BSD.L Regulatory News (BSD)

B.S.D. CROWN LTD - Company Update

PR Newswire

London, June 19

BSD Crown Ltd. (LSE: BSD)

(the “Company”)

Company Update

Ramat Gan, 19 June 2016

We hereby inform you that Willi-Food International Ltd., a significant subsidiary of the Company, has published its Financial Statements on 31 May 2016 for the three month period ended on 31 March 2016. The completed convenience translation to English of the Financial Statements is attached to this announcement.

Enquiries:

Yossi Schneorson, CEO: yossi@bsd-c.com

Condensed Consolidated Financial Statements

as of March 31, 2016

(Unaudited)

Willi-Food Investments Ltd.

Condensed Consolidated Financial Statements

as of March 31, 2016

(Unaudited)

C o n t e n t s

A review report of the auditor to the shareholders of

Willi-Food Investments Ltd.

Introduction

We have reviewed the accompanying financial information of Willi-Food Investments Ltd. the Company and subsidiaries (hereafter- “the Group”) which includes the condensed consolidated statement of financial position as of 31 March 2016 and the related condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the period three months ended on that date. The board of directors and management are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 “Interim Financial Reporting” and they are also responsible for the preparation of this interim financial information in accordance with Chapter D of Securities Regulations (Periodic and Immediate Reports) - 1970. Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of the review

We conducted our review in accordance with Review Standard 1 of the Institute of Certified Public Accountants in Israel "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in Israel and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the abovementioned financial information is not prepared, in all material respects, in accordance with IAS 34.

In addition to what is stated to the preceding paragraph, based on our review, nothing has come to our attention that causes us to believe that the abovementioned financial information does not comply, in all material respects, with the disclosure requirements of Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970.

Without qualifying our conclusion, we draw attention to Note 5(B) of the financial statements describing an investment made by a subsidiary of the company in a bond of a European entity in the amount of USD 2.25 million (approximately NIS 8.5 million) and which is currently under an investigation by the Israeli Securities Authority. As far as management is aware, the investigation relates to allegations whereby during January 2016, approximately USD 2.25 million previously held in a bank account of a subsidiary of the Company, were invested in a bond of a European entity, which, allegedly, served as collateral to a loan obtained by the controlling shareholder or another individual. On May 18, 2016, further to a request made by the subsidiary to the bond issuer, the latter alleged that the subsidiary undertook to invest in the bonds, in three installments, for a total amount US$ 5 million, and that a balance of US$ 2.75 million for the bonds had not yet been paid.

Similarly, we draw attention to Note 5(D) of the financial statements describing the motion to certify a derivative action which was filed in February 2016 against Company's directors and officers, as well as to Note 5(E) of the financial statements describing a lawsuit and motion to certify it as a class action lawsuit, which was filed in the United States in February 2016 against the Company, the controlling shareholder, and some of its officers, in the past and in the present.

Brightman Almagor Zohar & Co.

Certified Public Accountants

Member of Deloitte Touche Tohmatsu Limited

Tel Aviv, May 31, 2016

Willi-Food Investments Ltd.

Condensed Consolidated Statements of Financial Position

Willi-Food Investments Ltd.

Condensed Consolidated Statements of Financial Position

The financial statements were approved on: May 31, 2016

Willi-Food Investments Ltd.

Condensed Consolidated Statements of Profit and Loss

Willi-Food Investments Ltd.

Condensed Consolidated Statements of Profit and Loss

Willi-Food Investments Ltd.

Condensed Consolidated Statements of Comprehensive Income

Willi-Food Investments Ltd.

Condensed Consolidated Statements of Changes in Equity

Willi-Food Investments Ltd.

Condensed Consolidated Statements of Changes in Capital

Willi-Food Investments Ltd.

Condensed Consolidated Statements of Changes in Capital

Willi-Food Investments Ltd.

Condensed Consolidated Statements of Cash Flows

Willi-Food Investments Ltd.

Condensed Consolidated Statements of Cash Flows

Note 1 - General

A. Willy-Food Investments Ltd. (the “Company”) was incorporated in Israel, its offices are located at the Northern Industrial Zone in Yavne, and it is mainly engaged in the import, marketing and distribution of food products through a consolidated company - G. Willifood International Ltd. (“Willifood”).

The Company’s shares are listed for trade on the Tel Aviv Stock Exchange.

B. These condensed statements should be reviewed in the context of the Company’s annual financial statements as of December 31, 2015, and for the year then ended, and the notes accompanied thereto.

