Osem Investments Limited
Financial Statements
December 31, 2013
Investments Limited Consolidated Statements on Financial Position as at 31 December
Financial Statements for the year ended December 31, 2013
Page
2 - 3
Auditors’ Report
4 - 5 Consolidated Statements on Financial Position
6 Consolidated Income Statements
7 Consolidated Statements on Comprehensive Income
8 Consolidated Statements on changes in shareholders equity
9 Statements on Consolidated Cash Flows
10 - 56 Notes to the Financial Statements
57 Annex – list of Group companies
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Investments Limited Consolidated Statements on Financial Position as at 31 December
2012 2013
NIS thousands NIS thousands Note
Assets
60,265 328,059 5 Cash and cash equivalents
676,445 688,481 6
Trade receivables
37,896 27,662 7
Other receivables
7,416 5,464 20
Income tax
406,724 390,107 8
Inventory
13,670 7,067 9
Other investments
1,202,416 1,446,840
Total current assets
- 293 11
Employee benefits
1,127,990 1,144,497 12
Fixed Assets
1,025,654 977,057 13
Intangible Assets
37,669 38,806 14
Prepaid Expenses
30,441 34,795 20
Deferred tax assets
2,221,754 2,195,448
Total non-current assets
3,424,170 3,642,288 Total assets
Dan Propper - Chairman of the Board
Itzik Saig - CEO
Pinhas Kimelman - Deputy CEO Finance
The date of approval of the Financial Statements: 13 March 2014
Investments Limited
5
2012 2013
NIS thousands NIS thousands Note
Liabilities
58,938 29,212 15
Loans and short-term credit from banks
685,948 710,463 16
Trade payables
189,169 223,976 17
Other creditors
11,813 9,473 20
Income tax
945,868 973,124
Total current liabilities
3,370 - 18
Liabilities to banking institutions
357,104 342,514 19
Liabilities for acquisition of non controlling interest in subsidiaries
4,537 4,450 11
Employee benefits
69,847 69,327 20
Deferred taxes
434,858 416,291
Total non-current liabilities
1,380,726 1,389,415
Total liabilities
Equity
176,772 176,772
Share Capital
444,212 444,212
Share premium
(48,015) (68,353)
Reserves
1,469,789 1,699,113
Retained earnings
2,042,758 2,251,744 Total equity attributable to owners of the company
686 1,129
Non Controlling Interest
2,043,444 2,252,873
Total equity
3,424,170 3,642,288 Total liabilities and equity
The accompanying notes are an integral part of the financial statements.
Consolidated Statements of Profit and Loss for the year ending on 31 December
Investments Limited
6
2011 2012 2013 NIS thousands NIS thousands NIS thousands Note
3,960,877 4,091,593 4,190,047 A. 23 Sales 2,309,482 2,411,998 2,426,336 B. 23 Cost of Sales 1,651,395 1,679,595 1,763,711 Gross profit
878,759 885,610 928,833 C. 23 Selling, marketing and distribution
expenses 270,528 282,962 306,320 D. 23 General and administrative expenses 502,108 511,023 528,558 Operating profit before other expenses
2,830 7,030 2,885 E. 23 Other expenses, net
499,278 503,993 525,673 Operating profit
(41,538) (33,726) (24,653) F. 23 Financing expenses 9,904 4,088 1,892 F. 23 Financing income
(31,634) (29,638) (22,761) Financing costs, net
467,644 474,355 502,912 Profit before taxes on income 126,664 117,013 126,484 20 Taxes on income
340,980
357,342
376,428
Profit for the period
Attributed to:
341,052 356,886 375,985 Company's Owners
(72) 456 443 Non Controlling Interest
340,980
357,342
376,428
Profit for the period
Net earnings per NIS 1 par value of the
ordinary share capital
3.08 3.23 3.40 Basic and fully diluted net earnings (in NIS)
The accompanying notes are an integral part of the financial statements.
Statements of consolidated comprehensive income for the year ending on 31 December
Investments Limited
7
2011 2012 2013
NIS thousands NIS thousands NIS thousands
340,980 357,342 376,428 Profit for the period
Other comprehensive profit (loss)
Amounts transfered to profit or loss
Upon the occurrence of specific terms
Foreign currency translation differences
4,831 2,653 (20,338) from foreign operations
Amounts that will not be transfered to profit or loss
Actuarial gains (losses)
(13,581) 5,993 4,543 from defined benefit plans
Income tax from other components
3,396 (1,498) (1,204) Of comprehensive income
(5,354) 7,148 (16,999) Total comprehensive income (loss) for the period
335,626 364,490 359,429 Total comprehensive income for the period
Attributed to:
335,698 364,034 358,986 Company's Owners
(72) 456 443 Non Controlling Interest
335,626 364,490 359,429 Total comprehensive income for the period
The accompanying notes are an integral part of the financial statements.
Consolidated Statements on changes in shareholders equity
Investments Limited
8
Capital reserve
related to
Acquisition of
rights not
Total Rights not Total Conferring
control
equity Conferring
control Company's
Owners
Retained
earnings
Other
Reserves
In a Consolidated
Company
Translation
Reserve Fund
Premium on
shares
Share Capital
NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands
1,793,328 302 1,793,026 1,231,541 1,694 (41,675) (19,518) 444,212 176,772 Balance at at January 1 2011
4,831 - 4,831 - - - 4,831 - - Foreign currency translation differences
(10,185) - (10,185) (10,185) - - - - - Actuarial losses (net after tax)
340,980 (72) 341,052 341,052 - - - - - Net profit for the year 2011
335,626 (72) 335,698 330,867 - - 4,831 - - Total recognized income for the period
(300,000) - (300,000) (300,000) - - - - - Dividend paid
1,828,954
230
1,828,724
1,262,408
1,694
(41,675)
(14,687)
444,212
176,772
Balance at December 31 2011
2,653 - 2,653 - - - 2,653 - - Foreign currency translation differences
4,495 - 4,495 4,495 - - - - - Actuarial gains (net after tax)
- - - (4,000) 4,000 - - - - Capital reserve for approved enterprise
357,342 456 356,886 356,886 - - - - - Net profit for the year 2012
364,490 456 364,034 357,381 - - 2,653 - - Total comprehensive income for the period
(150,000) - (150,000) (150,000) - - - - - Dividend paid
2,043,444
686
2,042,758
1,469,789
5,694
(41,675)
(12,034)
444,212
176,772
Balance as at 31 December 2012
(20,338) - (20,338) - - - (20,338) - - Foreign currency translation differences
3,339 - 3,339 3,339 - - - - - Actuarial gains (net after tax)
376,428 443 375,985 375,985 - - - - - Net profit for the year 2013
359,429 443 358,986 379,324 - - (20,338) - - Total comprehensive income for the period
(150,000) - (150,000) (150,000) - - - - - Dividend paid
2,252,873
1,129
2,251,744
1,699,113
5,694
(41,675)
(32,372)
444,212
176,772
Balance as at 31 December 2013
The accompanying notes are an integral part of the financial statements.
Statements on consolidated cash flows for the year ending on 31 December
Investments Limited
9
2011 2012 2013
NIS thousands NIS thousands NIS thousands
Cash flows from operating activities
340,980 357,342 376,428 Profit for the period
Adjustments for:
112,500 114,809 114,204 Depreciation
Amortization of intangible assets
41,168 51,385 52,534 And Prepaid Expenses
(1,199) 503 155 Loss (gain) on sale of fixed assets, net
31,634 29,638 22,761 Financing costs, net
126,664 117,013 126,484 Income tax expense
3,388 1,675 (4,642) Change in derivatives
(20,561) (18,633) 11,856 Change in inventory
30,637 (37,258) (18,201) Change in trade and other receivables
3,061 44,959 76,330 Change in trade payables and other creditors
126 (2,979) 4,163 Change in employee benefits
(87,997) (115,165) (126,734) Income tax paid
580,401 543,289 635,338 Net cash from operating activities
Cash flows from investing activities
1,969 1,077 2,002 Proceeds from sale of fixed assets
(279) 5,476 6,996 Other investments, net
(78,607) (82,156) (145,009) Acquisition of fixed assets
(10,052) (18,108) (20,624) Investment in intangible assets and prepaid expenses
3,064 2,456 1,227 Interest received
(83,905) (91,255) (155,408) Net cash used in investing activities
Cash flows from financing activities
(12,570) (29,251) (3,637) Interest paid
(58,837) (24,838) (13,303) Repayment of longterm loans
(38,331) (52,544) (11,798) Credit from banks and others, net
(112,787) (239,600) (30,904) Repayment of other liabilities
(300,000) (150,000) (150,000) Dividend paid
(522,525) (496,233) (209,642) Net cash used in financing activities
(26,029) (44,199) 270,288 Change in cash and cash equivalents
128,771 104,479 60,265
Cash and cash equivalents as at the beginning of the
period
Effect of exchange rate fluctuations
1,737 (15) (2,494) on cash balances and cash equivalents
104,479 60,265 328,059
Cash and cash equivalents as at the end of the
period
The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
10
Note 1 – The Reporting Entity
A. Osem Investments Limited (hereinafter – the “Company”) is an Israeli resident company incorporated in Israel.
The consolidated financial statements of the Group as at 31 December 2013 include the statements of the
Company and its subsidiary companies (hereinafter: The "Group") The controlling interest in the Group is Nestle S.A., Switzerland. The Group is involved in industrial and
commercial activities in the food industry. The shares of the Company are registered for trade on the Tel Aviv Stock Exchange.
B. Definitions
In these financial statements -
1. Subsidiaries – Companies, including partnerships, the financial statements of which are fully
consolidated, directly or indirectly, with the financial statements of the Company.
2. Related party – Within its meaning in IAS 24 (2009), “Related Party Disclosures”.
3. Interested party – Within their meaning in Paragraph (1) of the definition of an “interested party” in
Section 1 of the Securities Law - 1968
Note 2 – Basis of Preparation
A. Declaration on compliance with IFRS
The annual financial statements are based on the international financial reporting standards (IFRS). The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs). The Group has adopted the IFRS in 2008. The transition to IFRS was first set as January 1
2007 (hereinafter: "transition date") These financial statements have been prepared in accordance with the Securities Regulations (Annual
Financial Statements) – 2010.
B. Functional and presentation currency
These consolidated financial statements are presented in NIS, which is the Company’s functional
currency, and have been rounded to the nearest thousand. The NIS is the currency that represents the principal economic environment in which the Company
operates.
C. Basis of Measurement
The reports were prepared on the historical cost basis except the following assets and liabilities. Inventory (cost
or net realizable value) of financial instruments at fair value via profit and loss and obligations for payments
based on shares which will be dismissed in cash, deferred tax assets and liabilities, provisions and assets and
obligations for employee benefits. Additional information related to the measurement of these assets and
liabilities see Note 3 following. The value of non-monetary assets and equity items that were measured on the historical cost basis was adjusted
to changes in the CPI until December 31, 2003, since until that date the Israeli economy was considered hyper
inflationary.
D. Operational turnover
The operational turnover of the Group does not exceed a year. As a result included in current assets and current
liabilities are items which are due to and anticipated to be realized during the normal turnover period of the
Group
E. Classification of expenses recognized in the statement of income
The classification of expenses recognized in the statement of income is based on the function of the expense.
Additional information regarding the nature of the expense is included, inasmuch as relevant, in the notes to the
financial statements.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
11
Note 2 – Basis of Preparation (cont'd)
F. Use of estimates and judgments
The preparation of financial statements in conformity with IFRS requires management to make estimates and
assumptions which affect the application of the policy and the amounts of assets and liabilities, income and
expenses. Actual results may differ from these estimates.
The preparation of accounting estimates used in the preparation of the Company’s financial
statements requires management to make assumptions regarding circumstances and events that
involve considerable uncertainty. The Company Management prepares the estimates on the basis of
past experience, various facts, external circumstances, and reasonable assumptions according to the
pertinent circumstances of each estimate. The estimates and assumptions made in their respect are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimates are revised and in any future
periods affected.
Critical estimates Critical estimates presented hereunder is information about critical estimates, made while implementing Group
accounting policies and which have a most significant effect on the financial statements:
Contingent liabilities - When assessing the possible outcomes of legal claims that were filed against the
Company and its subsidiary companies, the companies relied on the opinions of their legal counsel. The
opinions of their legal counsel are based on the best of their professional judgment, and take into consideration
the current stage of the proceedings and the legal experience accumulated with respect to the various matters. As
the results of the claims will ultimately be determined by the courts, they may be different from such estimates.
Valuation of intangible assets and goodwill – the Group is required in business combinations to measure the
assets acquired and the liabilities assumed based on an estimate of their fair values. These value estimates
require Management to make use of significant estimates and assumptions. The material intangible assets
recognized include mainly goodwill, know-how and trademarks. Critical estimates used in evaluating the useful
lives of such intangible assets include, among others, an estimate of the usage period of the know-how and
trademarks and the expected developments in the market.
Recoverable amount of a cash generating unit. When determining the recoverable amount of a cash generating
unit containing goodwill for the purpose of testing it for impairment, management uses assumptions regarding
the pre-tax discount rate and a budgeted EBITDA growth rate.
Allowance for doubtful debts – the Company follows the guidelines set forth in IAS 39 in determining
whether there has been a decline in value of the trade receivables. This determination requires exercise of
significant judgment. In exercising this judgment, the Group takes into account, among other factors, the level
of securities that are available to the Group, the age of the receivables, history of the bad debts, debt repayment
behavior, financial strength and short-term analysis of the customer’s business along with the trends in the
industry.
Obligation for PUT Options of the Non Controlling Interest in a Consolidated Subsidiary - The present
value of the obligation for PUT options to the non controlling interest in a consolidated subsidiary is based on
profit and cash flow forecasts. Any changes to these forecasts affect the book value of the obligation for
acquisition of the non controlling interest in a consolidated subsidiary. These forecasts are based on
assumptions found to be reasonable in the managements opinion, but they include uncertainty and as a result the
actual results could differ.
Deferred Tax Assets - The Group recognizes deferred tax assets and liabilities for the difference between the
book value of the assets and liabilities and their tax value. The Group examines on a regular basis the
recoverability of deferred tax assets based on the historical taxable income, anticipated taxable income and
anticipated date of reversal of temporary differences. If the Group is unable to create enough taxable income in
certain tax territories, or during the period of anticipated reversal of temporary differences, the Group is likely
to delete part of the deferred tax assets.
Share Based Payment - The Group has several employee compensation plans among them also phantom
options for compensation of senior employees. The fair value of the phantom options is based on certain
assumptions, including, the standard deviation of the share price. These assumptions are based on forecasts of
sales and earnings per share. Material gaps between the market performance of the share, the employee
realization behavior, the Group's sales and the earnings per share data anticipated verses the actual results.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
12
Note 2 – Basis of Preparation (cont'd)
G. Capital management – objectives, procedures and processes
Management’s policy is to maintain a strong capital base in order to preserve the ability of the Company to
continue operating so that it may provide a return on capital to its shareholders, benefits to other holders of
interests in the Company such as credit providers and employees of the Company, and sustain future
development of the business. The Board of Directors also monitors the level of dividends to ordinary
shareholders.
