               2000
                                                 --------------    --------------    ---------------
                                        Note                        NIS thousands     US $ thousands
                                     --------    --------------    --------------    ---------------
<S>                                     <C>        <C>             <C>                  <C>
Assets

Current assets
Cash and cash equivalents                              969,030         1,448,706            239,800
Short-term deposits and investments        4           632,028           472,335            156,403
Trade receivables                          5         2,660,295         3,213,207            658,326
Other receivables                          6           450,298           660,608            111,432
Inventories and work in progress,
 net of customer advances                  7         1,761,196         2,123,687            435,832
                                                 --------------    --------------    ---------------
Total current assets                                 6,472,847         7,918,543          1,601,793
                                                 --------------    --------------    ---------------
Investments and long-term
 receivables
Investments in affiliates                  8         3,000,889         3,495,772            742,610
Other investments and receivables          9         1,164,809           757,747            288,248
                                                 --------------    --------------    ---------------
                                                     4,165,698         4,253,519          1,030,858
                                                 --------------    --------------    ---------------
Fixed assets                              10
Cost                                                 6,736,136        10,662,967          1,666,948
Less - accumulated depreciation                      3,467,212         6,091,693            858,008
                                                 --------------    --------------    ---------------
                                                     3,268,924         4,571,274            808,940
                                                 --------------    --------------    ---------------
Intangible assets and deferred expenses          --------------    --------------    ---------------
 after amortization                       11           860,948           627,264            213,053
                                                 --------------    --------------    ---------------

                                                 --------------    --------------    ---------------
                                                    14,768,417        17,370,600          3,654,644
                                                 ==============    ==============    ===============
</TABLE>




<TABLE>
                                                       Koor Industries Ltd. (An Israeli Corporation)

----------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                         Convenience
                                                                                         translation
                                                                                           (Note 2B)
                                                                                     ---------------
                                                                      December 31        December 31
                                                 --------------------------------    ---------------
                                                           2000              1999               2000
                                                 --------------    --------------    ---------------
                                        Note                        NIS thousands     US $ thousands
                                     --------    --------------------------------    ---------------
<S>                                     <C>        <C>             <C>                  <C>
Liabilities and Shareholders Equity

Current liabilities
Credits from banks and others              12         2,695,516         3,559,014            667,042
Trade payables                             13         1,413,615         1,512,037            349,818
Other payables:                            14         1,077,535         1,733,912            266,651
Customer advances, net of work in
progress                                    7           297,678           203,449             73,664
                                                 --------------    --------------    ---------------
Total current liabilities                             5,484,344         7,008,412          1,357,175
                                                 --------------    --------------    ---------------
Long-term liabilities
Net of current maturities:              15,21
  Bank loans                                          3,025,250         3,691,887            748,639
  Other loans                                           188,848           133,060             46,733
  Debentures                                             33,949            65,228              8,401
  Convertible debentures                                 72,467           180,159             17,933
Customer advances                                       104,409            45,583             25,837
Deferred taxes                            16F           120,047           236,895             29,707
Liability for employee severance
benefits                                   17           288,955           304,891             71,506
                                                 --------------    --------------    ---------------
Total long-term liabilities                           3,833,925         4,657,703            948,756
                                                 --------------    --------------    ---------------
Liability for acquisition of
 subsidiaries' shares                                    80,517                 -             19,925
                                                 --------------    --------------    ---------------
Minority Interest                                     1,063,381         1,319,771            263,148
                                                 --------------    --------------    ---------------
Shareholders' Equity                       20         4,306,250         4,384,714          1,065,640
                                                 --------------    --------------    ---------------

Contingent liabilities and commitments     18


                                                     14,768,417        17,370,600          3,654,644
                                                 ==============    ==============    ===============



                    ------------------------------------         ------------------------------------
March 21, 2000      Jonathan Kolber                              Joseph Dauber
                    CEO and Vice Chairman                        Member of the Board of Directors
                    of the Board of Directors



The accompanying notes are an integral part of the financial statements.
</TABLE>




<TABLE>
Company Balance Sheets as at December 31
----------------------------------------------------------------------------------------------------
<CAPTION>
In terms of shekels of December 2000

                                                                                         Convenience
                                                                                         translation
                                                                                           (Note 2B)
                                                                                     ---------------
                                                                      December 31        December 31
                                                 --------------------------------    ---------------
                                                           2000              1999               2000
                                                 --------------    --------------    ---------------
                                        Note                        NIS thousands     US $ thousands
                                     --------    --------------------------------    ---------------
<S>                                     <C>        <C>             <C>                  <C>
Assets

Current assets
Cash and cash equivalents                                22,726           725,354              5,624
Short-term deposits and investments        4            466,400           279,097            115,417
Short-term loans and current
 maturities of loans to investees                        47,897             1,699             11,853
Receivables:
  Investees                                              11,975            94,905              2,963
  Deferred taxes                      6, 16E                  -           129,000                  -
  Others                                   6             21,824            26,176              5,401
                                                 --------------    --------------    ---------------
Total current assets                                    570,822         1,256,231            141,258
                                                 --------------    --------------    ---------------

Investments and long-term
 receivables

Investments in investees                   8          6,007,322         6,400,868          1,486,593
Other investments and receivables          9            536,775           383,377            132,832
                                                 --------------    --------------    ---------------
                                                      6,544,097         6,784,245          1,619,425
                                                 --------------    --------------    ---------------
Fixed assets                              10
Cost                                                     40,455            40,383             10,011
Less - accumulated depreciation                          (3,328)           (1,983)              (824)
                                                 --------------    --------------    ---------------
                                                         37,127            38,400              9,187
                                                 --------------    --------------    ---------------

Cost of raising of capital, net of
 amortization                             11                540             1,564                134
                                                 --------------    --------------    ---------------


                                                      7,152,586         8,080,440          1,770,004
                                                 ==============    ==============    ===============
</TABLE>




<TABLE>
                                                       Koor Industries Ltd. (An Israeli Corporation)

----------------------------------------------------------------------------------------------------
<CAPTION>

                                                                                         Convenience
                                                                                         translation
                                                                                           (Note 2B)
                                                                                     ---------------
                                                                      December 31        December 31
                                                 --------------------------------    ---------------
                                                           2000              1999               2000
                                                 --------------    --------------    ---------------
                                        Note                        NIS thousands     US $ thousands
                                     --------    --------------------------------    ---------------

<S>                                     <C>        <C>             <C>                  <C>
Liabilities and Shareholders' Equity

Current liabilities
Credit from banks and others              12            944,548           977,516            233,741
Trade payables                                              289             1,657                 72
Other payables:
  Investees                                              81,121            79,849             20,074
  Interim dividend                                            -           166,962                  -
  Others                                  14             95,241           134,210             23,569
                                                 --------------    --------------    ---------------
Total current liabilities                             1,121,199         1,360,194            277,456
                                                 --------------    --------------    ---------------
Long-term liabilities
Net of current maturities:            15, 21
  Bank loans                                          1,630,899         2,128,779            403,588
  Convertible debentures                                 72,467           170,897             17,933
  Investees                                              18,465            29,342              4,569
Liability for employee severance
 benefits, net                            17              3,306             6,514                818
                                                 --------------    --------------    ---------------
Total long-term liabilities                           1,725,137         2,335,532            426,908
                                                 --------------    --------------    ---------------
Total shareholders' equity                20          4,306,250         4,384,714          1,065,640
                                                 --------------    --------------    ---------------
Contingent liabilities and commitments    18


                                                 --------------    --------------    ---------------
                                                      7,152,586         8,080,440          1,770,004
                                                 ==============    ==============    ===============
</TABLE>
<TABLE>
<CAPTION>




                    ------------------------------------         ------------------------------------
<S>                  <C>                                         <C>
March 21, 2000       Jonathan Kolber                             Joseph Dauber
                     CEO and Vice Chairman                       Member of the Board of Directors
                     of the Board of Directors



The accompanying notes are an integral part of the financial statements.
</TABLE>




<TABLE>

                                                                             Koor Industries Ltd. (An Israeli Corporation)
<CAPTION>
Consolidated Statements of Operations*
--------------------------------------------------------------------------------------------------------------------------
In terms of shekels of December 2000

                                                                                                               Convenience
                                                                                                               translation
                                                                                                                 (Note 2B)
                                                                                                           ---------------
                                                                                                                Year ended
                                                                                 Year ended December 31        December 31
                                                    ---------------------------------------------------
                                                              2000               1999              1998               2000
                                                    --------------     --------------   ---------------    ---------------
                                           Note                                           NIS thousands     US $ thousands
                                 --------------     ----------------------------------------------------------------------
<S>                                      <C>          <C>               <C>               <C>                 <C>
Income from sales
 and services                              23A          8,281,242         10,675,301        12,792,316          2,049,305
Cost of sales and services
                                           23B          6,301,412          8,129,866         9,867,024          1,559,369
                                                    --------------     --------------   ---------------    ---------------
Gross profit                                            1,979,830          2,545,435         2,925,292            489,936
Selling and marketing
 expenses                                  23C            782,401            978,056         1,202,457            193,616
General and
 administrative expenses                   23D            552,293            729,509         1,010,885            136,672
                                                    --------------     --------------   ---------------    ---------------
Operating earnings                                        645,136            837,870           711,950            159,648
Financing expenses, net                    23E            330,681            358,289           251,015             81,832
                                                    --------------     --------------   ---------------    ---------------
                                                          314,455            479,581           460,935             77,816
Other income (expenses),
 net                                       23F            520,963            107,228           (71,270)           128,919
Earnings before income                              --------------     --------------   ---------------    ---------------
 tax                                                      835,418            586,809           389,665            206,735
Income tax                                 16G            281,876            161,887           233,985             69,754
                                                    --------------     --------------   ---------------    ---------------
                                                          553,542            424,922           155,680            136,981
Group's equity in the
 operating results of
 affiliates, net                           23G           (270,006)           121,725            61,985             66,816
                                                    --------------     --------------   ---------------    ---------------
                                                          283,536            546,647           217,665             70,165
Minority interest in
 subsidiaries, net                                        (15,849)             2,472          (239,964)            (3,922)
                                                    --------------     --------------   ---------------    ---------------
Net earnings (loss) from
 continuing activities                                    267,687            549,119           (22,299)            66,243
Result of discontinued
activities, net                            24H                  -                  -            69,420                  -
                                                    --------------     --------------   ---------------    ---------------
Net earnings for the year                                 267,687            549,119            47,121             66,243
                                                    ==============     ==============   ===============    ===============
                                                               NIS                NIS               NIS                US$
Basic earnings (loss) per                           --------------     --------------   ---------------    ---------------
 NIS 1 par value
 of ordinary shares:                        26
Continuing activities                                      17,400             34,892            (1,347)             4,306
Discontinued activities                                         -                  -             4,414                  -
                                                    --------------     --------------   ---------------    ---------------
                                                           17,400             34,892             3,067              4,306
Diluted earnings (loss)                             ==============     ==============   ===============    ===============
Per NIS 1 par value of
 ordinary shares:                           26
Continuing activities                                      17,319             34,559            (1,347)             4,286
Discontinued activities                                         -                  -             4,414                  -
                                                    --------------     --------------   ---------------    ---------------
                                                           17,319             34,559             3,067              4,286
                                                    ==============     ==============   ===============    ===============

The accompanying notes are an integral part of the financial statements
</TABLE>



<TABLE>

                                                               Koor Industries Ltd. (An Israeli Corporation)
<CAPTION>
Company Statements of Operations
------------------------------------------------------------------------------------------------------------

In terms of shekels of December 2000

                                                                                                               translation
                                                                                                                 (Note 2B)
                                                                                                           ---------------
                                                                                                                Year ended
                                                                                 Year ended December 31        December 31
                                                    ---------------------------------------------------
                                                              2000               1999              1998               2000
                                                    --------------     --------------   ---------------    ---------------
                                           Note                                           NIS thousands     US $ thousands
                                 --------------     ----------------------------------------------------------------------
<S>                                    <C>         <C>                <C>               <C>                 <C>
Income
Management services                        23A             39,569             65,121            62,752              9,792
Others, net                                23F            449,859                  -                 -            111,324
                                                    --------------     --------------   ---------------    ---------------
Total income                                              489,428             65,121            62,752            121,116
                                                    --------------     --------------   ---------------    ---------------
Expenses
General and administrative
 expenses                                 23D              61,600             66,170           116,643             15,244
Others, net                               23F                   -            107,505             6,729                  -
Financing, net                            23E             141,898            160,475            84,568             35,114
                                                    --------------     --------------   ---------------    ---------------
Total expenses                                            203,498            334,150           207,940             50,358
                                                    --------------     --------------   ---------------    ---------------
Earnings (loss) before
 income tax                                               285,930           (269,029)         (145,188)            70,758
Income tax                                               (129,000)           101,500                 -            (31,923)
                                                    --------------     --------------   ---------------    ---------------
                                                          156,930           (167,529)         (145,188)            38,835

Koor's equity in the
 operating results of
 investees, net                            23G            110,757            716,648           122,889             27,408
                                                    --------------     --------------   ---------------    ---------------
Net earnings (loss) from
 continuing activities                                    267,687            549,119           (22,299)            66,243

Results of discontinued
 activities, net                           24H                  -                  -            69,420                  -
                                                    --------------     --------------   ---------------    ---------------
Net earnings for the year                                 267,687            549,119            47,121             66,243
                                                    ==============     ==============   ===============    ===============

                                                               NIS                NIS               NIS                NIS
                                                    --------------     --------------   ---------------    ---------------
Basic earnings (loss )
 per NIS 1 par value of
  ordinary shares:                                             26
Continuing activities                                      17,400             34,892            (1,347)             4,306
Discontinued activities                                         -                  -             4,414                  -
                                                    --------------     --------------   ---------------    ---------------
                                                           17,400             34,892             3,067              4,306
Diluted earnings                                    ==============     ==============   ===============    ===============
(loss) per NIS 1 par
 value of ordinary shares:                  26
Continuing activities                                      17,319             34,559            (1,347)             4,286
Discontinued activities                                         -                  -             4,414                  -
                                                    --------------     --------------   ---------------    ---------------
                                                           17,319             34,559             3,067              4,286
                                                    ==============     ==============   ===============    ===============

The accompanying notes are an integral part of the financial statements.

</TABLE>



<TABLE>
<CAPTION>
(Part 1)
                                                               Koor Industries Ltd. (An Israeli Corporation)

Statement of Shareholders' Equity
----------------------------------------------------------------------------------------------------------------------------

In terms of shekels of December 2000
                                                                   Number                                         Company
                                                                       of                                     shares held
                                                                 ordinary           Share         Capital              by
                                                               shares (1)         capital        reserves    subsidiaries
                                                             -------------      ---------     -----------    ------------
                                                                                     NIS thousands
                                                             ---------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                <C>           <C>               <C>
Balance at January 1, 1998                                    15,307,569         532,747       2,272,859         (53,641)

Changes during 1998:
Net income                                                             -               -               -               -
Exercise of stock options granted to Israeli banks                     -              *-             619               -
Interim dividend                                                       -               -               -               -
Interim dividend                                                       -               -               -               -
Interim dividend                                                       -               -               -               -
Erosion of dividend proposed in 1996                                   -               -               -               -
Cumulative foreign currency translation
 Adjustments, net                                                      -               -               -               -
Dividend from company shares held by subsidiaries                      -               -               -               -
Conversion of debentures into shares                             315,658               1         141,163               -
Employee benefit from options granted by a controlling
 Shareholder (2)                                                       -               -           6,080               -
Adjustment of consideration in respect of purchase of
 Investment from controlling shareholder (3)                           -               -          (6,080)              -
Exercise of stock options granted to
 Senior employees (2)                                            100,100              *-               -               -
Other adjustment                                                       -               -             367               -
                                                             -------------      ---------     -----------    ------------
Balance at 31 December, 1998                                  15,723,327         532,748       2,415,008         (53,641)
                                                             =============      =========     ===========    ============
</TABLE>

<TABLE>
                                                             Koor Industries Ltd. (An Israeli Corporation)
<CAPTION>
(Part 2)


Statement of Shareholders' Equity
---------------------------------------------------------------------------------------------------------

In terms of shekels of December 2000
                                                               Cumulative        Retained           Total
                                                                  foreign        earnings
                                                                 currency
                                                              translation
                                                              adjustments
                                                              -----------      ----------     -----------
                                                                           NIS thousands
                                                              --------------------------------------------
----------------------------------------------------------------------------------------------------------
<S>                                                           <C>            <C>             <C>
Balance at January 1, 1998                                      (720,628)      2,500,869       4,532,206

Changes during 1998:
Net income                                                             -          47,121          47,121
Exercise of stock options granted to Israeli banks                     -               -             619
Interim dividend                                                       -         (68,870)        (68,870)
Interim dividend                                                       -         (66,352)        (66,352)
Interim dividend                                                       -         (87,299)        (87,299)
Erosion of dividend proposed in 1996                                   -             724             724
Cumulative foreign currency translation
 Adjustments, net                                                163,068               -         163,068
Dividend from company shares held by subsidiaries                      -           2,074           2,074
Conversion of debentures into shares                                   -               -         141,164
Employee benefit from options granted by a controlling
 Shareholder (2)                                                       -               -           6,080
Adjustment of consideration in respect of purchase of
 Investment from controlling shareholder (3)                           -        (588,904)       (594,984)
Exercise of stock options granted to
 Senior employees (2)                                                  -               -               -
Other adjustment                                                       -               -             367
                                                              -----------      ----------     -----------
Balance at 31 December, 1998                                    (557,560)      1,739,363       4,075,918
                                                              ===========      ==========     ===========


* Represents an amount lower than NIS 1,000.

(1)      Net of subsidiaries' holdings.
(2)      See also Note 20(D).
(3)      See Note 3A

The accompanying notes are an integral part of the financial statements.
</TABLE>



<TABLE>
<CAPTION>

In terms of shekels of December 2000
                                                                   Number           Share         Capital         Company
                                                                       of         capital        reserves     shares held
                                                                 ordinary                                              by
                                                               shares (1)                                    subsidiaries

                                                             -------------      ---------     -----------    ------------
                                                                                     NIS thousands
                                                             ---------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------

<S>                                                        <C>                <C>           <C>               <C>
Balance at January 1, 1999                                    15,723,327         532,748       2,415,008         (53,641)

Changes during 1999:
Net income                                                             -               -               -               -
Exercise of stock options granted to Israeli banks                     -             * -             414               -
Interim dividend                                                       -               -               -               -
Interim dividend                                                       -               -               -               -
Interim dividend                                                       -               -               -               -
Erosion of dividend proposed in 1998                                   -               -               -               -
Cumulative foreign currency translation adjustments, net               -               -               -               -
Dividend from company shares held by subsidiaries                      -               -               -               -
Conversion of debentures into shares                               2,171             * -           1,059               -
Employee benefit from options granted by a
 controlling shareholder (2)                                           -               -             774               -
Exercise of stock options granted to senior
 employees (2)                                                     5,473             * -               -               -
                                                             -------------      ---------     -----------    ------------
Balance at 31 December, 1999                                  15,730,971         532,748       2,417,255         (53,641)
                                                             =============      =========     ===========    ============
</TABLE>



<TABLE>
<CAPTION>
(Part 2)


In terms of shekels of December 2000
                                                              Cumulative        Retained           Total
                                                                 foreign        earnings
                                                                currency
                                                             translation
                                                             adjustments
                                                             -----------      ----------     -----------
                                                                          NIS thousands
                                                             --------------------------------------------
---------------------------------------------------------------------------------------------------------
<S>                                                          <C>            <C>             <C>
Balance at January 1, 1999                                      (557,560)      1,739,363       4,075,918

Changes during 1999:
Net income                                                             -         549,119         549,119
Exercise of stock options granted to Israeli banks                     -               -             414
Interim dividend                                                       -         (58,228)        (58,228)
Interim dividend                                                       -         (42,934)        (42,934)
Interim dividend                                                       -        (124,028)       (124,028)
Erosion of dividend proposed in 1998                                   -            (442)           (442)
Cumulative foreign currency translation adjustments, net         (19,350)              -         (19,350)
Dividend from company shares held by subsidiaries                      -           2,412           2,412
Conversion of debentures into shares                                   -               -           1,059
Employee benefit from options granted by a
 controlling shareholder (2)                                           -               -             774
Exercise of stock options granted to senior
 employees (2)                                                         -               -               -
                                                              -----------     ----------      -----------
Balance at 31 December, 1999                                    (576,910)      2,065,262       4,384,714
                                                              ===========     ==========      ===========

*        Represents an amount lower than NIS 1,000.
(1)      Net of subsidiaries' holdings.
(2)      See also Note 20D.

The accompanying notes are an integral part of the financial statements.
</TABLE>



<TABLE>
<CAPTION>
(Part 1)
                                                               Koor Industries Ltd. (An Israeli Corporation)

Statement of Shareholders' Equity (cont'd)
------------------------------------------------------------------------------------------------------------

In terms of shekels of December 2000
                                                                   Number           Share         Capital         Company
                                                                       of         capital        reserves     shares held
                                                                 ordinary                                              by
                                                               shares (1)                                    subsidiaries

                                                             -------------      ---------     -----------    ------------
                                                                                     NIS thousands
                                                             ---------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                <C>           <C>              <C>
Balances at January 1, 2000                                   15,730,971         532,748       2,417,255         (53,641)

Changes during 2000:
Net income                                                             -               -               -               -
Exercise of stock options granted to Israeli banks                     -              *-             138               -
Acquisition of "treasury stock"                                 (538,592)              -               -        (203,484)
Premium received in respect of issuance of option
 exercisable for company shares                                        -               -           1,879               -
 A capital reserve in respect of conversion of notes in
affiliate by a controlling shareholder                                 -               -             402               -
Interim dividend                                                       -               -               -               -
Erosion of dividend proposed in 1999                                   -               -               -               -
Cumulative foreign currency translation adjustments, net               -               -               -               -
Dividend from company shares held by subsidiaries                      -               -               -               -


Balance at 31 December, 2000                                  15,192,379         532,748       2,419,674        (257,125)
</TABLE>



<TABLE>
<CAPTION>

(Part 2)                                                    Koor Industries Ltd. (An Israeli Corporation)


In terms of shekels of December 2000
                                                              Cumulative        Retained           Total
                                                                 foreign        earnings
                                                                currency
                                                             translation
                                                             adjustments
                                                             -----------      ----------     -----------
                                                                          NIS thousands
                                                             --------------------------------------------
---------------------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>             <C>
Balances at January 1, 2000                                     (576,910)      2,065,262       4,384,714

Changes during 2000:
Net income                                                             -         267,687         267,687
Exercise of stock options granted to Israeli banks                     -               -             138
Acquisition of "treasury stock"                                        -               -        (203,484)
Premium received in respect of issuance of option
 exercisable for company shares                                        -               -           1,879
 A capital reserve in respect of conversion of notes in
affiliate by a controlling shareholder                                 -               -             402
Interim dividend                                                       -         (58,525)        (58,525)
Erosion of dividend proposed in 1999                                   -          (1,140)         (1,140)
Cumulative foreign currency translation adjustments, net         (86,066)              -         (86,066)
Dividend from company shares held by subsidiaries                      -             645             645
                                                             -----------      ----------     -----------
Balance at 31 December, 2000                                    (662,976)      2,273,929       4,306,250
                                                             ===========      ==========     ===========

*        Represents an amount lower than NIS 1,000.
(1)      Net of the Company holdings and its subsidiaries' holdings.



The accompanying notes are an integral part of the financial statements.
</TABLE>



<TABLE>
<CAPTION>
Part (1)
                                                               Koor Industries Ltd. (An Israeli Corporation)

Statement of Shareholders' Equity (cont'd)
------------------------------------------------------------------------------------------------------------

Convenience translation into US dollars (Note 2B)
                                                                   Number           Share         Capital         Company
                                                                       of         capital        reserves     shares held
                                                                 ordinary                                              by
                                                               shares (1)                                    subsidiaries

                                                             -------------      ---------     -----------    ------------
                                                                                     US$ thousands
                                                             ---------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                <C>             <C>             <C>
Balance at  January 1, 2000                                   15,730,971         131,836         598,182         (13,274)

Changes during 2000:
Net income                                                             -               -               -               -
 Exercise of stock options granted to Israeli banks                    -             * -              34               -
Acquisition of "treasury stock"                                 (538,592)              -               -         (50,355)
Premium received in respect of issuance of options
 exercisable for company shares                                        -               -             465               -
A capital reserve in respect of conversion of notes in
 affiliate by a controlling shareholder                                -               -             100               -
Interim dividend                                                       -               -               -               -
Erosion of dividend proposed in 1999                                   -               -               -               -
Cumulative foreign currency translation adjustments, net               -               -               -               -
Dividend from company shares held by subsidiaries                      -               -               -               -
                                                             -------------      ---------     -----------    ------------
Balance at 31 December, 2000                                  15,192,379         131,836         598,781         (63,629)
                                                             -------------      ---------     -----------    ------------
</TABLE>



<TABLE>
<CAPTION>
(Part 2)
                                                            Koor Industries Ltd. (An Israeli Corporation)
Statement of Shareholders' Equity (cont's)
---------------------------------------------------------------------------------------------------------
Convenience translation into US dollars (Note 2B)
                                                              Cumulative        Retained           Total
                                                                 foreign        earnings
                                                                currency
                                                             translation
                                                             adjustments
                                                             -----------      ----------     -----------
                                                                          US$ thousands
                                                             --------------------------------------------
---------------------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>           <C>
Balance at  January 1, 2000                                     (142,764)        511,077       1,085,057

Changes during 2000:
Net income                                                             -          66,243          66,243
 Exercise of stock options granted to Israeli banks                    -               -              34
Acquisition of "treasury stock"                                        -               -         (50,355)
Premium received in respect of issuance of options
 exercisable for company shares                                        -               -             465
A capital reserve in respect of conversion of notes in
 affiliate by a controlling shareholder                                -               -             100
Interim dividend                                                       -         (14,483)        (14,483)
Erosion of dividend proposed in 1999                                   -            (282)           (282)
Cumulative foreign currency translation adjustments, net         (21,298)              -         (21,298)
Dividend from company shares held by subsidiaries                      -             159             159
                                                             -----------      ----------     -----------
Balance at 31 December, 2000                                    (164,062)        562,714       1,065,640
                                                             ===========      ==========     ===========

*        Represents an amount lower than $ 1,000.

(1)      Net of the Company holdings and its subsidiaries' holdings.


The accompanying notes are an integral part of the financial statements.
</TABLE>



<TABLE>
<CAPTION>
                                                                             Koor Industries Ltd. (An Israeli Corporation)

Consolidated Statement of Cash Flows
--------------------------------------------------------------------------------------------------------------------------

In terms of shekels of December 2000

                                                                                                               Convenience
                                                                                                               translation
                                                                                                                 (Note 2B)
                                                                                                            --------------
                                                                                                                Year ended
                                                                                 Year ended December 31        December 31
                                                       ------------------------------------------------
                                                              2000               1999              1998               2000
                                                       -----------        -----------        ----------     --------------
                                                                                          NIS thousands     US $ thousands
                                                       ------------------------------------------------     --------------
<S>                                                     <C>                <C>                <C>                <C>
Cash flows generated by operating
 activities:
Net earnings                                              267,687            549,119            47,121             66,243
Adjustments to reconcile net earnings to net
 cash flows generated by
 operating activities (A)                                 195,915            171,509           632,419             48,482
                                                       ----------        -----------        ----------     --------------
Net cash inflow generated by operating
 Activities                                               463,602            720,628           679,540            114,725
                                                       ----------        -----------        ----------     --------------
Cash flows generated by investing
 activities:
Purchase of fixed assets                                 (488,252)          (654,694)       (1,056,788)          (120,824)
Investment grants in respect of fixed assets               15,091             45,050            16,015              3,734
Amounts charged to intangible assets and
 deferred expenses                                        (77,605)          (107,293)          (92,092)           (19,204)
Additional investments in subsidiaries                   (301,178)          (118,869)       (1,255,337)           (74,530)
Payment of liabilities for purchase of
 consolidated companies                                  (112,132)                 -                 -            (27,748)
Acquisition of initially-consolidated
 subsidiaries (B)                                         (16,924)          (234,432)         (231,504)            (4,188)
Investments in affiliates                                 (19,189)          (886,984)       (1,897,053)            (4,748)
Investments in loans to affiliates                           (946)            (5,911)           (8,265)              (243)
Repayment of long term loans from affiliates                  151                105            27,007                 37
Proceeds from realization of investments in
 formerly consolidated subsidiaries, net of
 cash in those subsidiaries at the time they
 ceased being consolidated (C)                          1,272,739            508,144           540,513            314,956
Proceeds from realization of activities (d)               474,662                  -                 -            117,461
Purchase of consolidated companies' shares
 by their consolidated companies                                -           (116,497)                -                  -
Investment in restricted bank deposit                           -                  -          (746,194)                 -
Proceeds from disposal of investments
 in investees                                              53,280            140,277           314,401             13,185
Proceeds from sale of fixed assets                        135,056            185,893            71,493             33,421
Investment in venture capital companies                  (330,048)                 -                 -           (81,674)
Decrease (increase) in other
 Investments                                             (211,450)          (347,184)          184,082            (52,325)
(Increase) in short-term deposits and
 investments, net                                        (192,551)          (150,962)         (161,955)           (47,648)
                                                       ----------        -----------        ----------     --------------
Net cash inflow (outflow) generated by
investing activities                                      200,704         (1,743,357)       (4,295,677)            49,662
                                                       ----------        -----------        ----------     --------------



The accompanying notes are an integral part of the financial statements
</TABLE>



<TABLE>
<CAPTION>
                                                               Koor Industries Ltd. (An Israeli Corporation)

Consolidated Statements of Cash Flows (cont'd)
------------------------------------------------------------------------------------------------------------

In terms of shekels of December 2000
                                                                                                               Convenience
                                                                                                               translation
                                                                                                                 (Note 2B)
                                                                                                            --------------
                                                                                                                Year ended
                                                                                 Year ended December 31        December 31
                                                       ------------------------------------------------
                                                              2000               1999              1998               2000
                                                       -----------        -----------        ----------     --------------
                                                                                          NIS thousands     US $ thousands
                                                       ------------------------------------------------     --------------
<S>                                                    <C>                <C>               <C>                 <C>
Cash flows generated by financing
 activities:
Proceeds from exercise of stock options
 granted to Israeli banks                                     138                414               619                 34
Acquisition of "treasury stock"                          (203,484)                 -                 -            (50,355)
Premium received in respect of issuance
 of options exercisable for Company shares                  1,879                  -                 -                465
Dividend paid                                            (224,192)          (144,411)         (193,176)           (55,479)
Issuance of shares to minority in
 subsidiaries                                              48,229             13,552           299,638             11,935
Issue of preferred shares to minority interest
 of subsidiary                                             61,350                  -                 -             15,182
Dividend paid to minority in
 subsidiaries                                             (12,511)           (12,894)          (25,859)            (3,096)
Payment of suppliers credit received
 for the purchase of fixed assets                               -             (1,232)           (1,917)                 -
Issuance of convertible debentures                              -             62,220           746,194                  -
Proceeds from principal of long-term
 loans and other long-term liabilities                    503,527            763,930         3,394,867            124,605
Repayment of long-term loans, debentures
 and other long-term liabilities                       (1,086,574)          (606,496)         (684,889)          (268,887)
Credit from banks and others, net                        (218,686)           913,907           172,504            (54,118)
                                                       -----------        -----------        ----------     --------------
Net cash inflow (outflow) generated by
 financing activities                                  (1,130,324)           988,990         3,707,981           (279,714)
                                                       -----------        -----------        ----------     --------------
Translation differences in respect of cash
balances of autonomous foreign investees                  (13,658)            (8,928)           64,746             (3,380)
                                                       -----------        -----------        ----------     --------------
Increase (decrease) in cash and cash
 Equivalents                                             (479,676)           (42,667)          156,590           (118,707)

Balance of cash and cash equivalents
 at beginning of year                                   1,448,706          1,491,373         1,334,783            358,507
                                                       -----------        -----------        ----------     --------------
Balance of cash and cash equivalents
 at end of year                                           969,030          1,448,706         1,491,373            239,800
                                                       ===========        ===========        ==========     ==============


The accompanying notes are an integral part of the financial statements
</TABLE>




<TABLE>
                                                               Koor Industries Ltd. (An Israeli Corporation)
<CAPTION>
Consolidated Statements of Cash Flows (cont'd)
------------------------------------------------------------------------------------------------------------

In terms of shekels of December 2000

                                                                                                               Convenience
                                                                                                               translation
                                                                                                                 (Note 2B)
                                                                                                            --------------
                                                                                                                Year ended
                                                                                 Year ended December 31        December 31
                                                       ------------------------------------------------
                                                              2000               1999              1998               2000
                                                       -----------        -----------        ----------     --------------
                                                                                          NIS thousands     US $ thousands
                                                       ------------------------------------------------     --------------
<S>                                                     <C>                <C>              <C>                  <C>
A.  Adjustments to reconcile net
      earnings to cash flows generated
      by operating activities:

Income and expenses not involving cash flows:

  Minority interest in subsidiaries, net                   15,849             (2,472)          247,052              3,922
  Dividend received from affiliates net
   of equity in the operating results
   (equity in operating results of
   affiliates net of dividend received
   therefrom)                                             295,241            (74,696)          (34,240)            73,061
  Depreciation and amortization                           373,669            570,070           683,095             92,469
  Deferred taxes                                          127,291           (155,683)         (117,068)            31,500
  Increase in liabilities in respect of
   employee severance benefits, net                        40,751             60,061            82,604             10,085
  Net capital losses (gains) from realization
  Fixed assets                                             (6,844)             2,993             7,339             (1,694)
  Investments in formerly consolidated
   subsidiaries                                          (510,566)          (401,880)         (147,902)          (126,346)
Profit from realization of activities                    (278,168)                 -                 -            (68,836)
Investments in investees                                  (27,499)           (47,560)         (249,716)            (6,805)
Inflationary erosion of principal of
 long-term loans and other liabilities                    (79,372)           (43,814)           53,510            (19,642)
Inflationary erosion of principal of
 credit from banks and others                              (5,088)                 -            16,204             (1,259)
Inflationary erosion of value of investments,
 deposits and loans receivable                             25,413             (2,619)          (54,425)             6,289
Changes in value of assets and
 Investments                                               66,266            262,232           227,398             16,398
Employee benefits in respect of option
warrants granted by a controlling
 Shareholder                                                    -                774             6,080                  -
                                                       -----------        -----------        ----------     --------------
                                                           36,943            167,406           719,931              9,142
                                                       -----------        -----------        ----------     --------------



The accompanying notes are an integral part of the financial statements
</TABLE>



<TABLE>
                                                               Koor Industries Ltd. (An Israeli Corporation)
<CAPTION>
Consolidated Statements of Cash Flows (cont'd)
--------------------------------------------------------------------------------------------------------------------------

In terms of shekels of December 2000
                                                                                                               Convenience
                                                                                                               translation
                                                                                                                 (Note 2B)
                                                                                                            --------------
                                                                                                                Year ended
                                                                                 Year ended December 31        December 31
                                                       ------------------------------------------------
                                                              2000               1999              1998               2000
                                                       -----------        -----------        ----------     --------------
                                                                                          NIS thousands     US $ thousands
                                                       ------------------------------------------------     --------------
<S>                                                    <C>               <C>               <C>                  <C>
A.  Adjustments to reconcile net
     earnings to cash flows generated
     by operating activities (cont'd)

Changes in operating asset and liability items:

 Decrease (lncrease) in trade receivables
and other receivables (after taking into
 account non-current receivables)                        184,628           (363,926)         (639,503)            45,689
Decrease (increase) in inventories, work
 in progress and customer advances
(including long-term customer
 advances and deposits)                                   (62,343)           (31,029)          (10,777)           (15,428)
Increase (decrease) in trade payables
 and other payables                                        36,687            399,058           562,768              9,079
                                                       -----------        -----------        ----------     --------------
                                                          158,972              4,103           (87,512)            39,340
                                                       -----------        -----------        ----------     --------------
                                                          195,915            171,509           632,419             48,482
                                                       ===========        ===========        ==========     ==============
B.  Acquisition of initially
      consolidated subsidiaries

Assets and liabilities of the
 subsidiaries at date of acquisition:

  Working capital deficit (surplus),
   excluding cash and cash equivalents                     (8,292)           137,360          (150,468)            (2,052)
  Fixed assets and investments                            (16,288)          (808,959)          (43,830)            (4,031)
  Long-term liabilities                                     4,086            192,422             4,675              1,011
  Minority interest in subsidiaries                        42,976             61,938             2,437             10,635
  Excess of cost over net asset value
   upon acquisition                                      (144,666)           (37,921)          (48,328)          (35,799)
Investment in affilates                                   105,260            108,597             4,010             26,048
  Liability for acquisition of subsidiaries                     -            112,131                 -                  -
                                                       -----------        -----------        ----------     --------------
                                                          (16,924)          (234,432)         (231,504)            (4,188)
                                                       ===========        ===========        ==========     ==============



The accompanying notes are an integral part of the financial statements
</TABLE>



<TABLE>

                                                               Koor Industries Ltd. (An Israeli Corporation)
<CAPTION>
Consolidated Statements of Cash Flows (cont'd)
--------------------------------------------------------------------------------------------------------------------------
In terms of shekels of December 2000
                                                                                                               Convenience
                                                                                                               translation
                                                                                                                 (Note 2B)
                                                                                                            --------------
                                                                                                                Year ended
                                                                                 Year ended December 31        December 31
                                                       ------------------------------------------------
                                                              2000               1999              1998               2000
                                                       -----------        -----------        ----------     --------------
                                                                                          NIS thousands     US $ thousands
                                                       ------------------------------------------------     --------------
<S>                                                     <C>                  <C>               <C>                <C>
C.  Proceeds from realization of
      investments in formerly
      consolidated subsidiaries, net of cash
      in those subsidiaries at the time
      they ceased being consolidated:

Assets and liabilities of the formerly consolidated
 subsidiaries at the time they ceased being
 consolidated:

 Working capital surplus (deficit), excluding
 cash and cash equivalents                                (87,882)           610,811            94,836            (21,748)
Fixed assets and investments                            1,437,704            994,450           793,540            355,779
 Long-term liabilities                                   (482,296)          (233,786)         (249,922)          (119,351)
 Minority interest in the subsidiary as at date
  of the sale                                            (131,285)          (243,164)         (206,326)           (32,488)
Investments in affiliated companies
 (previous year prior to the merger), net                  25,932         (1,022,047)
 Consideration not yet received from
 consolidation of companies                                     -                  -           (39,517)             6,417
 Capital gain on sale of  investments
  in subsidiaries                                         510,566            401,880           147,902            126,346
                                                       -----------        -----------        ----------     --------------
                                                        1,272,739            508,144           540,513            314,956
                                                       ===========        ===========        ==========     ==============
D.  Proceeds from realization of activities

Working capital surplus excluding cash and
 cash equivalents                                          151,204                 -                 -             37,417
Fixed assets                                               51,278                  -                 -             12,689
Accrued income - long-term                                 20,931                  -                 -              5,180
Realization proceeds receivable                           (26,919)                 -                 -             (6,661)
Capital gain from realization of activities               278,168                  -                 -             68,836
                                                       -----------        -----------        ----------     --------------
                                                          474,662                  -                 -            117,461
                                                       ===========        ===========        ==========     ==============
E.  Non-cash transactions:

Purchase of fixed assets                                   42,478              5,897             6,673             10,512
                                                       ===========        ===========        ==========     ==============
Purchase of other assets                                      913              8,306            29,426                226
                                                       ===========        ===========        ==========     ==============
Purchase of switching division                                  -              3,945                 -                  -
                                                       ===========        ===========        ==========     ==============
Proceeds from sale of fixed assets and
investees                                                  31,820                  -            44,874              7,874
                                                       ===========        ===========        ==========     ==============
Investment in initially consolidated
 subsidiaries                                                   -            112,132                 -                  -
                                                       ===========        ===========        ==========     ==============
Proposed dividend to minority shareholders                      -                  -             8,793                  -
Interim dividend                                                -            165,172            86,363                  -
                                                       ===========        ===========        ==========     ==============
Conversion of convertible debentures into
 shares of the Company and of subsidiaries                      -              1,020           141,492                  -
                                                       ===========        ===========        ==========     ==============
Investment in subsidiaries                                 54,622                  -                 -             13,517
                                                       ===========        ===========        ==========     ==============
Proceeds from realization of affiliated
 company in marketable securities                          26,915                  -                 -              6,660
                                                       ===========        ===========        ==========     ==============

The accompanying notes are an integral part of the financial statements.