Note 2 - Significant Accounting Policies

A. The basis for the preparation of the financial statements:

The Group’s condensed consolidated financial statements (“Interim Consolidated Statements”) were prepared in accordance with IAS 34, “Interim Financial Reporting”.

In the preparation of these Interim Financial Statements, the Group has applied the accounting policy, rules of presentation and methods of calculation identical to those used in the preparation of its financial statements as of December 31, 2015 and for the year then ended, other than changes in the accounting policy deriving from the application of new standards, amendments to standards and interpretations which took effect at the date of the financial statements, as specified in Note 3 below.

B. The condensed consolidated financial statements were prepared in accordance with the provisions in Chapter D of the Securities Regulations (Periodic and Immediate Reports), 5730-1970.

C. Income taxes in the interim statements:

Tax expenses (income) on the income for the presented periods, include the sum of the current taxes as well as the total change in the deferred tax balances, except in respect of deferred taxes that derive from transactions that are reflected directly under equity and under business combination transactions.

Current tax expenses (income) in interim periods are accrued while applying the average annual effective income tax rate. For the calculation of the effective income tax rate, losses for tax purposes, in respect of which no deferred tax assets were recognized, which are expected to reduce the tax liability in the tax year, are deducted.

Note 2 - Significant Accounting Policies (Cont.)

D. Rates of exchange and linkage basis:

(1) Balances that are stated in foreign currency or linked thereto are recorded in the financial statements according to the representative exchange rates published by the Bank of Israel and which were in force on the end of the reporting period.

(2) Balances that are linked to the Consumer Price Index are presented according to the last known index at the end of the reporting period or according to the index for the last month of the reporting period, according to the terms of the transaction.

(3) The following is data on the significant exchange rates and the index:

(*) The consumer price basis is based on an average Index for 2008.

Note 3 - New Financial Reporting Standards and Interpretations Released

· Amendment to IFRS 13 “Fair Value Measurement” (scope of application of the net measurement exception)

The amendment broadens the scope of the possibility to measure fair value of a portfolio of financial assets and financial liabilities on a net position basis, also to other financial instruments within the scope of IAS 39 or IFRS 9, regardless of whether they meet the definition of financial assets or financial liabilities under IAS 32. The amendment is applied prospectively, from the beginning of the annual reporting period in which IFRS 13 is first applied to annual periods commencing on or after July 1, 2014.

· Amendment to IAS 24 “Related Party Disclosures” (key management personnel)

The amendment clarifies that a management company providing key management personnel services to a reporting entity is a “related party” of the reporting entity. The amendment is applied retroactively to annual reporting periods commencing on or after July 1, 2014.

· Amendment to IAS 19 - treatment of employee contributions in the context of a defined benefit plan

The amendment distinguishes between contributions from employees or third parties that are linked to service and those that are not, and prescribes that contributions that are not linked to service (e.g. for covering deficits in the plan) shall affect remeasurements for a defined benefit plan, whereas contributions that are linked to service, shall be treated as a reduction in service cost. It was further determined that contributions linked to service that are also dependent on the number of years of service, shall be staggered according to the projected unit credit method. In addition, the amendment provides that if the amount of the contributions is independent of the number of years of service, the current service cost may be deducted in the period in which the related service is rendered. The amendment is applied retroactively to annual reporting periods commencing on or after January 1, 2015.

Note 4 - Financial Instruments

Financial instruments that are not measured at fair value:

Other than as specified in the following table, the Group believes that the book value of the financial assets and liabilities that are presented in depreciated cost in the financial statements is almost identical to their fair value:

Financial liabilities:

(*) Net of balances held by Willifood.

Note 4 - Financial Instruments (Cont.)

Note 5 - Material Transactions and Events during the Report Period

A. On July 15, 2015, the Company received notice (the “Notice”) from Mr. Alexander Granovsky, the ultimate controlling shareholder in the Company as of the same date by means of Israel 18 B.V (the “Controlling Shareholder's Notice”, “Mr. Granovsky” and “Israel 18” – respectively and as applicable) and from Mr. Gregory Gurtovoy, who according to the Notice is an Israeli citizen and is a businessman and banker ( “Mr. Gurtovoy”). According to the Notice, Mr. Granovsky and a philanthropic fund incorporated in the Netherlands, Stichting Chabad Charity Foundation (the “Foundation”) sold all of their holdings in Israel 18, which are detailed below, to Mr. Gurtovoy on July 15, 2015 (the “Transaction”). In accordance with the Notice received at the Company as aforesaid, after the Transaction and as of such date, Mr. Gurtovoy holds preferred shares in Israel 18, which constitute approximately 90% of the voting rights in Israel 18 and which grant him the right to appoint the directors of Israel 18, as well as the ordinary shares of Israel 18 which constitute approximately 9.5% of the voting rights in Israel 18, and approximately 95% of the issued and outstanding share capital in Israel 18. Mr. Yossi Schneorson, director of the Company and member of the boards of directors of the companies held by Israel 18 (together with the Company, the "Group") and CEO of B.S.D., holds approximately 4.95% of the rights in Israel 18's equity.

