Washington, D.C. 20549
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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:
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If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
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:
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to besubmitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files):
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U.S. GAAP ☐
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TABLE OF CONTENTS
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PART
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PRESENTATION OF INFORMATION
In this annual report on Form 20-F (“Annual Report”),
references to the “Company”, “we” and “us” refer to G. Willi-Food International Ltd. and its consolidated
subsidiaries. References to “Willi-Food” refer to Willi-Food Investments Ltd., our controlling shareholder.
The Company presents its consolidated financial statements in
New Israeli Shekels, the currency of the State of Israel. Unless otherwise specified or the context otherwise requires, references to
“$”, “US$”, “Dollars”, “USD” and “U.S. Dollars” are to the United States Dollars
and references to "NIS" are to New Israeli Shekels.
Solely for the convenience of the reader, this Annual Report
contains translations of certain NIS amounts into U.S. Dollars at specified rates. These translations should not be construed as representations
that the translated amounts actually represent such dollar or NIS amounts, as the case may be, or could be converted into U.S. Dollars
or NIS as the case may be, at the rates indicated or at any other rate. Therefore, unless otherwise stated, the translations of NIS into
U.S. Dollars have been made at the rate of NIS 3.11 = $1.00, the representative exchange rate on December 31, 2021.
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this Annual Report that
are not historical facts, including, without limitation, certain statements made in the sections hereof entitled “Information on
the Company,” “Dividends,” “Operating and Financial Review and Prospects,” and “Quantitative and Qualitative
Disclosures about Market Risk” are statements of future expectations and other forward-looking statements that are based on management’s
current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events
to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from
those in such statements due to, without limitation, the risks set forth in "Item 3. Key Information – D. Risk Factors", including
the following:
| • |
payment default by, or loss of, one or more of our principal clients; the loss of one or more of our key personnel; |
| • |
termination of, or changes in, arrangements with our key customers; |
| • |
market risks of our portfolio of marketable securities, such as changes affecting currency exchange rates; |
| • |
termination of arrangements with our suppliers; |
| • |
increasing levels of competition in Israel and other markets in which we do business; |
| • |
increase or decrease in global purchase prices of food products; |
| • |
our inability to accurately predict consumption of our products or changes in consumer preferences; |
| • |
product liability claims and other litigation matters; |
| • |
interruption to our storage facilities; |
| • |
our insurance coverage may not be sufficient; |
| • |
our operating results may be subject to variations from quarter to quarter; |
| • |
our inability to successfully compete with nationally branded products; |
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our inability to successfully integrate our acquisitions; |
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our inability to protect our intellectual property rights; |
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significant concentration of our shares are held by one shareholder; |
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we are controlled by and have business relations with Willi-Food Investments Ltd. and its management; |
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the price of our ordinary shares may be volatile; |
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our inability to meet the Nasdaq Capital Market (“Nasdaq”) and the TASE listing requirements; |
| • |
our inability to maintain an effective system of internal controls; |
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cyber-attacks on the Company's information systems; |
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changes in laws and regulations, including those relating to the food distribution industry, and inability to meet and maintain regulatory
qualifications and approvals for our products; |
| • |
economic conditions in Israel; |
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changes in political, economic and military conditions in Israel, including, in particular, economic conditions in the Company’s
core markets; |
| • |
our international operations may be adversely affected by risks associated with international business; and |
| • |
the ongoing COVID-19 pandemic. |
The Company is under no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information or for any other reason.
PART
I
ITEM 1. IDENTITY OF DIRECTORS,
SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2. OFFER STATISTICS
AND EXPECTED TIME TABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. Reserved
B. CAPITALIZATION
AND INDEBTEDNESS
Not applicable.
C. REASONS
FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK
FACTORS
You should carefully consider the risks we
describe below, in addition to the other information set forth elsewhere in this Annual Report, including our financial statements and
the related notes beginning on page F-1, before deciding to invest in our ordinary shares (the “Ordinary Shares”). The risks
and uncertainties described below in this Annual Report are not the only risks facing us. We may face additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial. Any of the risks described below or incorporated by reference in
this Annual Report could materially adversely affect our business, financial condition or results of operations. In such case, you may
lose all or part of your investment.
Risks Related to Our Business and Industry
We depend on a small number of principal clients who
have in the past bought our products in large volumes. Our business may be materially affected
if any of our major clients default on their payments to us.
Financial instruments that potentially subject us to concentrations
of credit risk consist principally of trade receivable. Despite our large number of clients (approximately 1,500 customers, 3,000 selling
points in Israel and abroad), a major part of our sales is made to a limited number of customers. Our largest customer is Shufersal Ltd.
("Shufersal"), which owns, among other things, supermarkets which accounted for approximately NIS 60.7 million (which represents 13.3%)
of our sales revenue during 2021. We generally do not require collateral from our big supermarket chain customers, such as Shufersal,
although we do require collateral from most of our remaining clients in Israel to ensure security in collecting payments that are due
to us. In addition, we buy credit insurance for many of our customers. We maintain an allowance for doubtful debts based upon factors
surrounding the credit risk of specific customers, historical trends and other information which our management believes adequately covers
all reasonably anticipated losses in respect of trade receivable. There can be no assurance that this allowance will be adequate. In the
event that any of our major clients default on their payment obligations to us, we will not possess sufficient security to collect the
entire debt.
We cannot assure that our principal clients or any other client
will continue to buy our products in the same volumes, on the same terms or at all.
We do not have long term purchase contracts with our clients,
including our major clients like Shufersal, and our sales arrangements do not have minimum purchase requirements. We cannot assure that
our major clients will continue to buy our products at all or in the same volumes or on the same terms as they have in the past. Losing
one or more of them may adversely affect our business results. In addition, we cannot assure that we will be able to attract new customers.
Our failure to do so may significantly reduce our sales.
Our results of operations may be impacted by monetary risk. Our
portfolio of marketable securities is subject to various market risks.
We are exposed to fluctuations in the rate of the United States
Dollar and Euro versus the NIS. Most of our income is in NIS, whereas most of our purchases are in United States Dollars and in Euros.
A significant depreciation in the NIS vis-à-vis the United States Dollar and/or Euro could have a material adverse effect on our
results of operations and financial condition.
We strive to minimize market risks arising from exchange rate fluctuations
and the cost of imported goods, especially by opening documentary credit arrangements (a/k/a letters of credit) for suppliers abroad,
holding foreign currency reserves and initiating forward transactions and foreign currency options.
As a method of investing cash reserves, we hold a portfolio of
marketable securities traded on the Tel Aviv Stock Exchange as well as other stock exchanges. This portfolio of marketable securities
is subject to various market risks resulting from fluctuations in interest rates, exchange rates, price fluctuations and other market
risks in Israel and abroad.
In order to reduce these risks, the Board has adopted the procedure
of regularly removing available funds in the Company's accounts for management by internal investment manager. In addition, the Board
has revised the Company's investment policy, has appointed members of the Board to the investment committee and has added both Co-Chairman
of the Board to the investment committee.
Our financial instruments consist mainly of cash and cash equivalents,
trade receivable, current trade payable and accruals. In view of their nature, the fair value of the financial instruments, included in
working capital, is usually identical or close to their book value.
We work with a limited number of key suppliers. If
these suppliers raise prices or terminate their engagement with us, our operating results could be adversely affected.
Although no one company supplies the majority of any of our
products, we work with a limited number of key suppliers. If one or more of our key suppliers raises their prices, our operating results
may be adversely affected. See risk factor below - "Increases or decreases in global product prices have in the past, and in the future,
may continue to have a material adverse effect on our profitability". We believe that there are alternative suppliers for purchasing our
products; however, we cannot assure that the products of the alternative suppliers will become immediately available and that the terms
of purchase will be similar to those provided by current suppliers.
We may not be able to successfully compete with larger competitors
who have greater operations, financial, marketing, labor and other resources than we have.
The food distribution business in Israel is highly competitive.
We face competition from existing competitors in respect of imported as well as locally manufactured food products. Local producers are
not subject to the financial risks of importing food products or to governmental policies regarding taxation of imported food products
to which we as importers are subject. We may also face competition from potential newcomers to the local food manufacturing business as
well as from existing importers and/or manufacturers not currently offering the same lines of products as us. In addition, in the event
we further expand our activity in international food markets, we will also face competition from manufacturers and/or distributors in
those markets. Certain of our current and potential competitors are substantially more established, benefit from substantially greater
market recognition and have greater financial, marketing, labor and other resources than we have. If any of our competitors materially
reduces prices, we may be required to reduce our prices in order to remain competitive. Such reductions, if effected, could have a material
adverse effect on our financial condition and results of operations.
Increases or decreases in global product prices have in the past,
and in the future may continue to have a material adverse effect on our profitability.
The cost of food commodities and other food products is cyclical
and subject to other market factors and may fluctuate significantly. As a result, our cost in securing these products is subject
to substantial increases over which we have no control. In addition, fuel costs, which represent the most significant factor affecting
both utility costs at our facilities and our transportation costs, are subject to wide fluctuations. Although we are making best efforts,
we cannot assure that we will be able to pass on to customers any increased costs associated with the procurement of these products. Moreover,
there has been in the past, and there may be in the future, a time lag between the occurrence of such increased costs and the transfer
of such increases to customers. To the extent that increases in the prices of our products cannot be passed on to customers or there
is a delay in doing so, we are likely to experience an increase in our costs which may materially reduce our margin of profitability.
Further, there is an additional lag time from the date we purchase
inventory from our suppliers situated outside of Israel (or commit to purchase inventory from such suppliers) and the date we sell the
inventory to our customers in Israel. To the extent that the price we are able to sell such inventory to customers decreases from the
time that we purchase it (or commit to purchase it), our margin of profitability may be materially reduced.
Increases or decreases in global product prices in the future
may have a material adverse effect on our profitability.
The COVID-19 pandemic has caused an increase in sea freight costs
and delays in delivery of inventory, which has and may continue to have a material adverse effect on our profitability. The COVID-19
pandemic may also adversely affect our business, revenues, results of operations and financial condition in other ways.
We purchase most of our inventory from countries outside the
State of Israel. This inventory is transported through shipping companies and other forwarders until the inventory arrives to the various
port in the State of Israel. We are dependent on shipping companies and other forwarders, and we are exposed to changes in inventory
transportation prices and the ability of the shipping companies and forwarders to move the volume of inventory required by our business
in a timely manner. During the last year, as a result of the COVID-19 crisis, the global supply chain has been adversely affected due
to quarantines, shelter-in-place and similar government orders, travel restrictions and health impacts of the COVID-19 pandemic and the
shortage of available containers and ships that used for sea transport. These events cause delays in the transport of ships and the release
of containers at world ports, including Israel, as well as a significant increase in world shipping prices. If we are unable to
obtain the inventory needed for our business on a timely and cost-effective basis, we will not have sufficient products to sell and may
be required to increase the price of our products, which may have a material adverse effect on our business.
The COVID-19 pandemic may also adversely affect our business,
revenues, results of operations and financial condition in other ways. The precautionary measures taken by the United States, Israel and
other affected countries around the world have and may continue to have an adverse effect on the global markets and its economy and could
impact the availability and/or pricing of our employees, resources, materials, manufacturing and delivery efforts. For example, COVID-19
may restrict the ability of our suppliers to manufacture our products in sufficient quantities or at all. The COVID-19 outbreak continues
to rapidly evolve, and its ultimate scope, duration and effects are unknown. The extent of the impact of the disruptions to our business,
including our manufacturing capabilities and commercial sales, as a result of the pandemic, will depend on future developments, which
are highly uncertain and cannot be predicted with confidence. The continuation of the COVID-19 pandemic could materially disrupt our business
and operations, hamper our ability to raise additional funds or sell our securities, slow down the overall economy, curtail consumer spending
and make it hard to adequately staff our operations,
Our results of operations may be adversely affected if we do not
accurately predict the rate of consumption of our products.
We hold inventory of basic foodstuffs (such as preserved food,
dairy and dairy substitute products, edible oils, pasta and rice (and other food products, and we accumulate inventories of these products
based on our prediction of the rate of consumption of these products by our customers. If actual consumption does not meet our expectations,
and the shelf life of such products expires or we cannot otherwise sell such products, this may materially and adversely affect our financial
condition and results of operations. On the other hand, to the extent we do not have adequate inventory of our products to meet demand
(for example, due to consumer conditions that create unexpectedly high demand or our failure to accurately predict the rate of consumption
of our products), we will not be able to meet the needs of our customers and our revenues may be adversely affected.
We may be unable to anticipate changes in consumer preferences,
which may result in decreased demand for our products.
Our success depends in part on our ability to anticipate the tastes
and eating habits of our consumers and to offer products that appeal to their preferences. Consumer preferences change from time to time
and our failure to anticipate, identify or react to these changes could result in reduced demand for our products, which would adversely
affect our operating results and profitability.
We may be subject to product liability claims for misbranded, adulterated,
contaminated or spoiled food products.
We sell food products for human consumption, which involves risks
such as product contamination or spoilage, misbranding, product tampering, and other adulteration. Consumption of contaminated, spoiled,
misbranded, tampered with or adulterated products may result in personal illness or injury. We could be subject to claims or lawsuits
relating to an actual or alleged illness or injury, and we could incur liabilities that are not insured or that exceed our insurance coverage.
Even if product liability claims against us are not successful or fully pursued, these claims could be costly and time consuming and may
require management to spend significant time defending the claims rather than operating our business. In addition, a product that has
been actually or allegedly misbranded or becomes adulterated could result in product withdrawals, product recalls, destruction of product
inventory, negative publicity, temporary plant closings, and substantial costs of compliance or remediation. Any of these events, including
a significant product liability judgment against us, could result in a loss of confidence in our food products, which could have an adverse
effect on our financial condition, results of operations or cash flows.
Our insurance coverage may not be sufficient to cover our losses
in the event our products are subject to product liability claims or our products are subject to recall. In such event, it could have
a material adverse effect on us.
Our products may become the subject of product liability claims
and product recalls, and there can be no assurance that our product liability insurance coverage limits will be adequate or that all such
claims will be covered by such insurance. A product liability claims or product recall, even one without merit or for which we have substantial
insurance coverage, could result in significant expenses, including legal defense costs, thereby lowering our earnings and potentially
resulting in additional losses. Successful product liability claims or other judgments against us in excess of our insurance coverage
could have a material adverse effect on us and our reputation.
We may be adversely affected by any interruption to our storage
facility.
We store most of our products to be distributed to customers in
one main location – a logistics center warehouse situated in Yavne, Israel. Any interruption to this storage facility, whether by
power failure, flooding or otherwise, would have a material impact on our ability to trade in the ordinary course of our business.
Our operating results may be subject to variations from quarter
to quarter.
Our operating results may be subject to variations from quarter
to quarter depending on, among other things, the timing of sales campaigns and special events initiated both by us and our customers,
the major Jewish holidays (such as the Jewish New Year and Passover), our ability to manage future inventory levels in line with business
opportunities and anticipated customer demand, competitive developments in the market, changes in government regulations, periodic work
stoppages or disruptions, changes in the rates of inflation in Israel and fluctuations in NIS/dollar and NIS/euro exchange rates. There
can be no assurance that our sales or net income (if any) in any particular quarter will not be lower than the preceding and/or comparable
prior-year quarter or that our sales or net income (if any) in a particular quarter will be indicative of our results of operations for
the entire year. The trading prices of our ordinary shares may fluctuate significantly in response to variations in our quarterly operating
results.
Our branded products may not be able to compete successfully with
nationally branded products.
Competition to obtain shelf space for our branded products with
retailers is primarily based on the expected or historical performance of our product sales relative to our competitors. The principal
competitive factors for sales of our branded products to consumers are brand recognition and loyalty, product quality and price. Most
of our branded product competitors have significantly greater resources than we do and may have a competitive advantage over our products
due to greater brand name recognition.
Competitive pressures or other factors could cause us to lose market
share, which may require us to lower prices, increase marketing expenditures, and/or increase the use of discounting or promotional programs,
each of which would adversely affect our margins and could result in a decrease in our operating results and profitability.
The failure to attract and retain key personnel could adversely affect our business.
Our success depends in large part on our ability to continue to
attract, retain, develop and motivate highly skilled professional personnel. Competition for certain employees, particularly top management,
is intense. We may be unable to continue to attract and retain sufficient numbers of highly skilled employees. Our inability to attract
and retain additional key employees or the loss of one or more of our current key employees could adversely impact our business, financial
condition and results of operations.
In particular, we depend on the management services provided
to us by Mr. Zwi Williger and Mr. Joseph Williger, each of whom is a director and Co-Chairman of the Board, through management companies
that they control. See Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders". We do not have any key-man
life insurance policy on either Mr. Zwi Williger or Mr. Joseph Williger. The loss of either or both of Mr. Zwi Williger and/or Mr. Joseph
Williger could adversely impact our business, financial condition and results of operations.
If we are unable to protect our intellectual property rights, our
competitive position could be compromised.
We market certain products under the trademarks “Willi-Food”,
"Euro European Dairies", "Donna Rozza", "Manchow", “Gold Frost”, "Tifeeret", "The Chef Dish", "Art Coffe", "Mr Chang", "Muchi",
"Euro Butter", "Euro Spread", "Euro Cheese", Euro Cream", "Euro Dessert", "Euro Veg", "Ha-Bulgaria ", "Gelato", "Pinukim", "Emma" and
"TenBo". Although we have registered trademarks for these brands, we cannot assure that the degree of protection from this registration
will be sufficient to protect our rights in these trademarks.
One shareholder owns a majority of our shares.
As of March 15, 2022, Willi-Food Investments Ltd., an entity
controlled by Messrs. Zwi Williger and Joseph Williger, owned approximately 59.1% of our outstanding shares. Our Articles of Association
do not provide for cumulative voting rights with respect to the election of directors and every resolution in a general meeting of shareholders
is deemed duly passed if passed by a simple majority of the shareholders present and voting unless another majority is required by the
Israeli Companies Law (the "Companies Law") or by our Articles of Association. Therefore, our controlling shareholders are able to control
the outcome of matters requiring shareholder approval that do not require a special majority.
We have business relations with Willi-Food and its management.
Willi-Food, our controlling shareholder, is a holding company whose
main asset is the ordinary shares it owns in our company. Willi-Food currently does not directly conduct any material business, excluding
investments in securities portfolio in the amount of NIS 19.1 million (USD 6.1 million) as of December 31, 2021.
Certain of our key personnel also serve in management positions
in Willi-Food. By serving in dual capacities, these persons may experience conflicts of interest involving the two companies. Israeli
law imposes procedures, including a requirement of shareholder approval for certain material transactions, as a precondition to entering
into interested party transactions. These procedures may apply to transactions between Willi-Food and us. However, we cannot assure that
we will be able to avoid possible detrimental effects of any such conflicts that may arise.
Our inability to meet the Nasdaq listing requirements could result
in delisting
We may in the future fail to comply with the Nasdaq
Capital Market regulations and listing requirements as to minimum share price, minimum net income, minimum number of shareholders and
public float and other requirements. In addition, under Nasdaq’s Listing Rules, any company whose shares have a closing bid price
less than $1.00 for 30 consecutive business days may be subject to a delisting proceeding by Nasdaq.
If we fail to meet the continued listing criteria
under Nasdaq rules, our ordinary shares may be delisted from trading on the Nasdaq Capital Market and the TASE under dual-listing requirements.
Delisting from the Nasdaq Capital Market and/or the TASE could
have an adverse effect on our business and on the trading of our ordinary shares. If a delisting of our ordinary shares from Nasdaq were
to occur, our shares would trade in the over-the-counter market in the U.S. such as on the OTC Bulletin Board or on the “pink sheets”.
The over-the-counter market is generally considered to be a less efficient market, and this could diminish investors’ interest in
our ordinary shares as well as significantly impact our share price and the liquidity of our ordinary shares. Any such delisting may also
severely complicate trading of our shares by our shareholders, or prevent them from re-selling their shares at/or above the price they
paid. Furthermore, relatively low trading volumes may make it difficult for shareholders to trade shares or initiate any other transactions.
Delisting may also make it more difficult for us to issue additional securities or secure additional financing.
Our inability to win tenders on tax exempt import quotas published
by the Ministry of Finance could negatively impact our business and harm our financial condition.
The Company participates in tenders for the importation into
Israel of certain food products on a duty free basis which are published from time to time by the Ministry of Finance. Our competitors
also participate in these tenders and may offer better bids than those of the Company, thereby resulting in the Company losing the competitive
processes to acquire the quotas. The winners of these tax exempt import quotas commit to selling preset quantities of the products at
a relatively low price to the final consumer. Violation of the terms of the tenders may cause forfeiture of bank guarantees granted against
compliance with the tender terms, and non-issuance of tax exempt import quotas in the competitive proceeding for up to five years. Our
inability to win such tenders or any Company violation of the terms of the tenders could negatively impact our business and harm our financial
condition.
We may not successfully integrate our acquisitions.
We have made acquisitions in the past and may do so in the future.
Our success will depend in part on our ability to manage the combined operations of any acquired company, to integrate the operations
and personnel of such company together with our other subsidiaries into a single organizational structure, and to replace those subsidiary
managers who have departed or may in the future leave our employ. There can be no assurance that we will be able to effectively integrate
the operations of our subsidiaries and our acquired businesses into a single organizational structure. Integration of operations could
also place additional pressures on our management as well as on our other key personnel. The failure to successfully manage any integration
could have an adverse material effect on results of our operations.
Risks Related to Our Location in Israel
We are subject to regulations and other policies of the Israeli
government and of other countries from which we import and into which we export. If we are unable to obtain and maintain regulatory qualifications
or approvals for our products, our business may be adversely affected.
Regulatory, licensing and quotas:
The import, export, storage, marketing, distribution and labeling of some major food products are subject to extensive regulation and
licensing by various Israeli government and municipal agencies, principally the Ministry of Health, the Ministry of Economy, the Ministry
of Agriculture and the Ministry of Finance. To the extent that we have imported and exported, or will import and export, food products
outside of Israel, we may be subject to quotas and other import and export laws and regulations which may limit our ability to sell or
buy certain of our food products into or from these countries. We are required to maintain our distribution processes in conformity with
all applicable laws and regulations. In the event that such laws and regulations change, or we fail to comply with such laws and regulations,
we may be prevented from trading within Israel or other parts of the world.