H. Changes in the accounting policies
1. Amendment to IAS 19, Employee Benefits (the following is the amendment) Commencing 1 January 2013 the Group implements the amendment. The amendment to IAS 19
introduces a number of changes to the accounting treatment of employee benefits, in general the interest that is recognized in profit or loss will be calculated on the balance of the net defined benefit liability (asset), according to the discount rate that is used to measure the liability. In addition, employee benefits will be classified as short or long term depending on when the entity expects the benefits to be wholly settled.
the application of the standard does not have a material effect on the financial statements.
2. Amendment to IAS 36, Impairment of Assets: Recoverable Amount Disclosures for Non-Financial Assets
(the following is the amendment)
The amendment contains new disclosure requirements for situations in which an impairment loss is
recognized and the recoverable amount is determined at fair value less costs of disposal. In addition, the
amendment eliminates the requirement to disclose the recoverable amount of significant cash-generating
units even if impairment was not recognized in their respect.
The mandatory effective date of the amendment is for annual periods beginning on January 1, 2014. The
company has chosen early implentation of the amendment, commencing with financial statements for year
ending 31 december 2013.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
13
Note 3 - Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, and have been applied consistently by Group entities, except as
explained in Note F.2 Basis of Preparation, under the section addressing changes in accounting policies.
A. Basis of Consolidation
1. Business Combinations The Group applies the acquisition method on all business combinations. Date of acquisition is the date the purchaser attains control over the acquired entity, control is the ability to set
the financial and operational policy of the company in order to attain benefits from its actions. Substantive
rights held by the Group and others are taking into account when assessing control. The Company applies
discretion in determining the acquisition date and if control was achieved.
Treatment of business combinations after 1 January 2010 (The date of initial implementation of IFRS 3 (2008)
and IAS27 (2008)
For acquisitions on or after January 1, 2010, the Group recognizes goodwill at acquisition according to the fair
value of the consideration transferred including any amounts recognized in respect of rights that do not confer
control in the acquiree , less the net amount of the identifiable assets acquired and the liabilities assumed. The consideration transferred includes the fair value of the assets transferred to the previous owners of the
acquiree, the liabilities incurred by the acquirer to the previous owners of the acquiree and equity instruments
that were issued by the Group. In addition, the consideration transferred includes the fair value of any
contingent consideration. After the acquisition date, the Group recognizes changes in fair value of the
contingent consideration classified as a financial liability in profit or loss. Changes in liabilities for contingent
consideration in business combinations that occurred before January 1, 2010 will continue to be recognized in
goodwill and will not be recognized in profit or loss. Costs associated with the acquisition that were incurred by the acquirer in the business combination such as:
finder’s fees, advisory, legal, valuation and other professional or consulting fees, other than those associated
with an issue of debt or equity instruments connected to the business combination, are expensed in the period
the services are received.
2. Subsidiary companies Subsidiary companies are entities controlled by the Group. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that control commences until the
date that control ceases. The accounting policies of subsidiaries have been changed when necessary to
align them with the policies adopted by the Company.
3. Put option granted to rights holders which do not confer control before 1 January 2010 The Group granted as part of the proceeds from business combinations “PUT” options to non controlling
shareholders in a subsidiary that permit them to sell to the company their shares in the subsidiary. The
commitment to acquire the minority interest is presented in the consolidated balance sheet as a
financial liability. This financial liability is measured based on the present value of the exercise price
of the “put” options. The difference between the financial liability and the book value of the minority
interest was allocated as additional goodwill. Re measurement of the liabilities, except for the charging of interest expense according to the interest
signifying the credit risk of the Company, is recognized as goodwill. The Group’s share in profit’s of
acquired share includes the portion of non controlling to whom the PUT option was issued.
4. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
5. Transactions with Non Controlling Interests, While Maintaining Control Commencing 1 January 2010 transactions with non controlling interests, while maintaining control, are treated
as equity transactions. Any difference between the consideration paid or received to change rights not
conferring control are charged to the equity holder's share in the Company in a separate capital reserve.
Notes to the Financial Statements as at 31 December 2013
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14
Note 3 - Significant Accounting Policies (cont'd)
A. Basis of Consolidation (cont'd)
6. Non Controlling Interest
Non controlling interests are the unallocable equity in subsidiary companies , directly or indirectly to the parent
company. Non-controlling interests that are instruments that give rise to a present ownership interest and entitle
the holder to a share of net assets in the event of liquidation (for example: ordinary shares), are measured at the
date of the business combination at either fair value, or at their proportionate interest in the assets and liabilities
of the acquiree, on a transaction-by-transaction basis. For acquisitions between January 1, 2007 and January 1, 2010, non-controlling interests were measured on the
date of the business combination at their proportionate interest in the identifiable assets and liabilities of the
acquiree. As from January 1, 2010, profit or loss and any part of other comprehensive income are allocated to the owners
of the Company and the non-controlling interests, total comprehensive income is allocated to the owners of the
Company and to the non controlling interests even when the result is a negative balance of the non-controlling
interests.
B. Foreign Currency
1. Foreign currency transactions Transactions in foreign currency are translated to the currency used for the activity of the Group according to the valid exchange rate on the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period. Foreign currency differences arising on translation are recognized in profit or loss. Non-monetary items which are stated in foreign currency and are measured according to historical cost are
translated according to the exchange rate which was valid on the date of the transaction.
2. Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to NIS at exchange rates at the reporting date. The income and expenses of foreign operations are translated to NIS at exchange rates at the dates of the transactions. Foreign currency differences are recognized directly in other comprehensive income since January 1, 2007, the date of transition to IFRS, such differences have been recognized in comprehensive income as part of the foreign currency translation reserve.
C. Financial Instruments
1. Non-derivative Financial instruments Non-derivative financial instruments comprise, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Non-derivative financial instruments are recognized initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. A financial asset is recognized when the Group assumes upon itself the contractual conditions of the instrument. Financial instruments are derecognized when the contractual rights of the Group to the cash flows deriving from the financial assets expire, or when the Company transfers to others the financial assets without retaining control over the asset or actually transfers all the risks and rewards deriving from the asset. Regular way purchase or sale of financial assets are recognized on the trade date, meaning on the date the Company undertook to purchase or sell the asset. Financial liabilities are derecognized when the obligation of the Group, as specified in the agreement, expires or when it is settled or cancelled. Cash and cash equivalents Cash comprises cash balances available for immediate use and call deposits. Cash equivalents comprise short-term highly liquid investments that are readily convertible into known amounts of cash and are exposed to insignificant risks of change in value.
Notes to the Financial Statements as at 31 December 2013
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Note 3 - Significant Accounting Policies (cont'd)
C. 1.Financial Instruments (cont'd)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not traded on an active market. After initial recognition, the loans and receivables are measured at
amortized cost using the effective interest method while taking into consideration transaction costs
and deducting any impairment losses.
Financial liabilities Non-derivative financial liabilities are measured at amortized cost using the effective interest method. Financial assets and liabilities are offset and the net amount presented in the statement of financial position
when, and only when, the Group currently has a legal right to offset the amounts and intends either to settle on a
net basis or to realize the asset and settle the liability simultaneously.
2. Derivative financial instruments
The Group holds derivative financial instruments to hedge its foreign currency (which constitute an
economic hedge). Derivatives are recognized initially at fair value; attributable transaction costs are
recognized in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured
at fair value, and changes therein are accounted for as described below:
Economic hedges Hedge accounting is not applied to derivative instruments that economically hedge monetary assets
and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are
recognized in profit or loss as part of the foreign currency gains or losses.
3. CPI-linked assets and liabilities that are not measured at fair value
The value of CPI-linked financial assets and liabilities, which are not measured at fair value, is re-
measured every period in accordance with the actual increase in the CPI.
4. Details regarding the management of financial instrument risks and the Group’s exposures to credit risk,
liquidity risk and market risks are provided in Notes 24.
D. Fixed Assets
1. Recognition and measurement
Fixed asset items are measured at cost less accumulated depreciation and accumulated impairment losses.
The cost of certain fixed asset items at January 1, 2007, the Group’s date of transition to IFRSs, was determined by reference to its fair value at that date (deemed cost).
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable to bringing the assets to a working condition for their intended use. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
When major parts of a fixed asset item (including costs of major periodic inspections) have different useful lives, they are accounted for as separate items (major components) of fixed assets.
Gains and losses on disposal of a fixed asset item are determined by comparing the proceeds net from
disposal with the carrying amount of the asset, and are recognized net within “other income or
expenses” in profit or loss.
2. Subsequent expenditure
The cost of replacing part of a fixed asset item is recognized in the carrying amount of the item if it is
probable that the future economic benefits embodied within the part will flow to the Group and its
cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of
day-to-day servicing are recognized in profit or loss as incurred.
Notes to the Financial Statements as at 31 December 2013
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Note 3 - Significant Accounting Policies (cont'd)
D. Fixed Assets (contd)
3. Leased assets
Capital land leases from the Israel Lands Administration where the Group assumes substantially all
the risks and rewards of ownership are classified as finance leases. The balance of the leases are classified as operating leases, where the leased assets are not recognized
in the statement of financial position of the Group. In leases of land and buildings, the land and building component are examined separately for the purpose of classifying the leases, while a major consideration in the classification of the land component is the fact that land generally has an indefinite life.
4. Depreciation
Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of the asset, or other amount substituted for cost, less its residual value.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of the fixed asset item, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets under finance lease agreements including lands are depreciated over the shorter of the lease term and their useful lives. Owned lands are not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
Buildings, 20-35 years Machinery, 10-20 years Computers, furniture, and equipment, 3-5 years Motor vehicles, 4-7 years Leasehold improvements, Over the lease period Leased land Over the lease period
Excess cost of investment allocated to specific assets is depreciated according to the remaining
balance to be depreciated at the date the excess cost was allocated.
Depreciation methods, useful lives and residual values are reviewed at least at each reporting date.
Notes to the Financial Statements as at 31 December 2013
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Note 3 – Significant Accounting Policies (cont'd)
E. Intangible Assets
1. Goodwill and intangible assets with indefinite lives
Goodwill and intangible assets having an indefinite life, that arise upon the acquisition of subsidiaries is included in intangible assets. For information on measurement of goodwill at initial recognition, see Paragraph A(1) above. In subsequent periods goodwill is measured at cost less accumulated impairment losses. In consecutive periods goodwill is measured at cost less accumulated impairment losses.
2. Other Intangible Assets
Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at
cost less accumulated amortization and accumulated impairment losses.
3. Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.
4. Amortization
Amortization is a systematic allocation of the amortizable amount of an intangible asset over its useful life. The amortizable amount is the cost of the asset, less its risidual value.
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of the intangible asset item, from the date available for use since this method most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
Goodwill and intangible assets having an indefinite useful life are not systematically amortized but are tested for impairment.
The estimated useful lives for the current and comparative periods are as follows:
Use rights of computer software, 3-5 years
Equipment for advertising and sales promotion, 3-5 years Distribution, know-how, brand and non-competition rights, 3-10 years The estimates regarding the amortization method and useful life are reassessed at each reporting date.
Intangible assets having an undefined useful life include a trademark that has an undefined useful life since there is no discernible limitation on the period in which the trademark is expected to produce net positive cash flows for the Company
The Group examines the useful life of an intangible asset that is not periodically amortized in order to
determine whether events and circumstances continue to support the decision that the intangible asset
has an indefinite useful life.
F. Inventory
Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes
expenditure incurred in acquiring the inventories and the costs incurred in bringing them to their existing
location and condition. In the case of manufactured inventories and work in progress, cost includes an
appropriate share of production overheads based on normal operating capacity. The cost of purchased finished
products is based on first-in first-out (FIFO), the average weighted average cost method is used to calculate cost
of other inventories. Net realizable value is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and selling expenses.
Notes to the Financial Statements as at 31 December 2013
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Note 3 – Significant Accounting Policies (cont'd)
G. Impairment
1. Financial assets A financial asset is tested for impairment when objective evidence indicates that one or more events
have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference
between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognized in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the
impairment loss was recognized. 2. Non financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax
assets are reviewed at each reporting date to determine whether there is any indication of impairment.
If any such indication exists, then the asset’s recoverable amount is estimated. In subsequent periods
the Group estimates, once a year and on the same date for each asset, the recoverable amount of
goodwill and intangible assets that have indefinite useful lives or are unavailable for use, or more
frequently if their a signs indicating impairment. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its net
selling price (fair value less costs to sell). In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. For the purpose of impairment testing,
assets are grouped together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other assets or groups of assets (the
“cash-generating unit”). For the purpose of assessing the impairment of goodwill, the cash generating
unit to which the goodwill was allocated is combined in such a way the level at which the impairment
of goodwill is measured reflects the lowest at which the goodwill can be monitored for internal
purposes but in any case is not greater than the segment activity. The goodwill acquired in a business
combination, for the purpose of impairment testing, is allocated to cash-generating units that are
expected to benefit from the synergies of the combination. An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds
its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment
losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount
of any goodwill allocated to the units and then to reduce the carrying amounts of the other assets in the
cash-generating of unit on a pro rata basis.
H. Employee benefits
1. Post-employment benefits The Group has a number of post-employment benefit plans. The plans are usually financed by deposits with
insurance companies or with funds managed by a trustee, and they are classified as defined contribution plans
and as defined benefit plans.
A. Defined contribution plans. Defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into
a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions
to defined contribution pension plans are recognized as an expense in profit or loss when they are due.
B. Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The
Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan
by estimating the amount of future benefit that employees have earned in return for their service in the
current and prior periods. That benefit is discounted to determine its present value, and the fair value
of any plan assets is deducted. The discount rate is the yield at the reporting date on Government
debentures denominated in the same currency, that have maturity dates approximating the terms of the
Notes to the Financial Statements as at 31 December 2013
Investments Limited
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Note 3 – Significant Accounting Policies (cont'd)
H. Employee benefits (cont'd)
B. Defined benefit plans (cont'd) Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit
method. When the calculation results in an asset for the Group, an asset is recognized up to the net
present value of economic benefits available in the form of a refund from the plan or a reduction in
future contributions to the plan. An economic benefit in the form of refunds or reductions in future
contributions is considered available when it can be realized over the life of the plan or after settlement
of the obligation. When in the framework of a minimum contribution requirement, there is an obligation to pay additional amounts for services that were provided in the past, the Company recognizes an additional obligation (increases the net liability or decreases the net asset), if such amounts are not available as an economic benefit in the form of a refund from the plan or the reduction of future contributions. Re measurements of the net defined benefit liability (asset) comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest). Re measurements are recognized immediately directly in retained earnings through other comprehensive income. Interest costs on a defined benefit obligation, interest income on plan assets and interest from the effect of the asset ceiling without gain are recognized in profit and loss When there is an improvement in the benefits which the Group provides the employees, the portion of the increased benefit relating to past service by employees are recognized immediately in profit or loss when the plan correction occurs. The Group has manager insurance policies which were issued before the year 2004 and according to the terms of the policy the real gains that accumulated on the severance pay component will be paid to the employee upon his retirement. For the said policies, the plan assets include the balance of the severance pay component and the balance of the real gains that accumulated (if accumulated) on deposits for severance pay until the reporting date are disclosed at fair value. These plan assets are used for a defined benefit plan which includes two liability components: A defined benefit plan component for severance pay, calculated actuarially as mentioned above, and an additional component which is a liability to pay the remaining real gain accumulated (if accumulated) at the employees retirement. This component is measured at the balance of real gain actually accumulated at the reporting date. The Company offsets an asset relating to one benefit plan from the liability relating to another benefit
plan only when there is a legally enforceable right to use the surplus of one plan to settle the
obligation in respect of the other plan, and there is intent to settle the obligation on a net basis.