On December 24, 2015, Adv. Arnon Gitzelter sent a letter to TASE, in which TASE was requested to release, forthwith, an immediate report stating that due to the fact that Israel 18 breached its undertakings towards Naftali Shani, Olamic Holdings NV and others (the “Beneficiaries”), the full, free and clear ownership and holding in the Collateral Shares for Shani (as defined in sub-section d below) has been ostensibly transferred, with the consent of Israel 18, to the trustee for the benefit of the Beneficiaries (“Adv. Gitzelter’s Letter”). In response to Adv. Gitzelter’s Letter, Israel 18 clarified, in its letter to B.G.I. dated December 27, 2015, that, inter alia, the position of Israel 18 is that it remains the owner of the Collateral Shares for Shani. In addition, it sought to clarify that it is acting to repay the debt to the Beneficiaries, and that upon the settlement of the debt, the pledge will expire, and Israel 18 shall no longer be dependent on the Beneficiaries.

Note 5 - Material Transactions and Events during the Report Period (Cont.)

In addition, on February 17, 2016, several of B.G.I’s directors received an e-mail from Mr. Naftali Shani, to which a document entitled “Minutes of a meeting of the Company’s Board of Directors that was held on February 17, 2016 at the offices of the Rotenstreich Gitzelter Trust Company” was attached, and which stated that “at an extraordinary general meeting of the Company” of that same date, “directors were appointed” and it was resolved to “terminate the office” of other directors, and that further to said “meeting”, a “board meeting” was convened, in which additional resolutions were adopted, changing the signatory rights of B.G.I and summoning a shareholders’ meeting of B.S.D. B.G.I.’s position, as conveyed to Adv. Gitzelter and his counsel, is that as long as B.G.I. shall not have received an authorized decision of a court which decides the dispute between said parties, B.G.I. does not intend to change the status quo, i.e., accept the position of Adv. Gitzelter and his counsel while dismissing the position of Israel 18.

On February 28, 2016, Adv. Gitzelter and Naftali Shani (the “Applicants”) filed an Originating Application against all of the directors holding office in B.G.I., with the District Court (Economic Department) in Tel Aviv, in the context of which the Applicants are seeking a declaratory remedy whereby the extraordinary general meeting of B.G.I. held on February 17, 2016, as specified above, was duly convened and that the resolutions adopted at said meeting regarding the changes in the board composition were duly adopted, and further that the directors that were elected at said meeting (in addition to the residing outside director), form the board of directors of B.G.I. (the “Originating Application” or the “Motion”). Concurrently with the filing of the Originating Application, and on that same day, the Applicants filed with the Court a motion to schedule an urgent hearing in the Originating Application. The Court scheduled a hearing in the file for March 24, 2016, and also determined that the respondents will submit their response by March 20, 2106. In the response that was submitted, B.G.I. clarified that it does not view itself as an active party to the dispute between Israel 18 and the Applicants, and that it shall not resolve the corporate power struggle therein. B.G.I. further clarified that it will follow any judicial decision that shall be issued in said dispute among the parties. On March 22, 2016, Israel 18 filed an urgent motion to join as a party to the proceeding. On March 23, 2016, the Court determined that the motion to join shall be heard in the context of the hearing scheduled for March 24, 2016. At the hearing, the Court determined that an additional hearing in the file will take place on April 14, 2016, such that Israel 18 will be allowed an opportunity to file its response to the Originating Application, by April 10, 2016.

In addition, to the Company’s best knowledge, on February 3, 2016, B.S.D. received a notice from the trustee for the convening of an extraordinary general meeting of the shareholders of B.S.D., for the purpose of replacing the directors of B.S.D. (other than the outside directors) by directors that will be appointed by Naftali Shani. The board of B.S.D. resolved, that as long as B.S.D. shall not have received an authorized decision of a court which decides the dispute between the parties, the trustee’s request to convene said general meeting is not legal. For further detaNIS see Chapter D, Regulation 21A of the Periodic Report for 2015, that was released on March 31, 2016.