</TABLE>



<TABLE>

                                                               Koor Industries Ltd. (An Israeli Corporation)
<CAPTION>
Company Statements of Cash Flows
--------------------------------------------------------------------------------------------------------------------------

In terms of shekels of December 2000
                                                                                                               Convenience
                                                                                                               translation
                                                                                                                 (Note 2B)
                                                                                                            --------------
                                                                                                                Year ended
                                                                                 Year ended December 31        December 31
                                                       ------------------------------------------------
                                                              2000               1999              1998               2000
                                                       -----------        -----------        ----------     --------------
                                                                                          NIS thousands     US $ thousands
                                                       ------------------------------------------------     --------------
<S>                                                     <C>                <C>                <C>                <C>
Cash flows generated by operating
 activities:
Net income                                                267,687            549,119            47,121             66,243
Adjustments to reconcile net income
 to net cash flows generated by
 operating activities (A)                                (111,366)          (322,620)          175,337            (27,559)
                                                       -----------        -----------        ----------     --------------
Net cash inflow generated by operating
 Activities                                               156,321            226,499           222,458             38,684
                                                       -----------        -----------        ----------     --------------
Cash flows generated by investing
   activities:
  Investees - acquisition of shares, payments
   on account of shares, loans granted, and
   non-current accounts                                  (520,560)        (1,098,942)       (3,633,853)          (128,820)
  Purchase of fixed assets                                   (761)           (14,052)          (26,320)              (188)
  Increase in investments and other
   receivables, net                                      (157,506)          (355,461)          (39,464)           (38,977)
  Proceeds from sale of fixed assets                          393                949             1,707                 97
  Proceeds from realization of investments
   in investees, net                                    1,003,445            178,379           409,463            248,316
  Dividend received from an investees                           -          1,448,145           542,761                  -
  Investment in short-term deposits and
   investments, net                                      (180,186)           (86,748)           (2,553)           (44,589)
                                                       -----------        -----------        ----------     --------------
Net cash inflow (outflow) generated by
 investing activities                                     144,825             72,270        (2,748,259)            35,839
                                                       -----------        -----------        ----------     --------------
Cash flows generated by financing
  activities:
  Proceeds from exercise of stock options                     138                414               619                 34
  Premium received in respect of issuance
   of options exercisable for company shares                1,879                  -                 -                465
  Acquisition of "treasury stock"                        (203,484)                 -                 -            (50,355)
  Dividend paid                                          (226,627)          (145,969)         (194,979)           (56,082)
  Receipt of long-term loans and other
   long-term liabilities                                   97,914            107,062         2,779,618             24,230
  Payments of long-term loans and
   other long-term liabilities                           (718,889)           (90,819)          (86,358)          (177,899)
  Credit from banks and others, net                        45,295            240,444            (6,137)            11,209
                                                       -----------        -----------        ----------     --------------
Net cash inflow (outflow) generated by
 financing activities                                  (1,003,774)           111,132         2,492,763           (248,398)
                                                       -----------        -----------        ----------     --------------
Increase (decrease) in cash and cash
 equivalents                                             (702,628)           409,901           (33,038)          (173,875)
Balance of cash and cash equivalents at
 beginning of year                                        725,354            315,453           348,491            179,499
                                                       -----------        -----------        ----------     --------------
Balance of cash and cash equivalents at
 end of year                                               22,726            725,354           315,453              5,624
                                                       ===========        ===========        ==========     ==============

The accompanying notes are an integral part of the financial statements.

</TABLE>



<TABLE>

                                                               Koor Industries Ltd. (An Israeli Corporation)
<CAPTION>
Company Statements of Cash Flows (cont'd)
------------------------------------------------------------------------------------------------------------

In terms of shekels of December 2000
                                                                                                               Convenience
                                                                                                               translation
                                                                                                                 (Note 2B)
                                                                                                            --------------
                                                                                                                Year ended
                                                                                 Year ended December 31        December 31
                                                       ------------------------------------------------
                                                              2000               1999              1998               2000
                                                       -----------        -----------        ----------     --------------
                                                                                          NIS thousands     US $ thousands
                                                       ------------------------------------------------     --------------
<S>                                                     <C>               <C>                <C>                 <C>
(A) Adjustments to reconcile net earnings
       to cash flows generated by
       operating activities:

Income and expenses not involving cash flows:
  Dividend received from investees net of
equity
   in their operating results (equity in
operating
   results of investees, net of dividend
   received therefrom)                                    241,096           (206,403)          141,275             59,662
  Depreciation and amortization                             2,674              2,433             3,143                662
  Deferred taxes                                          129,000           (129,000)                 -            31,923
  Increase (decrease) in liability in respect
of
   employee severance benefits, net                        (3,208)           (10,553)          (22,508)              (794)
  Net capital losses (gains) from realization
  Fixed assets                                                 (9)             1,661             1,121                 (2)
  Investment in investees                                (390,685)           (44,699)         (113,159)           (96,680)
  Decrease (increase) in value of deposits
   and other erosions, net                                 (3,560)             1,202               435               (881)
  Exchange rate differences and erosion of
   principal of long-term loans and other
   liabilities                                            (62,465)           (19,327)           13,059            (15,458)
  Erosion of principal of credit from banks
   and others                                              (2,010)                 -             6,678               (497)
  Employee benefits from option
   granted by a controlling shareholder                         -                774             6,080                  -
  adjustment in value of investments                      (78,095)           153,989           131,090            (19,326)
                                                       -----------        -----------        ----------     --------------
                                                         (167,262)          (249,923)          167,214            (41,391)
                                                       -----------        -----------        ----------     --------------
Changes in operating assets and liability items:
  Decrease (increase) in current accounts of
   investees, net                                          91,884            (88,911)           26,003             22,738
  Decrease (increase) in receivables                        4,349            (11,007)           (2,520)             1,076
  Increase (decrease) in other payables                   (40,337)            27,221           (15,360)            (9,982)
                                                       -----------        -----------        ----------     --------------
                                                           55,896            (72,697)            8,123             13,832
                                                       -----------        -----------        ----------     --------------
                                                         (111,366)          (322,620)          175,337            (27,559)
(B) Significant non-cash transactions:
                                                       ===========        ===========        ==========     ==============
Interim dividend                                                -            166,962            87,299                  -
                                                       ===========        ===========        ==========     ==============
Proceeds from realization of affiliated
 company in marketable securities                          20,944                  -                 -              5,183
                                                       ===========        ===========        ==========     ==============

The accompanying notes are an integral part of the financial statements.

</TABLE>


                                  Koor Industries Ltd. (An Israeli Corporation)

Notes to the Financial Statements
------------------------------------------------------------------------------

Note 1 - General

         Koor Industries Ltd. is a diversified holding company, which
         operates in the fields of telecommunication, defence electronics,
         agro-chemicals and other chemicals and venture capital investment
         through its subsidiaries, proportionately consolidated companies
         and affiliates (hereinafter - the "Koor Group" or the "Group").

         The Company's shares are traded both on the Tel-Aviv Stock
         Exchange and on the New York Stock Exchange.



Note 2 - Significant Accounting Policies

         The financial statements have been prepared in accordance with
         generally accepted accounting principles ("GAAP") in Israel, which
         differ in certain respects from those followed in the United
         States, as described in Note 28.

         The significant accounting policies, which were applied on a
consistent basis, are as follows:

         A.       Definitions:

         In these financial statements:

         1.       The Company - Koor Industries Ltd. (hereinafter - "Koor"
                  or the "Company").

         2.       Subsidiaries - companies in which more than 50% of the
                  equity is held by Koor.

         3.       Proportionately consolidated companies - jointly
                  controlled companies, which are consolidated by the
                  proportionate consolidation method in Koor's financial
                  statements.

         4.       Affiliates - companies, in which Koor has voting or
                  equity rights which give it significant influence over
                  the operating and financial policies of these companies,
                  and which are not fully or proportionately consolidated.
                  Such companies are included on the equity basis.

         5.       Investees - subsidiaries, proportionately consolidated
                  companies and affiliates.

         6.       Other companies - companies, the company's investment in
                  which does not obtain for the company significant
                  influence and which is stated by the cost method.

         7.       Related parties - as defined in the Israeli Securities
                  Regulations (Preparation of Annual Financial Statements),
                  1993, including related parties as defined by the
                  Institute of Certified Public Accountants in Israel -
                  (hereinafter - "ICPAI").

         8.       Venture capital fund - as defined in Standard No 1 of
                  Israeli Accounting Standards Board.

         9.       Consumer Price Index - The Consumer Price Index
                  (hereinafter - CPI) published by the Central Bureau of
                  Statistics.

Note 2 - Significant Accounting Policies (cont'd)

         B.       Adjusted financial statements:

         1.       a)       All NIS figures in the financial statements are
                           stated in terms of NIS of a identical purchasing
                           power (NIS of December 2000), the required
                           adjustments are based upon the changes in the
                           Israeli Consumer Price Index (hereinafter -
                           "CPI")

                  b)       The adjustments of the financial statements of
                           the Koor Group's is in accordance with the
                           opinions of the ICPAI and is based on the
                           accounting records which are kept in nominal
                           NIS, or in other functional currencies.

                  c)       The adjusted amounts of non-monetary assets do
                           not necessarily represent their realizable or
                           current economic value, but rather the original
                           historical cost of those assets in terms of
                           adjusted NIS. The term "cost" in these financial
                           statements means cost in adjusted NIS.

         2.       The following principles of adjustment relate to those
                  companies of the Koor Group whose financial statements
                  were adjusted on the basis of the CPI:

                  a)       Non-monetary items (mainly fixed assets,
                           inventory, work in progress and related customer
                           advances, intangible assets and deferred
                           expenses), have been adjusted on the basis of
                           the CPI at the time when the related
                           transactions were carried out.

                           The components of the statement of operations
                           relating to non-monetary items (mainly changes
                           in inventory and work in progress, depreciation
                           and amortization) have been adjusted on the same
                           basis used for the adjustment of the related
                           balance sheet items.

                  b)       Investments in investees and the equity in their
                           results of operations for the current year, as
                           well as the minority interest in subsidiaries
                           and their share in the results of their
                           operations for the current year, are based on
                           the adjusted financial statements of those
                           companies.

                  c)       Monetary items (items whose amounts in the
                           balance sheet reflect current or realizable
                           values) are presented in the balance sheet as at
                           31 December, 2000, at their historical amounts
                           (comparative figures are also stated in terms of
                           shekels of December 2000).

                  d)       The components of the statement of operations
                           (except for financing), relating to transactions
                           carried out during the year - sales, purchases,
                           labor costs, etc., have been adjusted according
                           to the CPI at the time the related transactions
                           were effected. The erosion of monetary balances
                           relating to the aforesaid transactions has been
                           included in the financing item.

                  e)       The components of the statement of operations
                           relating to provisions included in the balance
                           sheet, such as: liability in respect of employee
                           severance benefits, provision for vacation pay,
                           etc., are based on the changes in the balances
                           of the related balance sheet items after their
                           related cash flows were taken into account.

                  f)       The financing item which is derived from the
                           other items of the statement of operations
                           reflects real financing income and expenses, as
                           well as the erosion of monetary balances during
                           the year, the earnings and losses from the
                           realization and pledging of marketable
                           securities and the earnings and losses from
                           derivative financial instruments.

                  g)       Current income expense includes also the expense
                           resulting from the erosion in value of payments
                           on account of income tax from payment date to
                           the end of the year.

         B.       Adjusted financial statements: (cont'd)

         3.       Adjustment of financial statements on the basis of the
                  exchange rate of the dollar:

                  The financial statements of certain subsidiaries and
                  affiliates are adjusted on the basis of the exchange rate
                  of the dollar. For the purpose of consolidation or
                  inclusion according to the equity method, of the
                  above-mentioned companies, the amounts (in terms of
                  foreign currency), stated in the financial statements of
                  those companies, have been treated, as autonomous
                  investees.

                  According to Interpretation No. 8 to Opinion 36 of the
                  ICPAI, at each balance sheet date, the figures of the
                  balance sheet and the statements of operations for the
                  year then ended are translated into shekels at the
                  exchange rate prevailing at the end of the year, of the
                  foreign currency in which the financial statements of
                  those companies were prepared. Balance sheet items as at
                  the beginning of the year, and changes in capital during
                  the year, were translated according to the exchange rate
                  at the beginning of the year or at the date of the
                  change, respectively, and were then adjusted for the
                  changes in the CPI until December 2000. This treatment is
                  relevant both to the autonomous foreign investees as well
                  as to the Israeli companies whose functional currency is
                  the dollar.

                  Differences arising from the translation were included in
                  a separate item of shareholders' equity under "Cumulative
                  foreign currency translation adjustments".


         C.       Principles of consolidation:

         1.       The consolidated financial statements include the
                  accounts of Koor, all its subsidiaries and
                  proportionately consolidated companies.

                  The Group's share in the equity of subsidiaries and
                  proportionately consolidated companies is computed on the
                  basis of their issued share capital.

         2.       Consolidation of financial statements of proportionately
                  consolidated companies:

                  In accordance with generally accepted accounting
                  principles in Israel, the financial statements of
                  companies that are jointly controlled, are included in
                  Koor's consolidated financial statements according to the
                  proportionate consolidation method.

         3.       Goodwill deriving from the acquisition of an investment,
                  which represents the excess of acquisition cost or the
                  investment in subsidiaries over the fair value of
                  identifiable assets less the fair value of identifiable
                  liabilities upon acquisition, is amortized at equal
                  annual rates over 10 years commencing from the
                  acquisition date, except for goodwill arising from the
                  acquisition of some subsidiaries, which is amortized over
                  a period of 20 years. The amortization of goodwill is
                  presented in "other expenses".

                  Differences resulting from changes in holding rates are
                  charged to the statement of operations, as incurred,
                  except for changes deriving from the exchange of
                  homogenous assets, which are included in the goodwill and
                  are not charged to the statement of operations. .

         4.       Significant inter-company transactions and balances are
                  eliminated upon consolidation.

         5.       Koor's shares which were purchased by the Company and
                  subsidiaries are accounted for as treasury stock.


         D.       Use of estimates:

         6.       To the extent that sale and/or exercise of convertible
                  securities issued by investee is probable (including
                  stock options to employees), in accordance with the
                  criteria set forth in Opinions 48 and 53 of the ICPAI,
                  and if the percentage of Koor's holdings of such
                  subsidiaries is expected to decrease upon their
                  conversion or exercise, following which Koor will incur a
                  loss, an appropriate provision is included for such an
                  anticipated loss.

                  The financial statements, which were prepared in
                  accordance with generally accepted accounting principles,
                  include amounts based on estimates and assumptions of the
                  Management which take the factor of materiality into
                  consideration. Actual results may differ from such
                  estimates.

         E.       Cash equivalents:

                  Cash equivalents are considered by the Company to be
                  highly liquid investments which include short-term bank
                  deposits with an original maturity of three months or
                  less and which are not encumbered by a lien.

         F.       Marketable securities:

                  Investments in marketable securities designated for sale
                  in the short term, which can be sold immediately
                  ("current investments"), are stated at market value.
                  Investments in marketable securities not designated for
                  sale in the short term ("permanent investment") are
                  stated at cost (debentures - including accrued interest),
                  as long as there has not been a decline in value which is
                  not of a temporary nature.

         G.       Allowance for doubtful debts:

                  The allowance is partly determined in respect of specific
                  debts whose collection is doubtful, and partly as a
                  percentage of the balance of trade receivables.

         H.       Inventory:

                  Inventory is stated at the lower of cost or market value.
                  Cost is determined as follows:

                  Raw materials, auxiliary materials and spare parts - at
                  average cost or by the "first-in, first-out" method.

                  Finished goods and goods in process - mainly on the basis
                  of direct manufacturing costs and, in part, on the basis
                  of average manufacturing costs with the addition of
                  indirect manufacturing costs.

                  Merchandise - by the first-in, first-out method or by the
                  moving average method.

         I.       Work in progress:

                  Work in progress is valued at direct production cost,
                  plus allocated indirect expenses, all of which are on an
                  average basis. The cost of work in progress under
                  long-term contracts also includes allocation of general
                  expenses, as well as interest at an average rate for
                  external financing.

                  Interest is calculated in respect of the excess of the
                  cost of work in progress over customer advances received
                  for each order or in respect of the excess of customer
                  advances received for each order over the cost of work in
                  progress.

                  The excess of the investment in inventory and work in
                  progress, over related advances received, is included in
                  current assets, while the excess of advances received
                  over investment is included in current liabilities.

                  Work in progress and customer advances in respect of
                  long-term contracts include amounts in respect of
                  contracts the execution of which exceeds one year where a
                  loss is anticipated from work, a provision is made for
                  the entire anticipated loss up to completion of the work.

         J.       Venture Capital Investments:

                  Investment in a corporation whose principal business is
                  research or development and at least 90% of its funding
                  comes from owners' capital, support from State
                  authorities or research grants.
                  The holdings of venture capital funds in venture capital
                  investments are represented by their cost after deducting
                  devaluation differentials if a steady devaluation
                  applies.

         K.       Investments in investee companies:

                  The investments in investees (and in consolidated
                  accounts - investments in affiliates) are stated by the
                  equity method. Goodwill, arising from the acquisition of
                  investments, is amortized at equal annual rates over a 10
                  year period, commencing from acquisition date, other than
                  goodwill in a subsidiary which is amortized over 20
                  years, in light of the evaluation that requires that the
                  prior knowledge and experience accumulated serve it at
                  least for this period, and other than the goodwill for
                  purchase of part of the minority in another subsidiary,
                  which is also amortized over 20 years. If the proper
                  value of investments in investee companies falls below
                  their financial value and this decrease is not temporary,
                  a provision for loss of value is recorded.

         L.       Long-term receivables and liabilities:

                  Long-term receivables and liabilities, with below-market
                  interest rates at date of inception, were recorded at
                  their present values.

         M.       Fixed assets:

                  1.       The assets are stated at cost, after deduction
                           of related investment grants.

                  2.       Cost includes interest capitalized during the
                           period of construction of the assets, calculated
                           according to the specific interest rates
                           applicable to the sources used to finance the
                           investment.

                  3.       Improvements are attributed to the cost of
                           assets while costs of maintenance and repair are
                           attributed to the balance sheet when they occur.

                  4.       Depreciation is computed by the straight-line
                           method, on the basis of the estimated useful
                           lives of the assets.

                  The annual depreciation rates used are as follows:

                                                                %
                                                         --------

                  Buildings and leasehold rights             1-10   (mainly 2%)
                  Machinery, equipment and installations     5-20  (mainly 10%)
                  Vehicles and forklifts                    10-20  (mainly 15%)
                  Office furniture and equipment             6-33    (mainly 6%
                                                                       and 25%)

         N.       Convertible securities:

         1.       Debentures, conversion of which is not expected in the
                  foreseeable future, are stated at their liability value
                  as at balance sheet date, in accordance with the
                  provision, of Opinion 53 of the ICPAI, and are stated as
                  long-term liabilities.

         2.       In accordance with Opinions 48 and 53 of the ICPAI, the
                  provision for anticipated loss on the reduction in the
                  percentage of holdings of investees is included in the
                  item "Minority interest in subsidiaries", in the
                  consolidated balance sheet and in the item "Investment in
                  investee companies" in the company balance sheet. .

         O.       Intangible assets and deferred expenses:

         1.       Intangible assets - know-how, software and patents
                  purchased and payments for licensing of products abroad -
                  are stated at cost and are amortized in 5 to 10 annual
                  installments beginning with the commencement of the
                  utilization thereof.

         2.       Deferred expenses - debenture issuance costs:

                  These costs are amortized over the life of the
                  debentures, taking into account the dates of redemption.

         3.       See Note 2C(3) regarding goodwill deriving from the
                  acquisition of companies.

         P.       Deferred taxes:

         1.       Deferred taxes are computed in respect of differences
                  between the amounts stated in the financial statements
                  and those to be considered for tax purposes. As for the
                  main components in respect of which deferred taxes have
                  been created - see Note 16F.

         2.       Deferred tax balances are computed at the tax rate
                  expected to be in effect at the time these taxes will be
                  charged to the statement of operations. The amount stated
                  in the statement of operations represents the changes in
                  the said balances during the current year.

         3.       In calculating deferred taxes, taxes that would have
                  applied in the event of exercise of investments in
                  subsidiaries the sale of which is not expected in the
                  foreseeable future have not been included.

                  No deferred taxes have been created for taxes to apply
                  when distributing profits by subsidiaries, in accordance
                  with the policies of the company not to distribute
                  taxable dividends in the foreseeable future.


         Q.       Revenue recognition:

         1.       Work in progress:

                  In July 1999, the Accounting Standards Institute
                  published Standard No. 4 Work Under Performance Contract
                  (hereinafter: the new standard). The new standard applies
                  to financial statements for the period following 31
                  December 1999.

                  Revenue and costs related to work in progress under
                  long-term contracts are recognized under the percentage
                  of completion method, once accumulated costs have become
                  significant.

                  As for contracts involving technological uncertainties,
                  revenue is recognized on the basis of the completed
                  contracts method.

                  Income and costs relating to contracts on a "cost plus"
                  basis (i.e. cost with the addition of profit at a fixed
                  rate) are recognized when the costs are incurred.

                  Periodical reporting on income and costs from work in
                  progress covers all turnover periods, including those
                  where it is not possible to estimate anticipated profits
                  at the reporting stage, however, it may be stated that
                  the refund of costs already incurred is anticipated. In
                  such circumstances, all of the costs incurred are
                  attributed to the balance sheet as against income in the
                  amount of such costs ("0 interval presentation").

                  Full provision is made for anticipated losses.

         2.       Sale of products and rendering of services:

                  Sales are recognized upon delivery of the products or
                  performance of the services. In special contracts, the
                  sales are recognized after performing the work and
                  passing acceptance tests, as defined in the product
                  delivery contract.


         R.       Presentation of transactions between the Company and
                  the controlling shareholder

                  Transactions between the Company and the controlling
                  shareholder of the Company are presented in accordance
                  with the Securities Regulations (Presenting Transactions
                  Between a Company and its Controlling Shareholder in
                  Financial Statements) - 1996. Accordingly, the difference
                  between the price paid to the controlling shareholder,
                  regarding the sale of an asset, and the book value of the
                  asset in the books of the controlling shareholder is
                  included in the item Shareholders' equity of the Company.

         S.       Research and development:

                  Research and development costs, net of participations
                  (mainly from the Government of Israel), are charged to
                  the statement of operations, as incurred. Research and
                  development costs financed by the customer are charged to
                  the cost of work in progress, and are included in the
                  statement of operations, as part of the recognition of
                  revenue from such work in progress.

         T.       Derivative financial instruments:

                  Koor and its subsidiaries enter into option contracts and
                  forward transactions that are designated to reduce the
                  specific risks (i.e., commitments for the import of raw
                  materials, export of goods, liabilities linked to the CPI
                  or foreign currency) involved in the exposure to
                  fluctuations in the exchange rates of foreign currency
                  and changes in the CPI.

                  The results of option contracts and future transactions
                  for the purchase or sale of foreign currency, which are
                  designated to hedge the proceeds from export and the cost
                  of imports against changes in foreign currency (hedging
                  transactions), are recorded in the statement of
                  operations, concurrently with the recording of the
                  related import and export results.

                  The results of option contracts and forward transactions
                  for the purchase or sale of foreign currency intended to
                  hedge certain net assets, but not classified as hedging
                  transactions, are recorded in the statement of
                  operations, as financing expenses in the period of the
                  change in the exchange rate of the hedged balances.

                  The fair value of derivative financial instruments is
                  established according to their market values, and when
                  such does not exist, according to a valuation model.

         U.       Earnings per share:

                  Earnings per share data are computed in accordance with
                  Opinion 55 of the ICPAI.

         V.       Data regarding the CPI and the exchange rate of foreign
                  currency:

         1.    Below is data regarding the CPI and the US dollar exchange rate:

                                                  Israeli      Exchange rate
                                                     CPI*       of one U.S.$
                                                 --------      -------------
                                                   Points                NIS
                                                 --------      -------------
                  For the year ended:
                  December 2000                   168.53              4.041
                  December 1999                   168.53              4.153
                  December 1998                   166.30              4.160


         V.       Data regarding the CPI and the exchange rate of foreign
                  currency: (cont'd)

                                                 Israeli       Exchange rate
                                                    CPI*        of one U.S.$
                                                 --------      -------------
                                                        %                  %
                                                 --------      -------------

                  Changes during:

                  2000                                  -               (2.7)
                  1999                                1.3               (0.2)
                  1998                                8.6               17.6

                                                                           %
                                                               -------------

                  Real increase (decrease) in the CPI relative to the
                   exchange rate of the dollar during the year:
                   2000                                                   2.7
                   1999                                                   1.5
                   1998                                                  (8.3)


                  (*)      According to the index in respect of the month
                           (1993 average basis = 100) ended on balance
                           sheet date.

         2.       Assets and liabilities in foreign currency or linked
                  thereto are included in the financial statements
                  according to the representative exchange rate, as
                  published by Bank of Israel near the balance sheet date.

         3.       Assets and liabilities linked to the CPI are included in
                  the financial statements according to the latest index
                  published prior to balance sheet.



Note 3 - Information Regarding Certain Investee Companies

         A.       ECI Telecom Ltd. - An Affiliated Company

         1.       Merger of ECI and Tadiran Telecommunications

                  a.       On 16 March, 1999 ECI Telecom Ltd. (hereinafter:
                           "ECI") and Tadiran Telecommunications Ltd.
                           (hereinafter: "TTL") announced the completion of
                           the merger between them, effective 1 January,
                           1999.

                  b.       The merger was recorded in Koor's financial
                           statements at book value, based on the
                           accounting principles applying to transactions
                           in which assets of similar nature are exchanged.
                           This treatment is different from accepted
                           accounting treatment in the United States
                           (GAAP), where the transaction would have been
                           recorded at market value. See also Note 28A(2).

                  c.       Following the merger and before the purchase by
                           Koor of additional shares in ECI as described in
                           Section 2 below, the direct holdings of Koor and
                           Tadiran Ltd. (hereinafter: "Tadiran") in ECI
                           were 16.6% and 12.6% respectively. As a result
                           of the merger the balance of goodwill of both
                           Koor and Tadiran in ECI increased by some NIS
                           179 million.

                  d.       As a result of the merger, effective 1 January,
                           1999, Koor no longer consolidates TTL's
                           operations in its financial statements.

                           The details of TTL that is included in the
                           consolidated financial statements of the company
                           for the year ended December 1998:
                                                                 NIS millions
                                                                 ------------
                  Sales revenues                                       1,761
                  Operating income                                       179
                  Net profit as reported by TTL                          169


         2.       In February 1999, Koor exercised Call options for the
                  purchase from Clal Electronic Industries Ltd. of
                  3,830,000 ordinary shares of ECI at $37 per share.

         3.       On 7 November 2000, the board of directors of ECI
                  approved a resolution made in August 2000 for a division
                  plan to split ECI into five separate companies which were
                  to deal with the following separate areas: access
                  products, transmission, optic fiber networks, telephony
                  solutions for advanced networks, wireless communications
                  and ECI Industries - which would be a holding and
                  subcontractor company for the new companies. The purpose
                  of the demerger plan was that ECI would continue to
                  operate its existing manufacturing business, and, unless
                  otherwise resolved by the board of directors, it would
                  continue to hold shares in Ectel Ltd. and in various
                  start-up companies. Similarly, it would temporarily
                  provide management services and other technological
                  services. The implementation of the split is subject to
                  receipt of an exemption from tax for the division
                  transaction under section 105 of the Income Tax Law in
                  Israel, and the readiness of various departments to
                  split, and the situation of the capital market. It is
                  absolutely uncertain as to whether the original plan
                  shall be implemented exactly as intended.
                  As part of this plan, it was resolved to cease producing and
                  developing certain products and to fire employees and to
                  remove equipment that would become redundant in the new
                  organizational structure. Therefore ECI noted allocations in
                  its reports for reorganization expenses in the sum of $26
                  million and allocations for reduction of the value of fixed
                  and intangible assets in the sum of $23 million based on
                  external evaluation.
                  On 1 January 2001, the company set up five subsidiaries
                  which received the employees of the various operational
                  departments. The subsidiaries act at present as branches of
                  the company in respect of their areas of operations, until
                  their shares are floated or until such other date as may be
                  determined.

         4.       During 2000 ECI recorded an expense of $29 million for
                  the purchase of R&D in progress deriving from acquisition
                  of companies.

         5.       In 2000, ECI recorded a capital gain of some $31 million
                  from the exercise of traded shares in Terayon
                  Communications Systems Ltd., which were received by ECI
                  as part of a share swap with Telegate Ltd. at the end of
                  1999.


         A.       ECI Telecom Ltd. - An Affiliated Company (cont'd)

         6.       Adjustment of the net loss of ECI based on the loss
                  reported by ECI pursuant to the United States accounting
                  regulations, to the profit pursuant to Israeli accounting
                  regulations, see Note 28(A)(15).

         B.       Tadiran Ltd. - consolidated company

         1.       In 1999, Tadiran sold its holdings in Contahal Ltd.,
                  Advanced Technology Ltd., Tadiran Information Systems
                  Ltd. and Tadiran Com. Ltd. at a pre-tax capital gain of
                  some NIS 560 million.

         2.       In 2000 an agreement was signed between Tadiran, the
                  company and Elisra Electronic Systems Ltd. (hereinafter -
                  "Elisra"), whereby Tadiran transferred its entire
                  holdings (100%) in Elisra to the company, free of charge,
                  effective from 1 January 2000. Immediately after transfer
                  of the shares, Elisra received shares in Tadiran
                  Spectralink Ltd. and in Tadiran Electronic Systems Ltd.
                  (wholly-owned companies of Tadiran), free of charge.
                  The shares transfer is conducted under the tax exemption
                  conferred by section 104 of the Income Tax Law in Israel.

         3.       On 15 February 2000 a deal to sell all of the holdings of
                  Tadiran in Tadiran Telmetics Ltd. under an agreement
                  dated 25 November 1999 was closed, in consideration for
                  NIS 31 million. After recording an allocation for
                  devaluation in 1999, no significant capital gain was
                  recorded from the sale.

         4.       On 30 March 2000, a transaction to sell all of the
                  holdings (some 56%) of Tadiran in Tadiran Appliances Ltd.
                  under an agreement dated 30 December 1999 was closed, in
                  consideration for NIS 134 million. After recording an
                  allocation for devaluation in 1999, no significant
                  capital gain was recorded from the sale.

         5.       On 25 July 2000, a deal to sell all of the holdings of
                  Tadiran (100%) in Tadiran Batteries Ltd. was closed in
                  consideration for NIS 33 million including dividends. The
                  capital gain after tax in the third quarter amounted to
                  the sum of some NIS 56 million.

         6.       For sale of Tadiran's holdings in ECI, see note of events
                  following date of balance sheet. Subsequent to balance
                  sheet date, Tadiran sold its holding in ECI to Koor, see
                  Note 27.


         C.       Makhteshim Agan Industries Ltd. - Consolidated Company

         1.       On 26 December, 1999 the Board of Directors of Makhteshim
                  Agan Industries Ltd. (hereinafter: "M-A Industries")
                  decided on a plan to reorganize the group in light of the
                  continuing crisis in the global agro-chemicals industry,
                  which will be applied in the Company and its investee
                  companies overseas and in Israel, and which will include
                  mainly a focus on the company's key areas of business,
                  closing and relocating production installations, cutting
                  fixed costs, as well as employee retirement. The total
                  cost of the plan, the implementation of which has
                  commenced, is estimated to be approximately $ 36 million
                  (before tax on income).

         2.       During 1999 the local currency in Brazil was devalued in
                  relation to the dollar by approximately 48%, and the
                  currency rate was extremely volatile during this period.

                  Until the third quarter of 1999 most of the customer
                  debts of the consolidated company in Brazil were linked
                  to the exchange rate of the dollar. During the third
                  quarter, owing to the sharp cumulative rise in the
                  exchange rate of the local currency against the dollar,
                  the customer market in Brazil no longer accepts linkage
                  to the dollar and therefore, customer balances of the
                  consolidated company in Brazil, as at 31 December, 2000,
                  amounting to a total of $111 million, are not linked to
                  the dollar.

                  As a result of the change in the accounting method in the
                  third quarter of 1999, relating to the linkage of
                  customer balances, a customer debt from the previous
                  period was adjusted to the new accounting method, and
                  this led to inclusion of expenses amounting to $ 12.7
                  million deriving from the adjustment of customer balances
                  and from the granting of discounts due to the
                  devaluation.
                  Financing expenses, net, include expenses for translation
                  differentials amounting to approximately $8 million,
                  which stemmed mainly from the devaluation of the local
                  currency in Brazil in the first quarter of 1999.

         3.       During 2000, subsidiaries of M-A Industries entered into
                  agreements with Banks under which the companies sold
                  certain customer debts to the Banks. In the balance sheet
                  of 31 December, $40 million reduced the receivable
                  balance for surplus sold. The gap between the balance on
                  the books value of the debts sold and the consideration
                  received was moved to the financing item.