2. Other long-term benefits
The Group’s net obligation in respect of long-term employee benefits other than pension plans is the
amount of future benefit that employees have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value, and the fair value of any related
assets is deducted. The discount rate is the yield at the reporting date on Government debentures
denominated in the same currency, that have maturity dates approximating the terms of the Group’s
obligations. The calculation is performed using the projected unit credit method. Any actuarial gains
or losses are recognized in profit or loss in the period in which they arise.
3. Termination benefits
Short-term benefits Termination benefits for voluntary redundancies are recognized as an expense if
the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted,
and the number of acceptances can be estimated reliably.
4. Short-term benefits
Short-term employee benefit obligations are measured on an un-discounted basis and are expensed as
the related service is provided. A provision for short term employee benefits in respect of a cash bonus or profit sharing plan is
recognized when the Group has a present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation can be estimated reliably. The
employee benefits are classified, for measurement purposes, as short-term benefits or as other long-
term benefits depending on when the Company expects the benefits to be wholly settled.
Notes to the Financial Statements as at 31 December 2013
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Note 3 – Significant Accounting Policies (cont'd)
H. Employee benefits (cont'd)
B. Defined benefit plans (cont'd)
5. Share-based payment transactions
The fair value of the amount payable to employees in respect of share appreciation rights, which are
settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the
period that the employees become unconditionally entitled to payment. The liability is re-measured at
each reporting date and at settlement date. Any changes in the fair value of the liability are recognized
as a salary expense in profit or loss.
I. Provisions
1. A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle
the obligation.
2. Legal claims
A provision for claims is recognized if the Group has a present legal or a constructive obligation due to an event
in the past and it is more likely than not that the Group will need economic recourses to settle the obligation and
the amount of obligation can be estimated reliably.
J. Revenue
1. Goods sold
Revenue from the sale of goods is measured at the fair value of the consideration received or
receivable, net of returns, trade discounts and volume rebates. When the credit period is short and
constitutes the accepted credit in the industry, the future consideration is not discounted. Revenue is
recognized when the significant risks and rewards of ownership have been transferred to the buyer,
recovery of the consideration is probable, the associated costs and possible return of goods can be
estimated reliably, there is no continuing management involvement with the goods, and the amount of
revenue can be measured reliably. Transfers of risks and rewards vary depending on the individual terms of the contract of sale. For
sales of products in Israel, transfer usually occurs when the product is received at the customer’s
warehouse, but for some international shipments transfer occurs upon loading the goods onto the
relevant carrier.
2. Commissions
When the Group acts in the capacity of an agent rather than as the principal in a transaction, the
revenue recognized is the net amount of commission.
Notes to the Financial Statements as at 31 December 2013
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Note 3 – Significant Accounting Policies (cont'd)
J. Revenue (cont)
3. Government grants
Government grants are recognized initially when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Grants that compensate the Group for expenses incurred are recognized in profit or loss on a systematic basis in the same periods in which the expenses are recognized. Government grants that compensate the Group for the cost of an asset are presented as a deferred income or as a deduction from the asset and are recognized in profit or loss on a systematic basis over the useful life of the asset. Grants from the Chief Scientist in respect of research and development projects are accounted for as forgivable loans according to the provisions of IAS 20. Accordingly, grants received from the Chief Scientist are recognized as a liability according to their fair value on the date of their receipt, unless on that date it is reasonably certain that the amount received will not be refunded. The amount of the liability is reexamined each period, and any changes in the present value of the cash flows discounted at the original interest of the grant are recognized in profit or loss.
K. Financing income and expenses
Financing income comprises interest income on funds invested, gains on the disposal of financial assets, changes in the fair value of financial assets at fair value through profit or loss and gain on changes in exchange rate. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Financing expenses comprise interest expense on borrowings, changes in time value of provisions, changes in the fair value of financial assets at fair value through profit or loss and impairment losses recognized on financial assets. All borrowing costs, which are not discounted, are recognized in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis.
L. Income tax expense
A Income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that the tax relates to transaction or event which are recognized directly to equity. In these cases, tax expenses on income are attributed to other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries, to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
B A deferred tax asset is recognized to the extent that it is probable that future taxable profits will The Group may be required to pay additional tax if a dividend is distributed between Group
companies. This additional tax was not included in the financial statements, since the policy of
the Group companies is to not distribute a dividend which creates an additional tax liability for
the Group in the foreseeable future.
C Taxes on inter-company transactions
Deferred tax in respect of inter-company transactions in the consolidated financial statements is
recorded according to the tax rate applicable to the buying company.
Notes to the Financial Statements as at 31 December 2013
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Note 3 – Significant Accounting Policies (cont'd)
L. Income tax expense (cont'd)
D. Offset of deferred tax assets and liabilities
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current
tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the
same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be realized simultaneously.
M. Earnings per Share (EPS)
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS
is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the
weighted average number of ordinary shares outstanding during the period.
N. Transactions with controlling shareholder
Assets and liabilities included in a transaction with a controlling shareholder are measured at fair value on the date of the transaction. As the transaction is on the equity level, the Company includes the difference between the fair value and the consideration from the transaction in its equity.
O. New standards and interpretations not yet adopted
International Financial Standard (2010) IFRS 9, Financial Instruments. The standard replaces the requirements
included in IAS 39 regarding the classification and measurement of financial assets and financial liabilities. In
accordance with the standard, there are two principal categories for measuring financial assets: amortized cost
and fair value. the basis of classification for debt instruments being the entity’s business model for managing
financial assets and the contractual cash flow characteristics of the financial asset. In addition, investments in
equity instruments are measured at fair value with changes in fair value being recognized in profit or loss.
Nonetheless, at the time of the initial recognition of an equity instrument not held for trade, the Standard permits
choosing to present changes in the fair value of the equity instrument as part of the “other comprehensive
income” where the amounts included in the other comprehensive income will never be classified to the
statement of income. The Standard generally preserves the instructions regarding classification and measurement of financial
liabilities that are provided in IAS 39. Nevertheless, unlike IAS 9, (2010) IFRS 39 requires as a rule that the
amount of change in fair value of financial liabilities designated at fair value through profit or loss, other than
loan grant commitments and financial guarantee contracts, attributable to changes in the credit risk of the
liability be presented in other comprehensive income, with the remaining amount being included in profit or
loss.
The mandatory implementation date of the standard has not yet been set. Early application is possible, subject to
provision of disclosure and concurrent adoption of the amendments to other IFRSs as detailed in the appendix to
the Standard. The Standard is to be applied retroactively, except for certain relief provisions in accordance with
the transitional rules set forth in the Standard. The Group has not yet examined the implications of adopting the standard on its financial statements.
Notes to the Financial Statements as at 31 December 2013
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Note 4 - Determination of Fair Values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
A. Fixed Assets
The fair value of fixed assets recognized as a result of a business combination is based on market values. The market value of fixed assets is the estimated amount for which a fixed asset could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction .
B. Intangible Assets
The fair value of patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned.
The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.
C. Inventory
The fair value of inventories is determined based on the estimated selling price in the ordinary course of
business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort
required to complete and sell the inventories.
D. Derivatives
The fair value of foreign currency forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the
contractual forward price and the current forward price for the residual maturity of the contract using an
appropriate interest rate.
E. Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future
principal and interest cash flows, discounted at the market rate of interest at the reporting date.
F. Fair value of share based payments
The fair value of phantom options is based on certain assumptions, including, the standard deviation of the
share price. price and estimations related to the forecast of earnings per share.
Notes to the Financial Statements as at 31 December 2013
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Note 5 - Cash and Cash Equivalents
Composition: Interest rate
December 31 December 31
2012 2013 2013
NIS Thousands NIS Thousands %
51,629 60,445 Bank and cash box balances 8,636 267,614 0.23-1.65 Call deposit account
60,265 328,059
Note 6 – Trade Receivables
Composition:
December 31
2012 2013
NIS Thousands NIS Thousands
565,483 588,952 On open account 130,803 124,250 Checks receivable 696,286 713,202
19,841 24,721 Less - provision for doubtful debts
676,445 688,481
Note 7 - Other Receivables and Debit Balances
Composition:
December 31
2012 2013 NIS Thousands NIS Thousands
2,773 2,527 Employees receivables
13,430 1,379 Advances to suppliers 11,848 15,057 Prepaid Expenses 9,845 8,699 Other receivables
37,896 27,662
Notes to the Financial Statements as at 31 December 2013
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Note 8 - Inventory
Composition:
December 31 2012 2013
NIS Thousands NIS Thousands
68,494 62,574 Raw materials
39,375 40,988 Packaging and auxiliary materials
19,522 17,611 Work in process
245,667 237,050 Finished and purchased goods
373,058 358,223
33,666 31,884 Inventory in transit
406,724 390,107
Note 9 - Other Investments
Composition: Interest rate
December 31 December 31 2012 2013 2013
NIS Thousands NIS Thousands %
1,483 1,328 Linked to the CPI + 4% Short term loan - 5,739 1% Deposit in Pounds sterling
12,187 - Deposits on account of sick days
13,670 7,067
Note 10 - Subsidiary Companies
A. Details on material investments in subsidiary companies held by the Company
Company Scope of investment as at December
31 Name of Company: Interest 2013 2012
in Equity NIS Thousands NIS Thousands Osem Food Industries Ltd. 100% (*) 523,564 461,337
Noga Ice Cream Limited Partnership 100% 137,704 120,681
Tivall (1993) Ltd. 100% 730,081 704,006
(*) Since the direct or indirect control is 100%, the full value of the balance sheet was presented and
not only the direct portion held by the company. B. Details on dividends the Company received from subsidiary companies:
Year ended December 31 2011 2012 2013
NIS Thousands NIS Thousands NIS Thousands
61,259 65,425 69,520
Notes to the Financial Statements as at 31 December 2013
Investments Limited
26
Note 11 - Employee Benefits
The Israeli Severance Pay Law requires the Company to pay severance pay to an employee who is dismissed or
retires. The liability of the Company for employee benefits is calculated on the basis of the employment agreement in
effect and is based on the salary of the employee that, in the opinion of management, creates the right to receive
severance pay.
Regarding employees to whom section 14 of the Severance Pay Law, 1963 applies, the company treats as a defined
benefit plan The current deposits of the company to pension funds and insurance company policies, exempt the
company from all additional obligations to employees, for which the mentioned deposits were made.
The portion of the severance payments that is not covered by deposits as aforementioned is accounted for by the
Company as a defined benefit plan, and the liability for employee benefits is recorded accordingly.
A. Net plan liability:
December 31 2012 2013
NIS Thousands NIS Thousands
(35,225) (30,750) Present value of liabilities 30,688 26,593 Fair value of plan assets (4,537) (4,157) Total employee benefits
B. Presented under the following items:
2012 2013
NIS Thousands NIS Thousands
- 293 Non-current assets – employee benefits (4,537) (4,450) Non-current liabilities – employee benefits (4,537) (4,157) Defined benefit obligations at December 31
C. Movement in the present value of the defined benefit obligations
2012 2013
NIS Thousands NIS Thousands
49,663 35,225 Defined benefit obligations at January 1 (5,527) (5,737) Benefits paid by the plan
Expense recognized in profit or loss 3,426 5,876 Current service costs 1,464 1,092 Interest costs
Recognized in other comprehensive profit (13,801) (5,706) Actuarial gains 35,225 30,750 Defined benefit obligations at December 31
Notes to the Financial Statements as at 31 December 2013
Investments Limited
27
Note 11 - Employee Benefits (cont'd)
D. Movement in plan assets
December 31
2012 2013
NIS Thousands NIS Thousands
36,154 30,688 Fair value of plan assets as at January 1 1,609 1,295 Contributions paid into the plan
(339) (4,935) Benefits paid by the plan 1,072 708 Interest income recognized in profit and loss (7,808) (1,163) Actuarial losses recognized in other comprehensive income
30,688 26,593 Fair value of plan assets as at December 31
E. Actuarial assumptions and sensitivity analysis
The principal actuarial assumptions at the reporting date (expressed as weighted averages):
Year ended December 31
2011 2012 2013 % % %
3.38 - 4.96 2.11 - 4.82 1.72 - 4.90 Discount rate as at December 31 1.00 - 2.50 1.00 - 2.50 1.00 - 2.50 Future salary increases
Assumptions regarding future mortality are based on published statistics and mortality tables.
F. Benefit programs after completion of transaction - defined contribution plan
Year ended December 31
2011 2012 2013
NIS Thousands NIS Thousands NIS Thousands
Amount recognized as employee expense 28,627 32,713 33,737 For which section 14 of the Severance Pay Law applies
Notes to the Financial Statements as at 31 December 2013
Investments Limited
28
Note 12 – Fixed Assets
A. Composition:
Leasehold
Computers,
furniture &
office Motor
Land and
Total improvements equipment vehicles Machinery buildings
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousand
s
Cost or deemed cost
2,160,841 47,327 363,621 4,814 945,036 800,043 As at 1 January 2012
96,122 2,322 31,841 165 59,506 2,288 Additions for the year 2012
1,106 (1) 60 35 328 684 Effect of movements in exchange rates
(13,276) - (5,753) (1,491) (6,032) - Disposals
2,244,793 49,648 389,769 3,523 998,838 803,015 Balance as at 31 December 2012
149,376 4,297 35,819 651 101,682 6,927 Additions for the year 2013
(25,513) (5) (488) (35) (13,798) (11,187) Effect of movements in exchange rates
(13,140) (48) (7,990) (674) (4,428) - Disposals
2,355,516 53,892 417,110 3,465 1,082,294 798,755 Balance as at 31 December 2013
Depreciation
1,013,520 22,768 235,638 3,592 574,240 177,282 As at 1 January 2012
114,809 3,188 35,356 332 53,848 22,085 Charged for the year 2012
170 (1) 61 15 74 21 Effect of movements in exchange rates
(11,696) - (4,933) (1,393) (5,370) - Disposals
1,116,803 25,955 266,122 2,546 622,792 199,388 Balance as at 31 December 2012
114,204 3,300 33,682 391 54,830 22,001 Charged for the year 2013
(9,005) (4) (356) (27) (6,682) (1,936) Effect of movements in exchange rates
(10,983) (36) 6,902 (559) (3,486) - Disposals
1,211,019 29,215 292,546 2,351 667,454 219,453 Balance as at 31 December 2013
Carrying amounts
1,127,990 23,693 123,647 977 376,046 603,627 As at 31 December 2012
Carrying amounts
1,144,497 24,677 124,564 1,114 414,840 579,302 As at 31 December 2013
B. The depreciated cost of the assets in the balance sheet is stated net of investment grants in
respect of investments made in an "approved enterprise" in the amount of NIS 31,432 thousand
(December 31, 2012 – NIS 34,984 thousand).
