osem investments limited statement 30.09.12.pdf · strategic alliance with nestle. ... (cakes and...

Osem Investments Limited

Financial Statements

September 30, 2012

INVESTMENTS LTD

Contents

Page

The Board of Directors' Report on the Company Business as at 30 September 2012 A-J

Condensed Financial Statements as at September 30, 2012 (Unaudited)

Condensed Consolidated Interim Statement of Financial Position 3

Condensed Consolidated Interim Statement of Profit and Loss 4

Condensed Consolidated Interim Statement of Comprehensive Income and Expenses 5

Condensed Consolidated Interim Statement on Changes in Shareholders Equity 6

Condensed Consolidated Interim Statement of Cash Flows 8

Notes to the Financial Statements 9

Condensed Separate Financial Statements as at September 30, 2012 (Unaudited)

Condensed Interim Information on Seperate Financial Position 12

Condensed Interim Information on Seperate Profit and Loss 14

Condensed Interim Information on Seperate Comprehensive Income and Expenses 15

Condensed Interim Information on Seperate Cash Flows 16

Additional Information 17

Report on the effectiveness of the internal control over the interim consolidated financial reporting

A

22 November 2012

The Board of Directors' Report on the Company Business for the Nine Month Period

Ending 30 September 2012

The Board of Directors of Osem Investments Ltd. (hereinafter – “the Company”) is

honored to present to the shareholders the Board of Directors Report for the nine

month period ending 30 September 2012, in accordance with Securities Regulations

(periodic and immediate reports) -1970. The data appearing in the Board of Directors

report is based on the reviewed consolidated financial statements as at 30 September

2012. The financial data and results of operations of the Company are affected by

financial data and results of operations of subsidiary companies held by the Company.

The Company and its subsidiaries will be referred together as the “Group” or the

“Osem Group”

In certain cases details are mentioned relating to events occurring after the financial

statements date and close to the publication date of the report or additional details and

data at the Company level only.

This report has been prepared taking into consideration that the reader of the report has

at his disposal the Board of Directors' Report on the Company as at 31 December

2011.

A. The explanations of the Board on the Company state of affairs

Key figures from the Description of the Corporation's Business

Business environment - Osem Investments Ltd. is the parent company incorporating the

Osem Group of companies. The Group focuses on food production, marketing and

distribution and is considered to be one of the largest food producers and distributors in

Israel. The Group produces more than 2,000 different food items currently manufactured in

eleven production plants based in Israel and abroad and are marketed through regional

distribution centers. The Group also exports its products to other countries, primarily to

Europe and the USA.

Strategic alliance with Nestle. Nestle is the largest shareholder of Osem and holds about

58.8% of the Company. The Company has exclusive agreements of cooperation with the

Nestle Group in Switzerland, to exclusively market and distribute Nestlé's products in

Israel by Osem’s marketing and sales systems. There is also an agreement on possible

manufacturing of some of Nestlé's products locally. In addition, Osem receives technical

assistance in R&D and has extensive right of use of Nestlé know-how for the use of the

Group. This know-how includes, among others, technical, scientific, marketing, logistic,

sales, production, IT and financial knowledge and expertise. The Group receives IT and

computer services from Nestle as part of Nestlé’s GLOBE Template Solution.

Operating Segments/Areas of Activity. The Group focuses on the manufacturing and

marketing of food products and ranks among the largest food manufacturers and marketers

in Israel. The Group reports on a number of activities reported as operating segments in the

consolidated financial statements of the Company.

B

1. Culinary segment - 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 (pickles).

2. Snacks and Breakfast Cereals segment - 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, peanut

snacks, potato snacks and corn snacks, etc.) and breakfast cereals and cereal based

snack bars.

3. Bakery and Beverages segment - 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 the salty baked products (crackers and Lachmit), the

sweet baked products (cakes and cookies), concentrates, chocolate milk powder

and soluble coffee.

4. Prepared Foods segment - In this area the Group develops, manufactures and/or

sells, markets and distributes a large variety of frozen and chilled branded

products, the main ones being frozen bakery products baked at the point of sale,

schnitzels, hot dogs and prepared meals based on meat substitutes and vegetable-

based food products, prepared packaged salads (hummus salad, eggplant, tehina

etc.)

Infant Nutrition segment – 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

5. Other Activities. – In this area are included various activities which are not

included in the activities mentioned above. The main ones being, among others,

ice cream, pet foods, other purchased products and activities of the subsidiary

companies Asamim Gift Packages, 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.

Appointment of new CEO – On 13 March 2012, the Osem Company CEO, Mr. Gezy

Kaplan OBM, notified the board of directors that he will conclude his term of office,

effective 2 April 2012. This is due to his medical condition. The board of directors received

his notification with sorrow and thanked him for many years of achievements and success.

In light of the CEO's announcement, the Osem board of directors decided to appoint Mr.

Itzik Saig, in his place, who started his responsibility as the Company CEO on 2 April

2012. Itzik Saig has held successfully several management roles at Tivall and Osem

starting from 1991. During these years and along the way of his progress though

appointments he was also Nestle New Zealand Country Manager for almost 3 years. The

board of directors wished Itzik Saig success in this new role.

C

The public social protest movement in Israel. During the third quarter of 2011 a social

protest movement in Israel emerged. The protest sprang mainly due to the continual

increase in the prices of housing, and due to the general increase in the cost of living in

Israel. Since the onset of the movement, discussions have been conducted at Osem on how

to respond to the public sentiment and lead a move that will help decrease the prices of

basic staple products in the Israeli consumer shopping basket. In the first stage, Osem had

already cancelled its planned price increase for July 2011 which was intended to match the

increase in input costs. In the second stage, the Osem Group reduced prices at a rate of up to

10% for the staple product basket to be found at most households in Israel and which is

relevant to the widest number of the consumers, only after an additional wave of increases

in raw material and other input costs did the Company announce updating of the price list

commencing November this year and this only partially. In addition to this the Osem Group

instituted a social responsibility plan, which also includes change in the structure of wages

in a company that employs about 4,900 people. According to the plan, in 2012 the wage

level of the senior office holders in the Company will be frozen and the excess funds

created as a result of this freeze will be transferred to the Group employees who earn less

than the average wage in the market.

Following the social protest movement, the government of the State of Israel decided to set

up several regulatory committees, the Trachtenberg Committee, a committee to examine

ways to implement socio-economic change, headed by Professor Manuel Trachtenberg and

the Kedmi Committee to examine the competitive situation and the level of food prices,

headed by the Office of Industry, Trade and Employment Director, Mr. Sharon Kedmi.