                  Under these agreements, the subsidiaries undertook to
                  indemnify the Banks in certain circumstances which are
                  defined in the agreements, under which the debts will not
                  be paid.

         4.       In August 2000, M-A Industries exercised an option
                  granted to it and purchased 50% of the shares in
                  Luxembourg company in consideration for some $ 8 million.
                  Following this acquisition, M-A Industries has complete
                  ownership and control over this company.

                  The surplus cost relating to goodwill generated from this
                  deal amounted to some $ 9 million.

         5.       Further to the agreement of 1998, in December 2000, the
                  subsidiaries of M-A Industries signed an agreement with
                  the shareholders of Proficol - a subsidiary
                  proportionally consolidated at a rate of 45% of M-A
                  Industries, under which an additional 12.5% were
                  purchased in consideration for $ 5.9 million, (which was
                  being paid as an advance in 1998).

                  Surplus cost generated from this sale amounted to some $
                  4 million and was attributed to goodwill. As of 31
                  December 2000, M-A Industries is consolidating Proficol
                  into its financial statements.


         6.       On 4 August 2000, an agreement was signed between one of
                  the companies in the M-A Industries group and the
                  external shareholders in a subsidiary of M-A Industries
                  in Brazil (hereinafter: "Milenia"), for the purchase of
                  all of their shares at a rate of some 28.5% in Milenia
                  (hereinafter: the "minority shares").


         C.       M-A Industries Ltd. - Consolidated Company (cont'd)

         Consideration to the minority shareholders for the purchase of
         their shares included the following components:

                  1.       Immediate cash payment of about $22 million.

                  2.       The minority shareholders received 12.4 million
                           shares of M-A Industries, which are owned by
                           another subsidiary company of M-A Industries,
                           with a market value on the date of the
                           transaction of about $28 million. Of the
                           above-mentioned shares, 10.4 million shares were
                           granted immediately and the balance will be
                           granted in April 2002. For 8.9 million of these
                           shares the minority shareholders were granted a
                           PUT option granting them, on certain terms, the
                           right to sell the shares to the other subsidiary
                           on 31 January, 2002, in consideration of $2.57
                           per share (being $2.42 plus interest at a rate
                           of 10% p.a. for the option period).

                           M-A Industries share price as of 31 December 2000
                           is $2.45

                  3.       Future payment according to the cumulative
                           profits of Milenia in the years 2000-2001, in an
                           amount likely to reach $27 million if the
                           cumulative profits reach at least $50 million.

                  Following the acquisition, M-A Industries has full
                  ownership and control of Milenia. The surplus cost
                  generated on the date of the acquisition amounts to
                  approximately $37 million (by the assessment of the
                  management with regard to Milenia's profits as set out in
                  paragraph 3).

                  As at the balance sheet date Koor's holdings are some
                  58.86% of the issued share capital of M-A Industries.
                  Presuming that the minority holds the shares in M-A
                  Industries and does not exercise the PUT options, it will
                  reach a rate of holding of Koor in M-A Industries of some
                  57.4%.

                  The goodwill generated from the sale is to be amortized
                  over a period of 20 years, which is appropriate in the
                  opinion of M-A Industries. The main reasons for the
                  amortization of goodwill over a period of 20 years
                  include:

                  -        No significant technological changes are
                           anticipated in Milenia's sphere of activity.
                  -        Milenia's customers have very low turnover.
                  -        The agrochemical market in Brazil is the third
                           largest in the world, and the only one of the
                           large markets currently experiencing growth.

         7.       Wholly owned subsidiaries of M-A Industries signed
                  agreements in November 2000 with Syngenta A.G., which is
                  the largest agrochemical company in the world, for the
                  purchase of two of its agrochemical products businesses.
                  The consideration to be paid for the purchase of the
                  businesses comes to some 135 million Swiss Francs. If
                  sales rise by certain percentages over the next three
                  years, additional consideration shall be paid which could
                  come to about 15 million Swiss Francs.

                  These agreements are subject to the consent of the
                  European Economic Commission. Such consent was received
                  subsequent to balance sheet date.

         D.       Mashav Enterprise and Development Ltd. - a proportionately
                  consolidated investee

                  In January 2000 a transaction for the sale of Mashav was
                  closed between Koor and Clal Industries & Investments
                  Ltd. (hereinafter: "Clal") whereby Koor sold Clal all its
                  holdings (50%) in Mashav Enterprise and Development
                  (hereinafter: "Mashav") in consideration for NIS 890
                  million and 47.5% of the share capital in Mashal Alumina
                  Industries Ltd. The capital gain to Koor from this sale
                  is some NIS 363 million before tax, and after tax is some
                  NIS 234 million.

                  During December 1999 before conclusion of the
                  transaction, Mashav distributed a dividend to Koor and
                  Clal in the total amount of NIS 710 million.


         D.       Mashav Enterprise and Development Ltd. - a proportionately
                  consolidated investee (cont'd)

                  Below are data (on the basis of relative consolidation)
                  from Mashav's financial statements for 1999.

                                                                  NIS millions
                                                                  ------------
                  Total assets                                          1,300
                  Shareholders' equity                                    544
                  Revenues from sales                                     876
                  Operating earnings                                      134
                  Net profit                                               97

         E.       Telrad Networks Ltd. - consolidated company

         1.       On 30 August, 2000, a series of agreements was signed and
                  closed between Koor, Telrad Networks Ltd. (hereinafter -
                  Telrad) and Nortel Networks Ltd. (hereinafter "Nortel"),
                  a Canadian international telecommunications company.
                  Pursuant to the agreements, Nortel established a new
                  company in Israel, Nortel Networks Israel (Sales and
                  Marketing) Limited (hereinafter "Nortel Israel")
                  controlled by Nortel. Koor Group holds 28% of the
                  non-voting rights to profits and has the right to appoint
                  one director out of six. Under the series of agreements,
                  Koor was granted a PUT option to sell Nortel the shares
                  held by Koor in Nortel Israel and at the same time,
                  Nortel was granted a CALL option to purchase these shares
                  from Koor. The two options have identical exercise
                  prices, and are exercisable in 2003 at a price, which
                  reflects the sum of Koor's investment in the company,
                  plus a yield to be determined in the agreements. The
                  company evaluates the reasonableness of non-exercise of
                  either of the above options as being low.
                  In light of the above, Koor's investment in Nortel is
                  presented by the cost method under the item Investments and
                  other debts receivable.

                  As part of the series of agreements, the Koor group
                  invested a sum of some $ 5.6 million in the share capital
                  of Nortel Israel and provided it with an owners' loan of
                  some $ 42 million. The loan is to be paid in 2003, and
                  bears interest at a rate of 6 % p.a.

                  Similarly, on the date of effecting the said
                  transactions, Nortel exercised the option granted to it
                  in 1997 and sold 20% of the shares in Telrad to Koor for
                  $ 45 million, thereby making Telrad a fully-owned
                  subsidiary of Koor.
                  Concurrently, Telrad signed an agreement whereby the
                  marketing, the installations and the support in Israel,
                  Africa and several other countries, of the public
                  networks and TX1 business exchanges, will from now on be
                  effected by Nortel Israel, and elsewhere will be effected
                  by another company of Nortel Group. Telrad will serve as
                  a sub-contractor of Nortel Israel for the manufacture of
                  exchanges, which will be marketed by Nortel Israel for
                  the period defined in the agreement. These activities in
                  1999 and the eight months ended 31 September, 2000,
                  constituted about 43.5% and 31.3% of Telrad's sales.
                  Telrad received approximately $90 million for the
                  transaction, over the book value of the transferred
                  assets. As part of the above series of agreements,
                  earlier agreements concerning a commitment made by Telrad
                  to purchase know-how and pay royalties to Nortel, were
                  cancelled by mutual consent.
                  As a result of the transaction, Telrad recorded a capital
                  gain, after tax, in the third quarter of 2000, of
                  approximately NIS 258 million.

         E.       Telrad Networks Ltd. - consolidated company

         2.       During the third quarter, Telrad sold its plant at
                  Ma'alot to a third party. As part of the agreement, the
                  purchaser undertook to create electronic cards for Telrad
                  for a period of at least four years. Koor made a capital
                  gain of some NIS 20 million after tax.

         3.       A subsidiary of Telrad issued bonus shares to a third
                  part in consideration for some NIS 61 million. An
                  undertaking in respect of these bonus shares is presented
                  under the item "Minority Rights".

         4.       The Board of Directors of Telrad approved a retirement
                  plan for additional employees, over and above the
                  retirements plans from 1998 and 1999, at a total cost of
                  approximately NIS 257 million (about NIS 175 million
                  after tax), shown in the financial statements as at 31
                  December 2000 in the item Other income (expenses), net
                  (the cost of the reorganization plan in 1998 and 1999
                  amounted to NIS 223 million and NIS 85 million
                  accordingly).


         F.       Sheraton Moriah (Israel) Ltd. - consolidated company

                  Since 1999, Koor has held 55% of the ownership of
                  Sheraton Moriah (Israel) Ltd. Sheraton Moriah has been
                  the central Koor's hotel activities since Koor sold its
                  hotels and the Sheraton hotel management company that it
                  owned to Sheraton Moriah in 1999. Prior to the sale of
                  the hotels owned by Koor to Sheraton Moriah, Koor
                  recorded a provision for a write-off in value of the
                  hotels in the amount of NIS 38 million.


         G.       BVR Systems (1998) Ltd. - consolidated company

                  During 1999 Koor purchased shares in BVR Systems (1998)
                  Ltd. (hereinafter: "BVR") directly and via Elisra
                  Electronic Systems Ltd. (hereinafter - Elisra) for a
                  total cost of NIS 34 million, comprising some 28.6% of
                  the share capital of BVR. The purchases were affected as
                  part of trading on the NASDAQ exchange in the United
                  States, a private issue and purchase from other
                  shareholders. An original difference relating to goodwill
                  of some NIS 120 million was calculated in these
                  purchases.

                  During August 2000, BVR allotted to Elisra one million
                  ordinary shares (which are about 9% of the capital after
                  their offering) in consideration of $ 5 million. In
                  addition, BVR granted Elisra an option to purchase an
                  additional 1.5 million ordinary shares of BVR by June
                  2003 (which are about 12% of the capital of BVR after
                  their offering), for a total price of $ 9 million subject
                  to the adjustments stipulated in the agreement). During
                  July 2000 Elisra signed an additional agreement with a
                  shareholder in BVR, whereby Elisra acquired all of his
                  shares, which constitute about 10% of the share capital
                  of BVR (before dilution), in consideration of about $ 4.5
                  million. During the third quarter of 2000, after
                  examining the financial condition of the investment in
                  BVR, a reduction of about NIS 40 million was recorded in
                  the consolidated financial statements in the amount of
                  the goodwill following non-temporary share devaluation.
                  During the fourth quarter, Elisra purchased additional
                  shares on the stock exchange (some 1.4%) for $ 0.5
                  million. Elisra also purchased all of the shares in BVR
                  held by Koor. This purchase was recorded in respect of
                  the cost of such shares in Koor's books, in accordance
                  with the Securities Regulations regarding acts between a
                  corporation and holders of control in it.
                  As at the balance sheet date, Koor Group's holdings in
                  BVR are 46%. In addition, Elisra signed a voting
                  agreement with other BVR shareholders, whereby Elisra
                  will have the right to appoint most of the members of the
                  Board of Directors of BVR. Accordingly, the financial
                  statements of BVR as at 30 September, 2000 were
                  consolidated for the first time in the consolidated
                  statements of Koor.


         H.       United Steel Mills Ltd. - consolidated company

                  On 2 March, 2000 United Steel Mills Ltd. ("USM")
                  (approximately 73% interest) announced that it had not
                  reached an arrangement with the banks and other credit
                  suppliers for restructuring USM's short-term and
                  long-term debts, and that negotiations between USM and
                  the banks had been terminated.
                  The financial statements of Koor for 1999 included a
                  provision for reduction of value of the total investment,
                  including the loans which Koor extended to USM.

                  Owing to the fact that Koor is not guarantor for the
                  debts of USM to third parties, Koor and its legal
                  advisers believe that Koor will not be obligated in the
                  future to bear any financial cost beyond the above
                  provisions, in respect of the debts of USM to third
                  parties. Furthermore, the management of Koor does not
                  intend to cover the past debts and the capital deficit in
                  realization values, if any.

                  On 16 March, 2000, USM and its subsidiaries filed an
                  application in the Haifa District Court for an order to
                  stay proceedings pursuant to Section 350 of the Companies
                  Law, 1999 and for the appointment of a trustee.
                  The court acceded to the application and granted the
                  order against the applicants such that no legal
                  proceeding could be continued or started against the
                  applicants except with the consent of the court, so as to
                  enable the formulation of a comprehensive recovery plan
                  and a proposal for a composition of creditors.
                  Similarly, the Haifa District Court decided to revoke the
                  powers of the Board of Directors of USM and to appoint a
                  trustee for the period of the stay of proceedings. In this
                  ruling, all management powers in the company and the
                  subsidiaries were vested in the trustee. The court also
                  decided to approve an approach by the Trustee to various
                  business corporations in order to interest them in acquiring
                  USM and/or its subsidiaries and/or operating them. The stay
                  of proceedings is in effect until the end of December 2000.
                  Koor consented to the stay of proceedings, gratuitously
                  and without being required to do so, and made in March
                  NIS 15 million available in credit for the special
                  management for current operation purposes at USM. On 16
                  December 2000, with all of the possible periods set out
                  in the law for the further stay of proceedings having
                  expired, the Court agreed to extend the period for
                  another 6 months, after having received the consent of
                  creditors to do so. In order to enable this extension,
                  Koor provided, gratuitously and without being required to
                  do so, additional credit of NIS 6 million. If there is no
                  deficit in the trust fund, this credit (in the sum of NIS
                  21 million) will, under certain circumstances, have
                  preferred status to all the company's creditors. A
                  differential of NIS 21 million was recorded in Koor's
                  financial statements for deletion of the credit which was
                  made available.

                  Below are data from USM financials statements for the
year ended December 31, 2000:

                                                             NIS millions
                                                             ------------
                  Current assets                                     167
                  Fixed assets                                       209
                  Current liabilities                               (313)
                  Long-term liabilities                              (64)
                  Shareholders' equity                                 -


         I.       Koor Properties Ltd. - consolidated company

         1.       On 3 October, 2000 Koor Properties Ltd. (a wholly owned
                  subsidiary of Koor) sold its holdings (50%) in Carmel
                  Gate Ltd. to a foreign company in consideration for $ 20
                  million. The capital gain after tax recorded by Koor in
                  the fourth quarter was approximately NIS 52 million.

         2.       On 11 October, 2000, Koor Properties Ltd. signed a series
                  of agreements for the sale of its rights in various real
                  estate properties, in total consideration of
                  approximately $ 21 million. The capital gain recorded by
                  Koor after tax is approximately NIS 23 million.


         J.       Koor Corporate Venture Capital

         On 2 January 2000, Koor and a wholly owned subsidiary of it set up
         a registered partnership called "Koor Corporate Venture Capital"
         through which Koor concentrates its activities in venture capital
         fund investments and in technological companies with growth
         potential. See Note 18B(6) for investment undertakings and
         investments after the date of this balance sheet.

         K.       Divestiture of additional holdings

         1.       In January 2000 a transaction was closed for the sale of
                  Koor's entire holding (approximately 51%) in Merkavim
                  Metals Ltd. under an agreement from 7 December, 1999, in
                  consideration of approximately NIS 18 million. The
                  capital gain after tax amounted to approximately NIS 4
                  million.

         2.       Following completion of a tender offer for the purchase
                  of the holdings of various shareholders in Q Group PLC
                  ("Q Group"), in which Koor holds, through Koor Multimedia
                  Ltd. approximately 23%. On 18 January, 2000 Koor sold its
                  holdings in Q Group in consideration of approximately NIS
                  41 million. The capital gain to Koor from this sale
                  (before tax) amounts to approximately NIS 30 million.

         3.       On 21 February, 2000 a transaction was closed for the
                  sale of Koor's entire holding (approximately 51%) in
                  Histour-Altiv Ltd. ("Histour"), under an agreement from
                  25 November, 1999. Koor invested approximately NIS 16
                  million in Histour, and was released from all its
                  guarantees for the obligations of Histour towards third
                  parties. The capital gain after tax which was generated
                  in the sale, amounted to approximately NIS 2 million.

         4.       On 16 March, 2000, sale of Koor's holding (20%) in
                  Menorah Holdings and B. Gaon Holdings Ltd. was completed
                  by virtue of a PUT option which was granted, in
                  consideration of approximately NIS 12 million. The
                  capital gain after tax which was generated in the sale,
                  amounted to approximately NIS 2 million.

         5.       On 30 March, 2000 a transaction was closed for the sale
                  of Koor's entire holding (approximately 76%) in Middle
                  East Tubes Ltd. pursuant to an agreement from 23
                  December, 1999, in consideration of approximately NIS 83
                  million.
                  Following a loss of NIS 25 million which was reported by
                  Middle East Tubes in the first quarter, Koor recorded an
                  after-tax capital gain of approximately NIS 20 million in
                  the first quarter of 2000.

         6.       On 4 June, 2000 a transaction was closed for the sale of
                  Koor's entire holding (approximately 33.3%) in Y.D.
                  Vehicles and Transportation Ltd. in consideration of
                  approximately NIS 16 million. The capital gain after tax
                  amounted to approximately NIS 1 million.


Note 4 - Short-Term Deposits and Investments
<TABLE>
<CAPTION>

                                                                         Consolidated                              Company
                                                      -------------------------------       ------------------------------
                                                                          December 31                          December 31
                                                      -------------------------------       ------------------------------
                                                              2000               1999              2000               1999
                                                      ------------       ------------       -----------      -------------
                                                                        NIS thousands                        NIS thousands
                                                      -------------------------------       ------------------------------
<S>                                                     <C>                <C>               <C>                <C>
Marketable securities (1):

  Debentures                                              368,638            219,657           345,078            192,614
  Short-term Treasury notes                                49,061             35,368            39,341             29,122
  Shares and options                                      104,251             84,678            72,889             36,596
  Convertible securities                                        -              1,496                 -                  -
  Mutual fund participation
   certificates                                            17,181             13,102                 -                  -
                                                      ------------       ------------       -----------      -------------
                                                          539,131            354,301           457,308            258,332
Deposits in banks and financial
 institutions                                              83,805             96,177                 -                  -
Short-term loans and current maturities of
 loans to investees                                         9,092             21,857             9,092             20,765
                                                      ------------       ------------       -----------      -------------
                                                          632,028            472,335           466,400            279,097
                                                      ============       ============       ===========      =============
(1)      Stated at market value.
</TABLE>



Note 5 - Trade Receivables

         Consolidated:
<TABLE>
<CAPTION>

                                                                                                               December 31
                                                                                            ------------------------------
                                                                                                   2000               1999
                                                                                            -----------      -------------
                                                                                                             NIS thousands
                                                                                            ------------------------------
<S>                                                                                      <C>                <C>
         On open account                                                                     2,527,220          2,936,846
         Post dated checks receivable and credit card
          companies                                                                             81,586            224,222
         Current maturities of long-term trade receivables                                      51,489             52,139
                                                                                            -----------      -------------
                                                                                             2,660,295          3,213,207
                                                                                            ===========      =============
         Including:
         Affiliates                                                                                311                 11
                                                                                            ===========      =============
         Proportionately consolidated companies                                                      -                173
                                                                                            ===========      =============
         Net of allowance for doubtful accounts                                                 86,069             92,022
                                                                                            ===========      =============
</TABLE>


Note 6 - Other Receivables

<TABLE>
<CAPTION>

                                                                         Consolidated                              Company
                                                      -------------------------------       ------------------------------
                                                                          December 31                          December 31
                                                      -------------------------------       ------------------------------
                                                              2000               1999              2000               1999
                                                      ------------       ------------       -----------      -------------
                                                                        NIS thousands                        NIS thousands
                                                      -------------------------------       ------------------------------
<S>                                                     <C>                <C>                <C>                 <C>
         Government agencies                              105,114            112,644            12,530              8,837
         Deferred taxes, see Note 16F                     110,726            271,492                 -            129,000
         Accrued income (including
          from a subsidiary)                               67,180             53,571             2,357              5,193
         Prepaid expenses                                  35,681             76,003                 -                658
         Employees                                         19,274             17,591                14                 15
         Affiliates - current accounts                      4,197              5,631                27                394
         Proportionately consolidated
          companies                                             -             21,418                 -              3,035
         Others                                           108,126            102,258             6,896              8,044
                                                      ------------       ------------       -----------      -------------
                                                          450,298            660,608            21,824            155,176
                                                      ============       ============       ===========      =============
</TABLE>


Note 7 - Inventories and Work in Progress

         Consolidated:
<TABLE>
<CAPTION>
                                                                                                               December 31
                                                                                            ------------------------------
                                                                                                   2000               1999
                                                                                            -----------      -------------
                                                                                                             NIS thousands
                                                                                            ------------------------------
         A.  Inventories and work in progress, net of
               customer advances - stated as
               current assets:

         Industrial inventory:
<S>                                                                                         <C>                <C>
         Raw and auxiliary materials                                                           629,473            759,274
         Goods and work in progress (1)(2)                                                     264,414            341,272
         Finished goods                                                                        775,261            925,209
         Advances in respect of materials                                                        7,784             10,160
         Inventories for trading operations -
           merchandise (including advance payments)                                             95,712            161,482
                                                                                            -----------      -------------
                                                                                             1,772,644          2,197,397

         Less - customer advances                                                               11,448             73,710
                                                                                            -----------      -------------
                                                                                             1,761,196          2,123,687
                                                                                            ===========      =============
</TABLE>


Note 7 - Inventories and Work in progress (cont'd)

<TABLE>
<CAPTION>
                                                                                                               December 31
                                                                                            ------------------------------
                                                                                                   2000               1999
                                                                                            -----------      -------------
                                                                                                             NIS thousands
                                                                                            ------------------------------
         B.  Customer advances, net of work in progress - stated as
               current liabilities:

<S>                                                                                            <C>                <C>
             Customer advances in respect of work in progress(1)(3)(4)                         298,975            242,510
             Less - inventory and work in progress                                               1,297             39,061
                                                                                            -----------      -------------
                                                                                               297,678            203,449
                                                                                            ===========      =============
         (1)  Net of provision for loss in respect of work in progress                           8,517             15,917
                                                                                            ===========      =============
         (2)  Including long-term contracts, net:                                                    -             64,247
                                                                                            ===========      =============
         (3)  Not including long-term advances.

         (4)   See Note 22 regarding guarantees provided for securing the
               gross amounts of customer advances (including long-term
               advances).
</TABLE>



Note 8 - Investments in Investee companies

<TABLE>
<CAPTION>
                                                                                                               December 31
                                                                                            ------------------------------
                                                                                                   2000               1999
                                                                                            -----------      -------------
                                                                                                             NIS thousands
                                                                                            ------------------------------
         A.       Consolidated balance sheet - affiliates

<S>                                                                                          <C>                <C>
         Net asset value of the investments (1)(2)                                           1,769,216          1,957,207
                                                                                            -----------      -------------
         Goodwill (2):
         Original amount, net                                                                1,554,164          1,739,625
         Accumulated amortization                                                             (347,741)          (230,418)
                                                                                            -----------      -------------
                                                                                             1,206,423          1,509,207
                                                                                            -----------      -------------
         Long-term loans (3)                                                                    25,250             29,358
                                                                                            -----------      -------------
                                                                                             3,000,889          3,495,772
                                                                                            ===========      =============
         (1)      As follows:
                  Net asset value of investments as at 31 December, 1991                       261,563            261,563
                  Changes from January 1, 1992:
                  Cost of shares acquired or received                                        1,090,217          1,071,477
                  Accumulated net earnings                                                     310,039            441,233
                  Changes in capital reserves and
                   foreign currency translation adjustments                                    (62,676)           (12,336)
                  Initially consolidated subsidiaries, net                                     439,016           *448,861
                  Disposals, net                                                              (268,943)         *(253,591)
                                                                                            -----------      -------------
                                                                                             1,769,216          1,957,207
                                                                                            ===========      =============
         (2)      Including investments in companies traded on the
                   the Stock Exchange in Tel-Aviv or abroad, in NIS millions:
                  Carrying value                                                                 2,898              3,370
                                                                                            ===========      =============
                  Market value as at 31 December, 2000                                           1,951              4,517
                                                                                            ===========      =============
         (3)      Linkage terms and interest rates relating to long-term loans:
                  Linked to the CPI - in part bearing interest at the rate of 5%,
                   and in part bearing no interest                                              19,428             19,693
                  Linked to foreign currency (mainly to the dollar) - in part bearing
                   interest up to the rate of Libor + 2%, and in part bearing
                   no interest                                                                   5,822              7,411
                  Without linkage                                                                    -              2,254
                                                                                            -----------      -------------
                                                                                                25,250             29,358
                                                                                            ===========      =============

         * Reclassified
</TABLE>



Note 8 - Investment in Investee Companies (cont'd)

         B.       Company balance sheet - investees
<TABLE>
<CAPTION>

                                                                                                               December 31
                                                                                            ------------------------------
                                                                                                   2000               1999
                                                                                            -----------      -------------
                                                                                                             NIS thousands
                                                                                            ------------------------------
<S>                                                                                       <C>              <C>
         Shares:
         Net asset value of the investments                                                  3,963,404        * 4,417,969
                                                                                            -----------      -------------
         Goodwill:
         Original amount, net                                                                1,201,867        * 1,285,142
         Accumulated amortization                                                             (260,134)         *(156,057)
                                                                                            -----------      -------------
                                                                                               941,733          1,129,085
                                                                                            -----------      -------------
         Book value (1)                                                                      4,905,137          5,547,054
         Payments on account of shares (1)                                                      55,519             60,250
         Long-term loans and capital notes (2)                                               1,096,385            822,058
         Non-current inter-company accounts (3)                                                  3,922             25,147
                                                                                            -----------      -------------
                                                                                             6,060,963          6,454,509

         Less - Company shares held by subsidiaries                                             53,641             53,641
                                                                                            -----------      -------------
                                                                                             6,007,322          6,400,868
                                                                                            ===========      =============

         (1) As follows:
             Cost of shares including accumulated
              earnings as at 31 December, 1991                                               1,918,301          1,918,301
             Changes from January 1, 1992:
             Cost of acquired shares                                                         5,625,562          5,380,513
             Accumulated net earnings                                                          (24,098)           138,903
             Changes in capital reserves, net                                                 (538,168)          (442,379)
             Disposals                                                                      (2,020,941)        (1,388,034)
                                                                                            -----------      -------------
             Book value, including payments on
              account of shares (4)                                                          4,960,656          5,607,304
                                                                                            ===========      =============

         *Reclassified
</TABLE>


Note 8 - Investment in Investee Companies (cont'd)

B.       Company balance sheet - investees (cont'd)
<TABLE>
<CAPTION>
                                                                                                               December 31
                                                                                            ------------------------------
                                                                                                   2000               1999
                                                                                            -----------      -------------
                                                                                                             NIS thousands
                                                                                            ------------------------------
<S>                                                                                          <C>                  <C>
         (2)      Long-term loans and capital notes:
                  Long-term loans (a)                                                          146,971            254,965
                  Capital notes - unlinked and not bearing
                   interest (b)                                                                951,511            568,792
                                                                                            -----------      -------------
                                                                                             1,098,482            823,757
                  Less - current maturities of long-term loans                                   2,097              1,699
                                                                                            -----------      -------------
                                                                                             1,096,385            822,058
                                                                                            ===========      =============
</TABLE>



<TABLE>
<CAPTION>

         (a)      Loans classified by linkage terms and interest rates:

                                                                        Interest rate
                                                                       at December 31       December 31        December 31
                                                                      ---------------       -----------      -------------
                                                                                 2000              2000               1999
                                                                      ---------------       -----------      -------------
                                                                                    %                        NIS thousands
                                                                      ---------------       -----------      -------------

<S>                                                                       <C>                  <C>                <C>
                  Linked to the CPI                                            2-2.75           71,280             69,858
                  Linked to the CPI                                                -                 -             54,318
                  Linked to the CPI                                                -                 -             46,393
                  Linked to the CPI                                               6.5           24,109             30,472
                  Linked to the CPI                                       No interest           51,582             53,924
                                                                                            ----------        ------------
                                                                                               146,971            254,965
                                                                                            ==========        ============
</TABLE>


         (b)      Capital notes are not stated at their present value,
                  since their repayment date has not yet been fixed by the
                  parties.

         (3)      Non-current inter-company accounts:

<TABLE>
<CAPTION>

                                                                                                               December 31
                                                                                            -----------       ------------
                                                                                                   2000               1999
                                                                                            -----------       ------------
                                                                                                             NIS thousands
                                                                                            ------------------------------

<S>                                                                                              <C>               <C>
                  Linked to the dollar exchange rate                                               121                125
                  Unlinked-bears interest at the rate of
                   the increase in the CPI                                                       3,801             25,022

                                                                                                 3,922             25,147
</TABLE>



Note 8 - Investment in Investee Companies (cont'd)


         B.       Company balance sheet - investees (cont'd)

<TABLE>
<CAPTION>

                                                                                                               December 31
                                                                                            -----------      -------------
                                                                                                   2000               1999
                                                                                            -----------      -------------
                                                                                                             NIS thousands
                                                                                            ------------------------------

         (4)  Including investments in marketable shares traded on the
              Tel-Aviv Stock Exchange or abroad in NIS millions:

<S>                                                                                              <C>                <C>
             Carrying value                                                                      1,947              2,288
                                                                                            ==========        ============
             Market value as at 31 December, 2000                                                1,382              3,051
                                                                                            ==========        ============
</TABLE>



Note 9 - Other Investments and Receivables

         A.       Composition:
<TABLE>
<CAPTION>

                                                                         Consolidated                              Company
                                                      ------------      -------------      ------------      -------------
                                                                          December 31                          December 31
                                                      -------------------------------      -------------------------------
                                                              2000               1999              2000               1999
                                                      ------------      -------------      ------------      -------------
                                                                        NIS thousands                        NIS thousands
                                                      -------------------------------      -------------------------------
         Deposits in banks and in
<S>                                                     <C>                  <C>               <C>                <C>
          financial institutions                          396,462            391,459           365,000            365,000
         Non-current trade receivables                     91,212            141,284                 -                  -
         Long-term loans receivable
          from others (1)                                 278,404            129,143           152,588             15,464
                                                      ------------      -------------      ------------      -------------
                                                          766,078            661,886           517,588            380,464

         Marketable securities                              6,462              3,469                 -                  -


         Venture capital investment                       339,905                  -                 -                  -

         Non-marketable shares and
          payments on account                              26,147             65,597            19,047              2,812

         Others                                            26,217             26,795               140                101
                                                      ------------      -------------      ------------      -------------
                                                        1,164,809            757,747           536,775            383,377
                                                      ============      =============      ============      =============
         (1) Including loans to
              proportionately
              consolidated companies                            -             34,527
                                                      ============      =============
</TABLE>



Note 9 - Other Investments and Receivables (cont'd)


B.       Classification by linkage terms and interest rates of deposits,
         non - current debts of customers and long - term loans from others:

         Consolidated:

<TABLE>
<CAPTION>

                                                                              Average
                                                                    interest rates at
                                                                          December 31                          December 31
                                                                                           -------------------------------
                                                                                 2000              2000               1999
                                                                   ------------------      ------------      -------------
                                                                                    %                        NIS thousands
                                                                   ------------------      -------------------------------

<S>                                                                        <C>                 <C>                <C>
         Linked to CPI                                                     Mainly 6.6          390,781            425,506
         Linked to foreign currency
          (mainly to the dollar)                                           Mainly 6.0          374,266            228,618
         Unlinked                                                          Mainly 9.0            1,031              7,762
                                                                                            ----------       -------------
                                                                                               766,078            661,886
                                                                                            ==========       =============
</TABLE>

         Company:

<TABLE>
<CAPTION>
                                                                                                               December 31
                                                                                           -------------------------------
                                                                                                   2000               1999
                                                                                           ------------      -------------
                                                                                                             NIS thousands
                                                                                           -------------------------------
<S>                                                                        <C>                 <C>                <C>
         Linked to CPI                                                     Mainly 6.6          377,832            367,827

         Linked to the dollar                                              Mainly 6.0          139,756             12,637
                                                                                              ---------          ---------
                                                                                               517,588            380,464
                                                                                              =========          =========
</TABLE>




Note 9 - Other Investments and Receivables (cont'd)

         C.       Repayment schedule of deposits, non-current customers
                  balances and long-term loans from others, in the
                  consolidated balance sheet:

<TABLE>
<CAPTION>

                                                                         Consolidated                              Company
                                                         ----------------------------       ------------------------------
                                                                          December 31                          December 31
                                                         ----------------------------       ------------------------------
                                                              2000               1999              2000               1999
                                                         ---------      -------------       -----------      -------------
                                                                        NIS thousands                        NIS thousands
                                                         ----------------------------       ------------------------------
<S>                                                       <C>                <C>               <C>                <C>
         Amounts collectible in the:
         First year                                             -             34,527                 -                  -
         Second year                                       97,444            124,279            10,000              7,267
         Third year                                       594,152             60,628           499,350                  -
         Fourth year                                       28,697            395,634             8,238            365,000
         Fifth year                                        13,206             17,093                 -              8,197
         Thereafter and without a
          specific maturity date                           32,579             29,725                 -                  -
                                                         ---------      -------------       -----------      -------------
                                                          766,078            661,886           517,588            380,464
                                                         =========      =============       ===========      =============
</TABLE>




               Koor Industries Ltd. (An Israeli Corporation)

Notes to the Financial Statements
-------------------------------------------------------------------------------

Note 10 - Fixed Assets

<TABLE>
<CAPTION>
(Part 1)

         A.       Consolidated

                                                     Land       Buildings      Machinery,        Vehicles          Office
                                               (including                       equipment             and       furniture
                                                leasehold                             and       forklifts             and
                                                    land)                   installations                       equipment



                                               -----------   -------------  -------------     -----------     -----------
                                                                                                             NIS thousands
-----------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>             <C>              <C>              <C>
         Cost as at
          31 December, 1999                      472,082       2,698,704       6,757,999         371,702         231,247

         Additions during the year                20,775         126,388         230,386          23,429          21,642

         Adjustments resulting from
          foreign currency translation
          differences*                            (4,551)        (38,667)        (54,242)         (2,750)         (4,466)

         Formerly consolidated                  (211,817)       (570,039)     (2,591,404)       (271,215)        (60,056)
          subsidiaries, net

         Other changes during the
          year, net                              (52,114)       (168,726)       (315,589)        (35,378)        (17,346)
                                               -----------   -------------  -------------     -----------     -----------
         Balance as at
          31 December, 2000                      224,375       2,047,660       4,027,150          85,788         171,021
                                               ===========   =============  =============     ===========     ===========
</TABLE>



<TABLE>
<CAPTION>
(Part 2)
                                                      Tools   Installations           Total
                                                        and           under
                                                instruments    construction
                                                               and payments
                                                               n account of
                                                                acquisition
                                                                  of assets
                                               ------------  ---------------  --------------
                                                                              NIS thousands
--------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>          <C>
         Cost as at
          31 December, 1999                         16,449         114,784      10,662,967

         Additions during the year                    (117)         90,347         512,850

         Adjustments resulting from
          foreign currency translation
          differences*                                   -          (1,197)       (105,873)

         Formerly consolidated                        (235)        (39,682)     (3,744,448)
          subsidiaries, net
         Other changes during the
          year, net                                      -            (207)       (589,360)
                                               ------------  ---------------  --------------
         Balance as at
          31 December, 2000                         16,097         164,045       6,736,136
                                               ============  ===============  ==============
</TABLE>



* See Note 2B(3).


