AUDIT COMMITTEE CHARTER
The Audit Committee (the "Committee") is appointed by
the Board of Directors (the "Board") of Ampal-American Israel Corporation
(the "Company") to assist the Board in its oversight responsibilities
relating to (1) the integrity of the financial statements
of the Company and its financial reporting process, (2) internal
and external auditing and the independent auditor's qualifications
and independence, (3) the performance of the Company's internal
audit function and independent auditors, (4) the integrity of the
Company's systems of internal accounting and financial controls,
and (5) the compliance by the Company with legal and regulatory
II. Committee Membership
The Committee shall consist of no fewer than three members.
The members of the Committee shall meet the independence and experience
requirements of The NASDAQ Stock Market, Inc. and applicable law,
including the Sarbanes-Oxley Act of 2002 (the "Act"). All
members of the Committee must be able to read and understand fundamental
financial statements at the time of their appointment and at least
one member of the Committee shall be an "audit committee financial
expert," as defined under the Act and the regulations promulgated
thereunder, unless the Board shall have determined that the members
of the Committee have sufficient expertise in financial statement
oversight that such expert is not necessary, which determination
shall be disclosed in the Company's applicable Form 10‑K.
The members of the Committee shall be appointed by the Board.
Committee members may be replaced by the Board.
III. Committee Authority and Responsibility
The Committee shall be solely responsible for the appointment
and retention (or termination) of the independent auditor, and
shall be solely responsible for the compensation and oversight
of the work of the independent auditor. The independent
auditor shall report directly to the Committee.
The Committee shall have the authority to engage independent counsel,
accounting or other advisors to advise the Committee as it determines
appropriate to assist in the full performance of its functions.
The Committee shall approve in advance all audit services and
all non-audit services provided by the independent auditors based
on policies and procedures developed by the Committee. The
Company shall provide the Committee with appropriate funding,
as determined by the Committee, to (i) compensate the registered
public accounting firm engaged for the purpose of rendering an
audit report or related work or performing other audit, review
or attest services, (ii) compensate any advisers employed by the
Committee, and (iii) reimburse the Committee for its administrative
The Committee shall meet as often as it determines, but not less
frequently than quarterly.
The Committee may form and delegate authority to subcommittees
The Committee may request any officer or employee of the Company
or the Company's outside counsel or independent auditor to attend
a meeting of the Committee or to meet with any members of, or
consultants to, the Committee.
The Committee shall meet with management, the internal auditors,
if any, and the independent auditor in separate executive sessions
at least quarterly.
The Committee shall make regular reports to the Board and shall
submit the minutes of its meetings to the Board.
The Committee shall review and reassess the adequacy of this Charter
at least annually and recommend any proposed changes to the Board
The Committee shall provide a copy of the Charter to be included
as an appendix to the Company's proxy statement.
The Committee shall prepare the report required by the rules of
the Securities and Exchange Commission to be included in the Company's
annual proxy statement.
The Committee shall annually review and evaluate the Committee's
The Committee's policies and procedures shall remain flexible
in order to best react to changing conditions and to help ensure
that the Company's accounting and reporting practices are in accord
with all requirements and are of the highest quality. In carrying
out its responsibilities, the Committee, to the extent it deems
necessary or appropriate, shall:
Financial Statement and Disclosure Matters
Review and discuss with management and the independent auditor,
prior to filing, the annual audited financial statements, including
disclosures made in the Company's annual report on Form 10-K and
management's discussion and analysis.
Recommend to the Board of Directors, based upon a review of the
Company's audited financial statements and discussions with management
and the independent auditor, and a written statement provided by
management, whether the audited financial statements should be included
in the Company's annual report on Form 10-K.
Review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to the filing of
its Form 10‑Q, including the results of the independent auditor's
reviews of the quarterly financial statements.
Obtain from the independent auditor a report of all critical accounting
policies and practices, all alternative treatments of financial
information that have been discussed and the ramifications of such
alternate treatments, including the treatment preferred by the independent
auditor, and all material communications between the independent
auditor and management.