As at the date of the report, most of the Trachtneberg Committee recommendations were

approved by the government. These recommendations included, among others, the

cancellation of the framework of reduction in company tax rates which was previously

enacted and the increasing of the company tax rate from 24% to 25% besides this, the rest

of the committee recommendations do not have a material effect on the Group. The Food

Committee (Kedmi Committee) published its recommendations following which customs

were reduced on some raw materials and finished goods, regarding the rest of the

recommendations, these were not yet discussed and/or approved by the government. At this

early stage, it is not possible to estimate the changes that will occur due to the Committee

recommendations.

AAA Credit Rating for Osem. On February 2012, Midroug Company extended the AAA

rating Osem had received and gave a stable rating outlook. Osem is the first and only

industrial company in Israel, which is not a government enterprise, to ever receive an AAA

rating.

This rating attests to the high liquidity level and strong financial standing of the Group.

D

Financial situation

The liquid financial assets (cash and cash equivalents, and other investments) of the

Group as at the Balance Sheet date amounted to the sum of NIS 268,358 thousand

compared to the sum of NIS 122,342 thousand at the end of the previous year, an increase

of NIS 146,016 thousand.

The increase is due to cash flows from operating activities while the Group utilized part of

the increase in its excess cash for investments to expand factories, purchase equipment and

for the repayment of long-term loans.

The assets (fixed assets and intangible assets) amounted to the sum of NIS 2,136,817

thousand, compared to the sum of NIS 2,166,240 thousand at the end of the previous year.

The gross investments during the period of reporting totaled the sum of NIS 70,357

thousand.

The Groups investments were mainly in the purchasing of production line equipment and

in expanding of factories.

Long-term loans from banking institutions - as at the balance sheet date, were reduced

and totaled the sum of NIS 5,390 thousand compared to the sum of NIS 13,239 thousand at

the end of the previous year. The long-term loans from banks constitute only 0.1% of the

total of the balance sheet.

Total equity as at the balance sheet date amounted to the sum of NIS 2,121,238 thousand

compared to the sum of NIS 1,828,954 thousand at the end of the previous year. The

increase in the shareholders equity derives from the accumulation of current profits totaling

NIS 281,100 thousand. The shareholders equity constitutes 58.5% of the total of the

balance sheet.

The total of the balance sheet amounted to the sum of NIS 3,624,872 thousand compared

to the sum of NIS 3,431,096 thousand at the end of the previous year.

The structure of the balance sheet as at 30 September 2012 indicates continued expansion

in the business activity which is manifested by a growth in cash balances, an increase in the

gross investments in the fixed assets, in growth in the working capital resulting from the

growth in sales, and expansion which enabled a reduction in the long-term loans; it also

indicates continued financial strength, always important, but especially important in

times of financial crisis.

E

Results of Activities Total sales turnover for the first nine months of the year 2012 amounted to the sum of NIS

3,080,291 thousand compared to NIS 3,020,041 thousand in the corresponding period last

year, a growth of 2.0%.

The sales turnover for the three months of the third quarter of the year 2012 amounted to the

sum of NIS 1,071,846 thousand compared to NIS 1,044,443 thousand in the corresponding

period last year, a growth of 2.6%.

Sales to the local market for the first nine months of the year amounted to the sum of NIS

2,564,557 thousand compared to NIS 2,536,666 thousand in the corresponding period last


Sales to the local market for the third quarter amounted to the sum of NIS 900,850 thousand

compared to NIS 882,137 thousand in the corresponding quarter last year, a growth of 2.1%

and this in comparison to food sector sales in Israel which increased by only 1.0% in the third

quarter, based on Store Next publications.

Sales of the Group overseas for the first nine months of the year amounted to the sum of NIS

515,734 thousand compared to NIS 483,375 thousand in the corresponding period last year, a

growth of 6.7%.

The increase in overseas sales is mainly due to an increase in Tribe Company sales in the USA

which grew by 14.5% in the first nine months of the year and at a growth rate of 24.5% during

the three months of the third quarter. These increases were partly offset by a decrease in sales

to England, stemming from, among others, the discontinuing of activities with unprofitable

customers.

Sales of the Group overseas for the third quarter amounted to the sum of NIS 170,996

thousand compared to NIS 162,306 thousand in the corresponding period last year, a growth

of 5.4%.

Gross Profit of the Group for the first nine months of the year 2012 amounted to the sum of

NIS 1,270,779 thousand compared to NIS 1,266,754 thousand in the corresponding period last

year, an increase of 0.3%.

Gross profit rate as a percentage of the turnover decreased from a level of 41.9% to the level

of 41.3%.

The erosion in gross profitability stems from rising prices of raw materials around the world,

and rising prices of other inputs (energy, water and municipal taxes). Despite of the rising

prices of raw materials, Osem decided during the financial statement period, to absorb these

sharp increases in prices of raw material and to avoid increasing price of its products, while

continuing with efficiency measures in the Group.

The Operating Profit before other income and expenses, for the first nine months of the

year amounted to NIS 388,277 thousand compared to NIS 382,455 thousand in the

corresponding period last year, a growth of 1.5%.

The Operating Profit before other income and expenses of the Group for the three months of

the third quarter of the year 2012 amounted to the sum of NIS 138,345 thousand compared to

NIS 138,195 thousand in the corresponding period last year, a growth of 0.1%.

F

Operating profit rate before other income and expenses in the first nine months of the year, as

a percentage of the turnover decreased from a level of 12.7% to the level of 12.6%. Operating

profit rate before other income and expenses in the three months of the third quarter, as a

percentage of the turnover decreased from a level of 13.2% to the level of 12.9%.

The decline in the operating profit rate before other income and expenses stems from increase

in the prices of raw materials around the world and an increase in the price of other inputs

(energy, water and municipal taxes). During the financial statement period the Group absorbed

a large portion of these increases. The decline in the operating profitability was at this stage

only partly offset by the efficiency and synergy in the distribution network, and by the

reduction in advertising and administrative expenses

Profit for the period of the Osem Group for the first nine months of the year amounted to

the sum of NIS 281,100 thousand compared to NIS 273,502 thousand in the corresponding


Profit for the period of the Group for the three months of the third quarter of the year 2012

declined and amounted to the sum of NIS 100,780 thousand compared to NIS 101,859

thousand in the corresponding year, a decline of 1.1%.