<TABLE>
<CAPTION>
(Part 1)

Note 10 - Fixed Assets (cont'd)

         A.       Consolidated (cont'd)

                                                     Land       Buildings      Machinery,        Vehicles          Office
                                               (including                       equipment             and       furniture
                                                leasehold                             and       forklifts             and
                                                    land)                   installations                       equipment



                                               -----------   -------------  -------------     -----------     -----------
                                                                          NIS thousands
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>        <C>              <C>               <C>             <C>
         Accumulated depreciation as at
          December 31, 1999                          8,197      1,302,171       4,422,830         207,376         151,119

         Additions during the year                      82         57,458         185,098          14,363          16,847
         Adjustments resulting from
          foreign currency translation
          differences*                                 (20)        (8,911)        (34,473)           (888)         (2,490)
         Formerly consolidated
          subsidiaries, net                         (5,112)      (406,719)     (1,769,438)       (160,031)        (43,432)
         Other changes during the year, net         (2,129)      (113,374)       (319,352)        (16,500)        (15,460)
                                                  ---------    -----------    ------------      ----------       ---------
         Balance as at
          31 December, 2000                          1,018        830,625       2,484,665          44,320         106,584
                                                  ---------    -----------    ------------      ----------       ---------
         Net book value as at
          31 December, 2000                        223,357      1,217,035       1,542,485          41,468          64,437
                                                  =========    ===========    ============      ==========       =========
         Net book value as at
          31 December, 1999                        463,885      1,396,533       2,335,169         164,326          80,128
                                                  =========    ===========    ============      ==========       =========
         *   See Note 2B(3)
</TABLE>



<TABLE>
<CAPTION>
(Part 2)
                                                      Tools   Installations           Total
                                                        and           under
                                                instruments    construction
                                                               and payments
                                                               n account of
                                                                acquisition
                                                                  of assets
                                               ------------  ---------------  --------------
                                                             NIS thousands
--------------------------------------------------------------------------------------------
<S>                                           <C>            <C>              <C>
         Accumulated depreciation as at
          December 31, 1999                              -               -         6,091,693

         Additions during the year                       -               -           273,848
         Adjustments resulting from
          foreign currency translation
          differences*                                   -               -           (46,782)
         Formerly consolidated
          subsidiaries, net                              -               -        (2,384,732)
         Other changes during the year, net              -               -          (466,815)
                                               ------------  ---------------  --------------
         Balance as at
          31 December, 2000                              -               -         3,467,212
                                               ------------  ---------------  --------------
         Net book value as at
          31 December, 2000                         16,097         164,045         3,268,924
                                               ============  ===============  ==============
         Net book value as at
          31 December, 1999                         16,449         114,784         4,571,274
                                               ============  ===============  ==============
         *   See Note 2B(3)

</TABLE>



                                 Koor Industries Ltd. (An Israeli Corporation)

Notes to the Financial Statements
------------------------------------------------------------------------------


Note 10 - Fixed Assets (cont'd)

         A.       Consolidated (cont'd)

                  Supplementary data on consolidated fixed assets:

         (1)      Some of the properties have not yet been registered in
                  the Land Registry Office in the name of the subsidiaries,
                  in some cases because of the absence of formal
                  parcelisation of the area.

                  Leasehold rights are for a period of 49 years, ended in
                  the year 2000 and thereafter. Certain leases provide an
                  option for extension for another 49 years.

                  The cost of leasehold real estate as at 31 December,
                  2000, is NIS 788 million, of which NIS 453 million is
                  under a capitalised lease.

         (2)      After deduction of investment grants, net of
                  depreciation, which have been received from the State of
                  Israel by certain subsidiaries under the terms of the Law
                  for the Encouragement of Capital Investments, 1959,
                  amounting to NIS 121 million, adjusted, and NIS 130
                  million, adjusted, as at 31 December, 2000 and 1999,
                  respectively (see also Note 16A).

         (3)      Includes capitalised interest amounting to NIS 65,573
                  thousand, adjusted, and NIS 73,404 thousand, adjusted to
                  31 December, 2000 and 1999, respectively.

         (4)      As for amounts charged to cost of fixed assets, see Note
                  23B. and E.

         (5)      Including fully depreciated assets amounting to NIS 1,367
                  million, adjusted to 31 December, 2000.

         (6)      See Note 22 regarding liens.


         B.       Company

         Composition of the assets and accumulated depreciation, according
         to major groups, and changes therein during the current year, are
         as follows:
<TABLE>
<CAPTION>

                                              Balance at       Changes during the year
                                               beginning     ---------------------------    Balance at
                                                of year      Additions         Disposals    end of year
                                              -----------    ---------     -------------    -----------
                                                                           NIS thousands
                                                             ------------------------------------------
<S>                                        <C>             <C>              <C>           <C>
         Cost:

         Offices and land *                      33,624          323                 -        33,947
         Vehicles                                 1,396            -              (674)          722
         Office equipment                         5,363          438               (15)        5,786
                                             ----------     --------           --------     --------
                                                 40,383          761              (689)       40,455
                                             ----------     --------           --------     --------

         Accumulated depreciation:
         Offices                                    336          899                 -         1,235
         Vehicles                                   434          162              (294)          302
         Office equipment                         1,213          589               (11)        1,791
                                             ----------     --------           --------     --------
                                                  1,983        1,650              (305)        3,328
                                             ----------     --------           --------     --------

         Net book value:
         Land and offices                        33,288                                       32,712
         Vehicles                                   962                                          420
         Office equipment                         4,150                                        3,995
                                             ----------                                     --------
                                                 38,400                                       37,127
                                             ==========                                     ========
  </TABLE>

         (*)      Represents the ownership of two stories in an office
                  building in Tel Aviv and leasehold rights to land in
                  Dimona, in an area of 27 dunams, not yet registered in
                  the Company's name. These offices have not as yet been
                  registered in the name of the Company at the Land Registry
                  Office. The offices are on land leased under a capital lease
                  for a period of 49 years ending in 2044.



Note 11 - Other Assets, Net of Amortization
<TABLE>
<CAPTION>

                                                                         Consolidated                              Company
                                                                          December 31                          December 31
                                                             2000                1999              2000               1999
                                                         -----------    -------------          --------      -------------
                                                                        NIS thousands                        NIS thousands
                                                         ----------------------------          ---------------------------

         Intangible assets:

         Goodwill:
<S>                                                       <C>                <C>                  <C>            <C>
         Original amounts                                 755,359            443,135                 -                  -
         Accumulated amortization                         150,044             84,993                 -                  -
                                                      -----------         ----------           ----------       -----------
                                                          605,315            358,142                 -
                                                      -----------         ----------           ----------       -----------

         Licensing of products abroad:
         Original amounts                                 428,148            392,903                 -                  -
         Accumulated amortization                         216,157            189,502                 -                  -
                                                      -----------         ----------           ----------       -----------
                                                          211,991            203,401                 -                  -
                                                      -----------         ----------           ----------       -----------
         Know-how, software, patents and others:
         Original amounts                                  80,150             94,599                 -                  -
         Accumulated amortization                          37,048             30,892                 -                  -
                                                      -----------         ----------           ----------       -----------
                                                           43,102             63,707                 -                  -
                                                      -----------         ----------           ----------       -----------

         Deferred expenses:

         Debentures issuance costs:
         Original amount                                   24,025             41,854            16,228             25,004
         Accumulated amortization                          23,485             39,840            15,688             23,440
                                                      -----------         ----------           ----------       -----------
                                                              540              2,014               540              1,564
                                                      -----------         ----------           ----------       -----------
                                                          860,948            627,264               540              1,564
                                                      ===========         ==========           ==========       ===========
</TABLE>



Note 12 - Credit from Banks and Others
<TABLE>
<CAPTION>
         A.       Composition:

                                                                         Consolidated                              Company
                                                                          December 31                          December 31
                                                             2000               1999              2000                1999
                                                     ------------       -------------       ----------       -------------
                                                                        NIS thousands                        NIS thousands
                                                     --------------------------------       ------------------------------

<S>                                                     <C>                <C>                 <C>                <C>
         From banks                                     1,830,553          2,479,869           276,517            241,410
         From others                                       10,772                386             8,178                  -
                                                     ------------       ------------        ----------        ------------
                                                        1,841,325          2,480,255           284,695            241,410
                                                     ------------       ------------        ----------        ------------

         Current maturities of long-term
          loans and debentures
          (see Note 15)                                   854,191          1,078,759           659,853            736,106
                                                     ------------       ------------        ----------        ------------
                                                        2,695,516          3,559,014           944,548            977,516
                                                     ============       ============        ==========        ============
</TABLE>


         B.       Classification by linkage terms and average interest rates:
<TABLE>
<CAPTION>

                                                                              Average
                                                                     interest rates at                         Consolidated
                                                                           December 31                          December 31
                                                                                  2000            2000                 1999
                                                                     -----------------     -----------        -------------
                                                                                    %                         NIS thousands
                                                                     -----------------     -----------        -------------

<S>                                                                        <C>               <C>                <C>
         Linked to foreign currency (mainly to the dollar)                 5.0 - 12.8        1,310,976          1,737,078
         Linked to the CPI                                                          -                -             79,019
         Unlinked                                                          8.2 - 12.6          530,349            664,158
                                                                                           -----------         ------------
                                                                                             1,841,325          2,480,255
                                                                                           ===========         ============

                                                                              Average
                                                                     interest rates at                              Company
                                                                           December 31                          December 31
                                                                                  2000            2000                 1999
                                                                     -----------------     -----------        -------------
                                                                                     %                        NIS thousands
                                                                     -----------------     --------------------------------

                                                                                  6.9          101,606            240,961
         Linked to the dollar                                                     8.2          183,089                449
                                                                                           -----------         ------------
         Unlinked                                                                              284,695            241,410
                                                                                           ===========         ============


         C.       See Note 22 regarding liens to secure credit.

Note 13 - Trade Payables

                                                                                                              Consolidated
                                                                                                               December 31
                                                                                                   2000               1999
                                                                                           ------------      --------------
                                                                                                             NIS thousands
                                                                                           --------------------------------

         Including notes payable                                                                18,840             28,681
                                                                                           ============      ==============

</TABLE>


Note 14 - Other Payables
<TABLE>
<CAPTION>

                                                                         Consolidated                              Company
                                                                          December 31                          December 31
                                                             2000                1999             2000                1999
                                                      -----------       -------------       ----------       -------------
                                                                        NIS thousands                        NIS thousands
                                                      -------------------------------       ------------------------------

<S>                                                     <C>                   <C>                <C>              <C>
         Employees and withholdings
          remittable                                      172,844            194,633             6,284              5,834
         Provision for vacation pay and
          vacation expense allowance                      112,779            159,043               964              1,445
         Expenses to be paid                              219,350            238,756            26,281             27,267
         Government agencies
          (including taxes)                                89,182            202,188             4,911             38,142
         Provision for warranty and
          repairs                                          34,980             64,636                 -                  -
         Payables for purchase of
          investments                                       3,645            112,597                 -                  -
         Severance pay payable and
          current portion of early
          retirement pensions
          (see Note 17)                                   181,343            187,488               520                300
         Reserve for internal insurance                    15,797             30,122             9,164             14,150
         Interim dividend to Koor
          shareholders                                          -            165,172                 -                  -
         Deferred income                                   13,552             49,950               480                654
         Affiliated companies                                  18                 20                 -                  -
         Provision for loss for consolidated
          company (see Note 3H)                            53,765             33,837            23,637             24,709
         Others                                           180,280            295,470            23,000             21,709
                                                      -----------        -----------        ----------         ----------
                                                        1,077,535          1,733,912            95,241            134,210
                                                      ===========        ===========        ==========         ==========
         Includes interested parties                                                               808                830
                                                                                            ==========         ==========

</TABLE>



Note 15 - Long Term Liabilities

         A.       Loans
<TABLE>
<CAPTION>

                                                                         Consolidated                              Company
                                                                          December 31                          December 31
                                                              2000               1999              2000               1999
                                                     -------------      -------------     -------------      -------------
                                                     NIS thousands      NIS thousands     NIS thousands      NIS thousands
                                                     -------------      -------------     -------------      -------------

<S>      <C>                                            <C>                <C>               <C>                <C>
         1.       Loans from banks                      3,739,129          4,644,001         2,096,614          2,795,670
                  Less - current maturities               713,879            952,114           465,715            666,891
                                                     ------------       ------------      ------------       -------------
                                                        3,025,250          3,691,887         1,630,899          2,128,779
                                                     ------------       ------------      ------------       -------------
         2.       Loans from others:
                  Shareholders in
                   subsidiaries and in
                   proportionately
                   consolidated companies                  25,114             58,350                 -                  -
                  Investees                                     -                400           115,752             42,027
                  Receipts from time-sharing
                   units                                   34,724             35,302                 -                  -
                  Deferred income                          14,390                  -                 -                  -
                  Others and long-term
                   accrued expenses                       117,472             42,637                 -                  -
                                                     ------------       ------------      ------------       -------------
                                                          191,700            136,689           115,752             42,027
                  Less - current
                   maturities                               2,852              3,629            97,287             12,685
                                                     ------------       ------------      ------------       -------------
                                                          188,848            133,060            18,465             29,342
                                                     ------------       ------------      ------------       -------------
                  Total loans                           3,214,098          3,824,947         1,649,364          2,158,121
                                                     ============       ============      ============       =============
</TABLE>

         3.    Classification by linkage terms and interest rates:

                  The consolidated balance sheet:
<TABLE>
<CAPTION>

                                                                     Interest rate at
                                                                          December 31                          December 31
                                                                                 2000             2000                1999
                                                                     ----------------      -----------      --------------
                                                                                    %                        NIS thousands
                                                                     ----------------      -------------------------------

<S>                                                                               <C>        <C>                <C>
                  Foreign currency (mainly US dollar)                             6-9        3,239,208          3,937,683
                  Dollar exchange rate or CPI - the higher
                   of the two                                                    5.25          107,929            216,850
                  CPI                                                         Up to 5           18,031            297,170
                  CPI                                            Above 5 (mainly 6.2)          516,547            322,783
                  Unlinked                                                No interest           49,114              6,204
                                                                                           -----------        ------------
                                                                                             3,930,829          4,780,690

                  Less - current maturities                                                    716,731            955,743
                                                                                           -----------        ------------
                                                                                             3,214,098          3,824,947
                                                                                           ===========        ============
</TABLE>





Note 15 - Long Term Liabilities (cont'd)

         A.       Loans (cont'd)
<TABLE>
<CAPTION>

         The Company balance sheet:
                                                                     Interest rate at
                                                                          December 31                          December 31
                                                                                 2000             2000                1999
                                                                     ----------------      -----------      --------------
                                                                                    %                        NIS thousands
                                                                     ----------------      -------------------------------


         a.  From banks

<S>                                                                              <C>           <C>                <C>
             Dollar exchange rate or CPI - the higher of the two                 5.25          107,929            216,830
             CPI                                                           5.05 - 6.3          505,581            397,329
             US dollar                                                      6.23-7.65        1,483,104          2,181,511
                                                                                           -----------      --------------
                                                                                             2,096,614          2,795,670
             Less - current maturities                                                         465,715            666,891
                                                                                           -----------      --------------
                                                                                             1,630,899          2,128,779
                                                                                           ===========      ==============
</TABLE>


<TABLE>
<CAPTION>
                                                                     Interest rate at
                                                                          December 31                          December 31
                                                                                 2000             2000                1999
                                                                     ----------------      -----------      --------------
                                                                                    %                        NIS thousands
                                                                     ----------------      -------------------------------
<S>                                                                            <C>             <C>                 <C>
         b   From investees:

             CPI                                                               4-4.75          115,752             41,227
             Unlinked -capital notes                                               -                 -                800
                                                                                           -----------      --------------
                                                                                               115,752             42,027
             Less - current maturities                                                          97,287             12,685
                                                                                           -----------      --------------
                                                                                                18,465             29,342
                                                                                           ===========      ==============
</TABLE>




Note 15 - Long Term Liabilities (cont'd)

         B.       Debentures
<TABLE>
<CAPTION>

                                                                         Consolidated                              Company
                                                                          December 31                          December 31
                                                              2000               1999              2000               1999
                                                     -------------     --------------     -------------      -------------
                                                     NIS thousands      NIS thousands     NIS thousands      NIS thousands
                                                     -------------     --------------     -------------      -------------

<S>      <C>                                               <C>                <C>            <C>               <C>
         1.  Debentures                                    65,287             96,536                 -                  -
             Less - current maturities                     31,338             31,308                 -                  -
                                                     -------------     --------------     -------------      -------------
                                                           33,949             65,228                 -                  -
                                                     =============     ==============     =============      =============
         2.  Debentures convertible into
              Shares Issued by Koor:
             Series E                                           -             20,329                 -             20,329
             Series F                                     108,703            144,803           108,703            144,803
                                                     -------------     --------------     -------------      -------------
                                                          108,703            165,132           108,703            165,132

         Debentures convertible into shares
           of investee companies:
           Issued by Koor                                  60,615             62,295            60,615             62,295
           Issued by subsidiaries and
           Proportionately consolidated
           companies                                        9,271             44,440                 -                  -
                                                     -------------     --------------     -------------      -------------
         Total debentures convertible
          into shares                                     178,589            271,867           169,318            227,427
         Less - current maturities                        106,122             91,708            96,851             56,530
                                                     -------------     --------------     -------------      -------------
                                                           72,467            180,159            72,467            170,897
                                                     =============     ==============     =============      =============
</TABLE>

         3.       Debentures convertible into shares in Koor:

         (a)      NIS 11,340 thousand par value of debentures (Series E)
                  are linked to the CPI of December 1992 and bear interest
                  at an annual rate of 1.75%. The debentures were redeemed
                  on 31 January, 2000.

         (b)      NIS 70,305 thousand par value of debentures (Series F),
                  traded on the Tel-Aviv Stock Exchange, are linked to the
                  CPI of April 1994 and bear interest at an annual rate of
                  2.75%. The debentures are redeemable, if not previously
                  converted into shares, in the years 2000-2003. The
                  debentures are convertible into registered ordinary
                  shares of Koor of a par value of NIS 0.001 at the
                  conversion rate of NIS 330 par value of debentures for 1
                  ordinary share.

                  In the current period debentures of a par value of NIS
                  23,435 thousand (Series F) were converted into shares. As
                  at December 31, 2000 it is not probable that the
                  debentures will be converted.

         (c)      The debentures are secured by a first degree fixed token
                  charge on a NIS 1 coin deposited with a trustee. In
                  addition, Koor undertook not to create any charges on its
                  assets, whether fixed or floating, prior to receiving the
                  trustee's explicit approval, and on the condition that a
                  charge of the same degree will also be registered in
                  favor of the trustee to secure the debentures, except for
                  a token charge to secure additional series of debentures
                  that will be issued by Koor.


Note 15 - Long Term Liabilities (cont'd)

         B.       Debentures (cont'd.)

         (d)      According to the prospectuses of the issue of Koor's
                  convertible debentures, Koor will refrain from any
                  distribution of dividends out of capital reserves, or
                  from profits deriving from capital reserves, either of
                  the Company or of the subsidiaries.

         4.       The debentures are classified by linkage basis and interest
                  rate as follows:

         (1)      Convertible debentures issued by the company, subsidiaries
                  and proportionately consolidated companies:

<TABLE>
<CAPTION>

                                              Interest rate as at                                            Consolidated
                                                      December 31                                             December 31
                                                             2000                                  2000              1999
                                              -------------------       ------------      -------------     -------------
                                                                %           Maturity      NIS thousands     NIS thousands
                                              -------------------       ------------      -------------     -------------
<S>                   <C>                                     <C>          <C>                  <C>               <C>
                      Linked to CPI (a)                       3.0          2000-2001             9,271            44,440
                      Linked US dollar (b)                    2.5               2001            60,615            62,295
                                                                                          -------------     -------------
                                                                                                69,886           106,735
                                                                                          =============     =============
</TABLE>


                  (a)      NIS 9,271 thousand debentures were issued by United
                           Steel Mills Ltd., see also Note 3H.
                  (b)      Debentures convertible in to ECI shares held by Koor
                           at a minimum realization price of $50 per share.

                  The convertible debentures are, for the most part,
                  secured by a subordinated floating charge on the entire
                  assets of the issuing companies and some by a token
                  charge.

         (2)      Debentures of Series 7 issued by "Koor issuers" bear
                  interest of 4.5% and are linked to the CPI, both as to
                  principal and interest, and are redeemable until 2002.

                  The debentures are secured by a floating charge on all
                  the said company's assets. Under the terms of the trust
                  deed the Company has guaranteed the full payment of all
                  principal, interest and linkage differences of the
                  debentures. The Company registered a "negative pledge" to
                  secure its guarantee.





               Koor Industries Ltd. (An Israeli Corporation)

Notes to the Financial Statements
--------------------------------------------------------------------------------

Note 15 - Long Term Liabilities (cont'd)

         C.       Liabilities (net of current maturities) that will mature
         in the following years subsequent to balance sheet date, are as
         follows:

<TABLE>
<CAPTION>

         1.  Consolidated
                                                         Loans from banks               Loans from others
                                                              December 31                     December 31
                                                     --------------------      ------------------------------
                                                     2000            1999            2000            1999
                                              -----------    ------------     -----------      --------------
                                                                                               NIS thousands
                                              ---------------------------------------------------------------
<S>                                              <C>             <C>              <C>             <C>
             Second year                         212,922         811,495          98,355          15,124
             Third year                        1,987,114         298,189          13,436          13,969
             Fourth year                         536,408       1,853,130          10,107           9,008
             Fifth year                          132,030         393,569          11,819          10,097
             Sixth year                           50,825         172,242           4,415          17,733
             Subsequent years                    105,951         163,262          50,716          67,129
                                              -----------    ------------     -----------      ----------
                                               3,025,250       3,691,887         188,848         133,060
                                              ===========    ============     ===========      ==========


         1.  Consolidated (Continued)

                                                             Debentures                           Total
                                                            December 31                     December 31
                                              -------------------------     ---------------------------
                                                   2000            1999            2000            1999
                                              ----------    -----------     -----------    ------------

                                              ---------------------------------------------------------
             Second year                        70,242         139,065         381,519         965,684
             Third year                         36,174          70,121       2,036,724         382,279
             Fourth year                             -          36,201         546,515       1,898,339
             Fifth year                              -               -         143,849         403,666
             Sixth year                              -               -          55,240         189,975
             Subsequent years                        -               -         156,667         230,391
                                              ----------    -----------     -----------    ------------
                                               106,416         245,387       3,320,514       4,070,334
                                              ==========    ===========     ===========    ============


         2.  The Company
                                                         Loans from banks            Loans from investees
                                                              December 31                     December 31
                                              ---------------------------     ---------------------------
                                                     2000            1999            2000            1999
                                              -----------    ------------     -----------      ----------
                                                                                            NIS thousands
                                              ------------------------------------------------------------

             Second year                               -         477,595          18,465          12,685
             Third year                        1,622,761               -               -          15,857
             Fourth year                               -       1,651,184               -               -
             Fifth year                                -               -               -               -
             Sixth year                            8,138               -               -               -
             Subsequent years                          -               -               -             800
                                              -----------    ------------     -----------      ----------
                                               1,630,899       2,128,779          18,465          29,342
                                              ===========    ============     ===========      ==========


                                                 Convertible debentures                           Total
                                                            December 31                     December 31
                                              -------------------------     ----------------------------
                                                   2000            1999           2000            1999
                                              -----------    ----------     ----------     -------------

                                              ----------------------------------------------------------

             Second year                        36,236          98,495          54,701         588,775
             Third year                         36,231          36,201       1,658,992          52,058
             Fourth year                             -          36,201               -       1,687,385
             Fifth year                              -               -               -               -
             Sixth year                              -               -           8,138               -
             Subsequent years                        -               -               -             800
                                              -----------    ----------     ----------     -------------
                                                72,467         170,897       1,721,831       2,329,018
                                              ===========    ==========     ==========     =============

</TABLE>


          D.       See Note 22 for details of security pledged to secure
                   loans.


Note 16 - Taxes on Income

         A.       Tax benefits under the Law for Encouragement of Capital
                  Investments, 1959:

                  Under this law, by virtue of the "approved enterprise"
                  status granted to certain enterprises of several
                  investees, these companies are entitled to various tax
                  benefits. The income derived from these enterprises
                  during a period of up to 10 years, from the year in which
                  these enterprises first had taxable income (limited to 12
                  years from commencement of production or 14 years from
                  the date of the approval, whichever is earlier), is
                  subject to a corporate tax rate of 0 - 25%.

                  For fixed assets serving the approved enterprise,
                  investees are entitled to an accelerated amortization
                  deduction over five years.

                  In the event that an investee distributes a dividend to
                  shareholders out of income attributable to revenues from
                  an approved enterprise which received a tax exemption,
                  the company that distributes the dividend would be liable
                  to tax at 25% of the earnings distributed. Deferred taxes
                  in respect of income from approved enterprises were not
                  provided, since it is the Group's policy not to initiate
                  a distribution of dividend that involves an additional
                  tax liability to the Group.

                  Benefits are conditional upon the fulfillment of terms
                  set out in law or in deeds of approval. Non-fulfillment
                  of terms could cause cancellation of the benefit, in
                  whole or in part, and the return of benefit sums, plus
                  interest and linkage differentials. The investees met all
                  terms set out as above as at the dates of the financial
                  reports.

                  As security for the implementation of the approved
                  projects and compliance with the conditions of the
                  approval, a charge has been registered on the above
                  subsidiaries' assets in favor of the State of Israel.

         B.       Measurement of results for tax purposes in accordance with
                  the Income Tax (Inflationary Adjustments) Law, 1985
                  (hereinafter - "the Adjustments Law"):

                  In accordance with the Adjustments Law, the results for
                  tax purposes are measured in real (non-inflationary)
                  terms, based on the changes in the CPI.

         C.       Law for the Encouragement of Industry (Taxation), 1969:

                  Certain companies qualify as "industrial companies" under
                  the above law. By virtue of this status and certain
                  regulations published under the inflationary adjustments
                  law, the companies are entitled to claim, and have in
                  fact claimed, accelerated rates of depreciation.

         D.       Tax rates applicable to income from other sources:

                  Income not eligible to "approved enterprise" benefits,
                  mentioned in item A. above, is liable to tax at the regular
                  rate of 36%.

         E.       Losses for tax purposes carried forward to future years and
                  tax assessments:

         1.       The consolidated balance of net operating and capital tax
                  loss carryforwards at 31 December, 2000, amounted to
                  approximately NIS 921 million, out of which NIS 509
                  million relates to Koor.

                  In 1999 the utilization of capital losses and part of the
                  business losses carried forward for the Company's tax
                  purposes became feasible and in 1999 Koor accordingly
                  recorded a tax asset of NIS 129 million against the tax
                  income.

                  Under the Inflationary Adjustments Law, carryforward tax
                  losses are linked to the CPI.

         2.       Final tax assessments have been received by the Company
                  and by some of the subsidiaries through the 1999 tax
                  year. Some of the Group companies have received final
                  assessments through the 1993 tax year.

                  The Company has received final assessments until 1998 tax
year.

         F.       Deferred taxes:

         1.       Deferred taxes are presented in the consolidated balance
                  sheet as follows:

<TABLE>
<CAPTION>

                                                                                                   December 31
                                                                                       2000               1999
                                                                                 ------------    -------------
                                                                                                 NIS thousands
                                                                                 -----------------------------

                  Within current assets in respect of:
<S>                                                                                <C>                <C>
                  Provision for vacation pay and severance benefits                (78,239)           (73,843)
                  Operating loss and capital loss carryforwards (1)                (16,552)          (151,056)
                  Inventory, net of customer advances                                4,255             (9,428)
                  Timing differences in respect of recognition of
                   income and expenses                                             (20,190)           (37,165)
                                                                                 ------------    -------------

                  Total in current assets                                         (110,726)          (271,492)
                                                                                 ------------    -------------
                  Within long-term liabilities in respect of:
                  Depreciation                                                     311,532            391,212
                  Operating loss carryforwards                                    (422,254)          (450,066)
                  Capital loss carryforwards                                       (12,351)           (37,500)
                  Liability in respect of employee severance benefits              (83,184)           (90,459)
                  Other                                                             (5,399)            17,339
                                                                                 ------------    -------------
                                                                                  (211,656)          (169,474)
                  Balance not expected to be realized (2)                          331,703            406,369
                                                                                 ------------    -------------
                  Total in long-term liabilities (deferred tax receivable, net)    120,047            236,895
                                                                                 ------------    -------------
                  Net amount of deferred tax                                         9,321            (34,597)
                                                                                 ============    =============
                  (1)      Including in respect of the Company                           -            129,000
                                                                                 ============    =============
</TABLE>

                  (2)      The Company and certain subsidiaries have
                           deferred tax assets, that are not expected to be
                           realized, because of accumulated tax loss
                           carryforwards and other timing differences.
                           Company Management believes that it is not
                           likely that these balances will be realized and,
                           accordingly, no deferred taxes were created in
                           respect thereof.

<TABLE>
<CAPTION>

         2.       Balances and movement of deferred taxes in the consolidated balance sheet:

                               Depreciable    Inventories     Provisions    Losses and     Timing             Total
                               fixed          net of          for           deductions     differences
                               assets         customer        employee      carried        in respect of
                                              advances        rights        forward        recognition
                                                                                           of income
                                                                                           and
                                                                                           expenses
                               ----------    -----------    -----------    -----------    -------------    ----------
                                                                      NIS thousands
                               --------------------------------------------------------------------------------------

         Balance as at
<S>               <C>             <C>           <C>           <C>             <C>            <C>             <C>
          January 1, 1999         386,810       (9,030)       (175,269)       (96,648)       (46,350)        59,513
         Translation
          differences in
          Subsidiaries             (2,464)         200           1,057            327            413           (467)
         Amounts charged
          to statement of
           operations (1)          30,287      (15,783)          3,478        (98,365)       (75,300)      (155,683)
         Other changes, net*      (23,421)      15,185           6,432        (29,172)        93,016         62,040
                               ----------    -----------    -----------    -----------    -------------    ----------
         Balance as at
          31 December,
          1999                    391,212       (9,428)       (164,302)      (223,858)       (28,221)       (34,597)
         Translation
          differences
          in subsidiaries          (4,826)         303           1,694            635            138         (2,056)
         Amounts charged
          to statement of
          operations               33,005       (2,462)         (4,920)        99,203          2,465        127,291
         Other changes, net *    (107,859)      15,842           6,105          4,566             29        (81,317)
                               ----------    -----------    -----------    -----------    -------------    ----------
         Balance as at
          31 December,
          2000                    311,532        4,255        (161,423)      (119,454)       (25,589)         9,321
                               ==========    ===========    ===========    ===========    =============    ==========
</TABLE>


         (1) Including taxes
              for previous
              years

         * Mainly companies whose consolidation was terminated, net.

       Deferred taxes were computed at tax rates of 25% - 36% (mainly 28%).


Note 16 - Taxes on Income (cont'd)

         G.       Taxes on income included in consolidated statements of
                  operations:

         1.       Composition:
<TABLE>
<CAPTION>
                                                                                  Year ended December 31
                                                                2000              1999              1998
                                                          ----------        ----------        ----------
                                                                          NIS thousands
                                                          -----------------------------------------------

                  Earnings before income tax:
<S>                                                          <C>               <C>                <C>
                  In Israel                                  718,252           520,833            167,722
                  Abroad                                     117,166            65,976            221,943
                                                          ----------        ----------        ----------
                                                             835,418           586,809            389,665
                                                          ==========        ==========        ==========
                  For the current year:

                  Current taxes:
                  In Israel                                  151,960           284,821            287,246
                  Abroad                                       3,321            19,696             62,357

                  Deferred taxes:
                  In Israel                                  119,653          (135,472)          (110,635)
                  Abroad                                       7,638            14,371             (5,807)
                                                          ----------        ----------        ----------
                                                             282,572           183,416            233,161
                                                          ==========        ==========        ==========
                  In respect of previous years:
                  In Israel                                    1,551         * (15,356)             2,353
                  Abroad                                      (2,247)           (6,173)            (1,529)
                                                          ----------        ----------        ----------
                                                             281,876           161,887            233,985
                                                          ==========        ==========        ==========
</TABLE>


                  * Including deferred taxes in the amount of NIS 34,582
thousand.


Note 16 - Taxes on Income (cont'd)

         G.       Taxes on income included in the consolidated statements of
                  operations (cont'd):

         2.       Below is a reconciliation between the theoretical tax
                  expense, if all the income of Koor and the subsidiaries
                  were taxed at the regular rate of 36%, and the actual tax
                  expense as reported in the statement of operations:

<TABLE>
<CAPTION>

                                                                                  Year ended December 31
                                                                2000              1999              1998
                                                          ----------        ----------        ----------
                                                                          NIS thousands
                                                          -----------------------------------------------

         Earnings before taxes on income, as
<S>                                                          <C>               <C>                <C>
           reported in the statement of operations           835,418           586,809            389,665
                                                          ==========        ==========        ==========
         Statutory tax rate                                      36%               36%                36%
                                                          ==========        ==========        ==========
         Theoretical tax expenses in respect of
           these earnings                                    300,750           211,251            140,279
         Increase (decrease) in taxes resulting from
           the following factors - the tax effect:
         Tax benefits under various
           encouragement laws                                (40,290)          (46,523)           (72,272)
         Non-deductible expenses for tax
           purposes (including depreciation)                  30,612            38,509             29,159
         Losses for which deferred taxes
           were not recorded                                 118,853            29,303             36,900
         Capital gains from sale of investments
           and assets, net                                   (97,610)          (27,104)            (7,002)
         Provisions for anticipated
           losses from the sale of assets, net               (20,554)           64,032             68,157
         Tax loss carryforwards from prior years
           for which deferred taxes were not
           created and which were utilized during
           the current year                                   (8,637)         (102,980)           (16,212)
         Inflationary erosion of tax advances                      3               (50)             5,499
         Effect of the Inflationary Adjustments Law
          in respect of companies
           whose functional currency is the
           U.S. dollar                                          (719)            7,302             65,890
         Taxes in respect of prior years                        (696)          (21,529)               824
         Effect of foreign subsidiaries                         (883)           10,316            (23,349)
         Others                                                1,047              (640)             6,112
                                                          ----------        ----------        -----------
         Total taxes on income                               281,876           161,887            233,985
                                                          ==========        ==========        ==========
         Effective tax rate                                    33.74%           27.60%             60.00%
                                                          ==========        ==========        ==========
</TABLE>



Note 17 - Liabilities for Employee Severance Benefits, Net

         A.       Pension, severance pay and retirement grants:

         Under current labor laws and existing labor agreements, the
         companies in the Group are required to make severance payments, to
         employees who are dismissed or who retire. In respect of these
         liabilities, regular deposits are made by Group companies with
         pension and severance pay funds. The balance sheet amount
         represents the unfounded balance of the liabilities. Where the
         funds deposited are not under the control and management of the
         Group companies, the funded amounts are not reflected in the
         balance sheets. These deposits and the amount stated in the
         balance sheet fully cover the Company's liability for employee
         severance benefits.

         Employees dismissed before reaching retirement age are entitled to
         severance pay, computed on the basis of their latest salary. Where
         amounts accumulated in the pension funds are insufficient to cover
         such severance pay, the Company and its subsidiaries will make up
         the amount of the shortfall at the time of payment. In
         Management's opinion, an appropriate provision, based on the
         salary components used in the computation of severance pay, has
         been included in the financial statements to fully cover this
         liability.

         Regarding companies in which enhanced severance pay has been
         planned or agreed upon for the employees, appropriate provisions
         have been made for the supplementary amounts.


         B.       Early retirement pension:

         Under agreements with certain employees who retired from service,
         Koor Group companies have undertaken to make pension payments
         until they reach retirement age. The entire liability for such
         pensions is included in the accounts on the basis of the present
         value of future pension payments, computed at a monthly discount
         rate of 0.3% (3.6% per year).

         C.       Compensation for unutilized sick leave:

         A provision for this liability, according to agreements, is
         included in the accounts in respect of those employees who have
         reached the age of 55, due to the uncertainty as to whether
         employees who have not reached that age will be entitled to such
         compensation (as a result of utilization of sick leave or early
         retirement). The provision is computed on the basis of the latest
         salary for 8 working days in respect of each year during which the
         sick leave was not utilized.


         D.       Liabilities for severance benefits, which are presented in
                  the balance sheet, and the amount funded in severance pay
                  funds, are as follows:

<TABLE>
<CAPTION>
                                                                         Consolidated                              Company
                                                                          December 31                          December 31
                                                             2000               1999              2000               1999
                                                        ----------      -------------        ---------       -------------
                                                                        NIS thousands                        NIS thousands
                                                        -----------------------------        -----------------------------
<S>                                                       <C>                <C>                 <C>                <C>
         Severance pay and retirement
          Grants                                          386,856            518,168             4,453              7,051
         Amount accrued for early
          retirement                                      253,174            144,367             1,031              1,611
         Amount accrued in respect of
          unutilized sick leave                             7,653             24,329                 -                  -
                                                        ----------      -------------        ---------       -------------
                                                          647,683            686,864             5,484              8,662
         Less - amount funded *                           358,728            381,973             2,178              2,148
                                                        ----------      -------------        ---------       -------------
                                                          288,955            304,891             3,306              6,514
                                                        ==========      =============        =========       =============
</TABLE>

         *        The amounts funded can be withdrawn, subject to the
                  fulfillment of the provisions of the Severance Pay Law.



Note 18 - Contingent Liabilities and Commitments

         A.       Contingent liabilities

         1.       Commissioner of Restrictive Trade Practices:

         a)       During October 1997, proximate to the date of the
                  publication of a newspaper article containing details
                  about alleged violations of the Law for Restrictive Trade
                  Practices, 1988 (hereinafter - the "Law") regarding price
                  coordination and lack of competition between TTL and
                  Telrad, the Commissioner of Restrictive Trade Practices
                  (hereinafter - the "Commissioner") conducted an
                  examination at the offices of TTL, Telrad and the
                  Company, during which certain documents were confiscated,
                  certain employees were questioned and additional
                  information was submitted as requested.