C. Regarding liens and cancellation of liens - See Note 21 (C)
D. Acquisition of fixed assets on credit
On 31 December 2013, the balance of fixed assets acquired on credit amounted to NIS 31,640
thousand, as at 31 December 2012 - NIS 27,273 thousand
Notes to the Financial Statements as at 31 December 2013
Investments Limited
29
Note 13 - Intangible Assets
Customer
Relations,
brands Advertising
promotion
Goodwill and
Brand,
Sales and
Intangible Assets
Knowhow and Promotion Use right of Having an
Total Non competition
Equipment
of computer
software
Indefinite useful
life
NIS Thousands NIS Thousands NIS Thousands NIS Thousands NIS Thousands
Cost
1,160,103 77,164 2,494 118,681 961,764 Balance as at 1 January 2012
1,662 - 515 1,147 - Additions for the year 2012
Changes from linkage of obligations
related to 43,496 - - - 43,496 Acquisition of non controlling interest
(*) (1,887) 698 - 33 (2,618) Effect of movements in exchange rates
1,203,374 77,862 3,009 119,861 1,002,642 Balance as at 31 December 2012
1,429 - 644 785 - Additions for the year 2013
Changes from linkage of obligations
related to (6,259) - - - (6,259) Acquisition of non controlling interest
(*) (10,415) (1,984) - (107) (8,324) Effect of movements in exchange rates (2) - - (2) - Disposals
1,188,127 75,878 3,653 120,537 988,059 Balance as at 31 December 2013 Amortization
141,184
9
5
,
4
8
3
41,796
9
5
,
4
8
3
1,189
9
5
,
4
8
3
61,372
9
5
,
4
8
3
36,827 Balance as at 1 January 2012
36,066 11,871 867 23,328 - Charged for the year 2012
470 437 - 33 - Effect of movements in exchange rates
177,720 54,104 2,056 84,733 36,827 Balance as at 31 December 2012
34,476 10,394 736 23,346 - Charged for the year 2013 (1,124) (1,039) - (85) - Effect of movements in exchange rates
(2) - - (2) - Disposals
211,070 63,459 2,792 107,992 36,827 Balance as at 31 December 2013 Carrying amounts
1,025,654 23,758 953 35,128 965,815 As at 31 December 2012
Carrying amounts
977,057 12,419 861 12,545 951,232 As at 31 December 2013
See note 3 A.3.
A. Examination of impairment of cash-generating included in goodwill
The following units have significant goodwill and intangible asset values in the books that have
indefinite useful lives.
December 31 2012 2013
NIS Thousands NIS Thousands
297,026 297,026 Tivall (1993) Ltd.
74,482 74,482 Bonjour
115,645 107,527 USA (Tribe)
457,304 451,045 Materna
944,457 930,080
Notes to the Financial Statements as at 31 December 2013
Investments Limited
30
Note 13 - Intangible Assets (cont'd)
A. Examination of impairment of cash-generating included in goodwill (cont)
1. The recoverable amounts of the cash-generating units, except for Materna, are based on a calculation of the usage
value. These calculations are used for cash flow calculations based on the budget for the year 2014 and future
forecasts for subsequent years. The cash flows for the remaining periods are calculated using the relevant growth rate,
which takes into account the anticipated growth rate for the category, sector, country and population. The estimated
growth rates range between 1.0% and 2.5%. The forecasted cash flows were discounted rates of approximately 8.25%.
after tax. The discount rates reflect the risks of the cash-generating units. In addition sensitivity analysis was
performed with discount rates of 5% and 10% for the calculation of recoverable value.
2. Recoverable amount of the cash generating unit, Materna was done by fair value. Valuation calculation for
examination of impairment is attached to these reports in accordance with standard 8B.
Based on the examination of value measurement and since the recoverable amounts are higher that
the monetary value, no impairment of goodwill was required.
B. Goodwill created due to grant of “put” options to minority shareholders
As at 31 December 2013, the goodwill attributed to PUT options of the non controlling interest in
consolidated subsidiaries totaled NIS 337,804 thousand (31 December 2012 –NIS 344,063 thousand)
Note 14 - Prepaid Expenses and operational leases
A. Prepaid Expenses
December 31
2012 2013 End date
NIS Thousands NIS Thousands
37,669 38,806 2014-2021 Other
B. Operating leases
The Company and its subsidiaries have signed lease agreements in respect of buildings and warehouses and for vehicles and forklifts.
Non-cancellable minimum operating lease rentals are payable as follows:
December 31
2012 2013
NIS Thousands NIS Thousands
56,814 62,062 Less than one year 132,891 103,579 Between one and five years
81,757 90,852 More than five years 271,462 256,493
Year ended December 31
2011 2012 2013
NIS Thousands NIS Thousands NIS Thousands
62,793 63,913 68,963 Lease fees that were recognized as an expense
Notes to the Financial Statements as at 31 December 2013
Investments Limited
31
Note 15 - Loans and Short-Term Bank Credit
Composition:
Annual
December 31
Variable interest
rates
2012 2013 31 December 2013
NIS Thousands NIS Thousands %
17,015 - Unlinked
31,378 29,212 Libor + 1.50% Linked to foreign currency (*)
Current maturities of loans
10,545 - from banks (*)
58,938 29,212
(*) Including:
2,110 - Linked to Pound Sterling
8,435 - Linked to Euro
31,378 29,212 Linked to US$
Note 16 - Trade Payables
Composition:
December 31 2012 2013
NIS Thousands NIS Thousands
681,750 706,657 On open account
4,198 3,806 Checks and notes payable
685,948 710,463
Note 17 – Other Payables
Composition:
December 31
2012 2013
NIS Thousands NIS Thousands
97,844 122,213 Employees and salary related government agencies
21,095 23,256 Other government agencies
60,682 59,337 Provision for vacation pay and vacation expense allowance
9,548 19,170 Sundry creditors and accrued expenses
189,169 223,976
Notes to the Financial Statements as at 31 December 2013
Investments Limited
32
Note 18 -Liabilities to Banking Institutions
December 31 2012 2013
NIS Thousands NIS Thousands
5,480 - Linked to Pound Sterling
8,435 - Linked to Euro
13,915 -
10,545 - Less - current maturities
3,370 -
Note 19 – Liability for acquisition of non controlling interest in consolidated
subsidiaries
December 31
2012 2013 NIS Thousands NIS Thousands
357,104 342,514 For PUT options of non controlling interest in consolidated subsidiaries
The Group granted PUT options to the non controlling shareholders in a partnership in which it holds 51%. Should the
non controlling shareholders exercise their options, the Group will be required to purchase from them their holdings in the
partnership.
The options are presented at their obligation value including a secure component such as loan and declared dividend a nd a
component in the amount of NIS 319,743 thousand (year 2012 NIS 339,098 thousand), as prepared by an outside appraiser,
as follows:
The realization value of the option is determined according to a multiple of 16 as set in the agreement, multiplied by t he
net profit anticipated at the realization date, with certain adjustments, with addition of the future obligation to allocate
dividends and other contractual flows paid to the non controlling interest until the date of realization, for them being a
partner, for the period until the realization. The options are realizable by the non controlling interest in the fourth year
until the eighth year and in the fourteenth year as well. The amounts are discounted from the optimal realizable period by
the non controlling interest (year 2023)
As mentioned above the Group presents its liability to purchase the non controlling interests as a financial liability
measured according to the present value of the option’s exercise price. The difference between the liability and the share
of the Company in the net asset value is allocated to goodwill.
Every year the Company updates the anticipated net profit of the partnership according to which the obligation is
calculated. At the balance sheet date the updating resulted in a decline in obligation against a decline in goodwill in the
amount of NIS 6,259 thousand Finance expenses recorded in profit and loss, for the time value of the money, related to
this obligation in the year 2013 amounted to NIS 15,092 thousand (year 2012 NIS 14,077 thousand).
Notes to the Financial Statements as at 31 December 2013
Investments Limited
33
Note 20 - Income Tax
A. A.Benefits under the law for the encouragement of capital investments. Approved enterprise Several of the enterprises owned by Group companies were granted "Approved Enterprise" status in accordance
with the Law for the Encouragement of Capital Investments, 1959. Income deriving from an "Approved
Enterprise" is entitled to a reduced tax rate during a period of -7 to 10 years beginning with the year in which the
company first generated taxable income from the "Approved Enterprise". The benefit period is limited to 14 years
from the year in which the letter of approval was issued or 12 years from the year in which the enterprise began
operations. In lieu of an investment grant, the company may opt for a tax exemption for a period of 10 years. The
tax benefits are conditional upon the fulfillment of the terms of the Letter of Approval. Those enterprises which used the tax benefits, and were required to meet stipulated export quotas as a condition
for entitlement to the tax benefits, have met at least the minimum requirements. The tax provision reflects tax benefits according to the extent of compliance of the enterprises with the various
conditions of the approval. Some of the enterprises have not yet started using any of the tax benefits. Beneficiary Enterprise An industrial enterprise of the Company was granted “Beneficiary Enterprise” status in accordance with the Law
for the Encouragement of Capital Investments – 1959 (hereinafter – the Encouragement Law). The Company has
elected 2009 as the year of election. The income generated by the “Beneficiary Enterprise” is exempt from tax over a period of 10 years from the year
it first had taxable income . The tax benefit period of the beneficiary enterprise that commenced operations in the
year 2010 will end in the year. The benefits are contingent upon compliance with the terms of the Encouragement
Law (export rate, etc.). Company is currently in compliance with these terms. Amendment to the Law for the Encouragement of Capital Investments – 1959 On December 29, 2010 the Knesset approved the Economic Policy Law for 2011-2012, which includes an
amendment to the Law for the Encouragement of Capital Investments – 1959 (hereinafter – “the Amendment to
the Law”). The Amendment to the Law was published in the Official Gazette on January 6, 2011. The Amendment
to the Law is effective from January 1, 2011 and its provisions apply to preferred income derived or accrued in
2011 and thereafter The Company can choose not to be included in the scope of the Amendment to the Law and to
stay in the scope of the law before its amendment until the end of the benefits period. The 2012 tax year is the last
year the Company can choose as the year of election, providing that the minimum qualifying investment began in
2010. The Amendment provides that only companies in Development Area A will be entitled to the grants track and that
they will be entitled to receive benefits under this track and under the tax benefits track at the same time. In
addition, the existing tax benefit tracks were eliminated (the tax exempt track, the “Ireland track” and the
“Strategic” track) and two new tax tracks were introduced in their place, a preferred enterprise and a special
preferred enterprise, which mainly provide a uniform and reduced tax rate for all the company’s income entitled to
benefits, such as: for a preferred enterprise – in the 2011-2012 tax years – a tax rate of 10% for Development Area
A and of 15% for the rest of the country, in the 2013-2014 tax years – a tax rate of 7% for Development Area A
and of 12.5% for the rest of the country, and as from the 2015 tax year – 6% for Development Area A and 12% for
the rest of the country. On 5 August 2013, the Knesset passed the Law for Changes in National Priorities
(Legislative Amendments for Achieving Budget Objectives in the Years 2013 and 2014) – 2013, which canceled
the layout for the reduction in taxes so that commencing in the tax year 2014 the tax rate on preferred income will
be 9% in in Development Area A and 16% in the rest of the country. Furthermore, an enterprise that meets the
definition of a "special preferred enterprise" is entitled to benefits for a period of 10 consecutive years and a
reduced tax rate of 5% if it is located in Development Area A or of 8% if it is located in a different area. The Amendment to the Law also provides that no tax will apply to a dividend distributed out of preferred income
to a shareholder that is a company, for both the distributing company and the shareholder. A tax rate of 15% shall
continue to apply to a dividend distributed out of preferred income to an individual shareholder or foreign resident,
subject to double taxation prevention treaties, which means that there is no change from the existing law.
Furthermore, the Amendment to the Law provides relief (hereinafter – – “the relief”) with respect to tax paid on a
dividend received by an Israeli company from profits of an approved/alternative/beneficiary enterprise that
accrued in the benefits period according to the version of the law before its amendment, if the company
distributing the dividend notifies the tax authorities by June 30, 2015 that it is applying the provisions of the
Amendment to the Law and the dividend is distributed after the date of the notice (a distribution from profits of the
exempt enterprise will be subject to tax by the distributing company). B. Benefits under the Law for the Encouragement of Industry The Company is an "Industrial Company" as defined by the Law for the Encouragement of Industry (Taxes), 1969
and accordingly it is entitled to use accelerated depreciation rates as well as to additional benefits.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
34
Note 20 - Income Tax (cont'd)
C. Amendments to the income tax ordinance
1. Tax rates in Israel are: 2013 25%, 2012 25%, 2011 24%.
2. On 5 August 2013, the Knesset passed the Law for Changes in National Priorities
(Legislative Amendments for Achieving Budget Objectives in the Years 2013 and 2014) –
2013, which determined, among others, the increase in companies tax rate , commencing in
the year 2014 and onwards will increase by 1.5% until it will stand at 26.5%. The balance of deferred taxes as at 31 December 2013 were calculated in accordance to the
new tax rates as were determined in the Law for Changes in National Priorities, at the
expected tax rate in effect at the date of the reversal, the effect on the financial statements as
at 31 December 2013 is expressed in the increase of liability for deferred taxes in the amount
of NIS 4,095 thousand against profit and loss, in the same amount.
3. On 4 February 2010 amendment to the Income Tax Ordinance was published in the legal
register (number 174) temporary directive for tax years 2007, 2008 and 2009. Which stated that
Israeli Accounting standard 29 regarding adoption of IFRS accounting standards, will not apply in calculating
taxable income for the said years even if it was implemented for preparation of financia l statements. On 12
January 2012 was published the law for amendment of Income Tax Ordinance (number 188)
in the framework of which was amended a temporary directive, such that standard 29 will
not apply when calculating taxable income for tax years 2010 and 2011. The temporary directive relating to the calculation of taxable income for the years 2007-2011
does not effect the financial statements.
D. Deferred taxes in respect of temporary differences as follows:
Allowance
for
for Employee Vacation
Total Other Fixed Assets
Doubtful
debts Benefits
and
convalescence
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
(43,196) 22,105 (85,490) 4,128 4,913 11,148 Balance as at 1 January 2012
6,305 14,803 (7,069) (381) (1,112) 64 Changes recorded on the income
statements (2,515) (1,005) (10) (5) (1,493) (2) Changes recognized in other
comprehensive income (39,406) 35,903 (92,569) 3,742 2,308 11,210 Balance as at 31 December 2012
7,596 11,537 (9,891) 1,540 14 4,387 Changes recorded on the income
statements (2,722) (2,571) 1,070 (9) (1,204) (8) Changes recognized in other
comprehensive income (34,532) 44,869 (101,390) 5,273 1,118 15,589 Balance as at 31 December 2013
E. Income tax in the income statements
Year ended December 31
2011 2012 2013 NIS Thousands NIS Thousands NIS Thousands
117,420 123,318 134,080 Current taxes
Change in deferred taxes
(9,719) (6,305) (11,691) Regular basis
18,963 - 4,095 Change in tax rates
126,664 117,013 126,484
Notes to the Financial Statements as at 31 December 2013
Investments Limited
35
Note 20 - Income Tax (cont'd)
F. The Company has received final tax assessments for all years through the 2011 tax year. The
subsidiary companies have received final assessments for various years through the 2009 tax year,
certain subsidiaries which have not yet received final assessments since their inception.