The decline in profit for the three months of the third quarter stems from the erosion in gross

profitability as a result of the rising prices of raw materials and other inputs, an increase in

financing expenses and an increase in the rate of company tax.

Selling, marketing and distribution expenses for the first nine months of the year

decreased and represented 21.7% of the turnover, compared to 22.1% in the corresponding

period last year.

The improvement in selling expenses as a percentage of the turnover stems from efficiency

procedures in the distribution network and as a result of reduction in advertising expenses with

the transfer of part of the resources to increase discounts, sales promotion and campaigns to

customers which is included in the difference between gross sales and net sales.

General and administrative expenses for the first nine months of the year represented

6.9% of the turnover, compared to 7.2% in the corresponding period last year.

The improvement in administrative expenses both in nominal terms and also as a percentage of

the turnover stems from efficiency measures and the consolidating of headquarters functions.

Finance costs net of the Group for the first nine months of the year declined significantly and

amounted to the sum of NIS 16,817 thousand compared to NIS 26,394 thousand in the

corresponding period last year.

The improvement in finance expenses stems from, among others, repayment of loans and

decreases in liabilities. The majority of finance expenses results from non-cash-flow imputed

interest, related to the PUT options to the non-controlling interests.

On the other hand, finance expenses during the third quarter increased from NIS 5,732

thousand to NIS 7,141 thousand mainly due to exchange rate differences.

G

Liquidity and financing sources

The current ratio as at the balance sheet date is 1.29

The quick ratio as at the balance sheet date is 0.96

The high liquidity ratio and liquidity reserve of the Group have constituted the main

financing sources for further expansion of the Group business activities in different product

categories and the expansion of other production lines, this is accompanied by outside

financing if necessary.

The cash flow from current operations for the first nine months of the year 2012 amounted to

the sum of NIS 319,023 thousand compared to the sum of NIS 344,284 thousand in the

corresponding period last year. The cash flow from current operations for the first nine

months of the year was influenced by the timing differences of payments made during the

first quarter of this year, among other reasons, due to the fact that the 31st of December 2011

fell on a Saturday.

Analysis of the Groups business results according to operating segments

Culinary segment – during the first nine months of the year sales amounted to NIS 541,772

thousand compared to NIS 533,164 thousand in the corresponding period last year an

increase of 1.6%.The profit increased from a level of NIS 65,416 thousand to a level of NIS

65,957 thousand. During the third quarter sales increased from the level of NIS 181,647

thousand to the level of NIS 187,400 thousand, a growth of 3.2%. The profit rose from the

level of NIS 18,432 thousand to the level of NIS 21,144 thousand. The improvement in profit

arises from reduction in selling and administrative expenses.

Snacks and Breakfast Cereals segment – during the first nine months of the year the sales

increased from a level of NIS 494,372 thousand to a level of NIS 499,266 thousand, a

growth of 1.0%. The profit increased from a level of NIS 122,846 thousand to a level of NIS

127,389 thousand. During the third quarter sales decreased from the level of NIS 172,010

thousand to the level of NIS 166,472 thousand, a decrease of 3.2%. The profit declined from

the level of NIS 41,492 thousand to the level of NIS 36,640 thousand. The decrease in profit

is due to, among others, the rise in raw material costs and other input costs (energy, water

and municipal taxes)

Bakery and Beverages segment – during the first nine months of the year the sales

increased from a level of NIS 376,484 thousand to a level of NIS 393,554 thousand, a

growth of 4.5%. The profit declined from a level of NIS 50,293 thousand to a level of NIS

49,888 thousand. During the third quarter sales increased from the level of NIS 128,514

thousand to the level of NIS 130,033 thousand, a growth of 1.2%. The profit increased from

the level of NIS 12,989 thousand to the level of NIS 15,384 thousand. The improvement in

profit arises from reduction in selling and administrative expenses.

H

Prepared Foods segment – during the first nine months of the year the sales increased from

a level of NIS 671,686 thousand to a level of NIS 684,673 thousand, a growth of 1.9%.

These improvements are the result of, among others, from an increase of 14.5% in Tribe

sales in the USA which were partially offset by the decline in Tivall sales in Israel resulting

from the decision to lower prices of products to consumers. The profit increased from a level

of NIS 36,752 thousand to a level of NIS 49,143 thousand. The improvement in profit is the

result of, among others, the positive advance on the learning curve as a result of the merging

of the Foodtech factory in the USA. During the third quarter sales increased from the level

of NIS 232,495 thousand to the level of NIS 238,853 thousand, a growth of 2.7%. The profit

increased from the level of NIS 16,865 thousand to the level of NIS 22,328 thousand.

Infant Nutrition segment – during the first nine months of the year the sales declined from a

level of NIS 277,214 thousand to a level of NIS 258,235 thousand, a decline of 6.8%. The

profit declined from a level of NIS 50,102 thousand to a level of NIS 40,565 thousand. During

the third quarter sales declined from the level of NIS 98,486 thousand to a level of NIS 86,501

thousand, a decline of 12.2%. The profit declined from the level of NIS 16,920 thousand the

level of NIS 13,137 thousand. The sales and profit were affected by increase in raw material

costs and the decision to lower prices of products to consumers.

Other Activities segment - during the first nine months of the year the sales amounted to the

sum of NIS 742,874 thousand compared to NIS 703,233 thousand last year, an increase of

5.6%. The profit on the other hand decreased from a level of NIS 58,234 thousand to a level of

NIS 53,155 thousand. During the third quarter sales increased from the level of NIS 247,233

thousand to the level of NIS 275,971 thousand, a growth of 11.6% resulting from, among

others, the increase in ice cream sales and increase in Osem USA sales. The profit declined

from the level of NIS 31,497 thousand to the level of NIS 29,712 thousand due to, among

others, the increase in raw material costs and increase in cost of purchased products.

I

B. Exposure and Management of Market Risks

During the statement period there were no significant changes in the exposure of the Company

and the method of their market risks management in relation to the Company's reports on this

subject for the year ending 31 December 2011.

C. Disclosure Directives Related to Financial Reporting of the Corporation

Critical accounting estimates

No significant changes were made during the first nine months of the year 2012 in relation to

critical accounting estimations which the Company uses for the financial reports.

Financial data relating to the parent company

In accordance with regulation 38d of the Securities Regulations (periodic and immediate

reports), an appendix is attached to the Board of Directors report, separate financial statements

of the Company (“Solo Report”), with the examining auditor’s opinion attached.