                  On December 13, 1998, the Commissioner issued a press
                  release, in which he announced that the Investigations
                  Department of the Restrictive Trade Practices Authority
                  (hereinafter - the Authority) has concluded the
                  investigation regarding suspicions about restrictive
                  arrangements between Koor, TTL, Telrad, Bezeq and
                  Bezeqcall, in the field of the supply of switchboards for
                  the commercial market and in the field of N.S.R.

                  According to a press release by the Commissioner, the
                  investigators of the Investigations Department of the
                  Authority recommend submitting a bill of indictment
                  against some of the examinees regarding some of the
                  suspicions investigated, and that the Legal Department of
                  the Authority is to decide if offenses were in fact
                  committed and if there is a sufficient evidential basis
                  for trial. As at balance sheet date, nothing was
                  mentioned regarding details about the findings of the
                  Legal Department of the Authority.

                  Under the Law, penalties may be imposed against an entity
                  which has violated the Law. There is also the possibility
                  of repercussions at the civil level, if damage should be
                  proven as a result of a violation of the law.
                  The Management of the Company and the subsidiaries, after
                  consultation with their legal counsel, are of the opinion
                  that, at this stage, as long as the results of the
                  Commissioner's examinations have not yet been published,
                  it is not possible to assess the possible developments in
                  this matter, nor to evaluate if a significant loss is
                  expected to result - if at all. Accordingly, it was not
                  considered appropriate to make any provision in the
                  financial statements in respect of this matter.

         b)       Pursuant to the directives of the Commissioner, in the
                  conditions of the permit to merge Claridge Group with the
                  Company and the amendments thereto, various restrictions
                  were imposed on the Claridge Group, on Koor and on
                  companies in its Group. With the completion of the sale
                  of Koor's holding in Mashav Enterprise and Development
                  Ltd. the restrictions imposed were cancelled. (See Note
                  3D).


Note 18 - Contingent Liabilities and Commitments

         A.       Contingent liabilities (cont'd)

         2.       Within the framework of the merger agreement as aforesaid
                  in Note 3(A)1 Tadiran undertook to indemnify ECI for any
                  damage it incurred as a result of the matters listed
                  below:
         (a)      Taxes imposed on TTL and its consolidated companies over
                  and above the provisions included in the financial
                  statement.
         (b)      Breach of the obligations of Tadiran and TTL in the
                  merger agreement concerning agreement with related
                  parties.
         (c)      Any subject connected with the matters being investigated
                  by the Commissioner (see item 1 above). The indemnity
                  items will cover losses in excess of the deductible of
                  between $ 1.5 million to $ 10 million (contingent upon
                  each section separately) and/or are restricted to 81.67%
                  of the loss incurred.

                  For indemnity purposes only the representations made by
                  TTL shall remain valid for one year from the date of the
                  merger. Tadiran's indemnity in respect of the matters or
                  facts being investigated by the Commissioner, shall
                  remain valid for a period of seven years from the date of
                  the merger and shall be extendible for an additional
                  period as long as these matters are under investigation.
                  Aside from this all the remaining representations made by
                  the company shall not remain valid after the date of the
                  merger.


         3.       Environmental issues

                  The activities of M.A. Industries Ltd. are exposed to the
                  risk of causing damage to the environment, since the
                  Group manufactures, stores and sells chemicals. M.A.
                  Industries invests significant amounts in order to comply
                  with the provisions of the laws and of the environmental
                  regulations, and in the opinion of management it does in
                  fact comply therewith. M.A. Industries' insurance
                  policies provide coverage in the event of a sudden
                  unexpected crisis of environmental pollution in Israel
                  and worldwide, subject to relevant terms of the policy.
                  As at balance sheet date, M.A. Industries does not have
                  insurance coverage for continuous environmental
                  pollution. It should be noted that risks of damage to the
                  environment are not insurable.

                  One of M.A. Industries' plants is located in Ramat Hovav,
                  along with other chemical plants, since the Government
                  decided that the geological layers in that particular
                  area are completely impenetrable to liquid or pollution.
                  The Ministry of the Environment conducted examinations,
                  which determined that there is data indicating
                  subterranean pollution in Ramat Hovav. The examiners
                  recommended the taking of measures to prevent the
                  continuation of leakages from active and inactive plants,
                  which are liable to constitute a source of pollution of
                  the water table, in the area. At this stage, the
                  subsidiary cannot estimate the costs involved, if, in the
                  light of the research that will be carried out, a
                  solution will be found, which it will be decided to
                  implement. Furthermore, the local Municipality at Ramat
                  Hovav is continuing to take rehabilitation steps relating
                  to past incidents.


Note 18 - Contingent Liabilities and Commitments

         A.       Contingent liabilities (cont'd)

         4.       Claims against Telrad:

         a).      In October 1994, a claim was filed by the Union Engineers
                  against Telrad, for an unspecified amount. The claim
                  pertains to the recognition and applicability of the
                  salary tables included in the general collective
                  bargaining agreements, which were signed in 1994 and 1995
                  between the Engineers Union and the employers in the
                  public service sector, to Telrad engineers.
                  On January 31, 1996, a ruling was handed down by the
                  Tel-Aviv District Labor Court completely rejecting the
                  claims of the Engineers Union. The Engineers Union has
                  appealed against the judgment, which stated that the Koor
                  agreement is a collective agreement governing the
                  relations between the Company, the Union and the
                  employees of the Company. The appeal was heard in the
                  National Labor Court, and a decision thereon has not yet
                  been handed down.

                  In April 1996, a parallel claim was filed, by the Lod
                  Workers' Council and the Workers Committee concerning the
                  application of salary tables of the public service sector
                  to employees of Telrad.

         b).      In 2000 a claim was filed against Telrad by company
                  employees who are members of the company's workers'
                  committee. They are suing for accounts so that the
                  plaintiffs can examine the calculation of the
                  distribution of earnings to employees. They are also
                  suing for a declaratory judgment which will determine
                  that Telrad is obliged to draw up new accounts for the
                  distribution of earnings. In addition an application was
                  filed to recognize the plaintiffs as representatives of
                  all Telrad's workers and employees. The court rejected
                  the application for a representative claim. A statement
                  of defense has been filed.

         5.       Claims filed against Tadiran and its subsidiaries:

         a)       Employees of a plant of Tadiran, which had been closed
                  during 1990, filed actions against the company, alleging
                  that they sustained injuries and certain related
                  illnesses had been caused by exposure to certain
                  substances during their employment.
                  Tadiran has insurance policies, which, relying on legal
                  opinion, cover possible damages as a result of these
                  claims, and, consequently, no provisions have been made
                  in respect of those claims. Tadiran recorded provisions
                  in respect of possible damages which had been covered by
                  an insurance company currently in the process of
                  liquidation.

         b)       In October 1999, Bezeq, The Israel Telecommunication
                  Corp. Ltd. (hereinafter - "Bezeq") lodged a claim against
                  Tadiran Ltd. whose main cause is various losses incurred
                  by Bezeq due to delays in the performance of works which
                  were ordered under development and application contracts
                  originally signed between Bezeq and TTL in the amount of
                  some $6.7 million.

                  Alternatively, Bezeq is suing for the balance of
                  arrearage penalties to which it alleges it is entitled
                  pursuant to those contracts, and which were not paid in
                  full, in the amount of some $1.7 million.

                  In an arbitration judgment handed down on February 17,
                  2000 all Bezeq's arguments regarding the company's
                  liability for the Principal Claim were dismissed. The
                  arbitration judgment determines that pursuant to the
                  engagement contracts between the parties Bezeq is
                  entitled to compensation within the framework of
                  arrearage penalties only. The parties are in intensive
                  negotiations to reach a settlement. In the opinion of
                  Management of Tadiran, based on the opinions of its legal
                  counsel, the company will not bear additional substantial
                  expenses over and above the allocations contained in the
                  financial statements.


Note 18 - Contingent Liabilities and Commitments (cont'd)

         A.       Contingent liabilities (cont'd)

         6.       Claims filed against M-A Industries and its foreign
                  subsidiaries (cont'd)

         a)       A claim was filed against M-A Industries, a subsidiary in
                  Brazil, alleging that the subsidiary has copied a certain
                  process, which is a protected trade secret that is owned
                  by the claimant. Accordingly, the subsidiary is being
                  sued to indemnify the claimant in respect of unfair
                  competition, in the amount of $ 12 million (based on a
                  calculation involving the amount of materials used). In
                  addition, the claimant has requested that a fine of 100
                  thousand Brazilian Reals per day be levied against the
                  subsidiary in respect of the unlawful exploitation of
                  trade secrets. Based on the opinion of its legal counsel,
                  the subsidiary's management estimates that the claim has
                  no validity and, therefore, no provision has been
                  included in the financial statements in respect thereto.

         b)       A claim was filed against M-A Industries subsidiary in
                  Brazil and others, in the aggregate amount of $ 15
                  million, by a group that acquired the rights to two banks
                  that had declared bankruptcy. The subsidiary is requested
                  to repay a loan of $ 1 million, out of the aforementioned
                  amount, which the claimants maintain had been granted
                  directly to the subsidiary. With respect to the balance
                  of the claim, the subsidiary has been sued as the
                  guarantor of debts of agricultural cooperatives, which
                  were its former shareholders.

                  Based on the opinion of its legal counsel, the
                  subsidiary's management estimates that there is a
                  reasonable likelihood that its defense against the claim
                  will be accepted and, therefore, no provision has been
                  included in the financial statements in respect thereto.

         c)       Claims and other monetary demands have been filed against
                  M-A Industries investee in Brazil, in the aggregate
                  amount of $ 15 million. Based, inter alia, on the opinion
                  of its legal counsel, the investee's management estimates
                  that the provisions recorded in its financial statements
                  are adequate to cover any possible damage, which may
                  result in respect of these claims.

         d)       Pursuant to the amendment of the Employment of Workers by
                  Human Resources Contractors Law 1996, passed in July
                  2000, human resources employees are entitled to identical
                  work conditions to those that workers employed directly
                  by employers as of 2001.

                  Management of the M-A Industries estimates that the
                  amendment to this law shall not have any significant
                  influence on the results of its activities in the coming
                  years.

         7.       A number of claims have been filed against certain other
                  companies concerning various matters pertaining to the
                  normal course of business, including tax, customs and VAT
                  liabilities, which are in various legal proceedings. The
                  managements of said companies believe, based on the
                  opinion of the legal counsel handling the claims, that
                  appropriate provisions in light of the circumstances have
                  been included in the financial statements.

         8.       See Note 10A(2) regarding the matter of the fulfillment
                  of the conditions attached to the receipt of investment
                  grants.

Note 18 - Contingent Liabilities and Commitments (cont'd)

         A.       Contingent liabilities (cont'd)

         9.       The business activities of the Koor Group are
                  characterized primarily by advanced technologies. The
                  accelerated rate of technological developments and
                  innovations in the Group's segments of operations,
                  require the investment of substantial financial resources
                  in research and development, in order to assure the
                  Group's standing in its respective segments of operations
                  and facing the constant competition of both Israeli and
                  worldwide entities. Consequently, the Group may be
                  exposed to the loss of its position in certain segments,
                  as well as to substantial research and development costs,
                  which, in turn, may have an adverse effect on the Group's
                  operating results.

         10.      Tadiran Com. was sold to the buying company in a
                  transaction of representations. According to the terms of
                  the transaction, if it transpires that the condition of
                  Tadiran Com. is materially different from the
                  representation made, the buyer shall be entitled to
                  compensation therefore from Tadiran.
                  Koor is a guarantor to the commitments of Tadiran in the
                  transaction up to the total amount of the consideration
                  is received. This guarantee will be in effect if the
                  shareholders' equity of Tadiran falls to below $250
                  million.

         11.      In 1998, the American company Qualcomm Inc.("Qualcomm")
                  filed a claim against Elisra in response to the claim
                  filed by Elisra for a transaction that was cancelled by
                  Qualcomm in August 1996.
                  The claim filed by Elisra was for the sum of $ 25 million
                  and the cross claim was for the sum of $ 79 million, plus
                  punitive damages. The claims were filed during
                  arbitration proceedings in the USA. According to a legal
                  opinion, Elisra has a well founded cause of action
                  against Qualcomm, and good defense claims against the
                  cross claim, therefore, the chance of the claim being
                  rejected is good. No provisions were recorded in the
                  financial statements for the claim.


Note 18 - Contingent Liabilities and Commitments (cont'd)

         B.       Commitments

         1.       Certain subsidiaries have research and development
                  contracts with the Government of Israel. Under these
                  contracts, the subsidiaries are required to pay royalties
                  to the Government of Israel if the subsidiaries generate
                  income from such research (2% - 5% of proceeds of sales
                  resulting from the research and development) in amounts
                  not exceeding 100% - 150% of the linked amounts of the
                  grants received by the subsidiaries as participation in
                  the research and development projects.
                  Royalty paid to the Government of Israel in respect of
                  the aforementioned research and development contracts,
                  are as follows:

                  Year ended                                  NIS thousand
                  ----------                                  ------------

                  31 December, 1998                                75,732
                  31 December, 1999                                35,957
                  31 December, 2000                                36,219

                  Negotiations have been underway between a subsidiary and
                  the Office of the Chief Scientist (hereinafter - "OCS")
                  of the Government of Israel, to re-examine the royalties
                  paid to the OCS during a period exceeding 10 years. The
                  financial statements include a provision which, in the
                  opinion of the management of the subsidiary, will be
                  required to pay the royalties which will result from the
                  negotiations.

         2.       Certain subsidiaries are required to pay royalties at the
                  rate of 3% per year in respect of the increase in export
                  sales, not to exceed the amount financed by the Fund for
                  the Encouragement of Marketing Abroad. Such amounts are
                  linked to the exchange rate of the U.S. dollar

         3.       Commitments for the purchase of fixed assets are as
                  follows: 31 December, 2000 - NIS 29 million adjusted; 31
                  December, 1999 - NIS 60 million adjusted.

         4.       Koor has guaranteed, until the year 2004, the compliance
                  of Elad Hotels Ltd. with the terms of the agreement
                  regarding management of two hotels by a subsidiary. A
                  subsidiary pays usage fees for hotel services, as defined
                  in the agreement.

         5.       Certain companies in the Group lease and rent industrial
                  and office premises under long-term contracts. The lease
                  contracts are non cancelable and in most cases include,
                  renewal options. Those expenses of these companies was
                  NIS 32 million in 2000, NIS 45 million in 1999 and NIS 43
                  million in 1998.

                  Future minimum payments under the non-cancelable
                  operating leases and rent payment, for the years
                  subsequent to balance sheet date, are as follows:

                                                                December 31
                                                                2000
                                                                ---------------
                                                                (NIS thousands)
                                                                ---------------

                  First year                                       29,861
                  Second year                                      26,417
                  Third year                                       24,855
                  Fourth year                                      19,443
                  Fifth year and thereafter                        35,883
                                                                -----------
                                                                  136,459
                                                                ===========




Note 18 - Contingent Liabilities and Commitments (cont'd)

         B.       Commitments

         6.       Below are data on Koor's investment, through the Koor
                  Venture Capital partnership, in venture capital funds and
                  in start-up companies, and the commitments of Koor
                  Venture Capital for additional investment, as at the date
                  of publication of the financial statements:

                                                               $ millions
                                                               ----------

                Actual investment as at 31 December 2000               86
                                                           ===============

                Commitment to invest, over and above
                 the sum actually invested                             72
                                                           ===============

                In addition, transferred to the partnership Tadiran Ltd.
                in Tadiran Scopus Ltd.


Note 19 - Convertible Securities of Investee Companies

         Option warrants to employees:

         Certain investors issued options to their employees until 2000
         inclusive. Employee entitlement to such options is being
         determined over a number of years from their date of issue,
         subject to continued employment. The exercise term of the options
         varies according to the terms of the different plans.

         The exercise price was, in most cases, identical to the market
         price of the shares of subsidiary companies on the issuance date
         of the option warrants.


Note 20 - Share Capital, Stock Options and Warrants

         A.       Share capital is composed as follows:
<TABLE>
<CAPTION>
                                                                    31 December, 2000                    31 December, 1999
                                                       ------------------------------     --------------------------------
                                                        Authorized         Issued and        Authorized         Issued and
                                                                          outstanding                          outstanding
                                                       -----------      -------------     -------------      -------------
<S>                                                    <C>                <C>               <C>                <C>
         Number of shares:

         Ordinary shares of a par value
          of NIS 0.001 (1) (3)  (4)                    84,557,334         16,525,984        84,557,334         16,525,984
                                                      ===========        ===========       ===========        ============
         Deferred shares of a
          par value of NIS 0.001
          (2) (3) (4)                                  15,167,666         14,484,971        15,167,666         14,461,481
                                                      ===========        ===========       ===========        ============
         Amount in NIS:

         Ordinary shares of a par value
          of NIS 0.001                                     84,557             16,526            84,557             16,526
                                                      ===========        ===========       ===========        ============
         Deferred shares of a par value
          of NIS 0.001                                     15,168             14,485            15,168             14,461
                                                      ===========        ===========       ===========        ============
</TABLE>


Note 20 - Share Capital, Stock Options and Warrants (cont'd)


         A.       Share capital is composed as follows (cont'd):

         (1)      These shares are traded on the Tel-Aviv Stock Exchange.
                  As at 31 December, 2000, the market price was NIS 255.50
                  per share. Traded on the New York Stock Exchange (NYSE).
                  Each ADS represents 0.2 of Koor's ordinary Shares of NIS
                  0.001 par value. The market price in New York of the ADS
                  as at 31 December, 2000 was $13.
         (2)      Holders of the deferred shares are only entitled to
                  receive the nominal paid-up value of the deferred shares
                  in the event of a winding up of Koor, subject to prior
                  payment of the nominal paid-up value of the ordinary
                  shares to the holders of ordinary shares. The holders of
                  the Deferred Shares do not have any voting rights, and
                  they are not entitled to participate in the distribution
                  of dividends of any kind.
         (3)      The classification of the authorized and outstanding
                  ordinary shares, and the authorized and outstanding
                  deferred shares changes as a result of any deferral of
                  ordinary shares occurring at the time of the exercise of
                  stock options issued by the Company to the Israeli banks
                  (see (B) below).
         (4)      As at balance sheet date 170,436 ordinary shares and
                  12,927,374 deferred shares are held by subsidiaries and,
                  accordingly, an amount of adjusted NIS 257,125 thousand
                  was deducted from shareholders' equity.
                  As for the rights and legal status of the additional
                  624,577 ordinary shares held by a subsidiary, Koor Trusts
                  1995 Ltd., see B below. The shares held by Koor Trusts
                  will only be used in future for an issuance to company
                  employees, subject to receipt of the requisite approvals.
                  If these shares are not issued to the employees by June
                  2001 the company will reduce its capital. Until June 2001
                  Koor Trusts will not have the right to participate or
                  vote in general meetings of the company's shareholders,
                  nor will it have the right to receive a dividend for
                  these shares.

         B.       Self purchase of Company shares

                  On April 7, 2000, the Koor Board of Directors resolved to
                  approve an overall framework of $ 50 million for purposes
                  of self purchases of Koor ordinary shares. According to
                  the resolution, purchases would be carried out within
                  this framework from time to time during the course of
                  trade on the stock exchange, under the supervision of the
                  Company's Executive Committee and in accordance with its
                  instructions. Within this framework, which has been fully
                  utilized, 538,592 ordinary shares were purchased (about
                  3.4% of the ordinary share capital) at a cost of NIS 203
                  million. This amount is deducted from the Company's
                  capital.

                  On May 12, 2000, in return for NIS 1.9 million, Koor
                  issued Put options outside the stock exchange, which
                  granted grants the purchaser of the option the right to
                  sell to Koor on August 14, 2000, 115,000 ordinary Koor
                  shares at an exercise price of $ 92.949 per ordinary
                  share. On August 14, 2000, the above option expired.

         C.       Stock options:

                  Stock options issued to Israeli banks:

                  Within the framework of the comprehensive arrangement
                  signed in September 1991 between Koor and the Israeli
                  banks, banks were given options for the purchase of
                  ordinary shares of Koor. The stock options may be
                  exercised at any time through 2001. Upon exercise of a
                  stock option by any of the banks, an ordinary share held
                  by Hevrat Ha'ovdim will be converted automatically into a
                  deferred share, so, for all practical purposes, the total
                  number of ordinary shares does not change.

                  In 2000 and 1999, the Israeli banks exercised options for
                  the purchase of 23,490 and 69,844 ordinary shares
                  respectively.

                  As of 31 December, 2000 - 46,985 options were
outstanding.


Note 20 Share Capital, Stock Options and Warrants (cont'd)


         D.       Stock options to key employees:

         1.       The 1997 Plan:

                  On May 27, 1997, 134,547 options were issued (exercise
                  price - $ 90.989) and on November 6, 1997, an issuance of
                  an additional 54,421 options was completed (exercise
                  price - $ 98.747).

                  See item 4 as to details of stock options that have not
                  been exercised and of exercise in the current year.

         2.       On August 28, 1997, Columbus Capital Corporation
                  ("Columbus"), a member of the Claridge Group, undertook
                  to grant put options to those senior employees of Koor,
                  including Koor's President and Chief Executive Officer
                  who retired in 1998, who are eligible for options to
                  purchase Koor ordinary Shares by virtue of the 1997 Plan.
                  These put options are exercisable within 90 days from the
                  first date upon which the employees are eligible to
                  exercise the options under the above Plans. The put
                  options confer to the employees the right to sell to
                  Columbus the outstanding shares granted to them and the
                  profits inherent in the exercise of the options. Columbus
                  will purchase these shares from the employees, if they
                  should desire, at a price identical to that paid by the
                  Claridge Group for the purchase of Koor's shares held by
                  the Shamrock group - $ 121.25 per Common Share of NIS
                  0.001.

                  Each employee shall be eligible to sell his outstanding
                  shares, all or in part, to Columbus under the said terms
                  and according to his discretion.

                  In 1998 an expense of NIS 6,080 thousand was allocated
                  for the exercise of the aforementioned put options by all
                  of the employees, including the retired Chief Executive
                  Officer. In 1999 an expense of NIS 774 thousand was
                  allocated for the exercise of the aforementioned put
                  options.

         3.       The 1998 Plan:

                  On August 30, 1998, an Extraordinary General Shareholders
                  Meeting approved a private placement, at no cost, of up
                  to 400,000 stock options to employees of the Company.
                  Each option may be exercised into one ordinary share of a
                  par value of NIS 0.001 each (hereinafter - "the Plan").

                  The Plan authorizes the allotment of up to 313,596 stock
                  options, under specified terms, to 5 senior employees of
                  Koor, including 105,263 option warrants to Koor's Chief
                  Executive Officer who is also Vice Chairman of the Board
                  of Directors.

                  The effective date for implementation of the Plan is 16
                  July 1998 (hereinafter: the "Effective Date" or
                  "Determining Date"). At the end of the first year from
                  the Determining Date and at the end of each of the first
                  two years thereafter each employee will be entitled to
                  exercise up to one third of the total number of options
                  in his allotment.

                  The employee is entitled to exercise all or part of the
                  stock options, pursuant to the conditions of the Plan,
                  from the date of entitlement to exercise of the stock
                  options on the dates set forth above and up to five years
                  from the Determining Date, in other words, up to 16 July,
                  2003 (with the exception of the CEO who will be entitled
                  to exercise the stock options until four years have
                  elapsed from the Determining Date).


Note 20 Share Capital, Stock Options and Warrants (cont'd)

         D.       Stock options to key employees: (cont'd)

         3.       The 1998 Plan: (cont'd)

                  Under the terms of the Plan, each option may be
                  theoretically exercised to purchase one ordinary share
                  (subject to adjustments). In practice, however, the
                  optionees will not be issued the total number of shares
                  to which they are entitled upon exercising such options,
                  but only the number of shares reflecting the monetary
                  benefit component of the option as at the exercise date.
                  The exercise price of the issued options set for the
                  purpose of calculating the benefit component when
                  exercising the option (excluding those issued to the
                  trustee that do not as yet have an exercise price) is
                  $114.7 per share in respect of each option, payable in
                  NIS, (excluding options issued to the Chief Executive
                  Officer). The exercise price of the options issued to the
                  Chief Executive Officer equals the NIS equivalent of
                  $118.3 per share in respect of each option, subject to
                  adjustment of exercise price for dividend distribution.

                  The exercise price of the options issued to a trustee for
                  those employees to be defined in the future shall be
                  determined based on the share's market price on the Tel
                  Aviv Stock Exchange at a date to be decided by the
                  Remuneration Committee.

                  The theoretical economic value of the option on August 5,
                  1998, according to the Black-Scholes options pricing
                  model was $38.8 per option issued to the optionees (other
                  than the CEO) and $31.92 per option issued to the Chief
                  Executive Officer.

         4.       On March 22, 2000, the Koor Board of Directors decided to
                  amend the employee stock options plans (excluding
                  interested parties) from 1997 and 1998. It was decided
                  that, as regards the 1998 Plan, the exercise price would
                  be adapted due to the dividend distribution to all the
                  options, even if the date of entitlement to their
                  exercise falls prior to the entitlement to a dividend.
                  In addition, it was decided that, as regards the options
                  from the 1997 and 1998 Plans, an employee who has
                  resigned and who held options whose exercise date falls
                  due prior to his/her resignation, their exercise period
                  will be to the end of a five year period from the day the
                  Plan commenced.
                  On August 6, 2000, the Board of Directors decided to
                  amend the stock options Plan, in such a manner that the
                  exercise period of each option be extended to the end of
                  five years from the date of consolidation of its
                  eligibility, this vis-a-vis employees owning options, who
                  are not interested parties in the Company and who will
                  not retire before the end of 2000.

         5.       The 2000 Plan

                  On August 6, 2000 the Board of Directors of the Company
                  approved a 2000 Stock Options Plan, which had previously,
                  on June 14, 2000, been approved by the Executive
                  Committee of the Board of Directors; the main points of
                  the plan are as follows:

         1.       An overall framework was approved for the allocation of
                  400,000 options, with a theoretical exercise of up to
                  400,000 ordinary shares of the Company, that is about
                  2.5% of the Company's issued share capital.

         2.       The options will be exercised to shares in quantities
                  which will reflect the amount of financial benefit
                  encompassed by the options, that is, as against the
                  difference between the rate of an ordinary share of the
                  Company in effect on at the time of the exercise of the
                  options, and the price of the exercise of the option.
                  Therefore, the aforesaid, regarding the numbers and the
                  rates of the shares is entirely theoretical.

         3.       The exercise price of each option will be the average
                  closing rates of the ordinary share of the Company
                  (linked to the dollar) in the month prior to the date of
                  the Committee decision, that is, an exercise price of $
                  97.39.

Note 20 - Share Capital, Stock Options and Warrants (cont'd)

         D.       Stock options to key employees: (cont'd)

         4.       Since the exercise shares will be allocated only as
                  against the financial benefit, the employees will not be
                  required to pay the exercise price when exercising the
                  options. This price will serve only for purposes of
                  calculating the amount of the financial benefit.

         5.       The options intended for the Company employees who are
                  not "interested parties" and will not be "interested
                  parties" as a result of the allocation of the options.

         6.       Eligibility for the exercise of the options will apply
                  according to the division of the options into three
                  portions, so that at the end of the first year for the
                  Determining Date (that is 14 June 2000) or from the date
                  of the employee's start of employ (the later of the two),
                  the entitlement to exercise one third of the quantity
                  allocated will crystallize, and the remaining two thirds
                  at the end of each of the two years following. The
                  exercise period of each option whose eligibility from
                  exercise has been consolidated, is 5 years from the date
                  that the entitlement comes into existence.

         7.       On 5 October 2000, the overall quantity of 400,000 stock
                  options was allocated to a trustee, of which 125 thousand
                  options were earmarked for employees.

                  Detail of options that have not yet been exercised as at
                  31 December, 2000 are as follows:

<TABLE>
<CAPTION>

                                                 Exercise          Number of          Last exercise
                                                    price            options                   date
                                         ----------------     --------------       ----------------
                                                        $
                                         ----------------     --------------       ----------------
<S>               <C>                              <C>               <C>                       <C>
                  1997 plan                        90.989            66,518                May 2002
                  1997 plan                        98.747            54,421           November 2002
                  1998 plan                110.90 -111.60           244,754               July 2003
                  1998 plan               114.40 - 115.10           105,263               July 2002
                  2000 plan                         97.39           125,000             August 2005
                                                               -------------
                                                                    595,956
                                                               =============
</TABLE>


         Movement in options during the year was as follows:

<TABLE>
<CAPTION>

                                                         1997 plan         1998 plan         2000 plan             Total
                                                      -------------     -------------     ------------        -----------

<S>                                                       <C>               <C>                                 <C>
         Balance as at beginning of year                  120,939           353,596                 -           474,535
         Exercised                                              -            35,000           125,000           160,000
         Expired                                                -           (38,579)                -           (38,579)
                                                      -------------     -------------     ------------        -----------
          Balance as at end of year                       120,939           350,017           125,000           595,956
                                                      =============     =============     ============        ===========

</TABLE>



Note 21 - Financial Instruments and Linkage Terms of Monetary Balances

         A.       General:

                  The Company and certain subsidiaries have entered into
                  forward transactions and option contracts, in order to
                  hedge assets and liabilities denominated in foreign
                  currency and in order to reduce the overall exposure of
                  commitments for the purchase of raw materials and the
                  sale of goods, in currencies other than the US dollar.
                  Those subsidiaries neither hold nor issue financial
                  instruments for trading purposes.


         B.       Details of the open foreign exchange transactions made to
                  hedge subsidiaries' assets and liabilities in foreign
                  currency as at 31 December, 2000:

<TABLE>
<CAPTION>

                                                           Forward               Call               Put               Swap
                                                       Transaction            options           options       transactions
                                                       -----------         -----------       ----------       ------------
                                                                                                             NIS thousands
                                                       -------------------------------------------------------------------

                  Purchase of U.S. dollars
                   in exchange for:
<S>                                                        <C>                   <C>          <C>                       <C>
                    NIS                                         -             16,164                 -            445,462
                    European currencies                    23,927             92,943           123,978                  -
                    Brazilian Real                        111,128            260,645                 -                  -
                                                       -----------         -----------       ----------       ------------
                                                          135,055            369,752           123,978            445,462
                                                       ===========         ===========       ==========       ============

                  Sale of U.S. dollars in
                   exchange for:
                    NIS                                   266,706                  -           129,716            510,118
                    European currencies                   305,500             23,236            20,205                  -
                                                       -----------         -----------       ----------       ------------
                                                          572,206             23,236           149,921            510,118
                                                       ===========         ===========       ==========       ============
</TABLE>

                  The loss in respect of derivative financial instruments,
                  as included in the consolidated financial statements for
                  the year ended 31 December, 2000 and 1999 amounts to NIS
                  530 thousand and NIS 26,064 thousand, respectively.


         C.       Fair value of financial instruments:

                  Condensed data of monetary assets and liabilities, whose
                  fair value as at 31 December, 2000, based on their market
                  value, is significantly different from those presented in
                  the financial statements, is as follows:

<TABLE>
<CAPTION>
                                                                Carrying               Fair
                                                                  amount              value
                                                              ----------          ----------
                                                                        NIS millions
                                                              ------------------------------

<S>                                                               <C>                <C>
                  Investments in affiliates                       2,898              1,951
                  Debentures and convertible debentures             244                230
</TABLE>


                  The carrying amounts of cash and cash equivalents,
                  short-term investment, trade receivables, other accounts
                  receivable, credits from banks and others, trade payables
                  and other accounts payable and other financial
                  instruments approximate at their fair value.



Note 21 - Financial Instruments and Linkage Terms of Monetary Balances (cont'd)

         D.       Credit risk of trade receivables:
<TABLE>
<CAPTION>
                                                                               NIS millions
                                                                               ------------

         Condensed data of credit risk of trade receivables as at 31
          December, 2000:
<S>                                                                                  <C>
         Receivables insured by credit card companies                                  799
         Receivables insured by foreign trade risk insurance                           226
         Receivables - Government authorities and Bezeq                                101
         Other receivables, including checks and credit
          card companies                                                             1,625
                                                                               ------------
         Total, including non-current receivables                                    2,751
                                                                               ============

</TABLE>

         In Management's estimation, the allowance for doubtful accounts
         adequately covers all anticipated losses in respect of
         concentration of credit risks of trade receivables.

         The exposure to credit risks relating to trade receivables is
         limited, due to the relatively large number of customers.

         E.       Linkage terms of monetary balances:

         (1)      Consolidated

                  - 31 December, 2000
<TABLE>
<CAPTION>

                                                        In foreign           Linked           Unlinked           Total
                                                          currency           to the
                                                         or linked              CPI
                                                           thereto
                                                     -------------        -----------        ----------       -----------
                                                                                   NIS thousands
                                                     --------------------------------------------------------------------
<S>                                                       <C>                <C>               <C>                <C>
         Assets
         Current assets:
         Cash and cash equivalents                        804,247                  -           164,783            969,030
         Short-term deposits and
          investments                                     180,594            266,713           184,721            632,028
         Trade receivables                              2,177,664             17,881           464,750          2,660,295
         Other accounts receivable                        173,408             13,945           116,538            303,891
         Investments and other
          long-term receivables                           426,372            410,291             3,557            840,220
                                                     -------------        -----------        ----------       -----------
                                                        3,762,285            708,830           934,349          5,405,464
                                                     =============        ===========        ==========       ===========
         Liabilities
         Current liabilities:
         Credits from banks and others
          (not including current
          maturities of long-term
          liabilities)                                  1,310,976                  -           530,349          1,841,325
         Trade payables                                 1,043,634                  -           369,981          1,413,615
         Other accounts payable                           374,429             69,929           619,625          1,063,983
         Long-term loans and
          debentures (including current
          maturities)                                   3,299,823            874,882                 -          4,174,705
                                                     -------------        -----------        ----------       -----------
                                                        6,028,862            944,811         1,519,955          8,493,628
                                                     =============        ===========        ==========       ===========
</TABLE>




Note 21 - Financial Instruments and Linkage Terms of Monetary Balances (cont'd)

         F.       Linkage terms of monetary balances (cont'd):

         (1)      Consolidated (cont'd)

         - 31 December, 1999
<TABLE>
<CAPTION>

                                                        In foreign           Linked           Unlinked           Total
                                                          currency           to the
                                                         or linked              CPI
                                                           thereto
                                                     -------------        -----------        ----------       -----------
                                                                                   NIS thousands
                                                     --------------------------------------------------------------------

         Assets
         Current assets:
<S>                                                       <C>                  <C>             <C>              <C>
         Cash and cash equivalents                        932,747              3,591           512,368          1,448,706
         Short-term deposits and
          investments                                     105,354            209,810           157,171            472,335
         Trade receivables                              2,258,183            133,077           821,947          3,213,207
         Other accounts receivable                        133,016             25,126           154,882            313,024
         Investments and other
          long-term receivables                           259,485            448,122            11,066            718,673
                                                     -------------        -----------        ----------       -----------
                                                        3,688,785            819,726         1,657,434          6,165,945
                                                     =============        ===========        ==========       ===========
         Liabilities
         Current liabilities:
         Credits from banks and others
          (not including current
          maturities of long-term
          liabilities)                                  1,737,077             79,019           664,159          2,480,255
         Trade payables                                 1,160,042             37,793           314,202          1,512,037
         Other accounts payable                           312,508             60,583         1,310,871          1,683,962
         Long-term loans and
          debentures (including current
          maturities)                                   3,999,978          1,142,911             6,204          5,149,093
                                                     -------------        -----------        ----------       -----------
                                                        7,209,605          1,320,306         2,295,436         10,825,347
                                                     =============        ===========        ==========       ===========
</TABLE>



Note 21 - Financial Instruments and Linkage Terms of Monetary Balances (cont'd)

         F.       Linkage terms of monetary balances (cont'd):

         (2)      Company

         - 31 December, 2000

<TABLE>
<CAPTION>

                                                        In foreign           Linked           Unlinked           Total
                                                          currency           to the
                                                         or linked              CPI
                                                           thereto
                                                     -------------        -----------        ----------       -----------
                                                                                   NIS thousands
                                                     --------------------------------------------------------------------

         Assets
         Current assets:
<S>                                                         <C>               <C>                <C>                <C>
         Cash and cash equivalents                          1,230                  -            21,496             22,726
         Short-term deposits and
          investments                                     115,727            256,475            94,198            466,400
         Trade receivables                                    115                  -            21,709             21,824
         Short term loans to investees
          companies                                             -             45,800                 -             45,800
         Other investments and
          receivables                                     139,896            377,832                 -            517,728
         Investments and other
          long-term receivables:
         Investees companies (including
          current maturities of loans)                        121            146,971           955,312          1,102,404
                                                     -------------        -----------        ----------       -----------
                                                          257,089            827,078         1,092,715          2,176,882
                                                     =============        ===========        ==========       ============
         Liabilities
         Current liabilities:
         Credits from banks and others
          (not including current
          maturities of long-term
          liabilities)                                    101,606                  -           183,089            284,695
         Trade payables                                        74                  -               215                289
         Other accounts payable                            27,575              4,185            63,001             94,761
         Long-term liabilities (including
          current maturities of loans)                  1,543,719            837,965                 -          2,381,684
                                                     -------------        -----------        ----------       -----------
                                                        1,672,974            842,150           246,305          2,761,429
                                                     =============        ===========        ==========       ============
</TABLE>



Note 21 - Financial Instruments and Linkage Terms of Monetary Balances (cont'd)

         F.       Linkage terms of monetary balances (cont'd):

         (2)      Company (cont'd)

         - 31 December, 1999
<TABLE>
<CAPTION>

                                                        In foreign           Linked           Unlinked           Total
                                                          currency           to the
                                                         or linked              CPI
                                                           thereto
                                                     -------------        -----------        ----------       -----------
                                                                                   NIS thousands
                                                     --------------------------------------------------------------------
         Assets
         Current assets:
<S>                                                       <C>                  <C>                <C>                <C>
         Cash and cash equivalents                        346,114                  -           379,240            725,354
         Short-term deposits and
          investments                                      20,765            192,614            65,718            279,097
         Trade receivables                                      -                  -            25,518             25,518
         Short term loans to investees
          companies                                             -                  -                 -                  -
         Other investments and
          receivables                                      12,738            367,827                 -            380,565
         Investments and other
          long-term receivables:
         Investee companies (including
          current maturities of loans)                        125            254,965           593,814            848,904
                                                     -------------        -----------        ----------       -----------

                                                          379,742            815,406         1,064,290          2,259,438
                                                     =============        ===========        ==========       ============
         Liabilities
         Current liabilities:
         Credits from banks and others
          (not including current
          maturities of long-term
          liabilities)                                    240,961                  -               449            241,410
         Trade payables                                         8                  -             1,649              1,657
         Other accounts payable                            27,261             29,857           243,400            300,518
         Long-term liabilities (including
          current maturities of loans)                  2,352,808            711,516               800          3,065,124
                                                     -------------        -----------        ----------       -----------
                                                        2,621,038            741,373           246,298          3,608,709
                                                     =============        ===========        ==========       ============

</TABLE>



Note 22 - Liens and Guarantees

         A.       In order to secure liabilities, certain subsidiaries have
                  mortgaged their real estate and have placed fixed charges
                  on plant, equipment and bank deposits, as well as
                  floating charges on all of their assets. They also
                  pledged a portion of their shares in investee companies.