Tariffs: The Ministry of
Finance and the Ministry of Economy of the State of Israel may increase the levels of tariffs on importing goods. This would have a direct
impact on us and our financial performance by increasing our costs which we may not be able to pass on to our customers.
Kosher Licenses: Under
kosher regulations, we are required to ascertain that the food products which we offer for sale bear kosher certification approved by
certain authorities such as the Chief Rabbinate of Israel. There is a risk that the relevant authorities in Israel or other areas of the
world responsible for issuing kosher licenses may change the criteria for obtaining such licenses. In such circumstances, we may be prohibited
from obtaining kosher licenses for various products that we sell into the various kosher markets. Failure to comply with such applicable
laws and regulations in relation to kosher licenses could subject us to civil sanctions, including fines, injunctions, recalls or seizures,
as well as potential criminal sanctions, any of which could have a material adverse effect on us and our financial performance.
Economic conditions in Israel affect our financial performance.
A major part of our sales is made in Israel, and consequently
our financial performance is dependent to a significant extent on the economy of Israel. A deterioration of the economic situation in
Israel, or periodic work stoppages or disruptions, may erode the real wages and lower the buying power of our potential customers. This
in turn may adversely affect our activities and business results.
We may be affected by political, economic and military conditions
in Israel and the Middle East.
We are incorporated under the laws of the State of Israel, our
principal offices are located in central Israel and all of our officers, employees and directors are residents of Israel. Accordingly,
political, economic and military conditions in Israel have a direct influence on us. Since the establishment of the State of Israel in
1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption
or curtailment of trade between Israel and its present trading partners could materially and adversely affect our operations. During 2012,
2014 and 2021, Israel was engaged in armed conflicts with Hamas, a militia group and political party operating in the Gaza Strip. This
conflict involved missile strikes by Hamas against civilian targets in various parts of Israel and negatively affected business conditions
in Israel. Ongoing or revived hostilities related to Israel may have a material adverse effect on our business and on our share price.
The political uncertainty in surrounding countries, including Syria, is affecting the political stability of that country. This instability
may lead to deterioration of the political relationships that exist between Israel and neighboring countries and has raised concerns regarding
security in the region and the potential for armed conflict. In addition, Iran is believed to have a strong influence among extremist
groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon. The tension between Israel and Iran and/or these groups may escalate
in the future and turn violent, which could affect the Israeli economy generally and us in particular.
Many of our executive officers and employees in Israel are obligated
to perform annual military reserve duty in the Israeli Defense Forces and, in addition, may be called to active duty under emergency circumstances
at any time. If a military conflict or war arises, these individuals could be required to serve in the military for extended periods of
time. Our operations could be disrupted by the absence for a significant period of one or more of our executive officers or key employees
or a significant number of our other employees due to reserve duty. Any disruption in our operations may harm our business.
Our commercial insurance does not cover property, asset or operational
losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeli government
currently reimburses for the value of direct damages that are caused by terrorist attacks or acts of war, and if certain conditions are
met covers indirect damages (up to limited amounts) as well, we cannot assure you that this government coverage will be maintained. Any
losses or damages incurred by us could have a material adverse effect on our business.
Additionally, several Arab countries restrict business with Israeli
companies and these restrictions may have an adverse impact on our operating results, financial condition or the expansion of our business.
From time to time pro-Arab organizations in various locations around the world promote local boycotts of products from Israel. Prompted
by political, religious or other factors, these and other restrictive laws or policies directed towards Israel and Israeli businesses
may affect our financial condition and results of operations.
It will be extremely difficult to acquire jurisdiction and enforce
liabilities against us, our officers and directors who are based in Israel.
We are organized under the laws of the State of Israel. The majority
of our officers and directors reside outside of the United States and most of our operations and assets, and the assets of these persons,
are located outside the United States. As a result, it may not be possible for United States investors to enforce their legal rights,
to effect service of process or to enforce judgments of United States courts against us, our directors or our officers under federal securities
laws of the United States. Further, it is unclear if extradition treaties now in effect between the United States and Israel would permit
effective enforcement of criminal penalties under such securities laws. It may also be difficult to enforce civil liabilities under such
securities laws in actions initiated in Israel.
Our international operations may be adversely affected by risks
associated with international business.
We purchase food products from over 135 suppliers located in Israel
and around the world, including the Far East (China, India, the Philippines and Thailand and more), Eastern Europe (Poland, Lithuania
and Latvia and more), South America (Ecuador), the United States, Canada, Western and Central Europe (the Netherlands, Belgium, Monaco,
Germany, Sweden, Switzerland, Denmark, and France) and Southern Europe (Spain, Portugal, Italy, Turkey and Greece) and more. Therefore,
we are subject to certain risks that are inherent in an international business. These include the adverse effects on our operations from:
War, such as the current war between Russia and Ukraine, terrorism
and public health crises, such as pandemics and epidemics, including the COVID-19 pandemic;
varying regulatory restrictions on sales of our products to certain
markets and unexpected changes in regulatory requirements;
tariffs, customs, duties, quotas and other trade barriers;
global or regional economic crises;
difficulties in managing foreign operations and foreign distribution
partners;
longer payment cycles and problems in collecting trade receivable;
fluctuations in currency exchange rates;
political risks;
foreign exchange controls which may restrict or prohibit repatriation
of funds;
export and import restrictions or prohibitions, and delays from
customs brokers or government agencies;
seasonal reductions in business activity in certain parts of the
world; and
potentially adverse tax consequences.
Depending on the countries involved, any or all of the foregoing
factors could materially harm our business, financial condition and results of operations.
|
- |
The ongoing COVID-19 pandemic may adversely affect our business, revenues, results of operations and financial
condition. |
COVID 19 - In the first quarter of 2020,
the corona virus began to spread around the world, an event declared by the World Health Organization as a global pandemic (the "crisis").
As part of dealing with the crisis, many countries around the world, including Israel, have imposed restrictions on various activities
in the economy, including movement and gatherings restrictions. The crisis and the restrictions imposed and still pose challenges that
were reflected in an unprecedented decline in business activity, both in terms of its intensity and in terms of the speed with which it
occurred. In December 2020, the US Food and Drug
Administration approved, for the first time,
the use of the vaccine to prevent the corona pandemic. In mid-December, an extensive vaccination campaign began in Israel, and as of
the date of the report, a significant proportion
of the population has been immunized. The year 2021 was still marked by the corona crisis and steps to emerge from it taken by the world
and Israeli economies - both in the medical aspect, which is reflected in vaccinations and disease reduction, and in the economic aspect,
which is reflected, among other things, in opening the economy and helping victims of the crisis. Most of the restrictions in Israel have
been removed, but the Israeli economy and the world economy are still in the process of recovery, with epidemiological developments and
various waves of illness slowing down from time to time. The various guidelines and restrictions in Israel are updated from time to time,
in accordance with changes in the level of morbidity and infection.
The Company purchases its goods from about
135 suppliers around the world, including the Far East, Europe, the United States, South America and Israel. The rate of exit from the
crisis varies from country to country so that different restrictions on the production of products by some of the company's suppliers
may apply, which may make it difficult for it to import goods in sufficient quantities from those suppliers. The company is also facing
an increase in the prices of the raw materials it purchases, the unavailability of containers in the world and significant increases in
sea freight costs, which, in the company's estimation, are due to the corona crisis in the world. The company works to the best of its
ability to maintain the rate of receipt of goods on a regular basis in order to reduce the effects of the situation on sales to its customers.
At this stage the company is unable to estimate when this situation will change due to the recurring waves of illness, so the current time
is still characterized by uncertainty. This is a variable event whose scope and period of duration are not under the control of the Company
and therefore it is unable to assess the full extent of the economic effects on its activity.
|
- |
The ongoing Russia-Ukraine war may adversely affect our business, revenues, results of operations and financial
condition. |
In February 2022, a military confrontation
began between Russia and Ukraine (the "confrontation"), which led, among other things, to the imposition of sanctions on Russia and various
reactions in the capital markets in Israel and around the world. At this stage it is difficult to estimate all the effects of the conflict
- global and local, in the short and long term. Russia is one of the three largest oil producers in the world and Europe's main source
of gas, and as a result of this situation, oil prices have risen to over $ 100 per barrel. The Company anticipates that the conflict will
not have a direct impact on it in the short future but is unable to assess the nature and extent of future impacts, in any event, on the
environment in which it and its suppliers operate.
General Risk Factors
The market price of our ordinary shares on either Nasdaq or the
Tel Aviv Stock Exchange could fluctuate significantly.
The market price of our ordinary shares on the Nasdaq Capital Market
or the Tel Aviv Stock Exchange (the “TASE”) has in the past fluctuated significantly and may be affected by our operating
results, changes in our business, changes in the products we market and distribute, and general market and economic conditions which are
beyond our control. In addition, the stock market in general has, from time to time, experienced significant price and volume fluctuations
that are unrelated or disproportionate to the operating performance of individual companies. These fluctuations have affected stock prices
of many companies without regard to their specific operating performance. For these reasons, the price of our ordinary shares may fluctuate
significantly in the future.
Also, the financial markets in the Unites States, Israel and other
countries have experienced significant price and volume fluctuations, and market prices of public companies have been and continue to
be volatile. Volatility in the price of our ordinary shares may be caused by factors outside of our control and may be unrelated or disproportionate
to our results of operations. In the past, following periods of volatility in the market price of a public company’s securities,
shareholders have frequently instituted securities class action litigation against that company. Litigation of this kind could result
in substantial costs and a diversion of our management’s attention and resources.
If we fail to maintain an effective system of internal controls,
we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our ordinary
shares may be adversely affected.
Our reporting obligations as a public company make significant
demands on our management, operational and financial resources and systems. We implemented financial and disclosure control procedures
and corporate governance practices that enable us to comply, with the Sarbanes-Oxley Act of 2002 and related Securities and Exchange Commission,
or the SEC, rules. For example, we developed accounting and financial capabilities, including the establishment of an internal audit function
and development of documentation related to internal control policies and procedures. Failure to establish the necessary controls and
procedures would make it difficult to comply with SEC rules and regulations with respect to internal control and financial reporting.
We need to take further actions to continue to improve our internal controls. If we are unable to implement solutions to any weaknesses
in our existing internal controls and procedures, or if we fail to maintain an effective system of internal controls, we may be unable
to accurately report our financial results or prevent fraud and investor confidence and the market price of our ordinary shares may be
adversely impacted.
Our results of operations may be impacted by cyber-attacks on the
Company's information systems.
Suspension or malfunction of internal or third-party information
systems, or unauthorized access, misuse, computer viruses and cyber-attacks affecting such systems, could impact our results of operations.
Our businesses rely on secure processing, storage, transmission and reception of personal, confidential and proprietary information on
our systems. We may become the target of attempted unauthorized access, computer viruses or malware, and other cyber-attacks designed
to access and obtain information on our systems or to disrupt and cause other damage to our services. Although these threats may originate
from human error or technological failure, they may also originate from the malice or fraud of internal parties, such as employees, or
third parties, including foreign state actors and extremist parties. Additionally, we could also be adversely impacted if any of the third-party
vendors, exchanges, clearing houses or other financial institutions to which we are interconnected are subject to cyber-attacks or other
informational security breaches. Such events could cause interruptions to our systems, reputational damage, client dissatisfaction, legal
liability, enforcement actions or additional costs, any and all of which could adversely affect our financial condition and operations.
While we continue to devote significant resources to monitor and update our systems and implement information security measures to protect
our systems, there can be no assurance that any controls and procedures we have in place will be sufficient to protect us from future
security breaches. As cyber threats are continually evolving, our controls and procedures may become inadequate and we may be required
to devote additional resources to modify or enhance our systems in the future.
ITEM
4. INFORMATION ON THE COMPANY
| A. |
HISTORY AND DEVELOPMENT OF THE COMPANY |
The Company was incorporated in Israel in January 1994 under the
name G. Willi-Food Ltd. and commenced operations in February 1994. It changed its name to G. Willi-Food International Ltd. in June 1996.
The Company's corporate headquarters and principal executive offices are located at 4 Nahal Harif Street, Northern Industrial Zone, Yavne
81106, Israel. The Company's telephone number in Israel is +972 8-9321000 and its e-mail address is willi@willi-food.co.il. The Company’s
website address is www.willi-food.com. The information contained in its website, or that can be accessed therefrom, does not constitute
a part of this Annual Report and is not incorporated by reference herein. We have included our website address in this Annual Report solely
for informational purposes. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information
regarding issuers, such as we file electronically, with the SEC at www.sec.gov.
The Company completed its IPO in the United States in May 1997,
at which time its ordinary shares began trading on the Nasdaq Capital Market, where they currently trade under the symbol “WILC”.
On June 15, 2020, our ordinary shares began trading on the Tel Aviv Stock Exchange under the symbol “WILC”.
CAPITAL EXPENDITURES
Our capital expenditures were $2.0 million, $0.9 million and $0.52
million for the three years ended December 31, 2021, 2020 and 2019, respectively. For more information, see "Item 4. Information
on the Company – D. Property, Plants and Equipment".
Overview
The Company is an Israeli-based company engaged, directly and through
subsidiaries, in the development, import, export, marketing and distribution of a wide variety of over 600 food products world-wide. In
the year ended December 31, 2021, substantially all of our revenue was generated in Israel, with less than 1% of our revenue resulting
from exports outside Israel.
The Company purchases food products from over 135 suppliers located
in Israel and throughout the world, including from the Far East (China, India, the Philippines and Thailand), Eastern Europe (Poland,
Lithuania and Latvia), South America (Ecuador), the United States, Canada, Western and Central Europe (the Netherlands, Belgium, Monaco,
Germany, Sweden, Switzerland, Denmark, and France) and Southern Europe (Spain, Portugal, Italy, Turkey and Greece) and more.
The Company's products are marketed and sold to approximately 1,500
customers and 3,000 selling points in Israel, including to supermarket chains, wholesalers and institutional consumers. The Company markets
most of its products under the brand name “Willi-Food,” and some of its chilled and frozen products under the brand name “Euro
European Dairies”. Certain products are marketed under brand names of other manufacturers or under other brand names. In addition,
the Company distributes some of its products on an exclusive basis, as described further below. Less than 1% of the Company’s sales
come from product sales in countries other than Israel.
Following changes in management in recent years, the Company continues
to re-evaluate its strategic position and consider other business opportunities. As part of this re-evaluation, the Company is considering
forming strategic alliances with or entering into different lines of business, expanding its product lines, and increasing product sales
with existing customers while adding new customers. In addition, the Company is examining M&A opportunities to further increase its
market presence.
As of March 15, 2022, the Company’s principal shareholder,
Willi-Food, held approximately 59.1% of our ordinary shares. See “Item 7. Major Shareholders and Related Party Transactions –
A. Major Shareholders”. Willi-Food’s securities are traded on the Tel Aviv Stock Exchange.
Credit Activity
From 2019 until August 2021, the Company engaged in extending loans
to other Israeli companies through W.F.D. (Import, Marketing and Trading) Ltd., a wholly-owned subsidiary. The activity was funded from
the Company and subsidiary’s own resources. During 2021, all the loans were paid in full. On August 2021, the Company’s Board
of Directors decided to terminate the operations of its non-banking credit segment in light of the small number of loans made and significant
managerial attention that was required to conduct such operations. Therefore, commencing with the Company's financial statements for the
third quarter of 2021, the Company has ceased to present the segment of providing the non-banking credit as a separate accounting segment
Business Strategy
The Company’s principal business strategy is:
|
• |
to promote the “Willi-Food” brand name and other brand names used by the Company (such as " Euro European Dairies") and
to increase market penetration of products through marketing efforts and advertising campaigns; |
|
• |
to expand our current food product lines and diversify into additional product lines, as well as to respond to market demand;
|
|
• |
to enter new fields of activity/operating segments; |
|
• |
to expand the Company's activity in the international food markets; and |
|
• |
utilizing management’s expertise in identifying market demand and preferences, as well as its supplier sourcing abilities to:
|
|
o |
continue to locate, develop and distribute additional food products, some of which may be new to Israeli consumers; |
|
o |
penetrate new food segments within Israel through the establishment of food manufacturing factories or the establishment of business
relationships and cooperation with existing Israeli food manufacturers; |
|
o |
increase its inventory levels from time to time both to achieve economies of scale on its purchases from suppliers and to more fully
meet its customers’ demands; |
|
o |
further expand into international food markets, mainly in the U.S. and Europe, by purchasing food distribution companies, increasing
cooperation with local existing distributors and/or exporting products directly to customers; and |
|
o |
penetrate new markets in other countries through the establishment of business relationships and cooperation with representatives
in such markets, subject to a positive political climate. |
The Company has developed certain trade relationships locally,
as well as in areas administered by the Palestinian Authority, although current sales volumes to Palestinian-administered areas remain
small.
Principal Products
We and Euro European Dairies import a broad variety of over 600
food products, which are sold, marketed, and distributed by us in Israel. A small percentage of our products are purchased from suppliers
in Israel.
We aim to broaden the variety of products we import, and expect
to launch additional imported products in the near future while continuing to develop new and innovative food products internally.
The principal products in our import segment product line are as
follows:
|
• |
Canned Vegetables and Pickles: including mushrooms (whole and sliced), artichoke (hearts and bottoms), beans, asparagus, capers,
corn kernels, baby corn, palm hearts, vine leaves (including vine leaves stuffed with rice), sour pickles, mixed pickled vegetables, pickled
peppers, an assortment of olives, garlic, roasted eggplant sun and dried tomatoes. These products are imported primarily from China, Greece,
Thailand, Turkey, India, and the Netherlands. |
|
• |
Canned Fish: including tuna (in oil or water), sardines, anchovies, smoked and pressed cod liver, herring, fish paste and salmon.
These products are primarily imported from the Philippines, Thailand, Greece, Germany and Sweden. |
|
• |
Canned Fruit: including pineapple (sliced or pieces), peaches, apricots, pears, mangos, cherries, litchis and fruit cocktail. These
products are primarily imported from China, Monaco, the Philippines, Thailand, Greece and Europe. |
|
• |
Edible Oils: including olive oil, regular and enriched sunflower oil, soybean oil, corn oil and rapeseed oil. These products are
primarily imported from Belgium, Turkey, Italy, the Netherlands and Spain. |
|
• |
Dairy and Dairy Substitute Products: including hard and semi-hard cheeses (parmesan, edam, kashkaval, gouda, havarti, cheddar, pecorino,
manchego, maasdam, rossiysky, iberico and emmental), molded cheeses (Brie, Camembert and Bloose), feta, Bulgarian cubes, goat cheese,
fetina, butter, butter spreads, margarine, melted cheese, cheese alternatives, condensed milk, whipped cream, yogurt, frozen pizza and
others. These products are primarily imported from Greece, France, Lithuania, Denmark, Germany, Italy and the Netherlands. |
|
• |
Dried Fruit, Nuts and Beans: including figs, apricots and organic apricots, chestnuts organic chestnuts, sunflower seeds, walnuts,
pine nuts, cashews, banana chips, pistachios and peanuts. These products are primarily imported from Greece, Turkey, India, China, Thailand
and the United States. |
|
• |
Other Products: including, among others, instant noodle soup, frozen edamame soybeans, freeze dried instant coffee, bagels, breadstick,
coffee creamers, lemon juice, halva, Turkish delight, cookies, vinegar, sweet pastry and crackers, sauces, corn flour, rice, rice sticks,
pasta, organic pasta, spaghetti and noodles, breakfast cereals, corn flakes, rusks, rusks, tortilla, dried apples snacks, deserts (such
as tiramisu and pastries), ice cream and light and alcoholic beverages. These products are primarily imported from the Netherlands, Germany,
Italy, Greece, Belgium, the United States, Scandinavia, Switzerland, China, Thailand, Turkey, India, and South America. |
Product Information
The products that generated the largest sales volume for the year
ended December 31, 2021 were dairy and dairy substitute products (43.3% of sales), canned vegetables (13.2% of sales), cereals, rice and
pastas products (13.8% of sales) and fish products (12.3% of sales).
The allocation mentioned above does not include the product line
"Other Products" in the import segment, as this product line includes products that have no characteristic definition.
Most of the products that we import and market are approved as
kosher by, and/or under the supervision of, various supervisory institutions, including the Chief Rabbinate of Israel, Badatz
Edah HaChareidis, Badatz Beit Yosef, Chug Chatam Sofer, certain Jewish organizations
administering Kashrut procedures and certifications (such as the Union of the Orthodox Jewish Congregation of America (referred to as
OU), Badatz Igud Harabanim Manchester, OK, Circle K and Triangle K) and rabbis of local Jewish congregations abroad. For more information,
see “– Government Regulation” in this section below.
Our products are packaged by various manufacturers and suppliers
abroad and labeled in Hebrew, English and, in certain cases, Arabic and Russian, in accordance with our instructions and applicable law.
For more information, see “– Government Regulation” in this section below.
Suppliers
We purchase food products from over 135 suppliers all over the
world.
In addition, we actively maintain contact with our suppliers world-wide
through which we assess, on an on-going basis, world market trends, fluctuations in prices, and other issues relevant to our business.
Our management and personnel visit food trade fairs world-wide on a regular basis and endeavor to create new business relationships with
potential suppliers.
Certain of the products we import are seasonal agricultural products,
such as artichokes, cherries, mushrooms, eggplants and peaches. In order to ensure a continued supply of these seasonal items, we generally
make arrangements with the producers of such products at the beginning of the season for the terms of purchase of such items for the upcoming
year.
Major purchases from our suppliers outside of Israel are made
in U.S. Dollars and Euros, with the remaining purchases made in other foreign currencies. Supply is generally made to us against letters
of credit for a period of up to 90 days. No single supplier provides us with the majority of our products, most of which we purchase from
several suppliers.
In 2021, we purchased several products from two suppliers in 2021,
each of which accounted for more than 10% of our total purchases in 2021; however, purchases from these suppliers were made due to economies
of scale, operational efficiency and convenience, and the Company does not consider itself dependent on these suppliers.
The average volume of our credit balance with our suppliers
in 2021 was NIS 22.0 million (US$ 7.1 million) consisting of 28 days of suppliers credit on average.
Customers
The Company's products are marketed and sold to approximately 1,500
customers and approximately 3,000 selling points throughout Israel and outside of Israel.