D. View on Corporate Governance

Disclosure regarding the procedure of approval of the financial statements

A. The organs in charge of superior control include the members of the board, the

Balance Sheet Committee, the CEO, and the Deputy CEO of Finance. The identity of

the organs is specified in the Periodic Report in Regulation 26 and 26(A) in Chapter

D of the Periodic Report.

B. The Balance Sheet Committee for the examination of the financial statements

General: The Company Board of Directors has decided to establish a Balance Sheet

Committee which will examine the financial statements of the Company and which

will make recommendations with regard to the approval of the financial statements,

after the Committee has discussed the financial statements prior to making

recommendations. A representative of the Company external auditor attends the

meetings of the Committee for the examination of the financial statements and the

Internal Auditor of the Company attends these meetings as well.

Members of the Balance Sheet Committee:

The Committee comprises three members (who also hold the office of directors in the

Company) - Dr. Liora Meridor (Public Director), Yaki Yerushalmi (Public Director)

and Gaby Hake Adv. Dr. Liora Meridor presides as the Committee Chair. The

appointment of the Committee members was made based on their skills, including

their professional experience, their qualifications and additional institutions or boards

in which they held and hold office, as the case may be, based on the classification of

the public directors by the Company Board of Directors (prior to their appointment as

Condensed Consolidated Interim Statement of Financial Position

September 30 September 30 December 312012 2011 2011

(Unaudited) (Unaudited) (Audited)NIS thousands NIS thousands NIS thousands

Assets

Cash and cash equivalents 254,921 131,254 104,479

Accounts receivable - customers 755,479 799,137 655,529

Debtors and debit balances 27,958 24,938 31,496

Income tax 1,151 12,765 10,735

Inventory 363,328 346,369 388,191

Other investments 13,437 17,605 17,863

Total current assets 1,416,274 1,332,068 1,208,293

Employee benefits - 1,446 -

Fixed assets 1,139,274 1,156,445 1,147,321

Intangible assets 997,543 1,077,712 1,018,919

Prepaid expenses 41,756 38,583 36,542

Deferred tax assets 30,025 12,313 20,021

Total non-current assets 2,208,598 2,286,499 2,222,803

Total assets 3,624,872 3,618,567 3,431,096

Dan Propper - Chairman of the Board

Itzik Saig - CEO

Pinhas Kimelman - Deputy CEO, Finance

Date of approval of financial statements: 22 November 2012

INVESTMENTS LTD

September 30 September 30 December 312012 2011 2011

(Unaudited) (Unaudited) (Audited)NIS thousands NIS thousands NIS thousands

Liabilities

Loans and short term credit from banks 80,226 136,559 127,550

Accounts payable - suppliers 609,242 619,782 647,636

Other creditors 396,365 258,993 383,128

Income tax 7,989 7,210 14,153

Total current liabilities 1,093,822 1,022,544 1,172,467

Obligations to banking institutions 5,390 20,230 13,239

Liabilities for PUT options of non-controlling interests in subsidiaries 323,708 602,796 339,710

Employee benefits 13,457 2,693 13,509

Deferred taxes 67,257 43,884 63,217

Total non-current liabilities 409,812 669,603 429,675

Total liabilities 1,503,634 1,692,147 1,602,142

Equity

Share capital 176,772 176,772 176,772

Premium on shares 444,212 444,212 444,212

Capital reserves (43,484) (49,909) (54,668)

Retained earnings 1,543,164 1,354,887 1,262,408

Total equity attributable to equity holders of the company 2,120,664 1,925,962 1,828,724

Non-Controlling interests 574 458 230

Total equity 2,121,238 1,926,420 1,828,954

Total liabilities and equity 3,624,872 3,618,567 3,431,096

The accompanying notes are an integral part of the financial statements.

3

INVESTMENTS LTD

Condensed Consolidated Interim Statement of Profit and Loss

For the nine months ending For the three months endingFor the year ending

September 30 September 30 September 30 September 30 December 312012 2011 2012 2011 2011

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands

Sales 3,080,291 3,020,041 1,071,846 1,044,443 3,960,877

Cost of sales 1,809,512 1,753,287 625,424 606,748 2,309,482Gross profit 1,270,779 1,266,754 446,422 437,695 1,651,395

Selling and marketing expenses 669,726 667,898 236,133 226,653 878,759General and administrative expenses 212,776 216,401 71,944 72,847 270,528

Operating profit before other expenses 388,277 382,455 138,345 138,195 502,108

Other expenses (income), net 3,200 (1,066) (480) (85) 2,830Operating profit 385,077 383,521 138,825 138,280 499,278

Finance expenses (25,420) (34,025) (8,350) (10,358) (41,538)Finance income 8,603 7,631 1,209 4,626 9,904Financing costs, net (16,817) (26,394) (7,141) (5,732) (31,634)

Profit before taxes on income 368,260 357,127 131,684 132,548 467,644Taxes on income 87,160 83,625 30,904 30,689 126,664

Profit for the period 281,100 273,502 100,780 101,859 340,980

Attributed to:

Equity holders of the company 280,756 273,346 100,515 101,655 341,052Non-Controlling interests 344 156 265 204 (72)


Earnings per NIS 1 par value ordinary shares

Primary and fully diluted (in NIS) 2.54 2.47 0.91 0.92 3.08


4

INVESTMENTS LTD

Condensed Consolidated Interim Statement of Comprehensive Income

For the nine months ending For the three months endingFor the year ending



Foreign currency translation differences in respect of foreign operations 11,184 9,590 7,958 6,668 4,831

Actuarial gains from defined benefit plan - - - - (13,581)

Income tax regarding components of comprehensive profit - - - - 3,396Other comprehensive profit (loss) for the period, net of tax 11,184 9,590 7,958 6,668 (5,354)Profit for the period 281,100 273,502 100,780 101,859 340,980

Total recognized comprehensive profit forthe period 292,284 283,092 108,738 108,527 335,626

Attributed to:

Equity holders of the company 291,940 282,936 108,473 108,323 335,698

Non-Controlling interests 344 156 265 204 (72)

Total recognized comprehensive profit forthe period 292,284 283,092 108,738 108,527 335,626


5

INVESTMENTS LTD.