                  Regarding the lien in respect to an investment grant -
                  see Note 10A(2).

         B.       The balances of secured liabilities are as follows:

<TABLE>
<CAPTION>

                                                                                         Consolidated
                                                                                          December 31
                                                                             2000                1999
                                                                      -----------       -------------
                                                                                        NIS thousands
                                                                      -------------------------------

<S>                                                                       <C>              <C>
                  Credit from banks                                       739,764          1,083,166
                  Loans from banks and
                   others and debentures (including current
                   maturities), see Note 15, and also C
                   and D below                                          1,087,207            820,226
                                                                      -----------       -------------
                                                                        1,826,971          1,903,392
                                                                      ===========       =============
</TABLE>


         C.       For the purpose of securing debentures convertible into
                  Koor shares, Koor has undertaken not to pledge its assets
                  in future, except in accordance with the terms stipulated
                  by the trust deeds. See also Note 15B.

         D.       Debentures issued by Koor Issuance Ltd. a subsidiary, are
                  secured by a floating charge on all the assets of the
                  above company. Under the terms of the deed of trust, Koor
                  has guaranteed the full repayment of all the amounts of
                  the principal, interest and linkage differences of the
                  debentures. Koor registered a "negative pledge" to secure
                  its guarantee.


Note 22 - Liens and Guarantees (cont'd)

         E.       Guarantees to banks and others for loans and for assuring
                  credit lines and other guarantees in favor of:

<TABLE>
<CAPTION>

                                                                         Consolidated                              Company
                                                                          December 31                          December 31
                                                             2000               1999              2000                1999
                                                        ----------      ------------        -----------      -------------
                                                                        NIS thousands                        NIS thousands
                                                        -----------------------------       ------------------------------

<S>                                                       <C>              <C>                 <C>                 <C>
                  Subsidiaries                                  -                  -           134,186             91,628
                  Affiliates                                6,735             19,652             4,041             19,652
                  Others                                   30,351              9,114            13,532              1,622
                                                        ----------      ------------        -----------      -------------
                                                           37,086             28,766           151,759            112,902
                                                        ==========      ============        ===========      =============
</TABLE>

         1)       In certain cases when advances from customers are
                  received, a subsidiary provides its customers with bank
                  guarantees to secure the advances. Guarantees in excess
                  of the amount of advance payments stated as liabilities
                  in the balance sheet, amounted to NIS 358,489 thousand,
                  adjusted and NIS 307,035 thousand, adjusted as at the
                  years ending 31 December, 2000, 1999, respectively.


         2)       In connection with the Bezeq agreement to transfer
                  ownership of public switching, Bezeq received from Koor a
                  guarantee in the amount of NIS 107 million. See also Note
                  18A5.


         3)       There are also guarantees, in an unlimited amount, to
                  ensure due performance of work and customer agreements,
                  product warranty, advance payments received and
                  guarantees on behalf of liabilities to customs and excise
                  authorities.



Note 23 - Data concerning Items in Statements of Operations

         A.       Revenues from sales and services - net (1) (3) (4):

         1.       Consolidated
<TABLE>
<CAPTION>

                                                                                                    Year ended December 31
                                                                                2000              1999               1998
                                                                        ------------       -----------       -------------
                                                                                                             NIS thousands
                                                                        --------------------------------------------------

                  Local:
<S>                                                                       <C>               <C>                <C>
                  Industrial operations (2)                                1,605,882         3,425,703          4,631,273
                  Trading operations                                         687,350         1,064,315            945,412

                  Abroad:
                  Industrial operations - export and
                   international operations                                5,415,129         5,591,566          6,591,239
                  Trading operations                                         572,881           593,717            624,392
                                                                        ------------       -----------       -------------
                                                                           8,281,242        10,675,301         12,792,316
                                                                        ============       ===========       =============
                  (1) Not including agency sales                             315,739           428,032            367,653
                                                                        ============       ===========       =============
                  (2) Including sales to major customer (a)                        -           271,569            532,037
                                                                        ============       ===========       =============
                      Including sales to major customer (b)                1,175,201           836,221            532,519
                                                                        ============       ===========       =============
                  (3) Including sales under long-term credit
                       arrangements (see also Note 2K)                           251               510             78,004
                                                                        ============       ===========       =============
                  (4) Revenues and expenses relating
                      to work performed under long-term
                      contracts:
                      Revenues                                               844,719           830,637            869,969
                      Costs                                                 (663,860)         (617,547)          (696,080)
                      Decrease (increase) in provision for losses                  -             1,150             12,474
                                                                        ------------       -----------       -------------
                                                                             180,859           214,240            186,363
                                                                        ============       ===========       =============


         2.       Company

         Income from management fees:
         From subsidiaries                                                    39,569            45,589             42,181
         From proportionately consolidated Investees                               -            18,776             20,571
         From affiliated companies                                                 -               756                  -
                                                                       -------------       -----------       -------------
                                                                              39,569            65,121             62,752
                                                                        ============       ===========       =============
</TABLE>



Note 23 - Data to Items in Statements of Operations (cont'd)

         B.       Cost of sales and services - consolidated:

<TABLE>
<CAPTION>

                                                                                                    Year ended December 31
                                                                                2000              1999               1998
                                                                        ------------       -----------       -------------
                                                                                                             NIS thousands
                                                                        --------------------------------------------------
         Industrial operations:

<S>                                                                        <C>               <C>                <C>
         Materials                                                         3,057,636         3,522,270          4,660,519
         Labor                                                             1,000,546         1,542,802          2,293,136
         Subcontracted work                                                   74,065           127,930            177,767
         Depreciation and amortization                                       198,419           397,591            511,250
         Research and development expenses, net (*)                          359,808           427,722            527,928
         Other manufacturing expenses                                        547,708           609,489            762,012
                                                                        ------------       -----------       -------------
                                                                           5,238,182         6,627,804          8,932,612

         Less - expenses charged to cost of fixed assets                      10,718            12,659             33,600
                                                                        ------------       -----------       -------------
                                                                           5,227,464         6,615,145          8,899,012

         Decrease (increase) in inventory of goods and
          work in process                                                     54,050           214,223            (17,223)
                                                                        ------------       -----------       -------------
                                                                           5,281,514         6,829,368          8,881,789

         Decrease (increase) in inventory of finished goods                   18,091           137,487           (162,766)
                                                                        ------------       -----------       -------------
                                                                           5,299,605         6,966,855          8,719,023
                                                                        ------------       -----------       -------------
         Trading operations:
         Merchandise                                                         481,966           839,499            923,767
         Labor                                                               117,468           145,194            101,209
         Depreciation                                                         47,761            43,680             33,022
         Others                                                              354,612           134,638             90,003
                                                                        ------------       -----------       -------------
                                                                           1,001,807         1,163,011          1,148,001
                                                                        ------------       -----------       -------------
                                                                           6,301,412         8,129,866          9,867,024
                                                                        ============       ===========       =============
         (*)      Net of grants and participations, net                        6,872            15,645             56,180
                                                                        ============       ===========       =============

         C.       Selling and marketing expenses - consolidated:

                                                                                                    Year ended December 31
                                                                                2000              1999               1998
                                                                        ------------       -----------       -------------
                                                                                                             NIS thousands
                                                                        --------------------------------------------------

         Salaries                                                            256,128           337,646            422,873
         Commissions                                                         103,102           139,712            168,418
         Advertising expenses                                                 44,416            62,280             81,919
         Depreciation and amortization                                        50,746            44,350             47,001
         Other                                                               328,009           394,068            482,246
                                                                        ------------       -----------       -------------
                                                                             782,401           978,056          1,202,457
                                                                        ============       ===========       =============

</TABLE>

Note 23 - Data to Items in Statements of Operations (cont'd)


         D.       General and administrative expenses:
<TABLE>
<CAPTION>

                                                                 Consolidated                                      Company
                                                       Year ended December 31                       Year ended December 31
                                         2000           1999            1998           2000           1999            1998
                                   ----------     ----------    -------------    ----------     ----------   -------------
                                                                NIS thousands                                NIS thousands
                                   ------------------------------------------    -----------------------------------------

<S>                              <C>            <C>             <C>             <C>            <C>            <C>
         Salaries                     278,933        384,613         557,363         32,899         26,402         81,316
         Bad and doubtful
         debts                         27,892         27,463          58,783              -              -              -
         Depreciation and
          amortization                 24,872         32,190          35,976          1,650          1,237          1,240
         Other                        220,596        285,243         358,763         27,051         38,531         34,087
                                   ----------     ----------    -------------    ----------     ----------   -------------
                                      552,293        729,509       1,010,885         61,600         66,170        116,643
                                   ==========     ==========    =============    ==========     ==========   =============
</TABLE>


         E.       Financing expenses (income), net:
<TABLE>
<CAPTION>

                                                                 Consolidated                                      Company
                                                       Year ended December 31                       Year ended December 31
                                         2000           1999            1998           2000           1999            1998
                                   ----------     ----------    -------------    ----------     ----------   -------------
                                                                NIS thousands                                NIS thousands
                                   ------------------------------------------    -----------------------------------------

         In respect of
          convertible
<S>                                <C>             <C>            <C>            <C>            <C>            <C>
          debentures                   4,303           7,598          9,876          3,403          6,079          7,653
         In respect of
          debentures                   4,794           5,102          6,458              -              -              -
         In respect of
          long-term loans            184,885         218,430        257,017         87,450        126,188        107,010
         In respect of short-
          term loans and
          credit                     127,028         181,136        159,896          9,268         26,687              -
         Amortization of
          capital raising
          expenses                     1,632           2,546          5,663          1,023          1,196          1,902
         Losses (gains)
          from marketable
          securities, net             35,798         (67,707)       (59,804)        50,926        (27,229)        11,757
         Interest capitalized
          to fixed assets
          and work in
          process *                   (3,350)        *32,829       *(48,892)             -         28,257        (36,981)
         Revenue
          (expenses) from
          investees, net                   -               -              -           (592)        (3,397)         1,694
         Revenue from
          deposits and
          others, net                (24,409)        (21,645)       (79,199)        (9,580)         2,694         (8,467)
                                   ----------     ----------    -------------    ----------     ----------   -------------
                                     330,681         358,289        251,015        141,898        160,475         84,568
                                   ==========     ==========    =============    ==========     ==========   =============
</TABLE>

*        Including amounts recorded directly to shareholders' equity as
         "cumulative foreign currency adjustments."



Note 23 - Data to Items in Statements of Operations (cont'd)

         F.       Other income (expenses), net

         1.       Consolidated
<TABLE>
<CAPTION>

                                                                                                    Year ended December 31
                                                                                2000              1999               1998
                                                                         -----------       -----------       -------------
                                                                                                             NIS thousands
                                                                         -------------------------------------------------

<S>                                                                        <C>                  <C>             <C>
         Sale of investments and activities in investees
          (including changes in rates of holding)                            915,857           641,974            433,582
         Expenses relating to the termination
          and/or sale of activities and
           sale and write down of assets, net                                (59,418)         (319,312)          (231,974)
         Supplemental severance pay and pensions                            (294,131)         (205,599)          (269,061)
         Management services and participation in
          selling general and administrative expenses:
            Proportionately consolidated companies                               857             9,567              9,812
            Affiliates                                                         1,958             2,765              3,413
         Rent from buildings and equipment
          (net of related depreciation) (1)                                      243             4,231              2,739
         Joint ventures, net                                                    (534)              415              1,181
         Compensation for damages                                              3,120               560                368
         Sale of know-how                                                          -                 -             12,203
         Amortization of goodwill                                            (50,224)          (48,838)           (27,170)
         Miscellaneous, net                                                    3,235            21,465             (6,363)
                                                                         -----------       -----------       -------------
                                                                             520,963           107,228            (71,270)
                                                                         ===========       ===========       =============
         (1)      Including depreciation                                           -               745              1,427
                                                                         ===========       ===========       =============
</TABLE>


         2.       Company
<TABLE>
<CAPTION>

                                                                                                    Year ended December 31
                                                                                2000              1999               1998
                                                                         -----------       -----------       -------------
                                                                                                             NIS thousands
                                                                         -------------------------------------------------

<S>                                                                        <C>                 <C>             <C>
         Capital gain on sale of investments in investee
          companies                                                          390,685            44,699            113,159
         Joint venture                                                             -               610              1,231
         Changes in value of long-term assets                                 57,095          (157,099)          (131,091)
         Capital gain (loss) from sale of fixed assets                             9            (1,661)            (1,122)
         Sale of know-how                                                          -                 -             12,203
         Miscellaneous, net                                                    2,070             5,946             (1,109)
                                                                         -----------       -----------       -------------
                                                                             449,859          (107,505)            (6,729)
                                                                         ===========       ===========       =============
</TABLE>



Note 23 - Data to Items in Statements of Operations (cont'd)

         G.       Equity of the Koor Group in the operating results of
affiliates, net

         1.       Consolidated
<TABLE>
<CAPTION>

                                                                                                    Year ended December 31
                                                                                2000              1999               1998
                                                                         -----------       -----------       -------------
                                                                                                             NIS thousands
                                                                         -------------------------------------------------

<S>                                                                   <C>                <C>                <C>
         Affiliates companies, net (1)                                      (107,485)          284,197            105,713
         Amortization of goodwill                                           (162,521)         (162,472)           (43,728)
                                                                         -----------       -----------       -------------
                                                                            (270,006)          121,725             61,985
                                                                         ===========       ===========       =============
         Dividend received                                                    25,235            49,742             29,315
                                                                         ===========       ===========       =============
         (1) Including discontinued operations in an affiliate                     -           (86,773)                 -
                                                                         ===========       ===========       =============
</TABLE>

         2.       Company
<TABLE>
<CAPTION>

                                                                                                    Year ended December 31
                                                                                2000              1999               1998
                                                                         -----------       -----------       -------------
                                                                                                             NIS thousands
                                                                         -------------------------------------------------

<S>                                                                       <C>               <C>                <C>
         Equity of Koor in operating results for the year (1)                254,729           836,845            160,396
         Amortization of goodwill (2)                                       (143,972)         (120,197)           (37,507)
                                                                         -----------       -----------       -------------
                                                                             110,757           716,648            122,889
                                                                         ===========       ===========       =============
         Dividend received                                                   351,853         1,539,910          1,297,923
                                                                         ===========       ===========       =============
         (1) Including discontinued operations in an affiliate                     -           (86,773)                 -
                                                                         ===========       ===========       =============
         (2) Including write-off of goodwill in investee
             companies                                                        25,875            (1,849)                 -
                                                                         ===========       ===========       =============
</TABLE>



                                Koor Industries Ltd. (An Israeli Corporation)

Notes to the Financial Statements
-----------------------------------------------------------------------------

Note 23 - Supplementary Data to Items in Statements of Operations (cont'd)

         H.       Income (expenses) from investee companies and their
                  participation in expenses

<TABLE>
<CAPTION>
                                                                                                 Year ended December 31
                                         -----------------------------------------------------------------------------------------
                                                                               2000                                          1999
                                         ------------------------------------------   -------------------------------------------
                                                        Consolidated                                  Consolidated
                                                        companies by                                  companies by
                                         Consolidated   proportional    Affiliated    Consolidated    proportional    Affiliated
                                           companies    consolidation    companies      companies    consolidation     companies
                                         ------------   -------------   ----------    ------------   -------------    ----------
                                                                       NIS thousands                                 NIS thousands
                                         -------------------------------------------  --------------------------------------------

         Income:

<S>                                      <C>           <C>           <C>            <C>             <C>               <C>
         Management services                   39,569              -              -         45,589          18,776            756
                                         ============   =============   ===========   ============   =============    ===========

         Administrative expenses
         Salary and other
          Administrative expenses               4,469              -              -              -               -              -
                                         ============   =============   ===========   ============   =============    ===========
         Financing income
          (expenses),net                          786           (197)             3          4,443             (14)        (1,032)
                                         ============   =============   ===========   ============   =============    ===========

</TABLE>
H.     Income (expenses) from investee companies and their participation
       in expenses (cont'd)

<TABLE>
<CAPTION>

                                                       Year ended December 31
                                           ------------------------------------------
                                                                                 1998
                                           -------------------------------------------
                                                          Consolidated
                                                          companies by
                                           Consolidated   proportional    Affiliated
                                             companies    consolidation    companies
                                           ------------   -------------   ----------
                                                                         NIS thousands
                                           -------------------------------------------

         Income:

<S>                                        <C>           <C>            <C>
         Management services                          -         42,181         20,571
                                           ============   ============    ============

         Administrative expenses
         Salary and other
          Administrative expenses                     -         26,949              -
                                           ============   ============    ============
         Financing income
          (expenses),net                              -         (2,324)           705
                                           ============   ============    ============

</TABLE>





                             Koor Industries Ltd. (An Israeli Corporation)

Notes to the Financial Statements
------------------------------------------------------------------------------

Note 24 - Business Segments

         A.       The Koor Group operates in the following segments:

                  Telecommunications
                  Defence electronics
                  Agro-chemicals and other chemicals
                  Venture capital investments
                  The "others" segment includes mainly tourism, building,
                  and trade.

                  In 2000, the activity in the construction segment was
                  transferred to the "others" segment following the
                  exercise of most of the companies active in the sector.
                  Moreover, in 2000, Koor established a new activity
                  segment in the area of venture capital investments, by
                  means of a partnership with Koor Corporate Venture
                  Capital (see Note 3J).

         B.       Segment sales include products sold and services rendered
                  to unrelated customers. Inter-industry segment sales are
                  immaterial and are based primarily on prices determined
                  in the ordinary course of business. Accordingly, these
                  sales are not presented separately.

                  Segment operating earnings include all costs and expenses
                  directly related to the relevant segment and an
                  allocation of expenses from which more than one segment
                  may benefit. Expenses and revenue presented in the
                  statements of operations after operating earnings are not
                  taken in account in the determination of operating
                  earnings or loss. Identifiable assets by industry
                  segments are those assets that are used by Koor in its
                  activities in each segment.

         C.       See Note 24H for details of the discontinuation of the
                  activities of the energy segment.

         D.       Data regarding business segments of the Koor Group:*

<TABLE>
<CAPTION>

                                                                   Year ended December 31
                                                           2000                         1999                         1998
                                   ---------------------------- ---------------------------- ----------------------------
                                   NIS thousands              % NIS thousands              % NIS thousands              %
                                   -------------   ------------ -------------   ------------ -------------   ------------

         Revenues from
          sales and services:

         Segments:

<S>                                 <C>                <C>       <C>                <C>       <C>                <C>
         Telecommunication            2,201,159          26.58     2,199,702          20.61     3,419,501          26.73
         Defence electronics          1,146,767          13.85     1,333,690          12.49     1,572,584          12.29
         Agro-chemicals
         and other chemicals          3,460,288          41.78     3,540,922          33.17     3,376,893          26.40
         Venture capital
          investment                      80,117          0.97             -              -             -              -
         Others *                     1,392,911          16.82     3,600,987          33.73     4,423,338          34.58
                                   -------------   ------------ -------------   ------------ -------------   ------------
         Total segments               8,281,242          100.0    10,675,301         100.00    12,792,316         100.00
                                   =============   ============ =============   ============ =============   ============
         *        Reclassified
</TABLE>



Note 24 - Business Segments (cont'd)

D.       Data regarding business segments of the Koor Group (cont'd)*:
<TABLE>
<CAPTION>

                                                                   Year ended December 31
                                                           2000                         1999                         1998
                                   ---------------------------- ---------------------------- ----------------------------
                                   NIS thousands              % NIS thousands              % NIS thousands              %
                                   -------------   ------------ -------------   ------------ -------------   ------------

         Pre-tax earnings
         Operating earnings according to segments:

<S>                                   <C>             <C>          <C>             <C>           <C>             <C>
         Telecommunication              249,603         33.90        260,662         27.67         46,406          5.28
         Defence electronics             53,475          7.26         69,060          7.33        167,684         19.07
         Agro-chemicals and
          other chemicals               441,351         59.93        390,503         41.45        428,441         48.74
         Venture capital
          investments                    (5,907)        (0.80)             -             -              -              -
         Others*                        ( 2,122)        (0.29)       221,895         23.55        236,544         26.91
                                   -------------   ------------ -------------   ------------ -------------   ------------
         Total segments                 736,400         100.0        942,120        100.00        879,075        100.00
                                                   ============                 ============                 ============

         Joint general
          expenses                      (91,264)                    (104,250)                    (167,125)
                                   -------------   ------------ -------------   ------------ -------------
         Total operating
          earnings                      645,136                      837,870                      711,950
         Financing expenses,
          Net                          (330,681)                    (358,289)                    (251,015)
         Other income
          (expenses), net               520,963                      107,228                      (71,270)
                                   -------------   ------------ -------------   ------------ -------------
         Pre-tax earnings               835,418                      586,809                      389,665
                                   =============               =============                 =============
</TABLE>

         The Koor Group's equity in the excess of earnings over losses (the
         excess of losses over earnings) of affiliates, net, is as follows:
<TABLE>
<CAPTION>

                                                                   Year ended December 31
                                                           2000                         1999                         1998
                                   ---------------------------- ---------------------------- ----------------------------
                                   NIS thousands              % NIS thousands              % NIS thousands              %
                                   -------------   ------------ -------------   ------------ -------------   ------------

<S>                                  <C>               <C>         <C>             <C>           <C>             <C>
         Telecommunications            (239,477)         88.69       137,018         112.56        37,504          60.51
         Defence electronics            (20,669)          7.66        (8,018)         (6.58)            -              -
         Agro-chemicals and
          other chemicals                     -              -             -              -             -              -
         Venture capital
         Investments                          -              -             -              -             -              -
         Others*                         (9,860)          3.65        (7,275)         (5.98)       24,481          39.49
                                   -------------   ------------ -------------   ------------ -------------   ------------
                                       (270,006)        100.00       121,725         100.00        61,985         100.00
                                   =============   ============ =============   ============ =============   ============

         *        Reclassified
</TABLE>




Note 24 - Business Segments (cont'd)

         D.      Data regarding business segments of the Koor Group (cont'd)*:
<TABLE>
<CAPTION>

                                                                                December 31
                                                                                 2000                                 1999
                                                     --------------------------------     --------------------------------
                                                     NIS thousands                  %     NIS thousands                  %
                                                     -------------     --------------     -------------        ------------
         Identifiable assets:

         Segments:

<S>                                                  <C>                    <C>           <C>                    <C>
         Telecommunication                              1,782,688              16.69         1,843,738              15.49
         Defence electronics                            1,148,217              10.75           681,360               5.73
         Agro-chemicals and other
          chemicals                                     5,510,189              51.58         5,277,603              44.35
         Venture capital investments                      393,646               3.68                 -                  -
         Others *                                       1,847,519              17.30         4,097,888              34.43
                                                     -------------     --------------     -------------        ------------
         Total segments                                10,682,259             100.00        11,900,589             100.00
                                                                       ==============                          ============
         Corporate assets                               1,085,269                            1,974,239
         Affiliates**                                   3,000,889                            3,495,772
                                                     -------------     --------------     -------------        ------------
                                                       14,768,417                           17,370,600
                                                     =============                        =============
</TABLE>



         Identifiable liabilities

<TABLE>
<CAPTION>

                                                                                December 31
                                                                                 2000                                 1999
                                                     --------------------------------     --------------------------------
                                                     NIS thousands                  %     NIS thousands                  %
                                                     -------------     --------------     -------------        ------------

<S>                                                     <C>                  <C>             <C>                  <C>
         Telecommunications                                  608,892              22.01           648,111              20.30
         Defense electronics                                 655,888              23.71           384,322              12.04
         Agro-chemicals and other chemicals                1,142,329              41.30         1,106,503              34.66
         Venture capital investments                          33,726               1.22                 -                  -
         Others                                              325,126              11.76         1,053,217              33.00
                                                     ---------------   ----------------   ---------------      -------------
         Total segments                                    2,765,961             100.00         3,192,153             100.00
         Corporate liabilities                               127,731                              302,831
                                                     ---------------   ----------------   ---------------      -------------
                                                           2,893,692                            3,494,984
                                                     ===============                      ===============
</TABLE>

         *        Reclassified
         **       Including an investment as at December 31, 2000, and 1999
                  of NIS 2,758 million and NIS 3,067 million respectively,
                  in ECI which operates in the telecommunication segment.




Note 24 - Business Segments (cont'd)

         D.       Data regarding business segments of the Koor Group (cont'd)*:
<TABLE>
<CAPTION>

                                                                   Year ended December 31
                                                           2000                         1999                         1998
                                   ---------------------------- ---------------------------- ----------------------------
                                   NIS thousands              % NIS thousands              % NIS thousands              %
                                   -------------   ------------ -------------   ------------ -------------   ------------

         Capital investments:
         Segments:
<S>                                   <C>              <C>          <C>              <C>        <C>              <C>
         Telecommunication              100,017          16.68        67,051           9.50       208,106          19.09
         Defence electronics             30,954           5.16        42,888           6.07        67,772           6.22
         Agro-chemicals and
          other chemicals               318,459          53.12       277,545          39.31       340,780          31.25
         Venture capital
          Investments                     1,690           0.28             -              -             -              -
         Others *                       148,446          24.76       318,533          45.12       473,683          43.44
                                   -------------   ------------ -------------   ------------ -------------   ------------
         Total segments                 599,566         100.00       706,017         100.00     1,090,341         100.00
                                                   ============                 ============                 =============
         Discontinued activity                -                            -                       31,873

         Corporate assets                   761                       14,052                       27,112
                                   -------------                -------------                -------------
                                        600,327                      720,069                    1,149,326
                                   =============                =============                =============
</TABLE>

<TABLE>
<CAPTION>

                                                                   Year ended December 31
                                                           2000                         1999                         1998
                                   ---------------------------- ---------------------------- ----------------------------
                                   NIS thousands              % NIS thousands              % NIS thousands              %
                                   -------------   ------------ -------------   ------------ -------------   ------------

         Depreciation and
          amortization:
<S>                                    <C>             <C>         <C>            <C>          <C>        <C>
         Segments:
         Telecommunication               68,542          18.50        85,090          14.99       152,891          23.31
         Defence electronics             34,524           9.31        55,879           7.45        51,407           7.85
         Agro-chemicals and
          other chemicals               174,787          47.16       187,698          33.08       170,075          25.93
         Venture capital
          Investments                     1,957           0.53             -              -             -              -
         Others *                        90,787          24.50       238,670          44.48       281,391          42.91
                                   -------------   ------------ -------------   ------------ -------------   ------------
         Total segments                 370,597         100.00       567,337         100.00       655,764         100.00
                                                   ============                 ============                 ============
         Discontinued activity                -                            -                       21,967
         Corporate assets                 3,072                        2,733                        5,364
                                   -------------                -------------                -------------
                                        373,669                      570,070                      683,095
                                   =============                =============                =============  ==============
</TABLE>


E.       Industrial operations - export sales and foreign industrial
         operations by geographical destination:
<TABLE>
<CAPTION>

                                                      Year ended December 31
                                                   2000              1999               1998
                                           -------------    -------------    ---------------
                                                                               NIS thousands
                                           -------------------------------------------------

<S>                                         <C>               <C>                <C>
         North America                       1,675,227         1,608,174          1,907,365
         Europe                              1,608,069         1,710,133          2,032,650
         South America                       1,343,912         1,433,075          1,563,876
         Asia and Australia                    658,267           711,052            910,925
         Africa                                129,654           129,132            129,132
                                           -------------    -------------    ---------------
                                             5,415,129         5,591,566          6,591,239
                                           =============    =============    ===============
*        Reclassified
</TABLE>



Note 24 - Business Segments (cont'd)

         F.       Assets by geographic location of manufacturing operation

                                                   Year ended December 31
                                                  2000               1999
                                         -------------      -------------
                                         NIS thousands      NIS thousands
                                         -------------      -------------

         Israel                            12,941,517         15,724,883
         Brazil                             1,659,364          1,452,906
         United States                        167,536            192,811
                                          -----------        -----------
                                           14,768,417         17,370,600
                                          ===========        ===========

         G.       Capital investments in assets by geographic location

                                                   Year ended December 31
                                                  2000               1999
                                         -------------     --------------
                                         NIS thousands      NIS thousands
                                         -------------     --------------

         Israel                               559,250            688,678
         United States                          5,104              5,972
         Brazil                                35,973             25,419
                                         -------------     --------------
                                              600,327            720,069
                                         =============     ==============


         H.       Discontinued activity

         1.       In Koor's financial statements the companies Phoenicia
                  and Yonah constituted part of the food segment included
                  in the financial statements as at 31 December, 1998, in
                  the "Others" framework in the Note relating to segments.
                  After conclusion of the sale of the companies, operations
                  in Koor's food segment were terminated.

<TABLE>
<CAPTION>

                                                                               1999               1998
                                                                      -------------      --------------
                                                                      NIS thousands      NIS thousands
                                                                      -------------      --------------

<S>                                                                   <C>              <C>
                  Revenues from sales and implementation of
                   works                                                96,009            376,701
                                                                      =============      ==============
                  Profit (loss) from operating earnings                 (429)             18,939
                                                                      =============      ==============
                  Loss - Koor's share                                   4,078              1,439
                                                                      =============      ==============
                  Total assets                                                            109,412
                                                                                         ==============
</TABLE>

         2.       In the 1997 financial statements Granite Hacarmel
                  Investments Ltd. constituted all the operations in the
                  energy segment. As from the 1998 financial statements the
                  operation was retroactively represented in the energy
                  segment of the statement of operations as a sector in
                  which operations had been terminated.



Note 24 - Business Segments (cont'd)

         I.       Additional information on business segments of the Company:

         The Company operates through subsidiaries, proportionately
         consolidated companies and affiliates in various sectors of the
         economy.

         Data according to business segments is as follows:

         Equity of the Company in earnings (losses), net, of investees:

<TABLE>
<CAPTION>

                                                      Year ended December 31
                                                   2000              1999               1998
                                           -------------    -------------    ---------------
                                                                               NIS thousands
                                           -------------------------------------------------

<S>                                         <C>              <C>               <C>
         Telecommunications                      70,605           259,451           (162,928)
         Defence Electronics                    (42,212)           23,638             83,452
         Agro-chemicals and other chemicals      98,034            (1,281)           102,927
         Venture capital investments            (20,604)                -                  -
         Others *                                 4,934           400,258             89,040
                                           -------------    -------------    ---------------
                                                110,757           682,066            112,491
         Provision for severance benefits             -                 -             10,398
         Provision for taxes                          -            34,582                  -
         Discontinued activities                      -                 -             69,420
                                           -------------    -------------    ---------------
                                                110,757           716,648            192,309
                                           =============    =============    ===============
</TABLE>


         Investment of the Company in shares, loans and capital notes net,
of investees:

                                                                 December 31
                                                     2000               1999
                                              -----------      -------------
                                                               NIS thousands
                                              ------------------------------

         Telecommunications                    3,670,568          3,743,766
         Defence Electronics                     326,978            442,804
         Agro-chemicals and other chemicals    1,337,098          1,259,651
         Venture capital investments             353,928                  -
         Others *                                320,847            956,346
                                              -----------       -----------
                                               6,009,419          6,402,567
                                              ===========       ============
         *        Reclassified



Note 25 - Transactions and Balances with Interested Parties

         A.       The following are details of interested parties in Koor
                  resulting from their holdings of Koor's ordinary shares:

         1.       Claridge Group (Claridge).

         2.       Bank Hapoalim B.M. group (Bank Hapoalim B.M.)

         3.       In January 2000, an agreement which was signed on
                  September 8, 1999 between the Claridge Group, Anfield
                  Ltd. (a company owned by the CEO of Koor) and Bank Leumi
                  B.M., a shareholder of Koor until then, was consummated.
                  In accordance with the agreement Bank Leumi B.M. sold its
                  entire holding in Koor to Claridge, Anfield Ltd. and Bank
                  Hapoalim B.M. As at balance sheet date Anfield Ltd. is an
                  interested party of Koor.


         B.       Koor and its subsidiaries undertake transactions with
                  interested parties as detailed below. These transactions,
                  which consist principally of the receipt of banking
                  services, are carried out in the normal course of
                  business and thus no separate records are kept of the
                  handling and recording of such transactions.

                  Consequently, and given the large number of the above
                  mentioned entities, it is not possible to accurately
                  determine the scope and scale of these transactions.

                  The Securities Authority, in a meeting on 21 February,
                  2001, decided to exempt the Company from disclosure of
                  transactions with Bank Hapoalim B.M., Claridge and their
                  investee companies, for purposes of the financial
                  statements as at 31 December, 2000, other than for
                  exceptional transactions.


         C.       The balance of liabilities owed to Bank Hapoalim B.M. as
                  at 31 December, 2000 and 1999 is NIS 2,086 million,
                  adjusted, and NIS 2,396 million, adjusted, respectively.


         D.       The balance of liabilities owed to Bank Leumi B.M. as at
                  31 December, 1999 is NIS 1,849 million, adjusted.

         E.       See Note 20C(2) regarding the granting of put options to
                  senior employees of the Koor Group by the Claridge Group
                  for the purchase of shares in Koor.



Note 25 - Transactions and Balances with Interested Parties (cont'd)

         F.       Benefits to interested parties

         1.       Directors*
<TABLE>
<CAPTION>

                                                                                 Year ended December 31
                                                              2000              1999               1998
                                                      -------------    -------------    ---------------
                                                                                          NIS thousands
                                                      -------------------------------------------------


         Directors employed by the Company:
<S>                                                 <C>               <C>               <C>
         Salary and related costs (a) (b) )(c)              3,368             8,376             11,497
                                                      =============    =============    ===============
         Number of directors                                    2                 2                  3
                                                      =============    =============    ===============
         Directors not employed by the Company:
         Annual compensation and participation
          in meetings:

         Claridge Group                                       335               271                282
                                                      =============    =============    ===============
         Number of directors                                    5                 6                  7
                                                      =============    =============    ===============

         Poalim Assets (Shares ) Ltd.                         158               173                206
                                                      =============    =============    ===============
         Number of directors                                    3                 3                  3
                                                      =============    =============    ===============
         Other directors                                      293               235                280
                                                      =============    =============    ===============
         Number of directors                                    6                 3                  3
                                                      =============    =============    ===============
         Consulting fee                                         -             1,101                555
                                                      =============    =============    ===============
         Number of directors                                    -                 1                  1
                                                      =============    =============    ===============
</TABLE>


         * Including directors who resigned or were appointed during the year.

