Blue Square-Israel Makes An Announcement.

Business Editors

ROSH HA'AYIN, Israel--(BUSINESS WIRE)--Jan. 3, 2000

Blue Square -Israel Ltd. (the "Company") (NYSE: BSI) announced today that, following claims made by a few members of the Co-Op Blue Square Consumers' Cooperative Society Ltd. (the "Co-Op") as to the legality of certain activities of the Co-Op, the Registrar of Cooperative Societies in Israel has appointed an investigator to inspect certain activities of the Co-Op and its subsidiaries as well as the issuance of stock options by its subsidiaries to the employees, management and members of the Co-Op.

The Co-Op holds approximately 79.1% of the outstanding shares of the Company. The Company holds approximately 80.06% of Blue Square Investment Properties Ltd. ("BSIP"), a company traded on the Tel Aviv Stock Exchange.

In response, the Company notes that both the Company and its subsidiary BSIP have been duly incorporated under the Israeli Companies Ordinance, and that they are therefore subject only to the Companies Ordinance and the securities laws of the U.S. and Israel, respectively. Thus, the Company and BSIP are not subject to the Cooperative Societies Ordinance and, consequently, to the rulings and decisions of the Registrar of Cooperative Societies in Israel.

In addition, the Company notes that it has operated in the past and continues to operate in accordance with all applicable laws, including with respect to the above-mentioned issues.

Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 165 supermarkets under different formats, each offering varying levels of service and pricing.

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.