The Company's customers generally fall within one of the following
three groups:
|
• |
large retail supermarket chains, |
|
• |
small retail supermarket chains, and |
|
• |
other customers, including small private grocery shops, government institutions, wholesalers, restaurants, hotels, and hospitals.
|
The first group of customers above includes the large retail
food marketing chains: Shufersal Ltd., Yenot Bitan, Rami-Levy Ltd, Osher-Ad, Viktory, Yohananof, Mahsanei Hashuk, Hazi Hinam, Freshmarket
and others. Large retail food marketing chains usually have dozens of stores with nationwide deployment.
The Company contracts with large retail supermarket chains through
the buyers in the head office, after which the Company receives orders from the supermarket chain's logistics center or directly from
individual stores. Merchandise is then delivered directly to each branch or to the supermarket chain’s distribution centers. Simultaneous
with closing of sale prices with the buyers at the chains’ central offices, quantities of the products to be supplied to the branches
are routinely determined directly with the branches.
A number of provisions the Israeli "Promoting Competition in
the Food Industry" law (the "Food Law") apply to the Company, including a prohibition on any interference on the part of a supplier in
a retailer’s determination of the consumer price that such retailer will collect on another suppliers’ merchandise, or the
terms of such sale; a prohibition on retailers interfering in any way with a supplier’s determination regarding what products to
sell other retailers and what prices to charge for those products, or the terms of such sale; a ban on suppliers transferring payments
(in cash or cash equivalents) to a large retailer, other than by lowering the price per unit of a product, subject to certain exceptions;
a prohibition on interfering in any way in the price per product collected by a retailer for that supplier’s products, the allocation
of any share of sales space for that supplier’s products, the purchase of products provided by that supplier on any scale in proportion
to the retailer’s purchase of the product from alternative suppliers; and a prohibition on interfering in the purchase or sale of
products provided to a retailer by another supplier, including quantities and purchase targets, sales space allocated to another supplier
in stores and other commercial terms. In 2021, the Company had one retail customer, Shufersal, that is considered a large retailer according
to the Food Law. The Company’s sales to Shufersal exceeded 10% of its income in 2021. As a result, the Company's interaction with
this customer is required to meet certain principles for engagement, including those impacting commercial agreements, logistics and monetary
collection.
The second group of customers includes small retail supermarket
chains of up to 15 stores, usually in a regional deployment.
Generally, the Company’s engagement with small retail chains
does not involve exclusivity, or other obligatory terms of operations. Prior to entering into an engagement with such customer, the Company
gauges the customer's financial stability and determines the scope of credit to assign to and the sureties to obtain from such customer.
Small retail chains are generally requested to provide deferred checks as sureties, and some are requested to provide additional sureties,
including promissory notes, personal guarantees and bank guarantees. In addition, the Company insures most of its small retail chains
with credit insurance. In 2021, more than 65% of the Company's small retail chains were insured with credit insurance policies by credit
insurance companies.
With some small retail supermarket chains not subject to provisions
of the Food Law, the Company pays a fixed incentive in the form of a percentage of sales of our products, or other incentive payment in
the event the scope of sales exceeds the scope agreed upon between the parties. Towards a small number of small retail supermarket chains
the Company provides discounts for the inclusion of new products, limited-time discounts for the opening of new stores, and participates
in payments for certain of such customers’ advertisements at rates determined in negotiations between the parties, and subject to
the actual execution of the advertisements in various media, including in print newspapers, or in specific advertisement placed inside
a customer's stores.
The sale prices to small retail chains are determined in negotiations
that occur frequently, usually on a monthly basis, owing to the lack of uniformity in the purchase terms for different products from different
manufacturers, and to variable market conditions.
The Company's sales by customer group for the years ended December
31, 2021, 2020 and 2019 were as follows:
| |
|
Percentage of Total Sales
Year Ended December 31 |
|
|
Customer Group |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
Large retail supermarket chains |
|
|
50 |
% |
|
|
53 |
% |
|
|
50 |
% |
|
Other customers |
|
|
50 |
% |
|
|
47 |
% |
|
|
50 |
% |
| |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
The average aggregate receivable balance of the Company's customers
with the Company in 2021 was NIS 132.6 million (USD 42.7 million) and the average time period within which our trade receivable was paid
was 90 days.
In the event that a small retail supermarket chain or other customer
does not respect its financial commitments, the Company may elect to foreclose on the collateral or the promissory note provided by such
customer. The Company has not made significant use of this foreclosure power since 2008. The Company strives to minimize its credit risk
by constantly reviewing the credit it extends to customers versus the security it receives. As a result of such review, the Company has
ceased selling products to certain customers and considerably reduced sales to other customers, and may continue to do so.
Distribution, Marketing and Sales
The Company principally distributes and markets its products using
internal sales agents, although with sales of certain products to clients situated in different areas of Israel, the Company utilizes
external distributors, with whom it does not have exclusivity agreements.
The Company generally has no written agreements with its customers,
nor are its arrangements with its customers on an exclusive or binding basis. The Company generally extends its customers approximately
60-90 days credit, and in limited cases up to 110 days credit, beginning at the end of the month in which the sale took place. Most of
the large retail supermarket chains generally effect payment by wire transfers or cash payments on the due date, while other customers
are generally required to provide post-dated promissory notes at least one month prior to the date of the expected payment. The Company
does not require large retail supermarket chains to provide any kind of security for payments; however, other customers may be required
to provide security, including personal guarantees.
Sales are made by the placement of customers’ orders (except
for part of the dairy and dairy substitute products), which are directed to the Company’s regional office and placed by the sales
personnel or directly by the customers. Orders are delivered by the Company’s transport network (including 8 refrigeration trucks
and 3 regular trucks) and by independent transporters. In certain cases, the Company transports products directly from port to customers,
utilizing the services of independent transporters. In some instances, the Company transfers the merchandise to the logistics centers
of the supermarket chains, and the supermarket chains themselves are responsible for the distribution of the merchandise to their chain
stores for a commission charged to the Company.
The sale of most of our dairy and dairy substitute products is
performed by external distributers, although some of these sales are made by “van sale” sales agents using small terminals.
The sales agents supply these products immediately from the stock of products in the refrigeration trucks in which they travel.
Some of the marketing and distribution to institutional clients
in the private sector (such as hotels, police, prisons, the Ministry of Defense and "kibbutz" collective settlements) is done by winning
tenders, direct distribution or by wholesalers.
With imported products, the Company generally holds an inventory
of products which the Company believes to be sufficient to meet market requirements for a period of up to 70 days. Occasionally, the Company
may take advantage of low-priced merchandise and purchase larger amounts than usual of a product with long shelf life. In those cases,
the inventory may be sufficient to meet market requirements for more than 70 days. Products ordered by customers in full container loads
are generally forwarded directly to the customers’ facilities without being stored in the Company’s facilities. The Company
does not regularly maintain a significant backlog of orders from customers; orders received by customers are generally filled within one
week. The Company’s inventory as of December 31, 2021 amounted to NIS 59.5 million (USD 19.1 million) compared with NIS 59.5 million
(USD 19.1 million) as of December 31, 2020.
The Company maintains close contact with its consumers in an effort
to be attentive to market needs, market trends, and demand for certain products in various markets. The Company also regularly gathers
information on new products manufactured world-wide, including by attending food exhibitions and maintaining close relations with manufacturers
and suppliers world-wide.
The Company is responsible for the products it markets in Israel
under the Israeli Law of "Liability for Defective Products Law, 1980" and it has also purchased an insurance policy for product liability
claims.
Seasonality
Each year as the Jewish holidays of Pesach (Passover, celebrated
in March-April), Shavuot (celebrated in May) and Rosh Hashana (celebrated in September-October) approach, the Company normally increases
its inventories in order to meet the expected increase in market demand prior to such holidays. Despite the impact of the holiday season
on the Company’s activities, the Company’s quarterly sales are not materially affected as a result of these changes.
Competition
The food distribution business in Israel is highly competitive
with respect to imported, as well as locally manufactured, food products. The Company faces direct competition both from local manufacturers
and from a number of importers of food products, and the food market in Israel is very price sensitive. The Company’s competitors
include Shemen, Tomer, Taaman, Solbar and Y.T.V Foods Industries Ltd with respect to edible oils; Fodor (Starkist and Yona), Posidon and
Williger of the Neto Group, Filtuna, Vita Pri HaGalil and Shastowits with respect to fish products; the Vita Pri HaGalil, Yachin-Zan laKol,
Williger of the Neto Group, and Tomer with respect to canned fruit and vegetable products; Osem, Barila, Vita Pri HaGalil, Williger of
the Neto Group, Taaman and Tomer with respect to pasta products; and Tnuva, Tara, Strauss, Seyman, and Gad Dairy with respect to dairy
and dairy substitute products.
For each of the categories of products distributed by the Company,
there exists competition from dozens of local manufacturers and importers. The barriers to entry in the food market are low, and new potential
competitors are constantly joining the market. In addition to new-comers to the food business, the Company faces competition from existing
importers and/or manufacturers currently not offering the same lines of products as the Company.
For example, certain of the products imported by the Company, such
as canned fish, corn flakes, edible oils, certain pickles, olives, pasta, cereal, sweet pastry and crackers and certain dairy products,
are also produced by local manufacturers in Israel. Local producers are not subject to the financial risks of importing food products
or to governmental policies regarding taxation of imported food products to which the Company is subject.
To the Company's knowledge, several of its
competitors are substantially more established, have greater market recognition and have greater financial, marketing, human and other
resources than those of the Company. If any of the Company’s major competitors materially reduces prices, the Company would experience
significantly more competitive pressure and a decrease in profitability. The Company cannot predict whether it could successfully compete
with these pressures and, if it were unable to do so, the Company’s business would be adversely impacted.
Intellectual Property Rights
The Company markets certain products under the trademark “Willi-Food,”
which was approved for registration in Israel in May 1997 for certain uses relating to the food industry. In 2015, the trademark's validity
was extended for an additional ten years. The Company markets certain products under the trademark “Gold-Frost,” which was
registered in Israel in February 2002. The company markets certain product under the trademark "Euro European Dairies", which was approved
for registration in Israel in September 2019.
The Company also markets cheeses and cheese substitutes such
as "Ha-Bulgaria", which was registered in Israel in June 2009, and "EMMA", which was registered in Israel in December 2014.
The Company also markets ice cream products such as "Muchi-Ice",
which was registered in Israel in November 2019, and "Gelato", which was registered in Israel in May 2013.
The Company also markets a line of products under the trademark
"Pinukim," which was registered in Israel in June 2020.
The Company markets a line of products with kosher supervision
by Badatz Edah HaChareidis under the trademark "Tifeeret", which was registered in Israel
in September 2010 for different uses in the food industry.
The Company also markets pasta and sauces under the trademark "Donna
Rozza," which was registered in Israel in December 2005 for different uses in the food industry.
The Company also markets coffee products under the trademark "Art
Coffee," which was registered in Israel in January 2020.
The Company also markets other products which are in the process
of being registered in Israel, such as "Super Kidos", "Better Food", "Lucky Cat Ice-Cream", "Muchi Ice-Dessert" and "Super Kidoos".
Other products marketed by the Company under their original brand
names are “Completa”, "Del Monte", "Danesita", "Fiorentini", "Pils", "Wyke", "Muratbey", "Nobeleza Gaucha", "Sera", "Daawat",
"Zanetti", "Ferro", "Hahne", "Pastor", "Valio", "Ten bo" and "Kolios".
The Company imports several products for the Shufersal chain under
the brand name “Shufersal”.
The Company imports several products for the "Rami Levy" chain
under the brand name “Rami Levy”.
There can be no assurances as to the degree of protection registration
of the Company’s trademarks will afford.
The Company's investment in registering these trademarks was insignificant.
Government Regulation
The import, export, storage, distribution, manufacturing, marketing
and labeling of food products is subject to extensive regulation and licensing by various Israeli government and municipal agencies, principally
the Ministry of Health, the Ministry of Finance and the Ministry of Economy. Failure to comply with these applicable laws and regulations
could subject us to civil sanctions, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, any of
which could have a material adverse effect on us. We believe that we comply in all material respects with the above-mentioned requirements.
To the extent that the Company exports food products outside of Israel, we may be subject to quotas and other laws and regulations of
the country to which we export which may limit our ability to sell certain of our food products into these countries.
In 1978, the Israeli government issued the free import decree,
which exempted the import of most food products from the requirement to obtain a license. However, preliminary permits from the Ministry
of Health or the Ministry of Agriculture are still required. These preliminary permits are granted based on laboratory analysis reports
and other data.
Customs duties and charges are levied on a portion of the Company’s
products imported into Israel. In addition, the Company is required to obtain import licenses for the import of certain food products
from the Ministry of Economy. The Company has also obtained the necessary authorization required by the Ministry of Health (Food Authority)
for the import of all of its food products to Israel. The Company’s products are packaged by various manufacturers and suppliers
abroad and labeled in Hebrew, English and, in certain cases, Arabic and Russian, according to the Company’s instructions and the
requirements of the Israeli authorities. In the past, the Company has occasionally been found to have mislabeled packages, as a result
of which it was required to pay an immaterial amount of fines.
Customs duty applies to various food products in Israel, including
cheese, butter, frozen vegetable, oils, tinned goods and other food products imported by the Company. In May 2014, the Ministry of Finance
published a notice regarding a government decision in connection with increasing the tax-exempt import quotas of hard cheese and butter
(hereafter – “Tax Exempt Import Quotas”) whereby importers undertake to sell the products to the end customer at a relatively
low price. Further to the aforesaid resolution, the Ministry of Economy published, for the first time, a competitive process in which
companies can win Tax Exempt Import Quotas. The Company participated in this process and won some of these quotas while committing to
sell the products to the end customer at a relatively low price. In subsequent years, the Ministry of Economy has continued to publish
annual tenders for Tax Exempt Import Quotas against winners undertaking to sell the imported products at a relatively low price to the
end customer and to meet a minimum sale target in respect of the goods in question. The Company has participated in these annual tenders
and won some of these quotas. As part of the tender process, the Company was required to provide financial guarantees and participate
in audit procedures on behalf of the Ministry of Economy for the purpose of assessing its compliance with its undertakings. The Company
successfully passed most of the audit procedures, apart from immaterial breaches in which immaterial amounts, which were provided by the
Company, were forfeited, and an import quota which the Company was supposed to received was cancelled. Pursuant to the terms of the tenders,
a breach of undertakings in the tender process may result, among other things, in forfeiture of guarantees and in the imposition of sanctions
in the form of non-issuance of tax-exempt import quotas as part of the competitive process for a period of no more than five years.
On February 26, 2020, a temporary order was issued by the Ministry
of the Economy whereby the butter market will be opened for tax-exempt importation through December 31, 2020. On December 17, 2020 the
Ministry of the Economy extended the order until December 31, 2021. On December 31, 2021 the Ministry of the Economy extended the
order until December 31, 2022.
During December 2021, the Minister of Finance signed a free import
order for yogurts, dairy delicacies and cheeses, up to 5% tax-exempt to Israel until December 31, 2022.
Most of the products which the Company imports and markets are
approved as kosher by and/or under the supervision of various supervisory institutions including the Chief Rabbinate of Israel, Chug Chatam
Sofer, Badatz Edeh HaChareidis, certain Jewish organizations administering Kashrut procedures and certifications (such as the Union of
the Orthodox Jewish Congregation of America (OU), Badatz Igud Harabanim Manchester, OK, Circle K and Triangle K) and rabbis of local Jewish
congregations abroad. Such procedures include, in certain cases, personal supervision by a Kashrut supervisor sent by such institutions
to the manufacturing facilities from which the Company purchases products, who is present at the plant during the processing of the product.
Under Israeli law, the Company is required to ascertain that the kosher foodstuffs which it offers for sale bear kosher certification
approved by certain authorities, such as the Chief Rabbinate of Israel, and also bear the name of the individual authorized to certify
such product. Not all products marketed by the Company have been so certified, although they do bear certain kosher certifications from
other certification bodies.
| C. |
ORGANIZATIONAL STRUCTURE |
The Company has three wholly-owned active subsidiaries, each of
which is an Israeli corporation:
|
• |
W.F.D. (Import, Marketing and Trading) Ltd. ("WFD") |
|
• |
W. Capital Ltd. (“W. Capital”) |
|
• |
Euro European Dairies Ltd. |
WFD
WFD was incorporated in 1995. Its activities are engaging in occasional
importation of food products and extending credit.
W.
Capital
W. Capital was incorporated in 2014 and engages in capital market
investments.
Euro
European Dairies Ltd.
Euro European Dairies was acquired in 2001 and is engaged in designing,
developing and distributing frozen and chilled food products for private and institutional customers. Products are labeled in Hebrew,
English, and in certain cases, Arabic and Russian. Euro European Dairies is working towards broadening the variety of products that it
develops and distributes.
| D. |
PROPERTY, PLANTS AND EQUIPMENT |
The Company's principal executive offices are situated at a logistics
center in the northern industrial zone of Yavne, at 4 Nahal Harif St., Israel. The logistics center, which is owned by Company, is 8,526
square meters (approximately 92,000 square feet).
In addition to the current logistics center, the Company makes
use of so-called "free" warehouse services, mainly in the area of the Ashdod seaport. For such services, the Company is charged only for
storage per container or pallet (i.e., there is no charge for rental when containers or pallets are not stored there). The Company's expenses
for usage of free warehouses services were NIS 3,703 thousand (USD1,191 thousand) for the year ended December 31, 2021 and NIS 3,412 thousand
(USD 1,097 thousand) for the year ended December 31, 2020.
As of December 31, 2021, the Company owned 10 refrigeration trucks
(each with a capacity of 12 tons), seven refrigeration trucks (each with a capacity of 15 to 18 tons), three combined trucks (each with
capacity of 26 tons) and four private cars. As of December 31, 2021, the depreciated total cost of such vehicles amounted to approximately
NIS 1,194 thousand (USD 384 thousand).
During 2021, the Company began obtaining the approvals and permits
required for the expansion of its own logistics center located in the Yavne industrial zone. The estimated start date of development work
in the field is in the second half of year 2022, the estimated duration of work is approximately 18 months and the start date of the new
logistics center activity is expected to be during 2024. Once completed, the logistics center expansion will provide the Company with
additional storage of approximately 12,000 cooled / frozen surfaces compared to 8,500 dry / cooled / frozen surfaces currently available
to the Company. The estimated cost of the entire project is approximately NIS 60 million (NIS 0.5 million invested during 2021). Schedule
and costs estimates may vary as a result of events beyond the Company's control and changes in commercial terms.
ITEM 4A. UNRESOLVED
STAFF COMMENTS
Not applicable.
ITEM
5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report. Some
of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties.
You should review the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”
for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results
described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
The Company is engaged, directly and through its subsidiaries,
in the design, import, marketing and distribution of a broad range of food products purchased from over 135 suppliers worldwide and marketed
throughout Israel and abroad. The products imported by the Company are marketed in Israel and sold to approximately 1,500 customers and
3,000 selling points, including supermarket chains, mini-markets, wholesalers, manufacturers and institutional consumers. The Company
also sells its products outside Israel to a variety of customers world-wide.
From 2019 until August 2021, the Company engaged in extending loans
to other Israeli companies through a wholly-owned subsidiary On August 2021, the Company’s Board of Directors decided to terminate
the operations of its non-banking credit segment in light of the small number of transactions made and the significant managerial attention
that was required to conduct such operations. Therefore, commencing with the Company's financial statements for the third quarter of 2021,
the Company has ceased to present the segment of providing the non-banking credit as a separate accounting segment.
Critical
Accounting Policies
Management’s discussion and analysis is based upon the consolidated
financial statements, which have been prepared in accordance with IFRS as issued by the IASB for all reporting periods presented. The
use of IFRS Standards requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting accounting periods presented. These estimates include, among other things, assessing the collectability of trade
receivable and the use of recoverability of inventory. Actual results could differ from those estimates. The markets of the Company’s
products are characterized by intense competition and a rapid turnover of products and frequent introductions of new products, all of
which may impact future ability to value the Company’s assets.
The following critical accounting policies may affect significant
judgments and estimates used in the preparation of the consolidated financial statements.
Recognition of income
IFRS 15 – “Revenue from Contracts with Customers”
is mandatory for reporting periods starting on January 1, 2018.
Revenue is measured and recognized in accordance with the fair
value of the entire amount of proceeds receivable under the terms of the contract, net of the amounts collected on behalf of third parties
(such as taxes).
Revenue is recognized in the consolidated statements of profit
or loss at a point in time when control of the goods has transferred to the customer. This is generally when the goods are delivered to
the customer.
The Group is engaged mainly in the sale of food products in the
Israeli market. Revenue from sale of goods is recognized when control of the goods has transferred to the buyer, generally being when
the goods arrived to the buyer’s specific location. Upon receipt of the goods, the buyer has full discretion over the distribution
channels and price to sell the goods; the buyer has principal responsibility upon sale of the goods and it bears the risks of obsolescence
and/or loss of the goods. After delivery of the goods, the Group recognizes receivables in respect of the sale since as of that point
in time the consideration is unconditional. In most cases, the Group enables specific customers to return products which they have not
sold, despite that there is no agreement between the Group and its customers regarding such returns and the Group does not have a formal
policy regarding such returns. Accordingly, the Group recognizes a provision for return of goods against a decrease in revenues and a
corresponding inventory asset against the right to return the goods. The amount of the asset is determined based on the lower of cost
and net realizable value. Past experience is used by the Group to estimate the number of returns. Based on past experience, the Group
estimates, with a high level of probability that no significant portion of revenue recognized in respect of sale of goods will be reversed.
Inventories
Inventories are assets held for sale in the ordinary course of
business, in the process of production for such sale or in the form of materials or supplies to be consumed in the production process
or in the rendering of services.
Inventories are stated at the lower of cost and net realizable
value. Cost of inventories includes all the cost of purchase, direct labor, fixed and variable production overheads and other cost that
are incurred, in bringing the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
Cost is calculated using the weighted average cost method.
The Group records a provision for slow moving inventory in respect
of inventory items estimated by management not to be realized due to expiration date. The slow-moving inventory is based on the historic
realization rate of the respective item as well as on management's estimate with respect to its future realization rate.