G. Reconciliation between the theoretical tax, which would have resulted had the pre-tax earnings been
subject to tax at the statutory rate in effect in Israel, and the income taxes appearing in the income
statement:
Year ended December 31
2011 2012 2013 24% 25% 25% Statutory tax rate
NIS Thousands NIS Thousands NIS Thousands
112,234 118,589 125,729 Theoretical tax based on the statutory tax rate applying
to the Company Increase (decrease) in tax liability resulting from:
6,189 6,335 5,718 Non-deductible expenses
18,963 - 4,095 Effect of change in tax rates
(10,164) (8,784) (9,503) Income which is subject to different tax rates
Timing differences and losses for tax purposes for
which tax not charged (1,069) 76 1,319 Deferred in previous years
511 797 (874) Other
126,664 117,013 126,484 Income tax included in the income statements
H. The Group has carry-forward tax losses in the amount of NIS 134,228 thousand, for which the
Company recognized a deferred tax asset since in the opinion of management taxable profits are
anticipated in the future against which these losses can be utilized.
I. Change in Structure
The Group decided on a change in structure to the Group companies in the framework of which the baking
factory of Bonjour (1986) Ltd ( hereinafter - "Bonjour") was merged into the production setup of Osem
Investments ( hereinafter - "Osem") Since Bonjour was held via Alei Dagan Ltd ( hereinafter - "Alei Dagan") and
Magen Bakery and Coffee Shop Ltd ( hereinafter - "Magen Bakery"), two preliminary actions were effected
before the merger of Bonjour into Osem as a consolidation of parent and subsidiary companies as follows:
1. At the first stage, Magen Bakery transferred all its share holdings in Bonjour to Bonjour, exempt from
income tax as per section 104C in the income tax ordinance (new version) 1961-5721 ( hereinafter - "the
ordinance") in accordance with the Companies Law, 1999-5759 ( hereinafter - "the companies law).
2. In the second stage, Alei Dagan transferred all its holdings in Bonjour shares to Osem, exempt from income
tax as per section 104C in the ordinance and in accordance with the companies law.
3. In the third stage immediately and subsequent to the transfers mentioned in sections 1 and 2 above, Bonjour
was merged into Osem in accordance with section 103B to the ordinance in such a way that Bonjour
transfered all its assets and liabilities without consideration , thereby liquidating Bonjour without
dismantling.
4. The change in structure was contingent upon receipt of advance approval from the tax authorities and
conducting the mentioned structural change free from tax and with the approval of the Investment Center.
On 26 January 2012 and 26 July 2012 the approvals were received from the tax authorities for the tax
exempt change in structure, approval from the Investment Center was received in December 2012.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
36
Note 21 - Contingent Liabilities, Commitments and Liens
A. Contingent liabilities and commitments
1. Indemnification and insurance of directors and officers –
(A) The Company's Articles of Association provide for the indemnification and insurance of executives
according to law. In accordance therewith, the Company insures the liability of the directors and officers,
subject to the provisions of the law.
(B) The Company has undertaken to indemnify a past director of a foreign subsidiary, for an unlimited period of
time, against all claims, liabilities, payments or costs, which may arise from him being a director of the
subsidiary, or because of any reason connected with his being a member of management of the subsidiary,
subject to the provisions of the laws of the U.K. and to the judicial authority of the U.K. or of Israel, as he
may choose.
2. Group companies received investment grants from the State of Israel according to the Law for the
Encouragement of Capital Investments. In the event they fail to meet the conditions attached to the grants, they
will be required to refund the amount of the grants received, in whole or in part, plus interest and linkage
increments from the date of their receipt.
3. The Group companies have an agreement with companies, which are interested parties, granting the Company
the right to distribute their products in Israel and a license for the exclusive use of their know-how and brand
names in Israel. In accordance to agreements, the Company and its subsidiaries have undertaken to pay the said
interested parties royalties at the rate of 2.5% - 5% of the sales of their products.
4. The Company has an agreement with an interested party for the receipt of general assistance that includes, inter
alia, assistance in the areas of production, marketing and distribution, computers, logistics, materials handling
and employee training. In the agreement, the Company undertook to pay the interested party, in respect of receipt
of the said assistance, the amount of 1,000 thousand Swiss francs per each calendar year.
5. The Company has an agreement with an interested party company regarding implementation of the Globe project
in Israel, the purpose of which is the receipt of computer services and the creation of global standardization
between all the computer systems (hardware and software) as well as the implementation of best practices. In
this framework, the interested party company undertook that annual computer expenses would not exceed 1.5%
of consolidated gross sales net of returns and trade discounts on a multi-annual basis. The amount which exceeded 1.5% in the year 2013, which could be taken into account in the future multi-year
calculation (if the IT cost declined below 1.5% per year) amounted to NIS 7,322 thousand and cumulatively NIS
80,033 thousand.
6. Various guarantees are given by Group companies to third parties, aggregating NIS 8,454 thousand, this relates
to guarantees against liabilities of Group companies.
7. As at 31 December 2013, the Group companies have commitments to purchase fixed assets, in the amount of
NIS 8,040 thousand.
8. In an agreement that was signed between subsidiaries and their other shareholders, it was agreed that the
aforementioned subsidiaries would purchase from the shareholders manpower services and various services
required for its current operations. During the financial statement period the company purchased such services in the amount of NIS 23,388
thousand (year 2012 - NIS 24,844 thousand).
9. Outstanding against the Group companies are class action suits or requests for class action suits in the
evaluation of the company based on opinions of its legal advisors, their chances are slight or small financial
resources will be borne. As at 31 December 2013 an accrual of NIS 250 thousand has been included. (2012 - no
provision was included.) Filed against the company were lawsuits in the area of work relationships in the amount of approximately NIS
18 million. in the evaluation of the company based on opinions of its legal advisors, it is more likely than not that
the company will not be required to bear additional economic recourses in excess of provisions included in
financial statements in the amount of NIS 488 thousand (year 2012 NIS 161thousand).
Notes to the Financial Statements as at 31 December 2013
Investments Limited
37
Note 21 - Contingent Liabilities, Commitments and Liens (cont'd)
A. Contingent liabilities and commitments (cont)
10. Corresponding to the PUT option which the Group granted the non controlling shareholders in the partnership
where it holds 51% (see also Note 19), the Group received a CALL option to purchase the shares of the non
controlling interest. The exercise price of the CALL option was based on the multiple determined in the agreement, multiplied by the
net profit anticipated at the exercise date, with certain adjustments. The option is exercisable by the Group at the
end of the tenth year of the agreement (with a multiple of 21) at the end of year twelve (with a multiple of 18)
and at the end of year fifteen (with a multiple of 16)
11. On 28 May 2008 the board of directors of the company approved a bonus plan for the encouragement
and preservation of managers in the Osem Group (who are not controlling parties or their relatives, nor
directors in the Company). The program was approved for 3 years (2008-2010). According to the
program the Company granted “phantom options” to an number of senior managers in the company so
that the bonus that the company would give (if at all) would be based on the difference between the
average company share price for the two months before the granting date of the options average
company share price for the two months before the option exercise date. The the vesting period for each
“option” stands at three years form the month of May in each of the three years of the program. The value of
the options is calculated based on the binomial method. On 25 May 2011 the board of directors of the company approved the continuation a bonus plan for the
encouragement and preservation of managers in the Osem Group (who are not controlling parties or
their relatives, nor directors in the Company) for a period of 3 additional years (2011-2013). According
to the program the Company will grant “phantom options” to an number of senior managers in the
Company so that the bonus that the Company would give (if at all) would be based on the difference
between the average company share price for the two months before the granting date of the options
average company share price for the two months before the option exercise date. The the vesting period
for each “option” stands at three years form the month of May in each of the three years of the program. The
value of the options is calculated based on the binomial method. In the framework of the Group
compensation policy it was determined upon a ceiling according to which the options distributed from
year 2013 and on will not exceed 2 times the value of the benefit at the date of distribution, linked to
the CPI. The Company included in its statements of profit and loss an expense related to the change in value of
benefit to those managers which was calculated by an outside assessor at a value of NIS 21,243
thousand, NIS 10,952 thousand, NIS 1,721 thousand for the years 2013, 2012 and 2011 respectively.
B. Liens and cancellation of liens
1. The Company has a negative pledge agreement with the banks according to which if the Company
receives a bank loan, the banks will not record any pledges in the Company Registrar in the Bank's
favor and this, as long as the Company meets certain commitments and standards determined for
financial ratios. according to the financial standards:
(A) The portion of the company equity of the total balance sheet will not be less than 35% -.
(B) The annual profit from continuing operations before tax, will not be less than 1% of total sales.
and it is agreed that should the average profit be less than 1% during 2 years and the portion of
the equity of the total balance sheet will exceed 45%, the determined financial ratios will still be
considered met.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
38
Note 21 - Contingent Liabilities, Commitments and Liens (cont'd)
B. Contingent liabilities and commitments (cont)
In addition, the Company has additional obligations as detailed in the following:
(A) obligation not to pay dividend as long as previous years pre- tax profits levels in the distribution
year are less than 2% of sales (in 2 year average); under these circumstances the Company in
could distribute a dividend from current year profits provided that it would not exceed 50% of
current year profits.
(B) Obligation not to record liens on the Company's assets except certain liens (for example: In favor
of the State of Israel or for the financing to purchase a new asset)
(C) Obligation of the Company to insure the asset.
(D) Obligation to meet certain restrictions regarding the sale of fixed asets
(E) Each one of the companies signing the negative pledge , if requested by the banks, securing all
amounts due to the banks from any of the other companies.
In case the Company does not meet the obligations and the financial standards the Company will
create pledges to the satisfaction of the banks on those assets which today are not pledged due to
the negative pledge agreement.
In extreme cases of receivership, dissolution, cessation of activities, material sequestration, and
confiscation, the banks will be able (but not required) to immediately settle the credit.
As at the balance sheet date, the Company meets the obligations and maintained the required financial
ratios
2. A consolidated subsidiary has a negative pledge with banks whereby if it receives bank credit no
liens will be recorded in favor of the banks as long as it meets its obligations and financial criteria
according to which it was set up, among others, the tangible equity will not fall below 25% of the
total balance sheet of the subsidiary and total obligations to financial institutions will not exceed
30% of its balance sheet.
As at the balance sheet date the subsidiary meets all the obligations and financial criteria that
were set.
3. Subsidiaries have registered a floating charge, in favor of the State of Israel, on all of their assets,
to secure the fulfillment of the terms connected with investment grants received in respect of
investments in "approved enterprises".
4. To guarantee the obligation of a subsidiary in the Czech Republic to a bank corporation, the
subsidiary in the Czech Republic has put under lien its assets in favor of the bank corporation and
also gave guarantee in favor of this bank corporation.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
39
Note 22 - Related and Interested Parties
A. Transactions with related and interested parties in Nestle group
Year ended December 31 2011 2012 2013
NIS Thousands NIS Thousands NIS Thousands
247,001 273,923 251,376 Cost of Sales
15,395 21,925 24,403 General and administrative expenses
721 774 725 Other income
The transactions were at ordinary commercial terms.
B. Balances with related and interested parties in Nestle group
Year ended December 31 2012 2013
NIS Thousands NIS Thousands
102,258 73,612 Trade payables
914 2,875 Other receivables
Highest other receivable balance in the year 2013 were NIS 2,875 thousand (2012 – NIS 1,458 thousand)
C. Commitments with related and interested parties
See notes 21 A.3. through 21 A.5.
D. Key management personnel compensation (including directors)
Directors and executive officers in the Group are entitled to, in addition to salaries, non-cash benefits such as cars,
cellular phones etc.
The Group contributes to a post-employment defined benefit plan on their behalf.
Key management personnel compensation (including directors) comprises:
Year ended December 31 2011 2012 2013
Amount
Number of
people Amount
Number of
people Amount
Number of
people
NIS
Thousands
NIS
Thousands NIS
Thousands 11,322 4 13,616 4 13,472 2 Short-term employee benefits
138 4 251 4 133 2 Post-employment benefits
11,460 4 13,867 4 13,605 2 Compensation to key management personnel (including directors) that are not employed by the Company:
Year ended December 31 2011 2012 2013
Amount Number of
people Amount Number of
people
Amount Number of
people
NIS
Thousands
People
NIS
Thousands
People
NIS
Thousands
People
1,352
4 1,677
7
1,827
8
Total benefits for non-employed director Employed
The compensation policy for senior managers includes, among others, annual bonus based on meeting annual targets and phantom
options as detailed in note 21 A. 11.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
40
Note 23 - Details to the Income Statements
A. Sales revenues
1. Domestic and export: Year ended December 31
2011 2012 2013 NIS Thousands NIS Thousands NIS Thousands
3,320,925 3,423,047 3,560,200 Domestic sales
639,952 668,546 629,847 Export sales
3,960,877 4,091,593 4,190,047 Sales
2. Products from self-manufacture and other products: Year ended December 31
2011 2012 2013 NIS Thousands NIS Thousands NIS Thousands
2,869,097 2,953,838 2,996,638 Products from self-manufacture
1,091,780 1,137,755 1,193,409 Other products
3,960,877 4,091,593 4,190,047 Sales
3. The Group has one customer for which the scope of sales to it is greater than 10% of the total sales.
Total sales to Customer is as Follows: Year ended December 31
2011 2012 2013 NIS Thousands NIS Thousands NIS Thousands
566,026 628,480 646,617 Customer
B. Cost of Sales
Year ended December 31
2011 2012 2013
NIS Thousands NIS Thousands NIS Thousands
Cost of sales products from self-manufacture:
910,259 952,529 913,258 Materials used
311,086 319,981 327,302 Payroll and related expenses
297,151 308,763 305,769 Other manufacturing costs
70,816 73,197 74,711 Depreciation and amortization
1,589,312 1,654,470 1,621,040
19,143 (12,622) 9,106
Decrease (increase in inventory of finished goods and work in process
1,608,455 1,641,848 1,630,146 Total cost of sales products from self manufacture
701,027 770,150 796,190 Cost of sales of other products
2,309,482 2,411,998 2,426,336
Notes to the Financial Statements as at 31 December 2013
Investments Limited
41
Note 23 - Details to the Income Statements (cont'd)
C. Selling, marketing and distribution expenses Year ended December 31
2011 2012 2013 NIS Thousands NIS Thousands NIS Thousands
299,862 309,249 320,707 Payroll and related expenses
33,783 32,405 32,507 Depreciation and amortization
249,313 224,103 239,674 Advertising and sales promotion
82,958 92,722 94,317 Commissions
96,588 103,644 104,589 Motor vehicle and delivery expenses
116,255 123,487 137,039 Other
878,759 885,610 928,833
D. General and administrative expenses Year ended December 31
2011 2012 2013 NIS Thousands NIS Thousands NIS Thousands
147,632 156,210 177,374 Payroll and related expenses
37,748 43,923 40,270 Depreciation and amortization
6,129 7,105 6,715 Building maintenance
(273) 2,464 7,901 Bad and doubtful debts
79,292 73,260 74,060 Other
270,528 282,962 306,320
E. Other income (expenses), net Year ended December 31
2011 2012 2013 NIS Thousands NIS Thousands NIS Thousands
1,017 (503) (155) Gain (loss) from realization of fixed assets
- (4,759) (3,262) Reorganization expenses
(3,847) (1,768) 532 Other
(2,830) (7,030) (2,885)
F. Financing income and expenses
Year ended December 31
year ended
2011 2012 2013 NIS Thousands NIS Thousands NIS Thousands
5,478 1,220 6,583 Expenses on obligations and short-term credit 1,073 2,940 2,179 Expenses on bank liabilities 460 - - Change in fair value of financial assets through profit or
loss - 3,958 799 Exchange differences, net 34,527 25,608 15,092 Expenses in respect of liabilities for non controlling
interest PUT option 41,538 33,726 24,653 Total financing expenses
(3,102) (2,817) (1,512) Interest income from bank deposits (6,802) - - Exchange differences, net - (1,271) (380) Change in fair value of financial assets through profit or
loss (9,904) (4,088) (1,892) Total financing expenses 31,634 29,638 22,761 Net financing expenses
Notes to the Financial Statements as at 31 December 2013
Investments Limited
42
Note 24 - Financial Instruments
A. General
Management has overall responsibility for the establishment and overs ight of the Group’s risk
management framework. Management is responsible for the development of policies and
oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyze the risks faced by
the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits
Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities.
