[LETTERHEAD OF PRICEWATERHOUSECOOPERS LLP]

                                AUDITORS' REPORT

                             To the shareholders of

                       NAVEH BUILDING AND DEVELOPMENT LTD.

We have audited the financial statements of Naveh Building and Development Ltd.
(hereafter - the Company) and the consolidated financial statements of the
Company and its subsidiary: balance sheets as of December 31, 1998 and 1997 and
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's Board of Directors and
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We did not audit the financial statements of joint ventures, whose assets
constitute approximately 10.8% and 16% of total consolidated assets in 1998 and
1997 respectively and the investment in which is accounted for by the equity
method (see note 4). The financial statements of the above associated company
and joint ventures were audited by other auditors, whose reports have been
furnished to us, and our opinion, insofar as it relates to amounts included for
those companies, is based solely on the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards, including those prescribed by the Israeli Auditors (Mode of
Performance) Regulations, 1973. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement, either due to error or to intentional
misrepresentation. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Company's Board of Directors and management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.

The aforementioned financial statements have been prepared on the basis of
historical cost adjusted to reflect the changes in the general purchasing power
of Israeli currency, in accordance with pronouncements of the Institute of
Certified Public Accountants in Israel. Condensed nominal Israeli currency data
of the Company, on the basis of which its adjusted financial statements were
prepared, are presented in note 15.
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PRICE WATERHOUSECOOPERS [LOGO]

In our opinion, based upon our audits and the reports of the other auditors
referred to above, the aforementioned financial statements present fairly, in
all material respects, the financial position - of the Company and consolidated
- at December 31, 1998 and 1997 and the results of operations, changes in
shareholders' equity and cash flows - of the Company and consolidated - for each
of the three years in the period ended December 31,1998, in conformity with
generally accepted accounting principles. Also, in our opinion, the
abovementioned financial statements have been prepared in accordance with the
Israeli Securities (Preparation of Annual Financial Statements) Regulations,
1993.

Accounting principles generally accepted in Israel differ in certain respects
from accounting Principles generally accepted in the United States. The
application of the latter would have affected the determination of
nominal/historical net income and shareholders' equity to the extent summarized
in the attached note.


                                          /s/ Kesselman & Kesselman

Tel-Aviv, Israel                          Kesselman & Kesselman
February 21,1999                          Certified Public Accountants (Isr.)