Contingent liabilities and legal proceedings
In estimating the likelihood of the outcome of legal claims filed
against the Company and its investees, management considers the facts and circumstances, as well as the opinion of Company's legal counsel.
These estimates are based on professional judgment, taking into account, inter alia, the stage of proceedings and legal precedents in
respect of the different issues. Since the outcome of the claims will be determined in court, the results could differ from these estimates.
The following table sets forth for the periods indicated the correlation
(in percentages) between items from the Company’s statements of operations to its total sales for such periods:
| |
|
Year Ended
December 31, 2021
|
|
|
Year Ended
December 31, 2020
|
|
|
Revenues |
|
|
454,213 |
|
|
|
454,094 |
|
|
Cost of Sales |
|
|
315,920 |
|
|
|
308,717 |
|
|
Gross Profit |
|
|
138,293 |
|
|
|
145,377 |
|
|
Selling Expenses |
|
|
65,869 |
|
|
|
65,990 |
|
|
General and Administrative Expenses |
|
|
23,299 |
|
|
|
21,918 |
|
|
Other Income |
|
|
(230 |
) |
|
|
(108 |
) |
|
Operating profit |
|
|
49,355 |
|
|
|
57,577 |
|
|
Financial Income, Net |
|
|
8,465 |
|
|
|
10,095 |
|
|
Profit before taxes on income |
|
|
57,820 |
|
|
|
67,672 |
|
|
Taxes on income |
|
|
(12,719 |
) |
|
|
(15,463 |
) |
|
Net Income |
|
|
45,101 |
|
|
|
52,209 |
|
Year Ended December 31, 2021 compared with Year Ended December 31,
2020
Revenues for
fiscal year 2021 increased to NIS 454.2 million (USD 146.0 million) from NIS 454.1 million (USD 146.0 million) recorded in fiscal year
2020.
Cost of sales
for fiscal year 2021 increased by 2.3% to NIS 315.9 million (USD 101.6 million), or 69.6% of revenues, from NIS 308.7
million (USD 99.3 million), or 68.0% of revenues, recorded in fiscal year 2020. The increase in cost of sales was primary due to increase
costs of the Company’s imported products and due to a significant increases in shipping costs.
Gross profit for
fiscal year 2021 decreased by 4.9% to NIS 138.3 million (USD 44.5 million), or 30.4% of revenues, from NIS 145.4 million (USD 46.7 million),
or 32.0% of revenues, recorded in fiscal year 2020. The decrease in gross profit was mainly due to increased costs of the Company’s
imported products and increases in shipping costs in the second half of 2021.
Selling expenses for fiscal
year 2021 amounted to NIS 65.9 million (USD 21.2 million), or 14.5% of revenues, and were substantially the same as in fiscal 2020.
General and administrative expenses
for fiscal year 2021 increased by 6.3% to NIS 23.3 million (USD 7.5 million), or 5.1% of revenues, from NIS 21.9 million (USD 7.0
million), or 4.8% of revenues, recorded in fiscal year 2020. The increase in general and administrative expenses was mainly due to changes
in the provision for doubtful debts in the amount of NIS 0.7 million (USD 0.3 million) and
an increase in stock exchange fees and donations in the amount of 0.5 million (USD 0.16 million).
Operating profit for fiscal
year 2021 decreased by NIS 8.2 million (USD 2.6 million), or by 14.3%, to NIS 49.4 million (USD 15.9 million), or 10.9% of revenues, from
NIS 57.6 million (USD 18.5 million), or 12.7% of revenues, recorded in fiscal year 2020. The decrease in operating profit was primarily
due to a decrease in gross profit.
Financial income,
net, for fiscal year 2021 amounted to NIS 8.5 million (USD 2.7 million), compared to NIS 10.1 million (USD 3.2 million) recorded
in fiscal year 2020. Financial income, net for fiscal year 2021 comprised mainly of income from revaluation of the Company’s portfolio
of securities to fair value in an amount of NIS 19.5 million (USD 6.3 million) and interest and dividend income from the Company’s
portfolio of securities in an amount of NIS 9.5 million (USD 3.1 million), offset by from expenses from changes in fair value of
liabilities assets at fair values in an amount of NIS 14.0 (USD 4.5 million), exchange rate differences in an amount of NIS 5.2 million
(USD 1.7 million) and other finance expenses in an amount of NIS 1 million (USD 0.3 million).
Profit before
taxes on income for fiscal year 2021 decreased by NIS 9.9 million (USD 3.2 million), or 17.7%, to NIS 57.8 million (USD
18.6 million) from NIS 67.7 million (USD 21.8 million) recorded in fiscal year 2020. The decrease in profit before taxes on income
was primarily due to decrease in gross profit.
Taxes on Income
for fiscal year 2021 decreased by 17.7% to NIS 12.7 million (USD 4.1 million) from NIS 15.5 million (USD 5.0 million) recorded
in fiscal year 2020. The decrease in taxes on income in fiscal year 2021 compared to fiscal year 2020 was mainly due to decrease in profit
before taxes. For more information see Note 11 (Taxes on income) of our financial statements for the year ended December 31, 2021 included
in this report.
Net profit for the year for
fiscal year 2021 was NIS 45.1 thousand (USD 14.5 thousand), or NIS 3.25 (USD 1.05) per share.
Year Ended December 31, 2020 compared with Year Ended December 31,
2019
This analysis can be found in Item 5 of the Company’s
Annual Report on Form 20-F for the year ended December 31, 2020.
| B. |
LIQUIDITY AND CAPITAL RESOURCES. |
The Company’s operations are funded mainly through its own
equity and cash flows from its operating activities. In addition, the Company has unutilized bank credit lines.
As of December 31, 2021, cash and cash equivalents were NIS 195.7
million (USD 62.9 million), compared to NIS 201.8 million (USD 64.9 million) as of December 31, 2020.
As of December 31, 2021, financial assets at fair value through
profit or loss were 154.1 million (USD 49.5 million), compared to NIS 154.7 million (USD 49.7 million) as of December 31, 2020.
Net cash from operating activities
During the fiscal years ended December 31, 2021 and 2020, net cash
from operating activities was approximately NIS 45.5 million (USD 10.6 million) and 64.2 million (USD 20.6 million), respectively. The
change was primarily a lower profit from the company, net of non-cash items, gains on marketable securities, decrease in trade receivables
and other receivables, increased trade and other payables, loss of fair value of liabilities assets at fair values. and increase
in depreciation and amortization.
Net cash from investing activities
During the fiscal year ended December 31, 2021 net cash from investing
activities was approximately NIS 15.4 million (USD 5.0 million) compared to net cash used to investing activities NIS 24.6 million
(USD 7.9 million) in fiscal year ended December 31, 2020. The Company’s investing activities consist primarily of proceeds from
loan granted to other, proceeds from purchases of marketable securities, net and acquisition of property plant and equipment.
Net cash used in financing activities
During the fiscal years ended December 31, 2021 net cash used to
financing activities was approximately NIS 62.1 million (USD 20.0 million) compared to net cash from to financing activities of approximately
NIS 40.7 million (USD 13.1 million) in fiscal year ended December 31, 2020. Financing activities in 2021 was primarily due of dividend
distribution.
Cash requirements
The Company’s cash requirements, net, during the years ended
December 31, 2021 and 2020 were met primarily through its working capital. As of December 31, 2021, the Company had working capital
of NIS 503.9 million (USD 162.0 million) compared to working capital of NIS 536.8 million (USD 172.6 million) as of December 31, 2020.
The Company believes that its working capital is sufficient for its present requirements.
Trade receivables
The Company’s trade receivable balance as of December 31,
2021 and 2020 was NIS 134.1 million (USD 43.1 million) and NIS 131.3 million (USD 42.2 million), respectively. The average time period
within which our trade receivable was paid was 90 days in 2021 compared to 91 days in 2020.
Impact of Inflation and Devaluation on Results of Operations, Liabilities and Assets
The exchange rate of the U.S. Dollar was NIS 3.11 on December 31,
2021 compared to NIS 3.215 on December 31, 2020.
The annual rates of inflation in Israel during the year ended December 31,
2021 was 2.8% while during such period the revaluation of the NIS against the U.S. Dollar was approximately 6.6%.
A revaluation of the NIS in relation to the U.S. Dollar has
the effect of increasing the U.S. Dollar value of any assets of the Company which consist of NIS or receivables payable in NIS. Such
a revaluation also has the effect of increasing the U.S. Dollar amount of any liabilities of the Company which are payable in NIS (unless
such payables are linked to the Dollar). Conversely, any decrease in the value of the NIS in relation to the U.S. Dollar has the
effect of decreasing the U.S. Dollar value of any linked NIS assets of the Company and the U.S. Dollar amount of any linked NIS liabilities
of the Company.
The dollar cost of the Company’s operations in Israel is
influenced by the extent to which any increase in the rate of inflation in Israel over the rate of inflation in the United States is offset
by the devaluation of the NIS in relation to the U.S. Dollar.
Guarantees and Pledges
Other than letters of credit granted by the Company to some of
its suppliers, the Company has no obligation or use credit lines to the banks or to other party. The outstanding amount of such letters
of credit as of December 31, 2021 was approximately NIS 3.1 million (USD 1.0 million).
The Company provides bank guarantees for the purpose of securing
its obligations to sell products at a subsidized price to the end consumer as part of the procedure for obtaining import quotas from the
Ministry of Economy for various products, mainly cheeses. The total bank guarantee that the Company provided as of December 31. 2021 was
NIS 6.5 million.
| C. |
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES |
[In recent years, there
has been an increase in the number of small private supermarket stores that have opened in Israel, which has resulted in greater price
competition in the stores and in our business. The increased price competition resulted in an increase in our cost of sales as a percentage
of total revenues. In order to maintain our gross margin at its high levels, in the past we were able to change our product mix and introduce
new products with higher margins to increase our gross profit.
The food industry is characterized by a high level of competition
and limited consumer loyalty. The sector is dynamic, responding to the demands, needs and various tastes of an audience numbering millions
of Israeli consumers.
Recent years have seen a strengthening of private brands marketed
by the large supermarket chains Shufersal Ltd. (“Shufersal”) and Rami Levi Hashikma Marketing Ltd. (“Rami Levy”).
The marketing of these private brands strengthens competition; however, it also allows the Company to integrate into this market by marketing
its products as private brands to the large supermarket chains.]
In addition, various macro economic factors impact the food
industry, including the macro economic environment in Israel, which includes the following:
Local activity –
Israel has scaled back various COVID related restrictions and is expected to continue to do so According to the Bank of Israel, GDP is
expected to grow at the rate of 7% and 5.5% in the years 2021 and 2022, respectively. This growth is expected to be driven by accelerated
private consumption, continued investment in assets and the continuation of extensive export activity. At the same time, the rate of inflation
continued to rise.
Labor market activity
– There was a decline in the unemployment rate from 12.7% at the end of 2020 to 7% at the end of 2021.
Inflation environment
- The second half of 2021 was characterized by a high inflation environment compared to recent years. At the beginning, the annual inflation
rate entered the target range, which was 1% - 3%, during it rose above the target center to 2.5%, and towards the end it moderated slightly,
to 2.4%. Inflation expectations for the coming year according to all sources have risen, and are in the mid-target range. According to
various forecasts, the inflation rate is expected to moderate slightly later, but is expected to remain within the target range for all
ranges.
Developments in financial markets
- In the second half of 2021 the capital market, stock prices rose in the various sectors, and corporate bond spreads also rose, but to
a more moderate extent.
Fiscal policy - The
deficit continued to decline during the second half of 2021 and reached to 4.6%. This is due to the continued significant increase in
tax collection and a decrease in government spending.
Monetary policy - In
the second half of 2021, the Bank of Israel implemented various measures which included, among other things: (1) keeping the interest
rate unchanged at 0.1%, its lowest level ever; (2) intervention in the foreign exchange market - aggressive acquisitions to decelerate
the appreciate the value of the shekel ; (3) And against the background of the recovery of the Israeli economy, decided to stop operating
all the special tools that the committee announced in the midst of the corona crisis in 2020;
In
addition, the Company's management is evaluating the financial stability of its customers by entering into agreements with companies for
providing business data, examining bank accounts, conducting inquiries, and following negative publicity regarding its customers or other
signs indicating financial difficulties.
| E. |
CRITICAL ACCOUNTING ESTIMATES AND INDICATE |
N/A
as the Company prepared its financial statements under IFRS
ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
| A. |
DIRECTORS AND SENIOR MANAGEMENT |
The directors, executive officers and key employees of the Company
as of the date of this Annual Report are as follows:
|
Name |
Age
|
Position with the Company
|
|
Joseph Williger |
65 |
Director, Co-Chairman of the Board |
|
Zwi Williger |
67
|
Director, Co-Chairman of the Board |
|
Victor Bar (1) (2) |
57 |
Director |
|
Erez Winner |
53 |
Acting Chief Executive Officer |
|
Yitschak Barabi |
37 |
Chief Financial Officer |
|
|
38 |
Chief Trade and Selling Officer |
|
Einav Brar (1) (2) |
50 |
External Director |
|
Idan Ben-Shitrit (1) (2) |
47 |
External Director |
|
(1)
(2) |
Member of the Audit Committee
Member of the Compensation Committee |
The Directors are elected at the annual general meeting of shareholders
and hold office until the next annual general meeting of shareholders and until their successors have been elected. Officers serve at
the discretion of the Board, subject to the terms of any agreement between officers and the Company.
The business experience of each of the Directors, executive officers
and key employees of the Company is set forth below:
Joseph Williger has
served as the active Co-Chairman of the board of the Company (together with his brother Mr. Zwi Williger) and as a director of Willi-Food
the controlling shareholder of the Company since June 2017. From January 1994 until September 2011, he served as the Chief Executive Officer
of the Company and from September 2011(when he ceased serving as Chief Executive Officer of the Company) until January 2016 he served
as President of the Company. Mr. Williger has also served as a director of the Company from January 1994 until January 2016 and the chairman
of the company's subsidiaries, WFD and Gold Frost, from 1996 and 2001, respectively, until January 2016. Mr. Williger attended Business
Administration studies in California State University, Northridge, Los Angeles and attended Business Administration studies in Bar Ilan
University, Ramat-Gan, Israel.
Zwi Williger has
served as the active Co-Chairman of the board of the Company (together with his brother Mr. Joseph Williger) and as a chairman of the
board of Willi-Food, the controlling shareholder of the Company, since August 2017 and June 2017, respectively. In addition, From January
1994 until January 2016 he served as an active Chairman of the board of the Company and a director and a CEO of Willi-Food. Prior to that
and from inception of the Company in 1994 until 1997, he served as a director and Manager of Marketing Development of the Company. In
addition, Mr. Williger served as Chief Operating Officer of the Company from 1997 until 2011. Mr. Williger attended Fresno University
in California.
Victor Bar has served as
independent director of the Company since June 2017. In addition, Mr. Bar is director at his wholly-owned company, Victor Bar Consultant
Ltd, where. since 2015 he has provided financial services including value estimations for companies and other entities. Between 2014 and
2016, Mr. Bar served as CFO of Edriel Israel Assets Ltd, a real estate company traded on Tel Aviv Stock Exchange. Mr. Bar holds a B.A.
in accounting and economy from Bar Ilan University and C.P.A license in Israel since 1992.
Erez Winner has served as acting CEO since February 2021. Prior to his appointment as acting CEO, Mr. Winner
served as the Company Operations Manager from February 2020. Before joining the Company, Mr. Winner served as CEO of Jerusalem Wineries
Mr. Winner holds a Bachelor’s degree in Political Science and in Middle East Studies from the Hebrew University of Jerusalem and
a Master’s degree in Political Science from the University of Haifa. In addition, Mr. Winner is a graduate of the National Security
College, the Inter-Armed College of Command and Staff, the Board Members’ Course of the Israeli Center for Management and the Financial
Management course for executives of the Tel Aviv University. Mr. Winner has previously held a number of command positions in the IDF,
including Assistant Chief of Staff, and as an independent consultant in the fields of security, society and education, as a partner in
start-ups in the security and commercial fields and is a volunteer in the "Connect" organization.
Yitschak Barabi has served as Chief Financial Officer/finance manager of the Company and Willi-Food since September
2019. Prior to his appointment as Finance Manager, Mr. Barabi served as the Company’s Controller and Deputy CFO since October 15,
2017. Mr. Barabi is certified public accountant (Israel) and holds a BA (Accounting & Economic) from the Hebrew University.
Einav Brar has served as external director of the Company since August 2018.
Since 2015, Ms. Brar has served as owner and CEO of TLV Medical Center, and from 1994 until 2015, she served as founder and former CEO
of DPL - Disposable Hygienic Products LTD. Ms. Brar earned a bachelor's degree in Business Administration from
Roppin Academic Center in Emek Hefer, Israel.
Idan
Ben-Shitrit has served as external director of the Company since August 2018. From 2009 to 2016, he served as a portfolio manager
at Meitav Co. & Altris Co. Since 2017, he has served as a self-employed hedge fund manager, a wealth management advisor for private
clients and as an advisor in the finance and investment sector. Mr. Idan earned a bachelor of arts degree in Mathematics and
Economics from Tel-Aviv University and an MBA in Finance from IDC in Herzliya, Israel.
The table below reflects the compensation granted to our five
most highly compensated office holders (as defined in the Companies Law) during or with respect to the year ended December 31, 2021. We
refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.” For purposes of the table
below, “compensation” includes amounts accrued or paid in connection with management fees, salary cost, consultancy fees,
bonuses, equity-based compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits
and any undertaking to provide such compensation. All amounts reported in the table are in terms of cost to the Company, as recognized
in our financial statements for the year ended December 31, 2021, plus compensation paid to such Covered Executives following the end
of the year in respect of services provided during the year. Each of the Covered Executives was covered by our D&O liability insurance
policy and was entitled to indemnification and exemption in accordance with applicable law and our articles of association.
|
Name and Principal Position
|
Salary
(1) |
Management
Fees
(2) |
Bonus
(3) |
Total |
| |
NIS thousands
|
|
Zwi Williger (4)
Co-Chairman of the Board |
- |
1,516 |
2,237 |
3,753 |
|
Joseph Williger (4)
Co-Chairman of the Board |
- |
1,437 |
2,237 |
3,674 |
|
Yitschak Barabi
Chief Financial Officer |
628 |
- |
110 |
738 |
|
Ran Asulin
Chief Trade and Selling Officer |
603 |
- |
110 |
713 |
|
Erez Winner
Acting CEO |
545 |
- |
110 |
658 |
|
(1) |
Includes car and mobile phone benefits. |
|
(2) |
Includes tax gross-up payments. |
|
(3) |
Represents annual bonuses granted to the Covered Executive based on formulas set forth in the Company's compensation policy approved
by shareholders in June 2021 (the "Amended Compensation Policy") and the agreements with each of the Covered Executives. |
Terms of Service of Each of Mr. Zwi Williger
and Mr. Joseph Williger
On June 4, 2020, the shareholders approved an amendment to the Management Services Agreements
pursuant to which each of Mr. Zwi Williger and Mr. Joseph Williger will act as an active co-Chairman of the Board of Directors in a 100%
full-time position. Pursuant to the amendment, as of January 1, 2020 and for a period of three years, the maximum annual Measurable Bonus
to be paid to a co-chairman will not exceed the amount set forth in the Company’s Revised Compensation Policy, NIS 2.5 million (currently
approximately USD 0.8 million), provided that the Company’s annual minimum operating profit before bonuses exceeds NIS 30 million
(currently USD 9.33 million).
The main terms and conditions of each of the Management Services
Agreements, as amended on June 4, 2020, are as follows:
(a) Monthly
service fees of NIS 100,000 (currently approximately USD 31.1 thousand) (excluding VAT).
In addition to the monthly service fees, the co-Chairman will be
entitled to annual remuneration, remuneration for participation in meetings of the Board of Directors and/or its committees according
the “minimum amount” as set forth in the Israeli Companies Regulations (Rules Regarding Compensation and expenses of an External
Director), 5760-2000 (the “Compensation Regulations”) and in accordance with the level of equity of the Company as defined
in the Compensation Regulations (as amended from time to time).
(b) Profit
Related Bonus - an annual bonus determined according to measurable quantitative criteria:
Payment of the Measurable Bonus will be subject to achieving
an operating profit target before bonuses to all Company’s officers (the “Bonuses”) of at least NIS 30 million (currently
approximately USD 9.33 million) (the “Minimum Operating Profit before Bonuses”).
Achieving or exceeding the Minimum Operating Profit before Bonuses
the co-Chairman will entitle to receive a bonus in the following manner: (i) a Bonus of 2% of the actual operating profit before Bonuses
up to and including NIS 10 million (currently approximately USD 3.11 million); (ii) a Bonus of 3% of the actual operating profit before
Bonuses above NIS 10 million and up to and including NIS 15 million (currently approximately USD 4.66 million); (iii) ) a Bonus of 4%
of the actual operating profit before Bonuses above NIS 15 million and up to and including NIS 20 million (currently approximately USD
6.22 million); (iv) a Bonus of 5% of actual operating profit before Bonuses exceeding NIS 20 million.
The maximum annual Measurable Bonus to be paid to the co-chairman
will not exceed NIS 2.5 million (currently approximately USD 0.78 million).
(c) The
Company may terminate the Management Service Agreements at any time, and for any reason, by prior written notice of at least three months
in the first year of acting as co-Chairman and by prior written notice of at least four months after the first year.
The co-Chairman may terminate their respective Management Service
Agreement at any time, and for any reason, by prior written notice of at least three months.
During the notice period, the co-Chairman must fulfill his duties
in order to ensure the continued and smooth operation of the Company, unless the Board decides to conclude his service before the end
of the Notice Period.
(d) Upon
termination of Management Services Agreement by the Company, the co-Chairman will be entitled to a retirement grant in an amount equal
to six (6) monthly service fees (provided that the Company did not terminate the Management Services Agreement in circumstances specified
in the agreement), and three (3) monthly service fees following termination of the Management Services Agreement by the applicable co-Chairman.
The co-Chairman will be entitled to a retirement grant described
above, provided the co-Chairman has been acting as co-Chairman the Company for at least one (1) year.