1. Financial risk factors
The operations of the Company expose it to various financial risks such as market risks
(including currency risks, fair value risks in respect of interest, and price risks), credit risk,
liquidity risks and cash flow risks in respect of interest. The comprehensive risk management
plan of the Company focuses on actions that minimize the possible negative effects on the
financial performance of the Company. The Company uses also derivative financial instruments
in order to hedge certain exposures to risks. In this note is presented qualitative and quantitative information relating to exposure of the
Group to each of the above risks, the Group's aims, policies and methods regarding measurement
and management of risks.
A) Credit Risks
Credit risk is the risk of financial loss to the Group if a customer or counterpart to a financial
instrument fails to meet its contractual obligations, and arises principally from the Group’s trade
and other receivables, loans granted to third parties. The Group’s sales to it s customers are
mainly at accepted market terms for customer credit. Part of the credit is guaranteed by credit
insurance, various collaterals and credit card insurance via credit card companies. The rest of the
credit to the private sector that is not guaranteed by collateral relates to a large number of
customers which reduces the risk. Part of the credit to customers on the organized retail market is
not guaranteed and is concentrated with a small number of customers to which the Group’s sales
are considerable, although, on the other hand, these are customers with a good credit history.
Management examines the credit assessments of customers on a regular basis, and the financial
statements include provisions for doubtful debts that in the opinion of management appropriately
reflect the loss inherent in those debts the collection of which is doubtful.
B) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations
associated with its financial liabilities that are settled by delivering cash or another financial
asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group uses activity-based costing to cost its products and services, which assists it in
monitoring cash flow requirements and optimizing its cash return on investments Group ensures
that it has sufficient cash on demand to meet expected operational expenses for the forecasted
period, including the servicing of financial obligations; this excludes the potential impact of
extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Company was rated by the Midrog Company as having a credit rating of AAA with a stable
rating outlook. This rating attests to the strong financial liquidity level of the Group.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
43
Note 24 - Financial Instruments (cont'd)
A. 1. Financial risk factors (cont'd)
C) Market Risks
Market risk is the risk that changes in market prices, such as foreign exchange rates, the CPI,
interest rates and equity prices will affect the Group’s income or the value of its holdings of
financial instruments. The objective of market risk management is to manage and control market
risk exposures within acceptable parameters, while optimizing the return.
1) Currency Risks
The Group sales overseas comprise about 15% of its sales but also imports some of its raw
material as well as finished goods from Nestle as a result, most of its customers’ balance in
foreign currency are naturally protected against most of its suppliers’ balances in foreign
currency. In the cases where there is still an exposure, the Group generally acts to offset the part
of the exposures and foreign currency risks by setting up deposits in the relevant currencies
against the liabilities to overseas suppliers taken in the same currency or via forwards.
Nonetheless, the foreign subsidiaries use bank credit in foreign currency. As at 31 December
2013 the excess of financial assets in foreign currency over financial liabilities in foreign
currency amounted to approximatly NIS 74 million. And financial obligations in excess of the
financial assets in the amount of NIS 178 million in subsidiary companies in which the operating
currency is in foreign currency . In parallel the Group executed partial hedges via forward
transactions in the amount of about NIS 72 million.
2) CPI risks
As at 31 December 2013 the excess of financial liabilities linked to the CPI over financial assets
linked to the CPI amounted to approximatly NIS 1 million.
3) Price Risks
Some of the raw materials are commodities whose price is affected by price fluctuations on the
commodities markets on stock exchanges around the world and by fluctuations in foreign
currency exchange rates. These raw materials are produced from organic sources (such as sugar
and flour) and their prices are therefore affected by climatic changes, duration of ripening period,
etc.
The Company uses the central strategic procurement services of Nestle to obtain optimal prices
for the Company.
4) Interest rate risks
Loans bearing variable interest rates expose the Group to interest risk in respect of cash flows
whereas loans bearing fixed interest rates expose the Group to interest risk in respect of fair
value. This exposure is limited since the all long-term loans have been re payed while short term
loans constitute only 0.8% of the total balance sheet.
2. As at balance sheet date the amounts of the futures transactions are as follows:
Amount of
Transactions
Fair Value
NIS thousands NIS thousands
NIS forward transactions/foreign currency options on
exchange rates, net 71,696 1,274
The aforementioned transactions are for periods of up to
12 months.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
44
Note 24 - Financial Instruments (cont'd)
C. 2. Market risks (cont'd)
The future contracts are presented according to their fair value as level 2 assets: anticipated
figures, directly or indirectly, which are not included in level 1 (quoted prices, unadjusted, in an
active market for similar instruments).
3. Financial assets and liabilities
The book value of the cash and cash equivalents, short-term investments, trade receivables, other
receivables, credit from banks and others, trade payables and other payables is the same or
proximate to their fair value.
B. Credit risks
1. Exposure to credit risk
The carrying amount of financial assets represents the maximum credit and investment exposure. The
maximum exposure to credit and investment risk at the reporting date was:
December 31 2012 2013
NIS Thousands NIS Thousands
60,265 328,059 Cash and cash equivalents 676,445 688,481 Trade receivables
12,618 11,086 Other receivables 13,670 7,067 Other investments
762,998
1,651
1,034,675
1,651
The aforementioned balances are presented under the items of cash and cash equivalents, trade
receivables, other receivables, other investments and loans. Forecasted realization dates of customers, debtors and debit balances and other investments are
within one year.
2. Aging of debts and impairment losses
The aging of customer debts as follows:
December 31
2012 2013 NIS Thousands NIS Thousands
623,999 615,838 Not past due
60,377 79,833 Past due 1-60 days 5,712 8,539 Past due 61-120 days 6,198 8,992 Past due more than 120 days
(19,841) (24,721) Provisions for impairment
676,445
688,481
Notes to the Financial Statements as at 31 December 2013
Investments Limited
45
Note 24 - Financial Instruments (cont'd)
B. Credit risks (cont'd)
2. Aging of debts and impairment losses (cont'd)
The movement in the provision for impairment in respect of trade receivables during the year as
follows:
December 31
2012 2013
NIS Thousands NIS Thousands
22,366 19,841 Balance as at January 1 2,464 7,901 Impairment loss (gain) recognized, net
(491) (558) Movements against suppliers (4,498) (2,463) Doubtful debts that became bad debts
19,841
24,721
Balance as at December 31
Debts and impairment losses
The Company uses impairment provisions in order to recognize impairment losses, except for when
the Group is convinced that the debt will not be collected, in which case the uncollectible amount is
offset directly from the financial asset. A considerable part of the customer balances are insured by
the Company for credit insurance. As at Tuesday, December 31, 2013 and Monday, December 31,
2012, the Group also has a general impairment provision for customer balances. Management of the
Company regularly monitors the debts of customers, and the financial statements include provisions
for doubtful debts that appropriately reflect, in the opinion of management, the loss inherent in debts
the collection of which is doubtful.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
46
Note 24 - Financial Instruments (cont'd)
C. Liquidity risk
The following are the contractual maturities of financial liabilities in the forthcoming years,
including principal payments and estimated future undiscounted interest payments.
As at 31 December 2013
2-5 years 1-2 years
Less than
one year
years
Contractual
cash flow
Carrying
amount
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
Financial liabilities - - 29,310 29,310 29,212 Short-term loans and credit
- - 710,463 710,463 710,463 Trade payables - - 164,639 164,639 164,639 Payables
- - 904,412 904,412 904,314 Total
As at 31 December 2012
2-5 years 1-2 years
Less than
one year
Contractual
cash flow
Carrying
amount
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
Financial liabilities - - 48,803 48,803 48,393 Short-term loans and credit
- - 685,948 685,948 685,948 Trade payables - - 128,487 128,487 128,487 Payables
Bank liabilities - 3,571 10,614 14,185 13,915 Including current maturities
- 3,571 873,852 877,423 876,743 Total
Notes to the Financial Statements as at 31 December 2013
Investments Limited
47
Note 24 - Financial Instruments (cont'd)
D. Linkage and foreign currency risks
1. Exposure of the Group to linkage and foreign currency risks
As at 31 December 2013
Functional Linked to Foreign
Currency
Functional currency - NIS
Total Non-
monetary
Items
Foreign
Currency
Unlinked Unlinked Linked to the
CPI
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
Assets 328,059 - 17,590 27,073 283,396 - Cash and cash equivalents 688,481 - 48,472 27,568 612,441 - Trade receivables
27,662 16,594 1,089 2,390 7,589 - Other receivables 5,464 5,464 - -
-
- - Income tax 390,107 390,107 - -
-
- - Inventory 7,067 - 154,722 (148,983) - 1,328 Other investments
293 293 - -
-
- - Employee benefits 1,144,497 1,144,497 - -
-
- - Fixed Assets 977,057 977,057 - -
-
- - Intangible Assets 38,806 38,806 - -
-
- - Deferred expenses 34,795 34,795 - -
-
- - Deferred tax assets Liabilities
(29,212) - - (29,212) - - Short-term loans and credit (710,463) - (146,722) (43,950) (519,791) - Trade payables (223,976) (59,337) (74) (14,480) (150,085) - Other creditors
(9,473) (9,473) - -
-
- - Income tax - -
-
- -
-
- - Bank liabilities
(342,514) (342,514) - -
-
- - Other liabilities (4,450) (4,450) - -
-
- - Employee benefits (69,327) (69,327) - -
-
- - Deferred tax assets Excess (deficit) in assets
over 2,252,873 2,122,512 75,077 (179,594) 233,550 1,328 Liabilities
Notes to the Financial Statements as at 31 December 2013
Investments Limited
48
Note 24 - Financial Instruments (cont'd)
D. Linkage and foreign currency risks (cont'd)
1. Exposure of the Group to linkage and foreign currency risks (cont)
Linkage basis report as at 31 December 2012
Functional Items Linked to Foreign
Currency
Functional currency - NIS
Total Non-
monetary
Foreign
Currency
Unlinked Unlinked Linked to the
CPI
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
Assets 60,265 - 10,960 32,895 16,410 - Cash and cash equivalents
676,445 - 48,612 24,874 602,959 - Trade receivables 37,896 25,278 1,067 7,838 3,713 - Other receivables 7,416 7,416 - -
-
- - Income tax 406,724 406,724 - -
-
- - Inventory 13,670 - 228,353 (228,353) 12,187 1,483 Other investments
1,127,990 1,127,990 - -
-
- - Fixed Assets 1,025,654 1,025,654 - -
-
- - Intangible Assets 37,669 37,669 - -
-
- - Deferred expenses 30,441 30,441 - -
-
- - Deferred tax assets Liabilities
(58,938) - (8,435) (33,488) (17,015) - Short-term loans and credit (685,948) - (173,005) (34,695) (478,248) - Trade payables (189,169) (60,682) (884) (12,325) (115,278) - Other creditors
(11,813) (11,813) Income tax (3,370) - (3,370) - - Bank liabilities
(357,104) (357,104) - -
-
- - Other liabilities (4,537) (4,537) - -
-
- - Employee benefits (69,847) (69,847) - -
-
- - Deferred tax assets Excess (Deficit) assets
over liabilities 2,043,444 2,157,189 106,668 (246,624) 24,728 1,483 Liabilities
Notes to the Financial Statements as at 31 December 2013
Investments Limited
49
Note 24 - Financial Instruments (cont'd)
D. Linkage and foreign currency risks (cont'd)
2. Sensitivity analysis
A strengthening of the NIS against the following currencies as at December 31 and an increase in the CPI would
have increased (decreased) equity and profit by the amounts shown below. This analysis assumes that all other
variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2012. As at 31 December 2013
Equity Profit or loss
NIS Thousands NIS Thousands
Increase of 1% in the CPI 10 10 Increase in the exchange rate of: 1% in the US Dollar 78 78 1% in the Pound Sterling 51 51 1% in the Euro (6) (6) 1% in the Australian Dollar (79) (79)
As at 31 December 2012
Equity Profit or loss
NIS Thousands NIS Thousands
Increase of 1% in the CPI 11 11 Increase in the exchange rate of: 1% in the US Dollar 1,394 1,394 1% in the Pound Sterling 26 26 1% in the Euro (15) (15) 1% in the Australian Dollar (30) (30)
A similar rate of weakening of the NIS against the above currencies and a similar rate of decrease in the CPI as at
December 31 would have had an equal but opposite effect, in the same amounts, on the basis that all other variables
remain constant.