Note 5 - Material Transactions and Events during the Report Period (Cont.)

On May 8, 2016, Israel 18, the Company’s controlling shareholder, entered into a settlement agreement that was sanctioned as a judgment by the Court, in the context of which Israel 18 shall pay the trustee a sum of approx. $ 2 million for the benefit of the Shani group, within 60 days, with the balance payable within four and a half months after the signing date of the agreement. Insofar as Israel 18 faNIS to meet the payment prescribed as the first payment date, Adv. Yossef Shem Tov shall act to sell or dispose of the shares in any manner possible, with the sale proceeding completed within 45 days of the date prescribed as the first payment date. Insofar as the first payment was paid on time, but the balance of the debt shall not have been settled within 90 days of the signing date of said agreement, the sale and disposal mechanism shall be applied by Adv. Yossef Shem Tov, within a similar 45 day period, mutatis mutandis.

In view of all of the foregoing, as of the report release date, and as long as the dispute shall not have been decided by the Court, to the Company’s best knowledge, the Company’s controlling shareholder (in concatenation) is Israel 18.

B. On February 17, 2016, a search was conducted in the offices of Willifood, the Company, BSD Crown Ltd., and B.G.I Investments Ltd. (collectively, the “Group”), by the Israeli Securities Authority (the “Authority”), during which various documents and computers were taken from the Group's offices. Similarly, to the best of the Company's knowledge, a number of executives in the Group are being investigated by the Authority. Similarly, Mr. Gregory Gurtovoy, chairman of the Company's board of directors and the board of directors of the Group's companies (and the indirect controlling shareholder therein was detained for interrogation by the Authority for three days, after which, he was placed under house arrest for a period of two weeks (which has since ended). According to the exhibit attached to the arrest warrant, Mr. Gurtovoy was arrested on the suspicion of the crimes of fraudulent acquisitions under aggravating circumstances, falsifying corporate documents, fraud, breach of trust in a corporation, money laundering, as well as misleading reporting.

To Company management's knowledge, the investigation by the Authority relates to an investment of approximately US$ 2.25 million (the “Investment”) made during January 2016 (from sums previously held in a bank account of a subsidiary of the Company) in the form of bonds (the “Bonds”) of a European company (the “Issuer”), “ which allegedly served as a collateral to a loan obtained by the controlling shareholder or another individual, and which was unrelated to the Company's operations.

Note 5 - Material Transactions and Events during the Report Period (Cont.)

The Investment was carried out by B.H.W.F.I Ltd., a wholly owned subsidiary of Willifood (“BHWFI”), pursuant to subscription forms to purchase 300 Bonds with a nominal value of US$ 10,000 each (“Subscription Forms”). In practice, BHWFI acquired only 225 Bonds (after withholding tax). The Bonds bear an annual interest rate of 6%, payable semi-annually on June 30 and December 31 of each year as of the issue date until the final maturity date of 31 December 2018. The Issuer has the right to repay the Bonds with prior notice of 30 days without penalty. As of the balance sheet date, the Company decided to value the Bonds according to their nominal cost.

On May 18, 2016, further to a request by BHWFI to the Issuer, the Issuer confirmed (including by way of the provision of extracts from the local state Land Registry and Registrar of Companies) that the Issuer is a special purpose vehicle which holds full title to the primary asset of the Bonds, and that the Investment funds were received by the Issuer and registered in favor of BHWFI (the “Response”).

In this regard it should be noted that in response to a query from BHWFI, the Issuer clarified that it has no information in its possession relating to a pledge or undertaking given in connection with the Bonds, and information concerning a pledge or undertaking with regards to the Bonds is not the type of information that the Issuer would typically possess. To the Company's best knowledge and based on documents in its possession and clarifications it has obtained, including requests to all officers and authorized signatories of BHWFI, no pledge and/or undertaking was given in connection with the Bonds, and in any case there is no validity to any obligation, if any, without the requisite corporate authority. Additionally, BHWFI received confirmation from Bank Leumi Le-Israel Ltd. (“Bank Leumi”), the holder of BHWFI’s bank account (the “Account”), on May 25, 2016, that there are no pledges on the Account holding the Bonds.

In addition, in the Response, the Issuer alleged that BHWFI supposedly undertook to invest in the Bonds in three installments for a total amount US$ 5 million and that a balance of US$ 2.75 million for the Bonds has not yet been paid (the “Demand” or “Alleged Undertaking”). No supporting documentation or other basis for the Alleged Undertaking was attached to the Demand, which stands in contradiction to previous correspondence with the Issuer.