(e) The
Company will provide the co-Chairman with use of a vehicle, the value of which will not exceed the amount of NIS 400,000 (currently approximately
USD 124,417). The Company will cover all the operating expenses of the Company car (excluding fines), including grossing up the related
tax. In case, at the request of the co-Chairman, the value of the vehicle will exceed the amount of NIS 400,000, the co-Chairman will
reimburse the Company with any amount exceeding NIS 400,000.
(f) Benefits
in general, including the social benefits of the co-Chairman and income tax payments, national insurance payments and other payments due
to employees in respect of their employment, are to be paid for at the sole expense of the co-Chairman’s Management Company. The
co-Chairman’s Management Company has undertaken to indemnify the Company with respect to any claims against the Company with respect
to employer/employee relations.
Terms of Office and Employment of Mr. Erez
Winner, Acting CEO of the Company
The Board appointed Mr. Erez Winner as Acting CEO effective
May 2, 2021.
Mr. Erez Winner’s compensation is as follows:
|
• |
Salary – monthly salary of NIS 47,000 (currently approximately USD 15,113) (“Monthly Payment”). |
|
• |
Vehicle –a leased vehicle, the value of which will not exceed the amount of NIS 200,000 (currently approximately USD 64,308).
The Company will cover all the operating expenses of the Company car (excluding fines). Mr. Winner will bear all related taxes (known
in Hebrew as ‘Shovi Rechev’); |
|
• |
Profit Related Bonus – an annual bonus subject to the Company achieving a certain minimum operating profit.
|
Terms of Office and Employment of Yitschak Barabi, Chief Financial
Officer of the Company
Mr. Barabi has served as Chief Financial Officer of the Company
since September 1, 2019. Mr. Barabi is entitled to a monthly salary in accordance with the terms of his employment agreement as approved
by the certified organs of the Company, including salary, car, mobile phone and accepted social conditions. In addition, he also entitled
to exemption and indemnification from the Company. Pursuant to his employment agreement, Mr. Barabi is entitled to a bonus based on the
Company's operating profit. Each party may terminate the agreement by giving 60 days advance notice.
Terms of Office and Employment
of Ran Asulin, Chief Trade and Selling Officer of the Company
Mr. Asulin has served as Chief Trade and Selling Officer of
the Company since February 24, 2020. Mr. Asulin is entitled to a monthly salary in accordance with the terms of his employment agreement
as approved by the certified organs of the Company, including salary, car, mobile phone and accepted social conditions. In addition, Mr.
Asulin also entitled to exemption and indemnification from the Company. Pursuant to his employment agreement, Mr. Asulin is entitled to
a bonus based on the Company's sales and gross profit. Each party may terminate the agreement by giving 60 days advance notice.
Aggregate Compensation of Directors and Officers
The aggregate compensation paid by the Company to its directors
and officers as a group for the fiscal year 2021 was approximately NIS 5.4 million (USD 1.7 million), excluding bonuses in an aggregate
amount of approximately NIS 4.8 million (USD 1.5 million) paid to Messrs. Joseph and Zwi Williger and other officers. These amounts include
all contingent or deferred compensation payable to directors or officers during fiscal year 2021. These amounts also include payments
to non-executive directors in the aggregate amount of approximately NIS 0.2 million (USD 0.1 million) during fiscal year 2021.
Compensation Policy
Pursuant to the Companies Law, a compensation policy must be
reviewed and re-approved every three years, whether or not it has been amended. The Company’s Compensation Policy was most recently
approved by shareholders on June 4, 2020. The objective of the Compensation Policy is to achieve the goals and work plans of the Company,
including its long-term best interests by: (i) creating a reasonable and appropriate set of incentives for the Company’s executives;
(ii) providing the tools necessary for recruiting, motivating and retaining talented and skilled executives; (iii) putting an emphasis
on performance based compensation; and (iv) creating proper balance between the various compensation components (such as fixed versus
variable components and short-term versus long-term).
Terms of Office
Except as to External Directors, who are discussed below, Directors
are elected by the shareholders at the annual general meeting of the shareholders, except in certain cases where Directors are appointed
by the Board of Directors, and their appointment is later ratified at the first annual general meeting of the shareholders thereafter.
Except for External Directors, Directors serve until the next annual general meeting of the shareholders.
Alternate Directors
The Articles of Association of the Company provide that any director
(except for External Directors) may, by written notice to the Company, appoint another person to serve as an alternate director. Under
the Israeli Companies Law, the directors of the Company cannot appoint an incumbent director or an incumbent alternate director as an
alternate director. The term of appointment of an alternate director may be for a specified period or until notice is given of the termination
of the appointment. A Director who is member of a Board Committee may appoint anyone to be his alternate on that committee provided that
the candidate for appointment as alternate is not a member of such committee.
Audit Committee
Nasdaq Requirements
Our ordinary shares are listed for quotation on the Nasdaq Capital
Market, and we are subject to the rules of the Nasdaq Capital Market applicable to listed companies. Under the current Nasdaq rules, a
listed company is required to have an audit committee consisting of at least three independent directors, all of whom are financially
literate and one of whom has accounting or related financial management expertise. Einav Brar (Chair), Idan Ben-Shitrit, and Victor Bar
qualify as independent directors under the Nasdaq requirements and are members of the Audit Committee. The role of the audit committee
for Nasdaq purposes includes assisting the Board of Directors in fulfilling its responsibility for oversight of the quality and integrity
of the Company's accounting, auditing and reporting practices.
Israeli Companies Law Requirements
Under the Israeli Companies Law, the board of directors of a public
company must appoint an audit committee, comprised of at least three directors including all of the external directors, with a majority
of independent directors but excluding a:
|
• |
The Chairman of the board of directors; |
|
• |
A controlling shareholder or his relative; |
|
• |
Any director employed by or who provides services to the company on a regular basis. |
|
• |
Any director employed by the controlling shareholder or by any corporation controlled by the controlling shareholder or who provides
services to the controlling shareholder on a regular basis; and |
|
• |
Any director whose principal livelihood comes from the controlling shareholder. |
The Chairman of the audit committee must be an external director.
The responsibilities of the audit committee under the Israeli Companies
Law include, among others, identifying irregularities in the management of the company’s business, approving related party transactions
as required by law, approving “actions” or “transactions” (as such terms are defined in the Israeli Companies
Law), identifying deficiencies in the business management practices of the Company in consultation with the Company’s internal auditor
or independent auditors and recommending to the Board ways to improve such practices and approving transactions with affiliates. In addition,
the audit committee has certain powers with regard to transactions with controlling shareholders or with persons or entities in which
the controlling shareholder has a personal interest, including the power to require a competitive procedure or in some cases other procedure
prior to entering into such transactions and the power to establish a procedure for approving such transactions in cases they are not
de minimis to the Company.
Compensation Committee
Israeli Companies Law Requirements
Einav Brar (Chair), Idan Ben-Shitrit and Victor Bar are members
of the Board’s Compensation Committee. All of our Compensation Committee members have been determined to be eligible to be members
of a compensation committee in accordance to the Israeli Companies Law.
Under the Israeli Companies Law, the compensation committee of
a public company is required to consist of at least three members, all the external directors must be members of it and one of them must
be appointed as chairperson, and the majority of the members must be independent. The remaining members must be directors who qualify
to serve as members of the audit committee as defined in the Israeli Companies Law. The roles of the compensation committee include, among
others:
|
• |
Recommending the board of directors, the compensation policy for the company's office holders to be adopted by the company and to
recommend to the board of directors, once every three years, regarding any extension or modification of the current compensation policy
which had been approved for a period of more than three years; |
|
• |
From time to time, recommending to the board of directors regarding updates required to the compensation policy and examining the
implementation thereof; |
|
• |
Determining whether to approve the company’s office holders’ terms of office and employment in situations that require
the approval of the compensation committee in accordance with the Israeli Companies Law; and |
According to the Israeli Companies Law, the terms of service and
employment of a public company’s office holders (including cash and equity-based compensation, exemption from liability, indemnification,
D&O insurance and other benefits and payments related to service and employment) are usually approved by the board of directors, while,
the terms of service and employment of the directors and the CEO are usually approved also by the company's shareholders in accordance
with the majority requirements of the Israeli Companies Law.
Independent Directors
The Company is a “Controlled Company” within the meaning
of the Nasdaq rules since more than 50% of its voting power is held by Willi-Food. As a Controlled Company, the Company is exempt from
certain Nasdaq independence requirements, such as the requirement that a majority of the Board of Directors be independent and the rules
relating to independence of directors approving nominations and executive compensation.
External Directors under the Israeli Companies Law/Financial Experts
The Israeli Companies Law requires that the Company have at least
two external directors on its Board of Directors. The nomination of an external director under the Israeli Companies Law must be approved
by a general meeting of shareholders provided that either: (a) the majority of shares voted at the meeting, including at least a majority
of the shares of non-controlling shareholders and who do not have a personal interest in the appointment (excluding a personal interest
which does not result from the shareholder's relation with the controlling shareholder) voted at the meeting, vote in favor of such arrangement
(not including abstentions) or (b) the total number of shares voted against such arrangement does not exceed two percent of the aggregate
voting rights in the company.
A “Controlling Shareholder” is defined in the Israeli
Companies Law as a shareholder with the ability to control the actions of the company, whether by majority ownership or otherwise, and
for the purpose of transactions with related parties, the definition may include a shareholder who holds at least 25% of the voting rights
in the Company, provided that there is no other shareholder who hold more than 50% of the voting rights in the company; if two or more
shareholders who hold voting rights in the Company have a personal interest in the approval of a transaction with a related party will
be seen as holding together. The Israeli Companies Law further requires that at least one external director have financial and accounting
expertise, and that the other external director(s) have professional competence, as determined by the company’s board of directors.
A director having financial and accounting expertise is a person who, due to his or her education, experience and talents is highly skilled
in respect of, and understands, business-accounting matters and financial reports in a manner that enables him or her to understand in
depth the company’s financial statements and to stimulate discussion regarding the manner in which the financial data is presented.
Under the regulations, a director having professional competence is a person who has an academic degree in either economics, business
administration, accounting, law or public administration or an academic degree in an area relevant to the company’s business, or
has at least five years' experience in a senior position in the business management of a corporation with a substantial scope of business,
in a senior position in the public service or a senior position in the field of the company’s business.
An external director is appointed for a period of three consecutive
years and may be re-appointed for two additional three-year periods only, subject to certain conditions (including approval by shareholders
at a general meeting) as provided under Israeli regulations. Under the Israeli Companies Law, any committee of the Board of Directors
to which the Board of Directors has delegated its powers in whole or in part must include at least one external director. Under the Israeli
Companies Law, the Audit Committee and the Compensation Committee must include all the external directors.
The External Directors of the Company are Ms. Einav Brar and Mr.
Idan Ben-Shitrit. Ms. Brar was elected by the Company shareholders on August 19, 2021 to serve for a period of three years, and was determined
by the Board to have “financial and accounting expertise” under Israeli Companies Law. Mr. Ben-Shitrit was elected by the
Company shareholders on August 19, 2021 to serve for a period of three years, and was determined by the Board to have “professional
expertise” under the Israeli Companies law.
Internal Auditor
Under the Israeli Companies Law, Israeli companies whose securities
are publicly traded are also required to appoint an internal auditor, as recommended by the audit committee. The role of the internal
auditor is to check, among others, the integrity of the company's operations in terms of compliance with the law and proper business practice.
Mr. Doron Yunisy, the Company’s internal auditor, works in accordance with an annual audit plan approved by the Audit Committee.
Indemnification
In accordance with the Israeli Companies Law and the Company’s
Articles of Association, the Company has undertaken to indemnify and insure its directors and senior officers against certain liabilities
which they may incur in connection with the performance of their duties. Under the terms of such indemnification provisions, the Company
may, to the extent permitted by law, indemnify its directors or officers for legal expenses incurred by him/her in connection with such
liabilities.
Exemption
In May 2005, the Board of Directors and Audit Committee of the
Company approved an exemption in advance to any director or officer from any liability to the Company attributed to damage or loss caused
by breach of the director or the officer’s duty of care owed to the Company, except for such breach in distribution (as such term
is defined in the Israeli Companies Law). Also, the Board of Directors, the Audit Committee and the shareholders approved an irrevocable
indemnification of the Company officers with respect to any liability or expense paid for by the officer or that the officer may be obligated
to pay.
In accordance with the Israeli Companies Law, an agreement with
a controlling shareholder, such as the Company's exemption and indemnification letter to its controlling shareholders, must be approved
every three years by the Company’s Audit Committee or Compensation Committee (as the case may be), the Board of Directors and a
special majority of the Company shareholders.
All current officers and directors of the Company are parties to
indemnification agreements.
Directors and officer's liability insurance policy
In accordance with the Israeli Companies Law, an agreement with
a controlling shareholder, such as the Company's directors' and officers' liability insurance policy for its controlling shareholders,
must be approved every three years by the Company’s Audit Committee or Compensation Committee (as the case may be), by the Board
of Directors and by a special majority of the Company shareholders, unless it is approved in accordance with Article 1B(5) of the Israeli
Companies Regulations (Relief with Respect to Transactions with Interested Parties), 5760-2000 (the “Relief
Regulations”). On October 17, 2017 the Company shareholders approved an insurance policy for Messrs. Zwi Williger and Joseph
Williger for a three year period on the same terms such policy applies to the other directors and officers of the Company. The terms of
office of Messrs. Williger, including the insurance coverage, were re-approved by the Company shareholders on April 3, 2019 and on June
2020.
The company decided not to renew the insurance policy for directors
and officers for the year 2021 and 2022.
Approval of Related Party Transactions under the Israeli Companies
Law
Office Holders
The Israeli Companies Law codifies the fiduciary duties that office
holders owe to a company. An office holder is defined as a general manager, chief executive officer, deputy general manager, vice general
manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title and a director
or manager directly subordinate to the general manager. Each person listed in the table under "Item 6. Directors, Senior Management and
Employees – A. Directors and Senior Management” is an office holder under the Israeli Companies Law.
Fiduciary duties. An office
holder’s fiduciary duties consist of a duty of loyalty and a duty of care. The duty of loyalty requires the office holder to act
in good faith and for the benefit of the company, and includes, among other things, the duty to avoid any conflict of interest between
the office holder’s position in the company and his/her personal affairs. In addition, the duty of loyalty proscribes any competition
with the company or the exploitation of any business opportunity of the company in order to receive personal advantage for him or herself
or others. This duty also requires disclosure to the company of any information or documents relating to the company’s affairs that
the office holder has received due to his or her position as an office holder. The duty of care requires an office holder to act with
a level of care that a reasonable office holder in the same position would employ under the same circumstances. This includes the duty
to use reasonable means to obtain information regarding the advisability of a given action submitted for his or her approval or performed
by virtue of his or her position and all other relevant information pertaining to these actions.
Compensation. The Israeli
Companies Law requires that the terms of service and engagement of the chief executive officer, directors or controlling shareholders
(or a relative thereof) receive the approval of the compensation committee, board of directors, and shareholders, subject to limited exceptions.
Similarly, the terms of service and engagement of any officer other than the CEO must receive the approval of the compensation committee
and board of directors. However, shareholder approval is only required if the compensation of such officer other than the CEO is not in
accordance with the compensation policy. This compensation policy is required to take into account, among other things, providing proper
incentives to directors and officers, taking into account the risk management of the company, the officer’s contribution to achieving
corporate objectives and increasing profits, and the function of the officer or director. Following the approval of the Compensation Committee
and Board, a newly revised Compensation Policy was approved by the Company shareholders on October 17, 2017 at a special meeting of shareholders.
An amendment to the October 2017 Compensation Policy was approved by the shareholders for an additional period of three years on April
3, 2019 and was further amended by shareholders on June 4, 2020. For more information on the Company's Compensation Policy, see "Item
6. Directors, Senior Management and Employees – B. Compensation". In accordance with the Israeli Companies Law the compensation
policy must be re-approved every three years, in the manner described above. The Compensation Committee is responsible for reviewing from
time to time the compensation policy and determining whether or not there are circumstances that require adjustments to the current compensation
policy.
The Israeli Companies Law provides that a compensation policy requires
shareholder approval by a special majority vote. Notwithstanding the above, the compensation committee and the board of directors may
approve the compensation policy of a company, even if the shareholders do not approve such terms, provided that:
1) the compensation committee and after the Board decided, on the
basis of detailed reasons and re-discussion of the compensation policy, the approval of the compensation policy despite the shareholders'
objection is in favor of the company; and
2) the company is not a "Public Pyramid Held Company", which is
a public company controlled by another public company (including by a company that only issued debentures to the public), which is also
controlled by another public company (including a company that only issued debentures to the public) that has a controlling shareholder.
Disclosure of personal interest.
The Israeli Companies Law requires that an office holder promptly disclose to the company 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 the company. “Personal
interest”, as defined by the Israeli Companies Law, includes a personal interest of any person in an act or transaction of the company,
“Personal interest” does not apply to a personal interest stemming merely from the fact that the office holder is also a shareholder
in the company. "Personal interest" also includes (1) the personal interest of a person who votes via a proxy for another person, even
if the other person has no personal interest, and (2) the personal interest of a person who gives a proxy to vote even if the person who
votes on his or her behalf has no personal interest, regardless of whether the discretion of how to vote lies with the person voting or
not.
The office holder must make the disclosure of his or her personal
interest promptly and, in any event, no later than the first meeting of the company’s board of directors that discusses the particular
transaction. This duty does not apply to the personal interest of a relative of the office holder in a transaction unless it is an “extraordinary
transaction”. The Israeli Companies Law defines an extraordinary transaction as a transaction not in the ordinary course of business,
not on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities, and defines
a relative as a spouse, sibling, parent, grandparent, descendent and spouse’s descendant, and includes a sibling, parent and spouse
of any of the foregoing.
Approvals. The Israeli
Companies Law provides that a transaction with an office holder or a transaction in which an office holder has a personal interest may
not be approved if it is averse to the company’s interest. In addition, such a transaction generally requires board approval, unless
the transaction is an extraordinary transaction or the articles of association provide otherwise. If the transaction is an extraordinary
transaction, or if it concerns exculpation, indemnification or insurance of an office holder, then in addition to any approval stipulated
by the articles of association, approval of the company’s audit committee or compensation committee (as the case may be) and board
of directors, in that order, is required, and may also require special majority approval by shareholders. In accordance with the Israeli
Companies Law, approval by both the compensation committee and the board of directors is required for all arrangements regarding terms
of service, including cash and equity based compensation, exemption from liability, indemnification, D&O insurance and other benefits
and payments related to the service and employment of an office holder. Except for certain specific exemptions under the Israeli Companies
Law, matters referred to herein with respect to the CEO of a public company or a director of a company (including engagement with respect
to employment terms of a director in a position other than as a director) also require shareholder approval.
With respect to the CEO of a public company, or with respect to
a director who is a controlling shareholder, shareholder approval must be by a special majority vote. With respect to transactions described
above with the CEO, the compensation committee may determine that such transaction does not require shareholders' approval, provided that:
(i) the CEO is considered to be "independent" based on criteria set forth in the Companies Law; (ii) the compensation committee determined,
based on detailed reasons, that bringing the transaction to the approval of the shareholders may compromise the entering into the transaction;
and (iii) the terms of the transaction are consistent with the company's compensation policy.
In order to be approved, the terms of employment of Office Holders
of a public company must be consistent with the company's compensation policy. However, the compensation committee and the board of directors
may, under special circumstances, approve terms of employment which are not in accordance with the company's compensation policy if:
|
1) |
the compensation committee and the board of directors have taken into consideration the mandatory considerations and criteria which
are specified in the Israeli Companies Law for a compensation policy and the respective employment terms include such mandatory considerations
and criteria; and |
|
2) |
the company's shareholders approved such terms of employment, subject to a special majority requirement. |
Notwithstanding the above, the compensation committee and the board
of directors may approve terms of employment of Office Holders (other than CEO or directors) that are not in accordance with the company's
compensation policy, even if the shareholders' do not approve such terms, provided that:
|
1) |
both the compensation committee and the board of directors re-discussed the transaction and decided to approve it despite the shareholders'
objection, based on detailed reasons; and |
|
2) |
the Israeli company is not a "Public Pyramid Held Company", which is a public company controlled by another public company (including
by a company that only issued debentures to the public), which is also controlled by another public company (including a company that
only issued debentures to the public) that has a controlling shareholder. |
Under the Israeli Companies Law, changes of the terms of a current
arrangement regarding service and employment terms of an office holder (other than a director) may require only the approval of the compensation
committee if the compensation committee determines that such changes are not material.
A director who has a personal interest in a matter that is considered
at a meeting of the board of directors, compensation committee or audit committee may not attend that meeting or vote on that matter.
However, if the chairman of the board of directors or the chairman of the compensation committee or audit committee determines that the
presence of an office holder with a personal interest is required for the presentation of a matter, such officer holder may be present
at the meeting. Notwithstanding the foregoing, a director who has a personal interest may be present at the meeting and vote on the matter
if a majority of the board of directors, compensation committee or audit committee also has a personal interest in the matter. If a majority
of the board of directors, compensation committee or audit committee has a personal interest in the transaction, shareholder approval
also would be required.
Shareholders
The Israeli Companies Law imposes the same requirements regarding
disclosure to the company of a personal interest, as described above, on a controlling shareholder of a public company that it imposes
on an office holder. For these purposes, a controlling shareholder is any shareholder who has the ability to direct the company’s
actions, including any shareholder holding 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights
in the company. Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder.
Unless approved in accordance with the Relief Regulations, approval
of the audit committee, board of directors and shareholders, in that order, is required, among others, for:
|
• |
extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest; and
|
|
• |
the terms of an engagement by the company, directly or indirectly, with a controlling shareholder or a controlling shareholder’s
relative (including through a corporation controlled by a controlling shareholder), regarding the company’s receipt of services
from the controlling shareholder, and if such controlling shareholder is also an office holder of the company, regarding his or her terms
of employment. |
The shareholder approval must include the majority of shares voted
at the meeting. In addition, either:
|
• |
the majority of the shares of the voting shareholders who have no personal interest in the transaction must vote in favor of the
proposal (shares held by abstaining shareholders shall not be considered); or |
|
• |
the total shareholdings of those who have no personal interest in the transaction and who vote against the transaction must not represent
more than 2% of the aggregate voting rights in the company. |
Furthermore, any extraordinary transaction with a controlling shareholder
or in which a controlling shareholder has a personal interest with a term of more than three years requires the abovementioned approval
every three years, unless, with respect to transactions not involving the receipt of services or compensation, the audit committee or
compensation committee (as the case may be) determines that a longer term is reasonable under the circumstances.