         (a)      On July 1, 1998 Mr. B. Gaon resigned from his position as
                  General Manager of the Company. At the request of the
                  Board of Directors Mr. Gaon remained with the Company
                  until 31 December, 1998 and he undertook to continue to
                  render it services as a consultant in 2000 and 1999 for
                  an annual consulting fee of $125,000.

                  The 1998 figures include the cost of the retirement
                  arrangement with the outgoing General Manager.

                  In 1998, 137,274 options were exercised by Mr. Gaon,
                  under the 1995 incentive plan. The value of the benefit
                  included in the exercise was NIS 23,334 thousand based on
                  the market price at exercise date. In respect of options
                  granted by shareholders see also Note 20C(2).

         (b)      See Note 20C(3) in respect of the issue of options to the
                  General Manager and the Company's President under the
                  1998 Incentive Plan.

         (c)      In 2000, including the salary of only one month which was
                  paid to an officer who stopped serving as a director on
                  February 6, 2000.


Note 25 - Transactions and Balances with Interested Parties (cont'd)

         F.       Benefits to interested parties (cont'd)

         2.       Consultancy services

<TABLE>
<CAPTION>

                                                                                 Year ended December 31
                                                              2000              1999               1998
                                                      -------------    -------------    ---------------
                                                                                          NIS thousands
                                                      -------------------------------------------------

<S>                                                  <C>              <C>               <C>
         Claridge                                             1,611            1,683             1,734
                                                      =============    =============    ===============
         Poalim Capital Markets and
          Investment Ltd.                                     1,611            1,683             1,734
                                                      =============    =============    ===============
</TABLE>


         The Company has agreements with interested parties - Claridge and
         Poalim Capital Markets and Investments Ltd. (Poalim) - for the
         receipt of consultancy services. These services include, inter
         alia, advice in respect of investment strategies, monetary
         policies, international activities, strategic partnerships and
         company structuring. The agreements include instructions regarding
         the indemnification of the consultants (Claridge/Poalim) in
         respect of claims connected to the consultancy, except for cases
         of gross negligence and/or intentional damage.

         In consideration for the consultancy the Company has agreed to pay
         an annual sum which will not exceed $400,000 to each of the
         consultants. The agreements are for the period of one year and are
         automatically renewable each year, unless one of the parties gives
         60 days' prior notice of the termination of the agreement.


Note 26 - Earnings Per Share

         A.       Adjusted net earnings used in the computation of earnings
                  per NIS 1 par value of the share capital:

<TABLE>
<CAPTION>

                                                                                 Year ended December 31
                                                              2000              1999               1998
                                                      -------------    -------------    ---------------
                                                                                          NIS thousands
                                                      -------------------------------------------------

<S>                                                       <C>             <C>           <C>
         Earnings used in the computation of basic
          earnings per NIS 1 par value of shares             267,687        549,119             48,240

         Add - theoretical earnings resulting from:

           Conversion of convertible debentures:
           Series E                                                -            490                  -
           Series F                                            2,443          5,485                  -
                                                       -------------    -------------    ---------------
         Net earnings used in the computation of
         fully diluted earnings per NIS 1 par
         value of shares                                     270,130        555,094             48,240
                                                       =============    ============     ===============
</TABLE>


         B.       Weighted number of ordinary shares of NIS 0.001 used in
                  the computation of net earnings per NIS 1 par value of
                  the share capital:
<TABLE>
<CAPTION>

                                                                              Number of Ordinary Shares
                                                              2000              1999               1998
                                                      -------------    -------------    ---------------

                                                      -------------------------------------------------


<S>                                                     <C>            <C>                <C>
         In the computation of basic earnings per
         share                                            15,384,206     15,737,564         15,723,996

         Add - theoretical share capital resulting
         from:

         Conversion of convertible debentures:
         Series E                                                  -         40,500                  -
         Series F                                            213,047        284,062                  -
                                                        -------------    -----------      -------------
         Total share capital used in the computation
          of fully diluted earnings per share             15,597,253     16,062,126         15,723,996
                                                        =============    ===========      =============
</TABLE>

         C.       To examine that the conversion or exercise of convertible
                  securities is reasonable, the present value of these
                  securities was computed according to a discount rate of
                  7% (31 December, 1999 - 6%, 31 December, 1998 - 6%) for
                  securities linked to the CPI.


Note 27 - Events Subsequent to the Balance Sheet Date

         1.       On March 4, 2001, Koor and Tadiran Ltd. assigned an
                  agreement according to which Tadiran sold to Koor all the
                  shares of ECI held by it, at the market price prevailing
                  on the date of sale.

         2.       In January 2001, a subsidiary of M-A Industries Ltd.
                  controlled by the Company, signed two agreements with
                  Avnatis for acquisition of its worldwide business with
                  respect to two products in the field of its activity. The
                  products are intended mainly for the Western European
                  market, the U.S. and Japan.

                  The consideration to be paid in respect of the two
                  products will be approximately Euro 20 million.


Note 28 - Material Differences Between Israeli and U.S. GAAP and their Effect
          on the Financial Statements

         A.       The consolidated financial statements of Koor conform
                  with accounting principles generally accepted in Israel
                  ("Israeli GAAP"), which differ in certain respects from
                  those generally accepted in the United States ("U.S.
                  GAAP") as described below:

         1.       Effect of inflation

         In accordance with Israeli GAAP:
         The consolidated financial statements of Koor are expressed in
         terms of a uniform monetary unit - the inflation adjusted Israeli
         shekel - which is after adjustment respect of the changes in the
         Consumer Price Index. (See Note 2B for principles of the
         adjustment)

         In accordance with US GAAP:
         The financial statements are expressed in current nominal
         historical monetary terms.

         Measuring on the basis of the change in the CPI, which reflects
         the effect of changes in the general price level in the Israeli
         economy, provides a very valid picture of the financial position,
         results of operations and the cash flows of the Koor Group for
         both Israeli and US accounting purposes.

         In view of the above, no data on the effect of the differences
         between measurements on the basis of cost adjusted to the CPI or
         on the basis of historical cost, were included.

         2.       ECI and Tadiran Telecommunication - merger

         In accordance with Israeli GAAP:
         The merger described as aforesaid in Note 3A was recorded in
         Koor's financial statement at book values in accordance with the
         accepted rules governing similar asset exchange transactions.
         Pursuant to the merger agreement, shares of Tadiran
         Telecommunications held by Tadiran were exchanged for ECI shares
         at an exchange rate determined in the merger agreement.

         In accordance with U.S. GAAP:
         According to EITF 98-3 and EITF/D-81 the merger of ECI and TTL is
         not considered as an exchange of similar assets in respect of Koor
         and Tadiran and therefore a capital gain from the realization of
         TTL is recorded and an original differentials is recorded on
         behalf of ECI and allocated to goodwill.
         In 1999, the capital gain from this sale (after tax) amounted to
         NIS 64,473 thousand and an increase in original differentials
         allocated to goodwill of NIS 190,954 thousand, amortized at equal
         annual rates over 10 years.


Note 28 - Material Differences Between Israeli and U.S. GAAP and their
                Effect on the Financial Statements (cont'd)

         A.       Differences between Israel GAAP and U.S. GAAP (cont'd)

         3.       Debt arrangement within the framework of an overall
                  financial arrangement

         In accordance with Israeli GAAP:
         Koor reported an extraordinary gain in 1991 as a result of the
         restructuring of part of its debts.

         In accordance with US GAAP:
         In accordance with FAS No. 15 - "Accounting by Debtors and
         Creditors for Troubled Debt Restructuring" future interest
         payments must be deducted from the restructuring of an old debt.
         The recognition of non-realized earnings (which represents
         deferred interest) is affected by payments of interest over the
         period from the date of the restructuring of the debt up to its
         repayment date. The balance of deferred interest, net of the tax
         effect, (before minority interest), at 31 December, 2000 and 1999,
         was NIS 20,022 thousand, and NIS 10,888 thousand, respectively.

         4.       Deferred taxes

         a)       Deferred taxes in respect to inflation adjustment differences

                  In accordance with Israeli GAAP:
                  Koor does not provide deferred taxes in respect to
                  adjustment differences to the CPI for assets defined as
                  "immune assets" in the Law for Taxation Under
                  Inflationary Conditions and for which the depreciation
                  period is at least 20 years.

                  In accordance with US GAAP:
                  Under FAS No. 109, a provision for deferred taxes should
                  be made for all temporary differences, without relation
                  to the period of amortization of the assets. The effect
                  on net earnings, as a result of the above provision for
                  deferred taxes, was a decrease in income tax in 1998,
                  1999 and 2000, NIS 5,232 thousand, NIS 12,300 thousand
                  and NIS 7,881 thousand, respectively.

         b)       Deferred taxes in companies which adjust their financial
                  statements for inflation on the basis of changes in the
                  U.S. dollar exchange rate.

                  In accordance with Israeli GAAP:
                  Certain companies, which adjust their financial
                  statements on the basis of changes in the dollar exchange
                  rate, create deferred taxes in respect of all the
                  differences between the amounts of assets (mainly in
                  respect to fixed assets and inventory) as stated in the
                  financial statements and the amounts for tax purposes.

                  In accordance with U.S. GAAP:
                  According to paragraph 9(f) of FAS No. 109, deferred
                  taxes should not be provided in respect of differences,
                  the source of which is in the difference of assets and
                  liabilities for accounting purposes and their amounts for
                  tax purposes, where the source of the tax difference
                  stems from different measuring bases for accounting
                  purposes and for tax purposes.
                  The ultimate effect of the above write-off of deferred
                  taxes on the statement of operations is decrease in
                  income tax in the amount of NIS 40,366 thousand in 1998,
                  and an increase in income tax in 1999 in the amount of
                  NIS 29,444 thousand respectively and in 2000 a decrease
                  in the amount of NIS 19,481 thousand.

         c)       Earnings from "Approved Enterprises"

                  Under the Israeli Law for Encouragement of Capital
                  Investments, 1959, a company which owns an "approved
                  enterprise" is subject tax at a rate of 25% of
                  attributable earnings during "the period of benefits".


Note 28 - Material Differences Between Israeli and U.S. GAAP and their Effect
                on the Financial Statements (cont'd)

         A.       Differences between Israel GAAP and U.S. GAAP (cont'd)

         4.       Deferred taxes (cont'd)

         c)       Earnings from "Approved Enterprises" (cont'd)

                  Dividends paid to shareholders from the earnings of an
                  "approved enterprise" are subject to income tax at a rate
                  of 15%. A company that received such a dividend is
                  entitled to a 15% tax credit, if and when this dividend
                  is paid to its shareholders.

                  An "approved enterprise" which choose the "alternative
                  benefits" track are exempted from income tax on
                  undistributed profits.

                  In the event that a dividend is distributed out of tax
                  exempt earnings of the "approved enterprise" under on the
                  "alternative benefits" track, the distributing company
                  will be subject to tax on the distributed earnings at a
                  rate of 25%. Furthermore, the shareholders will be liable
                  to tax at the rate of 15%. However, if the shareholder is
                  a company, that shareholder will be entitled to a 15% tax
                  credit, if and when such dividend out of "approved
                  enterprise" earnings is distributed to its shareholders.

                  In accordance with Israeli GAAP:
                  Deferred tax should not be provided in respect to the
                  undistributed tax-exempt earnings of an "approved
                  enterprise" of subsidiaries, whose earnings have been
                  reinvested and will not be distributed to the company
                  shareholders.

                  Koor has not provided deferred tax in respect to
                  undistributed tax-exempt earnings attributed to the
                  "approved enterprise" of subsidiaries under the
                  "alternative benefits" track, which may be distributed,
                  since it is the Group's policy not to initiate such a
                  dividend distribution.

                  In accordance with US GAAP:
                  A reserve for deferred tax should be provided on the
                  undistributed tax-exempt earnings of local subsidiaries
                  established subsequent to December 15, 1992, as their
                  distribution results in additional tax.

                  The effect of providing a reserve for deferred tax on the
                  undistributed tax exempt earnings of an "approved
                  enterprise", assuming either the sale of the shares in
                  the subsidiary, a merger (change of structure), or its
                  liquidation, was an increase in income tax, in 1998 and
                  1999 amounting to NIS 34,980 thousand, NIS 3,270 thousand
                  respectively, and decrease in income tax, in 2000
                  amounting to NIS 7,183 thousand.

         5.       Handling of "benefit component" in respect of options
                  issued to employees

                  In accordance with Israeli GAAP:
                  The overall "benefit component", in respect to options
                  granted to employees of Koor, is not charged as an
                  expense in the statement of operations.

                  In accordance with US GAAP:

                  a)       Fixed Option Plan:

                           Under U.S. GAAP (APB-25), the "benefit
                           component" is measured as the difference between
                           the share market price and, the exercise price
                           of the option, when measuring the "benefit". The
                           benefit is charged as a salary expense during
                           the period in which the employee performs the
                           services for which the benefit was granted.

Note 28 - Material Differences Between Israeli and U.S. GAAP and their Effect
                on the Financial Statements (cont'd)

         A.       Differences between Israel GAAP and U.S. GAAP (cont'd)

         5.       Handling of "benefit component" in respect of options
                  issued to employees: (cont'd)

                  (b)      Variable Option Plans:

                           In the event that the options have been issued
                           to employees for the future performance of work
                           or services, the benefit is charged to salary
                           expense in the statement of operations. The
                           "benefit component" is computed on the basis of
                           the full benefit valued as at that date, and,
                           the proportional part of the period which has
                           passed from the opening balance of that period.

                           For information regarding the effect of proforma
                           data, according to FAS No. 123 data, see
                           subsection 3b below.


         6.       The accounting treatment of quoted securities:

                  In accordance with Israeli GAAP:
                  Quoted securities which constitute a short-term
                  investment (see note 2F) are stated at market value.
                  Quoted securities which constitute a permanent investment
                  is stated at cost (regarding debentures, including
                  accumulated interest), except where market value is
                  lower, and the decline in value is not considered to be
                  temporary.

                  In accordance with US GAAP
                  *FAS No. 115 divides quoted securities, into three types:
                  securities held for a short period and traded at a high
                  frequency (trading securities), available for sale
                  securities and held to maturity securities.

                  A change in the value of trading securities, including
                  unrealized earnings, is charged to the statement of
                  operations, while unrealized earnings after tax of the
                  available for sale type is reported as a separate item
                  within shareholders' equity.

         7.       Attribution of proceeds from an issuance to debentures,
                  when securities are issued as a package:

                  According to the accounting policy of Koor:

                  According to the accounting policy of Koor, the proceeds
                  from an issuance of debentures and stock options, as a
                  package, are attributed to debentures according to their
                  par value while the remainder of the proceeds is
                  attributed to the share options.

                  *According to US GAAP:

                  The proceeds from an issuance of share options and
                  convertible debentures, as a package, are split based on
                  the relative market prices of these securities at the
                  date of issuance. This will sometimes result in the
                  recording of a discount in respect of the convertible
                  debentures, that is to be amortized over the term of
                  debentures.


Note 28 - Material Differences Between Israeli and U.S. GAAP and their Effect
                on the Financial Statements (cont'd)


         A.       Differences between Israel GAAP and U.S. GAAP (cont'd)

         8.       Dividends

                  According to Israeli GAAP:

                  A dividend proposed prior to the date of approval of the
                  financial statements is included in the balance sheet as
                  a current liability.

                  According to US GAAP:

                  Such a dividend is reflected only in the notes and is not
                  recorded in the balance sheet as a liability until
                  declared.

         9.       Convertible securities of investees

                  According to Israeli GAAP:

                  According to the provisions of Opinion Nos. 48 and 53 of
                  the ICPAI, a parent company is required to create a
                  provision for losses which it may incur from the dilution
                  of its holdings in investees, when it is probable that
                  the share options will be exercised or the debentures
                  will be converted.

                  According to US GAAP:

                  A loss in the parent company resulting from the dilution
                  of its holdings, because of share options being exercised
                  or debentures being converted, is recorded only at the
                  time of exercise or conversion.

         10.      Employee severance benefits as a part of an efficiency program

                  According to Israeli GAAP:

                  Employee severance benefits as part of future anticipated
                  dismissals are recorded when management decides on the
                  dismissals, and/or when management intended on the
                  dismissals.

                  According to US GAAP:

                  According to the provisions of EITF 94-3, employee
                  severance benefits, as part of a program for promoting
                  efficiency, are charged as an expense in the financial
                  statements only when all the following conditions exist:

                  a)       Management has the appropriate authority to dismiss
                           employees and the efficiency program includes all
                           employee severance benefits.
                  b)       Management notified employees of its intention
                           to dismiss them, while supplying them with full
                           details regarding employee severance benefits.
                  c)       The plan for dismissals states specifically the
                           names of the dismissed employees, their positions
                           and their duties.
                  d)       The period of time for completion of the program
                           of dismissals indicates that a significant
                           change in the plan is not likely to occur.


Note 28 - Material Differences Between Israeli and U.S. GAAP and their Effect
          on the Financial Statements (cont'd)

         A.       Differences between Israel GAAP and U.S. GAAP (cont'd)

         11.      Earnings per share

                  According to Israeli GAAP:
                  Opinion No. 55 - the dilutive effect of share options and
                  convertible debentures is included in the computation of
                  basic earnings per share only if their exercise or
                  conversion is considered to be probable. Calculation of
                  the probability is based on the ratio between the market
                  price of the shares and the present value of the price of
                  exercising the stock options into shares or the present
                  value of the payments for conversion of the debentures
                  into shares.

                  According to U.S. GAAP:
                  In accordance with FAS 128. Basic earnings per share are
                  computed on the basis of the weighted average number of
                  shares outstanding during the year. Diluted earnings per
                  share is computed on the basis of the weighted average
                  number of shares outstanding during the year, plus the
                  dilutive potential of ordinary shares considered
                  outstanding during the year.

         12.      Acquiring an Investment in stages

                  According to Israeli GAAP:
                  Opinion 68 determines that when acquiring an investment
                  in stages, on the date of which the holding constitutes
                  an initial material influence, it is necessary to
                  calculate the original differentials and record the
                  investment according to the equity method from this date
                  onwards.

                  According to U.S. GAAP:
                  When acquiring an investment in stages, on the date an
                  initial influence becomes material it is necessary to
                  calculate post factum for each acquisition the original
                  differentials created by the acquisition despite the fact
                  that on that date the company did not yet have a material
                  influence and to implement the equity method
                  retroactively.

         13.      Venture capital investments:

                  According to Israeli GAAP:
                  Venture capital fund investments in venture capital
                  investments will be represented according to their cost
                  less a provision for devaluation in the event of a
                  permanent devaluation.

                  According to U.S. GAAP:
                  Under normal accounting practice in the USA:
                  Venture capital fund investments will be represented
                  according to their proper value.


Note 28 - Material Differences Between Israeli and U.S. GAAP and their
          Effect on the Financial Statements (cont'd)

A.       Differences between Israel GAAP and U.S. GAAP (cont'd)

         14.      Revenue recognition - SAB 101:

                  According to U.S. GAAP:
                  During the fourth quarter of 2000, the US SEC published
                  Staff Accounting Bulletin No. 101 (hereinafter - "SAB
                  101") which imposes stringencies on the rules for revenue
                  recognition which are to be implemented retroactively to
                  the beginning of the year, by way of cumulative effect to
                  the beginning of the year and presentation of the
                  previous quarters once again.
                  ECI implemented these guidelines in its statements which
                  are set out in accordance with the accounting rules in
                  the United States of America.

                  According to Israeli GAAP:
                  The provision does not apply in Israel, although it is
                  possible to adopt the principles set out in the rule if
                  management estimates that the method of revenue
                  recognition prescribed in SAB 101 is appropriate for
                  economic and commerce conditions presently existing in
                  its area of business.
                  This rule is going to be adopted as of the fourth quarter
                  of 2000, without implementing cumulative effect to the
                  beginning of the year and without presenting data which
                  has already been published in the past.

                  Therefore, cumulative effect has been recorded in the
                  adjustment note in the sum of NIS 37,236 thousand and
                  decrease of profit for timing differentials in revenue
                  recognition in the sum of NIS 4,535 thousand.

         15.      Adjustment on net loss of ECI as being reported according
                  to the U.S. GAAP to the net loss as being reported according
                  to the Israeli GAAP:

<TABLE>
<CAPTION>
                                                                                                     Year ended
                                                                                                   December 31,
                                                                                                           2000
                                                                                                  -------------
                                                                                                  NIS thousands
                                                                                                  -------------
<S>                                                                                                <C>
                  Net loss of ECI based on its reported profit according to U.S. GAAP                 (369,388)

                  Adjustments:
                  Adjustments on behalf of SAB 101:
                  Cumulative effect to beginning of year                                               112,837
                  Timing differentials for revenue recognition
                   for implementation of SAB 101                                                        13,743
                  Finance income - marketable securities, see Note 28A(6)                              (36,947)
                  Tax income - deferred taxes                                                           (2,950)
                  Salary expenses in respect of share options issued to
                   employees                                                                            11,711
                                                                                                   ------------
                  Net loss of ECI based on
                   net loss pursuant to Israeli GAAP                                                  (270,994)
                                                                                                   ============
</TABLE>



Note 28 - Material Differences Between Israeli and U.S. GAAP and their
          Effect on the Financial Statements (cont'd)

         B.       The effect of the material differences between Israeli and
                  U.S. GAAP on the financial statements

         1.       Statements of operations:
<TABLE>
<CAPTION>

                                                                                        Year ended December 31
                                                                              2000              1999               1998
                                                                          -----------     --------------   ------------
                                                                                                           NIS thousands
                                                                          ----------------------------------------------

<S>                                                                        <C>               <C>                 <C>
         a)  Net earnings as reported, according to
             Israeli GAAP                                                    267,687           549,119             47,121
                                                                          -----------     --------------   --------------
             Amortization of deferred interest in
              respect of the restructuring of debts                            9,134            11,924             17,236
             Deferred taxes                                                   35,518           (37,055)            10,619
             Salary expenses in respect of
              share options issued to employees                              (23,135)           (3,544)           (13,470)
             Correction of capital gain included in
              results of discontinued activities                                   -                 -              4,354
             Gain from marketable securities, net                             39,535           (43,566)            (1,304)
             Provisions for anticipated losses from
             realization of convertible securities in
              investees                                                       (2,390)            1,336             (2,492)
             Amortization of discount in respect of
              convertible debentures                                          (2,065)           (1,874)            (2,543)
             Severance pay, including that arising
              from an efficiency program                                     (11,287)           12,459             (4,743)
             Capital gain from a merger                                            -           190,954                  -
             Acquiring an investment in stage                                    390            (4,967)                 -
             Venture capital investments                                      19,340                 -                  -
             Amortization of goodwill in accordance with a
              merger                                                         (23,171)          (21,004)                -
             Temporary differences resulting from recognition
              of revenue arising from application of SAB 101                  (4,535)                -                  -
                                                                          -----------     --------------   --------------
                                                                              37,334           104,663              7,657
             Income taxes                                                     (3,621)         (129,321)             2,312
             Minority interests in respect of the above
              differences                                                    (13,470)            7,963            (15,717)
                                                                          -----------     --------------   ---------------
                                                                              20,243           (16,695)            (5,748)

             Extraordinary item (1)                                                -             5,475              1,817
             Cumulative effect as beginning of the year                      (37,236)                -                  -
                                                                          -----------     --------------   --------------
                                                                             (16,993)          (11,220)            (3,931)
                                                                          -----------     --------------   --------------
             Net income according to U.S. GAAP                               250,694            537,899            43,190
                                                                          ===========     ==============   ==============

         (1)      Deferred gains were recognized in respect of early repayment of debts.
</TABLE>



Note 28 - Material Differences Between Israeli and U.S. GAAP and their
          Effect on the Financial Statements (cont'd)

B.       The effect of the material differences between Israeli and
         U.S. GAAP on the financial statements (cont'd)
<TABLE>
<CAPTION>

         1.       Statements of operations (cont'd):

                                                                                         Year ended December 31
                                                                                2000               1999               1998
                                                                        --------------      ------------     -------------
                                                                                                             NIS thousands
                                                                        --------------------------------------------------


b)           Earnings per ordinary share

              Basic earnings per ordinary share:
<S>                                                                          <C>              <C>                 <C>

              As reported, according to Israeli GAAP                            17.4             34.89               3.07
                                                                        ==============      ============     =============
             As reported according to U.S. GAAP:
               Before extraordinary item                                        16.3             33.85               2.65
               Extraordinary item                                                  -              0.35               0.12
                                                                        --------------      ------------     -------------
             Total                                                              16.3             34.20               2.77
                                                                        ==============      ============     =============
              Weighted average of number of shares and share
              equivalents according to U.S. GAAP                          15,384,206        15,727,144         15,569,840
                                                                        ==============      ============     =============
              Diluted earnings per ordinary share:

              As reported, according to Israeli GAAP                           17.32             34.56               3.07
                                                                        ==============      ============     =============
             As reported, according to U.S. GAAP:
                     Before extraordinary item                                 16.23             33.52               2.64
                     Extraordinary item                                            -              0.34               0.12
                                                                        --------------      ------------     -------------
                     Total                                                     16.23             33.86               2.76
                                                                        ==============      ============     =============
              Weighted average of number of shares and share
              equivalents according to U.S. GAAP                          15,597,253        16,061,493         15,618,776
                                                                        ==============      ============     =============

</TABLE>


Note 28 - Material Differences Between Israeli and U.S. GAAP and their
          Effect on the Financial Statements (cont'd)

         B.       The effect of the material differences between Israeli
                  and U.S. GAAP on the financial statements (cont'd)

<TABLE>
<CAPTION>
         2.       Balance sheet:

                                                                    December 31
                                                     2000                                            1999
                               ---------------------------------------------    ---------------------------------------------
                                As reported      Adjustments     U.S. GAAP      As reported       Adjustment     U.S. GAAP
                                -----------      -----------     ---------      -----------      -----------     ---------
                                                                     NIS thousands
-----------------------------  ---------------------------------------------    ---------------------------------------------
<S>                  <C>         <C>               <C>           <C>             <C>               <C>           <C>
         Investments in
          affiliates (10)        3,000,889         113,094       3,113,983       3,495,772         165,626       3,661,398
         Intangible assets
         -
          net of
         Investments and
          other receivables      1,164,809          19,340       1,184,149         757,747               -         757,747
         Intangible assets
          after
          amortization (10)        860,948          21,748         882,696         627,264          24,467         651,731

         Total assets           14,768,417         154,182      14,922,599      17,370,600         190,093      17,560,693

         Payables and
          accruals (7)(8)        1,077,535          (1,172)      1,076,363       1,733,912        (135,161)      1,598,751
         Deferred
          interest                       -          10,888          10,888               -          20,022          20,022
         (3)
         Convertible
          Debentures (4)            72,467          (1,343)         71,124         180,159          (3,408)        176,751
         Deferred taxes(2)         120,047         264,748         384,795         236,895         295,676         532,571
         Minority
          interests (6)          1,063,381          (8,720)      1,054,661       1,319,771         (24,580)      1,295,191
         Capital reserve
          for "available
         for
          sale"                          -          (6,800)         (6,800)              -          33,276          33,276
         securities(1)
         Capital
          reserves (4)(5)        2,419,674          39,840       2,459,514       2,417,255         137,948       2,555,203
         Retained
          earnings (6)           2,273,929        (143,259)      2,130,670       2,065,262        (133,680)      1,931,582

         Total
          Shareholders'
          Equity                 4,306,250        (110,219)      4,196,031       4,384,714          37,544       4,422,258

         (1)      Adjustment of value of investment securities to market value.
         (2)      Change in deferred taxes.
         (3)      Deferred gain on debt restructuring.
         (4)      Debentures issued with stock options.
         (5)      Share options issued to employees.
         (6)      Effects of the reconciliation to US GAAP
         (7)      Proposed dividend.
         (8)      Provision for employee severance benefits resulting from an efficiency program.
         (9)      The effect of presenting investment in marketable securities before deduction
                  of long-term loans (see Note  9A(3).
         (10)     Original differentials arising from the exchange of
                  shares in the merger, acquiring an investment in stages
                  and increasing the holdings in a consolidated company, as
                  well as temporary differences with implementation of SAB
                  101.
</TABLE>



Note 28 - Material Differences Between Israeli and U.S. GAAP and their
          Effect on the Financial Statements (cont'd)

         B.       The effect of the material differences between Israeli
                  and U.S. GAAP on the financial statements (cont'd)


         3.       Additional information according to US GAAP

         The effect of proforma data calculated according to FAS 123:

         a)       Under the provisions of FAS 123, all option plans are
                  recorded in the statement of operations, based on the
                  fair value of the option to the balance sheet date.

         b)       The Company applies the Black-Scholes model to estimate
                  fair value of the options, utilizing the following
                  assumptions:

                  Risk free interest rate                          6.96%
                  Expected life of stock options                   2-7 years
                  Anticipated weekly standard deviation            35.22
                  Expected dividend per share                      1.2%

                  See Note 20C relating to the fair value of share options
                  at the time they were granted, (according to the
                  prevailing conditions at the grant date).

                  The group companies apply to black & scholes formula for
                  evaluating the fair value of the option. They apply
                  assumptions which are based on the terms of the options
                  and the fluctuation in the price of their shares.


         c)       If the cost of the benefit in respect of share options
                  issued to employees under this plan (including plans of
                  certain subsidiaries) had been computed on the basis of
                  the fair value at date of grant in accordance with FAS
                  123, the Company's net earnings and earnings per share in
                  accordance with U.S. GAAP would have been as follows:

<TABLE>
<CAPTION>
                                                                                         Year ended December 31
                                                                               2000              1999               1998
                                                                          -----------     -------------    --------------

------------------------------------------------------------------
<S>                                                                       <C>               <C>                 <C>
         Proforma net earnings (NIS thousands adjusted)                      164,337           497,703             21,654
                                                                          -----------     -------------    --------------
          Proforma basic earnings per share ( NIS adjusted)                    10.68             31.65               1.38
                                                                          ===========     =============    ==============
          Proforma diluted earnings per share ( NIS adjusted)                  10.68             31.36               1.38
                                                                          ===========     =============    ==============

*        A compensation to the exercise price in respect of the
         distribution of a dividend is included in the option
         plans of 1998 and 2000.
</TABLE>



Note 28 - Material Differences Between Israeli and U.S. GAAP and their
          Effect on the Financial Statements (cont'd)

         B.       The effect of the material differences between Israeli
                  and U.S. GAAP on the financial statements (cont'd)

         4.       Comprehensive earnings

         "Comprehensive earnings" consists of the change, during the
         current period, in Company's shareholder equity that does not
         derive from shareholders' investments or from the distribution of
         earnings to shareholders.

         A.       Comprehensive earnings include two components - net
                  earnings and other comprehensive earnings. Net earnings
                  are the earnings stated in the statement of operations
                  and other comprehensive earnings include the amounts that
                  are recorded directly in shareholders' equity and that do
                  not derive from transactions with shareholders.
<TABLE>
<CAPTION>

                                                                                          Year ended December 31
                                                                               2000              1999               1998
                                                                         ------------        --------------   -----------
                                                                                              NIS thousands


--------------------------------------------------------------
<S>                                                                       <C>               <C>                 <C>
                  Net earnings according to US GAAP                          250,694           537,899             43,190
                                                                         ------------        --------------   -----------
                  Other comprehensive earnings, after tax:
                  Adjustments from translation of
                   Financial statements of investees                         (86,066)          (19,492)           162,710
                  Unrealized gains (loss) from securities                    (40,508)           41,685              2,668
                                                                         ------------        --------------   -----------
                  Total other comprehensive earnings*                       (126,574)           22,193            165,378
                                                                         ------------        --------------   -----------
                  Total comprehensive earnings                               124,120           560,092            208,568
                                                                         ============        ==============   ===========
                  *Tax component included in the item                           (973)           (1,881)             2,333
                                                                         ============        ==============   ===========
</TABLE>


         B.       The effect of taxes on the other comprehensive earnings:
<TABLE>
<CAPTION>

                                                                           Before tax        Tax effect          After tax
                                                                        --------------    --------------    --------------
                                                                                                             NIS thousands


<S>                                                                        <C>              <C>                    <C>
                  Adjustments from translation of Investees                  (86,066)                -            (86,066)
                                                                        --------------    --------------    --------------
                  Unrealized loss from securities:
                  Loss  which arose in current year                          (10,461)             (973)           (11,434)
                  Less realized gains credited to net earnings               (29,074)                -            (29,074)
                                                                        --------------    --------------    --------------
                                                                            (39,535)              (973)           (40,508)
                                                                        --------------    --------------    --------------
                  Net unrealized gains                                      (125,601)             (973)          (126,574)
                                                                        ==============    ==============    ==============


</TABLE>






Note 29 - Event ( unaudited ) subsequent to the date of the Independent
auditor's report

A     1. ECI's management in view of the trend of declining world demand for
communications products, including ECI's products, decided on significant
reductions which included the discontinuation of production and marketing
of certain products and discontinuation of development work in the US which
was acquired in the second quarter of 2000. Consequently ECI registered a
provision for the drop in value of inventories of 95 million dollars for
the first quarter, a provision for a drop in value of goodwill, intangible
assets and fixed assets used for operations, which were being discontinued
totaling 90 million dollars.

In addition, during April 2001 ECI's management decided on the dismissal of
about 1,000 employees (in addition to the 365 employees whose dismissal was
decided in December 2000).

      2. As a result of the continuing drop in global demand for
communications products including ECI's products, the uncertainty with
regard to the recovery of the market, the significant reduction in ECI's
sales forecasts and the change for the worse in the indications recently
received about the fair value of ECI in general, and each of the spun-off
companies in particular, Koor's management decided to adjust the value of
the investment in ECI to the conditions created.

      Consequently, Koor's management decided to reduce the book value of
the investment in ECI due to the decline in value, which is not of a
temporary nature, in an amount of NIS 208 million to the amount of NIS
2,193 million. The reduction was registered at the first quarter of 2001.

      3. ECI has been named as a defendant in lawsuits, filed on June 2001
in the Eastern District court of Virginia, United States, on behalf of the
ECI's shareholders. ECI's CEO, former CFO as well the chairman of the Board
of Directors have also been named in the above-mentioned lawsuits. This is
a securities class action brought on behalf of public investors that
purchased the ordinary shares of the company between May 2, 2000 and
February 14, 2001 (the "Disputed period "). Plaintiffs contend that a fraud
had been preventative, a deceptive course of business followed false and
misleading financial statements disseminated that damaged purchasers of ECI
stock during the Disputed Period. The Plaintiffs seek remedies under the
Securities Exchange Act of 1934 for (a) compensatory damages and/or
rescission as appropriate for all ECI's stockholders during the Disputed
period. (b) The costs and disbursements of this lawsuit, including
attorneys, accountants' and experts' fees, and (c) such other and further
relief as the Court may deem just and proper. ECI expects to file a motion
to dismiss this action and is not submit a defense to respond before that
motion is filed. ECI believes that the plaintiffs have no basis for this
action and intends to vigorously defend the action.

B. Koor registered at the financial statements of the first
quarter of 2001 a provision for the decline in the value of investments in
investee companies and for impairment of long lived assets (mainly goodwill
and fixed assets) in a total amount of $32 million in order to reflect, in
the Company's opinion, expected losses as a result of the expected
realization of these investments and assets or a drop in their value which
is not of a temporary nature.




            INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF

                            TADIRAN SCOPUS LTD.



We have audited the accompanying consolidated balance sheets of Tadiran
Scopus Ltd. (the "Company") as of December 31, 2000 and the balance sheet
of the Company as of December 31, 1999, and the related statements of
operations, changes in shareholders' equity (deficiency) and cash flows -
consolidated and of the Company, respectively - for each of the years then
ended. These financial statements are the responsibility of the Company's
Board of Directors and management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Company's
Board of Directors and management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position - consolidated and of the
Company, respectively - as of December 31, 2000 and 1999, and the results
of operations, changes in shareholders' equity (deficiency) and cash flows
- consolidated and of the Company, respectively - for each of the years
then ended, in conformity with generally accepted accounting principles in
Israel.

The above financial statements are prepared in U.S. dollars, as explained
in Note 2A.

/s/ Brightman Almagor & Co.
Brightman Almagor & Co.
Certified Public Accountants

Tel Aviv, Israel
March 13, 2001

To the Shareholders of
      Fahrenheit Holding, B.V. and Celsius Property, B.V.:

We have audited the balance sheet of FAHRENHEIT HOLDING, B.V. (a Dutch
company) and its subsidiaries and of CELSIUS PROPERTY, B.V. (a Dutch
company) and its subsidiaries as of December 31, 2000 and the related
statement of income and retained earnings as set forth in the internal
financial statements. The notes to the internal financial statements are an
integral part of the financial statements. All information included in
these financial statements is the representation of the management of the
Companies. These audits were performed to, and our responsibility is to,
express an opinion on the combined financial statements only.