3. The following are details of the Group’s derivative financial instruments:
As at 31 December 2013
2008
2009
2008
2007
Term Term
Currency Currency Par
Value
Start Expiration/ Fair Value
Detail of the Derivative For
purchase For sale NIS
Thousand
s
Transaction Realization NIS
Thousands
Forward – hedging
supplier's debt
Australian
To supplier Dollar
Australia
n
NIS 16,134 12/2013 1/2014 44
Forward – hedging
supplier's debt
To supplier Euro NIS 2,416 3/2013 1-2/2014 (28)
18,550
16
Option on exchange rate
US Dollar
NIS
(90,246)
10/2013
3-9/2014
1,258
71,696
1,274
As at 31 December 2012
Term Term
Currency Curre
ncy
Par Value Start Expiration/ Fair Value
Detail of the Derivative For purchase
For
sale
NIS
Thousands
Transaction Realization NIS Thousands
Forward – hedging
supplier's debt
Australian
To supplier Dollar NIS 35,221 12/2012 1/2013 (102)
Forward – hedging
supplier's debt
To supplier US Dollar NIS 36,583 7-12/2012 1-8/2013 (449)
71,804
(551)
Notes to the Financial Statements as at 31 December 2013
Investments Limited
50
Note 24 - Financial Instruments (cont'd)
D. Linkage and foreign currency risks (cont'd)
4. Data Relating to CPI Index and Exchange Rates:
31 December
% Change
2013 2012 2013 2012 2011
Consumer Price Index in points 107.6 105.7 1.82 1.63 2.17
Exchange rate of US Dollar NIS = 1 Australian Dollar 3.471 3.733 (7.02) (2.30) 7.66
Exchange rate of Pound Sterling NIS = 1 Pound Sterling 5.742 6.037 (4.89) 2.46 7.26
Exchange rate of Swiss Franc NIS = 1 Swiss Franc 3.897 4.077 (4.42) 0.36 7.23
Exchange rate of Euro NIS = 1 Euro 4.782 4.921 (2.82) (0.35) 4.22
Exchange rate of Australian
Dollar
NIS = 1 Australian Dollar 3.103 3.870 (19.82) (0.18) 7.37
Notes to the Financial Statements as at 31 December 2013
Investments Limited
51
Note 24 - Financial Instruments (cont'd)
E. Interest rate risk
1. Interest rate profile
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was: December 31
2013 2012 Carrying
amount Carrying
amount NIS
Thousands NIS
Thousands
Variable rate instruments
Financial assets 695 13,818
Financial liabilities - -
695 13,818
Variable rate instruments
Financial assets 272,545 8,521
Financial liabilities (29,212) (62,308)
(243,333) (53,787)
2. Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and
the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge
accounting model. Therefore a change in interest rates at the reporting date would not affect profit or loss related to
changes in assets and liabilities at fixed interest rate. 3. Cash flow sensitivity analysis for variable rate instruments
A change of 1% in interest rates at the reporting date would have increased or decreased equity and profit or loss by
the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain
constant. The analysis is performed on the same basis for 2012. As at 31 December 2013
Profit or Loss Equity
Interest increase Interest decrease Interest increase Interest decrease
NIS Thousands NIS Thousands NIS Thousands NIS Thousands
Variable rate instruments 13 (13) 13 (13)
Cash flow sensitivity (net) 13 (13) 13 (13)
As at 31 December 2012 Profit or Loss Equity
Interest increase Interest decrease Interest increase Interest decrease
NIS Thousands NIS Thousands NIS Thousands NIS Thousands
Variable rate instruments (9) 9 (9) 9
Cash flow sensitivity (net) (9) 9 (9) 9
Notes to the Financial Statements as at 31 December 2013
Investments Limited
52
Note 25 - Earnings Per Share
Year ended December 31 2012 2013
Earnings used in computing the basic and the 356,886 376,428 fully diluted earnings per share (NIS thousands)
Number of shares used in computing the 110,644 110,644 basic and the fully diluted earnings per share (NIS thousands )
thousands)th)thousands)
Note 26 - Information on Operating Segments on a Consolidated Basis
A. The Company has reportable segments based on the areas of activity mentioned below:
1. Culinary - In this area the Group develops, manufactures and/or sells, markets and distributes a large
variety of branded products. The main ones being, among others, pasta, soups, casseroles, baking
aids, sauces, soup almonds and canned products.
2. Snacks and Breakfast Cereals - In this area the Group develops, manufactures and/or sells, markets
and distributes a large variety of branded products. The products in this area include snack products
(wheat snacks , potato snacks and corn snacks), breakfast cereals and health bars.
3. Bakery and Beverages - In this area the Group develops, manufactures and/or sells, markets and
distributes a large variety of branded food products. The products in this area include the salty baked
products (crackers and Lachmit), the sweet baked products (cakes and cookies), concentrates,
chocolate milk powder and soluble coffee.
4. Prepared Foods - In this area the Group develops, manufactures and/or sells, markets and distributes a
large variety of frozen and chilled branded food products, the main ones being frozen bakery products
baked at the point of sale, schnitzels and prepared meals based on meat substitutes and vegetable-based
food products, prepared packaged salads (hummus salad, eggplant, tehina etc.)
5. Infant Nutrition – In this area the Group’s activities are carried out via Materna partnership, which
develops, produces and/or sells and markets a wide variety of infant nutrition products which include
mother’s milk substitutes, cereals, purees, biscuits and pastas for infants
6. Other Activities. – In this area are included various activities which are not included in the activities
mentioned above. The main ones being, among others, iced tea (Nestea) ice cream, petfoods, other
purchased products and activities of the subsidiary companies Asamim Gift Packages, and Osem UK and
Osem USA. The said activities are not material to the activity of the Group and do not meet the
quantitative threshold to be presented in the financial statements as reportable segments.
The company calculates the intercompany transactions according to acceptable market price to outside customers
with similar products. The results of these activities are eliminated, in the framework of reconciliations for the
purpose of preparing consolidated financial statements. The segment results are measured based on the profit reported and regulary reviewed by the head
operational decision maker.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
53
Note 26 - Information on Operating Segments on a Consolidated Basis (cont'd)
For the year ended 31 December 2013 Snacks
Adjustment Infants Prepared Bakery And
Cereals
Consolidated to
consolidated
Other Nutrition Food Beverages Breakfast
Cereals
Culinary
NIS
Thousands NIS
Thousands NIS
Thousands
NIS
Thousands NIS
Thousands NIS
Thousands NIS
Thousands NIS
Thousands
4,190,047 - 995,592 358,644 920,486 541,065 651,098 723,162 Third party sales - (64,522) - - 11,080 4,840 16,186 32,416 Sales to other segments
4,190,047 (64,522) 995,592 358,644 931,566 545,905 667,284 755,578 Total segment sales Attributable costs –
3,661,489 - 896,174 296,493 853,967 456,766 503,429 654,660 From third parties
Attributable costs – - (64,522) 64,484 - 38 - - - From other segments
3,661,489 (64,522) 960,658 296,493 854,005 456,766 503,429 654,660 Total attributable costs
528,558 - 34,934 62,151 77,561 89,139 163,855 100,918 Segment results (2,885) Expenses not allocated, net
(22,761) Financing costs, net (126,484) Taxes on income
376,428 Profit for the period
148,681 26,860 6,522 48,710 16,855 23,249 26,485 Depreciation and amortization
For the year ended 31 December 2012
snacks Adjustment Infants Food Bakery And
Cereals
Consolidated To
consolidated
Other Nutrition prepared Beverages Breakfast
Cereals
Culinary
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousand
s
NIS
Thousand
s
NIS
Thousand
s
NIS
Thousand
s
NIS
Thousands
4,091,593 - 947,236 355,058 905,783 523,219 652,688 707,609 Third party sales - (56,859) - - 9,446 6,117 10,018 31,278 Sales to other segments
4,091,593 (56,859) 947,236 355,058 915,229 529,336 662,706 738,887 Total segment sales Attributable costs –
3,580,050 - 847,442 295,830 843,226 457,985 493,527 642,040 From third parties
Attributable costs – - (56,859) 56,766 - 93 - - - From other segments
3,580,050 (56,859) 904,208 295,830 843,319 457,985 493,527 642,040 Total attributable costs
511,543 - 43,028 59,228 71,910 71,351 169,179 96,847 Segment results (7,550) Expenses not allocated, net
(29,638) Financing costs, net (117,013) Taxes on income
357,342 Profit for the period
150,875 26,658 6,440 51,217 17,285 22,673 26,602 Depreciation and amortization
Notes to the Financial Statements as at 31 December 2013
Investments Limited
54
Note 26 - Information on Operating Segments on a Consolidated Basis (cont'd)
For the year ended 31 December 2011 Snacks
Adjustment Infants Prepared Bakery And
Cereals
Consolidated to
consolidated
Other Nutrition Food Beverages Breakfast
Cereals
Culinary
NIS
Thousands NIS
Thousands NIS
Thousands
NIS
Thousands NIS
Thousands NIS
Thousands NIS
Thousands NIS
Thousands
3,960,877 - 887,843 369,249 877,792 484,788 647,797 693,408 Third party sales - (51,455) - - 12,323 4,613 8,214 26,305 Sales to other segments
3,960,877 (51,455) 887,843 369,249 890,115 489,401 656,011 719,713 Total segment sales Attributable costs –
3,457,581 - 788,780 303,639 838,153 422,337 480,807 623,865 From third parties
Attributable costs – - (51,455) 51,372 - 83 - - - From other segments
3,457,581 (51,455) 840,152 303,639 838,236 422,337 480,807 623,865 Total attributable costs
503,296 - 47,691 65,610 51,879 67,064 175,204 95,848 Segment results (4,018) Expenses not allocated, net
(31,634) Financing costs, net (126,664) Taxes on income
340,980 Profit for the period
147,883 26,149 6,078 50,244 17,540 22,268 25,604 Depreciation and amortization
Notes to the Financial Statements as at 31 December 2013
Investments Limited
55
Note 26 - Information on Operating Segments on a Consolidated Basis (cont'd)
B. Disclosures at the entity level
1. Product information
Year ended December 31 2011 2012 2013
NIS Thousands NIS Thousands NIS Thousands
719,713 738,887 755,578 Culinary Food
512,610 511,317 514,788 Snacks
143,401 151,389 152,496 Breakfast Cereals
489,401 529,336 545,905 Bakery and Beverages
890,115 915,229 931,566 Prepared Food
369,249 355,058 358,644 Infant Nutrition
836,388 890,377 931,070 Others (*)
3,960,877 4,091,593 4,190,047 Total
(*) Within this framework, there is no product group whose income constitutes 10% or more of
the total of the Company revenue. 2. Information on geographical regions
The Company is situated in Israel and the Company is active and produces its income in
Israel, Europe and the USA.
In the presentation of information according to geographic regions, income from the region
is based on the location of the customer. The assets relate to the physical location of the assets.
Year ended December 31 2011 2012 2013
NIS Thousands NIS Thousands NIS Thousands Income from Third Parties
3,320,925 3,423,047 3,560,200 Israel
279,887 300,252 277,918 USA 351,599 356,596 340,670 Europe
8,466 11,698 11,260 Rest of the world
3,960,877 4,091,593 4,190,048 Consolidated
December 31 2012 2013
NIS Thousands NIS Thousands
Non-current assets
1,860,473 1,872,496 Israel
203,011 181,664 USA 127,829 106,200 Europe
2,191,313 2,160,360 Consolidated
Notes to the Financial Statements as at 31 December 2013
Investments Limited
56
Note 27 - Capital and Reserves
A. Nominal historical data
As at 31 December 2013
and 2012
Authorized Issued and paid NIS NIS NIS per ordinary share 150,000,000 110,644,444
The shares of the Company are registered for trade on the Tel Aviv Stock Exchange.
B. Translation reserve from foreign operations
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, as well as from the translation of liabilities that hedge the Company’s net investment in a foreign operation
Composition of translation reserve from foreign operations: December 31
2012 2013
(1,988) (17,971) Tivall (1993) Ltd. 01193 (9,209) (10,584) Osem UK Ltd.
(837) (3,817) Osem USA Inc.
(12,034) (32,372) Total
C. Dividends
The following dividends were declared and paid by the Company: Year ended December 31
2012 2013 NIS Thousands NIS Thousands
150,000 150,000 1.356 NIS per ordinary share
On 13 March 2014 the Company declared an additional dividend in the sum of NIS 150 million.
Notes to the Financial Statements as at 31 December 2013
Investments Limited
57
Country of
Company
Shareholding
conferring
direct and
indirect share
to profits and
voting rights %
Subsidiary companies -
Osem Food Industries Ltd. Israel 100.0
Assamim (1954) Ltd. Israel 100.0
Givol Ltd. Israel 100.0
OSEM UK Ltd. UK 100.0
Osem USA Inc. USA 100.0
Migdanot Habait Ltd. Israel 100.0
Noga Ice Cream Ltd Israel 100.0
Noga Ice Cream Limited Partnership Israel 100.0
Assamim Gift Packages Ltd Israel 74.0
Tivall (1993) Ltd. Israel 100.0
Beit Hashita - Assis, Food Industries Limited
Partnership
Israel 100.0
Beit Hashita - Assis, Food Industries Limited Israel 100.0
Materna Food Industries Limited Partnership * Israel 51.0
Materna Holdings Ltd * Israel 51.0
Tivall Europe B.V. Holland 100.0
TRIBE MEDITERRANEAN FOODS INC. USA 100.0
Tivall Food Industries Ltd.(formerly Zabar Food Ind.
(1985)(Ltd)
Israel 100.0
Osem Commerce Group (Limited Partnership) Israel 100.0
Tivall Holland B.V. Holland 100.0
Tivall Sweden A.B. Sweden 100.0
TIVALL CZ S.R.O. (5) Czech
Republic
100.0
Asmi Bakers Ltd. Israel 100.0
Recycling Organization of Israel Ltd. Israel 8.3
Inactive companies:
Ostiv Ltd Israel 100.0
Loop Frumin Ltd. Israel 100.0
Itur Osem Ltd. Israel 100.0
Osem International Foods Ltd Israel 100.0
Alei Dagan Ltd. Israel 100.0
Nestle Purina Petcare Israel (Limited Partnership) Israel 100.0
Baker Man (Bakery) Ltd. Israel 100.0
Magen Bakery and Coffee Shop Ltd. Israel 100.0
(*) Since there is an PUT option from the non controlling interest therefore the accounting
presentation relates to a 100% holding.
Osem Investments Limited
Separate Financial Statements
December 31, 2013
Investments Ltd.
Contents
Separate information is presented according to regulation 9c to the securities regulations (Periodic and
Immediate Reports) -1970. Financial data from the Consolidated Financial Statements relating to the Company
itself as at 31 December 2013
Page
Data on Financial Position 2-3
Data on Income 4
Data on Comprehensive Income 5
Data on Cash Flows 6
Additional Information 7
Investments Ltd.
Separate information is presented according to regulation 9c to the securities regulations
(Periodic and Immediate Reports) -1970 as at 31 December 2013
Presented hereunder are financial data from the Group’s consolidated financial statements of December 31,
2013 (hereinafter – the consolidated financial statements), which are issued in the framework of the periodic
reports, and which are attributed to the Company itself (hereinafter – separate financial data), and are
presented in accordance with Regulation 9C (hereinafter – the Regulation) and the tenth addendum to the
Securities Regulations (Periodic and Immediate Reports) – 1970 (hereinafter – the tenth addendum)
regarding separate financial data of an entity.
In this separate financial data- Investee companies are subsidiaries as they are defined in Note 1B in the
consolidated financial statements.
The tenth addendum states, among others, that the separate financial data should be detailed as follows:
1. Information on amounts of assets and liabilities included in the consolidated financial statements that are
attributable to the Company itself (other than in respect of investee companies), according to categories
of assets and liabilities, as well as information regarding the net amount, on the basis of the consolidated
financial statements, that is attributable to the Company’s owners, of total assets less total liabilities, in
respect of investee companies, including goodwill.
2. Information on amounts of revenues and expenses included in the consolidated financial statements,
allocated between income and other comprehensive income, attributable to the Company itself (other
than in respect of investee companies), while specifying the categories of revenues and expenses, as well
as information regarding the net amount, on the basis of the consolidated financial statements, that is
attributable to the Company’s owners, of total revenues less total expenses in respect of the operating
results of investee companies, including goodwill impairment.
3. Information on cash flows included in the consolidated financial statements that are attributable to the
Company itself (other than in respect of investee companies), based on the consolidated statement of cash
flows, classified according to flow from operating activities, investing activities and financing activities
with details of their composition. For this separate financial information, cash and cash equivalent
balances belonging to the company itself includes cash and equivalents passing between the Company
and its investee companies.
4. Any additional material information, which could have an effect on economic decisions of the investor, as
much as this information was not included in the consolidated financial statements, in a manner that it
specifically relates to the company itself. At the least, this information will include: disclosure related to
cash and equivalents, disclosure related to financial assets and liabilities, disclosure related to tax income
and expenses, disclosure related to deferred taxes, in compliance with the directives of the regulation. In
addition, a disclosure should be included regarding material relationships, commitments and transactions
with the Company’s investee companies. Whether or not they were recognized and measured in the
consolidated financial statements and received expression in the framework of the detailed information in
sections (1) through (3) above.