In accordance with amendments to the Israeli Companies Law, approval
by both the compensation committee and the board of directors is required for all arrangements regarding terms of service. Except for
certain specific exemptions under the Companies Law, matters referred to herein with respect to the CEO of a public company or a director
of a company (including engagement with respect to employment terms of a director in a position other than as a director) also require
shareholder approval. With respect to the CEO of a public company, or with respect to a director who is a controlling shareholder, shareholder
approval must be by a special majority vote, provided that either:
|
1) |
such majority includes a majority of the total votes of shareholders who have no personal interest in the approval of the transaction
(and in case of a CEO, who are not a controlling shareholder) and who participate in the voting, in person, by proxy or by written ballot,
at the meeting (abstentions not taken into account); or |
|
2) |
the total number of votes of shareholders mentioned above that vote the transaction do not represent more than 2% of the total voting
rights in the company. |
The Israeli Companies Law requires that every shareholder who participates
in person, by proxy or by voting instrument in a vote regarding a transaction with a controlling shareholder must indicate either in advance
or on the ballot whether or not that shareholder has a personal interest in the vote in question. Failure to so indicate will result in
the invalidation of that shareholder’s vote.
Under the Israeli Companies Law, a shareholder has a duty to act
in good faith towards the company and other shareholders and to refrain from abusing his or her power in the company including, among
other things, when voting in a general meeting of shareholders or in a class meeting on the following matters:
|
• |
any amendment to the articles of association; |
|
• |
an increase in the company’s authorized share capital; |
|
• |
approval of actions and transactions that require shareholder approval. |
A shareholder has a general duty to refrain from depriving any
other shareholder of their rights as a shareholder. In addition, any controlling shareholder, any shareholder who knows that he/she possesses
the power to determine the outcome of a shareholder vote, and any shareholder who has the power to appoint or prevent the appointment
of an office holder in the company is under a duty to act with fairness towards the company. The Israeli Companies Law does not describe
the substance of this duty of fairness except to state that the remedies generally available for breach of contract would also apply in
the event of a breach of the duty to act with fairness toward the company.
As of December 31, 2021, the Company, including its subsidiaries,
employed a total of 182 persons (all of them are located in Israel), six of whom were in management, 24 of whom were in accounting and
importing positions, 45 of whom were involved in the Company's sales and marketing departments and 107 of whom were employed in logistics
networks (warehousing and transportation).
All the Company's employees are party to written employment contracts.
The Company has complied with and is in compliance with all
material respects with all laws and other legal requirements relating to the employment of labor (including, without limitation, provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social pension benefits and the payment
or withholding of payroll or similar taxes for employees, or any other applicable law or regulation concerning the employees of the Company).
The Extension Order for Mandatory Pension Insurance and the
Extension Order for Increasing the Allocations to Pension Insurance (the "Extension Orders") that
apply to the Company, require the maintenance of pension insurance for the benefit of its employees (the "Pension
Insurance"). The Extension Orders settle the contribution of certain percentages of the employee's monthly insured salary to a
Pension Insurance that may be one of the two following types: pension fund or insurance fund. The contribution is made by both the Company
and its employees.
Each month, the employee contributes an amount equals to 6%
of his insured salary, and the Company contributes an additional amount equals to 12.5% or 14.83% of the employee's insured salary. The
contributions made by the Company to the pension fund cover 72% or 100% of the Company's severance liability towards its employees in
case of termination (the differences in coverage depends on the amount the Company contributes to the severance part of the Pension Insurance).
In the event that the Company contributes amounts to the severance part of the pension insurance that cover only 72% of the Company's
severance liability, then in the case of termination of employment relations that entitle the employee to a payment of full severance
pay under the law, the Company shall pay to the employee a supplementary amount. Furthermore, Israeli employees and employers are required
to pay predetermined sums to the Israeli National Insurance Institute (which is similar, to some extent, to the United States Social Security
Administration). The payments thereto range from 6.95% to 18.75% of wages; the employee’s share range from 3.5% to 12% (depending
on the marginal level of wages) and the employer’s share range from 3.45% to 6.75%.
For information regarding the share ownership of Directors and
Officers of the Company see “Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders”.
ITEM
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
MAJOR SHAREHOLDERS
The following table shows the beneficial ownership of ordinary shares as of March 15,
2022 by:
|
• |
each person known by the Company to beneficially own more than 5% of the outstanding shares of ordinary shares; |
|
• |
each of the Company’s named executive officers and directors; and |
|
• |
all of the Company’s named executive officers and directors as a group. |
Unless otherwise indicated, the Company believes
that all persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them. Except
as otherwise noted herein, the number and percentage of ordinary shares beneficially owned is determined in accordance with Rule 13d-3
of the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule,
beneficial ownership includes any ordinary shares as to which the holder has sole or shared voting power or investment power and also
any ordinary shares which the holder has the right to acquire within 60 days of March 15, 2022 through the exercise of any option, conversion
or any other right. As of March 15, 2022, there were 13,867,017 ordinary shares outstanding.
Unless otherwise noted, the business address of
each beneficial owner is c/o G. Willi-Food International Ltd., 4 Nahal Harif Street, Northern Industrial Zone, Yavne 81106, Israel.
|
Name and Address |
|
Number of
Ordinary Shares Beneficially Owned |
|
|
Percentage of Ordinary Shares |
|
|
Willi-Food Investments Ltd. |
|
|
8,200,542 |
|
|
|
59.1 |
% |
|
B.S.D. Crown Ltd. (1) |
|
|
8,971,617 |
|
|
|
64.7 |
% |
|
Joseph and Zwi Williger (2) |
|
|
9,605,677 |
|
|
|
69.3 |
% |
|
Brian Gaines (3) |
|
|
838,284 |
|
|
|
6.0 |
% |
|
The Phoenix Holdings Ltd. (4) |
|
|
1,215,042 |
|
|
|
8.8 |
% |
|
(1) |
Includes (i) 8,200,542 Ordinary Shares held by Willi-Food, and (ii) 771,075 Ordinary
Shares held by B.S.D. Crown Ltd. ("BSD"). Willi-Food is controlled by its majority shareholder, BSD, and BSD may be deemed to beneficially
own all of the shares owned by Willi-Food. |
|
(2) |
As of the date hereof, JW directly owns though a wholly-owned company 12,000 Ordinary
Shares and ZW directly owns though a wholly-owned company 622,060 Ordinary Shares. JW and ZW together own 100% of B.S.D shares and each
be deemed to beneficially own 9,605,677 Ordinary Shares (comprised of 8,200,542 Ordinary Shares held directly by WIL, 771,075 Ordinary
Shares held directly by B.S.D, 12,000 Ordinary Shares held directly by JW and 622,060 Ordinary Shares held directly by ZW), or approximately
69.3% of the outstanding Ordinary Shares. Thus, as of the date hereof, each of JW and ZW may be deemed to have the shared power to vote,
or direct the voting of, and the shared power to dispose of, or direct the disposition of, all such shares. |
|
(3) |
Based on a Schedule 13G filed February 11, 2022, this amount consists of 669,734 Ordinary
Shares (representing approximately 5.6% of our total shares outstanding) directly held by Springhouse Capital (Master), L.P. (the "Fund"),
and 128,959 Ordinary Shares owned by Mr. Gaines for his own account and an additional 39,951 Ordinary Shares held by immediate family
members in accounts Mr. Gaines controls, and that Mr. Gaines may be deemed to beneficially own (in total representing approximately 1.2%
of our total shares outstanding). Mr. Gaines serves as managing member of Springhouse Capital Management G.P., LLC ("Springhouse") and
as a director of Springhouse Asset Management, Ltd. (the "General Partner") and, as a result, may be deemed to beneficially own shares
owned by the Fund. Springhouse is the general partner of Springhouse Capital Management, L.P. ("Management") and, as a result, may be
deemed to beneficially own shares owned by the Fund. Management is the investment manager of the Fund and as a result, may be deemed to
beneficially own shares owned by the Fund. The General Partner is the general partner of the Fund, and, as a result, may be deemed to
beneficially own shares owned by the Fund. |
|
(4) |
Based on a Schedule 13G filed February 6, 2022, these shares are beneficially owned
by various direct or indirect, majority or wholly-owned subsidiaries of the Phoenix Holdings Ltd. (the “Subsidiaries”). The
Subsidiaries manage their own funds and/or the funds of others, including for holders of exchange-traded notes or various insurance policies,
members of pension or provident funds, unit holders of mutual funds, and portfolio management clients. Each of the Subsidiaries operates
under independent management and makes its own independent voting and investment decisions. |
Holdings by U.S. Shareholders
As of December 31, 2021, one U.S. record holder held in the aggregate 0.3% of our ordinary
shares.
| B. |
RELATED PARTY TRANSACTIONS |
Management Service Agreements.
See "Item 7. Major Shareholders and Related Party Transactions
– B. Related Party Transactions – Management Service Agreements".
Services to Willi-Food
The Company provides certain services to Willi-Food on an on-going
basis, including office space and certain management, financial and administrative services, pursuant to a services agreement effective
May 19, 1997, as most recently amended on June 4, 2020.
Pursuant to this agreement, Willi-Food is entitled to manage
its operations from the Company’s executive offices in Yavne, including use of an office space and facilities and certain management,
financial, accounting, legal, administrative and secretarial services.
Pursuant to this agreement, Willi-Food is to pay the Company a
monthly amount of NIS 10,000 for these services and for external services that are provided at the same time to the Company and to the
subsidiary by the same third party, such as legal services, auditing services, etc., but excluding unique and specific services that are
provided to the Company or to Willi-Food.
Under the Companies Law, an agreement with a controlling shareholder
must be approved every three years by the Audit Committee, Board of Directors and by a special majority of the General Meeting of Shareholders.
On June 4, 2020 following the unanimous approval of the Company's Audit Committee and Board of Directors, the General Meeting of Shareholders
of the Company approved the extension of the above service agreement, for a three-year period ending June 4, 2023.
| C. |
INTERESTS OF EXPERTS AND COUNSEL |
Not applicable.
ITEM
8. FINANCIAL INFORMATION
| A. |
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION |
The financial statements required by this item are found at the
end of this report, beginning on page F-1.
Dividend Policy
Pursuant to a dividend distribution policy adopted in August 2021,
the Company will distribute to its shareholders a dividend at a cumulative annual rate of at least 40% of the Company's annual net profit
according to its most recent audited or reviewed consolidated financial statements.
Any future determination relating to our dividend policy will be
at the discretion of our Board of Directors and will depend on a number of factors, including future earnings, our financial condition,
operating results, contractual restrictions, capital requirements, business prospects, applicable Israeli law and other factors our Board
of Directors may deem relevant.
Legal Proceedings
On February 24, 2016, a motion to certify a derivative action (hereinafter
- the “Motion”) was received at the offices of the parent company, Willi-Food. The Motion was filed with the District Court
(Economic Department) in Tel Aviv by Yaad Peer Management Services Ltd. (hereinafter - the “Applicant”), which holds shares
of Willi-Food. The motion was filed against all directors and office holders in the Company, and Willi-Food and the Company were added
as respondents to the Motion. The Motion deals with the Applicant’s claim for damages suffered by the Willi-Food, which is estimated
by the Applicant as of the filing of the Motion to be approximately $3 million, due to an alleged violation of the directors’ and
officers’ fiduciary duty, duty of care and duty of expertise towards Willi-Food in connection with a $3 million investment in a
company registered in the Czech Republic and which holds an inactive hotel in the Czech Republic. According to the Applicant, the investment
is not related in any way to the activity of the Company and was probably used to assist the then controlling shareholder of Willi-Food
in other matters or to cover his other obligations.
On August 16, 2018, the Company filed a notice whereby it intends
to lodge a lawsuit against the office holders in connection with the events which are the subject matter of the motion and therefore it
is no longer needed to discuss the motion to approve a derivative action. In view of Company's notice, the said motion was stricken out
and by a court ruling on October 4, 2018 and the case was closed. on November 4, 2018 the Company filed a NIS 4,183,208 lawsuit against
the Company’s former controlling shareholder – Mr. Gregory Gurtovoy and against five (former) Company directors and senior
office holder - Israel Joseph Schneerson, Pavel Buber, Iram Ephraim Graiver. Ilan Menachem Admon and Zalman Vigler (hereafter jointly:
the “Defendants”). According to the Company, the Defendants conspired to cause the use of millions of NIS of the Company funds
as collaterals to loans extended to foreign private companies related to the Company’s controlling shareholders on dates which are
relevant to the lawsuit without obtaining the required approvals from the Company’s directors and without issuing the required report
to Company’s shareholders. The lawsuit is based on the claim that an agreement signed by the Company, whereunder it has allegedly
invested in the bonds of a Czech company, is not a genuine agreement; rather, it is claimed, the purpose of the agreement was to assist
the then controlling shareholders (Gregory Gurtovoy and others) to secure private loans extended by the Austrian bank Meinl, while using
the company's funds for their concealed and inappropriate purposes. The Company demands that the Defendants compensate it for the funds
that were not refunded to the Company (in NIS values) plus a compensation at the rate of the alternative yield and a compensation equal
to the amounts paid by the Company to enable the refund of the funds. On January 24, 2019, the Defendants filed statements of defense,
various motions (to dismiss in limine and/or delay the proceedings) and a counterclaim against Willi-food and against the Company as part
of this proceeding. In their counterclaim the Defendants claims that they are entitled for funding of their legal defense and/or for indemnification
and exemption from the Company in respect of the lawsuit and request the Court to order the Company to fund their legal defense against
the Company’s lawsuit. Since the Defendants are accused of breaching their fiduciary duty to the Company, Company’s management
is of the opinion that their claims on this matter will be rejected. On December 25, 2019, the Court issued a resolution which approves
an application to give a Court ruling status to a compromise agreement signed between G. Willi-Food and Mr. Ilan Admon; according to the
said compromise agreement, the mutual claims lodged on behalf of the parties in this filed were rejected without issuing an order for
court costs. The proceedings relating to the other defendants shall continue as planned. A pre-trial hearing was set to April 7, 2022.
In view of the above, Company’s management is of the opinion that the disclosure in the financial statements and in the notes thereto
is sufficient.
On July 23, 2017, Mr. Iram Graiver, former CEO of the Company and
Willi-Food (hereinafter - “Mr. Graiver”) filed a lawsuit to the Regional Labor Court in Tel Aviv Jaffa (hereinafter - “the
Labor Court”) claiming payment of social rights and different compensations at the total amount of NIS 2,377,305. On November 26,
2017, the Company filed a statement of defense. On July 27, 2017, the Company filed a lawsuit to the Labor Court against Mr. Graiver,
demanding that he repays funds that he has taken unlawfully from the Company, amounting to NIS 1,694,325. According to the Company, throughout
his term of employment as an office holder in the Company, the defendant has unlawfully taken from the Company salary, bonus in respect
of 2016 and reimbursement of expenses. According to the Company, Mr. Graiver has done so while breaching his fiduciary duty and his duty
of care towards the Company as well as the cogent provisions of the Companies Law, 5759-1999, whereby it is mandatory that payments of
the type taken from the Company by Mr. Graiver are approved by the General Meeting of the Company’s shareholders; according to the
Company, Mr. Graiver has not obtained such an approval. On November 2, 2017, a resolution was issued to join the hearings pertaining to
the two proceedings described above. On November 26 2017 statements of defense were filed by the Company and Mr. Graiver and on March
7 2018 a preliminary hearing was held. The parties are in the process of document discovery and review. Proof hearing was held on January
15 2020. Second Proof hearing was held on June 7 2020.Third Proof hearing (and last) held on October 31 2021 and deadlines were set for
submitting summaries by Mr. Graiver and the Company on March 1, 2022 and May, 8 2022, respectively. In view of the above, Company’s
management is of the opinion that the disclosure regarding the proceedings in the financial statements and in the notes thereto is sufficient.
A lawsuit and a motion to approve it as class action was filed
on May 7, 2020, against the Company and 2 other respondents to the central district court. The applicant claimed that the company marketed
several products as products approved by the chief rabbinate of Israel before the actual rabbinate approval was obtained. Thus, the applicant
alleges a violation of various laws. On January 10, 2022 the court ordered the to submit the statements of claim and further instruction
will be given by the court regarding the continuation of the case. At this early stage, the company and its legal counsel are unable
to assess the chances of the class action.
A lawsuit and a motion to approve it as class action was filed
on June 24, 2020, against the Company, Euro European Dairies, and another respondent to the Haifa District Court. The applicant claimed
that the Company marketed several products with misleading captions and contrary to the provisions of the law and the relevant regulations.
On October 4, 2021, a hearing was held in which it was determined that the applicant will withdrawal from the request for approval and
each party will submit its claims regarding the compensation and fees. A hearing is scheduled for May 10, 2022, in which the compensation
and fees will be determined. From the company’s and its legal counsel experience, in the event of withdrawal and determination of
compensation and fees for the applicant, the amount expected to be paid are immaterial to the Company.
A lawsuit and a motion to approve it as class action was filed
on September 8, 2020, against Euro European Dairies to the Haifa district court. The applicant claimed that Euro European Dairies violated
its obligations to import and market Gauda cheese in the quantities and prices it undertook as part of duty-free tenders. The applicant
claims that he and the members of the group suffered damages in the amount of NIS 57 million. A response to the request for approval was
submitted on February 1, 2021 and a pre-trial hearing was set for December 28, 2021. A hearing to examine the decision on the request
for disclosure of documents is scheduled for May 1, 2022. At this early stage, the company and its legal counsel are unable to assess
the chances of the class action.
- A
lawsuit and a motion to approve it as class action was filed on August 2, 2021, against G. Willi-Food and another 5 respondents to the
District Court. The applicant claimed that the Company marketed several products with misleading captions and contrary to the provisions
of the law and the relevant regulations. The applicant claims that he and the members of the group suffered financial damages in amount
of NIS 100 million and Non-financial damages in amount of NIS 384 million. At this early stage, the company and its legal counsel are
unable to assess the chances of the class action.
- A
lawsuit and a motion to approve it as class action was filed on November 8, 2021, against the Company to the District Court. The applicant
claimed that the Company marketed several products with misleading captions and contrary to the provisions of the law and the relevant
regulations. The applicant claims that he and the members of the group suffered damages in amount of NIS 57 million. At this early stage,
the company and its legal counsel are unable to assess the chances of the class action.
- A
lawsuit and a motion to approve it as class action was filed on January 4, 2021, against the Company to the District Court. The applicant
claimed that the Company marketed several products with misleading captions and contrary to the provisions of the law and the relevant
regulations. The applicant claims that he and the members of the group suffered damages in amount of NIS 8.3 million. At this early stage,
the company and its legal counsel are unable to assess the chances of the class action.
We are not aware of any significant changes bearing upon our financial
condition since the date of the audited consolidated financial statements included in this Annual Report.
ITEM
9. THE OFFER AND LISTING
| A. |
OFFER AND LISTING DETAILS |
Our ordinary shares have been traded on the Nasdaq Capital Market
since May 19, 1997 and currently have the ticker “WILC”. Our ordinary shares have been traded on the Tel Aviv Stock Exchange
since June 15, 2020 under the ticker symbol “WILF”.
Not applicable.
In May 1997, our ordinary shares began trading on the Nasdaq Capital
Market under the symbol "WILCF". On March 25, 2005, the Company's Nasdaq ticker symbol was changed to "WILC". Our ordinary shares have
been traded on the Tel Aviv Stock Exchange since June 15, 2020 under the ticker symbol “WILC”.
Not applicable.
Not applicable.
Not applicable.
ITEM
10. ADDITIONAL INFORMATION
Not applicable.
| B. |
MEMORANDUM AND ARTICLES OF ASSOCIATION |
Purposes and Objects of the Company
We are an Israeli public company registered under the Israeli Companies
Law as G. Willi-Food International Ltd.; registration number 52-004320-9.
On March 20, 2014, shareholders approved an amendment to Article
6 of our articles of association changing the objectives of the Company from engaging in importing, exporting and marketing of products
and other commodities to engaging in any lawful activity. Our Board of Directors is empowered to embark on or withdraw from any business
in which we deal. Under our articles of association, our Board of Directors is entitled to donate reasonable amounts to worthy causes,
even if such donation is not within the framework of our business considerations.
The Powers of Directors
The powers of a Director to vote on a proposal, arrangement or
contract in which such Director is materially interested is limited by the relevant provisions of the Israeli Companies Law. In addition,
the power of the Directors to vote compensation to themselves or any members of their body requires the approval of the Compensation Committee,
the Board of Directors and, unless approved in accordance with the Relief Regulations, the shareholders at a general meeting. Compensation
and indemnification of expenses of External Directors must be in accordance with the applicable provisions of the Israeli Companies Law.
The Israeli Companies Law and our Articles of Association require
that a director or Office Holder promptly disclose, either at a board meeting or by way of a general notice, any personal interest that
he or she may have and all related material information know to him or her in connection with any existing or proposed transaction by
the Company. In addition, if the transaction is an extraordinary transaction (as defined in the Israeli Companies Law), the member of
the Board of Directors or Office Holder, must also disclose any personal interest held by his or her spouse, siblings, parents, grandparents,
descendants, spouse’s descendants and the spouses of any of the foregoing.
Once the Director or Office Holder complies with the above disclosure
requirements, the Company may approve the transaction in accordance with the provisions of the Articles of Association. If the transaction
is with a third party in which the member of the Board of Directors or Office Holder has a potential interest, the approval must confirm
that the transaction is not averse to the Company’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 the Audit Committee and then by the
Board of Directors, and, under certain circumstances, by a meeting of the shareholders of the Company. See “Item 6. Directors, Senior
Management and Employees - C. Board Practices – Approval of Related Party Transactions under the Israeli Companies Law”.
Directors with respect to whom the foregoing matters are brought
for Board of Directors or Audit Committee approval are not entitled to be present during discussions of, nor to participate in the vote
for approval of, such matters at Board and/or Audit Committee meetings, unless a majority of Audit Committee or Board members, as the
case may be, have a personal interest in such matter or the matter involves non-extraordinary transactions between the company and either
a Director or a third party in which a Director has a personal interest. The Israeli Companies Law further provides that in the event
that a majority of board members have a personal interest in such a matter, shareholder approval is also required.