Notes to the Financial Statements as at 30 September 2012 (unaudited)

6

Condensed Consolidated Reports on Changes in Shareholders' Equity

Capital reserve

from acquisition

Non

Total

of rights not

conferring

control

Capital reserve

from selling Asset

to

Total Equity

Controlling

Interest

Company's

equity holders

Retained

earnings

in consolidated

subsidiary

controlling

Shareholder

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

For the nine month period ending

30 September 2012 (unaudited)

1,828,954 230 1,828,724 1,262,408 (41,675) 1,694 (14,687) 444,212 176,772 Balance as at 1 January 2012 (audited)

11,184 - 11,184 - - - 11,184 - - Foreign currency exchange difference

281,100 344 280,756 280,756 - - - - - Net earnings for the period

292,284 344 291,940 280,756 - - 11,184 - - Total comprehensive income for the period

2,121,238

574

2,120,664

1,543,164

(41,675)

1,694

(3,503)

444,212

176,772

Balance as at 30 September 2012

For the nine month period ending


1,793,328 302 1,793,026 1,231,541 (41,675) 1,694 (19,518) 444,212 176,772 Balance as at 1 January 2011 (audited)




(150,000) - (150,000) (150,000) - - - - - Dividend paid

1,926,420

458

1,1925,962

1,354,887

(41,675)

1,694

(9,928)

444,212

176,772


The accompanying notes are an integral part of these

consolidated financial statements.

INVESTMENTS LTD.


7

Condensed Consolidated Reports on Changes in Shareholders' Equity (Cont.)

Capital reserve

from acquisition

Non

Total

of rights not

conferring

control

Capital reserve

from selling Asset

to

Total Equity

Controlling

Interest

Company's

equity holders

Retained

earnings

in consolidated

subsidiary

controlling

Shareholder

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

For the three month period ending


2,012,500 309 2,012,191 1,442,649 (41,675) 1,694 (11,461) 444,212 176,772 Balance as at 1 July 2012




2,121,238

574

2,120,664

1,543,164

(41,675)

1,694

(3,503)

444,212

176,772


For the three month period ending


1,817,893 254 1,817,639 1,253,232 (41,675) 1,694 (16,596) 444,212 176,772 Balance as at 1 July 2011




1,926,420

458

1,925,962

1,354,887

(41,675)

1,694

(929,9)

444,212

176,772


For the year ending 31 December 2011 (audited)

1,793,328 302 1,793,026 1,231,541 (41,675) 1,694 (19,518) 444,212 176,772 Balance as at 1 January 2011


(10,185) - (10,185) (10,185) - - - - - Actuarial losses (net after tax)

340,980 (72) 341,052 341,052 - - - - - Net earnings for the year 2011

335,626 (72) 335,698 330,867 - - 4,831 - - Total comprehensive income for the period

(300,000) - (300,000) (300,000) - - - - - Dividend paid

1,828,954

230

1,828,724

1,262,408

(41,675)

1,694

(14,687)

444,212

176,772

Balance as at 31 December 2011 (audited)

The accompanying notes are an integral part of these consolidated

financial statements.

INVESTMENTS LTD

Condensed Interim Information on Seperate Cash Flows

For the nine months ending


For the three months ending


For the year ending



CASH FLOWS FROM OPERATING ACTIVITIESNet profit for period 280,756 273,346 100,515 101,655 341,052

Adjustments:Company's share in profits of subsidiary companies (143,531) (139,132) (56,302) (51,671) (165,893)Depreciation 37,654 37,474 12,594 12,425 48,921Amortization of intangible assets and prepaid expenses 19,739 20,364 6,170 6,643 27,149Gain (loss) from sale of fixed assets, net 150 (1,269) 45 (49) (1,309)Finance costs, net 11,660 19,284 3,273 4,679 23,371Tax expenses on income 46,099 44,319 15,688 15,725 70,296Changes in derivatives 1,836 660 145 746 3,388

Changes in inventory 19,565 13,222 (12,854) 2,623 620Changes in accounts receivable and other debtors (729) (10,816) 115,529 33,360 76,426Changes in accounts payable and other creditors (48,298) (5,477) (22,711) 17,000 25,900Changes in employee benefits (433) 1,313 432 650 (78)Taxes paid (61,156) (49,925) (20,726) (16,013) (50,178)

Net cash flows arising from operating activities 163,312 203,363 141,798 127,773 399,665

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of fixed assets (25,989) (27,260) (11,656) (7,403) (31,679)Proceeds from sale of fixed assets 14 1,357 7 57 1,396Net cash from subsidiary investment activities 1,946 - 189 - 5,008Investment in intangible assets and prepaid expenses (5,196) (2,959) (126) (1,196) (4,459)Interest received 1,701 975 1,338 511 2,108Other investments, net 5,434 (278) 5,150 8 (278)Dividend received from subsidiary companies 50,425 61,259 15,800 19,200 61,259

Net cash flows arising from investing activities 28,335 33,094 10,702 11,177 33,355

CASH FLOWS FROM FINANCING ACTIVITIESInterest paid (646) (2,571) (254) (1,006) (2,518)Repayment of other liabilities (31,493) (37,423) (10,016) (12,016) (117,373)Repayment of long term liabilities - (37,500) - - (37,500)Credit from banking institutions and others, net (1,818) - (2,275) (94,147) 1,818Dividend paid - (150,000) - - (300,000)

Net cash used in financing activities (33,957) (227,494) (12,545) (107,169) (455,573)

Change in cash and cash equivalents 157,690 8,963 139,955 31,781 (22,553)

Cash and cash equivalents at beginning of period 9,331 31,679 27,080 9,070 31,679Effect of fluctuations in exchange rate on cash balances 43 216 29 7 205

Cash and cash equivalents at end of period 167,064 40,858 167,064 40,858 9,331


8

INVESTMENTS LTD.


9

Note 1 – The Reporting Entity Osem Investments Ltd. (hereinafter: the "Company") is a company residing in Israel. The consolidated

financial statements of the Group as at 30 September 2012 include the statements of the Company and its

investee companies (hereinafter: "the Group").

The controlling party in the Company is Nestlé S.A. Switzerland. The Group is engaged in the manufacturing

and marketing of food products.

The securities of the Company are listed for trading on the Tel Aviv Stock Exchange.

Note 2 – The basis for the preparation of the Financial Statements

The condensed consolidated interim statements have been prepared in accordance with IAS 34 – Interim

Financial Reporting – and do not include all the information required in the full annual reports. The summary

should be read together with the financial statements for the year which ended on 31 December 2011

(hereinafter –“ yearly financial statements”). Also, these reports were prepared in accordance with part 4 of

the Securities and Exchange Commission standards (periodic and immediate reports) 5740-1970.