We did not audit the financial statements of subsidiaries whose statements
reflect total assets and total revenues of 14% of the combined totals.
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 report of the other
auditors.

We conducted our audit in accordance with Generally Accepted Auditing
Standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amount and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statements presentation. We
believe that our audits provide a reasonable basis for our opinion.

The combined financial statements referred to above have been prepared to
be used in connection with the preparation of the consolidated financial
statements of Makhteshim Agan Industries (ultimate parent company) and,
accordingly, they state the assets, liabilities, shareholder's investment,
revenues and expenses of the companies as adjusted for this purpose and may
not be appropriate for another use.

As instructed, the companies present the internal financial statements in
conformity with International Accounting Standards adapted to reflect
certain Makhteshim Agan Industries accounting and disclosure policies. Note
2 to the internal financial statements described those policies and certain
differences with the International Accounting Standards. We draw your
attention to this note especially for the matters relating to the
presentation of the statement of cash flow and of certain disclosures, the
translation into U.S. dollars of the financial statements of the Brazilian
subsidiaries and the change of translation accounting policy of the
financial statements of Proficol S.A. into U.S. dollars.

In our opinion, except for described in the preceding paragraph, the
combined financial statements referred to above present fairly, in all
material respects, the combined financial position of Fahrenheit Holding,
B.V. and subsidiaries and Celsius Property, B.V. and subsidiaries as of
December 31, 2000 and the combined results of their operations and their
cash flows for the year then ended in conformity with statements of
International Accounting Standard issued by the International Accounting
Standard Committee (Note 2) and with the accounting policies of Makhteshim
Group.



ARTHUR ANDERSEN
Reviseurs d'Entreprises



s/s Georges Hepner
-------------------
Henri Lemberger (1)



February 16, 2001



(1) signed by Mr. Georges Hepner, partner of Arthur Andersen, Reviseurs
d'Entreprises, in absence of Mr. Henri Lemberger.




To the Shareholders of
      Makhteshim Agan Holding, B.V.:



We have audited the consolidated balance sheet of MAKHTESHIM AGAN HOLDING,
B.V. (a Dutch company) and subsidiaries as of December 31, 2000, and the
related consolidated statement of income and retained earning as set forth
in the internal financial statements. The notes to the internal financial
statements are an integral part of the financial statements. All
information included in these financial statements is the representation of
the management of the company. Our responsibility is to express an opinion
on these financial statements based on our audits.

We did not audit the financial statements of subsidiaries whose statements
reflect total assets and total revenues of 11% of the consolidated totals.
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 those entities, is based solely on the report of the other
auditors.

We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. Art audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

The financial statements referred to above have been prepared to be used in
connection with the preparation of the consolidated financial statements of
Makhteshim Agan Industries (ultimate parent company) and, accordingly, they
state the assets, liabilities, shareholder's investment, revenues and
expenses of the companies as adjusted for this purpose and may not be
appropriate for another use.

As instructed, the company presents its internal financial statements in
conformity with International Accounting Standards adjusted to reflect
certain Makhteshim Agan Industries accounting and disclosure policies. Note
2 to the internal financial statements described those policies and certain
differences with the International Accounting Standards.

In our opinion, except for the matter described in the preceding paragraph,
the consolidated financial statements referred to above present fairly, in
all material respects, the financial position of Makhteshim Agan Holding,
B.V. and subsidiaries as of December 31, 2000 and the results of its
operations and its cash flows for the year then ended, in conformity with
statements of International Accounting Standards issued by the
International Accounting Standards Committee (Note 2) and with the
accounting policies of Makhteshim Group.


ARTHUR ANDERSEN
Reviseurs d'Entreprises



s/s Georges Hepner
--------------------
Henri Lemberger (1)


February 16, 2001



(1) Signed by Mr. Georges Hepner, partner of Arthur Andersen, Reviseurs
d'Entreprises, in the absence of Mr. Henri Lemberger.



                              AUDITORS' REPORT


                           To the shareholders of


                          UNITED STEEL MILLS LTD.

                          (in stay of proceedings)


We have audited the accompanying balance sheets of United Steel Mills Ltd.
(in stay of proceedings) ("the Company") as of December 31, 2000 and 1999
and the consolidated balance sheets as of such dates and the related
statements of operations, changes in equity and cash flows - of the Company
and consolidated - for each of the three years in the period ended December
31, 2000. These financial statements are the responsibility of the
Company's Board of Directors and management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position - of the Company and
consolidated - as of December 31, 2000 and 1999, and the results of
operations, changes in equity and cash flows - of the Company and
consolidated - for each of the three years in the period ended December 31,
2000, in conformity with accounting principles generally accepted in
Israel.

As explained in Note 2, the financial statements referred to above are
presented in values adjusted for the changes in the general purchasing
power of the Israeli currency, in accordance with pronouncements of the
Institute of Certified Public Accountants in Israel.

Without qualifying our opinion, we wish to draw attention to the matter
discussed in Note 1a(6) to the financial statements. In the above note it
is mentioned, among other things, that the Company incurred losses
amounting to NIS 108 million for the year ended December 31, 2000 and
working capital deficiency amounting to MS 145 million for same date and
shareholders' equity amounting to NIS 0.3 million, including accumulated
deficit of NIS 379 million. In March 2000, the Haifa District Court issued
an order for stay of legal proceedings against the Company and its
subsidiaries, pursuant to section 350 to the Companies Law, 1999, and the
Court has also appointed a trustee, a special manager on behalf of the
Court to supervise the operations and businesses of the Company and its
subsidiaries and to act as a special manager for the Company and its
subsidiaries so as to facilitate the formation of a comprehensive recovery
plan and a proposal for creditor arrangement. The trustee has advertised,
under the consent of the Court, an international public tender for the sale
of the combined companies businesses. At this time, a comprehensive
recovery plan for the combined companies has not been formed and the
results of operations of the combined companies can not constitute a
sufficient basis for a minimal creditor arrangement since there is no
outsider investor.

These conditions, along with additional conditions set forth in Notes 1b.,
10 and 13c raise substantial doubts about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments
and classification of assets or the amounts and classification of
liabilities that may be required should the Company not be able to continue
to operate as a going concern.




                                    /s/ KOST FORER & GABBAYTel-Aviv, Israel
KOST FORER & GABBAY
March 13, 2001                        A Member of Ernst & Young nternational




                       REPORT OF INDEPENDENT AUDITOR

                           To the Shareholders of

                      KOOR VENTURE CAPITAL PARTNERSHIP


          We have audited the accompanying consolidated balance sheets of
Koor Venture Capital Partnership (the "Partnership") as of December 3 1,
2000 and the related statements of operations, changes in shareholders'
equity (deficiency) and cash flows for five year ended December 31, 2000.
These financial statements are the responsibility of the Partnership
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

          We conducted our audits in accordance with generally accepted
auditing standards in the United States and Israel, including those
prescribed by the Israeli Auditors' Regulations (Mode of Performance),
1973. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by the Partnership management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

          The investment in an investee Company is presented at cost offset
by additional paid-in capital in respect to a transaction with a
controlling interest and not in accordance with the equity method as is
required pursuant to pronounce of the Institute of Certified Public
Accountants in Israel.

          In our opinion, except for not presenting the investment in an
investee company pursuant to the equity method, as stated above, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of the as of December 31 ,
2000 and the consolidated results of their operations and cash flows for
each of the year ended December 31, 2000, in conformity with generally
accepted accounting principles in Israel.

          As explained in Note 2, the financial statements referred to
above are presented in values adjusted for the changes in the general
purchasing power of the Israeli currency, in accordance with pronouncements
of the Institute of Certified Public Accountants in Israel.

                                            /s/  KOST FORER & GABBAY

Tel-Aviv, Israel                               KOST FORER & GABBAY
March 30, 2000                        A Member of Ernst & Young International




                              AUDITORS' REPORT

                           To the shareholders of

                  LYCORED NATURAL PRODUCTS INDUSTRIES LTD.

         We have audited the accompanying balance sheets of Lycored Natural
Products Industries Ltd. ("the Company") as at December 31 2000 and 1999,
and the related statements of operations, changes in equity and cash flows
for each of the two years, in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's Board of
Directors and management. Our responsibility is to express an opinion on
these financial statements based on our audits.

         We did not audit the financial statements of certain subsidiary,
whose assets constitute 0.9% and 2.8% of the total consolidated assets as
at December 31, 2000 and 1999, respectively, and whose revenues constitute
5.3% and 5.9% of the total consolidated revenues for the years ended
December 31, 2000 and 1999, respectively. The financial statements of this
subsidiary was audited by other auditors whose reports have been furnished
to us. Our opinion, insofar as it relates to amounts emanating from the
financial statements of such subsidiary, is based solely on the said
reports of the other auditors.

         We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts arid
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 reports of the
above-mentioned other auditors, the financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 3 1 , 2000 and 1999, and the results of its
operations, the changes in its equity and its cash flows for each of the
two years, in the period ended December 3 1, 2000, in conformity with
accounting principles generally accepted in Israel.

                                             /s/  KOST FORER & GABBAY

Tel-Aviv, Israel                               KOST, FORER & GABBAY
February 25, 2001                     A Member of Ernst & Young International







                              AUDITORS' REPORT

                           To the shareholders of

                       LUXEMBURG PHARMACEUTICALS LTD.

         We have audited the accompanying balance sheets of Luxemburg
Pharmaceuticals Ltd. ("the Company") as at December 3 I, 2000 and 1999, and
the related statements of operations, changes in equity and cash flows for
each of the two years, in the period ended December 1, 2000. These
financial statements are the responsibility of the Company's Board of
Directors and management. Our responsibility is to express an opinion on
these financial statements based on our audits.

         We did not audit the financial statements of certain companies the
excess of losses over investment in which on the equity basis of accounting
totaled $252 thousand and $220 thousand as of December 31, 2000 and 1999,
respectively, and the Company's share in the net income (losses) of which
totaled $ (32) thousand, $ 22 thousand for the years ended December 3 1,
2000 and 1999, respectively. These statements were audited by other
auditors whose reports have been furnished to us, arid our opinion, insofar
as it relates to data included for this certain companies, is based solely
on the reports of the other auditors.

         We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

         The Company has restated its financial statements for the year
ended December 31 , 1999 in order to retroactively reflect the effect of
acquisition of a company from a controlling shareholder of the Company and
the sale of land to a shareholder of the Company (see Note 2) a change to
which we concur.

         In our opinion, based on our audits and the reports of the
above-mentioned other auditors, the financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 3 1, 2000 and 1999, and the results of its
operations, the changes in its equity and its cash flows for each of the
two years, in the period ended December 3 1, 2000, in con.ftnnity with
accounting principles generally accepted in Israel.

                                            /s/  KOST FORER & GABBAY

Tel-Aviv, Israel                               KOST, FORER & GABBAY
February 25, 2001                     A Member of Ernst & Young International






Auditors' Report to the shareholders of

Koor Investments Ltd.


We have audited the accompanying balance sheets of Koor Investments Ltd. as
of December 31, 2000 and 1999 and the related statements of operations,
shareholders' equity and cash flows for each of the three years, the last
of which ended December 31, 2000. These financial statements are the
responsibility of the Company's Board of Directors and of its Management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and Management, as well as evaluated the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, based on our audits, the financial statements referred to
above present fairly, in all material respects. the financial position of
the company as of December 3 1, 2000 and 1999 and the results of its
operations, the changes in its shareholders' equity and its cash flows for
each of the three years, the last of which ended December 31, 2000, in
conformity with accounting principles generally accepted in Israel.

As explained in note 1b, the abovementioned financial statements are stated
in values adjusted for the changes in the general purchasing power of the
Israeli currency, in accordance with opinions of the Institute of Certified
Public Accountants in Israel.

                                      /s/  Kesselman & Kesselman
Tel-Aviv                              Kesselman & Kesselman
February 25, 2001                     Certified Public Accountants (Isr.)






                               April 25, 2001

                  Auditors' Report to the Shareholders of
                   Solkoor Marketing and Purchasing Ltd.



I have audited the accompanying balance sheets of Solkoor Marketing and
Purchasing Ltd. (the "Company") as at December 31, 2000 and 1999, and the
related statements of operations and shareholders' equity, for each of the
years ended as at such dates. These financial statements are the
responsibility of the Company's Board of Directors and of its Management.
My responsibility is to express an opinion on these financial statements
based on my audits.

I conducted my audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that I
plan and perform the audit to obtain reasonable assurance about whether
financial statements are free of material misstatement, An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and Management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable basis
for my opinion.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 2000 and 1999 and the results of its operations and the
changes in shareholders' equity for each of the years ended as at such
dates in conformity with accounting principles generally accepted in
Israel.

As explained in note 2, the above-mentioned financial statements are stated
in values adjusted for the changes in the general purchasing power of the
Israeli currency, in accordance with opinions of the Institute of Certified
Public Accountants in Israel.

                                         /s/  Yosef Shimony

                                              Yosef Shimony
                                              C.P.A (Isr.)






                               March 20, 2001


                  Auditors' Report to the Shareholders of
                             Koor Holding Ltd.



I have audited the accompanying balance sheets of Koor Holding Ltd. (the
"Company") as at December 31, 2000 and 1999, and the related statements of
operations and shareholders' equity, for each of the years ended as at such
dates. These financial statements are the responsibility of the Company's
Board of Directors and of its Management. My responsibility is to express
an opinion on these financial statements based on my audits.

I conducted my audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that I
plan and perform the audit to obtain reasonable assurance about whether
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and Management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable basis
for my opinion.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 2000 and 1999 and the results of its operations and the
changes in shareholders' equity for each of the years ended as at such
dates in conformity with accounting principles generally accepted in
Israel.

As explained in note 2, the above-mentioned financial statements are stated
in values adjusted for the changes in the general purchasing power of the
Israeli currency, in accordance with opinions of the Institute of Certified
Public Accountants in Israel.


                                               /s/ Yosef Shimony

                                                   Yosef Shimony
                                                   C.P.A (Isr.)







                               March 14, 2001

                  Auditors' Report to the Shareholders of
                           Koor Technologies Ltd.

I have audited the accompanying balance sheets of Solkoor Technologies Ltd.
(the "Company") as at December 31, 2000 arid 1999, and the related
statements of operations and shareholders' equity for each of the years
ended as at such dates. These financial statements are the responsibility
of the Company' s Board of Directors and of its Management. My
responsibility is to express an opinion on these financial statements based
on my audits.

I conducted my audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that I
plan and perform the audit to obtain reasonable assurance about whether
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and Management, as well as evaluating the overall financial
statement presentation. I believe that my audit provide a reasonable basis
for my opinion.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 2000 and 1999 and the results of its operations and the
changes in shareholders' equity for each of the years ended as at such
dates in conformity with accounting principles generally accepted in
Israel.

As explained in note 2, the above-mentioned financial statements are stated
in values adjusted for the changes in the general purchasing power of the
Israeli currency, in accordance with opinions of the Institute of Certified
Public Accountants in Israel.



                                                /s/ Yosef Shimony


                                                    Yosef Shimony
                                                    C.P.A (Tsr.)





                               March 20, 2001


                  Auditors' Report to the Shareholders of
                          Koor Trusts (1995) Ltd.



I have audited the accompanying balance sheets of Koor Trusts (1995) Ltd.
(the "Company") as at December 31, 2000 and 1999, arid the related
statements of operations and shareholders' equity, for each of the years
ended as at such dates. These financial statements are the responsibility
of the Company's Board of Directors and of its Management. My
responsibility is to express an opinion on these financial statements based
on my audits.

I conducted my audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that I
plan and perform the audit to obtain reasonable assurance about whether
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and Management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable basis
for my opinion.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 2000 and 1999 and the results of its operations and the
changes in shareholders' equity for each of the years ended as at such
dates in conformity with accounting principles generally accepted in
Israel.

As explained in note 2, the above-mentioned financial statements are stated
in values adjusted for the changes in the general purchasing power of the
Israeli currency, in accordance with opinions of the Institute of Certified
Public Accountants in Israel.



                                              /s/ Yosef Shimony


                                                  Yosef Shimony
                                                  C.P.A(Isr.)







                              AUDITORS' REPORT

                           To the shareholders of

                      "ALDA" ISRAEL FOREIGN TRADE LTD.

We have audited the accompanying balance sheets of "Alda" Israel Foreign
Trade Ltd. ("the Company") at December 31, 2000 and 1999, and the related
statements of operations, changes in equity and cash flows for each of the
three years, the last of which ended December 31, 2000. These financial
statements are the responsibility of the Company's Board of Directors and
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We did not audit the financial statements of a certain company the
investment in which on the equity basis of accounting totaled NIS 63.5
million and NIS 68.1 million as of December 31, 2000 and 1999,
respectively, and the Company's share in the net income of which totaled
NIS 73 thousand, NIS 220 thousand and NIS 1,500 thousand for the years
ended December 31, 2000, 1999 and 1998, respectively. These statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to data included for this certain. company,
is based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

The Company has restated its financial statements for the year ended
December 31, 1999 in order to retroactively reflect the effect of the
operating results of an investee whose investment in the financial
statements for December 31, 1999 did not include its operating results for
1999 (see Note 2) a change to which we concur.

As no audited statements of other auditors were furnished, the investment
in investee was included according to the adjusted book value as of
December 31, 1999. The statement of operations does not include the
Company's share in the results of operations of that investee for the year
ended December 31, 2000.

In our opinion, except for the absence of information referred to in the
preceding paragraph, based on our audits and the reports of the
above-mentioned other auditors, the financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 31, 2000 and 1999, and the results of its
operations, the changes in its equity and its cash flows for each of the
three years, the last of which ended December 31, 2000, in conformity with
accounting principles generally accepted in Israel.

As explained in Note 2, the above-mentioned financial statements are stated
in values adjusted for the changes in the general purchasing power of the
Israeli currency, in accordance with opinions of the institute of Certified
Public Accountants in Israel.

                                          /s/      KOST, FORER & GABBAY

Tel-Aviv, Israel                              KOST, FORER & GABBAY
March 11, 2001                         A Member of Ernst & Young International



Kost, Forer & Gabbay                                 Phone: 972-3-6232525
3 Aminadav St     .                                  Fax:   972-3-5622555
Tel-Aviv 67067, Israel

AUDITORS' REPORT
To the shareholders of
KOOR TRADE LTD.

We have audited the accompanying balance sheets of Koor Trade Ltd. ("The
Company") as at December 31, 2000 and 1999, and the related statements of
operations, changes in deficiency and cash flows for each of the three
years, the last of which ended December 31, 2000. These financial
statements are the responsibility of the Company's Board of Directors and
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We did not audit the financial statements of a certain company the
investment in which on the equity basis of accounting totaled NIS 40.2
million and NIS 43.5 million as of December 31, 2000 and 1999,
respectively, and the Company's share in the net income of which totaled
NIS 55 thousand, NIS 200 thousand and NIS 1,500 thousand for the years
ended December 31, 2000, 1999 and 1998, respectively. These statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to data included for this certain company,
is based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

The Company has restated its financial statements for the year ended
December 31, 1999 in order to retroactively reflect the effect of the
operating results of an investee whose investment in the financial
statements for December 31, 1999 did not include its operating results for
1999 (see Note 2g.) - a change to which we concur.

As no audited statements of other auditors were furnished, the investment
in investee was included according to the adjusted book value as of
December 31, 1999. The statement of operations does not include the
Company's share in the results of operations of that investee for the year
ended December 31, 2000.

In our opinion except for the absence of information referred to in the
preceding paragraph, based on our audits and the reports of the other
auditors, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31,
2000 and 1999, and the results of its operations, the changes in its
deficiency and its cash flows for each of the three years, the last of
which ended December 31, 2000, in conformity with accounting principles
generally accepted in Israel.

As explained in Note 2, the above-mentioned financial statements are stated
in values adjusted for the changes in the general purchasing power of the
Israeli currency, in accordance with opinions of the Institute of Certified
Public Accountants in Israel.


Tel-Aviv, Israel
March 11, 2001
                                   /s/ KOST, FORER & GABBAY
                                   ------------------------------------
                                   KOST, FORER & GABBAY
                                   A Member of Ernst & Young International



LEVIN, DOV, ORLITZKY & Co. CPA's (Isr.)
            AUDITORS' REPORT
            To the Shareholders of
            KOORSHEVEL LTD.


We have audited the attached balance sheets of Koorshevel Ltd. (hereafter -
the company) as at December 31, 2000 and 1999, and the notes to the balance
sheets (hereafter - the financial statements). These financial statements
are the responsibility of the company's board of directors and management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance that the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the company's
board of directors and management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
fair basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the company as at
December 31, 2000 and 1999, in conformity with accounting principles
generally accepted in Israel.

As explained in note 2a., the financial statements referred to above are
presented in values adjusted for the changes in the general purchasing
power of the Israeli currency, in accordance with pronouncements of the
Institute of Certified Public Accountants in Israel.


Ramat-Gan, Israel
March 8, 200l
                                      /s/ LEVIN, DOV, ORLITZKY & CO.
                                      ------------------------------
                                      LEVIN, DOV, ORLITZKY & CO.
                                      Certified Public Accountants (Isr.)


HAGGAI WALLENSTEIN & Co. CPA's (Isr.)

Independent Auditor's Report

We have audited the accompanying balance sheets of Koor Electronics Ltd.
(hereafter - the Company) as of December 31, 2000 and 1999, and the related
statements of income (loss) and of cash flows for each of the three years
in the period ended December 31, 2000. These financial statements are in
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 audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 2000 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United
States of America.

As explained in Note 1B, the above-mentioned financial statements are
stated in values adjusted for the changes in the general purchasing power
of the Israeli currency, in accordance with opinions of the Institute of
Certified Public Accountants in Israel.


Ramat-Gan, Israel
February 21, 2001
                                        /s/ HAGGAI WALLENSTEIN & Co.
                                        ----------------------------
                                        HAGGAI WALLENSTEIN & Co.
                                        Certified Public Accountants (Isr.)

35 Jabotinsky St. (Twin Towers 2), Ramat-Gan 52511, Fax. 03-6135190 Tel.
03-6135197



Kost, Forer & Gabbay                                    Phone: 972-3-6232525
3 Aminadav St     .                                     Fax:   972-3-5622555
Tel-Aviv 67067, Israel


AUDITORS' REPORT

To the shareholders of

SOLOR AGENCIES LTD.


We have audited the accompanying balance sheets of Solor Agencies Ltd.
("the Company") as of December 31, 2000 and 1999, and the related
statements of operations, changes in equity (deficiency) and cash flows for
each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's Board of
Directors and management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 2000 and 1999, and the results of its operations, the changes
in its equity (deficiency) and its cash flows for each of the three years
in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.

As explained in Note 2, the financial statements referred to above are
presented in values adjusted for the changes in the general purchasing
power of the Israeli currency, in accordance with pronouncements of the
Institute of Certified Public Accountants in Israel.

Without qualifying our opinion, we wish to draw attention to the matter
discussed in Note 1a. to the financial statements. The Company has suffered
losses amounting to approximately NIS 2,050 thousand for the year ended
December 31, 2000 and has a working capital deficiency as of December 31,
2000 amounting to approximately NIS 1,225 thousand. These conditions raise
substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments for the
amounts and classification of assets or the amounts and classification of
liabilities that may result should the Company not be able to continue and
to operate as a "going concern".

Tel-Aviv, Israel
March 11, 2001
                                     /s/ KOST, FORER & GABBAY
                                     ---------------------------------
                                     KOST, FORER & GABBAY
                                     A Member of Ernst & Young International



Kost, Forer & Gabbay                                    Phone: 972-3-6232525
3 Aminadav St     .                                     Fax:   972-3-5622555
Tel-Aviv 67067, Israel


REPORT OF INDEPENDENT AUDITORS

To the shareholders of

KOOR INSURANCE AGENCY (1993) LTD.


We have audited the accompanying balance sheets of Koor Insurance Agency
(1993) Ltd. ("the Company") as of December 31, 2000 and 1999, and the
related statements of income, changes in shareholders' equity and cash
flows for each of the two years in the period ended December 31, 2000.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 2000 and 1999, and the results of its operations and cash
flows for each of the two years in the period ended December 31, 2000, in
conformity with generally accepted accounting principles in the United
States.

Tel-Aviv, Israel
February 22, 2001
                                    /s/ KOST, FORER & GABBAY
                                    --------------------------------
                                    KOST, FORER & GABBAY
                                    A Member of Ernst & Young International



Luboshitz Kasierer


REPORT OF INDEPENDENT AUDITORS

TO THE SHAREHOLDERS OF

KNAFAIM - ARKIA HOLDINGS LIMITED

We have audited the accompanying balance sheets of Knafaim - Arkia Holdings
Limited ("the Company") and the consolidated balance sheets as of December
31, 2000 and 1999, and the related statements of income, changes in
shareholders' equity and cash flows - of the Company and consolidated - for
each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's Board of
Directors and management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We did not audit the financial statements of subsidiaries whose assets
constitute approximately 2.1% and 2% of total consolidated assets as of
December 31, 2000 and 1999, respectively, and whose revenues constitute
approximately 25%, 18% and 16% of total consolidated revenues for the years
ended December 31, 2000, 1999 and 1998, respectively. Also we did not audit
the financial statements of affiliated companies, the investment in which
is U.S.$19,901,000 and U.S.$18,424,000 as of December 31, 2000 and 1999,
respectively, and the Company's equity in their earnings (losses) is
U.S.$1,043,000, U.S.$(970,000) and U.S.$576,000 for the years ended
December 31, 2000, 1999 and 1998, respectively. The financial statements of
those companies were audited by other auditors whose reports were furnished
to us, and our opinion, insofar as it relates to the amounts included for
those companies, is based on the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards in Israel and in the United States, including those prescribed
under the Auditors' Regulations (Auditor's Mode of Performance), 1973.
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by the Board of Directors and management, as
well as evaluating the overall financial statement presentation. We believe
that our audits and the reports of other auditors provide a reasonable
basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position - of the Company and on a consolidated
basis - as of December 31, 2000 and 1999, and the results of operations,
changes in shareholders' equity and cash flows - of the Company and on a
consolidated basis - for each of the three years in the period ended
December 31, 2000, in conformity with generally accepted accounting
principles in Israel. Also, in our opinion, the above financial statements
were prepared in accordance with the Securities Regulations (Preparation of
Annual Financial Statements), 1993.

As described in Note 2(a), the Company prepares its primary financial
statements in values adjusted for changes in the general purchasing power
of the Israeli currency as measured by the changes in the exchange rate of
the U.S. dollar in relation to the Israeli shekel in accordance with
pronouncements of the Institute of Certified Public Accountants in Israel.
The accompanying financial statements are a translation of the primary
financial statements into U.S. dollars, as described in Note 2(a).


Tel Aviv, March 20, 2001
                                          /s/ Luboshitz Kasierer
                                          ---------------------------
                                          Luboshitz Kasierer
                                          Certified Public Accountants (Isr.)



                        INDEPENDENT AUDITORS' REPORT

           TO THE SHAREHOLDERS OF MASHAL ALUMINA INDUSTRIES LTD.

We have audited the accompanying balance sheets of Mashal Alumina
industries Ltd. ("the Company") as of December 31, 2000 and 1999, and the
related statements of operations, changes in shareholders' equity and cash
flows for each of the years then ended. These financial statements are the
responsibility of the Company's Board of Directors and management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards, generally
accepted in the United States of Aamerica. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and management, as wcll as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 2000 and 1999, and the results of its operations, changes in
shareholders' equity and cash flows for each of the years then ended in
conformity with accounting principles generally accepted in the United
States of America.


/s/ Brightman Almagor & Co.
Brightman Almagor & Co.
Certified Public Accountants

Tel Aviv, 22 FEBRUARY, 2001




                        Independent Auditor's Report

We have audited the accompanying balance sheets of Telrad Business
Communication Ltd. (hereafter -- the Company), as of December 31 , 2000 and
1999, and the related statements of income (loss) and of cash flows for
each of the three years in the period ended December 31, 2000. These
financial statements are in the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of Ameria. 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 reffered to above present fairly,
in all material respects, the financial position of the Company as of
December 31 , 2000 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United
States of America.

As explained in Note B, the above-mentioned financial statements are stated
in values adjusted for the changes in the general purchasing power of the
Israeli currency, in accordance with opinions of the Institute of Certified
Public Accountants in Israel.

Ramat-Gan, Israel
February 21, 2001                         /s/ Haggai Wallenstein & Co.
                                          HAGGAI WALLENSTEIN & CO.
                                          Certified Public Accountants (Isr.)



                              AUDITORS' REPORT

                           To the Shareholders of

                       SHERATON MORIAH (ISRAEL) LTD.

We have audited the accompanying balance sheets of Sheraton Moriah (Israel)
Ltd. (hereafter - the Company) as of December 31, 2000 and 1999, and the
consolidated balance sheets of the Company and its subsidiaries as at such
dates, and the related statements of income (loss), changes in
shareholders' equity and cash flows for each of the years ended on those
dates. These financial statements are the responsibility of the company's
board of directors and management. Our responsibility is to express an
opinion on these financial statements based on our audit

We did not audit the financial statements of a subsidiary consolidated by
the proportionate consolidation method, whose assets constitute 10% of the
total consolidated assets as at December 31, 2000 and 1999 and whose
revenues constitute 26% and 0% of the total consolidated revenues for the
years ended on those dates, respectively. The financial statements of this
subsidiary were audited by other auditors whose report thereon was
furnished to us. Our opinion, insofar as it relates to amounts emanating
from the financial statements of that subsidiary is based solely on the
said report of the other auditors. Furthermore, the data included in the
financial statements relating to the net asset value of the Company's
investment in an affiliate and to its share in its operating results is
based on the financial statements of that affiliate which were audited by
other auditors.

We conducted our audits with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the company's board of
directors and management, as well as evaluating the overall financial
statements presentation. We believe that our audits, and reports of the
other auditors, provide a reasonable basis for our opinion.

In our opinion, based on our audits and on the reports of the above
-mentioned other auditors, the financial statements referenced to above
present fairly, in all material respects, the financial position of the
Company and the consolidated financial position of the company and its
subsidiaries as at December 31, 2000 and 1999 and the results of their
operations, changes in shareholders' equity and cash flows for each of the
years ended on those dates, in conformity with accounting principles
generally accepted in Israel.

 As explained in note 2, the above-mentioned financial statements are
stated in values adjusted for the changes in the general purchasing power
of the Israeli currency, in accordance with opinions of the Institute of
Certified Public Accountants in Israel.

Israel, March 8, 2001
                                           Sincerely yours,

/s/ Levin, Dov, Orlitzky & Co.             /s/ Brightman Almagor & Co.
Levin, Dov, Orlitzky & Co.                 Brightman Almagor & Co.
Certified Public Accountants (Isr.)        Certified Public Accountants (Isr.)




INDEPENDENT AUDITORS' REPORT

To the Stockholder and Board of Directors
Tadiran Electronic Industries, Inc.

We have audited the accompanying consolidated balance sheets of Tadiran
Electronic Industries, Inc. and Subsidiaries as of December 31, 2000 and
1999, and the relatad consolidated statements of Operations and retained
earnings and cash flows for the years then ended. These consolidated
financial statements are the responsibility at 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 auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by the board
of directors arid management, as well as evaluating the ovarall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Tadiran Electronic Industries, Inc., and Subsidiaries as of
December 31, 2000 and 1999, and the results their operations and their cash
flows for the years then ended, in conformity with generally accpeted
accounting principles.

As more fully discussed in Note 14, management has determined to terminate
the Company's operations and dispose of all of its assets. Although, at
this time there is no intention to dissolve the Company.

Our audits were conducted for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The additional
information on pages 16 through 19 is presented for the purpose of
additional analysis rather than to present the financial position and
results of operations of the individual companies, and is not a required
part of the basic consolidated financial statements. This additonal
information is the responsibility of the Company's management. Such
informaiton has been subjected to the auditing procedures applied in our
audits of the baisc consolidated financial statements and, in our opinion,
is fairly stated in all material respects when considered in relation to
the basic consolidated financial statements taken as a whole.


January 31, 2001                 /s/ Hoberman, Miller, Goldstein & Lesser, P.C.
                                      Certified Public Accountants



Auditors' Report to the shareholders of
Koor Hanpakot Ltd.


 We have audited the accompanying balance sheets of Koor Hanpakot Ltd. as
of December 31, 2000 and 1999 and the related statements of operations,
shareholders' equity and cash flows for each of the three years, the last
of which ended December 31, 2000. These financial statements are the
responsibility of the Company's Board of Directors and of its Management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and Management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, based on our audits, the financial statements referred to
above present fairly, in all material respects, the financial position of
the company as of December 31, 2000 and 1999 and the results of its
operations, the changes in its shareholders' equity and its cash flows for
each of the three years, the last of which ended December 31, 2000, in
conformity with accounting principles generally accepted in Israel.

As explained in note 1b, the above mentioned financial statements are
stated in values adjusted for the changes in the general purchasing power
of the Israeli currency, in accordance with opinions of the Institute of
Certified Public Accountants in Israel.

Tel-Aviv
                                         /s/ Kesselman & Kesselman
                                         Kesselman & Kesselman
         February 11, 2001               Certified Public Accountants (Isr.)



                               March 14, 2001

                  Auditors' Report to the Shareholders of

                            Koor Properties Ltd.

I have audited the accompanying balance sheets of Koor Properties Ltd. (the
"Company") as at December 31, 2000 and 1999, and the consolidated balance
sheets of the Company and its subsidiaries as at such dates, and the
related statements of operations, shareholders' equity, and cash flows, for
each of the three years, the last of which ended December 3 1, 2000. These
financial statements are the responsibility of the Company' s Board of
Directors and of its Management. My responsibility is to express an opinion
on these financial statements based on my audits.

I did not audit the financial statements of certain subsidiaries, including
those consolidated by the proportionate consolidation method, whose assets
constitute 27% of the total consolidated assets as at December 31, 1999,
and whose revenues constitute 3%, 11% and 20% of the total consolidated
revenues for the years ended December 31, 2000, 1999 and 1998 respectively.
The financial statements of those subsidiaries were audited by other
auditors whose reports thereon were furnished to me. My opinion, insofar as
it relates to amounts emanating from the financial statements of such
subsidiaries, is based solely on the said reports of the other auditors.
Furthermore, the data included in the financial statements relating to the
net asset value of the Company' s investments in affiliates and to its
share in their operating results is based on the financial statements of
such affiliates, some of which were audited by other auditors.

I conducted my audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that I
plan and perform the audit to obtain reasonable assurance about whether
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Board of
Directors and Management, as well as evaluating the overall financial
statement presentation. I believe that my audits, and reports of the other
auditors, provide a reasonable basis for my opinion.

In my opinion; based on my audits and on the reports of the above-mentioned
other auditors, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company and the
consolidated financial position of the Company and its subsidiaries as of
December 31, 2000 and 1999 and the results oftheir operations, the changes
in shareholders' equity and their cash flows for each of the three years,
the last of which ended December 31, 2000, in conformity with accounting
principles generally accepted in Israel.

As explained in note 2, the above-mentioned financial statements are stated
in values adjusted for the changes in the general purchasing power of the
Israeli currency, in accordance with opinions of the Institute of Certified
Public Accountants in Israel. .

                                                      /s/ Yosef Shimony
                                                      C.P.A (Isr.)



                        INDEPENDENT AUDITORS' REPORT


The Board of Directors of
Isram Wholesale Tours and Travel, Ltd. and Subsidiaries
(A Majority-Owned Subsidiary of Koor Industries Limited)

We have audited the accompanying consolidated balance sheets of Isram
Wholesale Tours and Travel, Ltd. and Subsidiaries (a majority-owned
subsidiary of Koor Industries Limited) as of December 31 , 2000 and 1999,
and the related consolidated statements of income and retained earnings,
and cash flows for each of the three years in the period ended December 31,
2000. 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 did not audit the
financial statements of Isram (Israel) Touring, Ltd., a wholly owned
subsidiary, which statements reflect total assets of $2,555,000 and
$3,638,000 as of December 31 , 2000 and 1999, respectively, and total
revenue of $28,670,000, $23,679,000 and $16,401,000 for the years ended
December 31 , 2000, 1999 and 1998, respectively. These 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 Isram (Israel)
Touring, Ltd., is based solely on the report of the other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial stlatement
presentation. We believe that our audits and the report of the other
auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Isram Wholesale Tours and
Travel, Ltd. and Subsidiaries as of December 31 , 2000 and 1999, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31 , 2000, in conformity with accounting
principles generally accepted in the United States of America.


/s/ Israeloff, Trattner & Co. P.C.
Valley Stream, New York
February 13, 2001 , except as to foreign
operations, covered by the other auditors'
report, as to which the date is February 26, 2001