The Articles of Association provide that the Board of Directors,
subject to the Israeli Companies Law, may, at its discretion from time to time in accordance with the needs of the Company, make decisions
to borrow and/or obtain credit facilities in any amount and to secure the repayment thereof either by mortgage, charge or other security
on the Company’s undertakings or on its property, in whole or in part (both existing and future) including the share capital of
the company which is, at the time, uncalled.
Subject to applicable provisions of the Israeli Companies Law regarding
matters that the Board of Directors may not delegate to a committee or matters for which a committee may only make recommendation to the
Board of Directors, the Board of Directors may delegate its powers to committees consisting of at least three (3) Directors, including
at least one External Director. A resolution passed or an action taken by a directors’ committee has the same validity as a resolution
passed or an action taken by the Board of Directors, unless otherwise specifically expressed in the resolution of the Board of Directors
that established said committee.
Rights Attached to Shares
The Company is authorized to issue 49,893,520 Ordinary Shares,
par value NIS 0.10 and 106,480 Preferred Shares, par value NIS 0.10, each ranking pari passu. The Company may alter the share capital
of the Company in accordance with the provisions of the Israeli Companies Law and the Articles of Association. The rights attached to
the Company’s Shares are as follows:
Dividend Rights
Holders of Ordinary Shares are entitled to participate pari passu
with all other shareholders of the Company’s Ordinary Shares in any distribution of a dividend, whether in cash, assets, or in any
other legal form, declared, as well as the right to participate pari passu with all other holders of our Ordinary Shares in the distribution
of bonus shares resolved by the Company. The Articles of Association note that a shareholder shall not be entitled to receive a dividend
or bonus shares as above, and shall not be entitled to exercise any right as a shareholder unless he has paid in full all notices of call
delivered to him, together with linkage differences, interest and expenses owed, as applicable, on calls which have not been paid by him
on time.
Voting Rights
Holders of Ordinary Shares of the Company have the right to receive
notices of general meetings of the Company, to be present, and to participate and vote therein. Each holder of Ordinary Shares in the
Company has the right to one vote per share in the general meetings of the Company on all matters submitted to a vote of shareholders.
A shareholder may vote in person, via proxy, or by means of a written form (“Voting Instrument”) described in the Articles
of Association. Any resolution of the Company in a general meeting shall be deemed duly passed if passed by a simple majority of registered
shareholders present and voting, unless a different majority is required by the Israeli Companies Law or the Articles of Association.
Under the Articles of Association, the Directors (who are not External
Directors) are elected annually by the shareholders at the annual meeting. Such directors hold office until the conclusion of the next
annual meeting or until their earlier removal or resignation. In addition, at least two (2) External Directors who comply with the qualifications
described in the Israeli Companies Law must serve on the Board of Directors. External Directors are appointed by a majority vote at a
general meeting, provided that: (i) the majority vote includes at least a majority of the shares of non-controlling shareholders who do
not have a personal interest in the appointment (excluding a personal interest not resulting from the shareholder's relation with the
controlling shareholder), as described in the Israeli Companies Law, voted at the meeting, with abstentions not taken into consideration
in calculating the total number of the non-controlling shareholders, and (ii) the total number of shares of such non-controlling shareholders
referred to in clause (1) voting against the resolution appointing an External Director is not more than two percent (2%) of the overall
voting rights in the Company. External Directors are appointed for a term of three (3) years and their office may be extended by a resolution
of the general meeting passed by special majority as mentioned above, for an additional two-three (3) years. An External Director may
be removed from office only in accordance with the relevant provisions of the Israeli Companies Law.
If no Directors are elected at an annual meeting, then the persons
who served as Directors immediately prior to the annual meeting will continue to serve as directors unless otherwise determined by the
annual meeting or by the Board of Directors. A Director who has ceased to serve in office is eligible for reelection. The Board of Directors
has the power to appoint additional Directors to fill a vacancy, so long as the number of directors will not exceed a number of Directors
approved at a general meeting. Any Director so appointed will hold office until the conclusion of the next annual meeting unless he is
removed or resigns earlier.
Rights in the Company’s Profits
The shareholders of the Company have the right to share in the
Company’s profits distributed as a dividend and any other permitted distribution. See “– Dividend Rights” above.
Rights in the Event of Liquidation
Holders of Ordinary Shares are entitled to receive any return of
capital, pari passu, with all other ordinary shareholders, upon the dissolution of the Company. Holders of Ordinary Shares are also entitled
to participate, pari passu, with all other Ordinary Shareholders in the distribution of the surplus of the Company’s assets available
for distribution in the event of dissolution of the Company which remain after the Company has paid the holders of Ordinary Shares all
amounts payable as return of capital.
Liability to Further Capital Calls by the Company
If the terms of allotment of any shares of the Company do not specify
a particular date for the payment of all of the consideration which is to be paid therefore, or any part thereof, our board of directors
may, from time to time, as it deems fit, make calls on the shareholders in respect of the amounts not yet paid for their shares, whether
on account of the par value of the shares or on the account of the premium, and each shareholder shall be obligated to pay the Company
the amount so demanded from him not later than the date of payment set forth in the notice containing the call. Shareholders shall be
given prior notice of at least fourteen (14) days in respect of any call. In the event that amounts set forth in the call have not been
paid in whole or in part as of the date of payment set forth in the call, the shareholders shall be obligated to pay linkage differences
or interest (or both) on the outstanding amounts, as determined by the Board of Directors.
Changing Rights Attached to Shares
Under the Articles of Association, the Company may, by resolution
of a general meeting, vary the rights attached to any class of shares on the Company’s stamp or its printed name (unless otherwise
determined in the terms of issue of the shares of such class), after obtaining the written consent of the holders of the majority of the
issued shares of said class or with the approval of a resolution duly passed at a class meeting of the holders of such class of shares.
Annual and Special Meetings
The Board of Directors must convene an annual meeting at least
once every calendar year, within fifteen months of the preceding general meeting, at a place prescribed by the board so long as it is
in the State of Israel. Per the Articles of Association and subject to the provisions of the Israeli Companies Law, notices to shareholders
regarding the convocation of a general meeting are to be published in two daily Hebrew language newspapers circulated in Israel. Notice
need not be served to our shareholders on an individual basis.
The Board of Directors will convene a special meeting upon receipt
of a written request from either (i) two directors or 25% of the total number of directors; (ii) one or more shareholders holding at least
5% of the issued share capital and at least 1% of the shareholders’ voting power; or (iii) one or more shareholders holding no less
than 5% of the Company’s issued voting shares. If the Board is required to convene a special meeting, it shall convene it at a time
which is at least 21 days, but not longer than 35 days after the date of the notice of convening such meeting. In the event that the board
of directors does not convene a special meeting within the timeframe set forth above, those that submitted the request for such meeting,
or part of them representing more than one-half of the voting rights of all of them, may convene the special meeting themselves, provided
that such meeting is held within three months of the time when the special meeting was requested.
Limitations on the Rights to Own Securities
The Articles of Association do not place limitations on the rights
to own securities. Under the Articles no limitations apply to the transfer of shares in the Company and the number of shareholders is
unlimited.
Changes in the Company’s Capital
Changes in the capital of the Company are subject to the approval
by ordinary majority of the shareholders at a general meeting, Shareholders may resolve to increase the authorized share capital; consolidate
our share capital and divide it into shares of greater value than existing shares; divide existing shares into shares of lesser value;
cancel any authorized share capital which has not yet been allotted (provided there is no undertaking to allot such share capital); or
reduce the capital by way of a distribution if such distribution has been approved by a court, in accordance with the relevant provisions
of the Israeli Companies Law. If the shareholders resolve to increase the share capital, the new shares will be subject to the same provisions
applicable to the shares of the original capital.
Neither the Memorandum of Association nor Articles of Association
of the Company nor the laws of the State of Israel restrict in any way the ownership or voting of ordinary shares by non-residents of
Israel, except with respect to citizens of countries which are in a state of war with Israel.
For information with respect to the Company’s material
contracts, see “Item 6. Directors, senior management and employees – B. Compensation.
D.
EXCHANGE CONTROLS
There are currently no Israeli currency control restrictions on
payments of dividends or other distributions with respect to our ordinary shares or the proceeds from the sale of our ordinary shares,
except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However, legislation
remains in effect, pursuant to which currency controls can be imposed by administrative action at any time and from time to time.
E.
TAXATION
The following is a discussion of certain material Israeli tax consequences
to purchasers of our ordinary shares. The discussion also contains a description of certain relevant material provisions of the current
Israeli income tax system applicable to companies in Israel, with special reference to its effect on us. To the extent that the discussion
is based on new tax legislation that has not been subject to judicial or administrative interpretation, we cannot assure you that the
appropriate tax authorities or the courts will accept the views expressed in this discussion.
This discussion applies to shareholders that hold our ordinary
shares as capital assets and does not address all of the tax consequences that may be relevant to holders of our ordinary shares in light
of their particular circumstances or certain types of holders of our ordinary shares subject to special tax treatment. Because individual
circumstances may differ, shareholders should consult their tax advisor to determine the applicability of the rules discussed below to
them, including the application of Israeli or other tax laws. The discussion below is not intended, and should not be construed, as legal
or professional tax advice and is not exhaustive of all possible tax considerations.
Potential investors are urged to consult their own tax advisors
as to the Israeli or other tax consequences of the purchase, ownership and disposition of the Shares including, in particular, the effect
of any foreign, state or local taxes.
Taxation of Israeli Companies
General Corporate Tax Structure
Israeli companies are generally subject to corporate tax on their taxable income at
the rate of 23 % for the 2021 tax year.
Capital Gains Tax on Sales of Our Ordinary
Shares
Israeli law generally imposes a capital gains tax on the sale of
any capital assets by residents of Israel, as defined for Israeli tax purposes, and on the sale of assets located in Israel, including
shares in Israeli resident companies, by non-residents of Israel, unless a specific exemption is available or unless a tax treaty between
Israel and the shareholder’s country of residence provides otherwise. In calculating capital gain, the law distinguishes between
real gain and inflationary surplus. The inflationary surplus is the portion of the total capital gain equal to the increase in the
relevant asset’s value that is attributable to the increase in the Israeli CPI between the date of purchase and the date of sale. The
real gain is the excess of the total capital gain over the inflationary surplus. A non-resident that invests in taxable assets with foreign
currency, or any individual who holds securities the price of which is stated in foreign currency, may elect to calculate the amount of
inflationary surplus in that foreign currency.
Taxation of Israeli Residents
An individual is subject to a tax at a rate of 25% on real capital
gains derived from the sale of shares, as long as the individual is not a “substantial shareholder” (generally a shareholder
with 10% or more of the right to profits, right to nominate a director or voting rights) in the company issuing the shares.
An individual who is a substantial shareholder is subject to tax
at a rate of 30% in respect of real capital gains derived from the sale of shares issued by the company in which he or she is a substantial
shareholder. The determination of whether the individual is a substantial shareholder will be made on the date that the securities are
sold. In addition, the individual will be deemed to be a substantial shareholder if at any time during the 12 months preceding this date,
he or she had been a substantial shareholder.
An additional income tax at a rate of 3% will be imposed on high
earners individuals whose annual income or capital gain in 2021 exceeds NIS 663,240 (USD 213,260).
Israeli companies are generally subject to the corporate tax rate
(see above) on capital gains derived from the sale of shares listed on a stock market.
Different taxation rules may apply to shareholders who purchased
the Shares prior to January 1, 2009 or prior to the listing on the Tel Aviv Stock Exchange or the Nasdaq Global Market. Such Shareholders
should consult with their own tax advisors for the tax consequences upon sale.
In general, a partnership will be a transparent entity for tax
purposes and the investors will be subject to tax with respect to their share in accordance with the tax rate applies individually.
In general, under the Israel Tax Ordinance, public institutions
are exempt from tax.
Taxation of Non-Israeli Residents
Non-Israeli residents are exempt from Israeli capital gains tax
on any gains derived from the sale of shares in an Israeli corporation publicly traded on the Tel Aviv Stock Exchange and/or on a foreign
stock exchange, provided such gains do not derive from a permanent establishment of such shareholders in Israel and that such shareholders
did not acquire their shares prior to the issuer’s initial public offering. However, non-Israeli corporations will not be entitled
to such exemption if Israeli residents (i) have a controlling interest of more than 25% in such non-Israeli corporation, or (ii) are the
beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.
Such exemption would not be available to non-Israeli residents dealing in securities in Israel which would be subject to Israeli tax at
the rates applicable to business income (at the corporate tax rate for a corporation (23% in 2018 and 23% in 2019) and the marginal tax
rate, of up to 50% for an individual in 2018 and in 2019.
Additionally, a sale of securities by a non-Israeli resident may
be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under the Convention Between the
Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended, or the
United States-Israel Tax Treaty, the sale, exchange or other disposition of shares by a shareholder who (i) is a U.S. resident (for purposes
of the treaty); (ii) holds the shares as a capital asset; and (iii) is entitled to claim the benefits afforded to such person by the treaty,
is generally exempt from Israeli capital gains tax. Such exemption will not apply if, among other things: (i) the capital gain arising
from such sale, exchange or other disposition is treated as industrial or commercial profits attributed to a permanent establishment in
Israel, subject to certain conditions; (ii) the shareholder holds, directly or indirectly, shares representing 10% or more of the voting
capital of the corporation during any part of the 12-month period preceding the disposition, subject to certain conditions; (iii) the
capital gain arising from such sale, exchange or disposition is treated as royalties; or (iv) such U.S. resident is an individual and
was present in Israel for 183 days or more during the relevant taxable year. In such case, the sale, exchange or disposition of our securities
would be subject to Israeli tax, to the extent applicable; however, under the United States-Israel Tax Treaty, the taxpayer would be permitted
to claim a credit for such taxes against the U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject
to the limitations under U.S. law applicable to foreign tax credits. The United States-Israel Tax Treaty does not relate to U.S. state
or local taxes.
In some instances where our shareholders may be liable to Israeli tax on the sale
of their ordinary shares, the payment of the consideration may be subject to Israeli withholding tax.
Taxation of Dividends Paid on Our Ordinary
Shares
Taxation of Israeli Residents
The following Israeli tax consequences shall apply in the event
of actual payment of any dividends on the Shares.
As of January 1, 2012, dividends, other than bonus shares (stock
dividends), paid to Israeli resident individuals who purchased our Shares will generally be subject to income tax at a rate of 25% for
individuals, or 30% if the dividend recipient is a Significant Shareholder (as defined above) at any time during the 12-month period preceding
such distribution. Dividends paid to Israeli resident companies will not be included in their tax liability computation.
Taxation of Non-Israeli Residents
Non-residents of Israel are generally subject to Israeli income
tax on the receipt of dividends paid on our ordinary shares at the rate of 25% unless the recipient is a significant shareholder at any
time during the 12-month period preceding the distribution in which case the applicable tax rate will be 30%. The company distributing
the dividend is required to withhold tax at the source at the rate of 25%.
A non-resident of Israel who has dividend income derived from or
accrued in Israel, from which tax was withheld at source, is generally exempt from the duty to file tax returns in Israel in respect of
such income, provided such income was not derived from a business conducted in Israel by such non-Israeli resident.
Taxation of Residents of the United States under the US Treaty
Residents of the United States generally will be subject to
withholding tax in Israel on dividends paid, if any, on Shares. Generally, under the Convention Between the Government of the United States
of America and the Government of the State of Israel with Respect to Taxes on Income (the “US Treaty”), the maximum rate of
withholding tax on dividends paid to a holder of Shares who is a resident of the United States (as defined in the US Treaty) will be 25%.
Under the US Treaty, the withholding tax rate on dividends will be reduced to 12.5% if (i) the shareholder is a U.S. resident corporation
which holds during the portion of the taxable year which precedes the date of payment of the dividend, and during the whole of its prior
taxable year, at least 10% of the outstanding shares of the voting stock of the Israeli resident paying corporation and (ii) not more
than 25% of the gross income of the Israeli resident paying corporation for such prior taxable year consists of certain types of interest
or dividends.
The US Treaty exempts from taxation in Israel any capital gains
realized on the sale, exchange or other disposition of Shares provided that the following cumulative conditions are met: (a) the seller
is a resident of the United States for purposes of the US Treaty; (b) the seller owns, directly or indirectly, less than 10% of our voting
stock at all times during the 12-month period preceding such sale, exchange or other disposition; (c) the seller, being an individual,
is present in Israel for a period or periods of less than 183 days during the taxable year; and (d) the capital gain from the sale was
not generated through a permanent establishment of the seller in Israel.
Subject to the exemptions from capital gains prescribed in the
Israeli Income Tax Ordinance (as described above), purchasers of Shares who are residents of the United States and who hold 10% or more
of the outstanding ordinary shares at any time during such 12-month period will be subject to Israeli capital gains tax. However, under
the US Treaty, residents of the United States (as defined in the US Treaty) generally would be permitted to claim a credit for this tax
against US federal income tax imposed on the sale, exchange or other disposition, subject to the limitations in US laws applicable to
the utilization of foreign tax credits generally.
The application of the US Treaty provisions to dividends and
capital gains described above is conditioned upon the fact that such income is not effectively connected with a permanent establishment
(as defined in the US Treaty) maintained by the non-Israeli resident in Israel.
United States federal income taxation
The following is a description of the material United States federal
income tax consequences of the acquisition, ownership and disposition of our ordinary shares. This description addresses only the United
States federal income tax consequences to holders of our ordinary shares and that will hold such ordinary shares as capital assets. This
description does not address tax considerations applicable to holders that may be subject to special tax rules, including:
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financial institutions or insurance companies;
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real estate investment trusts, regulated
investment companies or grantor trusts; |
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dealers or traders in securities or currencies;
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certain former citizens or long-term residents
of the United States; |
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persons that received our shares as compensation
for the performance of services; |
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persons that will hold our shares as part
of a “hedging” or “conversion” transaction or as a position in a “straddle” for United States federal
income tax purposes; |
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holders that will hold our shares through
a partnership or other pass-through entity; |
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U.S. Holders (as defined below) whose “functional
currency” is not the U.S. Dollar; or |
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holders that own directly, indirectly or
through attribution 10.0% or more, of the voting power or value, of our shares. |
Moreover, this description does not address the United States federal
estate and gift or alternative minimum tax consequences of the acquisition, ownership and disposition of our ordinary shares.
This description is based on the United States Internal Revenue
Code, 1986, as amended (the “Code”) existing, proposed and temporary United States Treasury Regulations and judicial and administrative
interpretations thereof, in each case as in effect and available on the date hereof. All of the foregoing is subject to change, which
change could apply retroactively and could affect the tax consequences described below.
For purposes of this description, a “U.S. Holder” is
a beneficial owner of our ordinary shares that, for United States federal income tax purposes, is:
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a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for United States federal
income tax purposes) created or organized in or under the laws of the United States or any state thereof, including the District of Columbia;
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an estate the income of which is subject
to United States federal income taxation regardless of its source; or |
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a trust if such trust has validly elected
to be treated as a United States person for United States federal income tax purposes or if (1) a court within the United States is able
to exercise primary supervision over its administration and (2) one or more United States persons have the authority to control all of
the substantial decisions of such trust. |
A “Non-U.S. Holder” is a beneficial owner of our ordinary
shares that is neither a U.S. Holder nor a partnership (or other entity treated as a partnership for United States federal income tax
purposes).
If a partnership (or any other entity treated as a partnership
for United States federal income tax purposes) holds our ordinary shares, the tax treatment of a partner in such partnership will generally
depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor
as to its tax consequences of acquiring, owing and disposing of our ordinary shares.
Distributions
Subject to the discussion below under “Passive foreign investment
company considerations,” if you are a U.S. Holder, the gross amount of any distribution made to you with respect to your ordinary
shares, before reduction for any Israeli taxes withheld therefrom, other than certain distributions, if any, of our ordinary shares distributed
pro rata to all our shareholders, will be includible in your income as dividend income to the extent such distribution is paid out of
our current or accumulated earnings and profits as determined under United States federal income tax principles. Subject to the discussion
below under “Passive foreign investment company considerations,” non-corporate U.S. Holders may qualify for the lower rates
of taxation with respect to dividends on ordinary shares applicable to long-term capital gains (i.e., gains from the sale of capital assets
held for more than one year), provided that certain conditions are met, including certain holding period requirements and the absence
of certain risk reduction transactions. Moreover, such lower rate of taxation shall not apply if we are a PFIC for the taxable year in
which we pay a dividend, or if we were a PFIC for the preceding taxable year. However, such dividends will not be eligible for the dividends
received deduction generally allowed to corporate U.S. Holders. Subject to the discussion below under “Passive foreign investment
company considerations,” to the extent, if any, that the amount of any distribution by us exceeds our current and accumulated earnings
and profits as determined under United States federal income tax principles, it will be treated first as a tax-free return of your adjusted
tax basis in your ordinary shares and thereafter as capital gain. We do not expect to maintain calculations of our earnings and profits
under United States federal income tax principles and, therefore, if you are a U.S. Holder you should expect that the entire amount of
any distribution generally will be reported as dividend income to you.
If you are a U.S. Holder, Israeli tax withheld on dividends paid
to you with respect to your ordinary shares may be deducted from your taxable income or credited against your U.S. federal income tax
liability. The rules relating to the determination of the foreign tax credit are complex, and you should consult your tax advisor to determine
whether and to what extent you will be entitled to this credit. Subject to certain exceptions, dividends paid to you with respect to your
ordinary shares will be treated as foreign source income, which may be relevant in calculating your foreign tax credit limitation. However,
for periods in which we are a “United States-owned foreign corporation”, a portion of dividends paid by us may be treated
as U.S. source solely for purposes of the foreign tax credit. We would be treated as a United States-owned foreign corporation if more
than 50% of the total value or total voting power of our stock is owned, directly, indirectly or by attribution, by United States persons.
To the extent any portion of our dividends is treated as U.S. source income pursuant to this rule, the ability of a U.S. Holder to claim
a foreign tax credit for any Israeli withholding taxes payable in respect of our dividends may be limited. A U.S. Holder entitled to benefits
under the United States-Israel Tax Treaty may, however, elect to treat any dividends as foreign source income for foreign tax credit purposes
if the dividend income is separated from other income items for purposes of calculating the U.S. Holder’s foreign tax credit. U.S.