The use of estimates and judgement and for the preparation of the interim financial statements, were

consistent with those used for the preparation of the year end financial statements.

Note 3 – Main Principles of Accounting Policy

The accounting policy of the Group as it relates to these condensed consolidated interim financial statements,

is the policy applied in the yearly financial statements.

Note 4 – Seasonality.

The Group’s sales are affected by the timing of Jewish Holidays with an emphasis on New Year and

Passover. The annual seasons also have an affect on certain groups of products. The seasons of Winter and

Autumn are characterized by greater consumption of soups, casseroles and soup almonds as compared to the

Summer and Spring seasons which are characterized by higher consumption of ice cream and concentrates as

compared to the seasons of Winter and Autumn.

Note 5 – Segment Activity

The Group has the following reportable segments in accordance with its areas of activity:

1. Culinary - In this area the Group develops, manufactures and/or sells, markets and distributes a

large variety of branded food products. The main ones being, among others, pasta, soups,

casseroles, baking aids, sauces, soup almonds and canned products (pickles).

2. Snacks and Breakfast Cereals - 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 snack products (wheat snacks, peanut snacks, potato snacks and corn snacks, etc.),

breakfast cereals and cereal based snack 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, hot dogs and prepared meals based

on meat substitutes and vegetable-based food products, prepared packaged salads (hummus

salad, eggplant, tehina etc.)

INVESTMENTS LTD.


01

Note 5 – Segment Activity (Cont.)

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, ice cream, pet foods, other

purchased products and activities of the subsidiary companies Asamim Gift Packages, 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.

months ending ninee For th

10December 20 Snacks and

(unaudited) 2201 September30 Breakfast Bakery and Prepared Infant Adjustment to

Culinary Cereals Beverages Food Nutrition Others Consolidated Consolidated

NIS NIS NIS NIS NIS NIS NIS NIS

Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands

Segment sales 541,772 499,266 393,554 684,673 258,235 742,874 (40,083) 3,080,291

Segment results 65,957 127,389 49,888 49,143 40,565 53,155 - 386,097

Other expenses, net (1,020)

Financing costs, net (16,817)

Profit before taxes on income

368,260

months ending nineFor the


(unaudited) 1201 September30 Breakfast Bakery and Prepared Infant Adjustment to Culinary Cereals Beverages Food Nutrition Others Consolidated Consolidated



Segment sales 533,164 494,372 376,484 671,686 277,214 703,233 (36,112) 3,020,041

Segment results 65,416 122,846 50,293 36,752 50,102 58,234 - 383,643

Other expenses, net (122)



357,127

INVESTMENTS LTD.


00

Note 5 – Segment Activity (Cont.)

three months ending For the Snacks and

audited)2012 (un September30 Breakfast Bakery and Prepared Infant Adjustment to Culinary Cereals Beverages Food Nutrition Others Consolidated Consolidated



Segment sales 187,400 166,472 130,033 238,853 86,501 275,971 (13,384) 1,071,846

Segment results 21,144 36,640 15,384 22,328 13,137 29,712 - 138,345

Non allocated expenses, net ¤ 480

Financing expenses, net (7,141)


131,684

three months ending For the


2011 (unaudited) September30 Breakfast Bakery and Prepared Infant Adjustment to Culinary Cereals Beverages Food Nutrition Others Consolidated Consolidated



Segment sales 181,647 172,010 128,514 232,495 98,486 247,233 (15,942) 1,044,443

Segment results 18,432 41,492 12,989 16,865 16,920 31,497 - 138,195

Non allocated expenses, net 85

Financing expenses, net (5,732)


132,548

ending yearFor the Snacks and

(audited) 131 December 201 Breakfast Bakery and Prepared Infant Adjustment to Culinary Cereals Beverages Food Nutrition Others Consolidated Consolidated



Segment sales 719,713 656,011 489,401 890,115 369,249 887,843 (51,455) 3,960,877

Segment results 95,848 175,204 67,064 51,879 65,610 47,691 - 503,296

Other expenses, net (4,018)



467,644

Note 6 – Event During the Balance Sheet Period

In continuation of the 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),

which exists since 2008, the board of directors of the Company approved about a year ago, on 25

May 2011, an additional plan for the period of 3 years (three portions to be allocated between the

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) will 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 vesting period for each “option” stands at three years from 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 24 May 2012 the board of directors approved the plan for

distribution of the second portion of the program to 17 senior managers in the total value of NIS

7.4 million spread out over the period of 3 years.

Osem Investments Limited

Separate Financial Statements

September 30, 2012

INVESTMENTS LTD

Condensed Interim Information on Separate Financial Position

September 30 September 30 December 31

2012 2011 2011

(Unaudited) (Unaudited) (Audited)

NIS thousands NIS thousands NIS thousands

Assets

Cash and cash equivalents 167,064 40,858 9,331

Debtors and debit balances 29,024 108,692 26,678

Income tax 2,231 4,827 -

Inventory 88,135 95,098 107,700

Other investments 13,437 17,605 17,863

Total current assets 299,891 267,080 161,572

Balances related to subsidiary companies 1,661,075 1,514,948 1,536,081

Loans to subsidiary companies 81,334 90,195 80,734

Employee benefits - 426 -

Fixed assets 621,199 637,975 636,041

Intangible assets 455,602 531,410 472,006

Prepaid expenses 17,518 16,659 15,657

Total non-current assets 2,836,728 2,791,613 2,740,519

Total assets 3,136,619 3,058,693 2,902,091

Dan Propper - Chairman of the Board

Itzik Saig - CEO

Pinhas Kimelman - Deputy CEO, Finance

Date of approval of financial statements: 22 November 2012

12

INVESTMENTS LTD

September 30 September 30 December 31

2012 2011 2011

(Unaudited) (Unaudited) (Audited)

NIS thousands NIS thousands NIS thousands

Liabilities

Loans and short term credit - - 1,818

Accounts payable - suppliers 284,159 278,610 333,528

Other creditors 360,840 230,580 350,253

Income tax - - 5,335

Total current liabilities 644,999 509,190 690,934

Liabilities for PUT options of non-controlling

interests in subsidiary companies 323,708 602,796 339,710

Employee benefits 10,300 - 10,733

Deferred taxes 36,948 20,745 31,990

Total non-current liabilities 370,956 623,541 382,433

Total liabilities 1,015,955 1,132,731 1,073,367

Equity

Share capital 176,772 176,772 176,772

Premium on shares 444,212 444,212 444,212

Capital reserves (43,484) (49,909) (54,668)