The accounting policies described in the consolidated financial statements in Note 3 will be applied for
presenting separate financial information, including the manner in which the financial information was
classified in the framework of the consolidated financial statements, with changes required for the
abovementioned.
Separate Financial Data as at 31 December 2013
2
Investments Limited
Data on Financial Position
As at 31 December
0212 2013 Additional
NIS
Thousands NIS Thousands Information
Assets
5,067 218,379 1 Cash and cash equivalents
15,600 10,692 2
Other receivables
5,846 978 3
Income tax
120,225 106,810
Inventory
13,670 1,328 2
Other investments
160,408 338,187
Total current assets
1,522,274 1,623,899
Balances related to investee companies
70,476 61,898 2
Loans to investee companies
662,783 684,218
Fixed assets
568,037 538,709
Intangible Assets
17,235 12,763
Prepaid expenses
2,840,805 2,921,487
Total non-current assets
3,001,213 3,259,674 Total assets
Dan Propper – Chairman of the Board
Itzik Saig – CEO
Pinhas Kimelman – Deputy CEO Finance
The date of approval of separate financial data: 13 March 2014
Separate Financial Data as at 31 December 2013
3
Investments Limited
As at 31 December
2012 2013
NIS Thousands NIS Thousands Additional
Information Liabilities
17,015 - 2
Loans and short-term credit
319,152 316,000 2
Trade payables
220,346 301,363 2
Other payables
556,513 617,363
Total current liabilities
357,104 342,514
Liabilities for acquisition of the non controlling interest in
investee companies
4,105 4,331
Employee benefits
40,733 43,722 3
Deferred taxes
401,942 390,567
Total non-current liabilities
958,455 1,007,930
Total liabilities
Equity
176,772 176,772
Share capital
444,212 444,212
Share premium
(48,015) (68,353)
Reserves
1,469,789 1,699,113
Retained earnings
2,042,758 2,251,744
Total equity
3,001,213 3,259,674 Total liabilities and equity
Separate Financial Data as at 31 December 2013
4
Investments Ltd.
Data on Income
For the year ending 31 December
2011 0212 0213 Additional
NIS Thousands NIS Thousands NIS Thousands Information
1,093,859 1,331,697 1,351,197 Sales
581,723 721,879 712,087 Cost of Sales
512,136 609,818 639,110 Gross profit
187,337
261,098
277,693
Selling, marketing and distribution
expenses
69,268 87,299 99,478 General and administrative expenses
255,531 261,421 261,939 Operating profit before other income
13,295 856,8 12,080 Other income, net
268,826 270,079 274,019 Operating profit
(34,682) (23,347) (16,367) Financing expenses
11,311 6,364 15,404 Financing income
(23,371) (16,983) (963) Financing expenses, net
165,893 167,769 176,993 Profit from investee companies
411,348 420,865 450,049 Profit before taxes on income
70,296 63,979 74,064 3 Taxes on income
341,052
356,886
375,985
Profit for the period
Separate Financial Data as at 31 December 2013
5
Investments Ltd.
Data on Comprehensive Income
For the year ending 31 December
2011 2012 2013
NIS
Thousands NIS
Thousands NIS
Thousands
Actuarial gains (losses)
(12,550) 6,454 3,818 from defined benefit plan
Income tax related to other elements
3,138 (1,614) (1,012) of comprehensive income
(9,412) 4,840 2,806 Other comprehensive income (expenses) for the period
Other comprehensive income (expenses),
4,058 2,308 (19,805) from investee companies
341,052 356,886 375,985 Profit for the period
335,698 364,034 358,986 Total comprehensive income for the period
Separate Financial Data as at 31 December 2013
6
Investments Ltd.
0222 2012 2013
Data on Cash Flows for the year ended 31 December 2013
NIS
Thousands NIS
Thousands NIS
Thousands
Cash flows from operating activities
25051,3 356,886 375,985 Profit for the period
(16,,892) (167,769) )176,993(
Adjustments for:
Company’s share in investee profits
585930 ,85118 57,663 Depreciation
Amortization of intangible assets
345059 27,753 27,747 And prepaid expenses
(1,309) 130 )126( Gain on sale of fixed assets, net
325240 16,983 963 Financing costs, net
415396 63,979 74,064 Income tax expense
3,388 1,675 )4,642( Changes in derivatives
631 (8,596) 13,415 Change in inventory
76,426 25,508 4,940 Change in trade and other receivables
25,900 69,417 109,896 Change in trade and other payables
(78) )174( 4,044 Change in employee benefits
(50,178) )81,036( )101,746( Income tax paid
399,665 362,764 385,210 Net cash from operating activities
Cash flows from investing activities
1,396 46 745 Proceeds from sale of fixed assets
- - 8,861 Repayment of loans granted
5,008 11,258 10,152 Net cash from investment activities in investee
(31,679) (53,767) )80,573( Acquisition of fixed assets
(4,459) ,5202) ) )206(
Investment in intangible assets and prepaid
expenses
35018 35629 1,581 Interest received
(348) 025388 12,735 Other investments
6053,9 6,553, 69,520 Dividend received from investee companies
33,355 33,576 22,815 Net cash from (used in) investing activities
Cash flows from financing activities
)7,104( )26,244( )2,149 ( Interest paid
)112,787( )239,600( )30,904( Repayment of other liabilities
)37,500( - - Repayment of long term loans
05808 0,5094 )11,834( Credit from banks and others, net
(300,000) (150,000) )150,000( Dividend paid
(455,573) (400,647) (194,887) Cash flows used in financing activities
(22,553) )4,307( 213,138 Change in cash and cash equivalents
305679 95331 5,067
Cash and cash equivalents as at the beginning
of the period
Effect of exchange rate fluctuations
31, 43 174 on cash balances and cash equivalents
95220 5,067 218,379
Cash and cash equivalents as at the end of
the period
Separate Financial Data as at 31 December 2013
7
Investments Ltd.
Additional data to the financial statements as at 31 December 2013
1 - Cash and Cash Equivalents
31 December
2012 2013
NIS Thousands NIS Thousands
3,356 215,668 New Israel Shekel
538 1,575 U.S. Dollar
693 624 Euro
374 443 Pound Sterling
106 69 Other currencies
5,067
218,379
1,651
Total Cash and Cash Equivalents
2. Financial Instruments
A. Linkage and foreign currency risks
331 December 201
Linked to Functional currency - NIS
Interest
Total Foreign
Currency
Unlinked Linked to
the CPI %
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
Assets
5,508 - 5,508 - Debtors and debit balances (*)
1,328 - - 1,328 5 Other investments (*)
61,898 - 49,401 12,497 3-, Loans to held companies
Liabilities
- - - - Short term liabilities
(316,000) (94,720) (221,280) - Trade payables
(250,020) - (250,020) - Other creditors
(497,286) (955431) (416,391) 13,825
(*)Debtors and debit balances and other investments are classified as current assets, their realization within the
operating cycle of the company.
Separate Financial Data as at 31 December 2013
8
Investments Ltd.
Additional data to the financial statements as at 31 December 2013
2. Financial Instruments (Cont.)
Linkage and foreign currency risks
212031 December
Linked to Functional currency - NIS Interest
Total Foreign
Currency
Unlinked Linked to
the CPI %
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
Assets
2,500 - 2,500 - Debtors and debit balances (*)
13,670 - 12,187 1,483 1-5 Other investments (*)
70,476 - 48,251 22,225 3-, Loans to held companies
Liabilities
(17,015) - (17,015) - 3.0 Short term liabilities includes
(319,152) (119,616) (199,536) - Trade payables
(168,295) - (168,295) - Other creditors
(5045806) (0095606) (2305918) 23,708
(*)Debtors and debit balances and other investments are classified as current assets, their realization within the
operating cycle of the company.
Separate Financial Data as at 31 December 2013
9
Investments Ltd.
Additional data to the financial statements as at 31 December 2013
B. Liquidity risk
The following are the contractual maturities of financial liabilities in the forthcoming years, including
principal payments and estimated future undiscounted interest payments.
As at 31 December 2013
Less than
one year Contractual Carrying
3-5 years 1-2 years 1 year Cash flow Amount
NIS
Thousands
NIS
Thousands
NIS
Thousands NIS Thousands
NIS
Thousands
Financial liabilities
- - - - - Loans and short term liabilities
- - 316,000 316,000 316,000 Trade payables
- - 250,020 250,020 250,020 Creditors
- - 566,020 566,020 566,020 Total
As at 31 December 2012
Less than
one year Contractual Carrying
3-5 years 1-2 years 1 year Cash flow Amount
NIS
Thousands
NIS
Thousands
NIS
Thousands NIS Thousands
NIS
Thousands
Financial liabilities
- - 17,015 17,015 17,015 Loans and short term liabilities
- - 319,152 319,152 319,152 Trade payables
- - 168,295 168,295 168,295 Creditors
- - 504,462 504,462 504,462 Total
Separate Financial Data as at 31 December 2013
01
Investments Ltd.
Additional data to the financial statements as at 31 December 2013
C. CPI and Foreign Currency Risks
The following are details of the Company’s derivative financial instruments:
As at 31 December 2013
2008
3101
2008
2007
Term Term
Functional Functional Par Value Start Expiration/ Fair Value
Detail of the Derivative For
purchase
For sale NIS
Thousands
Transaction Realization NIS
Thousands
Forward – hedging
supplier's debt
Australian
Dollar NIS 065025 12/2013 1/2014 55
Forward – hedging
supplier's debt
US
Dollar NIS 35506 3/2013 1-2/2014 (28)
085,,1 16
As at 31 December 2012
2008
3101
2008
2007
Term Term
Functional Functional Par Value Start Expiration/ Fair Value
Detail of the Derivative For
purchase
For sale NIS
Thousands
Transaction Realization NIS
Thousands
Forward – hedging
supplier's debt
Australian
Dollar NIS 35,221 12/2012 1/2013 (102)
Forward – hedging
supplier's debt
US
Dollar NIS 36,583 7-12/2012 1-8/2013 (449)
71,804 (551)
3. Income Tax
A. Deferred taxes in respect of temporary differences
Vacation Employee and
Total Other Fixed Assets Benefits Convalesce
nce
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
NIS
Thousands
(31,990) 1,073 (45,798) 2,683 10,052 Balance as at 1 January 2012
(7,129) 769 (7,768) (44) (86) Changes recorded on the income statements
(1,614) - - (1,614) - Changes recorded to shareholders' equity
(40,733) 1,842 (53,566) 1,025 9,966 Balance as at 31 December 2012
(1,977) 3,075 (9,825) 1,133 3,640 Changes recorded on the income statements
(1,012) - - (1,012) - Changes recorded to shareholders' equity
(43,722) 4,917 (63,391) 1,146 13,606 Balance as at 31 December 2013
Separate Financial Data as at 31 December 2013
00
Investments Ltd.
Additional data to the financial statements as at 31 December 2013
3. Income Tax (cont’d)
B. Income tax in the income statements
Year ended 31 December
0222 2012 2013
NIS Thousands NIS
Thousands
NIS Thousands
52,312 56,850 72,087 Current taxes
Change in deferred taxes 5,478 7,129 (646) Regular basis
12,506 - 2,623 Change in tax rates
70,296 63,979 74,064
4. Material relationships, commitments and transactions with investee companies.
A. Financial guarantees
Unlimited reciprocal guarantees exist to banks, between the Company and some of its
investee companies in which the company holds 100% ownership in the share equity and
voting rights.
B. Loans
1. The Company occasionally gives short term loans to investee companies. As at the
reporting date the loan and capital notes balances to investee companies were NIS 6,100
Thousands. (2012 - NIS 24,632 Thousands).
2. The Company gave long term loans to investee companies. As at the balance sheet date
the loan capital notes balances to investee companies were NIS 61,898 Thousands
(2012 - NIS 70,476 Thousands).
Net finance income from investee companies for the years 2013, 2012 and 2011 totaled
NIS 5,412, 5,691, and 11,308 Thousands respectively.
C. Service Agreements
1. The Company supplies the Group companies with headquarters services and central
purchasing services. The company recorded income related to these services in the years
2013, 2012 and 2011 in the amounts of 111,231, 104,274 and 95,980 NIS thousands
respectively.
2. The Company, as all the other Group companies, participates in the expenses of one of
the held Group companies which carry out the commerce and distribution services. The
company recorded expenses related to these services in the years 2013, 2012 and 2011 in
the amounts of 202,590, 211,890 and 162,341 NIS thousands respectively.
Separate Financial Data as at 31 December 2013
02
Investments Ltd.
Additional data to the financial statements as at 31 December 2013
4 . Material relationships, commitments and transactions with investee companies. (cont)
C. Service Agreements (cont’d)
3. The Company receives usage fees for the use of assets it owns. The company recorded
incomes related to these services in the years 2013, 2012 and 2011 in the amounts of
16,498, 16,369 and 16,985 NIS thousands respectively.
4. Net debit/credit balances arising from the settling of accounts against the held
companies as at 31 December 2013 are NIS 122,882 thousand for credit to the held
companies (as at 31 December 2012 NIS 72,270 thousand).
D. Change in Structure
The Group decided on a change in structure to the Group companies in the framework of
which the baking factory of Bonjour (1986) Ltd ( hereinafter - "Bonjour") was merged
into the production setup of Osem Investments ( hereinafter - "Osem") Since Bonjour
was held via Alei Dagan Ltd ( hereinafter - "Alei Dagan") and Magen Bakery and Coffee
Shop Ltd ( hereinafter - "Magen Bakery"), two preliminary actions were effected before
the merger of Bonjour into Osem as a consolidation of parent and subsidiary companies
as follows:
1. At the first stage, Magen Bakery transferred all its share holdings in Bonjour to Bonjour,
exempt from income tax as per section 104C in the income tax ordinance (new version)
1961-5721 ( hereinafter - "the ordinance") in accordance with the Companies Law,
1999-5759 ( hereinafter - "the companies law).
2. In the second stage, Alei Dagan transferred all its holdings in Bonjour shares to Osem,
exempt from income tax as per section 104C in the ordinance and in accordance with the
company’s law.
3. In the third stage immediately and subsequent to the transfers mentioned in sections 1
and 2 above, Bonjour was merged into Osem in accordance with section 103B to the
ordinance in such a way that Bonjour transferred all its assets and liabilities without
consideration , thereby liquidating Bonjour without dismantling.
4. The change in structure was contingent upon receipt of advance approval from the tax
authorities and conducting the mentioned structural change free from tax and with the
approval of the Investment Center. On 26 January 2012 and 26 July 2012 the approvals
were received from the tax authorities for the tax exempt change in structure, approval
from the Investment Center was received in December 2012.
5. The results of 2012 include the results of the baking factory of Bonjour (1986) Ltd which
was merged into the production setup of the company.
E. Dividend
During the year 2013 the Company received dividends from subsidiary companies in the
amount of NIS 69,520 thousand, (2012 – NIS 65,425 thousand).
For additional information regarding held companies see Note 10 in the consolidated
financial statements, relating to consolidated companies.