Holders should consult their own tax advisors about the impact of, and any exception available to, the special sourcing rule described
in this paragraph, and the desirability of making, and the method of making, such an election.
The limitation on foreign taxes eligible for credit is calculated
separately with respect to specific classes of income. For this purpose, dividends that we distribute generally should constitute “passive
category income,” or, in the case of certain U.S. Holders, “general category income.” A foreign tax credit for foreign
taxes imposed on distributions may be denied if you do not satisfy certain minimum holding period requirements.
Subject to the discussion below under “Backup withholding
tax and information reporting requirements,” if you are a Non-U.S. Holder, you generally will not be subject to United States federal
income (or withholding) tax on dividends received by you on your ordinary shares, unless you conduct a trade or business in the United
States and such income is effectively connected with that trade or business (or, if required by an applicable income tax treaty, the dividends
are attributable to a permanent establishment or fixed base that such holder maintains in the United States).
Sale, exchange or other disposition of ordinary
shares
Subject to the discussion below under “Passive foreign investment
company considerations,” if you are a U.S. Holder, you generally will recognize gain or loss on the sale, exchange or other disposition
of your ordinary shares equal to the difference between the amount realized on such sale, exchange or other disposition and your adjusted
tax basis in your ordinary shares. Such gain or loss will be capital gain or loss. If Israeli tax is imposed on the sale, exchange or
other disposition of our ordinary shares, a U.S. Holder's amount realized will include the gross amount of the proceeds of the deposits
before deduction of the Israeli tax. The adjusted tax basis in an ordinary share generally will be equal to the cost of such ordinary
share. Except as discussed below with respect to foreign currency gain or loss, if you are a non-corporate U.S. Holder, capital gain from
the sale, exchange or other disposition of ordinary shares is generally eligible for the preferential rate of taxation applicable to long-term
capital gains if your holding period for such ordinary shares exceeds one year (i.e., such gain is long-term capital gain). The deductibility
of capital losses for United States federal income tax purposes is subject to limitations.
Any such gain or loss that a U.S. Holder recognizes generally will
be treated as U.S. source income or loss for foreign tax credit limitation purposes. Because gain for the sale or other disposition of
our ordinary shares will be so treated as U.S. source income; and you may use foreign tax credits to offset only the portion of U.S. federal
income tax liability that is attributed to foreign source income; you may be unable to claim a foreign tax credit with respect to the
Israeli tax, if any, on gains. You should consult your tax advisor as to whether the Israeli tax on gains may be creditable against your
U.S. federal income tax on foreign-source income from other sources.
Subject to the discussion below under “Backup withholding
tax and information reporting requirements,” if you are a Non-U.S. Holder, you generally will not be subject to United States federal
income or withholding tax on any gain realized on the sale or exchange of such ordinary shares unless:
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such gain is effectively connected with your conduct of a trade or business in the United States; or
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you are an individual and have been present
in the United States for 183 days or more in the taxable year of such sale or exchange and certain other conditions are met. |
Passive foreign investment company considerations
A non-United States corporation will be classified as a “passive foreign investment
company,” or a PFIC, for United States federal income tax purposes in any taxable year in which, after applying certain look-through
rules, either
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at least 75% of its gross income is “passive income”;
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at least 50% of the average value of its gross assets (which
may be determined, in part, by the market value of our ordinary shares, which is subject to change) is attributable to assets that produce
“passive income” or are held for the production of passive income. |
Passive income for this purpose generally
includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the excess of gains over losses from
the disposition of assets which produce passive income, and includes amounts derived by reason of the temporary investment of funds raised
in offerings of our ordinary shares. If a non-United States corporation owns at least 25% by value of the stock of another corporation,
the non-United States corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other
corporation and as receiving directly its proportionate share of the other corporation’s income.
We believe that we were not classified
as a PFIC for the taxable year ended on December 31, 2019. Because PFIC status is based on our income, assets and activities for the entire
taxable year, it is not possible to determine whether we will be characterized as a PFIC for the 2020 taxable year until after the close
of the year. Moreover, we must determine our PFIC status annually based on tests which are factual in nature, and our status in future
years will depend on our income, assets and activities in those years. In addition, because the market price of our ordinary shares is
likely to fluctuate and because that market price may affect the determination of whether we will be considered a PFIC, there can be no
assurance that we will not be considered a PFIC for any taxable year.
If we were a PFIC, and you are a U.S.
Holder, then unless you make one of the elections described below, a special tax regime will apply to both (a) any “excess distribution”
by us to you (generally, your ratable portion of distributions in any year which are greater than 125% of the average annual distributions
received by you in the shorter of the three preceding years or your holding period for our ordinary shares) and (b) any gain realized
on the sale or other disposition of the ordinary shares. Under this regime, any excess distribution and realized gain will be treated
as ordinary income and will be subject to tax as if (i) the excess distribution or gain had been realized ratably over your holding period,
(ii) the amount deemed realized in each year had been subject to tax in each year of that holding period at the highest marginal rate
for such year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject
to tax at the U.S. Holder’s regular ordinary income rate for the current year and would not be subject to the interest change discussed
below), and (iii) the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable
in those years. In addition, dividend distributions made to you will not qualify for the lower rates of taxation applicable to long-term
capital gains discussed above under “— Distributions.”
Certain elections are available to U.S.
Holders of shares that may serve to alleviate some of the adverse tax consequences of PFIC status described above. If we agreed to provide
the necessary information, you could avoid the interest charge imposed by the PFIC rules by making a qualified electing fund (a “QEF”)
election, in which case you generally would be required to include in income on a current basis your pro rata share of our ordinary earnings
as ordinary income and your pro rata share of our net capital gains as long-term capital gain. We do not expect to provide to U.S. Holders
the information needed to report income and gain pursuant to a QEF election, and we make no undertaking to provide such information in
the event that we are a PFIC.
Under an alternative tax regime, you may
also avoid certain adverse tax consequences relating to PFIC status discussed above by making a mark-to-market election with respect to
your ordinary shares annually, provided that the shares are “regularly traded” on a “qualified exchange.” Shares
will be marketable if they are regularly traded on certain United States stock exchanges (including Nasdaq) or on certain non-United States
stock exchanges. For these purposes, the shares will generally be considered regularly traded during any calendar year during which they
are traded, other than in negligible quantities, on at least 15 days during each calendar quarter. U.S. Holders should be aware, however,
that if we are determined to be a PFIC, the interest charge regime described above could be applied to indirect distributions or gains
deemed to be attributable to U.S. Holders in respect of any of our subsidiaries that also may be determined to be a PFIC, and the mark-to-market
election generally would not be effective for such subsidiaries.
If you choose to make a mark-to-market
election, you would recognize as ordinary income or loss each year in which we are a PFIC an amount equal to the difference as of the
close of the taxable year between the fair market value of your ordinary shares and your adjusted tax basis in your ordinary shares. Losses
would be allowed only to the extent of net mark-to-market gain previously included by you under the election for prior taxable years.
If the mark-to-market election were made, then the PFIC rules described above relating to excess distributions and realized gains would
not apply for periods covered by the election. If you do not make a mark-to-market election for the first taxable year in which we are
a PFIC during your holding period of our ordinary shares, you would be subject to interest charges with respect to the inclusion of ordinary
income attributable to each taxable year in which we were a PFIC during your holding period before the effective date of such election.
If we were a PFIC, a holder of ordinary
shares that is a U.S. Holder must file United States Internal Revenue Service Form 8621 with respect to the company for each tax year
in which the U.S. Holder owns the ordinary shares, generally with such U.S. Holder’s federal income tax return for that year. If
we were a PFIC for a given taxable year, then you should consult your tax adviser concerning your annual filing requirements.
Backup withholding tax and information reporting requirements
United States backup withholding tax and
information reporting requirements generally apply to certain payments to certain non-corporate holders of stock. Information reporting
generally will apply to payments of dividends on, and to proceeds from the sale or redemption of, our ordinary shares made within the
United States, or by a United States payor or United States middleman, to a holder of our ordinary shares, other than an exempt recipient
(including a corporation, a payee that is not a United States person that provides an appropriate certification and certain other persons).
A payor will be required to withhold backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption
of, ordinary shares within the United States, or by a United States payor or United States middleman, to a holder, other than an exempt
recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish
an exemption from, such backup withholding tax requirements. Any amounts withheld under the backup withholding rules will be allowed as
a refund or credit against the beneficial owner’s United States federal income tax liability, if any, provided that the required
information is timely furnished to the IRS.
Certain U.S. Holders who are individuals
(or certain specified entities) are required to report information relating to an interest in our common shares by attaching a complete
United States Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, to their tax return for each year in
which they hold our common shares, subject to certain exceptions (including an exception for our common shares held in accounts maintained
by financial institutions in which case the account may be reportable if maintained by a foreign financial institution). U.S. Holders
are urged to consult their tax advisers regarding the effect, if any, of this legislation on their ownership and disposition of our common
shares.
3.8% Medicare Tax On “Net Investment Income”
Certain U.S. Holders who are individuals,
estates or trusts are subject to the requirement to pay a 3.8% tax on, among other things, dividends and capital gains from the sale or
other disposition of shares of common stock.
The following description is not intended to constitute a complete analysis of all tax
consequences relating to our prior units and our ordinary shares. You should consult your own tax advisor concerning the tax consequences
of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing
jurisdiction.
| F. |
DIVIDENDS AND PAYING AGENTS |
Not applicable.
Not applicable.
We are subject to the information reporting requirements of the
Exchange Act, applicable to foreign private issuers, and under those requirements, we file reports with the SEC. Our filings with the
SEC are available to the public through the SEC’s website at http://www.sec.gov and as of
June 2021 also at the TASE's website at http://maya.tase.co.il and
at the Israeli Securities Authority's website at http://www.magna.isa.gov.il.
As a foreign private issuer, we are exempt from the rules under
the Exchange Act, related to 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 Exchange Act. In addition, we are
not required under the Exchange Act, to file annual, quarterly and current reports and financial statements with the SEC as frequently
or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we are required to comply with the informational
requirements of the Exchange Act, and, accordingly, file current reports on Form 6-K, annual reports on Form 20-F and other information
with the SEC.
| I. |
SUBSIDIARY INFORMATION |
Not applicable.
ITEM
11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Exchange rate risk: The
Company regularly assesses currency rate risks to minimize any adverse effects on the Company’s business as a result of currency
fluctuations.
The Company's foreign currency exposure gives rise to market risk
associated with exchange rate movements of the NIS, the Company functional and reporting currency, against the USD and Euros. Most of
the Company’s purchases are denominated in USD and Euros, whereas its income and other expenses are denominated mostly in NIS. Consequently,
devaluation of the NIS against the other currencies may cause a negative impact on the Company profit margins.
The Company strives to minimize market risks arising from exchange
rates and the cost of imported goods, especially by opening wide documentary credits for suppliers abroad and holding foreign currency
surpluses, initiates forward transactions and foreign currency options.
The Company engages, from time to time, in activities to protect
against changes in exchange rates by holding some of its excess liquidity in foreign currency and making forward transactions in foreign
currency. As of December 31, 2021 there is a liability in the company's balance sheets in the amount of NIS 14 million. the company recorded
losses in the amount of NIS 17.9 million due to hedging transactions in the euro and dollar performed by the company. The hedges acquired
by the company were made at an average euro rate of about 3.79 and an average dollar of about 3.24.
The table below details the sensitivity analysis in respect to
exposure relating to exchange rate risk:
| |
Gain (loss) from exchange rate change NIS
thousands |
Fair net NIS thousands |
Gain (loss) from exchange rate change NIS
thousands |
|
Change in exchange rate
USD |
(10%)
(2,587) |
(5%)
(1,293) |
22,614
|
5%
1,281 |
10%
2,496 |
|
Change in exchange rate
EURO |
(10%)
(20,353) |
(5%)
(10,432) |
(1,834) |
5%
9,409 |
10%
17,172 |
Credit risk: Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivable. Despite the
Company's large number of clients (approximately 134,017) a major and significant part of its sales are made to only a limited number
of customers (mainly in large retail supermarket chains). The Company generally does not require and does not receive collateral from
those major customers. However, it does require and receive collateral from most of the remainder of its clients to insure security of
collecting payments. The Company maintains an allowance for doubtful debts, based upon factors surrounding the credit risk of specific
customers, historical trends and other information which management believes adequately covers all anticipated losses in respect of trade
receivable. There can be no assurance that this allowance will be adequate. In the event that any of the Company's major clients defaults
on its payment obligations to us, the Company will not possess sufficient collateral to collect the entire debt. The Company strives to
minimize the credit risks by constantly reviewing the credit it extends to customers versus the collateral it receives. As a result, the
Company has ceased selling products to certain customers and considerably reduced sales to other customers, and may continue to do so
in the future.
Interest rate risk: The
Company invests part of its cash reserves in instruments that bear fixed interest rate. The Company, as part of its investing policy,
invests part of its cash reserves in bonds and convertible debentures that bears fixed interest rate; as a result, the Company is espoused
to changes in interest rates.
The table below details the sensitivity analysis in respect to
exposure relating to investments in instruments with fix interest rates:
| |
Gain (loss) from interest change NIS thousands |
Fair value NIS thousands |
Gain (loss) from interest change NIS thousands |
|
Change in Interest as % of interest rate |
(10%) |
(5%) |
|
5% |
10% |
|
Increase\decrease in financial Income |
(9,198) |
(4,599) |
91,978 |
4,599 |
9,198 |
ITEM
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
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. CONTROLS AND
PROCEDURES
(a) Disclosure Controls
and Procedures
Our Chief Executive Officer, or CEO, and Chief Financial Officer,
or CFO, are responsible for establishing and maintaining our disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended). These controls and procedures were designed to ensure that information required
to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit
under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive
and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required
disclosure. We evaluated these disclosure controls and procedures under the supervision of our CEO and CFO as of December 31, 2021. Based
on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective to meet these objectives.
(b) Management’s
Annual Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934,
as amended. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Our internal control over financial reporting includes those policies and procedures that:
|
• |
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of our assets; |
|
• |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations
of our management and directors; and |
|
• |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on the financial statements. |
Our management recognizes that there are inherent limitations
in the effectiveness of any system of internal control over financial reporting, including the possibility of human error and the circumvention
provide only reasonable assurance with respect to financial statement preparation and presentation, and may not prevent or detect all
misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management (with the participation of the CEO and CFO) assessed
the effectiveness of our internal control over financial reporting as of December 31, 2021. In conducting its assessment of internal control
over financial reporting, management used the criteria established in "Internal Control - Integrated Framework (2013)" issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Our management has concluded, based on its assessment, that our internal control
over financial reporting was effective as of December 31, 2021 based on these criteria.
(c) This Annual Report does not include an attestation report
of our independent registered public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation
by our independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to
provide only management's report in this Annual Report.
(d) Changes in Internal
Control over Financial Reporting.
There were no changes in the Company’s internal control
over financial reporting that occurred during the year ended December 31, 2021 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
ITEM
16. [RESERVED]
| ITEM16A. -- |
AUDIT COMMITTEE FINANCIAL EXPERT |
The Company’s Board of Directors has determined that Einav
Brar, Idan Ben-Shitrit, and Victor Bar are the “Audit Committee Financial Experts” for the Company, as such terms are defined
under SEC rules. Ms. Brar, Mr. Ben-Shitrit, and Mr. Bar each serve on the Company’s Audit Committee and are “Independent Directors”
as defined in the Nasdaq listing standards applicable to us.
| ITEM 16B. -- |
CODE OF ETHICS |
We have adopted a Code of Ethics that applies to our principal
executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A
copy of the Code of Ethics will be provided upon request without charge to any person who requests such copy from Yitschak Barabi, Chief
Financial Officer, at cfo@willi-food.co.il or +972-8-932-1099.
| ITEM 16C. -- |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The following table presents the aggregate fees for professional
services and other services rendered by BDO Ziv Haft ("BDO"), the Company’s independent public accounting firm, in 2021. BDO’s
address is [__].
| |
NIS 2021 |
USD 2021 |
NIS 2020 |
USD 2020 |
|
Audit Fees and Tax Fees (1)(2) |
343,715 |
110,520 |
340,000 |
105,754 |
|
All Other Fees (3) |
3,110 |
1,000 |
17,404 |
5,413 |
|
TOTAL |
346,825 |
111,520 |
357,404 |
111,167 |
(1) Audit Fees consist of fees billed for the annual audit services engagement and
other audit services, which are those services that only the external auditor can reasonably provide, and include the company audit; statutory
audits; comfort letters and consents; attest services; and assistance with and review of documents filed with the SEC.
(2) Tax Fees include fees billed for tax compliance services, including the
preparation of original and amended tax returns and claims for refund; tax consultations, such as assistance and representation in connection
with tax audits, tax advice related to mergers and acquisitions, transfer pricing, and requests for rulings or technical advice from taxing
authority.
(3) All Other Fees include attestation services.
During fiscal year 2021, the external auditor performed additional services,
other than auditing and tax services, which amounted to NIS 1 thousand. These services did not exceed 45% of the total fee of the external
auditor and the audit fee for accounting represents more than 50% of the external auditor's total revenue from the Company.
Audit Committee Pre-Approval Policies and Procedures
Our audit committee’s specific responsibilities in carrying out its oversight
of the quality and integrity of the accounting, auditing and reporting practices of the Company include the approval of audit and non-audit
services to be provided by the external auditor. The audit committee approves in advance the particular services or categories of services
to be provided to the Company during the following yearly period and also sets forth a specific budget for such audit and non-audit services.
Additional non-audit services may be pre-approved by the audit committee.
| ITEM 16D. -- |
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
Not applicable.
| ITEM 16E. -- |
PURCHASES OF EQUITY SECURITIES BY THE COMPANY AND AFFILIATED PURCHASERS |
Not applicable.
| ITEM 16F. -- |
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT |
Not applicable.
| ITEM 16G. -- |
CORPORATE GOVERNANCE |
The following are the significant ways in which our corporate governance practices differ
from those followed by domestic companies under the listing standards of the Nasdaq:
|
• |
Executive Sessions – Under Nasdaq rules, U.S. domestic listed companies, must have
a regularly scheduled meeting at which only independent directors are present. We do not have such executive sessions. |
|
• |
Compensation of Officers - Under Nasdaq rules, the Company must adopt a formal written compensation
committee charter addressing the scope of the compensation committee's responsibilities, including structure, processes and membership
requirements, among others. We do not have such a formal written charter. |
|
• |
Nominations of Directors - Under Nasdaq rules, U.S. domestic listed companies, must have
a nominations committee comprised solely of independent directors and must have director nominees selected or recommended by a majority
of its independent directors. Our directors are not nominated in this manner. |
|
• |
Nominations Committee Charter or Board Resolution - Under Nasdaq rules, U.S. domestic listed
companies, must adopt a formal written charter or board resolution, as applicable, addressing the nominations process and such related
matters as may be required under the federal securities laws. We do not have such a formal written charter or board resolution.
|
|
• |
Quorum - Under Nasdaq rules, U.S. domestic listed company's by-laws provide for a quorum
of at least 33 1/3 percent of the outstanding shares of the company’s common voting stock. According to our articles our quorum
should be at least 25 percent of the outstanding shares of our common voting stock. |
|
• |
Review of Related Party Transactions: Under Nasdaq Listing Rules, domestic listed companies
must conduct an appropriate review and oversight of all related party transactions for potential conflict of interest situations on an
ongoing basis by the company’s audit committee or another independent body of the board of directors. Although Israeli law requires
us to conduct an appropriate review and maintain oversight of all related-party transactions similar to the Nasdaq Listing Rules, we follow
the definitions and requirements of the Companies Law in determining the kind of approval required for a related-party transaction, which
tend to be more rigorous than the Nasdaq Listing Rules. |
|
• |
Shareholder Approval of Certain Equity Compensation: Under Nasdaq Listing Rules, shareholder
approval is required prior to an issuance of securities in connection with equity-based compensation of officers, directors, employees
or consultants. The Company has indicated that it will receive shareholder approval as required by Israeli law, including upon issuance
of options to directors or to controlling shareholders. |
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
PART
II
ITEM 17.
FINANCIAL STATEMENTS
We have responded to Item 18 in lieu of this Item.
ITEM 18. FINANCIAL STATEMENTS
The financial statements required by this item are found at the end of this annual report,
beginning on page F-1.
ITEM
19. EXHIBITS
|
Exhibit Number
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1 |
Specimen of Certificate for ordinary shares (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS |
XBRL Instance Document |
|
|
101.SCH |
XBRL Taxonomy Extension Schema Document |
|
|
101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document |
|
|
101.LAB |
XBRL Taxonomy Extension Label Linkbase Document |
|
|
101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
101.INS |
XBRL Instance Document |
|
|
† |
Informal English translations from Hebrew original. |
|
|
(1) |
Incorporated by reference to the Company’s Registration Statement on Form F-1,
File No. 333-6314. |
|
|
(2) |
Incorporated by reference to the Company’s Annual Report on Form 20-F for the
fiscal year ended December 31, 2005. |
|
|
(3) |
Incorporated by reference to the Company’s Registration Statement on Form F-3,
File No. 333-138200. |
|
|
(4) |
Incorporated by reference to the Company’s Annual Report on Form 20-F for the
fiscal year ended December 31, 2013. |
|
|
(5) |
Incorporated by reference to the Company’s Annual Report on Form 20-F for the
fiscal year ended December 31, 2019. |
|
|
(6)
(*) |
Incorporated by reference to the Company’s Annual Report on Form 20-F for the
fiscal year ended December 31, 2020.
Filed Herewith |
|
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.
|
|
G. WILLI-FOOD INTERNATIONAL LTD.
By: /s/ Erez Winner
Erez Winner
Acting Chief Executive Officer |
Date: March 15, 2022
64
We have audited the accompanying consolidated balance sheets of G. Willi-Food International Ltd (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income and comprehensive income, changes in equity, and cash flows for each of the three years in the period ended, December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with International Financial Reporting standards as issued by the International Accounting Standards Board.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
We have served as the Company's auditor since 2018.
(*) Convenience Translation into US Dollars.
(*) Convenience Translation into US Dollars.
