Blue Square-Israel Ltd. (NYSE:BSI – news) has announced that a report prepared by Advocate Haim Indig with respect to the Co-Op Blue Square Cooperative Society (the “Co-Op”) was released to the public on July 11, 2000. Mr. Indig was appointed in December 1999 by The Registrar of Cooperative Societies, an Israeli government agency (the “Registrar”), to investigate certain activities of the Co-Op and certain aspects of its relationship with Blue Square and its subsidiaries. The Co-Op owns approximately 78.1% of the outstanding ordinary shares of Blue Square.

In the report Mr. Indig alleged that the 1996 grant of options to purchase ordinary shares of Blue Square, pursuant to the 1996 Blue Square – Israel Share Incentive Plan to certain officers, directors and employees of Blue Square and its affiliates (including the Co-Op) was improper. Mr. Indig recommended that a committee be appointed to replace the governing body of the Co-Op. The Committee would consider commencing legal proceedings with respect to such grant, to investigate possible conflicts of interest and to manage the Co-Op and direct the voting of the shares which the Co-Op owns in its subsidiaries, for the election of the directors of such subsidiaries and other matters.

In addition, the Registrar decided in an interim decision, on June 20, 2000, to nullify the elections to the governing body of the Co-Op. In his decision, the Registrar adopted the recommendations of Advocate Doron Dinaey, who was appointed to examine the election proceedings. The Registrar further decided to accept submissions from the parties regarding the holding of future elections and the status of the managing body of the Co-Op until the new elections take place. At present no change has been made in the Co-Op’s management.

The legal counsel in Israel of both the Co-Op and Blue Square have written letters to the Registrar strongly objecting to the procedures of Mr. Indig’s investigation and rejecting the conclusions of his report. Blue Square noted that, pending the outcome of a hearing which the Registrar is to hold with respect to the report and any other legal action that may ensue, it is unable at this stage to determine how, if at all, the report or its recommendations will impact upon Blue Square.

Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 166 supermarkets under different formats, each offering varying levels of service and pricing. For more information, please refer to Blue Square’s website at

The statements contained in this release which are not historical facts contain forward-looking information with respect to plans, projections, or future performance of the Company, the occurrence of which involve certain risks and uncertainties, including risk of market acceptance, the effect of economic conditions, the impact of competitive pricing, supply constraints, the effect of the Company’s accounting policies, as well as certain other risks and uncertainties which are detailed in the Company’s filings with the Security and Exchange Commission, particularly the prospectus with respect to its public offering in July, 1996.