Review analyses prepared by management setting forth the significant
financial reporting issues or judgments made in connection with
the financial statements, including analyses of the effects of alternative
GAAP methods on the financial statements.
Approve, if appropriate, major changes to the Company's auditing
and accounting principles and practices as suggested by the independent
auditors, management, or the internal auditors, if any.
Discuss with management and the independent auditor the effect of
regulatory and accounting developments as well as off-balance sheet
structures on the Company's financial statements.
Inquire of management, the internal auditor, if any, and the independent
auditor about any potential financial risks or exposures and assess
the steps management should take or has taken to identify and minimize
Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to
the conduct of the audit, including the management letter provided
by the independent auditor and the Company's response to that letter,
and any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access
to requested information, and any significant disagreements with
Discuss with management, the internal auditor, if any, and the independent
auditor the adequacy and effectiveness of the Company's internal
Review with the Chief Executive Officer and the Chief Financial
Officer the Company's disclosure controls and procedures and review
periodically, but in no event less frequently than quarterly, management's
conclusions about the efficacy of such disclosure controls and procedures.
Oversight of the Company's Relationship with the Independent Auditor
Review the experience and qualifications of the senior members of
the independent auditor team.
Obtain and review a report from the independent auditor at least
annually regarding (a) the auditor's internal quality-control procedures,
(b) any material issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or investigation
by governmental or professional authorities within the preceding
five years respecting one or more independent audits carried out
by the firm, (c) any steps taken to deal with any issues raised
in clause (b) above, and (d) all relationships between the independent
auditor and the Company. Evaluate the qualifications, performance
and independence of the independent auditor, including considering
whether the auditor's quality controls are adequate and the provision
of non-audit services is compatible with maintaining the auditor's
independence, taking into account the opinions of management and
the internal auditor, if any. The Committee shall present
its conclusions to the Board and, if so determined by the Committee,
recommend that the Board take additional action to satisfy itself
of the qualifications, performance and independence of the auditor.
Adopt a policy of rotating the lead and concurring audit partner
every five years and consider whether in order to assure continuing
auditor independence, it is appropriate to adopt a policy of rotating
the independent auditing firm itself on a regular basis.
Recommend to the Board guidelines for the Company's hiring of employees
or former employees of the independent auditor who were engaged
on the Company's account.
Discuss with the international office of the independent auditor
issues on which they were consulted by the Company's audit team
and matters of audit quality and consistency.
Meet with the independent auditors and the financial management
to review the scope of the audit proposed for the current year and
the audit procedures to be utilized, and at its conclusion, review
the audit, including the comments or recommendations of the independent
Oversight of the Company's Internal Audit Function
Review the appointment and, if necessary, the replacement of the
persons or entity performing the internal audit function.
Review the significant reports to management prepared by the internal
auditing function and management's responses.
Discuss with the independent auditor, the responsibilities, budget
and staffing of the internal audit group, if any, and any recommended
changes in the planned scope of the internal audit, if applicable.
Review the internal audit function including the independence and
authority of its reporting obligations, the audit plans proposed
for the coming year, and the coordination of such plans with the
work of the independent auditors.
Compliance Oversight Responsibilities
Obtain from the independent auditor assurance that it is not aware
of any circumstances that would require reporting under Section
10A of the Securities Exchange Act of 1934.
Obtain reports from management and the Company's internal audit
function that the Company is in conformity with applicable legal
requirements and the Company's Code of Conduct and advise the Board
with respect to such compliance.
Review with management and the independent auditor and approve all
transactions or courses of dealing with parties related to the Company.
Review with management and the independent auditor any correspondence
with regulators or governmental agencies and any published reports
which raise material issues regarding the Company's financial statements
or accounting policies.
Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters. Additionally, the
Committee shall ensure that all such complaints are treated confidentially
and anonymously, as set forth in Section 301 of the Act.
Discuss with the Company's counsel legal and regulatory matters
that may have a material impact on the Company's financial statements,
and compliance policies and programs, including corporate securities
Perform any other activities consistent with this Charter as the
Committee or the Board may deem necessary or appropriate.
These are the responsibilities of the Company's management and
the independent auditor.