Retained earnings 1,543,164 1,354,887 1,262,408

Total equity 2,120,664 1,925,962 1,828,724

Total liabilities and equity 3,136,619 3,058,693 2,902,091


13

INVESTMENTS LTD

Condensed Interim Separate Information on Profit and Loss





For the year ending



Sales 874,595 840,936 288,997 289,560 1,093,859

Cost of sales 458,314 (*) 438,152 150,402 (*) 150,911 581,723Gross profit 416,281 402,784 138,595 138,649 512,136

Selling and marketing expenses 170,667 (*) 156,474 59,092 (*) 51,386 187,337General and administrative expenses 58,702 58,693 20,139 20,128 69,268

Operating profit before other expenses 186,912 187,617 59,364 67,135 255,531

Other income, net (8,072) (10,200) (3,810) (3,253) (13,295)Operating profit 194,984 197,817 63,174 70,388 268,826

Finance expenses (22,195) (30,595) (7,444) (9,281) (36,958)

Finance income 10,535 11,311 4,171 4,602 13,587

Financing costs, net (11,660) (19,284) (3,273) (4,679) (23,371)

Profit from subsidiary companies 143,531 139,132 56,302 51,671 165,893

Profit before taxes on income 326,855 317,665 116,203 117,380 411,348

Taxes on income 46,099 44,319 15,688 15,725 70,296


(*) ReclassifiedThe accompanying notes are an integral part of the financial statements.

14

INVESTMENTS LTD

Condensed Interim Information on Seperate Comprehensive Income and Expenses

For the nine

months ending

For the nine

months ending

For the three

months ending

For the three

months ending

For the year

ending

September 30 September 30 September 30 September 30 December 31

2012 2011 2012 2011 2011

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)

NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands

Actuarial losses from defined benefit plan - - - - (12,550)

Income tax regarding components of

comprehensive income and expenses recorded directly in equity - - - - 3,138

Other comprehensive expense for the period - - - - (9,412)

Other comprehensive income (expense) from subsidiary companies 11,184 9,590 7,958 6,668 4,058


Total Comprehensive profit for the period 291,940 282,936 108,473 108,323 335,698


15

INVESTMENTS LTD

Condensed Interim Information on Seperate Cash Flows

For the nine

months ending

For the nine

months ending

For the three

months ending

For the three

months ending

For the year

ending

September 30 September 30 September 30 September 30 December 31

2012 2011 2012 2011 2011

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)

NIS thousands NIS thousands NIS thousands NIS thousands NIS thousands

CASH FLOWS FROM OPERATING ACTIVITIES

Net profit for period 280,756 273,346 100,515 101,655 341,052

Adjustments:Company's share in profits of subsidiary companies (143,531) (139,132) (56,302) (51,671) (165,893)

Depreciation 37,654 37,474 12,594 12,425 48,921

Amortization of intangible assets and prepaid expenses 19,739 20,364 6,170 6,643 27,149Gain (loss) from sale of fixed assets, net 150 (1,269) 45 (49) (1,309)Finance costs, net 11,660 19,284 3,273 4,679 23,371Tax expenses on income 46,099 44,319 15,688 15,725 70,296Changes in derivatives 1,836 660 145 746 3,388

Changes in inventory 19,565 13,222 (12,854) 2,623 620Changes in accounts receivable and other debtors (729) (10,816) 115,529 33,360 76,426Changes in accounts payable and other creditors (48,298) (5,477) (22,711) 17,000 25,900Changes in employee benefits (433) 1,313 432 650 (78)Taxes paid (61,156) (49,925) (20,726) (16,013) (50,178)

Net cash flows arising from operating activities 163,312 203,363 141,798 127,773 399,665

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of fixed assets (25,989) (27,260) (11,656) (7,403) (31,679)Proceeds from sale of fixed assets 14 1,357 7 57 1,396Net cash from subsidiary investment activities 1,946 - 189 - 5,008Investment in intangible assets and prepaid expenses (5,196) (2,959) (126) (1,196) (4,459)Interest received 1,701 975 1,338 511 2,108Other investments, net 5,434 (278) 5,150 8 (278)Dividend received from subsidiary companies 50,425 61,259 15,800 19,200 61,259

Net cash flows arising from investing activities 28,335 33,094 10,702 11,177 33,355

CASH FLOWS FROM FINANCING ACTIVITIES

Interest paid (646) (2,571) (254) (1,006) (2,518)Repayment of other liabilities (31,493) (37,423) (10,016) (12,016) (117,373)Repayment of long term liabilities - (37,500) - - (37,500)Credit from banking institutions and others, net (1,818) - (2,275) (94,147) 1,818Dividend paid - (150,000) - - (300,000)

Net cash used in financing activities (33,957) (227,494) (12,545) (107,169) (455,573)

Change in cash and cash equivalents 157,690 8,963 139,955 31,781 (22,553)

Cash and cash equivalents at beginning of period 9,331 31,679 27,080 9,070 31,679

Effect of fluctuations in exchange rate

on cash balances 43 216 29 7 205

Cash and cash equivalents at end of period 167,064 40,858 167,064 40,858 9,331


16

INVESTMENTS LTD.

Additional Information

71

1. General

The interim separate financial information is disclosed in accordance with regulation 38d of the securities regulations

(Periodic and Immediate Reports), -1970 relating to separate financial information for the company. It should be read

along with the Separate financial Information for the year ending 31 December 2011 and together with Condensed

Consolidated Interim Financial Statements as at 30 September 2012 (Heinafter – “the consolidated financial

statements”).

Included in this separate financial information is:

1. The Company – Osem Investments Ltd.

2. Consolidated Companies – companies, including partnerships, whose financial statements are fully

consolidated , directly or indirectly with the company’s financial statements.

3. Held companies – Consolidated subsidaries which the investment in them is included, directly or indirectly, in

the financial stetements on the basis of the balance sheet value.

Osem Investments Ltd.

Report for the third quarter of the year 2012 on the effectiveness of

the internal control over the financial reporting and over the

disclosure according to

Regulation 38C

Please find enclosed herewith the report for the third quarter of the year 2012

regarding the effectiveness of the internal control over the financial reporting

and over the disclosure according to Regulation 38C(a).

The management, with the supervision of the Board of Directors of Osem

Investments Ltd. (hereinafter - the corporation), is responsible for the

establishment and running of adequate internal control mechanism over the

financial reporting and over the disclosure in the corporation.