As of the date of this report, requests by BHWFI to the Issuer, including by way of a local law firm (in the Czech Republic), to clarify the Demand and receipt of supporting documentation for the Alleged Undertaking, have been left unanswered. 

Note 5 - Material Transactions and Events during the Report Period (Cont.)

To the Company’s best knowledge, based on documents in its possession and clarifications it has obtained, including requests to all of the officers and authorized signatories of BHWFI, the Company did not grant Issuer any undertaking to purchase additional Bonds beyond the amount undertaking in accordance with the Subsciption Forms, namely 300 Bonds, and in any event, the Company believes, based on the opinion of its legal counsel in Israel, that there is no validity to any obligation, if any, made without the requisite corporate authority.

It is apparent from the extracts of the Registrar of Companies received originally by BHWFI as a result of their attachment as annexes to the Response, that the ultimate controlling shareholder of the Issuer is the Austrian bank – Meinl Bank.

C. On February 18, 2016, trade was halted in the securities of Willifood, whose shares are listed, as aforesaid, on the NASDAQ stock exchange in the U.S. From a conversation held by the Company’s counsel with a representative of Nasdaq Listing Qualifications (“Nasdaq”), following the trade halt as aforesaid, Willifood received letters from Nasdaq requesting clarifications in respect of the investigation conducted by ISA in connection with the suspected violations of certain Sections of the Israeli Securities Law. As of the date of the report and the release date thereof, Willifood acted and responded to the questions raised in the letters, subject to the investigation’s restrictions. On April 7, 2016, trade was resumed in Willifood’s shares on NASDAQ. See immediate report dated April 10, 2016 (Reference No. 2016-01-045823).

D. On February 24, 2016, a motion to certify a derivative action (the “Motion”) was received at Willifood’s offices. The Motion was filed with the District Court (Economic Department) in Tel Aviv by Yaad Peer Management Services Ltd. (the “Applicant”), that claims to hold shares of the Company. The respondents to the Motion are the Company, Willifood, all of Willifood’s directors and two of Willifood’s officers.

The Motion contemplates the Applicant’s claim to damage suffered by Willifood, which is estimated by the Applicant, as of the filing of the Motion, at approx. $ U.S. 3 million, due to an alleged violation of the directors’ and officers’ fiduciary duty, duty of care and duty of expertise towards Willifood.

The Motion’s significance is that the Applicant is seeking Court approval for the filing of a claim by Willifood against the officers and directors, in the context of which the officers and directors will be required to compensate Willifood by said amount.

At this preliminary stage, the Company and Willifood, together with their legal counsel, are studying the Motion and the claims specified therein. The response to the Court is scheduled to be filed within 60 days. On April 21, 2016, the Court decided to grant a 45-day extension for filing a response to the motion to certify a derivative action.

Note 5 - Material Transactions and Events during the Report Period (Cont.)

E. On February 29, 2016, a motion to certify a securities class action was served onWillifood. Said motion was filed in the Southern District of New York by a shareholder who claims to hold Willifood shares (the “Plaintiff”), against Willifood, Mr. Gurtovoy, the chairman of the board of the Company and of Willifood and a controlling shareholder (in direct concatenation), and part of its past and present officers (the “Defendants”).

The action contemplates a demand for compensation for alleged damage suffered by the Plaintiff due to the Defendants' violations of the federal securities laws and other laws in the period commencing on April 30, 2014 and ending on February 18, 2016. In view of the preliminary stage of the action, the Company, in reliance on the position of its legal counsel, is unable to assess the risk underlying it, and thus, no provision was made in the financial statements therefor.

Note 6 - Segment Reporting

A. General:

The Group applies IFRS 8 "Operating Segments" ("IFRS 8") since January 1, 2009. According to the provisions of IFRS 8, operating segments are identified on the basis of the internal reports in respect of the components of the Group, which are reviewed on a regular basis by the Group’s chief operating decision maker for the purpose of the allocation of resources and the evaluation of the performance of the operating segments.

The Company’s only operating segment according to IFRS 8 is the import segment. The import segment derives its revenues from the import, production and marketing of food products to retail chains, supermarkets, wholesalers, institutional customers, etc.

B. Revenues from main customers:

Revenues from a main customer, the Group’s revenues from which comprise 10% or more of the corporation’s total revenues in the three months ended on March 31, 2016, are approx. NIS 14,471 thousand ( in the same period last year – NIS 11,793 thousand).

C. The revenues from main product groups:

(*) Less than 10%.