For this purpose, the management members are:

1. Itzik Saig - CEO

2. Pinhas Kimelman - Deputy CEO of Finance

3. Dody Manvich - Deputy CEO of business development & projects

4. Meir Imber - Deputy CEO of Operations

5. Omri Lotan - Deputy CEO and CEO of the Prepared Food Division

6. Zeev Kalimi - CEO of Noga Ice Cream

7. Ofer Green – CEO of Osem Group Commerce

Internal control over the financial reporting and over the disclosure includes

controls and procedures existing in the corporation, which were planned by the

CEO and the most senior office holder in the financial section or under their

supervision, or by someone who actually performs the above mentioned roles,

with the supervision of the board of directors of the corporation, which are

designed to provide a reasonable degree of assurance as to the credibility of

the financial reporting and on the preparation of the financial statements in

accordance with the Law, and to ensure that the information that the

Corporation is required to disclose in the reports published is in accordance

with the law, that it was collected, processed, summarized and reported in a

timely manner and in the format prescribed by the law.

The internal control includes, inter alia, controls and procedures that have

been planned to ensure that the information the corporation is required to

disclose is accumulated and sent to management of the Corporation, including

the CEO and the senior official on the Financial Section or to someone who

actually performs the above mentioned roles, so as to enable the making of

decisions in a timely manner, with regard to the disclosure requirements

Due to its structural limitations, the internal control over the financial

reporting and the disclosure is not designated to provide absolute assurance

that any misleading presentation or omission of information in the statements

will be prevented or will be discovered.

In the Quarterly Report on the effectiveness of the internal control over the

financial reporting and over the disclosure, which was enclosed with the

interim report for the period ended on 30 June 2012 (hereinafter - the last

quarterly report on the internal control), the internal control was found to be

effective.

Until the date of the report, the Board of Directors and the Corporation

management were not made aware of any event or matter where there is cause

to change the evaluation of the effectiveness of the internal control, as set out

in the last quarterly report relating to internal control.

As of date of the report, based on the statement in the last quarterly report on

the internal control, and based on information that has been brought to the

attention of management and the board of directors as mentioned above, the

internal control is effective.

Management statements

(a) Statement of the CEO according to Regulation 38C(d)(1):

Management Statement

Statement of the CEO

I, Itzik Saig, declare that:

1. I have evaluated the quarterly report of Osem Investments Ltd. (hereinafter:

the corporation) for the third quarter of the year 2012 (hereinafter: the reports).

2. To my knowledge, the reports do not include any incorrect presentation of a

material fact and they do not lack any presentation of a material fact that is

required, so that the presentations included in them, in light of the

circumstances in which these presentations have been included, are not

misleading with regard to the period of the reports

3. To my knowledge, the financial statements and the other financial information

included in the reports properly reflect, from every material aspect, the

financial situation, results of activities and cash flow of the Corporation as of

the dates and for the periods to which the reports refer

4. I have revealed to the auditing accountant of the Corporation, the Board of

Directors and the Audit Committee of the BOD of the Corporation, based on

my most current evaluation of the internal control over financial reporting and

disclosure:

A. All the significant lacks in control and material weaknesses in the

determinations or activation of the internal control mechanism, relating

to the financial reporting and disclosure that might reasonably be

expected to negatively influence the capability of the Corporation to

collect, process, summarize or report the financial information in a

manner that might leave room for doubt as to the credibility of the

financial reporting and the preparation of the financial statements in

accordance with the provisions of the law; and that –

B. Any fraud, whether material or not material, involving the general

manager or anyone directly subordinate to him or involving other

employees who have a significant position in the internal control over

the financial reporting and disclosure.

5. I, alone or together with others in the Corporation:

A. Have determined controls and procedures, or verified the

determination and the existence of controls and procedures under my

supervision, that are designed to ensure, that material information that

refers to the Corporation, including its consolidated companies, as

defined in the Securities Regulations (Preparation of Annual Financial

Reports) - 2010, is brought to my notice by others in the Corporation

and in the consolidated companies, especially during the period of the

preparation of the reports; and that –

B. Have determined controls and procedures, or verified the

determination and existence of controls and procedures under my

supervision, that are designed to ensure in a reasonable manner, the

credibility of the financial reporting and preparation of the financial

reports in accordance with the provisions of the law, and in accordance

with the accepted accounting regulations

C. Have not been informed of any event or matter that has occurred

during the period, between the date of the last quarterly report as of 30

June 2012 and the date of this report, that might be such as to change

the conclusion of the Board of Directors and management with regard

to the effectiveness of the internal control over the financial reporting

and disclosure of the corporation.

The above does not derogate from my responsibility or the responsibility of anyone

else according to the law.

22 November 2012 Signature - Itzik Saig

CEO

(b) Declaration of the most senior office holder in Finance, as

per Regulation 38C(d)(2)

Management Statement

Declaration of the most senior office holder in Finance

I, Pinhas Kimelman, declare that:

1. I have evaluated the interim financial statements and other financial

information included in the interim reports of Osem Investments Ltd.

(hereinafter: the corporation) for the third quarter of the year 2012

(hereinafter: the reports or the interim period reports).

2. To my knowledge, the interim financial statements and the other financial

information included in the reports of the interim periods, do not include any

incorrect presentation of a material fact and they do not lack any presentation

of a material fact that is required, so that the presentations included in them, in

light of the circumstances in which these presentations have been included, are

not misleading with regard to the period of the reports.

3. To my knowledge, the interim financial statements and the other financial

information included in the reports for the interim period, properly reflect,

from every material aspect, the financial situation, results of activities and

cash flow of the Corporation as of the dates and for the periods to which the

reports refer.

4. I have revealed to the auditing accountant of the corporation, the Board of

Directors and the Audit Committee of the BOD of the Corporation, based on

my most current evaluation of the internal control over financial reporting and

disclosure:

A. All the significant lacks in control and material weaknesses in the

determinations or activation of the internal control mechanism, relating

to the financial reporting and disclosure, as it relates to the interim

financial statements and the other financial information included in the

interim reports, that might reasonably be expected to negatively

influence the capability of the Corporation to collect, process,

summarize or report the financial information in a manner that might

leave room for doubt as to the credibility of the financial reporting and

the preparation of the financial statements in accordance with the

provisions of the law; and that –

B. Any fraud, whether material or not material, involving the general

manager or anyone directly subordinate to him or involving other

employees who have a significant position in the internal control over

the financial reporting and disclosure.

5. I, alone or together with others in the Corporation:

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